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Tokyo 'financial hub plan' fails to lure funds leaving Hong Kong

Japan's weak tax reform results in missed opportunity

Many hedge funds would move to Tokyo, left, from Hong Kong if Japan's tax system was not so burdensome. (Source photos by Kai Fujii and Kenji Kawase)

TOKYO -- Japan's dream of turning Tokyo into a new hub of international finance is fading, even as Hong Kong hedge funds scramble to find a new home in Asia.

Both the central government and Tokyo have been promoting the capital as the destination of choice for the large numbers of hedge funds fleeing Hong Kong. But Japan's restrictive tax system -- despite weak efforts at reform -- is proving a huge disincentive.

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