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Japan has signaled an intention to go all in on Web3 by unveiling a new tax reform to attract global service providers.
According to local reports, the Ministry of Economy, Trade and Industry is pushing for a new tax policy for digital asset firms in Japan to pursue a digitization agenda for its economy. The Minister, Takeru Saito, disclosed the ambitious tax plans during the Web X conference but did not delve into the details of the incoming tax policy.
Analysts opine that the new policy may involve tax credits and deductions for companies investing in blockchain in Japan while reducing the capital gains tax on local service providers. New players in the space are expected to enjoy tax holidays, and the Ministry is touted to pursue a simplified reporting standard for the startup digital asset industry.
Currently, exchanges in Japan are plagued with high taxes on each transaction and the absence of clear tax regulations further complicates the process of service providers.
Apart from a shiny new tax regime, Saito told attendees at the conference that Japan will explore more blockchain use cases outside of payments to achieve higher levels of digitization.
Japan’s Prime Minister Fumio Kishida echoed Saito’s ideas for Web3 in Japan, noting that the technology will be deployed to solve various social problems in the country. Given the popularity of its gaming and manga industries, the country is particularly placing a lot of faith in non-fungible tokens (NFTs).
In one novel use case, the village of Yamakoshi is using digital collectibles to solve the challenge of an aging population. The sale of NFTs has since raised over $500,000, which administrators say will be deployed toward caring for the elderly and organizing a series of community initiatives.
“If their strategy works and expands to other villages, we estimate that rural Japan could look to fund-raise sums in the region of half a billion dollars while also test-driving a new wave of social tech with global appeal,” said Yuri Group.
Another use case for NFT in Japan saw the government use the offering to reward best-performing mayors for exemplary service back in 2022.
Soaring adoption in Japan
Despite Japan’s unfavorable tax policy, Web3 adoption in the country is still on the rise, buoyed by the interest of retail and institutional investors in digital assets. A June study by Nomura Holdings (NASDAQ: NRSCF) revealed that over 500 investment managers in the country have ambitious plans to diversify their holdings by turning to digital assets.
While the implosion of mainstream digital asset exchanges may have dented the adoption metrics, a general view reveals that investors are leaning on the asset class as a hedge against inflation. Regulators are currently weighing the prospects of approving digital asset exchange-traded funds in the country as they monitor developments in Hong Kong and Singapore.
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