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Trade Policy Review

Japan2000

World Trade OrganizationGeneva, March 2001

PREFACE

The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT CONTRACTING PARTIES in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.

The objectives of the TPRM are to contribute to improved adherence by all WTO Members to rules, disciplines and commitments made under the Multilateral Trade Agreements and, where applicable, the

Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

Plurilateral Trade Agreements, and hence to the smoother functioning of the multilateral trading system, by achieving greater transparency in, and understanding of, the trade policies and practices of Members. Accordingly, the review mechanism enables the regular collective appreciation and evaluation of the full range of individual Members' trade policies and practices and their impact on the functioning of the multilateral trading system. It is not intended to serve as a basis for the enforcement of specific obligations under the Agreements or for dispute settlement procedures, or to impose new policy commitments on Members.

The assessment carried out under the TPRM takes place, to the extent relevant, against the background of the wider economic and developmental needs, policies and objectives of the Member concerned, as well as its external environment. However, the function of the review mechanism is to examine the impact of a Member's trade policies and practices on the multilateral trading system.

Under the TPRM, the trade policies of all Members are subject to periodic review. The four largest trading entities in terms of world market share, counting the European Union as one, are reviewed every two years, the 16 next largest trading entities every four years, and other Members every six years; a longer period may be fixed for least-developed countries.

The reviews are conducted by the Trade Policy Review Body (TPRB) on the basis of two documents: a policy statement by the Member under review and a comprehensive report drawn up by the WTO Secretariat on its own responsibility.

TABLE OF CONTENTS[Page number references are to the corresponding print version.]

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PART A CONCLUDING REMARKS BY THE CHAIRPERSON vii

PART B REPORT BY THE WTO SECRETARIAT xi

PART C REPORT BY THE GOVERNMENT OF JAPAN 165

PART D MINUTES OF THE TPRB MEETING 187


Trade Policy Review

PART A

CONCLUDING REMARKS BY THE CHAIRPERSONOF THE TRADE POLICY REVIEW BODY,

H.E. MR. IFTEKHAR AHMED CHOWDHURYAT THE TRADE POLICY REVIEW OF

JAPAN

14 AND 16 NOVEMBER 2000

CONCLUDING REMARKS BY THE CHAIRPERSON

1. We have had an open and informative discussion of Japan's trade policies. Members were encouraged by signs of economic recovery in Japan, whose economic prosperity is important for the continued recovery of the region, for the health of the world economy and the expansion of trade. Members attributed this nascent recovery largely to Japan's macroeconomic policies and structural reforms. At the same time, Members recognized that the multilateral trading system had contributed to the improved economic outlook for Japan, by keeping foreign markets open to Japan's exports. In commending Japan's recent efforts to implement deregulation and other structural measures, including the removal of barriers to foreign businesses, Members strongly urged Japan to continue its reform process and improve access to its


Trade Policy Review

markets for goods and services.

2. Members expressed their appreciation of Japan's active participation in the work of the WTO. Many Members underlined that their bilateral trade and investment ties with Japan had been strengthened over the recent period. Noting Japan's increased willingness to explore bilateral trade agreements, they sought (and received) assurance that such agreements would be WTO-consistent.

3. On trade and trade-related policies, Members remarked in particular on Japan's complex tariff (and tariff quota) structure and the fact that the use of non-ad valorem tariffs appeared to conceal high applied rates. Some Members also voiced concern about the complexity and seeming lack of transparency of government procurement practices. Furthermore, many Members were concerned about the complexity of Japan’s sanitary and phytosanitary regulations, including quarantine procedures. In addition, pointing to the low level of inflows of foreign direct investment (FDI) into Japan, Members welcomed Japan's efforts to open further its FDI regime.

4. On sectoral policies, Members noted that the level of domestic support for agriculture was disproportionate to its share in GDP. While Members generally recognized that non-trade concerns did arise in agriculture, some urged Japan (among the world’s largest importers of agricultural products) to address these concerns in a manner that would not unduly distort trade. While recognizing that substantial reforms had been undertaken in the financial services and telecommunications sectors, Members expressed their belief that reform should continue with a view to enhancing competition in these sectors. They also urged Japan to extend reforms to other sectors, such as agriculture, transport, legal services and education services.

5. Members also sought further clarification in a number of areas, including:

- matters concerning tariff classification and high tariff rates for certain goods;- the opacity and complexity of tariff quotas and quantitative restrictions; - alignment of national standards with international standards;- reform of standards and environment-related regulations;- competition policy;- the new agricultural policy embodied in the Basic Law on Food, Agriculture and Rural Areas;- impediments to market access for certain items, such as rice, leather, and forestry products;- Japan’s initiative to promote information technology;- restrictive business practices in Japanese ports; and- independence of regulatory authorities in some areas, such as telecommunications, electricity.

6. Members expressed their appreciation to the Japanese delegation for their oral and written responses to the large number of questions posed by them, and for the Japanese delegation's undertaking to provide written responses as soon as possible to any outstanding queries.

7. In conclusion, it is my view that this Review has provided Members with a much better understanding of Japan's trade and trade-related policies, particularly regulatory and other structural reforms. Members were pleased to see signs of Japan's economic recovery; they strongly urged Japan to maintain the momentum of structural reform so as to ensure that the recovery is sustained. It is my sense that Members were reassured by Japan's commitment to multilateralism; nonetheless, they urged Japan to ensure that bilateral and regional arrangements were WTO-consistent. Members also looked to Japan for strong leadership in pursuing future multilateral trade liberalization, including in any new round of negotiations at the WTO.


Trade Policy Review

PART B

REPORT BY THE SECRETARIAT

This report was written by Masahiro Hayafuji with Michael Daly as supervisor.

Clemens BoonekampDirector

Trade Policies Review Division

TABLE OF CONTENTS[Page number references are to the corresponding print version.]

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SUMMARY OBSERVATIONS XIX

(1) Economic Environment xix

(2) Trade Policy Regime: Framework and objectives xix

(3) Trade Policies and Practices by Measure xx

(4) Trade Policies by Sector xxii

(5) Outlook xxiii

I. ECONOMIC ENVIRONMENT 1


Trade Policy Review

(1) Main Economic Developments 1

(2) Macroeconomic Policies 4(i) Monetary and exchange rate policies 4(ii) Fiscal policy 7

(3) Structural Policies 7(i) Corporate restructuring 7(ii) Restructuring the financial system 9(iii) Regulatory reform 9(iv) Competition 10(v) Labour market policies 11(vi) Public and private pension reform 11

(4) Developments in Trade and Foreign Direct Investment 11(i) Composition of merchandise trade 13(ii) Direction of merchandise trade 14(iii) Composition of trade in services 14(iv) Foreign direct investment (FDI) 14

(5) Prospects 18

II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 19

(1) Introduction 19

(2) Development and Administration of Trade Policy 20(i) Main trade law and regulations 20(ii) Trade policy formulation and implementation 22(iii) Evaluation of trade and trade-related policies 23(3) Trade Policy Objectives 24(4) Trade Agreements and Arrangements 24(i) WTO 24(ii) Other multilateral agreements 28(iii) Regional and inter-regional agreements 28(iv) Preferential arrangements 29(v) Bilateral agreements 31


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III. TRADE POLICIES AND PRACTICES BY MEASURE 35

(1) Introduction 35

(2) MEASURES DIRECTLY AFFECTING IMPORTS 36(i) Customs valuation and clearance 36(ii) Rules of origin 37(iii) Tariffs 37(iv) Other charges affecting imports 44(v) Non-tariff border measures 45(vi) Anti-dumping, countervailing, and safeguard measures 49(vii) Government procurement 49(viii) State trading 53(ix) Standards, and sanitary and phytosanitary measures 54(x) Other measures 57

(3) Import and Inward Investment Promotion Measures 57(i) Overview 57(ii) Import promotion 58(iii) Investment regulation and promotion measures 59(iv) Foreign access zones (FAZs) 63

(4) Measures Directly Affecting Exports 64(i) Export taxes and other charges 64(ii) Export restrictions, licensing, and cartels 64(iii) Export promotion schemes 64

(5) Measures Affecting Production and Trade 65(i) Taxation and tax-related assistance 65(ii) Subsidies and other financial assistance 67(iii) State-owned companies and privatization 67(iv) Trade-related investment measures 67(v) Trade-related intellectual property rights 67(vi) Deregulation and regulatory reform 71(vii) Competition policy and regulatory issues 72

IV. TRADE POLICIES BY SECTOR 80

(1) Introduction 80

(2) Agriculture 81(i) Overview 81(ii) Border measures 83(iii) Domestic measures and support programmes 86

(3) Energy and Utilities 87(i) Overview 87(ii) Electricity 88(iii) Gas 88

(4) Manufacturing 89Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

(i) Overview 89(ii) Sectoral developments 91


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(5) Services 93(i) Overview 93(ii) Financial services 93(iii) Telecommunications 100(iv) Transportation services 105(v) Other services 110

REFERENCES 115

APPENDIX TABLES 117

CHARTS

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I. ECONOMIC ENVIRONMENT

I.1 Merchandise trade by product, 1996 and 1999 12I.2 Intra-industry trade of Japan by region, 1985-99 13I.3 Merchandise trade by country, 1996 and 1999 15I.4. Composition trade in services, 1995-99 16

III. TRADE POLICIES AND PRACTICES BY MEASURE

III.1 Share of non-ad valorem duties, by HS section, FY2000 40III.2 Simple average applied MFN tariff rates, by HS section 43III.3 Applied MFN tariff distribution, FY2000 44

IV. TRADE POLICIES BY SECTOR

IV.1 Changes in the Financial Regulatory System 97


Trade Policy Review

TABLES


I.1 Selected macroeconomic indicators, 1990-99 1I.2 Shares of GDP and employment by sector, 1990-99 3I.3 Current and capital accounts, 1990-99 5I.4 Inward and outward FDI flows by source and destination, FY1995-99 16I.5 Inward and outward FDI flows by activity, FY1995-99 17

II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES

II.1 Japan's major trade-related laws and regulations 20II.2 Principal notifications under WTO Agreements, as at 25 April 2000 25II.3 Main beneficiaries of Japan's GSP scheme, 1997-98 31II.4 Major arrangements between Japan and the United States 32


III.1 Average time between import declaration and import permission in Japan, 1991-98 37III.2 Structure of applied MFN tariffs in Japan 38III.3 Allocation of import quota by item, FY1999 46III.4 Import quotas on fisheries products, FY1995-99 47III.5 Procurement composition by product and by origin, 1997 52III.6 Major standards and technical regulations in Japan, March 2000 54III.7 Overview of Japan's import promotion policy, 2000 58III.8 Total budget for Japan's import promotion programmes and forgone tax revenues, FY1997-2000 59

PageIII.9 Measures for promoting imports and foreign direct investment into Japan, FY2000 61III.10 National government tax revenue, FY1998 66III.11 Legislation regarding intellectual property rights protection in Japan 68III.12 Patent, utility model, design, and trade mark applications filed and registered, 1995-98 69III.13 Suspension of imports likely to infringe intellectual property rights, 1990-99 70III.14 Exemptions from the Anti-Monopoly Act, FY2000 73III.15 Merger and acquisition notifications, 1995-99 75III.16 Enforcement statistics related to competition policy, 1995-99 76


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III.17 Industries monitored by the JFTC with respect to a "monopolistic situation", 1995-99 77


IV.1 Major indicators for Japanese agriculture, FY1990-98 81IV.2 Protection in agriculture, FY2000 83IV.3 Special safeguard (SSG) actions in agriculture by Japan, FY1997-99 85IV.4 Procurement prices for all major crops subject to pricing and/or marketing

arrangements/price controls, 1997-99 87IV.5 Manufacturing output and value added in Japan, 1992-98 89IV.6 Employment in manufacturing, value added per employee, and wages per employee

in Japan, 1992-98 90IV.7 Financial institutions in Japan, December 1999 94

APPENDIX TABLES


AI.1 Exports by product group, 1995-99 119AI.2 Imports by product group, 1995-99 120AI.3 Exports by destination, 1995-99 121AI.4 Imports by origin, 1995-99 122AI.5 Composition of trade in services, 1995-99 123


AIII.1 Non-ad valorem tariffs applied by Japan, FY2000 124AIII.2 Current and minimum access commitments by Japan under the Uruguay Round 133 AIII.3 Tariff quotas in Japan, FY1997, 1998 and 2000 139AIII.4 Tariff escalation and tariff ranges in Japan, FY2000 141AIII.5 Systems for reduction, exemption, refund, and repayment of customs duty, May 2000 144AIII.6 Other end-use tariff concessions in Japan, FY2000 145AIII.7 Import approval requirements in Japan, FY1999 147AIII.8 Other laws and regulations related to mandatory technical regulations 149AIII.9 Japan's SPS notifications, 1998-2000 151AIII.10 Amended plant and animal quarantine regulations since 1997 153


Trade Policy Review

AIII.11 Import volume of foreign accesses zones, 1997 and 2000 155AIII.12 Subsidies notified under WTO provisions, FY1996-99 156AIII.13 Stockholding by the Government of Japan 161AIII.14 Regular staff of the Japanese Patent Office, FY1995-99 162AIII.15 Merger notifications by sector, FY1994-99 163AIII.16 Notifications of acquisitions by sector, FY1994-99 164


Trade Policy Review

SUMMARY OBSERVATIONS

(1) Economic Environment

1. Japan appears to be extricating itself slowly from a severe economic situation; real GDP was up by 0.2% in 1999 and showed signs of further strength in the first half of 2000. This nascent recovery follows negative growth of 2.5% in 1998, when Japan was the only industrialized economy in recession. The main factors behind this shrinkage were the sharp drops in business investment and private consumption, both reflecting dampened expectations. The fall-off in business investment also reflected excess capital, financed largely by debt, prompting firms to restrain investment as part of their restructuring efforts. The drop in private consumption was also due, inter alia, to households' almost static disposable income and uncertainty surrounding the sustainability of pensions and the social security system. Government outlays were a positive growth factor in 1998 as were net exports, due in part to the openness of the multilateral trading system. Growth was stimulated later in 1998 by a rebound in public investment, reflecting public works projects implemented as a result of the April 1998 fiscal package; public works then surged in 1999 as a consequence of an additional fiscal package in November 1998. Having recovered by 0.2% in 1999, real GDP growth is projected by the Government to be around 1% in 2000. Consumer price inflation has been practically non-existent, at 0.6% in 1998 and -0.3% in 1999. The unemployment rate has continued to rise, reaching 4.7% in 1999, the highest level for four decades, although there are signs of improvement.

2. The Government has sought to revive the economy through expansionary macroeconomic policies together with structural reforms. But in this regard financial policies may be reaching their limits: the Bank of Japan, in moving away from a zero-interest-rate policy, recently raised one of its short-term rate by 0.25%; the fiscal deficit is approaching 10% of GDP and government debt is around 130% of GDP. Concurrently the view is taking hold that a sustained economic recovery can be achieved only through more aggressive structural reform that enhances competition.

3. A key element in structural reform is deregulation, which has the potential to reduce costs and prices to world levels, thereby stimulating demand and growth. Economic intervention has been reduced in several sectors, especially financial services, telecommunications and retailing. At the same time, Japan has had to counter the threat to economic recovery posed by the fragility of the financial system. Another element of structural reform entails corporate restructuring aimed at redressing several imbalances that have eroded corporate profits; these imbalances involve excess capital and labour, high levels of long-term debt, and inadequate funding of company pensions. Steps have also been taken by the Japan Fair Trade Commission (JFTC) to increase competition. These elements are in addition to the stimulus to competition provided by Japan's further liberalization of its trade and investment regime, partly in accordance with WTO commitments.

(2) Trade Policy Regime: Framework and Objectives

4. Since its previous Trade Policy Review in 1998, Japan has made no major changes to its trade policy regime except those pertaining to its regulatory framework for financial services. Japan's trade policy priorities include strengthening the multilateral trading system.

5. Japan remains committed to the promotion of deregulation and improved transparency. Its commitment to the former is demonstrated by the Cabinet's adoption in April 2000 of a revised Three-Year Program for Promoting Deregulation (TYPPD) in sectors including financial services, telecommunications, energy, transportation and distribution. A July 1999 cabinet decision on "Ideal Socio-economy and Policies for Economic Rebirth" calls for the establishment of fair markets and consumer sovereignty in a transparent


Trade Policy Review

manner. Recently, steps have also been taken by a few ministries, notably the Ministry of Industry and Trade (MITI), to evaluate the costs and benefits of trade and trade-related measures, including regulations; these evaluations could contribute to more informed policy-making and, if published, would improve public accountability.

6. Japan grants at least MFN treatment to all WTO Members. During the period under review, Japan has been an active participant in WTO activities. It has used extensively the WTO dispute settlement mechanism, having been a party to four disputes, three as plaintiff and one as defendant. Japan participates in the Working Groups on Competition Policy and Investment, as well as those on Electronic Commerce and Government Procurement.

7. In a break with the past, regional free-trade agreements now seem to be attracting greater interest in Japan; more specifically, an agreement with Singapore is being studied jointly by the two Governments, and government-affiliated institutes in Japan and Korea are exploring the possibility of a free-trade agreement between the two countries. According to the authorities, these regional and bilateral initiatives will not undermine Japan's commitment to the multilateral trading system. Japan has, of course, long had a strong bilateral relationship with the United States; arrangements between the two countries currently cover several trade and trade-related areas. Japan also has bilateral treaties with several countries on investment, taxation, and social security, six of which were concluded between 1998 and first half of 2000.

8. Japan continues to grant unilateral preferential market access to products from certain developing countries under its Generalized System of Preference (GSP) scheme.

(3) Trade Policies and Practices by Measure

9. Japan has continued to liberalize its trade and investment regimes, mainly as part of its broad regulatory reforms. However, measures constituting potentially important distortions to competition are still evident in some sectors, notably agriculture and certain services. Recognizing the need to further promote competition, the authorities attach high priority to sound competition policy.

10. The tariff is Japan's principal trade policy instrument. Most imports to Japan are either duty free or are subject to low tariff rates. In fiscal year (FY) 2000, the simple average applied MFN tariff rate was 6.5%; the rate is expected to fall to 6.3% once the Uruguay Round tariff cuts are fully implemented, by 2009. Nearly 99% of tariff lines are bound and most applied tariff rates coincide with bound rates, thereby imparting a high degree of predictability to Japan's tariff schedule. At the same time, non-ad valorem duties are an important feature of the tariff, particularly in agriculture; they accounted for 6.9% of all lines in FY2000. While such duties are indicated clearly in Japan's tariff schedule, they can conceal high ad valorem equivalent (AVE) rates. In the interests of transparency, the Japanese authorities have provided the Secretariat with AVE estimates for more than two thirds of these duties; AVEs for the remaining such duties are not available due to the absence of imports, which might suggest that the rates are prohibitive, and that the applied MFN tariff average is underestimated. Available AVE estimates show that 90 of the top 100 tariffs entailed non-ad valorem duties whose ad valorem equivalents (AVEs) ranged from 40.1% to 983.7%. Japan applies tariff quotas on about 200 agricultural items; the allocation of these quotas varies by product and can be complex.

11. Japan has few non-tariff border measures; those currently applied involve some import prohibitions, import licensing, and quantitative import restrictions (on fish and silk, for example). Imports of certain goods are subject to licensing requirements in order to ensure national security, safeguard consumer health and well-being, or to preserve domestic plant and animal life and the environment. Like tariff quotas, certain aspects of the import quota system can be complex.


Trade Policy Review

12. Japan has rarely used contingency measures, such as countervailing and anti-dumping duties and emergency safeguards, although there has been resort to special safeguards in agriculture.

13. Japan maintains certain export controls on grounds of national security and public safety and to ensure adequate domestic supplies of certain agricultural and other primary products. Indicating their absence, Japan has not notified any export subsidies to the WTO. Export finance, insurance, guarantees, and duty drawback schemes are available.

14. Various forms of assistance are provided by central and local governments to some sectors, notably agriculture. An interesting anomaly involves assistance, in the form of tax breaks and low interest loans, provided for certain types of imports (and investment).

15. Japan has made several major changes in its foreign direct investment (FDI) regime since its previous review. These include: the introduction of ex-post facto notification for mining (instead of prior notification) and the elimination of reporting requirements when foreign corporations change their activities to sectors that do not require prior notification; the elimination of limits on foreign capital participation in certain types of telecommunications carriers, except for the Nippon Telegraph and Telephone Corporation (NTT); and the abolition in June 1999 of the regulations on foreign investment, and employment of non-Japanese officers, in the cable television industry. Although a notified inward FDI project may be rejected by the Government, the authorities state that this has not been the case since 1997. Inflows of FDI into Japan have risen considerably during the past two years but are still low by OECD standards; whereas Japan is the OECD's second largest economy, it is 19th with respect to FDI inflows. This contrasts with Japan's position as one of the main sources of FDI.

16. As regards government procurement covered by the Agreement on Government Procurement, no preferences are granted to domestic suppliers. The share of foreign suppliers in the total value of government procurement was 5.7% in 1998 (up from 4.6% in 1997); there are indications that this share is considerably lower in the case of public-works procurement, which has been a key feature of recent fiscal stimulus packages.

17. Japan continues to bring its standards into line with international standards; it has also taken further steps to ensure acceptance of foreign test data and conformity assessments.

18. Japan has continued to participate in multilateral and regional discussions for agreements to promote international harmonization of regimes protecting intellectual property rights (IPRs).

19. The Three-Year Program for Promoting Deregulation (TYPPD), as revised in April 2000, is aimed, inter alia, at creating a "free and fair" Japanese economy fully open to the international community. Furthermore, with a view to increasing transparency of government policy and related measures, in March 1999, Japan introduced a notice and comment ("public comment") system for use prior to introducing or revising regulations. The TYPPD also contains measures to increase competition. These include the abolition of a number of exemptions from the Anti-Monopoly Act (AMA), Japan's principal competition law; as a result, the number of exemptions under the AMA (and other laws) dropped from 89 in 1996 to 22 in 2000. At the same time, following the modest increase in its budget and staff, the role of the Japan Fair Trade Commission (JFTC) has been strengthened. Moreover, judging from the increased number of cases and actions taken, the JFTC also seems to have become somewhat more aggressive in addressing private anti-competitive practices; a majority of these cases involve bid-rigging in connection with tenders for government procurement contracts. However, the operation of the JFTC is perhaps hampered by its lack of resources and expertise in pursuing complex cases.

(4) Trade Policies by SectorTextual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

20. Japan is moving from price to income support for agriculture. However, the sector remains relatively well protected from foreign competition. The average tariff on imports of agricultural products remains high, tariff quotas can be intricate, and a number of these products receive domestic support. As a consequence, the overall level of government assistance for agriculture (as measured by producer and consumer support estimates) is well above the OECD average, and appears to have risen since 1997. The average annual amount of transfers to agriculture during the 1990s has exceeded agriculture's contribution to GDP, which has averaged roughly 1.5%. Productivity in Japanese agriculture remains low by national standards.

21. Japan enacted a new Basic Law for Food, Agriculture and Rural Areas in July 1999, in order to cope with major economic and social changes facing agriculture and to lay out the future direction of agricultural policy. The new Law is based on four basic principles: a stable food supply, fulfilment of agriculture's multifunctional role, sustainable development of agriculture, and the development of rural areas. With a view to implementing the policy direction stipulated in the new Law, a Plan was decided by Cabinet in March 2000. It contains various measures, some of which have already been implemented; these include the reform of the price policy for wheat and the introduction of direct payments to farmers in hilly and mountain regions. The Plan also includes a guideline for reaching a 45% food self-sufficiency ratio (on a calorie basis) by 2010 (compared with 40% in 1998).

22. Japanese manufacturing has traditionally been much more exposed to international competition than other sectors (except in the cases of prepared food products, tobacco, alcoholic beverages, textiles, footwear and headgear, and leather and leather products). Tariffs on manufactured goods are usually low, non-tariff barriers are few, and the sector receives relatively little financial or other assistance from the State. Nonetheless, manufacturing, unlike agriculture, has been the driving force behind Japan's rapid export-led development during the past 50 years. This is especially true for automobiles, robotics, video recorders, cameras and video games, where the government has played a very minor role other than to participate actively in multilateral trade liberalization. As in most other industrialized countries, however, manufacturing's contribution to Japan's GDP has declined steadily; in 1998, it accounted for 23.5% of GDP compared with 24.4% in 1997.

23. The share of services in Japan's GDP has grown to roughly 65%. Protection for Japanese suppliers from foreign competition has been provided not so much through border measures, but more through internal regulations (including licensing and restrictions on foreign investment), state-ownership in some instances, and anti-competitive private practices. In recognition of the growing importance of services, both to consumers and as a determinant of international competitiveness, Japan's attention has focused increasingly on deregulation combined with the strengthening of competition laws and their enforcement. The high cost of services and other inputs can be a factor encouraging Japanese businesses to relocate abroad.

24. Financial services liberalization is one of the centrepieces of recent structural reform efforts; Japan has continued to make progress in implementing the liberalization agenda that was established in 1997. Popularly known as the "Big Bang", the purpose of these reforms is to create a "free, fair and global" financial system by, inter alia, allowing firms to provide various types of financial services beyond existing borders of financial institutions (that is, banks, insurance companies, or securities companies), and opening the door to foreign institutions wishing to operate in Japan. Entry of foreign institutions may well have provided a further impetus to financial and corporate restructuring. Financial liberalization is also creating new opportunities for household savings, such as fast-growing mutual funds, which are more inclined to invest in new, fast growing enterprises. Financial liberalization is thus likely to contribute to a more efficient allocation of savings.

25. At the same time, Japan has had to grapple with the threat to economic recovery posed by the fragility of the financial system. Accordingly, it has taken steps to re-capitalize the banking system. More


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specifically, 1998 legislation provided up to ¥60 trillion (12% of GDP) to address the problem of non-performing loans: some insolvent institutions have been closed, two large banks were temporarily nationalized (one of which was subsequently sold to a foreign bank), and many others have received large injections of public capital. Regulatory and supervisory responsibilities for banks have been transferred from the Ministry of Finance to a new agency, the Financial Services Agency (FSA) and its parent body, the Financial Reconstruction Commission (FRC). Provisioning standards have also been tightened. Whereas Japan appears to have successfully addressed the banking sector's problems, some life insurance companies still face the threat of bankruptcy and are therefore attracting increased regulatory attention from the FSA.

26. Japan has also introduced various measures to promote further deregulation in the telecommunications sector, including: elimination of foreign ownership restrictions for certain types of telecommunications services and cable TV service providers; the elimination of the authorization requirement for end-user charges; the introduction of a price-cap regulation for certain end-user charges; and an amendment in May 2000 to the Telecommunications Business Law setting up a framework to introduce a long-run incremental costing (LRIC) system. Nonetheless, as indicated by the JFTC, the Japanese telecommunications market remains monopolistic, and the prices of some services are still high by developed-country standards. For example, Japan's internet-access charges for 40 off-peak hours in March 2000 were higher than in most other OECD member countries; such high charges tend to discourage the use of the internet and the spread of information technology, thereby hampering the development of electronic commerce.

27. Concerns have been raised about the adequacy and effectiveness of competition policy in relation to other service sectors as deregulation proceeds, notwithstanding the recent strengthening of competition laws and their enforcement. In particular, several sectors, notably maritime and air transport, are exempt from the Anti-Monopoly Act.

(5) Outlook

28. There are signs of recovery in the Japanese economy. Led by public investment, real GDP was up at an annual rate of 4.2% in the second quarter of 2000. But after increasing strongly in the first quarter of 2000, partly as a result of a rise in corporate profitability, corporate investment dropped somewhat in the second quarter despite increasing profitability. The recent mixed trends in private consumption and investment, together with the present high level of unemployment (which has contributed to Japanese consumers' reluctance to spend), persistent downward pressure on prices, and declining net exports, provide a rather unclear picture concerning the strength of the recovery and its durability. The strengthening of the yen, which has appreciated considerably against the U.S. dollar and the Euro since the middle of 1998, could cause net exports to fall further, possibly weakening the recovery. The decision by the Bank of Japan, in August 2000, to end its "zero-interest-rate" policy has probably taken into account the likely impact of that decision, not just on the exchange rate but also on the financial system and on consumer spending and investment. Nevertheless, as a result of continuing doubts about the strength of the economic recovery, the Government is reportedly considering yet another fiscal stimulus package, albeit much smaller than the two previous ¥18 trillion packages (in November 1998 and 1999).

29. With economic prospects seemingly brighter, there is perhaps the danger that Japan may waver in its resolve to continue to pursue structural reforms, thereby jeopardizing a sustained recovery. Indeed, there have been some recent signs of "reform fatigue" (e.g. postponement of the introduction

of consolidated taxation; delays in pension reform; the two-year delay in the planned abolition of bank deposit safety-net scheme; and the fact that, as yet, no licences have been granted to non-financial groups wishing to engage in banking). Nonetheless, the Government seems firm in its intention to intensify regulatory and other reforms aimed at removing distortions to competition. In this respect, the Government's


Trade Policy Review

recent decision to abandon plans to bail out a heavily indebted major retailer constitutes a positive sign. By and large, the private sector has urged the Government to press ahead with reform.

30. While continuing to open its market at the multilateral level, Japan appears to be becoming increasingly involved in regional arrangements, notable the APEC forum, and is developing links with the grouping consisting of ASEAN, China and Korea (ASEAN+3 (including Japan)). Japan is also exploring bilateral free-trade agreements, having eschewed such arrangements in the past. It is important that such regional and bilateral arrangements do not erode Japan's long-standing attachment to the multilateral trading system.


(1) Main Economic Developments

1. Since Japan's previous Trade Policy Review in 1998, the Japanese economy has in the aggregate shown negative growth, continuing the pattern of poor growth performance since the early 1990s. However, real GDP grew 0.2% in 1999 and has shown signs of further strength in the first half of 2000, suggesting that Japan may be extricating itself slowly from a severe economic situation. In 1998, with real GDP shrinking of 2.5%, Japan was the only industrialized economy in recession (Table I.1). The main factors behind this shrinkage were the sharp drops in business investment and private consumption. The drop in business investment was the consequence of a 25% decline in corporate profitability; this, in turn, was due to low capacity utilization (in manufacturing) and falling capital productivity, both of which reflect excess amounts of capital that were financed largely by debt, prompting firms to slash investment as part of their restructuring efforts. The drop in private consumption was due, inter alia, to households' almost static disposable income together with their growing insecurity, probably caused by the rise in unemployment and uncertainty surrounding the sustainability of pensions and the social security system.11 One of the few components of demand that contributed positively to real GDP growth in 1998 was net exports of goods and services, along with Government spending on consumption. This was reinforced in the fourth quarter of the year by a rebound in public investment, reflecting public works projects implemented as a result of the April 1998 fiscal package; public works then surged in 1999 as a consequence of an additional fiscal package in November 1998. Having recovered in 1999 to 0.2% growth (and in fiscal year 1999 to 0.5%), real GDP growth is projected by the Government to be around 1.0% in FY2000.22 Consumer price inflation has been practically non-existent; that is, only 0.6% in 1998 and -0.3% in 1999. The unemployment rate has continued to rise, reaching 4.7% in 1999, the highest level for four decades, although there are signs of improvement.33

Table I.1Selected macroeconomic indicators, 1990-99(¥ trillion and per cent)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Real economy (changes in %)Real GDP 5.1 3.8 1.0 0.3 0.6 1.5 5.1 1.6 -2.5 0.2Real domestic demand 5.2 2.9 0.4 0.1 0.1 2.3 5.7 0.1 -3.5 1.5

a

Private consumption 4.4 2.5 2.1 1.2 1.9 2.1 2.9 1.0 -1.1 1.7a

Gross fixed investment 8.5 3.3 -1.5 -2.0 -0.8 1.7 11.1 -1.9 -8.8 1.2a

Government consumption 1.5 2.0 2.0 2.4 2.4 3.3 1.9 1.5 0.7 0.7a

Real exports of goods and services 6.9 5.2 4.9 1.3 4.6 5.4 6.3 11.6 -2.3 0.3a


Trade Policy Review

Real imports of goods and services 7.9 -3.1 -0.7 -0.3 8.9 14.2 11.9 0.5 -7.5 1.1a

Household disposable income (changes in %)

6.1 6.2 3.9 2.5 2.7 1.9 2.6 1.3 0.3 ..

Prices (changes in %)

Consumer prices (CPI) 3.1 3.3 1.6 1.3 0.7 -0.1 0.1 1.8 0.6 -0.3

GDP deflator 2.3 2.7 1.7 0.6 0.2 -0.6 -1.4 0.3 0.3 -0.9

Table I.1 (cont'd)

Employment/unemployment

Employment (changes in %) 2.0 1.9 1.1 0.2 0.1 0.1 0.4 1.1 -0.6 -0.9a

Unemployment rate 2.1 2.1 2.2 2.5 2.9 3.2 3.4 3.4 4.1 4.7

Productivity (changes in %)

Labour productivityb 3.0 1.8 -0.0 0.1 0.6 1.4 3.4 -0.3 .. ..

