Tax policies to promote innovation

Bold incentives are crucial for the Japanese Government to successfully achieve its policy objectives for digital transformation. The 2022 tax reform further relaxed the requirements for the tax incentives for promoting open innovation and extended the applicability of the incentives, set to expire on 31 March 2022, by two years to 31 March 2024. The direction of travel in this area is positive and encouraging. However, much more must be done to maintain Japan’s global competitiveness and improve its attractiveness as a location for global innovation. The scope of activities remains too restrictive in scope (both in terms of access and benefit) to be a deciding factor in a foreign company’s choice between potential innovation locations.