The ruling Liberal Democratic Party and two key opposition parties — both eager to have their signature policies reflected in the fiscal 2025 budget — are in an all-out battle of nerves as the government aims for the budget to clear the Lower House in the next week.
Nippon Ishin no Kai and the Democratic Party for the People (DPP) are intensifying their rhetoric, confident that the ruling coalition needs their support for the budget. The LDP has shown signs of frustration over the two parties’ entrenched resistance in the negotiations over education reform, social insurance and the tax-free income threshold.
The LDP, Komeito and Nippon Ishin on Friday morning failed to reach a compromise over the language for a reduction in the burden of social insurance premiums on households in a potential agreement.
“Unless we make necessary coordination within the parties, there won’t be any progress. It’s more about looking at what can be revised rather than which proposal would be accepted,” Nippon Ishin policy chief Hitoshi Aoyagi told reporters after a meeting between the three parties, adding his party wasn’t hung up on reaching an agreement by the end of the day.
Nippon Ishin’s stance is irritating LDP lawmakers and raising doubts over the coalition’s approach with the two opposition parties.
“When you make significant policy changes, you might encounter unforeseen problems and challenges,” former LDP election committee Chairman Shinjiro Koizumi reportedly said in a speech in Yokohama on Thursday.
“If (the ruling camp) accepts their requests for free education, it would be irresponsible for Nippon Ishin to not be held accountable for the consequences. It’s the same for the DPP’s ¥1.03 million ($6,840) threshold (for tax-free income),” said Koizumi. “If they demand significant policy changes, we should ask them to join the ruling coalition.”
Former education minister Masahiko Shibayama — the LDP's chief negotiator for education policy — sounded the alarm on Friday morning as he posed questions to Prime Minister Shigeru Ishiba in the Lower House Budget Committee.
“I strongly urge the prime minister to carefully examine the side effects of implementing free education policy and consider what kind of blueprint is preferable,” Shibayama said, leaving the door open to an agreement.
Reportedly the parties were then able to come to a final agreement only in the afternoon, with a formal meeting between the party leaders expected for early next week.
Meanwhile, the DPP has long voiced its dissatisfaction over a LDP proposal on raising the threshold for taxable income from the current ¥1.03 million, insisting on a more generous plan and the scrapping of the gasoline tax.
On Wednesday, DPP Secretary-General Kazuya Shimba made provocative remarks against Nippon Ishin: If a vote in favor of the government's budget proposal by Nippon Ishin results in the exclusion of the DPP's policies, then it would need to take the blame for depriving citizens of those benefits.
“We are not going to be fussy about any time limits and make a compromise on the LDP’s proposal,” Shimba told a regular news conference Friday, toning down his remarks on Nippon Ishin.
According to media reports, the LDP is considering significantly expanding the pool of people who would benefit from a tax cut following backlash from inside and outside the party. Shimba said on Friday afternoon that he had yet to receive a formal proposal from the LDP on the matter.
In a new session of three-way talks opened Friday evening, Komeito presented its own proposal for the threshold — reflecting its desire to boost support for middle income households.
The DPP criticized the proposal as failing to take into account its requests to avoid setting income brackets and creating unnecessary complications.
“We can see they worked hard on this proposal,” DPP acting leader Motohisa Furukawa said. “But it doesn't respect the three basic principles of taxation systems: fairness, neutrality and simplicity.”
The party will formally consider the proposal in its internal tax committee Tuesday morning, Furukawa said.
Adding fuel to the fire, former Economic Security Minister Sanae Takaichi — who is notably in favor of fiscal expansionist policies and higher government spending — took to social media platform X on Thursday to blast the proposal to raise the tax-free income threshold, criticizing LDP’s tax committee for deciding things behind closed doors.
The powerful tax committee of the ruling party is seen as being very close to the Finance Ministry.
“A number of LDP lawmakers, including myself, are outraged by the fact that we only found out about the proposal through media reports,” Takaichi wrote.
“The tax system should be simpler and fairer, and shouldn’t discourage people from working more,” she continued, using language similar to that of the DPP.
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