The Japanese government is weighing a plan to lower the consumption tax on food products from the current 8% to 1%, slated to start in April 2027. This move comes as a faster alternative to a previously suggested zero-tax rate. The Liberal Democratic Party, Japan’s ruling party, had initially advocated for a complete elimination of the tax on groceries. Meanwhile, Prime Minister Sanae Takaichi had shown support for implementing such a measure during the fiscal year 2026.
However, the plan to reduce the tax to zero has encountered technical obstacles. According to government officials, system developers have indicated that modifying cash register and payment systems to accommodate a zero-percent tax rate would require roughly a year. On the other hand, reducing the rate to 1% could be accomplished in about six months, prompting the government to consider this option as a feasible way to quickly alleviate the financial burden on consumers.
The proposal to lower the tax to 1% is gaining traction within government circles as a more immediate form of cost-of-living relief. In addition to implementing this reduced tax rate, officials are exploring ways to return the revenue derived from it back to the public through subsidies and other financial support mechanisms.
The restaurant industry, which would continue to be subject to the standard 10% consumption tax rate, is also under consideration for additional support measures. This sector remains an area of concern as policymakers deliberate on how to balance the tax burden across different segments of the economy.
A final decision on the matter is anticipated later this month, with the government poised to submit relevant legislation to parliament during an extraordinary session expected to take place in the autumn.