Japan's Takaichi Considers Lifting Food Sales Tax Ahead of Elections

Post by : Mina Rahman

Prime Minister Sanae Takaichi of Japan is reportedly contemplating a significant policy shift to halt the sales tax on food in her election strategy for the general elections set for next month. As per sources, Takaichi's government and the Liberal Democratic Party (LDP) are meticulously assessing the potential ramifications for the market before arriving at a decision on this proposal.

Presently, an 8 percent consumption tax on food sales contributes considerably to public finances. If implemented, the suspension could result in an annual revenue shortfall of approximately 5 trillion yen (around US$31.6 billion). Such a considerable financial impact raises questions, which officials have chosen to remain silent about for now.

Reports suggest that Takaichi will officially dissolve the Japanese parliament on Friday, paving the way for a snap election anticipated on February 8. This early election is perceived as a strategy for Takaichi to earn public support for her plans amidst increasing concerns regarding their influence on financial stability.

In October, the LDP established a coalition with the right-wing Japan Innovation Party, known as Ishin. This partnership has enabled Takaichi to become Japan’s inaugural female prime minister, marking a significant milestone for the nation's political domain.

The LDP and Ishin have reportedly agreed to contemplate new legislation which would exempt food and beverages from the consumption tax for two years. However, details regarding the execution of this exemption and its wider economic consequences have not yet been revealed.

The proposed suspension of the food sales tax aims to relieve financial pressure on consumers amidst escalating living costs while striving to stabilize the economy as elections near. The final verdict from the government will likely weigh the necessity for economic relief against concerns about fiscal responsibility and revenue losses.

As election day draws near, all eyes will be focused on Takaichi and her administration's strategy to tackle this sensitive economic issue and whether the tax suspension resonates with voters and legislators.