In Japan, government officials are gearing up to offer advance cash benefits to low- and middle-income families as a temporary measure to ease the transition when a reduced consumption tax on food ends in 2029. Starting in April 2027, the consumption tax on food will temporarily drop from 8% to 1% for a period of two years. This measure is designed to provide financial relief, but as the reduced rate expires in April 2029, eligible households will receive half of their annual benefit in advance to help cushion the impact of the tax reverting to its original 8% rate.
The government’s plan, which is still in the proposal stage, includes an income-based benefit program scheduled to commence alongside the tax reduction in April 2027. Payments will be adjusted according to the income levels of the beneficiaries and the number of children in each household. Estimates suggest that during the fiscal years 2027 and 2028, the annual disbursement for these benefits will hover around ¥600 billion, equivalent to approximately $4 billion.
Authorities are working towards finalizing the policy by September, with plans to present the necessary legislation during an extraordinary parliamentary session anticipated in October. The funding to support this tax reduction and the accompanying benefits is expected to be sourced from a reevaluation of existing subsidies, special tax measures, and government expenditures, deliberately avoiding the issuance of deficit-financing bonds. Nevertheless, the exact funding details remain to be settled.
Apart from the direct financial benefits to households, the government is also considering support measures for industries likely to be impacted by these tax changes, including agriculture, forestry, fisheries, and the restaurant sector. Retailers will benefit from extended timeframes to adapt to the tax-inclusive pricing display requirements, ensuring a smoother transition for businesses and consumers alike.