Japan proposes 1% food consumption tax from April 2027

The Japanese government is set to present a proposal to reduce the consumption tax on food to 1% for a two‑year period beginning in April 2027. The plan, outlined by Liberal Democratic Party tax chief Shun'ichi Ono, is positioned as a compromise to the ruling party’s original pledge of a zero‑rate tax, emphasizing a faster implementation timeline—about six months quicker than a zero‑rate change would require.

The proposal includes a mechanism to offset the roughly ¥6 trillion in lost revenue by providing targeted cash benefits to low‑ and middle‑income workers, effectively aiming for a “real‑zero” impact on household food costs. Opposition parties have criticized the approach, questioning the speed of the rollout, potential confusion with upcoming local elections, and the adequacy of the compensatory payments. The government expects to begin preparatory work by October 2026, with a draft bill to be submitted during the upcoming autumn special session of the Diet.

Debate is expected to continue in the next round of the cross‑party “national conference,” with the opposition likely to push for a more thorough discussion of the fiscal source and the design of the benefit scheme.