By Jason Chau
Shares of Japanese food-and-beverage companies rose amid growing hopes that a consumption tax cut is coming.
When Japanese Prime Minister Sanae Takaichi on Monday confirmed plans to dissolve the lower house of parliament to set the stage for snap elections, she said her party is mulling a plan to suspend the sales tax on food and beverages for two years.
That was music to investors' ears. Many already considered a tax cut as a strong possibility as measures to ease rising living costs typically enjoy broad political support since inflation pressures household budgets.
Shares of instant noodles producer Nissin Foods jumped as much as 3.4% Tuesday, while soy sauce retailer Kikkoman added 3.5%. Food seasoning producer Ajinomoto and dairy beverage maker Yakult Honsha added 2.6% and 1.7%, respectively.
Drinks companies got a boost too, with Kirin gaining 3.1% and Asahi rising 1.7%.
Bernstein analysts believe the tax holiday would benefit Nissin and Yakult the most, given their high earnings exposure to sales of domestic products that would likely qualify for the cuts.
Retailers of daily staples like Kikkoman and Ajinomoto are also likely to see a modest lift in demand.
Companies are expected to hold off on capitalizing on the tax breaks in the first year by hiking prices, though that could change in the second year, Bernstein added.
There are also some expectations that the cuts may become permanent.
"Even if the consumption tax cut is said to be temporary, the risk of it becoming permanent is high," Citi Research rates strategist Tomohisa Fujiki said in a note.
Write to Jason Chau at jason.chau@wsj.com
(END) Dow Jones Newswires
01-20-26 0216ET
