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Japan’s PM reshuffles Cabinet to win tax support (AP)

/ January 15, 2012 / No comments

TOKYO ? Japanese Prime Minister Yoshihiko Noda replaced five Cabinet members Friday in a bid to win more cooperation from the opposition and voters to raise the sales tax and rein in the bulging fiscal deficit.

The new Cabinet is meant to create “the best and strongest lineup to steadily tackle the issues that we must achieve without running away or putting off,” Noda told a news conference. “I chose people who can move ahead and make a breakthrough.”

Two of the removed ministers had been censured by the opposition, including former Defense Minister Yasuo Ichikawa, who claimed he was unaware of the details of a 1995 rape of a schoolgirl by three U.S. servicemen on the island of Okinawa ? a crime that continues to deeply impact local support for the large American troop presence there.

The opposition, which controls the less powerful upper house of parliament, had threatened to reject any discussion about key tax legislation unless Ichikawa was fired.

Twelve posts were unchanged, including finance and foreign minister. The 17-member Cabinet was formally installed Friday in a ceremony with the emperor.

Noda, who took office in September, says Japan urgently needs to reduce its debt burden as the nation ages and its labor force shrinks, putting a greater burden on the social security and tax systems. He has promised to submit a bill by the end of March to raise the 5 percent sales tax in two stages, to 8 percent in 2014 and to 10 percent by 2015.

“It’s not time for politics that is only pleasing to your ears. It’s painful for us to ask (for higher taxes), and it may hurt our election results. This is a test of whether we can gain understanding for tough policies in Japan,” Noda said.

The reshuffle will “strengthen our government to tackle the major policy goal of social security and tax reforms,” Chief Cabinet Secretary Osamu Fujimura said in announcing the new lineup.

Noda named Katsuya Okada, a former foreign minister, as deputy prime minister to spearhead those efforts.

Noda’s public approval rating has slid below 40 percent amid resistance to raising the sales tax and a general lack of confidence in political leadership in Japan, which has seen a new prime minister every year for the past six years.

Japan’s divided parliament makes it difficult for Noda to pass legislation. The tax issue has also divided the ruling Democratic party, with powerbroker Ichiro Ozawa and his supporters arguing that raising taxes would hurt the already weak economy.

Noda has said his government’s priorities also include leading reconstruction efforts after last March’s devastating tsunami and bringing “rebirth” to the area around the stricken Fukushima nuclear plant. The government declared a month ago that the plant is essentially stable despite widespread skepticism, with experts warning it remains vulnerable to earthquakes.

The new defense minister, Naoki Tanaka, is a relative of former Prime Minister Kakuei Tanaka, one of Japan’s most powerful politicians who was felled by a corruption scandal. He is replacing Ichikawa, who had boasted that his lack of experience with security issues would allow him to view them with a fresh perspective.

Ichikawa’s claim of ignorance about the Okinawa rape case complicated already-stalled efforts to move an important U.S. Marine base which is a key element in Washington’s plans to restructure its forces in Asia.

Jin Matsubara will replace consumer affairs minister Kenji Yamaoka, who was censured for making comments in support of a pyramid marketing scheme, perceived as shady in Japan. He was also criticized for reportedly comparing the collapse of the euro to the tsunami, which was deemed insensitive to the victims of that disaster.

A Kyodo News agency poll on Jan. 7-8 showed public support for Noda’s Cabinet fell to 35.7 percent from 44.6 percent in December, with three-quarters of respondents citing an insufficient explanation of the tax hike plan. However, some experts say such polls ? and by extension the media ? wield too much influence in determining a prime minister’s longevity.

They say the absolute nature of the polls’ top question ? do you approve of the Cabinet’s performance, yes or no ? makes it very hard for leaders to stay popular. If people are the least bit dissatisfied with the government, it’s easy to respond in the negative, they say.

___

Associated Press writers Mari Yamaguchi and Eric Talmadge contributed to this report.

