Firms’ internal reserves at issue for general election

October 12, 2017

TOKYO- The large internal reserves held by Japanese companies are one of the major issues for the Oct. 22 general election, amid a debate on whether to impose a tax on retained earnings or encourage firms to promote investments using the reserves.

As of the end of March 2017, the internal reserves of Japanese businesses had swollen to a total of 406 trillion yen, marking the largest-ever level, after the yen's depreciation and higher stock prices boosted their earnings.

In their campaign pledges for the upcoming House of Representatives election, parties such as Tokyo Governor Yuriko Koike's Party of Hope and the Social Democratic Party are calling for taxation of large companies' internal reserves.

By contrast, Prime Minister Shinzo Abe, also president of the Liberal Democratic Party, has stressed that "what is important is to promote wage hikes and investments."

The proposed taxation would involve a levy on the remainder of after-tax profits following dividend and other payments. Taxation of one pct on some 200 trillion yen in cash and deposits, out of total corporate internal reserves, is seen generating 2 trillion yen in tax revenue. Jiji Press