Photo/Illutration Prime Minister Fumio Kishida, second from right, addresses a session of the Children’s Future Strategy Council on May 22. (Jin Nishioka)

Child care allowances will be offered to all households regardless of income and extended to cover children of high school age, according to a draft of government policies to lift Japan’s birthrate.

The draft for “other dimensional” policies, revealed on May 24, also said an additional allowance for third children and beyond in a family will be raised to 30,000 yen ($214) a month, double the current amount provided.

The additional allowance covers children from age 3 to elementary school pupils.

The administration of Prime Minister Fumio Kishida will need a total of around 3 trillion yen annually to implement these policies.

It plans to secure around 2 trillion yen in funds by cutting spending on social welfare and establishing a new “support fund system,” in which the government will collect additional social insurance contributions.

The government decided to scrap the income cap for the child care allowance after hearing arguments that child rearing support should be provided regardless of income level or family environment.

However, some in the government and business circles said the focus should be on supporting low-income households.

The government will have to balance these views in reforming the child care allowance system.

The expansion of child care allowances is part of the government’s “acceleration plan,” a group of high-priority policies that are scheduled to be phased in from next fiscal year.

But the government said it may be unable to secure the necessary new funding sources within the next year or two. Therefore, it is considering issuing bridge bonds as a temporary measure to raise the needed funds.

The government will now discuss the draft with opposition parties and businesses.

It aims to fine-tune the draft and finalize it by June, when it will publish its “Basic Policies for Economic and Fiscal Management and Reform” for 2023.

According to the draft, the government plans to spend 1.2 trillion yen to expand the child care allowance system.

Specifically, the government will pay 10,000 yen every month per high school student, the same amount provided for junior high school students under the current system.

However, the draft also says the government will consider reviewing tax deductions for households with high school students.

To expand child care services, the government will spend between 800 billion yen and 900 billion yen to ensure every child can attend nursery school, according to the draft.

The planned new system will enable parents without jobs to use nursery schools for their children.

The draft also estimates the government will spend around 700 billion yen to pay allowances for parents whose working hours are cut short because of child rearing reasons.

The government expects to use around 900 billion yen in revenue from the consumption tax to fund the policies.

Based on past experiences, the government estimates it will be able to secure around 180 billion yen annually for the policies by cutting social welfare spending, or around 1 trillion yen over five to six years.

As for the “support fund system,” the government plans to collect additional health insurance contributions, for which employers and employees equally share the burden.

Legal changes will be required to introduce the new system, therefore, the earliest the government can start operating the system is believed to be fiscal 2026.

However, the plan could be delayed if there is fierce backlash over the new program.

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