Shizuo Kambayashi / The Associated Press

School children react as they read an extra edition reporting New York Yankees' Ichiro Suzuki got his 4,000th hit between Japan and the major leagues, in Tokyo Thursday.

Japan eyes industrial reorganization

Published: Thursday, Aug. 22, 2013 - 3:50 pm

The government and the ruling Liberal Democratic Party have nearly completed the main points of a policy package aimed at rejuvenating the nation’s industry, including a plan to publish a list of industrial sectors that should be realigned to eliminate over competition, government sources said.

The package would provide preferential tax treatment and other favors for targeted corporations if their realignment plan is given the go-ahead by the government, according to the sources.

The industrial rejuvenation policy package constitutes one of the main pillars of the government’s growth strategy and would permit the government to play a greater role in reorganizing sectors currently experiencing excessive competition, analysts said.

The policy package will be the main plank of a bill the government hopes to submit to an extraordinary Diet session in autumn, with the aim of shoring up industrial competitiveness.

On Wednesday, the government presented the LDP’s Research Commission on the Tax System with documents outlining the policy package at a meeting of the panel’s chairman and vice chairmen.

The package is designed to help realign and consolidate corporations that find it difficult to increase profitability and have little prospect of achieving growth on their own. It would mainly single out such sectors as the liquid crystal display TV business, which is comprised of many companies in the electronics, parts and component manufacturing sector.

The plan would also target sectors that enjoy high technological excellence, such as railway carriage production and the production and operation of water-related systems. These sectors are largely comprised of small corporations.

The plan would limit government assistance to sectors whose profitability and productivity could be improved through changes in their current business structure. To this end, the envisaged law would set up a system by which the government would study which sectors should be consolidated to eliminate over competition and oversupply. The government would produce and publish a list of sectors needing realignment.

If more than one corporation in such a sector submits a reorganization plan to the government and receives the go-ahead, they would be eligible for such preferential treatment as tax breaks and low-interest loans. The government is also considering reducing corporate taxes for companies in the realigned sectors.

Under the plan, the government would play an active role in facilitating industrial realignment. This would likely increase the creditworthiness of corporations affected by the proposal, making it easier for them to raise funds by, for example, receiving loans from financial institutions.

The envisaged law is not the first to encourage industrial realignment. For instance, the current Industrial Revitalization Law reduces registration and license taxes to be paid by a business operator seeking to establish a new corporation. However, the law is based on the assumption that the establishment of a new company takes place within a single corporate group.

Therefore, corporations are usually left to their own devices in deciding whether to consolidate member companies of their respective business groups.

Read more articles by The Yomiuri Shimbun

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