Diet convenes. Takaichi: 1% consumption tax on food, “without relying on deficit bonds”
The 222nd extraordinary session opened and runs 69 days, to Dec. 12. In her policy speech, Prime Minister Takaichi put first a bill to cut the tax rate on food and drink from 8% to 1% for two years from next April. She did not say where the money would come from
The 222nd extraordinary Diet session was convened on Oct. 5, and Prime Minister Sanae Takaichi (高市早苗) gave her policy speech the same day in plenary sessions of both houses. It is the first round of Diet debate for her second cabinet, reshuffled in September. The session runs 69 days, to Dec. 12, and the government plans to submit 21 bills. Takaichi raised the motto of “governing the world and relieving the people,” and said she would protect livelihoods through economic strength. Jiji Press reported that she put economic growth first. With high prices dragging on, the idea is to lighten household burdens first, in a way people can see. The bill she weighted most heavily would cut the consumption tax on food and drink for two years from April 2027, from the current reduced tax rate of 8% to 1%. Combined with income-based support payments, she said, it would give households “some breathing room.” She said the money would be found without relying on deficit-financing bonds, and that “there is no need to worry.” She said she would manage bond issuance while watching prices, tax revenue, interest rates and interest costs, and would make this year the first year of “responsible and proactive public finance.” She also said a five-year action plan to spur domestic investment would be drawn up by year-end, with a focus on economic security, cyber defense, AI and semiconductors. The plot is to cut taxes and invest at the same time, and raise revenue through growth. Eating out is not covered by the reduced rate, so meals in restaurants stay at 10%.
What she did not say is what will fill the gap. The Hokkaido Shimbun criticized her in an editorial for naming no specific source of funds, and for saying nothing about restoring the rate after two years. Estimates of the revenue loss vary in the press: the Ryukyu Shimpo puts it at about ¥5 trillion a year, the Akita Sakigake Shimpo at about ¥10 trillion over two years for national and local governments combined. Kyodo News noted that the promise comes when Japan's finances are already seen as the weakest in the G7. The opposition says a start next April will do nothing quickly about the high prices in front of people now. The arithmetic in the Diet is not easy either. The ruling bloc holds two-thirds of the lower house but is in the minority in the upper house. Another focus is a bill to cut the number of lower house seats, carried over from the last session. The opposition plans to press Agriculture Minister Kazuo Yana (簗和生), who on Oct. 5 retracted remarks about road budgets made at a local gathering, and to question the prime minister's responsibility for appointing him. Party leaders' interpellations run Oct. 7-8 in the lower house and Oct. 8-9 in the upper house. From Oct. 13 the prime minister is expected to appear before the budget committee of each house. Explaining the funding will be the first hurdle.