FACTBOX-Japan ruling party may need coalition partners

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July 4 (BestGrowthStock) – Japan will hold an upper house election
on July 11, the outcome of which could determine how smoothly
the ruling Democrats can forge ahead with plans to raise the
sales tax and cut huge public debt.[ID:nTOE66200S].

The Democratic Party, which swept to power last year, has a
huge majority in parliament’s more powerful lower house and
will almost certainly run the government whoever wins the upper
house poll, but the party needs an upper house majority to
enact laws smoothly.

If the Democrats fall short of an outright majority they
are likely to keep their coalition with the tiny People’s New
Party (PNP) but they may also woo other parties. While several
have said they do not plan to switch sides after the vote,
analysts say the dynamics will change depending on the outcome.

Below are possible coalition partners and their policies,
with their names in Japanese in parentheses:


Headed by outspoken former banking minister Shizuka Kamei,
the party wants stimulus spending of 100 trillion yen ($1.1
trillion) over the next three years. It has said the 5 percent
sales tax should not be raised before an economic recovery.

The conservative party began as a group of Liberal
Democratic Party lawmakers who opposed former Prime Minister
Junichiro Koizumi’s plan to privatise the postal system. The
Democrats have promised to pass a shelved bill to scale back
postal privatisation in the next session of parliament.


Headed by another former banking minister, Yoshimi
Watanabe, who left the then-ruling Liberal Democrats last year,
the party has promised not to raise the sales tax for another
three years.

It wants to cut wasteful spending and tap government

The party wants the Bank of Japan (BOJ) to do more to
overcome deflation. It has suggested the BOJ share a price
stability target with the government and that the BOJ support
funding for small and medium-sized companies.


Founded by members of a Buddhist sect, Soka Gakkai, Japan’s
third-largest political party favours a drastic reform of the
tax system, including the sales tax, but has not specified by
how much the sales tax should be raised.

The party, which was the Liberal Democratic Party’s
coalition partner while it was in power, wants the government
and the BOJ to cooperate to achieve inflation of 1-2 percent.


Headed by Yoichi Masuzoe, a popular former health minister
who left the Liberal Democrats in April, the party says Japan’s
finances will be unsustainable without a sales tax increase to
over 10 percent by 2020.

The pro-reform party has also called for a 1-2 percent
inflation target and favours lowering the corporate tax rate to
25 percent from the current rate of around 40 percent.


Led by former finance minister Kaoru Yosano and ex-trade
minister Takeo Hiranuma, the party wants to raise the sales tax
to 8 percent from 2012/13 before raising it to 12-15 percent
after the economy recovers. The party of former Liberal
Democratic Party lawmakers also wants to lower the corporate
tax to 30 percent from 2012/13.


Founded by heads of local governments, the group has
pledged to halve the corporate tax rate to 20 percent and to
gradually raise the consumption tax to 10 percent, using the
revenues to fund social security costs.


The LDP, ousted by the Democrats last year after more than
50 years of almost continuous rule, is the main opposition
party and has called for the sales tax to be raised to 10

Like the Democrats, LDP members range from proponents of
market-friendly reforms to those who favour a gentler
capitalism. Both are also home to diplomatic doves seeking
closer ties with Asia to pro-U.S. advocates of a bigger
security role for Japan.
(Reporting by Chisa Fujioka and Kiyoshi Takaneka; Editing by
Sanjeev Miglani)

FACTBOX-Japan ruling party may need coalition partners