By Leika Kihara
TOKYO, Jan 20 (Reuters) - Japanese Prime Minister Sanae Takaichi's decision to call a snap general election on February 8 to seek voter backing for her reflationist policies pushed bond
yields to multi-decade highs, driven by rising concern over the country's worsening finances.
Below are key economic policies proposed by each party, based on their election campaigns and comments from executives:
LIBERAL DEMOCRATIC PARTY (LDP)
Since succeeding her predecessor Shigeru Ishiba, Takaichi has been the dominant force behind the ruling LDP's pursuit of more aggressive spending plans and is seeking to water down a long-held fiscal austerity target.
While Takaichi nodded to the Bank of Japan's interest rate hike in December to slow unwelcome yen falls, an election win could embolden her reflationist advisers to warn against further increases in borrowing costs for fear of cooling economic growth.
Takaichi promised to end what she saw as "excessively" tight fiscal policy and vowed to suspend an 8% levy on food sales for two years. She ruled out issuing additional debt but was vague on how the government will fill the revenue shortfall, saying only that her party will decide on the issue after debate with other parties.
Analysts say Takaichi’s fiscal policies would fuel already rising inflation and do little to help an economy grappling with labor shortages and supply constraints, rather than weak demand.
JAPAN INNOVATION PARTY (ISHIN)
The right-wing party helped Takaichi secure enough votes in parliament to become elected as premier in October and formed a ruling coalition with the LDP.
Ishin has traditionally focused on deregulation and cuts to wasteful spending. But it is also calling for suspending by two years an 8% levy on food sales as part of a policy agreement with the LDP.
CENTRAL REFORM ALLIANCE (CRA)
Formed between the largest opposition Constitutional Democratic Party of Japan and another opposition party Komeito, CRA describes itself as a party seeking middle ground on issues including economic policy in a fragmented world.
It calls for permanently abolishing the 8% consumption tax levied on food sales. To fill the revenue shortfall, the party proposes creating a sovereign wealth fund that can generate profits by investing government reserves more efficiently.
The party also aims to correct "excessive" yen weakness that is accelerating inflation, and focuses on lowering prices for daily necessities such as food and fuel.
DEMOCRATIC PARTY FOR THE PEOPLE
The party is led by former finance ministry bureaucrat Yuichiro Tamaki, who has increased seats in elections pledging to give households more purchasing power including by expanding tax exemptions.
The party proposes issuing 5 trillion yen ($31.56 billion)in "education" bonds each year to double spending on child care, education and scientific research.
It also calls for lowering the consumption tax rate to 5% from 10% until the pace of wage gains exceeds the rate of inflation by 2%. To fund the measures, the party says Japan should use proceeds from investing government reserves and exchange-traded funds (ETFs) held by the central bank.
Tamaki said the decision on whether the tax rate needs to be lowered should be made after scrutinising this year's wage negotiations.
SANSEITO
A once fringe far-right party, Sanseito emerged as one of the biggest winners in an upper house election last July with its "Japan First" campaign meant to rebuild people's livelihood by resisting globalism.
The party calls for abandoning the consumption tax altogether and overhauling what it sees as "tight" fiscal policy by ramping up spending.
($1 = 158.4300 yen)
(Reporting by Leika KiharaEditing by Shri Navaratnam)
