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2024 Tax Reform: Japan Eases Corporate Tax on Crypto and Token Holdings

2024/1/30

 

The Japanese government has revised the tax rules in the 2024 fiscal year tax reform outline for blockchain companies and investors holding cryptocurrencies and tokens. Previously, corporate tax was imposed based on the market value at the end of the fiscal year for these holdings, but the revision excludes them from market value assessment if they are not held for short-term trading purposes. This revision is in response to the outflow of Japanese blockchain companies and investors to overseas, aiming to promote collaboration with Web3 companies and market formation in Japan. However, it remains uncertain whether the outflow of Web3 companies to foreign countries will completely stop, and Japan faces competition from other countries like Dubai and Singapore in attracting these companies. 

 

 


Prime Minister Kishida Proposes Temporary Income Tax Reduction for Japanese Citizens

2023/10/20

 

On October 20th, Prime Minister Fumio Kishida indicated a policy to instruct ruling party leaders to consider a temporary income tax reduction to return the increased tax revenue to the people. The Prime Minister stated, "We want to concretize the return to the people as soon as possible," and plans to meet with Koichi Hagiuda of the Liberal Democratic Party and Yosuke Takagi of the Komeito Party, both chairpersons of political research committees. The strategy to return a portion of the increased tax revenue to the citizens is positioned as a "temporary and limited measure," and is expected to be announced in the policy speech on the 23rd.

Furthermore, a concrete policy is expected to be established within the ruling parties' tax reform outline for the fiscal year 2024. The government and ruling parties are adjusting towards including extensions of benefits for low-income earners and gasoline subsidies in response to rising prices, and are also considering income tax cuts that would benefit the middle class.

The tax revenue for the fiscal year 2022 increased by 6 trillion yen from the previous year to 71.1 trillion yen, and the Prime Minister has made it clear that the increased tax revenue should be appropriately returned to the citizens. The government believes that measures are necessary to fully escape from deflation, and economic measures are expected to focus on countermeasures for high prices and strengthening supply capacity.

 

 

 


Digital Wills in Focus: Japan's New Online Inheritance System

2023/10/4

 

The Ministry of Justice has announced the commencement of research on a new system that allows for the creation and storage of wills online using digital technology. In October, an initial meeting of experts regarding the introduction of this new system is scheduled. The objective is to establish a system that enables the easy creation and storage of legally valid wills using the internet, facilitating smooth inheritance in a digital society.

 

Currently, there are three types of wills with legal validity: handwritten wills, notarized wills, and sealed wills. In the new proposal, considerations are being made to allow individuals to easily draft their handwritten wills on computers or smartphones and store them on the cloud. With digitalization, even those without specialized knowledge can effortlessly create wills. Moreover, by utilizing blockchain technology, the risk of tampering can be reduced.

 

Looking at international examples, in 2019, the US enacted the Electronic Wills Act, which acknowledges digital wills if they have an electronic signature. On the other hand, countries like Germany and France still do not recognize digital or recorded wills. Wills are critical documents used to confirm an individual's intent after their death, so discussions around digitalization are approached with caution.

 

The Japanese government plans to proceed with deliberations to ensure the safety and effectiveness of the new system, taking into account these international examples and opinions.

 

 


Revolutionizing Trade Settlements: Japan's Banking Titans Embrace Digital Currency

2023/9/6

 

The Mitsubishi UFJ Financial Group (MUFG) and Mizuho FG are collaborating on a digital currency for inter-company settlements. By 2024, the digital currency is expected to be issued through the common infrastructure of MUFG's Mitsubishi UFJ Trust Bank, with Mizuho also participating in this framework. This digital currency can complete settlements instantly and at nearly zero cost, bringing efficiency to complex and costly trade settlements.

 

Mitsubishi UFJ Trust is planning to establish a new company called "Progma," which will be responsible for the issuance infrastructure of digital currencies and digital securities. This project will be funded by entities such as the Big Three banking groups, JPX Research, and NTT Data. Mizuho Bank will also join Progma's framework and explore potential areas for digital currency application. Meanwhile, Sumitomo Mitsui FG is considering the use of digital securities backed by tangible assets like real estate.

 

The digital currency being considered for issuance by these banks is known as "stablecoin." By Japanese regulations amended in the Fund Settlement Law, the issuance of these stablecoins is limited to specific financial institutions and requires backing by an equivalent amount of legal tender.

 

The main features of stablecoins on the blockchain are their fast settlement speeds and the ability to incorporate transaction information. This enables simultaneous product delivery and payment. Particularly for complex trade settlements, which can be time-consuming and costly, this digital currency is expected to bring significant efficiencies.

 

Currently, many international remittances are settled via the Swift system, which often takes more than two business days. Additionally, the commission fee can be as high as 10%, increasing the cost of trade. With the new digital currency, these costs and time delays are expected to be reduced. Banks plan to generate revenue by managing the legal currency held as collateral for stablecoins, and the specifics of service fees will be discussed in the future.

 


Decarbonization Drive: Japan Focuses on Domestic Production and Global Collaboration

2023/8/23

 

For the fiscal year 2024 budget proposal, the Japanese government has unveiled plans to allocate over 2 trillion yen towards the Green Transformation (GX) initiative aimed at decarbonization. Of this, 1.2 trillion yen is slated for the 2024 budget, with the remainder to be spent over the next 3 to 5 years. Key areas of focus include support for domestic production of batteries, semiconductors, and hydrogen-related equipment, as well as investments in EVs and renewable energy devices, research and development for next-generation nuclear reactors, nurturing of startups in the decarbonization sector, and promotion of EVs and FCVs. Furthermore, efforts are being considered for decarbonizing production processes and supporting sustainable aviation fuel. Globally, the U.S. and the EU are also pushing forward with massive decarbonization investments. Japan is following suit, aiming for an investment of over 150 trillion yen over the next decade. The government also plans to issue GX economic transition bonds, targeting an expenditure of 20 trillion yen. Against the backdrop of the novel coronavirus and international political tensions, Japan is signaling a policy that emphasizes domestic production and collaboration with the U.S. and Europe.

