Japan is planning to introduce advance cash benefits for low- and middle-income households as a temporary measure to ease the impact when a reduced consumption tax on food expires in 2029. Initially, the government intends to lower the tax on food from 8% to 1% for a period of two years, starting in April 2027. As this reduced rate concludes in April 2029, eligible households will receive half of their annual benefits in advance to cushion the financial effect of the tax returning to its original 8% rate.
The proposed income-based benefit program is scheduled to commence in April 2027, with the amount of payments determined by the recipient’s income level and number of children in the household. For the fiscal years 2027 and 2028, the annual payouts are projected to total approximately ¥600 billion, which is equivalent to about $4 billion. The government is working towards finalizing this policy by September, with plans to submit the necessary legislation during an extraordinary parliamentary session anticipated in October.
To fund the tax reduction, the government is considering a review of existing subsidies, special tax measures, and overall government spending rather than resorting to deficit-financing bonds. Although the exact funding sources have not yet been determined, this approach aims to maintain fiscal responsibility while implementing the temporary tax relief.
In addition to the household benefits, the government is also devising strategies to support sectors such as agriculture, forestry, fisheries, and restaurant businesses that may be affected by the tax changes. Retailers, on the other hand, will be given additional time to adjust to the requirements for tax-inclusive price displays, ensuring a smoother transition during the implementation of the new policy.