Prime Minister Shinzo Abe suggested Sunday that he will re-examine the advisability of following through with the doubling of the consumption tax to 10 percent in October 2015.
“If we raise the tax (to 8 percent), we need to make a decision by looking at the consequences. Whether risks in the global economy will become evident is an important factor to be watched,” Abe said on a TV program.
Abe did not say clearly whether he would go ahead with the first stage of the consumption tax hike to 8 percent in April 2014, but is expected to make a final decision on Oct. 1.
The government has been also discussing reviewing taxes related to corporate activities.
The government and the ruling coalition might relax the criteria for a temporary cooperative tax cut program aimed at encouraging companies to hike wages while Abe targets 2 percent inflation, sources said.
In focus is whether the pay hike target will be cut to 3 percent from 5 percent now so more firms can participate, they said.
This will help the government, led by the Liberal Democratic Party, encourage more businesses to boost wages and make “Abenomics” actually work.
If the tax system research panels of the LDP and its coalition partner, New Komeito, sign off on the plan this week, the measure will likely appear in the economic stimulus package set to be compiled by the end of this month, the sources said.
The corporate tax cut program, which began in April as a three-year step ending in fiscal 2015, lets firms that raise wages by 5 percent or more from fiscal 2012 levels deduct 10 percent of wage growth from their taxes.
The tax cut period may also be extended through fiscal 2017, but the wage growth criteria will return to 5 percent in fiscal 2016 and 2017.