Land of the Rising Sun expected to lower taxes.
Asian Powerhouse Japan is experiencing persistent inflation, partly fuelled by rising costs of raw materials.
Inflation rates have remained above the central bank’s target of 2% for over a year, and it’s weighing down on citizens purchase power and consumption levels.
Now, incumbent government means to compensate households for the rising cost of living.
By signaling with subsidies and payouts, Prime Minister Fumio Kishida is stressing his government’s resolve to pull the economy permanently out of stagnation.
Kishida is preparing to take ‘bold economic measures’, including an income tax cut for households hit by inflation, and tax breaks for companies to promote investment.
This move is widely perceived to be an attempt to lift his dwindling public support.
Kishida said it is time to shift from ‘an economy of low cost, low wages and cost-cutting’ to one backed by growth led by sustainable wage hikes and active investment.
Associated Press reported:
“’I’m determined to take unprecedentedly bold measures’, Kishida said, pledging an intensive effort to achieve stronger supply capability in about three years. ‘I will put more emphasis on the economy than on anything else’.
He said he is determined to help people ride out the impact of soaring prices for food, utilities and other costs that have exceeded their salary increases, by implementing income tax cuts. He also pledged to introduce corporate tax incentives to promote wage increases, investment and optimization.”
Kishida wouldn’t cut taxes because of the need to find funds to double Japan’s defense budget within five years, as planned.
Kishida’s promise of tax breaks has been criticized by opposition leaders as a vote-buying attempt.
The proposed tax cuts would be part of a new economic stimulus package to be announced by the end of the month.
“On the diplomatic front, Kishida in his speech reiterated the need to strengthen Japan’s military, given conflicts that are underway elsewhere, such as Russia’s invasion of Ukraine and the war between Israel and Gaza’s militant Hamas rulers.
Kishida also urged China to immediately lift its ban on Japanese seafood imports imposed in August when the tsunami-wrecked Fukushima Daiichi nuclear plant started releasing the treated radioactive wastewater into the sea. The government is working to find new markets for the Japanese fishing industry that are less reliant on China, Kishida said.”
Japan’s economy is just now making a delayed recovery from the scars left by COVID lockdowns.
Reuters reported:
“With the rise in wages proving too slow to offset ‘rapidly rising prices’, the government will cushion the blow by returning to households some of the expected increase in tax revenues generated by solid economic growth, Kishida said.
‘We’re seeing signs of change in an economy that had focused on cutting costs for three decades’, he told an extraordinary session of parliament.
‘To ensure this change takes hold, we must achieve sustained, structural wage increases and promote investment through private-public cooperation’, Kishida added. “I’m putting the highest priority on the economy.”
[…] While big firms have pledged pay hikes, inflation-adjusted real wages, a barometer of consumer purchasing power, fell 2.5% on the year in August for a 17th straight month of declines, as persistent price hikes outpaced salary growth.”
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