Japan’s government is set to offer advance cash benefits to low- and middle-income households as part of plans to cushion the impact of a proposed temporary reduction in the consumption tax on food, set to expire in 2029. The plan involves reducing the tax on food from its current 8% to 1%, starting in April 2027 for a two-year period. This initiative aims to alleviate financial pressure on eligible households when the tax reverts to its original rate in April 2029, with half of the annual benefit being disbursed ahead of time.
The income-based benefit program is scheduled to commence in April 2027, with payments adjusted according to household income levels and the number of children. The anticipated annual disbursements for the fiscal years 2027 and 2028 are projected to total approximately ¥600 billion, or $4 billion. The government has set a timeline to finalize this policy by September, with plans to introduce the necessary legislation during an extraordinary parliamentary session expected in October.
To finance the tax reduction, the government intends to reassess subsidies, special tax measures, and overall government spending, avoiding the issuance of deficit-financing bonds. Details regarding the specific sources of funding are still under consideration and have not been finalized at this time.
Additionally, the government is preparing to implement measures aimed at supporting agriculture, forestry, fisheries, and the restaurant industry, all of which may be adversely affected by these tax changes. Retailers will also be granted extra time to adjust to tax-inclusive price display requirements, ensuring a smoother transition for businesses and consumers alike.
