DPP’s Option for Leading Coalition

The Liberal Democratic Party (LDP) and the Democratic Party for the People (DPP) agreed on raising threshold of imposing income tax from 1.60 million yen of annual income to 1.78 million yen on December 18th. The agreement paved the way for the DPP to join the leading coalition, which is now formed by the LDP and Japan Innovation Party (JIP). The party, which is currently enjoying the greatest approval rate among opposition parties, is seriously considering the option.

The DPP insisted on the threshold of 1.78 million yen as its core policy for election campaigns in 2024 and 2025, in which they promised the voters to increase their take-home pay. Although the DPP reached an agreement with the LDP in December 2024 to get that goal, the LDP failed in achieving it by stopping at 1.60 million yen. When LDP president-elect Sanae Takaichi offered coalition with the DPP in October, the DPP refused it, because of the threshold had not reached the goal.

 

The LDP’s acceptance of 1.78 million yen was effectively an offer of inviting the DPP to the leading coalition. Takaichi ordered the Research Commission on the Tax System to accept DPP’s request for 1.78 million yen in the annual tax reform for FY2026. She argued in an interview of Yomiuri Shimbun that further cooperation with the DPP would be necessary for stable handling of politics. The agreement between the LDP and DPP included that the DPP would vote for FY2026 budget bill in the ordinary session of the Diet next year.

 

For Takaichi administration without a majority in the Upper House, the top priority is put on how to pass the budget bill by the end of March next year. Although 1.78 million yen threshold may require additional spending in the budget, achieving majority with support of the DPP will meet the cost. The DPP’s support for FY2026 budget bill proved to be a good shopping for Takaichi administration.

 

Other opposition parties are disappointed to DPP’s decision to help Takaichi administration. “It means that the DPP is already one of the leading parties, if it agree on passing 2026 budget bill, even though the budget has not been formulated,” said the leader of the Constitutional Democratic Party of Japan (CDPJ), Yoshihiko Noda. While the CDPJ has been seeking cooperation with the DPP to prevent the leading party from further advance, it is unrealistic for the opposition parties to make a greater framework.

 

One obstacle for the DPP to join the coalition is cooperation for next Lower House election, in which DPP candidates will contend against LDP candidates in some single-seat districts. Tamaki argued that DPP’s participation in the coalition will depend on reform of election system, including an option of introducing multiple-seat districts. If the DPP joins the coalition without any agreement on election, the party is expected to lose in some districts against the LDP.

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