It emerged this week that the Japanese Ministry of Finance is considering offering tax breaks on a new type of government bond to be launched next year, in order to increase their attractiveness to individual investors.
Currently, very few government bonds are held by individuals in Japan. However, the new bonds will come in 10,000 yen ($84.20) units, making them far easier for private investors to purchase than the existing government bonds, for which the minimum investment level is 50,000 yen.
In the normal way, brokerages selling the instruments would collect two types of tax on the bond interest - national level income tax and local residency taxes - withheld at a combined rate of 20%.
However, the Wall Street Journal reported this week that the Ministry of Finance's Financial Bureau is calling for interest on the new government bonds to be exempted from income tax, as part of the government's tax system review for fiscal 2003.
According to the WSJ, the government's Tax Bureau is less than enthusiastic about the idea, but Finance Minister, Masajuro Shiokawa is in favour of providing a tax incentive to stimulate bond investment.
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