TOKYO - Economist Toshihiro Nagahama joined lawmaker Yuichiro Tamaki for an urgent discussion on Japan’s economic policies. The conversation took place against the backdrop of the Ishiba administration’s efforts to pass the 2025 fiscal budget by the end of March, with opposition parties playing a crucial role in shaping policy decisions.
One key proposal from the Democratic Party for the People (DPP) is to raise the so-called ‘103 million yen income wall’ to 1.78 million yen. Tamaki explained the reasoning behind this push, highlighting the need to create financial incentives for middle-income earners and alleviate labor shortages. However, securing the necessary financial resources remains a major concern. Nagahama also weighed in on the recent tax reform plan, which raises the threshold from 1.03 million to 1.23 million yen, arguing that this increase is inadequate and does little to address deeper structural economic issues.
The discussion extended to broader fiscal and economic policies, particularly regarding potential inflationary pressures under a possible second Trump administration in the United States. Japan’s ability to manage social security costs in such an environment was a major point of debate. Entrepreneur Takafumi Horie proposed a straightforward approach to increasing take-home pay for workers, suggesting that Japan needs a more aggressive strategy to boost wages and reduce financial burdens on the working population.
In the area of tax policy, Tamaki addressed the ongoing debate over the 2025 tax reforms. One major issue was the government’s decision to postpone gasoline tax reductions. While the ruling party leaders had agreed to raise the income threshold to 1.78 million yen and eliminate the temporary gasoline tax, the timeline for implementation remained unclear. Tamaki strongly advocated for abolishing the gasoline tax, arguing that it was initially introduced as a temporary measure 50 years ago and had since outlived its original purpose.
The conversation also touched on Japan’s broader approach to defense-related taxation. Initially, the government had planned to raise corporate, income, and tobacco taxes to fund increased defense spending. However, the ruling coalition later revised its stance, aiming to reduce income tax hikes while still increasing corporate and tobacco taxes. This move was expected to generate approximately one trillion yen in revenue. Tamaki pointed out that Japan’s tobacco tax remains significantly lower than international standards, suggesting that further hikes could be a viable revenue source.
A critical aspect of the discussion centered on Japan’s declining investment in science and technology. Over the past two decades, China has increased university research funding 24-fold, South Korea by nearly six times, and the United States by 2.7 times. In stark contrast, Japan has actually reduced its funding by 10%. As a result, Japan is the only major country where the number of Ph.D. holders is decreasing. Nagahama and Tamaki emphasized that without substantial investment in research and innovation, Japan’s future economic growth could be severely hampered. They argued that funding for scientific research should not be subject to the same fiscal constraints as social welfare spending, advocating for new government bonds specifically allocated for education and technological advancement.
Healthcare policy was another major topic, particularly concerning Japan’s medical system and workforce distribution. Nagahama pointed out that a growing number of the country’s brightest students are opting for careers in medicine over science and technology, primarily due to income stability. Horie suggested that medical institutions should adopt corporate management structures to improve efficiency and cost-effectiveness. He also highlighted the need for preventive healthcare policies, citing models from Germany and Denmark where regular dental check-ups are mandated to maintain insurance coverage. Implementing similar measures in Japan, he argued, could help reduce long-term healthcare costs by encouraging early medical intervention.
As Japan enters a crucial year with significant elections and policy debates on the horizon, Tamaki stressed the importance of decisive political action. He underscored the need for bold reforms in taxation, economic policy, and social spending to ensure the country’s long-term stability and prosperity. The discussion ended with a call for continued debate and policy innovation to navigate the complex challenges facing Japan’s economy.
Source: 堀江貴文 ホリエモン
