TOKYO - Japan's government is set to approve tax reform guidelines on September 15 that will reduce the consumption tax on food from the current 8% to 1% for two years starting in April 2027 as part of measures to ease the burden of rising prices.
The tax reform outline will formally specify the temporary reduction, which will remain in place through March 2029.
After the tax cut ends in April 2029, the government plans to introduce income-based payments for low- and middle-income households.
The food tax reduction is expected to create an annual revenue shortfall of around 5 trillion yen. The guidelines stress that the government will not rely on deficit-financing government bonds to cover the gap, but they do not specify how the lost revenue will be replaced.
Discussions over securing alternative funding have therefore been postponed until the end of the year.
Itsunori Onodera, chairman of the Liberal Democratic Party's tax system research commission, said the legislation is likely to face intense debate in the Diet. "I think discussions in the Diet will also be quite fierce, so I would like the government to prepare legislation and a parliamentary strategy that can withstand that scrutiny," he said.
The government plans to submit tax reform legislation to an extraordinary Diet session scheduled to convene in October and aims to secure passage by the end of 2026.
Source: TBS
