Bloomberg News

Ozawa Leaves Ruling DPJ Over Japan Sales Tax in Blow to Noda

July 02, 2012

Former Democratic Party of Japan leader Ichiro Ozawa

Former Democratic Party of Japan leader Ichiro Ozawa, center, speaks during a news conference in Tokyo. Photographer: Toshifumi Kitamura/AFP/Getty Images

Former Democratic Party of Japan leader Ichiro Ozawa will leave the ruling bloc to form his own political group, complicating Prime Minister Yoshihiko Noda’s efforts to pass legislation doubling the consumption tax.

Lawmaker Kenji Yamaoka submitted a letter of resignation to DPJ Secretary-General Azuma Koshiishi today in Tokyo on behalf of 50 lawmakers, 38 from the lower house of parliament and 12 from the upper chamber. Ozawa, 70, and 56 other ruling party legislators voted against the sales tax bill in the lower house on June 26.

While Ozawa’s new group can try to block the legislation by submitting a no-confidence motion against the government, it lacks sufficient numbers to topple the DPJ. The opposition Liberal Democratic Party’s support of the tax makes passage through the upper house likely, and it has shown no sign of cooperation with Ozawa, who left the LDP two decades ago.

“It appears Ozawa really thinks that opposing the sales tax is going to bring him a lot of seats,” said Steven R. Reed, a professor of political science at Chuo University in Tokyo. “Politics always involves strange bedfellows, but given his history of breaking up parties, it is hard to imagine who would want to work with him now.”

Yamaoka corrected his list to 50 defectors from 52 after lower house lawmakers Takeshi Shina and Megumi Tsuji denied on TBS Television that they were leaving the DPJ.

Ozawa ‘Destroyer’

The legislation would increase the five percent tax to 8 percent in April 2014 and to 10 percent in October 2015. Its opponents argue the increase contradicts the platform on which the DPJ came to power in 2009, and say it may discourage consumption and fail to increase tax revenue.

Ozawa, who engineered the Democrats’ 2009 election victory, was acquitted in April of violating campaign finance laws. He has been nicknamed “the destroyer” for his 20-year history of leaving political parties and forming new ones.

Opinion polls show the tax bill is unpopular with voters, without translating to support for Ozawa. In a survey published in the Asahi newspaper on June 28, 52 percent of respondents said they opposed the bill, while 78 percent said they did not have high expectations for Ozawa’s breakaway party.

Noda has repeatedly said raising the tax is necessary to address the world’s largest public debt and soaring welfare costs. The International Monetary Fund and the Organization for Economic Cooperation and Development have both urged Japan to be more aggressive in tackling a debt that the OECD predicts will reach 223 percent of gross domestic product next year.

Even with the defections, the DPJ will retain its majority in the 480-seat lower house and remain the party with the most seats in the upper house.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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