Japanese Prime Minister Sanae Takaichi will launch tax-reform talks this week aimed at cutting fuel taxes to support households while identifying offsetting revenue measures to protect fiscal discipline. The ruling Liberal Democratic Party and its coalition partner will debate next-year’s tax package, including the already-agreed scrapping of gasoline and diesel surcharges — a move that will leave a ¥1.5 trillion revenue hole.
Info via the Nikkei. In brief:
To plug the gap, the government is considering scaling back major corporate tax breaks, particularly those for R&D and wage-boosting firms, and examining higher taxes on wealthy households, including reforms to the “100-million-yen barrier.” Ministries are split over shrinking the R&D incentive, which cost nearly ¥1 trillion last fiscal year.
Officials are also exploring new investment-focused incentives such as first-year full depreciation for domestic capex, startup-investment tax breaks, and benefits for companies relocating out of central Tokyo. Personal tax changes are on the table too, including expanding the standard deduction and widening mortgage-tax relief by lowering the minimum eligible home size.
Bond yields have risen as investors question the fiscal implications of Takaichi’s stimulus agenda, underscoring the pressure to secure credible offsets before fuel-tax cuts take effect.