Money stock (end of year, % change)

M2 + CDs 11.7 3.6 0.6 1.1 2.1 3.0 3.3 3.1 4.0 3.6

Interest rates (%)

Official discount rate 6.0 4.5 3.3 1.8 1.8 1.8 0.5 0.5 0.5 0.5

Exchange rate (¥ per US$) 144.8 134.7 126.7 111.2 102.2 94.1 108.8 121.0 130.9 113.9

Fiscal balance (% of GDP)

Revenue 34.2 33.8 33.2 32.1 32.1 32.0 31.7 31.7 30.8 30.5a

Expenditure 31.3 30.9 31.7 33.7 34.4 35.6 35.9 35.0 36.9 38.1a

Balance 2.9 2.9 1.5 -1.6 -2.3 -3.6 -4.2 -3.4 -6.0 -7.6a

Balance excluding social security -0.6 -0.8 -2.0 -4.8 -5.1 -6.4 -6.9 -6.0 -8.5 -9.9a

Government debtc 61.4 58.2 59.8 63.0 69.4 76.0 80.6 84.7 97.3

a105.4

a

Saving and investment (% of GDP)

National saving (gross) 33.5 34.2 33.8 32.6 31.3 30.8 31.5 30.9 29.2 ..

Domestic investment (gross) 32.3 32.2 30.8 29.7 28.7 28.6 30.0 29.1 26.7 ..

Balance-of-payments

Current account (¥ trillions) 6.5 9.2 14.2 14.7 13.3 10.4 7.2 11.4 15.8 12.2Current account (% of GDP) 1.5 2.0 3.0 3.1 2.8 2.1 1.4 2.2 3.2 2.5Exports of goods and services (% of GDP)

10.9 10.4 10.3 9.5 9.5 9.6 10.2 11.4 11.4 10.6

Imports of goods and services (% of GDP)

10.0 8.8 8.1 7.2 7.4 8.2 9.7 10.2 9.5 9.1

.. Not available.

a Estimates.b In terms of real GDP.c General government gross financial liabilities, including the debt of the Japan Railway Settlement Corporation and the Inherited Debt Fund

from 1995 onwards.

Source: Information provided by the Japanese authorities; IMF (2000); OECD (1999b); Bank of Japan (2000); Japan Productivity Center for Socio-economic Development (1999); and WTO Secretariat calculations.

2. As a consequence of this sluggish economic performance, the Government has sought to revive the economy through expansionary macroeconomic policies together with structural reforms. Monetary and fiscal policies may be reaching their limits in this regard, however. Indeed, after maintaining what, in effect, constituted a zero-interest-rate monetary policy during much of the period under review, the Bank of Japan raised slightly one of its key interest rates in August 2000. Moreover, with the fiscal deficit approaching 10% of GDP in 1999, and government debt over 105% of GDP and expected to rise to about 130% by the end of


Trade Policy Review

FY200044, there seems to be little scope for further fiscal stimuli following the most recent fiscal package, amounting to roughly ¥18 trillion, which was announced in November 1999.55 Hence, there now seems to be a broadly held view within Japan that the cause of the country's economic woes are mainly structural in nature and a sustained recovery of the economy can be achieved only through more aggressive structural reforms that enhance competition; regulatory reform continues to be a key element of these structural reforms (section (3)(iii)).

Table I.2Shares of GDP and employment by sector, 1990-99

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Share of GDP

Total (¥ trillion) 430.0 458.3 471.0 475.4 479.3 483.2 500.3 509.6 498.5 495.1

Agriculture, forestry and fishing 2.5 2.4 2.3 2.1 2.1 1.9 1.9 1.7 1.7 ..

Mining 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 ..

Manufacturing 28.2 28.1 27.1 25.5 24.5 24.7 24.5 24.4 23.5 ..

Services 64.5 64.8 65.7 66.7 67.4 67.2 67.2 67.3 67.9 ..

Construction 10.1 10.2 10.4 10.8 10.8 10.4 10.3 9.8 9.3 ..

Electricity, gas and water 2.6 2.6 2.7 2.7 2.8 2.8 2.8 2.9 3.0 ..

Wholesale and retail trade 13.6 13.7 13.5 12.9 12.7 12.6 12.0 12.1 11.8 ..

Financial services and insurance 5.9 5.6 5.2 4.9 5.2 5.0 4.7 5.0 4.9 ..

Real estate 10.9 11.0 11.5 12.3 12.7 12.9 13.2 13.5 14.1 ..

Transport and communications 6.6 6.5 6.4 6.4 6.4 6.5 6.6 6.5 6.5 ..

Other services 14.8 15.2 16.0 16.7 16.8 17.0 17.6 17.5 18.3 ..

Government 7.6 7.5 7.6 7.7 7.9 8.0 8.0 8.0 8.3 ..

Non-profit services for households 2.0 2.0 2.0 2.1 2.2 2.3 2.3 2.4 2.5 ..

Import tax and other -5.2 -4.9 -4.8 -4.3 -4.3 -4.4 -3.9 -4.4 -4.5 ..

Statistical discrepancy 0 -0.1 0 0.1 0.1 -0.1 -0.2 0.3 0.3 ..

Share of employment

Total (million) 62.5 63.7 64.4 64.5 64.5 64.6 64.9 65.6 65.1 ..

Agriculture and forestry 6.6 6.1 5.8 5.4 5.3 5.3 5.1 4.9 4.9 ..

Fishing 0.6 0.6 0.6 0.5 0.4 0.4 0.4 0.4 0.4 ..

Mining 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 ..

Manufacturing 24.1 24.3 24.4 23.7 23.2 22.5 22.3 22.0 21.2 ..

Services 65.0 65.3 65.5 66.6 67.1 67.9 68.4 68.8 69.5 ..

Construction 9.4 9.5 9.6 9.9 10.2 10.3 10.3 10.4 10.2 ..

Electricity, gas and water 0.5 0.5 0.5 0.5 0.6 0.7 0.6 0.5 0.6 ..

Transport and communications 6.0 5.9 6.0 6.1 6.1 6.2 6.3 6.3 6.2 ..

Wholesale and retail trade 22.6 22.5 22.3 22.4 22.4 22.4 22.6 22.5 22.8 ..

Share of employment

Financial services, insurance and real estate 4.1 4.1 4.1 4.0 4.1 4.1 3.9 3.9 3.9 ..

Other services 22.3 22.7 23.0 23.5 23.9 24.3 24.6 25.1 25.9 ..

Government 3.1 3.1 3.2 3.2 3.3 3.4 3.3 3.3 3.3 ..

.. Not available.

Source: Information provided by the Japanese authorities.


Trade Policy Review

3. Since 1997, the shares of services in GDP and total employment have continued to grow, mainly at the expense of manufacturing (Table I.2). Much of the growth of services' share in GDP has occurred in real estate and "other services"66; the shares of other services in employment have also grown steadily. Agriculture accounts for a small and declining share of GDP and employment; OECD estimates suggest that total transfers were higher than the sector's value-added during the period 1990-98 (Chapter IV(2)(i)).

(2) Macroeconomic Policies

(i) Monetary and exchange rate policies4. During the period under review, the Bank of Japan (BOJ), whose formal independence was strengthened in April 1998 (with the entry into force of the new Bank of Japan Law), has, in effect, been pursuing a "zero-interest-rate policy" since February 1999, apparently as a temporary emergency measure. While this policy was seemingly aimed primarily at arresting the deflationary spiral, it also bolstered ailing banks (section (3)(ii)).77 Negative rates of inflation in 1999 and early 2000 indicate that the real interest rate may have been somewhat higher, however.88 It would appear that past pressure by, inter alia, the Ministry of Finance (MOF) on the BOJ to loosen monetary policy further and, more recently, not to tighten it has been resisted by the BOJ on the grounds that Japan's fundamental problem is not that monetary policy is too tight, but that resource use is inefficient, and that the solution, therefore, is structural reform. According to the Governor of the BOJ, the zero-interest-rate policy might create moral hazard in the private sector and, as a consequence, delay the necessary structural adjustments.99

5. More specifically, some members of the Policy Board of the BOJ, which has price stability as its main goal1010, appear to believe that an artificially low cost of credit constitutes an effective subsidy for companies, permitting them to operate as before – notwithstanding their inefficiency – and postpone addressing their problems (section (3)(i)). The implication is that raising interest rates would induce struggling enterprises to restructure themselves, perhaps freeing capital for more productive uses. In the event, the BOJ raised its uncollateralized overnight call rate to 0.25% in August 2000.

6. Since the zero-interest-rate policy was introduced, banks' commercial lending has continued to decline, as private credit demand has remained weak. In such circumstances, they invest in government bonds, which keeps long-term interest rates extremely low. As low interest rates tend to dampen the incentive to curb public spending, a great deal of capital has been channelled into cheap loans to the Government for spending on public works.

7. During the past two years or so, the nominal exchange rate of the yen against the U.S. dollar has fluctuated widely. After falling to a 3_-year low of around ¥147 to the U.S. dollar in August 1998, the yen recovered to around ¥109 in January 1999. Subsequently, it traded within a narrow range centred on ¥120 to the dollar until mid-July, possibly aided by mainly unilateral market intervention by the authorities to prevent the currency from appreciating before the economy had begun a self-sustained recovery. While such intervention was seemingly interrupted in mid-July 1999, it resumed when the yen appreciated further, briefly reaching ¥102 to the dollar in December 1999. In the first half of 2000, the currency has depreciated somewhat, remaining within the range ¥102-112 to the dollar. The real effective exchange of the yen, after hitting a bottom in the third quarter of 1998, continued appreciating until December 1999; the rate declined slightly in the first quarter of 2000.

8. As regards the external sector, Japan's current account surplus increased from 2.2% of GDP in 1997 to a ten-year peak of 3.2% in 1998 (Table I.3), reflecting the widening gap between national saving and domestic investment (Box I.1), owing to stagnating business investment; this surplus decreased to 2.5% in 1999. Exports and imports of goods declined in 1999, despite a recovery of exports to and imports from Asia.

Table I.3


Trade Policy Review

Current and capital accounts, 1990-99(¥ trillion)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Current account balance 6.5 9.2 14.2 14.7 13.3 10.4 7.2 11.4 15.8 12.2

Goods balance 10.1 12.9 15.8 15.5 14.7 12.3 9.1 12.3 16.0 14.0

Services balance -6.2 -5.6 -5.6 -4.8 -4.9 -5.4 -6.8 -6.5 -6.5 -6.2

Goods and services balance 3.9 7.3 10.2 10.7 9.8 7.0 2.3 5.8 9.5 7.9

Income balance 3.3 3.5 4.5 4.5 4.1 4.2 5.8 6.7 7.4 5.7

Exports of goods, services and income 64.4 66.5 66.4 61.6 61.2 64.5 75.4 84.8 84.5 74.2

Imports of goods, services and income 57.3 55.7 51.7 46.3 47.2 53.4 67.2 72.3 67.5 60.7

Net transfer balance -0.7 -1.6 -0.5 -0.6 -0.6 -0.7 -1.0 -1.1 -1.1 -1.4

Capital and financial account balance -4.9 -9.3 -12.9 -11.7 -9.0 -6.3 -3.3 -14.8 -17.3 -5.4

Financial account -4.7 -9.1 -12.8 -11.5 -8.8 -6.1 -3.0 -14.3 -15.4 -3.5

Capital account -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.5 -1.9 -1.9

Changes in Reserve Assets 1.4 1.1 -0.1 -3.0 -2.6 -5.4 -3.9 -0.8 1.0 -8.8

Statistical discrepancy -3.0 -1.0 -1.2 0.0 -1.8 1.3 0.1 4.2 0.6 2.0

Source: Bank of Japan.

9. A major development in Japan's balance of payments involves the volatility of portfolio capital inflows, which fell in 1998, but rose strongly in 1999, thereby contributing to the appreciation of the yen. Portfolio inflows were eleven to twelve times inflows of FDI in 1999. Another development was the increase in inflows of foreign direct investment, which reached about ¥2.4 trillion in FY1999 (exceeding the cumulative inflows of the two previous years); inflows still remained well below outflows, however, which were at ¥7.4 trillion.


Trade Policy Review

Box I.1 Accounting for Japan's current account surplus

In an open economy, the total output of goods and services available for purchase consists of domestic production (Y) plus imports (M). Total expenditure consists of domestic demand, which is the sum of consumption (C), investment (I) and government purchases (G), together with foreign demand, namely exports (X). As the value of total output must equal total expenditure, the equilibrium condition for GNP is:

Y = C + I + G + X – M. (1)

Thus, whereas exports add to Japan's GNP, imports do not do so directly; imports add instead to the GNPs of foreign countries.

The difference between export value of goods and services and the import value of goods and services is known as the current account balance (CA) so that:

CA = X – M. (2)

When a country's imports exceed its exports, it has as a current account deficit (CA-). By contrast, when exports exceed imports it has a current account surplus (CA+). (In addition to net exports of goods and services, the current account imbalance included net transfers, which are ignored to simplify the discussion.)

The difference between government purchases of goods and services (G) and taxes (T) is the government budget (or fiscal) balance; a budget deficit arises when G exceeds T, while a budget surplus, or government saving, occurs when T exceeds G.

As GNP (Y) is, by definition, equal to disposable income (DI), which can be either consumed or saved, plus taxes (T) collected from households and firms,

Y = C + S + T. (3)

It follows from the GNP identity (1) and equations (2) and (3) that:

CA = X – M = S + (T - G) or CA = NS - I, (4)

where national saving (NS) is the sum of private saving (S) plus government saving (T-G). In other words, the current account surplus (CA+) must be equal to the amount by which national saving exceeds investment. This fundamental equation highlights the close relation between the trade surplus and the extent to which national saving exceeds investment.

As the current and capital account surpluses must sum to zero under floating exchange rates,

CA+ + Net Capital Outflow = 0, (5)

which, when substituted into equation (4) gives:

NS - I = Net Capital Outflow. (6)

The last equation demonstrates that if Japan saves more than enough to meet domestic investment needs, then the excess must flow abroad. The resulting outflow of capital tends to drive down the exchange rate leading to a trade surplus. As the Japanese Government is currently running a large budget deficit, the fundamental cause of Japan's present wide trade deficit is that private saving is far higher than domestic investment.

Source: WTO Secretariat.


Trade Policy Review

(ii) Fiscal policy10. The zero-interest-rate monetary policy has been accompanied by an expansionary fiscal policy. During the period under review, the Government has implemented various fiscal stimulus packages, namely the April and November 1998 packages involving ¥16 trillion and ¥17 trillion, respectively; a further package of ¥18 trillion was announced in November 1999.1111 As a result, the Central Government's fiscal deficit rose from about 6% of GDP in 1997 to almost 10% in 1999. A deficit of around 10% is projected for 2000. The combination of large fiscal deficits, low growth in real GDP, and non-existent inflation has resulted in mounting public debt, despite very low nominal interest rates; general government gross debt rose from 76% of GDP in 1995 to 105% in 1999, and, according to IMF predictions, will hit 150% in 2004. These figures exclude the debts of public entities (outside general government), whose financial situation tends to be opaque, as well as a variety of contingent liabilities in the pension, banking and credit guarantee systems.1212 At the same time, net interest payments on government debt have also increased, amounting to 2.2% of GDP in FY1999. While Japan's fiscal deficit and consequent public debt are large by international standards, they do not appear to pose an immediate threat because private domestic saving is sufficient to finance the deficit. The build-up of public debt will eventually necessitate considerable fiscal consolidation, involving both spending cuts and tax increases.

11. A major feature of recent fiscal packages on the expenditure side has been public works projects. These projects have been especially beneficial to domestic construction companies, many of which are heavily indebted. The share of foreign suppliers in Japan's public works projects was as at least 0.04% in FY1997 (Chapter III(2)(vii)); a more competitive tendering system might have reduced the cost of these projects, easing pressure on the fiscal accounts.

12. There have been some cuts in tax rates, notably those concerning corporate and personal income taxes. Nonetheless, the question arises as to whether more emphasis might not have been placed on tax cuts rather than expenditure increases in providing a fiscal stimulus to the Japanese economy and, at the same time, promoting structural reform. The Government Tax Commission is currently considering reforms of the tax system by reviewing a number of taxes and tax measures; such reforms include consolidated taxation and improved loss carry-forward provisions, which would facilitate corporate restructuring. However, the rise in government indebtedness probably reduces the prospects that any reforms will involve substantial tax cuts.

(3) Structural Policies

(i) Corporate restructuring13. As a result of the recent recession and the bleak outlook for the economy during much of the past decade, the corporate sector has had to confront several imbalances that have eroded companies' profitability. These imbalances involve excess capital and labour together with high levels of long-term debt.

14. According to the EPA, excess labour is of the order of 1.4 million employees, or 2.2% of total employment1313; private sector estimates are much higher than these official figures.1414 This situation is largely due to Japan's strong attachment to lifetime employment, mainly found in its large corporations. However, anecdotal evidence suggests that firms have been starting to adjust their labour forces during the review period, through attrition, increased early retirement, and across-the-board wage cuts, which may explain the rise in unemployment and the steep fall in employment in the period 1998-99. As discussed below (section (3)(v)), the Government has taken measures to address the deteriorating situation in the labour market.

15. Excess capital is reflected in unusually low capacity utilization in manufacturing and declining capital productivity (i.e. a rising capital-output ratio).1515 According to EPA estimates, excess capital is between ¥35 trillion and ¥52 trillion. Excess capacity affects in particular steel, motor vehicles, cement, construction, gas stations, and department stores.


Trade Policy Review

16. Japanese companies are highly leveraged by international standards and earn inadequate returns on their assets. The outcome is very low returns on equity; the rate of return for all firms listed on the first section of the Tokyo Stock Exchange was only 1% in FY1998.1616 In the face of a deflationary environment, recent and planned changes in accounting rules1717, and foreign pressure, companies have taken steps to redress this situation. They have not only cut back investment, as discussed above, they have also announced their intentions to sell assets and restructure their businesses. Mergers have increased sharply during the review period; in 1998, for example, there were over 900, more than double the 1993 figure – the value of such activity rose from US$21 billion to US$57 billion. Bankruptcies have also risen substantially; construction companies, manufacturers, wholesalers, and retailers were among the most vulnerable.1818

17. An additional imbalance that companies need to confront is their inadequate funding of pensions. This situation is largely because until 1997, company pension funds had long been required by government regulation to guarantee a 5.5% annual return on premiums paid. Recently, actual returns on most company pension fund investments have only been around 4%, however, as a consequence of poor returns on equity and low interest rates, thus requiring companies to bridge the gap.1919 Under new accounting rules introduced in FY2000, companies must disclose any under-funding and fund any shortages over 15 years. According to a report by the NLI Research Institute, listed companies' pension plans are under-funded to the tune of ¥56 trillion on a consolidated basis; the report estimates that the total annual burden over the next 15 years will be nearly ¥3 trillion, which could squeeze combined parent-only pre-tax profits by 38% annually. The decision by the Government to allow companies to make up their pension shortfalls by contributing their cross-holdings along with the associated voting rights could have profound implications for corporate governance in Japan, raising the possibility of powerful return-seeking funds exerting discipline on corporate managers.

(ii) Restructuring the financial system18. Financial market liberalization is a cornerstone of recent structural reform efforts, with the Government continuing to make progress in implementing the liberalization agenda set in 1997. Popularly known as the "Big Bang", the purpose of these reforms is to create a "free, fair and global" financial system (Chapter IV(5)(ii)) by, inter alia, allowing firms to provide various types of financial services beyond existing borders of financial institutions (banks, insurance companies, or securities companies), and opening the door to foreign institutions wishing to operate in Japan. Financial liberalization has the potential to reform Japan's traditional "main bank" system under which banks extended loans to affiliated companies with little regard to credit risk, a practice that eventually contributed to the financial problems both of the banks and of affiliated companies. Financial liberalization is also creating new opportunities for household savings, such as fast-growing mutual funds, which are more inclined to invest in new, fast-growing enterprises. Financial liberalization is thus likely to contribute to a more efficient allocation of savings.

19. At the same time, the Government has had to grapple with the threat to economic recovery posed by the fragility of the financial system. Accordingly, it has taken steps to recapitalize the banking system, thus reducing the risk of a systemic collapse under the weight of non-performing loans (NPLs). Legislation passed in 1998 provided up to ¥60 trillion (12% of GDP) to address the problem of NPLs. While some insolvent institutions have been closed, two large banks were temporarily nationalized and many others have received large injections of public capital.2020 Regulatory and supervisory responsibilities for banks have been transferred from the Ministry of Finance to a new agency, the Financial Services Agency (FSA) and its parent body, the Financial Reconstruction Commission (FRC). Provisioning standards have also been tightened.

20. Whereas the Government appears to have addressed the banking sector's problems successfully, some life insurance companies still face severe balance-sheet problems. The main reason is that their actual rates of return have fallen short of the rates promised to policyholders; the causes of this so-called "negative spread" are similar to those underlying the inadequate funding of private pension plans. While there have been some signs of improvement recently (falls in the cancellation and expiry of policies together with an increase in new contracts), life insurance companies are attracting increased regulatory attention from the


Trade Policy Review

FSA.

(iii) Regulatory reform 21. The authorities continue to attach great importance to regulatory reform, which has the potential to reduce costs and prices towards world levels, thereby stimulating private domestic demand and growth.2121 A sustained effort has begun to reduce economic intervention in many sectors, including financial services (Chapter IV(5)(ii)), telecommunications (Chapter IV(5)(iii)) and large retail stores (Chapter III(5)(vii)).2222 One of the most important developments in this regard was the decision to move towards a regulatory framework based on "retroactive supervision" rather than "prior intervention"; unlike the latter approach, which had restricted free and fair market competition, the former accords a greater role to the judicial system. Another significant development involves the modification of the price-setting methods of public utilities, notably those operating in the telecommunications and domestic transportation sectors. These modifications involved the introduction of price flexibility, subject only to a cap (instead of fixing prices administratively on the basis of full costs), and information disclosure requirements. Electric utilities, which had already been benefiting from competitive tendering by independent generators, can now choose their suppliers to a certain extent (Chapter IV(3)(ii)). Furthermore, to increase transparency of government policy and related measures, in March 1999 the Government introduced a "public comment" system prior to making regulatory changes (Chapter II(2)(ii)).

22. In the Three-Year Program for Promoting Deregulation, introduced in April 1998, particular emphasis is placed on the removal of barriers to the entry of foreign companies and their products into the Japanese market. The Program also stressed the importance of reviewing Japanese standards with a view to ensuring that they conform as much as possible with international standards. Since its previous Trade Policy Review, more industrial standards defined in the Japan Industrial Standards have been aligned to international norms (Chapter III(2)(ix)).

(iv) Competition23. Liberalization of trade and investment has provided a major stimulus to competition in Japan; it is also an integral part of the Government's present efforts to promote structural reform. By and large, tariffs on manufactured goods have declined to low levels and non-tariff barriers have become less pervasive; moreover, considerable progress has been made recently in liberalizing certain services, notably telecommunications and financial services. As a result, Japanese consumers have benefited increasingly from lower prices and a wider choice of these goods and services. Insofar as domestic producers use such goods and services as inputs, their competitiveness has also been enhanced. By contrast, some other sectors, particularly agriculture, have been largely exempt from liberalization efforts and therefore competition, at considerable cost to the economy; not surprisingly, productivity in agriculture has lagged behind that in manufacturing.2323

24. Measures have also been taken by the Japan Fair Trade Commission (JFTC) to increase competition (Chapter III(5)(vii)). These measures include the abolition of a number of exemptions from the Anti-Monopoly Act (AMA); as a result the number of exemptions under the AMA (and other laws) dropped from 89 in 1996 to 22 in 2000.2424 At the same time, following the modest increase in its budget and staff, the role of the JFTC has been somewhat strengthened. Moreover, judging from the increased number of cases and actions taken, the JFTC has become rather more aggressive in addressing private anti-competitive practices. A majority of these cases involve bid-rigging in connection with tenders for government procurement contracts. However, the operation of the JFTC may be hampered, inter alia, by its lack of resources.

(v) Labour market policies25. The Government has taken measures to address the recent deterioration in the labour market as reflected in the rise in and duration of unemployment. Disbursements under the long-standing Employment Adjustment Subsidy (EAS) programme are thought to have more than quadrupled since FY1997 to reach ¥61


Trade Policy Review

billion in FY1999; the EAS consists of financial subsidies to help companies overcome temporary demand shortfalls. In the past, these subsidies have amounted to as much as half of the wages of employees of major firms and two thirds of the wages of SMEs. Assistance has also been provided for hiring at recent start-up firms, job-related training at technical and professional schools, local government temporary jobs, and employment of older workers, especially in high-unemployment areas or in new and growing areas.

(vi) Public and private pension reform26. Sluggish economic growth combined with a rapidly aging population pose a potentially serious problem for the public pension (and health care) system, and thus fiscal policy, in the longer term. According to one study2525, in the absence of action to address the problem, the fiscal burden on future generations could be 2.7 to 4.4 times that on present generations. Doubts over the sustainability of the scheme may well have contributed to weak private consumption and high personal saving. In 1999, however, the Government announced plans to reform the scheme; among the measures included in the reform were increases in contributions, reductions in benefits, and an increase in the age of eligibility.2626

27. Furthermore, in order to encourage private pensions, the Government is considering the use of tax incentives for defined-contribution plans. It has also lifted a part of the regulations concerning employee pension funds.

(4) Developments in Trade and Foreign Direct Investment

28. During the period under review (1998-2000), Japan ran a merchandise trade surplus, which stood at ¥14.0 trillion in 1999; this contrasts with a deficit in services of ¥6.2 trillion. Continuing the trend observed since 1994, the ratios of exports and imports of goods and services to GDP increased in 1998 to reach 11.4% and 9.5% respectively; these declined somewhat in 1999, to 10.6% and 9.1%, respectively. Since 1997, both exports and imports of goods and services have decreased; the decrease in exports can be attributed to weaker demand, especially by the Asian economies, in the aftermath of the crisis in the region, while the decrease in imports is the result of weak domestic demand. A larger decline in exports compared with imports has contributed to a fall in the current account surplus in 1999.


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(i) Composition of merchandise trade29. Manufactures accounted for about 94% of Japan's exports in 1999; the share slightly declined from 1996 (Chart I.1). During the period 1997-99, machinery and transport equipment continued to be Japan's most important merchandise export, accounting for 69% of total exports of goods in 1999 (Table AI.1). Within machinery and transport equipment, the value of exports of automotive products has increased every year since 1997, growing at 6.8% in 1999. Other major exports such as office machines and telecommunications equipment and other non-electrical machinery declined in 1998, partly reflecting the negative effect of the Asian financial crisis on the domestic demand of Asian economies, but grew substantially in 1999.

30. The share of manufactures in Japan's merchandise imports has increased steadily since 1997 (Table AI.2). There has been a corresponding decline in the share of primary imports, from 44.4% to 40.8%. Machinery and transport equipment continue to be the most important merchandise import in Japan, with a share of 27.5% in 1999, up from 24.7% in 1997. Chemicals, clothing and other consumer goods have also contributed to the growth in imports of manufactures.

31. Intra-industry trade (the import and export of goods classified in the same product category) accounted for some 37% of Japan's total merchandise trade in 1999, up 0.4 of a percentage point from 1996 (Chart I.2). The level of Japan's intra-industry trade with the world has been lower than in most OECD countries. Japan's intra-industry trade with Canada and the United States comprised about 35% of the trade between these countries in 1999, a decline of about five percentage points since 1996; bilateral intra-industry trade with the European Union and East Asia was higher, accounting for about 40% and 38%, respectively.


Trade Policy Review

(ii) Direction of merchandise trade32. The main destination of Japanese exports is the United States, whose importance has been increasing, attracting 31% of total Japanese exports in 1999 (Chart I.3 and Table AI.3). The share of Asia declined during the period 1997-99, though it remained higher than Europe's and America's in 1998 and 1999, amounting to about 36% in 1999. The relative share of Europe increased in 1998 by three percentage points; it declined in 1999 by one percentage point despite a 2.3% growth of exports, reflecting higher growth of exports to Asia (12.3%) and to the United States (8.2%).

33. The main suppliers of imports is the United States, with a share of 21.8% of Japan's total imports in 1999 (Table AI.4). The share of East Asia as a source of imports declined in 1998, but increased in 1999 by 2.6 percentage points to 38.7%, up from its 1997 level (36%).

34. APEC's share of Japan's exports declined by four percentage points in 1998, but increased in 1999, to about 73% of the total.

(iii) Composition of trade in services35. During the period 1997-99, Japanese cross-border sales (exports) and purchases (imports) of services both declined; in 1999, services exports and imports dropped by 15.1% and 10.5%, respectively (Chart I.4


Trade Policy Review

and Table AI.5). Large deficits occurred in travel, other business services, transportation, and insurance; trade in construction services was in surplus.

(iv) Foreign direct investment (FDI)36. Since the previous Trade Policy Review of Japan, FDI inflows have increased significantly; growth rates of some 97% and 79% were observed in FY1998 and FY1999, respectively. Investments from the United States mainly contributed to the growth of inward FDI in 1998, while in 1999, a large inflow of investment from France and the Netherlands was the main source of growth. The outflows of FDI from Japan declined in 1998, reflecting a decline in Japan's FDI into Asia, but increased in 1999, with a strong growth of outward FDI into the United States (Table I.4).

37. Sectorally, a large increase of inward FDI was observed in financial services in 1998, and in machinery and communications in 1999 (Table I.5). Outward FDI growth was prominent notably in financial services and insurance in 1998, and food manufacturing and electrical machinery in 1999.

38. Foreign direct investment into Japan has traditionally been lower than its outward foreign direct investment; as noted by the Japan Investment Council in 1995, the low level of FDI into Japan may be attributed to macroeconomic factors such as the appreciating trend of the yen, high costs of business, and regulatory barriers. Despite recent regulatory reforms and rising FDI, inflows are still low by OECD countries' standards. Although Japan is the OECD's second largest economy, it is ranked as only 19th with respect to FDI inflows.2727


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Table I.4Inward and outward FDI flows by source and destination, FY1995-99(¥ billion and per cent)

FY1995 FY1996 FY1997 FY1998 FY1999

Inward FDITotal (¥ billion) 369.7 770.7 678.2 1,340.4 2,399.3By source (percentage)North America 48.3 31.7 22.4 60.4 17.4

United States 47.9 31.0 22.4 60.3 10.4Canada 0.4 0.7 0.0 0.1 7.0

Europe 34.5 28.6 45.4 22.6 58.9France 3.1 1.4 1.4 1.3 31.1Germany 4.5 6.2 8.1 2.5 1.9Netherlands 14.5 10.4 21.6 9.6 19.6Switzerland 2.7 3.2 2.8 2.1 1.6United Kingdom 3.1 5.3 6.6 2.8 3.7

Asia 6.7 17.8 10.9 1.6 4.6Hong Kong, China 0.7 2.3 6.0 0.4 0.5Korea, Rep. of 2.5 1.0 1.2 0.1 0.4Singapore 0.2 13.9 2.8 0.5 3.1Chinese Taipei 2.7 0.3 0.7 0.4 0.6

Table I.4 (cont'd)


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Latin America 3.8 8.5 8.7 2.6 12.1Cayman Islands 0.1 0.0 7.8 1.6 10.5Virgin Islands (British) 0.5 4.4 0.7 0.1 1.0

Outward FDITotal (¥ billion) 4,956.8 5,409.4 6,622.9 5,216.9 7,439.0By destination (percentage)North America 45.2 47.9 39.6 26.9 37.1

United States 44.1 45.8 38.5 25.3 33.4Canada 1.1 2.1 1.1 1.5 3.7

Latin America 7.5 9.3 11.7 15.9 11.2Panama 3.3 2.1 2.1 2.6 2.1Cayman Islands 1.3 2.2 4.7 11.0 3.4Brazil 0.6 1.8 2.2 1.1 1.0Virgin Islands (British) 0.3 1.6 1.3 0.4 1.6

Asia 24.0 24.2 22.6 16.0 10.7Hong Kong, China 2.2 3.1 1.3 1.5 1.5Indonesia 3.1 5.0 4.7 2.6 1.4Korea, Republic of 0.9 0.9 0.8 0.7 1.5Malaysia 1.1 1.2 1.5 1.3 0.8Philippines 1.4 1.2 1.0 0.9 0.9Singapore 2.3 2.3 3.4 1.6 1.4Chinese Taipei 0.9 1.1 0.8 0.6 0.4Thailand 2.4 2.9 3.5 3.4 1.2China 8.7 5.2 3.7 2.6 1.1

Middle East 0.3 0.5 0.9 0.4 0.2Europe 16.7 15.4 20.8 34.4 38.7

France 3.1 1.0 3.2 1.3 1.7Germany 1.1 1.2 1.4 1.4 1.0Netherlands 2.9 2.3 6.1 5.2 15.5United Kingdom 6.7 7.2 7.6 24.0 17.6

Africa 0.7 0.9 0.6 1.1 0.8Oceania 5.5 1.9 3.8 5.4 1.3

Australia 5.2 1.6 3.1 3.4 1.3New Zealand 0.2 0.1 0.2 1.9 0.0

Source: Ministry of Finance.

