Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: fut_trade who wrote (1228)	7/3/1998 3:58:00 AM
From: chirodoc	Read Replies (1) \| Respond to of 3902

Friday July 3, 3:34 am Eastern Time Facing voters and U.S., Japan PM hints at tax cuts (Recasts, adds full PM quote, EPA reaction) By William Mallard TOKYO, July 3 (Reuters) - Facing restive voters and an upcoming U.S. summit, Prime Minister Ryutaro Hashimoto on Friday gave his strongest hint yet of permanent income tax cuts. But Hashimoto, on the parliamentary election campaign trail in southwestern Japan, indicated he might make one-off tax cuts permanent while ignoring the thorny issue of whether or when any reductions would be offset with new taxes elsewhere. ''We will review the state of income taxation, leaving no sanctuary,'' Hashimoto told a news conference in the provincial capital of Kumamoto. ''Rather than having the result take the form of special tax cuts, I hope there will be a permanent tax system reform. And that's the direction I think it will go.'' Some Japanese media took the remark to mean he is considering permanent income tax cuts, while one news agency dubbed it a tax-cut announcement. The comment temporarily jolted financial markets. The Japanese currency rocketed instantly by more than two yen against the dollar and Tokyo stocks surged about two percent, but both markets later shedded almost all their gains as investors doubted how much new ground the premier had trod. ''He is right in the middle of an electoral campaign,'' said Martin Foster, senior analyst at Standard & Poor's MMS. ''Until we get more on this, we're talking about electioneering rather than fiscal policy.'' Next week's elections are seen as a referendum on Hashimoto, whose handling of Japan's slumping economy has come under criticism both domestically and internationally. The vice minister of the Economic Planning Agency, Takafusa Shioya, said permanent tax cuts would have a positive effect on the economy but that the authorities should consider how to fund such cuts. Fearing just such a divisive debate, Hashimoto and other campaigning politicians have so far hesitated to confront the tax issue directly. They have skirted whether or when to pay for the tax cut by lowering the minimum taxable income level to bring more lower-income earners onto the tax rolls. Until now, the premier has promised only to launch full-fledged debate after the July 12 elections to make the income tax system fair, transparent and give people the incentive to work. But Hashimoto, having just Thursday issued a plan to help clear the banking sector of its estimated 77 trillion yen ($550 billion) in problem loans, remains under pressure from the United States and elsewhere for fresh stimulus ahead of a July 21 Washington visit. Treasury Secretary Robert Rubin welcomed the bank-sector plan but also urged quick action on ''sustained and substantial fiscal stimulus.'' One prominent local economist said Hashimoto avoided a U.S. verbal drubbing at May's Group of Seven (G7) summit by secretly promising President Clinton the tax cuts, which would be laid out before the elections and welcomed by the White House on Hashimoto's subsequent visit. U.S. investment adviser Richard Medley, who advised Hashimoto's party on the bank-sector plan, said he expects tax cuts as part of a six-trillion to seven-trillion yen fiscal stimulus plan that he said could be announced within a couple of weeks. ''They will pass by the end of this year a major supply-side reform in taxes, bringing the top rates of both the residential -- the local -- taxes and the national (income) taxes down significantly, probably to a top rate of around 45 percent,'' Medley told Reuters Television earlier on Friday. A member of the government's Tax Commission, Haruo Shimada, told Reuters earlier in the week that the LDP would likely express its intent to cut taxes before the elections in order to woo voters and mollify the United States. The Yomiuri Shimbun, a major newspaper, reported on Wednesday that the government and ruling Liberal Democratic Party were aiming to announce before the election plans for tax cuts worth two trillion yen to four trillion yen a year.