The Japanese government is set to offer advance cash benefits to households with low and middle incomes, coinciding with the conclusion of a temporary reduction in the consumption tax on food, slated for 2029. This initiative is part of a broader policy proposal that suggests lowering the food tax from 8% to 1% for a span of two years, beginning in April 2027. As the reduced rate is scheduled to revert in April 2029, eligible families would receive half of their annual benefits in advance to mitigate the impact of the tax hike back to 8%.
Scheduled to commence in April 2027, this income-based benefit program will tailor payments according to the income levels of recipients and the number of children in their households. The government anticipates that the annual disbursements for fiscal years 2027 and 2028 will collectively amount to approximately ¥600 billion, or $4 billion. The policy is expected to be finalized by September, with related legislation to be presented during a special parliamentary session likely convened in October.
To finance the tax reduction, the government plans to review existing subsidies, special tax measures, and government expenditures rather than resorting to issuing deficit-financing bonds. Nonetheless, the specific funding sources are still under consideration and have yet to be definitively determined.
In addition to the tax adjustments, the government is preparing to implement support measures for sectors such as agriculture, forestry, fisheries, and restaurant businesses, all of which might be negatively impacted by the changes in tax policy. Retailers, on their part, will be granted extended timeframes to adjust to the tax-inclusive price display requirements.
