Gasoline Tax Cut and Cash-Back Tax Credit Top Takaiichi’s Economic Agenda

Takaiichi has outlined several key measures to tackle rising prices, including the abolition of the temporary gasoline tax rate, raising the so-called “income wall” threshold, and introducing a refundable tax credit system designed to support households struggling despite being employed. Discussions among the LDP, Komeito, and the Constitutional Democratic Party began on September 30th to explore the framework of this proposal.

According to TBS economics reporter Keisuke Hasui, past government aid during the pandemic mostly targeted all citizens through uniform handouts or focused on low-income households exempt from local tax. Takaiichi’s proposed system aims to help working households under financial strain, such as those earning between 2 million and 4 million yen annually, who might receive 100,000 yen in benefits, while those with incomes around 6 million yen would receive 50,000 yen, and those above 8 million yen would receive none. However, Hasui noted that accurately assessing incomes will take time and that implementing the scheme could require as long as three years.

Anchor Takahiro Inoue commented that while the system lacks immediate impact, it represents a meaningful shift from prior aid programs that mostly benefited elderly and asset-holding households, offering targeted support for the middle class. Actress Miho Owada added that the plan would be especially helpful for single mothers and others unable to work full-time, though she expressed concern over how self-employed and freelance workers would be treated under the program.

Hasui emphasized that since the three parties have only just begun talks, further debate will be necessary to refine both the objectives and design of the system.

Funding remains a major challenge. Abolishing the temporary tax on gasoline and diesel alone would require roughly 1.5 trillion yen, while raising the income threshold to 1.78 million yen, as proposed by the Democratic Party for the People, would add about 1.7 trillion yen. Together, these measures would demand more than 3 trillion yen in new resources. Despite multiple discussions since August among ruling and opposition parties, no agreement has been reached on substitute revenue sources.

During the LDP leadership race, Takaiichi stated that issuing government bonds would be “unavoidable if necessary.” Hasui explained that this would involve deficit-financing bonds, which typically weaken the yen and raise import costs for fuel and food, potentially undermining the very purpose of price-relief measures. Unlike the Abenomics era, when fiscal stimulus was used to escape deflation, current policy must combat inflation, making overreliance on bond issuance risky. Officials in the economic ministries have warned that delaying fiscal discipline could cause Japan to lose market confidence.

Inoue noted that Takaiichi frequently speaks of “responsible fiscal expansion” and emphasizes maintaining budget discipline, suggesting that her ability to balance these goals will be tested in the upcoming year-end tax reform debates. Hasui said that the appointment of key figures, including the finance minister and members of the LDP’s Tax System Research Commission, will serve as an important indicator of her resolve to secure stable funding sources.

Anchor Mai Demizu pointed out that while various figures are emerging to support the Takaiichi administration, internal coordination remains uncertain. Hasui agreed, saying that it remains unclear how cohesive the team will be. Inoue added that attention will also focus on personnel changes, noting that Yoichi Miyazawa, a fiscal conservative and former chair of the tax panel who often disagreed with Takaiichi, has stepped down—making his successor’s stance another crucial factor for the new administration.

Source: TBS