Japan Intent on Implementing Tax Breaks for Locally Manufactured EV Batteries and Semiconductors


Japan intends to implement tax breaks for domestically manufactured electric vehicle (EV) batteries and semiconductors beginning in April 2024 in order to improve economic security, according to sources on August 11.

The move would be similar to similar industrial policies in the United States and the European Union aimed at encouraging companies to bring production back home from China, as well as easing the country's energy transition.

As per the source, the Ministry of Economy, Trade, and Industry will propose tax cuts for companies manufacturing strategically important items in Japan for the government's fiscal 2024 tax code revision.

According to the source, the planned scheme would reduce corporate taxes based on the output of batteries and chips, similar to the US Inflation Reduction Act. According to the report, the ministry will draught the specifics, including applicable items, by the end of this year. Every spring, the Japanese government revises its tax code after the ruling coalition agrees on a draught and sets the overall course in December.

Japan has also announced 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 to secure supply chains for strategic goods.

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