Tokyo, July 30 (QNA) – Japanese Prime Minister Sanae Takaichi on Thursday said her government will implement a cut in the consumption tax rate on food and beverages to 1 percent from the current 8 percent for two years starting next April, as households continue to struggle with high prices.

The tax cut, which will be coupled with cash handouts to low – to middle-income earners to effectively reduce the tax burden to zero, was unveiled during a meeting of ruling Liberal Democratic Party executives earlier that day. It marks the first time that the consumption tax rate has been lowered since the system’s introduction in 1989.

Japan’s consumption tax rate has gradually increased, mainly to finance mounting social security costs as the population rapidly ages. The rate started at 3 percent, increased to 5 percent in 1997, and rose to 8 percent in 2014.

Since 2019, the rate has been set at 10 percent, but a reduced rate of 8 percent has been applied to food and beverage sales.

Amid the current rise in government bond yields and the weakness of the yen, tax cuts could heighten concerns about Japan’s fiscal position, as such a move would create a significant shortfall in social security funding, with tax revenue losses expected to reach around 10 trillion yen (USD 61 billion) over two years. (QNA)