Japanese policymakers indicated they favor tax incentives to lift weak business investment rather than a cut in corporate taxes, as the government signaled confidence its stimulus policies had put the economy on the path to escape deflation.
In its most upbeat view on prices in four years, the government said on Thursday that Japan was approaching an end to deflation as a steady pick-up in the economy allowed more companies to pass on rising costs to consumers.
“Recent price developments indicate that deflation is ending,” the government said in its economic report for August, offering a brighter view than last month when it said deflationary pressures were easing.
Prime Minister Shinzo Abe wants to keep that momentum alive, but also needs to decide whether to go ahead with a planned doubling of the sales tax rate which is intended to help contain public debt that has exceeded 1,000 trillion yen ($10 trillion).
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