Deputy Chief Cabinet Secretary Teijiro Furukawa told Okinawa Vice Gov. Mitsuko Tomon in a meeting Wednesday that the central government will give positive consideration to the Okinawa Prefectural Government’s proposal to make the prefecture a free trade zone by around 2005.

Tomon was delivering the plan, aimed at making the prefecture economically independent by reducing its dependence on U.S. military bases and central government subsidies, to Tokyo. During their meeting at the Prime Minister’s Official Residence, Furukawa told Tomon that the government will examine the proposals with a forward-looking attitude.

Okinawa Gov. Masahide Ota plans to outline details of the proposal at a meeting in Tokyo today with central government officials. The central government will then ask a group at the National Institute for Research Advancement, a government-run think tank, to study the proposal.

Relevant government ministries and agencies will also examine the plan.

Chief Cabinet Secretary Kanezo Muraoka told a regularly scheduled news conference later Wednesday that the government will respond favorably to Okinawa if a close examination shows that some of the elements in the proposal are feasible. Prime Minister Ryutaro Hashimoto has reiterated that Okinawa-related issues, including economic stimulus measures, continue to be high on his agenda.

Under the plan, the Okinawa Prefectural Government would be exempt from tariffs and consumption tax on materials used at factories within the free trade zone. Products to be manufactured within the area would not be dutiable if they are shipped elsewhere in Japan.

Companies operating in Okinawa would be allowed to deduct an amount equivalent to up to 50 percent of their investment from corporate taxes over 10 years, and the applicable corporate tax rate would be cut to 30 percent from 37.5 percent at present.

However, it appears it will be some time before the government takes any action, because the proposal includes a number of tax incentives whose implementation would lead to creating two taxation systems within the country. Okinawa officials said they expect the free trade zone to be the prefecture’s first step toward making Okinawa like Hong Kong or Singapore.

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