Candidates to Head LDP Shift Focus to Tax Cuts, Moving Away From Handout Proposals in Last Election

By Ryuichi Sato and Takahito Higuchi / Yomiuri Shimbun Staff Writers

1:00 JST, September 26, 2025

The five candidates vying for the presidency of the Liberal Democratic Party made a noticeable shift toward tax cuts, including income tax cuts, during a recent public debate.

This marks a clear pivot away from the blanket cash handouts that the ruling parties pledged in the House of Councillors election in July, and sparked a lively debate over the effectiveness and speed of their proposals to combat rising prices.

Calls to reverse policy

“Even if it was a campaign pledge, we should apologize and rethink it since the public said ‘no,’” former economic security minister Sanae Takaichi said during the debate on Wednesday. “This means starting over in a manner tantamount to a breakup of the party.”

Takaichi advocated scrapping the policy to provide a ¥20,000 cash handout per person that the LDP and Komeito made a centerpiece of their campaign pledges for the upper house election. This cash handout plan would add another ¥20,000 per child or adult in households that are exempt from resident tax.

Former LDP Secretary General Toshimitsu Motegi agreed, saying: “The people said ‘no.’ We shouldn’t just amend the policy; we should change it.”

Chief Cabinet Secretary Yoshimasa Hayashi indicated that a policy reversal is unavoidable, saying, “We must listen to the public and change what needs to be changed.” Hayashi was involved in formulating the cash handout policy as a key government figure.

Measures to tackle rising prices

With the push for blanket handouts losing steam, some candidates are now putting income tax cuts at the center of their plans to combat rising prices. Former economic security minister Takayuki Kobayashi proposed temporarily implementing a fixed-rate tax cut, deducting a fixed percentage from income tax.

A fixed-rate tax cut means greater savings for those paying more income tax, so Takaichi questioned this approach, asking if it would benefit high-income earners.

Kobayashi countered that his plan was designed to provide a greater benefit to the middle class, arguing that it would reward those whose hard work led to higher salaries. He also clarified that he would “put a cap on the amount of the tax cut.”

Takaichi has advocated since 2021 for a “tax credit with cash payments” plan that would combine direct cash payments and income tax cuts. “It’s important to focus resources on those who truly need assistance,” she said. She also expressed her support for the Democratic Party for the People’s proposal to raise the tax exemption threshold, or “annual income barrier,” to ¥1.78 million.

Hayashi advocates for a “Japanese version of Universal Credit” that provides income-based support to low- and middle-income households. However, determining income levels and designing the system would take time. Some have pointed out that it took 15 years for the system to become established in Britain, which would serve as a reference.

Hayashi indicated his desire to expedite the institutionalization of the system, saying: “I want to focus on young people, families with children, and low- and middle-income earners. It’s not my intention to take 15 years.”

In contrast, Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi said, “The public’s voice is calling for swift action on immediate measures to combat rising prices.” He emphasized the merits of his policy to “raise the basic income tax deduction in line with increases in prices and wages.”

Consumption tax cut a possibility

Policies that align with opposition party arguments are noticeable because the ruling parties lack a majority in both houses of the Diet, making opposition support essential for policy implementation.

Regarding the provisional gasoline tax rate, all six parties — both ruling and opposition — have agreed to abolish it within the year, and all five LDP candidates pledged its swift abolition.

On the consumption tax cut advocated by opposition parties during the upper house election, many expressed skepticism about it as a short-term policy. “It takes time and has a limited effect,” Motegi said.

However, Koizumi suggested that such a consumption tax cut could be a possibility in the future. “I won’t rule out the option and we will discuss it,” he said.