Japan’s government is set to introduce a new initiative aimed at providing financial assistance to low- and middle-income households as a temporary reduction in the consumption tax on food is scheduled to end in 2029. The proposed plan includes lowering the food tax from 8% to 1% for a two-year period starting in April 2027. To ease the transition when the tax returns to 8% in April 2029, the government will offer part of the annual benefit upfront to eligible households.
The initiative, which is income-based, is planned to commence in April 2027. Payments will be calculated based on household income levels and the number of children in each household. The estimated annual payments for fiscal years 2027 and 2028 amount to roughly ¥600 billion, equivalent to around $4 billion. Authorities are planning to finalize the policy details by September and aim to introduce related legislation during an extraordinary parliamentary session anticipated in October.
Funding for the tax reduction is expected to be sourced from a review of existing subsidies, special tax measures, and government expenditures, rather than by issuing deficit-financing bonds. However, the precise funding sources are yet to be determined. This approach underscores the government’s commitment to maintaining fiscal responsibility while supporting household incomes during the transition period.
In addition to household support, the government is also preparing measures to aid sectors such as agriculture, forestry, fisheries, and restaurant businesses that might be affected by the tax adjustments. Retailers will be granted extra time to adapt to the tax-inclusive price display requirements, ensuring they can effectively manage the transition without undue pressure.