If the goal of the FSA is to increase the demand for Japanese bonds, then removing the corporate bond tax is an appropriate decision. Ceteris paribus, if taxes imposed upon the bond-interest earned by bondholders (lenders why purchase bonds) decrease, then the wealth of bondholders and the expected returns on bonds will increase. Furthermore, if the wealth of bondholders and the expected returns on bonds increase, then the demand for bonds will increase as well since these are determinants of bond demand.
Moreover, if the demand for bonds increases, then the supply of loanable funds will increase, since every bond transaction involves an exchange of loanable funds from bondholders to bond issuers. The exemption proves to be a step in the right direction for Japan, especially since it will enhance Japan's competitiveness with nations like Germany, Britain, France and the U.S. where such taxes on foreigners are non-existent.
-Kitano, Masayuki, and Naoyuki Katayama. "Japan to Exempt Foreigners from Corporate Bond Tax | Reuters." Business & Financial News, Breaking US & International News | Reuters.com. 01 June 2010. Web. 02 June 2010. http://www.reuters.com/article/idUSTOE65000X20100601