Japan's cabinet approves bill cutting food consumption tax to 1% for two years
In short
Japan's government approved a bill at a cabinet meeting on October 9 that would cut the consumption tax on food from 8% to 1% for two years from April 2027. The bill also creates a new income-linked cash benefit for working people on low and middle incomes. The funding, put at about 10 trillion yen over two years by Tokyo Shimbun, was left unspecified, and opposition parties have criticised the bill.
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Japan's government approved a bill at a cabinet meeting on October 9 that would cut the consumption tax rate on food from 8% to 1% for two years from April 2027. Asahi Shimbun and Tokyo Shimbun reported that it would be the first cut to the consumption tax since it was introduced in 1989; Asahi Shimbun noted it was introduced at 3%. Tokyo Shimbun said the cut is meant to ease the burden on households struggling with high prices. [ 1 , 3 , 4 , 6 ]
The bill also creates a new income-linked cash benefit for working people on low and middle incomes, called 就業者負担軽減支援金 (worker burden reduction support payment). According to Asahi Shimbun, it would start in fiscal 2027 at a size equal to 1 percentage point of the tax rate, about 600 billion yen, and would be expanded from fiscal 2029, when the tax cut ends. Asahi Shimbun said the aim is to raise the take-home pay of low- and middle-income people who carry heavy tax and social insurance burdens, and to encourage work. [ 1 , 3 ]
Tokyo Shimbun reported that decisions on funding, about 10 trillion yen over two years, were put off. The bill only says the money will be secured "without relying on special deficit-financing bonds, through a review of spending and revenue overall", the paper said. The bill describes the cut as a "temporary" two-year measure and sets five special provisions, including on total-price display in shops, to avoid confusion for businesses. [ 3 ]
The ruling bloc is a minority in the upper house and needs opposition support, Asahi Shimbun reported, and opposition parties object that neither the funding nor the recipients of the benefit have been set out. Tokyo Shimbun said the ruling parties' 1% proposal did not win support in a cross-party national council on social security. NHK said the ruling parties want to pass the bill in the current Diet session with opposition cooperation, while Asahi Shimbun said passage is uncertain. [ 1 , 3 , 4 ]
Why it matters
According to Asahi Shimbun and Tokyo Shimbun, it would be the first cut to the consumption tax since it was introduced in 1989. The ruling bloc is a minority in the upper house and needs opposition votes, and Asahi Shimbun reported that passage is uncertain.
Key facts
- The cabinet approved the bill on October 9. [ 1 , 3 , 4 , 6 ]
- The consumption tax rate on food would fall from 8% to 1% for two years from April 2027. [ 1 , 3 , 4 ]
- It would be the first cut to the consumption tax since its introduction at 3% in 1989. [ 1 , 3 ]
- A new income-linked benefit for working people on low and middle incomes, the 就業者負担軽減支援金 (worker burden reduction support payment), would start in fiscal 2027. [ 1 , 3 ]
- The benefit would start at a size equal to 1 percentage point of the tax rate, about 600 billion yen, and be expanded from fiscal 2029, when the tax cut ends. [ 1 ]
- Tokyo Shimbun reported that the funding, about 10 trillion yen over two years, was left unspecified. [ 3 ]
- The ruling bloc is a minority in the upper house and needs opposition support to pass the bill. [ 1 ]
Confirmed by several sources
- The cabinet approved the bill on October 9. [ 1 , 3 , 4 , 6 ]
- The food consumption tax rate would be cut to 1% for two years from April 2027. [ 1 , 3 , 4 , 6 ]
- It would be the first consumption tax cut since the tax was introduced in 1989. [ 1 , 3 ]
- The bill creates a new income-linked benefit for working people on low and middle incomes. [ 1 , 3 ]
- Opposition parties object that the funding and the benefit's recipients have not been set out. [ 1 , 3 ]
Still unclear
- How the tax cut will be funded. Tokyo Shimbun reported that the bill only says funding will come from a review of spending and revenue without deficit-financing bonds; Asahi Shimbun said no funding source was given.
- Who will receive the new benefit. Asahi Shimbun and Tokyo Shimbun said the recipients have not been clearly defined.
- Whether the bill will pass the Diet. NHK said the ruling parties want it passed in the current session with opposition cooperation, but Asahi Shimbun said passage is uncertain.