TOKYO (Reuters) - Japan will consider various measures, including tax cuts, to deal with deepening damage to its economy from the coronavirus outbreak, economy minister Yasutoshi Nishimura said on Tuesday, amid growing debate on the possibility of cutting sales tax.
A group of ruling party lawmakers last week proposed that the government temporarily eliminating altogether Japan’s 10% sales tax and preparing a 30 trillion yen ($282 billion) supplementary budget for spending to address the hit to economic growth from the health crisis.
Although extreme, the proposal highlights the seriousness of issues facing the world’s third-biggest economy, and has not been shot down completely by government officials like Nishimura.
While revenue from the sales tax was important to fund social welfare costs, Nishimura said, the government must take all available measures to support the economy.
“We’ll look into a wide range of options on tax, fiscal policy and deregulation” to battle the damage from the outbreak, he said, speaking to reporters after a cabinet meeting when asked about the lawmakers’ proposal.
The government’s decision to implement a long-mooted increase in sales tax to 10% from 8% in October has been widely blamed for hurting the world’s third-biggest economy, which shrank an annualised 7.1% in the final quarter of last year.
Many analysts expect another contraction in the current quarter amid the virus outbreak, which would mean two straight quarters of negative growth - the technical definition of a recession.
Nishimura’s remarks follow those by Prime Minister Shinzo Abe, who also said on Saturday the proposal on sales tax was among options worth considering to support the economy.
Policymakers across the globe are scrambling to deal with the fallout of the epidemic that sent global stocks in a tailspin. The Bank of Japan ramped up asset purchases in an emergency meeting on Monday, joining global central banks in their efforts to stave off a global recession.
Abe’s government is working on a huge-scale fiscal spending package, acknowledging an agreement by Group of Seven leaders to use all available policy tools to support growth.
“Business confidence is tanking to levels comparable to those during the Lehman crisis” in 2008, Nishimura said.
“Now is not the time to think about how to balance the budget. Rather, it’s a time to do everything that’s necessary to keep the economy on a solid footing,” he said.
Meanwhile Finance Minister Taro Aso said on Tuesday that G7 finance leaders are expected to hold a conference call on Tuesday evening Tokyo time.
($1 = 106.2400 yen)
Reporting by Tetsushi Kajimoto and Kaori Kaneko; Writing by Leika Kihara; Editing by Chang-Ran Kim and Kenneth Maxwell