Prime Minister Shinzo Abe announced on October 1 he will raise the
consumption tax rate from 5 to 8 percent on April 1 as scheduled. At
the same time, Abe unveiled a \5 trillion stimulus package to offset
some of the immediate negative effects of the tax hike.
On September 30, the ruling Liberal Democratic Party and New Komeito
agreed on the final draft of the outline of taxation reform for the
next fiscal year pillared on (1) a two-year extension of tax reduction
to the companies which raised wages, (2) requests to the business
world to raise wages, (3) ending special corporate tax surcharges for
reconstruction in disaster-hit Tohoku a year earlier than planned, (4)
tax deduction to the companies which invested to improve productivity,
and (5) revision (reduction) of vehicle-weight and vehicle-sales tax.
The economic stimulus package includes a \10,000 cash allowance for
low earners and various tax cuts totaling about \1 trillion, including
temporary ones, as well as \730 billion in tax incentives to encourage
corporate investment. The total amount of tax reduction will amount to
about 1 trillion yen.
In hammering out the stimulus package, Abe and the LDP proposed to
end special corporate tax surcharges for reconstruction in
disaster-hit Tohoku a year earlier than planned and thereby boost the
broader economy. This step would save firms a projected \900 billion
Abe has been sensitive to requests from foreign investors, and has
repeatedly floated the idea of cutting the corporate tax to attract
more foreign business investment. But New Komeito, the LDP’s junior
coalition partner, opposes the idea. Unable to reach agreement, the
two parties merely agreed Monday to revisit the proposal by year’s
While Abe and his Cabinet has argued that a corporate tax cut would
help companies to raise wages, which would in turn benefit workers.
But Komeito doesn’t buy the notion and an arrangement will likely be
made some time after FY 2015.
On September 30, the Abe Cabinet officially nominated the new 25 vice
ministers and 27 parliamentary secretaries while reappointing the
lawmakers engaging in the ongoing challenges like the post-quake
reconstruction and the Trans-Pacific Partnership negotiation. Also,
Abe appointed 4 female lawmakers as vice ministers, increased from the
previous 1, putting into practice the mobilization of women’s power
which he has repeatedly appealed to the public.
On September 25, the opposition Democratic Party of Japan, Your Party,
Communist Party, Social Democratic Party and People’s Life Party
jointly handed a document to Upper House President Yamasaki to request
the government to convene the Diet session earlier than October 15
officially scheduled in order to censure the government for its slow
response to the radioactive water leaks at the stricken Fukushima no.1
nuclear complex. The five opposition parties, according to the
Constitutional provision (Article 53), gathered signatures of 92 Upper
House lawmakers dominating more than a quarter of the House (242) to
enforce the Cabinet to convene a Diet session. Also, Jin Matsubara,
DPJ Chairman of Diet Affairs Committee, handed the same request to the
Chairmen of Diet Affairs Committee of LDP and Komeito. Yet, the
Cabinet will likely reject the request for Abe’s scheduled foreign
visits to attend meetings of APEC and ASEAN summits.
Abe officially announced to raise the consumption tax from April 2014
in combination with the \5 trillion economic stimulus package on
Tuesday. It is to see how the opposition parties will respond to it
toward the convening of the next extraordinary Diet session on October 15.