Japan will temporarily slash consumption tax on food from eight percent to just one percent starting next April, the prime minister said on Thursday, as her administration seeks to tackle rising inflation. It will be the first such reduction since the tax was introduced in 1989, and the rate will return to eight percent after two years, Sanae Takaichi told reporters. The move aims to ease cost-of-living pressures in the world’s fourth-largest economy, which have been rising due to the war in the Middle East and a weak yen. But it comes despite worries over Japan’s colossal debts, which are more than twice the size of its gross domestic product -- the highest ratio among advanced economies. From April, Japan will implement “the lowering of our sales tax on food and beverages to one percent for two years,” Takaichi said. The current rate will then be reinstated in 2029 to coincide with the introduction of more “meticulous subsidies” targeting lower-income workers burdened by rising social insurance premiums, she said. The two-year cut is estimated to cost 10 trillion yen (US$61 billion) in lost tax revenues, according to media reports. Takaichi pledged in February to eliminate the sales tax on food and beverages, a key part of her manifesto that helped her win a resounding victory in lower house elections. She said on Thursday that the government would explore steps like reassessing other tax relief measures and subsidy programmes to make up for the lost revenues. Her administration would “aim to secure funding without relying on special government bonds, to gain market confidence,” she said.
