Behind the Scenes of Yohei Kono’s Memorial Service: Chief Mourner Taro Kono’s “Act of Defiance” and the Party Split Caused by the “Takashi Administration’s Tax Cuts Without Funding”

The Tense Atmosphere at Yohei Kono’s Memorial Service

A memorial service for Yohei Kono (89), who served as president of the Liberal Democratic Party and Speaker of the House of Representatives, was held on August 5 at the Hotel Okura Tokyo.Prime Minister Sanae Takaichi (65) served as chair of the funeral committee. After laying flowers, she reportedly stated , “We must not forget that it is thanks to Mr. Kono’s leadership that the LDP is now in power.”

The memorial service was closed to the press. Former Prime Minister Fumio Kishida (69), Defense Minister Shinjirō Koizumi (45), and, from the opposition, Kiyomi Tsujimoto (66), a member of the House of Councillors from the Constitutional Democratic Party of Japan, were among those who attended.

Panels commemorating Yohei Kono’s life were displayed throughout the venue.The walls were adorned with images depicting his joy upon his first election victory, scenes of him surrounded by voters in his constituency, and photographs with world leaders; particularly striking was a snapshot of a young Taro Aso (85), then Vice President of the party, with long hair and a gentle smile, standing alongside Yohei Kono.

“Mr. Aso delivered the eulogy, and the service proceeded solemnly and solemnly. Even after the major politicians had left, police officers with metal detectors remained at the entrance to the venue, and photography and recording were prohibited. The atmosphere was extremely tense.“That’s probably because Taro-san has begun openly criticizing the administration,” said a participant at the memorial service.

“Taro-san” refers to the chief mourner, former Minister of Digital Affairs Taro Kono (63).On that day, the Takagi Cabinet approved a policy to lower the consumption tax rate on food items to 1% for a limited period of two years starting next April. Leading up to the cabinet decision, heated debates took place within the Liberal Democratic Party, and Mr. Konorepeatedly criticized the plan, stating, “There is no guarantee of funding,” and “Instead of a consumption tax cut that benefits high-income earners the most, we should provide generous cash payments focused on low- and middle-income earners.”

On the same day, Mr. Kono appeared live on TV Asahi’s “Shinichi Hatori Morning Show” and made the following remarks:

“We must do something about rising prices. However, if we proceed without securing funding, it could lead to a weaker yen or higher interest rates. A weaker yen would cause import prices to rise, or lead to higher electricity and gas prices, which would directly hit household budgets.If we lower the consumption tax starting next April, prices could start creeping up gradually from now on. Therefore, we must carefully assess whether this will truly be an effective measure against rising prices.”

In addition to Mr. Kono, a number of LDP lawmakers—including former Prime Minister Shigeru Ishiba (69), former Election Campaign Committee Chair Yuko Obuchi (52), and House of Councillors member Masashi Nishida (67), who supported Ms. Takaichi in the party leadership race—are voicing opposition to the consumption tax cut.There is also a history of successive administrations raising the consumption tax to cover rising social security costs, even at the cost of their approval ratings.

Tax Cuts to Boost Approval Ratings

On the other hand, Ms. Takaichi was not necessarily enthusiastic about a consumption tax cut during the party leadership race, stating that she would “not rule it out as an option.” Even in the recent House of Representatives election, the party’s platform stated that it would “accelerate consideration” of the issue, suggesting that a consumption tax cut was not a policy that had to be implemented at all costs.

“As her approval ratings began to wane, Ms. Takaichi—perhaps in an attempt to win public favor—began pushing for a consumption tax cut through a top-down approach.In the National Conference, which was advancing discussions on the consumption tax cut, the opposition parties’ views were not incorporated, leading to a situation where opposition parties—which had pledged tax cuts in their own election platforms—ended up opposing the measure. With five of the six opposition parties participating in the National Conference—all except the Japan Conservative Party—coming out against it, the debate is likely to become contentious during the extraordinary session of the Diet this fall.

“Forrcing the issue even within the LDP has created rifts, and open criticism has begun, led by veteran lawmakers known for their electoral prowess. Resentment toward Ms. Takaichi’s top-down approach is spreading among both the opposition and the ruling party,” said a veteran LDP secretary.

The cost of the two-year consumption tax cut is estimated at 10 trillion yen. Mr. Kono, Mr. Ishiba, Mr. Obuchi, and others have all made the obvious point that “this should be considered only after a prospect for alternative revenue sources is established.”

Although Ms. Takaichi has explicitly stated that she will not rely on deficit-financed government bonds, at a press conference on August 5, she limited herself to saying, “We will proceed with reviewing both expenditures and revenues while closely monitoring tax revenue trends.” It is not just the consumption tax cut. No alternative revenue source has been found to replace the provisional gasoline tax rate that was abolished at the end of last year.

Although the government is implementing fiscal stimulus under the banner of “responsible expansionary fiscal policy,” unless it identifies permanent alternative revenue sources, it risks being viewed as pursuing “reckless fiscal policy.” This could lead to a further weakening of the yen in the markets and accelerate the “sell-off of Japan,” where government bonds are sold off.

“Sanae-nomics,” based on expansionary fiscal policy and tax cuts, initially gained the market’s confidence following a landslide victory in the recent House of Representatives election.However, once the “Comprehensive Policy Guidelines”—centered on an investment plan totaling 370 trillion yen from both the public and private sectors over the next 14 years—are unveiled, Japanese government bonds could be sold off, the yen could weaken further, and the “sell-off of Japan” could intensify.

Keisuke Yamada, a former Jiji Press editorial writer and journalist, discusses the concerns spreading among market participants.

“If bills related to a consumption tax cut are submitted during the extraordinary Diet session beginning this fall, the Diet will likely become chaotic; however, it is possible to enact the legislation by leveraging the House of Representatives’ ‘majority power’ to pass the bills again. But the market won’t see it that way.

If Ms. Takaichi pushes for a tax cut without explaining alternative revenue sources, the market will view it as ‘handouts,’ leading to a weaker yen, a sell-off in government bonds, and rising interest rates.This would create a vicious cycle in which inflation escalates, forcing the government to implement further measures to combat rising prices. There are also voices in the market expressing concern that this could be a repeat of the ‘Truss Shock’ that occurred in the UK in the fall of 2022.”

Opposition to the Takaichi administration is also growing outside of Nagatacho.