Japan to raise sales tax, cushion blow with stimulus -final draft

Reuters

TOKYO, Sept 30 (Reuters) - Japan's Prime Minister Shinzo Abewill announce that he is raising the nation's sales tax in Aprilwhile cushioning the economy with a $50 billion stimuluspackage, according to a final draft of the government measuresseen by Reuters on Monday.

The tax increase to 8 percent from 5 percent, to beannounced on Tuesday, is the government's first attempt in morethan 15 years to rein in Japan's runaway public debt.

The stimulus package - including public works spending forthe 2020 Tokyo Olympics, tax breaks for corporate capitalspending and an early end to a corporate tax add-on that fundsreconstruction from the 2011 earthquake and tsunami - is worth 5trillion yen ($50.89 billion), according to the draft.

A source involved in the process said the size of thepackage could increase somewhat, depending on final handling ofthe reconstruction tax.

Most of the contents had been widely expected, but onesurprise was that the package does not mention possible futurecuts in the corporate tax rate.

Economy Minister Akira Amari and many business leaders hadpushed for a clear vow to consider in the near future reductionsto the corporate tax rate, but the Finance Ministry successfullyfought such a commitment out of concern for Japan's runawaypublic debt.

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