TOKYO (Kyodo) -- The government on Tuesday approved a tax reform package that would cut Japan's 8 percent consumption tax on food and nonalcoholic beverages to 1 percent for two years starting in April 2027 to ease the burden of rising prices.

The government will not count on deficit-financing bonds to cover the tax revenue shortfall, estimated at roughly 10 trillion yen ($65 billion), Finance Minister Satsuki Katayama said amid growing concerns over how it will secure the necessary funds. The government will outline its funding plan by the end of this year.

It will be Japan's first consumption tax cut since the system was introduced in 1989. Retailers will begin full-fledged preparations, including cash register system upgrades.

Prime Minister Sanae Takaichi's government plans to submit related legislation to parliament during an extraordinary session expected to convene in October.

"The government will provide a concrete picture of how to secure the necessary funds through the upcoming budget-compilation process," Katayama said at a press conference after the tax package was approved at an extraordinary Cabinet meeting.

The funds will be secured "without relying on special deficit-financing bonds to maintain market confidence," she said.

In financial markets, investors are increasingly concerned about Japan's fiscal health as the Takaichi government aims to boost growth through aggressive spending.

The ruling Liberal Democratic Party and its coalition partner, the Japan Innovation Party, also pledged support for small farmers and restaurants, which are expected to face revenue declines.

The package also calls for an income-based benefit for low- and middle-income earners starting in fiscal 2027.

The benefit payments would total about 600 billion yen per year in fiscal 2027 and 2028, equivalent to the revenue from the remaining 1 percentage point of the consumption tax that will not be cut. The cash handouts will be expanded from fiscal 2029.

Details such as eligibility and the amount of the handouts have yet to be determined.

The government adopted the basic policy for the tax cut and benefit program on Aug. 5. The measure is expected to face parliamentary debate, with opposition parties having raised concerns in a multiparty social security council.