Japan Cuts Food Tax to 1% Amid Inflation Concerns

Japan's Cabinet has approved a plan to lower the consumption tax rate on food and beverages from 8% to 1% for two years, starting next April. This move is aimed at providing relief to households affected by persistent inflation. The tax cut will result in around 10 trillion yen (S$81.27 billion) in lost revenue, a vital funding source for social security.

The plan was announced by Prime Minister Sanae Takaichi's government, which aims to enact related legislation during an extraordinary parliamentary session likely to begin in the fall. The tax reduction is estimated to provide about 600 billion yen (S$48.92 billion) a year to low- and middle-income households.

The decision has sparked concerns about Japan's fiscal health amid already high government bond yields and a weak yen. Some opposition forces and even members of the ruling Liberal Democratic Party have expressed their opposition, arguing that a de facto tax rate hike eventually awaits the public since the cut is a temporary measure.