Noda’s Rocky Road


A new administration headed by Prime Minister Noda Yoshihiko took office on September 2. According to the results of a poll conducted by the Yomiuri Shimbun on the launch of the new government, it enjoyed an initial support rate of 65% (poll conducted on September 2–3 and published September 4). A Mainichi Newspapers poll showed a somewhat lower support rate of 56% (Mainichi Shimbun, September 4), but even this was far higher than the dismal 15% figure for the cabinet of Noda’s predecessor, Kan Naoto, according to an August 20–21 Mainichi poll (published August 22).

Results like these, however, are liable to be transient. What is of more concern is the loss of public trust in government. For example, a September 3–4 Yomiuri Shimbun poll asked respondents to rate various organs and groups for their performance in responding to the Great East Japan Earthquake disaster in March; the Self-Defense Forces got a high positive rating of 82%, followed by volunteers (73%), firefighters (52%), local governments in the disaster area (42%), and police (40%), but the government’s figure was a mere 6%, and the National Diet’s was 3%. If we consider that Prime Minister Kan seemed to be more interested in prolonging his own hold on power than on dealing with the disaster, these results are not surprising. But with such a low level of public trust, it will be extremely difficult for any government to undertake bold policy initiatives concerning issues on which public opinion is split, such as participation in the negotiations on the proposed Trans-Pacific Partnership and the combined reform of the social security and tax systems.

This difficulty became apparent during the Noda administration’s first month in power. On September 27 the cabinet and ruling parties agreed on a set of temporary tax hikes to help fund the disaster reconstruction effort, including increases in national and local individual income taxes, corporate income taxes, and the tobacco tax for periods of 3–10 years. But reaching this decision was no simple matter.

On September 16 the government’s Tax Commission decided on a pair of proposals to submit to the government and ruling parties, centering on hikes in individual and corporate income taxes. According to media reports, the commission actually came up with three proposals, but when Finance Minister Azumi Jun reported on them to Prime Minister Noda, the prime minister directed him to exclude the one calling for a hike in the consumption tax, since it has already been decided to increase this tax to provide funds for social security, and opposition to hiking it runs deep within the ruling Democratic Party of Japan. Despite this move by Noda to placate members of his own party, the plenary meeting of the DPJ’s Tax System Research Committee called on September 26 to seek approval for the government’s proposal produced a loud chorus of opposing voices, and a final decision had to be postponed till the next day.

According to a Mainichi poll published on September 4, 53% of those surveyed approved the idea of raising the consumption tax to provide revenues for social security and reconstruction after the March disaster, but a substantial minority of 43% were opposed. Given this split in public opinion, it is no wonder that opinions on tax reform are sharply divided within the DPJ. But in view of the resistance the administration faced from DPJ members even for disaster-related revenue measures, I cannot help worrying about the prospects for the combined reform of social security and taxes. Late in June the government and ruling parties agreed on a combined reform plan that included a consumption tax hike. The government plans to submit legislation related to this hike to the Diet next year, providing for an increase from the current rate of 5% to 10%, to be implemented in stages by the middle of the current decade. But public trust in the government and the legislature is at rock-bottom levels, as noted above, and the next general election for the lower house is approaching. The question is how well the Noda administration will be able to maintain a consistent, strong commitment to this combined reform agenda in this difficult context.

Interesting Developments in Myanmar

Recently we have seen a series of noteworthy developments in Myanmar (Burma). This country had been under military rule since the coup d’état of 1988, but a general election was held in November last year, and the new legislature that convened late in January this year selected Thein Sein as president on February 4. Initially the transfer of power to a civilian government was seen as being merely for show. Almost 80% of the seats in the newly elected legislature were held by the Union Solidarity and Development Party, the party of the military junta’s camp, and the new president had served as prime minister under the military regime. But the State Peace and Development Council, which had been the supreme decision-making body under the junta, was dissolved, and by August it had become fairly clear that Senior General Than Shwe, who had formerly headed this council, would retire.

A number of other events of note have also occurred along with the change at the top level of the government. Late in May Thein Sein visited China, his first trip outside of Southeast Asia since becoming president. He and Chinese President Hu Jintao agreed to upgrade the relationship between their two countries to a comprehensive strategic partnership, expanding their cooperation in such areas as energy, electric power, and transportation infrastructure.

