The decision by Keidanren (Japan Business Federation) to resume its call on roughly 1,300 member companies to make political donations is no doubt aimed at rebuilding the influence of the nation’s largest business lobby on the ruling Liberal Democratic Party.
Keidanren chairman Sadayuki Sakakibara denies that the group is trying to use the donations to buy policies that favor big businesses. But it is hard to understand why his stated bid for the business community to work hand in hand with politicians to revive Japan’s economy needs to be achieved through political donations.
Keidanren, for a long time, served as the main conduit of its members firms’ contributions to the LDP since its inception in 1955 through the merger of conservative forces. The group set the amount of the donations and the share for each business sector and firms, and the annual contributions to the LDP totaled ¥10 billion in the early 1990s.
However, the group gave up on that role in 1993 after a series of money scandals involving senior LDP lawmakers invited criticism of collusion between business and politics and after the LDP lost power for the first time to a coalition led by Prime Minister Morihiro Hosokawa.
In 2004, Keidanren resumed its involvement in political donations by urging the member firms to voluntarily make contributions on the basis of the group’s evaluation of each political party’s policies, but ended that practice in 2009 when the LDP was ousted from power by the Democratic Party of Japan-led administration.
Sakakibara, who took over as head of the business federation in June, is taking care to dispel the impression that Keidanren is returning to its old ways. He says whether to make the donations, and to which political party, will be up to each member company, although he adds that Keidanren “fully supports” the economic policies of Prime Minister Shinzo Abe and will deepen its cooperation with the Abe administration. Keidanren’s policy evaluations of political parties, which resumed last year, will not necessarily be linked to its call for the donations, he says.
There are doubts as to whether the member firms will actually respond to the call by substantially increasing their donations to the LDP. Political donations to the LDP by businesses have dwindled to about ¥1.4 billion as of 2012. Corporate management will need to explain to their shareholders why they’re making the political donations.
There will also be criticism that the companies should put priority on the interests of their customers and employees.
Keidanren apparently wants to rebuild its ties with the LDP, which were strained under former chairman Masahiro Yonekura, who — before Abe returned to power in December 2012 — had criticized his radical monetary proposals as “reckless.” Although the Abe administration pursued pro-business policies, Yonekura remained left out from the government’s Council on Economic and Fiscal Policy, in which a Keidanren chairman was believed to have a reserved seat. Abe meanwhile tapped younger-generation business leaders such as Rakuten Inc. President Hiroshi Mikitani, who quit Keidanren to create a new business organization, as key members of government panels that set his economic policy agenda.
The efforts by Sakakibara may be paying off. Just before he announced resumption of Keidanren’s role in political donations, Sakakibara was officially tapped as a new member of the Council on Economic and Fiscal Policy. This is at a crucial time as discussions within the administration on Abe’s key agenda, including the merits of making cuts in the corporate tax — which Keidanren has called for — are expected to come into full swing toward the yearend.
Sakakibara says it is the “social responsibility” of businesses to “shoulder the cost of maintaining parliamentary democracy” by making donations to political parties. He should be reminded that government subsidies to political parties were introduced in 1994 in exchange for the tightening of control on political donations following severe public criticism of shady money passing from businesses to LDP lawmakers.
Under the subsidy system, a total of ¥32 billion a year in taxpayer money is currently distributed among political parties in accordance with their respective share of Diet seats.
In 2013, the LDP received roughly ¥15 billion in such subsidies, accounting for about 60 percent of the party’s annual revenue. Corporate donations reportedly account for only about 10 percent of its revenue.
In other words, the lion’s share of the LDP’s expenses is shouldered by taxpayers.
The subsidy to political parties, which translates into an annual contribution of ¥250 from each Japanese, has its own problems, such as the fact that the taxpayers’ money can be used to subsidize parties that they do not support.
Still, it was introduced as a way to spread the operating costs of political parties among taxpayers to ensure fairness in their activities. Donations by corporations and other organizations to individual politicians were outlawed, although criticism persists that contributions to local chapters of political parties effectively run by locally elected politicians serve as a loophole in the ban.
It is an accepted practice for business organizations like Keidanren to try to have their views reflected in government policies through policy proposals and lobbying activities. But using donations to parties in power to achieve that could distort the policymaking process of parties that are publicly subsidized at the taxpayers’ expense.
Sakakibara emphasizes that business cannot keep a distance from political circles, but instead must cooperate with them to rebuild the Japanese economy at this juncture. If that’s so, major companies that make up the Keidanren membership should play their share of the role by raising wages for their workers and boosting their investments to achieve sustained growth of the economy.
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