Food and Beverage, Government:
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Summary
Japan is progressing plans for a temporary reduction in the rate of consumption tax applied to food items in response to inflation and rising living costs. Japan currently applies a 10% consumption tax, with an 8% reduced rate for take-home food and non-alcoholic beverages. On 5 August the administration of Prime Minister Takaichi announced it would lower consumption tax on food items to 1% for a period of two years, starting April 2027. Legislative changes are required.
For New Zealand exporters, particularly food and beverage suppliers, a lower food tax could modestly improve consumer demand and retail competitiveness for imported products such as dairy, kiwifruit, and meat. However, the impact on restaurant demand is unclear given the potential for the consumption tax rate difference between dine-in meals and take-home foods to grow. The proposed changes would not change the structure of the consumption tax system and the points at which consumption tax is payable.
Report
Japan is progressing plans for a temporary reduction in the consumption tax applied to food items as part of the government’s response to inflation and cost‑of‑living pressures.
Under the current system, Japan applies a standard 10% consumption tax, with a reduced 8% rate for take-home food and non-alcoholic beverages introduced in 2019.
The Takaichi Government campaigned on temporary elimination of consumption tax on food items. The Government is reportedly aiming to submit enabling legislation later in 2026, with implementation from April 2027, aligned with the start of Japan’s fiscal year.
While Prime Minister Takaichi initially advocated for a full 0% rate, momentum shifted toward a compromise 1% rate. Officials argue this would allow faster implementation because many point‑of‑sale and accounting systems across Japan are not configured to handle a zero-tax rate without extensive upgrades. Government estimates suggest changing systems for a 1% rate could be completed within five to six months, versus up to a year for a 0% rate.
Implications for New Zealand exporters
For New Zealand exporters, especially in the food and beverage sector, a reduction in Japan’s consumption tax on food products would likely be marginally positive for consumer demand and retail price competitiveness. Imported products sold through supermarkets and retail channels — including dairy, kiwifruit, meat, seafood and processed foods — would generally benefit in the same way as domestic products if covered under the reduced tax category.
Restaurant sales may not benefit equally, as Japan’s existing reduced tax framework distinguishes some dine‑in transactions from take‑home food products. Exporters heavily exposed to food service channels should monitor final policy design carefully. An increase in the difference in the consumption tax rate for dine-in transactions vs take-home products has the potential to reduce demand for dine-in options. There have been some suggestions that the government is looking at how it can support the hospitality sector.
The proposed changes would not change the structure of the consumption tax system, the points at which consumption tax is payable, and at which points tax refunds can be sought. It may have cash flow implications for businesses given a lower consumption tax rate would apply on food and beverage related transactions.
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External links
The following links may provide useful information to businesses:
NZTE’s website(external link) and their myNZTE(external link) provides a range of insights and tools available to support New Zealand exporters.
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MBIE publishes a sector reports series(external link) which provides regularly updated reports on all industry sectors that make up the New Zealand economy. These include official economic data and the challenges and opportunities that face New Zealand’s industry sectors.
Business.govt.nz(external link) provides tools and advice from across government to save small businesses’ time and help make the business a success.
MFAT has created a tariff finder(external link) which is designed to help goods exporters and importers maximise benefits from New Zealand’s Free Trade Agreements and compare tariffs in 136 other markets.
The all of government Trade Barriers(external link) website can be used to register any trade barriers experienced or issues exporting to an offshore market. Queries can be sent via the website or through the MFAT Exporter Helpline 0800 824 605. Enquiries will be sent to the government agency best placed to answer.
Tatauranga Aotearoa Stats NZ provides official data on the value of New Zealand’s exports and imports of both goods and services, by commodity type via the New Zealand Trade Dashboard(external link). This interactive dashboard is updated every quarter and allows for filtering by country and by commodity type.
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