Japan's looming election heightens chance of sales tax cut

By Leika Kihara

TOKYO, Jan 19 (Reuters) - Japan's expected snap general election is increasingly likely to lead to a cut in the ​consumption tax rate, as ruling and opposition party executives on ‌Sunday stressed the need to do so to cushion the hit to households from ‌rising living costs.

Japan levies an 8% consumption tax for food and a 10% rate on other goods and services, which is a key source of funding for rising social welfare costs in a rapidly ageing population.

Shunichi Suzuki, ⁠secretary-general of the ruling Liberal ‌Democratic Party (LDP), pointed to the party's earlier agreement with its coalition partner, Ishin, to aim at scrapping the ‍8% levy on food sales for two years.

"It's our basic stance to sincerely achieve what's written in the agreement," he told a television programme on Sunday.

The Mainichi ​newspaper reported on Saturday that Prime Minister Sanae Takaichi, upon calling ‌a general election next month, may pledge to temporarily scrap the 8% levy on food sales.

The main opposition Constitutional Democratic Party of Japan (CDP), which agreed to form a new political party with Komeito, will also call for a temporary cut to the tax rate, CDP Secretary-General Jun Azumi ⁠told the same programme.

Takaichi is likely to ​hold a news conference later on Monday ​to announce her intention to dissolve parliament and call a snap election in February, capitalising on her administration's strong approval ‍ratings.

A cut in ⁠the 8% food sales levy would reduce government revenue by an estimated 5 trillion yen ($31.71 billion) a year, according to government data, ⁠straining Japan's already tattered finances and heightening the risk of a bond sell-off as ‌investors focus on Takaichi's expansionary fiscal policy.

($1 = 157.6900 yen)

(Reporting by ‌Leika Kihara; Editing by Paul Simao)