Decision on consumption tax cut left to PM after cross-party talks fail

Prime Minister Sanae Takaichi (2nd from L) speaks at a meeting of a cross-party national council on taxation and social security held in her office in Tokyo on July 29, 2026. (Kyodo) ==Kyodo Image: Kyodo politics Decision on consumption tax cut left to PM after cross-party talks fail Today 07:09 am JST Today | 07:14 am JST 0 Comments TOKYO Japan's ruling and opposition parties on Wednesday wrapped up months of discussions on a proposed consumption tax cut on food and beverages without a consensus, leaving the decision on the step aimed at mitigating the impact of inflation on consumer spending to Prime Minister Sanae Takaichi. Takaichi is expected on Thursday to instruct her Liberal Democratic Party to move ahead with the plan to slash the tax rate to 1 percent from the current 8 percent for two years from April 2027.

The ruling camp has been pushing for it and will now work toward Cabinet approval early next month. A summary report on their discussions was presented at a meeting of a cross-party national council on taxation and social security on Wednesday, with the report also referring to opposition parties' proposals such as providing cash handouts, which would take less time to implement than a tax cut, and a permanent tax reduction amid prolonged inflation. "As the government and as a ruling party, we will immediately consider our policy," Takaichi told the meeting.

Takaichi, seen as a fiscal dove who is facing a decline in approval ratings for her Cabinet in recent media polls, has vowed to quickly submit related bills to parliament once the council presents its view. She hopes that the public will "feel the benefits of reduced tax burden as soon as possible." The move comes after the LDP and its junior coalition ally, the Japan Innovation Party, promised to cut the consumption tax rate on food products to zero for two years in their campaign for the House of Representatives election in February.

The idea of a 1 percent tax rate emerged later in the government because it would only take around six months to adjust the cash register systems of many retailers -- several months faster than would be possible with a zero percent rate. To fulfill its campaign pledge of a zero tax rate, the ruling bloc also proposed cash handouts to low- to middle-income households totaling an annual 600 billion yen ($3.7 billion), an amount equivalent to the expected revenue from a 1 percent food tax.

Since March, the council has held more than 20 working-level rounds of discussions. Some opposition forces were not invited to participate in the talks. The ruling coalition refers to the two-year tax cut plan as a "transitional measure" until the new income-linked relief program for lower-income workers is introduced in fiscal 2029.

The council has already approved the program's implementation. © KYODO ©2026 GPlusMedia Inc. How to Buy a Home in Japan Learn how to buy a home in Japan, including the purchase process, financing options and latest market trends.

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