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Japan business leaders urge foreign investment push

TOKYO, Dec 16 (Reuters) - With their nation's economy struggling and giant neighbour China stealing the limelight, a group of business leaders said on Monday that Tokyo must do more to promote foreign investment in Japan.

The group, Invest Japan Forum, unveiled a list of 12 proposals it has presented to Prime Minister Junichiro Koizumi, including lowering various tax rates to bring Japan's tax system in line with those of other leading industrial nations.

"Prime Minister Koizumi agreed it was imperative to encourage foreign direct investment into Japan, and that it would lead to a revitalisation of Japan's economy," Minoru Makihara, chairman of the group, told reporters.

Other proposals included amending laws to make mergers and acquisitions easier, boosting the transparency of Japan's financial markets and stepping up the government's promotion of foreign investment both within and outside the country.

Makihara, who is chairman of trading house Mitsubishi Corp , said foreign direct investment for other developed countries dwarfed the ratio for Japan, which he said amounted to just one percent of gross domestic product.

That compares with about 27 percent for the United States, 32 percent for Britain and 22 percent for Germany, he said.

Japan's ratio puts the amount of foreign direct investment at five trillion yen ($41 billion) a year, against $48 billion for China in the first 11 months of this year.

The inflow of foreign funds has been an important driver of China's economy, which is widely expected to grow around eight percent this year.

Japan's growth, on the other hand, is sputtering at a rate of less than one percent.

"Today, the message getting out is more about the bad loans, the deflation and the problems of the economy," said Carlos Ghosn, president of Nissan Motor Co and one of the forum's 12 members, who are mostly from the private sector.

"These problems are covering up part of the reality of Japan, which is the existence of capital, technology, excellent infrastructure and the quality of the work force," he said.

Ghosn said that if foreign direct investment into Japan were to rise to 20 percent of GDP it could create two million jobs.

Foreign firms -- Nissan included -- have poured money into China during its first year in the World Trade Organisation, hoping that Asia's second-largest economy would open wider its potentially vast market.

Many foreign-funded factories have been cranking out goods to be shipped abroad, helping fuel a boom in Chinese exports this year. ($1=120.60 Yen)