Japan's Social Security at Crossroads with Consumption Tax Cut

Tokyo, Aug. 6 (Jiji Press)--A planned consumption tax cut in Japan will require the government to secure alternative revenue sources to cover costs related to social security measures.

But no specific ways to make up for the expected loss of revenue have yet to be found.

Revenues from the consumption tax are important financial resources to cover public pension payments, medical expenses and other social security costs.

The government of Prime Minister Sanae Takaichi decided Wednesday a plan to cut the consumption tax rate for food from 8 pct to 1 pct for two years starting in April 2027 as a measure to mitigate the impact of rising prices in the country. The government also plans to provide low- and middle-income people with cash benefits equivalent to the amount of revenue from a 1 pct consumption tax rate for food, in order to effectively reduce the tax to zero.

The total fiscal costs for the food tax cut and cash benefits are seen reaching about 5 trillion yen a year.

[Copyright The Jiji Press, Ltd.]