Japan to slash food and drink consumption tax to 1% for two years starting April 2027

Japan’s cabinet gave the green light to a two-year reduction of the consumption tax on food and beverages, dropping the rate from the current 8% to 1% starting in April 2027. Prime Minister Sanae Takaichi’s government will accompany the cut with annual cash handouts of roughly 600 billion yen to low- and middle-income families, aiming to achieve an effectively zero tax burden. The tax cut is projected to forfeit about 10 trillion yen in revenue, a key source for the nation’s social-security financing, prompting criticism from opposition parties and some senior Liberal Democratic Party lawmakers such as Taro Kono and Gen Nakatani.

Takaichi said the reduction is a transitional step until a new income-linked relief scheme launches in 2029, and she pledged to restore the original rate after the two-year period. The administration also promised support measures for small farmers and restaurant operators who might be hurt by the change. The decision follows internal debates within the ruling coalition and a cross-party tax council that concluded a zero-rate would require costly retailer system upgrades.