Passage of Extra Budget: More Discussion Needed on Funding for Birth Rate Measures, Effects of Tax Cuts

It is difficult to say that debate has deepened on measures to secure financial resources to deal with the declining birth rate and the effects of tax cuts.

A supplementary budget for fiscal 2023 exceeding ¥13 trillion in total was approved, mainly to deal with measures against high prices.

At Budget Committee meetings, deliberations focused on the government’s planned ¥40,000 per capita fixed-amount tax cuts scheduled for June next year.

Prime Minister Fumio Kishida initially explained that the tax cuts were aimed at “returning to the public part of the recent growth in tax revenues.” However, during the Diet deliberations, he stated that the tax cuts would be implemented to “show the determination and resolve of the government” to encourage companies to raise wages. He also said that the cuts would “be aimed at supporting child-raising efforts.”

Perhaps Kishida wanted to emphasize that the tax cuts were significant in various ways because they have not been well received, but his remarks may have made it harder to understand the aim of the tax cuts. It is hoped that Kishida will try to provide a coherent explanation.

The government has stated that the creation of a subsidy system to counter the declining birth rate, which would be financed by medical insurance premiums, “would not impose any additional burden on the people in real terms.”

Kishida said this means that the “national burden ratio” — meaning the ratio of the tax and social security burden to the overall income of the people — will not be increased.

He may be trying to say that the government will take steps to increase incomes by raising wages, while curbing the growth of social security spending through expenditure reform. Whether this will be realized depends on wage increases by private companies.

Some opposition parties — Nippon Ishin (Japan Innovation Party) and the Democratic Party for the People — also voted in favor of the supplementary budget, thus creating a stir in the conventional ruling parties versus opposition parties structure.

The DPFP appreciated Kishida’s clear indication that he would consider using a “trigger clause” to temporarily reduce gasoline taxes.

The prime minister may be hoping to draw the DPFP to his administration’s side, but the government has long kept the trigger clause frozen on the grounds that allowing it to operate would cause confusion on the front lines of the distribution system. How will the government ensure consistency with past explanations?

Meanwhile, opposition parties have pursued the LDP’s political funds issue, in which political organizations of five party factions are alleged to have understated income from fundraising parties in their political funds reports.

Political organizations are required to list the names of individuals or entities that purchased more than ¥200,000 in tickets for their fundraising parties in their political funds reports. Political organizations that purchased tickets for such parties organized by the political organizations of the factions showed their expenditures for the purchases. However, the political organizations of the factions did not mention the income in their funds reports.

According to the factions, when political organizations purchased their tickets from multiple legislators, for some reason, none of the factions added up the amounts, resulting in the omission of the names of the political organizations as purchasers.

The five factions corrected their funds reports. The LDP should be aware of the public’s strict view of political funds.

(From The Yomiuri Shimbun, Nov. 30, 2023)