Table I.5Inward and outward FDI flows by activity, FY1995-99(¥ billion and per cent)

FY1995 FY1996 FY1997 FY1998 FY1999

Inward FDITotal (¥ billion) 369.7 770.7 678.2 1,340.1 2,399.3By activity (percentage)Manufacturing 38.2 40.4 39.4 23.3 40.8

Chemicals 29.6 9.0 10.9 3.0 2.5Machinery 4.9 20.2 21.4 15.9 36.1

Non-manufacturing 61.8 59.6 60.6 76.7 59.2Communications 1.4 0.3 0.5 1.3 13.8Commerce and trading 18.4 21.6 14.7 13.1 14.5Financial services and insurance 27.1 3.5 23.8 34.1 21.3

Outward FDITotal (¥ billion) 4,956.8 5,409.4 6,622.9 5,216.9 7,439.0


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Table I.5 (cont'd)By activity (percentage)Manufacturing 36.8 42.2 35.8 30.1 63.4

Food 1.6 1.5 1.1 3.1 22.4Chemicals 4.2 4.3 5.6 5.5 2.5Ferrous and non-ferrous metals 3.0 5.1 2.6 3.0 2.2Machinery 3.7 3.0 2.4 2.0 1.5Electrical machinery 10.5 13.6 12.4 8.4 24.5Transport equipment 3.9 8.1 5.4 3.9 7.2

Non-manufacturing 61.3 55.7 63.1 69.1 36.3Mining 2.1 3.3 5.0 2.1 1.4Commerce and trading 10.4 10.0 8.1 9.3 5.8Financial services and insurance 10.6 16.2 22.2 40.2 14.8Transportation 4.5 3.7 4.3 4.7 4.2Real estate 11.7 12.9 10.3 6.9 3.2

Establishment of branches 1.9 2.1 1.1 0.9 0.3

Source: Ministry of Finance.

(5) Prospects

39. There are tentative signs of moderate private-demand-based recovery in the Japanese economy, although the strength of the recovery is not altogether clear owing to some technical anomalies concerning the calculation of the official figures.2828 According to these figures, real GDP increased by 0.7% in the first quarter of 2000 (over the first quarter of 1999), driven mainly by corporate investment, which was 3.7% higher than a year earlier. This increase in corporate investment is thought to be partly the result of a rise in corporate profitability. But the strength of the recovery remains to be seen, given the present high level of unemployment, which has contributed to Japanese consumers' reluctance to spend and thus the fragility of consumption demand, persistent downward pressure on prices, and declining net exports. The recent strengthening of the yen, which has appreciated considerably against the U.S. dollar (and Euro) since the middle of 1998, could cause exports to fall further (and imports to rise), possibly weakening the recovery. As the strength of the economic recovery remains in some doubt, the Government is reportedly considering yet another fiscal stimulus package. The recent decision by the Bank of Japan to end its zero-interest-rate policy has probably taken into account the likely impact of that decision not just on the exchange rate, but also on the financial system as well as on consumer spending and investment.

40. With the prospects for the economy apparently brightening, there is perhaps the danger that the Government may waver in its resolve to continue to pursue structural reforms, thereby jeopardizing a sustained recovery. Indeed, there have been some recent signs of "reform fatigue" (e.g. postponement of the introduction of consolidated taxation; delays in pension reform; two-year delay in planned abolition of bank deposit safety net scheme/entry of non-financial groups into banking sector). Nonetheless, the Government does appear to believe in the need to intensify regulatory and other structural reforms aimed at removing distortions to competition.


(1) Introduction

1. Since its previous Trade Policy Review in 1998, Japan has made no major changes to its trade policy regime except those pertaining to its regulatory framework on financial services. Japan's trade policy priorities include strengthening the multilateral trading system, as embodied in the WTO. According to the authorities, recent initiatives by the Government and government-affiliated institutions to study the possibility


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of establishing bilateral free-trade agreements will not undermine Japan's commitment to the multilateral trading system.

2. The Government remains committed to the promotion of deregulation and transparency. Its commitment to further deregulation is demonstrated by the Cabinet's adoption, in April 2000, of a revised Three-Year Program for Promoting Deregulation, which is intended to implement further deregulation in various sectors (Chapter III(5)(vi)).291 Another cabinet decision on Ideal Socio-economy and Policies for Economic Rebirth, adopted in July 1999, calls for the establishment of fair markets and consumer sovereignty in a transparent manner. Recently, steps have also been taken by a few ministries, notably the Ministry of Industry and Trade (MITI), to evaluate trade and trade-related measures; by improving the transparency of such measures, these evaluations would improve public accountability, insofar as evaluations are published, and thereby contribute to more informed policy-making.

3. During the period under review, Japan has been a major participant in WTO activities; it also actively participated in the WTO's Third Ministerial Conference in Seattle in 1999. Japan has used extensively the WTO dispute settlement mechanism, having been a party to four disputes, three as plaintiff and one as defendant.302 Japan participates in the Working Groups on Competition Policy and Investment, as well as that on Transparency on Government Procurement.

4. Although Japan has traditionally eschewed regional free-trade agreements on the grounds that they could lead to exclusive, discriminatory trading blocs, and thereby undermine the multilateral trading system, such agreements now seem to be attracting greater interest in Japan; more specifically, an agreement with Singapore is being studied jointly by the two Governments concerned as well as business representatives and academics, and government-affiliated institutes in Japan and Korea are exploring the possibility of a free-trade agreement between the two countries. Japan has long had a strong bilateral relationship with the United States; arrangements between the two countries currently cover several trade and trade-related areas. Japan also has bilateral treaties with several countries in the areas of investment, taxation, and social security; six were concluded between 1998 and first half of 2000.

5. Japan grants unilateral preferential market access to products from certain developing countries under its Generalized System of Preference (GSP) scheme (section (4)(iv)). Japan renewed its GSP scheme for ten years in 1991, up to 31 March 2001. The list of beneficiaries and items covered by GSP is reviewed annually. On 1 April 2000, the West Bank and the Gaza Strip was added to the list of beneficiaries, while countries classified in the World Bank Atlas as high income economies for the previous three years were removed.

(2) Development and Administration of Trade Policy

(i) Main trade law and regulations6. As reported in its previous Trade Policy Reviews, Japan has no general trade laws that set out general objectives and modalities of trade policies. Rather, within the framework of existing laws (Table II.1), the Cabinet, in close cooperation with the ruling political parties, decides upon major trade policy objectives relevant to specific trade problems. The Japanese Constitution stipulates that treaties concluded by Japan should be faithfully observed.313 The WTO Agreements are deemed by the authorities to be treaties under the Constitution and, as such, have domestic effect. Obligations under the WTO Agreements supersede those under domestic laws or ordinances to the extent that the latter are in conflict with the former.

Table II.1Japan's major trade-related laws and regulations(Date of most recent amendment in square brackets)

Foreign trade and exchange restrictions


Trade Policy Review

Foreign Exchange and Foreign Trade Law (1949 Law No. 228) [1998] Export and Import Transaction Law (1952 Law No. 299) [1997]Foreign Exchange Order (1980 Order No. 260) [1998]Cabinet Order on Inward Direct Investment (1980 Order No. 261) [1996]Export Trade Control Order (1949 Order No. 378) [1999]Import Trade Control Order (1949 Order No. 414) [2000]

Customs- and tariff-related regulationsCustoms Law (1954 Law No. 61) [2000]Customs Tariff Law (1910 Law No. 54) [2000]Temporary Tariff Measures Law (1960 Law No. 36) [2000]Cabinet Order Relating to Countervailing Duties (1994 Order No. 415)Cabinet Order Relating to Anti-Dumping Duties (1994 Order No. 416) [1996]Cabinet Order Relating to Emergency Duties (1994 Order No. 417)Cabinet Order Relating to Retaliatory Duties (1994 Order No. 418)Cabinet Order on Tariff Quotas (1961 Order No. 153) [2000]

Trade promotionInternational Trade Insurance Law (1993 Law No. 36) [1998]Law on Extraordinary Measures for the Promotion of Imports and the Facilitation of Foreign Direct Investment in Japan (1992 Law No. 22) [1996]

Services and energy Construction Business Law (1949 Law No. 100) [1996]Banking Law (1981 Law No. 59) [1999]Insurance Business Law (1995 Law No. 105) [1999]Securities and Exchange Law (1948 Law No. 25) [1999]Telecommunications Business Law (1984 Law No. 86) [1998]Law Concerning the Measures by Large-Scale Retail Stores for Preservation of Living Environment (1998 Law No. 91)Employee's Pension Insurance Law (1954 Law No. 115)Civil Aeronautics Law (1952 Law No. 231) [1999]Marine Transportation Law (1949 Law No. 187) [1999]Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers (1986) Law No. 66) [1998]

Table II.1 (cont'd)

Services and energy (cont'd)Certified Public Accountants Law (1948 Law No. 103) [1999]Certified Tax Accountant Law (1951 Law No. 237) [1993]Law for Improvement of International Tourist Hotels (1949 Law No. 279) [1999]Travel Agency Law (1952 Law No. 239) [1999]Electricity Utilities Industry Law (1964 Law No. 170) [2000]Gas Utility Industry Law (1954 Law No. 51) [1999]Provisional Measures Law on the Importation of Specific Petroleum Refined Products (1985 Law No. 95) [expired in March 1996]Petroleum Reserve Law (1975 Law No. 96) [1999]Petroleum Industry Law (1962 Law No. 128) [1995]Law on the Quality Control of Gasoline and Other Fuels (1976 Law No. 88) [2000]

Standards and technical regulationsTextual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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Industrial Standardization Law (1949 Law No. 185) [1997]Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (JAS Law) (1950 Law No. 175) [1999]Pharmaceutical Affairs Law (1960 Law No. 145) [1999]Food Sanitation Law (1947 Law No. 233)Quarantine Law (1951 Law No. 201) [1998]Plant Protection Law (1950 Law No. 151) [1996]Domestic Animal Infectious Diseases Control Law (1951 Law No. 166) [1997]Construction Business Law (1949 Law No. 100) [1996]Building Standard Law (1950 Law No. 201)Electrical Appliance and Material Control Law (1961 Law No. 234)Consumer Product Safety Law (1973 Law No. 31) [1996]High Pressure Gas Safety Law (1996 Law No. 14)

Intellectual property rightsPatent Law (1959 Law No. 121) [2000]Customs Tariff Law (1910 Law No. 54) [2000]Act Against Unjustifiable Premiums and Misleading Representations (1962 Law No. 134) [1993]Unfair Competition Prevention Law (1934 Law No. 47) [1993]Utility Model Law (1959 Law No. 123) [2000]Design Law (1959 Law No. 125) [2000]Trademark Law (1959 Law No. 127) [2000]Copyright Law (1970 Law No. 48) [2000]Civil Code (1896 Law No. 89) [1999]Penal Code (1907 Law No. 45) [1995]

AgricultureThe Basic Law on Food, Agriculture and Rural Areas (1999 Law No. 106)Manufacturing Milk Producer Compensation Temporary Law (1965 Law No. 112) [1999]Cocoon and Raw Silk Price Stabilization Law (1951 Law No. 310) [1997]

OthersLaw Concerning the Organization of Small and Medium Enterprises Organizations (1957 Law No. 185) [1997]Administrative Procedure Law (1993 Law No. 88)Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade (Anti-Monopoly Act) (1947 Law No. 54) [1999]Law on Temporary Measures to Facilitate Industrial Structural Adjustment (1987 Law No. 24)


7. The Government of Japan considers administrative guidance to be an effective tool to implement various policies, including trade policies. The Administrative Procedure Law of 1993 states that administrative guidance is not legally enforceable, that its purpose and contents must be made clear, and that the officials responsible must be clearly identified. Administrative guidance to more than one person and with the same objective must be made public in advance, unless there is special reason not to do so.

8. Under a cabinet decision of 23 March 1999, public comment procedures have been officially


Trade Policy Review

incorporated into the process of policy formulation. This has the aim of improving transparency and securing fairness in the decision-making process with regard to introducing, amending or repealing regulations. Under the procedures, proposed statements and other information must generally be notified to the public in the process of formulating cabinet orders and ministerial ordinances that are related to regulations. The purpose is to ensure that comments and information of relevance are submitted by the general public before final decisions are made. The Management and Coordination Agency reviews the status of implementation and publishes its findings. Since its inception, various trade-related measures have been subject to the public comment procedures, including the introduction of labelling on fresh food and on genetically modified organisms and the rules for interconnection charges based on a Long-Run Incremental Cost methodology.

(ii) Trade policy formulation and implementation9. There has been little change in the basic institutional framework governing the formulation and implementation of Japan's trade and investment policies, except for the regulatory regime concerning financial services. Responsibility for trade-related issues remains with several ministries, particularly Foreign Affairs (MOFA), International Trade and Industry (MITI), Finance (MOF), Agriculture, Forestry and Fisheries (MAFF), Construction (MOC), Transport (MOT), Health and Welfare (MHW), and Posts and Telecommunications (MPT), as well as with the Economic Planning Agency (EPA), and the Japan Fair Trade Commission (JFTC). The financial services sector is regulated by the Financial Services Agency, established in July 2000 as a result of a regulatory reform in MOF (Chapter IV(5)(ii)).

10. Under the Japanese Constitution, the Cabinet has the authority to conclude treaties, including trade agreements, subject to Diet approval, while MOFA proposes and coordinates trade policies and represents the Japanese Government in negotiations with foreign governments. MITI proposes trade policies and is responsible for implementing trade-related agreements falling under its jurisdiction. Customs and tariff administration is under the jurisdiction of the Customs and Tariff Bureau of MOF. Issues related to services are under the jurisdiction of various ministries, including MOF, MITI, MPT, MOT, MOC, MHW, and the Ministry of Justice. MITI and the Ministry of Education (MOE) are mainly in charge of intellectual property rights. MITI is in charge of setting standards for a variety of industrial and mineral products and coordinates Japan's work in international standard-setting bodies such as ISO and IEC. The MAFF plays a key role in the formulation and implementation of trade policy for food and agricultural products, and is responsible for plant and animal quarantine; MAFF and MHW are in charge of setting standards for food and agricultural products and coordinating Japan's work in international standard setting bodies such as Codex Alimentarius. On government procurement, each ministry and agency is responsible for its own and its affiliated or related agencies' procurement policies and practices; the Ministry of Foreign Affairs seeks to assure consistency of procurement policies and practices with the WTO Agreement on Government Procurement, to which Japan is a party. The Councillor's Office on External Affairs in the Cabinet Secretariat has been taking initiatives to draft various voluntary measures related to government procurement.

11. MITI, MOF, and ministries in charge of the industries concerned, are also responsible for conducting investigations into alleged dumping in the Japanese market.

12. Consistency in domestic and external policies is sought at Cabinet level; this process is assisted by a number of organizations under the Prime Minister or Cabinet, including the Councillor's Offices on Internal and on External Affairs, the Ministerial Conference for Economic Measures, the Trade Conference, the Office of the Trade and Investment Ombudsman (OTO) and the Japan Investment Council.

13. Various advisory councils, committees and study groups established under the relevant trade related ministries and agencies play a role in forging consensus on trade policy issues. They include the Economic Council, the Customs Tariff Council, and the Industrial Structure Council. These bodies often provide advice on matters arising in connection with the development, implementation, and administration of Japan's trade


Trade Policy Review

policy.

14. The Regulatory Reform Committee, which was originally established by the Prime Minister in January 1998 as the Deregulation Committee, thereby effectively replacing the Administrative Reform Committee, is mandated to promote regulatory reform, inter alia, by studying the feasibility of regulatory reform measures, and promoting dialogue with ministries and agencies concerned with particular regulations.

15. The authorities state that non-governmental organizations (NGOs) and non-profit organizations (NPOs) may influence Japan's trade policy through government advisory councils, committees, and study groups as well as through public hearings and questionnaire surveys.

16. The ministries and agencies in the Government are to undergo major restructuring in January 2001; thus, the existing Prime Minister's Office and 22 ministries and agencies will be reorganized into the Cabinet office and 12 ministries and agencies, each of which will be established under a new law.

(iii) Evaluation of trade and trade-related policies17. Apart from regular auditing by the Board of Audit, an official independent body, ministries normally evaluate their own trade and trade-related measures and programmes to some extent. For example, the Ministry of International Trade and Industry recently established a specific division to begin evaluation of its own policy measures. Furthermore, in an effort to improve the management of public works projects, and to cut costs, the Ministry of Construction is currently introducing a scheme to evaluate projects on the basis of the bid price and the quality of the proposed project. The Ministry of Home Affairs decided recently to allow municipalities to adopt an evaluation method that employs quality and technology standards as well as prices; this method has been used by the central government ministries and agencies for items including computers, electronic-communication gear, and medical equipment.324

18. A cabinet decision on Ideal Socio-economy and Policies for Economic Rebirth335, adopted in July 1999, called for the establishment of fair markets and consumer sovereignty in a transparent manner. To achieve this objective, the Government will, inter alia, introduce cost-benefit and regulatory impact analyses, rationalize systems related to government regulations, and establish fair and clear rules to promote economic activities based on self-responsibility thereby shifting to a system that stresses ex post facto monitoring instead of ex ante regulations.

(3) Trade Policy Objectives

19. The authorities state that the general objective of Japan's trade policy, which has remained unchanged since the previous Trade Policy Review, is to ensure Japan's prosperity and growth in the long term by promoting business activities in and outside Japan; in order to achieve this objective, Japan wishes to further strengthen the multilateral trading system under the WTO and promote Japan's linkage with other countries and regions in Asia and other parts of the world.

20. Traditionally, Japan has been sceptical of preferential regional trade agreements on the grounds that they might lead to exclusive, discriminatory trading blocs, and that, if the WTO consistency of the regional agreements is not clearly assured, they might weaken credibility in the rules and procedures of a liberal, non-discriminatory, multilateral trading system under the WTO.346 However, Japan is considering regional or bilateral trade agreements and arrangements to complement the multilateral trading regime.357 The authorities state that the objective of Japan's regional and bilateral trade policy is to promote Japan's linkage with other countries and regions in Asia and other parts of the world to supplement the WTO system. In this regard, a free-trade agreement with Singapore is being explored by a joint study group (consisting of government officials, business representatives, and academics from both countries), while the idea of a Japan-Korea free-trade area has been under discussion between government-affiliated institutes of Japan and Korea.


Trade Policy Review

21. With regard to Japan's relationship with the Asia-Pacific Economic Cooperation (APEC) and Asia-Europe Meeting (ASEM), the authorities indicate that Japan will maintain the frameworks for "open regionalism", which assures MFN treatment regarding measures decided within the regional frameworks. The authorities state that Japan intends to emphasize economic and technical cooperation in the APEC as well as seeking to promote the liberalization and facilitation of trade and investment.

(4) Trade Agreements and Arrangements

(i) WTO22. Japan applies its MFN tariffs to all trading partners, except for some countries or customs territories, i.e. Albania, Andorra, Eritrea, Lebanon, Lithuania, Nepal, North Korea, and Republic of Equatorial Guinea, which together accounted for less than 0.2% of Japan's imports in 1998.

(a) Participation in the WTO23. Japan has played an active role in the WTO since its inception in 1995, and continues to do so through its participation in the various committees and councils. For example, in the Council for Trade in Services, Japan made proposals concerning preparations for the services negotiations and the review of MFN exemptions in services trade, both to take place in 2000.368 Japan ratified the Fourth and Fifth Protocols of the GATS concerning telecommunications and financial services, in July 1997 and June 1998, respectively. Japan actively participated in the Third Ministerial Conference of the WTO in Seattle in November 1999.

24. Table II.2 lists Japan's notifications under the WTO Agreements as at 25 April 2000.

Table II.2Principal notifications under WTO Agreements, as at 25 April 2000

Agreement Document reference and date Requirement/Contents/Comments

General Agreement on Trade in Services

GATS/SC/46 Suppl.3, 26.02.1998 Submission of Japan's Schedule of Specific Commitments.

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

IP/N/1/JPN/C/1, Rev.1/Add.1,25.02.1998 and 07.08.1998

Japan has notified a number of amendments to its Copyright Law, under Article 63.2 of the Agreement.

IP/C/W/154/Add.1, 14.10.1999 Updated information on Japan's technical and financial cooperation activities relevant to the implementation of the TRIPS Agreement.

Agreement on Agriculture G/AG/N/JPN/25, 15.12.1997G/AG/N/JPN/28, 06.05.1998G/AG/N/JPN/30, 17.06.1998G/AG/N/JPN/32, 16.11.1998G/AG/N/JPN/39, 29.06.1999G/AG/N/JPN/44, 16.11.1999

Notification under Article 5 of the Agreement: special safeguard: volume-based.

G/AG/N/JPN/37, 10.05.1999 Notification concerning the use of the special safeguard provisions (annual summary FY1998).

G/AG/N/JPN/26, 08.01.1998 Export subsidy commitments (total volume of food aid).

G/AG/N/JPN/27, 14.01.1998G/AG/N/JPN/33, 08.12.1998G/AG/N/JPN/46, 03.03.2000

Notification under Article 16:2 of the Agreement in the context of action taken within the framework of the decision on measures concerning the possible negative effects of the reform programme on least-developed and net


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food-importing countries.G/AG/N/JPN/34, 02.03.1999G/AG/N/JPN/47, 21.02.2000

Domestic support commitments

G/AG/N/JPN/29, 06.05.1998G/AG/N/JPN/36, 10.05.1999

Export subsidy commitments

G/AG/N/JPN/31, 28.10.1998G/AG/N/JPN/43, 22.09.1999

Tariff and other quota commitment

G/AG/N/JPN/35, 29.04.1999G/AG/N/JPN/38, 11.06.1999G/AG/N/JPN/40, 12.08.1999G/AG/N/JPN/41, 25.08.1999G/AG/N/JPN/45, 27.01.2000G/AG/N/JPN/48, 09.03.2000G/AG/N/JPN/49, 30.03.2000G/AG/N/JPN/50, 05.04.2000

Price-based special safeguard.

G/AG/N/JPN/42, 22.09.1999 Notification concerning administration of tariff quota

Agreement on Textiles and Clothing G/TMB/N/39/Add.1, 15.09.1997G/TMB/N/39/Add.2, 17.09.1997

Notification of Japan's first stage integration programme of textiles and clothing products under Article 2, paragraphs 6 and 7(b) of the Agreement.

Agreement on Trade-Related Investment Measures (TRIMs)

No notification.

Agreement on Anti-Dumping Practices

G/ADP/N/1/JPN/2/Suppl.2, 21.11.1997 Notification of laws and regulations under Article 18.5 and 32.6 of the agreements.

G/ADP/N/53/JPN, 15.09.1999G/ADP/N/59/JPN, 29.03.2000

Semi-annual report under Article 16.4 of the Agreement.

Agreement on Customs Valuation No notification.

Table II.2 (cont'd)Agreement on Rules of Origin No notification.

Agreement on Subsidies and Countervailing Measures

G/SCM/N/25/JPN, 17.11.1997 G/SCM/N/25/JPN/Suppl.1, 04.12.1997

Updating notifications pursuant to Article XVI.1 of the GATT 1994 and Article 25 of the Agreement.

G/SCM/N/38/JPN, 17.08.1998G/SCM/N/38/JPN/Suppl.1, 23.09.1998 G/SCM/N/48/JPN, 07.09.1999

New and full notifications pursuant to Article XVI.1 of the GATT 1994 and Article 25 of the Agreement.

Agreement on Safeguards No notification.Agreement on Sanitary and Phytosanitary measures

G/SPS/N/JPN/29, 12.03.1998G/SPS/N/JPN/30, 12.03.1998G/SPS/N/JPN/30/Corr.1, 20.03.1998G/SPS/N/JPN/31, 12.03.1998G/SPS/N/JPN/32, 25.03.1998G/SPS/N/JPN/33, 01.04.1998G/SPS/N/JPN/34, 01.04.1998G/SPS/N/JPN/35, 08.05.1998G/SPS/N/JPN/36, 09.06.1998G/SPS/N/JPN/37, 23.07.1998G/SPS/N/JPN/38, 02.09.1998G/SPS/N/JPN/39, 19.10.1998G/SPS/N/JPN/40, 03.02.1999G/SPS/N/JPN/41, 03.02.1999G/SPS/N/JPN/42, 15.02.1999G/SPS/N/JPN/43, 15.02.1999G/SPS/N/JPN/44, 28.05.1999

Notification pursuant to Article 7 and the provisions of Annex B.


Trade Policy Review

G/SPS/N/JPN/44/Corr.1, 04.06.1999G/SPS/N/JPN/45, 29.07.1999G/SPS/N/JPN/46, 30.07.1999G/SPS/N/JPN/47, 25.10.1999G/SPS/N/JPN/48, 25.10.1999G/SPS/N/JPN/49, 06.12.1999G/SPS/N/JPN/50, 08.02.2000G/SPS/N/JPN/51, 08.02.2000G/SPS/N/JPN/52, 08.02.2000

Agreement on ImportLicensing Procedures

G/LIC/N/2/JPN/2 04.09.1998 Notification pursuant to paragraphs 1 and 3, Article 5 of the Agreement.

G/LIC/N/3/JPN/1/Corr.1, 02.04.1998 Reply to Questionnaire pursuant to Article 7.3.

Agreement on TechnicalBarriers to Trade

G/TBT/CS/N/94, 24.03.1998G/TBT/CS/N/99, 22.04.1998G/TBT/CS/N/106, 18.02.1999G/TBT/CS/N/107, 01.03.1999

Notification under paragraph C of the WTO TBT code of good practice.

G/TBT/Notif.97.734-736, 03.12.1997G/TBT/Notif.97.764, 12.12.1997G/TBT/Notif.97 776-781, 794, 30.12.1997G/TBT/Notif.98.62-64, 06.02.1998G/TBT/Notif.98.81, 24.02.1998G/TBT/Notif.98.107, 05.03.1998G/TBT/Notif.98.128, 09.03.1998G/TBT/Notif.98.150, 25.03.1998G/TBT/Notif.98.159, 25.03.1998G/TBT/Notif.98.291, 30.06.1998G/TBT/Notif.98.292, and 293, 02.07.1998G/TBT/Notif.98.294, 25.06.1998G/TBT/Notif.98.322, 03.07.1998G/TBT/Notif.98.328, 06.07.1998G/TBT/Notif.98.340-342, 06.07.1998G/TBT/Notif.98.348, 08.07.1998G/TBT/Notif.98.376 and 377, 04.08.1998G/TBT/Notif.98.449, 02.09.1998G/TBT/Notif.98.450, 01.09.1998G/TBT/Notif.98.465, 21.09.1998

Notification under Article 2.9.2, 2.10.1, 5.6.2, 5.7.1 and other.

Table II.2 (cont'd)Agreement on TechnicalBarriers to Trade (cont'd)

G/TBT/Notif.98.565-568, 16.11.1998G/TBT/Notif.98.619, 11.12.1998G/TBT/Notif.98.619/Corr.1, 23.12.1998G/TBT/Notif.99.3, 11.01.1999G/TBT/Notif.99.38, 05.02.1999G/TBT/Notif.99.44 and 45, 11.02.1999G/TBT/Notif.99.112-116, 23.03.1999G/TBT/Notif.141, 30.03.1999G/TBT/Notif.141/Corr.1, 12.05.1999G/TBT/Notif.99.159 and 174, 19.04.1999G/TBT/Notif.99/314, 28.06.1999G/TBT/Notif.99/314/Rev.1, 14.07.1999G/TBT/Notif.99/335, 16.07.1999G/TBT/Notif.99/359, 30.07.1999G/TBT/Notif.99/364, 05.08.1999G/TBT/Notif.99/443, 01.09.1999G/TBT/Notif.99/492 and 493,


Trade Policy Review

06.10.1999G/TBT/Notif.99/539-542, 22.10.1999G/TBT/Notif.99/553 and 554, 05.11.1999G/TBT/Notif.99/555, 10.11.1999G/TBT/Notif.99/565, 19.11.1999G/TBT/Notif.99/667-669, 23.12.1999G/TBT/Notif.00/21, 13.01.2000G/TBT/Notif.00/39, 31.01.2000G/TBT/Notif.00/56, 07.02.2000G/TBT/Notif.00/57, 07.02.2000G/TBT/Notif.00/63, 09.02.2000G/TBT/Notif.00/109, 02.03.2000G/TBT/Notif.00/135-140, 14.03.2000G/TBT/Notif.00/147, 22.03.2000G/TBT/Notif.00/158-161, 24.03.2000G/TBT/Notif.00/169, 07.04.2000G/TBT/Notif.00/193, 14.04.2000G/TBT/Notif.00/203, 19.04.2000

Understanding on the Interpretation of Article XVII of the GATT

G/STR/N/3/JPN, 13.11.1997 Notification of Laws and regulations under Article XVII:4(a) of the GATT and Paragraph 1 of the Understanding on the Interpretation of Article XVII.

G/STR/N/4/JPN, 24.03.1999 Notification of products traded by state-trading entities.

Agreement on Government Procurement

GPA/W/88, 09.07.1999GPA/W/91, 06.09.1999GPA/W/93, 29.09.1999GPA/W/94, 30.09.1999GPA/W/98, 04.10.1999

Notification under Article XXIV:6(a)

Source: WTO Notifications.

(b) Involvement in WTO dispute settlement25. Between January 1998 and April 2000, Japan was involved in four disputes. Japan requested consultations with WTO Members with regard to Canadian measures affecting the automobile industry; US Anti-Dumping Act of 1916; and US anti-dumping measures on certain hot-rolled steel products imported from Japan; while consultations were requested by the European Union with regard to Japanese tariff quotas and subsidies affecting leather.379

(ii) Other multilateral agreements26. Japan is a member of the international commodity agreements on coffee, cocoa, grain, sugar, and tropical timber. Japan has also signed and ratified the Agreement on the Common Fund for Commodities.

(iii) Regional and inter-regional agreements27. Japan does not belong to any customs unions, free-trade areas or other preferential regional agreements. However, in the context of the Asia-Pacific Economic Cooperation (APEC) and the Asia-Europe Meeting (ASEM), Japan promotes close regional and inter-regional cooperation.

(a) APEC28. More than 70% of Japan's external trade is with fellow APEC members.3810 Japan participates fully in the work of the APEC Forum.3911 At the November 1998 APEC Ministerial Meeting in Malaysia, APEC members agreed that each member should: voluntarily implement tariff reductions in the nine sectors selected at the APEC


Trade Policy Review

Leaders Meeting in Vancouver in November 1997 for the Early Voluntary Sectoral Liberalization (EVSL) market opening action4012; make efforts to include the tariff measures for the nine sectors to be negotiated in the WTO; and to work to achieve the critical mass of support in the WTO that would be necessary for the successful completion of such an agreement. Japan did not make tariff reduction commitments in forestry and fisheries. Its position was that APEC measures should be of a voluntary nature; it fully participated in trade facilitation and economic and technical cooperation measures in the two sectors, but would discuss these sectors in the WTO as part of a sufficiently broad-based new round.4113

29. At the September 1999 APEC Economic Leaders Meeting in Auckland, New Zealand, leaders endorsed a Declaration, which confirmed members' support for strengthening the functioning of markets, their commitment to a leadership role in multilateral trading system, and their responsibilities to ensure full and successful participation by all the population of APEC members in the modern economy. APEC Principles to Enhance Competition and Regulatory Reform was endorsed by ministers and leaders; they also agreed to a "road map" that sets out future work by APEC to strengthen markets within the APEC region.

30. Over the last two years, Japan's initiatives within APEC concerned, inter alia, a mutual recognition arrangement for conformity assessment of telecommunication equipment and the alignment of members' standards with international standards in the four priority areas: electrical and electronic appliances; food labelling; rubber products; and machinery. Japan has been the convenor of the Intellectual Property Rights Experts' Group that discusses the implementation of the TRIPS Agreement.

(b) ASEM31. The Asia-Europe Meeting (ASEM) first convened its Summit Meeting in March 1996, in Thailand, with ten countries from Asia, including Japan, China, Korea and seven ASEAN members, the 15 members of the European Union, and the European Commission. ASEM was established as a forum through which Asia and Europe may promote dialogue in the political, economic, cultural and other areas on an equal partnership and in a spirit of cooperation, in order to help enhance mutual understanding between the two regions and contribute to further expansion of trade and investment and to foster economic development.

32. The second ASEM Summit Meeting was held in April 1998 in London and the second ASEM Economic Ministers' Meeting was held in Berlin in October 1999. Through these meetings, ASEM partners agreed to voluntarily report to the Senior Officials' Meeting on Trade and Investment each year on progress made in the nine categories of investment promotion and policy measures that have been found to be most effective in attracting foreign direct investment.

