Japan Cabinet Approves Reducing Food Consumption Tax to 1% for Two Years Starting April 2027
Macro
Japan's cabinet has approved a plan to lower the consumption tax rate on food and beverage items to 1% from 8% for a two-year period, beginning in April 2027. This marks the first reduction since the tax was introduced in 1989. The government of Prime Minister Sanae Takaichi will submit a bill to ease the impact of inflation, which includes cash handouts for low- to middle-income earners to effectively bring their real tax burden to zero. The tax cut is expected to cost the government around 10 trillion yen in lost revenue, a key funding source for the social security system. Takaichi has not yet specified how to make up for the shortfall but has pledged to do so through budget reforms without relying on deficit-covering bonds.
