Cabinet OKs bills on competitiveness, tax breaks

Japan Policy & Politics, July 26, 1999

TOKYO, July 21 Kyodo

The cabinet on Wednesday approved government bills designed to improve Japan's industrial competitiveness and to provide tax breaks for companies that scrap excess capacity. The government sent the bills immediately to the Diet, Japan7s parliament, with the aim of passing them within the current Diet session, which ends August 13. It plans to put the bills into effect in October, government officials said. The bill on improving competitiveness is a result of the waning competitiveness of Japanese industry, which declined particularly after the speculative bubble economy collapsed in the early 1990s. Japan's productivity growth between 1987 and 1993 was an annual average of 0.8%, below the 0.9% average recorded by the 29 member nations of the Organization for Economic Cooperation and Development during the same period, the Ministry of International Trade and Industry said. The bill will be effective for a three-year period and encourage corporate restructuring through various measures. Included is a measure that would permit the smooth spin-off of businesses by corporations to allow for the concentration of management resources into profitable areas. Also included is more low-interest loans for small and midsize companies to help them modernize facilities, and expanded credit guarantees for new businesses and small firms. The government stated that it and the corporate sector will try their utmost to maintain employment to minimize the negative impact of restructuring on workers. The bill to amend tax provisions will provide either tax breaks or tax rebates for companies that incur losses stemming from scrapping excess capacity. A company can choose between one of two methods -- to receive tax breaks for up to seven years from the proceeding business year or to get a one-time refund on the previous year's tax equal to the losses it incurred.