33. In the Trade Facilitation Action Plan (TFAP), which is aimed at reducing non-tariff barriers and promoting trade opportunities between Asia and Europe, Japan has served as facilitator in the priority areas of public procurement and customs procedures, and has been participating in the meetings and seminars of TFAP priority areas.

(c) Cooperation with East Asian countries34. Japan is also pursuing cooperation with other East Asian countries in a broad range of areas, including trade and investment. This cooperation involves an annual dialogue among the leaders of the Association of South-East Asian Nations (ASEAN), China, Japan, and the Republic of Korea (the so-called ASEAN+3).4214

(iv) Preferential arrangementsGeneralized System of Preferences (GSP)35. Japan's GSP scheme began on 1 August 1971, and was authorized by the Temporary Tariff Measures Law to grant preferences for ten years initially. The authorization to grant GSP treatment was renewed twice, in FY1981, for ten years, and in FY1991, to be valid until 31 March 2001. In FY2000, the scheme grants


Trade Policy Review

preferential duty-free entry on 74 agricultural products (on HS 4-digit basis) and all manufactured products, except for the 27 items listed in a negative list4315, from 162 designated beneficiary countries and territories (Box II.1). Under the current programme, about 4.7% of Japan's global imports or about 8.5% of imports from the GSP beneficiary countries and territories received GSP benefits in FY1999.

36. The ten major beneficiaries of Japan's GSP are listed in Table II.3. Under its GSP scheme, Japan grants unilateral preferential market access for products from the countries requesting preferential treatment, subject to the following conditions:

- the economy of the country or the territory must be at the stage of development;

- the country must be a member of the United Nations Conference on Trade and Development (UNCTAD);

- the territory must have its own tariff and trade system;

- the country or territory desires to receive a special benefit as to customs duties; and

- the country or territory must be prescribed by a Cabinet Order as a country or a territory to which such benefit may appropriately be extended.

Box II.1: Countries granted GSP treatment as of 1 April 2000

Afghanistan; Albania; Algeria; American Samoa; Angola; Antigua and Barbuda; Argentina; Armenia; Azerbaijan; Bahrain; Bangladesh; Barbados; Belarus; Belize; Benin; Bhutan; Bolivia; Botswana; Brazil; British Anguilla; British Virgin Islands; Bulgaria; Burkina Faso; Burundi; Cambodia; Cameroon; Canary Islands; Cape Verde; Central African Republic; Ceuta and Melilla; Chad; Chile; China (except Hong Kong, China; and Macau, China); Colombia; Congo Republic; Democratic Republic of Congo; Cook Islands; Costa Rica; Côte d'Ivoire; Croatia; Cuba; Czech Republic; Dominica; the Dominican Republic; Ecuador; Egypt; El Salvador; Equatorial Guinea; Eritrea; Estonia; Ethiopia; Falkland Islands and Dependencies; Fiji; French Polynesia; Gabon; the Gambia; Georgia; Ghana; Gibraltar; Gilbert and Ellice Islands; Grenada; Guatemala; Guinea; Guinea-Bissau; Guyana; Haiti; Honduras; Hungary; India; Indonesia; Iran; Iraq; Jamaica; Jordan; Kazakhstan; Kenya; Kyrgyz Republic; Laos; Latvia; Lebanon; Lesotho; Liberia; Libya; Lithuania; Former Yugoslav Republic of Macedonia; Madagascar; Malawi; Malaysia; Maldives; Mali; Malta; Marshall Islands; Mauritania; Mauritius; Mexico; Micronesia; Moldova; Mongolia; Montserrat; Morocco; Mozambique; Myanmar; Namibia; Nepal; Nicaragua; Niger; Nigeria; Niue; Oman; Pakistan; Palau; Panama; Papua New Guinea; Paraguay; Peru; the Philippines; Poland; Romania; Rwanda; Samoa; St. Kitts and Nevis; St. Lucia; St. Vincent and the Grenadines; Sao Tome and Principe; Saudi Arabia; Senegal; Seychelles; Sierra Leone; Slovak Republic; Slovenia; Solomon Islands; Somalia; South Africa; Sri Lanka; St. Helena and Dependencies; Sudan; Suriname; Swaziland; Syria; Tadzhikistan; Tanzania; Thailand; Togo; Tokelau Islands; Tonga; Trinidad and Tobago; Tunisia; Turkey; Turkmenistan; Turks and Caicos Islands; Uganda; Ukraine; Uruguay; Uzbekistan; Vanuatu; Venezuela; Viet Nam; the West Bank and Gaza Strip; Yemen Arab Republic (Sanaa); Federal Republic of Yugoslavia; Zambia; Zimbabwe.

Beneficiary countries designated as least developed countries

Afghanistan; Angola; Bangladesh; Benin; Bhutan; Burkina Faso; Burundi; Cambodia; Cape Verde; Central African Republic; Chad; Equatorial Guinea; Eritrea; Ethiopia; The Gambia; Guinea; Guinea-Bissau; Haiti; Laos; Lesotho; Liberia; Madagascar; Malawi; Maldives; Mali; Mauritania; Mozambique; Myanmar; Nepal; Niger; Rwanda; Samoa; Sao Tome and Principe; Sierra Leone; Solomon Islands; Somalia; Sudan; Tanzania; Togo; Uganda; Vanuatu; Yemen Arab Republic (Sanaa).


Trade Policy Review


37. Forty-two countries considered to be least developed countries (LDCs) are eligible for preferential tariffs; these are chosen by the Japanese Government from LDCs designated by the United Nations.4416 Imports from LDCs accounted for about 1.3% of total imports receiving GSP treatment in FY1999.

Table II.3Main beneficiaries of Japan's GSP scheme, 1997-98(Ґ million and per cent)

FY1997 FY1998

Country Imports under GSP Country Imports under GSP

Total GSP imports (Ґmillion) 2,058,392 Total GSP imports (Ґ million) 1,691,726

China 32.8 China 38.2

Korea 16.4 Chinese Taipei 10.4

Chinese Taipei 12.3 Korea 9.4

Thailand 7.3 Thailand 9.0

Malaysia 5.3 Malaysia 6.0

Indonesia 4.8 Indonesia 5.2

Philippines 3.5 Philippines 4.5

Brazil 1.9 Morocco 1.6

Chile 1.7 Chile 1.4

Singapore 1.3 Brazil 1.3

Source: Japan Tariff Association (1999).

38. The items covered by the programme are chosen in consideration of the GSP's effects on domestic industries, as well as for budgetary reasons.4517 Under the Temporary Tariff Measures Law, the Government (inter alia, the Ministry of Finance) has the authority to designate, withdraw, suspend, or limit countries and products to which GSP treatment is granted. The MFN tariff is applied when imports of certain items have exceeded each ceiling.

39. In April 1998, Japan introduced a process of "partial graduation", whereby products of beneficiary countries or territories that were classified as high income economies in the World Bank Atlas in the previous year and whose export products to Japan had strong competitiveness were excluded from the GSP.4618 In April 2000, high income economies that had been listed in the World Bank Atlas in three consecutive years were excluded from Japan's GSP scheme.

40. As a result, the Bahamas; Bermuda; Brunei; Cayman Islands; China; Chinese Taipei; Cyprus; Greenland; Guam; Hong Kong, China; Israel; Republic of Korea; Kuwait; Macau, China; Netherlands Antilles; New Caledonia; Qatar; Singapore; the United Arab Emirates; and the U.S. Virgin Islands were removed from Japan's list of GSP beneficiaries on 1 April 2000. The West Bank and the Gaza Strip was added to the list on 1 April 2000.

(v) Bilateral agreements(a) Japan–U.S. bilateral relationship41. The Japan-U.S. Framework for a new Economic Partnership (Framework), established in July 1993, continues to serve as a mechanism for consultations regarding economic cooperation between the two


Trade Policy Review

countries. According to the authorities, the results of Framework talks are extended on an MFN basis to third countries.

42. Since the previous Trade Policy Review of Japan, new measures regarding procurement by the Nippon Telegraph and Telephone Corporation (NTT) have been concluded, and others such as in the area of civil aviation have been concluded outside the aegis of the Framework (Table II.4).

Table II.4Major arrangements between Japan and the United States

Date of initiation Product/Service Arrangement Measures taken

I. Arrangements and measures affecting exports1998 Aviation (Cargo) New Arrangement based on

the Civil Air Transport Agreement

Equalization of opportunities between Japanese and U.S. airlines

II. Arrangements and measures affecting imports

(1) Trade liberalization and deregulation1986 Medical equip. and

pharmaceutical prod.The Report on Talks on Medical Equipment and Pharmaceuticals

Relaxation of legal approval system and tariff revision

1988 Beef and oranges .. Abolition of import quotas and tariffication1990 (June) Wood products Measures to be taken by the

Government of Japan Relating to Wood Products

Relaxation of standards and revision of tariff category

1994 (Oct.) Insurance Measures by the Government of Japan and the Government of the United States Regarding Insurance

Measures by both governments to increase market access of foreign insurance suppliers and intermediaries

1995 (Feb.) Financial services .. Measures by the Government of Japan and the Government of the United States regarding financial services

1995 (June) Autos and auto parts Joint announcement Measures by the Government of Japan and the Government of the United States regarding autos and auto partsMeasures by both Governments to increase access and sales opportunities of competitive foreign autos and auto parts, efforts by manufacturers to export to Japan

1996 (Dec.) Insurance Supplementary Measures by the Government of the United States and the Government of Japan Regarding Insurance

Further deregulation in the non-life insurance sectors and mitigation measures in the "third sectors" to medium-sized and foreign insurers

(2) Public procurement procedures1990 (June) Supercomputers Procedures to Introduce

SupercomputersStreamlining of procedures and improvement in transparency

1990 (June) Satellites .. Streamlining of procedures and improvement in transparency

1992 (Jan.) Computer products and services

Measures Related to Japanese Public Sector Procurement of Computer Products and Services

Streamlining of procedures and improvement in transparency


Trade Policy Review

1994 (Jan.) Public works Action Plan on Reform of the Bidding and Contracting Procedures for Public Works

Streamlining of procedures and improvement of transparency

1994 (Nov.) Telecommunications products and services

Measures on Japanese Public Sector Procurement of Telecommunications


1994 (Nov.) Medical technology products and services

Measures Related to Japanese Public Sector Procurement of Medical Technology Products and Services


Table II.4 (cont'd)

1996 (June) Public works Operational Guidelines with Respect to the Action Plan on Reform of the Bidding and Contracting Procedures for Public Works.Measures by the Japanese Government to further promote the Action Plan

(3) Other procurement1997 (Sept.)(terminated July 1999)

Telecommunications equipment

Improvement Arrangement on NTT Procurement Procedures


1999 (July) Telecommunications equipment

New measures on NTT Procurement

Accepting new procurement policy

(4) Import facilitation1990 (Sept.) Amorphous metals Joint announcement Establishment of evaluation method on

economic efficiency and encouragement of purchase of amorphous metal transformers by Japanese utilities

1992 (Jan.) Automobile parts Global Partnership Plan of Action

Announcements by Japanese auto manufacturers to increase parts imports, government support for promoting design-ins and receiving sales missions

1992 (Jan.) Automobiles Global Partnership Plan of Action

Announcements by Japanese auto manufacturers to help expand U.S. car imports, government assistance to car imports, support for securing show space and arranging import car fairs

1992 (Jan.) Glass products Global Partnership Plan of Action

Government encouragement for establishing internal Anti-Monopoly Act compliance programmes by the private sector, and for establishing buyer-supplier relationship with foreign producers

1995(terminated Dec. 1999)

Flat glass Measures by the Government of Japan and the Government of the United States Regarding Flat Glass

Measures by both governments to increase market access for competitive foreign flat glass, efforts by manufacturers to export to Japan

1996(terminated July 1999)

Semiconductors Joint Statement by the Government of the United States and the Government of Japan concerning semiconductors

Measures by both governments to support cooperative efforts of private sectors to face challenges posed by structural changes in the semiconductor industry

1992 (Jan.) Structural issues Structural Impediments (Japanese measures)


Trade Policy Review

Initiative (SII) Talks Amendments of Large-scale Retail Store Law, Anti-Monopoly Act and Corporate Law; enactment of Administrative Procedures Law(U.S. measures)Commitment to budget deficit reduction, etc.

1993 (July) Sectoral and structural issues

Framework for a New Economic Partnership

Sectoral and structural consultations and negotiations.Common Agenda for Cooperation in Global Perspective

.. Not available.

Source: Information provided by the Japanese authorities; and WTO Secretariat.

43. The U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy, under the Framework, was introduced in June 1997 to "strengthen the dialogue between and reinforce the efforts of their governments with regard to deregulation and competition policy". In May 1998 and May 1999, the Governments of Japan and the United States issued joint status reports on deregulation and competition policy. The reports outline deregulation and other measures implemented by each Government; measures by the Japanese Government include telecommunications, housing, medical devices and pharmaceuticals, financial services, energy, distribution, antimonopoly act and competition policy, legal services, motorcycles, as well as transparency and other government practices. As of May 2000, the two governments have been working on a third joint status report.

44. On 7 October 1999, the Government of Japan and the Government of the United States signed an agreement concerning cooperation on the prevention of anti-competitive activities (Chapter III(5)(v)).

(b) Japan–EU bilateral relationship45. Since the previous Trade Policy Review, Japan's bilateral trade relationship with the European Union has continued in the form of cooperative dialogue. Bilateral talks between Japan and the EU have been held mainly within the framework of the 1991 Joint Declaration on relations between Japan and the European Community and its member countries.

46. Further strengthening of the Japan-EU relationship was agreed through the eighth Japan-EU Summit meeting in June 1999 and the ninth Japan-EU Ministerial Meeting in January 2000. The issues raised by the EU in the 1999 Japan-EU regulatory reform dialogue mainly related to the improvement of systems concerning trade and investment barriers in Japan.4719 Regarding the Japan-EU Mutual Recognition Agreement, both sides reached an agreement on main elements of the draft agreement in June 1999. Japan and the EU are also scheduled to begin negotiations for a cooperation agreement in the field of competition during the year 2000. The monitoring of the EU-Japan arrangement limiting EU imports of Japanese cars was terminated by 31 December 1999.

(c) Other bilateral agreements47. During the period under review, Japan has extended its network of bilateral investment agreements and tax treaties. Bilateral investment treaties were concluded with Bangladesh and Russia, while tax treaties were concluded with the Republic of Korea, Sweden, and Malaysia. In addition, a social security agreement was signed with Germany.


(1) IntroductionTextual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

1. Since its previous Trade Policy Review, Japan has continued to liberalize its trade and investment regimes, mainly as part of its regulatory reforms. Substantial progress has been made with these reforms, improving the competitive environment, including in important service areas, such as telecommunications; however, potentially important distortions to competition are still evident in some sectors, particularly in agriculture and in certain service sectors, such as parts of domestic transportation. Recognizing the continued need to promote competition, the authorities attach high priority to further regulatory reform and to sound competition policy.

2. The tariff is Japan's main trade policy instrument. Most imports enter Japan duty free or are subject to low tariff rates. In fiscal year 2000481, the simple average applied MFN tariff rate was 6.5% and is expected to fall to 6.3% once the Uruguay Round tariff cuts are fully implemented, by 2009. Nearly 99% of tariff lines are bound and most applied tariff rates coincide with bound rates, thereby imparting a high degree of predictability to Japan's tariff schedule. At the same time, non-ad valorem duties are an important feature of the tariff, particularly in agriculture. Such duties, which account for 6.9% of all lines, are indicated clearly in Japan's tariff schedule, but they can result in high ad valorem equivalents (AVE). In the interests of transparency, the Japanese authorities have provided the Secretariat with AVE estimates for more than two thirds of these non-ad valorem duties; these estimates show that 90 of the top 100 tariffs entailed non-ad valorem duties whose AVEs ranged from 40.1% to 983.7%. Non-ad valorem duties are intended to provide consistent levels of protection to domestic agricultural products in the face of international price fluctuations. The allocation of tariff quotas varies by product and can be complex.

3. Japan has few non-tariff border measures. Those currently applied involve some import prohibitions, import licensing and quantitative import restrictions, for example, on fish and silk. Imports of certain goods are subject to licensing requirements in order to ensure national security, safeguard consumer health and well-being, or to preserve domestic plant and animal life and the environment. Like tariff quotas, certain aspects of the import quota system can be intricate.

4. Japan has rarely used contingency measures, such as countervailing and anti-dumping duties and emergency safeguards, although there has been resort to special safeguards in agriculture.

5. Japan maintains certain export controls on the grounds of national security and public safety and to ensure adequate domestic supplies of certain agricultural and other primary products. Indicating their absence, Japan has not notified any export subsidies to the WTO. Export finance, insurance, guarantees and duty drawback schemes are available.

6. Various forms of assistance are provided by central and local Governments, particularly in agriculture. An interesting anomaly involves assistance, in the form of tax breaks and low interest loans; such assistance is provided for certain types of imports (and investment).

7. No preferences are granted to domestic suppliers on government procurement covered by the Agreement on Government Procurement. The share of foreign suppliers in the total value of government procurement was 5.7% in 1998 (up from 4.6% in 1997); there are indications that this share is considerably lower in the case of public-works procurement, which has been a key feature of recent fiscal stimulus packages.

8. Japan continues to bring its standards into line with international standards; it has also taken further steps to ensure acceptance of foreign test data and conformity assessments.

9. Japan has continued to participate in multilateral and regional discussions for agreements to promote international harmonization of regimes protecting intellectual property rights (IPRs).

10. The Three-Year Program for Promoting Deregulation (TYPPD), as revised in April 2000, is aimed, inter alia, at creating a "free and fair" Japanese economy fully open to the international community.


Trade Policy Review

Furthermore, with a view to increasing transparency of government policy and related measures, the Government introduced in March 1999 a notice and comment (public comment) system for use prior to introducing or revising regulations (Chapter II(2)(ii)).

11. The TYPPD also contains measures to increase competition. These include the abolition of a number of exemptions from the Anti-Monopoly Act (AMA); the number of exemptions under the AMA (and other laws) dropped from 89 in 1996 to 22 in 2000. In addition the role of the Japan Fair Trade Commission (JFTC) has been strengthened following a modest increase in its budget and staff. Given the increased number of cases and actions taken, the JFTC also appears to have become somewhat more aggressive in addressing private anti-competitive practices; a majority of these cases involve bid-rigging in connection with tenders for government procurement contracts. The operation of the JFTC is perhaps hampered by its lack of resources and expertise in pursuing complex cases.

(2) Measures Directly Affecting Imports

(i) Customs valuation and clearance12. Under Article 67 of Japan's Customs Law, importers must provide Customs with an import declaration when goods are imported. Japan uses the c.i.f. prices of imports (which is taken to be the "transaction value" of the import) as the basis for customs valuation. Japan does not employ minimum import prices.

13. The average time between import declaration and import permission decreased between March 1996 and March 1998 from 0.4 to 0.2 of a day for sea cargo and from 1.8 to 0.7 hours for air cargo. Likewise, during the same period the average time between cargo arrival and import permission dropped from 4 to 3.6 days for sea cargo and from 46.3 to 31.5 hours for air cargo (Table III.1). The authorities recognize the importance of reduced customs clearance times both for foreign suppliers and domestic importers. Improvements related to customs clearance have focused on increased computerization as well as planned improvements in facilities and procedures. Accordingly, the TYPPD stated that the Government aims to simplify and speed up customs procedures in a transparent manner (section (5)(vi)).492

14. No customs clearance fee is charged except for overtime services, which are charged at ¥8,300 per hour.

15. Changes in customs clearance since Japan's previous Review, in 1998, include an amendment to the Customs and Tariff Law introducing, from March 2001, Simplified Declaration Procedures that may enable an earlier release of goods by separating the release and duty payment declarations.503 The authorities believe that this initiative will reduce the paperwork required for declarations, and basically obviate the need for examinations or inspections for the purpose of customs duty payment.

Table III.1Average time between import declaration and import permission in Japan, 1991-98

Sea cargo (days) Air cargo (hours)

February 1991 1.1 (7.0) 2.3 (52.6)

February 1992 0.8 (6.2) 1.6 (52.9)

March 1993 0.5 (4.8) 1.6 (43.7)

March 1996 0.4 (4.0) 1.8 (46.3)

March 1998 0.2 (3.6) 0.7 (31.5)

Note: Figures in parenthesis are the average times between cargo arrival and import permission.


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16. Complaints about customs valuation and other customs measures must be filed with the appropriate Director General of Customs within two months of the date of importation. Appeals to the Minister of Finance must be made within one month of the decision by the Director General. If unsatisfied, complainants may seek judicial review within three months of the Minister's decision.514 Complaints may also be filed with the Office of Trade and Investment Ombudsman. Since 1997, no legislative changes regarding complaint and appeal procedures have taken place.

(ii) Rules of origin17. Japan does not have preferential rules of origin, except those under the Generalized System of Preferences (GSP). The authorities state that the rules of origin under the GSP scheme are generally more stringent than for MFN purposes. The GSP rules also have a list of exceptions for some goods; the exceptions involve specific criteria such as processing rules and value added on a product-by-product basis. To apply MFN tariff rates, the country of origin for imported goods is defined as the country in which the goods have last undergone substantial transformation that results in a new essential characteristic being conferred on the goods. The change of tariff classification at the HS 4-digit level is generally used as a reference point for such transformation. Detailed information on Japan’s rules of origin is publicly available.525 Appeals against decisions by Directors-General of Customs may be submitted to the Appeals Committee on Customs, as stipulated in the Customs Law.

(iii) Tariffs (a) Main features18. Japan's FY2000 tariff schedule consists of 9,029 tariff lines at the Harmonized System (HS) 9-digit level.536

19. The Japanese tariff schedule has three distinct sets of rates: statutory rates (which include both general and temporary rates), WTO bound rates, and preferential (GSP) rates.547 In the case of statutory rates, the "temporary", but apparently open-ended, rate is normally used instead of the higher general rate558; the lower of the statutory and bound rates are applied to WTO Members on an MFN basis, except when the GSP rate is applied; in instances where the temporary or general rate is above the WTO bound rate, the latter rate applies. The main features of the schedule concerning MFN tariffs are captured by the summary indicators for 1998, 1999, 2000, which reflect the Information Technology Agreement (ITA), and the full implementation of the Uruguay Round (UR) reported in Table III.2.569

Table III.2Structure of applied MFN tariffs in Japan(Per cent)

Indicators FY1998a FY1999 FY2000

bU.R.

c

1. Bound tariff lines (per cent of all tariff lines) 98.9 98.9 98.9 98.9

2. Duty free tariff lines (per cent of tariff lines) 37.7 37.1 37.1 41.2

3. Non-ad valorem tariffs (per cent of all tariff lines) 6.8 7.0 6.9 6.3

Of which differential and sliding duties (per cent of all tariff lines) 0.3 0.6 0.4 0.0

4. Tariff quotas (per cent of all tariff lines) 2.0 2.0 2.0 2.0

5. Non-ad valorem tariffs with no ad valorem equivalent (per cent of all tariff lines)

6.8 2.0 2.0 1.9

Excluding "in-quota" rates 6.9 2.1 2.1 1.8

6. Simple average bound tariff rate 5.6 6.8 6.6 6.3

7. Simple average applied tariff rate 5.4 6.7 6.5 6.3


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Agricultural products (HS 01-24)d 11.8 17.5 17.0 17.4

Industrial products (HS 25-97) 3.9 4.1 3.9 3.6

8. Import-weighted average applied tariff rate .. .. .. ..

9. Production-weighted average applied tariff rate .. .. .. ..

10. Domestic tariff "spikes"e 6.8 5.5 5.9 6.0

11. International tariff "spikes"f 7.4 7.7 7.1 6.9

12. Overall standard deviation (SD) of tariff rates 7.4 24.9 24.8 25.0

13. Coefficient of variation (CV) of tariff rates 1.4 3.7 3.8 4.0

.. Not available.

a Not including AVEs, but taking into account the ad valorem part of compound and alternate rates.b Using 1999 AVEs, as available, provided by the Japanese authorities.c Using 2000 nomenclature.d Under the definition used in the WTO Agreement on Agriculture the simple applied tariff average on agricultural imports is 18.2% in

FY2000.e Domestic tariff "spikes" are defined as those exceeding three times the overall simple average applied rate (indicator 7); thus, in 2000, for

example, a domestic tariff spike is defined as one that exceeds 19.5% (that is, three times the average applied rate of 6.5%).f International tariff "spikes" are defined as those exceeding 15%.

Note: Indicators 1, 3 and 4 are calculated taking into account all tariff lines (i.e. in-quota and out-of-quota tariff lines). Each of the other ten indicators exclude in-quota lines.

Source: WTO Secretariat estimates, based on data provided by the Japanese authorities.

20. Current applied MFN tariffs reflect Japan's scheduled reductions under the WTO Agreement; they also reflect the tariffication in April 1999 of the previous quantitative restriction on imports of rice as well as the results of the Information Technology Agreement and agreements on pharmaceuticals. With certain exceptions, Japan’s agricultural tariff reductions under the Uruguay Round have been completed over six years (by April 2000) and industrial tariff reductions over five years (by January 1999).5710 The impact of the ITA has been minor, as nearly all of the items concerned were already either duty free or subject to very low tariffs.

(b) MFN tariff bindings21. Ninety-nine (1.1%) of Japan's HS 9-digit tariff lines are unbound. These lines involve a number of "sensitive" items, notably fisheries products (including seaweed), certain wood products, and petroleum. By and large, bound and applied rates coincide, thereby ensuring a high degree of tariff predicability.5811 Bound rates exceed applied rates only on certain agricultural items, food products, alcohol beverages, tobacco, chemicals and petroleum.

(c) Duty-free items22. In FY2000, about 37% of Japan's tariff lines (at the 9-digit HS level) bore a zero rate. This proportion is expected to rise to 41.2% once the Uruguay Round is fully implemented. By contrast, as most of the products covered by the ITA were already subject to zero duty rates, full implementation of the Agreement in FY2000 has had little effect on the proportion of tariff lines that are duty free.

(d) Non-ad valorem duties23. In FY2000, non-ad valorem duties accounted for 6.9% (628 lines) of all Japan's tariff lines (at the HS 9-digit level). Non-ad valorem duties consist of compound duties5912, alternate duties6013, differential duties6114, and sliding duties6215, all of which include specific rates (Table AIII.1). Such duties are generally intended to provide consistent levels of protection to domestic products facing fluctuations in import prices.

24. Japan's non-ad valorem duties apply mainly to agricultural products (Chart III.1). According to the authorities, the products subject to specific duties are selected on the basis of prevailing market conditions


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and product characteristics, including fluctuations and trends in prices owing to shifts in supply and demand as well as differences in quality. Non-ad valorem duties are indicated clearly in Japan's tariff schedule and the Japanese authorities have ensured the transparency of more than two-thirds of these duties by providing estimates of their AVEs.6316 These official estimates show that 90 of the top 100 tariffs entailed non-ad valorem duties whose AVEs ranged from 40.1% to 983.7%, indicating that specific duties can result in high ad valorem equivalents. It should be noted that every method of calculating AVEs is subject to bias and that AVEs can vary widely depending on the world prices of the products involved. Some thoughts on the use of non-ad valorem duties are summarised in Box III.1.


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Box III.1: Non-ad valorem duties

Specific duties are relatively simple to administer in instances where the value-for-duty cannot be easily observed. Moreover, as import prices fall, the ad valorem equivalents of specific duties rise, and vice versa, thereby contributing to domestic price stability in the face of "excessive" fluctuations in world prices; while these duties provide protection against surges in imports, they do so only in so far as those surges are caused by lower import prices. At the same time, specific duties impart a degree of predictability to the amount of duty payable. As the amounts of duty collected are unaffected by drops (or rises) in import prices, for whatever reason, specific duties may also reduce pressure to resort to anti-dumping or countervailing (AD/CV) measures for protection. And unlike with AD/CV duties, any increases in real tariff protection associated with specific duties are on an MFN basis.

On the other hand, the use of non-ad valorem duties involving specific rates may be regarded as undesirable for several reasons. Such duties tend to be less transparent and less predictable than ad valorem tariffs in that they can conceal high ad valorem equivalents (AVEs) and can vary widely with changing world prices. Specific rates of duty also tend to distort domestic production patterns more than ad valorem tariffs because they provide disparate levels of protection for somewhat different goods falling in the same tariff line (and subject to the same specific rate), by taxing imports of cheaper products relatively more heavily, thereby encouraging domestic firms to produce less expensive goods for which the level of protection against imports is proportionately greater. At the same time, specific duties can encourage quality upgrading by exporters, which may entail efficiency losses in addition to the conventional dead weight losses associated with tariffs. Furthermore, as AVEs are inversely related to import prices, specific duties progressively cushion domestic producers against competition from lower-priced imports, thereby counteracting cuts in specific duty rates. Consequently, they counteract the relative price effects of exchange rate changes on countries' trade balances. It follows that the application of specific duties to imports of selected products could lead to an increase in real tariff protection for producers of those products in so far as the appreciation of the currency results in declining prices for such imports. Likewise, to the extent that a depreciation of the currency results in increasing prices for imports of products subject to specific duties, real tariff protection for those products may fall. To the extent that developing countries are exporters of relatively low-priced products, specific duties also tend to have a greater impact on their exports than on those of industrialized countries.

Source: WTO Secretariat.

25. As a result of the considerable decline in Japan's import prices during the period under review (1998-2000), real protection for some of those products subject to specific duties may well have increased, notwithstanding cuts in their applied rates.6417 As information on AVEs was available for 1999, but not for 1998 (or 2000), the Secretariat was unable to ascertain whether or not there have been any such instances during the review period.6518

(e) Tariff quotas26. In 1995, Japan introduced tariff quotas for 20 groups of agricultural products, as part of its commitment under the WTO Agreement on Agriculture to "tariffy" quantitative import restrictions (Table AIII.2). In addition, Japan has long had a system of autonomous tariff quotas, primarily for the purpose of providing low-cost inputs for industrial purposes (Table AIII.3). Recent revisions to Japan’s tariff quota system include the "tariffication" of rice in April 1999 (Chapter IV(2)(ii)).6619

27. In FY2000, tariff quotas covered 2.0% of all tariff lines (at the HS 9-digit level). Less than 18% of the out-of-quota rates were ad valorem, compared with 100% of the in-quota rates. The simple average in-quota MFN tariff rate is estimated to be 18.9%; the corresponding average out-of-quota MFN tariff was


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111.7% (including AVEs of non-ad valorem duties). Many of the tariff quotas with end-use provisions were agriculture-related, while tariff quotas for leather were linked to regional and social policies.

28. The quota allocation method tends to be intricate. In the case of tanned leather, the in-quota amount is divided into a "general quota" (95% of the annual quota amount) and "reserved quota" (remaining 5%). Those eligible for quota allocations must be a corporation or an individual undertaking the production, sale or import of the tanned leather or related goods. The general quota is allocated to applicants who were licensees in the previous year or two. When the total requested amount exceeds the quota, each applicant is allocated a pro rata share of the quota. The reserved quota is allocated to those who did not apply for either the general or reserved quota in the previous year. Quotas not filled by any of the above applicants as well as those returned unused are reallocated to applicants on an "equal basis". In the case of agricultural products, quota allocation is based upon historical imports and current and future plans for imports. Some qualification requirements for applicants are stipulated taking into account the characteristics of the product and the market, with a view to ensuring that the licensed goods are supplied to end users.

(f) MFN tariff averages29. In FY2000, the overall simple applied MFN tariff average was 6.5%, down from 6.7% in 1999.6720 HS categories of products with the highest simple tariff averages were footwear and headgear agricultural products and prepared food (Chart III.2).

(g) MFN tariff dispersion30. In addition to the 37% of tariff lines that are duty free, 28.4% lines are subject to applied tariff rates of 5% or less (Chart III.3). Tariff spikes, that is rates exceeding three times the simple applied MFN average, affect 5.9% of all tariff lines in FY2000, a slightly higher percentage than in FY1999.

(h) Tariff escalation31. Tariff escalation is evident in a number of sectors, most notably processed food, textiles, other chemicals, and leather products (Table AIII.4).


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(i) Tariff concessions and exemptions32. Details of Japan's system of tariff concessions and exemptions are found in Table AIII.5. Customs duty reductions and exemptions for FY1997 amounted to about ¥186 billion.6821 Many end-use tariff concessions are agriculture-related (Table AIII.6). In FY2000, the system of reduction or exemption for raw materials for manufacture was, in effect, abolished with the elimination of tariffs on sugar, the only remaining raw material covered by the system. Japan's GSP-related measures are described in Chapter II(4)(iv).

(j) Tariff adjustments33. Annual procedures for tariff revisions begin in July, when the Ministry of Finance (MOF) requests other ministries concerned to initiate studies of desired changes; this is followed by individual negotiations between the MOF and each ministry. Proposed changes are reviewed by the Customs Tariff Council, after which the MOF prepares legislation for Diet approval.


