JIN-479 -- Japan proposes tax breaks to encourage investment

J@pan Inc Newsletter
The 'JIN' J@pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 479 Wednesday August 27, 2008, Tokyo
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On Monday, new Financial Services Minister Toshimitsu Motegi
implored the press at the Foreign Correspondents Club of
Japan to focus on the positives. Paraphrasing Winston Churchill,
the Harvard-educated former journalist argued that every
adversity could be turned into an opportunity. The demographic
change could see an army of grey-haired would-be retirees
joining the “silver labor force,” and the 1500 trillion yen
horded under the mattresses of reluctant investors could be
coaxed back into the economy. With the average healthy life
expectancy of Japanese women now standing at 78 years and men
73, there's a strong argument for increasing the age of
retirement. Similarly, the underutilized savings of households
across the nation have long been seen as a way to revitalize the
economy. It is early days yet, but Motegi and the Fukuda
administration are talking about tax reform to encourage
investment. And not only for small investors: new laws would
enable companies to avoid double taxation on money made
overseas. A territorial taxation system that would limit taxable
corporate profits to domestic sources of income or, alternately,
an international tax system are both being considered.

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On Tuesday, it was reported in the Nikkei newspaper that the
Financial Services Agency is considering the introduction of a
10-year tax exemption for dividend payouts arising from
investments in the stock market. The proposal would be an
extension of a tax reduction plan already in place for 2009 and
2010. The elderly could receive up to 5 million yen in tax
exemptions from capital gains while those under a certain
age would receive an exemption for dividend payouts of up to
1 million yen.

No-one underestimates the task of the Financial Services Agency.
Japan will form the prototype for the other developed countries
facing the challenge of a rapidly aging workforce.
Japan is still wealth and is still the island nation with the
second-biggest economy in the world, but in terms of GDP per
capita it ranks 20th. Small, outwardly looking countries such as
Switzerland, Norway and Luxemburg top the list. When asked
about what the government planned to do in terms of immigration
and women in the workforce, Motegi remained vague. The minister
has only been in the post for under a month and the details of
any law reform are yet to be finalized.

Motegi did make the point of differentiating between immigrants
and foreign workers, however. Earlier this year, lawmakers
handed a paper to the government suggesting that an increase of
foreign-born workers would be necessary to bolster the economy.
By 2050, Japan's foreign-born residents could make up as much as
10 percent of the population.
But the idea of a large-scale immigration program, where
citizenship is more freely offered, may still be a long-way from
being accepted in parts of the government.

The nation's lawmakers need to realize that they cannot have it
both ways. If the government truly wants to keep the economy
where it is it needs to be more outwardly looking. Not only in
terms of immigration but also in the way it attracts foreign
investment. Talk of Tokyo as an international financial center
continues to be heard on the lips of both members of the Tokyo
metropolitan government and also the central government.
While Motegi's positives should be focused on, the problems
the nation need s a real solution, and this will mean real
change.

Michael Condon
Editor-in-chief

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Entrepreneur Association of Tokyo-Seminar-Tuesday, September 2nd

Title: 'Breathing New Life into an Old Industry'

Speaker: Daisuke Iwase
- Co-founder and COO of Lifenet Insurance Company

Lifenet, an online insurance venture was co-founded by Daisuke
Iwase and Hal Deguchi in April 2008.
They have successfully raised over 13 billion yen to date
to grow Lifenet and revolutionalize Japan's 45 trillion yen
life insurance industry.
Daisuke started his career at the Boston Consulting Group
and went on to work at Intenet Capital Group and Ripplewood
Holdings before starting Lifenet. He has a B.A. in Law from
the University of Tokyo, and MBA with High Distinction
(Baker Scholar) from Harvard Business School.

Please sign up early while seats are available.
Date/Time: Tuesday, September 2nd 7:00 pm
Location: Foreign Correspondents' Club of Japan
Language: English
Website: http://www.ea-tokyo.com
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Details: Complete event details at http://www.icajapan.jp/
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Date: Thursday, Sept 11, 2008
Time: 6:30-8:30pm - includes open bar and buffet
Cost: 6,000 yen (members), 7,000 yen (non-members)
Open to all-venue is The Foreign Correspondents' Club of Japan
http://www.fccj.or.jp/aboutus/map

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STAFF
Written by: Michael Condon, Editor-in-Chief, Japan Inc Magazine
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