Japan’s government is set to implement a policy providing advance cash benefits to low- and middle-income households when a temporary reduced consumption tax on food ends in 2029. The proposed initiative will see the food tax lowered from 8% to 1% for a two-year period beginning in April 2027. Once the reduced rate concludes in April 2029, eligible households are expected to receive half of their annual benefits in advance to alleviate the impact of the tax reverting to 8%.
The income-based benefit program is scheduled to commence in April 2027, with the amount of payments tailored according to the recipients’ income levels and the number of children in each household. The government forecasts that annual payments during the fiscal years 2027 and 2028 will amount to approximately ¥600 billion, or $4 billion.
In preparation for this policy, the government aims to finalize its plans by September and intends to present the associated legislation during an extraordinary parliamentary session anticipated in October. As part of the funding strategy, the government plans to review subsidies, special tax measures, and government spending instead of resorting to deficit-financing bonds. However, the exact sources of funding have yet to be determined.
Additionally, the government is considering measures to support businesses in the agriculture, forestry, fisheries, and restaurant sectors that may be impacted by these tax changes. Retailers, on the other hand, will be given extra time to adjust to the tax-inclusive price display requirements, ensuring a smoother transition as they adapt to the new regulations.