Proposed Tax Cut on Food: Ideas Later.

Japan PM Takaichi eyes cutting consumption tax on food to 1% from April

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Article:

TOKYO (Kyodo) -- Japanese Prime Minister Sanae Takaichi on Thursday expressed her intention to seek 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, according to ruling party officials, as households continue to struggle with high prices.

The tax cut plan, which would 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. It would be the first time that the consumption tax rate has been lowered since the system's introduction in 1989.

Takaichi directed senior LDP officials to accelerate preparations for the Cabinet to endorse the plan early next month, LDP Secretary General Shunichi Suzuki told reporters, adding that the party aims to pass related bills during an extraordinary Diet session likely to be convened in the fall.

"Realizing an effective zero consumption tax on food and beverages is the best option," Suzuki quoted Takaichi as saying when she explained her decision, which he said was unanimously approved by the LDP executives.

Amid already high government bond yields and a weak yen, the tax cut could further fuel concerns over Japan's fiscal health as the measure would create a gaping hole in funding for social security, with the loss of tax revenues reaching about 10 trillion yen ($61 billion) in two years.

Takaichi, who is pursuing expansionary spending to spur economic growth, has yet to propose a concrete source of revenue to make up for the shortfall, but Suzuki said the premier promised at the LDP gathering that the government will secure alternative revenue sources "without relying on deficit-covering bonds."

The LDP's junior coalition ally, the Japan Innovation Party, also agreed to Takaichi's tax cut plan and will cooperate on it when the two parties' senior officials hold talks, JIP Secretary General Hiroshi Nakatsuka told reporters.

Meanwhile, some LDP members openly expressed their opposition. Former Foreign Minister Taro Kono told reporters that there is "no guarantee" the planned tax reduction will lead to lower food prices and that they could "spike significantly" when the tax rate is restored to its original level two years later.

Yuko Obuchi, former LDP election strategy chief, has resigned as a senior member of an informal meeting under the LDP's research commission on the tax system in protest at the tax cut plan, sources familiar with the matter said.

She is known for emphasizing fiscal discipline. Her father, Keizo Obuchi, served as chief Cabinet secretary under the government of Noboru Takeshita, which first introduced the country's 3 percent consumption tax in 1989.

The LDP, led by Takaichi, scored a landslide victory in the House of Representatives election in February on pledges that included slashing the consumption tax rate on food and beverage products to zero for two years. The JIP and many opposition parties made similar promises at that time amid elevated prices.

But the ruling parties decided to change course and seek a cut to 1 percent after learning at a cross-party meeting about taxation and social security that adjusting retailers' cash register systems to a zero rate would require more time.

To fulfill the campaign pledge of a zero tax, cash handouts to low- to middle-income households would total an annual 600 billion yen, which is equivalent to the revenue from a 1 percent tax rate on food and beverage items.

With opposition parties arguing that a de facto tax rate hike eventually awaits the public because the cut is a temporary measure, the cross-party meeting, called the national council on social security, failed to reach a consensus following monthslong discussions, leaving it up to the prime minister to decide.

While Takaichi has vowed to reinstate the tax rate after two years, which may mean April 2029, it could become a politically risky move given that a House of Councillors election is slated for the summer of 2028.

The ruling bloc refers to the two-year tax cut scheme as a "transitional measure" until the new income-linked relief program for lower-income workers is introduced in fiscal 2029. The program was approved during the cross-party talks.

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, excluding alcoholic beverages and dining out.

Article source:  https://mainichi.jp/english/articles/20260730/p2g/00m/0na/023000c

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Japan Govt. GDP Growth Outlook: Ideas Later.

Gov't cuts Japan's FY 2026 GDP growth outlook to 0.9% on higher oil prices

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TOKYO (Kyodo) -- The Japanese government on Thursday cut its economic growth outlook to 0.9 percent for the current fiscal year from April, down from an earlier estimate of 1.3 percent as higher crude oil prices hit the import-reliant economy.

