Fukuda, a glutton for punishment

On Tuesday, at the same press conference where he complained about the stress of the job, Prime Minister Fukuda made a statement guaranteed to ensure that his stress will increase inexorably.

"Since [the consumption tax rate] is only 5%, we are burdened with a budget deficit. We must decide — this is an extremely important period. If we think about the aging society, the road is narrowing." He compared Japan's consumption tax rate unfavorably with European consumption tax rates, but admitted that he didn't know how the public would respond to a consumption tax hike. [This story was front page news in Asahi.] The idea is that the LDP and the Diet will debate comprehensive tax reform in the fall.

Yamamoto Ichita seems to have a better idea of how the public will respond — and finds it intolerable that some LDP members are willing to proceed with the tax hike even if it means an LDP defeat.

"In my thirteen years in politics, I have never met a politician 'resolved to discard his Diet member's badge at any time."

The prime minister has now opened the flood gates on a debate between tax-hikers (many of whom happen to be zoku giin) and budget-cutters, the latter of which want to government to trim as much waste as possible from the budget before raising taxes. (Nakagawa Hidenao is probably the leading advocate of this school of thought, as in this post in response to the prime minister's remarks.) Naturally the zoku giin don't want to see "wasteful spending" trimmed — because it's not wasteful to them.

In short, the prime minister will be attempting a tricky maneuver in the autumn, dealing a blow to the road tribesmen by getting his road construction plan written into law and then wheeling about to use a victory on the road construction (read: budget trimming) front to get a consumption tax hike. He will do all of this while dealing with a party full of backbenchers terrified that they will lose their seats in the next election. In order to execute this pirouette successfully, Mr. Fukuda has quickly assembled a project team on eliminating waste, headed by Sonoda Hiroyuki, to " review [spending] thoroughly with an eye to reducing waste to zero." According to Shukan Bunjun, the project team is staffed with abrasive reformist Diet members like Kono Taro who are bound to use the project team to antagonize bureaucrats and zoku giin alike as they review spending in four areas (public works, social security, energy and agriculture, and culture and technology) in search of savings. (An additional working group will focus on spending in another twelve ministries and agencies, including the ministries of foreign affairs and defense.) I wish Mr. Kono and company success in their endeavor, but I cannot help but wonder whether this project team is too little, too late.

It sounds like a recipe for catastrophic defeat, especially when discontent over North Korea is thrown into the mix. It is becoming less and less likely that Mr. Fukuda will survive the year. Moreover, by introducing the consumption tax question, Mr. Fukuda is poisoning the well for the post-Fukuda era, making it difficult for tax-hiker Yosano Kaoru to win election as his replacement.

Mr. Fukuda has not only triggered a fierce debate within the LDP; he has also given encouragement to the DPJ, which is desperately in need of LDP mistakes (just as the LDP is in desperate need of DPJ mistakes — I leave it to you to determine which needs the other's mistakes more). Ozawa Ichiro jumped on the prime minister's remarks, arguing along lines similar to Mr. Nakagawa's that wasteful spending must be eliminated first before having a debate about tax reform.

Bait and switch

The HR passed the road construction bill a second time on Tuesday afternoon, as scheduled. Despite rumors to the contrary, there was no rebellion. Kono Taro and his comrades voted with the government, in the process illustrating why the much-anticipated political realignment has yet to occur: for all the discontent voiced by backbenchers about the leadership of both the LDP and the DPJ, they remain reluctant to bear the risks associated with bucking the party leadership and possibly leaving the party.

Mr. Kono and other reformists are still threatening to fight for the party to adopt the prime minister's plan to phase out the road construction fund from 2009, but after caving on the road construction plan Tuesday, will their concerns be taken seriously in the coming months? As Mainichi reports, despite remaining silent in the face of the cabinet decision supporting Mr. Fukuda's plan, the road tribe remains ready to fight to preserve its privileges. The road tribesmen will instead focus their efforts on the year-end budget proposal, a sound strategy considering that Mr. Fukuda will likely be gone by then, leaving the reformists to fight on alone.

