Japan’s Refundable Tax Credit Simulator: bridge payments and the 2029 rollout
On 5 August 2026 the Japanese Cabinet approved the basic policy for introducing a refundable tax credit. The new scheme is officially called “income-linked fine-grained benefits” and will be fully introduced in FY2029. For the two years before that, a bridge combines a 1% consumption tax rate on food and drink with an advance benefit payment. Enter your annual income and grocery spending to estimate how much your take-home pay rises per year, and see the shape of the benefit curve (rising → flat → tapering) that the Cabinet decision describes. No sign-up; your inputs are never sent to a server (estimates only).
・The scheme is called “income-linked fine-grained benefits”. It is assessed per individual and covers single people, sole proprietors and freelancers, as well as working low- and middle-income older people
・Full introduction in FY2029
・As a bridge, the consumption tax rate on food and drink drops to 1% for two years from 1 April 2027, with an advance benefit introduced in FY2027. Together these are meant to bring the effective consumption tax on food to zero
・The benefit amount and the income level at which it starts to disappear have not been decided (to be settled together with permanent funding). This simulator lets you move those two figures yourself with sliders
What the shape of the curve means
The Cabinet decision sets out how the benefit is calculated. The graph above is that text turned into a picture.
| Entry | Covers people with a certain level of income from work and a certain tax and social insurance burden. Income from work includes business income and employment income as well as miscellaneous income from work, so sole proprietors and freelancers qualify. The interim report lists candidate entry points such as employment income above ¥740,000, employment insurance coverage (about ¥530,000) and employee health insurance coverage (about ¥1.06M). |
|---|---|
| Flat band | Below the tax-exempt line the amount is flat: incomes there are hard to measure accurately, and a rising scale would risk incorrect payments. The decision says so explicitly. |
| Rising band | To encourage work, the benefit increases until income from work reaches a certain level — the same logic as the US Earned Income Tax Credit. |
| Flat (full amount) | Above that level the benefit stays at the full amount. |
| Taper and disappearance | Once total income passes a set figure, the benefit tapers down to zero in the name of fairness. The interim report notes that in other countries the vanishing point sits at roughly 50% of average pay. |
| Top-up at the income walls | Because take-home pay dips at the ¥1.06M and ¥1.30M social insurance walls, a top-up is added. This is explicitly a temporary measure until the walls are removed by reforming Category 3 insured status and widening employee insurance. |
| Child top-up | People supporting children receive a top-up per child aged 18 or under (15 or under during the bridge). Some members warned this makes the scheme more complex. |
For the walls themselves, see the ¥1.06M and ¥1.30M walls; to see where the dip falls, use the dependent-income threshold simulator.
What happens during the bridge (April 2027 to March 2029)
Before full introduction in FY2029, the government needs new ways to capture spousal income and information on dependants aged 16 to 18. The two years until then are bridged by the following combination.
| 1% tax on food | From 1 April 2027, for two years, the consumption tax rate on food and drink covered by the reduced rate falls from 8% to 1%. If the full 7 points feed through to prices, a household spending ¥70,000 a month on groceries saves roughly ¥54,000 a year (this page assumes that). |
|---|---|
| Advance benefit | Within the value of the remaining 1%, an income-linked benefit using existing income data starts in FY2027. Unlike the full scheme, it has no exception for spousal income, and the child top-up applies to children aged 15 or under. |
| Together | The Cabinet decision describes the pair as bringing the consumption tax on food and drink effectively to zero. |
The decision also flags support for farmers who cannot reclaim input tax, and cash-flow help for restaurants once the impact is clear.
Where the money comes from
Because the scheme is permanent, the Cabinet decision says permanent rather than one-off funding is required, and that it must be secured “without relying on special deficit bonds, so as not to undermine market confidence — for example by reviewing subsidies and special tax measures, through every avenue on both the spending and revenue sides.” The same applies to the two bridge years, to be settled in the FY2027 budget process.
In other words, who pays for it is still to be decided. Whether special tax measures really are pared back, or whether a tax rise follows, will only become clear in future budgets. You can see what Japan currently collects, and from where, in our tax revenue data.
This page provides general information and gives estimates only; it is not tax or social insurance advice. The benefit amount, the thresholds and the point at which tapering begins have not been decided. The shape of the curve (entry at ¥740,000, the flat band, the rising band ending at ¥1.60M, tapering starting at 65% of the vanishing income, a wall top-up of 50% of the full amount and a child top-up of 50% per child) is our own placeholder, built from the wording of the Cabinet decision. The consumption tax figure assumes the full 7 points pass through to retail prices; actual price changes will vary. The Japanese version of this page and the official documents are authoritative. Please check the eventual legislation, and consult a tax office or a licensed tax accountant for individual matters.
Related pages
- What the refundable tax credit is: the whole picture
- All simulators / Dependent-income thresholds / Tax reform / iDeCo tax saving
- Residence-tax-exempt households: conditions and support
Sources: Cabinet Secretariat, Basic Policy for Introducing a Refundable Tax Credit (Cabinet decision, 5 August 2026) and the interim report of the Social Security National Council (29 July 2026). Figures and rules may change; please check the official sources.