Japan Cuts Food Consumption Tax to 1% From April 2027, Funding Still Unsettled
- The cabinet approved a basic policy on 5 August cutting the food consumption tax from 8% to 1% for two years from April 2027.
- Restaurant dining stays at 10%, with legislation due in the autumn Diet session.
- Cash payments worth about 600 billion yen a year go to lower and middle income households.
- Finance Minister Katayama discussed funding and internal ministry views in an NHK interview.
- Katayama put the funding decision at around the second week of December 2026.
Japan will cut the consumption tax on food for the first time since the levy was introduced in 1989. The cabinet approved the basic policy on 5 August: from April 2027, for two years, the rate on food and drink falls from the current 8% to 1%. NHK's 7 August interview with Finance Minister Katayama focused on the two open questions, funding and internal resistance at the ministry.
The design matters. The cut applies to the reduced 8% food rate, not the standard 10%; restaurant dining stays at 10%. The floor is 1% rather than zero because registers can be reprogrammed in time for April 2027, while a zero rate would require rebuilding exemption logic. Cash payments worth roughly 600 billion yen a year go to lower and middle income households. Legislation goes to the autumn Diet session, with the funding decision expected around the second week of December.
For a household spending 80,000 yen a month on food before tax, the bill falls from 6,400 yen to 800 yen, saving about 67,000 yen a year. That lands against real household spending down 3.3% year on year in June and a food self-sufficiency ratio at a record low 37%.
Overseas readers should note the limited effect on tourists, who already buy food under duty-free rules. The people affected are residents and operators. Lodging businesses serving meals must reprice from April 2027, since ingredients carry 1% while prepared dining still carries 10%.