 


Japanese Crypto Associations Request Tax Reform for 2024

2023/8/4

 

The Japan Virtual Currency Exchange Association (JVCEA) and the Japan Cryptocurrency Business Association (JCBA), which are self-regulatory organizations for cryptocurrency in Japan, announced that they have submitted a request for tax reform for the fiscal year 2024 to the Financial Services Agency.

 

At the heart of the request is a proposal to change the current comprehensive taxation on cryptocurrencies, which can reach as high as 55%, to a uniform 20% as in the UK and US. The rationale behind this proposal is the expectation that the trading and holding of cryptocurrencies can be liberated from tax burdens, fostering further development.

 

Furthermore, they are advocating for the application of a loss carryover deduction for the next three years. This is a system that allows the losses from investments to be carried over and deducted from income tax in subsequent fiscal years. In addition, they are calling for tax reform regarding derivative trades, demanding an appropriate taxation for not only spot trades but also future and other derivative trades of cryptocurrencies.

 

They also request exclusion from taxation based on market value at the end of the term for cryptocurrencies held by corporations. This is a request to exclude from taxation cryptocurrencies held by corporations for purposes other than short-term trading, at the market value at the end of the term. It aims to remove obstacles when venture capitals hold cryptocurrencies issued by companies or when companies engaged in Non-Fungible Token (NFT) businesses hold cryptocurrencies for payment purposes.

 

Furthermore, they are requesting that tax be deferred at the time of exchange between cryptocurrencies. In other words, they suggest considering not taxing at the point of exchanging one cryptocurrency for another, and taxing collectively when that is exchanged for fiat currency. However, as there are various points of discussion on this matter, including whether or not to include stablecoins, it has been submitted as a future request.

 

All these proposals are perceived as necessary tax reforms to enhance the competitiveness of the domestic cryptocurrency industry, as the government positions Web3, the next-generation Internet, as a growth strategy.

 


Japan’s Tax System in Flux: Addressing Defense Costs, Declining Birth Rates, and Workstyle Changes

2023/7/12

 

Japan's Government Tax Commission (an advisory body to the Prime Minister) has compiled a midterm report outlining the direction of mid-to-long-term tax policies. It made clear its stance that adequate tax revenues should be secured in response to the increase in expenditures such as defense costs and measures to counteract declining birth rates. While the report did not mention an increase in consumption tax, it underscored the importance of securing stable financial resources.

 

The report stressed that the "sufficiency" of securing tax revenues in line with expenditures is as important as the three principles of taxation (fairness, neutrality, simplicity). In addition, it called for tax systems responsive to societal changes, particularly diversification of work styles (such as the increase of freelancers) and digitalization. Notably, with the increase in freelancers and sole proprietors, the necessity for a "workstyle-neutral tax system" was emphasized.

 

Regarding digitalization, the report proposed strengthening measures to handle transactions that cross borders, such as the sale of smartphone apps. At the same time, it initiated a review of the automobile tax system, advocating for necessary tax reform in response to the decrease in fuel tax revenues associated with the proliferation of electric vehicles (EVs).

 

These proposals call for a fair and sustainable tax system responsive to societal and economic changes. Along with securing financial resources for specific measures, they also consider the equalization of burdens on future generations. The midterm report was the first in four years, since 2019.

 


Challenges of Health Insurance and My Number Card Integration in Japan

2023/6/25

 

The government is rapidly addressing the issues surrounding the integration of health insurance cards into the My Number Card system. The revised Health Insurance Law, established in the recent regular Diet session, set the abolition of the current health insurance cards for the fall of 2024, with a transitional measure allowing the continued use of issued cards for a year from that date.

 

However, there have been a number of instances where the wrong My Number has been mistakenly linked during the transition to the My Number system. From October 2021 to May 2023, 7372 cases of erroneous registration were discovered. These errors have led to situations where individuals, despite having valid insurance, were charged the full 100% of medical expenses, causing anxiety among the populace.

 

Prime Minister Fumio Kishida, in a press conference, stated about the transition to the My Number Card, "We will work on the premise that measures to dispel the anxiety of the people are completed." He suggested that if the anxieties are not alleviated, the government may delay the abolition date or extend the grace period.

 

On the other hand, it is also important to help the public understand the benefits of the My Number Card. With the My Number Card, patient information can be shared among medical institutions, and patients themselves can view their own health information on the internet. However, according to a survey by the Ministry of Health, Labour and Welfare, 56.5% of users do not feel any particular benefits from the My Number Card, indicating a need for detailed explanation. The government is addressing these challenges while striving to gain public understanding and support.

 


Japan attracts semiconductor investments from global giants

2023/5/19

 The Japanese government is putting efforts into strengthening the semiconductor industry, and companies from the US, Europe, South Korea and Taiwan are expanding their investments in Japan. Since 2021, the amount of investment announced by related companies in Japan has exceeded 2 trillion yen. Prime Minister Kishida met with the top executives of seven semiconductor companies on the 18th and called for expanding investment in Japan. 

Semiconductors are important for the economy and security, and there is an aim to establish a supply chain among countries that share values with China in mind. Japan has strengths in semiconductor manufacturing, research and development, supply chain, advanced materials, precision machinery and so on, and the market size is expected to continue to expand.

 

 

 


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