Japan's finance minister used his September 8 post-cabinet press conference to repeat a pledge that has become central to the credibility of next year's budget: the planned cut in consumption tax on food and beverages will not be paid for with special deficit bonds.
Katayama, who also serves as minister of state for special missions, was pressed on how the government intends to cover the cost of the tax cut and related benefit payments, which a reporter's question put at roughly ¥5tn a year based on recent media estimates. Katayama did not confirm that figure, but he laid out the funding logic the Takaichi cabinet adopted in its August 5 cabinet decision: pursue every possible spending and revenue change, keep the debt-to-GDP ratio on a stable downward path, and only then settle on how much in Japanese government bonds to issue for the full year, in a way that keeps market confidence.
On the revenue side, Katayama said the government will run a zero-based review of tax special provisions, subsidies, and non-tax income sources to find additional funding for the food tax cut and other fiscal needs. He was more specific about how the government plans to change its own habits. He said Japan has, in his words, undeniably run a fiscal policy dependent on supplementary budgets in recent years, and the reform now commits future supplementary budgets to "truly urgent" measures only. He pointed to the roughly ¥3tn a year the government has been booking in supplementary budgets for inflation relief, saying that spending will be reworked once income-linked benefit payments and the food tax cut, which he described as a bridge measure, take over that role.
Asked separately about Japan's version of a government-efficiency review body, Katayama was candid about its early results: the cuts and reductions ministries have proposed at the request stage so far involve either very small revenue effects or programs with no track record of actual use. He said the finance ministry will not simply accept ministries' self-assessments, calling the request stage only the first step in a longer process that continues through the tax reform negotiations ahead.
What remains undecided is the number that matters most to bond investors: how large the full-year JGB issuance will be once the spending and revenue reviews are complete. Katayama said that figure, along with the concrete funding plan for the tax cut, will be spelled out later in the budget-compilation process, and that the government intends to explain it directly to market participants at home and abroad before asking for their confidence.