TOKYO: Facing a sudden slide in public support, Japanese Prime Minister Sanae Takaichi is pushing forward with a high-stakes economic gamble – temporarily slashing the food consumption tax, a popular move that could prove politically costly down the road.
Her Cabinet on Wednesday (Aug 5) approved the plan to cut the tax from 8 per cent to 1 per cent for two years, starting April 2027, and it will be tabled when Parliament convenes around October.
Takaichi’s Cabinet support has been sliding over perceptions that she was prioritising ideologically-driven legislation over measures to ease economic pain wrought by rising costs.
This move, which on paper helps lower costs, could thus shore up her popularity in the short term, with Takaichi framing it as essential relief for low- and middle-income households struggling with inflation.
But it could in the longer term exacerbate inflation and create a massive budget shortfall among other things.
The Prime Minister has also presented the move as a sacred obligation to deliver on a core promise made during the ruling Liberal Democratic Party’s (LDP) unprecedented landslide election victory in February.
The cut will apply specifically to groceries, non-alcoholic beverages and takeaway meals currently taxed at a reduced 8 per cent rate, while dining out will remain taxed at the standard 10 per cent.
It represents an unconventional shift from the standard playbook of targeted cash handouts and marks Japan’s first consumption tax reduction since the levy was introduced in 1989 to fund social security programmes, raising acute questions over how the government will plug a two-year revenue shortfall of up to 10 trillion yen (S$81.2 billion).
Reducing the food consumption tax could also worsen inflation by driving up demand, while a growing fiscal deficit could trigger negative market reactions that would weaken the yen further. That would drive up the costs of imported food and energy.
“Inflation is the most politically unpopular phenomenon in any country or era,” Sota Kato, a former trade bureaucrat and now a resident fellow at the Tokyo Foundation for Policy Research think-tank, told The Straits Times. “If high prices persist, public backlash could ensue. I believe this represents the single greatest political risk for a Takaichi administration.”
The intervention, expected to lighten an individual’s tax burden by roughly 36,000 yen annually, comes as Cabinet approval ratings suffer a drop across major media surveys.
Having ridden high in the 60 to 75 per cent range since she took office in October 2025, Takaichi’s support has eroded to between 41 and 59 per cent. In several polls, Cabinet disapproval ratings surpassed approval ones for the first time in July.
Although these numbers remain healthy by Japanese political standards, the slide has rattled the administration, signalling a definitive end to its honeymoon period. A Cabinet and LDP executive reshuffle now appears imminent and could take place by September.
Doshisha University political scientist Toru Yoshida believes the tax cut will hand Takaichi a short-term political win that will “at least trigger a temporary rebound in support”, given that her early popularity was buoyed by high expectations that she would tackle rising living costs head-on.
He told ST her approval slipped largely because of perceptions that she prioritised ideological battles during the parliamentary session that closed on July 25, focusing on “issues that had nothing to do with ordinary people’s lives”.
Among the policies that Takaichi’s government bulldozed through the Diet, with the LDP’s overwhelming numbers, were reforms to the Imperial House Law cementing male-only succession, defying strong public support for female emperors.
Even so, political scientist Mikitaka Masuyama of the National Graduate Institute for Policy Studies noted that the tax cut could easily backfire on Takaichi, given the impossibility of predicting economic conditions in April 2027, let alone two years after that.
The tax cut does not guarantee that inflation or food prices will fall, and it may “turn into another disappointment in people’s minds,” he told ST. “Also, restoring the tax rate will not be politically easy, and this cut may go on longer than two years.”
The proposal also risks unsettling financial markets, as Takaichi has yet to identify a stable funding source to plug the revenue shortfall at a time when fiscal pressures are mounting given Japan’s ballooning social security costs and a push to expand defence spending.
Such concerns have sparked a revolt within the LDP against the tax reduction move. While junior lawmakers are reportedly keeping quiet to avoid being sidelined in the upcoming Cabinet reshuffle, party heavyweights who have openly rebelled include former prime minister Shigeru Ishiba and former defence ministers Tomomi Inada, Taro Kono and Takeshi Iwaya.
The public is similarly divided. A Nikkei survey conducted from July 24 to 26 found 48 per cent in favour of the tax cut and 44 per cent opposed, while a Japan News Network (JNN) poll from Aug 1 to 2 showed 52 per cent supporting the cut against 39 per cent opposed.
Crucially, the same JNN poll highlighted a deeper structural anxiety with 62 per cent expressing deep concern that slashing the consumption tax would ultimately compromise essential public services like healthcare and pensions.
Major newspaper editorials have slammed the policy as short-sighted. The Nikkei newspaper warned on Aug 5: “Forcing through a tax cut with significant side effects and risks is nothing more than a foolish policy that will leave lasting negative consequences for the future.”
The unfolding scepticism surrounding the tax cut underscores the woes afflicting Takaichi, who by right should be celebrating a historic legislative triumph. The Diet session closed on July 25 with all 64 government-sponsored Bills successfully passed, a clean sweep achieved only for the fourth time in Japan’s postwar history.
It has not helped that Takaichi has made communication missteps that have soured the mood surrounding her leadership.
When asked about her falling support at a July 27 press conference, a defiant Takaichi said she had “no particular regrets” over her management style, adding that the causes of the decline were “difficult to analyse”.
She also drew sharp backlash after taking to X on July 20 to post about her gruelling schedule, noting that “zero to three hours of sleep has become the norm”.
Even as world leaders like US President Donald Trump and French President Emmanuel Macron are known for clocking punishing hours, Takaichi was criticised by the public and media for engaging in gekimu appiru (”hard work flex”) that glorifies Japan’s culture of overwork.
This stands in contrast to the mood in October 2025, when she pledged to “abandon the concept of work-life balance” when she won the LDP leadership election. Her quip to “work, work, work, work, work” was met with such enthusiasm that it was named Japan’s buzzword of the year.
“A perception is spreading in Japan that loudly broadcasting one’s busyness is actually proof of incompetence,” Yoshida said. “This is likely the price the PM is paying for communicating with a mindset rooted in the 1980s.”
Takaichi faced fresh anger over a slick social media video, set to gentle background music, that was produced by her office covering her Aug 3 visit to earthquake-stricken Kumamoto. Netizens have accused her of “milking a disaster for personal political gain”.
University of Tokyo political scientist Izuru Makihara, speaking to the Asahi newspaper, likened her to “a reality show participant” who tries to win support by casting herself as a struggling, unpolished outsider trying her best against the odds.
As the novelty of this persona wears off, Takaichi will have to come up with a concrete, fiscally-responsible plan that works if she does not want to end up like many of her predecessors, pushed out of office before her term is up. The fear is that this food tax cut would end up a reckless, short-sighted gamble that sows the seeds of a fiscal crisis future generations cannot afford. - The Straits Times/ANN
