Tokyo, Oct. 9 (Jiji Press)–The Japanese government at a cabinet meeting Friday adopted legislation to cut the consumption tax rate for food and introduce a benefit program linked to income levels. As a temporary measure to tackle soaring prices, the government of Prime Minister Sanae Takaichi, who heads the ruling Liberal Democratic Party, plans to cut the 8 pct consumption tax rate for food items to 1 pct for two years from fiscal 2027, which starts next April. It aims to submit the legislation to the ongoing extraordinary session of the Diet, the country’s parliament, aiming to secure its enactment by the Dec. 12 end of the session. The consumption tax reduction would be the first since it was introduced in 1989. A total of some 10 trillion yen will be needed for the tax cut and the benefit program over the two years. The legislation stipulates that the government does not plan to issue deficit-financing bonds to cover the costs. Full-fledged discussions on how to finance the tax cut and the benefit program will likely be held alongside the work late this year to compile the government’s fiscal 2027 budget. Eligible for the benefit program will be low- and middle-income workers, with the aid money to be paid once a year in principle. Under the aid program, benefits equivalent to revenue from 1 pct consumption tax on food will be introduced in fiscal 2027, effectively lowering the food tax rate to zero in line with the Takaichi administration’s election promise. The government plans to fully launch the benefit program in fiscal 2029. The government pushed back a decision on details of the program, with the legislation spelling out that specific income levels and the amounts of benefits would be determined by relevant ordinances. The ruling camp of the LDP and the Japan Innovation Party lacks a majority in the Senate, the upper chamber of the Diet, compared with its overwhelming control of the House of Representatives, the lower chamber. A major focus will be whether the government and the coalition can obtain support from the opposition camp, which is critical of the ruling side’s failure to present concrete funding sources for the consumption tax cut and the benefit program. END [Copyright The Jiji Press, Ltd.]
