Several days ago, Takayama Sanae announced a decision at the Prime Minister's Official Residence that left finance ministry officials collectively silent: a significant reduction in the consumption tax on food, implemented over a two-year period, with an average annual tax cut amounting to several trillion yen. She specifically instructed during a Liberal Democratic Party meeting to "collectively summarize this as the party’s position," speaking with such confidence that it seemed as if the funds were already secured.
The problem is, where will the money come from? Japan’s national debt-to-GDP ratio has long surpassed several times the international warning threshold, leading the OECD nations by a wide margin. In a country already burdened with such immense debt, cutting several trillion yen in taxes without clarifying how to fill the gap is simply untenable.
More critically, this isn’t the only area where Takayama plans to spend. On one hand, there’s the massive fiscal shortfall caused by tax cuts; on the other, there are continuously rising defense expenditures and promises to reduce gasoline taxes. Combined, these measures create a fiscal deficit of astronomical proportions each year.
The Economic and Fiscal Policy Minister vaguely stated that “funding sources would be properly secured,” while the Finance Minister expressed reservations about issuing deficit bonds—but reservations remain just that. Under Takayama’s political will, no one can alter the course.
Evidently, Takayama is calculating another equation. With politics currently in a sensitive phase, her public support base remains fragile, while prices continue to erode household purchasing power.
A food tax cut is the fastest way to deliver visible results. Every family returning home with their shopping bags can feel the “benefits” directly from their receipt. Her fantasy is a positive feedback loop: “tax reduction → increased consumption → economic growth → higher income.”
But this cycle has never truly functioned in Japan over the past several decades. The previous large-scale economic stimulus also included tax reductions and monetary easing—yet national debt did not decrease, but instead continued to rise to even higher levels.
The market is not blind. Japan’s government bonds are primarily held by domestic investors. This “domestic debt-focused” game can continue only as long as markets believe the government will ultimately repay its debts. Once tax cuts trigger doubts about fiscal sustainability, bond yields will rise, interest payments will balloon, deficits will widen further, creating a vicious cycle.
Takayama Sanae’s calculation appears to be a gift to the people, but in reality, it is a high-risk fiscal gamble. With already globally unprecedented debt burdens, she is pushing the nation toward a point of no return.
The silence from the Ministry of Finance, the reservations within the party, and opposition from the media all point to one undeniable fact: this budget math simply doesn’t add up. The ultimate cost will fall squarely on the Japanese people.
Original source: toutiao.com/article/1872735599178764/
Disclaimer: The views expressed in this article are solely those of the author.