A cross-party working group on social security resumed meetings Tuesday to discuss a new refundable tax credit system to ease household financial burdens [1].

The move reflects an urgent effort by Japanese lawmakers to combat rising prices and inflation. By combining direct benefits with tax credits, the government hopes to create a more flexible safety net for low-income citizens.

Itsutaro Onodera, the Liberal Democratic Party (LDP) chairman of the tax system research council and head of the working group, said the panel will prioritize discussions on the refundable tax credit system to reach a preliminary agreement quickly [1]. The group is targeting the 2029 fiscal year for the implementation of this new system [1].

However, the panel failed to reach a consensus regarding a proposed reduction in the consumption tax on food. One proposal suggests lowering the food consumption tax rate to one percent for a two-year period starting in April 2027 [2]. Other discussions have surfaced regarding a total reduction to 0%, but the working group remains divided on the specific width of the cut [2].

Onodera said, "First, regarding the main body, I want to make an effort so that we can collect opinions early."

The working group is scheduled to meet again on July 16 to further refine the framework for the tax credits [1]. Onodera said the next meeting will focus on leading the discussion on refundable tax credits to finalize a summary proposal [1].

While the tax credit system offers a targeted approach to relief, the disagreement over the food tax highlights the political tension between broad consumption tax cuts and targeted welfare spending. The LDP and other parties continue to clash over how to balance immediate relief for consumers, and long-term fiscal stability [2].

“The group is targeting the 2029 fiscal year for the implementation of this new system.”

The decision to prioritize refundable tax credits over a general consumption tax cut indicates a strategic shift toward targeted social assistance. While a food tax reduction provides immediate, broad relief, a refundable tax credit allows the government to direct funds specifically to those most affected by inflation without permanently altering the national tax structure. The deadlock over the food tax suggests that the LDP may be hesitant to set a precedent for broad tax cuts that could undermine future revenue.