Tax Hikes Reason for Japanese Election Loss

July 12, 2010 Taxation in Japan

Korea-Japan summit talks in Toronto, CanadaJapan’s ruling political party has suffered a major setback in its plan to instate tax hikes, after experiencing a defeat at the national Upper House elections.

According to media exit-polls, the Democratic Party of Japan (DPJ) has won fewer than 50 seats of the contested 121 seats in the Upper House Government elections, held on June 11th. The result has been attributed to the party’s proposal of doubling the national sales tax rate to a level of 10 percent. The DPJ previously stated that it was aiming at attaining at least 54 seats. Official election results, scheduled for release by June 13th, are expected to confirm that the DPJ will hold a maximum of 110 seats of the total 242 Upper House seats.

Naoto Kan, Prime Minister of Japan and DPJ leader, has stated that he intends to stay in office despite the election results, as his party still holds a majority of seats in the Lower House, or House of Representatives. He stated that he will continue to pursue an increased sales tax rate, in order to revive the Japanese economy and reduce national debt levels. He added that without appropriate fiscal actions, the Japanese economy could soon face a Greek-style crisis of unstable escalations of debts, along with an inevitable cut to public services and pension payments. The party’s loss of Upper House majority is expected to lead to gridlocks when the sales tax rate increase is brought up for consideration in the future.

The Prime Minister has conceded that his stance on raising the sales tax rate was perceived as sudden by national voters. Political analysts also postulated that while many rival parties agreed with Naoto Kan’s intentions, the tax hike plans were perceived as inadequately planned or explained. The Japanese Liberal Democratic Party leveled critique directly at the Prime Minister, his economic revival plans and sales tax proposal, saying that he has no clear vision on how to revive the country’s financial system while still protecting the livelihoods of taxpayers.

Despite the fact that not all votes have been counted, Naoto Kan has already commented on his party’s probable loss of seats, saying, “…I sincerely and humbly accept this result,” and “I will continue to push for responsible government.” Naoto Kan added that Japan is deeply invested in worldwide financial markets, and any financial turmoil within the country will hold significant ramifications for the worldwide economy.

Photo by KOREA.NET – Official page of the Republic of Korea