Even with Mr. Fukuda as premier the tribesmen have important allies within the party for their campaign to derail the reform: local and prefectural politicians, who will undoubtedly remind their patrons in Tokyo that their communities need the road fund and suggest that if Mr. Fukuda's plan goes forward, they cannot guarantee that the LDP will get favorable returns in the next general election. Whether such a threat is credible is not the issue — if the LDP leadership becomes convinced that ending the special fund truly alienates the party from its supposed base, that will be enough to ensure that the reform plan gets watered down to the point of irrelevance. The head of the national mayors association has already criticized the plan, no doubt the first of many such comments to come from local politicians.

In short, the LDP, already concerned that its rural base could desert the party in a general election, will not follow through on Mr. Fukuda's proposal, a classic bait and switch.

And so the LDP's death throes will continue, as the LDP can no longer rely on the two methods that had extended its life in the past: opportunistic policy shifts (like this, for example) and "divide-and-rule." (These arguments are made by Ito Atsuo in a Chuo Koron article to which I linked above.) Regarding the former, not only has the LDP calcified ideologically, but its reformist members, who want to change the party's policies, find it nearly impossible to overcome the opposition of older members who desperately cling to their remaining privileges. What do the latter have to lose in resisting reform tooth-and-nail? The party is in no position to punish them, Mr. Koizumi's 2005 purge notwithstanding. Mr. Koizumi's purge of postal rebels — so objectionable to many LDP members, judging by the return of most of the rebels to the LDP — was clearly an aberration.

As for the latter, the LDP's bid to divide and co-opt the opposition by offering a grand coalition to the DPJ clearly failed and if anything united the DPJ in its opposition to the government. This scheme may have temporarily created turmoil within the DPJ by intensifying dissatisfaction with Ozawa Ichiro's leadership, but Mr. Ozawa appears to have quelled most of the resistance to his leadership. The LDP continues to hope that Mr. Ozawa will face a serious challenge in the September party leadership election but the threat to Mr. Ozawa may be overstated. A reformist like Maehara Seiji or Okada Katsuya, both former party leaders, may ultimately stand against Mr. Ozawa, but it is unlikely that the bulk of the party will abandon Mr. Ozawa for either man.

Meanwhile, the depth of the LDP's desperation is revealed in its hope for an incapacitated DPJ.

The LDP's dilemmas

Yamamoto Ichita, taking a break from rocking out, writes of the divide between LDP veterans and youngsters in the debate over Prime Minister Fukuda's plan to shift the special road construction fund into the general fund from 2009.

The question is how the prime minister should proceed. At present, the HR will be voting next week to override the HC and pass the road construction plan in its current form, even as the prime minister has promised a new plan. Mr. Yamamoto himself sees no inconsistency in passing the existing plan and then revising after the fact; he recognizes, however, that the public doesn't see it this way. Mr. Yamamoto and other potential rebels want official decisions by the cabinet and the LDP executive in support of Mr. Fukuda's plan. Party veterans, according to Mr. Yamamoto, fear that giving Mr. Fukuda's plan official imprimatur also means giving opponents the opportunity to sabotage the plan. Mr. Yamamoto chalks up the dispute to differing perceptions of election timing.

Is it really as simple as that? This seems to be another example of the cautious/risk-taking divide within the LDP in the face of conservative reaction (in this case in the form of the road tribe resistance to reform). For the "veterans" — Mr. Yamamoto's word — a direct, open schism in the LDP as a result of fights in the party council and the cabinet is a greater concern than the possible electoral consequences of going forward solely on the basis of the prime minister's promise. The young reformists want official decisions, even if it means open confrontation with the opponents of road construction reform and a greater risk of failure. As before — see the case from 2005 when the LDP council forced revisions to the postal reform bills on Mr. Koizumi by virtue of an unprecedented majority (as opposed to unanimous) vote — the veterans are willing to violate procedures and customs if doing so minimizes the risks to the party (as they see it).

Without official decisions, Mr. Fukuda's strategy on his compromise plan amounts to telling the people, "Trust me." It entails back-loading LDP resistance to the plan, in the hope that somehow the resistance will be placated over time. The reformists' approach entails front-loading resistance, tackling it head on, at the beginning. Even if Mr. Fukuda's plan gets derailed while in deliberation, at least the "opposition forces" will be out in the open, enabling the prime minister to draw a firm line on reform, à la Koizumi, and possibly revive his crumbling cabinet.

