Pledges to Cut Consumption Tax: Parties Should Not Compete to Offer More Irresponsible Populist Policies

Editorial

17:38 JST, January 23, 2026

All major parties running in the House of Representatives election scheduled for Feb. 8 have pledged to cut the consumption tax rate.

As the tax supports the foundation of the nation’s social security system, it is nothing short of irresponsible for the parties to compete with each other over how to cut it without presenting a clear prospect for alternative sources of revenue. Warnings from the financial markets should not be taken lightly.

The Centrist Reform Alliance, the new party formed by the Constitutional Democratic Party of Japan and Komeito, has announced a policy of permanently reducing the consumption tax on food items from 8% to zero. The Liberal Democratic Party set a two-year exemption of food items from the consumption tax as a key part of its official pledges for the election.

The consumption tax is shouldered broadly and equitably by the people. It must not be forgotten that the tax was introduced in 1989 through persistent efforts made by the cabinets of three leaders amid strong public opposition. Former Prime Ministers Masayoshi Ohira, Yasuhiro Nakasone and Noboru Takeshita devoted great efforts to trying to gain the public’s understanding on the matter.

Today, the tax exists as a stable revenue source supporting social security, including pensions and medical and nursing care, with annual revenue amounting to about ¥25 trillion.

If the rate on food items were reduced to zero, the central and local governments would face a drop in annual tax revenue of ¥5 trillion. If there were no alternative source, reductions to social security benefits would inevitably have to be made.

The LDP has surely historically taken pride in its ability to govern as a party for the people. This is the first time the ruling party has pledged to cut the consumption tax in a national election.

Prime Minister Sanae Takaichi, who has long called for reducing the consumption tax, showed a cautious stance on the issue when she assumed premiership. However, the reversal of this stance in the LDP’s campaign pledges was likely aimed at keeping the tax from becoming a point of contention with opposition parties.

The phrasing of the LDP’s official pledge to “accelerate consideration” of exempting food items from the consumption tax contains some degree of vagueness. However, if the party is thought to have signaled its willingness to align with such a tax cut, it could make this move certain to happen.

Yoshihiko Noda, coleader of the new party, has been totally inconsistent on this issue. As prime minister when the now defunct Democratic Party of Japan was in power, Noda called for fiscal reconstruction, promoting reforms to raise the consumption tax rate to 10%.

A proposal has been made to create a sovereign wealth fund as a means to secure revenue. However, the creation of such a fund should be discussed separately as a measure to utilize government-owned assets.

Rising prices of food and other items have been mainly triggered by the weaker yen. If the yen falls further due to concerns over the nation’s fiscal conditions, the benefits of the proposed consumption tax cut would be wiped away. Merely discussing the benefits of such a cut, while ignoring the impact it would have on the complex economy, is nothing but a populist political tactic.

Yields on super-long-term government bonds showed unusual spikes on Tuesday due to concerns over deterioration in the nation’s fiscal conditions. U.S. Treasury Secretary Scott Bessent indicated that surges in Japan were also affecting yields on U.S. long-term government bonds. Japan must avoid being seen as a cause of turmoil in the international market.

(From The Yomiuri Shimbun, Jan. 23, 2026)