As the likely dissolution of the House of Representatives approaches, those close to Prime Minister Shinzo Abe have begun hinting that the ruling Liberal Democratic Party (LDP)'s election platform will include new ways to use revenue from a coming consumption tax hike. Notably, there had been not a peep on the subject within the LDP ranks until now.
The consumption tax is scheduled to go from 8 percent to 10 percent in October 2019, boosting annual government revenue by an estimated 5 trillion yen. At present, it is official policy that about 4 trillion yen of that will be put to paying off the national debt, with the remaining 1 trillion yen or so used to expand social programs.
The proposal that has bobbed to the political surface in recent days would use a portion of the revenue that was to be allocated to debt reduction to fund the elimination of tuition fees at Japan's educational institutions.
The Abe administration is looking to make kindergartens and daycare centers free as soon as possible. However, the government has to come up with 700 billion yen to cover the cost, while ending tuition at institutes of higher education would require yet more money. It would seem that this mathematical squeeze has prompted the Abe administration to re-examine how to use that 5 trillion yen coming down the pike.
Abe has used the consumption tax hike as a political football before. Just before both the 2014 general election and the 2016 House of Councillors election, Abe announced the hike would be delayed. This despite the fact that three major parties, including the LDP, signed an agreement on social welfare and tax reform which had at its heart the promise not to use social program funding as a political tool. Abe's pre-election consumption tax hike delays made a mockery of this agreement.
And now we hear of yet another sudden shift in how the government wants to spend the nation's money. The LDP again seems ready to use the fate of the tax hike as an election ploy. Until very recently, the party had been discussing funding free education through a scheme modeled on insurance premiums and informally dubbed a "children's insurance" plan. We have to ask, where on earth did the consumption tax revenue switch-up idea come from? When was it ever discussed, and by whom?
Furthermore, if the new tax revenues are indeed shifted away from debt reduction, what becomes of the government's fiscal 2020 goalpost for getting Japan's primary balance back in the black? Would it not become difficult in the extreme to meet that deadline?
What's more, using the revenue for ending school fees would be a major departure from the as-yet extant principle of putting the money into four pre-existing areas of social welfare. For this to be changed without discussion is unthinkable for an organized political party.
We must also point out that it is in fact the largest opposition Democratic Party (DP) that has driven debate on how to use the tax hike revenue. If the LDP starts singing the same tune on the subject as opposition forces, then the issue could be a Diet consensus-builder. That being the case, there is no reason to dissolve the lower house and make the tax money an election issue at all.
Forced to search for some defensible rationale for dissolving the chamber, it seems likely the LDP was drawn to this calculated attempt to blur the differences between itself and opposition parties. Once the plan to send Japan to the polls is finalized, we may see the usual process for calling an election run in reverse; the house dissolved, and then a mad scramble to dig up a reason why.