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Hosokawa, Morihiro

Tokyo Stock Market Jumps on Tax Reform Deal

Strategic Insights

— 1 min read

Prime Minister Morihiro Hosokawa's tax reform agreement has provided a much-needed boost to the Japanese economy, with the Tokyo stock market experiencing a significant increase in morning trading. The deal, which will allow the government to implement six trillion yen ($55.5 billion U.S.) in income and other tax cuts, is expected to form the core of a long-delayed economic stimulus package. The coalition's unanimous agreement on the deal reflects growing confidence in the government's ability to address economic issues.

Key Takeaways:

  • The tax reform deal will allow the Japanese government to implement six trillion yen ($55.5 billion U.S.) in income and other tax cuts.
  • The tax cuts will form the core of a long-delayed economic stimulus package, which is expected to be announced later in the day.
  • The Tokyo stock market jumped over 500 points in morning trading, pushing the Nikkei average of 225 selected issues to 20,516.35.
  • The coalition has been struggling to mend rifts over the tax issue since Prime Minister Morihiro Hosokawa unveiled his original plan early last Thursday.
  • Mr. Hosokawa wants to take the economic stimulus package, as well as a draft of the state budget for the fiscal year starting April, to Washington for his summit with U.S. President Bill Clinton.
  • The government will decide within the year whether to raise taxes or introduce a new tax to offset the cuts.
  • Socialists members of the coalition threatened to pull out over the original tax plan, which would have introduced a new 7-per-cent "welfare" tax three years later in place of the current 3-per-cent consumption tax.

Statistics:

  • Six trillion yen ($55.5 billion U.S.) in income and other tax cuts will be implemented.
  • The Nikkei average of 225 selected issues increased to 20,516.35.
  • The Tokyo stock market jumped over 500 points in morning trading.
  • 7-per-cent "welfare" tax proposed in the original plan, replacing the current 3-per-cent consumption tax.
  • The government will decide within the year whether to raise taxes or introduce a new tax to offset the cuts.

Sources:

  • Reuters News Agency, "Tokyo Stock Market Jumps on Tax Reform Deal"

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