Japan Cabinet Approves Consumption Tax Cut Outline

Japan's cabinet on Tuesday approved a policy to lower the consumption tax on food items.

The tax will be cut to 1 percent from April 2027 for two years. It currently stands at 8 percent.

The policy document describes the tax relief as a temporary measure responding to high commodity prices.

The government will also introduce benefits for low- and middle-income earners. It says this will make the tax effectively zero.

The government stresses it will not issue deficit-covering bonds to fund the tax cut, which is expected to cost about 5 trillion yen a year.

The policy document says all spending and revenue streams will be reviewed to secure the necessary funding.

Some experts have raised concerns about the temporary nature of the cut. They say raising the tax back to 8 percent in two years could impact consumer spending and the economy.

The administration hopes to present bills based on the policy at an extraordinary Diet session expected in early October.

It will further discuss funding the policy in budget talks toward the end of the year.