TOKYO -- Tokyo Gov. Yuriko Koike is determined to make the Japanese capital a "global financial city." According to a blueprint obtained by the Nikkei, the plan is to slash taxes and dismantle regulatory hurdles, aiming to draw in 40 foreign fintech or asset management companies by fiscal 2020.
Koike will present the preliminary plan on Friday. Lowering corporate taxes will be key, according to an outline of the draft. The metropolitan government will weigh cutting twin taxes on business activity and corporate residency, and will urge the national government to lower the nationwide corporate tax. The city could also allow financial firms in specially designated zones to exempt 20% of their income from taxation.
The effective corporate tax rate in central Tokyo's 23 special wards tops 30% -- a formidable figure, particularly when compared with the 17% or so for such rival Asian cities as Hong Kong and Singapore. Tokyo aims to bring its rate in line with London's 20%.
Sweeping regulatory and cultural changes are also in order. The city intends to simplify procedures for corporate registration and licensing, seen by many as the biggest barrier to business entry in Japan. Seeking help from the Financial Services Agency, the metropolitan government will call for an expedited entry program. It also aims to produce an English-language guide to corporate registration procedures by summer.
In areas of central Tokyo undergoing redevelopment, the city plans to build international-school facilities and expand access to medical treatment aimed at foreigners, aiming to make life simpler for the workers foreign companies will bring. Specialists with advanced financial knowledge will also be able to bring their family members and household help along more easily.
This city will take hints from other financial capitals to appeal to foreign business. A position akin to Lord Mayor of the City of London, the British capital's financial center, will be created to promote Tokyo as a financial capital and the businesses that have settled here. An award will be created to help the financial industry spread solid roots in society. Tentatively named the Tokyo Award, it will recognize companies using financial services to address such challenges as environmental degradation and poverty.
Meanwhile, special measures will nurture companies in such growth areas as financial technology and asset management. One idea is to create a mechanism for upstart asset management firms to take on some business from more established institutional investors, helping them break into a field traditionally unfriendly to newcomers. Tokyo will also create a fintech center bringing together major companies, entrepreneurs and research organizations, and establish a "regulatory sandbox" suspending certain rules so that companies can experiment and expand into new fields.
These policies were recommended by an advisory panel for the "Global Financial City Tokyo" effort made up of financial-sector leaders from around the world and experts from the Japanese private and public sectors. Koike will now flesh out the plan, in part through talks with top executives from foreign financial institutions. The goal is to have a final version ready by November.
All of this aims to bring an annual average of 10 foreign companies in such areas as asset management and fintech to Tokyo, making for 40 new entrants by the year ending March 2021. Even before the 2008 financial crisis, when forays into the city were at their peak, fewer than 10 foreign asset management firms opened up shop here annually.
The hope is that a booming financial sector will support the economies of Tokyo and the nation far into the future. For now, the city's population is climbing as it gears up for the 2020 Summer Olympics, and foreign travelers are on the rise. But many fear that this could change after the Olympics, as the megacity is expected to face a declining population and rapid aging.
The financial and insurance sectors now account for just 5% of Japan's gross domestic product. Doubling this to 10%, in line with the U.K.'s figure, could add an estimated 30 trillion yen ($272 billion) to GDP.