The Cabinet Office also unveiled its latest projections for the primary balance, a key indicator of a country's fiscal health, expecting a 1.4 trillion yen ($8.6 billion) surplus in fiscal 2027 on a boost in tax revenues, compared with last month's estimate of a deficit of 2.1 trillion yen.

The improved projections for the primary balance -- calculated by subtracting spending from tax and other revenues, excluding government bond interest payments -- come as financial markets remain concerned that Prime Minister Sanae Takaichi's push for aggressive spending to boost growth will further worsen the heavily indebted country's finances.

"In promoting the shift to responsible and proactive public finances, we will also secure confidence from the market by communicating with the market carefully with high transparency," Takaichi told the Council on Economic and Fiscal Policy at her office where the latest economic outlooks were presented.

A surplus in the primary balance -- meaning tax and other revenues exceed spending, excluding debt-servicing costs -- indicates the government can cover its expenses without new bond issuances.

Still, the Cabinet Office said in the report that it foresees a larger deficit of 1.2 trillion yen in fiscal 2026, up from the 800 billion yen deficit projected earlier, due to the need to finance a supplementary budget for the year.

In its midyear report, the government said that the weaker yen against the U.S. dollar and elevated oil prices resulting from the conflict in the Middle East pose risks to the Japanese economy, despite the fact that wage growth and a rise in personal consumption have been bolstered by government subsidies for energy costs.

The Cabinet Office's forecast said that the government expects the yen to trade at 161.4 against the U.S. dollar, which is much weaker than the projected 155.2 in January. The forecast also said that crude oil prices will rise to 92.5 dollars per barrel, surging from the previous estimate of 68 dollars.

Resource-poor Japan is vulnerable to rises in crude oil prices, while the weaker yen against the dollar contributes to raising import costs.

For the 2027 fiscal year starting next April, the government said GDP will expand 1.1 percent on the back of Takaichi's push for boosting investments in crisis management and strategic growth sectors -- a move that is expected to spur recovery in personal consumption and increase capital investments.

To promote public-private investments, the Takaichi Cabinet on Thursday approved guidelines for drafting the state budget for the year starting next April, featuring a newly created investment allotment for creating a "strong and prosperous Japan," under which ministries can make budget requests without upper limits.

The requests will be assessed in the budget-making process based on factors such as whether they will contribute to growth by generating investment returns. The process will also include a multiyear budget framework to enhance predictability for executions of the projects.

Finance Minister Satsuki Katayama said the officials could utilize sophisticated generative AI in their discussions, taking a different drafting approach from before.

Article source:    https://mainichi.jp/english/articles/20260730/p2g/00m/0bu/013000c

Japan Minimum Wage Hikes: Ideas Later.

Japan hikes FY2026 average minimum wage guideline by 4.9% to 1,176 yen

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TOKYO (Kyodo) -- An advisory panel to Japan's labor ministry decided Tuesday to raise the minimum wage guideline for fiscal 2026 by a nationwide average of 55 yen (34 cents), or 4.9 percent, to 1,176 yen per hour, amid rising living costs.

The increase fell short of the previous year's guideline hike of 63 yen, which was the largest since the current system began in fiscal 2002. The margin reflected the need both to alleviate the financial burden on workers hit by inflation and to give consideration to small and midsize firms' business conditions.

Minimum wages are revised every fiscal year. The government panel sets an annual guideline for minimum wages in each of Japan's 47 prefectures. Local panels then decide the specific rates for their respective areas, with the new wages typically taking effect from October onward.

If prefectures raise wages in line with the guideline, the highest minimum wage would be 1,280 yen in Tokyo, while the lowest would be 1,079 yen in Kochi, Miyazaki and Okinawa prefectures.

Citing the impact on daily life of the Middle East conflict and other factors, labor representatives had called for an average increase of 75 yen, exceeding last year's guideline increase. Employer representatives, meanwhile, urged restraint as surging materials prices were also driving up business costs.

