Japan faces a clear and present danger in public finance, epitomized by a crushing debt load equal to 140 percent of its gross national product. In this light, changes to the tax code for fiscal 2003, proposed by the ruling coalition last week, fall far short of expectations. It is essentially a patchwork of tax cuts and tax hikes that, on balance, fails to convey a clear message.
What is lacking is a long-term vision for revamping the tax system. The coalition parties would have done well to tell the nation forthrightly about the gravity of the crisis and present a credible game plan to combat it. Specific tax changes for the next fiscal year and beyond should have been proposed along the lines of such a long-range strategy.
The tax package was originally aimed at keeping the runaway budget deficit under control. To that end, tax cuts were to have been offset by tax hikes over five years. Now this policy of fiscal balancing has all but collapsed. The key reasons for this are conventional wisdom and weak leadership -- Prime Minister Junichiro Koizumi has left almost everything to tax gurus in his party.