Japan’s government is preparing to implement a cash benefits program aimed at supporting low- and middle-income households when the temporary reduction in the consumption tax on food concludes in 2029. The initiative proposes a significant tax cut on food from 8% to 1%, set to begin in April 2027 and last for two years. As the reduced rate reverts to 8% in April 2029, eligible households would receive half of their annual benefit in advance to alleviate the financial impact.
The income-based benefits program is slated for initiation in April 2027, with the amount of payments hinging on the income level of recipients and the number of children in each household. For fiscal years 2027 and 2028, the total annual payments are projected to be approximately ¥600 billion, equivalent to $4 billion. The government is working towards finalizing this policy by September, intending to present the necessary legislation during an extraordinary parliamentary session anticipated in October.
Funding for this tax reduction will be sourced by reassessing subsidies, special tax measures, and government spending, rather than resorting to deficit-financing bonds. Nonetheless, the precise funding sources have not yet been determined. The government’s strategy underscores its effort to balance fiscal responsibility with social support, aiming to ease the burden on citizens once the temporary tax relief ends.
Additionally, the government plans to introduce measures to bolster sectors impacted by the tax adjustments, including agriculture, forestry, fisheries, and restaurant businesses. Retailers will also benefit from extended time frames to adapt to tax-inclusive price display requirements, ensuring a smoother transition when the tax rate returns to its original level.