A Time for Daffodils—But No Taxes, Please

The effort to breathe fresh energy into Japan’s recovery was poignantly demonstrated yesterday when the emperor and empress of Japan visited Miyagi prefecture. One of the evacuees at a shelter in Sendai presented Empress Michiko with a bunch of daffodils, freshly picked that morning from the garden of her devastated home. Amidst the rubble, spring flowers are blooming all across Tohoku, and across Japan the idea that recovery will indeed be possible is gradually taking hold.

Daffodils, with their bright yellow petals, are a vibrant reminder of the energy and the rejuvenation of spring. Empress Michiko had brought a bouquet from the Imperial gardens to place on the ruins of Kobe City after the 1995 Hanshin-Awaji earthquake. The gift of daffodils clearly touched Japan’s empress, as did the intended message to the rest of Japan—that those in the hardest hit regions were finding the strength to look ahead.

While nature and hope were the themes for the Imperial visit, the recovery ahead seemed more fraught in Tokyo. This week, the chair of the Prime Minister’s new Reconstruction Design Council, Makoto Iokibe, president of the National Defense Academy of Japan, created controversy by advocating a new reconstruction tax. At first glance, Professor Iokibe’s argument seems quite sensible. A short-term “recovery tax” would allow all of Japan to share in the cost of reconstruction, and would bring much needed fiscal resources to the planning effort currently underway in his commission.

But both government officials and politicians swiftly rejected Iokibe’s idea. Internal Minister Yoshiro Katayama announced that fiscal policy decisions were the government’s prerogative, and that the Reconstruction Design Council should stick to thinking about what needed to be done rather than how to pay for it. Minister of Finance Yoshihiko Noda was less strident, but suggested that while an open debate over policy options was welcome, he too thought that Professor Iokibe had exceeded his mandate.

Outside of government, the recovery effort—and especially the pros and cons of how to finance it—is the stuff of intense political debate. Professor Iokibe is not the only person who thinks that a special tax to support Japan’s recovery is the simplest and best way forward. But the more complex, and more politicized question of how to reform Japan’s tax system—including the dreaded consumption tax that caused the DPJ’s loss at the polls last year—remains unresolved. Thus, as the recovery conversation continues, some of these unmade choices will undoubtedly merge with the policy debates specific to Japan’s recovery from the March 11 disaster.

On April 26, the Diet passed a bill to provide tax relief to those hardest hit by the earthquake-tsunami. Income and corporate taxes will be reduced, as will taxes on the replacement of household and company assets, including cars, homes, and factories. Likewise, the DPJ, LDP and Komeito today on April 29, concluded a basic framework for the supplementary budget, putting aside some of their more acrimonious exchanges thus far and agreeing to concentrate on several core questions, including whether or not to issue a new recovery bond.

Japan’s emperor and empress are scheduled to return to Iwate and Fukushima prefectures in the coming weeks. Returning from Miyagi prefecture, Empress Michiko stepped off the SDF aircraft with her husband holding her bouquet of daffodils. Her serene but purposeful gesture was a reminder perhaps to those in Tokyo that even in the worst hit regions, people have found the determination to hope.