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34. Tariff changes implemented by Japan in FY1998 included the reduction or elimination of tariff rates on metal watch straps and raw sugar, together with a simplification of the customs clearance procedure in Hozei (bonded) areas.6922 The FY1999 tariff changes included: the elimination of the tariff on niobium titanium alloys; a tariff rate reduction for yarn spun from silk waste; and an extension of the periods for the reduction or exemption and repayment systems. The FY2000 tariff changes included tariff revisions for crude oil, and the elimination of the tariff on raw sugar and rare-earth metals.

(iv) Other charges affecting imports 35. Indirect taxes, including the consumption (value-added) tax and the excise taxes applied mainly to liquor, tobacco, gasoline, and automobiles, are levied at the same rates on imports and on domestically produced goods and services (section (5)(i)). In the case of imports, the consumption tax is levied on import prices plus customs duties and excise taxes.

36. Following WTO dispute settlement concerning liquor taxation, Japan substantially reduced tax rates on whisky and brandy, while raising rates on shochu and other products.7023

(v) Non-tariff border measures37. The non-tariff border measures (NTMs) currently applied by Japan involve import prohibitions, import licensing, and quantitative restrictions. The importation of certain goods may be prohibited or subject to licensing in order to ensure national security, safeguard consumer health and well-being, or to preserve domestic plant and animal life and the environment. Some commodities, including fish and silk yarn and


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certain silk fabrics, are subject to import quotas or restraints under bilateral trade agreements and arrangements with, for example, China and the Republic of Korea. In addition, import surveillance is employed for certain products to confirm place-of-origin and documentation requirements.

(a) Import prohibitions and sanctions38. Prohibited imports are classified in the Customs Tariff Law under five categories: narcotics; revolvers and pistols; imitation currencies; books and other articles considered contrary to public security or morality; and articles infringing patents or other intellectual property rights.7124 Import prohibitions pertaining to items listed in Annex I to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) are specified in the Import Control Order. Directors-General of Customs may confiscate prohibited import items at the border or order their reshipment. There has been no change in the list of prohibited imports since 1998.

(b) Licensing and approval requirements39. Import licensing procedures in Japan are governed by the Foreign Exchange and Foreign Trade Law, as amended in 1998. Such licensing is primarily for the purpose of enforcing health, public security or environmental measures; it is also used to implement border protection schemes for agriculture and other policy measures (for example, to ensure compliance with bilateral agreements on silk yarn and silk fabrics).7225 Under the Law, the Minister of International Trade and Industry may, in the interest of promoting the sound development of foreign trade and the national economy, require prior ministerial approval for the import of certain goods (Article 52).

40. Approval from the Minister of International Trade and Industry is required to import goods subject to Japan's international arrangements; such arrangements relate to commodities covered by its membership of international commodity and bilateral agreements. Since January 1998, changes in the list of items requiring import approval other than those subject to import quotas have included the addition of diamonds shipped from Angola, and the elimination of silk yarn from 155 countries and territories.7326 Imports requiring approval are listed in Table AIII.7.

(c) Import quotas41. Japan maintains import quotas on various items, including fishery products, certain organic chemicals, pharmaceuticals, explosives, rubber adhesives, military equipment and firearms (Table III.3).

Table III.3Allocation of import quota by item, FY1999

Ratio of allocated quota to the total quota amount (%) Total quota amount

Unit

Trading companies

Designated corporations

Fishery industries

First-come-first-served

basis

Other

Fish and shellfish (HS 0301.99.2; 03.02; 03.03; 03.04; 03.05; 03.07)

6.8 11.6 74.1 4.9 2.7 180.0 US$ million

Fish and shellfish imported from the Republic of Korea

97.5 n.a. n.a. 2.5 n.a. 40.0 US$ million

Horse mackerela 34.0 48.2 2.8 15.0 n.a. 108.0 TMT

Mackerela 30.6 49.7 4.8 15.0 n.a. 210.0 TMT

Sardine 2.7 47.3 35.0 15.0 n.a. 22.0 TMT

Scallops n.a. 80.2 4.8 15.0 n.a. 5.0 TMT

Herring (except Clupea pallasi) 16.6 57.1 n.a. 26.3 n.a. 55.0 TMT

Herring (Clupea pallasi) 4.2 46.5 2.8 46.5 n.a. 71.0 TMT

Pollack productsa 9.8 6.1 15.6 0.3 68.2 1,027.0 TMT

Squid and cuttlefish 41.9 36.8 16.1 2.4 2.9 56.5 TMT


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Dried squid & cuttlefish 57.8 31.1 n.a. 11.1 n.a. 4.5 TMT

Cod and pollack roes 23.1 29.4 29.5 17.8 0.2 78.0 TMT

Dried laver 15.8 63.3 n.a. 20.8 n.a. 120.0 million sheets

Dried seaweed (Enteromorpha and Monostroma species)

n.a. 100.0 n.a. n.a. n.a. 0.1 TMT

Preparation of Kombu (Kjellemaniella spp. and Laminaria spp.)

96.0 n.a. n.a. 4.0 n.a. 0.5 TMT

Other edible seaweed (HS 1212.20-1-(3)) n.a. 100.0 n.a. n.a. n.a. 2.9 TMT

CFC n.a. n.a. n.a. n.a. n.a. 34.0 ODP kg.

HCFC n.a. 61.1 n.a. 38.9 n.a. 505,741.0 ODP kg.

Methyl bromide n.a. n.a. n.a. n.a. n.a. 506,054.0 kg.

Machinery and pipes of zirconium for nuclear power generation

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Arms n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Nuclear materials n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Gunpowder n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Certain chemicals n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Certain pharmaceuticals n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Species registered in the Washington treaty


Products made of species registered to the Washington Treaty


Textiles and clothing of Chinese origin

n.a. n.a. n.a. n.a. n.a. 630 m2 n.a.

n.a. Not applicable.

a Allocation for trading companies is divided into two categories: (A) performance basis; and (B) newcomers-oriented performance basis. The latter system is only for companies who were newly allocated in the last year's allocation on first-come-first-served basis. Allocation on first-come-first-served basis is also divided into two categories: (A) interim allocation system; and (B) conventional system. The former is only for bidders who have been ever allocated less than 30 ton per an allocation, the latter for others.

Note: TMT = thousand tonnes; ODP = ozone depleting potential.

Source: JETRO International Trade Bulletin, various issues.

42. Since 1998, certain vaccines and chemicals have been added or removed from the list of import quotas. Rice and prepared rice products were removed from the list in April 1999. As regards fish products, separate quotas were established during the period 1997-99 for horse mackerel, mackerel, sardine, scallop, and herring, which were previously included in the fish and shellfish quota (Table III.4).

Table III.4Import quotas on fisheries products, FY1995-99

Commodity Unit 1995 1996 1997 1998 1999

Fish and shellfish (actual imports) US$ million 362 (302) 362 (318) 342 (279) 213 (..) 220 (..)

Horse mackerel (actual imports) TMT .. .. 78 (58) 95 (..) 108 (..)

Mackerel (actual imports) TMT .. .. 198 (155) 204 (..) 210 (..)

Sardine (actual imports) TMT .. .. .. 20 (..) 22 (..)

Scallop (actual imports) TMT .. .. .. .. 5 (..)

Herring (actual imports) TMT 118 (79) 118 (71) 118 (63) 119 (..) 126 (..)

Pollack products (actual imports) TMT 1,027 (514) 1,027 (621) 1,027 (564) 1,027 (..) 1,027 (..)

Squid and cuttlefish (actual imports) TMT 55.1 (49) 55.1 (44) 55.6 (45) 55.6 (..) 56.5 (..)

Dried squid & cuttlefish (actual imports) TMT 4.5 (2.8) 4.5 (2.4) 4.5 (2.8) 4.5 (..) 4.5 (..)


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Cod and pollack roes (actual imports) TMT 48.6 (47) 55.4 (53) 66.7 (45) 73.1 (..) 78 (..)

Dried laver (actual imports) million sheets 250 (12) 250 (10) 250 (32) 69 (..) 120 (..)

Edible seaweed (actual imports) TMT 2.9 (2.1) 2.9 (2.5) 2.9 (2.1) 2.9 (..) 3.5 (..)

.. Not available.

Note: TMT = thousand tonnes.Horse mackerel and mackerel quotas have been separated from fish and shellfish quota and managed by metric ton since 1997. Sardine quota has been separated from fish and shellfish quota and managed by metric ton since 1998. Scallop quota has been separated from fish and shellfish quota and managed by metric ton since 1999. Figures in parenthesis are actual imports based on reports of import quota holders, as of November 1999.

Source: Data provided by the Japanese authorities.

43. The import quota system is administered by MITI, which issues eligible importers with a certificate of import quota allocation. Import quotas on fish and fish products often have origin requirements. Quotas on scallops, fish and shellfish, horse mackerel, mackerel, sardine, dried squid and cuttlefish, and squid and cuttlefish are accorded only to countries not listed in the Import Notice; quotas on dried laver and certain edible seaweed apply only to imports from the Republic of Korea.7427 In addition, import quotas apply to silk fabrics and certain specialized silk fabrics shipped from China.

44. According to the authorities, the reasons for limiting countries eligible for quotas are historical. Originally, quotas on fish and fish products were accorded solely to imports from the Republic of Korea. The origin criteria mentioned above have been modified according to requests from various exporting countries. Although no importation is allowed from countries listed in the Import Notice, the authorities state that the list may be further modified according to requests from countries wishing to export items under quota to Japan. According to the authorities, no such requests have been denied to date.

45. The amount of quotas to be allocated is decided annually or on a six-monthly basis. The size of fish-related quotas are determined by MITI, with the consent of the Ministry of Agriculture, Forestry and Fisheries (MAFF), according to domestic supply and demand, e.g. the amount of imports, domestic production, consumption, and prices in the previous year as well as projections for the coming year.7528 Information concerning the quota application procedures and requirements for individual items subject to import quota is published.7629 Quotas are allocated to applicants who meet various criteria and, for some items, on a first-come first-served basis7730; when the amount applied for exceeds remaining unallocated quota, the latter quotas are allocated by lottery.

46. Unused quota entitlements may (or may not) be carried over to the next period, seemingly at the authorities' discretion.7831 Unused quotas are not transferable and the Government does not reallocate unused quotas. A certificate of import quota allocation, normally with a validity of four months, is issued by the Minister of International Trade and Industry to eligible importers.

(d) Import surveillance47. The intent of the system of prior confirmation is to collect data concerning imports, monitor and confirm that imports are for specific uses, and verify documentation and origin requirements.7932 Prior confirmation is required from the Minister of International Trade and Industry, or other relevant ministers, for some imports such as silk fabrics, tuna, marlin, whales, certain species listed in Appendices II and III of CITES, microbial vaccines, and uranium catalysts. Prior confirmation is used, inter alia, in cases where fraudulent declarations have been found in the past or are deemed more likely.8033 In regard to the bilateral consultations between Japan and the Republic of Korea on silk products, a ten-year phase-out programme has been notified to the WTO Textiles Monitoring Body pursuant to Article 3 of the Agreement on Textiles and Clothing.8134

48. Changes in Japan's import surveillance system include the elimination in January 2000 of the import confirmation requirement for wakame seaweed.


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(e) Administrative guidance49. The Government employs administrative guidance to implement its trade policy. For example, the Director-General of Fisheries Agencies, under MAFF, issued a letter to importers, transporters, and equipment manufacturers, requesting that tuna captured by the flag-of-convenience vessels that do not abide by an international treaty for the conservation of the fish not be imported.8235 According to the authorities, the request is intended to induce voluntary action by importers; it is up to importers whether to abide by the request.

(f) Import cartels50. No authorized import cartels remain in Japan.

(vi) Anti-dumping, countervailing, and safeguard measures51. Japan's current use of anti-dumping, countervailing, and safeguard measures is based on the Customs Tariff Law and the relevant Cabinet Orders. Since the previous Trade Policy Review, there have been no changes in these measures or their implementation procedures.

(a) Anti-dumping and countervailing duty actions52. An anti-dumping duty on Chinese ferro-silico-manganese, imposed by Japan in 1993, ended in January 1998.8336 Japan levied definitive duties on Pakistani cotton yarn of 20-21 count in August 1995; several reviews of duty rates for new suppliers were conducted in March 1996, May 1996, and February 1998, and new dumping margins have been notified to the WTO.8437

53. To date, Japan has never taken any countervailing actions.

54. Japan has often expressed the view that some of its trading partners abuse anti-dumping measures, perhaps making them the source of "hidden protectionism".8538

(b) Safeguard measures55. Japan has never applied a safeguard measure based on the WTO Agreement on Safeguards.

(vii) Government procurement 56. Procurement by the Government, notably public works projects, accounted for a large share of the spending contained in various fiscal stimulus measures employed since Japan's previous Trade Policy Review (Chapter I(2)(ii)). According to the authorities, the aim of the procurement system of the Central Government is to secure efficiency and equal opportunity regardless of the origin of products or services, in accordance with the principle of price competition.

57. Japan is a signatory to the WTO Agreement on Government Procurement (GPA). Its GPA coverage encompasses all central government entities, all 47 prefectures, all "designated cities"8639, and certain public corporations.8740 Coverage of services includes most public works, telecommunications, air transport, computer and vehicle repair. As a consequence of the 1999 restructuring of the Nippon Telegraph and Telephone (NTT) Company, which had been under Japan's GPA coverage, Japan notified the Committee on Government Procurement in 1999 of the addition of NTT East Company, and NTT West Company to the "List of Entities" and to the "List of Entities which procure the services specified in Annex 4" in the Annexes of GPA; it did not include NTT Communications in the lists.8841

58. The Accounts Law and relevant ordinances specify the procurement procedures of the central government entities, while the Local Autonomy Law stipulates procurement procedures of local governments. The authorities state that government procurement is conducted without any restrictions on suppliers’ nationality or on the origin of products or services, based on the principle of non-discrimination, and that all relevant entities have thoroughly implemented the GPA; no price or other kinds of preferences


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are granted to domestic suppliers in a tender covered by the GPA.

59. Government procurement practice in Japan is highly de-centralized. There is no agency coordinating government procurement; each procurement entity maintains its own list of registered suppliers. Nevertheless, the Ministry of Foreign Affairs seeks to assure the consistency of procurement policies and practices with the GPA.

60. Japan's unilateral actions concerning government procurement include the 1994 Action Program on Government Procurement Procedures, as amended, and the 1994 Action Plan on Reform of Bidding and Contracting Procedures for Public Works.8942 The former, together with its supplementary understandings and guidelines, is intended to improve market access and encompass the procurement of goods and services covered by the GPA above a threshold level of SDR 100,000, except public works. The latter is aimed at promoting greater fairness, transparency and competition in the procurement of construction services; it includes measures to promote "open tendering" and thereby addresses the previously pervasive practice of selective tendering.9043 The Plan applies to central government projects with a contract value over SDR 4.5 million and quasi-governmental projects exceeding SDR 15 million, the same as the current GPA levels; it includes a commitment on the part of most central government and government-related entities to publish their annual planned procurement above the threshold levels at the beginning of each fiscal year

61. According to the Japanese authorities, the voluntary measures, which are aimed, inter alia, at providing transparent, open, and non-discriminatory competitive procedures on government procurement in the field of computers, supercomputers, satellites, medical technology, telecommunications, and construction, reflect the results of bilateral consultations between Japan and the United States.9144 The authorities state that these measures are applied on an MFN basis. The Government carries out annual reviews of such voluntary measures; in 1999, it invited opinions from domestic and foreign suppliers concerning the measures' implementation. Reflecting opinions submitted, a 3 December 1999 review of voluntary measures resulted in the Government Initiative on Future Management of Government Procurement.

62. Whereas threshold levels, set by Japan under the GPA for the procurement of goods and services other than construction, are generally equivalent or below those of other signatories, the level for the procurement of construction services by local governments and public corporations, as well as their procurement of architectural, engineering, and other technical services covered by GPA is, in most cases, considerably higher.9245

63. Data provided by the Japanese Fair Trade Commission (JFTC) show that many cases of known infringement of Japan's Anti-Monopoly Act (AMA) continue to involve bid rigging (section (5)(vii)). In order to prevent bid-rigging, the Bidding Instruction for procurement by the Ministry of Construction, for example, was revised in June 1999 to require a declaration by participants in bidding that the bid price had been decided solely on the basis of a decision by the bidder; the bidders are not allowed to intentionally disclose their bid prices before the tendering is finished.9346 According to the authorities, infringement of the requirements results in disqualification from the particular bid, but does not automatically disqualify the bidder from selective tendering procedures in general, and no other penalty may necessarily be entailed unless legal measures under the AMA are taken by the JFTC.

64. For procurement above the threshold level of SDR 100,000 specified under the 1994 Action Program, the level of open contracting in 1997 was slightly less than 70% of the total procurement value of ¥964 billion, down by 6 percentage points from 1995, with procurement of overseas goods and services accounting for 13.2% (16.1% for goods only) of the total (Table III.5). The share of selective tendering fell to 3.6%, while that of single tendering rose to 26.7%, compared with 4.2% and 19.7%, respectively, in 1995.9447 Procurement from foreign suppliers increased in 1998 but remained low; the ratio of foreign suppliers in Japan's government procurement was 5.6% in terms of value and 2.1% in terms of contracts, compared with 4.7% and 1.8%, respectively, in 1997. The shares of foreign suppliers in contracts resulting from open, selective, and single


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tenders were 1.8%, 0.4%, and 3.7%, respectively, in 1998; the ratios decreased from those in 1996 by 0.4, 0.4 and 1.2 percentage points, respectively.9548 In the case of procurement involving public works, data provided by the authorities show that the share of foreign suppliers was at least 0.04% in FY1997.

Table III.5Procurement composition by product and by origin, 1997(¥ 100 million, per cent)

No.

Products Total value

Share

Domestic Foreign

1. Products from agriculture, and from agricultural and food processing industries 1.9 84.5 15.5

2. Mineral products 199.1 12.0 88.0

3. Products of the chemical and allied industries 33.7 62.4 37.6

4. Medicinal and pharmaceutical products 261.1 73.5 26.5

5. Artificial resins and plastic materials, cellulose esters and ethers, and articles thereof; rubber, synthetic rubber, factice, and articles thereof; raw hides and skins, leather, furskins and articles thereof, other than articles of apparel and clothing accessories of leather, saddlery and harness, articles of animal gut

40.2 99.2 0.8

6. Wood and articles of wood; wood charcoal; cork and articles of cork; paper making material; paper and paperboard and articles thereof; manufactures of straw of esparto and of other planting materials, basketwork and wickerwork

407.1 99.9 0.1

7. Textiles and textile articles, footwear, headgear, umbrellas; sunshades; walking sticks, whips, riding crops and parts thereof; travel goods; hand-bags and similar containers; articles of apparel and clothing accessories, of leather or composition leather

106.8 98.8 1.2

8. Articles of stone, plaster, asbestos, mica and similar materials; ceramic products, other than sanitary fixtures; glass and glassware, other than illuminating and signalling glassware and optical elements of glass, not optically worked nor of optical glass

14.6 100.0 0.0

9. Iron and steel and articles thereof, other than boilers and radiators for central heating, air heaters and hot air distributors not electronically heated

167.1 99.2 0.8

10. Non-ferrous metals and articles, other than lamp and lighting fittings 124.9 93.2 6.8

11. Power generating machinery and equipment 52.4 91.5 8.5

12. Machinery specialized for particular industries 89.8 93.3 6.7

13. General industrial machinery and equipment, and machine parts 196.3 99.3 0.7

14. Office machines and automatic data processing equipment 2,613.8 90.0 10.0

15. Telecommunications and sound recording and reproducing apparatus and equipment 968.3 98.2 1.8

16. Electrical machinery, apparatus and appliances, and electrical parts thereof 160.6 95.1 4.9

17. Road vehicles 379.3 97.7 2.3

18. Railway vehicles and associated equipment 56.8 56.8 43.2

19. Aircraft and associated equipment 104.1 6.7 93.3

20. Ships, boats and floating structures 23.7 100.0 0.0

21. Sanitary, plumbing, heating and veterinary equipment 1.2 100.0 0.0

22. Medical, dental, surgical and veterinary equipment 509.1 56.5 43.5

23. Furniture and parts thereof 79.0 99.4 0.6

24. Professional, scientific and controlling instruments and apparatus 887.0 68.3 31.7

25. Photographic apparatus, equipment and optional goods; watches and clocks 82.0 81.8 18.2

26. Miscellaneous articles 136.4 82.3 17.7

Total 7,696.3 83.9 16.1


65. The Office of Government Procurement Review (OGPR), headed by the Chief Cabinet Secretary, began processing complaints concerning procurement procedures by the Central Government and public


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corporations, in January 1996. The Government Procurement Review Board, an independent examining body, considers complaints; the Board issues a written report of findings within 90 days of the filing of a complaint, and, if necessary, the Board's written recommendations concerning appropriate remedies accompany the report.9649

66. Japan's complaint review procedures were amended on 11 January 1999 to allow the Review Board to judge whether a complaint should be dismissed under Article 23 (exceptions to the agreement).9750 The amendment also introduced detailed procedural rules including methods of counting days, methods of withdrawal, and mandates of agents and assistants; a complainant may also choose to remain anonymous to the public.

67. The procuring entity is expected to follow the recommendations voluntarily. Since the establishment of the OGPR and the Board, two complaints, including one concerning telecommunications system (in 1996) have been filed. The status of receipt and review of complaints has been issued every quarter. The authorities stated that the Board encourages consultation between a complainant and a procuring entity before a complaint is filed; the Board also acts as intermediary and many complaints have been resolved through consultation. Complaint procedures in the bilateral agreements take precedence to the OGPR procedures. For local governments under the GPA coverage, complaints may be addressed to the contact points set up in each local government.

68. According to the authorities, the procuring entities of public works are required to decide proper and clear criteria for, inter alia, the selection of construction works undertaken by joint ventures and the organization of joint ventures by contractors; the requirement was established to prevent the participation of inadequate contractors and to secure smooth joint-operations. For example, the criteria stipulate that construction works executed by joint ventures must be large-scale involving technical difficulty.

(viii) State trading69. State trading in Japan involves leaf tobacco9851, salt for common use, opium, alcohol, rice, wheat and barley, milk products, and raw silk.9952 The stated aims of such trading include: stabilizing supplies to consumers; controlling imports to assist domestic producers; and protection of consumers' interests. State-trading activities are generally underpinned by legislated import rights and, in some cases, by specific monopoly rights over domestic production and distribution. Examples are the monopolies regarding production of manufactured tobacco by the Japan Tobacco Inc.; the rights of the Salt Industry Centre for Japan to control the distribution of imported salt for common use; the Ministry of Health and Welfare's monopoly of opium imports and exports; and MITI's monopoly on production and distribution of certain industrial alcohol10053. Under the Alcohol Business Law of March 2000, MITI's monopoly on the production and distribution of certain industrial alcohol is to be abolished by 1 April 2001.

(ix) Standards, and sanitary and phytosanitary measures(a) Standards, testing and conformity assessment70. Japan has moved toward increased international harmonization of its standards and technical regulations and the adoption of mutual recognition arrangements, as outlined in the Three-Year Program for Promoting Deregulation (TYPPD). The TYPPD, as amended for FY2000, re-emphasized that the responsible ministries and agencies should endeavour to achieve greater international harmonization of standards, accept foreign data, adopt mutual recognition arrangements, and eliminate redundant inspections. Japan's voluntary standards, mandatory technical regulations, and sanitary and phytosanitary (SPS) regulations are summarized in Tables III.6 and AIII.8.

Table III.6Major standards and technical regulations in Japan, March 2000

Number of standards or regulations

Percentage corresponding to international

Percentage equivalent to international

Percentage acceptance of overseas

Percentage acceptance of overseas


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standardsa standards certification

b test datab

A. Mandatory technical regulations

Pharmaceuticals Affairs Law 2,557 .. .. .. ..

Food Sanitation Law 377 .. .. .. ..

Electrical Appliance and Materials Control Law

498 100 .. .. 100

Consumer Product Safety Law 6 0 0 0 100

High Pressure Gas Control Law 2 50 .. .. 100

Building Standard Lawc .. .. .. .. ..

Safety Regulations for Road Vehicles 274 11 0 14 11

Law concerning the Safety Assurance and Quality Improvement of Feed

151 n.a. n.a. n.a. 100

Law concerning Screening of Chemical Substances and Regulation of their Manufacture

.. .. .. .. ..

Telecommunications Business Law .. .. .. .. ..

Radio Lawd .. .. .. .. ..

Fertilizer Control Law 138 n.a. n.a. n.a. 100

B. Voluntary standards

Japan Industrial Standards (JIS)e 8,364 43 51 .. ..

Japan Agricultural Standards (JAS) 353 .. .. n.a. n.a.

Total .. .. .. .. ..

.. Not available.n.a. Not applicable.

a Defined as "primary aspects sharing a common scope".b Where applicable.c Bulding Act Code.d According to the authorities, the number of mandatory technical regulations is not available because the scope and definition of mandatory

technical regulations is ambiguous; the technical conditions of radio stations in Japan generally comply with ITU-R Recommendations and Radio Regulations, and international harmonization is given consideration. Regarding the system for the certification of radio equipment, the Radio Law was amended to establish the system for accepting foreign test results and foreign certification (promulgated in 1998 and went into effect in 1999).

e As of March 1998.


Voluntary standards71. Voluntary standards in Japan comprise the Japan Industrial Standards (JIS) and the Japan Agricultural Standards (JAS), with about 8,300 and 350 standards, respectively.

72. Japan is continuing to bring its standards into line with international counterparts. According to MITI, about half of JIS were equivalent to international standards in FY1997 compared with 25% in FY1996; in FY1998, 880 new standards were introduced, of which 58% were aligned to international standards, and out of 747 standards developed in FY1999, 62% were aligned. The authorities state that some international industrial standards are not appropriate to be adopted as JIS because of technical progress and regional characteristics. With regard to JAS, in July 1998 Japan revised standards for fruit drinks in line with Codex international standards; the 1950 Law Concerning Standardization and Proper Labelling of Agriculture and Forestry Products (JAS Law) was revised to make JAS standards subject to mandatory review every five years.10154 Japan also established standards, in January 2000, for organic plant products and processed foods made


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from organic plant products, in accordance with Codex guidelines.10255 The authorities have taken into account international standard in the establishment, revision, and elimination of standards in accordance with the Government's commitment in TYPPD.

73. As of April 1999, about 15,000 domestic and 350 foreign factories had received approval to affix JIS marks. The JIS marking system covers about 700 products. With an amendment to the Industrial Standardization Law in 1997, an accreditation system of private certification bodies, domestic or foreign, was introduced in the JIS marking system, based on the related ISO/IEC Guides. At the end of January 2000, six Japanese organizations were accredited as JIS mark certification bodies. No foreign organization has yet been accredited as a JIS mark certification body (as of 1 August 2000). For the JAS system, certification of products manufactured by foreign plants may be carried out based on test data prepared by foreign testing organizations (FTOs) designated by the Minister of Agriculture, Forestry and Fisheries; Japan has designated four such FTOs since 1997.10356 In June 2000, a new grading system for foreign products was introduced in accordance with the 1999 amendment to the JAS Law. Only products graded under the JAS system may affix JAS symbols.

Mandatory technical regulations74. Approximately 7% of all JIS were quoted in 1996 as mandatory technical regulations.10457 Changes in technical regulations since 1997 include amendments in 1999 to 11 laws related to mandatory technical regulations. The amendments involved, for example, termination of the government certification system, the introduction of a self-confirmation system by private enterprises and a third-party certification system, which may involve a mandatory conformity assessment by a state-accredited third-party institution. There have been no other significant changes to mandatory technical regulations since 1997.

75. Currently, 50 inspection bodies, none foreign, are designated by MITI for testing based on standards and certification systems under the jurisdiction of MITI. For telecommunications equipment, the amendments to the Telecommunications Business Law and the Radio Law in 1998 established a system for accepting foreign test results and foreign certification, which went into effect in 1999. In 1998, guidelines regarding the acceptance of foreign clinical data, in the form of two notifications, were issued by a bureau in the Ministry of Health and Welfare. (No information was available on the current number of inspection bodies or on foreign inspection bodies designated by each ministry and agency concerning certification systems.)

Bilateral, regional, and multilateral arrangements76. With regard to bilateral mutual recognition agreements (MRAs) of standards, no comprehensive measures are currently in place. Japan has been exchanging views on such agreements with the European Union, and has been holding consultations with the United States in regard to medical devices, pharmaceutical products, and building standards.

77. Japan has participated in regional and multilateral voluntary frameworks regarding the acceptance of foreign certification and test results. For example, the following laboratory accreditation schemes in Japan have participated in the Asia-Pacific Laboratory Accreditation Cooperation Multilateral Mutual Recognition Arrangement (APLAC–MRA): Japan National Laboratory Accreditation System (since October 1998), Japan Calibration Service System (since December 1999), and Japan Accreditation Board for Conformity Assessment (since October 1998). In the area of quality management, the Japan Accreditation Board for Conformity Assessment has been a member of the Pacific Accreditation Cooperation Multilateral Mutual Recognition Arrangement (PAC–MLA) since January 1998, and of the International Accreditation Forum (IAF)–MLA since October 1997.

78. The Japanese Industrial Standards Committee (JISC) represents Japan at the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC).10558 Japan


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unilaterally provides technical cooperation to developing countries, including training programmes for officials and the dispatching of Japanese experts on-site.

(b) Sanitary and phytosanitary measures79. Since 1998, no change has been made to the Food Sanitation Law, which is the main legislation for sanitary and phytosanitary regulations in Japan. Japan's SPS notifications are summarized in Table AIII.9. Recent changes in plant and animal quarantine arrangements are listed in Table AIII.10.

80. On 19 March 1999, the WTO Dispute Settlement Body (DSB) adopted Panel and Appellate Body findings regarding the dispute "Japan - Measures Affecting Agricultural Products".10659 On 31 December 1999, Japan announced the immediate abolition of the varietal testing requirement that was in force for eight products, in accordance with the rulings and recommendations adopted by the DSB; Japan has been conducting consultations with the United States regarding a new quarantine methodology for the eight products, which are currently subject to import prohibition on the grounds that they are hosts of codling moths.

81. Since its previous Review, Japan has extended operating hours for plant and animal quarantine procedures.10760

(c) Labelling and packaging requirements82. As a result of the 1999 amendment to the JAS Law, labelling has become mandatory for any food and beverage sold in Japan; in particular, the amendment introduced mandatory labelling of place of origin for any perishable food.10861 Inspection certification and a labelling system for organic food was newly introduced under the amendment10962; to label food as "organic" it is now necessary to obtain accreditation from an authorized accreditation body that the food meets certain JAS requirements. Only accredited food may carry an Organic-JAS Mark label.

83. Mandatory labelling regarding genetically modified organisms (GMOs) is to be applied as of April 2001 to soybeans, corn, potatoes, rapeseeds, cotton seeds, and some processed foods mainly made of soybeans or corn according to the Genetically Modified Food Labelling Standard, which has been enforced since June 2000. The Ministry of Health and Welfare does not permit the importation of GMOs that do not meet its safety requirements. The authorities maintain that the labelling requirement is to provide consumers with information necessary to make an informed choice.

(x) Other measuresCountertrade84. Since its previous Trade Policy Review, Japan has not been involved in any countertrade arrangements.

(3) Import and Inward Investment Promotion Measures

(i) Overview85. Japan's import and inward investment promotion programmes have mainly been conducted under the Law on Extraordinary Measures for the Promotion of Imports and the Facilitation of Foreign Direct Investment in Japan, which was renewed in 1996 for ten years. These programmes appear to be concerned more with enhancing existing procedures than with removing major impediments to imports and inward FDI; the removal of such impediments is instead being addressed by the Government in its deregulation programmes. The matter of whether the considerable restrictions imposed on the sectors and products eligible for incentives sharply limit the potential benefits for the Japanese economy as a whole remains a concern, as pointed out in the 1995 and 1998 Secretariat Reports.


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(ii) Import promotion86. The Import Board plays an important role in the formulation of Japan’s import promotion policy.11063 The current import promotion measures, first announced in October 1993 and renewed for FY2000, include tax incentives, a financing programme, import promotion activities by the Japan External Trade Organization (JETRO) 11164, improvements in infrastructure, and the Trade Promotion Cooperation Program between MITI and U.S. Department of Commerce (Table III.7). Budgetary costs and cost estimates in terms of forgone tax revenue in during FY1997-2000 are summarized in (Table III.8).

