Noda Reshuffles Japan Cabinet in Bid for Support on Sales Tax

Japanese Prime Minister Yoshihiko Noda reshuffled his Cabinet in an effort to win opposition backing for his bill to double the consumption tax, after his bid to heal a breach in the ruling party failed.

Noda today named Satoshi Morimoto as defense minister, replacing Naoki Tanaka, and Yuichiro Hata as transportation minister, in place of Takeshi Maeda. Tanaka and Maeda were censured by parliament in April and the main opposition Liberal Democratic Party had insisted they be replaced as a condition to negotiate on the sales tax bill.

“We are reaching a very important juncture, with less than 20 days to go until the end of the parliamentary session,” Noda said at a press conference in Tokyo. “I reshuffled the Cabinet to create an environment for progress on a number of issues, including the tax and welfare reform bill now being discussed.”

Noda has staked his career on the bill to double the five percent tax and address a debt burden that Fitch Ratings cited last month in cutting Japan’s sovereign credit rating. LDP leader Sadakazu Tanigaki has signaled that a deal on the legislation is possible.

“This is all about getting rid of the two cabinet ministers who were censured,” said Jiro Yamaguchi, a political science professor at Hokkaido University. “It’s hard to say how effective this will be. The LDP knows how to get the better of Noda, so they may demand something more.”

Also named to the Cabinet were Tadahiro Matsushita as financial services minister, replacing Shozaburo Jimi, Makoto Taki as justice minister and Akira Gunji as agriculture minister. The new ministers are all lawmakers with the exception of Morimoto, a professor at Takushoku University in Tokyo.

Finance Minister Jun Azumi, Trade and Industry Minister Yukio Edano and Foreign Minister Koichiro Gemba kept their posts.

Ozawa Showdown

The prime minister yesterday failed for the second time in a week to persuade ruling party powerbroker Ichiro Ozawa to drop his opposition to a tax increase, hindering efforts to pay for rising welfare costs. The Noda-Ozawa showdown threatens to widen a rift in the Democratic Party of Japan three years after it ousted the LDP from half a century of rule.

Maeda and defense chief Tanaka were censured on April 20 by the opposition-controlled upper house of parliament. Today’s shakeup was the second time Noda has replaced some ministers since he took office in September, and Morimoto becomes his third defense minister.

Ozawa, head of the DPJ’s largest faction and engineer of its August 2009 election victory, says a tax increase contradicts the party’s platform and could fail in its aim of boosting the economy if it prompts consumers to cut spending. Noda has said the combination of the world’s most-rapidly aging society and a declining birthrate has put Japan in an “unprecedented situation” that requires increasing revenue and reining in welfare expenditures.

Ozawa’s influence in the DPJ has risen since he was acquitted last month of charges of campaign finance violations.

To contact the reporters on this story: Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net; Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.