Japan election landslide clears path for Takaichi to pursue tax cuts

The ruling LDP won a landslide and campaigned to suspend the 8% food sales tax for two years; investors reacted with government bond selling and pressure on the yen.

Japanese Prime Minister Sanae Takaichi won a commanding election result that supporters say strengthens her ability to press ahead with promised tax relief and other stimulus. The ruling Liberal Democratic Party ran on a pledge to suspend the 8% food sales tax for two years. Financial markets reacted to the policy uncertainty with notable moves in stocks, bonds and the yen. Takaichi is expected to hold a major post‑election press conference on Monday as questions about funding for the pledge remain. Key facts: - The LDP’s campaign included suspending the 8% food sales tax for two years as a measure to ease household living costs. - The suspension has been estimated to cost about 5 trillion yen a year, according to reporting. - Takaichi has said she would not issue fresh debt and has pointed to cross‑party debates on social welfare and taxation to work out details. - Past hints about tapping non‑tax revenues have drawn attention to Japan’s roughly $1.4 trillion foreign exchange reserves, held largely for yen intervention. - Markets reacted with a sell‑off in government bonds and downward pressure on the yen, while stocks moved higher and the yen recovered some ground after initial falls. - Government spokespeople said officials are closely monitoring rapid moves in foreign exchange markets. Summary: The election result has strengthened the political case for a temporary consumption tax suspension, but significant uncertainty remains about how to offset the revenue loss without issuing new debt. Officials have indicated funding details will be discussed through cross‑party debates and Takaichi is expected to address the plan in a post‑election press conference on Monday.