LDP tax debate weighed down by predecessors' hardships

2026-08-15

Bittersweet memories of the tax's introduction

The Liberal Democratic Party's debate over the consumption tax has again highlighted not only arguments for and against the system, but also the weight of history accumulated within the party. Former election strategy chief Yuko Obuchi stepped down in July from the Tax Commission's senior inner circle after opposing a government plan to cut the tax rate on food to 1% for two years.

Looking back at the history of the consumption tax brings to mind the anguish within the party. Obuchi's father, Keizo Obuchi, served as chief cabinet secretary in the Noboru Takeshita cabinet, which created the 3% consumption tax in April 1989. It was part of preparations for rapid population aging and broader tax reform, but it drew criticism not only from public opinion and the opposition, but also from within the LDP. Yuko Obuchi had just entered high school at the time.

The practical work was handled by the seven leading figures of the Takeshita faction. Along with Obuchi, they included Deputy Secretary-General Ryutaro Hashimoto, Deputy Chief Cabinet Secretary Ichiro Ozawa, Home Affairs Minister Seiroku Kajiyama, Diet Affairs Committee Chairman Kozo Watanabe and House of Representatives Budget Committee Chairman Yukio Okuda. Tsutomu Hata became a director of the special House of Representatives committee chaired by Shin Kanemaru. The Takeshita cabinet, which pushed through the tax's introduction, was short-lived.

The cost of higher taxes and power

Hashimoto became prime minister and raised the rate to 5% in 1997. He resigned after losing the next year's upper house election, and Obuchi succeeded him. In 1999, while serving as prime minister, Obuchi reportedly startled those around him by saying in Ehime Prefecture on a business trip, 'I have become the world's biggest debtor.' At the time, Japan was being forced to issue more government bonds in response to the financial crisis. Former Finance Vice Minister Koichi Hosokawa, who served as a secretary to Obuchi when he was chief cabinet secretary and later prime minister, has explained the background.

Hosokawa believed Obuchi may have been likening his remark to Korekiyo Takahashi. In the 1930s, Takahashi was finance minister and was assassinated after angering the military by trying to curb the expansion of defense spending. Fiscal policy is a national issue that can shape a politician's fate, and Obuchi is said to have said, 'This time, even if we loosen fiscal policy, I understand very well that discipline must still be maintained. That is why I have resolved to do this.' Obuchi fell ill the year after making that remark.

Fiscal challenges left behind

Looking back to the 1970s, Prime Minister Masayoshi Ohira also felt a strong sense of responsibility for having opened the way to large-scale issuance of deficit-covering bonds while serving as finance minister. He ran in a lower house election pledging to introduce a 'general consumption tax,' but abandoned the plan during the campaign, and the LDP lost its majority. The Diet later passed a no-confidence motion against the cabinet, and he died suddenly during the period of a simultaneous upper and lower house election. It took nearly 10 years after that for the consumption tax to be introduced.

When Prime Minister Shinzo Abe raised the rate from 5% to 10%, he said Japan had to 'fulfill its responsibility to hand over the social security system to the next generation and secure the country's credibility in the market and the international community.' There were two postponements, but he did not proceed with a tax cut. Debate over introducing the consumption tax gathered momentum in response to fiscal deficits that deepened against the backdrop of the oil crises of the 1970s. Long-term debt for the central and local governments combined stood at about 600 trillion yen during Obuchi's premiership, but now exceeds 1,300 trillion yen. For most of that period, the LDP has been in power.

Prime Minister Sanae Takaichi has described a tax cut on food as a 'long-cherished wish' and decided on the first reduction in the consumption tax rate. With uncertainty over procurement of Middle East crude continuing, that marks a different judgment from Ohira's administration. Compared with the sense of crisis over debt felt by Obuchi, how much weight is being taken seriously now is being put to the test. Portraits of successive LDP presidents line the party's eighth-floor hall, where Takaichi was chosen as the 29th president. How will those predecessors view this decision?

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