Japan plans to cut food consumption tax to 1% — The Japan Times
Japan’s Cabinet is expected to approve on September 15 a plan to reduce the consumption tax on food products from 8% to 1% for two years. The reduced rate is planned to be introduced from April 2027, The Japan Times reports.
Reduced rate for two years
The government-approved plan is to form the basis for bills that are planned to be submitted during the autumn parliamentary session. Authorities intend to offset the losses from the tax cut by reviewing government spending and revenue, without resorting to the issuance of bonds to finance the deficit.
Annual tax revenue losses from this move are expected to reach ¥5 trillion, or $32.3 billion. At the same time, specific details of how the government will offset these losses remain unclear.
From April 2029, the Japanese government aims to introduce new payments for low- and middle-income households. Prime Minister Sanae Takaichi has said that once these payments are launched, the food tax rate will return to 8%.
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Parliamentary vote
Passing laws related to the tax cut in both chambers of parliament this autumn may be difficult. Takaichi’s Liberal Democratic Party and its coalition partner, the Japan Innovation Party, control the lower house, where the Liberal Democratic Party itself holds a two-thirds majority.
At the same time, the coalition is four seats short of a majority in the opposition-controlled upper house. Opposition parties oppose the initiative. The autumn parliamentary session is expected to begin in the first half of October, and the government aims to pass the bills by the end of the year.
Some Liberal Democratic Party representatives have also raised concerns about the potential impact of the decision on local budgets, for which consumption tax revenue helps fund social programs. If the upper house rejects the bills or does not vote on them within 60 days after receiving them from the lower house, Takaichi may invoke Article 59 of the Constitution. In that case, the bills may return to the lower house, where renewed approval by a two-thirds majority would make them law.
