Japan’s government has distanced itself from tax cuts in its latest draft of annual economic and fiscal policy guidelines, emphasizing fiscal discipline amid rising volatility in the Japanese government bond (JGB) market and growing concerns over public debt. The draft, presented on Friday, stated that Japan will aim to boost disposable household income through sustained wage growth that outpaces inflation — “not through tax cuts.”

The stance comes ahead of a crucial upper house election in July, where political pressure for tax relief is mounting. Opposition parties, including the Constitutional Democratic Party and Japan Innovation Party, have called for a zero consumption tax rate on food to ease the burden of inflation and U.S. tariffs. Komeito, the junior coalition partner, is considering a food tax reduction but opted not to include it in its official campaign pledge.

Prime Minister Shigeru Ishiba has signaled upcoming stimulus measures but remains cautious on tax cuts, arguing they favor the wealthy and risk further straining Japan’s already overstretched social welfare budget. Internal debate within the ruling Liberal Democratic Party continues, with some lawmakers warning of electoral losses unless tax relief is offered.

Japan’s public debt stands at over twice the size of its economy — the highest among industrialized nations. Reflecting fiscal stress, super-long JGB yields hit record highs last month. The policy draft calls for maintaining stable government bond issuance and promoting domestic bond ownership to curb interest rate spikes. It also delays the primary budget surplus target from FY2025 to “as early as possible during FY2025–26.”