The decision by the government to cut the corporate tax rate was a clear reflection of its fear that the country is losing its attractiveness as a destination for investment.
Prime Minister Naoto Kan expressed his hope that the tax cut, which needs some final arranging before its implementation, will help boost the economy by encouraging companies to increase their business investment and employment in the country, bucking the trend of their shifting production bases abroad.
The relatively high cost of doing business in Japan has long been noted and this negative image has been reinforced recently by many others factors, notably the strength of the yen to the dollar and other major currencies, which makes it more appealing to domestic companies to build factories overseas and hire cheaper labor there.