Moody's: The impact of reducing the consumption tax on Japan's rating will depend on its scope, extent, and persistence.

Moody's Ratings said on Tuesday that the potential impact of reducing Japan's consumption tax on the country's sovereign debt rating will depend on the "scope, magnitude, and duration." The ruling coalition led by Japanese Prime Minister Yoshihide Suga lost its majority in the Sunday's upper house election, making it more likely for the ruling coalition to heed the calls of the opposition parties to increase spending and potentially cut Japan's 10% consumption tax rate. Christian de Guzman, Senior Vice President and Manager at Moody's Ratings, said that the possibility of fiscal expansion will increase as the ruling coalition now needs to seek the cooperation of the opposition parties to pass legislation in the parliament. However, he stated in a statement on Tuesday that the ruling coalition's position remains "sufficiently stable" to preempt major adjustments to the consumption tax rate. He added, "The potential impact of lowering the consumption tax on credit will depend on its scope, magnitude, and duration."