‘Embarrassment for Japan’: PM wants to cut sales tax but cash registers say no

The Japanese government has pledged to suspend an 8% sales tax on food but says it is being thwarted by an unexpected opponent – uncooperative cash registers.

According to the devices’ manufacturers, the systems at big retail chains that process everything from cash to cardless transactions were never designed to calculate a tax rate of zero and so they require a major overhaul that could take up to a year.

All the major parties running in Japan’s February election, which prime minister Sanae Takaichi’s Liberal Democratic party (LDP) won by a landslide, promised some form of cut or temporary abolition of the 8% consumption tax on food as people struggled with a cost-of-living crisis.

The LDP’s manifesto called for the rate to be reduced to zero for two years, to be implemented by March next year.

However, after being repeatedly pressed by opposition parties on a concrete timetable, Takaichi put the fault for the delay firmly at the feet of cash registers.

The prime minister blamed the inflexible machines, calling the situation an “embarrassment for Japan” at a parliamentary committee on 11 May. She added that it was nothing short of “pathetic that we can’t even flexibly change tax rates when a pandemic or major disaster occurs”.

But some critics claim Takaichi is using the issue to delay the cut she promised during her victorious election campaign this year as her government looks for ways to fund the measure.

Political opponents and commentators pointed out that Takaichi herself had suggested that adjustments to cash registers would take time during a debate on tax cuts last year. Some believe the issue – called the “reji-kabe”, or register wall, in some quarters of the domestic media – is being used as a delaying tactic while the ministry of finance works out a plan to fund the tax suspension.

Japan’s public debt-to-GDP ratio is the highest in the world, at about 230%.

The tax pledge on food would cost the finance ministry around 5tn yen ($31.5bn) annually.

But a compromise has surfaced: the government is now floating the idea of reducing the tax on food to 1%, which could be done in five or six months. It would allow the government to – almost – fulfil its campaign promise, while also reducing the cost by nearly $4bn.