On Monday, Prime Minister Yoshihiko Noda made comments implying that if his bill to double Japan’s 5% consumption tax is passed before the current Diet session ends on June 21st, he might have no choice but to dissolve the Lower House and call for a general election. Just yesterday it was noted that Noda’s Democratic Party of Japan (DPJ) and both the opposing Liberal Democratic Party (LDP) and New Komeito were in agreement that negotiations on the tax increase bill needed to be concluded by this Friday, the 15th. However, analysts believe that yesterday’s comments were a subtle threat to warn the large faction in Noda’s own party who adamantly oppose the debated bill.
This faction, which makes of a majority of the DPJ, is led by former party president Ichiro Ozawa. Credited with bringing the DPJ to power in 2009, Ozawa has been vocal in his criticism of Prime Minister Noda’s intention to increase the sales tax. Ozawa is confident that the public also opposes the tax increase, as the DPJ made it a pledge to not do so in its election campaign. He also feels that Noda’s administration hasn’t done nearly enough to cut wasteful government spending, and that to increase the tax at this time would ruin any hopes of economic recovery at this point.
Noda has repeatedly stated that he is betting his political career on the tax bill, as he views it as absolutely necessary to save Japan’s ailing pension system and attempt to slow the world’s largest public debt. In addition to a recent reshuffle of Noda’s cabinet, one of the other conditions the LDP has called for in negotiations is for Noda to make a clear stand that he will separate himself from Ozawa and his faction should it become necessary. Ozawa does not want the Lower House dissolved for a general election, so Noda’s threat might just what he needs to reach his June 21st goal.