In anticipation of the upcoming House of Councillors election, set to be held by July, political parties in Japan are beginning to unveil – or at least hint at – their campaign promises. The platforms increasingly converge on a common theme: a consumption tax cut.
For instance, leaders of Nippon Ishin no Kai (Nippon Ishin) and the Social Democratic Party (SDP) have both announced that they will advocate for groceries to receive a several year exemption from the consumption tax. Both the Japanese Communist Party (JCP) and the Democratic Party for the People (DPFP) have publicly proposed an across-the-board 5 percent consumption tax cut for all products, which is the same policy prescription they laid out last year’s lower house election. In the case of the DPFP, the fact that they are considering as their potential candidate Sudo Genki, a former upper house member of the Constitutional Democratic Party (CDP) who left the CDP because it was not serious on consumption tax cuts, shows that the party will likely to sustain or even sharpen its economic populist message regarding tax cuts.
In addition to these developments, what is noteworthy is that the so-called “tax cut dominoes” are falling even in Japan’s largest opposition parties. Noda Yoshihiko, the leader of the CDP, shocked the political scene by stating that his party would adopt a one-year exemption on the consumption tax for food. This came after a fierce tug of war among the pro-tax cut members of the party and the others who prioritize fiscal prudence. As the debate headed up, Edano Yukino, the founding leader of the CDP, went so far as to imply that members who argued for tax cuts must leave the party.
Noda’s announcement was even more surprising considering he risked his premiership – and his political future – by laying the groundwork for raising the rate of consumption tax back when he was prime minister in 2011-12. Although Noda explained his turnaround as a sincere effort to meet the voters’ needs today, the capitulation of his principled stance shows his difficult position in uniting the party – and also reflects the overwhelming appeal of a consumption tax cut, which all parties see as a vote-getting tool.
Even Japan’s ruling party, the Liberal Democratic Party (LDP), is not immune to the falling dominoes. According to Matsuyama Masaji, who is the head of the LDP delegation in the upper house, around 93 members from his caucus have demanded the leadership to adopt tax cuts. Matsuyama himself has been arguing since early April that all options, including tax cuts, should be on the table to protect the livelihood of the Japanese nationals. Such an admonition by upper house members of the LDP, a party whose leadership has been staunchly opposed to any measure that will worsen Japan’s fiscal health, shows how potent the issue of tax cuts is becoming on the ground. Politicians who are up for re-election are clearly feeling the heat.
Conservative members of the LDP see the issue of tax cuts as an indirect way to attack Ishiba, whom they dislike on many grounds. Both Takaichi Sanae and Kobayashi Takayuki, who were conservative candidates that were defeated by Ishida in the LDP’s 2024 internal leadership race, have advocated for a consumption tax cut. Takaichi, who finished second to Ishiba in the LDP vote, stated in an interview that she’s “all for it.”
It is an open question whether Ishiba can weather the pressure – from both within and outside of his party – on the issue of tax cuts. Moriyama Hiroshi, the LDP’s secretary general, has rebuked the forces advocating for tax cuts by stating that the policy “would be very difficult to achieve if it lost international credibility.” Despite that, there are some signs that Ishiba personally wants to go down with the “tax cut domino.” Veteran political journalist and commentator Suzuki Tetsuo says that his sources have told him that Ishiba believes that the cost of a tax cut will be cheap compared to his potential ouster from the premiership.
The “tax cut domino” that is swallowing Japanese politics could be explained by a simple theory of supply and demand. The issue that most concerns the public is the rising cost of groceries. In particular, the price of rice, which is the staple food in Japan, have close to doubled within a year. On top of that, U.S. President Donald Trump’s punitive tariffs have stoked concerns that prices will rise even higher in the near future.
Therefore, there has been an increasing demand among the public for measures to improve their financial situation. Political parties are responding to such calls by supplying easy-to-understand measures that will intuitively lower costs – hence the idea of a consumption tax cut.
It seems clear that a consumption tax cut will a pivotal issue in the upcoming election. With all the major opposition parties uniting around this stance, it will become increasingly challenging for the LDP to resist aligning with them. The LDP’s minority government status may make such a compromise even more appealing. The LDP’s response to the consumption tax debate will have significant implications for Japan’s fiscal health and will also determine the relevance of the forces advocating for economic populism in the country.