Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.11C h a i r m a n ’ s

6/ 1/ 2022

C o l u m n

A surge in prices – what’s next?
Japan has finally begun discussing an end to face masks inpublic places. I am very happy with this news. Meanwhile,
Shanghai, China is still in strict lockdown under thegovernment’s zero-Covid policy.
Currently, the big news is about rising food and productprices. Without a doubt, two big factors at play are therecovering demand after the worst of Covid and theRussian-Ukrainian confrontation that has led to surging
material costs. For example, dry foods like curry, pasta,
and noodles have risen from 200 to 230 yen per package.
A 30-yen or 15% increase, which is a significant difference
when purchased in bulk. Add 10% consumption tax on top
and you can see that prices are very high now.

The real estate businesses that ASA deals with is noexception. During Covid, property prices hardly took a dip,and most recently, a rise in building materials and fuelcosts have pushed construction costs higher. However,since real estate is an asset that is used as an inflation
hedge, there seems to be no signs that the market isworsening.
Also, in the blink of an eye, the currency exchange rate is

R e n e w a b l e

at 130 yen per dollar (128.8 yen as of May 13). For Japan,
there is hope that tourism rebounds from the return ofinternational visitors as well as more foreign investments
into real estate. For tourism, it’s necessary to physicallycome to Japan, however with real estate investing, there
seems to be more opportunities for investors to remotely
purchase property through trusted asset managers anddevelopers.
However, I am seriously concerned that additional priceincreases will exacerbate the problem of stagnant wages
and gaps will widen with the actual economy.
(Kazuhiro Matsuzawa, Chairman)

E n e r g y

FY2022 and onward: Renewableenergy purchase price andsurcharge rate under FIT and FIP
systems

1.

Purchase price from January 1, 2022 onward● Solar power generation① Solar power generation for homes and businesses(Ineligible for bids)

On March 25, 2022, METI (Ministry of Economy, Trade,and Industry) announced purchase prices and surcharge
rates for FY2022 and onward for renewable energy under
FIT and FIP systems.

Power sourceFor HomesForBusinesses

Scale（reference）
FY2021

FY2022

FY2023

Under 10 kＷ

19yen

17yen

16yen

More than 10 kＷ
less than 50 kＷ

12yen

11yen

10yen

50 kＷ or more
Ineligible for bids

11yen

10yen

9.5yen※ Since FY2020, under FIT, regional utilization requirements for selfconsumption types must be met for business-use solar power
generation.
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Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.11

6/ 1/ 2022

Renewable energy (continued)② Solar power generation for businesses (Eligible for bids)
Bids will determine the FY2022 purchase price. In FY2022,
bidding will be possible at 1,000 kW or more with FIP
certification and from 250 to under 1,000 kW with FIT
certification. (However, bids will be waived and FY2022
purchase price will be 10 yen for roof installations on
existing buildings.) Developers can bid up to four times inFY2022 with the maximum prices being 10.00 yen, 9.88
yen, 9.75 yen, and 9.63 yen, respectively.

Power source

Scale（reference）
FY2021

FY2022

FY2023

FY2024

Onshore wind
powergeneration

Under
50 kＷ

17yen

16yen

15yen

14yen

② Onshore wind power generation (50kW or more)
Bids will determine the FY2022 purchase price. Developers
can bid once in FY2022 with the maximum price being
16.00 yen. If the bid capacity exceeds 1.7 GW, however,the developer will submit an additional bid within the fiscal
year. The maximum price will be the weighted averagecontract price from the first bid in that same fiscal year or
15.00 yen, whichever is higher.
③ Onshore wind power generation (Replacements)
Power source

Scale（reference）
FY2021

FY2022

Onshore wind powergeneration(Replacements)

All

15yen

14yen

④ Offshore wind power generation（Act to Promote
Offshore Use by Offshore Renewable Energy Facilities isnot applicable）

Bottommounted
offshorewind powergeneration
Floating
offshore windturbine power
generation• Based on the purchase price in section 1, we
determined that the FY2022 surcharge rate is 3.45
yen/kWh. Looking at an example of a consumer whouses 260 kWh/month, their monthly charge is 897 yen(+24 yen), and their annual charge is 10,764 yen (+288yen).
Note: The FY2021 surcharge rate was 3.36 yen/kWh(consumer’s monthly charge: 873 yen; yearly charge:10,476 yen)

● Wind power generation① Onshore wind power generation (Under 50 kW)

Power source

2. FY2022 Surcharge Rate

• The 2022 surcharge rate will be applicable on electricity
charges based on from May 2022 to Apr. 2023 meterreadings.