And even that probably won't be enough to save Mr. Fukuda, given that the DPJ's obvious retort is if it can be done from 2009, why not from 2008?

Regardless, the party's dilemma remains. Tahara Soichiro points out in Liberal Time that although there is probably a majority within the LDP in favor of ousting Mr. Fukuda, but is deterred from pushing for his replacement for fear that the formation of a new government will prompt irresistible calls for a general election. No one in the LDP is ready to risk that, given that it could be a massacre for LDP and Komeito candidates.

But how long will Mr. Fukuda be protected by fears of a general election?

I still suspect that he has until July, after which the party will take its chances on a new leader — and perhaps even resign itself to a general election that I expect will trigger the realignment once the general election produces a nearly split HR. In short, Mr. Fukuda will most likely not have the opportunity to see his road construction plan through to fruition.

Fukuda under pressure

A council of LDP, Komeito, and cabinet officials have conferred and agreed to a plan to phase out the road construction fund, based largely on the plan mooted by Prime Minister Fukuda in the waning days of March.

As anticipated, the plan calls for shifting gasoline tax revenue from the road construction fund to the general fund from fiscal 2009. As Mainichi notes, however, while the government says it will be shifting "the full amount" in the general fund, there is a giant loophole in the government-ruling parties agreement in the form of the phrase "roads judged essential will be steadily maintained," which will enable the doro zoku to preserve their empire and limit the amount of revenue shifted to the general fund. Asahi raises similar questions, wondering whether the "grand reform" Mr. Fukuda claims to be delivering is actually realizable: "If it is implemented this time, it is a huge reform that will transform LDP politics — but there is strong opposition from the doro zoku and the transport ministry."

Despite these concerns — and despite the plan's neither having been approved by the LDP's executive council nor having been approved via an official cabinet decision — the governing coalition will present its plan to the opposition next week in the hope of reaching an agreement across the aisle. Whether such an agreement is possible remains to be seen.

According to Sankei, Ozawa Ichiro has made an LDP general council and cabinet decisions prerequisites for entering into negotiations over the new plan. Mainichi suggests that the DPJ is divided on this issue, although it is vague about who exactly is calling for a "prudent" stance on the road construction issue. I would argue, however, that Mr. Ozawa is on firm ground on this issue — and beyond that, he cannot afford to appear soft lest he further undermine whatever remains of his standing with the party's reformists (who are looking for excuses to throw their weight behind a candidate to run against Mr. Ozawa in September).

By Mainichi's own reckoning, the LDP remains horrendously divided, with Mr. Fukuda pressured by the party's young reformists — who, in addition to suggesting that they'll vote against the reimplementation of the temporary tax, have like the DPJ called for a cabinet decision and LDP executive council decision on the prime minister's plan — and the doro zoku, who are not particularly pleased with Mr. Fukuda's plan. Naturally the prime minister is reluctant to go to both the cabinet and the LDP general council with his plan, where he will face strident and implacable opposition. As such, Nikai Toshihiro, chairman of the executive council has dismissed both demands, stating "Why is a decision in the executive council necessary?" (And Mr. Machimura thinks the DPJ lacks democracy?) On top of the divisions within the Tokyo party is the division between Mr. Fukuda and the party's many members in prefectural assemblies, whose political fortunes rest on their ability to secure funding from Tokyo for projects in their constituencies.

I think the DPJ is in a good position here. For the sake of party unity, Mr. Ozawa can continue to stonewall without risking too much electorally. The more protracted, public, and messy the fight over Mr. Fukuda's plan gets, the better it is for the DPJ. The more aggressively the zoku giin fight to preserve their privileges — and the more Mr. Fukuda bends to them to save his plan — the easier it will be for the DPJ to paint the LDP as retrograde and anti-reformist. And the more Mr. Fukuda pushes for his plan, the deeper he drives the wedge between reformists and zoku giin, Tokyo leadership and prefectural party, bringing the party closer to fracturing.

