Japan cuts food consumption tax to 1% for two years

August 06, 2026 (MLN): Japan's government has cleared a plan to cut the consumption tax on food items from 8% to just 1% for a two-year period starting April 2027, which marks the first reduction in the sales tax since it was introduced in 1989.

Prime Minister Sanae Takaichi's administration is moving to bring new legislation before an extraordinary parliamentary session expected in the fall, under which low- and middle-income households would also receive direct financial support to ease their overall tax burden, APP reported.

The relief measure is designed to cushion households from the impact of persistent inflation and rising living costs, which have squeezed consumer spending across the country.

According to government estimates, the two-year tax reduction will result in a revenue shortfall of nearly 10tr yen (around $63bn)  funds that would otherwise support social security spending at a time when Japan's ageing population continues to push up healthcare costs.

A full exemption on food tax was considered but ultimately ruled out, with inter-party discussions concluding that a zero-rate policy would require lengthy adjustments to retailers' accounting and sales-recording systems, making the 1% rate a more workable interim option.

Prime Minister Takaichi described the tax cut as a temporary and transitional step, to remain in place until a new income-linked support programme for low-income workers is rolled out in 2029, after which the consumption tax would revert to its earlier level.

The government has also committed to introducing safeguards for small farmers and the restaurant sector to shield them from any adverse effects of the reduced tax rate.

The move comes after nearly four decades of successive hikes in Japan's consumption tax  introduced at 3% in 1989, raised to 5% in 1997, 8% in 2014, and finally to 10% in 2019, with a reduced rate maintained throughout for food and beverages.

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