Japan should map out an economic stimulus package that includes large-scale income tax cuts, a senior official of the International Monetary Fund said April 8 in Tokyo.
Stanley Fischer, first deputy managing director of the IMF, told a news conference that while financial stability in the Asian region is gradually being restored, the situation could be jolted by such external shocks as a continued decline in the Japanese economy.
"Japan faces some critical policy choices in the next few days, and there are encouraging statements coming out about the size of a supplementary fiscal package," he said. Many observers have noted the ineffectiveness of massive government public works spending over the past few years and how last year's tax increases negatively affected demand, he said. "There is therefore a strong economic case for tax reductions, and they should be a substantial, indeed the greater part, of any package that is put together," Fischer said.
In a speech earlier in the day, he pointed out that recent proposals for a pump-priming plan to the tune of 16 trillion yen "would be a good starting point."