In fiscal 2025, the guideline called for a 63 yen hike on average but the local panels ultimately raised it by 66 yen.

Article source:  https://mainichi.jp/english/articles/20260729/p2g/00m/0bu/025000c

Japan Economy: Ideas Later. Updated July 26, 2026.

Japan economy may surpass 73-month postwar growth record in July

Ideas

The government, as a way to not upset or scare the financial markets, always tries to spin the economic situation as being positive and or a recovering moderately even though there might some sectors not doing so well.

And yes, the Japanese economy might have grown 73 consecutive months but mostly likely the expansion or growth, while positive, might be considered minimal growth at best.

The economic growth, yes positive, as not been enough to really help Japanese households or even some some business such as small and mid-size companies in Japan.

And of course the cost of living continues to be a significant factor in Japan as even again small and mid-size companies continue to struggle costs which seems to be not out of control but rather enough to stress out households and businesses in Japan.

Most likely the Cabinet Office panel, to make sure the financial markets and large companies are placated will say in one way or another that the economy did expand for 73 months, even though again, the expansion can be described as just minimal.

And yes, even though, to be positive, despite significant global situations, the Japanese economy while not that strong has been able to ignore or by-pass many of the disturbances affecting many other countries.

Of course like all leaders of a country, or most anyway, they need and want to say "everyone across Japan can really feel that 'the economy is getting better," when in reality, as with most countries, these days, not everyone is feeling the economy is getting better but they have to say it anyway.

And yes, they want to see everyone is doing better because of the economy is doing better, but unfortunately, in a market economy, because of the increase in inequality, there are some who are doing better and some who are not doing better.

Yes personal consumption or consumer spending might be solid being about half of Japan's GDP, but at the same time, it might not be enough to actually help the expansion be even better, and while wage hikes are good and needed, they need to be continued with even more, with even more, if possible, from small and mid-size companies make up about 70 percent of the workforce is in Japan and not the large name-brand companies which make up maybe 30 percent of the workforce.

Yes government subsidies are needed and important for many Japanese households as their disposable income, ever since the pandemic continues to be eroded.

Capital investment or company spending is very important if the economy is robust and most likely its a good metric that shows companies in Japan are bullish on the economy and are willing to spend significantly as need.

But here is the challenge or maybe the blind spot that is missing here, as back in the late 1990's when the global economy was at its peak and booming no one really saw or thought that there might be a dot.com bust which could be on the horizon related to artificial intelligence and semiconductors.

Its looks like since the so-called US tariff situation has resolved but you can really never know for sure, demand for Japanese cars in Japan has grown again and but at the same time there is still the challenge of inflation in the US that is affecting many families too.

And of course Japanese government officials are going to say its going to take some time, as they don't want to say anything negative as again they don't want to upset to financial markets in Japan or globally, so they are taking a wait and see approach for as long as they can.

And that seems to how Japan does things by taking a lot of time to decide something looking at all the possibilities and even scenarios to a situation while, good or not so good, for most the the time, the US is much different in how they makes decisions.

Yes, that statement, "its hard to be genuinely happy at a time when is uncertain whether inflation-adjusted real wages will keep rising," as here the Japanese government is not only being realistic but at the same time being somewhat in concert with the rest of Japan might everything is not good or feels good even though there might actually be 73 months of economic expansion.

The problem is many household probably haven't felt the economic expansion due to the continued inflation situation in Japan along the idea, again, that up to 70 percent of the Japanese workforce don't work for the large name-brand companies but small and mid-size companies that are unable to match or give the same wage increases that the large companies can give.

Have a nice day!

Article source:  https://mainichi.jp/english/articles/20260723/p2g/00m/0bu/018000c

BOJ Position: Updated July 23, 2026.

BOJ to stand pat on rates in July, may raise growth forecast.

Ideas

The Bank of Japan always seems, recently, to say its looking into the situation about the economy, and for the most part, never jumps to quick decision making as increasing the key rate can sometimes have significant side affects to many in the economy.

