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Publication Date : 03-10-2012
Japanese Prime Minister Yoshihiko Noda's reshuffled Cabinet faces many pressing economic issues, but it is expected to have difficulty tackling them as future economic prospects are murky with global economic slowdowns.
The economic issues facing the Noda Cabinet, reshuffled Monday, include revising the tax system in conjunction with the increase of the consumption tax in April 2014; taking measures to correct the yen's excessive appreciation and end economic deflation; and compiling a budget for fiscal 2013.
Newly appointed Finance Minister Koriki Jojima must play a leading role in both rebuilding the nation's finances and pursuing economic growth.
One of the pressing issues is passing a bill to allow the issuance of deficit-covering bonds. During a press conference Monday night, Jojima expressed his idea to work positively with a proposal from the main opposition Liberal Democratic Party, which demands the fiscal 2012 budget be pared, in exchange for passing such a bill.
"I will sincerely consider it if [the LDP] presents a concrete proposal on the issue," Jojima said.
It is expected Jojima will utilise his network of opposition party contacts he cultivated as chairman of the ruling Democratic Party of Japan's Diet Affairs Committee before assuming the post of finance minister.
Based on his experiences as Diet Affairs Committee chairman, Jojima also indicated he is open to discussions with opposition parties regarding the integrated reform of the social security and tax systems, with the consumption tax hike as its main pillar.
"I understand quite well what opposition parties see as problems and their demands and I hope to take advantage of that knowledge," Jojima said.
Among other issues he faces, Jojima will have to work on measures to ease the burden on low-income earners when the consumption tax increases to 8 per cent from the current 5 per cent in April 2014.
In addition, the finance minister will also have to work on raising taxes--such as increasing income tax for high-income earners--when changes to the tax system for the next fiscal year are discussed at the end of the year.
Jojima used to serve as an executive of the labor union at food giant Ajinomoto Co. before becoming a lawmaker. He gained knowledge of welfare and labor issues during his time as acting chair of the DPJ's Policy Research Committee.
Jojima will be tested on how much he can trim wasteful spending on social security costs--which increase by 1 trillion yen every year--when the budget for fiscal 2013 is formulated toward the end of the year.
The International Monetary Fund and the World Bank will hold an annual meeting from October 12 to 14 in Tokyo. Jojima called the event "the best opportunity for the world to see Japan after starting over from scratch following the [March 11, 2011] earthquake."
"We'll do our best to have a successful meeting," Jojima added.
On the other hand, the Noda Cabinet will likely have to reconcile certain issues among its members.
For example, some members--including Seiji Maehara, state minister for national policy, and economic and fiscal policy--insist the Bank of Japan purchase foreign bonds, to which Jojima has a cautious stance.
"We should examine the issue carefully," he said.
No change in financial services
The Noda administration's financial services policy is likely to remain basically unchanged as Ikko Nakatsuka, the new state minister for financial services, served as senior vice minister in charge of the issue at the Cabinet Office from September last year.
A law that obligates financial institutions to allow small and midsize companies to review conditions for their loans will expire at the end of March next year. There have been calls for the law to be extended because its expiration could adversely affect management of these companies.
During a press conference Monday night, Nakatsuka made it clear the law would not be extended.
"[This is because] financial institutions have become more willing to accept changes in loan conditions," he said.
Therefore, the focus will move to whether the government can offer new support measures for small and midsize companies.
In addition, strengthening regulations against insider training will be among key problems facing Nakatsuka.