Japan's industry leaders demand tax reforms for decarbonization

The country's eight major industrial groups, including the Japan Iron and Steel Federation, the Petroleum Association of Japan (PAJ) and the Japan Automobile Manufacturers Association, have asked the government for more tax incentives for decarbonization investments.

Industry representatives specifically demanded that the government eliminate taxes on depreciable assets. This is one of the reasons why the country's manufacturing sectors are losing international competitiveness, they said.

CCTS is not enough

Some of the demands stem from dissatisfaction with the current Carbon Neutral Investment Incentive Tax Credit Scheme (CNTS), which offers temporary tax credits for investments that contribute to decarbonization. The groups criticized the CCTS for its short duration, narrow scope, and low investment caps, concluding that supporting private sector investment for the country's decarbonization effort was neither sufficient nor practical.

Moreover, although various Japanese industry groups oppose CBAM's reporting obligations, domestic investment is expected to increase in the US and Japan, which offers many dynamic measures, including the US Inflation Reduction Act and the EU's Carbon Border Adjustment Mechanism (CBAM). They are worried about falling behind the EU.

PAJ chairman Shuichi Kito also said that the government should implement tax measures as well as budget allocations. He added that these measures should not be limited to startup investments only.