Solid Japan Newsletter – September/October 2010

Pension Premiums Increasing from September

The Social Insurance Office is increasing premiums employers and employees pay for pension contributions effective from the September 2010 salaries. Total combined employee and employer Premiums will increase from 15.704% to 16.058%. The increases are to be shouldered equally by the employer and employee as the contribution ratio for these programs is 50:50 which means employer and employee will each pay 8.029% of gross monthly salary plus commuting costs.

For more information, visit: www.kyoukaikenpo.or.jp

¥915 billion stimulus plan

The Japanese government unveiled a ¥915 billion stimulus plan last Friday to give a boost to the Japanese economy in order to support an economy which has long been suffering and further distressed by the recent rise in the yen. The plan purports to create about 200,000 jobs focusing in the areas of medical care, energy, the environment and tourism, and give GDP a bump by 0.3%.

Prime Minister Kan with his leadership position secured has vowed to focus efforts on curbing the rise of the yen and improving the Japanese economy starting with this plan which will assist young people to find work and provide incentives to companies who are able to provide jobs.

The effectiveness of these measures will take some time to appear but they do demonstrate a proactive approach by the government to improve the economy.     

Strong Yen –Is it all bad?

With all of the talk recently of the high price of the yen versus all of the world’s currencies, it has not been all bad news.  For those with overseas suppliers, foreign M&A aspirations and travel abroad, the rise of the yen has been a welcome cost saver.

Memories of the ‘carry trade’ still fresh from only a few years ago, the yen has made a big turn around since the downturn in the global economy as investors seek a safe haven for their savings.  The yen has long been one of the world’s popular places to keep money during turbulent times. Even China who have long reportedly been buying up US bonds are buying Japanese bonds to stay diversified and anticipating a further increase in the value of the yen as many experts predict.

Despite the recent intervention by Prime Minister Kan to weaken the yen, it may prove to be ineffective (see the Swiss France) with some officials and experts admitting that any intervention may not yield the intended results and even cause further harm to the Japanese economy.

It appears that the high yen will be with us for a while and that it is an excellent time to be generating revenue in Japan and receiving Japanese yen.

 What`s the Deal with Revenue Stamp Tax.?

We frequently receive questions from clients on what type of documents require revenue stamps and why? In order to take away some of the mystery, we’ve put together a brief overview of revenue stamp laws in Japan.

First of all, revenue stamps resemble postage stamps, and you can often see them affixed to official documents in Japan. They are in fact the government’s primary method of collecting taxes and fees imposed on documents such as contracts and receipts. Revenue stamps are available in denominations ranging from 1 yen to the maximum 1,000,000 yen, and can be purchased at post offices and most convenience stores.

There are approximately 20 categories of documents that require revenue stamps, including most commercial agreements, real estate sales contracts, lease agreements, employment agreements, bank loan contracts, official receipts, etc.  Depending on the type and value of the contract or agreement, there is a prescribed denomination of revenue stamp that must be affixed.  Although contracts without revenue stamps still remain legally valid, should the tax office find you have not affixed the appropriate revenue stamps, they can impose a fine equal to triple the amount of the prescribed stamp tax duty. Also, in cases where contracts are amended, additional stamp duties of 200 yen or more are required. For more information on revenue stamps, please visit the following link: http://www.nta.go.jp/taxanswer/inshi/7140.htm

Government Incentive Programs for Business Start-Ups

Did you know that there is a program run by the Health, Labour and Welfare Ministry that provides subsidies to help cover a portion of company set-up costs? The program is available to individuals who have lost their job, tried unsuccessfully through Hello Work to find new employment, exhausted their unemployment insurance benefits and subsequently decided to start their own business. The program covers up to one-third of start-up costs incurred in the first 3 months up to a maximum of 2 million yen - or one-half of start-up costs up to 3 million yen in rural areas. The company must stay in business for more than 3 months and must enroll in the Unemployment Insurance program within a year of the company establishment date. Also, the owner must be the Representative of the new company and must have been paying into the unemployment insurance program for more than 5 years. Other conditions may apply. For more information contact Solid Japan. www.solidjapan.com

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