Now that the so-called "twisted Diet" problem has been resolved as a result of the House of Councillors election, the government has more policy-making freedom. But many policy problems lie ahead.

Most pressing is a decision on raising the consumption tax rate in April 2014. Considering that Japan has the worst fiscal health among developed countries, many people feel that the tax hike is unavoidable.

Every increase in the consumption tax rate results in a spike in demand before the increase takes effect, followed by a slump in demand afterward. While this demand fluctuation evens out in about a year for general consumer goods, it lasts for several years in the case of housing investment. Policies to mitigate the effect of next fiscal year's consumption tax hike on home buyers include an expansion of the home mortgage tax reduction and the introduction of an income-based subsidy. However, as there are no such policies that apply to the construction of rental homes, there is serious concern that the demand spike before the tax hike and the following fall in demand will be even more pronounced.

It is said that the consumption tax rate will need to rise to 15% or 20% in the future. Especially as the type of housing that Japan needs is changing with its aging population and low birthrate, the levying of consumption tax on homes - which are the basis of security and stability for living - should be fundamentally reconsidered.

Although Japan's population has already begun to decline, the number of households is poised to rise as elderly single-member households increase. Japan's total pool of housing stands 13% vacant so there is no deficiency of housing volume. But the vacant homes do not match the needs of renters and there is little prospect of anyone moving into them.

Under the current housing tax system, preferential treatment is centered on the home mortgage tax reduction, which largely applies to the younger generation of first-time home buyers. There are no tax reduction policies for changing homes or building rental units. There is a need to shift the focus of the tax system toward promoting higher quality throughout the overall housing pool, including rental units, rather than giving preference only to first-time home buyers.

The consumption tax on homes is a levy on the acquisition of assets; the higher the quality of the home, the heavier the tax burden. We need to consider stable policies in the future to permanently reduce the tax rate and to provide rebates for both home ownership and rental units, reinforcing a pillar of domestic economic demand while expanding the pool of high-quality homes that are suited to Japan's aging population and low birthrate. We need to introduce a housing tax reduction policy that meets the real needs of our society.