Japan Financial Services Agency minister sets principles to finance a two-year zero-rate consumption tax on food and beverages without deficit bonds

The Japan Financial Services Agency published a summary of the Minister of Finance’s post-Cabinet press conference, which focused on delays in Diet deliberations on the next fiscal year’s budget bill and tax revision bill and on the ruling party pledge to set the consumption tax rate on food and beverages at zero for two years. The minister positioned the timetable and financing for the temporary zero rate as issues for Diet discussion, and said implementation would not rely on issuing deficit-financing government bonds, with an interim report targeted for the summer. Cost-of-living and high-price measures totalling JPY 8.9 trillion on a general-account basis were cited as already being delivered through fuel and utility support and other programmes. Funding options for the two-year tax cut were framed around reviewing subsidies and special tax measures and using non-tax revenues, alongside consideration of “benefit tax credits” and the operational lead time needed for point-of-sale and related system changes. On the Foreign Exchange Fund Special Account, a FY7 surplus of JPY 4.5 trillion was referenced, with 70% transferred to the general account and 30% retained, while no position was taken on further use pending broader financing discussions. Separately, on an inappropriate funds-handling case disclosed by Prudential Life, the minister said the Japan Financial Services Agency should strictly confirm the firm’s fact-finding, root-cause analysis and recurrence-prevention measures.