Yes, there might be strong demand for artificial intelligence products but at the same time, it might not be so strong as it might just be too soon to see whats going on as a month here or there of strong demand doesn't mean it will hold for a year.

And yes, economic growth might finally be trending upward but again an month here there or even a quarter here or there of positive growth doesn't mean growth for a year so more needs to be seen in the coming months.

Again, the BOJ is going to take its time to see just how much the increase in the key rate is affecting business and households and for a very long time, the BOJ's position was the Japanese economy was just to weak to be able to handle a key rate increase so it will be interesting to see just what is stance is now related to the latest rate hike.

And the latest statement that it would allow the bank to asses the impact is maybe communication to the financial markets that its not going to do increase the rate in July as it sometimes, like most central banks, they talk in code to communicate what they might do in the future.

The main targets, usually, that a central bank wants to manage or help control in an economy is inflation and unemployment and as unemployment is not a major problem these days for the BOJ as Japan is supposedly in the midst of a labor shortage but inflation has been a challenge for the Japanese economy almost since the beginning of COVID and to this day inflation is still not under control in Japan, as Japanese households are still experiencing increased prices and now the energy situation could get even worse.

And then there is the weak yen, which can be both a positive and a negative depending if it's an export company or companies in Japan that don't export. For example a weak Japanese yen actually gives more money or yen to Japanese export companies as the price of their products will be higher but at the same time for domestic companies in Japan that don't export, as Japan is a resource-poor country, Japan has to import much of what it needs meaning, due to the weak yen import prices are going to be much higher which potentially can put the entire economy under significant stress.

Its highly unlikely that the Japanese economy is going to overheat unless you use the idea that continued inflation over 3 percent is enough to say that an economy is close to or is overheating but the Japanese economy, for the most part, has been around 3 percent or a little under it for a very long time.

And then there is the idea of unemployment and while Japan does have a significant challenge with unemployment at this time, but usually with unemployment its about an economy that is running at full steam and companies can't find enough workers, but in Japan's case the economy is not running at full steam, as its just beginning to grow after a period of stagnation and even though some reports and articles might suggest the Japanese economy is nearing a record for so many months of economic growth, the growth, while still growth, has been minimal at best, and the Japanese economy might be growing ever so slowly its not growing significantly enough to say the economy is overheating in any sense of the word.

And yes, the BOJ might decide to increase the rate but the increase might be very slight as to not cause a lot of side effects on the economy.

Have a nice day!

 Article source: https://mainichi.jp/english/articles/20260717/p2g/00m/0bu/040000c

Japan and Foreign Visitors: Updated July 16, 2026.

Foreign visitors to Japan dip 2% in 1st-half 2026 as Chinese travelers drop

Ideas

A 2.0 percent decrease from a year earlier should not be that much of a concern considering some in Japan now think there are too many foreign tourists entering Japan. And the idea there was a decrease in Chinese tourists should make some happy as again, there have been complaints lately of too many tourists and over-tourism has become a real challenge in Japan now.

It's interesting, as maybe not all Chinese tourists are following exactly what the government wants or says as sometimes a suggestion can be like an order in China, but if there were 2.06 million tourists from China that indicates maybe they can make their own choices without government interference.

It's also interesting that as early as 2019 or around there, South Korea had a supposed boycott on Japanese products and even traveling to Japan was limited as South Korean tourists and travelers avoided going to Japan but those days seem long gone as other articles have suggested that South Korean tourists are the number one group entering Japan or close to it.

Taiwan, compared to China and South Korea has always had a friendly relationship with Japan and they haven't had any of the post-war entanglements that the other two countries have had and as a result tourists from Taiwan has remained consistent while both China and South Korea have had periods of less than normal relations, kind of like squabbling siblings going back and forth over the years.

It seem, unfortunately, whether deserved or not or whether deliberate or not, Japan keeps saying things that seem to upset China and has at times also upset South Korea from time to time but these days South Korea and Japan seem to be going out of their way to make sure all things are normal as maybe they are looking at China as the main instigator in the Asia-Pacific region and both countries seem to be working together now on diplomatic and security issues.

