Japan's Second Takaichi Cabinet officially launched on February 18, 2026, following Prime Minister Sanae Takaichi's selection as the 105th Prime Minister in a special Diet session. The new administration has retained all cabinet ministers from the previous government and immediately set an ambitious agenda focused on consumption tax reduction and swift passage of the fiscal year 2026 budget, according to NHK. For foreign residents in Japan, the most significant development is the government's commitment to reducing consumption taxes on food items. Prime Minister Takaichi has instructed all cabinet ministers to work on implementing the Liberal Democratic Party's campaign promise to eliminate consumption tax on food products for a two-year period. During her evening press conference on February 18, Takaichi emphasized her intention to lower consumption tax rates on food and beverages as soon as possible, NHK reported. The consumption tax reduction plan represents a substantial shift in Japan's fiscal policy. Currently, food items are taxed at the reduced rate of 8%, while most other goods and services face a 10% consumption tax. The proposed elimination of consumption tax on groceries could provide meaningful relief for households, including expat families managing living costs in Japan's expensive urban centers. To implement this tax reduction, Prime Minister Takaichi has directed her cabinet to examine both direct consumption tax cuts and an alternative system called "급부付き税額控除" (kyufu-tsuki zeigaku koujo), or tax credits with benefits. This mechanism would provide refunds to taxpayers, potentially offering a more targeted approach to tax relief. The government plans to submit related legislation during the current Diet session, though specific timelines have not been announced. The cabinet's other immediate priority is securing passage of the fiscal year 2026 budget before the current fiscal year ends on March 31, 2026. Speaking at a joint meeting of Liberal Democratic Party Diet members, Takaichi stressed that passing the budget within the fiscal year is essential for ensuring public security and building a strong economy. She has called on opposition parties to cooperate in achieving this goal, according to NHK. The Second Takaichi Cabinet's formation follows a recent House of Representatives election, which necessitated the special Diet session. Despite the electoral transition, the prime minister opted for continuity by reappointing all cabinet ministers to their previous positions. This decision suggests a strategy of maintaining policy momentum rather than signaling new directions through personnel changes. Takaichi has also held discussions with coalition partner Nippon Ishin no Kai (Japan Innovation Party) leader Hirofumi Yoshimura at the Prime Minister's Office, indicating efforts to maintain the governing coalition's unity on key policy initiatives. For expats living in Japan, the proposed consumption tax changes could affect daily expenses significantly. If implemented as promised, the two-year elimination of consumption tax on food products would reduce grocery costs by 8%. However, foreign residents should note that the policy details remain under development, and the government must navigate the legislative process to enact these changes. The administration has emphasized what it calls "responsible proactive fiscal policy," suggesting the government will pursue economic stimulus measures while maintaining fiscal discipline. This approach will shape not only tax policy but also government spending priorities that may affect public services, infrastructure, and social programs used by both Japanese citizens and foreign residents. As the Second Takaichi Cabinet begins its work, expats should monitor developments in consumption tax legislation and budget passage, as these will directly impact household finances and the broader economic environment in Japan throughout 2026 and beyond.