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Japan's opposition party pitches alternatives to Abenomics

Would-be Democratic Party leaders split on how to fund policies

Yukio Edano, left, former secretary-general of the Democratic Party, will battle former Foreign Minister Seiji Maehara for the party's leadership.

TOKYO -- The Democratic Party's former secretary-general has formally entered the race to lead Japan's main opposition party, laying the groundwork for a battle over whether the Democrats can offer viable alternatives to Prime Minister Shinzo Abe's economic policies, known as Abenomics.

Yukio Edano declared his candidacy Tuesday for the party's presidency, which will be decided Sept. 1. He faces Seiji Maehara, a former foreign minister who announced his run the day before. The two are competing to replace current chief Renho, who said in late July that she would step down to take responsibility for the party's stinging loss in the Tokyo Metropolitan Assembly election early that month.

Rebuilding the party

"The Democratic Party needs to be rebuilt," Edano told reporters at Japan's Diet, pledging to "stand courageously at the helm" during that process.

Like Maehara before him, Edano used the opportunity to take aim at the Liberal Democratic Party-led ruling coalition's vision for the country. The LDP "has advanced policy promoting free competition," he charged, noting that "inequality has increased and consumption has stagnated" under the ruling bloc's watch.

Edano said he wants the Democratic Party to "create a framework for mutual support to get the economy back on its feet." The Democrats would seek wage hikes for day-care workers, registered nurses, nursing-care employees and others, he said, arguing that raising pay in these fields would help energize consumption. "This, right here, is how the Democratic Party's economic policy differs from the LDP's," he said.

Maehara envisions Japan offering residents "moderate" welfare services balanced by a "moderate" financial burden. This involves enhancing wealth transfers to lower-income residents while asking all to contribute more, effectively "getting the economy moving from the bottom up," he told reporters Monday.

Maehara hopes to offer benefits such as free programs for preschool and higher education. He also spoke of a need for programs such as pensions and nursing care to assist the elderly, as well as for government support to disabled individuals.

Won't come free

The two candidates stand roughly on the same page in terms of their goals: expanding social welfare programs and bolstering employment to strengthen economic growth. But they diverge on how those programs should be funded.

Edano expresses doubts about a tax increase in the immediate future, saying that "unless we win the trust and understanding of the people, we cannot proceed" with such a hike. Instead, he says, funding for his proposals will be diverted from projects such as public works.

Maehara's plan depends on asking the public to shoulder a greater burden, such as through higher taxes. But while he intends to spell out in the party's platform for the next lower house election exactly how much residents must pay, the lawmaker has yet to detail how much funding his proposals require, concerned that "the numbers would take on a life of their own."

Neither candidate has clarified his position on an increase in Japan's consumption tax to 10%, scheduled for October 2019. The tax rate already has been raised from 5% to 8%. But carrying out this second stage of the increase is "a matter for the government to decide," Edano said. Maehara previously argued for the hike to be conducted as scheduled, but said Monday that "while my personal views have not changed, I would like to coordinate with the new party leadership."

Maehara has told those close to him that it "would be fine to alter" the plans for using the revenue brought in by the hike to 10%. The two stages of the increase add a total of 5 percentage points to the consumption tax rate, but 80% of that additional revenue is designated for cleaning up the government's finances. Only 20% of the money would be used to expand social programs, a distribution that does little "to convince taxpayers to accept the higher tax burden," the candidate said.

"Given the failures of the previous government headed by the Democratic Party of Japan," the Democratic Party's predecessor, would-be party leaders "must seriously discuss the necessity of a tax hike to fund social programs," said Ryutaro Kono, chief economist at BNP Paribas.


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