Japan’s government is set to introduce a financial aid initiative aimed at assisting low- and middle-income households as a temporary reduction in the consumption tax on food is scheduled to conclude in 2029. The proposed policy involves decreasing the food tax from the current 8% to 1% for a two-year period beginning in April 2027. To mitigate the impact when the tax rate reverts to 8% in April 2029, the government plans to provide half of the annual benefits to eligible households in advance.
The initiative, which is income-based, will start in April 2027. The amount of aid will vary depending on the income levels of the recipients and how many children are in their households. The government anticipates that the annual payments for the fiscal years 2027 and 2028 will total approximately ¥600 billion, which equates to roughly $4 billion.
Japan’s government aims to finalize the policy framework by September and intends to present related legislation during an extraordinary parliamentary session slated for October. To fund the tax reduction, the government plans to reassess subsidies, special tax measures, and current expenditure, rather than resorting to deficit-financing bonds. However, the exact sources of funding have not yet been determined.
Additionally, the government is preparing measures to support sectors such as agriculture, forestry, fisheries, and restaurant businesses, which could be adversely affected by the changes in tax policy. In a bid to ease the transition for retailers, they will be granted extra time to adhere to tax-inclusive price display requirements.