Japan is set to implement a financial support plan for low- and middle-income households as it prepares for an upcoming change in the consumption tax on food items. The government intends to reduce the consumption tax from 8% to 1% for a two-year period starting in April 2027. This temporary measure is designed to alleviate the tax burden on food, which will revert to the original 8% rate in April 2029. To cushion the impact of this transition, eligible households will receive half of their annual benefit in advance.
The income-based benefit program will commence in April 2027, with the amount of financial assistance determined by the recipient’s income and family size, particularly the number of children. The estimated annual disbursement for fiscal years 2027 and 2028 is projected to be around ¥600 billion, equivalent to $4 billion. The Japanese government is working towards finalizing the details of this policy by September, aiming to present the necessary legislation during an extraordinary parliamentary session anticipated in October.
To fund the tax reduction initiative, the government plans to reassess existing subsidies and special tax measures, as well as scrutinize government expenditures. Notably, the strategy avoids the issuance of deficit-financing bonds, though precise funding sources have not been definitively established.
Additionally, the government is formulating strategies to support sectors that will be impacted by the tax changes, such as agriculture, forestry, fisheries, and the restaurant industry. Retailers, on their part, will be granted an extended period to adjust to the new tax-inclusive pricing display requirements.