March 14, 2020
By Leika Kihara
TOKYO (Reuters) – Japanese Prime Minister Shinzo Abe has instructed his close aide and ruling party heavyweight Akira Amari to consider tax cuts to help the economy weather the hit from the coronavirus outbreak, the Nikkei newspaper reported on Saturday.
Amari, head of the ruling Liberal Democratic Party’s tax panel, said he discussed with Abe “various options on budget and tax measures” that could be considered if the economy needed support, the paper said.
“The prime minister said the government will take bold measures” to mitigate the economic fallout from the epidemic, Amari was quoted as saying after his meeting with Abe on Friday, according to Nikkei.
Japan is under pressure to deploy fiscal and monetary stimulus steps to battle headwinds to the economy from the coronavirus epidemic that has cooled consumption and rattled financial markets.
Tax cuts have long been ruled out as among measures to prop up economic growth due to the need for Japan to rein in its huge and ballooning public debt which, at twice the size of its economy, is the largest among major economies.
Abe’s reported remarks underscore the concern among policymakers over the growing risk of recession in Japan, as travel bans and event cancellations caused by the virus hit retailers reliant on inbound tourism and domestic consumption.
The government is already working on a huge-scale fiscal spending package, while the Bank of Japan is expected to take additional monetary easing steps to ease the economic strain from the virus.
On Saturday, the BOJ said it has set up a coronavirus response team to ensure the bank can continue providing essential central banking services.
Finance Minister Taro Aso last week said his ministry will not oppose tax cuts as part of measures to support the economy, but did not elaborate on what kind of levy could be reduced.
Some ruling party and government officials have called for tax relief for companies hit by slumping sales from the virus.
The government so far has brushed aside calls from some opposition parties to cut Japan’s sales tax, which was raised to 10% from 8% in October last year.
(Reporting by Leika Kihara; Additional reporting by Daniel Leussink; Editing by Leslie Adler and Daniel Wallis)
