Japan considers moving up part of income-linked benefits payment schedule in 2029

The government is considering moving up distributing part of the payments that are under a planned income-linked benefit program from September to April 2029, according to informed sources.

The financial aid program is planned to be introduced during fiscal 2029, and the portion that may be paid in April 2029 would be part of the benefits for the entire fiscal year starting that month.

The move is intended to mitigate the financial burden on households after the consumption tax rate for food, which is planned to be cut from 8% to 1% for two years from fiscal 2027, is brought back to the original rate in April 2029, the sources said Sunday.

The government plans to pay the rest of the fiscal 2029 benefits around September 2029, according to the sources.

If local governments agree to the two-staged payment plan involving greater burden concerning related administrative work, the central government and the ruling coalition will reflect this in a tax system reform package on the consumption tax cut that is expected to be drawn up shortly, the sources said.

Last month, the government decided to introduce the full-scale benefit program, which would cover low- and middle-income workers, in fiscal 2029, after the end of the two-year consumption tax reduction.

The government envisions that the benefits would normally be paid around September every year, after the completion of work to figure out how much recipients earned in the preceding year.

For fiscal 2029, however, the financial burden on households could be heavy if they have to wait until around September to receive the benefits following the food tax rate’s return to 8%, prompting the government to consider moving up the distribution of part of the aid, according to the sources.

Some in both the ruling and opposition camps are concerned that the government may face difficulties restoring the tax rate to 8%, depending on the economic situation and public opinion.

On this, Prime Minister Sanae Takaichi has vowed to bring back the tax rate to 8% after two years with her responsibility.

She also argued that the effects of the benefit program would be greater than those of the consumption tax cut. Still, details of the program, including the benefit amounts and income thresholds, have yet to be decided.