As election looms, Ishiba stands firm against calls to cut sales tax

Any U-turn in favour of tax cuts now will cement impressions of him as a weak leader: Expert

- Walter Sim

TOKYO - As a national election looms in July, Japan's Prime Minister Shigeru Ishiba is up against mounting pressure from within and outside his party for a temporary cut to the consumption tax.

His administration, which has been struggling with tepid public support since he took office in October 2024, is wary of inflicting long-term fiscal damage on Japan's state coffers with short-sighted populist manoeuvres.

The Upper House poll is a make-or-break moment for Mr Ishiba's longevity as prime minister. His government is already navigating the complexities of a hung Lower House, after the ruling coalition comprising the Liberal Democratic Party (LDP) and junior partner Komeito lost its majority in a 2024 Lower House poll.

The debate comes as food and energy prices surge, straining household finances as wages fail to keep pace with inflation. Weak spending contributed to a contraction in Japan's economy by an annualised 0.7 per cent in the first three months of 2025, preliminary data showed on May 16, with the decline coming even before the jolt of US tariffs.

Now, Mr Ishiba and his allies are staking their election strategy on portraying the LDP as the "only responsible party" for Japan's fiscal health, with the consumption tax used to fund big-ticket expenditures in social security.

"It's vital to implement generous measures for those who are truly in need, while taking our responsibilities to future generations seriously," he said in Parliament on May 12.

But on the other side of the fence are arguments that Japan desperately needs to inject stimulus into its tepid economy. A cut in the sales tax will help struggling households and theoretically boost spending.

Japan currently imposes a 10 per cent rate on most goods, with an 8 per cent rate for food items and non-alcoholic beverages, except when dining out.