Takaichi Indicates Governmental Bonds for Tax Cut

Having backed to normal process of the Diet with replacement of Minister of Agriculture, Forestry and Fisheries, Prime Minister Sanae Takaichi entered discussions over the bill for consumption tax cut for foods. Although she had been denying issuance of governmental bonds for the policy, Takaichi referred to a possibility of new governmental bonds in a context of national budget as a whole. If she decides issuance of governmental bonds for consumption tax cut, it will totally contradict from what she has been saying. 

Takaichi government submitted a bill for the tax cut to the Diet, which would reduce consumption tax rate for foods from eight percent to one percent for two years and introduce new subsidy to support low-income families using the revenue of the rest of one percent of consumption tax. After two-year tax cut, the government intends to introduce subsidy for supporting low-income families, as consumption tax rate for foods will go back to eight percent.

 

The greatest question for her policy is how the government can find financial resource for the tax cut. It is estimated that the government will need about 10 trillion yen for two years to compensate the missed revenue. The opposition parties have been asking where is the alternative revenue. Takaichi has not figure it out and kept on saying that she would not rely on issuance of governmental bonds or they do not need to be worried about it.

 

In the discussion at the Committee on Budget of the Upper House, a member of Democratic Party for the People (DPP), Yoshifumi Hamano, asked Takaichi about her idea on issuance of governmental bonds, arguing that necessary issuance of governmental bonds as an appropriate measure.

 

Takaichi insisted that she would appropriately control issuance of governmental bonds and added that she would not deny the issuance. Worrying about self-contradiction in her references, Takaichi later posted on X that her comment was not about a specific policy but about the national budget as a whole. However, Takaichi did not disclose how she will find the fiscal resource for the consumption tax cut.

 

It is obvious that spending for consumption tax cut is a part of “national budget as a whole.” When Takaichi says that she can issue governmental bonds in the context of whole budget, it means that she can use them for anything including consumption tax cut. It is possible that Takaichi has changed her policy without obvious announcement.

 

Opposition parties are criticizing Takaichi of her ambiguity in fiscal resource for consumption tax cut, as well as about the targeted annual income for receiving the subsidy which would newly be introduced. Komeito proposed 80 thousand yen of subsidy for each citizen, instead of consumption tax cut. The party also upholds setting threshold of minimum annual income at 530 thousand yen to receive the subsidy.

 

The DPP made a proposal of reducing income tax or other ones, instead of consumption tax cut. The party also demands raising threshold of annual income for imposing income tax. Having no majority in the Upper House, it is watched how Takaichi will respond to those proposals from those opposition parties.

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