Japan considers tax breaks for divestitures

Japan's government is considering tax breaks on gains from sales of non-core businesses, a move that could accelerate corporate restructuring and spur industry consolidation. The plan would defer roughly 30% corporate tax on divestiture gains indefinitely, provided companies reinvest proceeds within several years in acquisitions aligned with core operations. The proposal is expected to be submitted as part of tax reform requests due at the end of August, with details finalized before year-end. Modelled on Germany's early-2000s tax reform, the initiative aims to address inefficient capital allocation, as a government study found about 65% of Japanese companies' invested capital is tied up in businesses failing to earn their cost of capital. The reform is likely to boost M&A activity, which reached a record $353 billion last year, with divestitures accounting for $44.7 billion.