Japanese ruling and opposition parties reached a broad agreement Thursday to introduce a new benefit system for low- and middle-income earners [1].
The move aims to reduce the financial burden on households struggling with rising prices and expand support for those unable to work due to illness or disability [4, 5].
Under the agreed framework, the government will implement a refundable tax credit system. The initial phase will focus on providing cash payments based on income levels, with full implementation targeted for the 2029 fiscal year [1, 3]. The plan includes additional payments based on the number of children aged 15 or younger in a household [2].
Separate discussions also addressed a proposal to lower the consumption tax on food and beverages to 1% [1]. While a preliminary summary of the plan was presented on June 24 [3], the specific timing for the tax reduction remains a point of contention. Some reports suggest the tax could drop to near 0% for two years starting next April, though other sources indicate the start date has not yet been finalized [1, 2].
Itsunori Onodera, the Liberal Democratic Party's tax commission chairman and head of the working-level meeting, said he was "entrusted" with the process [1].
The working-level meeting, which included Prime Minister Sanae Takaichi, took place within the National Diet [1, 2]. The group is scheduled to meet again on July 22 to continue refining the details of the proposal [1].
“The initial phase will focus on providing cash payments based on income levels.”
This agreement signals a shift toward a more targeted social safety net in Japan, moving away from universal subsidies toward a means-tested refundable tax credit. By linking benefits to income and the number of dependents, the government is attempting to address systemic poverty and inflation-driven cost-of-living crises without triggering the long-term fiscal instability often associated with permanent broad tax cuts.
