Japan Planned Food Cuts: Ideas Later.

Japan's planned food tax cut faces consumer, retailer skepticism

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TOKYO -- Japan's Cabinet on Aug. 5 approved a policy to cut the consumption tax rate on food and beverages from 8% to 1%. However, with prices continuing to rise and the reduction set to apply for only two years from April 2027, the plan has drawn a cool response from consumers and retailers. The restaurant industry, where the 10% rate is expected to remain in place, has also voiced concerns about the impact. Will Japan's first consumption tax cut since the tax was introduced prove effective?

"When it returns to 8%, the impact will be substantial, so I can't simply welcome the cut," said Emi Hashimoto, 42, a financial planner in Tokyo's Shinjuku Ward who is raising six children, from a first grader to a second-year high school student.

With her children at growing ages, the family's monthly food bill, excluding meals out, comes to about 100,000 yen (roughly $630). In 2024, she managed to keep the monthly total to around 60,000 yen (approx. $380), but relentless price increases are now weighing heavily on the household budget.

The tax cut would theoretically reduce the family's monthly burden by about 7,000 yen (around $44). But Hashimoto is skeptical.

"Stores that have held off on raising prices may do so when the tax cut takes effect, and the costs of adjusting to the new rate may also be passed on to consumers," she said. "I doubt we'll actually save the full 7,000 yen."

"In the end, the tax cut is essentially another giveaway," she added. "Rather than spending so lavishly, the government should tighten its belt, eliminate waste and stop unnecessary spending."

Retailers weigh the impact

The more consumers spend, the greater the benefit they would receive from the tax rate cut. But how do retailers selling high-end food products view the measure?

About 40 pieces of Wagyu beef are displayed at Tokyo Cowboy, a butcher shop in Tokyo's Setagaya Ward. Popular items include cuts such as "ichibo," or top sirloin cap, and "misuji," or top blade, priced at around 2,500 yen (roughly $16) per 100 grams.

A 600-gram purchase for a family would cost 15,000 yen (about $95), with the tax cut reducing the consumption tax by 1,050 yen (roughly $6.70). The benefit may appear substantial, but the shop is not entirely optimistic.

According to company President Nozomi Ueno, 53, many customers place greater importance on the quality and value of the meat than on its price.

"It's hard to imagine the tax cut producing a major boost in foot traffic," he said.

Although the tax burden on purchases by the shop would be reduced, continued increases in the cost of ingredients and packaging materials could still force it to raise prices.

"I don't know whether we'll be able to pass the full savings on to customers," Ueno said.

Concerns in the restaurant industry

The proposed cut is expected to follow the reduced-rate system introduced in October 2019, excluding dine-in meals. If so, the tax rate on dine-in meals would remain at 10%, while the rate on takeout food would fall from the current 8% to 1%, widening the gap.

On July 14, the Japan Foodservice Association and other industry groups issued an "emergency message on reducing the consumption tax rate on food products."

They warned that the difference in tax rates "would put dining out at a price disadvantage, affect the many job roles that sustain the food service industry and place a heavy burden on the management of various restaurants."

An association official said, "Restaurants have told us they are concerned that the difference in tax rates will discourage consumers from dining out."

A 53-year-old man who operates a stand-up soba shop in Tokyo said, "The tax cut may lower my purchasing costs, but considering how customers would react if I raised prices when the tax rate returns to 8% in two years, I can't lower my prices this time."

Facing higher operating costs, he had just increased the price of a basic bowl of hot soba from 430 yen (about $2.70) to 480 yen (around $3) in June.

"I just hope we won't have to compete with takeout businesses covered by the tax cut or with restaurants that lower their prices," he said.

Article source:   https://draft.blogger.com/blog/post/edit/2653803302921314930/1150161409062193337

Japan Editorial: Ideas Later.

Editorial: Japan needs basic economic policy review, not reliance on US, to stop yen's slide

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The responsibility for securing confidence in the yen as a currency rests with the Japanese government. Relying on the United States will not overcome the negative spiral of a weaker yen and higher prices.

In response to the yen's historic depreciation, the Japanese and U.S. governments have moved to buy yen in the market. It is the first coordinated intervention in 15 years, since 2011, when the yen surged immediately after the Great East Japan Earthquake. It is the first yen-buying intervention in 28 years, since 1998, when Japan fell into a financial crisis over bad-loan problems at Japanese banks.

Such a move is unusual outside of a major disaster or a global economic crisis. That is because it could distort financial markets.

This time, the political calculations of Prime Minister Sanae Takaichi's administration and the administration of President Donald Trump in the United States aligned. Japan had repeatedly intervened on its own to buy yen and sell dollars, but those efforts failed to correct the yen's weakness, and Tokyo had been hoping for help from Washington.