Table III.7Overview of Japan's import promotion policy, 2000

I. System of tax incentives for manufactured imports

a. Tax Credits for Manufacturers (Special depreciation was eliminated in 1999)

II. Policy financing measures for the promotion of imports

a. Financing Program for Import Facilities Enhancement (Development Bank of Japan)

b. Financing Program for Manufactured Imports (Japan Bank for International Cooperation)

c. Import Promotion Credit Line (Japan Bank for International Corporation)

d. Loans to Facilitate Imports (Small Business Finance Corporation, National Life Finance Corporation)

e. Prepayment Import Insurance

III. JETRO's import promotion activities

a. Senior Trade Advisor

b. Import Product Specialist

c. Inviting Business People to Japan

d. Program to Provide Local Training to Foreign Business People

e. Business Support Center

f. Local (Integrated) Import Promotion Center

g. Support Program for Export-to-Japan Campaigns

h. Regional Import Promotion Activities

i. Program to Promote Housing Imports

j. Program to Promote Imports of Automobiles and Automotive Parts

k. Survey on the Actual Conditions Regarding Access to Japan

IV. Establishment of foreign access zones (FAZs)

V. Import Board

a. Vision of Improvements in Accessing the Japanese Market

VI. Office of Trade and Investment Ombudsman (OTO)

a. Market Access Ombudsman Council

VII. Trade Promotion Cooperation Program (TPCP)

VIII. Measures to stimulate consumer demand

a. Designation of "Import Promotion Month"

b. MIPRO's support to consumers' imports

IX. Government procurement of foreign products

a. Action Programme for Government Procurement



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Table III.8Total budget for Japan's import promotion programmes and forgone tax revenues, FY1997-2000(¥ billion)

FY1997 FY1998 FY1999 FY2000

1. Total budget for import promotion programmes 7.0 7.2 6.8 6.6

FAZ related budget 0.67 0.68 0.60 0.51

JETRO import promotion related budget 6.3 6.5 6.2 6.0

2. Forgone tax revenues (Special Incentives Measure for the Promotion of Manufactured Product Imports): total amount of tax

breaka

19.0 25.0 14.0 ..

.. Not available.

a MOF's estimated value, not based on accumulated data on tax breaks.


87. The main objectives of Japan's import promotion measures are to encourage domestic producers and distributors to switch to imported products, by subsidizing transition costs, and to encourage foreign exporters and investors to increase their presence in Japan by subsidizing entry costs.11265 Tax incentives offered under Japan's import promotion programmes are applied only to manufactured products already entering Japan on a duty free basis.11366

88. Although MITI believes that these programmes have been effective, no rigorous cost-benefit analysis has been undertaken. Data from MITI, however, do indicate that imports of manufactured goods eligible for tax incentives increased more than 5% faster than Japan's total imports in FY1990 and FY1991 (the latest available data provided by the authorities).

89. In FY1998, the tax incentive for manufactures, comprising a tax credit and special depreciation, was initially extended for two years; the special depreciation was abolished in FY1999 owing to insufficient use; in FY2000, the tax credit system was extended for another two years, with a reduction in the amount of tax credits. The provision of low interest loans under the Financing Program for Import Facilities Enhancement, the Financing Program for Manufactured Imports, and Loans to Facilitate Imports was extended until the end of FY2000.

(iii) Investment regulation and promotion measures90. In FY1997, foreign-affiliated firms accounted for 1.4% of total sales in Japan, 0.6% of employment in all incorporated companies and 14.2% of total imports.11467 The value of inward direct investment in Japan increased by 79% in FY1998, amounting to ¥2.4 trillion, which is about one third of the level of Japan's foreign direct investment (FDI) abroad. The size of the stock of inward FDI in 1996 was 0.7% of GDP.11568

(a) Regulatory regime91. Inward and outward FDI is governed mainly by the Foreign Exchange and Foreign Trade Law, as amended in 1998, together with relevant cabinet and ministerial ordinances.11669 Inward FDI generally requires ex post facto reporting to the Minister of Finance and the Minister in charge of the industry involved within 15 days of executing a foreign investment in Japan.11770 Prior notification is, in principle, required for inward FDI in industries recognized in the OECD Code of Liberalization of Capital Movements, such as agriculture, forestry and fisheries, petroleum, leather and leather products, investment trust management11871, air and maritime transport. In addition, some other sectors require prior notification on the grounds of public order and national security.11972

92. Besides the notification requirements, various other laws stipulate specific restrictions on inward FDI in sectors such as real estate, fisheries, financial services, telecommunications, and transport. For example,


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the 1926 Alien Land Law outlines reciprocity restrictions with respect to acquisition of land properties in Japan; the 1967 Law for Regulation of Fishing Operation by Foreign Nationals prohibits foreign nationals and foreign-controlled enterprises from engaging in fishing, and restricts the extent to which foreign-controlled vessels may engage in fishing-related activities in Japan12073; reciprocity requirements exist in banking and other financial services under the Banking Law12174; cabotage in maritime transport is generally prohibited12275; and in the air transport sector, foreign participation in equity and management is restricted.12376

93. Although a notified inward FDI project may be rejected by the Government, the authorities state that this has never happened.12477 The reasons for rejection (implicit in relevant articles of regulations applied) of each FDI proposals are made public.

94. Major changes since the previous Review in the regulatory framework related to FDI into Japan include: the introduction of ex post facto reporting for mining (instead of prior notification) and the elimination of reporting requirements when foreign corporations change their business to sectors that do not require prior notification12578; the elimination of the limits on foreign capital participation in all Type-I (facility-based) telecommunications carriers, except for the Nippon Telegraph and Telephone Corporation (NTT)12679; the abolition in June 1999 of the regulations on foreign investment and employment of non-Japanese officers in the cable television industry (Chapter IV(5)(iii)); and the 1998 relaxation of restrictions on the operation of foreign lawyers in Japan (Chapter IV (5)(v)).

(b) Investment promotion measures95. The framework of Japan's promotion measures for inward FDI has remained generally the same since its previous Trade Policy Review. The 1992 Law on Extraordinary Measures for the Promotion of Imports and Facilitation of Foreign Direct Investment in Japan, valid until 2006, its related ordinances, and other relevant legislation outline measures for investment promotion that mainly comprise tax incentives12780, financial support such as low interest loans and loan guarantees, and technical support (Table III.9). No estimates of the total budgetary cost of Japan’s investment promotion programmes, including forgone tax revenues were available to the Secretariat. One of the various eligibility criteria for most incentives requires participants be certified as "Designated Inward Investor".12881 A total of 151 economic sectors are open to approval as sectors for Designated Inward Investors12982; many sectors are excluded, however, including agriculture, leather, footwear, and many other low-productivity sectors.

Table III.9Measures for promoting imports and foreign direct investment into Japan, FY2000

I. Tax incentives – extension of loss carry-over periodDesignated Inward Investors can carry forward their operating losses for up to seven years in those accounting years ending no later than five years after the enterprise's founding. (Operating losses occurring from FY1994 to FY1999 can be carried over for up to 10 years.)

II. Loan guarantees through the Industrial Structural Improvement Fund (ISIF)Designated inward investors are entitled to obtain loan guarantees from the Industrial Structure Improvement fund when they obtain financing loans from private institutions. (Credit screening by the Industrial Structure Improvement Fund is required.)

III. Provision of low-interest financing from the Development Bank of Japan, etc.(a) Expanding eligible projectsFormer limitation that required establishment in one of six industrial high-tech fields was eliminated in 1996. Those projects establishing facilities (including land) for lease used by foreign companies and foreign affiliates with one third foreign ownership or more, or any company establishing office buildings in which the main tenants are non-Japanese businesses are eligible.

Table III.9 (cont'd)


Trade Policy Review

(b) Creating new loan programmes- Loan programme for promoting market entry of foreign-affiliated firms: in addition to the capital

investment finance, the new programme will finance related operating capital needs (e.g. rent for facilities, property tax, insurance premium).

- Loan programme for facilitating international cooperation between enterprises: if the foreign share in the company exceeds one third of total equity as a result of M&A, the company can obtain DBJ loans for capital investment afterward. Corporate alliances involving transfer of operations are also eligible for this loan programme.

IV. Import promotion measures(a) Tax reductions, applied to national and local taxes, for import-related businesses. Businesses undertaking activities to promote distribution of imported cargo (wholesalers, manufacturers, transporters or retailers dealing with imported goods) within specified zones for congregation in FAZ areas designated by the local governments of approved FAZ areas can make use of following tax reduction measures:

- Reduction of national taxes (Tax Incentives for the Promotion of Business Congregation within the FAZ Areas): businesses conducting activities to promote distribution of imported cargo are allowed a special depreciation with regard to certain machinery, facilities, buildings, etc. which have been acquired for their business use. (Special depreciation rate: 22% for machinery and facilities; 10% for buildings.)

- Reduction of local taxes: Businesses conducting activities to promote distribution of imported cargo are exempted from special landholding tax on the land for the facilities.

(b) Loan guarantees and exceptional measures provided by the Small Business Credit Insurance for import-related businesses: businesses undertaking activities to promote distribution of imported cargo (wholesalers, manufacturers, transporters or retailers dealing with imported goods) within specified zones for congregation in FAZ areas designated by the local governments of approved FAZ areas can make use of following loan guarantees and exceptional measures related to credit insurance:

- Loan guarantees through the (ISIF): loan guarantees are provided by the Industrial Structure Improvement Fund to businesses conducting activities to promote distribution of imported cargo to aid in borrowing necessary funds, including operation funds.

- Exceptional measures provided by Small Business Credit Insurance: exceptional measures are provided by the Small Business Credit Insurance to small and medium-sized companies conducting activities to promote distribution of imported cargo.

(c) Special financing measures for FAZ-related businesses: with regard to the DBJ financing programme for import facilities enhancement and the low-interest loans provided by the Japan Finance Corporation for Small Business to facilitate import sales, import-related businesses within the FAZ areas are able to receive loans with special conditions:

- DBJ (Financing Programme for Import Facilities Enhancement). Companies are eligible for this programme if the share of imported goods among their handling is 30% or more.

- Japan Finance Corporation for Small Business (Loans to Facilitate Import): wholesalers, retailers or manufacturers selling imported goods or using imported intermediate goods through their own offices in the FAZ facilities or contacts with businesses in the FAZ facilities are eligible for this programme up to ¥400 million.

V. Measures for small and medium-sized enterprisesTraining for administrative managers of foreign-affiliated firms: Institute of the Japan Small Business Corporation offers training programmes on personnel management and business practices in Japan, etc. for administrative managers etc, of small and medium-sized foreign-affiliated firms. The participants are subsidized on two thirds of the training fee.

VI. Venture support measures(a) Loan guarantees for loans using collateral of intellectual property rights for venture enterprises: the ISIF provides loan guarantees for up to 80% (usually 70%) of business funds, and does not require a guarantee backer of a capitalized enterprise if the collateral of the loan is intellectual property rights.(b) Investment for venture enterprises: in addition to a company that has been operating or has submitted an application for a patent less than five years earlier (currently three years), a company that establishes know-how in five years is able to take investments from the New Business Investment Company Limited.


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(c) Introducing a stock option system: the Government of Japan expands the term of exercise for the company's executives or employees to accept new stock shares of the company at lower price than others, based on the resolution of a general meeting of stockholders, from six months to within ten years.


96. The Development Bank of Japan (DBJ) has programmes providing low-interest loans to foreign companies and foreign affiliates.13083 A total of ¥13.4 billion was loaned (involving 15 cases) in FY1998, and ¥10.8 billion (17 cases) in FY1999.

97. Changes in investment promotion measures since Japan's previous Trade Policy Review include the introduction in January 1998 of special low-interest loans by DBJ for all sectors that make green-field investment in Japan, and the lowering in April 1997 of foreign capital ratio requirements for foreign affiliated companies to qualify for low-interest loans provided by DBJ. In April 2000, the carry-forward period of losses for Designated Inward Investors was reduced from ten years to seven years.

98. The Expert Committee of the Japan Investment Council (JIC), a ministerial level council established in July 1994, accepts requests and opinions concerning the investment environment in Japan. The budget of JIC for FY2000 is ¥24.1 million. On 27 April 1999, JIC issued a statement titled "Toward an Age of Diversified Ideas through Foreign Direct Investment in Japan". The statement highlighted the Government's efforts to improve the investment climate in Japan, pointing out lowered investment costs, notably land prices, and an increasing trend in FDI into Japan; a report by the JIC Expert Committee, which the JIC statement took into account, summarized the significance of FDI in Japan and provided background to the recent increase in inward FDI.13184

99. The provisions of bilateral investment treaties (BITs) also regulate investment policy. Since the previous Trade Policy Review, Japan has concluded two additional BITs, with Bangladesh (in 1999) and Russia (in 2000), bringing the total to seven.13285

(iv) Foreign access zones (FAZs)100. By January 1999, Japan had approved a total of 22 foreign access zones (FAZs) (Table AIII.11). Since 1997, no additional FAZs have been approved, while nine FAZ facilities have started operations. The zones are a major component of Japan's import and investment promotion schemes, and are intended to serve as centralized locations for import-related operations and facilities, as well as to streamline the internal distribution of imported cargos. FAZs are organized by "third-sector" companies set up with public and private funds to provide facilities for distribution, processing, wholesale, business support, exhibitions and conventions. FAZs must include a seaport or airport. FAZs are also intended to facilitate customs clearance of imports by, for example, applying simplified bonded warehouse procedures. Companies located in FAZs may benefit from incentives including tax breaks and low-interest loans. In 1997, Japan's imports and exports through FAZs accounted for 33% and 40% of its total imports and exports.

(4) Measures Directly Affecting Exports

(i) Export taxes and other charges101. Japan has no export taxes or levies. Exports are normally exempt from consumption tax.

(ii) Export restrictions, licensing, and cartels102. Export controls implemented in Japan are defined in the Foreign Exchange and Foreign Trade Law and the Export Control Order. Goods requiring permission from the Minister of International Trade and


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Industry for exportation include certain seeds, endangered animals and plants specified in international treaties; narcotics; designated art works; false currencies; and other products involving criminal offences in Japan. Export controls are maintained to ensure national security and public safety and to ensure adequate domestic supplies of certain agricultural and other primary products.13386 Changes in Japan's export controls since its previous Review concern the elimination of the export approval system of cocoon, silkworm eggs and silk waste in 1998, and that of rice in 1999. Exports of crude oil, volatile oil, paraffin oil (including jet fuel oil), gasoline, heavy oil, and liquid petroleum gas are restricted under the provisions of the Foreign Exchange and Foreign Trade Law.

(a) Voluntary export restraints103. The authorities indicate that by the end of 1999 Japan had eliminated its only remaining voluntary export restraint (VER), on its car exports to the European Union.

(b) Export cartels104. The authorized cartels for the export of pearls was abolished on 1 January 1999, as a consequence there are no longer any authorized export cartels in Japan.

(iii) Export promotion schemes (a) Subsidies and tax concessions105. The authorities indicate that Japan has no subsidy or tax concession schemes to promote its exports.13487

(b) Export finance, insurance and guarantees106. Long-term official export credits for exports of plant and technology to developing countries are handled by the Japan Bank for International Cooperation (JBIC).13588 In FY1998, JBIC made 59 export loans of ¥379.8 billion in total. The main sectors assisted by the loans included power and telecommunications. Export credits provided by the JBIC meet the terms and conditions of the OECD Arrangement on Exports Credits. Standard forms of export credit extended by the JBIC include supplier credits, buyer credits, and bank-to-bank loans.

107. MITI, through its Trade Insurance Division, operates insurance schemes to protect exporters against risks not covered by existing private insurance institutions.

(c) Export promotion schemes108. The Government has provided little funding for export promotion and marketing assistance, which used to be handled by the Japan External Trade Organization (JETRO) until the mid 1980s. JETRO now focuses mainly on import and inward-investment promotion schemes.

(5) Measures Affecting Production and Trade

(i) Taxation and tax-related assistance(a) Indirect taxes109. A consumption tax (value-added tax) of 5% is levied on goods and services transactions in Japan.13689 Revenues from this and other indirect taxes, including excise taxes applied mainly to liquor, tobacco, gasoline, and automobiles, accounted for 37.3% of total central government revenue in FY1998; the consumption tax accounted for more than half of the indirect tax revenue (Table III.10).

(b) Direct taxes110. Revenue from personal income tax and corporate income tax in FY1998 accounted for 33.2% and 22.3% of the total tax revenue of central government, respectively. The reduction of marginal rates of corporate and individual income tax took place in FY1998 and FY1999. As a result, the effective rate of corporate tax, including local taxes, was lowered from 49.98% in FY1997 to 40.87% in FY1999, and the


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highest marginal rate of personal income tax from 65% to 50%.

111. The tax reform in FY2000, which was adopted in March of that year, did not include further reduction of corporate or individual income taxes compared to the FY1999 regime.

(c) Tax incentives112. In order to achieve various policy objectives, including investment in certain equipment to address environmental concerns and stimulate demand, Japan has a complex system of tax breaks, which are described in the Special Taxation Measures Law; this has been amended annually. Estimates of the amounts of tax revenues forgone as a result of these and other tax measures do not appear to be publicly available; clearly, publication of such estimates along the lines of practices in many other OECD countries would enhance fiscal transparency in Japan.13790 The FY2000 amendment included special taxation measures, concerning public welfare, the energy sector, and housing.

Table III.10National government tax revenue, FY1998(¥ billion)

Tax Item FY1998

Amount Per cent of total

Direct taxes 30,339 59.3

Income tax 16,996 33.2

Corporate tax 11,423 22.3

Inheritance tax 1,916 3.7

Land value tax 4 0.0

Indirect taxes 19,093 37.3

Consumption tax 10,074 19.7

Liquor tax 1,898 3.7

Tobacco tax 1,046 2.0

Gasoline tax 1,998 3.9

Liquefied petroleum gas tax 14 0.0

Aviation fuel tax 90 0.2

Petroleum tax 477 0.9

Motor vehicle tax 817 1.6

Custom duty 869 1.7

Tonnage duty 9 0.0

Other 193 0.4

Stamp tax 1,608 3.1

Special taxes 1,766 3.4

Local road taxa, b 285 0.6

Liquified petroleum gas taxa, b 15 0.0

Aviation fuel taxa, b 17 0.0

Motor vehicle tonnage taxa, b 272 0.5

Special tonnage tax 11 0.0

Customs duty on oila 52 0.1

Promotion of power resources development taxa 357 0.7

Gasoline taxa 665 1.3


Trade Policy Review

Special tobacco tax 93 0.2

Total 51,198 100.0

a Taxes whose revenues are distributed to special accounts.b Taxes whose revenues are distributed to local governments.


(d) Bilateral tax treaties113. As of 31 March 2000, Japan maintains tax treaties with Armenia13891, Australia, Austria, Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic13992, Denmark, Egypt, Fiji14093, Finland, France, Georgia, Germany, Hungary, India, Indonesia, Ireland, Israel, Italy, Republic of Korea, Kyrgyz, Luxemburg, Malaysia, Mexico, Moldova, the Netherlands, New Zealand, Norway, Pakistan, the Philippines, Poland, Romania, Russia, Singapore, Slovak Republic, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Turkey, Turkmenistan, Ukraine, the United Kingdom, the United States, Uzbekistan, Viet Nam, and Zambia.

(ii) Subsidies and other financial assistance114. Energy and mining, agriculture, and small and medium-sized enterprise (SME) have accounted for the majority of the subsidies notified by Japan since 1998 (Table AIII.12).14194

(iii) State-owned companies and privatization115. There are several sectors where the state retains stakes in major companies through which it can directly affect production and trade (Table AIII.13).

(iv) Trade-related investment measures116. Japan has not notified any measures under the WTO Agreement on Trade-Related Investment Measures (TRIMs); the authorities state that Japan has no TRIMs inconsistent with the Agreement.14295

(v) Trade-related intellectual property rights117. Japan is a founding member of the World Intellectual Property Organization (WIPO), and a signatory to most major treaties regarding intellectual property rights (IPRs). Japan's major IPR-related laws and regulations have been notified to the WTO (Table III.11).14396 The authorities consider that Japan's IPR-related laws and regulations fully comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights.

(a) Scope of IPRs and examination procedures118. Recent changes in Japan regarding IPRs include a 1998 amendment to three IPR-related laws, i.e. the Patent Law, the Design Law, and the Trademark Law, effective in January 1999, with the aim of further strengthening the protection of IPRs in Japan. The amendment included additional measures against patent infringements.14497 A 1999 amendment to the IPR-related laws, which entered into force in January 2000, includes shortening of the period for requesting patent examination from seven years to three years, improvement of the registration system for patent term extension as well as reduced patent fees.14598 The Copyright Law was amended in June 1999 with a view to, inter alia, complying with the 1996 World Intellectual Property Organization (WIPO) treaties; the amendment includes the regulation of the circumvention of technological measures such as copy protection, the regulation of alteration of rights management information, the establishment of the rights of distribution, the extension of the right of presentation, and the elimination of a transitory provision with regard to the exception to the right of public performance by the use of sound recordings. The amendment entered into force on 1 January 2000. On the protection of trade secrets, a new Civil Proceedings Act entered into force in 1998; the new Act allows only parties of the litigation to access trade secrets involved.14699


Trade Policy Review

Table III.11Legislation regarding intellectual property rights protection in Japan

Specific intellectual property rights Relevant legislation Agencies responsible for the administration of law

Copyright and related rights Copyright Law Agency for Cultural Affairs, MOE

Trade marks Trademark Law Japanese Patent Office, MITI

Patents Patent Law – Utility Model Law Japanese Patent Office, MITI

Plant variety rights Seeds & Seedling Law Ministry of Agriculture, Forestry & Fisheries

Patent Law Japanese Patent Office, MITI

Designs Design Law Japanese Patent Office, MITI

Geographical indications (Wines and spirits)The Special Measures Law concerning the Stability of Sake Brewing and Related Industries

National Tax Administration

Layout designs of integrated circuits Law concerning the Circuit Layout of Semiconductor Integrated Circuits

Japanese Patent Office, MITI

Protection of undisclosed information Unfair Competition Prevention Law MITI

Control of anti-competitive practices Anti-Monopoly Act Fair Trade Commission

Unfair Competition Prevention Law MITI

Civil and administrative enforcement remedies

Code of Civil Procedure – Law of Civil Execution Ministry of Justice

Patent Law – Utility Model Law Japanese Patent Office

Design Law Japanese Patent Office

Trademark Law Japanese Patent Office

Law concerning the Circuit Layout of Semiconductor Integrated Circuits

MITI

Anti-Monopoly Act Fair Trade Commission

Border measures Customs Tariff Law Ministry of Finance

Export & Import Trading Law MITI


119. Recent trends in patent, design and trade mark applications are presented in Table III.12. According to the authorities, JPO has made efforts to speed up the examination of IPR-related applications by promoting mechanization, entrusting research to outside agencies, and by increasing the number of examiners (Table AIII.14). The average "first action" period for patents was reduced to 19 months in 1998, from 21 months in 1997; similarly, average "first action" periods for trade marks and designs were reduced to 17 months and 18 months in 1998, from 21 months and 19 months in 1997, respectively.147100 The JPO has taken measures to reduce the pending period of design examination and wishes to reduce the average first action period for design applications to 12 months by the end of 2000.

Table III.12Patent, utility model, design, and trade mark applications filed and registered, 1995-98

Patent Utility model Design Trade mark Total

Applications filed

1995 369,215 15,662 40,067 179,689 604,633

(34,603) (1,357) (1,810) (22,899) (60,669)

1996 376,615 14,082 40,192 188,160 619,049


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(36,514) (1,254) (1,736) (24,642) (64,146)

1997 391,572 12,048 39,865 133,116 576,601

(40,765) (1,331) (2,099) (18,727) (62,922)

1998 401,932 10,917 39,352 112,469 594,670

(42,551) (1,248) (2,012) (15,624) (61,435)

Registrations

1995 109,100 77,732 34,887 144,911 366,630

(14,296) (2,494) (1,325) (8,028) (26,143)

1996 215,100 95,481 35,495 178,251 524,327

(37,419) (2,072) (1,494) (12,707) (43,692)

1997 147,686 50,108 37,418 253,272 488,484

(17,749) (1,717) (1,574) (31,442) (52,482)

1998 141,448 35,513 36,264 132,066 345,291

(15,744) (1,510) (1,382) (17,171) (35,807)

Note: Figures in parenthesis indicate the number of applications filed by and registrations granted to foreigners.


(b) International harmonization and cooperation120. Progress on international harmonization of application and examination procedures related to IPRs, has been made concerning, inter alia, patents and trade mark and industrial designs. In particular, Japan has participated in the discussions in the Standing Committee on the Law of Patents, regarding the Patent Law Treaty, which aim to harmonize patent application procedures. Moreover, Japan amended the Trademark Law in 1999 to accede to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, to facilitate and expedite the process for enterprises to acquire trade marks; the amendment entered into force on 14 March 2000. Japan has also been studying the possibility of acceding to the Geneva Act (New Act) of the Hague Agreement Concerning the International Deposit of Industrial Designs, and has taken part in the Professional Committee Responsible for the Development of the Hague Agreement as well as the Diplomatic Conference for the Adoption of a New Act of the Hague Agreement, held in June 1999.

121. The JPO authorities maintain cooperative bilateral relations with U.S. and European patent authorities to solve common problems. Major programmes in this regard include: a comparative study of patent examination practices in the field of advanced technologies; examiner exchanges; the assessment of search and examination results of each authority; the development of the Trilateral Network for data exchange concerning administrative and technical patent data; and the establishment of a trilateral website.

(c) Enforcement122. Statistics detailing Japan’s efforts since 1990 to combat violations of intellectual property rights at the border are provided in Table III.13.148101 Infringement of IPRs, such as patents, exclusive licences, or trade marks or the use of false marking may result in either imprisonment or a fine.149102

Table III.13Suspension of imports likely to infringe intellectual property rights, 1990-99

Category Main items 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

(A) Products concerned (1,000 units)

Shoes Sports shoes (tennis shoes, sneakers)

21 17 22 13 5 0.2 12 7 0.5 49

Bags Handbags, purses 29 38 58 304 245 309 161 148 37 54


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Clothing T-shirts, sweatshirts, raincoats, scarfs

140 110 91 211 445 290 359 861 476 658

Sports equipment Golf equipment, ski equipment

6 21 2 0 22 8 0 4 0.9 0

Watches Wristwatches, pocket watches

62 7 10 1 5 44 3 76 226 32

Smoking equipment

Lighters 28 10 3 0.05 0.3 8 6 5 0 32

Toys Stuffed animals, mini-cars

366 175 108 48 80 122 10 0.5 11 40

Others Household goods, key holders, cosmetics

652 400 147 110 389 372 366 492 255 129

Total 1,305 779 441 687 1,191 1,153 917 1,594 1,006 994

(No. of cases) (6,114) (1,274) (767) (676) (826) (1,550) (3,996) (2,136) (1,689) (1,972)

(B) Types of violation (Number of cases)

Patent rights 1 2 1 4 9 9 4 1 0 0

Utility rights 9 7 2 18 52 29 22 5 3 1

Design rights 47 35 77 117 196 194 107 104 58 32

Trade mark rights 5,957 1,154 618 390 445 1,114 3,240 1,675 1,437 1,719

Copyright 100 76 64 123 125 73 113 63 22 65

Total 6,114 1,274 762 652 827 1,419 3,486 1,848 1,520 1,807

.. Not available.

Note: Cases involving hand baggage and unaccompanied baggage are excluded.Each violation is counted for cases violating more than one intellectual property right.


(d) Parallel imports123. The authorities indicate that there is no legislation prohibiting parallel imports into Japan of products subject to intellectual property protection. In addition, a Japanese Supreme Court decision of 1 July 1997 did not prohibit the import of patented products except for cases where individual sales contracts prohibited it; this particular prohibition is enforced at the border by the Customs service, which examines relevant individual contracts and products.

(vi) Deregulation and regulatory reform124. Since its previous Trade Policy Review, Japan has continued to pursue its deregulation initiatives, mainly through the new Three-Year Program for Promoting Deregulation (TYPPD), first adopted on 31 March 1998, and effectively replacing the Deregulation Action Program (DAP), which was first formulated in March 1995. The TYPPD initially listed 624 measures, including 327 newly added measures, such as the elimination of the foreign equity restriction in cable television business, deregulation in port transport business, and deregulation in the sales of certain medicines. TYPPD was revised twice, in March 1999 and March 2000. The 1999 revision included 248 new measures, such as a review of the electricity supply system, and the 2000 revision included 351 new measures. The revisions were conducted in the light of opinions and requests from domestic and foreign entities, as well as opinions from the Regulatory Reform Committee.

125. The direction of reform contained in the TYPPD is largely the same as that of the DAP. In particular, it envisages the creation of a free and fair socio-economic system fully open to the international community, and a general shift from ex ante regulatory-type administration to ex post facto monitoring of compliance.


Trade Policy Review

The TYPPD also prompted a "horizontal" review of deregulation across sectors; these reviews encompass entry regulations (inter alia, with a view to removing barriers affecting the entry of foreign companies and products into the Japanese market), approval and notification requirements, certified qualification systems, standards and certifications, examination procedures and criteria regarding licensing and approval, the enforcement of the Administrative Procedures Law (Chapter II(2)(i)), "public comment" procedures, and the examination of regulations to be introduced. The TYPPD also calls for active development and enforcement of competition policy.

126. The main sectors covered in the TYPPD include housing, land and public works, information and telecommunications, distribution, transportation, financial services, energy, explosives and combustibles, education, medical care and welfare, and legal affairs; the TYPPD also contains measures related to standards and certification, employment and labour, environment, disaster prevention, and safety.

127. Other programmes for deregulation and regulatory reform include the Action Program for Economic Structural Reform, announced in May 1997, which contains individual action programmes related to the Program for Economic Structural Reform, announced in December 1996.

128. Proposals for deregulation are formulated by the ministries and agencies in charge of the applicable regulation; the Management and Coordination Agency compiles the whole TYPPD, generally in line with the items submitted by the ministries and agencies. The proposals and items listed in TYPPD range from concrete measures, including amendments to laws and ordinances aimed at eliminating market entry regulations for foreign investors (e.g. in cable television services), to statements simply proposing to launch reviews of certain regulations in the future.

129. The authorities appear to favour intensifying the process of deregulation to achieve a steady economic recovery; this view is supported by, for example, Keidanren, a major association of corporations in Japan. According to data published by Keidanren, 12.2% of the requests it had made to the Government for the March 2000 revision of the TYPPD were fully included and 25.9% partially included, while no relevant measures were included concerning 61.9% of the requests.

(vii) Competition policy and regulatory issues (a) Recent developments130. As noted in the previous Trade Policy Review of Japan, several aspects of Japan's competition policy – most notably enforcement issues – continue to be of major concern for trading partners.150103 The Government acknowledges this concern and, in accordance with the Government's commitments in the TYPPD, the Japanese Fair Trade Commission (JFTC) has introduced various measures to strengthen competition policy. These include the publication of guidelines concerning patent and know-how licensing agreements under the Anti-Monopoly Act (AMA), and mergers and acquisitions. It has also increased its efforts to enforce the AMA since the previous Trade Policy Review.

131. In international fora, Japan is an active participant in the WTO Working Group on the Interaction between Trade and Competition Policy, and in OECD committees and working groups established to increase cooperation in competition policy.151104 Japan has also included various competition-related measures in its APEC Individual Action Plan. In 1999, an Agreement Between the Government of Japan and the Government of the United States of America Concerning Cooperation on Anticompetitive Activity, Japan's first bilateral anti-trust agreement, was signed.

132. As part of a comprehensive administrative reform, scheduled to take place on 1 January 2001, the JFTC is to become a part of the Ministry of General Affairs, which also includes regulators of telecommunications services.


Trade Policy Review

(b) Exemptions from the AMA prohibition of cartels133. The AMA contains a provision exempting natural monopolies from its general prohibition of cartels. It also contains provisions exempting the enforcement of intellectual property rights, activities of cooperatives, and resale price maintenance of copyrighted work. In addition, provisions authorizing certain cartels are incorporated into other laws, including the Insurance Business Law and the Export-import Trading Law (Table III.14). In recent years, the Government has steadily reduced the number of authorized cartels, most of which are found in services sectors. In July 1997, 35 exemption systems under 20 individual laws were abolished or reduced in scope by the enactment of the Omnibus Act to Repeal and Reform Cartels and other Systems Exempted from the Application of the Anti-Monopoly Act under Various Laws. An Act entered into force in July 1999 eliminating exemption systems (i.e. depression cartels and rationalization cartels), abolishing the AMA Exemption Act, and amending other laws With the enactment of the above-mentioned laws and amendments, the number of exemption system is to be decreased from 89 systems under 30 laws at the end of FY1996 to 22 systems under 16 laws at the end of FY2000. In May 2000, the AMA was amended to eliminate Section 21, which had exempted natural monopolies in public utilities; this amendment reflected the recent liberalization of the electricity and gas sectors (Chapter IV(3)(ii) and (iii)).

