Japan approves cutting food tax to 1%, starting April 2027
MacroRegulation
The Japanese government has approved tax reform measures for fiscal 2027, paving the way to cut the consumption tax on food and non-alcoholic beverages from 8% to 1% for two years, starting in April 2027, to ease the burden of rising prices. The tax cut is expected to cost the government about 10 trillion yen, or 65 billion US dollars, in lost revenue. The government will not issue bonds to offset the lost revenue, and details on funding sources are to be finalized by the end of this year. Kyodo News reported that this is Japan's first consumption tax cut since the tax system was introduced in 1989. Retailers will begin full-scale preparations, including upgrading cash register systems to handle the new rate. The government of Prime Minister Sanae Takaichi plans to submit the relevant bill to parliament during an extraordinary session expected to convene in October. The measures also include income-based assistance payments for low- and middle-income earners, with the government paying out a total of about 600 billion yen per year in fiscal 2027 and 2028, equivalent to the revenue from the remaining 1% of the consumption tax that is not being cut, and it will increase the amount of assistance from fiscal 2029 onward. However, details on eligibility and payment amounts have not yet been finalized.
