Japan's cabinet approves bill for 1st food consumption tax cut

Japan's cabinet on Friday approved a bill to temporarily cut the consumption tax on food and beverages and introduce an income-based benefit program, marking a major step toward securing its passage during the current Diet session.

Under the bill, the consumption tax rate on food and beverages would be reduced from 8% to 1% for two years starting in fiscal 2027, which begins next April. The bill also provides for annual cash benefits for low- and middle-income earners.

The government aims to submit the bill to the ongoing extraordinary session of the Diet, Japan's parliament, and secure its enactment by the end of the session on December 12.

The tax cut and cash benefit program are expected to require a total of about 10 trillion yen (about $63 billion) over the two years, raising concerns about Japan's fiscal health, which is already among the weakest of advanced economies.

Opposition lawmakers have questioned how the necessary funds would be secured and criticized the eligibility criteria for the benefits as vague.

The proposed reduction would mark the first cut in Japan's consumption tax rate since the tax was introduced in 1989. The standard rate has been 10 percent since October 2019, while food and beverages are subject to a reduced rate of 8%, excluding alcoholic beverages and dining out.