Cry havoc

Painted into a corner over the gasoline tax issue, Prime Minister Fukuda attempted to undercut Ozawa Ichiro in an interview on NHK Sunday, suggesting that the impetus for a grand coalition came from Mr. Ozawa. The facts of the negotiations surrounding an LDP-DPJ grand coalition — especially Watanabe Tsuneo's role in it — may never be known, but the significance of Mr. Fukuda's mentioning this now has everything to do with undermining Mr. Ozawa's position at the head of the party.

The grand coalition fiasco, after all, was the end of the DPJ's love affair with Mr. Ozawa, insofar as it was a love affair. Recalling the fiasco can only undercut Mr. Ozawa's relationship with his own party.

But Mr. Fukuda must be encouraged by the results of an Asahi poll that shows that the public is favorable towards his latest compromise solution to the gasoline tax dispute. In a phone survey of approximately 650 respondents from across Japan, 58% approved of delaying the transfer of the road construction fund into the general fund until fiscal 2009, while only 24% opposed. At the same time — and more than slightly contradictorily — only 31% approve of the plan to retain to the temporary gasoline tax and use the revenue for road construction in fiscal 2008 (55% opposed). Respondents were pleased at the prospect of a drop in gasoline tax in April by a margin of 72% to 12%, but that did not translate into more support for the DPJ. Asked whether they approve of the DPJ's position, 40% approved, 44% disapproved. Less significantly, the DPJ saw a one-point drop in its support rate to 20%, compared with the LDP's two-point increase to 31%. The LDP, however, should not be too encouraged by this poll: respondents overwhelmingly blamed both parties for the gasoline tax dispute, and when asked about the BOJ dispute, respondents approved of neither the LDP's nor the DPJ's approach to the succession battle.

There is now the open question of whether Mr. Fukuda truly has the support of the LDP in pushing for a compromise that includes provisions for the demise of the special road construction fund, whatever the time line. The opposition parties consulted with Chief Cabinet Secretary Machimura on Friday on this question, who replied, "I think that individual members hold various opinions, but I think that since it is the prime minister's decision and leadership, understanding will be reached." Mr. Fukuda indicated Friday in response to a question in the HC Budget Committee that he consulted beforehand with the ministers of finance, transportation, and internal affairs, but not with the whole cabinet.

Neither response sounds particularly convincing to me, hence Mr. Fukuda's effort Sunday to change the subject to Mr. Ozawa's shenanigans last autumn.

Hence Kono Taro felt compelled to describe Thursday's about-face as a "palace coup," with Mr. Kono and his comrades, who believe in the need to transfer special road construction funds into the general fund and are prepared to vote against the prevailing measure if it comes before the HR a second time, "transformed in a stroke from opposition forces to imperial guards" as Mr. Fukuda wholly embraced their ideas.

The idea that road tribe and its allies in prefectural and local governments will be cowed by Mr. Fukuda's sudden shift is unrealistic. Confident that they had won the argument — convinced that the government, having passed the bill, would simply wait for sixty days to elapse and then pass the bill again — there is no reason to think that the advocates of business as usual will be silenced. As Mr. Kono wrote, "Within the party there are still various voices. Whether or not the LDP will completely cut longstanding ties of obligation, whether or not it can do the ordinary things — there will not be a second chance."

The just-passed compromise bill that extends to the end of May various taxes in the special measures bill on taxation except the temporary tax means that the price of a liter of gasoline is set to drop from Tuesday. It also means that both Mr. Fukuda and Mr. Ozawa will now be under tremendous pressure that will grow by the day. Mr. Fukuda will be pressured by the reformists to hold the new line, even as the road tribe and its allies pressure Mr. Fukuda to back down from his newly announced plan. The prime minister will also face some pressure from the DPJ, which has promised once again to pass a non-binding censure motion against the prime minister if the HR re-passes the tax bill at the end of the sixty-day period. (Mind you, I don't take this threat particularly seriously — and I'm sure neither does Mr. Fukuda — because the prime minister is free to ignore the censure motion and carry on as if nothing happened. But it's worth mentioning...)

