Japan's government is contemplating a budget of approximately $33bn to provide relief to low-income households and implement an income tax reduction aimed at mitigating the impact of rising living costs, as per three government officials who spoke to Reuters on October 25.
The proposed expenditure, which is currently estimated at about ¥5 trillion (equivalent to $33.37 billion), includes a one-time blanket income tax reduction of ¥30,000 per person and a residential tax cut of ¥10,000. A draft plan obtained by Reuters indicates that these measures are scheduled for implementation in June 2024. Furthermore, Prime Minister Fumio Kishida's cabinet is set to officially decide on the spending plan on November 2, and it also confirms financial support for low-income households, as reported earlier by the Nikkei newspaper.
The ruling party's influential tax panel will deliberate the specific details concerning these tax reductions toward the end of the year, as per the officials who spoke anonymously. Deputy Chief Cabinet Secretary Hideki Murai informed reporters that he was aware of the prime minister's televised statement on October 24, in which he expressed a desire to achieve wage increases that would counterbalance rising prices next year.
Tax revenues have shown growth this year, and Murai stated that the prime minister is keen to explore ways to redistribute some of those revenues to support households.
"The prime minister will provide formal and detailed instructions at a meeting tomorrow with government officials and the ruling bloc, which will be formulated through discussions in the ruling party's tax panel," Murai stated.
Inflation, driven by escalating raw material costs, has exceeded the central bank's 2% target for over a year, dampening consumption and casting a shadow on the prospects of an economy that is slowly recovering from the aftermath of the COVID-19 pandemic.
Given that wage increases have been insufficient to offset rising prices, Kishida has outlined a plan to alleviate the financial burden on households by returning a portion of the anticipated increase in tax revenues resulting from robust economic growth.
Murai also disclosed that Kishida is scheduled to discuss wage hikes, among other topics, with officials from the automotive industry during his visit to the Japan Mobility Show on October 26.
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