Japan’s new JPY 4 trillion annual tax cut on food raises concerns over fiscal sustainability and Yen support amid market interventions.
GBP/JPY stabilizes near 212.53, supported by its 200-day Simple Moving Average, as the Yen weakens for a third straight session. The pair recovers from a brief dip below 210.00 earlier this week following Japan’s currency intervention.
Japan’s government approved a two-year sales tax cut on food, costing JPY 4 trillion annually, alongside handouts for lower-income households. Analysts question the fiscal impact, as the plan lacks specified funding sources and may widen the deficit despite assurances from officials.
Rabobank warns the measures fail to address structural growth, potentially undermining long-term Yen support. The tax cut, equivalent to 0.6% of GDP, contrasts with Japan’s recent FX interventions aimed at strengthening the currency.