The Japanese Cabinet has approved reducing the food consumption tax to 1% for two years, without issuing new bonds, but the funding plan has been postponed.

(1) The cabinet of Japanese Prime Minister Sanae Takaichi has approved a plan to temporarily reduce the consumption tax on food, taking a step toward fulfilling a key election promise aimed at easing the burden families face due to surging living costs. (2) The cabinet approved the annual tax reform program, requiring that the sales tax on food and beverages be lowered from 8% to 1% starting in April, for a period of two years. (3) According to the proposal, the government will not issue new bonds to finance this approximately 5 trillion yen measure, but the decision on how to fund the tax cut has been postponed until the end of the year. (4) The government plans to submit the relevant bill to an extraordinary session of parliament expected to convene at the beginning of next month. (5) The proposal also includes support for some affected industries: tax-exempt farmers and fishermen will receive subsidies to offset income losses, and restaurants will receive assistance to introduce or expand takeaway services. (6) Although the tax rate on food sold by retailers will drop to 1%, dine-in meals at restaurants will continue to face a 10% tax rate.