Japan may face a variety of challenges to lure banks and bankers to become a major hub – such as high taxes or the non-English environment – but its vice finance minister believes only one thing truly matters: can serious money still be made?
Japan’s vice finance minister Kenji Nakanishi underlined that the pandemic has driven companies to diversify their operations which in turn has created a window of opportunity for Japan to realize its ambitions to become an international financial hub, according to a «Bloomberg» report.
Appointed under the new Yoshide Suga administration that succeeded Shinzo Abe, Nakanishi has been tasked to accelerate efforts to lure foreign financiers with a focus on making more business services available in English and, notably, tax reductions.
Tax Cuts
In Japan, corporates are taxed at 30 percent while the top income bracket is taxed at 55 percent – double and triple of Hong Kong’s rate, respectively.
Despite the resistance likely faced by proposing foreigner tax cuts to a strongly egalitarian electorate, authorities will still look to push for more benefits including billable executive bonuses and exemptions on inheritance taxes that can even cover offshore assets.
«It’s impossible to make taxation levels exactly the same,» Nakanishi said, highlighting differences in social security costs as the reason. «But we often hear that even a small change would make a difference and the government needs to send some kind of clear message.»
Bottom Line
According to Nakanishi, interest in Japan remains lukewarm evidenced by the lack of an international shock reaction following the outage of the Tokyo Stock Exchange this month.
As much as the nation can continue to tweak its tax and regulatory regime, what ultimately matters is if business opportunities for firms and economic growth, another traditionally weak factor for Japan compared to its regional competitors like China.
«In the end, what matters is whether Japan can smell of money,» said Nakanishi.
