The Tamesis
February 12, 2026
Tokyo – Japan’s Prime Minister and Liberal Democratic Party President Takaichi Sanae is pushing ahead with delivering on the party’s policy commitments after the ruling Liberal Democratic Party scored a historic victory in a lower house election on Sunday.
High City will speed up discussions on consumption tax cuts and the introduction of a “cash payment tax credit” system, especially at the Inter-Party National Committee. She is also expected to spearhead a push for constitutional amendments and other conservative policies she has supported over the years.
Among the Liberal Democratic Party’s election promises, Gao Shi paid special attention to reducing the burden of taxes and social insurance premiums on low- and middle-income people. At a press conference on Monday, she highlighted her commitment to introducing a “cash payment tax credit” system that combines income tax relief with cash benefits, saying it was “at the heart” of planned reforms.
The city has positioned the zero consumption tax on food as a “two-year stopgap measure” because of the time it will take to obtain the data on revenue and other factors needed to implement the policy.
Systematic design
The systematic design of these policies will be discussed at the inter-party national committee, which will include policy chiefs from the ruling and opposition parties. “We hope to establish a committee as soon as possible to discuss both policies to reach a conclusion,” Chief Cabinet Secretary Minoru Kihara said at a news conference on Tuesday.
“We hope to draft an interim plan at the national committee before the summer,” Takaichi said on Monday.
To ensure a quick discussion, the Prime Minister intends to only allow opposition parties that support the idea of cash payment tax credits to sit on the committee. “We will discuss it in the national conference with parties that share the same views and in parliament with parties that hold different views,” a senior official in the Prime Minister’s Office said.
Some government officials believe that the government should reflect the National Committee’s discussions in the “Basic Policies for Economic and Fiscal Management and Reform” to be formulated in June. Relevant laws will be enacted at next year’s regular session of Congress, and the policy will be implemented in fiscal year 2027. A source close to the Finance Ministry said this was “a realistic timetable.”
However, during a party leadership debate the day before the official start of the House campaign, Takaichi said that if the national parliament reaches a conclusion before the summer, she will “aim” to introduce relevant bills in the special congressional session in the fall and implement these policies in fiscal year 2026.
An aide close to her said: “If the work is completed in the shortest possible time as the prime minister said, the relevant laws may be enacted in a special congressional session and implemented by the end of fiscal year 2026.”
Make up for falling revenue
However, discussions at the National Council were not easy. The biggest challenge is how to obtain financial resources to make up for the 5 trillion yen annual tax reduction, as the parties’ positions on this issue are widely divided.
High City has made it clear that it will not issue bonds to cover the deficit to raise funds, saying that funds should be raised through measures such as increasing non-tax revenue and reviewing subsidies.
“The prime minister’s explanation is consistent with the discussions she has had with us,” Japanese Finance Minister Satsuki Katayama said at a news conference on Tuesday. “We will find the best way to realize our plan as soon as possible.”
There has been little discussion within the Liberal Democratic Party about the consumption tax cut. If the first year of high school jumps to conclusions without detailed discussions at the LDP’s tax system study committee, it could cause strong opposition within the LDP.
In financial markets, there are concerns that fiscal uncertainty related to tax cuts could lead to higher yields and a weaker yen. Once the consumption tax rate is lowered, it will also be politically difficult to raise it again.
A senior government official said, “In order to avoid criticism after the consumption tax reduction, it is important for the ruling and opposition parties to discuss it in the National Assembly.”