Mr. Ozawa, meanwhile, will be under pressure from opponents within his own party not to cave, lest his position as party leader become forfeit, just as the DPJ as a whole will be under pressure from the media (AKA "public opinion) and the government to compromise. Every day that passes will help the DPJ, as consumers become accustomed to paying less for gas and less willing to countenance a tax hike (and worried LDP backbenchers less willing to risk their seats to see the higher rate restored in a month's time).

The newly passed agreement may momentarily ease the sense of crisis, but not for long. The LDP and the DPJ are in the midst of a battle with significant consequences for the future of the Japanese political system.

More discouraging numbers for Fukuda

Following on the heels of a Mainichi poll that shows a public both increasingly opposed to the Fukuda government and its plans related to the temporary gasoline tax and the road construction plan and eager for the LDP and DPJ to compromise (discussed in this post by Jun Okumura), Asahi has released its first opinion poll for March.

In regards to road construction and gasoline taxes, the numbers are no better (for the government) than the Mainichi poll.

Support for directing gasoline tax revenue into the general fund has risen to 59%, with 30% opposed. Similarly, 59% are opposed to the ten-year temporary gasoline tax extension, while only 28% approve of it. 71% want the government's road maintenance plan trimmed, while only 15% want it to remain as is. Not surprisingly, when asked to evaluate Mr. Fukuda's position on the gasoline tax/road construction issue, only 18% "valued" it, while 66% did not. (Beyond that, the poll recorded a drop in the cabinet's approval ratings similar to other polls: disapproval at 50%, approval at 32%.)

Interestingly, the Asahi poll recorded stronger support for Mr. Ishiba than the Mainichi poll. The latter showed 49% in favor of his resignation, 47% opposed; the former found only 34% in favor of his resignation, while 57% felt it is unnecessary. Among those who want him to resign, only 18% thought he should resign soon. 80% felt he should resign after resolving the situation. It's not entirely clear to me why this poll found a reservoir of support for the besieged defense minister, but it does suggest that Mr. Ishiba might be able to remain in office for longer than it seemed last week.

Despite all this, the poll did show that the LDP stills enjoys an edge in support, with 29% to the DPJ's 21%. The DPJ's approval rating actually dropped three points.

Unlike Okumura-san, I don't think that the DPJ should be particularly worried about the results of this and other polls. Yes, there is always the danger that the DPJ, convinced it has founded the miracle solution to unseating the LDP, will go too far with an issue, abandoning public support in the process. But the LDP crackup is continuing apace, with the gasoline tax/road construction debate revealing not only the lingering power of the road tribe and its prefectural allies but also the frailty of the LDP's reformists, a frailty that even Mr. Koizumi's reemergence in the midst of this debate cannot correct. This debate has revealed the extent to which the government is out of touch with the public and the LDP at war with itself. Even if the LDP manages to retain a slim (simple) majority in a general election, I remain convinced that an election will serve simply as a catalyst for a transformation of the political landscape.

More on Koizumi's address

Yamamoto Ichita, reformist LDP member of the House of Councillors from Gunma-ken, writes at his blog that journalists and other members of the Diet have contacted asking him to explain what Mr. Koizumi's intention was in his Friday remarks.

He says:

You might say that the average person cannot understand the thinking of a political genius. (Laughter.) But Yamamoto Ichita's hunch is that "The purpose of that Koizumi address is to support Prime Minister Fukuda."

I got the same impression from the press coverage of Mr. Koizumi's address. The overt purpose of Mr. Koizumi's remarks was clearly to encourage Mr. Fukuda to stand strong and compromise with the DPJ on ending the special fund for road construction, a Koizumi bugbear.

In the process, however, Mr. Koizumi signaled to friend and foe alike that his word still matters.

Whether his word will prove decisive on the road fund, however, remains to be seen. The LDP is purportedly shifting its tactics: over the weekend, Ibuki Bunmei, LDP secretary-general, and Koga Makoto, LDP election strategist and road tribesman, suggested that the government might be willing to compromise with the DPJ on the road fund and the temporary gasoline tax, provided the DPJ submits its own bill on the fund. In other words, if the DPJ provides the LDP with political cover — "They made us do it!" — the government might be willing to consider scaling back the road fund beyond the modest remaubder that will be directed into the general fund in the government's plan.

