Page 473 - Sustainable Cities and Communities Design Handbook

Japanese Smart Communities as Industrial Policy Chapter j 21 443

Supplementing direct finance, Japanese policy makers also use numerous
tax incentives to incentivize smart and compact communities. Policy makers in
MIC and MLIT are focusing tax reform on increasing urban density (to raise
land values) and foster the diffusion of smart energy systems (e.g., LEDs,
district heating, light rail, fuel cell vehicles buses, etc.). The property tax is one
mechanism in this initiative. Several municipal governments explicitly aim at
densification to raise property values and thus increase property and other tax
revenues while cutting expenditures for infrastructure maintenance and other
costs. The use of “special tax measures” (sozei tokubetsu sochi) is also notable.
After 3-11, Japan’s special depreciation tax measures for energy and the
environment mushroomed from YEN 800 million in FY 2011 to JPY 552.5
billion in 2013. FY 2013 special depreciation tax measures for energy and the
environment were thus well over half of FY 2013’s YEN 949.3 billion in total
special depreciation allowances (Sakamoto, 2015). From FY 2011, these spe-
cial measures include LEDs, biomass, small hydro, waste heat recovery (from
sewerages), batteries, cogeneration, and other energy-producing and storage
systems. 16 Most of this investment is clustered in compact and smart cities.
The smart communities fostered by the resilience paradigm are also
important to Japan’s plans to increase infrastructure exports from JPY 10 trillion
in 2010 to JPY 30 trillion in 2020. As seen in Fig. 21.7, Japan’s infrastructure
exports in 2010 totaled just under JPY 10.3 trillion. JPY 3.8 trillion of this total
was energy related, most of it being JPY 2.2 trillion in coal plant (listed in the
figure as “conventional power”). The distributed energy and other systems of
the smart community composed JPY 800 billion, more than the JPY 300 billion
in nuclear sales and the JPY 500 billion in gas and oil plant exports. The
Japanese government aims to triple infrastructure exports to JPY 30 trillion, by
2020, with energy infrastructure more than doubling, to JPY 9 trillion. It ach-
ieved JPY 19 trillion in 2014, suggesting that the 2020 target is realistic. What
remains to be seen is how much the relative shares of smart community exports
increase versus the proportions for coal and other fossil fuel plant as well as
nuclear plant. One powerful determinant of the shift is likely to be the domestic
deployment of smart communities, including microgrids, energy management
systems, and the array of distributed energy inputs being developed.
Aiding in this effort to export smart communities was harnessing them to
the Japan International Cooperation Agency, Japan Overseas Infrastructure
Investment Corporation, and other export promotion networking and finance
facilities. 17

16. For a listing of the items included in energy and environmental special tax measures, see (in
Japanese) “Special Tax Measures Law, Tax Deductions” at the following URL: http://www.
zeiken.co.jp/25kaisei/soz1-3.html.
17. On this objective, see (in Japanese) the Japanese Government’s revised 2016 “Infrastructure
Export Strategy” at the following URL: http://www.kantei.go.jp/jp/singi/keikyou/dai24/kettei.
pdf.