Gov't to provide 10,000 to 15,000 yen to low-income earners

To cushion the impact of a sales tax increase, the government plans to provide 10,000 to 15,000 yen in cash to low-income earners, sources close to the matter said Wednesday.

The government plans to give 10,000 yen per person to households exempt from the local inhabitant tax. Those payments would be provided to around 24 million households, at a cost of 240 billion yen, the sources said.

It is also considering boosting the payment to 15,000 yen per person to the more than 10 million low-income households that receive pensions or child allowances, boosting the total cost to nearly 300 billion yen, the sources added.

The government plans to fund the cash-benefit program under an extra budget for fiscal 2013 through next March, as a step to cushion the potential negative impact on the economy of a sales tax hike next April to 8 percent, from the current 5 percent.

Private-sector members of the Council on Economic and Fiscal Policy, a key government panel, said last week that they estimate the 3-point hike would cost Japanese households an additional 6 trillion yen ($60.6 billion) in tax payments.

Abe is expected to announce Oct. 1 if the planned tax hike will be implemented.

Under legislation passed by the Diet late last year, the national sales tax is to be raised in two stages to twice the current amount to raise money needed to cover the swelling social security costs of Japan's aging population.

The legislation provides for the sales tax to be raised to 8 percent next April, and to 10 percent in October 2015.

Abe's Liberal Democratic Party and its coalition partner New Komeito party have been considering lowering the tax rate on daily necessities such as food after the second increase to 10 percent, to reduce the burden of the tax hike on lower-income earners.