Japan’s Cabinet has approved cutting the corporate tax by 5 percentage points in a bid to spur the country’s sluggish economy.

The corporate tax cut is part of tax reforms approved by the Cabinet of Prime Minister Naoto Kan yesterday hat still require parliamentary approval.

Japan’s corporate tax rate now stands at 40%. Companies have long urged the government to slash the rate, which is higher than the global average of 25% to 30%, the government said.

The move comes as the latest Bank of Japan survey showed on Wednesday that Japanese business sentiment fell for the first time in seven quarters on worries about a persistently strong yen and slowing global demand.