The Japanese government is set to implement a plan to ease the financial impact on low- and middle-income households when a temporary reduction in the consumption tax on food ends in 2029. The proposed policy will initially decrease the tax on food items from 8% to 1% for a two-year period, starting in April 2027. To help mitigate the effects once the tax reverts to its original rate of 8% in April 2029, half of the annual benefit for the qualifying households will be disbursed in advance.
This income-based benefit program is scheduled to launch in April 2027, with the amount of payments adjusted according to the income level of recipients and the number of children they have. The government anticipates that annual disbursements during fiscal years 2027 and 2028 will reach approximately ¥600 billion, which is about $4 billion. The finalization of this policy is expected by September, with the related legislation planned for submission to an extraordinary parliamentary session in October.
To support this tax reduction initiative, funding will be sourced through a careful review of subsidies, special tax measures, and government spending, rather than resorting to deficit-financing bonds. Although the exact funding sources have not yet been determined, the government is committed to ensuring the financial integrity of the program.
In addition to providing direct benefits to households, the government is preparing measures to assist sectors such as agriculture, forestry, fisheries, and restaurants that may be affected by these tax changes. Retailers will also be given additional time to adjust to the requirements for tax-inclusive price displays.