Japan gets serious about promoting foreign investment into Japan

Practical Law UK Legal Update 0-504-2844 (Approx. 3 pages)

Japan gets serious about promoting foreign investment into Japan

by Atsumi & Sakai

Published on 22 Dec 2010 • Japan

This article is part of the PLC Global Finance December 2010 e-mail update for Japan.

The Round-Table Conference for Promotion of Investment into Japan organised by the Ministry of Economy, Trade and Industry (METI) published its report regarding the Promotion Program for Investment into Japan (the PPIJ) on 29 November 2010. The purpose of the PPIJ is to assure Japan's sustained growth to match the rapid growth of developing countries mainly in Asia.

The purpose of the PPIJ is to assure Japan's sustained growth to match the rapid growth of developing countries mainly in Asia. In order to carry out that purpose, the PPIJ suggests that Japan should share a mutual sense of crisis about the shrinking competitiveness of Japan as a business site and implement the following measures:

Attract investment from overseas strategically and intensively, and focus on developing Japan's competitive advantages to transform Japan into a business hub for Asia.
Make the business environment in Japan dramatically more attractive to foreign investors by:
- conforming corporate tax rates to international standards;
- expanding the tax convention network by entering into agreements such as Economic Partnership Agreements and Transpacific Partnerships;
- improving infrastructure particularly in relation to transportation & distribution systems; and
- relaxing the regulations applicable to the location of plants.

As for the first purpose above, the PPIJ proposes the creation of substantial incentives, such as preferential tax treatment and immigration procedures in relation to certain types of approved companies in relation to the setting up of Asian headquarters and R&D functions in Japan. In addition, a more specific program for the transformation of Japan into a hub in Asia will be published in the summer of 2011.

As for the second purpose shown above, the PPIJ makes a number of notable proposals in relation to reforms of the relevant systems:

As for reform of corporate taxes aiming at the international standard, the PPIJ has proposed that it be discussed by the government and this is currently occurring.
As for expansion of the tax convention network, the PPIJ proposes the dissolution of double taxation through the introduction of an arbitration system.
As for improvements to transportation & distribution systems and other infrastructures, the PPIJ makes three notable proposals as below.

Strategic open skies to facilitate international distribution

Japan should remove certain obstacles that add to the cost of using airports in Japan so that hub airports in Japan can play a role as cargo hubs for the airports of other countries.

Easing of various regulations related to charter flights

In order to enable Japan to enter into open skies agreements with various countries (recently Japan entered into a memorandum of understanding with the USA regarding an open skies agreement) various regulations regarding forwarder charter services should be eased.

Strengthening of international competitiveness of strategic seaports

Japan should streamline trade procedures to match those applied by other countries by abolishing "the rule of bonded installation", which requires installation of freight in a bonded area before export declaration, in order to decrease export-related costs and lead times.
Japan should lower port costs, which are more expensive than ports in other countries.
Japan should extend the operating hours of port gates.
Japan should lower costs by promoting the sharing of wharf facilities and workers among terminals.

As for relaxation of regulations regarding plant location, the PPJ suggests reform of environmental laws so as to prevent other countries from experiencing "carbon leakage".

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