Japan's Ministry of Economy, Trade and Industry (METI) finalized plans on the 26th to propose changing the Wage Hike Promotion Tax System from a total-payroll benchmark to an average wage per employee benchmark in the fiscal 2027 tax reform. The change is intended to preserve support for regional SMEs that raise wages while reducing headcount amid population decline. METI also plans to seek a three-year extension of the system's March 2027 application deadline for SMEs. About 270,000 SMEs used the system in fiscal 2024. Separately, the ministry plans to propose a framework tentatively named the Business Portfolio Transformation and Enhancement Promotion Tax System, which would defer taxation on gains from business divestitures when companies also complete acquisitions within a specified period. The measures are intended to support wage growth, mergers and acquisitions (M&A), and capital investment, although the average-wage test could be inflated mechanically by workforce reductions and the deferral plan raises concerns about lost tax revenue and tax avoidance.