Japan to implement two-year consumption tax cut on food items

The Japanese government has decided on a policy to reduce the consumption tax rate on food and beverages from 8% to 1% for a two-year period starting in April 2027. This decision, approved during an extraordinary cabinet meeting on August 5, represents the first consumption tax reduction since the tax was introduced in 1989.

While the move is expected to benefit households by lowering the cost of groceries, it has sparked significant concern within the dining industry. Because the tax reduction does not apply to restaurant dining—which will remain at 10%—industry experts warn of a "9% wall." This disparity may drive consumers toward purchasing groceries for home cooking or takeout rather than dining out. Business owners have expressed anxiety that without government support, the shift could threaten the survival of some establishments.

Political commentary suggests that the proposed legislation, expected to be submitted during the autumn extraordinary Diet session, could influence political maneuvers. Some analysts suggest that if the proposal faces opposition in the House of Councillors, it could potentially lead to the dissolution of the House of Representatives.