Japan is the premier hub for asset protection in Asia.
Wealthy individuals from emerging countries have recognized this and they choose Japan to safeguard their assets by purchasing real estate in Japan or acquiring Japanese companies. Investments by foreign individuals in Japan are increasing year by year.
Today, when considering global asset allocation, Japan is considered one of the key investment destinations alongside the United States, Western Europe, and Australia.
Here are the reasons why Japan excels in asset protection:
1. Stable Politics
Japan has maintained a single imperial dynasty throughout its history, leading to a notable characteristic of political stability. Japan is one of the most important allies of the United States in Asia and has a long history of democracy.
Furthermore, Japan has a significant economic presence with the world’s third-largest GDP and maintains political independence. As a result, Japan is unlikely to make arbitrary political decisions under pressure from foreign governments.
Moreover, being an island nation surrounded by the sea, Japan maintains a certain “distance” from global events in various contexts.
In Japan, there is significant concern about the high government debt, but the majority of government bonds are purchased by domestic financial institutions. Japan holds the largest net external assets in the world and is a creditor nation. Therefore, it is difficult to imagine a scenario where the Japanese government defaults on its debt.
Additionally, although Japan faces significant government debt, the majority of government bonds are purchased by domestic financial institutions. Japan holds the world’s largest net external assets and is a creditor nation. Consequently, it is unlikely to imagine a scenario where the Japanese government defaults.
2. Trust in the in the Private Property System
Japan has been governed by a continuity government throughout its history. As a result, the private property system has a remarkably long-standing tradition.
There are numerous companies that have existed for hundreds of years in Japan. According to a survey, 65% of companies worldwide that have survived for more than 200 years are Japanese companies.
In Japan, it is common for property to be inherited within families over the course of centuries.
3. Fair Legal System
Japan’s legal system is fair, and instances of judicial corruption have been almost non-existent throughout its history. Similarly, misconduct within law enforcement, police and prosecution, are extremely rare, making it highly unlikely for foreign individuals to be exposed to bribery requirements.
Japan also has a highly sophisticated judicial system, and as long as an appropriate lawyer is selected, foreign individuals do not face at a disadvantage in legal proceedings.
4. Low Property Taxes
Due to the government’s policy of encouraging homeownership among its citizens, property taxes on land have been taxed at a very low rate since the post-WWⅡ period. Property tax on land is referred to as “Fixed Asset Tax (Kotei shisanzei).
“Fixed asset” is a general term for land, buildings and depreciable assets, including the followings:
[Land] Rice fields, farms, residential land, mineral springs, ponds and swamps, forests, stock farms, wasteland and land for other purposes (miscellaneous land)
[Buildings] Residential buildings, stores, factories (including power stations and substations), warehouses and buildings for other purposes
[Depreciable assets] Business property such as structures, machinery, equipment, vessels, aircrafts, tools, instruments, fixtures that are subject to depreciation under the Corporate Tax Act or Income Tax Acts, excluding the property subject to motor vehicle tax (category base) or light motor vehicle (category base)
Land: Standard taxable value × Tax rate of 1.4%
Buildings: Registered price in the tax ledger × Tax rate of 1.4%
Depreciable assets: Standard taxable value × Tax rate of 1.4%
Please also refer to Guide to Metropolitan Taxes 2022 by Tokyo Bureau of Taxation
It’s important to note that this 1.4% tax rate is not based on the transaction price of land or buildings but on the tax-assessed value (standard taxable value) determined by the government. The tax-assessed value is said to be approximately 70% of the actual transaction price.
In Japan, there are generally no restrictions on foreign nationals owning land. Foreigners can acquire both land and buildings with full ownership rights.
However, based on the “Act on the Review and Regulation of the Use of Real Estate Surrounding Important Facilities and on Remote Territorial Islands”, which came into full effect in September 2022, there is a system for prior notification regarding locations of significant importance to national defense.
Areas surrounding the facilities of the Japan Self Defense Forces, Japan Coast Guard, U.S. military bases, nuclear power plants, airports, within approximately 1 kilometer, and remote territorial islands have been designated as monitored areas and special monitored areas.
This applies to only a very small part of Japan and rarely poses obstacles to real estate investment.
5. Easy Visa Acquisition
For wealthy foreigners, obtaining a visa in Japan is not particularly difficult.
The commonly used Investor/Business Manager visa requires an investment of at least JPY 5000,000 or the having at least 2 full-time employees. However, simply meeting these requirements does not guarantee a visa approval.
One highly reliable method to obtain an Investor/Business Manager visa is to acquire a Japanese business corporation that has an actual business presence, particularly one that holds a public license for its operations.
Our firm has a wealth of experience in providing proposals, selection, due diligence, and other M&A services for appropriate and reasonable acquisition candidates.
6. Family Offices
In Japan, there are well-established laws regarding various vehicles such as corporations like Stock Company (Kabushiki Kaisha, KK) or Limited Liability Company (Godo Kaisha, GK), trusts, and collective investment schemes based on the Financial Instruments and Exchange Act.
When investing in Japan, it is necessary to consider the legal nature and tax implications of each vehicle and choose the optimal investment vehicle for your investment.
As a politically and economically stable advanced country, Japan provides an excellent environment for safeguarding assets over the long term. It is worth considering Japan as one of the options for asset diversification, such as setting up a family office.
Even if the original owner faces bankruptcy, there are methods to preserve those assets by utilizing bankruptcy remoteness, GKTK scheme, or the use of General Incorporated Associations and Foundations.
Our firm can offer customized services to affluent individuals who are interested in asset preservation in Japan, including asset storage, establishment of foundations, support for real estate investments, and more.
We are also available to assist foreign investors who are interested in asset protection based in Japan or setting up a family office. Please feel free to contact us through our inquiry form.