Moody's says sales tax cut impact on Japan's rating will depend on scope, permanence
Prime Minister Shigeru Ishiba's ruling coalition lost its majority in upper house elections on Sunday, heightening the chance it may heed opposition calls for bigger spending and possibly cuts to Japan's consumption tax rate of 10%, except for food items at 8%.
With the ruling coalition now required to seek the cooperation of opposition parties to pass legislation through parliament, prospects for fiscal expansion will heighten, said Christian de Guzman, senior vice president and manager at Moody's Ratings.
But the ruling coalition's position remains "sufficiently strong" to preempt significant changes to the consumption tax rates, he said in a statement on Tuesday.
"The potential credit impact of a lowering of consumption taxes will depend on their scope, magnitude and permanence," he added.
Moody's has rated Japan A1, the fifth-highest level, with a "stable" outlook since December 2014.
But it warned in a report in May that it may downgrade the rating "if prospects increase of a material and sustained widening in fiscal deficits leading to a significant deterioration" in Japan's already high debt burden.
Japanese government bond (JGB) yields rose prior to the election on concerns a loss by fiscal hawk Ishiba's ruling party could heighten the chance of big spending and cuts to Japan's consumption tax.
Before the election, Ishiba shunned calls to slash the consumption tax, which funds social welfare costs for a rapidly ageing population.
He reiterated his caution over the idea after the election, telling reporters on Monday that cutting the tax could temporarily increase household income, but would raise questions on how to pay for Japan's ballooning social welfare costs.
The Bank of Japan's efforts to roll back its massive stimulus also increase the cost of funding Japan's debt burden, which is the highest in the developed world at 250% of GDP.
A credit rating downgrade to Japan's sovereign debt could trigger a sell-off of bonds, yen and Japanese stocks, and boost the cost of dollar funding for domestic banks, analysts say.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
2 hours ago
- The Independent
India signals it will keep buying Russian oil despite Trump tariff threat
India has suggested it will continue purchasing oil from Russia despite US president Donald Trump 's threats to hit Delhi with new tariffs over the imports. Foreign ministry spokesperson Randhir Jaiswal told reporters on Friday that India 's energy decisions were based on market availability and global conditions, adding that ties with Moscow were 'steady and time-tested' and should not be seen through the prism of a third country. Mr Trump said earlier this week that he plans to impose a 25 per cent tariff on Indian goods along with an additional import tax in response to Delhi 's continued buying of Russian crude. The US president has stepped up warnings against nations doing business with Moscow as Washington seeks leverage over Russia 's war in Ukraine. India bought about 68,000 barrels of crude oil a day from Russia in January 2022, but this rose to 1.12 million barrels per day by June that year, peaking at 2.15 million barrels a day in May 2023, according to data from analytics firm Kpler cited by Press Trust of India. Russian supplies at one point made up nearly 40 per cent of India's total oil imports, making Moscow its biggest crude supplier. While the Indian government may not be deterred by Mr Trump's threats, Reuters news agency earlier reported that Indian state refiners stopped buying Russian oil after July discounts narrowed to their lowest since 2022 - when sanctions were first imposed on Moscow - due to lower Russian exports and steady demand. Indian Oil Corp, Hindustan Petroleum Corp, Bharat Petroleum Corp and Mangalore Refinery Petrochemical Ltd have not sought Russian crude in the past week or so, four sources told Reuters. Reacting to the reports, Mr Trump told reporters: 'I understand that India is no longer going to be buying oil from Russia. That's what I have heard. I don't know if that's right or not. That is a good step. We will see what happens.' He added that despite his tariff announcement, trade deal talks with India were progressing. India consumes around 5.5 million barrels of oil a day, importing roughly 88 per cent of its needs. The world's third-largest crude buyer after China and the US shifted sharply towards Russian supplies after the invasion of Ukraine in February 2022, taking advantage of steep discounts as Western nations turned away from Moscow's energy exports.
Times
3 hours ago
- Times
Lions chief says tours will always be pinnacle despite rebel league threat
British & Irish Lions executives believe their tours will always remain rugby's pinnacle, despite the looming threat of rebel league R360. Those attempting to start a new franchise competition, including England 2003 World Cup winner Mike Tindall, want to establish eight men's and four women's teams. They claim to have signed up swathes of the world's best players, and have funding from billionaire backers. Their intention is to start a Formula 1-style circuit of matches across the world in cities such as London, Tokyo, Miami, Boston and Dubai. The new league intends to pay the world's top 40 rugby union players more than £1million a season, which will last just 14 weeks. They plan to avoid international rugby, so that their stars can play in Tests, although it remains to be seen whether national unions would sanction their players playing R360 matches. At present, England, Ireland and New Zealand have strict rules which dictate that players must play domestic rugby at home in order to be eligible for Test selection. However, while the provisional R360 calendar has left gaps for Test matches and World Cups, there seem to be no provisions for a men's Lions tour every four years. Ben Calveley, the Lions chief executive, has insisted that no one from R360 has contacted him or his organisation about their project. It is understood that several 2025 squad members have signed provisional deals to join the rebel circus if it starts with a soft launch this year, and a full tournament in 2026. Calvely insisted that British and Irish players will always want to play for the Lions, and would turn down R360 contracts to do so. 'No, we haven't had any formal discussions at all with R360 so I can't comment in any detail on their proposition and their proposal,' Calvely said. 'It's up to them who they want to make contact with. I don't really want to comment on how they manage their own business. 'What I can say, and you have seen these quotes come from players at every stage throughout the tour, is that they remain absolutely committed to the Lions. We talk about the Lions being the absolute pinnacle and I think it is for the players. Their reaction when they were selected, you could just see the emotion on their face, you could see what it meant to them.' Earlier on the tour, Lions captain Maro Itoje was asked about R360 and said: 'I don't know too much about that league but obviously players want to play for the Lions and that's not going to change for generations to come. 