In a strategic move to cushion the financial impact on low- and middle-income families, Japan’s government is set to introduce advance cash benefits following the conclusion of a temporary reduction in the consumption tax on food, scheduled to expire in 2029. The proposed plan outlines a decrease in the food consumption tax from the current 8% to 1% over a two-year period starting in April 2027. To mitigate the effects of the tax reverting back to 8% in April 2029, eligible households will receive half of the annual benefits in advance.
The initiative, designed to support those most affected by the tax change, is slated to begin in April 2027. It will cater to varying needs of recipients based on their income levels and household size, particularly the number of children. The government projects that annual disbursements for fiscal years 2027 and 2028 will amount to around ¥600 billion, equivalent to approximately $4 billion.
Japan’s government is working towards finalizing this policy by September, with plans to present the corresponding legislation during an extraordinary parliamentary session anticipated in October. Rather than resorting to deficit-financing bonds, the funding for this tax reduction will likely be secured through a review of current subsidies, special tax measures, and adjustments in government spending. However, the exact sources of these funds remain under discussion.
In addition to direct financial support for households, the policy includes measures aimed at assisting sectors like agriculture, forestry, fisheries, and restaurant businesses that could be impacted by these tax modifications. Retailers will also benefit from an extended timeline to adhere to updated tax-inclusive pricing display standards, ensuring a smoother transition.