TOKYO — Japanese Prime Minister Sanae Takaichi has announced her intention to proceed with a sharp, temporary cut to the sales tax on food items. The current 8% consumption tax on food will be reduced to 1% for two years starting from April 2027, according to a senior ruling party official.

The ruling Liberal Democratic Party (LDP) will begin discussions within its tax panel to reach a consensus on the plan. The government is expected to finalize the tax cut in a Cabinet meeting in early August 2026 and submit the necessary legislation during the autumn parliamentary session.

LDP Secretary-General Shunichi Suzuki expressed strong political determination to restore the tax rate to its original level after the two-year period. He also stated that an overshoot in overall tax revenues is expected to fund the temporary cut without the need for additional debt issuance.

Japan currently levies an 8% consumption tax on food and a 10% rate on other goods and services, which are critical for funding rising social welfare costs amid the country's rapidly aging population. If enacted, this would mark the first reduction in Japan's sales tax rate since its introduction in 1989.

Prime Minister Takaichi has pledged this suspension of the 8% levy on food as a temporary measure before introducing a new payout system aimed at supporting low and middle-income households, as part of efforts to mitigate the impact of rising living costs.

However, the proposal has faced pushback from both ruling and opposition lawmakers concerned about the strain it may place on Japan's worsening fiscal situation, especially since the administration has yet to clarify how it will address the resulting revenue shortfall.

Sources