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Ex-vice finance minister “secret control tower” shaping Abe administration’s fiscal policy

(Facta: July 2015 – pp. 82-83)

 

 Japan Tobacco Inc. Chairman Yasutake Tango, a powerful former vice finance minister and former councilor of the Cabinet Secretariat, is said to be the “control tower behind the scenes” playing a key role in drafting the government’s fiscal restructuring plan up to FY2020 due for release by the end of June. The critical component of this plan is how to cut spending to reduce the enormous fiscal deficit, specifically how to control social security expenditures.

 

 The Abe administration’s goal is to achieve primary balance in national and local government finances by FY2020. However, the Cabinet Office’s estimates show that even with increased tax revenues generated by high economic growth, there will still be a deficit of 4 trillion yen in the basic fiscal balance.

 

 Tango was secretary to Prime Minister Junichiro Koizumi, head of the Cabinet Secretariat, director general of the Finance Ministry’s Budget Bureau, and eventually became vice finance minister in 2009, before retiring in 2010. He was appointed by Prime Minister Shinzo Abe as councilor to the Cabinet Secretariat in 2012 to advise him on fiscal and social security policy. He left this post to become Japan Tobacco chairman in June 2014.

 

 Tango had also worked closely with Abe when Abe was deputy chief cabinet secretary under the Koizumi administration. This close personal relationship, in addition to his in-depth knowledge of and expertise on social security issues from his supervision of the Ministry of Health, Labor, and Welfare (MHLW) budget when he was at the Budget Bureau, is the basis of his strong voice and presence in fiscal policy, even after he left government service.

 

 Within the administration, there are two lines of thinking on how to restore fiscal health – increase tax revenues through economic growth or prioritize spending cuts. Nevertheless, even proponents of revenue increase in the Council for Economic and Fiscal Policy (CEFP) agree that cutting social security spending is a top priority.

 

 Through his extensive connections with incumbent Finance Ministry bureaucrats, private sector members of the CEFP, and other senior administration officials, Tango is guiding policy to achieve fiscal health. While MHLW Minister Yasuhisa Shiozaki is wary that “excessive fiscal austerity may hinder growth,” Economic Revitalization Minister Akira Amari is saying “the MLHW needs to make an effort.” Even the Liberal Democratic Party special committee on fiscal restructuring (chaired by Policy Research Council chief Tomomi Inada) issued a report in mid-May stressing the importance of reduction of social security spending in overall spending cut.

 

 The strategy envisioned by Tango and his friends in the Finance Ministry is to implement serious social security reforms to pave the way for future consumption tax increase beyond 10% for the cause of fiscal health. However, a decision on fiscal policy direction will depend very much on growth-oriented Abe, so there is no guarantee that they will succeed. (Summary)

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