Japan Proposes Tax Breaks to Spur Corporate Restructuring

The Government of Japan is considering a new tax incentive plan to accelerate corporate restructuring and industry consolidation. The proposal would allow companies to indefinitely defer the approximately 30 percent corporate tax on gains from the sale of non-core businesses, provided the proceeds are reinvested into acquisitions aligned with core operations within several years.

This initiative is part of a broader push for corporate governance reform led by Prime Minister Sanae Takaichi. The plan is modeled after German tax reforms from the early 2000s and seeks to correct inefficient capital allocation. A government study indicated that 65 percent of invested capital in Japanese companies is currently tied up in businesses that fail to earn their cost of capital.

Officials expect to submit the proposal as part of tax reform requests by the end of August. A final package for the next fiscal year is slated for approval by the end of the year.