Japan’s Nishimura Calls for Quick Corporate Tax Cut to Under 30%

Japan needs to quickly lower its corporate tax rate to less than 30 percent to boost the nation’s competitiveness in the global market, Deputy Economy Minister Yasutoshi Nishimura said.

“I’d like to see deeper corporate tax cuts in the special economic zones” in which the government hopes to loosen business regulations, Nishimura, 51, said in an interview today at his Tokyo office.

Prime Minister Shinzo Abe plans to experiment with reforms in the labor market, health care and agriculture and other areas in the zones -- a central plank of his growth strategy. Japan will lower its tax on corporate profits to 35.6 percent from 38 percent in April when a temporary levy to fund reconstruction of regions devastated by the 2011 earthquake and tsunami ends.

Nishimura said he wants to create a road map for lowering the effective tax rate, first to 30 percent, then below that mark.

“I want to show the direction of special-zone tax reductions” in a revised growth strategy the government plans to release in June, and discuss them later, Nishimura said. He did not specify the timing of any corporate tax reductions.

Organization for Economic Cooperation and Development data show Japan’s corporate tax rate is among the highest in developed economies, comparing with 30.2 percent in Germany and 34.4 percent in France. Japan’s levy includes national and local components.

Ending Deflation

A report today showed prices excluding fresh food rose 1.2 percent in November from a year earlier -- putting Japan past the halfway mark to the central bank’s 2 percent inflation target. Nishimura said it “may be difficult” to declare an end to deflation during 2014.

The timing of Japan’s emergence from deflation will be determined by factors including overseas economic conditions, the impact from a planned second increase in the sales tax in 2015 after next year’s rise, and the extent of wage gains, he said.

In response to a question about the yen falling past 105 per dollar today for the first time since October 2008, Nishimura said the current level shows a “smooth market understanding” of the U.S. Federal Reserve’s decision to taper its bond purchases.

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