Japan Press Weekly

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2012 February 8 - 14 TOP3 [POLITICS]

Focus on household consumption and small firms to spur economic upturn: Shii

Japanese Communist Party Chair Shii Kazuo on February 10 presented an approach to end the ongoing financial crisis at the Lower House Budget Committee that entails bolstering household consumption which accounts for 60% in domestic demand as well as increased support for small- and- medium-sized businesses which account for 70% in employment.

Compared to the year before the consumption tax rate was raised to 5% from 3% in 1997, Shii pointed out that tax revenues from the consumption tax increased to 12.7 trillion yen in 2011 from 7.6 trillion yen in 1996 but the total national coffers decreased to 76.2 trillion yen from 90.3 trillion yen during the same period of time.

“How did this come about?” Shii asked.

Financial Minister Azumi Jun answered, “Because the government ‘flattened’ income and residential taxes.”

Shii in reply said, “You’ve just now used the word ‘flattened.’ This means that the government reduced taxes for the wealthy. The generous corporate tax relief also contributed to a 14.1 trillion yen-decrease in the country’s tax revenues.”

Back in 1997 when 9 trillion yen in burdens, including a 5% consumption tax, was imposed, people’s yearly income was continuing growing. Their after-tax income increased from 5.29 million yen in 1990 to 5.96 million yen in 1997, Shii pointed out.

Shii pointed out, however, that the present after-tax income decreased by 920,000 yen from 5.96 million yen in 1997 and that consumer spending now totals 3.7 million yen, down 590,000 yen from 4.29 million yen in 1997.

Shii referred to an additional burden the general public will have to shoulder between now and 2015 when the consumption tax rate is raised to 10%.

According to his estimate, more than 20 trillion yen will be added to the present burden as a result of the planned increase in public insurance premiums, the planned cutbacks in social security programs, and the planned increase in the consumption tax.

Holding up a panel, Shii simulated how small- and- medium-sized corporations would be affected.

The panel showed that 50% of corporations with sales of 100-200 million yen indicated that they “cannot shift the consumption tax increase onto their sales price”. Among smaller corporations with sales of 10-15 million yen, those who indicated that they “cannot” do so reach 71%.

Shii said, “The consumption tax is not levied on profits but on sales. In short, they must pay whether they make a profit or go into the red.”

Shii asserted, “A whopping 73% of small- and- medium-sized businesses are presently in the red though they provide 70% of national employment.”

Focusing on household consumption accounting for 60% of domestic demand and on small companies providing 70% of national employment as a lifeline for economic recovery, Shii presented the JCP proposal to improve social welfare programs while overcoming the ongoing financial crisis without imposing an increase in the consumption tax.

The following are the policy prescriptions Shii presented:

The government should eliminate the wasteful budgetary expenditures for promoting unneeded large development projects and nuclear power generation, the so-called “sympathy” budget for the stationing of the U.S. forces in Japan, and governmental subsidies to political parties; and the government must revamp the highly regressive tax system that favors large corporations and the rich at the expense of the majority.

The government must implement a drastic expansion of social security programs and secure financial resources through tax revisions based on the “principle of ability to pay” and “progressive taxation”.

Rules and regulations should reflect the interests of the general public in which regular employment is the norm and the minimum wages increase; and the government pursues sound economic growth led by domestic demand by legislating that a portion of the 260 trillion yen in internal reserves large corporations have hoarded be used to benefit society at large.