Japan’s cabinet has approved a plan to cut the consumption tax on food from 8% to 1% for two years from April 2027, with household payouts also proposed to offset the remaining tax burden.
Japan’s cabinet approved an outline on 15 September 2026 to reduce the consumption tax on food from 8% to 1% for two years from April 2027, alongside household payouts equivalent to the remaining 1%. The proposed measures are intended to ease the impact of rising living costs.
The tax cut would create a revenue shortfall of roughly JPY 5 trillion. The government has not yet provided specific funding details, although Finance Minister Satsuki Katayama said the measure would be financed through spending and revenue reviews rather than deficit-financing bonds.
The proposal came as Japan’s public finances faced renewed market scrutiny, with the benchmark 10-year Japanese government bonds (JGB) yield reaching 3.025% on Tuesday, its highest level in 30 years. Prime Minister Sanae Takaichi’s plan to limit fiscal 2027 new government bond issuance to around JPY 40 trillion was also facing scrutiny amid rising expenditure.
The outline will provide the basis for legislation to reduce the consumption tax, which is expected to be submitted to parliament when it convenes next month. If enacted, the measure would represent Japan’s first consumption tax rate cut since the tax was introduced in 1989.
