Japan could introduce new dividend and capital gains tax breaks in an effort to shift savings into the stock market, under a plan being finalised by the financial services minister.

The proposal - modelled on Britain's individual savings account, or Isa, introduced by Gordon Brown shortly after he became chancellor in 1997 - is part of wide-ranging reforms aimed at boosting the competitiveness of Japan's markets. The sluggish Tokyo market has fallen about 16 per cent this year.