As Japan prepares for snap elections as early as February 8, one economic issue is now in the spotlight: the possibility of suspending sales tax on food.
The move is being considered by the government led by Prime Minister Sanae Takaichi, as the cost of living continues to put pressure on Japanese households.
Japan currently imposes an 8% tax on food and non-alcoholic beverages, compared to 10% on other goods.
With food prices continuing to rise and inflation remaining above the 2% target for four consecutive years, the proposal is seen as an effort to ease the burden on the people while at the same time strengthening political support ahead of the vote.
The issue has become increasingly heated with reports that the ruling Liberal Democratic Party (LDP) may make cutting food taxes a campaign promise.
Although no final decision has been made yet, top LDP leaders have insisted that they are committed to implementing what was agreed upon in the government coalition agreement.
Interestingly, the opposition is not left behind. The new Centrist Reform Alliance bloc has also expressed its intention to cut sales taxes, but has vowed to do so without adding to the national debt, making the issue a key battleground between Japan’s two biggest political forces.
Markets have reacted early. Shares in food-related companies such as Yamazaki Baking and Seven & i Holdings (7-Eleven) have surged, reflecting expectations that lower taxes could boost consumer spending.
With Takaichi’s popularity still high, he is seen as betting this election on a stronger mandate to pursue more aggressive economic policies.
However, half of respondents to a public opinion poll disagree with a snap election, suggesting that an LDP victory is far from certain.
One thing is clear: whoever wins, the fate of food taxes will shape the direction of Japan’s economy and politics for the foreseeable future.
