The head of the nation's most powerful business group on Sept. 25 called for a cut in corporate taxes, stressing that such a move would invigorate corporate activity, lead to greater tax revenues and not run counter to the government's fiscal reconsolidation efforts.

Shoichiro Toyoda, chairman of the Japan Federation of Business Organizations (Keidanren), is also head of the Fiscal System Council, an advisory body to the finance minister. At a news conference after a meeting of the Fiscal System Council, Toyoda said that while he does not believe the economy is getting worse, it could be boosted by a reduction in corporate taxes in real terms. He said the issue would need to be decided politically, pointing out that the tax reductions, coupled with further deregulation, would breathe new life into Japan's industry.

The Finance Ministry has so far been reluctant to consider a net reduction in corporate taxes, because it could affect the government's target to stop issuing deficit-covering bonds and bring the fiscal deficit to 3 percent or less of gross domestic product by fiscal 2003. The ministry wants to review the preferential tax treatment offered to companies' various reserve funds to broaden the scope of taxable income before reducing the tax rate, thus keeping revenue stable.