Tokyo, August 05 (QNA) - Japan's government approved a plan to slash the consumption tax on food items to 1% from 8% for two years, starting April 2027. If adopted, the measure would be Japan's first time lowering the sales tax since it was introduced in 1989.

The tax cut is part of a government effort to ease the impact of rising living costs on households caused by persistent inflation. Prime Minister Sanae Takaichi's government is preparing to introduce new legislation during an extraordinary parliamentary session expected in the fall. This legislation includes providing financial support to low- and middle-income families to significantly reduce their tax burden.
The government estimates that the two-year tax reduction will create a revenue shortfall of roughly 10 trillion yen (about $63 billion). This revenue is crucial for funding social security programs, especially given the aging population and rising healthcare costs.
The 1% rate was adopted instead of a complete exemption after inter-party discussions concluded that implementing a zero tax would take longer due to the need to adjust accounting and sales recording systems at retailers.
Prime Minister Takeichi confirmed that the measure would be temporary and transitional until a new income-linked support program for low-income workers is launched in 2029, emphasizing the government's commitment to restoring the tax rate to its previous level after the reduction period ends.
The government also pledged to take measures to protect small farmers and the restaurant sector from any potential negative impacts of the tax cut.

This decision comes after decades of successive increases in Japan's consumption tax, which rose from 3% when it was introduced in 1989 to 5% in 1997, then to 8% in 2014, before reaching 10% in 2019, while maintaining a reduced rate for food and beverages. (QNA)