TOKYO (Reuters) – Japan plans to create tax breaks for domestically-made electric vehicle (EV) batteries and semiconductors from April 2024 to enhance economic security, the Nikkei newspaper reported on Friday.
The move would follow similar industrial policies in the United States and European Union aimed at encouraging companies to bring production home from China, and would also facilitate the country’s energy transition.
For the government’s fiscal 2024 tax code revision, the Ministry of Economy, Trade and Industry will propose the tax cuts for companies manufacturing strategically crucial items in Japan, Nikkei said.
Akin to the U.S. Inflation Reduction Act, the planned scheme would reduce corporate taxes based on output of batteries and chips, according to the Nikkei. The ministry will draft the specifics including applicable items by end of this year, the report said.
The Japanese government revises its tax code every spring after the ruling coalition politically agrees on the draft and sets the overall course in December.
To secure supply chains for strategic goods, Japan has also unveiled billion-dollar subsidies for chipmakers such as Taiwan Semiconductor Manufacturing and Micron Technology to build plants in Japan, and enacted the Economic Security Promotion Act last year.
(Reporting by Kantaro Komiya; Editing by Kim Coghill)