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Economic Relief and Tax Policy Drive Debate in Japan’s Upcoming Upper House Election
July 4, 2025 | Politics

Japan’s upcoming House of Councillors election has turned economic relief measures and tax policies into central campaign issues.


Prime Minister Shigeru Ishiba has unveiled a plan to deliver a one-time payment of 20,000 to 40,000 yen to every citizen nationwide by 2025, insisting that implementation begin this year to maintain its impact. The government plans to link disbursements to My Number Card–tied public money receiving accounts, ensuring rapid delivery and streamlined administration, and will cover costs with surplus tax and non-tax revenues.

**As the July 20, 2025 election draws near, the ruling Liberal Democratic Party and its coalition partner Komeito have centered their campaign on a uniform 20,000 yen cash payment per person to combat inflation.**
Opposition parties counter with consumption tax cut proposals ranging from a temporary 0 percent rate on food items or a uniform 5 percent rate to the outright abolition of the food tax.

**Debating these measures at the Japan National Press Club on July 2, Prime Minister Ishiba defended the speed and targeted nature of the cash payments.**
Yuichiro Tamaki of the Democratic Party for the People and Kiyohiko Noda of the Constitutional Democratic Party argued that cutting consumption taxes would more effectively rein in inflation. Komeito leader Tetsuo Saito cautioned that abrupt tax changes could spark hoarding and public confusion. Participants also discussed targeted agricultural support such as allowances for farmers who reduce costs, boost exports or operate in mountainous areas, alongside proposals to increase defense spending.

**The Dai-ichi Life Research Institute applied artificial intelligence to forecast economic outcomes under four policy scenarios that mirror the competing party platforms.**
The first scenario, resembling the LDP proposal, combines a 20,000 yen uniform benefit with an additional 20,000 yen for low-income households. The second, aligned with the Constitutional Democratic Party, pairs food tax abolition with a uniform benefit. The third reflects the Japan Innovation Party’s call for food tax abolition only, and the fourth models a temporary cut of the consumption tax to 5 percent as proposed by the Democratic Party for the People.

**AI projections assign a 40 percent probability to the LDP-style uniform benefit scenario, which would raise GDP by 0.2 percent at an estimated cost of 2.8 trillion yen, though about 30 percent of that funding could end up saved rather than spent immediately.**
The combined food tax abolition and benefit scenario carries a 25 percent likelihood and would boost GDP by 0.5 percent with a fiscal burden approaching 7 trillion yen. Eliminating the food tax alone shows a 20 percent chance of adoption, a 0.3 percent GDP gain and a cost of roughly 4.5 trillion yen, primarily benefiting low-income households. Finally, a temporary reduction of the consumption tax to 5 percent offers the largest GDP increase of 0.7 percent but entails an annual revenue shortfall of about 15 trillion yen, threatening fiscal sustainability, social security funding and bond creditworthiness.

**Yuu Kashimura, chief researcher at Dai-ichi Life, emphasizes that while AI can quantify the benefits and risks of each policy mix, policymakers must still exercise human judgment informed by rigorous, data-driven analysis.**







### IMPACT ANALYSIS
**From this Development, various impacts could cascade through the system, to a lesser or greater extent, depending on the severity and criticality of the shocks.**





























































Domain Causal Chain Possible Outcome
Macroeconomics & Growth (Uniform Cash Payment Plan ↑ → Public-spending composition ↑ → Credit impulse ↑ → Real GDP growth ↑) The cash payment plan spurs credit-driven consumption and investment, boosting near-term GDP growth.
Macroeconomics & Growth (Temporary consumption-tax cut ↑ → Fiscal-stance (structural balance) deterioration ↑ → Sovereign spread over risk-free rate ↑ → Long-term real yield ↑) The tax cut’s fiscal deterioration raises sovereign yields, lifting long-term real borrowing costs.
Households (Uniform benefit (20 000 yen) ↑ → Median real household income ↑ → Consumer-confidence diffusion index ↑ → Household consumption growth contribution to GDP ↑) The one-time benefit lifts income and consumer confidence, strengthening household consumption’s contribution to GDP.
Households (Extra 20 000 yen for low-income households ↑ → Effective marginal tax-benefit rate ↓ → Precautionary savings gap ↓ → Household saving rate ↓) Additional support reduces precautionary savings and lowers household saving rates, freeing income for immediate spending.
Social Cohesion (Uniform Cash Payment Plan ↑ → Social-safety-net generosity perception ↑ → Social-trust composite swing ↑ → Protest-to-dialogue conversion ratio ↑) Improved perceptions of social safety nets bolster trust and shift dissent from protest to dialogue with policymakers.
Macroeconomics & Growth (Consumption-tax reduction proposals ↑ → Tax-structure progressivity ↓ → Gini coefficient (post-tax, post-transfer) ↑ → Social-trust composite swing ↓) Reduced tax progressivity heightens inequality and erodes social trust in institutions.
Financial System (Fiscal-stance deterioration ↑ → Public-debt/GDP trajectory ↑ → Sovereign-credit-rating moves ↓ → Investor confidence premium ↑) Worsening fiscal metrics lead to rating downgrades and higher investor risk premiums on sovereign debt.
Macroeconomics & Growth (Liquidity injection (My Number benefit) ↑ → Savings-rate determinants shift ↑ → Household saving rate ↓ → Credit impulse ↑) Immediate liquidity injections curb saving rates and fuel a stronger credit impulse, underpinning growth.
Macroeconomics & Growth (AI-modeled uniform benefit ↑ → Fiscal-stance (structural balance) worsening ↑ → Sovereign-credit-rating moves ↓ → Corporate bond spread blowout ↑) A weaker fiscal balance triggers sovereign rating pressure that blows out corporate bond spreads.
Macroeconomics & Growth (Policy uncertainty (election tax debate) ↑ → Fiscal-rule credibility index ↓ → Asset-price wealth effect ↓ → Real GDP growth ↓) Elevated policy uncertainty dampens asset wealth effects and curtails consumption and investment, slowing GDP growth.




