May 17, 2014 4:52 am JST

Think tanks envision Tokyo as low-tax financial center

Plans for a Tokyo Financial City are laid out by, from right, Daiwa Institute of Research Chairman Toshiro Mutoh, Japan Center for Economic Research Chairman Ryoki Sugita and Mizuho Research Institute President Mitsuaki Tsuchiya.

TOKYO -- Taxes should be lowered for financial institutions in Tokyo to attract foreign businesses and turn the city into the leading financial hub in Asia, three major Japanese research institutes recommended Friday.

     The Japan Center for Economic Research, the Daiwa Institute of Research and the Mizuho Research Institute suggested lowering local corporate taxes and asset taxes for financial institutions that set up new locations in Tokyo. Combined with the corporate tax cuts the central government is considering, these incentives would give Tokyo better footing to compete with such financial centers as Singapore.

     The think tanks said a framework should be created to facilitate trading of many currencies, including the key currencies of Asia. They added that an organization should be established in Tokyo to specialize in yuan settlements.

     Britain's financial center, the City of London, was held out as a model. The research institutions proposed the creation of a position equivalent to Lord Mayor to serve as an ambassador for supporting and promoting Tokyo's financial center overseas.

     The vision for a Tokyo Financial City meshes with the government's designation of Tokyo as a special deregulation zone under a national growth strategy. Japan finally has prospects for ending prolonged deflation, and Tokyo has been chosen to host the Summer Olympics in 2020. With such tailwinds at its back, the three research institutes see an opportunity to turn Tokyo into Asia's premier financial hub.

     According to a U.K. study, Tokyo is the sixth-most attractive financial center in the world from the viewpoint of financial institutions. Hong Kong and Singapore, ranked third and fourth, both have effective corporate tax rates that are about half as high as Tokyo's.

     The government designated the six special zones in March and plans to draw up specific deregulation measures as early as this summer. And Tokyo Gov. Yoichi Masuzoe has expressed support for cultivating the financial industry in the city by leveraging the special zone program.

     "I hope to adopt any measures that should be incorporated," Masuzoe said Friday, referring to the latest recommendations.