IMF official welcomes Japan’s temporary tax cut plan

A senior IMF official has welcomed Japan's temporary tax cut plan for food as a measure to tackle rising prices. Rahul Anand, IMF assistant director and mission chief for Japan, called the approach "a very welcome step". However, he cautioned against fiscal deterioration, noting that Japan's debt level is exceptionally high. On October 9, Japan passed a bill to lower the consumption tax rate for food items to 1% for two years starting in April and introduce a benefit program for low- and middle-income workers.

The Lower House is set to begin deliberation on the bill on Tuesday. Anand also welcomed the authorities' decision not to issue additional debt to finance the tax cut bill, stating that targeted, temporary, and budget-neutral measures are the best ways to support households adversely affected by higher living costs. He emphasized the importance of building buffers while maintaining the downward trend in Japan's debt-to-GDP ratio, given the country's high level of debt.

Concerns about an increase in debt repayment costs due to rising long-term interest rates were also noted. Anand stated that the Bank of Japan is appropriately conducting monetary policy, given the uncertainties, and projected that Japan's inflation rate would rise over the next few months and then decline towards the BOJ's 2% target by the end of next year.