Japan LDP candidates' economic policies converge
The contest for the presidency of the Liberal Democratic Party had looked like it would be fought over economic policy. But as soon as the contest officially kicked off Thursday, the five candidates revised their positions, greatly narrowing their differences on key economic issues.
Policy differences relating to the economy--in particular whether and when to raise the consumption tax rate and how to achieve the conflicting goals of tackling government debt while also addressing rising prices and economic stagnation--were tipped to be the biggest points of contention in the 12-day race that concludes Sept. 22.
The five LDP presidential candidates had expressed markedly different views on the economy right up until the start of the campaign: some gave priority to shoring up the flagging economy, while others stressed the importance of ensuring fiscal discipline to prevent a further deterioration of government finances.
However, faced with the likelihood that the House of Representatives will be dissolved for a general election soon after the LDP election, the candidates for the top party post all seem to have decided to avoid touching on sensitive policies that could lead to a heavier burden on the public, such as increasing taxes.
One of the five candidates, Kaoru Yosano, 70, state minister in charge of economic and fiscal policy, said at a press conference Thursday, "It would be almost impossible to greatly increase the consumption tax rate from next year."
The remark by Yosano was subtle, but it marked a significant change from the language he had previously used when discussing the tax issue.
Before declaring his candidacy for the party race, Yosano was known for his articulate assertion that the consumption tax rate should be raised when the state's contribution to the basic national pension program rises from the current one-third to half, which is expected to occur in fiscal 2009.
Speaking alongside his four opponents at the first joint rally held in Tokyo on Thursday, Yosano reiterated his cautious stance on the issue, saying the tax rate "should, if possible, be increased in stages to 10 percent by 2015."
With Yosano, who has long been considered a key proponent of tackling the fiscal crisis, having toned down his statements on the issue, the other candidates were swift to stress business assistance measures as the most pressing concern.
This means all the candidates have virtually been as one in giving up the idea of increasing the consumption tax rate in fiscal 2009.
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Together on tax
The candidates also have expressed similar views regarding how to pay for the planned increase in the state's contribution to the basic national pension plan, with all expressing support, in principle, for using reserve funds held in the state's special accounts.
Former LDP Policy Research Council Chairman Nobuteru Ishihara told reporters Wednesday he supported the use of reserve funds in the special accounts "as a stopgap measure" for the increased pension costs--a position echoed by former Defense Minister Shigeru Ishiba.
Yosano, who had previously denied the government even held reserve funds, expressed a "new view" in his election pledge, vowing to favor using surplus funds held in special accounts under the government's investment and loan program for such purposes as lowering expressway tolls.
Regarding another contentious point, the government's goal of achieving a surplus in the primary balance--the balance between government revenues excluding those from government bond issues and expenditure excluding bond-servicing costs--the five candidates have now adopted much the same stance.
Since LDP Secretary General Taro Aso, who currently leads the others by a considerable margin in the campaign, has championed the view that the primary balance goal should be postponed and government spending should be increased in the short-term, Yosano, who was a keen advocate of maintaining fiscal discipline, has shifted toward Aso's position. "I'm prepared to act flexibly [on the matter] if necessary," Yosano said.
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Call to avoid splits in LDP
Former Defense Minister Yuriko Koike, the first-ever female candidate for the LDP leadership, has positioned herself as a key proponent of structural reforms that were pursued under the administration of former Prime Minister Junichiro Koizumi.
However, she also noted a cooling of the debate on fiscal issues. "It seems that the economic policy dispute between us may have already come to an end," she said.
The candidates appear to have borne in mind the dissolution of the lower house and a subsequent general election that the LDP and its ruling coalition partner, New Komeito, want to see take place on Oct. 26.
One senior LDP member said, "If the public gains the impression that the views of the presidential candidates vary too greatly, they might conclude the LDP is sharply divided over economic policy."
"No matter who wins the party election, it would never benefit our forthcoming fight with the DPJ [the major opposition Democratic Party of Japan] if our party was divided on economic issues," he added.
When it comes to the task of curbing the snowballing government deficits over the medium and long term, opinions in the LDP remain divided.
Koike backs what is called the "rising-tide theory," a line of argument that calls for rebuilding government finances on the strength of increases in tax revenue--realized via significantly high economic growth--not through increased taxes.
In the election campaign, Koike has declared her resolve to pursue a "goal of realizing a 4 percent rise in nominal growth per year" in the coming years.
Yosano, by contrast, has offered a counterargument, noting, "Any attempt to raise the nominal growth rate by depending on inflation would result in something akin to a Faustian pact."
If differences on these issues become more stark, the strategies the LDP should pursue to secure economic growth might resurface as major points of contention during the rest of the party race.
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