Bill to lower consumption tax on food clears Lower House

The Lower House passed a bill Friday to cut the consumption tax on food from 8% to 1% for two years, advancing a key measure in Prime Minister Sanae Takaichi’s push to ease the cost of living.

The cut would take effect in April next year and apply to food and nonalcoholic drinks already subject to the reduced rate. Income-linked cash payments for low- and middle-income workers would also begin in fiscal 2027 to offset the 1%.

The government plans to roll out a longer-term payment program in fiscal 2029, when the food tax rate is due to return to the original rate.

At a financial affairs hearing on Friday morning, opposition lawmakers pressed the prime minister to clarify who would qualify for the income-linked payment and how the measures would be funded. The government says it will finance the measures without relying on deficit-financing bonds.

Takaichi said the government aimed to make at least 30% of workers eligible for the payments, while leaving the income thresholds and key details of how the payments would be calculated to be set by Cabinet order.

“We will listen to a wide range of views and spell out the details as we draw up the budget toward year-end,” she told the committee.

Lawmakers also questioned how the return to the 8% rate would affect people who would lose the tax break without qualifying for the payments.

Takaichi responded by saying workers eligible for payments after the tax cut expires would receive more than they would save under the lower rate. For workers earning above the income ceiling, she said the increase in their net burden as a share of income would be relatively small.

“We will look closely at how to make sure no one is left out of both the payment program and the existing social security system,” she said.

Although most opposition parties campaigned on cutting or abolishing the consumption tax in February’s Lower House election, some have pushed back against the current plan over how the tax reduction would be financed and who would qualify for the accompanying cash payments.

An October Sankei-FNN poll found that 62.6% backed the food tax cut, while 52.2% expected it to do little or nothing to ease the impact of rising prices.

All opposition parties, including the Democratic Party for the People and Komeito, voted against the bill.

The ruling coalition has a majority in the more powerful Lower House but falls short of a majority in the upper chamber. If the bill is rejected in the Upper House, the Lower House can override it with the support of at least two-thirds of members present.