Itsunori Onodera (LDP) proposed a plan to reduce the consumption tax on food from 8% to 1% to combat rising prices [1].
This move represents a significant shift in fiscal policy aimed at easing the financial burden on low- and middle-income citizens. By effectively eliminating the tax on essential goods, the ruling party seeks to stabilize the cost of living and strengthen its political support base [2].
According to the proposal presented on June 17 during a National Conference on Social Security, the tax rate would drop by seven percentage points [1]. To achieve a "real zero" tax rate, the government would provide cash handouts to low- and middle-income earners to cover the remaining 1% [1], [3]. The total amount for these benefits is estimated at 600 billion yen [1].
Onodera said the plan would be implemented for two years starting in April 2027 [1]. He said, "This time, the consumption tax rate on food and beverages is effectively zero. We will lower it by 7%, and as for the remaining 1%, we will provide benefits in advance to middle- and low-income earners" [1].
Opposition leaders criticized the proposal for lacking depth and preparation. Motohisa Furukawa (Democratic Party for the People) said that there has been almost no discussion on the matter and that no prior talks regarding the 1% benefit payout had occurred [1].
Takayuki Ochiai (Center Reform Union) also condemned the approach, describing it as a fragmented solution. Ochiai said, "A plan that looks like it was grafted together has now emerged, and it should not be an irresponsible plan overall" [1].
While some reports suggest the benefits would be delivered as a combination of cash and tax credits [4], the primary proposal emphasizes direct payouts to ensure the most vulnerable populations receive immediate relief [1].
“The consumption tax rate on food and beverages is effectively zero.”
The proposal highlights a growing tension between the Liberal Democratic Party's need to address inflation-driven public discontent and the opposition's demand for systemic fiscal reform. By utilizing a hybrid of tax cuts and targeted cash transfers, the government is attempting a surgical intervention to support lower-income brackets without fully dismantling the consumption tax structure. However, the lack of consensus on the delivery mechanism—whether via direct cash or tax credits—suggests the plan may face significant legislative hurdles before its proposed 2027 launch.
