Options to Strengthen the Social Safety Net in Japan: Japan

Selected Issues Papers, May 18, 2023

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Japan’s unemployment rate remains relatively low compared to other OECD countries.
Japan’s poverty rate among the working-age population is one of the higher ones among OECD countries.
The public assistance program in Japan does not provide adequate income support for the working poor and creates inherent work disincentives.
The Earned Income Tax Credit (EITC) warrants consideration to strengthen the social safety net and relieve poverty of the working poor in Japan.
The paper provides an overview of the theoretical and practical issues of EITC to support its potential introduction in Japan.

Consider introducing an Earned Income Tax Credit (EITC) as an in-work benefit to:
- Strengthen the social safety net for working poor households.
- Alleviate poverty among the working-age population.
- Mitigate work disincentives created by the current public assistance program.
Assess theoretical and practical design features of EITC suitable for the Japanese context (detailed design issues are the focus of the paper).

Subject areas covered: Employment, Expenditure, Income, Income tax systems, International organization, Labor, Monetary policy, National accounts, Social assistance spending, Taxes, Wages.
Keywords: Earned Income Tax Credit (EITC), EITC program, Employment, in-work benefits, Income, Income tax systems, inequality, Japan, Japan's poverty rate, Japan's unemployment rate, program in Japan, public assistance, public assistance program, Social assistance spending, Social safety net, Wages, working poor.

Zhiyong An and Kohei Asao, Options to Strengthen the Social Safety Net in Japan: Japan, Selected Issues Papers, May 18, 2023.