The passing of His Imperial Highness Prince Katsura

I respectfully express my condolences on the passing of His Imperial Highness Prince Katsura. I observed with respect that the prince continued to carry out his official duties while recovering from illness for a long time. It is extremely regrettable that he passed away against my hope.

The Economic Outlook

The Japanese economy grew at an annualized rate of 6.7% in real terms in the first quarter of the year, sharply higher than the initial estimate of 5.9%.

It is true that a spending spree right before the April sales tax hike boosted economic activity and contributed to the upward revision, but it is just the trees.

The wood to see is Japan coming back. The latest official data supports my view that business in the nation has been slowly but steadily picking up in spite of the impact of the recent tax increase. Companies have become more positive about their growth and capital spending expansion has no sign to stop.

Effective Corporate Tax Rate Cut

Prime Minister Abe expressed his firm determination to start lowering the effective corporate tax rate in fiscal year 2015. The leader has made great action.

The corporate tax rate cut should be implemented without delay so that substantial tax burden on companies will begin to decrease in fiscal year 2015. The tax should go down to below 30% in the next three to five years. The future target is 25%, the average OECD figure. What is needed for the tax reduction scenario is a review of the taxation system as a whole and cut in government expenditures including social security costs. It is essential to maintain revenue neutrality on a multi-year basis in the reform process.

Although zero-based reviews over the current Act on Special Measures concerning Taxation are well worth consideration, the items which contribute to enhancing international competitiveness such as research and development tax credits should be placed in the Corporation Tax Act having legal force or validity for an indefinite time.