Japan Offers Office Space To Attract HK Businesses, Which May Stay Or Relocate To Singapore

HONG KONG – Japan is attempting to woo multinational companies in Hong Kong to relocate to the Land of the Rising Sun as China tightens its grip over the special administrative region (SAR). However, Japan could struggle in doing so as businesses may likely remain or go to Singapore, reported Agence France-Presse (AFP) on Sunday afternoon (15 November).

Among other concrete incentives, Tokyo is offering temporary office space to international financial institutions that want to try doing business in Japan.

There are also theoretical perks being suggested, like a streamlined bureaucracy, tax breaks, and a special economic zone, similar to China’s Silicon Valley in Shenzhen.

“I want to make Tokyo Asia’s number one financial city,” announced the city’s Governor Yuriko Koike in October when the Japanese government established an information centre in Hong Kong for multinational firms mulling to shift to Tokyo.

Japan appears as an obvious alternative for international companies considering to exit Hong Kong as it’s the 3rd biggest economy in the world and houses many global companies and financial firms, in addition to having the Tokyo Stock Exchange.

However, experts revealed that Japan has several unattractive qualities that could put off global firms from relocating there and derail its objective of being a top financial hub in the region.

For instance, income tax in Japan of up to 45 percent is considered exorbitant. This makes Hong Kong (17 percent) and Singapore (22 percent) more appealing.

Other disadvantages are the low English fluency of Tokyo’s population and Japan’s relatively slow adoption of digital technology. For instance, trade on the Tokyo Stock Exchange was stopped for 24 hrs due to a “hardware failure” in October, and the glitch undermined business confidence.

Michael Mroczek, President of the Japanese branch of the European Business Council, noted while there are high expectations for Prime Minister Yoshihide Suga’s push for deregulation & digitization, “there’s also a lot of scepticism because there haven’t been a lot of changes” during the years when similar measures were proposed.

Meanwhile, consultancy firm IHS Markit’s Chief Economist for Asia Pacific Rajiv Biswas mentioned that Singapore is likely the most obvious alternative for multinational companies looking to leave Hong Kong.

“Most international financial services firms may already have a large presence in Singapore, and therefore may prefer to expand their existing operations in Singapore rather than finding another new location,” he told Agence France-Presse.