Consumption Tax Cut is Back at the Forefront

The Extraordinary Session of the Diet Begins

By Takuya Nishimura, Senior Fellow, Asia Policy Point
Former editorial writer for the Hokkaido Shimbun
You can find his blog, J Update here.
October 5, 2026

An extraordinary session of the Diet was convoked on October 5 with closure scheduled for December 12. The top priority for Prime Minister Sanae Takaichi and the ruling Liberal Democratic Party (LDP) is a consumption tax cut that would begin in April 2027. However, Takaichi faces the headwind of a scandal inside her administration and reservations about her diplomatic skills.
 
Ordinarily, such a Diet session in the fall is to discuss a supplemental budget for the Japanese economy or for dealing with an unexpected event such as a natural disaster. However, Takaichi has no plans so far to submit a supplemental budget bill. Indeed, she previously declared that she would not propose any supplemental budget and would integrate all the budget items into an annual budget that begins every April. Forgoing a supplemental budget should improve the efficiency of private business activities by improving the predictability of government spending.
 
Hence a consumption tax cut is the focus of this session. The Takaichi Cabinet made an official decision on the tax cut in mid-September: it will seek to reduce the consumption tax rate on food from eight percent to one percent for two years starting next April. The government will also establish a new system to subsidize job-hunting efforts by low-income families, instead of a refundable tax credit.
 
The leading coalition, the LDP and its partner, the Japan Innovation Party (JIP), does not have a majority to pass the bill in the Upper House, forcing the two parties to seek some help from opposition parties. LDP and JIP expect Komeito, which left the Centrist Reform Alliance (CRA) in September, to vote yes on the consumption tax cut bill.
 
However, the situation among the opposition parties is extremely complicated. The CRA lawmakers who had joined the party from the Constitutional Democratic Party of Japan (CDPJ) have since established a new party, the Democratic Reform Association (DRA). The DRA and Komeito then have organized a parliamentary group in the Lower House. Although the CDPJ and Komeito have not launched a similar project in the Upper House and continue to work separately there, it is up to Komeito whether to take a position closer to the CDPJ or to the LDP on the consumption tax cut proposal.
 
In addition to enacting the consumption tax cut, the LDP/JIP coalition hopes to reduce the number of Diet seats. The JIP has been calling on the LDP to implement their agreement made in October 2025 to reduce the number of seats in the Lower House by ten percent. The two parties failed to pass such a bill in either the extraordinary session of last fall or the special session earlier this year. Several members of the LDP are skeptical of JIP’s hard push for seat reduction.
 
The seat reduction proposal has led to an unusual unification of the opposition parties because all 45 seats to be eliminated are in proportional districts of the Lower House and thus work against small parties. If the LDP and JIP decide to ignore opposition complaints and take advantage of their super majority in the Lower House to pass the seat reduction, Komeito may oppose the consumption tax cut bill in retaliation. A multi-partisan group of lawmakers, including some from the LDP, submitted their opinion to the council for election reform, which argued that the 45-seat reduction would be baseless.
 
Controlling the procedure in the Diet will be crucial for Takaichi, who is reluctant to join the Diet’s discussion of the bills. The newly appointed Chairman of the LDP Council on Diet Affairs, Hideki Murai, supports Takaichi’s hesitancy and may negotiate to reduce her appearances before the Committee on Budget. But if Murai fails, the opposition parties will be further emboldened to oppose the leading coalition.
 
The Committee on the Budget has been a venue for discussing political scandals. Weekly magazines have reported that, before taking the position as Minister of Agriculture, Forestry and Fisheries, Kazuo Yana threatened some municipalities in his electoral district with cuts to their road construction budgets. The mayors of those cities supported another candidate in the last election in February. Yana’s possible involvement can be interpreted as blackmailing political opponents.
 
Yana is one of the lawmakers who received kickbacks from a former Abe faction in the LDP. His punishment was exclusion from a leadership position in the LDP for six months. Nevertheless, Takaichi allowed him to return to the leadership group by appointing him as minister in her cabinet reshuffle in September. She must have thought the kickback scandal was over. However, in an Asahi Shimbun poll, 68 percent considered it a problem that Takaichi had begun to appoint lawmakers embroiled in the funding scandal to ministerial positions. Mishandling of the Yana scandal may affect Takaichi’s approval rating.

Takaichi’s limited diplomatic skills have also raised concerns. A member of the U.S. Marine Corps in Okinawa was arrested by Japanese police on suspicion of a robbery from and the murder of a Japanese woman. The government of Japan has expressed its extreme regret to the U.S. However, Takaichi has not taken the matter up with U.S. President Donald Trump. Takaichi once said (in what she must now recognize as a grave mistake) that Trump was the only person who could bring peace and prosperity to the world. If she remains wedded to this view, she will show her irresolution about protecting Japanese citizens, and her public image will deteriorate.
 
Takaichi still has not improved bilateral relations with China that resulted from her careless speech on the Taiwan contingency in the Diet last November. Some lawmakers are trying to normalize Japan-China relations. This is not within Takaichi’s repertoire. Her missteps in diplomacy will give challengers a window to consolidate their opposition to her reelection as the LDP president in the fall of 2027.