Kaoru Yosano, a veteran politician who favors raising Japan’s consumption tax rate to repair tattered public finances, returned for a second stint as commander-in-chief of Japan’s economic policy planning.

He won the job as part of a broad reshuffle that saw Prime Minister Yasuo Fukuda replace most of his cabinet, including former Economics Minister Hiroko Ota.
Sometimes seen as a possible successor to the unpopular Fukuda, Yosano has been supportive of Bank of Japan rate hikes and said last month he favored higher Japanese interest rates.
Yosano, one of a number of Japanese politicians who play the chess-like strategy game of Go, now takes charge of an economy sputtering under the weight of falling exports and rising raw material and energy prices.
“There is a possibility that from a cyclical perspective, a downturn may have begun late last year,” Yosano told a news conference after his appointment.
Yosano, 69, is a leader of a group of ruling party lawmakers who say a higher consumption tax is inevitable to restore battered public finances in Japan, where government debt runs at a sky-high 1-½ times GDP and the rapidly growing ranks of elderly threaten to blow out health and welfare spending.
Yosano and his fellow lawmakers published a report in June that said the tax needed to be doubled from 5 percent to at least 10 percent by around 2015.
His appointment, however, could raise the ire of other powerful lawmakers who argue the government should cut wasteful spending and then boost growth to increase tax revenue.
Yosano has admitted that raising consumption tax is politically impossible for now after the ruling party lost control of parliament’s upper house in an election last year -- allowing opposition parties to stall legislation there.
In addition, the growing turbulence in the global economy has made a tax hike difficult.
“What’s obstructing our discussion on tax is the development in the world’s economy. The U.S. financial crisis will surely hit our economy too. When we consider tax, we must think about its impact on the economy,” Yosano said in a speech last month.
Many politicians are nervous that rate hikes could send Japan deeper into a downturn but Yosano said last month that higher interest rates would benefit the economy overall -- by raising returns on a huge pool of savings held by householders.
First elected as lawmaker in 1976, Yosano has held key government and ruling party posts in recent years, including another stint as economy minister under former Prime Minister Junichiro Koizumi in 2005-2006.
When the Bank of Japan raised interest rates for the first time in six years in 2006, to 0.25 percent from zero, Yosano, then the economy minister, was one of the strongest government supporters for the central bank’s move even as other political heavyweights warned it would suppress growth.
Grandson of two well-known poets and a graduate of prestigious University of Tokyo, Yosano started his political career in 1968 by joining the office of Yasuhiro Nakasone, who later became prime minister in the 1980s.
Yosano is a master player of Go and has boasted that he taught Ichiro Ozawa, the leader of the main opposition party, how to play the game many years ago.
But while Fukuda hopes his new economics minister and his revamped cabinet will win the upper hand over Ozawa, it was the opposition leader who bested Yosano when they played each other at Go last year.
(Source: Reuters)