Sanae Takaichi Proposes 1% Food Tax for Two Years

Prime Minister Sanae Takaichi announced a plan to temporarily reduce the consumption tax on food and beverages from 8% to 1% for two years starting in April 2027. This marks the first consumption tax cut since the tax was introduced in 1989. The measure aims to alleviate cost-of-living pressures driven by a weak yen and Middle East conflicts, with the rate scheduled to return to 8% in 2029 as targeted subsidies for lower-income workers begin.

The initiative carries an estimated cost of 10 trillion yen in lost revenue. To maintain market confidence and avoid further spiking government bond yields, Takaichi pledged to secure funding through the reassessment of other tax reliefs and subsidy programs rather than relying on special government bonds.

Despite support from former prime minister Taro Aso, the proposal faces significant opposition within the Liberal Democratic Party. Fiscal hawks and LDP executives have questioned the plan's efficiency and the feasibility of restoring the tax rate after two years. Some officials have advocated for direct benefits instead of a broad tax cut. Takaichi intends to secure a cabinet decision in early August and submit legislation to the Diet during the autumn parliament session.