Japanese PM Sanae Takaichi vows sustainable finance, faster tax cut talks
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Japan's prime minister and LDP party leader, Ms Sanae Takaichi, speaks to the media at the party's headquarters in Tokyo, on Feb 8.
PHOTO: BLOOMBERG
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TOKYO – Japanese Prime Minister Sanae Takaichi stuck to a cautious line on fiscal policy and a sales tax reduction in her first comments since polls closed with her ruling party on track for a landslide victory.
The prime minister reiterated her view that it is important for fiscal policy to be sustainable as she continues to try and ease concerns among investors about her spending plans.
“We will accelerate talks over a sales tax reduction,” Ms Takaichi told reporters. She said a tax Bill would be submitted to Parliament if agreement is reached.
On a TV programme, Ms Takaichi said that she’d like to proceed on the premise that her ruling Liberal Democratic Party (LDP) had earned public approval for its election manifesto, which referenced to a suspension of the food sales tax for two years without issuing fresh government bonds.
“The consumption tax is an extremely significant issue. We intend to proceed flexibly, listening to the opinions of each party, while we aim to reach a conclusion as soon as possible,” she said.
Finance Minister Satsuki Katayama said she intends to proceed on the same premise, too.
“We intend to explore securing funding without relying on deficit-covering sovereign bonds,” Ms Katayama said on a TV programme on the night of Feb 8. “We plan to proceed with this approach for a limited period of two years.”
Ms Takaichi’s coyness on committing clearly to a temporary sales tax cut during most of her election campaign appears to be a response to market jitters over her government’s pro-active fiscal policy. Longer-term bond yields spiked sharply in January as investors weighed Japan’s plans for a tax reduction without clear financing.
In her comments, Ms Katayama didn’t specify how exactly a tax cut would be funded. A two-year suspension is estimated to cost the government 5 trillion yen (S$40 billion) in lost annual tax revenue.
Mr Toshihiro Nagahama, one of the prime minister’s economic advisers, told Bloomberg that Ms Takaichi is likely to lower the sales tax in some form.
Still, Mr Nagahama, who is chief economist at Dai-Ichi Life Research Institute, believes the final plan may differ from the initially floated two year suspension. That’s because of the political difficulty of returning the tax back to 8 per cent after the time period.
Mr Nagahama hinted at the possibility of different alternative that also provides relief for people eating out. BLOOMBERG
