Indeed, I almost wrote wealth tax when describing the tax. The difference being I think that capital goods in relation to taxes are most about depreciation. The capital account is meant to be decreasing.

The business optimal situation is for a capital good's book value to reach 0 while the productive use continues unchanged. Thus the business got to buy the machine without paying income taxes on the investment.

Thus from the tax office's perspective handling of capital goods is about preventing too-fast depreciation and or over investment. By such logic any dollar spent on capital goods is a dollar not booked at profit and thus taxed.

About 1/3 of Japan's national tax revenue comes form corporate income tax. Oddly enough, while the capital goods tax is levied by the town, towns do not control their own tax policy. Instead the federal level dictates the exact tax rates down to the prefectural and city level.

Thus in Japan there is little room for the tax centric competition we see in the US. Towns cannot negotiate tax exceptions with industry. Instead the only instances of regional tax preferences in force now were written at the federal level to give various incentives to rebuild the Touhoku region after the tsunami of 2011.

Thus while the town may tax capital goods it is the federal tax authority (NTA) which benefits from the increase in profits.