Japan considering $33 billion spending on payouts, tax cut to counter inflation

Japan's government is considering spending around $33 billion for payouts to low-income households and an income tax cut in a package of measures to cushion the blow to households from rising living costs, three government officials told Reuters on Wednesday.

The spending, currently estimated around 5 trillion yen($33.37 billion), will include a blanket, one-off income tax hike and the payouts to low-income households, the officials said, confirming a report by the Nikkei newspaper.

Details on the income tax hike will be discussed by the ruling party's influential tax panel toward the year end, the paper said.

The officials spoke on condition of anonymity as they were not authorised to speak publicly. The government was not immediately available for comment.

Inflation, fuelled by rising costs of raw materials, has kept above the central bank's target of 2 per cent for more than a year, weighing on consumption and clouding the outlook for an economy making a delayed recovery from the COVID-19 scars.

With wage rises proving too slow to offset the increase in prices, Prime Minister Fumio Kishida has announced a plan to ease the pain by returning to households some of the expected increase in tax revenues generated by solid economic growth.