Prime Minister Shinzo Abe’s government pledged Wednesday to hammer out concrete tax reforms by fall in an attempt to bolster business investment, after its growth strategy unveiled last week failed to meet market expectations, driving down stock prices.
The final draft of the strategy, presented at a meeting of the Industrial Competitiveness Council, stipulated the Abe administration will “boldly support companies eager to bravely take on a challenge” through “drastic tax cuts for investment.”
The tax breaks would target efforts by firms to replace old facilities with efficient and state-of-the-art ones, said the draft of the strategy that the Cabinet plans to endorse Friday, adding they would be also designed to prompt the exploitation of new markets.
The growth strategy, presented ahead of the July Upper House election that Abe’s Liberal Democratic Party-New Komeito ruling bloc hopes to emerge from with a majority in the chamber, is one of the “three arrows” of Abe’s “Abenomics” economic policies aimed at ending nearly two decades of deflation that include aggressive monetary easing by the Bank of Japan and massive fiscal spending.
Abe on June 5 announced the latest part of the strategy, but most of the policy proposals appeared insufficient to break fresh ground, raising skepticism about whether the world’s third-largest economy can really get on a full-fledged growth path. The proposals were also criticized for lacking detail.
In particular, a lack of specific tax steps for the corporate sector and deregulation in agriculture triggered disappointment among investors and a sell-off of Tokyo stocks, forcing Abe to declare he will create a second version of the strategy later this year.
The government will therefore start considering tax reform plans earlier than hoped. It normally compiles tax proposals in December before submitting them to the ordinary Diet session that starts in January, officials said.
Abe’s administration aims to map out a bill including concrete tax measures and submit it to the extraordinary Diet session scheduled this autumn, they added.