Shigeru Ishiba resists consumption tax cut even after his coalition suffered a major setback in Sunday’s upper house election. Meanwhile, opposition parties are intensifying their calls to slash taxes as inflation continues to squeeze Japanese households.
The ruling Liberal Democratic Party (LDP) and its partner Komeito had campaigned on cash handouts to ease economic strain. However, that proposal failed to resonate with voters. In contrast, opposition parties pledged to reduce or eliminate the consumption tax—currently 10% for most goods and 8% for food.
According to a Kyodo News exit poll, 72% of voters favored a tax cut. Just 22% supported the cash handouts. The results clearly showed that voters want long-term solutions for rising prices—especially for essentials like rice and daily items.
Still, Shigeru Ishiba resists consumption tax cut, arguing that the levy funds vital services. Speaking on television after the election, he defended the policy. He said Japan needs the tax to finance healthcare and social security. “What happens if state finances worsen further?” he asked.
Despite this explanation, many observers believe the LDP failed to explain its economic strategy clearly. “We struggled to show our policies were for the people,” Ishiba admitted during his post-election remarks.
Since losing the lower house last October, Ishiba now faces even more pressure. To pass any bills, he must consider opposition demands more seriously. As a result, tax reform debates could dominate the legislative agenda in the coming weeks.
Financial markets already reacted ahead of the vote. Bond yields jumped as traders anticipated a weaker ruling coalition and looser fiscal discipline. Specifically, Japan’s 10-year bond yield rose to 1.595% on July 17—its highest level since 2008.
Meanwhile, the Finance Ministry projects total government debt will reach 1,330 trillion yen by March. That figure equals 211% of Japan’s GDP. Therefore, any major tax cuts or spending hikes could strain already fragile fiscal conditions.
Additionally, Shigeru Ishiba resists consumption tax cut as economists warn of broader consequences. If the LDP replaces Ishiba with a more dovish leader, the Bank of Japan may delay future interest rate hikes. That scenario could interrupt efforts to unwind years of monetary stimulus.
For now, Ishiba remains in office. However, growing public dissatisfaction, internal party friction, and deep economic challenges continue to shake his leadership.
