The Journal The Authority on Global Business in Japan

MEETING | INVEST

FEBRUARY 2015

No Better Place for FDI

Seminar details incentives for foreign businesses new to Tokyo

There are many companies around the world that would like to have a foot in the door of the Japanese market, but are put off by the prospects of doing business in Tokyo.

Their worries range from the language barrier to finding the ideal office space and qualified, capable staff; identifying potential partners; negotiating local regulations; dealing with the paperwork attached to imports and exports; and any number of other headaches that a newcomer might face.

For some, that list of potential pitfalls is just too long, and so they turn their attention to Hong Kong or Singapore. But that would be a mistake.

The Tokyo Metropolitan Government has teamed up with the Ministry of Economy, Trade and Industry (METI), the Japan External Trade Organization, the Mori Memorial Foundation, and a number of private companies to promote the Japanese capital as the ideal location for a foreign corporation.

Together, they are providing an array of incentives designed to make the transition into Tokyo easier for overseas companies.

The incentives were outlined at the Invest Tokyo Seminar held in November, at the Roppongi Hills complex. Several benefits are available for new investors in Japan, including subsidy programs, tax incentives, and the provision of office space for reduced rent.

The public–private partnership has also created a Business Development Center with bilingual staff, who are tasked with providing advice and answering companies’ questions about doing business in Tokyo.

“The administration of Prime Minister Shinzo Abe has set the rejuvenation of the Japanese economy as the most important item on its agenda,” emphasized Hirobumi Iida, director of the Trade and Investment Facilitation Division at METI.

Foreign direct investment (FDI) can play a big part in achieving that aim, and the government has set a target of ¥35 trillion in new FDI into the country by 2020, Iida explained.

To encourage overseas investment of that scale, already being put into motion are measures such as regulatory reforms that will improve the business environment, and legislation that will reduce the corporate tax rate to 20 percent.

“The prime minister, other ministers, and local governors have all given speeches in recent months designed to promote investment in Japan, including in London and New York, and this government will continue to strengthen those investment efforts,” Iida said.

In tandem with the national government’s efforts, Tokyo has declared the city to be a National Strategic Special Zone. The capital’s target is to attract 50 internationally minded companies willing to set up their Asian headquarters or research-and-development facilities here by 2016.

According to city officials, early indications hint at success: in fiscal 2013, 11 foreign businesses set up in the capital, surpassing the target of 10.

“We are making bold efforts to attract foreign companies to begin their operations in Tokyo,” said Noriko Adachi, director of the Tokyo Metropolitan Government’s special zone project.

Spread out across the city, the zone covers areas around Shinjuku and Shibuya stations, a vacant site alongside Tokyo International Airport Haneda, a stretch of land between Shinagawa and Tamachi stations on the Yamanote Line, and a larger district that encompasses central Tokyo and the waterfront area.

In all, some 2,600 hectares are incorporated into the zone, which is home to about 1,000 foreign companies, almost one-third of all the foreign enterprises operating in Japan.

Detailing the assistance that is available to companies seeking a presence in Tokyo, Adachi said they are eligible for free consultation services on issues such as growth strategy planning, market research and analysis, as well as business partner identification.

Subsidies are available to enable an incoming company to establish a base of operations and recruit staff, covering half of all expenses up to ¥5 million. Designated office space in the special zone is also available for rent at half the market price during the first year of operations.

The Business Development Center Tokyo has been set up in the JP Tower Kitte building in the Marunouchi district, just a stone’s throw from Tokyo Station.

Foreign companies, foreign-affiliated enterprises, and non-Japanese individuals who are starting a business can go there for advice, ranging from guidance on administrative procedures to an introduction to specialists in business areas such as accounting.

Show me the money
For newly established companies in Japan, arguably even more important than advice are the range of tax incentives that are available. Options include full exemption from metropolitan taxes, the real estate acquisition tax, the fixed assets tax, and the city planning tax, as well as generous assistance with investment tax credits and special depreciation rates.

According to the 2014 Global Power City Index, a study carried out by the Mori Memorial Foundation, Tokyo ranks fourth among the world’s top 10 cities.

Ranked according to 70 indicators that take into account each city’s economic clout, cultural offerings, livability, environment, accessibility, and degree of research and development, London comes out on top, followed by New York and Paris.

Tokyo scores highly on the size of its market, its economic vitality, academic resources, living facilities, and inner-city transport services, but falls short on cultural resources, cost of living, natural environment, business regulations, and international transport links.

Presenting the findings of the study, Norio Yamato, senior researcher at the foundation’s Institute for Urban Strategies, said vigorous efforts are being made to address Tokyo’s shortfalls on the index.

“Tokyo is changing, and it will continue to change more dynamically over the next 10 years,” Yamato said. “But [we still need] to catch up with those other cities.”

“We want to become a magnetic force that attracts people and capital from all over the world.”
There are numerous reasons that a foreign company should set its sights on Tokyo for its Asia–Pacific headquarters, Adachi agreed, ticking them off on her fingers.

The Japanese capital has excellent accessibility, it is already home to a vast pool of potential business partners, it enjoys a wealth of human resources, and an increasing number of office buildings are designed to withstand natural disasters. On the personnel side of the equation, the city has excellent healthcare facilities with English-speaking staff.

“We are aiming to make Tokyo the most attractive city in the world in the run-up to the 2020 Olympic and Paralympic Games,” Adachi said. “The city of Tokyo welcomes foreign businesses and will do everything in its power to assist them.”

Meeting-table

Japan External Trade Organization
www.investjapan.org

Tokyo Metropolitan Government
www.seisakukikaku.metro.tokyo.jp/invest_tokyo/index.html

According to the 2014 Global Power City Index, Tokyo ranks fourth among the world’s top 10 cities.