Just Don't Do It

The Gadfly on the Wall believes that the appointment of Yosano Kaoru and Machimura Nobutaka to the Tax Committee will result in a raising of the consumption tax.

I am not so sure.

I do not think that Yosano Kaoru is in the pocket of the Ministry of Finance. In the final months of the Koizumi Administration, he was arrayed against the more happy-go-lucky stance of Financial Services Minister Takenaka Heizo, LDP Secretary General Takebe Tsutomu and the then Chairman of the Policy Research Council Nakagawa Hidenao.

However, Yosano's stance was tactical, not strategic. With Tanigaki Sadakazu an effective check on Finance Ministry influence and Bank of Japan Governor Fukui Toshihiko sidelined by the Murakami investment scandal, the pro-fiscal budget balance team needed help. Yosano, who has a nose for going where he is wanted, found himself playing alongside the hard-money, balanced budget side.

With Yosano on the tax hot seat, I think he will play a different game. He is not a fool--he knows that the consumption tax is regressive and will bite the elderly on fixed incomes hardest, followed by young couples just starting out. Yosano knows that trying to balance the difference between revenues and expenditures on the backs of retirees and the young families is a recipe for electoral meltdown.

Even though he is neither one of the top party leaders nor a member of the Cabinet, with his head in a noose awaiting the outcome of the July 2007 elections, Yosano is still very sensitive about electoral failure. He is the oldest of the Koizumi children. He was in the political wilderness, sitting around, talking about politics but not practicing it much. Then Koizumi magic came along and gave Yosano the power him to reclaim his downtown district from the Democratic usurper Kaieda Banri.

The government has given assurances of no consumption tax rises before next fall as a political bouquet to the electorate. I think with the rise in personal incomes from rising wages, land sales and stock sales--and continued rises in revenues from corporate tax receipts (unless, of course, the government decides to give away the store to the corporations), the debate over a rise in the consumption tax will be pushed out into 2008.