Prime Minister Fumio Kishida said on Sunday he won’t seek to change the country’s taxes on capital gains and dividends for now as he intends to pursue other steps for better wealth distribution, such as raising wages of medical workers.
Kishida, who has vowed to rectify wealth disparities, had previously said reviewing those taxes would be an option in addressing income gaps.
The prime minister’s new stance indicates his concern about jitters in the stock market caused by the prospects of higher tax levies.
Kishida took the top job in the world’s third-largest economy on Oct. 4, replacing Yoshihide Suga, who had seen his support undermined by surging COVID-19 infections.
“I have no plan to touch the financial income tax for the time being. … There are many other things to tackle first,” Kishida told a news program on commercial broadcaster Fuji Television Network.
“Misunderstanding is spreading that I may do it soon. That will give unnecessary worry to people concerned if not dispelled firmly.”
The change in rhetoric came before he is set to dissolve the Lower House on Thursday for a general election on Oct. 31.
Some investors have expressed concern that the new prime minister may press ahead with capital-gains tax hikes, signalling a turnaround from investor friendly economic policies pursued by Japan’s longest-serving leader, Shinzo Abe, from 2013 to 2020.
Some analysts had called for raising Japan’s tax levied on investment income from the current 20% to raise funds to support low-income households.
Others were skeptical about the impact such tax hikes may have on correcting wealth disparities.
Kishida’s ruling Liberal Democratic Party made no mention of reviewing taxes on capital gains and dividends in its campaign platform for the Oct. 31 general elections, a draft obtained by Reuters showed.
Investors had been concerned about any negative impact a higher tax rate on capital gains and dividends could have on stock markets, which could cool local investment and drive away foreigners.
Japan’s benchmark Nikkei average has declined 7% since Kishida won the LDP leadership election late last month.
In his first press conference as prime minister on Oct. 4, Kishida said, “We need to think about (reviewing) the financial income tax. It’s one of various options.”
Kishida, long considered a fiscal hawk, had struck a positive note about reviewing the financial income tax during campaigning for the presidential election of the ruling Liberal Democratic Party last month.
The government plans to compile an economic package worth “tens of trillions of yen” to bolster the coronavirus response and help the economy hit by prolonged COVID-19 restrictions.
Komeito, the junior coalition partner of the LDP, has proposed a cash handout of ¥100,000 for children 18 or younger. The plan is part of the party’s efforts to help households hit by the coronavirus pandemic.
“We are in agreement over the need to distribute cash to people who are struggling,” Kishida said, adding that he wants to decide what is the best way to do so in consultation with the ruling parties.
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