With congressional midterm elections coming in November, the United States was concerned that the negative effects of "selling Japan" -- a simultaneous weakening of the yen and rise in long-term interest rates -- would spill over into its own economy. U.S. Treasury Secretary Scott Bessent, who led the coordinated intervention, was deeply wary that turmoil in Japanese markets would push up U.S. long-term interest rates.

Japan has, in effect, incurred a major debt to the United States. President Trump has been emphasizing that Japan "wanted a little bit of help." Washington may seek something in return, such as the early completion of the $550 billion, or about 86 trillion yen, in investment in the United States that Japan promised under the Japan-U.S. tariff agreement.

The Takaichi administration is touting the move as "the completed form of the Japan-U.S. currency alliance," but intervention alone will not easily reverse the stream of yen selling.

At the root of the yen's weakness is market distrust of the Japanese government's economic policies, which disregard fiscal consolidation and independent monetary policy.

The U.S. side argues that an early interest rate hike is essential to correcting the yen's weakness. Monetary policy, however, is something the Bank of Japan should decide. To put the brakes on the weaker yen and higher prices, it is only natural to raise the policy rate, which is far too low relative to the inflation rate.

It is also essential that the Takaichi government change its irresponsible fiscal policy. If it forces through a consumption tax cut without identifying a funding source or presses ahead with fiscal expansion, long-term interest rates will rise further.

There are limits to the stopgap method of coordinated intervention. It is time for the Japanese government to review economic policy itself to restore market confidence.

Article source:  https://mainichi.jp/english/articles/20260805/p2a/00m/0op/017000c

Japan Real Wages: Ideas Later.

Japan real wages in June rise for 6th straight month on summer bonuses

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TOKYO (Kyodo) -- Japan's real wages in June rose 1.6 percent from a year earlier, increasing for the sixth straight month in the longest positive streak since a seven-month run in 2021, reflecting higher summer bonuses, government data showed Wednesday.

Nominal wages per worker, including base and overtime pay, were up 3.4 percent at 531,677 yen ($3,370), marking the fifth straight month of growth exceeding 3 percent and the first such streak in more than 34 years, the Ministry of Health, Labor and Welfare said.

The latest growth in inflation-adjusted wages matched an upwardly revised 1.6 percent rise in May and came as the inflation index used for the data climbed to 1.9 percent in June from 1.7 percent in the previous month.

Wage growth was supported by a 3.5 percent increase in special earnings, mainly bonuses, to 232,445 yen, as this year's robust "shunto" labor-management negotiations kept pressure on the corporate sector to raise pay.

Data released Tuesday by the Japan Business Federation, the country's largest business lobby known as Keidanren, showed that major companies agreed in the talks to raise wages by 5.37 percent on average, surpassing 5 percent for the third straight year.

The organization also said summer bonuses at major firms were up 1.88 percent on average from a year earlier on the back of healthy corporate profits, topping 1 million yen for the first time since comparable data became available in 1981.

While the yen's sharp fall has pushed up import costs, Japan's consumer prices have remained below 2 percent due in part to government measures to keep down gasoline and other energy prices, helping real wages to stay in positive territory.

Economic analysts, however, warn that the pace of inflation in resource-poor Japan is likely to accelerate later this year as more companies are expected to pass on rises in raw materials and labor costs to retail prices.

Solid wage growth and stable price increases are key conditions for the Bank of Japan to continue lifting interest rates as it seeks to normalize its monetary policy after a decade of unorthodox easing that ended in March 2024.

The central bank left the benchmark policy rate unchanged at 1.0 percent at its meeting last month, but Governor Kazuo Ueda signaled more rate hikes, flagging upside risks to inflation and citing factors including the weaker yen, which drives up import costs.

Article source:  https://mainichi.jp/english/articles/20260805/p2g/00m/0bu/017000c

Japan Food Exports: Ideas Later.

Japan farm, food exports up 10.9% to record high in 1st half of 2026

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TOKYO (Kyodo9 -- Japan's exports of agricultural, forestry and fishery products and food products in the first half of 2026 rose 10.9 percent from a year earlier to 897.7 billion yen ($5.7 billion), a record high for the period, the government said Tuesday.

Shipments to all of Japan's top 10 destinations, including the United States and Hong Kong, exceeded year-before levels, pushing the overall total to a new January-June peak for the second straight year.

By product, green tea posted a notable gain, supported by a global matcha boom, with the Ministry of Agriculture, Forestry and Fisheries saying that growing inbound tourism has raised overseas awareness of Japanese food.

Rising health consciousness also contributed, while new sales channels expanded at supermarkets and restaurants abroad that had not previously handled Japanese food. But the pace of export growth slowed from 15.5 percent in the first half of 2025.

Among the top 10 destinations by export value, eight countries and regions, apart from second-ranked Hong Kong and third-ranked China, marked first-half records. Exports to Hong Kong increased 3.0 percent, while those to China grew 4.3 percent.

