Takaichi Pledges Two-Year Sales Tax Cut Amid Rising Household Costs

Japanese Prime Minister Sanae Takaichi has announced plans to cut the sales tax on food items from 8% to 1% for two years, starting in April 2027. The move is aimed at easing household living costs, which have been strained by a weak yen and rising energy prices. According to LDP Secretary-General Shunichi Suzuki, Takaichi ordered preparations for the tax cut during a meeting with ruling party executives.

The decision comes as Takaichi's administration faces falling approval ratings, with households struggling to cope with increasing living costs. The tax cut would be the first time Japan has lowered its sales tax rate since 1989. However, some analysts have expressed concerns over the impact on the country's worsening finances and the potential for inflation.

Tsutomu Watanabe, emeritus economics professor at the University of Tokyo, warned that the tax cut could accelerate inflation by increasing households' purchasing power. The Bank of Japan has been working to tame price pressures, but fiscal policy could lead to too-high inflation in Japan, he said.