At the time of globalization of business activities, reduction of corporate tax is really important. We have already reduced the effective tax rate from about 50 percent last year to about 46 percent this year. Under this package, this tax rate will be further reduced to the international level as soon as possible in three years. In addition, a special tax deduction was decided as an incentive for business investment and housing purchases. In this connection, it may be worth mentioning our commitment of fiscal consolidation in the medium term.
Fiscal consolidation is critical for Japan's future amid a rapid ageing society.
At present, the fiscal deficit of the central and local governments is now 4.7 percent of GDP, and accumulated government debt has climbed to 103 percent of GDP in fiscal year 1998, on the high side among the OECD countries. Therefore we will definitely not change our basic stance toward fiscal consolidation. However, in order to address this emergent economic situation, the Japanese government decided to revise the law for fiscal consolidation. A flexibility clause will be incorporated in the law so that it is able to temporarily expand fiscal deficit. In addition, the target year of reducing the fiscal deficit to 3 percent of GDP will be delayed from the year 2003 to 2005.