Exports to South Korea rose 20.5 percent, with yellowtail and beer showing solid gains, while those to Vietnam jumped 35.4 percent on strong demand for scallops and mackerel. The United States ranked first, up 15.3 percent to 162.6 billion yen.

Green tea, beef, apples, and sauces and mixed seasonings registered record highs for the January-June period. Green tea surged 83.5 percent to 48.2 billion yen, while yellowtail surged 69.0 percent to 43.4 billion yen.

Demand for the tea as an ingredient for lattes and sweets grew. Yellowtail exports to North America and South Korea remained firm, while prices increased. Rice exports fell in volume terms due to shortages but rose in value to a record 7.5 billion yen on higher prices.

Article source:  https://mainichi.jp/english/articles/20260804/p2g/00m/0bu/030000c

BOJ Keeps Key Interest Rate Unchanged. Ideas Later.

BOJ keeps key interest rate unchanged, lifts economic outlook for FY 2026

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TOKYO (Kyodo) -- The Bank of Japan on Friday kept its benchmark interest rate unchanged at around 1.0 percent after raising it to a 31-year-high last month while revising upwards its economic outlook for the current fiscal year, which started in April, despite ongoing Middle East tensions.

After a two-day policy meeting, the central bank said it will continue to raise the rate to stably achieve 2 percent inflation target, vowing to adjust the timing and pace by examining the Middle East development, expansion in artificial intelligence-related demand and the developments in foreign exchange rates.

In the latest quarterly economic outlook report, the central bank said it expects the Japanese economy to grow 0.6 percent in fiscal 2026, compared with its earlier projection of a 0.5 percent expansion.

While the U.S.-Iran conflict is expected to weigh on economic activity for fiscal 2026, the economy will be supported by factors such as the increase in global AI demand, the BOJ said.

For fiscal 2027, the central bank lifted the outlook to an expansion of 0.8 percent compared to 0.7 percent forecast earlier, noting that the negative effects of high crude oil prices will wane and that a "virtuous cycle from income to spending will gradually intensify."

Core consumer prices, excluding volatile fresh food, are estimated to rise 2.5 percent in fiscal 2026, against the 2.8 percent forecast in April.

With businesses continuing moves to pass on wage increases to sales prices, high crude oil prices and a weak yen, the bank said the consumer price index is likely to "accelerate to a level clearly above 2 percent from the second half of fiscal 2026."

"As for underlying CPI inflation, there is a risk that it will deviate upward to a level above the price stability target of 2 percent," it said in the report.

Of the nine Policy Board members, Hajime Takata voted against the action to keep the key short-term interest rate unchanged and called for a hike to around 1.25 percent, citing the need to respond to upside risks to prices.

Article source:  https://mainichi.jp/english/articles/20260731/p2g/00m/0bu/022000c

Japan Possible Cut in Food Tax: Ideas Later.

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

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TOKYO (Kyodo) -- Prime Minister Sanae Takaichi said Thursday that Japan will cut the consumption tax rate on food and beverages to 1 percent from the current 8 percent for two years starting next April, marking the first reduction since the system was introduced in 1989.

The tax cut will be coupled with cash handouts to low- and middle-income earners to "effectively reduce the tax burden to zero," which is "the best option" to support households struggling with higher prices, Takaichi told a press briefing at her office.

The plan was unveiled earlier in the day at a meeting of executives of the ruling Liberal Democratic Party led by Takaichi, who instructed senior LDP officials to secure the party's endorsement and pave the way for Cabinet approval by early next month.

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 social security funding, with the loss of tax revenues reaching about 10 trillion yen ($61 billion) over two years.

Takaichi, who is pursuing expansionary spending to spur economic growth, has yet to identify a specific revenue source to offset the tax cut, but told reporters the government will secure the necessary funds through fiscal "reforms" and "without (issuing) deficit-covering bonds."

Acknowledging that the consumption tax is a vital source of funding for social security, Takaichi said, "I will take full responsibility for restoring the tax rate to its original level two years after (implementing the cut) to ensure fiscal sustainability and maintain market confidence."

Takaichi's tenure as LDP head, however, will expire in fall 2027, meaning it is uncertain whether she will remain prime minister in spring 2029.

LDP Secretary General Shunichi Suzuki told reporters earlier Thursday that Takaichi explained her decision to party executives, who unanimously approved it. The party aims to have related bills approved during an extraordinary Diet session likely to be convened in the fall, he added.

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, the late Prime Minister Keizo Obuchi, served as chief Cabinet secretary under Prime Minister Noboru Takeshita, whose government introduced Japan's 3 percent consumption tax 37 years ago.

The LDP, led by Takaichi, scored a landslide victory in the House of Representatives election in February on pledges that included rapid consideration of 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 600 billion yen annually, 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

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