Japan’s government is preparing to introduce a financial relief plan aimed at assisting low- and middle-income households as the country phases out a temporary reduction in the consumption tax on food set to expire in 2029. Under this initiative, the consumption tax on food items will be lowered from 8% to 1% for a two-year period beginning in April 2027. To cushion the impact when the tax rate returns to 8% in April 2029, the government plans to disburse half of the annual financial benefits to eligible households in advance.
The proposed income-based assistance program is scheduled to kick off in April 2027, with the amount of aid determined by the recipients’ income levels and family size. For the fiscal years 2027 and 2028, it is projected that the annual payments will be around ¥600 billion, or approximately $4 billion. This policy is expected to be finalized by September, with the government planning to present the necessary legislation during an extraordinary parliamentary session anticipated in October.
In terms of funding the tax reduction, the government is looking into options such as reassessing existing subsidies, reviewing special tax measures, and optimizing government expenditures, as opposed to issuing deficit-financing bonds. However, definitive sources for the funding have yet to be determined.
Additional measures are also being considered to support sectors that might be adversely affected by the tax changes. These include agriculture, forestry, fisheries, and the restaurant industry. Retailers, on the other hand, will be granted more time to adjust to the requirements for displaying tax-inclusive prices, ensuring they can comply with the upcoming changes smoothly.