Japanese Prime Minister Sanae Takaichi on Monday called a snap general election, pledging to suspend the country’s 8 percent consumption tax on food for two years, a move that mirrors proposals from opposition parties but raises fresh concerns about Japan’s fragile public finances.
A cut to the consumption tax, which several opposition groups also support, would significantly reduce government revenue at a time when worries over Japan’s fiscal position are already driving bond yields to their highest levels in decades.
Japan currently applies an 8 percent consumption tax on food and a 10 percent tax on other goods and services. The revenue helps fund growing social welfare costs linked to the country’s rapidly ageing population.
Takaichi said the temporary removal of the food tax would help protect households struggling with higher living costs. She stressed that the government would not issue new debt to finance the measure, adding that funding options could include a review of existing subsidy programmes. We will overhaul past economic and fiscal policy. My administration will put an end to an excessively tight fiscal stance and a lack of investment in the future,” Takaichi said at a press conference.
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