Prime Minister Sanae Takaichi¡¯s proposed plan to cut tax on food purchases risks lowering Japan¡¯s revenues and undermining the nation¡¯s finances in the long term, according to S&P Global Ratings in a sign of its rising concerns.

¡°The risk of tax cuts, such as on some sales tax items, is that this is not a one-off hit, and it would lower government revenues on a sustained basis,¡± Rain Yin, director of sovereign ratings based in Singapore, said in a statement Wednesday.

¡°With a structural increase in expenditure components, this would further worsen the government¡¯s fiscal situation if economic and revenue growth were to weaken,¡± Yin said.

While S&P refrained from commenting on the potential for any changes to its ratings, the remarks point to its heightened concerns over a nation that has the largest public debt burden among developed nations.

The remarks come a day after Japan¡¯s superlong bond yields saw a historic rise in response to Takaichi¡¯s announcement that she would lower the sales tax on food for two years if her Liberal Democratic Party emerges triumphant in a snap election on Feb. 8.

Given the historical difficulty governments have faced in raising consumption taxes, analysts are doubtful that such a move would prove temporary.

Fitch Ratings indicated that the reduction of the levy would be within the realm of their projections, as they had already built in expectations that more expansionary fiscal policies would be forthcoming around the election in their latest affirmation of Japan¡¯s ratings earlier this week.

¡°We will continue to assess the impact of new fiscal announcements, including the latest proposal to suspend the consumption tax for food products, but we believe these announcements are sufficiently captured in our current fiscal forecasts,¡± said Jeremy Zook, director of APAC sovereign ratings of the Fitch.

Japan¡¯s bond market sell-off affected global financial markets. U.S. Treasury Scott Bessent said he touched base with Finance Minister Satsuki Katayama. In an interview in Davos on Tuesday, Katayama called for market calm and cited Japan¡¯s improved fiscal situation as a reason why investors shouldn¡¯t worry.

Following Katayama¡¯s comments, Japan¡¯s 30-year and 40-year bond yields fell sharply Wednesday after hitting the highest level since they were first issued, in 1999 and 2007 respectively, the previous day.