Vol.38 - EXOTIC FUNDS & Taxes on Real Estate

**CONTENTS**

-Feature - EXOTIC FUNDS
-From the Editor
-Forex Weekly
-Yen Watch
-Events
-Job Watch
*Please scroll down below to read the disclaimer*

FEATURE

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EXOTIC FUNDS
(By Chris Cleary, Banner Japan K.K. | January 19, 2006 | Comment on this Article)

If you had invested in a particular Asia ex-Japan mutual fund early in 1971, you would now have a profit of 14,600%.

Of course there are some assumptions going on here, and not just those of hindsight – that you knew about the fund way back then; that you were not only alive but old enough to invest; that you believed in the economic prospects of a region with a reputation for not much more than making textiles and cheap plastic toys, and was largely perceived as Third World; that you were prepared to put your money into the region while the Vietnam War intensified and the domino theory was taken seriously; and that you held the fund whatever the drawdowns, as you would have had losses of 50% or worse into January 1975, in the aftermath of the Asian Crisis, and at the end of the US stock debacle 2000~2003.

Nevertheless, the thought of a 14,600% profit is quite attractive, and begs the question: do such opportunities belong only in the past / are there equivalent opportunities open another generation along?

Click here to read more....

FROM THE EDITOR

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Taxes on Real Estate

This issue, I interrupt my review of interesting pre-IPO companies in Japan that are looking for investment, to cover an important housing issue – one of taxes. In November 2005, Paul Previtera of Grant Thornton Ltd., gave a really succinct but excellent overview of property transaction taxes in Japan at the Australia New Zealand Chamber of Commerce, and has given us permission to base this PII article on it. Anyone needing more assistance on tax can get it from Paul at pprevitera@gtjapan.com.

From Previtera's point of view, there are four distinct phases of tax relating to property in Japan. These are: i) Acquisition, ii) Holding, iii) Rental, and iv) Disposition (Selling). For the purpose of this article, I'm going to assume that the reader is resident in Japan and is taxable here.

Acquisition Taxes:
The Japanese Real Property Acquisition Tax (Fudosan Shutoku-zei) for a residence is currently 3% of the assessed value of your property. However, if you are the owner-occupier – the condition under which most home loans are made anyway – then only half the assessed value will be calculated into the tax equation. The tax only applies to the land, not the building. Note that the tax amount will increase to 4% from April 1st, 2006, thus giving you yet another reason (rising interest rates and property prices are the others) to move quickly if you plan to invest in your own place.

An example of the acquisition tax at work is as follows. You buy a property with an existing home for JPY75m, for you, your spouse and kids to live in. You have the land value assessed at JPY50m. The tax will then be JPY50m/2 = JPY25m x 4% = JPY1m. From my understanding after talking to a mortgage banker, an "owner occupier" means a member of your immediate family, which I was told could apply to the grandparents (without your necessarily having to live there).

Two more taxes that apply on a purchase are Consumption Tax (Shohizei: 5%), which applies to the building value only, and Registration/Licence Tax (Toroku Menkyo-zei: 0.3%), which is calculated on the statutory valuation of both the land and building. The "statutory valuation" amount is variable and changes depending on the locality, type of structure, size, type of use, and some other factors – so you will need proper tax advice if you want to be fully prepared. However, as an absolute number, the actual tax amount is not large. The statutory valuation generally tends to be less than the actual purchase price, sometimes 30-50% less.

In our example, the Consumption Tax will be JPY25m x 5% = JPY1.25m. The Registration/Licence Tax will be somewhere around JPY75m x 0.3% = JPY225,000.

The last tax on a purchase is the Stamp Tax (Inshi-zei), literally for the stamp that goes on the purchase contract. This is calculated on the basis of a fixed schedule and for any amount between JPY50m – JPY100m, it is JPY60,000 flat rate.

Holding (Ownership) Taxes
Once you've bought your dream home, you have the yearly cost of paying taxes to the local municipality. These taxes function similarly to "rates" and other local levies applied in the West and are reasonably priced considering the capital value of the properties being taxed. Of course, the actual amounts are payable on top of your principal and interest repayments – and so where you have heavily leveraged yourself to buy a property, it may be a consideration which makes/breaks your decision to buy rather than rent.

There are two annual ownership taxes, the Fixed Asset Tax, which is 1.4% of the statutory valuation of the property, and the City Planning Tax, which is 0.3%.

(Next issue we discuss rental taxes and disposition (sales) taxes)

Terrie Lloyd
・・・Investor in Training/

FOREX WEEKLY

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Team Tokyo Forex Weekly
Januay 7, 2006

Welcome back to a new year of PII (Personal International Investor)
This year I am set to analyze the best short term and long term investment opportunities that will make you a strong investor.

Not many people are aware but there have been many infamous reporters telling us what we should be focusing on.

Let's reflect on the past 5 years and the events that have surrounded the evolution of the world markets we live in.

It is true that I have primarily reported on Forex movements in the market place. Mathematics also plays an important role in this so let me summarize the "State of the Union", so to speak on hot investments that will propel your working cashflow into profits beyond imagination.

I presented to you a basic scenario last year.

We are cycling into a new investment era. The U.S dollar dominated the show and quite right it should as it hit the mark with parallel timing as we cycle through this new business era here in Japan. If you attended one of Terrie Lloyd's seminars you will already be in the front runners pack as Terrie quite clearly pointed out we are entering into a positive growth cycle of new business.

