When will there be reforms in individual tax rates and the social welfare system?
Reforms aren’t adopted because they’ve been proven to create a more efficient economy but “because a political leader is able to tell a story,” as Koizumi did, a story that says that the economy has to adapt or it will fall behind, Mr. Hubbard responded. The U.S. benefits from the high Japanese corporate tax rate–“they’re the only one worse than we are, and so we need you to stay so high”; with labor hours shrinking in Japan, “Japanese growth will be more than entirely a story of productivity growth.” What is the Takenaka vision of fiscal reform? “In the second year, in 2002 of the Koizumi cabinet we had a strategic tax reduction. I wanted to do more but I was opposed. But we offered an investment tax credit and that has contributed to today’s additional cap ex in Japan,” answered Mr. Takenaka. “To keep tax burden to a minimum, keep government to a minimum,” while funding the social security system and restructuring the provinces, Japan needs a “wide, shallow tax system,” he said; and
