IMF urges Japan to raise taxes and reduce emergency pandemic support


The International Monetary Fund (IMF) said Japan’s tax revenues on gross domestic product (GDP) would reduce urgent pandemic support while leaving room for the country to raise some tax rates. Report On thursday.

According to the IMF, Japan’s policy response to pandemics is “very strong,” with GDP projected to grow from 1.6% in 2021 to 3.3% this year.

“Once the recovery is solid, it will be important to gradually restructure the fiscal buffer to ensure debt sustainability over the medium to long term,” he said.

The IMF recommended adjusting the support scale to account for the uncertainties surrounding the pandemic. This can pose a downside risk.

“Given the great uncertainty surrounding the pandemic, fiscal policy must be agile and flexible, adjusting the scale and composition of support in response to epidemiological and economic developments,” he said.

Japan’s tax revenues in GDP are lower than in other G7 countries (Canada, France, Germany, Italy, UK, US) and “there is room to increase revenue mobilization,” the report said. ..

Some income mobilization options have raised the standard consumption tax rate. Strengthen property tax by eliminating incentives for residential areas. Deduction of personal income tax and rationalization of deduction. Raise the capital income tax rate.

The IMF also limits the ability of the Bank of Japan to provide appropriate allowance for doubtful accounts, proactively recognize bad debts, confine resources to infeasible companies and assist banks in their recovery. Advised to avoid that.

“As the pandemic recedes, authorities are shifting support to feasible but liquidity-constrained companies, reducing loan guarantees and concessional lending programs, and at a pace that does not jeopardize recovery. Should continue to curtail measures. ” ..

On monetary policy, the IMF suggested that the Bank of Japan prepare to lower the policy rate if the underlying inflationary momentum remains weak.

“Because a relatively small portion of bank reserves are subject to negative interest rates, [Bank’s] In a three-tier system, increasing that percentage could help strengthen the transmission of negative policy rates to money markets and deposit rates, especially corporate interest rates. “

According to the IMF, another option for banks is to steer the yield curve by aiming for shorter maturities than existing 10-year yields to offset the impact of long-term monetary easing on financial institutions’ profitability. That is.

Japan’s Prime Minister Fumio Kishida said earlier that he has no plans to change the national financial tax on capital gains and dividends as he intends to pursue other measures to improve income distribution.

Reuters contributed to this report.

Aldograph Redley

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Aldgra Fredly is a Malaysia-based freelance writer featuring the Epoch Times Asia Pacific News.