"Let's Play Hard Ball": The Politics of Ishihara's Tax on the Bank

On February 7 of this year, Tokyo Governor Ishihara Shintarō lobbed a firebomb into Japanese fiscal politics. After several months of secret deliberation with a small circle of advisors, he proposed a special, 5-year tax on the major banks. Of course, this incensed the banks and their friends in the national government, who then tried negotiations, name-calling, and threats to get him to back down or amend his plans. But the measure, skillfully premised on the claim that tax burdens should be commensurate with services received, attracted overwhelming popular support. Not even bashing Ishihara as quote;Hitlerquote; could slow the tax’s swift progress into legislation. Less than two months from its announcement, the measure was passed by the Tokyo Assembly with only one dissenting vote, and became effective as of April 1.

This talk focuses on Ishihara’s tax, viewing it against the backdrop of contemporary Japanese fiscal politics. It describes the budgetary crunch that Ishihara and his advisors confronted, and why they opted to nail the banks for extra revenues. The talk also sketches the enormous fiscal challenges facing Japan’s national and subnational governments in general. The Japanese fiscal system is in the midst of massive structural change. It is being pressed to assume burdens previously left to the family and the firm, even as it increases official and quote;hiddenquote; debts through delivering mountains of pork to powerful political interests that dodge their taxes. On top of all that, it has to contend with an environment of worsening inequality and the zero-sum politics of sectorial lobbying for tax relief. The talk therefore asks whether Ishihara’s style of fiscal populism stops at the banks, or has the potential to spread.

Andrew DeWit is Associate Professor of Economic Policymaking at Shimonoseki City University, an Abe Fellow for 1999-2000, and is currently working on a research project that compares tax politics in Anglo-America and Japan.