While purchase prices for solar power generation is falling,
the country is seeking to maximize on other renewablesources leading up to carbon neutrality by 2050. Windpower is viewed as a substantial source, low-cost, and withhopes of a positive ripple effect on the economy. The
current purchase price is 29yen for bottom-mounted
offshore types and 36yen for floating offshore types.
The government has goals to implement 10million kW of
offshore wind power generation by 2030 and 30～
45million kW of by 2040. There are several challenges
including a lack of consistent rules regarding offshore usage,
need for technical knowledge of port infrastructure, andtraining of specialized personnel. However, our firm isreceiving more wind power generation business thanbefore. We will certainly keep an eye out for newdevelopments as they come.
(Kenichi Shimizu, Executive Manager)

Scale（reference）
FY2021

FY2022

FY2023

FY2024

All

32yen

29yen

Biddingsystem-All

36yen

36yen

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Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.11J a p a nR e a l

6/ 1/ 2022

E s t a t e

The evolving landscape of Data
Center investments③ Being an operational asset, there is a lack of operatorsin the market that can manage and operate the facility④ Available locations with access to electricity, lines, andundersea cables is limited.
With that said, there are “hyperscale” suburban DC sites
underway in Inzai, Chiba prefecture. The area is serving
large foreign-based cloud service providers with ambitions
for “INZAI” to become internationally recognized. Once
fully operational, REITs and private funds are expected toinvest.
(Shigeru Hirai, Client Relations Group)● ● ●In recent years, we have seen a massive increase in thevolume of data transmitted online, in no small part due toCovid accelerating at-home activities and remote work. Asa result, demand is up for data center (DC) construction.

Blackstone continues Life Science
Investments

Japan is third behind China and Singapore in the number of
DC locations. In current trends, data stored at overseas
DCs are being moved back home, and DC restrictions inother countries (e.g., electricity supply, access to undersea
cables), are reasons said to be pushing demand upwards
for domestic DC construction.
The merits of DC investments are that long-term leases
provide stable cash-flow and tenants find it difficult tomove because facilities are in place. In the U.S., DC REITs
are a huge sector that make up 7% (market cap of nine
trillion yen) of the US-REIT market. Also in 2014, Singapore
launched Asia’s first publicly traded DC REIT.
Meanwhile in Japan, there are challenges.
① 70% of investments go to depreciable assets likefacilities and with the corresponding capital outflow
and depreciation expense, dividends are limited② Energy consumption can be up to 10 times that of anoffice and subject to regulation under the Energy
Savings Act

Coming off a record financial year, Blackstone (NYSE: BX) is
betting more on life sciences than ever.
Its purchase of BioMed Realty in 2016 signaled Blackstone’s
commitment to investing in life sciences. The real estatecompany leases, develops, acquires, and finances small-tolarge scale labs and offices in leading innovation hubs
across the U.S. and U.K. Considered one of the largest
private landlords in the country, a significant portion of itsCambridge, MA area properties came from its acquisition

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Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.11G l o b a l

N e w sBlackstone (continued)

Notable deals with biopharmaceutical companies
Pfizerfrom Brookfield Asset Management Real Estate Fund in2020.

(NYSE: PFE)

In recent news, Biomed Realty Trust acquired Flatiron Park,a 22-building complex in Boulder, CO for $600 million.
Although this move addresses an intense need for lab andoffice space, BioMed's CEO acknowledges that space will beadded incrementally due to inherent risk of companies
falling short in R&D funding.
In addition to owning real estate, BXLS (Blackstone LifeSciences) was created in 2018 to provide funding for
products in late-stage clinical trials. In April of this year,
BXLS Yield Fund closed with $1.5 billion for post-approval,commercial stage investments. They are looking tostructure deals similar to that with Alnylam
Pharmaceuticals (see table right).

