Laws and Regulations in Japan
- Laws and Regulations in Japan
Japan’s business environment for international finance
Becoming an “International Financial Center” open to the world
The Japanese government is committed to establishing a role for Japan as an international finance hub. By making Japan’s financial asset market more attractive, the government aims to encourage overseas asset managers and other firms to enter the market, thereby raising its profile as an International Financial Center of Asia and the wider world.
In addition to deregulation, such as simplifying market entry procedures, the government is proactively working on measures such as providing bold tax incentives, making visas and other procedures more user-friendly, and providing one-stop services for daily living.
Organizing laws related to acquisition of financial licenses
The Financial Services Agency (FSA) and local finance bureaus have jointly established the “Financial Market Entry Office” to handle all regulatory processes--from pre-application consultation and registration to supervision after registration--for newly entering asset management firms as a single point of contact with all communication possible in English. Overseas applicants can also communicate with the office online via video conferencing.
In addition, the FSA has published the “Guidebook for Registration of Investment Management Businesses and Other Financial Instruments Businesses” to facilitate the registration process for new entrants to the Japanese financial market and to ensure smooth entry for financial instruments operators.
For those evaluating the possibility of operating an asset management business in Japan, this guidebook illustrates the registration types and other information for key asset management business schemes in an easy-to-follow manner using flow charts and diagrams. It also explains the registration procedures and summarizes the registration requirements.
Law to simplify market entry
The guidebook provides the flowcharts to determine required types of registration for each business scheme as follows:
- 1) Investment advisory business
- 2) Investment management business (including investment solicitation of funds you have established)
- 3) Intermediation between an investment management/investment advisory company and its customers
- 4) Solicitation or sales of funds established by other investment management companies
- 5) Establishment of a foreign business operator’s representative office for collecting information in Japan
Tax policies for Japan as an International Financial Center
The following bold tax policies have been adopted for corporate taxes, inheritance taxes and income taxes to facilitate businesses and persons running asset management businesses overseas in order to conduct similar business in Japan.
Though asset management companies are taxed, unlisted and non-family companies, etc. whose main line of business is asset management, in addition to listed companies, are permitted to include losses when publishing the calculation method, etc. for their board members’ performance-based compensation on the Financial Services Agency website (enacted on November 22, 2021).
Though beneficiaries such as fund managers, etc. are taxed, the overseas assets of non-Japanese nationals living in Japan for work, etc. are exempted from inheritance taxes, regardless of the length of time such individuals have lived in Japan (enacted on April 1, 2021).
Though individuals such as fund managers are subject to income taxes, it has been clarified that cases such as those whose interest distribution is found to be economically rational, etc. shall be regarded as capital gains, etc. and subject to separate taxation (a fixed rate of 20%) rather than consolidated taxation (a progressive tax rate of up to 55%) (announced on April 1, 2021).