Stage set for bipartisan talks on consumption tax hike
Drastic reform of the social security system, long overdue, has finally begun. However, this is just a milestone. Reform must not end up as just a fantasy.
The joint panel of the government and Democratic Party of Japan-led ruling coalition discussing social security reform, which is headed by Prime Minister Naoto Kan, formally approved an integrated social security and tax reform plan on Thursday.
The plan stipulates that the consumption tax rate will be raised in stages to 10 percent by the mid-2010s, to secure resources to fund the social security system.
An earlier draft set the deadline for the consumption tax rate hike at "fiscal 2015," but the approved plan used rather vague wording in consideration of opposition within the DPJ. Cabinet approval will also be put off.
This could raise doubts over whether the government is really serious about social security reform and financial reconstruction.
However, the government was adamant about stating a "10 percent tax rate." Some DPJ members demanded that "about" be added to the targeted rate, but the government refused. It should be given credit for this.
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Joint action important
It is significant that the DPJ and the main opposition Liberal Democratic Party moved in tandem over the 10 percent tax rate, in an effort to secure resources to fund the social security system. The minimum conditions have been met to realize cross-party talks.
Nevertheless, there are many unresolved issues involving the reform plan, including the timing of the increase in the consumption tax rate. The reform plan sets an upturn in the economy as a requirement for raising the tax rate, but it is difficult to determine that the economy has improved if the criteria for such a judgment are left unclear.
Also, it is not clear how much of the extra revenue resulting from the tax hike will be allocated to local governments' social security budgets, and the reform plan is rather weak in terms of eliminating waste in the health care and nursing care systems to make them more efficient.
There is likely to be much opposition and many questions over the specifics of the reforms. However, now is the time to bury minor differences for the common good.
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Time running out
There is little time left to achieve the consumption tax rate hike by the mid-2010s. The ruling and opposition parties should start talks quickly. We believe the opposition parties have no objection to the direction of the reforms themselves. Whoever the prime minister is, reforms must proceed.
It is unreasonable for the opposition parties not to participate in discussions simply because of their antipathy to the Kan administration.
Within the DPJ, there will likely be active bargaining over choosing a successor to Kan, who has already expressed his intention to resign. It is possible that the consumption tax rate hike may become a point of contention in the DPJ presidential election.
Kaoru Yosano, state minister in charge of economic and fiscal policy, worked on drawing up the integrated reform plan and has said the DPJ should maintain the plan even after Kan resigns.
"The DPJ, not DPJ President Kan as an individual, decided [on the reform plan]," Yosano said.
That is only right. The government and the ruling camp must not allow what they have decided on to be set back.
China still learning its world power role
The Chinese Communist Party (CCP) commemorated the 90th anniversary of its founding on Friday.
The international community expects China, which has become the second-largest economy in the world, to fulfill its responsibilities as a major power.
To do that, China first should correct its habit of unilaterally pushing its opinions through on others and repeatedly causing friction with neighboring countries by intimidating them.
The Chinese military, which is increasing its strength through such steps as building its first aircraft carrier, is gaining an even greater voice within the country. Military influence is seen as a factor behind the hard-line attitudes taken by the Chinese government concerning issues involving sovereignty and maritime interests.
This might indicate disrespect for the conventional Chinese system in which the party leads the military. We cannot dispel our concerns.
The launch of bullet train services connecting Beijing and Shanghai was timed to coincide with the party's 90th anniversary. The train is apparently a technically modified version of the Hayate train that runs on Japan's Tohoku Shinkansen line, but the Chinese side claims its train uses only original technology developed by that country.
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Intellectual property unsafe
When Japanese bullet train technology was offered to China, its Railways Ministry reportedly promised Japanese companies not to transfer the technology to third countries. It is surprising to see that the Chinese side has now filed patent applications on the bullet train in Europe and four countries, including the United States, regardless of that promise.
However, the Japanese side must have known beforehand that China does not respect the intellectual property rights of others. Japan apparently let its guard down.
The Chinese government has domestic problems, too.
On a daily basis, farmers and urban residents are holding mass protests and even rioting against the forcible expropriation of land and the high-handedness and corruption of public officials. According to one estimate, there are now more than 180,000 such incidents per year.
The Chinese public's dissatisfaction with social inequalities, symbolized by a widening gap between the rich and the poor, is reaching its limit.
The costs of maintaining law and order exceeded defense spending this year for the first time in the history of China's national budget, a fact that suggests the seriousness of the social unrest in the country.
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Human rights disregarded
Authorities are detaining and putting under house arrest one intellectual after another for voicing objections to the government and the party. The authorities' disrespect for human rights is outrageous.
Conflicts between Han people and ethnic minorities such as Tibetans and Uygurs continue. Riots by Mongolians have erupted recently. They show the limitations of Beijing's policy toward ethnic minorities, which focuses exclusively on economic development.
When it was founded in 1921, the CCP had only a little over 50 members. Today, it has expanded into a gigantic organization with a membership of more than 80 million people.
Those party members, who account for only 6 percent of the whole population, are the elites of Chinese society. They comprise a special interest group enjoying various privileges through the party organization or as senior officials of the government and state enterprises. "Realization of a harmonious society," a slogan chanted by the party leaders, rings hollow.
The CCP will hold a party convention in autumn next year to choose Xi Jinping as new general secretary to succeed current General Secretary and President Hu Jintao, who is set to step down.
Xi, who will be put in charge of steering the major power, has extremely heavy responsibilities.
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