Archived IMT (2009.08.28)

A JAPANESE HOMELAND INVESTMENT ACT? An article in the Nikkei this week noted that Japanese companies are looking to take advantage of an impending tax exemption on dividends from overseas units in order to repatriate foreign profits. Chatter suggests that up to Y4 trillion may be repatriated over the coming year could especially weigh on USDJPY as well as on other Yen crosses. Whether the repats will start ahead in the second half of the fiscal year (after Sep 30) or until the new fiscal year (April 1st, 2010) remains to be seen. The Japanese tax holiday bears resemblance to the US Homeland Investment Act of 2004, which allowed US companies to repatriate their foreign-based earnings during 2005 at the reduced 5.25% tax rate instead of the normal 35% tax rate. HIA was instrumental in boosting the USD in 2005 until its expiration in Dec 2005. More on the historical FX implications on HIA in Chapters 1 and 3 of my book http://www.ashraflaidi.com/book/