Itsunori Onodera, chairman of the Liberal Democratic Party's tax research council, proposed a plan to virtually eliminate consumption taxes on food [1].
The proposal seeks to protect low-income households from economic risks stemming from volatility in the Middle East [1, 5].
During a cross-party meeting of the Social Security National Council on Wednesday, Onodera presented a plan to lower the consumption tax rate on food to 1% [1, 3]. This is a significant drop from the current rate of 8% [2]. To achieve a virtual zero-tax state, the plan includes income-linked benefits to cover the remaining 1% [1].
The proposed tax reduction would last for two years, beginning April 1, 2027, and ending March 31, 2029 [1]. The accompanying benefit payments are scheduled for introduction during the 2027 fiscal year [1].
While the proposal was presented as a chairperson's draft, its implementation remains uncertain. Some members within the Liberal Democratic Party have expressed concerns regarding the available funding and the actual effectiveness of the tax cut [3].
Onodera said the goal is to provide substantial support to those most affected by rising costs. The combination of a direct tax cut and targeted benefits is intended to provide a more precise safety net than a broad tax reduction alone [1, 5].
“virtually eliminate consumption taxes on food”
This proposal represents a shift toward a hybrid fiscal strategy, combining traditional tax cuts with targeted social transfers. By lowering the rate to 1% rather than 0%, the government maintains a tax infrastructure while using income-linked benefits to ensure the most vulnerable citizens receive the highest relative relief. However, the internal friction within the LDP suggests that the primary hurdle is not the policy design, but the identification of a sustainable funding source for the benefits.
