Parties lavish in election pledges, reluctant to cut spending

October 17, 2017

TOKYO- Japan's ruling and opposition parties are clearly divided over a planned hike in the consumption tax rate to 10 percent in two years, one of key issues in Sunday's House of Representatives election.

The ruling camp, comprising Prime Minister Shinzo Abe-led Liberal Democratic Party and its partner, Komeito, argues that the consumption tax should be raised from the current 8 pct in October 2019 as planned, and part of the expected revenue from the rate hike should be spent to realize tuition-free education or other measures.

Opposition parties are calling for a freeze on the tax hike or object to it.

But the ruling and opposition camps share a reluctance to cut spending, which would cause pain to citizens.

The political parties' election pledges look lavish, giving rise to fears that Japan's fiscal discipline will further deteriorate.

"We will drastically change how (the revenue from) the consumption tax will be spent," Abe said in a speech on Thursday in Niigata Prefecture, central Japan. "We will actively disburse funds for child-rearing generations and people looking after elderly family members in need of care."

After twice postponing the tax hike to 10 percent, Abe's government now plans to spend 2 trillion yen of the expected revenue from it, estimated at more than 5 trillion yen, on measures such as tuition-free education, despite its earlier plan to use the revenue to repay state debts.

The topic is particularly important for Abe, who dissolved the lower chamber of parliament for a snap election on the grounds that he wants a fresh mandate to change how the expected revenue of the tax hike will be spent.

Natsuo Yamaguchi, leader of Komeito, also explained that the purpose of the election is to seek public judgement on the proposed change of tax revenue use, at a meeting with officials of the Japan Business Federation, or Keidanren.

But an increase in spending will make it more difficult for the government to improve the nation's fiscal health. Jiji Press