Japanese Prime Minister Sanae Takaichi is considering pledging to suspend Japan’s consumption tax on food as part of her campaign platform ahead of a snap general election expected next month, the Mainichi newspaper reported, citing unnamed government and ruling party sources.
According to the report published late Friday, Takaichi and senior figures in her Liberal Democratic Party (LDP) are weighing the political appeal of scrapping the reduced 8 per cent sales tax on food and beverages, while carefully assessing the potential impact on markets and public finances. Eliminating the levy would reduce government revenue by an estimated 5 trillion yen ($31.6 billion) annually, Mainichi said.
A request for comment sent to the Prime Minister’s Office on Saturday went unanswered.
The proposal comes as Takaichi prepares to dissolve the lower house of parliament on Friday and call a snap election, seeking a fresh mandate for an expansive fiscal agenda that has unsettled investors concerned about Japan’s already heavy debt burden. Two LDP lawmakers told Reuters that the prime minister is considering holding the election on Feb. 8, giving parties only a short campaign window.
Takaichi, a longtime conservative figure within the LDP, became Japan’s first female prime minister after the ruling party formed a coalition government in October with the right-leaning Japan Innovation Party, known as Ishin. The alliance gave the LDP a workable parliamentary majority following a period of political instability.
In a joint statement at the time of forming the coalition, the LDP and Ishin said they had agreed to consider legislation that would exempt food and beverages from the consumption tax for a two-year period. The parties did not provide details on how the revenue shortfall would be financed or whether the exemption would apply universally or be targeted at lower-income households.
Japan’s consumption tax, introduced to help fund social security costs in a rapidly ageing society, is set at 10 per cent for most goods and services, with a reduced 8 per cent rate applied to food and non-alcoholic beverages. Any change to the tax has historically been politically sensitive, with past increases blamed for slowing economic growth.
