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Measures to Make Japan an Asian Business Center

Background

By attracting foreign companies and capital to Japan, there will be the chance of an inflow of superior technologies and new expertise, while creation of innovation and high-value-added accumulated technologies will be promoted. However, the balance of direct investment to Japan as of the end of FY 2010 was 17.5 trillion yen (approximately 3.7% of GDP), showing a consecutive decrease for two years after peaking in 2008.

End of 2001 End of 2002 End of 2003 End of 2004 End of 2005 End of 2006 End of 2007 End of 2008 End of 2009 End of 2010
6.6 9.4 9.6 10.1 11.9 12.8 15.1 18.5 18.4 17.5

In recent years, foreign companies are transferring their R&D centers and Asian headquarters, which had previously been based in Japan, as emerging Asian countries achieve economic growth, making the relative size of the Japanese market smaller, even as support offered by these emerging countries to attract foreign companies intensifies. Japan is losing its position as a key international business center in Asia.

In the context of the sense of crisis arising from the situation described above, policies to make Japan an Asian business Center were included in the “New Growth Strategy” decided by the Cabinet in June last year. The “New Growth Strategy” aims for realization of a “strong economy,” “strong public finance,” and “strong social security” and advocates seven strategic fields. Under “Asian economic strategy,” one of these strategic fields, it is emphasized that we must incorporate Asian growth into Japan by opening up the country and facilitating the flow and concentration of people goods and money into Japan; the importance of policies to make Japan an Asian Business Center is recognized.

Furthermore, in the “Inward Investment Promotion Program” established in November 2010, it was stated that Japan should enhance administrative approaches, including one-stop services, in addition to cross-cutting measures to improve the business environment (e.g., effective corporate tax rate cuts), with the aim of strengthening Japan’s capability as a business center in Asia.

Overview of the measures

In order to attract R&D centers and Asian headquarters of global companies, METI will take incentive measures, such as tax incentives to certified companies in accordance with laws and location subsidies, and promote cross-cutting measures including the establishment of the “Program of Japan as an Asian Business Center Promotion and Promotion of Direct Investment to Japan” (provisional name), which incorporates such measures as collaboration with the special zone system and improvement of the living environment of foreigners.

Bill on Promotion to make Japan an Asian Business Center

The following incentives are applicable to new R&D and headquarters operations conducted in Japan by global companies certified by the competent minister.

  • (1)   Preferential corporate tax (20% deduction for 5 years for certified companies)
  • (2)   Preferential income tax (preferential tax treatment for stock options from the foreign parent company)
  • (3)   Preferential treatment under the Foreign Exchange Act (faster investment procedures)
  • (4)   Special exemption for patent fees (patent fees and examination request fees reduced by half)
  • (5)   Special treatment under the Small and Medium-sized Enterprise Investment Business Corporation Act (Small and medium firms capitalized at over 300 million yen will also be supported.)

* Expedited visa examination for foreigners through supportive implementation of the system

Location subsidies

Initial investment support for establishment of Asian headquarters/R&D center with potential for particularly large economic benefits
(FY 2010 supplementary budget: about 2 billion yen/FY 2011 regular budget: 0.5 billion yen)

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