TOKYO -- The Japanese government plans to roll out a host of policy measures, including tax breaks and visa rule changes, to entice foreign talent in a bid to create a global financial hub in the country.
Japan will also set up a dedicated office that will accept English-language applications from foreign companies setting up operations.
"Japan aims to bring in financial talent from overseas to become an international financial center for Asia and for the world," Prime Minister Yoshihide Suga said in a November speech. Tokyo, Osaka and Fukuoka have thrown their hats into the ring as potential hubs.
Foreign financial institutions will be able to file registration paperwork in English starting in January. A special office will initially be set up within the Financial Services Agency, with a separate facility slated to open in Tokyo as early as spring, likely in a financial center such as the Marunouchi or Nihonbashi district.
Since China enacted controversial security legislation for Hong Kong this year, in effect undermining its high degree of autonomy, financial institutions and skilled workers have flooded out of the territory. Competition to attract them has been fierce, particularly in Asia.
Critics have blamed Japan's slow adoption of English for the country's struggle to achieve the same prominence as Hong Kong or Singapore as a financial center. Since Suga took office in September, the government has come out with new policies aimed at paving the way toward resolving these issues by fiscal 2021.
Forms and disclosures from foreign banks and insurers, including applications for operating licenses and annual reports, will be accepted in English. The government plans to enable reviews and oversight of financial institutions to be handled in English soon.
Currently, only some documents, such as forms for high-frequency trading firms and funds for professional investors, are available in English, according to the FSA.
The government and Japan's ruling coalition are rushing to hammer out tax breaks for financial institutions and foreign talent, looking to include the changes in the coalition's tax reform proposals for fiscal 2021.
But at a Nikkei forum held Wednesday, Akira Amari, chairman of the ruling Liberal Democratic Party's powerful tax panel, talked about the difficulty of creating a preferential income tax rate for a certain group of people.
"If we are talking about reducing taxes only for the people we want, that is something we cannot do," he said.
Top income tax rates in rival cities are lower than Japan's 45%. Hong Kong has a maximum rate of 17%, while Singapore charges up to 22% for people earning around $1 million. With its coffers slim from the coronavirus, Japan is currently not in a position to carry out a large-scale income tax cut for the wider population.
Also foreign workers who have lived in the country for more than 10 years are subject to inheritance taxes of up to 55% on both domestic and overseas assets -- a higher rate than in other major economies. The government plans to broaden inheritance tax exemptions for foreign assets and let skilled finance workers remain exempt regardless of the length of their residency.
Changes to the visa system are in the works. Highly skilled workers with specialized knowledge are typically granted five-year visas, with an option for permanent residency under certain conditions. Some foreign companies have pushed for restrictions to be relaxed not only for skilled workers themselves, but also for others coming to the country with them, including domestic staff.
Starting in fiscal 2021, Japan will let skilled professionals bring multiple providers of household services. The visa now permits a one-year stay for only a single "house servant," which some see as an inconveniently small allowance.
The government will also look to address issues with the point system used to determine how long recipients of skilled-worker visas can stay. It will consider options including a shorter path to permanent residency, looking to other countries for examples.