The government will consider various measures, including tax cuts, to deal with deepening financial damage from the coronavirus outbreak, economy minister Yasutoshi Nishimura said Tuesday amid growing debate on the possibility of cutting the consumption tax.
A group of ruling party lawmakers proposed last week that the government temporarily eliminate altogether the 10 percent consumption tax and prepare a ¥30 trillion supplementary budget to address the hit to economic growth from the health crisis.
Although extreme, the proposal highlights the seriousness of problems facing the world’s third-biggest economy and has not been completely shot down by senior officials like Nishimura.
While revenue from the consumption tax is important to fund social welfare costs, Nishimura said, the government must take all available measures to support the economy.
“We’ll look into a wide range of options on tax, fiscal policy and deregulation” to battle the damage from the outbreak, he told reporters after a Cabinet meeting.
The Abe government’s decision to implement the long-mooted consumption tax increase to 10 percent in October has been widely blamed for hurting the economy, which shrank an annualized 7.1 percent in the final quarter of last year.
Many analysts expect another contraction this quarter amid the virus outbreak, which would mean two straight quarters of negative growth, the technical definition of a recession.
Nishimura’s remarks follow those by Prime Minister Shinzo Abe on Saturday that the proposal on the consumption tax is among the options worth considering to support the economy.
Policymakers across the globe are scrambling to deal with the fallout of the epidemic that sent global stocks in a tailspin. The Bank of Japan ramped up asset purchases in an emergency meeting Monday, joining global central banks in their efforts to stave off a global recession.
“Business confidence is tanking to levels comparable to those during the Lehman crisis” in 2008, Nishimura said. “Now is not the time to think about how to balance the budget. Rather, it’s a time to do everything that’s necessary to keep the economy on a solid footing.”
Meanwhile, Finance Minister Taro Aso said Tuesday that G7 finance leaders were expected to hold a conference call in the evening.
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