Japan’s Finance Minister Sadakazu Tanigaki has warned that tax cuts legislated under a previous administration may soon be phased out now that the country appears to be emerging from its long economic malaise.
Speaking to reporters earlier this week, Tanigaki observed: “I think we have come to a stage where we can discuss such policy options," due to improvements in the economy since the tax cuts were passed.
However, he added that the government must proceed with caution given the fragility of the recovery.
Tanigaki’s comments came hot on the heels of a reference by Prime Minister Junichiro Koizumi to the phasing out of ‘proportional’ tax cuts, possibly from 2005, as the country seeks to raise revenues to meet growing levels of debt and government spending.
The tax cuts in question, introduced under Prime Minister Keizo Obuchi, allow a 20% deduction of income tax, or up to Y250,000 per year ($2,300) and a 15% deduction in residential tax, or up to Y40,000 per year.
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