When you shop in Japan, you may notice signs that say “tax included (税込)” or “tax excluded (税別)”. You might also hear about tax-free shopping for foreign visitors. These are all connected to Japan’s consumption tax system, which plays a central role in both everyday life and the nation’s economy. In this article, we will explore the history of consumption tax, how it is used, the reduced tax rate system, and practical tips for travelers—including useful Japanese phrases you can use while shopping.
What is Consumption Tax?
Consumption tax is an indirect tax added to goods and services when they are purchased in Japan. While consumers pay it at the counter, businesses are responsible for remitting it to the government. It has become a central part of daily life in Japan, and for travelers, it is something they cannot avoid when shopping.
The History of Consumption Tax
Consumption tax was first introduced in 1989 under Prime Minister Noboru Takeshita, with a starting rate of 3%. The main reason was the need to secure a stable source of revenue for social security, as Japan’s rapidly aging population required more funding.
At the time, the public strongly opposed the introduction, and demonstrations and protests took place nationwide. Over time, however, the tax rate has been raised step by step:
- 1997: 5% (under Prime Minister Ryutaro Hashimoto; the economy slumped, leading to the so-called “consumption tax shock”)
- 2014: 8% (under Prime Minister Shinzo Abe; part of major tax and social security reforms)
- 2019: 10% (along with the introduction of the reduced tax rate system)
Thus, the tax has gradually increased in line with social and economic needs.
The Reduced Tax Rate System
When the rate was raised to 10% in 2019, the reduced tax rate system was introduced. Under this system, a lower rate of 8% applies to food and beverages (excluding alcohol) and to regularly subscribed newspapers.
The purpose is to reduce the burden on everyday necessities. However, the rules are sometimes confusing. For example:
- Eating at a restaurant → 10%
- Buying a boxed meal at a supermarket → 8%
This complexity was widely discussed when the system first began.
How Consumption Tax Is Used
Revenue from consumption tax mainly funds social security programs, including:
- Pensions
- Healthcare
- Nursing care
- Childcare support and tuition-free education
In addition, some of the revenue is used for debt repayment and economic stimulus measures. In this way, consumption tax is one of the main pillars supporting Japan’s public finances.
Tax-Free Shopping in Japan
For foreign visitors, Japan offers a tax-free shopping system. This allows travelers to shop without paying consumption tax if they meet certain conditions.
Conditions
- Show your passport at the store.
- Spend at least 5,000 yen in one store (up to 500,000 yen for consumable items).
- Goods must be taken out of Japan and not consumed domestically.
Tax-free stores can be found not only in airports but also in major cities such as Tokyo, Osaka, and Kyoto, as well as in department stores, large electronics shops, and drugstores. At checkout, your passport will be checked, and a special receipt will be issued. Since customs may check it when you leave Japan, it is important to keep these documents safe.
Cultural Point: Japan’s “Receipt Culture”
Japanese receipts are extremely detailed. They clearly list the tax rate, tax amount, and total for each category. For example, if you buy both groceries and daily goods at a supermarket, the receipt will show 8% for groceries and 10% for daily goods separately.
This level of transparency is a distinctive feature of Japan’s “receipt culture” and often surprises visitors from abroad.
Key Vocabulary Related to Consumption Tax
- 税込み (zeikomi): tax included
- 税別 (zeibetsu): tax excluded
- 税抜き (zeinuki): essentially the same as tax excluded
- 軽減税率 (keigen zeiritsu): reduced tax rate
- 免税 (menzei): tax free
- 還付 (kanpu): tax refund
On price tags and advertisements, you will often see “税込” (tax included) or “税別” (tax excluded). Be careful: the actual amount you pay may differ depending on which is used.
Useful Phrases for Shopping
Here are some helpful Japanese phrases with English translations:
これは税込みですか。
Kore wa zeikomi desu ka.
(Is this price tax included?)
免税にできますか。
Menzei ni dekimasu ka.
(Can this be tax free?)
レシートをください。
Reshīto o kudasai.
(Please give me the receipt.)
領収書をお願いします。
Ryōshūsho o onegaishimasu
(May I have an official receipt?)
Memorizing these expressions will make your shopping experience much smoother.
Final thoughts
Since its introduction in 1989, Japan’s consumption tax has undergone several increases and now stands at 10%, with a reduced rate of 8% for certain items. It plays a critical role in funding social security while directly affecting consumers’ daily spending.
For travelers, knowing about the tax-free shopping system allows them to shop more wisely. In addition, understanding Japan’s unique receipt culture and the difference between tax included (税込) and tax excluded (税別) pricing will make shopping easier and less confusing.
With this knowledge, both residents and visitors can enjoy a smoother and more comfortable shopping experience in Japan.