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In the United States and elsewhere, basic principles of international taxation have, in recent years, become the subject of vigorous debate and controversy. Historically, the United States has taxed residents, including domestic corporations, on worldwide income, but has allowed them credit for foreign income taxes in order to alleviate double taxation. Other countries, particularly countries of continental Europe, have long used an exemption system under which income from foreign business activities is exempted from home-country tax, while passive investment income is taxed with a worldwide/credit system similar to that of the United States. Recently, several countries that historically had worldwide/credit systems switched to exemption systems. Some scholars, business representatives, and politicians argue that the United States should do the same. This article examines the law of one such country, Japan, and compares the existing U.S. system with the new Japanese exemption system. A principal conclusion of the article is that a simple switch by the United States, without other corrective changes, would open up tax minimization and avoidance opportunities that are not available to Japanese companies, even after the recent changes in Japanese law.