Event: the suprapartisan National Council on Social Security

The government has presented a funding plan for its proposal to reduce the 8% consumption tax rate on food items to 1% for two years starting next April, stating that it will avoid relying on deficit-covering bonds.The plan was shown at a working-level meeting of the suprapartisan National Council on Social Security on Friday. The plan said the tax cut will not use the bonds in order to avoid undermining market confidence, suggesting that subsidies, special tax incentives, and additional nontax revenues could be reviewed as alternative sources.The tax cut proposal was included in a related interim draft shown by the council’s head on Wednesday.The move to avoid the issuance of deficit-covering bonds follows a policy that Prime Minister Sanae Takaichi has consistently emphasized.Still, the funding plan did not specify concrete measures for securing financial resources, instead deferring the issue by stating that the government will reach a conclusion during the process of compiling its budget for fiscal 2027, which starts next April.The council has aimed to consolidate opinions on the tax cut plan by the end of this month, but due to objections from opposition parties, there is no prospect of an agreement.According to the interim draft, “a finely tailored cash benefit program linked to income levels” with about ¥600 billion in financial resources, which is equivalent to the amount of revenue from a 1% consumption tax rate, will be introduced in a simplified form on a provisional basis from fiscal 2027. The move would effectively reduce the tax rate to zero for food items, the draft said.The benefit program and the tax cut will require a combined total of about ¥5 trillion a year in financial resources.Although local governments will lose about ¥1.6 trillion in revenue due to the consumption tax cut, the funding plan only said that…