By Tetsushi Kajimoto

TOKYO (Reuters) – Japan will extend tax breaks on low-emission cars and offer incentives to promote green investment to help Prime Minister Yoshihide Suga meet his carbon-neutral goal, according to the ruling bloc’s tax reform proposal to be approved on Thursday.

Suga has vowed to cut greenhouse gas emissions to zero in 2050, bringing Japan in line with the European Union and ahead of China’s pledge to achieve the same goal by 2060.

In a nod to Suga’s ambition, the ruling coalition’s tax reform proposal for next fiscal year will focus on steps to encourage corporate investment in green technology, lawmakers with knowledge of the deliberations said.

The proposal will also call for extending tax breaks on low emission cars and adopting incentives for next-generation lithium-ion batteries used in electric vehicles, they said.

The proposal, to be finalised by Suga’s ruling Liberal Democratic Party (LDP) and its ally Komeito Party later on Thursday, will serve as a platform for the government’s tax policies for the year beginning in April.

The ruling coalition will also call for steps to ease the blow from the coronavirus pandemic on households and businesses, such as an extension of tax breaks on mortgages and a lower levy for jet fuel, the lawmakers said.

The tax plan would follow Japan’s decision on Tuesday to compile a $708 billion economic stimulus package that features support for green and digital innovation.

Suga’s administration sees green innovation as a key area for Japanese business investment that could give the economy a much needed boost to emerge from a pandemic-induced slump.

While Japanese carmakers have seen sales rebound from the pandemic’s hit, they are laggards in the global race on development of electric vehicles.