Opposition Seeks Quick Political Fix Via Tax Cuts; History Shows This Tactic Does Not Always Work
The Yomiuri Shimbun
Prime Minister Shigeru Ishiba, left, and Constitutional Democratic Party of Japan leader Yoshihiko Noda engage in a party leaders' debate at the Diet on May 21.
As the House of Councillors election approaches this summer, the debate over a consumption tax cut is intensifying among the ruling and opposition parties.
On the evening of May 8, following a dinner with Liberal Democratic Party Secretary General Hiroshi Moriyama, Prime Minister Shigeru Ishiba, who is also the LDP president, expressed his determination not to cut the consumption tax despite calls for such a cut as a measure against rising commodity prices. Although the prime minister had previously leaned towards the idea of a tax cut to support those suffering from high prices, he acknowledged that tax revenue is essential for funding social security. In a meeting on May 12, he remarked, 'If politicians start making promises just to please the public, the country will perish.'
Moriyama, who is also an advisor to the LDP's research commission on the tax system, shared the prime minister's negative view on tax cuts. They agreed that the LDP would not pursue discussions on this issue.
In contrast, Yoshihiko Noda, leader of the Constitutional Democratic Party of Japan, has taken a stance in favor of a consumption tax cut. In 2012, while he was prime minister, Noda reached an agreement with the LDP and Komeito on a 'comprehensive reform of social security and taxes,' which included a gradual increase in the consumption tax rate. Although he is recognized as a fiscal conservative, Noda has failed to quell the growing support for tax cuts within his own party. The CDPJ's decision to support a consumption tax cut was also influenced by the fact that other opposition parties are calling for one.
On April 25, the CDPJ decided to include a proposal in its campaign pledges for the upper house election aimed at reducing the 8% consumption tax rate on groceries to 0% for one year. Noda claimed that they need to address the struggles of the current generation, but this position is inconsistent with his previous political beliefs.
Debates over taxation have significantly influenced political affairs throughout history. The tax system is a basic pillar of government, but many politicians approach it with such dread that they call it 'kimon.' Literally meaning 'demon gate,' this term describes a direction — northeast — from which misfortune was traditionally said to arrive.
One prominent figure in the discussion of taxation and politics is Sadanori Yamanaka, who was instrumental in the introduction of the consumption tax as the chairman of the LDP's research commission on the tax system. In June 1988, the commission approved the 'Outline for Fundamental Tax Reform,' which included a 3% consumption tax to take effect in April 1989. The administration of Prime Minister Noboru Takeshita passed the law to introduce the consumption tax, but Takeshita himself resigned in June 1989 amid the Recruit scandal. Yamanaka subsequently lost his seat in the House of Representatives election in February 1990.
The Democratic Party of Japan, under Noda's leadership, also faced defeat in the lower house election of 2012 and fell from power in the wake of its decision to increase the consumption tax rate.
Reflecting on the political sacrifices of the past, it's likely that many politicians believe tax cuts are advantageous for their election prospects. However, evidence suggests that appeals to populism through easy tax cuts do not guarantee electoral support. Former Prime Minister Fumio Kishida attempted to break a political deadlock with a fixed-amount tax cut, but it ultimately failed to buoy his administration. Kishida had to give up on running in the 2024 LDP presidential election.
Overly simplistic calls for tax cuts can undermine a politician's ability to manage taxpayer money effectively. For voters to grasp the necessary burdens, it's crucial that politicians build public trust, demonstrating that they are worthy of being entrusted with tax revenue. In this regard, it is not certain that Ishiba and the LDP will be able to gain this kind of public trust, given their past stance on issues such as politics and money scandals.
During a debate among leaders of different parties on May 21, the topic of the consumption tax was prominently discussed. Noda advocated for 'a responsible tax cut' while Ishiba emphasized his commitment to being responsible for the future.
Ishiba cited Takeshita as one of the politicians he admires. Moriyama, who regards Yamanaka as his political mentor, said in a June 2 speech that 'statesmen have always recognized the importance of the consumption tax, social security, and the need for public understanding.'
In the upcoming upper house election, each party has a responsibility to engage in an honest discussion about the burdens and benefits they aim to propose. Voters will need to determine which party is truly responsible. The election outcome will likely shape not only the fate of the Ishiba Cabinet but also the broader trajectory of politics in Japan.
Political Pulse appears every Saturday.
Michitaka Kaiya
Michitaka Kaiya is a deputy editor in the Political News Department of The Yomiuri Shimbun.
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