But as mentioned above there were 2.06 million visitors from China that visited Japan, so there are still quite a few who want to go to Japan and spend their money.

It's quite possible that a decrease of 6.8 percent from a year earlier might be just enough to satisfy those in Japan who think and feel that over-tourism has overtaken Japan and some might want to see even less tourists.

The problem is the Japanese domestic economy is now heavily dependent on foreign tourism for spending as overall, consumer spending in the domestic economy is now where it should be due to the continued inflation situation.

As the Japanese yen is very weak now, which gives foreign tourists more purchasing power Japanese businesses should welcome foreign tourists with open arms as they spend a lot when they are in Japan despite, unfortunately, there are always going to be some who have poor manners in Japan like some tourists in all countries these days.

Have a nice day!

Article source:    https://mainichi.jp/english/articles/20260715/p2g/00m/0li/056000c

Japan Overseas Travel Situation: Updated July 16, 2026.

Japan's summer outbound travel to fall 9% on weak yen, 1st post-COVID drop

Ideas.

There are probably more than one reason why travel out of Japan is going to decrease during the summer holiday period than just the weak yen. The weak yen has been around for a very long time and Japanese households and consumers have had a lot of reasons not to travel, if they don't want to besides weak yen

The overall inflation situation has not been that good so the disposable income or money needed to save for an overseas trip has been eroding almost since the pandemic period and then add in all the global situations going on and it might deter some from traveling overseas.

And then there was the football/soccer world cup in the US and some or many Japanese might have traveled to Mexico and the US to see the Japanese national football play and some might have gone to Nashville TN to see them workout before the competition began.

Yes, the Obon holiday period this year might see less people traveling as maybe travel for this has peaked already with the Golden Week period and then the World Cup competition period about to end in a few days and people are exhausted not to mention the record high temperatures that are already hitting Japan, which might keep people inside or at least from traveling this summer.

And then there is the continued high cost of airline tickets and the Middle East situation and the so-called shortage of oil and gas is increasing airline tickets and unfortunately the summer holiday travel period is usually the most expensive time to travel.

It might be no surprise that travel could decrease more than 9 percent as it could get as high as over 12 percent the summer holiday period as people for the most part, are just exhausted and again add in the record high temperatures in Japan along with the continued inflation situation and the eroding of disposable incomes, and then of course the weak yen means even less purchasing power for Japanese consumers overseas.

Yes, shorter trips to South Korea and Taiwan are probably the most logical trips to take and both regions seem to be having a record number of tourists.

But, as some news outlets have recently reported hotel rooms in South Korea are all filled up and they just have enough room for all of the foreign travelers wanting to travel there.

And of course, unfortunately, the China situation is very sad and always the on again and off again situation with China just keeps making the news which means of course Japanese travelers are going to be very weary about traveling to Japan this summer.

Again, it very possible the projected record heat this summer, which some have suggested it already here, might deter traveling even more and a drop of 4.4 percent might be more than 7 or 8 percent this summer, but it still very possible domestic travelers are going to seek out cooler places to travel if the can go there and that's the key can they afford to go to the cooler regions of Japan this summer.

Of course the Tokyo region including Yokohama just south of Tokyo to might see an increase of domestic travelers but as some news has suggested there might not be enough hotel rooms this summer and foreign tourists too might be headed to the Tokyo area if not the Kyoto/Osaka area.

Yes, overall, in most countries there are polarization's related to traveling as some want to keep within a budget and take shorter trips and some want to splurge on expensive trips that they've been planning for a long time.

But most likely Japanese travelers, for the most part, are in the budget category as they are still mostly savers and not big spenders as maybe the big spender travelers are the wealthy and upper-income group in Japan who will splurge on a long holiday trip to Hawaii or even to Europe.

Have a nice day!

Article source:  https://mainichi.jp/english/articles/20260712/p2g/00m/0bu/005000c