Opposition parties to press Ishiba on consumption tax cut

Japan Today

3 days ago

Shigeru Ishiba, Japan's Prime Minister and president of the ruling Liberal Democratic Party (LDP), walks before a board with few red paper roses showing elected candidate at the LDP headquarters in Tokyo, Sunday, July 20, 2025. (Franck Robichon, Pool Photo via AP)
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