Prime Minister Ryutaro Hashimoto on Wednesday repeated hints he made the previous day that further tax cuts to boost domestic consumption and support the sagging economy have not been ruled out.”The government will strive to make it unnecessary to continue a 2 trillion yen cut in income and residential taxes in 1999,” Hashimoto told a House of Councilors plenary session. His remark was taken as indicating the government has not entirely ruled out further tax cuts.On the strength of Hashimoto’s comment, the Tokyo Stock Exchange’s benchmark Nikkei average recovered the 15,000 mark, ending the morning session at 15,052.95, up 297.01 points, or 2.01 percent, from Tuesday’s close.Hopes were also fueled by a news report that the prime minister has instructed Taku Yamasaki, head of the ruling Liberal Democratic Party’s policy affairs research council, to begin studying further economic stimulus measures, dealers said. Before this week, Hashimoto had been saying the 2 trillion yen tax cut, expected to take effect in February at the earliest, would be limited to one year.The opposition camp has demanded that the government continue the 2 trillion yen tax cut in later years and that the size of the reduction be increased so it can help bring about an economic recovery.During the Upper House plenary session, Hashimoto also voiced confidence that government projections of economic growth in fiscal 1998 can be met. “We believe the nation can achieve economic growth of 1.9 percent, as the government has estimated,” he said, citing the expected effects of the 2 trillion yen tax cut, reductions in corporate income taxes and stock and land transaction taxes, as well as a 30 trillion yen scheme to stabilize the financial system.”We expect these measures will have a multiplier effect on business recovery,” he said. Hashimoto made the remark in reply to a question from Yoshio Terasawa, former director general of the Economic Planning Agency and policy chief of Minyuren, the largest opposition force.Terasawa said it would be impossible for the nation to achieve 1.9 percent economic growth in the current economic climate. “The government should review the growth estimate,” he said during a question-and-answer session that followed Hashimoto’s speech on the economy and financial markets. “Otherwise, public distrust in the government will deepen.”Hashimoto also indicated the corporate tax rate may be further reduced in fiscal 1999; the government has already decided to reduce the tax by 3 percent in fiscal 1998. The suggestion came in answer to a question from Kimitaka Kuze, deputy chief of the Liberal Democratic Party’s policy affairs research council, who urged the prime minister to implement deeper cuts in the corporate tax.
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