TOKYO : Fumio Kishida is already backpedaling with one of his major policies, after markets reacted coolly to his proposal to raise taxes on investment income.
Much attention has been focused on the taxation issue, and there are widespread misconceptions that we will do it immediately, Kishida said during a Fuji TV program on Sunday.
A week ago, Kishida suggested at his first news conference that raising the tax on capital gains and dividends was one option to foster economic growth. Some commentators called the idea a symbol of Kishida's redistributive economic policy.
However, Kishida's idea raised concerns that the new policy would hinder the country's goal of raising investment. Some market participants began calling the recent decline in Japanese stocks the Kishida shock. In response, Kishida said: If my thinking is having an impact on the stock market I need to clear up the misunderstanding, adding that growth is the key to distribution. The basic idea is that growth is first and foremost in importance. At present, Japan imposes a flat tax of 20% on investment income. Because of this, the burden of income and resident tax peaks around annual incomes of 100 million yen $900,000 Some critics have pointed out that this 100 million yen barrier is causing inequality.
Kishida has pledged to create a positive cycle of growth and distribution to stimulate an economy where people can prosper. Based on this pledge, the Prime Minister proposed a tax reform proposal, prompting proposals such as raising the tax above 20% or gradually lifting it for high-income earners.
Investors on the Tokyo stock market have taken Kishida's latest comments positively, with the blue-chip Nikkei stock average rising more than 500 points, or 1.9%, at one point on Monday.