Japan Panel Agrees to Introduce New Benefit Program in FY 2029

Tokyo, July 16 (Jiji Press)–Japan’s suprapartisan National Council on Social Security at a working-level meeting Thursday agreed to introduce a new benefit program for low- and middle-income earners in fiscal 2029. The council, however, postponed a decision on a proposed consumption tax cut for food products, eyed as a stopgap measure until the benefit program is introduced, due to the ruling and opposition parties remaining at odds over the matter. In talks with reporters after the meeting, Itsunori Onodera, chairman of the ruling Liberal Democratic Party’s Research Commission on the Tax System, who heads the working-level talks, said, “We’ve reached an agreement to adjust the wording (concerning the program) and report to the full council.” Under the program, aimed at increasing take-home pay of middle- and low-income workers and promoting employment, the amount of benefits will vary according to the levels of income. The specific amounts of benefits and income limits will be decided within the scope of available permanent financial resources and based on comparisons of the ratio of tax and social security premium burdens to income with other countries. The program will also call for additional benefit payments taking into account income thresholds with respect to income tax payments and the number of children aged 18 or below. There will be exceptions to the benefits for recipients with high-income spouses. For people who will not be covered by the program, including those unable to work due to illness or disability, various measures will be considered, such as providing financial aid, consultations and employment support in an integrated way. Administrative work related to benefit payments will be jointly undertaken by the central and local governments. The program calls for generating necessary financial resources for the benefits through full-scale reviews of spending and revenues, including existing subsidies and tax incentives, without relying on the issuance of deficit-covering bonds so as not to lose financial market confidence. Regarding the proposed consumption tax cut, opposition parties have raised objections to a plan to reduce the rate for food items effectively to zero by lowering it to 1 pct for two years from April 2027 and providing cash benefits equivalent to the amount of revenue from a 1 pct consumption tax rate. The consumption tax issue will be discussed again on Wednesday. Prime Minister Sanae Takaichi has expressed hopes that a conclusion on the consumption tax issue will be reached by around the beginning of August, with in mind a plan to submit related legislation to an extraordinary parliamentary session likely to be convened this autumn. END [Copyright The Jiji Press, Ltd.]