The government has decided to target regional areas such as Osaka and Fukuoka to attract foreign financial institutions, shifting from its Tokyo-focused approach to creating a global financial hub after the coronavirus pandemic, sources familiar with the matter said Tuesday.
The addition of the two areas also comes as China’s recent tightening of its grip over Hong Kong has raised concern about the semiautonomous region’s status as a major financial hub in Asia and the Japanese government hopes that these areas will become a new magnet for companies and skilled people.
Despite the renewed push for boosting Japan’s appeal as a financial hub, the country still faces challenges, including higher corporate and income tax rates than Hong Kong and Singapore, and the language barrier to administrative procedures that are often complicated. Another risk factor is Japan is prone to natural disasters.
The sources said the government plans to set up consultation services in Osaka and Fukuoka for foreign institutions by allocating 50 million yen ($474,000)in a state budget for fiscal 2021 from April.
The coronavirus outbreak has heighted the need for more decentralization from Tokyo. Osaka is the center of the Kansai region that includes Kyoto and Hyogo prefectures in western Japan and has an integrated stock and commodity futures exchange. Osaka and Fukuoka have also been identified by the government as strategic areas for deregulation.
Beijing’s recent imposition of a national security law on Hong Kong has triggered an international outcry and raised concern that the former British colony will become less business-friendly and foreign firms will leave. Following its 1997 return to Chinese rule, Hong Kong was promised a high degree of autonomy for 50 years.
“It’s natural that people will start moving to Japan and Singapore (from Hong Kong),” Finance Minister Taro Aso said at a press conference in early August. “We need to be mindful of Japan’s position as a financial hub and address this issue.”