Will the prime minister once again postpone a tax hike and call an election?
WHEN Shinzo Abe last called a snap general election, just two years after coming to power in 2012, Japan’s prime minister saw an opposition in disarray and a chance to consolidate seats in the Diet. Yet he presented the election as a matter of high principle: in the face of a sluggish economy he had chosen to delay a long-agreed rise in Japan’s consumption (value-added) tax, and such a portentous decision required the people’s approval. Mr Abe won handily. Now, principle appears to demand yet another election soon.
That is because, with an economy refusing to show any bounce, Mr Abe may well announce that he is putting off the tax hike (from 8% to 10% and promised for April 2017) a second time. Perhaps he will do so after he hosts a summit for G7 leaders in May. Precedent would make it very hard for him not to dissolve the Diet and announce a general election over the matter. The betting is that he would fix the election for the same time as a scheduled poll in June or July for half of the seats in the upper house.
Some of his colleagues want Mr Abe to hurry up and call a general election sooner, before his luck runs out. There are challenges on various fronts. The economy is the biggest worry: it shrank by an annualised 1.1% in the final three months of 2015, as consumer spending slowed. To boost demand the central bank announced a policy of negative interest rates in January. But the market reaction—a lower stockmarket and a higher yen—has been just the opposite of what was hoped for.
Sooner or later, voters will want to blame Mr Abe for an economy he promised to fix. And there are other policies that are unpopular but for which he has not yet been punished. They include attempts to get Japan’s nuclear power plants working again after all were shut down following the catastrophic meltdown at Fukushima Dai-ichi five years ago this week. And new security laws passed last year, allowing Japan to take a more robust stance overseas, appear, according to many experts, to be unconstitutional. They certainly make many Japanese uncomfortable.
Adding to the mood of discontent are the political scandals within the ruling party. In January the economy minister, Akira Amari, one of the prime minister’s key allies, resigned over a dodgy political donation. And a lawmaker in the ruling Liberal Democratic Party (LDP) who had made much of his being the first Diet member to take paternity leave turned out to have been having affairs during his wife’s pregnancy. Since then the prime minister’s approval rating has fallen to below 50%.
As for the consumption tax, a first increase, from 5% to 8% in April 2014, knocked consumer spending. A key economic adviser to the prime minister, Etsuro Honda, now says that postponing the next hike is essential if people are not to lose faith in Mr Abe’s broader efforts to boost the economy. As it is, after three years of radical monetary easing, core inflation remains around zero, a long way from the central bank’s target of 2%. Not even Japan’s trade-union leaders are calling for big wage increases. And banks’ lending margins remain under pressure. It all threatens Mr Abe’s promises of a virtuous circle of higher wages, consumption and investment—and raises questions about how the Japanese might vote in the summer.
Plenty of people think that Mr Abe should redouble his efforts to liberalise the economy, including by introducing sweeping reforms to the labour market. He could push much harder to ensure that part-time workers, whose low wages are a drag on consumption, are treated better. But no menu of deeper reforms is about to be revealed, a government official says.
Meanwhile, however, though the opposition Democratic Party of Japan (DPJ) is working hard to ready candidates for a general election, it is unlikely to gain much ground. It still has miserable levels of popular support: only a tenth of voters back the centre-left party, according to opinion polls, compared with two-fifths for the LDP. The DPJ would highlight a second postponement in the consumption tax hike as a sign that Mr Abe’s economic plans have failed. But it is unlikely to oppose a postponement, especially if ordinary households are suffering.
In weighing whether or not to call a double election, Mr Abe will consider the chances of a victory large enough to carry through his dream, that of rewriting Japan’s constitution in ways that erode the pacifist promises, laid down by the American occupiers in the late 1940s, that lie at the heart of it. He says that such a revision is necessary because, seven decades after a disastrous war, Japan no longer deserves to have its hands tied by an outdated pacifism when it lives in an increasingly dangerous neighbourhood.
Abe likes a sound constitution
Changing the constitution would require a two-thirds majority in both houses of the Diet, and a plain majority in a national referendum. The LDP and its coalition partner, Komeito, have more than two-thirds of the lower house, with 325 out of 475 seats, but a narrower majority, of 136 out of 242 seats, in the upper chamber. Mr Abe might pick up seats in the upper house, and also be able to rely on the help of a small right-wing party called Osaka Ishin no Kai. Yet attempting to revise the constitution would still cause deep alarm among the many Japanese who remain enormously proud of their country’s pacifism. In short, the main risk to Mr Abe’s hopes of securing electoral victory is his inclination to speak lovingly of his plans for constitutional change.