The Yomiuri Shimbun
The gravity and urgency of dealing with the devastation caused by the March 11 earthquake and tsunami has left the government unsure how to approach its prequake priorities--tax and social security reform, and participation in a trans-Pacific free trade pact.
The administration of Prime Minister Naoto Kan has been left with no choice but to put all discussions on key issues on hold.
A thorough review of both decision-making schedules and plans laid before the forces of nature struck is needed before moving forward, senior government officials have said.
Prior to the disaster, the government since mid-February had been holding almost weekly meetings of a council chaired by Kan to discuss tax and social security reforms. The council listened to the opinions of experts, business and media leaders.
The council was slated to work out reform proposals for the social security system by the end of April, and to put the finishing touches on a reform package to present it to the opposition camp in June.
Kaoru Yosano--the economic and fiscal policy minister at the forefront of the social security and tax reform effort--is apparently still determined to go ahead with integrated reforms as scheduled. His aides have said he would like to resume the council's hearings as early as Saturday.
Officials in the bureaucracy, however, have called the idea "absolutely impossible," adding he has yet to consult the Cabinet Office on the matter.
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Relief-funding tax hike eyed
Before March 11, the government had its sights set on raising the consumption tax rate as part of the planned reforms to finance its social security plans.
But one executive member of the council said, "Any discussion of a higher consumption tax rate can never take place as long as the hearts and minds of the public are unsettled [over the disaster]."
The handling and rescheduling of policy priorities should be discussed in April at the earliest, he said.
Regarding the consumption tax issue, many in both the ruling and opposition blocs now are eyeing a tax hike to secure revenue not for social security programs, but to help fund the massive reconstruction and relief efforts.
Sadakazu Tanigaki, the head of the Liberal Democratic Party, was quoted as telling Kan last week he did not think it was possible to fund the huge sums that would be needed for disaster relief only through issuing government bonds. Political observers believe Tanigaki was hinting that a temporary, short-term consumption tax hike should be passed.
LDP Diet Affairs Committee Chairman Ichiro Aizawa has been more direct, and has proposed boosting the consumption tax rate by one percentage point from the current 5 percent exclusively to fund relief programs for earthquake and tsunami victims. A number of business leaders have voiced their support for the proposal.
Some in the government have said the tax rate should be doubled to 10 percent to support disaster relief for a certain period of time, after which all of the revenue from the 10 percent tax would be allocated to funding social security programs.
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TPP talks 'off the table'
Also prior to the March 11 tragedy, the government had intended to make a final judgment by the end of June about whether it would take part in negotiations on the multilateral Trans-Pacific Partnership free-trade pact.
But with the earthquake, tsunami and ongoing crisis at Tokyo Electric Power Co.'s Fukushima No. 1 nuclear plant, farmers in the Tohoku and northern Kanto regions have been dealt a serious blow. In consideration of the situation, an increasing number in the government have said it is not the right time to discuss the TPP.
Government sources said it is unknown how it will meet its goal of "strengthening the farming sector" before Japan joins the TPP talks.
Since the earthquake and tsunami struck, Koichiro Gemba, state minister in charge of national policy, has stopped traveling the country to hold explanatory sessions about why the government favors joining the TPP.
"The havoc this [disaster] has wreaked on the agriculture sector has flattened the TPP issue," one government source said, expressing no hope that Japan would join the free-trade pact talks in the near future.
Another item on the government's political agenda--civil service system reform--which was to be taken care of in April at the earliest, would be "put on hold indefinitely" unless the prime minister orders things to move forward by the end of the month, the source said.
(Mar. 23, 2011)
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