IMF advises Japan to avoid broad tax cuts and handouts
"Our advice to Japan is that, given this limited fiscal space, it's essential that ... any fiscal response to shocks is both temporary and also targeted," Kozack told a regular news conference in Washington. "Generalized subsidies and tax cuts, in our view, should be avoided."
The suggestion came after Sunday's election in the House of Councilors, the upper chamber of parliament, resulted in a disastrous loss for the ruling bloc, likely increasing pressure for greater fiscal spending.
Tackling inflation was a major campaign issue in the Upper House race. The ruling Liberal Democratic Party and its junior coalition partner, Komeito, pledged to give cash handouts while opposition parties called for reducing or abolishing the consumption tax.
Japan's long-term interest rates rose in interdealer trading after the election due to worries about fiscal expansion. The nation's outstanding debt is the highest among major economies, standing at more than double the country's gross domestic product.
"Japan has limited fiscal space ... because of high public debt," Kozack said, recommending that any fiscal stimulus measures to address economic shocks should be temporary and targeted at vulnerable households and companies.
Broad tax cuts and benefits are "not an efficient use of Japan's limited fiscal space," the spokesperson added.
She said Japan should urgently develop a "clear fiscal consolidation plan," considering that Japan's outstanding debt will likely increase further due to growing interest payments on Japanese government bonds amid rising interest rates, and that social security costs will inevitably rise due to the aging population.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
an hour ago
Barcodes and QR Codes Become New Standard for Cashless Payments in Japan
A July survey in Japan found that 84.2% of respondents make use of code payments for purchases, using a barcode or QR code displayed on a smartphone. The survey was conducted by Kufū Company Holdings on 2,559 users of its household budgeting app and related services. Code payments have become a standard for cashless transactions in Japan, even surpassing the 76.3% of respondents who use physical credit cards. The next most popular form of payment, at 69.8%, is electronic money, which includes systems used on public transportation such as Suica and Pasmo, or money issued by retailers like Aeon. Meanwhile, only a minority of respondents, at 14.7%, use debit cards. Over 75% of the survey respondents cited 'earning points or receiving cashback' as well as 'easy and speedy payment' as a benefit of using code payments. In today's era of rising prices, consumers seem to be motivated by the desire to get something in return. Additionally, 21.7% of the respondents mentioned the convenience of 'peer-to-peer money transfer functions,' which are useful for such situations as splitting the bill for a group outing. The most commonly mentioned inconvenience or concern related to code payments is that it is not accepted by some stores, as mentioned by 62.2% of the recipients. Meanwhile, only 26.4% expressed concerns about unauthorized use and other security issues. (Translated from Japanese. Banner photo © Pixta.)
5 hours ago
Bridgestone to Sell Carbon Black Biz in Mexico
News from Japan Economy Aug 5, 2025 15:04 (JST) Tokyo, Aug. 5 (Jiji Press)--Bridgestone Corp. said Tuesday it will sell Mexico Carbon Manufacturing SA de CV to Cabot Corp. of the United States for about 70 million dollars as part of the Japanese tire maker's efforts to restructure its carbon black business. The deal is expected to close within three to six months, pending regulatory approval in Mexico. The impact of the sale on Bridgestone's financial forecast for this year is minimal, the company said. In July, Bridgestone announced the sale of its carbon black operations in Thailand to Japan's Tokai Carbon Co. Asahi Carbon Co., based in the city of Niigata, central Japan, will be Bridgestone's only carbon black arm. It will continue to develop and make the material for premium and racing tires. END [Copyright The Jiji Press, Ltd.] Jiji Press
The Mainichi
5 hours ago
- The Mainichi
Some BOJ members signal rate hikes if tariff concerns ease: minutes
TOKYO (Kyodo) -- A few Bank of Japan board members said in June that the central bank would likely consider resuming interest rate hikes if friction over U.S. tariffs does not escalate, the minutes of their meeting showed Tuesday. In the meeting, the BOJ maintained its policy rate at around 0.5 percent, citing the "extremely uncertain" impact of higher U.S. tariffs that Japan was negotiating to reduce. At the June 16-17 meeting, a few members expressed the view that the central bank "would likely move on from its current wait-and-see approach and consider resuming the process of policy interest rate hikes, if trade friction was expected to progress without escalation," the minutes said. With the BOJ standing pat at its meeting last week, held after Japan and the United States reached a trade agreement, the focus is on whether the central bank will raise the policy rate at its next gathering in September. In June, one member said the central bank needed to be able to respond flexibly so it can return to raising rates depending on policy developments in the United States. Another member warned that "extremely high uncertainties" remained over the outlook for Japanese economic activity, with risks still skewed to the downside, and it would "take some time" to assess future trends in corporate profits and the direction of the U.S.-Japan trade talks.