'It was the same in the 1950s and it will be the same in 2050. People want to play for their country. People want to play for the Lions. I am sure that will remain.' Calveley responded to that by adding: 'Hearing comments from the likes of Maro I think just firmed that up in people's minds that for these players to get on a Lions tour is the ultimate for them. This is very encouraging. 'We all know that we have our place in the calendar baked into regulation 9 and I wouldn't see that changing in the future. We have the support of our four shareholder unions. We have a partnership now with PRL and URC and with the clubs from those leagues. The same is true with the player associations and the players themselves. Our relationship with the professional game is better than it has ever been and I would see that continuing in the future. 'For me, what is encouraging is that our players remain committed to the Lions. I think we have seen on this tour just what it means, not just to them but to the fans and the whole of the game. We are very confident that our position in the future is secure.' Calveley is supportive of Andy Farrell returning as Lions coach in 2029, on the tour to New Zealand. Farrell himself said he loves the Lions concept, and is keen on a return to the job. The Lions bosses endorsed him for another trip in four years' time. 'Andy's done an incredible job and I have really enjoyed working with him,' Calveley added. 'Since he started full time back in December, he has brought a real focus to the operation which has ultimately resulted in success on the field of play. We will now give him a bit of time off. He can go back to Dublin and decompress a little bit and then he can start building for the autumn internationals in Ireland and building towards the World Cup in 2027. 'When it comes to our appointments for future tours, we will start the process in about two years and I don't think it would be right to comment on where it ends up, let's see. But certainly he has put himself in a very strong position hasn't he, let's put it that way.'
Telegraph
8 hours ago
- Telegraph
Retirees pull billions from pension pots to escape Reeves's tax raid
Middle-class Britons risk a retirement 'disaster' after a record £5bn was pulled from pension pots in the wake of Rachel Reeves's inheritance tax raid. Official figures showed 672,000 retirees, representing roughly 5pc of all pensioners, pulled £5bn from their pots in the first three months of this year. HM Revenue and Customs (HMRC) said the amount taken from retirement funds was 25pc higher than the same quarter a year ago, with 13pc more people withdrawing money. It means withdrawals during the period were the highest since George Osborne introduced pension freedoms a decade ago. It comes after the Chancellor announced in her maiden Budget last October that pension pots would no longer be exempt from inheritance tax from April 2027, making them subject to a levy of up to 40pc. Baroness Altmann, a former Tory pensions minister, urged the Chancellor to reverse the policy, warning that many more people would choose to withdraw money from their retirement pot as soon as possible, creating a 'pensioner poverty time bomb'. Sweeping changes mean retirees can now withdraw unlimited amounts from their pot as soon as they hit 55. The figures also revealed a 50pc increase in the number of octogenarians taking money out of their pensions over the course of last year with the amount withdrawn by those aged 81 and over up by 80pc to £360m. 'It's a disaster' The Chancellor hopes to raise £1.5bn from her decision to bring pensions within the scope of inheritance tax. Pension withdrawals from defined contribution pots above the 25pc tax-free lump sum incur an income tax charge of 20pc for basic rate taxpayers and a 40pc levy at the higher rate. The changes mean heirs will be subject to both inheritance and income tax at the marginal rate from 2027. 'It's a disaster,' Lady Altmann said, adding that she expected withdrawals to accelerate as more people became aware of the looming inheritance tax charge. She added that the 'draconian' way the policy was introduced was storing up a crisis for the future, and said she was pushing for changes in the Lords that would see beneficiaries charged a maximum 20pc 'pension recovery tax' instead on inherited pots. Lady Altmann said: 'This policy could end up being as damaging to workplace pensions as Gordon Brown's tax rate was for DB [defined benefit] pensions. 'I honestly think this is an existential threat to the long-term survival of our DC [defined contribution] pensions, because there's a clear incentive to take the money out as soon as you possibly can.' She added that this would leave many middle-class families in danger of not leaving themselves enough to fund their retirement. Lady Altmann said: 'This IHT [inheritance tax] imposition will ensure that more and more people – especially those who don't have massive amounts of money – will just say, 'Why on earth would I want to lose two thirds of my pension to the taxman? I'll just take it out as soon as I can.' 'Those who build up, say, between £200,000 and £300,000 over their working life are now in danger of having a real financial incentive not to keep money in their pensions for their later life and then end up in poverty.' 'Taking a big hit' Guy Opperman, another former pensions minister, said: 'Pensions are taking a big hit from the Government's actions. 'The consequences of this policy are clear: people will save less for their pension and will withdraw more. This will also affect the ability to pass money on. There is time for the Government to think again and they should. It is very short-term.' Jamie Jenkins, director of policy at pensions giant Royal London, which manages more than £170bn of client cash, said there was already clear evidence that people were changing their retirement planning ahead of the changes. He said: 'There is increased interest from advisers and their clients in how they can mitigate the potential inheritance tax bill.' Claire Trott, at wealth managers St James's Place, added: 'Every individual's circumstances are different, but IHT changes to pensions have certainly triggered more conversations about gifting strategies and whether it makes sense to start drawing from pensions earlier.' An HM Treasury spokesman said: 'We continue to incentivise pensions savings for their intended purpose – of funding retirement instead of them being openly used as a vehicle to transfer wealth – and more than 90pc of estates each year will continue to pay no inheritance tax after these and other changes.'
