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Japan plans major regulatory overhaul

Wednesday 5 January 2011 - by Andrew Hickley

The Japanese Financial Services Authority is set to implement a detailed action plan over the coming year, with planned changes including reforms of international tax rules and a reforming of the tax treatment of OTC derivatives.

Central to this will be a change to the tax system on cross-border transactions, aimed to promote participation from foreign investors in the Japanese securities markets.

These are aimed to enable Islamic finance in the region, and will go alongside changes designed to increase securities lending and to change international taxation principles from an 'entire income principle' to an 'attributable income principle'.

Changes will also be made to the taxation on OTC derivatives, into a self-assessment tax currently used for market derivatives.

Currently OTC derivatives are subject to aggregated taxation, though they represent the same economical value as market derivative transactions, with this change also aimed to be implemented by the end of the year.

The FSA will also review accounting standards used, in an attempt to tailor them to the actual circumstances of small and medium-sized enterprises.

To do this, it has encouraged firms to conduct their own studies detailing how they can improve confidence in public listing examinations and reduce the burdens on listed companies. The FSA has said it will set up a conference to discuss the conclusions which firms find.

The plan, drafted on December 7, details a number of changes that should be achieved over the coming fiscal year.

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