Japan's ruling party has called for extended tax breaks on low-emission cars and green investment incentives, a proposal showed on Thursday, as the country's Prime Minister Yoshihide Suga puts carbon neutrality at the center of his economic recovery plan.

Suga "pledged to establish a fund of two trillion yen ($19.2 billion) for firms developing green technologies as part of efforts to achieve carbon neutrality by 2050 and spur economic growth," according to Kyodo News.

The ruling coalition's tax reform proposal for next fiscal year focuses on steps to encourage corporate investment in green technology, lawmakers with knowledge of the deliberations said.

The proposal, finalized by Suga's ruling Liberal Democratic Party (LDP) and its ally Komeito Party 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.

Kyodo News reported that the Japanese government said Tuesday it will "boost investment in technologies to tackle climate change, including promoting zero- and low-emission vehicles and developing competitive automotive batteries."

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.

(With input from agencies)