Japan PM Takaichi Announces 2-Yr Consumption Tax Cut Plan

Tokyo, July 30 (Jiji Press)–Japanese Prime Minister Sanae Takaichi on Thursday officially announced a plan to cut the consumption tax rate on food to 1 pct for two years starting next April. The government plans to lower the food tax rate to virtually zero through the envisaged consumption tax cut and cash benefits distributed to low- and middle-income earners that are equivalent to the 1 pct tax. This will be the first reduction in the consumption tax since its introduction in 1989. The consumption tax rate on food products is currently set at 8 pct. The government will “secure funding without relying on deficit-covering bonds, in order to gain market confidence,” Takaichi told reporters at the prime minister’s office in Tokyo, citing possible resources, such as reviewing special tax measures and subsidies. “In two years’ time, I will take responsibility and make sure that the tax rate is restored to the current level,” she said. She also said that related legislation would not include an economic clause allowing the tax cut to be maintained depending on economic conditions. The prime minister said the government plans to submit the legislation to an extraordinary parliamentary session expected to be convened in autumn and seek its swift passage, after adopting the tax cut plan at a cabinet meeting early next month. At an extraordinary executive meeting of the ruling Liberal Democratic Party on Thursday morning, Takaichi called for concluding intraparty discussions to help reach a decision on the tax cut plan in early August. This request was unanimously approved at the meeting. Secretaries-general of the LDP and its junior coalition partner, the Japan Innovation Party, held talks to affirm the tax cut plan. The ruling parties had proposed a plan at the suprapartisan National Council on Social Security to reduce the consumption tax rate on food products to virtually zero. The plan was included in an interim report compiled by the council, along with a program to provide cash benefits sought by opposition parties. At a press conference in January, when she announced the dissolution of the House of Representatives to call a snap election, Takaichi, who heads the LDP, said the food tax cut had long been her desire. While the LDP pledged to speed up discussions on the tax cut in its Lower House election campaign in February, some party members have expressed caution over the proposed tax cut due to concerns over fiscal discipline. On Thursday, former Foreign Minister Taro Kono of the LDP said, “As many problems have been brought up, I’m against a consumption tax cut.” He called for the country to provide benefits instead. On the pushback within her party, Takaichi said, “We’re fellow lawmakers who fought the (election) together under the same campaign pledges.” “I’m sure they will understand,” as the tax cut plan was included in the pledges approved by the party, she said. END [Copyright The Jiji Press, Ltd.]