Retail: Macro Monthly (August 2026) Update on factors including incomes, prices, consumer sentiment, and sector investment stance

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

05 August 2026

Retail: Macro Monthly (August

2026)

Update on factors including incomes, prices, consumer

sentiment, and sector investment stance

Subsectors and stocks to watch: We maintain our preference rankings for

covered stocks over the next three to six months (see Figure 2 for details).

Cutting food consumption tax from April 2027: The Takaichi

administration announced a policy to lower the food consumption tax rate

to 1% for two years from April 2027. Further, from June 2027, it plans to

provide a 1% benefit to low- and middle-income working households, and

from April 2029, implement a new income-based benefit system and

restore the food consumption tax rate to 8%. The Cabinet approved these

policies this evening (August 5). According to the calculations in the Nihon

Keizai Shimbun and other media reports, the required fiscal resources are

expected to total about ¥4.4 trillion per year for the food consumption tax

reduction (from 8% to 1%) and about ¥5 trillion per year including the 1%

benefit, for around ¥10 trillion in total over two years.

According to the Nihon Keizai Shimbun and other media reports, benefits

of these measures include (1) mitigating the regressive nature of the

consumption tax, which places a higher tax burden on lower-income

households, and (2) stimulating consumer spending by lowering the

amount paid at the register, unlike cash benefits, which tend to be saved

rather than spent. Further, the move toward zero consumption tax on food

products fulfills the Liberal Democratic Party’s pledge during the Lower

House election in February 2026 to accelerate consideration of this policy.

However, points to be wary of include (i) the possibility of the tax reduction

not being fully reflected in retail prices due to higher crude oil prices, yen

depreciation, and other higher costs, as well as the risk of the effect of the

tax cut being temporary amid persistent inflation; (ii) administrative costs

at the retail level, such as price display changes and system modifications;

(iii) even for the same food items, there is a fairness issue of the disparity

…