Finance Minister Masajuro Shiokawa said Tuesday that he will tell Japan’s Group of Seven partners that the nation is ready to bolster its fragile economy by cutting taxes and accelerating the disposal of bad loans held by Japanese banks.
This week’s meeting of the G7 industrial powers, scheduled to be held in Halifax, Canada, on Friday and Saturday, comes amid mounting pressure on Japan to achieve visible results from the structural reform agenda pursued by the administration of Prime Minister Junichiro Koizumi.
Shiokawa told a news conference Tuesday that he will outline Japan’s tax reform plans to his counterparts from the United States, Canada, Britain, France, Germany and Italy.
“I will say that Japan will conduct tax reforms to revitalize its economy,” Shiokawa said. “Although the tax reforms will be for the midterm, we will see to it that steps that will be effective will be carried out swiftly.”
Shiokawa’s remarks suggest that some tax cuts may be introduced by the end of fiscal 2002, although the majority of the measures in question are expected to take effect next April.
Immediate tax relief will likely involve the introduction of tax deductions for investment in corporate research and development.
Shiokawa is also expected to outline plans to establish specially designated economic zones in which the government promises to lessen regulations.
But whether quick tax cuts will be clearly defined when the government compiles the nation’s fundamental tax reform blueprint later this month remains murky, as Koizumi and the Finance Ministry have yet to reconcile conflicting views on tax reform.
While the Council on Economic and Fiscal Policy, supported by the Cabinet Office, emphasizes the importance of encouraging economic activity via tax breaks, the Tax Commission, backed by the Finance Ministry, is seeking to combine tax breaks with hikes to keep overall tax revenues intact.
Furthermore, some ruling coalition lawmakers have fueled the tax debate by demanding quick tax cuts by the end of fiscal 2002 in an effort to bolster the economy.
Regarding the bad-loan situation, Shiokawa said he will tell his G7 counterparts that Japan will “further promote the swift disposal of nonperforming loans, and as a monetary policy, will provide further liquidity” to support the economy.
Other topics on the G7 agenda include policy coordination among member countries aimed at achieving sustained global growth, along with continued efforts to target the funding sources of terrorists, the officials said.
The G7 meeting will set the stage for the Group of Eight summit in Kananaskis, Alberta, on June 26 and 27.
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