Japan Tax Reform: Consumption Tax on Food and Beverages to Drop to 1% | WPN World People News

At an extraordinary cabinet meeting on September 15, the Japanese government approved a two-year tax relief package scheduled to take effect in April 2027. Designed to cushion the blow of persistent inflation, the core of the tax reform outline lowers the consumption tax rate on food and beverages from 8% to 1%.

The measure is valued at approximately ¥5 trillion. The government stated it will not issue new bonds to fund the reduction, leaving specific funding mechanisms to be finalized by the end of the year. This marks Japan's first consumption tax cut since the tax was introduced in 1989. With the framework now finalized, preparations—including updating retail point-of-sale (POS) systems—are set to begin in earnest.

Approval of the plan brings Sanae Takaichi one step closer to fulfilling a campaign pledge made ahead of the national election in February. Alongside the tax cut, the government plans to introduce an income-linked subsidy program in fiscal 2027 to assist low- and middle-income workers. This initiative will operate with an annual budget of roughly ¥600 billion through fiscal 2027 and 2028, with plans to expand the program starting in fiscal 2029.