Sanae Takaichi reiterates: will not issue deficit-covering government bonds to fund the food sales tax cut

Japanese Prime Minister Sanae Takaichi reiterated that she will not rely on special deficit-financing bonds to fill the government debt gap, in order to fund the food consumption tax cut. Her earlier remarks had sparked market speculation that her stance had shifted. Takaichi said in a post on X that she has not ruled out issuing government bonds for the overall national budget, but will not use special deficit-financing bonds to fill the government debt gap to make up for the revenue shortfall caused by the temporary consumption tax cut. She wrote that the government's position "remains unchanged." Earlier on Monday she spoke in parliament, and some media reports were misinterpreted, so she came forward to clarify her stance. At a meeting of the House of Councillors Budget Committee, when asked about the source of funding for the tax cut, Takaichi said she does not rule out issuing government bonds. Takaichi said: "Regarding the funding source for the consumption tax cut on food and beverages, we will carefully assess the fiscal scale within the overall framework of budget formulation reform, and achieve a decline in the debt ratio while monitoring tax revenue trends and reviewing both revenue and expenditure." She said: "As in the previous fiscal year, we will reasonably manage the total annual government bond issuance through the initial budget and supplementary budgets. This does not mean we will not issue government bonds at all." The market is closely watching how Takaichi will implement the tax cut policy without further increasing the national debt burden. The tax cut plan is expected to cause an annual tax revenue loss of 5 trillion yen. This temporary tax cut policy is scheduled to start in April and last for two years.