Bank of Japan (BOJ) Governor Kazuo Ueda said on July 25 that the central bank will closely monitor the economic impact of a potential cut to the consumption tax on food.
Speaking at a press conference after the BOJ announced its monetary policy decision, Ueda emphasized that any changes in tax policy could affect prices and consumption, and therefore require careful evaluation.
Earlier, lawmakers from the ruling party proposed studying a reduction in the consumption tax, currently at 8%, on essential food items to ease the cost-of-living burden on households. However, the proposal has raised concerns about budget revenues and its impact on the BOJ's inflation stability target.
Ueda made clear that the BOJ is not directly involved in fiscal policy decisions, but it must thoroughly assess the spillover effects on the economy and inflation. The BOJ is currently in the process of normalizing its ultra-loose monetary policy, having raised interest rates in recent meetings.
Analysts suggest this move indicates the BOJ aims to maintain caution, ensuring that fiscal policy does not disrupt its current policy direction.
