Japan’s government is preparing to implement advance cash benefits for low- and middle-income households in anticipation of the expiration of a temporary consumption tax reduction on food in 2029. This proposed policy involves a significant reduction of the food tax rate from 8% to 1% over a two-year period, commencing in April 2027. As the reduced tax rate concludes in April 2029, eligible households will receive half of their annual benefit in advance to cushion the impact of the tax reverting to 8%.
The income-based benefit program is slated to launch in April 2027, with payment amounts depending on the beneficiaries’ income levels and the number of children in their households. The government estimates that annual payments for fiscal years 2027 and 2028 will total approximately ¥600 billion, equivalent to $4 billion. This initiative is part of a broader effort to mitigate the financial burden on households following the reintroduction of the standard tax rate.
Authorities aim to finalize this policy by September and plan to present the corresponding legislation during an extraordinary parliamentary session anticipated in October. The funding for the tax reduction will be sourced by reviewing existing subsidies, special tax measures, and government spending, avoiding the need to issue deficit-financing bonds. However, the precise funding sources are still under determination.
In addition to the direct benefits for households, the government also intends to introduce measures to support sectors such as agriculture, forestry, fisheries, and restaurant businesses, which may be adversely affected by these tax changes. Furthermore, retailers will be granted additional time to adjust to the requirement for tax-inclusive price displays, providing them with the necessary leeway to comply with the new regulations.