Japan plans temporary cut in consumption tax on food to 1%

In autumn 2026, the government of Prime Minister Sanae Takaichi settled on a plan to cut Japan's consumption tax on food from 8% to 1% for two years, starting in April 2027. It was the first time the country had planned to lower the tax since its introduction in 1989. Cabinet later adopted legislation for the measure, which needs approval from the National Diet, Japan's parliament.

Earlier proposals had pointed to a 0% rate. The 1% rate was reportedly chosen partly to ease the burden on retailers, who would otherwise face heavier changes to cash registers and pricing systems. Low- and middle-income households were also to receive cash benefits linked to income, which would in effect bring their food tax to zero.

The plan mattered because of its cost. Estimates put the lost revenue at several trillion yen a year, and the government had not yet said how it would pay for it, which raised concern about public finances and bond markets. Takaichi said the rate would return to 8% after two years. The plan also set the stage for businesses, including restaurants, to rethink their prices ahead of the change.