Katayama: Won't rely on debt to finance food sales tax cut

Japanese Finance Minister Satsuki Katayama has clarified that the government will not rely on additional debt to finance a proposed two-year tax cut on food sales, addressing concerns raised by investors and foreign media. The plan, announced by Prime Minister Sanae Takaichi, aims to reduce the 8% consumption tax on food to 1% starting in April 2027, providing temporary relief to households amid rising living costs. Katayama emphasized that the measure will be implemented without increasing public debt, countering earlier market speculation that the policy could worsen Japan’s fiscal challenges.

The government has also sought to dispel confusion over the scope of the tax cut, which was initially misinterpreted as a broader or permanent reduction in the consumption tax. Katayama explained the details during the World Economic Forum in Davos, helping to calm market nerves after a selloff in government bonds following the initial announcement. The administration is working with ruling and opposition parties to finalize the plan, which is expected to ease financial burdens without compromising long-term fiscal stability.