The political and policy fall-out from the Japanese earthquake and tsunami
18 March 2011
Author: Aurelia George Mulgan, UNSW@ADFA
In the week before Japan’s earthquake and tsunami, observers quipped that Prime Minister Kan needed a major disaster to rescue his administration. Well, he got one, at a terrible price to his nation, and it certainly took the immediate heat off his administration — coming from members of his own party as well as from the opposition.
The crisis will either sink or save the Kan government, which is now on the brink of a full-blown nuclear emergency.
National disasters of this kind either provide an opportunity for governments to exercise strong leadership or they cruelly expose the lack of leadership ability. If Kan is correct in saying that this is the biggest disaster facing the nation since WWII, then restoring the nation to growth may become the biggest challenge that any Japanese government has faced since the end of the war.
It is certainly the end of ‘politics as usual.’
The LDP has switched from conflict to cooperation mode — a truce has been called between the LDP and DPJ — it’s all hands to the wheel. For Diet members, that means passing the necessary legislation to fund disaster relief and reconstruction assistance, including legislation to secure the necessary funds. Something approximating a government of national unity seems to be emerging. Of course, there will be haggling over how much is to be spent, and how the funds are to be raised — whether by issuing government bonds, including special reconstruction bonds or special revival national bonds, or by raising taxes including the consumption tax, or both. Politics is not altogether absent from these discussions.
For the DPJ, the question is whether or to what extent it relinquishes key planks in its manifesto such as the child allowance and income subsidies to farmers, and redirects these funds to disaster reconstruction. A suggestion has come from some LDP members that the government should abolish its child-allowance program in entirety, describing it as a ‘pork barrel’ measure. LDP President Tanigaki Sadakazu has called for a Tohoku Revival New Deal policy.
The necessary expenditures to fund Japan’s revival and reconstruction will inevitably exacerbate its fiscal debt problem. This was a disaster Japan could not afford to have. Not only will the debt expand, but government revenue will also fall owing to the projected decline in funds raised from income and corporate taxes. Local governments in the severely affected areas will be particularly squeezed and will be looking to the national government to bail them out.
More is known about the damage to Japan’s fishing industry than to its agricultural industry, despite headlines saying ‘Agriculture industry takes a massive hit.’