By coming down on the side of the tax cutters, Mr Kan has reinforced the embrace of business-friendly policies by his left-leaning Democratic party, which before its historic election victory last year tended to focus more on social welfare and environmental issues.

The DPJ-led government had already unveiled a "new growth strategy" under which it pledged to lower the 40 per cent effective corporation tax rate to a level closer to that of competitor nations - put at 25-30 per cent - during the next decade.