Financial Resources May Be Hurdle for Takaichi’s Tax Cut Plan

Tokyo, Feb. 18 (Jiji Press)–Attention is being paid to whether Japanese Prime Minister Sanae Takaichi will be able to implement her plan to cut consumption tax to zero for food, following the launch of her second administration Wednesday. Takaichi will face a challenge to secure stable financial resources to put the tax measure in place although her ruling Liberal Democratic Party won a record high number of House of Representatives seats since the end of World War II in the Feb. 8 election for the all-important lower chamber of the Diet, the Japanese parliament. The prime minister has said that she aims to draw up an interim report on the planned two-year exemption of food from the consumption tax before summer, after discussions on issues including financial resources at an envisaged conference to be joined by both the country’s ruling and opposition parties. Her government plans to submit related legislation to an extraordinary Diet session seen to be held in autumn and implement the measure within fiscal 2026, which ends in March 2027. Meanwhile, some in the LDP are cautious about the tax cut proposal in light of fiscal discipline. The prime minister has proposed reviewing existing subsidy programs and special tax breaks to offset the revenue drops from the consumption tax cut. But it is uncertain whether these will be able to cover some 5 trillion yen a year in such revenue declines. Even if the two-year tax cut is implemented as planned within fiscal 2026, the government may find it difficult to undo the step because it would end around an election for the House of Councillors, the upper chamber of the Diet, in summer 2028. It is also unclear whether Takaichi will be able to win support from opposition parties at the planned conference. “We aren’t going to help the administration cover its back,” Centrist Reform Alliance chief Junya Ogawa said. “It would be more fruitful to discuss (the introduction of) a refundable tax credit system first,” Democratic Party for the People leader Yuichiro Tamaki said, responding to Takaichi’s idea of launching the refundable tax credit system only after the consumption tax reduction. Takaichi also aims to push ahead with policies that could divide the nation and therefore require careful consideration, such as the establishment of an antiespionage law and constitutional revisions. Following the LDP’s overwhelming victory in the Feb. 8 Lower House election, its coalition partner, the Japan Innovation Party, is expected to see its presence decline. Discussions on a cut in Lower House seats, regarded as the centerpiece of reform by JIP leader Hirofumi Yoshimura, are expected to lose momentum. Active debates are also unlikely for a proposal to set up the country’s secondary capital, another signature policy of the JIP. END [Copyright The Jiji Press, Ltd.]