Japanese Prime Minister Sanae Takaichi is pushing forward with her plan to slash the consumption tax on food, which, if successful, would be the first cut since its implementation in 1989. Takaichi announced that the tax on food would be reduced from 8% to 1% for two years starting in April 2027, and cash payments would be offered to offset the impact of that 1% on select groups.
The food-tax cut captures the central gamble behind Takaichi's economic agenda: Japan is giving up revenue now in the hope that stronger consumption and an estimated 370 trillion yen (2.35 trillion) public-private investment plan through to the 2040 fiscal year will help boost growth.
However, the plan has already drawn criticism from her own Liberal Democratic Party, with members warning that this move could undermine Japan's fiscal position and push interest rates higher.