Let's highlight the indicators that brought us to these conclusions. Let's begin with the tell tale signs that the American populas were clearly uncertain if their own constitution remains intact since the new form of country management took place after 9/11.

9/11 was set to destroy the world economy, but failed and brought about great scientific conclusions as 3 days of grounded flights cleared the skys and those studying Global Diming realised that reducing pollution in fact created faster depletion of time that is required to further study green house emissions which cause "Global Warming". We learnt that each of these issues need to be studied at a level that addresses the root cause. Global dimming and the cleaning up of environmental pollution actually contributes to the increase of Global Warming? Yes it does.

Anyone that knows how to use the internet knows our mission are more complicated than we really think.

Forceful takeover of Iraq brought about fierce competition of conspiracey activists which is worth taking a look at as the U.S was condemed and it drove general laymen and money makers alike to create fantastical documentaries surrounding the evolution of the U.S government.

How does all of this bare any relevance to the investors world one might ask?

Well it holds great relevance as we are the financial supporters of all institutions that endeavour to make us rich through our investment in their ventures.

Let's make a pact that as investors we would like to see fairness and equality that balances our fragile co-existance.

2005 saw natural resources as our mandate of future survival, this has always been so. My wish is that 2006 creates a much more reasonable and strategically morale way of co-exhisting with each country around the world.

In financial news we saw the half day trading of Japan's dedut into 2006 reach a 5 year high and a decline in the U.S dollar, we expect to see more of this as the Fed rationalizes it's postion and will continue to withdraw to fight another day. Focus on the Asian markets will be the corner stone of 2006.

Something I would also like to see in this news group is a focus on local business opportunities. There are many great entrprenuers here in Japan that can see the 'Next big thing' so I hope to do more than Forex reporting and make 2006 a creative year for investors.

Happy New Year to you all.

The editor
Forex Weekly
Jason Bainbridge
www.tokyo-forex-japan.com

YEN WATCH

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Currency	1/9Mon	1/10 Tue	1/11 Wed	1/12 Thu	1/13 Fri
USD	n/a	115.55	115.55	115.29	115.70
GBP	n/a	205.07	204.63	204.50	204.55
EUR	n/a	139.91	139.65	140.27	139.59
CAD	n/a	99.72	100.00	100.18	100.34
HKD	n/a	15.19	15.18	15.15	15.21
SGD	n/a	70.91	70.90	71.13	71.17
AUD	n/a	88.09	87.86	88.25	87.96

(The above TTS Exchange Rates has been brought to you by the courtesy of GoLloyds TSB)
The above rates were posted at 10:09 on Friday, January 13, 2005 and are valid for funds received before 3:00 pm on Friday, January 13, 2005. All funds received after 3:00 pm are remitted the following day at the following day's exchange rates. The exchange rates provided are intended only as a guide. The Bank reserves the right to apply a different exchange rate if the market is particularly volatile.

EVENT

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Start a Company in Japan
Entrepreneur's Handbook Seminar
Feb 4, 2006

If you have been considering setting up your own company, find out what it takes to make it successful. Terrie Lloyd, founder of over 13 start-up companies in Japan, will be giving an English-language seminar and Q&A on starting up a company in Japan. This is an ideal opportunity to find out what is involved, and to ask specific questions that are not normally answered in business books. All materials are in English and are Japan-focused.

For more details: http://japaninc.com/handbook_seminar3/

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Foreign Executive Women (FEW)
Apr 22, 2006

presents the 14th Career Strategies Seminar aimed at foreign women who are seeking to achieve success in their careers in Japan.

Inspirational presentations will be made by foreign professional women who have made their mark in the Japanese business world. In addition to the keynote speeches, there will be a series of interactive workshops which will provide in-depth information on selected industries and fields.

Date: Saturday, Apr 22 2006
Time: 9:00am – 6:00pm.
Venue: Temple University, Japan
For information and to register,
email fewcss2006@yahoo.com or visit http://www.fewjapan.com

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ICA Event
Feb 16, 2006

Speaker: Yosuke I. Itoh III, Director, CSP and Media Industry Services, Abeam Consulting LLP.

Title: Japan's Mobile Commerce Boom! A Driver for Marketing Loyalty Program Consolidation

RSVP Complete event details at http://www.icajapan.jp/
Date: Thursday, February 16, 2006
Time: 6:30 Doors open, buffet dinner included
Cost: 3,000 yen (members), 5,500 yen (non-members),
Open to all - Location is Foreign Correspondents'
Club http://www.fccj.or.jp/static/aboutus/map.php

JOB WATCH

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Brought to you by DaiJob, Inc – providing jobs for bilinguals.

- Data Cabling Manager (Negotiable)
- Tokyo GD/Earnings and Fundamentals/Japanese Market Analyst (Negotiable)
- Debt Settlement Specialist (Negotiable)
- Custody Service Specialist (Negotiable)
- Product Controller (Negotiable)

Check out these and other jobs like these here!

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Disclaimer: This commentary is designed to help foreigners living in Japan understand the financial and investment opportunities available to them. It is NOT intended to constitute professional financial advice or an inducement to purchase the services and products mentioned. A condition of subscribing to this newsletter or reading this web site is that any actions taken by readers as a consequence of reading this column shall be the sole responsibility of the reader and no liability, implied or otherwise shall be assumed by Lloyd, Japan Inc. Communications, or other business entities related to either person.

© Japan Inc. Communications, 2005

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