Agreement on Gasoline Tax Cut

Major six parties in the Diet agreed on gasoline tax cut by the end of this year. Although a bill for gasoline tax cut was dismissed by the leading coalition in the ordinary session of the Diet earlier this year, the Liberal Democratic Party (LDP) made a concession, given serious defeat in the Upper House election in July. It marked the first post-election policy deal after the election.

The chairs on Diet affairs committee of the LDP, Komeito, the Constitutional Democratic Party of Japan (CDPJ), the Democratic Party for the People (DPP), Japan Innovation Party (Nippon Ishin-no Kai) and Japan Communist Party (JCP) signed on an agreement that they would abolish the temporary tax rate on gasoline as early as possible within this year. It is likely that related bill will be submitted to the extraordinary session of the Diet, whish is supposed to be convoked to discuss economic stimulus package this fall. The CDPJ hopes to abolish it by November 1st.

 

The temporary gasoline tax rate was introduced in 1974 for a resource of constructing and repairing public roads. As of July 30, average price of regular gasoline in Japan is 174 yen per litter, out of which 53.8 yen is gasoline tax. The temporary gasoline tax rate occupies 25.1 yen out of 53.8 yen of gasoline tax. The parties agreed on removal of that 25.1 yen from gasoline price.

 

The LDP, Komeito and DPP once agreed on abolishment of temporary gasoline tax rate in December 2024. However, Shigeru Ishiba administration could not afford to implement it, as it was devoted in policy discussions with other parties on other issues. Then, the DPP with other six opposition parties submitted a bill to abolish it from July 2025. 　After the bill passed the House of Representatives, in which the leading coalition did not have majority, the bill was dismissed in the Upper House. The LDP argued that fiscal resource was not clearly suggested by the opposition parties.

 

In the Upper House election campaign, the opposition parties appealed necessity of gasoline tax cut to the voters. After all, the leading coalition lost in the election. Six opposition parties, CDPJ, DPP, Ishin, JCP, Sanseito, and Conservative Party of Japan (CPJ) agreed on early abolishment of temporary gasoline tax rate, but Sanseito and CPJ did not join the agreement with the leading parties.

 

The LDP reluctantly accepted the request from opposition parties, considering the will of voters expressed in the election. The leading coalition lost majority in both Houses of the Diet. No bill passes the Diet without approval from an opposition party. The agreement on gasoline tax cut was necessary for maintaining Shigeru Ishiba government, which is facing oppositions even in the LDP.

 

The opposition parties hope the cooperation over the gasoline tax to pave the way for constructing greater framework which is an alternative to current leading coalition. However, it is still unlikely for all the opposition parties are united on every policy, including imperial succession or constitutional amendment.

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