TOKYO — In its first major tax overhaul in roughly 70 years, Japan is set to reform its consumption tax exemption program for foreign visitors. Beginning next month, the current "instant discount" system at retail stores will be replaced with a "post-departure refund" model aimed at curbing illegal reselling and tax evasion.

Under the previous framework established in 1952, international tourists enjoyed tax-free pricing directly at checkout in over 64,000 duty-free stores across the country. Under the revised system, visitors will first pay the full tax-inclusive price at retail shops. To claim their refund, travelers must verify at airport or seaport kiosks within 90 days of purchase that the items are leaving Japan. Refunds will then be issued via credit card or cash upon departure.

The government implemented this transition to combat illicit resale schemes, where individuals purchase tax-free goods domestically at discounted rates rather than exporting them. Alongside this shift, the 500,000-yen daily purchase limit on consumables—such as food, cosmetics, and medicines—will be abolished. However, the minimum threshold of 5,000 yen in pretax spending per store per day remains unchanged. Furthermore, the cumbersome requirement to seal consumables in special transparent bags will be eliminated, though using these items within Japan remains prohibited.

Japan’s retail sector views the sweeping changes with cautious optimism and concern. Department stores and luxury retailers anticipate a boost in high-end sales following the removal of purchase caps, alongside smoother store operations due to the end of special packaging rules. Conversely, industry experts warn that the added departure procedures and potential refund processing fees might deter some shoppers.

Industry analysts predict a potential 10% dip in certain duty-free sales as illegal bulk buyers exit the market, which could cascade into secondary spending losses at retail basement food halls. Nevertheless, with foreign arrivals hitting a record 42.68 million and spending reaching 9.5 trillion yen in 2025, Tokyo remains steadfast. The government aims to attract 60 million annual visitors and generate 15 trillion yen in tourism revenue by 2030, balancing strict regulatory enforcement with continued visitor growth.

[Copyright (c) Global Economic Times. All Rights Reserved.]