The Journal The Authority on Global Business in Japan

Ministry of Finance
New tax measure for single-parent households?

Japan’s Liberal Democratic Party (LDP) and Komeito had difficulty reaching agreement on details of major tax reforms for the 2019 tax year, but adjustments have been made that will reduce taxes on single-parent families.

Komeito, which bills itself as the welfare-oriented party, pushed strongly for the changes but faced opposition from the LDP, which supports traditional views of marriage and family. Debate set back the finalization of the tax-reform framework by two days.

Until now, only single parents who are divorcees or widows/widowers have been recognized. Such individuals are eligible for certain tax exemptions, but a single parent who had not married was unable to qualify for the same income-tax exemptions and faced stricter provisions to qualify for a deduction of the resident’s tax.

Noting that the number of unmarried single parents has been increasing annually, Komeito had campaigned for tax relief and pushed for such adjustments in the latest bill. Conservatives in the LDP resisted.

The LDP’s Yoichi Miyazawa and Komeito’s Makoto Nishida, joint chairmen of the tax review committee, worked behind the scenes to achieve a compromise and loosen requirements for exceptions to the resident’s tax.

But when Komeito continued to press for additional concessions, the talks bogged down. In the end, the two parties agreed on provisions that would provide an annual subsidy of ¥17,500 per person. This is in addition to an existing rule that entitles an unmarried single parent earning less than ¥2.04 million per year to a reduction in the resident’s tax.

A key factor in the compromise was that both parties wanted to avoid discord during the runup to July’s elections for the National Diet’s upper house. While the two found common ground concerning payouts for unmarried single parents in 2019, Komeito is clearly mulling further tax concessions for the next fiscal year, making it highly possible that disagreement will flare up again.

Ministry of Economy, Trade and Industry
Will the next heads of JIC face difficulties?

Nine directors of the Japan Investment Corporation (JIC) tendered their resignations at the end of 2018. All were from the private sector and had disagreements with the Ministry of Economy, Trade and Industry (METI) over issues such as the guidelines for operation and remuneration. METI oversees the JIC, which was just launched last September to support business compe-titiveness. Resignations coming so soon after the launch may create a stumbling block for the government’s growth strategy.

Masahiro Sakane, former chairman of the Komatsu K.K. board of directors and an adviser to the equipment maker, was a key leader whose departure will impact the JIC. He had previously served as vice chairman of Keidanren, the Japan Business Federation.

At the end of 2018, METI organized a group of external advisors comprising experts on corporate governance. President Masaaki Tanaka, a former vice president of Mitsubishi UFJ Financial Group, Inc., was named one of the successors. His initial tasks will include formulation of new operation guidelines and remuneration systems.

METI’s plans are to bring in mainly individuals from the private sector who have experience in investment, but there is concern that it may be difficult to get cooperation from megabanks or the financial sector.

Still, an upper-echelon executive is hope-ful and voiced his expectations, saying: “It’s based on a major assumption that the candidates will accept the remu-neration package and other conditions. Once you are a head of this fund, it becomes easy to meet with important individuals overseas. It is certain that people will come forward for the job when they see affiliation with the JIC as a stepping-stone to advancement.”

To achieve results, importance is being placed on quicker action for investments and a greater a degree of autonomy. But, perhaps due to a higher priority being placed on transparency, the two sides clashed. This suggests the existence of opposing philosophies when it comes to the most desirable formula for operation of a public-–private sector fund.

Keizaikai magazine