* Japan mulls 5 trln yen stimulus package
* PM Abe set to raise sales tax to 8 pct in April
* Package aims to keep recovery on track
By Stanley White
TOKYO, Sept 20 Japan's government will include
more that $14.1 billion in corporate tax cuts in an economic
stimulus package intended to offset the blow from planned sales
tax hikes, the Nikkei newspaper reported on Friday.
The tax breaks, which are worth 1.4 trillion yen, will be
part of an economic stimulus in excess of 5 trillion yen, the
Nikkei said, as Prime Minister Shinzo Abe prepares to approve on
Oct. 1 an increase in the sales tax needed to pay for welfare
The sales tax hike is the biggest effort in years by the
world's third-largest economy to contain public debt of more
than $10 trillion, which at more than twice the value of gross
domestic product is the largest burden among major economies.
Some of Abe's senior ministers have openly cautioned that
the tax hike could derail the escape from deflation. The
corporate tax cuts are expected to buffer the economy from such
risks and ensure Abe's cocktail of aggressive fiscal and
monetary stimulus puts growth on a sustainable footing over the
The government will use reserves from last year's budget and
extra tax revenue from the current fiscal year to fund the
stimulus package, but if the size of the package increases it
may be difficult to avoid issuing new debt, the Nikkei said.
The government will end a temporary increase in the
corporate tax from fiscal 2014, one year earlier than planned,
which will save companies 900 billion yen, the Nikkei said
without citing sources.
These steps would lower the effective corporate tax rate to
35.6 percent next fiscal year from 38.0 percent currently, the
The government will also offer 500 billion yen in tax breaks
on capital expenditure spending from the current fiscal year,
the Nikkei said.
The scheme also includes 1 trillion yen in public works
spending for the Tokyo Olympics in 2020, 300 billion yen in
handouts to low-income earners and 400 billion yen in tax breaks
for new home owners, the Nikkei said.