— Adds Noda, Abe Remarks

TOKYO (MNI) – Japan’s lower house of parliament was dissolved on
Friday, as promised by Prime Minister Yoshihiko Noda in a surprise
public announcement during parliamentary debate with opposition leaders
this week.

This sets the stage for a showdown between the ruling Democratic
Party of Japan and the main opposition Liberal Democratic Party in
general elections for the 480-seat House of Representatives (lower
house).

Voters are expected to go to the polls on Dec. 16 to deliver their
second judgment on a national level since the DPJ took power away from
the LDP in 2009 after a landslide win in lower house elections.

During this period, the world has gone through two major slumps,
first triggered by the collapse of Lehman brothers and then by the
European sovereign debt crisis — clouding the prospects for Japan’s
recovery from slow growth and years of deflation.

“Are we going forward or are we going backward?” Noda asked the
public at a news conference on Friday evening.

To revive Japan’s economy vitality, which has been dampened by the
fast-aging working population, the DPJ will continue to focus on
developing renewable energy sources to replace accident-prone nuclear
power generation, prompting farming and supporting small businesses, he
said.

He repeated the DPJ’s slogan to “invest in people, not concrete,”
criticizing massive fiscal spending on building roads, bridges and dams
during the years under LDP governments.

“We can’t go back to the days when hereditary politics was rampant,”
Noda said.

Until recently, Japan has seen blueblood politicians running the
country.

Among them is Shinzo Abe, a right-wing politician who has recently
returned to head the opposition LDP after giving up his premiership five
years ago due to poor heath.

Noda rejected Abe’s hard-line approach in diplomacy as well as
macro-economic policy coordination between the government and the
central bank.

The Prime Minister said governments must honor central bank
independence, countering remarks by the leader of the main opposition
party ahead of national elections next month.

“If the government sets a target for monetary policy, ignoring the
wisdom Japan and other countries have gained, a problem will arise,” he
said.

Noda was asked to comment harsh remarks on the BOJ by Abe, who is
considered to be a strong candidate for the new prime minister after the
general elections.

“We want to conduct monetary policy boldly, by taking into account
the possibility of revising the Bank of Japan Act,” Abe, told reporters.

On Thursday, Abe also said the biggest concern for Japan is
prolonged deflation and a strong yen and called for “unlimited” monetary
easing by the BOJ and a reduction in the policy rate to zero or below
zero from the current range of zero to 0.1%.

Recent remarks by the ring-wing politician spurred expectations for
more pro-active monetary easing by the BOJ, sending the yen to Y81.46
against the dollar on Thursday, the weakest level since April 25, when
it stood at Y81.69.

Abe has also urged the BOJ to set a target for achieving 3%
inflation, instead of the bank’s interim goal of 1% consumer price
rises. The year-on-year change in Japan’s CPI has been depressed around
zero.

By contrast, Noda has been speaking in general terms, saying he
expects the BOJ to continue taking “decisive” monetary policy actions in
a timely manner.

Noda stressed that he and BOJ Governor Masaaki Shirakawa has been
comparing notes regularly.

After the BOJ’s policy-setting meeting on Oct. 30, Shirakawa,
together with Economic and Fiscal Policy Minister Seiji Maehara and
Finance Minister Koriki Jojima, released a rare joint statement,
pledging to do their best to overcome deflation.

While the BOJ vowed to continue its monetary easing until prospects
for its longer-term goal of 1% inflation emerge, it also urged the
government and “a wide range of economic agents, such as business firms
and financial institutions” to push up the economy’s growth potential.

In response, the government said it will implement deregulation and
conduct budgetary and tax measures, which it believes will create an
economy that can sustain deflationary pressures better.

Noda, the third prime minister under DPJ, has been seeking ways to
trim soaring public debt while supporting the economy, contain the
nuclear crisis caused by the March 2011 earthquake disaster and counter
the drag from the yen’s rise and global slowdown on exporter profits.

Since taking office in September 2011, Noda has also been dealing
with the hung parliament.

In July 2010 national elections, the ruling coalition led by the
DPJ lost a majority in the upper house.

During the 2010 election campaigns, the Prime Minister Naoto Kan
called for parliamentary debate on the need to raise the 5% sales tax in
order to secure a stable funding source for additional public spending
on job creation, which he said should help Japan move out of stubborn
deflation.

Kan mentioned an idea of hiking the sales tax rate to 10% in the
medium term, which appeared to have come as an abrupt proposal to some
voters, prompting the public approval rating for the Kan administration
to slump.

Two summers later, however, Noda won support from the leaders of
the two main opposition parties for doubling the consumption tax rate by
2015 in exchange for a value promise to dissolve the lower house and
call a snap election.

Opposition parties, which control the 242-seat House of Councilors
(upper house), has been calling on Noda to call an election for the more
powerful lower house but he has been cautious amid falling public
support for his cabinet after telling the opposition camp in August that
he would do so “in the near future.”

Noda then came under fire from the opposition leaders for not
delivering his promise sooner, further delaying parliamentary approval
of a key bill that will allow the government to issue debt for financing
spending in the current fiscal year that began on April 1.

On Wednesday the embattled Prime Minister caught the opposition
leaders off guard by making a rare public proposal that he would
dissolve the lower house of the Diet on Friday if opposition parties
agreed to the ruling coalition’s plan to cut parliamentary seats in
electoral reform.

In response, Shinzo Abe, who heads the LDP, told reporters after
the debate that his party will endorse the reform plans in parliament
early next year.

The DPJ beat the LDP in 2009 by promising to boost Japan’s fiscal
health through slashing “wasteful” government spending and reallocating
tax money for projects that would support families with children and
reduce unemployment.

But the DPJ government soon hit a policy wall, realizing that there
was only so much it could do to trim spending in order to generate funds
for necessary public programs.

In August 2012 the Japanese parliament enacted by majority vote
legislation that would double the current 5% consumption tax by 2015 and
improve social security services on condition that the economy continues
to recover steadily.

The government plans to hike the tax rate to 8% in April 2014 and
to 10% in October 2015.

–email: msato@mni-news.com

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