Japan’s prime minister, facing a divided parliament and doubts over his political survival, yesterday stepped up his campaign for a sales tax rise he argues is vital to pay for huge welfare costs in the fast-ageing society.
Japanese Prime Minister Naoto Kan’s key economic ministers, also speaking to the opening session of parliament, promised on their part to impose fiscal discipline, as the government presses ahead with a proposed budget from April last year with record spending of ¥92.4 trillion (US$1 trillion).
Kan has made social security and tax reform his policy priorities and warned in his speech that he would have to ask the public to “bear the burden” to secure stable funding — a reference to a future hike in the 5 percent sales tax.
His government is grappling with a public debt that is the largest among advanced nations, double the size of the US$5 trillion economy.
However, even the budget for this year and next is far from secure. To pass bills needed to implement it, Kan must either cobble together a simple majority in the upper house with opposition help or build a two-thirds majority in the lower house to override the upper chamber.
RESPONSIBILITY
“Limits are emerging to the securing of greater revenues for social security under only existing efforts,” he said in a speech at the start of the regular parliament session. “Every single lawmaker, in both the ruling and opposition parties, is responsible for responding to this major issue.”
Japan’s consumption tax rate is among the lowest in major economies, but successive governments have put off tackling the issue, fearful a rise would anger voters.
Kan said the Cabinet would also present basic outlines for tax and welfare reform by June. Analysts said it was not certain Kan would be in office that long if opposition parties refused to budge on their position.
‘CRUNCH TIME’
“Crunch time will come in March or April,” Sophia University professor Koichi Nakano said, noting the possibility that Kan might resign or call a snap election if budget bills stalled.
The prospects for talks on tax and social welfare reform also appear dim because of a combative opposition and division within the ruling Democratic Party (DPJ) on the issue.
Japanese Minister of Finance Yoshihiko Noda sought to reassure markets about fiscal policy by vowing to pursue a prudent approach to debt issuance and to maintain a close dialogue with financial market participants.
Although the government can enact the budget because the ruling DPJ controls the powerful lower house, it needs support from the opposition, which controls the upper chamber, to pass legislation to implement spending.
The head of the biggest opposition party, the Liberal Democratic Party (LDP), which some polls show is now more popular than the DPJ, said last week the LDP would have a hard time agreeing to those bills unless the DPJ abandons costly campaign pledges such as special allowances for families with children.
The No. 2 opposition group, the New Komeito, said it was undecided. Its support would be enough to pass the bills through the upper house.
Japanese Minister of State for Economic and Fiscal Policy Kaoru Yosano, a former LDP heavyweight drafted by Kan in a Cabinet reshuffle this month to bolster his tax reform push, urged the central bank to do its bit to fight deflation. Japan has been in mild deflation since 2000.
“I hope the BOJ [Bank of Japan] will maintain close communication and cooperation with the government and continue supporting the economy through appropriate and flexible monetary policy, in order to overcome deflation early,” he said.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to