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Prime Minister Sanae Takaichi announced a major tax break on food, committing to cut the consumption tax from 8% to 1% for a two‑year period starting in April 2027 and to fund the move without issuing new government bonds. The Diet has now approved the bill, though the financing details for the roughly 10 trillion‑yen cost remain unsettled.
Key developments: the tax cut targets everyday grocery items, promising a direct boost to household budgets; the government emphasizes bond‑free financing to avoid adding to the fiscal deficit; the legislation passed despite questions about funding.
Why it matters: cutting the food tax is expected to raise disposable income for consumers amid rising living costs, bolstering domestic demand and helping the government’s goal of protecting household livelihoods. It also signals the Takaichi administration’s willingness to use targeted fiscal relief while maintaining overall fiscal discipline.
What to watch next: how the Treasury will source the 10 trillion‑yen needed without new bonds; reactions from opposition parties and business groups; early economic data on consumer spending once the lower rate takes effect; and whether the policy will be extended beyond the two‑year window. [[1, 2]]