The Abe administration will likely lower the corporate tax as a means of achieving a virtuous cycle to put the Japanese economy on a growth path. At the recent World Economic Forum in Davos, Switzerland, Prime Minister Shinzo Abe said, "We must also make our corporate taxes internationally competitive." The Abe administration is trying to respond positively to requests from business lobbyists for lowering the corporate tax.
Given the reality surrounding the corporate tax, to think that lowering it will automatically lead to an expansion of the economy is simplistic.
Sadayuki Sakakibara, the next head of the Japan Business Federation (Keidanren), Japan's most powerful business lobby, expressed his hope Monday that the effective corporate tax rate will be reduced to around 25 percent from the current 38 percent in the Tokyo area. But lowering the corporate tax will invite criticism that businesses are being given favorable treatment compared with households, which will directly feel the impact of the consumption tax hike, which will go from 5 percent to 8 percent from April.