Since 1988 China has provided large amounts of economic and military assistance to Myanmar, and recently it has been implementing many major economic cooperation projects. For example, as of last year Chinese enterprises were involved in 63 hydroelectric development projects around the country, and work is underway on the construction of oil and gas pipelines and a highway from Kunming, capital of China’s Yunnan Province, to Myanmar’s deep-water port of Kyaukpyu on the Indian Ocean. And as of January this year the cumulative total of China’s direct investment in Myanmar came to $9.6 billion (about ¥740 billion); China has thus overtaken Thailand to become Myanmar’s biggest source of investment. Bilateral trade last year amounted to $4.4 billion (¥340 billion), 50% more than the year before. So it was natural for the new president to select China as his first destination outside of the region.

Meanwhile, however, something unexpected also occurred. In April Myanmar declared its candidacy for the presidency of the Association of Southeast Asian Nations in 2014. Myanmar was originally scheduled to hold the ASEAN presidency in 2006, but it was forced to decline the office under pressure from other ASEAN members concerned over the prospect that Western countries would boycott the regular forums hosted by ASEAN if Myanmar were presiding. In order for Myanmar to assume the association’s presidency, it will need to produce substantial results in the area of domestic political reform, including the freeing of political prisoners. The announcement of its candidacy signaled the new government’s readiness to take such moves. In August President Thein Sein met with Aung San Suu Kyi, the symbol of Myanmar’s democracy movement, and since then the talks between her and the government seem to have progressed considerably. On September 30 she met with Labor Minister Aung Kyi, who declared afterwards that they had discussed a plan to grant amnesty to political prisoners. That same day President Thein Sein reported to the legislature that the government had decided to suspend construction of the Myitsone hydroelectric power dam, a $3.6 billion (¥277 billion) project being undertaken with Chinese assistance on the Irrawaddy River, in the state of Kachin. This decision to shelve the project, which was opposed by ethnic Kachin rebels and others within the country, showed the government putting precedence on national reconciliation over economic cooperation with China.

Evidently Thein Sein’s administration is focusing on reconciliation with domestic rebels and dissidents and on economic growth to improve the nation’s living standard, for which purpose it seeks the lifting of the sanctions Western countries have imposed. And recently the economy has been performing well. For one thing, foreign direct investment has surged, reaching about $20 billion (¥1.5 trillion) in 2010, a figure larger than the cumulative total for the years from 1988 through 2009 ($16 billion). Myanmar has also embarked on economic cooperation projects with countries other than China. The prime example is the development of Dawei, a city in southern Myanmar. The massive project, with a total cost of $58 billion (¥4.5 trillion) aims to create a port to serve as the gateway on the Indian Ocean for an east-west corridor linking Myanmar to Thailand, Cambodia, and Vietnam; plans also call for the construction of factories and refineries.

The new government of Myanmar, like those of many other East Asian countries, thus seems to have identified economic growth as its main political priority. And to succeed in this area, it needs to have Western countries lift their sanctions, improve its relations with the international community, and pursue economic cooperation with Japan and other countries. This set of policies will also serve to prevent Myanmar from becoming too dependent on China.

China is energetically undertaking economic cooperation with its neighbors to the south, focusing on the so-called Greater Mekong Subregion, where it is involved in building expressways and high-speed rail links, developing hydroelectric power sources, and extending power transmission grids. China’s Yunnan Province has already become the center of a hub-and-spokes set of links with Vietnam, Thailand, and Myanmar. But for the sake of regional market integration and economic development, these Southeast Asian countries must also develop their east-west links.

As noted above, Myanmar has been under sanctions imposed by Western countries since 1988, but recently there have been signs of change in this area as well. On September 29, Myanmar’s Foreign Minister Munna Waung Lwin met in Washington with US government officials, including Kurt Campbell, assistant secretary of state for East Asian and Pacific Affairs, and Derek Mitchell, special envoy and policy coordinator for Myanmar. If Myanmar’s government takes concrete steps to implement political reform, including the release of political prisoners, the United States and other countries may move to lift their sanctions.

To sum up, the possibility has emerged for great change in Myanmar. It is a welcome development, therefore, that Minister of Foreign Affairs Genba announced the resumption of Japanese aid to Myanmar in mid-October.

Shiraishi Takashi Noda Yoshihiko Democratic Party of Japan support rate tax hike Tax System Research Committee Myanmar Thein Sein ASEAN Aung San Suu Kyi Dawei