New PM Takaichi Seeks Economic Measures by Year-End

Tokyo, Oct. 21 (Jiji Press)–The administration of new Japanese Prime Minister Sanae Takaichi will soon begin work on drawing up economic measures to address soaring prices, aiming to have a supplementary budget to finance them enacted by the end of this year. In economic and fiscal management, the focus is likely to be on balancing fiscal expansion through the “responsible and aggressive fiscal policy” advocated by Takaichi, who became Japan’s first female prime minister on Tuesday, with the “expenditure reform” demanded by Nippon Ishin no Kai (Japan Innovation Party). In a coalition agreement reached Monday between the LDP and Nippon Ishin, the two parties vowed to have the Diet enact a bill by the end of the year to abolish the provisional gasoline tax surcharge as part of efforts to tackle inflation. Takaichi has also said she aims to abolish the provisional tax rate on gas oil. The economic measures are expected to include new subsidies for electricity and gas rates, as requested by Nippon Ishin. To compile the government’s fiscal 2026 budget, it is necessary to finalize by the end of this month a plan to make high school education free, a flagship policy for Nippon Ishin. Another issue that needs to be discussed is a plan to make elementary school meals free. Takaichi has called for aggressive fiscal spending in growth areas such as semiconductors and artificial intelligence. On the other hand, Nippon Ishin is focusing on expenditure reform centered on social security, such as reducing ballooning medical costs by 4 trillion yen per year. “The entry into the coalition of Nippon Ishin, which favors a small government, would put the brakes on aggressive fiscal spending and weaken the so-called Takaichi color,” an economist predicts. The most challenging task is securing stable financial resources. The abolition of the provisional tax rate on gasoline and gas oil is expected to reduce tax revenue by about 1.5 trillion yen annually. Plans to make high school education free and provide free elementary school meals are estimated to require a total of 700 billion yen. Nippon Ishin has long advocated the need to secure financial resources by reducing the special taxation measures for businesses. In fiscal 2023, tax revenue decreased by 2.9 trillion yen due to the special measures. Of that amount, 1.7 trillion yen stemmed from programs designed to encourage wage hikes and promote investment in research and development. While the tax break programs are criticized as a “hidden subsidy” that gives preferential treatment to specific companies, the business community strongly opposes any reduction in them, saying, “Such a move will put a damper on domestic investment and wage hikes.” In addition, the coalition agreement included a pledge to “consider” a plan to reduce the consumption tax rate on food products to zero for two years, a move estimated to cut annual tax revenue by 5 trillion yen. Still, a senior Finance Ministry official said, “There is no time frame for implementing it.” END [Copyright The Jiji Press, Ltd.]