Japan’s government is planning to offer advance cash benefits to low- and middle-income households as an offset measure when a temporary reduction in the consumption tax on food ends in 2029. This initiative will coincide with a proposed policy that reduces the consumption tax on food from 8% to 1% for a period of two years, starting in April 2027. Once the reduced rate concludes in April 2029, half of the annual benefits for qualifying households will be disbursed ahead of time to help mitigate the impact of the tax reverting to 8%.
The income-based benefit program is slated to commence in April 2027, with the amount of payments varying based on the recipients’ income levels and the number of children in each household. For the fiscal years 2027 and 2028, the annual payments are projected to total approximately ¥600 billion, or $4 billion. The government aims to finalize this policy in September and intends to submit the necessary legislation during an extraordinary parliamentary session anticipated in October.
To finance the tax reduction, the government plans to review existing subsidies, special tax measures, and government spending, rather than resorting to deficit-financing bonds. However, the specific sources of funding have not yet been finalized. This careful planning reflects the government’s commitment to maintaining fiscal responsibility while implementing these tax adjustments.
In addition to the cash benefits, the government is also preparing measures to support sectors such as agriculture, forestry, fisheries, and restaurant businesses that may be affected by these tax changes. Retailers, in particular, will be given additional time to comply with tax-inclusive price display requirements, ensuring a smoother transition as the new tax rates take effect.
