Japan to cut the food sales tax from 8% to 1% as the Bank of Japan opens its policy meeting

Japanese Prime Minister Sanae Takaichi instructed the ruling Liberal Democratic Party on Thursday, 30 July 2026 (8 Mordad 1405), to proceed with a temporary cut in the sales tax on food. Under the plan, the consumption tax rate on food and soft drinks would fall from 8 percent to 1 percent for two years starting in April 2027. The details are expected to be finalised in early August, with the related legislation submitted during an extraordinary Diet session in the autumn.

Takaichi said the measure is intended to ease the burden on households facing higher food prices, and that the government will seek to use surplus tax revenue rather than issue deficit-financing bonds. According to News On Japan, the plan could cost the government several trillion yen a year. Takaichi's approval rating fell to 57 percent in July from 69 percent in June, and the yen is trading near its weakest levels in about 40 years, which has made imported food, fuel and raw materials more expensive.

At the same time the Bank of Japan opened its two-day policy meeting on 30 and 31 July. Markets expect the policy rate to be held at 1 percent, a level reached after a June increase that took it to its highest in more than three decades. According to the report, the focus is not this week's decision but how strongly the central bank signals the possibility of further increases later this year. For Iran's market, Japanese monetary policy is followed through the yen, bond yields and global risk appetite; Japan is one of the world's largest crude oil importers.