Prime Minister Yukio Hatoyama on Tuesday decided to maintain the current rates on gasoline and other road-related taxes throughout fiscal 2010 even though the road-related tax system will be overhauled by April 2010. The abolition of surcharges on road-related taxes was a main campaign pledge of the Democratic Party of Japan, and the question of whether to maintain the tax rates, including the surcharges, had become a focal point of fiscal 2010 taxation policy.
If Mr. Hatoyama had chosen to stick to the campaign pledge, the gasoline tax would have fallen about ¥25 per liter, but the central and local government would have lost ¥1.7 trillion and ¥800 billion in tax revenue, respectively. Mr. Hatoyama's decision is reasonable since tax revenues in fiscal 2010 are expected to fall to around ¥37 trillion amid plans to limit bond issuance to ¥44 trillion, roughly the same level as in fiscal 2009. It will also help prevent a rise in greenhouse gas emissions.
Mr. Hatoyama should have made this decision much earlier, though, in light of the nation's difficult financial situation. The decision came only after DPJ Secretary General Ichiro Ozawa demanded that current rates on the road-related taxes remain. This has left the impression that the prime minister cannot make an important decision on his own.