According to reports from January 2025, LDP Secretary-General Moriyama criticized the Democratic Party for the People’s proposal to raise the “103-man yen wall” (income tax threshold), stating, “Talk without guaranteed funding sources is impermissible. It will break the country.” Similarly, in May 2025, Chief Cabinet Secretary Hayashi asserted that the consumption tax is a “crucial funding source supporting the all-generation social security system.”
To me, this “funding source” argument is entirely nonsensical. For proponents of MMT or anyone who understands the mechanism of credit creation, debating funding sources is inherently trivial—but my point goes beyond theory. Don’t you feel an indescribable sense of discomfort and frustration toward the LDP’s stance?
The Hypocrisy of a Deficit-Running Government
The LDP-Komeito coalition runs massive fiscal deficits every single year, covering the gap by issuing government bonds. If they truly believed that bond issuance is not a legitimate “funding source” and that fiscal discipline is paramount, their budget would have to be in surplus every year to remain consistent. They continue to issue massive amounts of debt precisely because they cannot find other funding sources. For this same party to demand that others “show their funding” is beyond comprehension. Furthermore, let’s not forget that under the Kishida administration, they implemented temporary income tax cuts with no permanent funding to speak of.
To use a crude analogy: Imagine a man, let’s call him A, who has just passed gas 50 times. When man B says, “I might let just one out as well,” A tells him, “Stop that, you’ll pollute the air!” Everyone watching would think, “You’re the last person who should be talking.”
Reframing the Debate: From “How Much Money” to “Economic Reality”
The debate should not be about an arbitrary “funding source” that the government itself fails to maintain. Instead, we must discuss “what level of fiscal deficit is appropriate given the current state of the economy.” If the LDP believes their chosen deficit is acceptable while the additional deficit proposed by the DPP is not, they are the ones who must provide proof.
After all, citizens are genuinely struggling due to inflation. As I have argued elsewhere, as long as the current account is in surplus, expanding spending poses no fundamental threat. To simply scream about “funding” without analyzing the actual economic context is an abdication of responsibility. Continuing the same failed approach will only turn the “Lost 30 Years” into the “Lost 40 Years”—the ultimate burden on future generations.
The Myth of Rising Interest Rates
Some might bring up rising interest rates as a downside to bond issuance. I find this argument unconvincing. If the economic outlook brightens, interest rates should naturally rise. If the impact becomes too large, the government simply needs to coordinate with the Bank of Japan to purchase more bonds. We should only start worrying about such risks once the current account hits a deficit.
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