Japan Opposition Chief Warns Noda Against Altering Tax Bill

Japanese opposition leader Sadakazu Tanigaki said he may submit a no-confidence motion aimed at removing the ruling Democratic Party from government if it backpedals on a plan to double the sales tax.

Prime Minister Yoshihiko Noda pushed the measure through the Diet’s lower house last month in a bid to tackle Japan’s record debt and ballooning welfare outlays, at the cost of splitting his Democratic Party as dozens of its lawmakers left. Noda needs support from Tanigaki’s Liberal Democratic Party to pass the plan in the upper house, where he lacks a majority.

“If they modify it to please members of the ruling party, we are more likely to tell them to forget the whole thing than to say OK,” Tanigaki said in an interview yesterday with Bloomberg News in his Tokyo office. At that point a no- confidence motion would be “possible,” he said.

Tanigaki’s warning raises the political stakes for Noda as he seeks to secure both the enactment of the tax legislation and the survival of his administration. Noda faces re-election as leader of his party in September, and is the third DPJ prime minister since it took power in September 2009.

“For Tanigaki and the LDP, the timing is wonderful to try to precipitate a national election,” said Jeff Kingston, director of Asian Studies at Temple University in Tokyo. “The key will not be whether the LDP votes for a no-confidence motion, but whether they can also get everybody else on board.”

Photographer: Tomohiro Ohsumi/Bloomberg

Liberal Democratic Party of Japan President Sadakazu Tanigaki. Close

Liberal Democratic Party of Japan President Sadakazu Tanigaki.

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Photographer: Tomohiro Ohsumi/Bloomberg

Liberal Democratic Party of Japan President Sadakazu Tanigaki.

Majority Dwindles

After the departure of the sales tax rebels, the DPJ’s majority has dwindled, with the party and coalition partner controlling 254 of 480 seats in the lower chamber, according to the parliamentary website.

Some members who voted against the bill and remained in the party are still agitating for change. Former Prime Minister Yukio Hatoyama has set up a sales-tax study group, and lawmaker Hiroshi Kawauchi said this month he planned to put forward proposals to alter the bill.

The legislation would increase the 5 percent sales tax to 8 percent in April 2014 and to 10 percent in October 2015. Opponents argue that the increase contradicts pledges the DPJ made in coming to power in 2009, and say it may restrain consumption while failing to increase tax revenue.

Tanigaki, 67, who has called for parliament to be dissolved next month, precipitating a general election, said his party would only cooperate with the DPJ on the tax issue. He said the LDP won’t support the government on a deficit-financing bill, which Finance Minister Jun Azumi has said is essential if the government is to ensure it doesn’t run out of money in October.

Alliance ‘Difficult’

“It’s difficult to ally yourself with a group that doesn’t have a clear identity,” he said of the DPJ.

There’s no guarantee the LDP would win an election and form the next government. Disenchantment with the major parties runs deep: the approval rating for both the DPJ and LDP was 26 percent in a Nikkei newspaper poll published June 25.

Tanigaki, who has served for three years as party head, faces his own leadership contest in September. A former finance minister and a cycling enthusiast, he worked as a lawyer after graduating from the law department of the University of Tokyo, entering politics in 1983 after the sudden death of his lawmaker father.

He said he wasn’t opposed to intervening in the foreign- exchange market to stem the appreciation of the yen, which has hurt Japanese exporters. The currency rose to the strongest since 2000 against the euro this week, with Europe’s sovereign- debt woes spurring its appeal as a haven for investors.

The yen rose 0.2 percent to 78.26 per dollar as of 11:41 a.m. in Tokyo after it climbed beyond 78 yesterday for the first time since June 4. It reached a post-World-War-II record of 75.35 on Oct. 31.

Intervention Tool

“It is possible to intervene when such moves go against the economic fundamentals,” said Tanigaki. Japan shouldn’t abandon its right to intervene unilaterally, he said.

Turning to the arrival in Japan yesterday of 12 Osprey aircraft, Tanigaki said the development has sparked safety concerns, raising the danger of damage to relations with the U.S. Japan asked the U.S., which plans to deploy the Ospreys at an Okinawa base, for information about a June crash of the aircraft in Florida that injured five as well as a fatal crash in Morocco in April.

The plan to deploy the Ospreys, which can fly like an airplane or like a helicopter, has sparked protests with about 5,000 people rallying in Okinawa last month.

“If there is an accident, the U.S.-Japan alliance will become extremely difficult to handle,” Tanigaki said, urging the government to conduct independent safety checks.

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

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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