* Draft plan stops short of targeting cuts in corporate tax
* Private sector calls for bringing tax rate to global
* PM Abe under pressure to proceed with fiscal consolidation
* Govt to finalise key fiscal, economic policy outline later
(Adds comment on market expectations, detail from growth
By Tetsushi Kajimoto
TOKYO, June 9 An economic plan being prepared by
Japan's government commits it to "corporate tax reform", but
resistance from fiscal hawks prevented it from specifying a cut
in the tax rate in an outline it released on Monday.
Prime Minister Shinzo Abe says he wants to cut the corporate
tax rate, among the highest in the world, to spur business
activity - a pledge that is a focus for investors seeking to
gauge how strong his policies will be for economic growth.
But the outline of his policy priorities indicated that the
issue of corporate tax reform was still "pending" and under
discussion by officials, who also need to find ways to curb a
public debt burden that, at more than twice the size of the
economy, is the world's heaviest.
Japanese economy minister Akira Amari said a tax panel set
up by Abe's Liberal Democratic Party would need to "iron out
differences" on a corporate tax cut.
"There was not much debate here at this stage," Amari told
reporters after a meeting of an economic advisory panel.
Abe is expected to announce a package of broad economic
policies, along with a detailed "growth strategy" of structural
reforms, around June 27.
Global investors have been keen to see what Abe will offer
in this "third arrow" of long-term policies, meant to complement
the massive monetary and fiscal stimulus that have started to
pull the world's third-biggest economy out of two decades of
deflation and sluggish growth.
The pressure on Abe is rising amid growing signs that the
Bank of Japan has no immediate plans to expand monetary
stimulus. The BOJ is set to maintain its upbeat view on the
economy and may revise up its assessment on capital expenditure
An updated draft of the Abe government's growth strategy,
seen by Reuters on Monday, promises to overhaul corporate
governance and overhaul the management of Japan's public pension
fund. But it leaves many tough questions unanswered.
Japan's corporate tax rate is nearly 36 percent for large
companies operating in Tokyo. Private-sector members of the
government's top economic and fiscal council have proposed
cutting the rate to 25 percent to put it in line with
The Finance Ministry and ruling party tax panel counter that
any revenue lost in the tax rate cut should be offset by
bringing in alternative revenues. Each percentage point of tax
cuts would reduce government revenue by about 470 billion yen
($4.6 billion) a year, according to the finance ministry.
At the same time, only 30 percent of all Japanese firms pay
corporate income tax, so fiscal hawks want many more brought
onto the tax rolls to offset a cut in the tax rate.
Companies such as Fanuc Corp, NTT Docomo Inc
and Central Japan Railway Co would be among
the big winners from a corporate tax cut, according to an
estimate by SMBC Nikko Securities.
Takuya Takahashi, senior strategist at Daiwa Securities,
said expectations for a cut in the corporate tax rate to 25
percent to be approved later this year would provide immediate
support for the stock market even in the absence of a specific
commitment from the government.
The Nikkei stock average is down almost 7.5 percent from the
start of the year.
"For the moment, markets are expecting discussion on tax
cuts to continue towards the end of year and there will not be a
reaction even if the government does not specify the size of tax
cut this month," Takahashi said.
ECONOMIC REFORM PLAN
Apart from the corporate tax issue, the four-page economic
policy outline renews a pledge to decide by the end of the year
whether to go ahead with a plan to raise the national sales tax
to 10 percent in 2015.
The politically contentious sales tax hike is seen as a
first step towards meeting Japan's aim of halving its budget
deficit - excluding new bond sales and debt servicing - in the
fiscal year ending in March 2016 and achieving a surplus in the
fiscal year that ends in March 2021.
The policy outline also includes a pledge to stabilize
Japan's declining population at around 100 million -
representing more than a 20 percent drop - over the next 50
years, a target that outside experts have said would be
difficult to reach without allowing more immigration.
The outline appears to rule out the controversial step of
opening up immigration as a way to boost Japan's dwindling pool
of workers. But the government has pressed ahead with plans to
allow in more white-collar professionals from abroad and manual
workers under a trainee program.
"Use of foreign workers is not an immigration policy," the
($1 = 102.3900 Japanese Yen)
(Editing by Kevin Krolicki, Chris Gallagher, Kim Coghill,
William Mallard and Simon Cameron-Moore)