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  5. Cabinet Decision on the Bill for Partially Amending the Act on Strengthening Industrial Competitiveness and Other Acts to Create New Business and Encourage Investment in Industries

Cabinet Decision on the Bill for Partially Amending the Act on Strengthening Industrial Competitiveness and Other Acts to Create New Business and Encourage Investment in Industries

February 16, 2024

On February 16, 2024, a cabinet decision was made on the Bill for Partially Amending the Act on Strengthening Industrial Competitiveness and Other Acts to Create New Business and Encourage Investment in Industries. The bill will be submitted to the ongoing 213th ordinary session of the Diet.

1. Purpose of the bill

The bill is to stipulate provisions for: large-scale and long-term tax deductions for investment and production in strategic areas and tax deductions for strengthening Japan’s competitiveness in locations used as research and development bases, both of which are initiatives for expanding strategic domestic investment; and measures for intensively supporting Leading Medium Enterprises and startups,  which are the driving force of the Japanese economy, as initiatives for promoting Japan’s innovation and reorganization of industries, which together contribute to expanding domestic investment.

2. Outline of the bill

(1) Partial amendment of the Act on Strengthening Industrial Competitiveness

[i] The bill is to stipulate provisions for defining products with particular significance to gaining domestic and international markets amidst international competition (i.e., clean vehicles, green steel, green chemicals, sustainable aviation fuels (SAF), and semiconductors); and financial support measures for the companies producing those products, including both a tax deduction that is proportionate to domestic production and sales in the strategic areas and a two-step loan, conditional on the competent minister approving the plans submitted by the companies on production and sales of the aforementioned products. 

[ii] The bill is to stipulate the establishment of provisions for the government’s investigation over such companies’ current utilization of intellectual property (IP) and other activities. A tax deduction for innovation bases (innovation box tax regime) will be provided to companies, conditional on the government confirming that the companies are utilizing intellectual property (IP) to a certain level, pursuant to these provisions.

[iii] The bill is to stipulate provisions for defining companies that have 2,000 or fewer full-time employees, excluding SMEs, as “Leading Medium Enterprises” and, in particular, defining Leading Medium Enterprises that pay higher wages and are proactively engaging in domestic investment as “Specified Leading Medium Enterprises”; and providing measures to such companies, including a tax benefit for such Leading Medium Enterprises and SMEs that have formed group companies through conducting multiple M&As, a measure for supporting large-scale and long-term financing (two-step loans), and for the provision of subsidies and advice, etc. by the National Center for Industrial Property Information and Training (INPIT), conditional on the competent minister approving the plans submitted by the Specified Leading Medium Enterprises and other applicable entities, on business reconstruction with the potential for growth.

[iv] The bill is to stipulate provisions for the extension of the period for which the Japan Investment Corporation (JIC) can hold securities, etc. to the end of March 2050 (from the current limit of the end of March 2034).

[v] The bill is to stipulate provisions for establishing special measures (so-called stock option pools) that allows startups to issue stock options in a flexible and agile manner.

[vi] The bill is to develop provisions in which companies are allowed to receive consultations from INPIT and the New Energy and Industrial Technology Development Organization (NEDO), conditional on the competent minister approving the plans submitted by the companies on creating new markets that take advantage of standardization and IP, focusing on joint research and development between the companies and universities, etc.; and provisions in which the government may investigate trends in standardization and the current state of IP utilization of the companies.

(2) Partial amendment of the Limited Partnership Act for Investment

The bill is to stipulate provisions for adding crypto asset to the list of assets that an investment limited partnership (LPS) is allowed to acquire and hold.

(3) Partial amendment of the Act on the National Center for Industrial Property Information and Training, Independent Administrative Agency

The bill is to revise the purpose of INPIT and add to its services the provision of advice and subsidies related to the protection and utilization of IP to SMEs, research and development institutes, and other similar organizations.

(4) Partial amendment of the Act on the New Energy and Industrial Technology Development Organization

The bill is to enhance the function of the New Energy and Industrial Technology Development Organization (NEDO) to provide subsidies to support activities by deep-tech startups for business development.

3. Related materials

Division in Charge

Industry Creation Policy Division, Economic and Industrial Policy Bureau