- Masaki Kuwahara, a senior economist at Nomura Securities
Japan's government adopted an emergency fiscal stimulus package worth 3.5 trillion yen to boost the nation's economy, which was hit by higher prices due to sales tax increase in April as well as the Yen's sharp weakening. The stimulus scheme is aimed at providing financial assistance designed to offset soaring fuel costs and help local governments. $9.96 billion will be used to support consumers and companies, about $4.98 billion for revitalization of local communities and $14.11 billion for disaster prevention and reconstruction. Coupled with a delay of the second planned consumption tax hike to 10% by 18 months from October 2015, analysts expect the package to fuel domestic demand. It is predicted that the new programme will boost Japan's real gross domestic product by around 0.7 percentage points.
Meanwhile, Japan's Prime Minister Shizno Abe and the ruling Liberal Democratic Party have approved a plan to cut the corporate tax rate by 3.29 percentage points, with a 2.51% reduction in 2015 and additional cut in the following fiscal year. Moreover, companies will be able to deduct R&D costs worth 25% of corporate taxes from their tax payments, compared with the current maximum deduction of 30%. There will also be changes in taxes paid by individuals, including income tax breaks for housing loan borrowers to support the housing market.
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