Leadership tussle to turn on economy

Osamu Kawakami and Takeshi Kurihara / Yomiuri Shimbun Staff Writers

Economic and fiscal management will form the axis of confrontation in the DPJ presidential election, it emerged during the joint news conference held Wednesday by Prime Minister Naoto Kan and former Democratic Party of Japan Secretary General Ichiro Ozawa.

Kan said his plan for achieving fiscal stability would possibly involve raising the consumption tax in the future, reasserting a policy that has caused unrest within the party.

Ozawa stressed his policy of expanding expenditure and steadily implementing the DPJ manifesto from last year's House of Representatives election, saying it was important that strategies for growing the nation's economy did not depend on foreign demand.

Ozawa budgeted his proposed increases in public spending, aimed at expanding domestic demand, at 2 trillion yen.

That figure is more than double the 920 billion yen that the Kan administration estimates it would cost to implement its own economic plan.

Ozawa offered concrete examples of areas targeted for increased spending, such as making school buildings earthquake-resistant and extending the housing eco-point system. Housing eco-points are rewards for building energy-efficient houses or improving the energy-efficiency of existing houses, and can be exchanged for goods and services.

Ozawa places importance on regional areas, and his plan proposes to enable prefectural governments to take control of the construction of expressways, with financial support from the central government. Some local governments are seeking to accelerate expressway construction.

According to Ozawa, such an arrangement will create employment in regional areas, which could revitalize the economy.

Kan is likely to postpone the construction of expressway sections deemed to be least cost-effective.

The most important issue according to Kan, however, is employment, and he emphasized job creation in his economic growth strategy.

Kan believes job creation is most urgently needed in fields that are expected to grow rapidly in the future, such as medical services, nursing care and the environmental sector. Kan proposed intensive investment, within limits, in such fields.

Kan also touted investment in domestic industry to prevent it being hollowed out.

Regarding the rising yen and weak stock market, Ozawa was critical of Kan's failure to rectify the situation.

During the press conference, Ozawa pledged to make "market interventions" to stop the yen's rise. Kan did not use the word "intervention."

On tax reform, Kan said he intended to look into a drastic overhaul of the tax system, including the possibility of a hike in the consumption tax rate.

Kan thinks raising the consumption tax is inevitable if swelling social security expenses are to be covered.

In the wake of the DPJ's defeat in the House of Councillors election in July, Kan has avoided the topic of the consumption tax, but mentioning the possible hike on Wednesday indicates a more aggressive attempt to differentiate himself from Ozawa, who is inclined to boost government revenue by giving handouts to the public.

"We'll have comprehensive discussions about issues of social security and revenue sources," Kan said.

The issue of government revenue could prove to be Ozawa's Achilles' heel.

His policy calls for a review of the entire budget, including special account budgets, to find more revenue.

However, major budgetary reviews have already been attempted by the current administration and that of former Prime Minister Yukio Hatoyama, and both failed to secure a bigger surplus.

Many DPJ members doubt Ozawa's plans for increasing revenue can be realized.

The difference between Kan and Ozawa on this issue can be seen in their attitudes toward the centerpiece policies of the DPJ's manifesto.

Ozawa said the monthly child-rearing allowance of 13,000 yen per child aged 15 or younger should be raised to 20,000 yen in fiscal 2011, and to 26,000 yen in fiscal 2012, as per the manifesto.

Kan, however, suggested the child-rearing allowance and other pillars of the manifesto, such as income compensation for farmers, should be pared back.

"If [manifesto policies] prove difficult to realize due to limited revenue, I'll give the public an explanation and seek their understanding," Kan said.

He did not mention on Wednesday the amount by which he thought the child-rearing allowance should be raised.