Japan Slashes Food Tax to Combat Inflation

The Japanese government has approved a plan to reduce the consumption tax on food items from 8% to 1% for two years, starting in April 2027. This move is aimed at easing the impact of rising living costs on households caused by persistent inflation. The government estimates that this revenue shortfall will be around 10 trillion yen ($63 billion), which is crucial for funding social security programs, particularly with Japan's aging population and increasing healthcare costs.

The tax cut was adopted after inter-party discussions concluded that implementing a zero tax would take longer due to the need to adjust accounting and sales recording systems at retailers. Prime Minister Sanae Takaichi confirmed that this measure will be temporary and transitional until a new income-linked support program for low-income workers is launched in 2029.