Cabinet approves tax cut on food, but Diet tussle looms ahead | The Asahi Shimbun: Breaking News, Japan News and Analysis
Cabinet approves tax cut on food, but Diet tussle looms ahead
August 6, 2026 at 13:58 JST
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Prime Minister Sanae Takaichi speaks to reporters on Aug. 5 after the Cabinet approved the consumption tax cut. (Takeshi Iwashita)
2-line hed: Cabinet approves tax cut on food, but opponents worry about funding
Prime Minister Sanae Takaichi’s administration is pushing ahead with a first-ever cut in the consumption tax despite concerns over funding and objections from opposition parties
At an extraordinary meeting on Aug. 5, the Cabinet approved the plan to lower the tax rate on food items from 8 percent to 1 percent for two years from April
The government plans to submit the necessary legislation to an extraordinary Diet session this autumn
If enacted, it would mark the first reduction in the tax rate since the consumption tax was introduced in 1989. It will be in effect during fiscal 2027 and 2028
During the same period, the government also plans to provide income-linked benefits to low- and middle-income earners
The benefits will be equivalent to the remaining 1 percentage point portion of the tax revenue, or about 600 billion yen ($3.8 billion) annually, to make the tax burden “effectively zero.”
The combination of the tax cut and the benefits would require about 10 trillion yen in financial re
While Takaichi said she intends to avoid relying on deficit-covering government bonds, she has not yet specified how the funds will be secured
Speaking to reporters on Aug. 5, she only said, “We will review both expenditures and revenues while monitoring tax revenue trends and other factors.”
Financial market conditions, such as the weak yen and rising long-term interest rates, present challenges
“We will manage public finances by giving due consideration to ensuring fiscal sustainability and maintaining market trust,” said Takaichi, who is sensitive to market reactions
Diet deliberations on the tax cut plan are expected to be difficult
The ruling coalition of the Liberal Democratic Party and Nippon Ishin (Japan Innovation Party) falls four seats short of a majority in the Upper House
The proposed consumption tax cut was discussed at the national council on social security, but representatives from the ruling and opposition parties failed to reach a consensus
Most opposition parties objected. Many argued that cash handouts, given soon, would be a more effective measure in the face of rising prices
“It will not be smooth sailing,” a senior aide to the prime minister said of the legislation. “I am not looking forward to it.”
During the special Diet session that ended in July, the government secured support from the Democratic Party for the People and Team Mirai on a bill-by-bill basis to pass legislation
However, both opposition parties advocated cash handouts and opposed the consumption tax cut at the national council on social security
DPP leader Yuichiro Tamaki criticized the government’s tax cut proposal on Aug. 5, saying his party had conveyed numerous concerns
“It is extremely regrettable that the Cabinet is set to approve the policy without providing sufficient answers,” he said
Even the LDP appears far from united in support
The tax cut policy was unanimously approved at a meeting of the party’s General Council on Aug. 5
However, nine of the 25 council members were absent, including Yoichi Miyazawa, a former chairman of the party’s Research Commission on the Tax System, who is seen as opposed to the tax reduction
In addition, some LDP lawmakers have raised concerns over how the measure will be funded even though they are not openly opposed to it
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