By The Straits Times | Created at 2026-08-03 15:26:29 | Updated at 2026-08-04 04:04:36
12 hours ago
TOKYO - Japan’s ruling Liberal Democratic Party (LDP) on Aug 3 decided to leave the decision on a proposal to cut the consumption tax on food to its tax policy chief after the idea faced opposition from fiscal hawks.
At the party’s tax and social security research commissions, most members supported the plan as Japan’s Prime Minister Sanae Takaichi, who also heads the LDP, seeks to cut the consumption tax on food to 1 per cent from 8 per cent for two years starting in April 2027 to ease the impact of inflation.
“There was considerable support for the consumption tax cut we campaigned on as a way to help the public cope with rising prices,” Itsunori Onodera, the LDP tax policy chief, said after the meeting of lawmakers from the commissions.
The LDP pledged to accelerate discussions on eliminating the consumption tax on food as a key campaign promise for the House of Representatives election in February.
The Cabinet is expected to approve the tax measure possibly on Aug 5 once the party completes procedures for the proposal, according to a senior government official.
The first cut since the consumption tax was introduced in 1989 would be accompanied by cash handouts to low- and middle-income earners before the planned introduction of a new income-linked relief programme for lower-income workers in fiscal 2029.
Pushback against the proposals has come from fiscally conservative LDP lawmakers concerned they would create a funding shortfall for social security, estimated at 10 trillion yen (S$81.9 billion) over two years, at a time of rising government bond yields and a weakening yen.
Acting Secretary-General Yoshihisa Furukawa, a deputy chair of the LDP tax panel, submitted a written objection stating that “if a decision is made without a clear prospect for securing funding, Japan will lose the confidence of the markets”.
