The nation's business leaders welcomed Prime Minister Ryutaro Hashimoto's surprise announcement of 2 trillion yen in income tax cuts as a timely measure that will stimulate the nation's sagging economy.

"We hope the income tax cuts, along with the corporate tax reduction and the financial stabilization measures, will encourage consumers' sentiment and that these measures will lead to the recovery of the nation's economy and stock market," said Shoichiro Toyoda, chairman of the Japan Federation of Economic Organizations (Keidanren).

Jiro Nemoto, president of the Japan Federation of Employers' Associations (Nikkeiren), also welcomed the income tax cuts, saying repeated requests from business groups and labor unions have finally been accepted by the government.

Kosaku Inaba, chairman of the Japan Chamber of Commerce and Industry, said the issuance of deficit-covering bonds is inevitable at this stage. "Unless the government implements every possible measure to stimulate the economy now, it will not be able to ensure an increase in future tax revenues, and a picture cannot be drawn up for the nation's fiscal reform," Inaba said.

Jiro Ushio, chairman of the Japan Association of Corporate Executives (Keizai Doyukai) also called Hashimoto's move a brave one. "Unless the economy becomes active, the government will not be able to achieve fiscal reform," he said. "The decision by the prime minister will not run counter to the fiscal reform."