The Japanese Finance Ministry is considering abolishing tax on yields from government bonds marketed towards individual investors, after recording disappointing sales during its recent issue of these instruments.
The government had hoped to attract ordinary investors to these securities by creating bonds that could be purchased in 10,000 yen ($85) increments, as opposed to the previous minimum purchase of 50,000 yen. However, part of the government's June issue remains unsold.
At present, a 20% tax is levied on the yield of government bonds, which had for many months stood at a paltry 0.05%. It is thought that this tax rate, combined with the low yield has deterred individuals from investing in the bond in the past. Therefore, eliminating the tax would likely go some way to boosting its popularity.
The proposal is scheduled to be debated by the ruling parties in December as part of tax reforms set for introduction in 2004.
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