Japan is gearing up to introduce a financial relief plan for low- and middle-income families, coinciding with the conclusion of a temporary cut in the consumption tax on food set for 2029. The initiative will see the food tax reduced from 8% to 1% for a span of two years, beginning in April 2027. As the reduced rate expires in April 2029, the government intends to disburse half of the yearly benefits in advance to these households, cushioning them from the sudden tax rebound to 8%.
Starting in April 2027, the proposed income-based benefit program will allocate payments to households based on their income levels and the number of children they support. This initiative is projected to distribute around ¥600 billion ($4 billion) annually during the fiscal years of 2027 and 2028. The government is set to finalize the policy details by September and plans to present the necessary legislation during an extraordinary parliamentary session anticipated in October.
To finance the tax reduction plan, the government plans to reassess current subsidies, special tax measures, and overall public expenditure, avoiding the issuance of deficit-financing bonds. However, the specific sources of funding remain undecided as of now.
Alongside the tax adjustments, the government is also preparing to implement supportive measures for sectors such as agriculture, forestry, fisheries, and the restaurant industry, which may face challenges due to the tax changes. Moreover, retailers will be granted an extended timeframe to align with tax-inclusive pricing display requirements.