Japanese ministers differ in tax policy

TOKYO - Reuters

Japanese Prime Minister Shinzo Abe,(C), speaks at a meeting by Council on Economic and Fiscal Policy at Prime Minister’s Official Residence. AP photo

Japan’s top two financial ministers openly disagreed on whether a corporate tax cut was needed to cushion any pain from an increase in the sales tax, as the government upgraded its view of the economy on Sept. 13 for the seventh time this year.

The two-stage doubling of the sales tax, seen as a test of the government’s resolve to start fixing its tattered finances, looks set to go ahead, with debate now focused on what support measures Prime Minister Shinzo Abe should also introduce. “The Japanese economy is on the way to recovery at a moderate pace,” the government said in its report for September, a more optimistic view than last month when it said there were some moves towards a sustained recovery.

Abe has tasked Finance Minister Taro Aso and Economics Minister Akira Amari with crafting a package to ensure the tax hike does not derail the escape from deflation, and the two were at loggerheads over what was needed after a cabinet meeting. Aso dismissed the need to cut the corporate tax rate, a step proposed by the business sector to boost competitiveness, and saw no need to issue new bonds to finance the support package.

Aso says rising sales tax to be rejected by public

“I don’t think the public will accept the government raising the sales tax and cutting the corporate tax rate at the same time,” Aso told reporters.

But Amari, a former trade minister, said a cut in the corporate tax rate was on the table, along with fiscal stimulus and targeted tax breaks to boost capital expenditure.

“There needs to be a combination of steps with immediate stimulus effects and those for long-term growth,” Amari said.