Can Takaichi Push Through Japan’s Long‑Delayed Refundable Tax Credits?
Refundable tax credits have repeatedly been proposed in Japan as a way to ease burdens on low income households while encouraging labor participation, yet they have never been implemented. Prime Minister Takaichi Sanae is now advancing the policy as a core reform, but questions about funding remain unresolved.
Takaichi Sanae, Prime Minister of Japan, announced plans in February 2026 to temporarily reduce the consumption tax on food to zero for two years. This measure served as a transitional step before introducing refundable tax credits as part of her government's reform program. A cross-party National Council on Social Security was established to design the new system.
After months of deliberation, the council agreed on July 16 to introduce an annual, income-linked, finely calibrated benefits program beginning in fiscal 2029. The benefits aimed to reduce tax and social-insurance burdens on low- and middle-income workers by eliminating thresholds that cause sudden drops in take-home pay. Administrative procedures were initially postponed, with benefits introduced first, while tax credits remained under examination.
However, strong opposition from parties advocating for a benefits-only scheme prevented a full consensus. In late June, another proposal suggested lowering the consumption tax on food and non-alcoholic beverages to 1% for two years, starting in fiscal 2027, with the revenue expected to fund income-linked benefits for low-income consumers.
Debt concerns and opposition from opposition parties prevented a cross-party consensus. The final decision on the policy was expected to be made by the Prime Minister.
Written by urgent.news from Nippon.com's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
