Opposition parties to press Ishiba on consumption tax cut
Prime Minister Shigeru Ishiba remains opposed to a consumption tax cut, but opposition parties are expected to intensify calls for such measures after gaining more seats in Sunday's House of Councillors election.
Ishiba's Liberal Democratic Party and its junior coalition partner, Komeito, suffered a major setback in the upper house election, as the ruling bloc proposed cash handouts to address inflation as a key pillar of its campaign pledges.
Opposition forces have pledged to reduce or abolish the consumption tax, currently set at 10 percent for most goods and services and 8 percent for food and beverages.
With households continuing to struggle with rising prices for rice and daily necessities, how to tackle inflation emerged as the central issue in the upper house race.
The election results indicated voter support for opposition parties' proposals, with a Kyodo News exit poll showing that 72 percent of respondents favored a consumption tax cut, compared with 22 percent who preferred cash payouts.
Speaking on a television program after the polls closed, Ishiba reiterated that the consumption tax is a key source of revenue for medical and other social security programs, adding, "What will happen if the state's finances deteriorate further?"
"We struggled to show the public that we were proposing policies for the people, not for the sake of our political parties," he said.
However, the ruling coalition, which already lost its majority in the House of Representatives, or lower chamber, in the October election, may now have to pay greater attention to opposition demands to ensure the smooth passage of bills, potentially prompting debates over the consumption tax and government spending.
In the run-up to the election, financial markets reacted to projections of a ruling bloc setback, amid concerns that opposition gains could lead to looser fiscal policy and further worsen Japan's already poor fiscal health.
Long-term Japanese government bond yields are on the rise on concerns over potential increases in fiscal spending, with the benchmark 10-year yield rising to 1.595 percent on July 17, the highest level since 2008.
Japan's combined central and local government debt is projected to reach 1,330 trillion yen ($9 trillion) by the end of March next year, equivalent to 211 percent of the country's gross domestic product, according to the Finance Ministry.
The election outcome may also complicate the Bank of Japan's efforts to normalize its monetary policy after ending its unorthodox monetary easing framework, economists say.
The central bank may be forced to keep interest rates on hold if Ishiba is replaced by a successor who favors aggressive monetary easing, economists say.
© KYODO
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Kyodo News
3 hours ago
- Kyodo News
Japan, U.S. discussing scenario for nuclear weapons use: sources
TOKYO - Japan and the United States have been discussing a scenario, in which the U.S. military would use nuclear weapons in the event of a contingency, during talks on so-called extended deterrence, sources close to the two countries said Saturday. It is the first time the allies have delved into the issue, in a sign that they are seeking to strengthen the U.S. nuclear umbrella, under which Japan is protected, amid intensifying military activity by China, North Korea and Russia, the sources said. Japan is the only country to have experienced an atomic bomb attack and has long advocated for a nuclear-free world. However, it also relies on the U.S. nuclear umbrella for defense. The United States dropped an atomic bomb on Hiroshima on Aug. 6, 1945, and a second one three days later on Nagasaki in the final days of World War II. As part of the extended deterrence talks in recent years, Tokyo and Washington have held multiple tabletop exercises to strategize a scenario in which a conflict broke out in East Asia and the United States is pressured to use nuclear weapons, according to the sources. With that in mind, Japan and the United States reviewed how to coordinate and how to deal with issues stemming from the possible use of nuclear weapons, such as managing public opinion. Discussions also broached how much information the United States can share with Japan, the sources said. In December, the countries announced their first guidelines for extended deterrence -- including U.S. nuclear protection -- to better tackle regional security challenges. But details were not revealed due to the sensitivity of information related to national security, according to a senior Japanese Foreign Ministry official. Diplomatic sources said the guidelines stipulated the steps the countries would take should the United States use nuclear weapons under Article 5 of the bilateral security pact. Article 5 obliges the United States to defend territories under Japan's administration from armed attack. The sources close to the nations also said the guidelines made it clear that Japan can convey its thoughts on a possible nuclear weapons use. Since extended deterrence talks were established in 2010, senior-level discussions, led by top foreign affairs and defense officials, have been held once or twice a year. The dialogue was upgraded in July 2024, with the first-ever ministerial talks on the issue held in Tokyo to better coordinate the alliance with an eye on China's military buildup and North Korea's missile and nuclear development.
Kyodo News
4 hours ago
- Kyodo News
Japan, U.S. ministers reached trade agreement in mid-June: sources
TOKYO - Japan's chief negotiator reached an agreement with U.S. Commerce Secretary Howard Lutnick in mid-June on a deal offering massive Japanese investment in the United States in exchange for a reduction in tariffs, sources close to the matter said Saturday. Over the following month, Japan focused on convincing U.S. President Donald Trump through Lutnick of the advantages of the agreement, with the proposal of expanding imports of U.S.-grown rice used as the final bargaining chip. The trade deal, announced by Trump on July 23, includes tariffs on Japanese cars set at 15 percent -- lower than the 27.5 percent that was to have been levied -- in exchange for $550 billion of Japanese investment in the United States. During the course of the negotiations, which spanned around three months from mid-April, Japan identified Lutnick as the only person who could communicate "directly and on a deep level" with Trump due to their close friendship of over 30 years, and directed its efforts on him, according to one of the sources. Ryosei Akazawa, Japan's chief tariff negotiator, built trust with Lutnick not only through in-person talks but also through dozens of phone calls, the source said. Believing that Lutnick placed a high priority on economic security amid China concerns, Japan emphasized its willingness to contribute to strengthening U.S. domestic supply chains and eventually reached an understanding with him. Trump, however, maintained a hardline stance even in late June, venting frustration that Japan does not import significant amounts of American cars and rice. "I'm not sure we're going to make a deal. I doubt it," he had said, while demanding additional concessions in exchange for lowering tariffs. The tide turned on July 22 immediately following Japan's upper house election. A sudden meeting was arranged for the following day between Trump and Akazawa, who was in Washington for an eighth round of talks. Akazawa and Lutnick began to "rehearse" in preparation for the talks, with Lutnick suggesting that a total investment of $400 billion be proposed in the expectation that Trump would ask for $500 billion. A board was prepared by U.S. officials to clearly show Trump how much Japan would investment. But Trump demanded even more, leaving Akazawa no choice but to agree to $550 billion. A senior official of the prime minister's office acknowledged that the deal does not align with World Trade Organization rules or the Japan-U.S. trade agreement that took effect in January 2020, but also conceded that Trump "is a president who genuinely believes in protecting his country through tariffs."