### BOTTOM LINE

- The ruling coalition’s plan for a one-time 20,000 yen transfer would rapidly inject liquidity into households and businesses via My Number–linked accounts and could trigger a surge in the credit impulse, spurring a short-term uptick in real GDP growth.


- Opposition proposals for sweeping reductions or abolition of the consumption tax on food would erode Japan’s structural fiscal balance, likely widen sovereign spreads over risk-free rates, and push up long-term real yields that raise borrowing costs for the government and private sector.


- The targeted extra payment of 20,000 yen for low-income households would lower effective marginal tax rates at the bottom of the income distribution, reduce precautionary savings, and translate into a decline in the aggregate household saving rate, freeing more income for immediate consumption.


- AI forecasts suggest that pairing a uniform cash benefit with additional low-income support carries a 40 percent probability of adoption and would lift GDP by 0.2 percent at a cost of ¥2.8 trillion, though roughly one-third of those funds may be saved rather than spent outright.


- By contrast, the AI scenario modeling a temporary cut of the consumption tax to 5 percent projects a 0.7 percent GDP gain but an annual revenue shortfall of about ¥15 trillion, threatening fiscal sustainability, social security funding, and sovereign creditworthiness if enacted.


- Greater debate over taxation and transfers could amplify policy uncertainty, dent the credibility of Japan’s fiscal-rule framework, weaken asset-price wealth effects, and ultimately weigh on consumption, investment, and GDP growth.


- A tangible boost in public-spending generosity via the cash transfer would enhance perceptions of social safety nets, foster higher social trust, and encourage a shift from street protests toward constructive engagement with policymakers.


- Conversely, more regressive tax-cut measures would reduce the progressivity of Japan’s tax system, elevate post-tax income inequality, and risk undermining public confidence in institutions.


- Any substantial deterioration in Japan’s structural balance prompted by either cash transfers or tax cuts would likely trigger negative rating actions, elevate risk premiums on both sovereign and corporate debt, and strain financial conditions.


- The election-driven focus on economic relief and tax policy underscores how near-term fiscal measures can reverberate through macroeconomic growth, household behavior, social cohesion, and financial stability, forcing decision-makers to balance growth objectives with fiscal credibility.
Record Tax Revenue and Surging Debt Define Japan’s Shifting Fiscal Landscape
July 4, 2025 | Financial System

Record tax revenues, evolving monetary policy and mounting debt pressures shape Japan’s current fiscal outlook.


Japan’s general account tax revenues for fiscal 2024 rose 4.4 percent over the previous year to a record ¥75.232 trillion, marking the fifth consecutive year of growth and surpassing November projections by about ¥1.8 trillion. Corporate tax receipts climbed 12.9 percent to ¥17.9101 trillion—the highest level since 1990—driven by strong corporate earnings. Consumption tax revenue grew 8.4 percent to ¥25.0212 trillion, reflecting higher domestic spending and import values. Income tax revenue, however, fell by roughly ¥0.8 trillion to ¥21.21 trillion, partly due to one-off tax reductions.

**These tax gains, together with lower-than-expected spending on budget appropriations, produced a general account net surplus of ¥2.2645 trillion in fiscal 2024.**
Even so, this surplus cannot fully finance the ruling party’s proposed ¥20,000 per-person benefit. The Finance Ministry expects fiscal 2025 revenues to again exceed initial estimates, prompting both ruling and opposition lawmakers to propose additional cash payments or tax cuts. Those measures will feature prominently in the House of Councillors election campaign set to begin July 3.

**After the Bank of Japan ended its large-scale loose monetary policy in spring 2024, market interest rates climbed sharply.**
Yields on super long-term government bonds reached record highs in May as the BOJ scaled back its bond purchases, continuing a gradual reduction of its holdings that started in summer 2024. To support market functioning, the BOJ plans to further slow the pace of reductions in the next fiscal year, marking the end of an era of ultralow rates that allowed the government to borrow extensively without significant funding-cost pressure.

