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On July 18, the meeting of the Special Committee of the House of Councillors on Comprehensive Reform of Social Security and Taxation Systems began fully-fledged deliberations on eight pieces of legislation relating to the comprehensive reform of social security and taxation systems. First to raise questions was Mitsuru Sakurai, a member of the DPJ-Shinryokufukai group in the House of Councillors. Sakurai brought up a wide-range of issues, including: (1) the significance of a bicameral system; (2) the impact on national finances of the consumption tax increase of 1997; (3) the current economic outlook; (4) economic recovery measures; (5) causes and countermeasures for deflation; (6) the internal reserves of companies; (7) matters relating to social security premiums and taxation; (8) the kind of country Japan should aim to be in terms of social security; (9) housing policy; (10) causes and countermeasures for the declining birth rate; (11) growth strategy; and (12) the necessity for a national referendum on nuclear power. These points that Sakurai raised lead to a positive discussion toward the establishment of a sustainable social security system.
Regarding the increase in consumption tax as a part of reform, Sakurai made a note that “Although there are some people who understand the necessity for a tax hike, such people are regrettably few in number.” He raised the question of whether taxation could really be raised in the current adverse economic climate and questioned the government’s recognition regarding the economy. Minister of State for Economic and Fiscal Policy Motohisa Furukawa made the following response: “The Japanese economy is on the way to recovery at a moderate pace, reflecting emerging demand for reconstruction, while difficulties continue to prevail. However, the impact of the Euro-zone debt crisis is now being felt even in China. Such downside risks could also have a negative impact on the economy of Japan and careful monitoring of the various risks that exist will need to be implemented.”
Sakurai also pointed out the following by questioning Furukawa about the government’s economic measures: “In the recent legislation it is written that measures will be taken to ensure stable economic growth from fiscal 2011 to 2020, with nominal GDP growth of 3% and real growth of 2%. However, unless economic measures are carried out decisively and thoroughly, will such growth really be achievable?” Furukawa responded that he considered overcoming deflation to be the macro-economic policy challenge of highest priority, and explained that a comprehensive policy package towards overcoming deflation as soon as possible had been decided upon and was already being implemented. He added that the Strategy for Rebirth of Japan had been formulated to follow up on the New Growth Strategy created two years ago, taking into consideration the Great East Japan Earthquake and the nuclear power station accident, and while checking for any bottlenecks that might be impeding results. He concluded by stating: “While we work to overcome deflation as soon as possible, we will also seek to thoroughly implement the Strategy for Rebirth of Japan as a retooled and enhanced version of the New Growth Strategy, thus ensuring economic growth that moves from reconstruction-led demand to private-sector-led demand.”
Sakurai raised questions in which he pointed out, “A rise in the savings rate caused by unease about the future is impacting domestic demand and will lead to deflation.” And he made a request to Prime Minister Yoshihiko Noda, “creating a sustainable social security system will lead to an escape from deflation. Social Security reform will contribute to the economy. I want you to strongly emphasise this point concerning the significance of social security reform.” In addition, he pointed some facts that over the last decade employment in the medical and welfare sectors has increased by two million jobs, and is now absorbing the impact of job losses in the manufacturing and construction industries. Sakurai made a request to the Prime Minister by saying, “During the Koizumi Administration, social security costs were referred to as being almost like unwanted baggage, but in terms of employment, the medical and welfare sectors have now become significant job creators, helping to reduce unemployment and aid social stability. The use of medical equipment and other devices is also helping to energise peripheral industries. It is for this reason that I want you to promote the necessity and significance of social security reform.”
Prime Minister Noda responded: “Eliminating worry and unease by enhancing and stabilising social security will have a commensurate economic effect by helping to ensure that excessive savings are instead channelled into consumption. Furthermore, in areas such as medicine, nursing and childcare, where there is strong potential demand, the inflow of money to such areas will create employment. I believe that the medical and health-related sectors are key sectors for future growth. The concept of ‘life innovation’ has also been incorporated in the growth strategy and I believe that it is also important to position this as a sector that will contribute to growth.”
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