Japan's Takaichi to push 1% food tax cut from April 2027 amid funding doubts

Prime Minister Sanae Takaichi’s plan to cut Japan’s consumption tax on food and beverages to 1% for two years from April 2027 is facing renewed scrutiny over how it would be funded, after Liberal Democratic Party lawmakers warned that gains from U.S. Treasury sales tied to currency intervention cannot serve as a lasting revenue source. Former Senior Vice Minister of the Environment Toshitaka Ooka said profits generated when the government and Bank of Japan sell U.S. Treasuries as part of yen-buying, dollar-selling intervention may be usable only on a limited basis and would not provide continuous funding. Ooka, who opposes the tax cut, also argued it could reduce funds for Kumamoto earthquake reconstruction and worsen manpower shortages. The proposal, announced by Takaichi at an extraordinary LDP executive meeting on July 30, would lower the current 8% tax rate on food and beverages to 1% for two years and pair it with income-linked benefits within a 1% range, effectively bringing the net burden to zero mainly for low-income households. While supporters at an internal party meeting backed using non-tax revenues including the Foreign Exchange Special Account, the financing question remains unresolved and underscores broader concern that a temporary inflation-relief measure could become a more permanent strain on Japan’s public finances.