**In response to rising yields, the Finance Ministry revised its fiscal 2024 financing plan by cutting planned issuance of super long-term bonds—a rare step outside standard budget procedures.**
With annual issuance, including refunding, approaching ¥200 trillion, the ministry recognizes that traditional buyers such as domestic banks may no longer suffice. It is exploring a broader range of bond types and sales channels to attract individual and foreign investors, aiming to secure stable mid- to-long-term demand and manage funding costs without stoking further market volatility.

**Japan now carries the heaviest public debt burden among major economies, and its outstanding debt continues to rise.**
Election-driven proposals for more spending or tax cuts, without measures to strengthen fiscal revenues, have deepened market worries about expanding bond issuance and the sustainability of public finances. Ensuring smooth bond placement and closing the gap between funding needs and available buyers remain critical challenges for Japan’s fiscal management.

Monitored Intelligence for Japan - July 4, 2025


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【#1267】Ishiba Should Address Defense Hike in Election

Japan Institute for National Fundamentals | English | AcademicThink | July 4, 2025 | Geopolitical Conflict and Disputes

Prime Minister Shigeru Ishiba withdrew at the last minute from the June 24-25 NATO summit in The Hague, where Japan was expected to play a leading role in enhancing cooperation between NATO and its Indo-Pacific partners. Despite Japan's history of security engagement with NATO and former Prime Minister Fumio Kishida's attendance at previous summits, Ishiba’s absence was notable, especially as other Indo-Pacific partners faced difficulties attending as well. Japanese officials cited the challenge of securing a meeting with U.S. President Donald Trump and the absence of Australian and South Korean leaders as reasons for his cancellation. However, critics argue that Ishiba should have attended to demonstrate Japan’s commitment.

At the NATO summit, there was a focus on increasing defense spending to 5% of GDP, a goal supported by the U.S. Department of Defense and echoed in calls for Japan to raise its military budget. The U.S.-Japan Security Consultative Committee meeting scheduled for July 1 was postponed, reportedly at the U.S. request for Japan to increase defense spending, though Japanese officials denied this connection. Observers suggest Ishiba may be avoiding highlighting Japan’s defense budget increase ahead of the House of Councilors election in July, concerned about public reaction to potential tax hikes.

The article argues that Ishiba and his government should openly communicate the necessity of increasing defense spending amid intensifying security threats, as outlined in Japan’s Defense Ministry white paper. Rather than evading the issue, the election campaign should be used as an opportunity to gain public support for strengthening Japan’s defense capabilities. The piece concludes that avoiding this debate undermines public trust and that transparent discussion is warranted.

【#1268】Americans Should Reflect on Atomic Bomb Justification Remarks

Japan Institute for National Fundamentals | English | AcademicThink | July 4, 2025 | Geopolitical Conflict and Disputes

On June 30, 2025, Japan responded strongly to remarks made by U.S. President Donald Trump in The Hague, where he compared U.S. military strikes on Iran to the atomic bombings of Hiroshima and Nagasaki, claiming both actions ended wars. Japanese officials and commentators rejected this analogy, emphasizing the fundamental differences between these events.

Japan points out that the attack on Pearl Harbor targeted military bases and was followed by Japan seeking surrender through Soviet mediation, which ultimately failed due to Soviet betrayal. In contrast, the atomic bombings of Hiroshima and Nagasaki targeted cities with large civilian populations, resulting in over 200,000 deaths and occurring while Japan was already seeking ceasefire. The strikes on Iran were limited to nuclear facilities suspected of weapon development and therefore fundamentally differ from the attacks on Japan during WWII.

Japanese opposition to President Trump's remarks was strongly voiced by Prime Minister Shigeru Ishiba and Yoshiko Sakurai, president of the Japan Institute for National Fundamentals. They stressed that these comments reveal a lack of understanding of historical realities and hurt the bond between the two nations. They urged the U.S. to reflect deeply on the remarks to prevent lingering resentment and to ensure a stronger and broader alliance to deter regional threats and promote global peace.

非常勤職員募集情報(技術補佐員1名・災害放射線医学分野)

Part-time Staff Recruitment Information (1 Technical Assistant, Disaster Radiology Medicine Division)

International Research Institute of Disaster Science | Local Language | AcademicThink | July 4, 2025 | UndeterminedEmployment

Tohoku University’s Disaster Radiology Medicine Division within the Disaster Medicine Research Department is recruiting one part-time Technical Assistant. The position is hourly employment, with negotiable working hours such as approximately five hours a day, three days a week. Applicants must submit a resume and a work history by July 31, 2025, although the application period may close early if a candidate is selected.

Applications and inquiries should be sent to the Department of Radiological Technology at Tohoku University, addressed to Hayashi, with the envelope clearly marked "Application Documents Enclosed." The university promotes diversity, equity, and inclusion (DEI) and encourages applications from diverse candidates.

Tohoku University offers extensive childcare support, including three nursery schools for university faculty and staff, and daycare facilities for mildly ill children, making it the largest on-site childcare provider among national universities in Japan. Additional work-life balance and family support information is available on the university’s DEI Promotion Center and Human Resources Planning Department websites.

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