Japan’s LDP Seeks a Nov. 6 Lower House Vote on Cutting the Food Tax to 1% From 8%

Photo: Kakidai, Wikimedia Commons, CC BY-SA 4.0 (file photo, October 2018). The National Diet Building in Tokyo.

Japan’s governing Liberal Democratic Party has proposed passing Prime Minister Sanae Takaichi’s bill to cut the consumption tax on food from 8% to 1% through the House of Representatives on Friday, Nov. 6, Japan time. Takaichi agreed to face an hour of opposition questions in the Financial Affairs Committee that morning, under a deal struck on Wednesday, Nov. 4. Opposition parties have not agreed to hold the vote that day.

LDP Diet affairs chief Hideki Murai and Yuichi Goto, who handles Diet strategy for the opposition “Chudo” caucus in the lower chamber, agreed on the committee session, the Asahi Shimbun reported. The LDP then proposed a committee vote and a full Lower House vote on the same day. Friday morning in Tokyo is Thursday evening ET.

What the bill does

According to the Cabinet Secretariat, the bill lowers the consumption tax on food and drinks that now qualify for the reduced 8% rate to 1% for two years, starting April 1, 2027. During that period, the government plans to begin a cash benefit tied to income in fiscal 2027, within the money equal to the remaining 1% tax. From fiscal 2029, a fuller income-linked benefit would take over. The government describes the overall package as “effectively zeroing” the consumption tax on food (TBR translation). The rate itself would be 1%, not zero.

The Cabinet approved the bill on Oct. 9 and sent it to the current Diet session, the 222nd, the Cabinet Secretariat says. The general consumption tax rate of 10% would not change.

The Lower House fight

Goto had asked for two hours with the prime minister, according to the Asahi. Murai held it to one hour, with Takaichi answering only opposition questions. Murai told reporters that parts of the bill had already been “debated exhaustively” (TBR translation).

Goto said his side would decide on the vote “after hearing the answers on the day” (TBR translation). He called the one-hour limit “the limit of the strength” of an opposition that holds less than a quarter of the seats in the lower chamber, the Asahi reported. He told broadcaster NTV that the opposition wanted to hear whether the prime minister had any new judgment on questions only she could answer.

The LDP and its partner, the Japan Innovation Party, control the Lower House and can pass the bill there on their own, Kyodo News reported via The Mainichi. Kyodo noted that forcing a vote could anger opposition parties and hurt the bill’s chances in the upper chamber. NTV said the date of the vote was still under discussion.

Opposition parties stake out positions

Several opposition parties said on Wednesday they were not ready to back the bill. Yuichiro Tamaki, leader of the Democratic Party for the People, said support would be “impossible in its current form,” The Japan Times reported, citing Jiji Press. He said the party would decide after seeing whether the government and the ruling coalition would accept its own proposal. The party also plans to submit a similar bill of its own in the upper chamber.

Komeito acting representative Toshiko Takeya said the government’s explanation of the tax cut’s effects was still unclear. “It is far too early to say the conditions are in place for Komeito to support the legislation,” she said. Komeito head Mitsunari Okamoto had urged the government on Tuesday to set out clearly how it would pay cash benefits to low-income households alongside the cut, Kyodo reported. Otherwise, it said, his party might not support the bill in the Lower House vote.

Takeshi Shina, secretary-general of the Democratic Reform Party, told reporters, “It is difficult to find any grounds for supporting the legislation.”

The harder test: the upper chamber

The House of Councillors set up a special committee on Wednesday to handle the bill, NTV reported. The ruling camp does not hold a majority there, so it needs votes or abstentions from other parties to pass the bill. Kyodo said the ruling side wants to start debate in the upper chamber next week, and the session is set to end on Dec. 12.

Yoshihiko Isozaki, the LDP’s Diet affairs chief in the upper chamber, said the party would consider “as much as possible” the opposition’s request for Takaichi to attend several committee sessions. His counterpart in the Constitutional Democratic Party of Japan, Yoshitaka Saito, said: “They look like rushing straight ahead to enact the bill but we won’t allow it in the upper house.”

Why it matters

Food prices are a daily concern in Japan. TBR reported this month on Japan’s November price hikes on 1,477 food items. The tax cut is also on the central bank’s radar: in minutes released on Thursday, one Bank of Japan board member estimated that the cut would lower Japan’s inflation rate for fiscal 2027 by more than 1 percentage point if fully passed on to prices, as TBR reported in its story on the BOJ’s September minutes.

For U.S. visitors, a lower tax on groceries would mean somewhat cheaper food purchases in Japan from 2027. It would not change the separate tax-refund rules for tourists that TBR covered in its report on Japan’s new tax-free shopping system. More regional coverage is in TBR’s Asia-Pacific news section.

Sources

• Asahi Shimbun: LDP aims to pass consumption tax cut bill in Lower House on Nov. 6 (Japanese)
• NTV News: Takaichi to attend committee on consumption tax bill (Japanese)
• Cabinet Secretariat: Food consumption tax cut and refundable tax credit (Japanese)
• Kyodo via The Mainichi: Takaichi’s food tax cut bill
• The Japan Times (Jiji): DPP leader rejects food tax cut bill in current form

Additional sources

• Yomiuri Shimbun: consumption tax cut bill could pass Lower House Nov. 6 (Japanese)