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2015/10/15
Okada describes Abenomics as “failure”, calls for new measures to be taken
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On October 15, DPJ President Katsuya Okada held his regular press conference at party headquarters.
According to media reports, Prime Minister Abe has issued instructions to the Chair of LDP Research Commission on the Tax System, Yoichi Miyazawa, to study introducing reduced tax rates at the same time as the consumption tax is increased to 10%. Okada pointed out that such reduced rates “also benefit those on high incomes. They would also require the allocation of equivalent financial resources, and the budget available for social security would be reduced correspondingly. How will the government cope with this? The current framework has been created on the presumption that an amount equivalent to a 1% increase in consumption tax will be used to enhance the social security system, so if a large amount needs to be used to fund reduced tax rates, the government will either have to abandon the idea of reducing the national debt, or give up on the plan to enhance the social security system.” He also indicated that “It is necessary for the government to explain clearly what the scope of the reduced tax rates will be, and how they will prevent the reduced rates from becoming a potential hotbed of special interests.”
Okada further repeated the DPJ’s policy which was to call for the establishment of refundable tax credits that would compensate those on low incomes.
Okada also commented on the monthly economic report for October, which had been released by the government on October 14. He stated, “Whatever your perspective, it is clear that the economy has come to a total standstill. Machinery orders have decreased for the second month in a row, the index of current business conditions has worsened for the second month running, and the predictions in the economy watchers survey have also become more pessimistic for the second month running. The Prime Minister is saying that the economy is in a virtuous cycle, but whether it be capital investment or consumption, one can see absolutely no sign of a virtuous cycle beginning in future, and he is just attempting to misrepresent the situation.” Okada also discussed the direction of the economy since the launch of the Abe administration in 2012. His evaluation was that “new dimension” in quantitative easing, the impact of the resulting weak yen and high share prices and flexible fiscal policy management, and the increase in public works produced what seemed to be an improvement, at least in certain sectors, but that this lasted for less than a year. Okada pointed out that “The government might have kept on saying that this is due to the introduction of the consumption tax increase, but in fact minus growth was already occurring before that. The government must accept that Abenomics is a failure, and develop new policy measures.”
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