Japanese Prime Minister Sanae Takaichi on Monday called a snap general election with a vow to suspend an 8% food levy for two years, echoing proposals by her rivals despite the potential strain on the country’s already precarious finances.
A consumption tax cut that many opposition parties have also proposed would create a
huge hole in state revenue at a time when concern over Japan’s fiscal health is pushing up bond yields to multi-decade highs. Japan levies an 8% consumption tax on food and a 10% levy on other goods and services, helping to fund rising social welfare costs among a rapidly aging population.
Takaichi said that a two-year exemption of the 8% food levy would cushion the blow to
households from rising living costs. The government will not issue debt to fund the suspension, she said, adding that other measures could include a review of existing subsidies.
“We will overhaul past economic and fiscal policy. My administration will put an end to an excessively tight fiscal policy and a lack of investment for the future,” Takaichi told a
press conference.
The growing prospect of a sales tax cut and expectations that Takaichi will use an election victory to solidify her expansionary fiscal policies sent the yield on the 10-year Japanese government bond to a 27-year high of 2.275% on Monday. Mindful of the public’s grumbling over inflation, opposition parties have also called for consumption tax to be cut or ditched ahead of the election to be held on February 8.
Credit: cnn.com
