Discussion Papers 2026

Hasegawa, Makoto, Takafumi Kawakubo, Takafumi Suzuki and Masayoshi Hayashi

Using Japanese firm-level customs data from 2014 to 2019, we investigate profit shifting through transfer pricing by Japanese multinational corporations. We find that Japanese firms reduce related-party export prices relative to arm's-length prices as the tax differentials between Japan and destination countries widen, indicating tax-motivated transfer pricing. The responsiveness of related-party prices to these taxdifferentials is, on average, smaller than that reported in previous studies but varies depending on transaction characteristics. Specifically, transfer mispricing is more pronounced in transactions involving larger parent-affiliate pairs and products that are exported less frequently. We also examine the impact of the country-by-country reporting (CbCR) system, introduced in Japan in 2016, and find no evidence that it reduced transfer mispricing by Japanese multinationals subject to CbCR.

Keywords: Transfer pricing; Profit shifting; Multinational corporations; International taxation; Country-by-country reporting