Table III.14Exemptions from the Anti-Monopoly Act, FY2000

Relevant ministries and agencies Legislation System

1. Exemptions under the AMA (3 systems)Japan Fair Trade Commission Section 23 Enforcement of intellectual property

rightsSection 24 Activities of cooperativesSection 24-2 Resale price maintenance contracts

2. Exemptions under various individual laws (19 systems under 15 laws)Ministry of Justice Cooperation Reorganization Law Acquisition of shares of companies

under reorganizationMinistry of Finance Insurance Business Law Insurance cartels

Law Concerning Non-Life Insurance Rating Organizations

Rating of standard ratio concerning compulsory automobile insurance and earthquake insurance

Law Concerning Liquor Business Associations and Measures for Securing Revenue from Liquor Tax

Rationalization cartels

Ministry of Education Copyright Law Cartels on fees for secondary use of commercial phonograph

Ministry of Health and Welfare Law on Concerning Coordination and Improvement of Hygienically Regulated Business

Cartels to prevent excessive competition

Ministry of Agriculture, Forestry and Fisheries

Agriculture Cooperative Association Law Central Associations of Agriculture CooperativesCorporation of Farmers' cooperative organization

Ministry of International Trade and Industry

Export-import Trading Law Cartels on exports by exporters and exporters' trade associations

Law Relating to Organization of Small and Medium-Sized Business Associations

Economic business by cooperatives

The Cooperative Societies of Minor Enterprises Act

Central Associations of Small and Medium Business Groups

Law on Investment Companies for the Development of Small and Medium-sized Companies

Underwriting and possession of shares of small and medium-sized companies

Ministry of Transport Marine Transportation Law Maritime transportation cartels (coastal shipping)Maritime transportation cartels (ocean shipping)


Trade Policy Review

Road Transportation Law Transportation cartelsCivil Aeronautics Law Aviation cartels (domestic)

Aviation cartels (international)Coastal Shipping Association Law Coastal shipping cartels

Joint shipping cartels


(c) Private remedies134. Though only the JFTC may currently enforce injunctions against violation of the AMA, a May 2000 amendment to the AMA introduced a private remedy system, which will be in force in 2001; a private party who has suffered or is likely to suffer serious damage due to "unfair trade practices" that seemingly violate the AMA will be able to bring a case to court for injunction against alleged violators.

(d) Resale price maintenance system135. Since the previous Trade Policy Review, Japan has not changed the AMA exemption for the resale price maintenance (RPM) system, although the Government has adopted various Cabinet Decisions to review the system, currently applied to books and magazines, newspapers, music CDs, music cassettes and records. On the basis of these decisions, the JFTC has held meetings of a study group on government regulations and competition policy to review RPM issues since February 1997; the group submitted its report on 13 January 1998. In response to the report, the JFTC made public the following conclusions on 31 March 1998:

- in the light of competition policy, the RPM exemption for copyrighted works must be reviewed with a view to repealing the exemption. However, the RPM exemption for copyrighted works has a function of disseminating copyrighted materials and promoting culture, and further study and review of the scheme is needed to ascertain the effects of its repeal; and

- the goods subject to the RPM scheme must be limited to six items: books and magazines, newspapers, music CDs, music cassettes and records.

136. On 2 December 1998, and 28 December 1999, the JFTC released reports on relevant industries' efforts to address the problems under the current RPM scheme. The authorities indicate that the JFTC is to reach a conclusion on whether to repeal the exemption for RPM system on copyrighted works by spring 2001.

(e) Holding companies, and mergers and acquisitions (M&As)137. The establishment of holding companies had not been allowed until recent amendments to the AMA. Article 9 of the AMA was amended in June 1997, and made effective in December 1997, to allow the establishment or transformation of an existing company into a holding company that is not deemed to constitute an "excessive concentration of economic power".152105

138. Against the background of a recent decline in the number of M&As and the need for corporate restructuring, the Government hopes to facilitate M&As (Tables III.15, AIII.15, and AIII.16). In May 1998, the AMA was amended to reduce the scope of notification and reporting requirements concerning stockholding and mergers.153106 The amended AMA also enables the JFTC to investigate M&As conducted outside Japan and modifies notification requirement concerning M&As in Japan involving foreign companies.154107 The Commercial Code was amended in August 1999 to introduce a system that allowed shares swaps between existing companies155108; the system apparently reduced procedures for establishing a holding company by consolidating existing companies through share swaps. Such share swaps would enable one company to acquire another without incurring transfer taxes. The authorities did not indicate whether foreign as well as Japanese companies could take advantage of this arrangement.


Trade Policy Review

Table III.15Merger and acquisition notifications, 1995-99

1995 1996 1997 1998 1999

Mergers 2,520 2,271 2,174 1,514 151

Acquisitions of business, etc. (No. including foreign affiliates) 1,467 1,476 1,546 1,176 179

Total 3,987 3,747 3,720 2,690 330

Note: As the amended Anti-Monopoly Act was effective from 1 January 1999, the scope of notification requirements concerning merger and acquisitions was reduced.


139. To ensure transparency concerning the enforcement of the Act, the JFTC published guidelines in December 1998 concerning situations where M&As may be considered to substantially restrain competition.156109 On the basis of these guidelines, the JFTC accepts prior enquiries and consultations from companies as to whether planned M&As might contravene the AMA. With a view, in part, to further facilitating M&As, the Government is currently discussing how tax consolidation might be introduced in Japan.

(f) Bilateral arrangement 140. On 7 October 1999, Japan and the United States signed a bilateral anti-trust agreement; the agreement took effect on the same day.157110 The agreement includes a requirement for the competition authority of each party to notify enforcement activities that may affect the important interests of the other party. The agreement also provides for cooperation and coordination with regard to enforcement activities of both parties, and positive comity.158111

(g) Enforcement141. In order to ensure transparency and enhance deterrence, the JFTC makes public all formal actions, including recommendations and surcharge payment orders. The Government made efforts to strengthen staffing and the budget of the JFTC; budgetary allocations have been increased by about 2% per annum since FY1997, and the number of investigation-department personnel has risen from 248 in FY1997 to 263 in FY2000. The JFTC appears to have no mandate to take action against anti-competitive administrative measures initiated by other ministries and agencies. The 1999 Industrial Revitalization Law prescribes that, if a "business restructuring plan" includes merger, joint development and production of new goods by, inter alia, two or more firms, JFTC can provide opinions to the relevant minister on whether there is a problem under the AMA in implementing such a plan, in response to the relevant minister's inquiry.

142. Data involving investigations by JFTC of alleged AMA violations and legal measures taken are summarized in Table III.16. Of the 93 complete cases investigated in FY1999, 27 cases resulted in legal measures. Of these 27 cases, 18 were concerned with bid-rigging in public procurement of goods and services, including garbage incinerators, petroleum products, and bridge-painting; the other nine cases involved private monopolization, price cartels, unfair trade practices and private sector regulation (min-min kisei).

Table III.16Enforcement statistics related to competition policy, 1995-99

Details Fiscal Year

1995 1996 1997 1998 1999a

(A) Cases in which legal measures were taken against acts prohibited by the Anti-Monopoly ActNumber of legal measures 31 21 31 27 27

Private monopoly 0 1 3 1 1Cartels 24 15 19 19 20


Trade Policy Review

Price cartels 4 10 3 1 1Collusive tendering 20 5 16 17 18

Other types of cartelsb 0 0 0 1 1

Unfair trading practices 4 2 9 6 3Others 3 3 0 1 3(B) Surcharge payment orders (¥ billion)Payment order

Number of cases 24 14 16 16 16Number of enterprise operators 741 368 369 576 315Surcharge amount 6.45 7.49 2.83 3.15 5.96

Decision to initiate hearings 0 2 1 2 1(C) Recently processed investigation casesCases investigated

Carry-over from the previous fiscal year 70 68 70 45 50New cases begun during the current fiscal year 128 112 155 125 82

Total 198 180 225 170 132Processed CasesLegal measures

Recommendation 26 19 30 27 26

(Decision to commence hearing)c (2) (3) (4) (3) (6)

Surcharge Payment Orderd 5 2 1 0 1

(Decision to initiate hearing)c

Sub-total 31 21 31 27 27Others

Warnings 13 17 19 17 20Cautions 60 61 123 62 36

Discontinuede 26 11 7 14 10

Sub-total 99 89 149 93 66Total 130 110 180 120 93Carry-over to the next fiscal year 68 70 45 50 39Criminal accusations 0 (1) 1 0 1 (1) 1 (1)

.. Not available.a Data for FY99 are from April to December 1999.b Other types of cartels include restrictions on sales volume and restrictions on business clients.c Figures in () are cases in which the decision to commence hearing procedures has been made.d Cases in which surcharge payment orders were given without a recommendation.e Cases that have been discontinued due to lack of evidence of wrong-doing.


143. Under Section 8-4 of the AMA concerning measures against a monopolistic situation, the JFTC monitors highly oligopolistic markets, and may order measures to restore competition in the event of "undesirable market performance".159112 Under Article 2-7, a monopolistic situation is defined as a situation where the market share of a single enterprise is no less than 50%, (or 75% for two enterprises combined in a particular field of business), and where the annual total output of the business is no less than ¥100 billion; new entry into the market is conspicuously difficult and for a considerable period of time, (a) the price structure in the market is rigid or inflexible, and (b) profit or expenditure (e.g. on advertizing and marketing) is far in excess of standard levels in the industry. "Undesirable market performance" includes such factors as barriers to entry, extraordinary price increases or extremely high profit rates.160113 In 1999, a total of 24 industries were being monitored by the JFTC in respect to the presence of a monopolistic situation (Table III.17).

Table III.17Industries monitored by the JFTC with respect to a "monopolistic situation", 1995-99


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1995 1997 1999

Chewing gum X X

Beer X X X

Whisky X X X

Brandy X X X

Cigarettes X X X

Household synthetic detergent X

Photographic color film X X X

Photographic paper X X

Polished sheet glass X X X

Glass bulbs for cathode-ray tubes X X X

Tiles X

Fluorescent lamp X

Plasterboard X X

Tin cans (including aluminium cans) X X X

Shutters X X X

Cranes for construction X

Closed electric power distribution panels X

Charging generators X

Ventilators X X X

Incandescent light features for automobiles X X X

Fluorescent lamp fixture X X

Touch-tone telephones X X

Numerical controllers X

Medical X-ray equipment X

Transfer equipment X

Motorcycles X X X

Gasoline engines for motor vehicles X X X

Radiators X X X

Air-conditioners for transportation machines X X X

Table III.17 (cont'd)

TV game devices for family use X

Scheduled domestic passenger flights X X X

Domestic basic telecommunications X X X

International basic telecommunications X X X

Dust control X X X


(h) Keiretsu144. The JFTC regularly conducts surveys of the six major corporate groupings, namely Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, and Dai-ichi Kangyo Bank; the most recent report published was in October 1998. The most recent (1998) survey found that the member companies of these groups continued to maintain a certain degree of cross-share holding, financing, dispatching of executives within the member companies and close business transactions. On the other hand, ties among group members through capital, personnel and financing were loosening and the volume of business transactions within a group was decreasing. Nonetheless, the authorities believe it is necessary to continue to monitor the ties within those corporate groups in regard to personnel and capital, business transactions within the group, and the degree of


Trade Policy Review

concentration, as the groups include many leading companies in various industries.

(i) Distribution measures145. Since its previous Trade Policy Review, there has been a shift in Japan's legal framework pertaining to the distribution sector, particularly concerning the opening and expansion of large-scale retail stores. Unlike the previous legislation, which aimed to preserve business opportunities for small shop-owners, the new law, rather than regulating large shops, notably their floor space and opening hours, seeks instead to regulate their impact on the local environment. The Large-Scale Retail Store Law was thus abolished, and replaced on 1 June 2000 by the Law Concerning the Measures by Large-Scale Retail Stores for Preservation of Living Environment. Under the new law, businesses that wish to establish or expand store-structures with total retail space exceeding 1,000 square meters must notify local governments of their establishment or expansion plan161114, and the plan must go through public hearing and examination under the law before any recommendation by local government is issued and made public. Responsibility for adjusting facilities to ensure a sound environment for local residents, e.g. parking space and opening hours, is assigned (by law) to local governments with a view to maintaining living standards and environment. The Central Government has no formal enforcement mechanism against the decisions of local governments however, it provides, inter alia, technical assistance or recommendations. There is no appeals mechanism regarding the decisions associated with the new Large-Scale Retail Store Law; the authorities believe that such mechanism does not fit into the framework of the law, under which firms are only recommended to abide voluntarily by the decisions of local governments. According to the authorities, the new law does not include an economic needs test ("demand-supply adjustments") for retailers.

146. On 30 June 1999, MITI issued guidelines for entities wishing to open or expand a large-scale store; among the issues that entities are urged to consider are factors that may have an impact on the local environment (such as parking space, reduction of noise and waste).

147. On 23 May 2000, MITI established official contact points within its headquarters in Tokyo and at eight regional bureaux in order to receive questions and complaints from and give advice to any interested party regarding the law. MITI explained the purpose and content of the new law by holding meetings with prefectures and 12 major cities, and provided technical training to local governments; it has undertaken to provide necessary information regarding the implementation of the law.

148. The JFTC published a survey in July 1999 concerning transactions between large-scale retailers and suppliers. The survey found that from the competition policy perspective, these transactions had improved. However, remaining problems include return of unsold goods, request for cooperative payments, and lack of opportunities (from suppliers' viewpoint) to negotiate the prices of supplies.


(1) Introduction

1. Since Japan's previous Trade Policy Review, the Government has continued to pursue structural reforms to create a "free and fair" economy open to the international community, thereby fostering competition. These reforms pertain especially to the services sector.

2. In agriculture, Japan is moving away from price to income support. However, the sector remains relatively protected from foreign competition. The average tariff on agricultural imports remains high, tariff quotas can be intricate and domestic support applies to a number of products. As a consequence, the overall level of government assistance for agriculture (as measured by producer and consumer support estimates, for example) is well above the OECD average, and may have risen since 1997. The average annual amount of transfers to agriculture during the 1990s exceeded agriculture's contribution to GDP, which averaged roughly 1.5%. Despite this assistance, productivity in Japanese agriculture, although growing, remains low by


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national standards.

3. Japanese manufacturing has, by and large, traditionally been much more exposed to international competition than agriculture and certain services (except in the cases of prepared food products, tobacco, alcoholic beverages, textiles, footwear and headgear, and leather and leather products). Tariffs on manufactured goods are usually low; moreover, non-tariff barriers are few and the sector receives relatively little financial or other support from the Government. Nonetheless, manufacturing has been the driving force behind Japan's rapid development during the past 50 years. This is especially true for automobiles, robotics, video recorders, cameras and video games, where the Government has played a very small role other than to participate actively in multilateral trade liberalization. As in most other industrialized countries, however, manufacturing's contribution to Japan's GDP has been declining steadily; it currently accounts for 23.5% of GDP compared with 24.4% in 1997.

4. On the other hand, the share of services in Japan's GDP has been growing steadily; it accounted for roughly 65% in 1998. Japanese suppliers of services have by and large been considerably protected from foreign competition. Such protection has been provided not so much through border measures, but more through internal regulations (including licensing and restrictions on foreign investment), state-ownership of what were perceived to be "natural monopolies", and the Government's tolerance of anti-competitive private practices. In recognition of the growing importance of services, not just to consumers, but to all kinds of businesses for which services are essential inputs and therefore a significant determinant of their international competitiveness, and the fact that during the 1990s total factor productivity growth in the services sector lagged behind that in manufacturing, the Government's attention has focused increasingly on deregulation combined with the strengthening of competition laws and their enforcement. The high cost of services and other inputs can be a factor encouraging Japanese businesses to relocate abroad.

5. Deregulation and the promotion of competition have thus been two key elements of structural reform. Since it was first announced in March 1998, the Three-Year Program for Promoting Deregulation has been revised twice. Progress in this regard has been most notable in telecommunications and financial services. In the case of financial services, deregulation has gone hand in hand with the restructuring of Japan's financial institutions (Chapter I(3)(ii)). In addition, greater emphasis is being placed on ensuring the transparency of regulations, based on well-defined rules, and evaluating the costs and benefits. As discussed in Chapter III, however, concerns have been raised about the adequacy and effectiveness of competition policy in various service sectors as deregulation proceeds, notwithstanding the recent strengthening of competition laws and their enforcement; certain activities in several sectors, notably, maritime and air transport, are exempt from Japan's principal competitions law, the Anti-Monopoly Act (AMA).

(2) Agriculture

(i) Overview6. Agriculture accounts for a small and declining share of GDP, about 1.3% in FY1998. In absolute terms, Japan's agricultural market is quite large, with imports of US$59.8 billion in 1999; by contrast, agricultural exports amounted to a mere US$4.2 billion. Labour productivity in the sector increased by 2.3% in 1997. Land scale per farmer in Japan has remained roughly the same during 1997-99, at around 1.6 hectares.1621 OECD estimates indicate that the total transfers to agriculture were higher than the sector's value-added during the period 1990-98 (Table IV.1). The high cost of agricultural inputs may have been an important factor in encouraging Japan's food processing industries to relocate offshore.1632

7. The authorities indicate that the average retail prices of food in Tokyo in 1998 were higher than in other major cities in the world, by about 20% to 30%; they attribute such price discrepancies to high transportation and distribution costs, partly reflecting differences in consumer buying behaviour, which, for example, favours a “more-frequent, less quantity” delivery system.


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Table IV.1Major indicators for Japanese agriculture, FY1990-98 (¥ trillion and per cent)

1990 1991 1992 1993 1994 1995 1996 1997 1998

Agricultural production (percentage of total)Rice 27.8 25.4 30.1 27.1 33.8 30.5 29.6 28.0 25.6Vegetables 22.5 24.4 21.9 25.4 22.2 22.9 22.3 23.3 26.3Fruit 9.1 9.6 8.5 7.7 8.5 8.7 9.0 8.1 9.0Flowers 3.3 3.6 3.8 4.1 3.8 4.2 4.3 4.6 4.7Livestock 26.8 26.9 25.2 25.4 22.5 24.0 25.0 26.0 24.4

Dairy cattle, milk and other dairy products

7.9 7.8 7.7 8.0 7.0 7.6 7.8 8.0 7.9

Beef cattle 5.2 5.1 4.9 4.7 4.2 4.3 4.2 4.6 4.4Pigs 5.5 5.6 5.6 5.4 4.7 4.8 5.3 5.3 4.9Eggs and poultry 7.5 7.7 6.4 6.6 6.1 6.7 7.3 7.5 6.6

Total agricultural GDPa (¥ trillion) 7.7 7.6 7.4 7.0 7.5 6.8 6.5 6.1 6.3

Percentage of total GDP 1.8 1.6 1.6 1.5 1.6 1.4 1.3 1.2 1.3

Total agricultural transfers (¥ trillion) 8.3 8.4 9.4 9.0 9.8 8.7 8.8 8.0 8.7Percentage of total GDP 1.9 1.8 2.0 1.9 2.0 1.8 1.7 1.6 1.8

Table IV.1 (cont'd)

Self-sufficiency ratio by productsRice 100 100 101 75 120 103 102 99 95Wheat 15 12 12 10 9 7 7 9 9Soybeans 5 4 4 2 2 2 3 3 3Vegetables 91 90 90 88 86 85 86 86 84Fruit 63 59 59 53 47 49 47 53 49Milk and dairy products 78 77 81 80 72 72 72 71 71Beef 51 52 49 44 42 39 39 36 35Pork 74 70 68 69 65 62 59 62 61Chicken eggs 98 97 97 96 96 96 96 96 96

Self-sufficiency ratio on a caloriebasis

47 46 46 37 46 43 41 41 40

a Provisional; data for 1999 are not available.

Source: Data provided by the Japanese authorities; OECD (2000).

8. The Basic Law on Food, Agriculture and Rural Areas, which replaced the 1961 Agricultural Basic Law, outlines the future direction of Japan's agriculture policies1643; the new law was enacted on 16 July 1999. The purpose of the new law is to cope with major changes in Japan's economic and social situation concerning, inter alia, agriculture, food supply, and rural areas. The Law has established four basic principles: a stable food supply; fulfilling agriculture's multifunctional roles; sustainable agricultural development; and the development of rural areas. With a view to implementing the policy direction stipulated in the new Law, the Basic Plan for Food, Agriculture and Rural Areas was decided by the Cabinet in March 2000. The Plan, which covers policy directions for the coming ten-year period, includes various measures that correspond to the four principles embodied in the law. Some of the


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measures have already been implemented; these include the reform of price policy for wheat and the introduction of direct payment to farmers in hilly and mountain regions. The Government has indicated that a guideline under the Plan is the achievement of a food self-sufficiency ratio of 45% (on a calorie basis) by 2010. This compares with a ratio of 40% in 1998, which was six percentage points less than in 1994. The main factors behind this decline, which is a part of a longer-term falling trend in self-sufficiency, include: an increase in the domestic consumption of livestock products and fats1654; a decrease in the domestic consumption of rice, in which Japan has been largely self-sufficient; and an overall decrease in agricultural production. According to the authorities, the improvement of the food self-sufficiency ratio requires efforts, inter alia, by farmers, the food industry and consumers; to encourage their efforts, the Government plans to take, inter alia, the following measures:

- expanding the scale of production and improving agricultural infrastructure to raise the productivity of the sector;

- developing and disseminating technology to improve the quality of products;

- promotion of agricultural products reflecting the needs of consumers and food industries; and

- developing a nationwide campaign for a dietary guideline that encourages consumers to review dietary patterns in order that, for example, their nutritional balance may be improved and the amount of food wasted is reduced.

(ii) Border measures9. The average applied MFN tariff for agriculture (WTO definition) was 18.2%1665 in FY2000 compared with an overall average of 6.5% (Chapter III(2)(iii)); some 16% of duties applied to agricultural goods were non-ad valorem. Many agricultural subsectors, (particularly dairy products, vegetables, products of the milling industry, sugar and sugar products) benefit from relatively high levels of MFN tariff protection (Table IV.2); several of these subsectors are also subject to a number of tariff peaks (defined here as tariff rates exceeding three times the simple applied MFN average). Some of the average tariffs for the subsectors may be underestimated, owing to the lack of estimates of AVEs for some specific duties. In particular, the average applied MFN tariff for cereals (e.g. rice and wheat) was estimated to be 3.9%; this average does not include ad valorem equivalents (AVEs) for 12 specific duty lines because estimates of these were not available. In the case of rice, the amount of duty payable is one of the highest rates of duty in Japan's customs tariff. According to the authorities, AVEs could not be calculated because none of the 12 items were imported; this suggests that the tariff rates were prohibitive.

Table IV.2Protection in agriculture, FY2000(Per cent)

HS Chapter/Description AVE-tariff Max. tariff

Tariff

peaksa

(% of lines)

Non-ad valorem tariff(% of lines)

01 Live animals 4.5 40.1 7.4 22.202 Meat and edible meat offal 12.1 80.2 17.8 20.603 Fish and crustaceans, molluscs and other aquatic

invertebrates5.5 15.0 0.0 0.0

04 Dairy produce; birds' eggs; natural honey; edible products of animal origin, not elsewhere specified or included

68.1 490.7 90.8 60.5

05 Products of animal origin, not elsewhere specified or included

0.3 3.5 0.0 0.0

06 Live trees and other plants; bulbs, roots and the like;


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cut flowers and ornamental foliage 0.5 3.0 0.0 0.007 Edible vegetables and certain roots and tubers 32.1 983.7 6.5 8.308 Edible fruit and nuts; peel of citrus fruit; melons 7.9 24.0 6.5 0.009 Coffee, tea, maté and spices 3.5 17.0 0.0 0.010 Cereals 3.9 69.7 4.9 31.711 Products of the milling industry; malt; starches;

inulin; wheat gluten 33.0 386.5 46.9 39.5

12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder

26.4 690.3 7.0 5.6

13 Lac; gums, resins and other vegetable saps and extracts 3.0 17.0 0.0 8.714 Vegetable plaiting materials; vegetable products not

elsewhere specified or included 2.6 8.5 0.0 0.0

Table IV.2 (cont'd)

15 Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes

4.8 29.8 2.4 40.2

16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates 13.7 53.7 30.7 3.0

17 Sugars and sugar confectionery 30.6 121.6 70.2 55.318 Cocoa and cocoa preparations 19.3 29.8 64.3 7.119 Preparations of cereals, flour, starch or milk;

pastry cooks' products 22.8 301.6 50.8 26.620 Preparations of vegetables, fruit, nuts or other parts

of plants16.3 46.8 30.3 4.8

21 Miscellaneous edible preparations 27.8 465.2 47.8 16.322 Beverages, spirits and vinegar 19.2 68.0 38.8 57.123 Residues and waste from the food industries;

prepared animal fodder 0.8 12.8 0.0 9.524 Tobacco and manufactured tobacco substitutes 5.1 29.8 9.1 0.01-24 Agriculture 17.0 983.7 23.7 16.0

a Three times the simple average of applied MFN rates.

Note: All indicators were calculated excluding in-quota tariff lines.

Source: WTO Secretariat, based on data provided by the Japanese authorities.

10. Tariff quotas apply mainly to agricultural products, including dairy products, rice, wheat and barley, silk-worm cocoons and raw silk, prepared edible fat, and starches (Chapter III(2)(iii)); such measures cover 2.0% of all tariff lines. Whereas over 82% of out-of-quota tariffs are non-ad valorem duties, all in-quota tariffs are ad valorem. The authorities maintain that the applicable quotas for products tariffied in the Uruguay Round are set each year in accordance with Japan's WTO commitment. The degree to which tariff quotas are filled varies by product. Tariff quotas for products such as maize intended for use in the manufacture of corn starch, malt, and certain dairy products were filled by more than 90% for FY1998; while tariff quotas for some other products such as skimmed milk powder and whey have been little utilized (Table AIII.3). Quota allocations for many products are based on previous business records and plans of applicants. In-quota imports of rice, wheat, barley, certain milk products, and raw silk are handled mainly by state-trading entities; certain amounts of rice, wheat, and barley may be imported by private entities (e.g. the


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simultaneous buy-sell system for rice (see below)).1676

11. Special safeguards (SSGs) were triggered during the period FY1997-99 for a number of products, including starches, condensed milk and milk powders, and inulin (Table IV.3). Both price-based and volume-based SSGs, which are applicable only to above-quota imports, have been imposed. Japan invoked separate emergency tariff measures on pork products, from 1 April 1997 to 30 June 1997. Under the measure, the standard import price for access was increased from ¥440.06/kg. to ¥545.49/kg. (i.e. the WTO bound rate).

Table IV.3Special safeguard (SSG) actions in agriculture by Japan, FY1997-99

Description Type of action Date or period of application

FY1997

Inulin Volume-based 1 October 1997 to 31 March 1998

Milk and cream, not concentrated nor containing added sugar or other sweetening matter

Volume-based 1 December 1997 to 31 March 1998

Condensed milk Volume-based 1 December 1997 to 31 March 1998

FY1998

Condensed milk Volume-based 1 June 1998 to 31 March 1999

Inulin Volume-based 1 November 1998 to 31 March 1999

Food preparations containing by weight not less than 30% natural milk constituents on the dry matter

Price-based 16 March 1999

Wheat flour Price-based 18 March 1999

FY1999

Condensed milk Volume-based 1 June 1999 to 31 March 2000

Inulin Volume-based 1 November 1999 to 31 March 2000

Wheat starch Price-based 26 May 1999

Other starch (excluding sago starches) Price-based 19 July 1999

Milk powder, not containing added sugar or other sweetening matter

Price-based 13 August 1999

Peas (Pisum sativum) Price-based 6 January 200025 February 2000

Food preparations by weight not less than 30% natural milk constituents on the dry matter

Price-based 7 March 2000

Wheat flour Price-based 16 March 2000

Other starch (excluding sago starches) Price-based 16 March 2000

Source: WTO notifications.

12. Quantitative import restrictions on rice have been replaced by tariff quotas since 1 April 1999.1687 The applied out-of-quota duty on rice in FY1999 was set at ¥351.17 per kg.; the duty is a sum of a specific duty of ¥59.17 per kg., and a levy, collected by Japan's Food Agency, of ¥292 per kg. of imports.1698 The applied out-of-quota duty was reduced to ¥341/kg. in FY2000. According to the authorities, an increase in rice imports is unlikely.1709

13. Japan's minimum access commitments for rice imports, under the WTO Agreement on Agriculture, continue to be implemented. With the tariffication, importation under the minimum access commitments is to be increased by 0.4% per annum, which would have been about half of Japan's import requirement (i.e. 0.8% per annum) if Japan's special treatment of rice under the WTO Agreement on Agriculture had continued. The Food Agency continues to import rice as a state-trading entity; of some 0.6 million tonnes of rice imported in 1998 under the minimum access commitments, 0.13 million tonnes were to be used for economic assistance to developing countries. According to the authorities, this arrangement was introduced


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so that the unsold rise would not affect domestic markets.17110 Actual rice imports in the context of Japan's minimum access commitments totalled 530,600 tonnes in FY1997 and 606,400 tonnes in FY1998.

14. As part of Japan's minimum access commitments, a certain amount of rice can be purchased and marketed directly under the simultaneous buy-sell (SBS) system.17211 In FY1997, a total of 55,100 tonnes were imported under SBS, and 120,000 tonnes for FY1998 and FY1999. Data on actual bids received were not available to the Secretariat

(iii) Domestic measures and support programmes15. The support received by farmers in Japan and the costs to consumers of agricultural products remain above the OECD average and have increased since 1997. Japan's net producer and consumer support estimates (PSE and CSE) for 1999 have been provisionally estimated at 65% and 53%, against an OECD average of 40% and 31%, respectively.17312 In the same year, the producer nominal assistance coefficient (NAC) of 2.8 indicates that gross farm receipts (including support) were almost three times as high as they would have been without support. Likewise, the consumer NAC of 2.15, indicates that consumers were implicitly taxed, and paid on average more than twice as much as they would have paid in the absence of market price support to producers and consumer subsidies.17413 These producer and consumer NACs were, on average, 1.7 and 1.4 times as much as the respective OECD averages.17514 Judging by the above indicators, assistance to agriculture may have risen; for example, the PSE and CSE for all commodities rose by 14% and 15%, respectively, between 1997 and 1999.17615 Data provided by the authorities show that the total Aggregate Measure of Support level in FY1997 was ¥3,171 billion, a 4.8% decrease from FY1996.

16. Total budgetary expenditure for agricultural price support increased slightly in FY1997 (the most recent year for which data are available).17716 Budgetary expenditures in FY1999 under the six-year, ¥6 trillion programme to aid Japanese farmers, to alleviate the domestic effects of the Uruguay Round, were ¥0.7 trillion, compared with about ¥1.0 trillion in FY1998.

17. Current price support schemes and their magnitudes are tabulated in Table IV.4. Official purchase prices of major agricultural products have declined every year since FY1997. The authorities indicate that data for annual budgetary expenditures involving direct payments to farmers in FY1998 and subsequent years, have not been finalized.

Table IV.4Procurement prices for all major crops subject to pricing and/or marketing arrangements/price controls, 1997-99(¥ and per cent)

1997 1998 1999

¥ % ¥ % ¥ %

Rice, official purchase price (unpolished rice, 60 kg.) 16,217 -1.1 15,805 -2.5 15,528 -1.75

Wheat, official purchase price (60 kg.) 9,023 -1.0 8,958 -0.7 8,893 -0.7

Soybeans, standard price (60 kg.) 14,160 -0.4 14,082 -0.6 14,011 -0.5

Sweet potatoes, trading guideline price (1 ton) 31,740 -0.4 31,620 -0.4 31,520 -0.3

White potatoes, raw material standard price (1 ton) 14,270 -1.0 14,150 -0.8 14,050 -0.7

Sugar beets, lowest producer price (1 ton) 17,330 -1.0 17.070 -1.5 16,960 -0.6

Sugar cane, lowest producer price (1 ton) 20,510 -0.1 20,510 0.0 20,490 -0.1

Milk for processing, guaranteed price (1 kg.) 74.27 -2.0 73.86 -0.6 73.36 -0.7

Calves for beef, guaranteed standard price (black cattle) (per head) 304,000 .. 304,000 .. 304,000 ..

Beef, stable standard price (1 kg.) 810 -1.2 805 -0.6 795 -1.2

Pork, stable standard price (1 kg.) 385 -1.3 380 -1.3 370 -2.6

Raw silk, stable standard price (1 kg.) 5,775 .. .. .. .. ..


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.. Not available.


18. The authorities have introduced various internal measures to promote domestic competition in the sector, including a direct income support scheme in place of price support schemes. For example, wheat and barley, which have been distributed solely by a government corporation, can now be distributed by the private sector. The Government also established the Wheat and Barley Farming Income Stabilization Fund for income support. Management stabilization measures, to mitigate the adverse effects of price fluctuations on farming operations, were introduced for the soybeans produced in 2000. Producers of about 90% of voluntarily marketed rice (in volume) benefited for two consecutive years (1998 and 1999) from the Rice Farming Income Stabilization Program, in which the Government provides financial assistance to privately established loss-compensation programmes, which provide a fund to compensate for the price declines of the voluntarily marketed rice.

