The administration is considering a reduction in corporate income taxes as part of a stimulus package to cushion the economy from the first of two planned increases in the consumption tax, according to three sources briefed on the matter.
Prime Minister Shinzo Abe has instructed officials to discuss a cut in the tax on company profits as he weighs whether to proceed with an increase in the consumption tax in April, according to the sources, who asked not to be identified as the discussions aren't public.
Lowering the effective corporate tax rate, which is more than double that of Singapore's, would boost Japan's competitiveness while helping to offset the economic blow from a consumption tax increase. While a reduction is backed by industry chiefs, Abe may run into opposition at the Finance Ministry, which may be reluctant to lose revenue.