Komeito Leader Tetsuo Saito Proposes Tax Cuts to Combat Inflation and Tariffs in Japan

Komeito leader Tetsuo Saito proposed economic measures focused on tax cuts, including reducing the consumption tax on food, to boost household consumption amid inflation and U.S. tariffs. The proposal, ahead of the summer House of Councillors election, faces resistance from the LDP and government officials concerned about funding Japan's social security system. The opposition CDP advocates for a one-year suspension of the food tax. The debate occurs as Japan's economy struggles with inflation, tariffs, and slowing growth, with the BOJ lowering its 2025 growth forecast.

Komeito’s Economic Strategy: Tax Cuts at the Core

At a press conference on May 9, Komeito leader Tetsuo Saito outlined his party’s forthcoming economic policy package, emphasizing that tax cuts would form its backbone. “In the face of rising prices and the uncertainty caused by Trump’s tariffs, we need measures that firmly support personal consumption,” Saito stated. He acknowledged that while tax cuts take time to implement, the party remains committed to providing direct support to those most in need.

Among the measures under discussion is a reduction in the reduced consumption tax rate currently applied to food and beverages. Since 2019, Japan has maintained a two-tier consumption tax system: 10% for general goods and services, and 8% for food and non-alcoholic beverages. Saito confirmed that lowering the 8% rate is “one of the items on the table” as part of broader discussions on tax relief.

Political Coordination with the LDP

Saito also stressed the importance of aligning with the LDP, Komeito’s senior coalition partner, on the core elements of the economic package. “We must coordinate with the LDP to ensure unity within the ruling coalition,” he said, signaling that any final proposal would require consensus-building within the government.

However, this coordination may prove challenging. Prime Minister Shigeru Ishiba has taken a cautious stance on tax cuts, particularly those affecting the consumption tax. “Given that consumption tax revenue is designated as an important source to support the social security system for all, we think it's not appropriate to reduce it,” Chief Cabinet Secretary Yoshimasa Hayashi reiterated at a separate press conference.

The LDP leadership has so far resisted calls for a tax cut, despite internal pressure from dozens of party lawmakers advocating for more aggressive fiscal stimulus. These lawmakers have proposed making food and beverages tax-free indefinitely, a move that would go even further than Komeito’s proposal. Yet, the government has officially ruled out a consumption tax cut, citing Japan’s precarious fiscal health and the need to maintain funding for social security programs, which consume about a third of the national budget.

Opposition Pushes for Bolder Measures

The opposition Constitutional Democratic Party of Japan (CDP) has taken an even more assertive position. In response to the economic strain caused by inflation and U.S. tariffs, the CDP is calling for a complete suspension of the consumption tax on food items for one year. The party argues that such a measure would provide immediate relief to households and stimulate domestic consumption.

This proposal has gained traction amid growing public concern over the cost of living. However, the government has dismissed the idea, with senior officials warning that such a move would jeopardize the financial foundation of Japan’s social safety net.

Economic Context: Inflation, Tariffs, and Slowing Growth

The debate over tax policy comes at a time of mounting economic uncertainty. The Bank of Japan (BOJ) recently downgraded its growth forecast for fiscal year 2025 from 1.1% to 0.5%, citing the impact of U.S. tariffs and persistent inflation. BOJ Governor Kazuo Ueda has indicated that while interest rates remain unchanged for now, the central bank is closely monitoring wage growth and price trends, which could prompt future rate hikes.

Meanwhile, Japan’s export-driven economy is feeling the strain of President Donald Trump’s renewed tariff policies. The government is engaged in delicate negotiations to protect key sectors, particularly the automobile industry, from further trade barriers. Analysts warn that without swift and effective domestic policy responses, Japan risks slipping into a deeper economic slowdown.

Internal Tensions and Broader Political Implications

The tax debate is unfolding against a backdrop of political friction within the ruling coalition and between the government and opposition. While Komeito seeks to position itself as a champion of household relief, the LDP is grappling with internal divisions and external scrutiny.

Recent reports have also reignited controversy over political funding practices, with the CDP demanding further investigation into former LDP policy chief Hakubun Shimomura’s role in a factional finance scandal. These tensions could complicate efforts to build consensus on economic policy, particularly as the summer election approaches.

References

• Japan gov't rules out consumption tax cut as inflation, tariff relief - The Mainichi
• 公明 斉藤代表 党経済対策 減税も骨格に 軽減税率引き下げ検討 | NHK
• The Fragile Alliance
• Caution vs. Action: What’s next for Japan’s interest rates? - Bank of Japan – March Policy Meeting Overview
• We’re lowering our Asia growth forecasts because of tariffs
• Economists debate consumption-tax cut as Japanese politicians warm to the idea
• 政治資金問題 自民と立民 下村氏の参考人招致は引き続き協議 | NHK