Japan Cuts Food Sales Tax to 1% Amid Inflation Fears

Japan's Prime Minister Sanae Takaichi has ordered a drastic cut in the national food sales tax from 8 percent to 1 percent, sparking anxiety in global bond markets.

The move is designed to combat inflation and protect lower-middle-class households from rising living costs. The proposed reduction will be implemented for two years, starting in April 2027, and is expected to slash approximately 10 trillion yen (KES 7.93 trillion) in government tax revenues over that period.

However, the plan has raised concerns about Japan's already heavy sovereign debt burden, with some analysts warning of a potential market backlash. The lack of a clear funding strategy for the policy has led to speculation about how the government plans to plug the 10 trillion yen revenue gap.