Asahi and Nikkei report Prime Minister Takaichi may ask officials as soon as
Thursday to launch a consumption-tax cut for food and beverages, lowering the
rate to 1% within two years; a proposal could be announced this week. Markets
worry that a more expansionary fiscal stance, together with elevated oil prices,
raises inflation risk. The key market question is how added spending and tax
cuts would be financed and whether they would increase government bond issuance.
SMBC Nikko Securities senior FX and rates strategist Rinto Maruyama said the
plan could raise the fiscal-risk premium embedded in Japanese assets, which
would be negative for the yen and likely push JGB yields higher—especially at
the long and ultra-long end—causing bear-steepening of the curve.