The Mainichi
7 hours ago
- The Mainichi
Japan may face political turmoil if PM quits soon after election loss
TOKYO (Kyodo) -- If Prime Minister Shigeru Ishiba resigns soon, the move could herald political turmoil in Japan, as no decisive winner emerged from Sunday's House of Councillors election, in which the ruling bloc suffered a major setback. Having lost its majority in both chambers of parliament it remains unclear whether the ruling Liberal Democratic Party could even produce the next prime minister from within its own ranks, should Ishiba step down. Amid deep ideological divisions, prospects for an opposition-led government are dim, compelling the LDP's next leader to pursue new alliances. Should coalition talks falter, Japan could be thrust into a period of prolonged political turbulence, analysts warn. The ruling bloc was already a minority in the more powerful House of Representatives following last year's general election, held about a month after Ishiba won the LDP leadership race in late September. Frustration over his government's failure to take effective measures to ease the negative impact of inflation on the economy also led to the LDP losing this year's Tokyo metropolitan assembly election one month before the upper house race. A government official said, "Ishiba struck out on three pitches. He's out and it's time to switch sides." Some pundits say Ishiba's reluctance to cut the consumption tax rate to maintain the social security system -- a move believed to favor the elderly -- is viewed by the younger generation as tone-deaf to household struggles, eroding support across ideological lines. The LDP has not clarified whether it will begin discussing a consumption tax cut with opposition parties. Ikuo Gonoi, a politics professor at Takachiho University, said the public "will not be satisfied" unless the ruling party "makes concessions" on the issue. Ishiba, meanwhile, said Japan has reached a crucial trade agreement with the United States, avoiding the worst-case scenario of a 25 percent "reciprocal tariff," but the deal's conclusion may pave the way for Ishiba's exit, the pundits added. While the ruling camp's loss of its majority in both the lower and upper houses has provided a window of opportunity for opposition parties to take power, they have been ideologically fragmented, particularly on national security issues. Even if the LDP-led coalition remains the core of the government, it must seek cooperation from opposition parties to pass individual bills and budgets, at least until the next scheduled upper house election in three years. Ishiba's resignation would force the LDP to hold a leadership race -- either involving rank-and-file members or decided swiftly by lawmakers alone. A shift toward a more conservative, pro-spending figure might be the party's best bet. Sanae Takaichi, a former minister for economic security, is considered a top candidate to succeed Ishiba. She won the most rank-and-file votes in the previous LDP leadership race and would become the party's first female president if elected. Takaichi, known as an advocate of expansionary fiscal spending and hawkish national security policies, could trigger a broader political realignment as Ishiba has alienated conservative supporters from the LDP. If the LDP pivots rightward, the possibility of a grand coalition with the Constitutional Democratic Party of Japan would diminish, as the largest opposition force holds more left-leaning perspectives on security and diplomacy. But some conservative opposition groups that gained momentum in the latest election -- such as the Democratic Party for the People and the right-leaning populist Sanseito party -- could align with Takaichi's LDP, making a coalition feasible. Even so, it remains to be seen whether Takaichi can become Japan's first female prime minister. As a last resort to expand the coalition, the LDP could tap a partner party leader as premier in exchange for securing a bicameral majority. In Japan, the biggest party in parliament has occasionally handed the prime ministership to the leader of a smaller coalition partner to form a government, most notably after the LDP was briefly ousted from power in 1993. Other potential successors to Ishiba could face difficulties bringing other parties into the coalition, as many are regarded as moderates like him. He has prompted conservative opposition groups to further distance themselves from the LDP. Farm minister Shinjiro Koizumi, who has regained media attention for promoting efforts to curb surging rice prices, is perceived as a close ally of Ishiba, while Chief Cabinet Secretary Yoshimasa Hayashi shares the blame for Sunday's setback as the government's top spokesman. Former Prime Minister Fumio Kishida, Ishiba's predecessor, appears eager to make a comeback, but he has not escaped criticism for losing the conservative support base that Shinzo Abe, Japan's longest-serving premier who was assassinated in 2022, had built. Only Koizumi seems well-positioned to forge a coalition government with the conservative Japan Innovation Party, as he has a "strong affinity" with its leader, Osaka Gov. Hirofumi Yoshimura, the group's founder Toru Hashimoto said on a TV program. If the next LDP president fails to join hands with groups other than its long-standing partner Komeito party, the opposition bloc could submit a no-confidence motion against the Cabinet. Given the seat distribution in the lower house, the motion is set to pass. The new leader would then most likely dissolve the lower house and call a snap election, said Masamichi Adachi, chief economist for Japan at UBS Securities, adding, "In any case, political uncertainty is expected to continue for some time."