The DPJ has shown no sign that it will cave on this issue (yet). In the debate in the HR Transportation committee over the government's revision of the bill mandating funding for road maintenance, the DPJ has done its duty as an opposition party, criticizing the government's plan for moving some road construction money to the general fund as a fake plan that leaves most of the road construction fund untouched.

Koizumi or no Koizumi, the parties seem no closer to reaching a compromise that will enable the Fukuda government to move all of its budget-related legislation through the HC.

Collision ahead

Thanks to Mainichi, we have a calendar of this week's events related to the progress of the budget and budget-related legislation — the latter including the special measures bill on taxation — through the House of Representatives and its committees.

It'll be a busy week.

The budget will be discussed in the Budget Committee all this week. Budget-related legislation will be discussed in the whole House on Tuesday, after which it may or may not go to the Financial and Monetary Affairs Committee. The Budget Committee will debate the subject of road funding on Thursday, with the government's bill directing the balance of gasoline tax revenue to the general fund going before the whole House the same day, after which the bill may or may not go before the Land and Transportation Committee. (In the midst of all this, Kan Naoto — apparently a glutton for punishment — will be debating the temporary gasoline tax at another meeting of the National Governors Association in Tokyo on Tuesday.)

As Mainichi notes, with the DPJ's having shifted its focus from the tax to the special fund for road construction, the battle will be particularly fierce over the government's bill shifting the gasoline tax revenue left after "essential" road construction to the general fund. The DPJ, not surprisingly, considers the government's proposal watered down and ultimately meaningless.

The deal negotiated between Messrs. Kono and Eda is likely doomed, especially once legislation is passed from the HR to the House of Councillors. Koshiish Azuma, head of the DPJ caucus in the HC, promised a decisive battle in the HC over the gasoline tax, which would presumably force the government to extend the temporary tax for two months to give the HR time to pass it again. The government has indicated that it will not relent in the face of HC (and DPJ) intransigence, and will do whatever necessary to prevent the "chaos" that would result from the expiration of the temporary tax.

I hope that the DPJ does not cave on this issue. Even if the government ultimately gets its way on both the temporary tax and the partial redirection of gasoline tax revenue, I hope the DPJ continues to make the point that the LDP would rather fund the construction of "necessary" roads (enriching the companies that build them) than, for example, the failing hospitals that dot the landscape.

Even if the LDP and the Fukuda government win this legislative battle, the DPJ can make it a Pyrrhic victory by using it to illustrate that the LDP, for all the talk of reform, remains a party unable to make the hard decisions required to secure Japan's future.

Intimations of change

The revised bill for the special measures law on taxation, which includes the government's ten-year extension of the temporary gasoline tax, has been scheduled for interpellation in the plenary session of the House of Representatives from Tuesday, 19 February. The bill on the road construction special fund will be under discussion from Thursday, 21 February. The tax bill will be submitted for questioning in the HR Financial and Monetary Affairs Committee on Wednesday.

In the midst of the slow progress towards the climax of the debate on the gasoline tax and road construction, Yamashita Yasuo (DPJ), chairman of HC State Basic Policy Committee, and Eto Seishiro, chairman of its HR counterpart (LDP), called upon Prime Minister Fukuda and DPJ President Ozawa to have a debate in the Diet. They have yet to do so this session, and did not debate last session until the final days of the session.

They're right: the party leaders should debate, regularly and publicly.

But even without regular clashes between Messrs. Fukuda and Ozawa, the current "Road Diet" (previously known as the Gasoline Diet) belies the popular notions that the Japanese political system is broken and that the DPJ is little more than a pale imitation of the LDP. The clash between the LDP and the DPJ over road construction is a policy debate with real consequences for the future of Japan — and shows that there are genuine and deep differences between the two parties. The DPJ, in taking a stand on the special fund for road construction, has placed itself firmly on the side of ending the privileged and corrupt system that has long characterized LDP rule; the LDP has shown, in the blatant attempt by road tribesmen to preserve the special fund, that vestiges of Tanaka Kakuei's LDP remain, even if their days are numbered. The line between the parties is clear; it is not just a matter of a twenty-five yen surcharge on gasoline.

Political change is happening before our eyes.