October 2, 2026

The government led by Prime Minister Takaichi Sanae on September 15 at its Cabinet meeting decided to lower the consumption tax rate on food and beverages to 1% from the current 8% for two years. It is intending to pass legislation for this decision in an extraordinary Diet session scheduled to be convened on October 5.

If the legislation is enacted, the tax cut will be implemented in April 2027. On the other hand, the tax rate on dine-in meals and alcoholic beverages will remain at the current 10%.

The Takaichi government’s limited tax cut policy is insufficient as a measure to deal with the ongoing inflation and associated severe price hikes.

The Internal Affairs Ministry’s survey on the household economy which was conducted in July found that food and beverages (excluding dining out and alcoholic beverages) accounted for a little under 15% of household consumption expenditure. The Consumer Price Index which the ministry released the same month showed that prices for more than 70% of items went up from a year earlier.

The two-year tax cut will result in a revenue shortfall of ten trillion yen. However, the Takaichi government fails to explain how to secure an alternative revenue source, which is highly likely to accelerate the yen’s depreciation due to concerns over Japan’s fiscal health and will lead to further inflation. Moreover, after the two-year tax reduction period ends, as claimed by PM Takaichi, the tax rate would be restored to the original level, a de facto tax hike.

The general public is taking a critical view of the Takaichi government’s tax cut policy. A public opinion survey conducted by Jiji Press in September showed that 56.9% of the respondents opposed the two-year, limited consumption tax reduction. In a Kyodo News opinion poll, 63.1% said that this policy has little effect in combating rising prices.

The Japanese Communist Party is calling for a uniform cut in the consumption tax rate to 5% and proposing that funding for this measure be secured through imposing a fair share of tax burdens on large corporations and the ultrarich.