Source: http://us.rd.yahoo.com/dailynews/rss/asia/*http%3A//news.yahoo.com/s/ap/20120113/ap_on_re_as/as_japan_politics

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Economy to suffer if tax cut, jobless aid end

/ November 24, 2011 / No comments

WASHINGTON?? A tax cut that reaches 160 million Americans and government aid for the long-term unemployed will expire at the end of the year unless Congress takes action ? and suck $165 billion out of the economy next year.

Economists hoped the so-called congressional supercommittee would decide whether to extend both measures. But the committee couldn’t even agree on how to reach its main goal, cutting $1.2 trillion from the federal budget deficit.

If the tax cut goes away, the average family would pay about $1,000 more in taxes next year, the equivalent of an extra tank of gas every two weeks. Someone earning $100,000 would pay $2,000 more.

And if long-term unemployment benefits are allowed to expire, about 6 million people would lose weekly checks averaging about $300. For most of the long-term unemployed, that is their main source of income.

“There’s an awful lot of uncertainty ahead,” said Michael Hanson, senior U.S. economist at Bank of America Merrill Lynch.

Both changes would leave Americans with an estimated $165 billion less to spend. The Federal Reserve expects the economy to grow only 2.7 percent next year, and economists say the expiration of the two programs could reduce growth by a full percentage point.

The government said Tuesday that the economy grew at a 2 percent rate in July, August and September, down from earlier estimates of 2.5 percent.

To bring unemployment down significantly, the economy has to grow more than twice as fast as it grew this summer.

Congress could extend the tax cut and unemployment benefits when it returns from Thanksgiving recess next week. But the same partisan philosophical differences that sank the supercommittee could complicate the debate.

At the same time, Congress may be unwilling to force what is essentially a tax increase on tens of millions of Americans just as an election year begins.

Both measures were part of a deal struck in December 2010 by President Barack Obama and Republicans in Congress.

The cut applies to the tax that pays for Social Security. The tax applies to the first $106,800 a person makes in a year. The deal lowered the rate paid by individuals to 4.2 percent from 6.2 percent for this year. Companies also pay a 6.2 rate on their payroll.

Some Republicans have indicated they could support extending the tax cut, but there would almost certainly be a fight over how to pay for it. Without spending cuts or other tax increases, renewing the Social Security tax cut would swell the deficit.

Obama, as part of his jobs bill in September, Obama proposed lowering the rate further, to 3.1 percent, and cutting the employer portion to 3.1 percent up to the first $5 million on their payrolls.

Cuts at that level would pump almost $250 billion more into the economy compared with last year, when individuals and employers both paid the 6.2 percent rate.

Obama, speaking Tuesday in New Hampshire, urged Republicans to continue the tax break.

“Don’t be a Grinch,” the president said. “Don’t vote to raise taxes on working Americans during the holidays.”

On Monday, White House press secretary Jay Carney suggested that renewing or deepening the tax cut could be paid for by raising taxes on the wealthy. Republicans have refused to consider doing so.

Most states provide up to 26 weeks of unemployment benefits. The deal extended benefits to up to 99 weeks in states with the highest unemployment rates.

Unless that is renewed, almost 2.2 million people out of work will lose benefits by the first week in February. About 6 million people would lose weekly benefits by the end of the year.

Just the uncertainty of not knowing what Congress will do could cause businesses to hold back on hiring and investment, and therefore drag down economic growth, Hanson said.

Most economists would like to see lower budget deficits, but most would like the government to reduce the deficit gradually, to avoid hurting the weak economy. And they would all prefer robust economic growth to solve the problem.

The supercommittee’s failure triggers $1 trillion in automatic cuts in government spending beginning in 2013. Congress could undo them, but then credit rating agencies might downgrade the government’s long-term debt, as Standard & Poor’s did in August.

An even bigger hurdle looms at the end of 2012. That’s when the tax cuts passed during the Bush administration are set to expire. Losing those tax cuts would cost taxpayers up to an additional $4 trillion over 10 years.

Combined, all those factors would reduce growth in 2013 by between 1.5 and 3.5 percentage points, Douglas Elmendorf, director of the Congressional Budget Office, estimated last week.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Source: http://www.msnbc.msn.com/id/45407943/ns/business-stocks_and_economy/

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