Mon May 19 06:41:52 UTC 2025: Here’s a news article summarizing the provided text, written from an Indian perspective:
**Japan Rejects Debt-Funded Tax Cuts Amid Economic Uncertainty**
**Tokyo, Japan – May 19, 2025** – Amidst a fragile economic recovery threatened by US trade policies and persistent inflation, Japanese Prime Minister Shigeru Ishiba has firmly rejected calls for debt-funded tax cuts. Speaking before parliament today, Ishiba emphasized the need for fiscal prudence, particularly with rising interest rates and increasing social welfare costs.
The move comes as Japan faces growing pressure from both ruling and opposition parties to stimulate the economy ahead of upper house elections in July. Lawmakers are urging for a reduction in the country’s 10% consumption tax to alleviate the burden of “sticky” food inflation on consumers.
However, Ishiba countered that adding to Japan’s already substantial debt through tax cuts would be irresponsible, especially as the Bank of Japan (BOJ) continues to tighten monetary policy. The BOJ ended its decade-long stimulus last year and has since raised short-term interest rates to 0.5%, with further hikes planned if inflation remains on track to reach its 2% target. The central bank is also gradually reducing its bond buying, which will increase the cost of funding government debt.
Finance Minister Katsunobu Kato echoed Ishiba’s concerns, warning that a loss of market confidence in Japan’s fiscal stability could trigger a sharp rise in interest rates, a weakening yen, and runaway inflation, severely damaging the economy.
This decision carries significant implications for India, which relies heavily on Japan as a key investor and development partner. A stable and prosperous Japanese economy is crucial for maintaining the flow of investment and supporting collaborative projects in infrastructure, technology, and other key sectors. Any economic instability in Japan could have a ripple effect on Indian markets and strategic partnerships. The Indian government will be closely monitoring Japan’s economic policies and their potential impact on bilateral relations.
The Japanese economy contracted by 0.7% in the first quarter of 2025, further emphasizing the precariousness of its recovery. Analysts suggest that Ishiba’s commitment to fiscal discipline is a calculated risk, aimed at ensuring long-term economic stability even if it means sacrificing short-term stimulus measures. The political fallout of this decision, and its impact on the upcoming elections, remains to be seen.
First Piper 