Japan plans tax breaks for firms to move headquarters from Tokyo

[TOKYO] Prime Minister Shinzo Abe's Cabinet approved plans to give tax breaks to companies that move their headquarters out of Tokyo as Japan seeks to revitalize its regional economies.

Under a bill that will be put to parliament, companies will receive a deduction on their taxes equal to 7 per cent of the amount they spend building a new headquarters outside the greater Tokyo area, excluding Osaka and Nagoya. The bill also offers tax deductions for hiring employees for the new offices.

Tokyo accounts for nearly one-fifth of Japan's economic output and more than 1,700 listed companies have their headquarters in the city, according to Urban Research Institute Corporation. Abe's government wants to create 300,000 new jobs in regional areas by 2020.

"Attractive jobs for young people in regional areas is the only way to prevent people from gathering in Tokyo," said Makoto Yonekawa, senior consultant at Daiwa Institute of Research. "This policy is a step in the right direction, but how effective it will be in halting concentration in Tokyo is still unclear." Cabinet approved the bill on Tuesday, according to the prime minister's office. A date has not been set for its introduction to parliament, where a coalition led by Abe's Liberal Democratic Party has a majority.

The policy will help companies such as YKK Group, a closely held maker of zippers and fasteners, which is already moving part of its headquarters to Kurobe City, on the west coast. YKK has relocated 80 employees from Tokyo and plans to move a further 140 by March next year, according to company spokesman Kazuhiro Kumagai.

About 40 per cent of people living in Tokyo said they are considering, or would be prepared to consider, moving out of Tokyo, according to a survey conducted by the prime minister's office in August. The biggest concern among those surveyed was finding a job in regional areas, the survey showed.

BLOOMBERG