Op-Ed Contributors

Consumption tax raise hit prospects

By Hu Feiyue (China Daily)
Updated: 2010-07-13 07:59

The ruling Democratic Party of Japan (DPJ) suffered a major blow after winning just 44 seats in the nation's Upper House elections on July 11, far short of Prime Minister Naoto Kan's target of 54. A total of 121 seats were being contested by the party in the election.

The main opposition Liberal Democratic Party (LDP) won 51 seats, far more than predicted and Your Party claimed 10 more seats.

Evidently, the outcome signals the ruling party's defeat, and victory for the LDP and Your Party. Moreover, DPJ's tiny ally, the People's New Party won no seat in the election.

Related readings:  Japan PM pounded in poll rout  Japan ruling party handed big defeat over tax plan

Accordingly, the ruling party must now look for allies among smaller parties to form a new collation government. Otherwise, the Upper House might thwart ambitious legislation put forward by the government in future.

It is generally believed that Kan's proposal to increase the consumption tax from 5 percent to 10 percent, aimed at whittling down the ever-increasing public debt mainly contributed to his party's electoral mauling.

Without intra-party discussion beforehand, the tax reform proposal raised by the prime minister dominated the Upper House election. According to a national poll by the Kyodo News, the new Cabinet's public support rate plunged to 43.4 percent just before the voting from 61.1 percent when Kan took office. So it's understandable why the DPJ suffered a crushing defeat in the election.

From the perspective of Japanese national character and political tradition, Upper House elections have always been favorable to opposition parties. However, Kan's echo to LDP's tax reform policy was extensively criticized by the Japanese media and met with firm opposition from voters.

Meanwhile, the results also showed voters' denial of Kan's neo-liberal political roadmap and his irresolute stance during the pre-election phase.

In fact, the issue of consumption tax has been the tipping point for Japan's ruling parties. In Japan's history, there were several Cabinets, including the Takeshita, Uno and Hashimoto Cabinets, which all fell from power due to the introduction of the general consumption tax or after attempts to improve the tax rate.

The close relationship between Japanese politics and general consumption tax fully reflects Japanese voters' opposition to the tax, as well as its profound influence during national elections, especially the Upper House poll.