TOKYO : Japan’s junior coalition partner, Komeito, is poised to unveil a proposal to reduce the consumption tax rate on food items from the current 8% to 5%, as part of its campaign platform for the upcoming upper house election in July, according to a report by the Yomiuri Shimbun. The full pledge is expected to be formally announced on Friday.
The initiative aims to provide immediate relief to households grappling with rising living expenses, with the party also set to advocate for direct cash payments. A Komeito official, speaking on condition of anonymity, confirmed to Reuters that the proposed tax cut would feature prominently in the party’s policy platform.
Unlike previous fiscal stimulus plans that relied heavily on debt issuance, Komeito intends to finance the proposed measures through anticipated gains in tax revenues. A draft of the campaign pledge, obtained by Yomiuri, suggests that the party is seeking to maintain fiscal discipline amid a challenging economic backdrop.
Currently, Japan imposes a consumption tax of 8% on food and 10% on other goods and services. Revenues from the tax are primarily allocated to support the nation’s ballooning social welfare costs, exacerbated by a rapidly ageing population.
Komeito’s proposal could increase pressure on Prime Minister Shigeru Ishiba and the ruling Liberal Democratic Party (LDP) to take additional fiscal action ahead of the election. While the LDP has so far resisted calls—particularly from opposition parties—to reduce the consumption tax, citing concerns over fiscal sustainability, the introduction of such a measure by a coalition partner may compel a policy reconsideration.
Government finances remain a key concern, especially as the Bank of Japan signals a potential upward shift in interest rates. Rising yields on super-long-term government bonds last month reflect investor unease over Japan’s towering public debt burden and the increasing cost of servicing it.
-Reuters
