IMF Urges Japan to Avoid Fiscal Risk of Cutting Sales Tax (2)

The International Monetary Fund warned Japan against cutting its sales tax when borrowing costs on public debt are set to double, comments that come as Prime Minister Sanae Takaichi prepares to speed up debate on a potential suspension of the tax on food.

“The authorities should avoid reducing the consumption tax, an untargeted measure that would erode fiscal space and add to fiscal risks,” the IMF said Wednesday in its latest concluding statement after an Article IV consultation on Japan.

Japan shouldn’t be loosening its fiscal policy when debt servicing and welfare costs are likely to keep increasing and eventually ...