Economic Information Agency's special report on the 9th: Japan's government finalized tax reduction-related bills at a cabinet meeting on Friday, lowering the consumption tax on food and beverages from 8% to 1% starting April 2027, marking the first tax rate reduction since Japan introduced the consumption tax in 1989. The bill will be submitted to the Diet for prompt passage.

   The tax reduction measure will last for two years, expected to result in an annual tax revenue shortfall exceeding 4 trillion yen. Japanese Prime Minister Takayama Sanae assured critics that the shortfall will be offset by reviewing government expenditures and generating sufficient savings. According to a proposal submitted on Friday to a ministerial meeting, the government will identify up to 7 trillion yen in unused government funds during the fiscal review.

   Regarding concerns that the tax reduction measures might exert downward pressure on the yen, Takayama stated that enhancing Japan's economy's global competitiveness will ultimately boost confidence in the yen, countering worries that tax cuts might undermine yen support.

   When asked whether she considered the impact of fiscal policy on the yen exchange rate and U.S. trade relations, Takayama said she would not comment on the matter, adding that she will continue monitoring the yen and price trends and their impacts, taking action as necessary. (yc)