A proposed food tax cut has brought Japan’s household costs into focus as Finance Minister Satsuki Katayama sees rising wages bringing lasting inflation closer, Reuters reported.
The government’s bill would reduce the consumption tax on eligible food and drink from 8% to 1% for two years starting April 1, 2027. It also proposes payments for workers with low and middle incomes. The bill was referred to a House of Representatives finance committee on Oct. 20 and has not passed.
The Ministry of Finance says the tax reduction would benefit households across income groups. It intends to fund the measures without special deficit-financing bonds and says it will provide a detailed funding plan during the budget process.
Preliminary labour ministry data for August recorded average monthly cash earnings of ¥311,364 per worker, up 3.8% from a year earlier. Wages adjusted for inflation rose 1.5%, their eighth consecutive monthly gain. The survey covers establishments with at least five regular employees.
Katayama told lawmakers on Oct. 21 that import costs were still pushing prices higher even as pay gains brought wage-driven inflation nearer, Reuters reported. She said the proposed relief would help households and, when asked about the Bank of Japan’s interest rate policy, said the government and central bank shared the same view, according to Reuters.
The Bank of Japan (BOJ) said in September that companies continued to reflect higher wages in their prices. It also identified oil costs, a weaker yen and global demand tied to artificial intelligence as sources of pressure. The BOJ raised its overnight rate target to around 1.25%, effective Sept. 24. National consumer prices excluding fresh food had risen 1.7% from a year earlier in August.
The BOJ said underlying inflation was approaching its 2% target and that it would consider further rate increases as conditions develop.
Japan’s September inflation figures are scheduled for Oct. 23. The BOJ’s next policy meeting is set for Oct. 29-30.
