Foreign companies with operations in Japan could see a large rise in their financing costs, after the finance ministry said it was considering closing a loophole that allows investors to avoid paying withholding tax on some foreign corporate bonds.

The loophole is used regularly by foreign companies in a number of manufacturing and service industries, including carmaking. Hidehiro Utsumi, tax and corporate partner at Linklaters, the law firm, said: “Every year there is a number of new deals like this.”