The Japanese government is planning to provide ten-year tax incentives to promote mass production in five areas including electric vehicle production and semiconductor equipment manufacturing, local media reported on Wednesday. The move would follow similar policies in the United States and the European Union, aiming to encourage domestic companies to produce domestically while promoting Japan's energy transition.
The Japanese government will revise the tax law every spring. Before this, the ruling coalition needs to reach an agreement on the draft and determine the overall policy in December of the previous year. It is reported that Japan’s ruling Liberal Democratic Party will incorporate the above tax reduction measures into the tax reform framework for fiscal year 2024, which is expected to be finalized as early as this week.
In addition to electric vehicles and semiconductors, other industries expected to receive the 10-year tax break include sustainable aviation fuel, green steel made from renewable energy, and green chemicals made from plants and recycled waste. The electric vehicle category will also include storage batteries.
Specifically, the proposed tax incentives will include a reduction of 400,000 yen (approximately US$2,750.28) per electric vehicle, a reduction of 30 yen per liter of sustainable aviation fuel, and a reduction of 20,000 yen per ton of green steel.
For semiconductor companies, corporate income tax can be reduced by up to 20% each fiscal year, while tax reductions for other categories are capped at 40%. If a business suffers a loss during a reporting period, it can carry forward unused tax credits to the next reporting period – this applies for up to three years in the semiconductor sector and four years in other sectors.
The Japanese government will include relevant measures in the tax reform framework for fiscal year 2024 determined as early as this week, and will determine the specific scale of tax incentives based on the production and sales of eligible products.
Analysts said that this measure aims to strongly support Japan's domestic manufacturing industry, further promote its competitiveness in the global market, and strengthen Japan's position in the electric vehicle and semiconductor industries. This is expected to attract more companies to invest in these fields and promote technological development and innovation.
This strategy may also have long-term implications for Japan's economy as global demand for environmentally friendly and high-tech products increases.
From a global perspective, although Japan's automobile industry has been relatively prosperous for a long time, no Japanese automobile manufacturer can currently rank among the top 20 electric vehicle manufacturers in the world by sales. This can definitely cause concerns in the Japanese automobile industry.
In terms of semiconductors, Japan is trying to regain the glory of the semiconductor industry. In June this year, Japan's Ministry of Economy, Trade and Industry released the revised "Semiconductor and Digital Industry Strategy", which plans to triple the sales of Japan's domestic semiconductor industry to 15 trillion yen in 2030.