As the government of Prime Minister Takaichi pushes ahead with the first tax cuts since the introduction of the consumption tax, there is growing concern that unfunded tax reductions are shaking market confidence and that the aggressive fiscal stance carries the risk of triggering a Japan sell-off. The administration is showing a stubborn commitment to tax cuts, which it has long championed, but experts warn that loosening fiscal discipline could destabilize the Japanese economy through rising long-term interest rates and a weaker currency.
Unfunded tax cuts raise long-term interest rates, pushing yields up.
