Basic Policy for Introducing a Refundable Tax Credit

A policy was presented to achieve, as soon as possible, the reduction of the burden on middle- and low-income people suffering from tax, social insurance premium, and rising price burdens as the most important current priority.

Following discussions at the National Council on Social Security and the ruling parties' process, the Cabinet approved the Basic Policy for Introducing a Refundable Tax Credit.

The government aims to achieve an early reduction in the burden on middle- and low-income people through a refundable tax credit.

Measures will be taken to avoid affecting social security, which relies on consumption tax as a valuable source of funding, while also considering fiscal sustainability and securing market confidence.

The government will develop the system's detailed design, finalize the basic framework in September, submit a bill to the extraordinary Diet session, and seek early enactment. To secure funding, it will review both expenditures and revenues while assessing tax revenue trends, examine the feasible fiscal scale as it steadily reduces the debt-to-GDP ratio, and specify total annual government bond issuance.

Supplementary budgets will be limited to measures of truly high urgency and reviewed in light of cost-of-living measures, including finely targeted income-linked benefits and temporary bridges. Special tax measures and subsidies will be examined in greater depth, while revenue will be secured from special accounts and public funds on a zero-based basis, in addition to payments from the Foreign Exchange Special Account and independent administrative agencies.

In the FY2025 supplementary budget, post-supplementary-budget government bond issuance was kept at or below the previous fiscal year's level, while in the FY2026 budget, new government bond issuance in the general account was held below 30 trillion yen for the second consecutive year. The government will continue to adhere to its fiscal management policy under the Basic Policy on Economic and Fiscal Management.