Japan upstart party has US$37bil offer to back PM Ishiba’s budget


Japanese Prime Minister Shigeru Ishiba. — Bloomberg

TOKYO: Japanese Prime Minister Shigeru Ishiba’s goal of getting the annual budget passed – and perhaps the fate of his own political future – is shaping up to be a multi-billion-dollar battle for votes from two mid-sized opposition parties.

The Japan Innovation Party wants an agreement from Ishiba’s ruling coalition on moving forward with a package of education and social welfare cost exemptions worth around 5.7 trillion yen in order to consider voting for the budget, the co-leader of the party said on Tuesday.

“We’ll make a decision on the budget based on whether our policy goals can all be realised,” Seiji Maehara, the co-leader of the Osaka-based party, said in an interview with Bloomberg.

The clock is ticking for Ishiba to find the votes to pass the national budget before the end of March after his ruling coalition lost its majority in an election last October.

His only realistic options for garnering enough support to pass the budget are to do a deal with the Japan Innovation Party or the smaller Democratic Party for the People (DPP).

Neither option would come cheap.

The DPP’s policy chief told Bloomberg on Monday the party would continue to demand that the ceiling on tax-free income be raised to 1.78 million yen from the current level of 1.03 million yen.

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So far, the coalition has balked at lifting the ceiling to that level. Doing so would result in eight trillion yen or so of lost tax revenue, according to the finance ministry.

Cross-party brinkmanship over budgets isn’t unusual in democracies, but it’s relatively rare in Japan, where governments headed by the Liberal Democratic Party (LDP) have had a virtual lock on power for decades.

It also piled pressure on Ishiba, who was surprisingly propelled into power last year from the party sidelines.

As the leader of a minority government, he has used his first few months as prime minister to emphasise cooperation with opposition parties when policy interests align.

Maehara’s Japan Innovation Party, which advocates de-regulation and reforms to encourage entrepreneurship, has similar views to the LDP in areas such as foreign policy.

The party held ambitions of breaking out of its electoral stronghold in the region around Osaka to become a national power, but it lost seats in the October election and dropped its leader.

Maehara became co-leader with Osaka prefectural governor Hirofumi Yoshimura.

Maehara has long advocated free education, and the party is now using the leverage it has over the LDP to push the concept as a policy goal.

The party wants a range of benefits introduced, including free high school and university education for all. Its platform also calls for a lower social welfare insurance burden.

Funding for the policies could be found from the Foreign Exchange Special Account, which includes gains from foreign exchange intervention, and short-term bond issuance to add to the account, Maehara said.

The party also wants over-the-counter medication removed from the national health insurance programme to help lower premiums.

LDP leaders have indicated they are open to discussing the Japan Innovation Party’s policy demands, but introducing free education from the fiscal year starting in April would be too soon.

In the interview, Maehara said the Bank of Japan’s (BoJ) decision last week to raise interest rates was appropriate.

Policy normalisation was needed to give the BoJ room to cut rates if Japan’s economy reverses course and enters recession, he said.

“I think the BoJ should gradually raise interest rates to 1%, while keeping an eye on the economic and international situation,” he said. — Bloomberg

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