Tokyo will add duty-free trade zone for art

— July 14 , 2021 by YIART

According to Japanese media reports, in order to uphold the local development of Japan’s art market, the government authorities have revised the tax system and are actively seeking ways for the country to increase its competitiveness in the international art market. In February 2021, Tokyo officials, led by Taro Kono (Minister for Administrative Reform & Regulatory Reform) took action and promised that galleries, auction houses, and art fairs that they could transport artworks for sale or display the through the free trade port area, saving them millions of dollars in tariffs and taxes. Japan’s current art tax reform and the recent announcement that Frieze Art Fair will host the first Asia Expo in September 2022 have become the focus of the art world. Taro Kono pointed out in his blog that Japan can now open up its art business like Hong Kong has, and emphasized that Japan may become one of Asia’s art hubs in the future.

In the late 1980s, Japan transformed into an emerging art market due to its economic boom, dominating the impressionist and modern art market and importing nearly 1.5 billion worth of paintings between September 1989 and September 1990. It is estimated that in the late 1980s, one third of the world’s total art sales came from Japanese buyers. However, after facing an economic bubble, Japan is no longer what it used to be. As the world’s third largest economy, Japan’s art market share is so small that even UBS and Art Basel are not able to announce any records. According to Nikkei Asia, Japan’s art fair, Art Fair Tokyo, pushed the domestic market to 236.3 billion yen (US$2.1 billion) in 2020, but only accounts for 4% of the global share. However, can this move and the tax system change Japan’s competitiveness in the international art market?

Yasuaki Ishizaka, Chairman of Sotheby’s Japan said: “The Japanese government, especially Taro Kono, is very determined to develop the art business in Japan, making Japan a hub in Asia, like Hong Kong. However, it is unlikely that the tax-free reform alone will change the art market. But this is only the beginning.” Katsura Yamaguchi, Head of Christie’s Japan stated that: “It is important to improve the art transaction tax, but we must first lay a solid foundation for art in the country.” In addition to the establishment of tax-free zones, Japan’s research groups are also studying the reform for donations, inheritance, tax depreciation, etc.

Blum & Poe opened an art gallery in Tokyo in 2014, representing about 10 artists. Tim Blum, one of the co-founders of Blum & Poe said that “as of now, if we import art into Japan, we have to pay a 10% tax in advance. Let it go into custody, if the artwork is being exported, it will be reimbursed, or if it is transferred to a domestic buyer, then it will be subject to taxes.” This way, the cost of expenditure puts considerable pressure on art galleries. Tim Blum has confidence in the establishment of this free trade port area. However, Marie Imai, gallery director of Blum & Poe, is not. She said that: “the application process for the approval to become a free port is very long and the free port zone operation is subject to strict consultation and review by customers, which will require a lot of time, energy, and manpower. Some galleries believe this system is impractical.”

However, Japan still has its own advantages, ranking third in the world in terms of the billionaires (behind the US and China) and has a strong appeal to international tourists. Domestic art development is also booming, and art collections tend to be newer. Now, coupled with the art tax reform proposed by Taro Kono, it will bring a stronger development to Japan’s art market. This 30,000 square meter trading port is 5 minutes away from Haneda Airport and is located in the free trade zone. The existing building is currently being built and is expected to be completed in 2023. The ultimate goal is to become an international hub for art.

Figure 1: Haneda Airport International Terminal, Picture © Masahiro TAKAGI from Ichikawa, Chiba, Japan [CC BY 2.0], via Wikimedia Commons)

Figure 2 upper left: 2017 ART FAIR TOKYO © ART FAIR TOKYO

Figure 2 upper right: Japan’s Minister of Administrative Reform, Kono Taro © Kono Taro FB

Figure 2 bottom: 2019 ART FAIR TOKYO © ART FAIR TOKYO