Masashi Nishida Calls for Abolishing the Consumption Tax and Prime Minister’s Resignation

The desperate cry of a member of the House of Councillors

As the Tokyo Metropolitan Assembly election and the House of Councillors election approach, divisions within the Liberal Democratic Party (LDP) are deepening.

While advancing measures to address price hikes and economic concerns, the implementation of the Trump tariffs caused a sharp 2,188-point drop in the Nikkei Stock Average on April 7, plunging Japan’s economy into turmoil. With the U.S.-Japan trade issues added to the economic policy agenda, proposals such as cash handouts of 30,000 to 50,000 yen, consumption tax reductions, and rice coupon distribution suddenly gained traction within the ruling party.

“In recent elections, the Komeito party’s organizational voting power had visibly declined, and as a ‘carrot’ before this summer’s major elections, they pushed for tax reductions and cash handouts, but it was nothing more than election-driven handouts. Tax reductions require legal amendments and take time. As a temporary measure, the proposal was to pass a supplementary budget, using deficit bonds or any other means, to carry out cash handouts—a proposal that was clearly infeasible.

Normally, such a proposal should have been rejected. However, given the harsh situation in the upcoming House of Councillors election and the sharp drop in stock prices, Secretary-General Hiroshi Moriyama (80) leaned toward accepting cash handouts. From there, House of Councillors candidates jumped on board, and within the LDP, there was a chorus calling for distributing cash and lowering the consumption tax rate” (National newspaper political department reporter).

In the previous 2022 House of Councillors election, the LDP secured 18 proportional representation seats, but the forecast for this summer’s election is around 12. The single-member districts in Tohoku are particularly facing tough challenges, with some voices expressing that a complete defeat is possible.

In the midst of this, the pressure on Prime Minister Shigeru Ishiba (68), who has seen a decline in approval ratings after it was revealed that he distributed 100,000 yen worth of gift certificates to 15 new members of the House of Councillors, is growing stronger.

A bold change of mindset

“Consumption tax should be abolished altogether.”

This shocking plan is being proposed by Masashi Nishida (66), a member of the House of Councillors who has been continuously demanding the resignation of Prime Minister Ishiba.

“Eliminating the consumption tax will increase disposable income for households, and individual consumption will certainly expand. If the economy rises, tax revenue will increase. During the COVID-19 pandemic, we calculated a massive supplementary budget of over 100 trillion yen, but fiscal collapse did not occur, and the huge supplementary budget supported the economy, leading to a significant increase in tax revenue afterwards.”

In the initial budget for FY2025, a record tax revenue of 77.819 trillion yen is expected, but abolishing the consumption tax would result in a 25 trillion yen decrease.

“We should revert the corporate tax rate, currently at 23.2%, back to 40%. Even if the corporate tax rate was lowered, it only resulted in internal reserves and did not lead to investment. At the same time as abolishing the consumption tax, we should immediately implement the full depreciation of investments in AI and other technologies. In the first few years, we may need to issue deficit bonds, but investment and consumption will significantly expand, and we can expect a tax revenue increase equivalent to the consumption tax through domestic demand-driven economic growth, which is not a bubble. Right now, there’s a lot of discussion about raising the consumption tax, but this is a shift in thinking to lower it and boost the economy.”

Nishida spoke about this and showed reporters his phone, revealing that he had shared his consumption tax abolition plan with Secretary-General Moriyama, who responded, “I will consider it.”

However, the ruling party’s leadership is opposed not only to handouts but also to tax cuts. On April 11, during a press conference, Chief Cabinet Secretary Yoshimasa Hayashi (64) firmly stated, “There is no fact that we are considering measures like tax cuts, supplementary budgets, or economic countermeasures, especially since the new fiscal year’s budget has just been passed.”

Secretary-General Moriyama has not changed his negative stance on both consumption tax cuts and cash handouts, stating, “A tax cut policy without a financial foundation would undermine international trust” (speech in Kagoshima on the 13th), and “We have done cash handouts a few times in the past, but the result was that the money went into savings” (press conference on the 14th).

There is a struggle within the party

Within the party, there is a clash of opinions.

“Moriyama, who served as the finance secretary under the Koizumi administration, is a proponent of fiscal discipline and comes from the ‘Okura faction’ . Given his respect for past administrations that introduced or increased the consumption tax, such as the Takeshita and Hashimoto cabinets, it is unlikely that he will approve of tax cuts.

Furthermore, Prime Minister Ishiba feels indebted to former Prime Minister Fumio Kishida (67), who supported him during the final round of the party leadership election, and cannot easily dismiss his advice. Both Kishida and Chief Cabinet Secretary Yoshihide Suga, who come from the fiscal discipline-focused Koike faction, are opposed to tax cuts,” said the reporter.

Prime Minister Ishiba is caught between the coalition partner Komeito and the Upper House members facing elections, and the party leadership and key members.

In the budget committee on the 14th, Prime Minister Ishiba responded:

“I must emphasize that the government has not considered ‘distributing money for election purposes.'”

His cautious response is likely influenced by public opinion. A survey conducted by Kyodo News from the 12th to the 13th showed that 55.3% opposed cash handouts, while only 37.5% supported it. In a separate survey by Mainichi Shimbun in April, 57% of respondents did not support the idea of cash handouts, while only 20% did.

A current member of parliament, who has known Prime Minister Ishiba for years, commented:

“The idea of cash handouts has been widely criticized on social media and in public opinion surveys, and it seems unlikely that the opposition parties will cooperate. By the 14th, it had been removed from Prime Minister Ishiba’s plans. However, a temporary reduction in the consumption tax on food, as a measure to combat high prices, still seems to be an option. Though a legal revision would be required, and it would not be ready in time for the Upper House elections, he may be contemplating whether to promise tax cuts to boost approval ratings before the elections.”

As discussions split the ruling party, it remains to be seen what decision Prime Minister Ishiba will ultimately make.