Prime Minister Fumio Kishida asked senior ruling coalition executives on Friday to consider reducing income tax as a temporary measure to relieve households from the adverse effects of inflation.
Kishida, who has made the "redistribution" of economic growth a hallmark of his policy, met with senior lawmakers from the ruling Liberal Democratic Party and its coalition partner Komeito to ask them to look into the proposal on the same day an extraordinary parliamentary session was convened.
A cut to income tax is expected to be a key feature of an inflation-relief package that the Cabinet plans to finalize on Nov. 2, as rising prices of everyday goods are already squeezing household budgets while real wages are falling.
Although the idea of cutting income tax has emerged within the ruling bloc, some lawmakers have reservations about pursuing the policy due to questions about its effectiveness, as well as the amount of time it would take to get the measures through parliament among other factors.
LDP policy chief Koichi Hagiuda has said the LDP will not rule out an income tax cut while his Komeito counterpart Yosuke Takagi asked the prime minister to consider the proposal during an in-person meeting earlier this week.
Still, neither the LDP nor Komeito specifically requested an income tax reduction be considered when they submitted separate lists of items that they would like to see in the new economic package to the prime minister.
Cutting income tax would mean either subtracting a certain amount from tax payments, irrespective of income, or setting a certain subtraction rate.
As tax burdens increase according to income levels under the current system, the second option would benefit high-income earners.
An income tax reduction will not benefit people on low incomes, who are exempt from paying the tax in the first place.
Kishida has been struggling to shore up public support for his Cabinet, and some consider the move part of efforts to dispel the perception among some voters that he is pro-tax hikes, amid persisting speculation that he will dissolve the House of Representatives for a snap election sooner or later.
Some opposition lawmakers and critics have lashed out at the government for its perceived inconsistency because, on the one hand, it is pushing for higher taxes to help fund a substantial increase in defense spending while on the other, it wants to reduce people's tax burdens, albeit temporarily to fight inflation.
Kishida has expressed his willingness to return some tax revenues to the Japanese public, who have been hit by the cost-of-living crisis.
Japan's tax revenues have hit a record high for the past three business years but its fiscal health is the worst among advanced nations, with its debt more than twice the size of its economy.
The country faces the daunting challenge of reining in its fiscal spending, which swelled during the COVID-19 pandemic, while tackling inflation and limiting the issuance of debt, despite the Bank of Japan's monetary easing having helped curb borrowing costs.
