Japan's Takaichi proposes cutting the food tax to 1 %
Japan's prime minister opened the Diet with a two-year cut that would start in April 2027. The opposition says it brings no relief now.
Japanese Prime Minister Sanae Takaichi proposed on Monday, Oct. 5, cutting the consumption tax on food and beverages from 8 % to 1 % for two years, starting in April 2027. She made the pledge in her speech opening an extraordinary session of the Diet, Japan's parliament, according to Kyodo News.
Middle- and low-income households would also receive cash payments. Takaichi said the government will not issue bonds to cover the deficit, and she aimed the promise at investors:
To ensure market confidence, we will secure the funds without relying on bonds that cover the deficit.
Japan has the worst fiscal position in the G7, the group of seven advanced economies, so where the money will come from is the plan's weakest point. The sources consulted do not yet say how the gap will be covered.
Takaichi said the measure aims to give household finances "a little more room" against inflation. Nikkei Asia describes a speech meant to reassure markets: the prime minister said she will act flexibly depending on the economy, but barely moved from her expansionary spending line.
The opposition argues that, as designed, the cut does not bring immediate relief to households. The reduction would not start until April.
The cabinet approved the cut on Aug. 5, according to The Japan Times. In February's elections, the coalition of the Liberal Democratic Party and the Japan Innovation Party won more than two-thirds of the lower house, and almost every party had promised to lower or scrap this tax.
The extraordinary session will last 69 days, through Dec. 12, and the government will submit 21 bills. Whether the one on this cut passes in time for April 2027 remains to be seen.
