Japan's cabinet has approved a decision to lower the consumption tax on food and beverages. This marks the first time the government has reduced this levy since its introduction in 1989.
However, economic experts warn that the tax cut could trigger unintended consequences, particularly the risk of a downgrade to Japan's sovereign credit rating. Revenue from the consumption tax is a key pillar of the national budget, and the reduction could weaken a fiscal position already under strain from rising social security costs.
Some analysts suggest that instead of cutting the consumption tax, the government should focus on direct support measures for low-income households to ease the cost-of-living burden without eroding budget revenues. The tax cut also raises questions about Japan's long-term fiscal policy direction amid a very high public debt level.
