Japan Opposition Suggests, Then Denies, Taxing Tax-Free Accounts

(Bloomberg) -- The leader of Japan’s main opposition party did damage control two days ahead of a national election after a senior member floated removing the tax-exempt status on individual savings accounts held by millions of voters.

Yukio Edano, the leader of the Constitutional Democratic Party, on Friday tried to walk back comments made by one of his top lieutenants about a policy that could dent support as the party tries to pick up ground on the ruling Liberal Democratic Party. “We are not thinking of increasing taxes,” he wrote on Twitter, adding the CDP’s election manifesto includes pledges to expand the program. 

But the party may have taken a hit. The program known as NISA, or the Nippon Individual Savings Account, was the number one trending topic in Japan on Friday, with many on social media angered about possible changes to a program designed to help the average household invest.

Kenji Eda, a senior CDP member made the comments on a BS Fuji TV program Thursday. After saying his party would increase the capital gains tax on stock investments to 30% from the current 20%, Eda was asked if he would apply the same standard to individual investors, including those in tax-free accounts. He replied that he would. 

The topic of taxing high earners has been one of the key areas of focus of the election campaign, with Prime Minister Fumio Kishida, the leader of the ruling LDP, stealing some of the opposition’s thunder by initially promising to rethink capital gains taxes. The level at which high earners pay a lower tax rate, termed the “100 million yen ($880,000) barrier,” has led to calls for reform. 

The Nippon Individual Savings Account was launched in 2014 and modeled on the U.K.’s ISA program. It allows individuals to invest as much as 1.2 million yen a year in accounts without being taxed on capital gains and dividends. The program was designed to promote investment in stocks in a country where only around 26% of those over 20 own shares or mutual funds, according to Nomura Asset Management. More than 16 million NISA accounts had been opened as of end-June, according to the Financial Services Agency.

Kishida’s ruling coalition is expected to keep its majority in the powerful lower house after the vote, but polls largely compiled before Eda’s comments and published Friday by the Yomiuri and Nikkei newspapers found the LDP was at risk of losing its outright majority in the body for the first time in about nine years. 

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