Japanese businesses brace for tax cut

Japanese businesses are rushing to cope with a consumption tax cut on food from 8% to 1% that will be implemented for two years from next April.

Restaurant operators are poised to expand take-home meals, such as bento boxed meals and other precooked dishes, to cope with a wider tax gap between eat-in meals and takeout foods.

They are concerned that customers may end up refraining from dining out, as the consumption tax rate will remain at 10% on eat-in orders. The tax rate gap between eat-in meals and precooked foods sold at convenience stores and supermarkets will broaden to 9 percentage points from the current 2 points.

“This is extremely difficult. Restaurants will lose customers,” said Miki Watanabe, chairman and CEO of Watami, an operator of izakaya Japanese-style pubs.

Zensho Holdings, which operates Sukiya gyūdon beef-on-rice restaurants and other chains, intends to expand take-home and delivery food services. “We are ready to accept any circumstances,” Chief Financial Officer Kiyohiko Niwa said.

Royal Host, a family restaurant chain, is considering offering menu items exclusively for taking away, said Masataka Abe, president of Royal Holdings, its parent company.

A restaurant industry group is demanding the government take measures to boost demand, such as issuing premium dining vouchers.

The tax rate change will force retailers to revise cash register systems.

In general, it takes about half a year to revise a cash register system for deployment at stores, an official of a major cash register maker said.

This means that retailers have to fight a battle against time. “We will make all-out efforts to avoid any confusion for consumers,” said Shinichiro Nakamura, an executive at the All Japan Supermarket Association.

Support is needed for small-scale farmers as the tax cut is expected to reduce their income.

Farmers with annual sales of ¥10 million or less, who are exempt from tax payments, are able to keep as revenue the consumption tax that they receive from buyers of their products. But the tax cut will reduce the revenue.

The government is considering providing assistance to small-scale farmers and restaurant operators.

Yoshito Shinno, chief of the Central Union of Agricultural Cooperatives, or JA-Zenchu, said, “We hope measures will be taken to help resolve the problems.”