News Column

IMF asks Japan to secure resources to finance corporate tax cuts

May 29, 2014

The International Monetary Fund on Friday welcomed Prime Minister Shinzo Abe's eagerness to cut Japan's relatively heavy corporate tax rate, but called for securing financial resources to cover a possible decline in tax revenues amid the country's fiscal woes.

In a concluding statement after its annual consultation mission to Japan, the IMF also said the government should raise its consumption tax rate to 15 percent, after increasing it to 10 percent in October next year as planned, to restore the country's fiscal health, the worst among major developed economies.

The near-term outlook for the world's third-biggest economy "remains favorable" on the back of the "Abenomics" policy mix, the Washington-based lender said, adding, "Japan appears to be weathering well the effects" of the 3-percentage-point tax hike to 8 percent on April 1.

A corporate income tax cut "raises investment and growth, but not sufficiently to make them self-financing, adding further to fiscal consolidation needs. Therefore, compensating revenue and expenditure measures need to be identified," the IMF said.

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Source: Japan Economic Newswire

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