Following the Liberal Democratic Party's significant victory in the House of Representatives elections, Takaichi Sanae, the Prime Minister of Japan, is once again focusing on his economic policy known as ‘Sanaenomics,’ centered around responsible fiscal expansion. However, the proposed consumption tax cuts have sparked both optimism and concerns, with the debate becoming more complex post-election. The market reacted positively to the election results, with the Nikkei 225 index hitting record highs repeatedly, reflecting investor expectations regarding Takaichi's economic approach.

Since taking office in October last year, Takaichi has emphasized strong fiscal policies, committing to robust government spending in strategic areas such as military, security, energy, and essential materials, without hesitation in issuing government bonds. The LDP's election victory has created anticipation that Takaichi will continue this expansionary fiscal policy, following a significant issuance of bonds exceeding 11 trillion yen in the supplementary budget last year. This approach has led to rising expectations among market analysts about sustained fiscal growth under his leadership.

However, the issue of consumption tax cuts has become a topic of cautious discussion. Takaichi had previously expressed a desire to exempt food items from the consumption tax for two years, which was a prominent campaign promise across most parties. Nevertheless, he refrained from making this a focal point during the election campaign. Following the victory, Takaichi announced that he would explore the possibility of a temporary consumption tax rate of 0% on food items for two years, establishing conditions for limitations on deficit financing. This shift indicates a more prudent approach to fiscal policy amidst market concerns regarding sustainable economic management and governmental accountability.