A special 2 trillion yen tax cut will be included in this fiscal year's supplementary budget, Prime Minister Ryutaro Hashimoto announced Wednesday, signaling an abrupt about-face in his fiscal restructuring efforts.
The unexpected 2 trillion yen cut in income and resident taxes is aimed at jump-starting the economy, Hashimoto said at an unscheduled news conference. He said the emergency, one-time measure will be financed through deficit-covering bonds -- a move expected to further damage the nation's fiscal health.
The action was interpreted as a virtual abandonment of the government's commitment to reduce the deficit to no more than 3 percent of gross domestic product and to cease issuing deficit-covering bonds by fiscal 2003. "I hope this tax cut, along with the tax revisions for fiscal 1998 that include reductions in corporate, securities transaction and landholding levies agreed to (by the ruling Liberal Democratic Party) Tuesday and a financial stabilization plan using 10 trillion yen in bonds will dispel concerns over the future prospects of the economy," Hashimoto said.