Japan PM Takaichi Pushes Food Tax Cut to 1% from 8% in 2027

Japanese Prime Minister Sanae Takaichi is pushing ahead with a plan to reduce the consumption tax on food, proposing to cut the rate from 8% to 1% for two years starting in April 2027. If successful, the move would mark the first reduction since the consumption tax was introduced in 1989.

The government also unveiled a public and private investment plan totalling an estimated 370 trillion yen through fiscal 2040. The plan has drawn opposition from some members of the ruling Liberal Democratic Party, including former ministers Taro Kono and Takeshi Iwaya, while former Prime Minister Shigeru Ishiba walked out of a meeting. Objections stem from concerns over the fiscal position, though specific details were not disclosed in public statements.

Japan faces a heavy public debt burden, with the International Monetary Fund projecting government debt at roughly 204% of gross domestic product in 2026. The 10-year Japanese government bond yield was trading at about 2.85%, near multi-year highs.

The government has pledged not to issue deficit-financing bonds, but fiscal details remain unclear. Specific funding arrangements for the investment plan have yet to be announced, with the government saying it will review spending, tax breaks, subsidies and public funds, without providing a detailed blueprint.