[Editorial] Japan’s 40% Tax Credit for Advanced Industry Investment: A Model Korea Should Follow

The Government of Japan has prepared a revised tax bill that offers up to a 40% tax credit on investments made by companies in six sectors designated as National Strategic Technology, including artificial intelligence (AI), advanced robots, and semiconductor communication. The amendment also includes a provision to raise the credit rate to 50% for joint research with universities and research institutes.
Global competition surrounding advanced industries such as AI and semiconductors is intensifying, expanding into a contest among nations. The scale of investment is too vast for companies to handle alone, and, above all, every country recognizes these fields as future growth engines. In short, governments are putting their national fate on the line to lead support for advanced industries.
The Federal government of the United States has acquired a 10% stake in Intel Corporation to support its sub-2nm Intel 18A process foundry business. Donald Trump stated, "Intel's production of cutting-edge semiconductors and integrated circuits forms the backbone of our nation's future." As is well known, Taiwan passed the CHIPS and Science Act (CHIPS Act) in 2023 through bipartisan agreement to support advanced technologies such as semiconductors. Taiwan provides a 25% tax credit for R&D expenses and a 5% credit for facility investments in strategic industries like semiconductors and electric vehicles. Taiwan Semiconductor Manufacturing Company Limited (TSMC) is reportedly building three additional 2nm plants in the Southern Taiwan Science Park (STSP).
The People's Republic of China (PRC) is pouring astronomical sums into its domestic advanced industries, including semiconductors, and is generous with tax credits and financial support. Not only is the PRC advancing rapidly in AI, but it is also closing in on Korea in semiconductor competitiveness, with some assessments suggesting it has already surpassed Korea in certain fields. Japan’s latest support for advanced industries is a move to avoid falling behind in this fierce global competition. This year, the Government of Japan included a supplementary budget plan to provide 400 billion yen—nearly 4 trillion won—for six key sectors.
So where does Korea stand? Both the ruling and opposition parties have proposed the Semiconductor Special Act, but fierce debate over exceptions to the 52-hour workweek regulation has left the bill stalled in the National Assembly of the Republic of Korea. The most promising bill is the one submitted by the ruling party in July last year, but it has yet to be placed on the agenda of the Legislation and Judiciary Committee. Reportedly, the parties have agreed to process the bill after removing the '52-hour workweek exception' clause.
However, the semiconductor industry argues that unless this issue is resolved, it will be difficult not only to surpass Taiwan but also to fend off the PRC’s pursuit. Taiwan enacted a law in 2017 allowing flexible working hours for major industries such as semiconductors. In the PRC, the so-called '996 working hour system'—working from 9 a.m. to 9 p.m., six days a week—has become commonplace.
Unlike traditional industries, the development of advanced sectors is a race against time, where every second counts. Nevertheless, Korea’s ruling party and government remain steadfast in prioritizing workers’ rights and refuse to relax the 52-hour workweek regulation. Of course, no company should force employees to work late hours. However, as long as total working hours do not increase and employees consent, flexible work arrangements are necessary to remain competitive.
Even in Taiwan, labor unions exist, but the Democratic Progressive Party (DPP), the progressive ruling party, has taken a proactive stance in supporting businesses and introducing flexible work systems. Since this aligns with the Kuomintang (KMT) opposition party’s policy, there is no partisan conflict. When it comes to policies that support businesses and promote industry, both parties join hands. The contrast with Korea’s political reality is stark.