In Japan, new taxes levy political toll on Prime Minister Yoshihiko Noda


Japan's Prime Minister Yoshihiko Noda speaks to the media at his official residence in Tokyo on July 2, 2012. (AFP/Getty Images)

Yoshihiko Noda’s greatest legislative victory could also become his last major move.

The Japanese prime minister swore for months that he was willing to risk his job for a controversial plan to double the country’s sales tax to 10 percent. Now, political analysts in Tokyo and Washington say, Noda has won support for that increase, to be phased in by 2015, but he is nearly out of a job, having burned almost all of his political capital in order to push the bills through a notoriously inert parliament.

Noda, they say, has proved far more capable than Japan’s previous five prime ministers, all short-lived in office. He is unlikely to keep his job much longer than any of them, though, because of concessions made to win opposition support for the tax increase, which he says is necessary to stabilize Japan’s balance sheet.

After less than a year on the job, Noda is expected within the next several months to dissolve the more powerful lower house and call for a “snap election” — a promise he made to leaders of the opposition Liberal Democratic Party (LDP) and New Komeito during tax negotiations. That’s troubling for Noda because his Democratic Party of Japan (DPJ), which currently holds a slim majority in the lower house, has an approval rating of just 12 percent.

Barring a drastic shift in public sentiment, analysts in Tokyo say that Noda’s party is likely to get trounced in the next election, leaving the next prime minister to be selected by the new ruling party.

“Noda is exactly the kind of person, with style and grit, that Japan probably needs right now,” said Sheila Smith, a senior fellow for Japan studies at the Council on Foreign Relations. “He’s determined; he’s a coalition-builder by nature; he’s interested in the governance of the country. And the irony is, Japan may have . . . that person taken away from them” in the next election.

Noda has spent recent days dealing with the consequences of his tax increase. When he met the domestic news media earlier this month, he began by apologizing for causing a burden to the Japanese people. But he also defended his strategy, saying that Japan — saddled with soaring social security costs and one of the world’s highest debt burdens — needed to make hard decisions to stave off a European-style fiscal crisis.

“People ask me why I often say that I will put my political career on the line for this reform,” Noda said. “Unless I was resolved to put my political career on the line, we may have wavered, deferred, avoided or hesitated to take action.”

In pushing for the increase, Noda said he faced “difficulties beyond my imagination.” As he dealt with opposition parties, dozens of protesters from his own party staged a mass defection. Political critics pointed out that the DPJ’s original manifesto said nothing about raising taxes. Noda meanwhile drew ire for other reasons, particularly his push to restart a pair of nuclear reactors in western Japan, which sparked weekly protests outside his office.

If Noda’s DPJ loses power in the next elections, it will underscore the rocky road the party has traveled since it took over from the LDP after a half-century of near-uninterrupted rule. Rising to power with a landslide victory three years ago, the DPJ promised a new era of politics here: The party would work with greater transparency, depend less on bureaucrats and push for a generous populist agenda, eliminating highway tolls, bumping up the minimum wage, even giving extra money to parents to raise children.

Little of this happened. The first two DPJ prime ministers, Yukio Hatoyama and Naoto Kan, were quickly driven from power. The 2011 natural and nuclear disasters made a new priority of reconstruction in the hard-hit northeast. Fears about Europe’s failing finances and a double-dip global recession prompted a focus in Japan on fiscal austerity, and leaders such as Noda called for restrained spending and higher taxes.

The DPJ’s approval rating is only slightly lower than the LDP’s, which stands at 21 percent. Almost half of Japan’s voters favor no political party, making it likely that the next ruling party will be formed with a broad coalition, behind the LDP.

Asked how Noda will be remembered as a politician, Tokyo-based political analyst Eiken Itagaki said: “The prime minister who raised consumption tax. . . . The prime minister who broke the DPJ.”

Yuki Oda contributed to this report.

Chico Harlan covers personal economics as part of The Post's financial team.

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