Nakasone Expected to Survive Sales tax Defeat

Prime Minister Yasuhiro Nakasone’s unpopular sales tax plan has been defeated and although fellow politicians and political analysts agree he has suffered a grave loss of face only a few are willing to write him off.

Michio Watanabe, a Nakasone faction member and deputy secretary general of the ruling Liberal Democratic Party, LDP, is one of those who believes he will survive.

“He’s tough, he won’t step down,” but “will hang on to the death” at least until his term ends on October 30, Watanabe told Reuters.

The sales tax scheme was a mainstay in Nakasone’s plans to revamp the nation’s tax system for the first time in 36 years. Watanabe acknowledged that the five pct sales tax was a mistake.

“It was too greedy,” he said. A two or three pct tariff might have been easier to swallow, he said.

One popular school of thought among skeptical analysts is that Nakasone will be remain in office at least until the June 8-10 summit of industrialised nations in Venice.

A Western diplomatic observer said he believed that Nakasone would be at the summit as prime minister. But he would not bet on his chances of survival up until October.

Masamichi Inoki, a senior fellow at the conservative Institute of Peace and Security, said he did not think Nakasone had suffered irreparable damage.

“He will certainly hang on for the summit,” Inoki said.

In any event, the general belief now is that the five pct sales tax, as championed by Nakasone, is a dead issue but that an indirect tax, in another form, will be introduced by the LDP.

Inoki said he believed the issue would be resurrected as early as the next Diet (parliament) meets. The current session finishes on May 27.

The newspaper Tokyo Shimbun expressed another stream of opinion, stating that Nakasone might well get another year to deal with the unfinished and unpopular business of tax reform.

The government has to find a way of generating revenue to support an expected glut of elderly Japanese.

And the only means of drumming up the money is to levy an indirect tax, said Watanabe, a former Minister of International Trade and Industry.

The next prime minister will have to grapple with an indirect tax, and “whoever is the next prime minister won’t be in the job very long,” Watanabe said.

Watanabe said he doubted the next prime minister would be any of the three so-called “New Leaders,” LDP secretary general Noboru Takeshita, LDP executive council chairman Shintaro Abe, and Finance Minister Kiichi Miyazawa. Each of them controls a powerful LDP faction. “It will be somebody else,” he said.

Political science professor Rei Shiratori of Dokkyo University gave one of the darkest readings on Nakasone’s political future.

“Soon after the Venice summit, there will be a move to change the government by the New Leaders,” Shiratori said.

“He can’t fight on,” he said.

He said Nakasone had a special emotional attachment to the sales tax plan as the last and most important item in Japan’s purge of policies inherited from the U.S. Occupation.

Shiratori said an indirect tax will have to be levied, but “to introduce such a tax, they’ll have to change the prime minister.”

Nevertheless, Shiratori said he believes Nakasone could hang on until as late as September.