Written by Laika Kihara
TOKYO (Reuters) – An expected snap general election in Japan is increasingly likely to lead to a cut in the consumption tax rate, with ruling party and opposition executives stressing on Sunday the need to do so to cushion the damage to households from rising living costs.
Japan imposes a consumption tax of 8% on food and 10% on other goods and services, which is a major source of funding for increasingly rising social welfare costs among a rapidly aging population.
Shunichi Suzuki, secretary-general of the ruling Liberal Democratic Party, pointed to the party’s previous agreement with its coalition partner Isshin, aiming to abolish the 8% tax on food sales for two years.
“Our basic position is to faithfully fulfill what is written in the agreement,” he said on a television program on Sunday.
Prime Minister Sanae Takaishi, when calling a general election next month, may pledge to temporarily scrap the 8% tax on food sales, the Mainichi newspaper reported on Saturday.
The main opposition party, the Constitutional Democratic Party of Japan, which has agreed to form a new political party with Komeito, will also call for a temporary cut in the tax rate, Constitutional Democratic Party of Japan Secretary-General Jun Azumi told the same programme.
Takaishi is likely to hold a press conference later on Monday to announce her intention to dissolve parliament and call early elections in February, taking advantage of her administration’s strong approval ratings.
An 8% food sales tax cut would reduce government revenue by an estimated 5 trillion yen ($31.71 billion) annually, according to government data, straining Japan’s already tattered finances and raising the risk of a bond sell-off as investors focus on Takaishi’s expansionary fiscal policy.
($1 = 157.6900 yen)
(Reporting by Leika Kihara; Editing by Paul Simao)