Each party has announced its campaign promises toward the House of Councillors election in July.
While opposition parties are pledging to temporarily reduce the consumption tax rate, the Liberal Democratic Party has decided to provide a uniform cash handout of 20,000 yen per person, and an additional 20,000 yen per person for children and households that are exempted from resident tax.
However, uniform cash handouts are insufficient as well-targeting support measures for households that are truly facing difficulties due to high prices. Moreover, households exempted from resident tax that are eligible for the addition of 20,000 yen include a certain number of elderly people who have low incomes, but in fact hold substantial financial assets. Criticism that the uniform cash handout is an economically ineffective handout merely aimed at winning votes in the election is unavoidable.
Additionally, there is the problem of the increased administrative workload imposed on local governments that must administer these cash handouts. While cash handouts have been employed regularly as measures against the COVID-19 crisis and high prices, frustrations are growing among local governments, who rightly complain that local governments are not subcontractors for the national government. Why hasn't the national government developed an efficient system for smoothly providing these cash handouts?"
Traditionally, the national government has had little direct contact with individual households. For example, income tax and social insurance premiums are withheld at the source, and most workers do not directly file tax returns with tax offices. Meanwhile, in the United States, where filing tax returns is a common practice, refundable tax credits (earned income tax credits), which are preferable to uniform cash handouts, have been successfully implemented.
Additionally, the employment adjustment subsidies, which were frequently utilized during the COVID-19 crisis, were provided via employers, and child allowances are handled by local governments. It is obviously more efficient from the national government’s perspective to provide subsidies indirectly via the relatively smaller number of employers and local governments than to deal directly with the countless individuals.
However, the social environment has changed significantly. Local governments are chronically suffering from labor shortages amid population decline, and employment has been diversifying and mobilizing. In the meantime, it has become technologically possible for individuals to file applications online. In light of such changes, the national government should change its point of contact from institutions, such as local governments and companies, to individuals.
In reality, the COVID-19 crisis triggered the establishment of a system for registering public fund receiving accounts that are linked to My Number cards (Japan’s national identification card). Specific public benefits--such as those provided in the event of a disaster or the outbreak of an infectious disease that is likely to exert an enormous impact on people's lives and the national economy--are distributed via these accounts. This has made push-type support, which does not require applications, possible.
According to the Digital Agency, the number of registered public fund receiving accounts is around 60% of the total number of My Number cards that have been issued to date. If these accounts are registered in advance, they can be used not only for providing emergency benefits, but also for providing child allowances and income tax refunds.
For the uniform cash handout that was decided recently, the use of public fund receiving accounts is being considered to enable swift payment. If so, (and if the payments are going to be implemented regardless), registration of public money receiving accounts should be made a requirement for receiving the cash handout. This would allow the national government to establish a system for direct payments without the involvement of local governments.
What Japan lacks is the infrastructure (execution system) to establish a safety net for households. Politicians should focus on the development of an effective safety net, instead of competing on populist policies for winning votes, such as tax cuts or uniform cash handouts.
>> Original text in Japanese
* Translated by RIETI.
July 12, 2025 Weekly Toyo Keizai
