Japanese Congress Still Undecided on Corporate Tax Cut

Cabinet members in charge of economic and fiscal policies remained at odds Tuesday over whether to cut Japan’s corporate tax rate to soften the negative impact of a planned sales tax hike from 5 percent to 8 percent next April.

“Is it reasonable to cut the corporate tax rate while raising the consumption tax rate (by 3 percentage points)?” Finance Minister Taro Aso said at a press conference, adding, “From a commonsense standpoint, (a corporate tax cut) is difficult.”

Aso also indicated that he believes such a tax reduction could further hurt Japan’s fiscal health, already the worst among industrialized economies.

The corporate tax cut would be a significant hurdle to Japan achieving its fiscal rehabilitation goal, Aso suggested.

Meanwhile, economic and fiscal policy minister Akira Amari, a proponent of a corporate tax cut, said that Prime Minister Shinzo Abe’s opinions will take precedence if he and the Finance Ministry were to lock horns on the tax issue.

“There is no room for discussion. Of course, the prime minister’s views” will take priority, Amari, a close ally of Abe, said at a separate news conference.

Last week, Abe instructed Cabinet members including Aso and Amari to map out a stimulus package by the end of this month to ease the expected economic impact of the scheduled sales tax hike.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza