The measure consists of five pillars. To protect people’s lives from the impact of high prices; Sustained increases in wages, incomes and local economic growth; Promoting domestic investment; Overcoming population decline; To ensure the safety and peace of mind of our citizens.
At an interim cabinet meeting on November 2, the Japanese government finalized comprehensive economic measures, including wage increases and domestic investment promotion programs. The measure will be worth 17 trillion yen, including tax cuts on income and household taxes. Japanese Prime Minister Fumio Kishida held a press conference at the Prime minister’s official residence and said, We will create a situation in which income growth exceeds inflation through a combination of wage hikes and income tax cuts next summer.
The Japanese government is trying to raise the potential growth rate from zero percent to one percent in order to ensure wage increases commensurate with inflation.
Kishida stressed that “this is an economic measure aimed at getting rid of deflation completely.” The measures, which include investment from the government, local governments and the private sector, will be worth 37.4 trillion yen. The general accounting amount of the supplementary budget for 2023, which will be supported by financial resources, is 13.1 trillion yen.
“Before next year’s spring labor talks, I will take the lead in pushing for a higher wage increase than this year,” Kishida said. Tax breaks and subsidies for companies that raise workers’ wages will be expanded.
As a measure to strengthen supply capacity, the government has introduced tax breaks to promote domestic investment in strategic materials such as semiconductors and batteries. Restrictions will also be eased to allow the construction of factories on land where development is restricted, such as agricultural land and forests.
On the purpose of the tax cut, Kishida explained that the government will mobilize all policies to expand the disposable income of the people at a critical moment to overcome deflation.
By June 2024, income tax will be reduced by 30,000 yen and resident tax by 10,000 yen. In the two years to 2022, the increase in income tax and resident tax revenue of 3.5 trillion yen will be returned to the people.
Households exempt from the resident tax will receive a subsidy of 70,000 yen per household. In addition to the 30,000 yen subsidy decided in March to cope with inflation, the burden of the government will be reduced by 100,000 yen.
Regarding the policy coherence between the tax cuts and the tax increases needed to increase defense spending, Kishida noted that “the order is more important than anything.” He said he “does not intend to implement defensive tax measures alongside this tax cut.”
Subsidies to curb rising petrol prices and lower electricity and gas bills will be extended until the end of April 2024. The measures for electricity and gas will reduce the scope of containment of soaring fuel prices by May 2024.