Prime Minister Sanae Takaichi said Wednesday that Japan will reduce the consumption tax on food and beverages from 8% [1] to 1% [2].
The measure aims to provide immediate relief to low- and middle-income households struggling with the cost of living. By lowering the tax burden on essential goods, the government seeks to stabilize domestic consumption, and mitigate economic pressure on the restaurant sector and farmers.
The decision followed an emergency cabinet meeting held in Tokyo on Aug. 5. According to the government, the reduced rate will take effect on April 1, 2027 [4], and will remain in place for two years [3]. The policy is scheduled to expire in fiscal year 2029, at which point the rate is planned to return to 8% [5].
To further support vulnerable populations, the administration will introduce complementary cash-benefit measures for low- and middle-income workers. These payments are designed to work alongside the tax cut to ensure the most affected citizens receive direct financial assistance.
This announcement follows weeks of deliberation. On July 15, Takaichi said the government and a social security national council involving both ruling and opposition parties would work to consolidate opinions by the end of the month.
"Regarding the consumption tax reduction on food, the government and the social security national council consisting of ruling and opposition parties will proceed with the consolidation of opinions through the end of this month," Takaichi said.
By July 28, the prime minister said the government intended to decide on a policy by early August. The final plan, as announced Wednesday, formalizes the shift to a 1% rate for the specified period.
“Japan will reduce the consumption tax on food and beverages from 8% to 1%.”
This policy represents a significant shift in Japan's fiscal approach to inflation and cost-of-living crises. By implementing a temporary, drastic reduction in consumption tax rather than relying solely on cash transfers, the Takaichi administration is attempting to lower the baseline price of essential goods. The two-year limit and the planned return to 8% in 2029 suggest this is a tactical intervention to prevent a long-term erosion of tax revenue while addressing immediate public hardship.