J a p a nTa x

6/ 1/ 2022

U p d a t e

2012: Partnership with Pfizer and SFJPharmaceuticals to develop a lung cancer
drug (later approved)
2020: Former Pfizer CEO, Jeffrey Kindler
joins as Senior Advisor

Anthos
Therapeutics

2019: $250 million financing for
cardiovascular medicine startup

Alnylam
Pharmaceuticals

2020: $2 billion deal for cholesterollowering drug, Inclisiran that wasapproved for market. $1 billion for rights
to 50% of royalties and $750 million as
senior term loan

(NYSE: ALNY)(Yuichi Totani, Client Relations Group)

Under this year’s reform, effective October 1, 2023,
domestic companies receiving dividends from ① wholly
owned subsidiaries and ② from related companies thatare 1/3 or more directly owned on the date of record will
no longer need withholding.

Dividends from wholly owned
subsidiaries no longer need towithhold tax
This year’s tax reform had relatively minor changes,
however one item was noteworthy – the “change inwithholding tax on dividends”.
Prior to this, the provision stated that even dividends
received that were non-taxable were subject towithholding tax at the time of payment. For the company
receiving dividends, tax credits and refund filings were used,
resulting in administrative burden by the tax office andmassive refunds and interest to be paid.
The Board of Audit of Japan criticized that the current
process does not serve the main purpose of thewithholding tax system, which is for withholdings to act asa prepayment of corporate income tax and to be an
efficient and effective means to collect income tax.

The new provisions above will even apply for preferredshareholders of a TMK that must include dividends
received as taxable income. In other words, starting next
October 1 and onward, any domestic company with one
third or more preferred shares of a TMK will be exempt
from withholding tax. In the case of foreign capital, GKs
with more than 50% as domestic shareholders will beexempt from withholding tax.
Tax revenue is expected to decrease from this change inwithholding tax on dividends, so the tax reform outline
states that a 2023 tax reform may include relief measures
to counteract this. There is still some time remaining until
this new change takes effect, so we will pay close attention
to any future reforms.
(Yasuhiro Ando, Tax Group)

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Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.11

6/ 1/ 2022

I n f o r m a t i o n

SDG Plan and New Services
Under our “SDG Plan”, ASA Group will become more than an accounting firm, allowing ourfund-based clients to focus on sourcing and increasing the value of their investments. While
we will continue to provide our core fund administration services, we look to implement DX
to deliver faster and more accurate data to our clients and ultimately to investors.

Expansion ofServicesBy providing an integrated platform in theJapanese real estate market, we will add
greater transparency and convenience forreal estate transactions. We hope toultimately contribute to a more accessible
market for both domestic and foreign
investors.

IntegratedPlatform

By maintaining confidentiality and building a
database of market, investment property,and structure information, we will servevarious roles including marketing, advisory,and thinktank for our clients and investors.
ASA Group will go beyond the confines ofan accounting firm to expand into an
information-based company.

By extracting and standardizing informationfrom various AM, GP, and PM data sets, wewill deliver faster and more accurate data to
our clients and investors. Specifically, a
web-based system will allow financial
figures to be available one business dayfrom month-end close.

SystematicApproach

We will provide asset managers (AM),general partners of PE funds (GP), andproperty managers (PM) with additional
support services that align closely withexisting ASA services.

Information-basedCompanySDG（Smart Data Guideway）Plan

Our 1st STEP is to expand our service lineup to include these additional services:AM support / GP support services

PM support services

Wide range of AM and GP support services forvarious funds including real estate, solar energy, PE(Closing support, ongoing management support,dissolution and liquidation support)

Support of accounting functions related to PM work.
(PM report preparation support, data entry into
specified software)

AM/GP support services will be provided by Aoyama Sogo Accounting Firm and ASA Advisory. PMsupport services will mainly be provided by ASA Reporting Professional.

As always, we truly thank you for your continued business with us. Our group will continue striving
to make improvements and expand our services.
Please ask about our services or topics you’d like to see infuture newsletters. Comments and questions to:✉ newsletter@aoyama.ac＊Read our back issues here

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