TOKYO (AP) - Japan's Cabinet on Thursday approved cutting the corporate tax by 5 percentage points in a bid to spur the country's sluggish economy.
The corporate tax cut - the first in 12 years - is among tax reforms approved by the Cabinet of Prime Minister Naoto Kan on Thursday. They still require parliamentary approval.
Japan's corporate tax rate now stands at 40 percent. Companies have long urged the government to slash the rate, which is higher than the global average of 25 percent to 30 percent, the government said.
The cut will amount to a 1.5 trillion yen ($17.8 billion) in tax savings for corporations. Kan has said he hopes the cut will encourage companies to increase investment and create more jobs.
The move comes as the latest Bank of Japan survey showed Wednesday that Japanese business sentiment fell for the first time in seven quarters on worries about a persistently strong yen and slowing global demand.
Along with the gloomy central bank survey, recent economic indicators have only reinforced concerns about the world's third-biggest economy.
Japanese factories cut production for the fifth straight month in October, and consumer spending fell. Consumer prices have fallen for 20 straight months. Unemployment worsened to 5.1 percent - historically high for Japan.
Citing a survey of 42 economists, the government-affiliated Economic Planning Association forecast Wednesday that Japan's economy would shrink 1.9 percent in the fourth quarter.