Lowering the corporate tax rate could add 1.1 percent to gross domestic product in 10 years by spurring consumer and corporate investment, according to Dai-ichi Life Research Institute.
The amount, equivalent to ¥5.9 trillion of GDP, could be achieved if Japan's 41 percent corporate tax is slashed by 10 points, Chie Umezaki, Tokyo-based economist at Dai-ichi Life, wrote in a report published Wednesday.
"Lowering corporate tax is unavoidable to ensure growth in the longer term," Umezaki wrote. "The government has to decide how to solve funding issues to allow it to cut corporate taxes as soon as possible."
Still, the growth generated won't be enough to make up for a decline in revenues obtained from companies, the report said. The government will only make up for 64 percent of the lost revenue over 10 years, Dai-ichi Life said.
Prime Minister Naoto Kan has initiated debate on whether to raise the 5 percent consumption tax.