Japan cuts consumption tax.

The Japanese government and its ruling coalition have begun discussions on a plan to reduce the consumption tax on food and beverages for two years, tentatively scheduled to take effect in April 2027. The preferred option is to lower the tax to 1%, instead of 0%, in order to shorten the nationwide upgrade of the point-of-sale system from approximately one year to six months. The government wants to implement the policy before the local elections in April 2027. If approved, the new tax rate would help ease the financial burden on citizens amid rising prices and would be one of the notable economic commitments of Prime Minister Sanae Takaichi's administration.

Ahead of the February 2026 House of Representatives election, Prime Minister Sanae Takaichi made it clear that a 0% consumption tax on food and beverages was a “long-cherished goal,” and any rate other than 0% could be seen as a breach of his campaign promise. However, if the government insists on pursuing 0% and the start of tax cuts is significantly delayed, voter discontent could actually intensify.

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A government source argued, "If it can be done quickly, wouldn't 1% be acceptable?" Within the government and ruling parties, another idea emerged: to return to the people, in the form of subsidies or other support, the equivalent of approximately 600 billion Yen per year, or about $3.76 billion USD, corresponding to 1% of tax revenue, and to present this tax as "effectively zero."

Regarding the reform of the point-of-sale system, the Ministry of Economy, Trade and Industry is finalizing its assessment of whether a tax rate other than 0% could help shorten the nationwide reform timeframe, including in small supermarkets in rural areas.

The ministry plans to report its findings to the National Social Security Council as early as this week. The Council is expected to publish a mid-term report in June, and the Prime Minister will make a decision based on that report. If it can be confirmed that starting the tax cuts in April 2027 is feasible without causing chaos, the 1% option is predicted to be implemented.