Japan's Prime Minister Sanae Takaichi has encountered an unexpected obstacle in her pledge to suspend the 8% sales tax on food: cash registers that cannot calculate a zero tax rate. The systems used by major retailers were never designed for a tax rate of zero percent, requiring a costly overhaul that could take up to a year, according to manufacturers.
The tax cut was a key promise during the February election campaign, which Takaichi's Liberal Democratic Party (LDP) won by a landslide. The LDP manifesto called for reducing the consumption tax on food to zero for two years, to be implemented by March next year, as part of efforts to ease the cost-of-living crisis affecting many Japanese households.
However, when pressed by opposition parties for a concrete timetable, Takaichi placed the blame on inflexible cash registers, calling the situation an 'embarrassment for Japan' during a parliamentary committee on 11 May. She added that it was 'pathetic that we can't even flexibly change tax rates when a pandemic or major disaster occurs.'
Critics argue that Takaichi is using the issue to delay the promised cut while her government seeks ways to fund the measure. Political opponents and commentators note that Takaichi herself had previously suggested that adjustments to cash registers would take time during a debate on tax cuts last year. Some in the domestic media have dubbed the issue the 'reji-kabe,' or register wall, believing it is a delaying tactic while the Ministry of Finance works out a funding plan.
Japan's public debt-to-GDP ratio stands at about 230%, the highest in the world. The tax pledge on food would cost the finance ministry around 5 trillion yen ($31.5 billion) annually. A compromise has emerged: the government is now considering reducing the tax on food to 1%, which could be implemented in five or six months. This would nearly fulfil the campaign promise while reducing the cost by nearly $4 billion.