(3) Energy and Utilities

(i) Overview19. A stable energy supply has been one of main objectives of Japan's energy policy, reflecting the fact that about 80% of its primary fuels (e.g. oil, coal, natural gas, nuclear, hydro and geothermal energy) were imported in 1999.17817 In recent years, more emphasis has been placed on economic efficiency in Japan's energy policy, as observed in various deregulation measures implemented since its previous Trade Policy Review.

20. Japan's deregulation measures since its previous Trade Policy Review affect in particular electric and gas utilities, which used to be full regional monopolies regulated by the Ministry of International Trade and Industry (MITI), as well as petroleum17918; the measures introduced concerned, inter alia, partial liberalization of the retail business of electric and gas utilities.

(ii) Electricity21. Based on a traditional view that electric utilities were thought to constitute "natural monopolies", Japan has allowed the existence of regional monopolies by vertically integrated firms (i.e. companies conducting generation, transmission, and retailing), and, at the same time, regulated prices, quantities, and quality of services to prevent negative impacts arising from the monopoly arrangement.18019

22. Reflecting such factors as recent technological change, Japan has promoted deregulation as a means of enhancing competition. In doing so, it aims to realize internationally comparable cost levels by 2001. In this context, wholesale power generation has been liberalized since 1995.18120

23. Partial liberalization of electricity supply at the retail level was introduced in March 2000 as a result of a 1999 amendment to the Electric Utility Industry Law. The amendment enabled customers consuming over 2,000 kW and taking power at 20,000V to buy from sources other than incumbent regional electric utility companies. Price regulation was also relaxed under the amendment; the lowering of electricity rates now requires prior notification, while the raising of rates continues to require authorization. The Government also introduced a set of rules regarding the use by new entrants of existing transmission lines ("wheeling rule").18221 The wheeling rule consists of a rule requiring prior notification of the wheeling contract, a rule concerning the setting of rates, and a rule ordering the use of existing transmission lines.

(iii) Gas24. Japan aims to realize internationally comparable cost levels in the gas sector by the year 2001, and to that end, the Gas Industry Law was amended in May 1999. Before 1995, the supply of "city gas" had been


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under regional monopolies.18322 The 1999 law provided for various reform measures, notably: an approval requirement for the change in user charges was replaced by a notification requirement, in the case of reduction in rates18423; "large scale supply" of piped-gas, which has been liberalized since 1995, is expanded to annual contracts exceeding 1 million cubic metres or more. A rule concerning the use of existing transmission pipes by new suppliers was also established and published.18524

(4) Manufacturing

(i) Overview25. Manufacturing accounted for about 24% of Japan's GDP and some 21% of employment in 1998 (Table I.2). Against a background of recession, manufacturing output was down slightly in the period 1995 to 1998; over the same period, nominal value added declined by some 3%. In 1998, electrical machinery was the largest industry in terms of gross output and value added, followed by transport equipment and non-electrical machinery (Table IV.5). With a decline in the number of employees in manufacturing, value added per employee remained almost unchanged between 1995 and 1998; wages per employee increased slightly over the same period (Table IV.6). The highest level of value added per employee is in the petroleum and coal sector. In individual industries, the number of employees slightly increased in printing, but decreased in other industries including electrical machinery and transport equipment.

Table IV.5Manufacturing output and value added in Japan, 1992-98(Per cent and ¥ trillion)

JSIC Description Gross output Value added

1992 1995 1998 1992 1995 1998

Total (¥ trillion) 329.5 309.4 309.3 121.1 119.3 115.3

12 Food manufacturing 7.5 7.9 8.0 7.5 7.9 8.1

13 Beverages and tobacco 3.3 3.5 3.6 2.4 2.6 2.9

14 Textiles 2.3 1.4 1.2 2.6 1.6 1.4

15 Clothing 1.5 1.7 1.5 1.9 2.2 1.9

16 Wood product 1.4 1.4 1.2 1.3 1.3 1.1

17 Furniture 1.2 1.2 1.1 1.4 1.4 1.3

18 Pulp and paper 2.7 2.8 2.7 2.6 2.7 2.7

19 Printing 4.0 4.3 4.5 5.5 5.8 6.2

20 Chemicals 7.3 7.6 7.5 9.8 10.1 9.8

21 Petroleum & coal products 2.6 2.5 2.7 1.1 1.1 0.8

22 Plastic products 3.4 3.4 3.4 3.6 3.6 3.7

23 Rubber products 1.1 1.1 1.1 1.4 1.3 1.3

24 Leather products 0.4 0.3 0.3 0.4 0.3 0.3

25 Pottery, china, glass 3.3 3.3 3.1 4.3 4.2 4.0

26 Iron and steel 5.0 4.6 4.2 4.8 4.2 3.8

27 Non-ferrous metals 2.1 2.1 2.1 1.6 1.7 1.6

28 Fabricated metals 6.0 5.9 5.6 7.3 6.9 6.8

29 Non-electric machinery 10.1 9.9 10.3 11.0 10.6 11.1

30 Electric machinery 16.6 17.8 18.2 16.4 16.5 16.1

31 Transport equipment 15.0 14.3 14.7 10.2 10.5 11.4

32 Prof. & scientific equipment

1.5 1.3 1.5 1.6 1.4 1.6

33 Arms and weapons 0.2 0.1 0.0 0.2 0.2 0.0

34 Other 1.7 1.7 1.7 2.0 1.9 1.9


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Source: MITI, Industrial Statistics, various issues.

26. In 1999, manufactured products accounted for about 94% of Japan's total merchandise exports and some 57% of its total merchandise imports. Office machinery and telecommunications equipment, and automotive products are the main export industries; machinery and transport equipment account for about half of manufactured imports.

Table IV.6Employment in manufacturing, value added per employee, and wages per employee in Japan, 1992-98

JSIC and description Number of employees('000)

Value added per employee (million yen)

Wages per employee (million yen)

1992 1995 1998 1992 1995 1998 1992 1995 1998

Total 11,157 10,880 10,399 10.9 11.0 11.1 4.1 4.2 4.4

12. Food manufacturing 1,117 1,178 1,197 8.1 8.0 7.8 2.9 2.9 2.9

13. Beverages and tobacco 127 129 126 22.9 24.2 26.2 4.4 4.5 4.7

14. Textiles 496 327 272 6.2 5.9 6.0 3.0 3.0 3.1

15. Clothing 567 644 544 4.1 4.0 4.1 2.2 2.1 2.2

16. Wood product 237 232 202 6.9 6.9 6.6 3.3 3.2 3.3

17. Furniture 221 247 229 7.8 6.9 6.4 3.5 3.2 3.4

18. Pulp and paper 281 279 270 11.0 11.7 11.4 4.2 4.3 4.4

19. Printing 566 583 586 11.8 11.9 12.2 5.0 5.0 5.1

20. Chemicals 415 393 384 28.5 30.5 29.5 5.6 5.9 6.1

21. Petroleum & coal products 34 34 32 39.6 39.7 28.2 6.6 7.0 7.4

22. Plastic products 447 467 457 9.7 9.2 9.3 3.8 3.9 3.9

23. Rubber products 171 157 145 10.0 9.9 10.5 4.2 4.3 4.5

24. Leather products 77 74 65 6.3 5.6 5.3 3.0 2.6 2.6

25. Pottery, china, glass 454 450 417 11.7 11.2 10.9 4.2 4.2 4.4

26. Iron and steel 331 301 265 17.7 16.6 16.6 5.8 6.1 6.2

27. Non-ferrous metals 170 165 153 11.4 12.0 12.3 5.0 5.1 5.3

28. Fabricated metals 850 980 846 10.3 9.3 9.2 4.7 4.1 4.2

29. Non-electric machinery 1,197 1,156 1,156 11.1 10.9 11.1 4.9 4.9 5.1

30. Electric machinery 1,927 1,769 1,686 10.3 11.1 11.0 4.0 4.4 4.7

31. Transport equipment 974 928 908 12.7 13.5 14.5 5.2 5.3 5.7

32. Prof. & scientific equipment 236 206 200 8.2 8.3 9.5 4.2 4.2 4.4

33. Arms and weapons 10 7 7 18.0 25.7 26.5 5.5 6.6 5.9

34. Other 251 269 258 9.5 8.4 8.7 3.6 3.3 3.5

Source: MITI, Industrial Statistics, various issues.

27. Japan's manufacturing has traditionally been much more exposed to international competition than agriculture. The simple average applied MFN tariff for imported industrial products (HS 25-97) was 3.9% in FY2000, compared with 17% for agricultural imports. Simple average tariffs are considerably higher for footwear and headgear and for prepared food than for other manufactured goods (Chart III.2).

28. In a few instances, non-tariff border measures are applied to imports and exports of certain manufactured products to ensure national security, safeguard consumer health and well-being, or to preserve the environment (Chapter III(2)(v)).


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29. Japan has been making efforts to align its industrial standards to international norms (Chapter III(2)(ix)), and to accept foreign test results, notably in the approval process for pharmaceuticals.

(ii) Sectoral developments(a) Motor vehicles30. Japan's motor vehicle industry is the third largest, after the United States and the European Union, accounting for 19.3% of world production by volume in 1998.18625 Domestic production of motor vehicles (cars, trucks and buses) amounted to 10 million units, down 8.4% from 1997, the first decline in three years, and 25% less than the peak level of production achieved in 1990. Japan's exports of four-wheel motor vehicles in 1999 experienced a decline of 2.6% from 1998, and were one-third below the peak in 1985 (6.7 million units). Imports, which amounted to 261,000 units, also declined in 1999, by 3.6%.

31. Production abroad by Japanese automakers has expanded since the previous Trade Policy Review. In 1998, Japanese automakers' production in U.S. plants increased by 2.3%, to 2.4 million units. The increase reflected a 14% increase in the production of trucks (0.49 million units in 1998), while the production of cars decreased by 0.2%. In Europe, Japanese automakers produced 0.91 million units in 1998, up 7.0% from the previous year.18726

32. Japan's motor vehicles industries have gone through various moves to form alliances. Various Japanese companies have made alliances in terms of equity holding with foreign automakers: for example, as of March 1999, about 37% of Nissan's shares are held by Renault; 34% of Mitsubishi Motors' shares are held by Daimler-Chrysler (since March 2000)18827; and General Motors (GM) has long held substantial shares of Isuzu, Suzuki, and Subaru (49%, 10% and 20%, respectively, as of April 2000).18928

33. Japan's voluntary export restrictions on passenger cars to the European Union were terminated by the end of 1999. Measures introduced as a result of the 1995 Japan-U.S. Autos and Auto Parts Consultation are to terminate by the end of 2000.19029

(b) Semiconductors34. Imports of semiconductors and integrated circuits amounted to ¥1.4 trillion in 1999, an increase of 13.2% over 1998; exports amounted to ¥2.7 trillion, some 2% more than in 1998. In June 1999, Japan agreed to establish an international framework concerning semiconductors; the framework includes a new World Semiconductor Council, comprising private sector representatives from Japan, Chinese Taipei, the European Union, the Republic of Korea, and the United States, as well as meetings to be held involving governments and the private sector. The first such meeting was held in the Republic of Korea in June 2000.

(c) Pharmaceuticals35. The production of pharmaceuticals in Japan amounted to ¥5.8 trillion in 1998, down 5% from the previous year. Exports in 1998 were ¥42 billion, down 9.5% from the previous year, and imports were ¥566 billion, down 8.7%.19130 Pharmaceutical imports are duty free. Ministerial licence is required to manufacture or import pharmaceuticals19231; an examination is conducted by the authorities before approval is granted. Prohibited drug imports include rhinoceros horn, musk, and tiger bones, in accordance with CITES (Convention on International Trade in Endangered Species); the importation of stimulants (amphetamine and metamphetamine) is also prohibited.

36. The acceptance of foreign clinical test data has often been a subject of concern by Japan's trading partners. The authorities indicate that the scope of acceptance of foreign test data was expanded in August 1998 by MHW notifications.19332 In particular, foreign test data are accepted provided foreign test procedures meet corresponding domestic testing standards; in some cases, the testing results must be supplemented by other data in order for authorities to verify a drug's effectiveness and safety for the Japanese users. As described in the second revision of the Three-Year Program for Promoting Deregulation, the Government recognizes that licensing procedures are lengthy compared with those in the United States. According to the authorities, the standard processing period for the approval


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of prescription drugs has been shortened to 12 months since April 2000.

37. Certain vitamins, herbs, and minerals have been allowed to be sold as food since March 1999; on 5 April 2000, MHW relaxed regulations concerning dosage of these products provided that they are clearly labelled as food. A large number of prescription drugs used in medical services are under the Public Health Insurance Reimbursement System19433, where an official Drug Tariff (reimbursement price) is set. The Drug Tariff has been revised seven times since 1990. Pricing decisions on the Drug Tariff is not subject to the public comment procedures; the authorities indicate that these decisions are not regarded as regulations, and discussions in "Chuikyo" (a policy deliberation committee regarding drugs and medical service), whose members include parties concerned, is sufficient to assure transparency. Some of Japan's trading partners claim that the fixed (reimbursement) prices listed in the Drug Tariff are insufficient to meet the costs of developing and marketing innovative pharmaceutical products. Furthermore, as medical doctors are reimbursed for drugs prescribed to patients on the basis of the fixed price listed in the Drug Tariff rather than the actual price, there may be an incentive for them to prescribe a cheaper, albeit similar, product in the same tariff classification, that may be less effective.19534

(5) services

(i) Overview38. The services sector is the largest contributor to output and employment in the Japanese economy, and the sector's importance has continued to grow recently. In 1998, services sector accounted for 67.9% of Japan's GDP, and for 69.5% of employment (67.2% and 67.9%, respectively, in 1995).

39. In view of the importance of services as business inputs in various sectors of the economy and that during the 1990s total factor productivity growth in the services sector has lagged behind that in manufacturing, the authorities recognize the need to foster more competition in the supply of services.

40. As regards financial services, various measures outlined in the "Big Bang" initiative since 1997 have been steadily implemented. Japan has made efforts to improve the transparency of regulation in the financial services sector, under the jurisdiction of the Financial System Planning Bureau of the Ministry of Finance, the Financial Reconstruction Commission (FRC), and the Financial Supervisory Agency, until June 2000, and under the jurisdiction of the FRC and the new Financial Services Agency from July 2000.

41. Deregulation of telecommunications has progressed since Japan's previous Trade Policy Review, including, inter alia, elimination of foreign ownership restrictions for certain services. Foreign ownership restrictions remain, however, in the Nippon Telegraph and Telephone Corporation, a facility-based de facto monopoly in Japan.

42. Transportation services remain somewhat insulated from international competition especially as regards domestic activities. As in many other countries, cabotage policies restrict the provision of domestic services both in maritime and air transport to national carriers.

43. Little foreign participation is observed in other services, including legal and education services. Reform in education services, which was one of six main items of the Government's 1997 reform programme, has not concerned market access by foreign entities.

44. Japan's Schedule of Specific Commitments under the General Agreement on Trade in Services (GATS) covers 121 of the 160-odd sectors; Japan has not taken any MFN exemptions. Japan has ratified the Fourth and Fifth Protocols of GATS, involving telecommunications and financial services; it has been actively participating in the services trade negotiations, which began in 2000 as part of the "built in agenda".

(ii) Financial services


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(a) Overview45. The financial services sector in Japan has been undergoing significant change. Technology and deregulation have increasingly blurred the traditional distinction between financial products. Globalization is another force driving the growth of Japan's financial services sector. These forces have encouraged mergers and acquisitions across different types of financial services firms with a view to realizing economies of scale.

46. Trade in financial services (except for insurance) increased in 1999, after two consecutive years of decline.19635 The number of financial institutions by category are indicated in (Table IV.7).

Table IV.7Financial institutions in Japan, December 1999

1. Banks Number of banks

Total funds(¥ trillion)

Related laws

City bank 9 254 Banking LawLong-term credit bank 3 42.1 Long-Term Credit Bank LawTrust bank 33 157.5 Banking Law, Trust Business LawRegional bank 64 174.6 Banking LawSecond regional bank 60 61.1 Banking LawForeign owned bank 84 6.8 Banking Law

2. Cooperative financial institutions Number of organizations

Total funds(¥ trillion)

Related laws

Zenshinren Bank .. 16.2 Shinkin Bank LawShinkin Bank 392 103.5 Shinkin Bank LawShinkumi Federation Bank .. 3.0 Law on Financial Business by

CooperativesMutual Federation of Labor Credit Association

.. 2.9 Labour Credit Association Law

Labour Credit Associations 41 11.6 Labourer's Cooperative LawShoko-Chukin Bank .. 12.8 Shoko-Chukin Bank LawNorinchukin Bank .. 38.6 Norinchukin Bank LawCredit Federation of Agricultural Cooperatives

47 48.2 Agricultural Cooperative Law

Agricultural Cooperatives 1,558 71.0 Agricultural Cooperative LawCredit Federation of Fishery Cooperatives 35 2.4 Fishery Cooperative LawFishery Cooperatives (including Processed Marine Products Cooperatives

893 1.4 Fishery Cooperative Law

Credit Guaranty Association .. .. Credit Guaranty Association Law

3. Insurance companies Number of companies

Total assets(¥ trillion)

Related laws

Life insurance: Domestic 41 185 Insurance Business LawForeign 3 2.8

Non-life insurance: Domestic 36 24 Insurance Business LawForeign 27 0.2

Mutual fire insurance cooperative associations

43 0.05 Law for Cooperatives of Small Business

Ship owner's mutual insurance associations 2 0.03 Ship Owners' Mutual Insurance Association Law


Trade Policy Review

Table IV.7 (cont'd)

4. Non-banks and other Number ofregistered companies

Number of reported

companies

Related laws

Loan companies 31,668 .. Regulatory Law for Loan BusinessHousing Loan Companies .. 1 Old Investment LawMoney Market Brokers .. 14 Old Investment LawMortgage companies 125 .. Act concerning Regulation of Mortgage

Backed Securities BusinessPrepaid voucher issuers 2,055 363 Law on Regulation of Prepaid VoucherCommodity investment brokers 111 .. Law on Regulation of Commodity

Investment Business

Special credit brokers 45 .. The Business Asset Securitization LawDenominated credit brokers 21 ..Real-estate syndications 21 .. Real Estate Syndication ActFinancial futures brokers 199 .. Law on Financial Futures Trade

5. Government's financial institutions Aggregated balance of loans(¥ trillion)

Related laws

Japan Development Bank 15.5 Japan Development Bank LawExport-Import Bank of Japan 9.1 Export-import Bank of Japan LawPeople's Finance Institution 8.9 People's Finance Institution LawHousing Loan Corporation 70.1 Housing Loan Corporation LawAgriculture, Forestry and Fisheries Finance Corporation

4.5 Law on Agriculture, Forestry and Fisheries Finance Corporation

Japan Finance Corporation for Small Business

7.2 Small Business Finance Corporation Law

Small Business Credit Insurance Corporation

.. Japan Finance Corporation for Small Business Law

Hokkaido Tohoku Development Corporation

1.4 Hokkaido Tohoku Development Corporation Law

Japan Finance Corporation for Municipal Enterprise

18.9 Japan Finance Corporation for Municipal Enterprise Law

Environmental Sanitation Business Financial Corporation

1.0 Environmental Sanitation Business Financial Corporation Law

Okinawa Development Finance Corporation 1.6 Okinawa Development Finance Corporation Law

6. Other financial institutions Related laws

Bank of Japan Total assets of ¥61.9 trillion Bank of Japan Law (as of December 1996)

Deposit Insurance Corporation .. Deposit Insurance Law

.. Not available.



Trade Policy Review

47. The "Big Bang" reform programme of Japan's financial services sector, announced in November 1996, started effectively in April 1998 with the enactment of the Foreign Exchange and Foreign Trade Law as an initial legislative step.19736 The Big Bang, a package of measures promoting regulatory reform in the sector, is aimed at making the Japanese financial market an international market comparable to those in New York and London by the year 2001.19837 As a part of the Big Bang, the Financial System Reform Law entered into force in December 1998, introducing measures in banking, insurance and securities.19938 Bank holding companies have been allowed since 1998. Banks' entry in insurance business, through subsidiaries, will be allowed from October 2000.

48. Japan ratified the Fifth Protocol of the GATS in June 1998; the protocol entered into force on 1 March 1999. Japan's GATS Schedule of Specific Commitments includes some limitations on market access and national treatment; for example, the deposit insurance system does not cover deposits taken by branches of foreign banks, and commercial presence, as a juridical person established in Japan, is required for investment trust management services.

(b) Regulatory framework49. Since its previous Trade Policy Review, Japan's regulatory framework for financial services has changed substantially (Chart IV.1). Currently, the Financial Reconstruction Commission (FRC) and Financial Services Agency (FSA), under FRC, are mainly responsible for regulatory control, inspection and supervision. By contrast, the responsibility of MOF, which used to be the main regulator for the sector, is restricted to financial failure resolution, financial crisis management and international finance, including exchange rate policies and foreign investment.20039 The FRC is also responsible for the resolution of failed banks, in accordance with the Financial Reconstruction Law, and capital injections for financial institution, in accordance with the Financial Functions Early Strengthening Law.20140 The Bank of Japan has responsibility for the smooth settlement of funds between banks and other financial institutions with a view to contributing to the maintenance of "an orderly financial system".

Banking50. The centrepiece of legislation governing the operation of banks is the Banking Law; the Law stipulates that a licence by the FRC is required to operate a bank in Japan. Licensing criteria include a sound financial basis, appropriate business conduct in terms of management staff, and a "financial order" clause for prudential reasons.


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51. Foreign banks may enter the Japanese market by establishing branches, agencies, or subsidiaries; a licence from the FRC is required in each case.20241 Under the Banking Law, foreign banks with Japanese branches


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or agencies are subject to regulations no less favourable than those applied to domestic banks. While the Law includes "reciprocity" provisions with regard to licensing20342, the authorities maintain that these do not apply to WTO Members, given Japan's WTO commitments.20443 The authorities consider that prudential requirements are no more onerous for nationally licenced subsidiaries of foreign banks than for domestic banks.20544 Under the Foreign Exchange and Foreign Trade Law, cross-border capital transactions are not regulated, and free entry and exit is guaranteed for foreign exchange businesses.

52. As well as commercial banks, there are two non-commercial banks20645, six finance corporations, and one corporation defined as Government Financial Institutions (GFIs), which have been established with a view to ensuring appropriate implementation of policy-based finance.20746 For the past two years, this policy-based finance has, inter alia, targeted small and medium-sized enterprises in order to supplement financing by private-sector financial institutions, which had fallen in the wake of the burst "bubble" in the early 1990s.

53. As of 31 March 1999, the Postal Savings System, operated by MPT, had ¥252 trillion in deposits, or about 19% of total individual financial assets in Japan.20847 Deposits in the Postal Savings System must all be re-deposited in the Trust Fund Bureau of MOF; these deposits then become part of the fund for the Fiscal Investment and Loan Program (FILP) (Chapter I(2)(ii)). As a part of the restructuring envisaged for January 2001, the planning and management body of Postal Businesses, including the Postal Savings System, is to be separated from the operational body, which is to become a new state-run public corporation in 2003. In April 2001, the mandatory re-depositing of savings with the FILP is to be terminated; the Postal Savings System will instead be granted full discretion in fund management.

54. Since 1 October 1999, banks have been allowed to issue bonds other than "financial bonds", which can be issued by three long-term credit banks and Tokyo-Mitsubishi Bank. In order to deal in securities, banks must establish specialized subsidiaries; these have been allowed to engage in all securities businesses since 1 October 1999.

Insurance55. Japan's insurance market consists of three subsectors: non-life, life, and the "third" sector; the third sector includes insurance for personal accidents, liability, sickness, nursing care and hospitalization. Forty-seven life insurance companies and 50 non-life companies provide the third sector services, as of 1 August 2000. There are no state-owned insurance companies in Japan other than the Trade Insurance, operated by MITI, and the Postal Life Insurance, operated by the MPT.20948

56. A licence from the FRC is required to conduct insurance business in Japan.21049 Insurance policies, both for new products and modifications to existing ones, as well as premium rates, require approval.21150 Life and non-life insurance companies may enter each other's markets only by means of subsidiaries. Commercial presence, licensed by FRC, is required in order to offer insurance services in Japan, except for such cross-border insurance contracts as reinsurance, commercial aviation insurance, and international marine hull insurance. The criteria for granting licences and the requirement of solvency margins are the same for Japanese and foreign insurance providers.

57. One of the main reform initiatives in Japan's insurance sector since its previous Trade Policy Review involves the elimination of the requirement that non-life insurance companies use rates approved by rating organizations (July 1998).21251 A package of measures introduced under the Financial System Reform Law, in December 1998, includes: allowing over-the-counter sale of investment trust by insurance companies; introducing a requirement for insurance companies to prepare and disclose consolidated financial statements; and allowing entry of insurance companies into banking and securities business by way of establishing subsidiaries.

58. Japan reached a bilateral agreement on insurance with the United States in December 1996.21352 Under the agreement, Japan undertook to deregulate primary life and non-life insurance, where Japanese insurers had the dominant market share. Japan also agreed to avoid "radical change" in the "third" sector for two-and-a-half years following Japan's full implementation of specific primary sector deregulation measures, as well as to shield the incumbent non-Japanese insurers in the third sector from full competition until January 2001. The Japanese authorities


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confirm that the measures under the agreement have been steadily implemented.

Securities59. The FSA is the main authority regulating the securities sector, in accordance with the Securities and Exchange Law. Only joint-stock corporations registered with the FRC may engage in securities business. There is no foreign ownership restriction in the securities sector; subsidiaries and branches of foreign securities firms are registered in the same manner as domestic securities firms.

60. Under the Law on Foreign Securities Firms, the main office in Japan of a foreign securities firm requires registration with the FRC to operate securities business in Japan.21453 Registration is not accepted unless a firm has engaged in the same type of business for no less than three years.

61. On 1 October 1999, the setting of brokerage commissions was fully liberalized, in accordance with the Financial System Reform Law. Segmentation of business structure has been reformed; the Financial System Reform Law eliminated "compartmentalization" of securities business (i.e. underwriting, brokerage, etc.), which existed in the Securities and Exchange Law and the Law on Foreign Securities firms. The Tokyo Stock Exchange and Osaka Stock Exchange introduced options on individual stocks in July 1997, and over-the-counter securities derivatives were legally allowed as of 1 December 1998. Reform measures concerning asset investment businesses include the elimination of restrictions on investments trusts to invest in unlisted and unregistered equities on 1 September 1997.

(iii) Telecommunications(a) Overview62. Since its previous Trade Policy Review, Japan has introduced various measures to promote further deregulation in the telecommunications sector, based on the Government's Deregulation Action Program and the Three-Year Program for Promoting Deregulation. The measures include: elimination of foreign ownership restrictions for Type-I telecommunications services and for cable TV service providers21554; the elimination of the authorization requirement for end-user charges; the introduction of a price-cap regulation for certain end-user charges21655; and an amendment in May 2000 to the Telecommunications Business Law setting up a framework to introduce a long-run incremental costing (LRIC) system.

63. The JFTC has indicated that the Japanese market for telecommunications services remains monopolistic (Chapter III(5)(vii)). Prices of some services remain high by developed-country standards (section (b) below). Against such a background, requests for further reform to enhance competition (including the establishment of dominant-carrier regulation) have been made by, inter alia, domestic businesses, for which telecommunications services constitute important inputs, and Japan's trading partners.

64. In July 1997, Japan ratified the Fourth Protocol of the GATS concerning telecommunications.21756 Its GATS Schedule of Commitments includes all telecommunications services subsectors except telegraph services.21857 Limitations on market access and on national treatment remain in Mode 3 (commercial presence) with regard to the Nippon Telegraph and Telephone (NTT) Corporation.21958

(b) Market structure65. Telecommunications services accounted for 2.0% of Japan's GDP in 1998, compared with 1.6% in 1990. Nominal growth of output in the telecommunication sector averaged 4.5% per annum during 1980-97.22059 Employment in public telecommunications operation was about 238,000 in 1997, down 23.4% from 1985; these figures include employment in mobile telecommunications, however, which has steadily increased from some 10,000 in 1985 to 18,000 in 1997.

66. International telecommunications have also grown considerably; total hours of calls abroad originating in Japan, for example, increased by 2.5% in FY1998. At the same time, however, cross-border


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trade in telecommunication services in 1999 declined, in value terms; exports decreased from ¥165 billion to ¥87 billion and imports from ¥208 billion to ¥160 billion during the period 1997-99.22160

67. In 1998, the market share of "new common carriers" (NCCs, i.e. those other than NTT (domestic) and KDD (international)) in the national long-distance (that is, inter-prefectural) market reached 48.8% in terms of number of calls; the market share of NCCs in the international market reached 41.0% in terms of connection time in 1997. With regard to revenues, NTT retained a dominant market share in FY1999, at 87.5% in domestic telephone market; and on international telephony, KDD had a share of 67.5% in terms of revenue.22261

68. Since the initial privatization of the NTT in 1985, and against the background of market entry by other carriers, communications charges have declined for long-distance and international communications; for example, the charge for a three minute call between Tokyo and Osaka (weekday daytime) was around ¥63-90 in 1998, compared with ¥400 in 1985. Communications charges between Japan and the United States were around ¥150-240 in 1998 compared with ¥1,530 in 1985. NTT's high profitability indicates that there might be considerable scope for lowering communications charges, some of which are high by developed-country standards.22362 For example, Japan's internet access charges for 40 off-peak hours in March 2000 were higher than most other OECD member countries. (In terms of purchasing power parity, Japan's access charges for 40 off-peak hours were roughly the same as the OECD average, but substantially higher than the access charges of the United States, or the United Kingdom.)22463

(c) Regulatory framework69. The Ministry of Posts and Telecommunications (MPT) formulates policy to promote the development of the sector, and regulates domestic and international telecommunications services as well as broadcasting services. It is also responsible for administering various laws concerning telecommunications and broadcasting; these include the Telecommunications Business Law (TBL), the Radio Law, the Wire Communications Law, the NTT Law, the Broadcast Law, the Cable Television Broadcast Law, and the Cable Broadcasting Telephone Law. The TBL stipulates rights of way concerning the use by Type-I carriers of privately owned land, these carriers can obtain, inter alia, the approval of the MPT Minister before engaging in negotiations with the parties concerned to seek rights of way. Other rights of way including the use of roads, rivers, lakes, and ocean are under the jurisdiction of the Ministry of Construction and local governments, as are building standards. (No details of Japan's rights-of-way regulations, other than those under TBL, were provided by the authorities.) Notwithstanding complaints by domestic and foreign operators, the authorities state that rights-of-way regulations are implemented on a non-discriminatory manner to any new applicants, domestic or foreign, seeking such rights.

70. Along with other ministries and agencies, including the Japan Fair Trade Commission, The MPT is to become a part of the Ministry of General Affairs (MGA), which is to be established as part of a comprehensive administrative reform scheduled to take place on 1 January 2001. The independence of the JFTC is legally guaranteed.

Entry regulations71. The Telecommunication Business Law classifies telecommunications services into Type-I and Type-II services; Type-II services are further classified into "Special" and "General" subcategories.22564 Ministerial permission is required for entry into and exit from Type-I businesses.22665 Prior notification is required for General Type-II businesses. Special Type-II businesses require registration upon entry; registration may be denied, inter alia, if the MPT Minister determines that the applicant does not possess enough financial and technical ability to conduct the business properly.

72. Ministerial authorization is required in order for Type-I and Special Type-II carriers to conclude, modify or abolish contracts between foreign governments, foreign citizens or foreign corporations. There is


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no foreign ownership or management restriction in the telecommunications services sector, except in the case of the NTT Corporation22766; as stipulated in the NTT Law, no more than one fifth of NTT's voting rights may be foreign owned and its board members and auditors must be of Japanese nationality.

73. In July 1999, NTT was reorganized into the East and West NTT companies and the NTT Communications Corporation, a long-distance communications provider; all three companies are under the NTT Corporation, a holding company.22867 The Government currently holds 53.1% of the holding company's total stock. The NTT Corporation must, at all times, hold all stocks issued by the East and West NTT regional companies.22968 The two local NTT companies have a de facto monopoly of the local communications market.23069 According to a report by a study group of the JFTC, the enhanced competition expected from the reorganization of NTT has not yet materialized. In order to foster competition, the study group recommended, inter alia, that the NTT Corporation reduce its share-holding in NTT Docomo, a mobile phone provider; the Government is currently considering the issue.23170 The authorities state that the MPT will continue to monitor the situation of NTT companies in accordance with relevant laws.23271

74. In accordance with the NTT Law, the NTT Corporation is required to provide universal service.23372 No other carriers have such an obligation. There is no compensating fund for the provision of universal service.

75. Although there is no explicit mention, in the TBL or other telecommunications-related regulations, of the promotion of competition in Japan's telecommunications sector, the authorities confirm that competition is promoted under the current legislative framework.23473 Telecommunications business is not exempt from the application of the Anti-Monopoly Act (Chapter III(5)(vii)).

Regulations on charges76. For Type-I carriers, charges and their modification must be notified to MPT at least a week in advance.23574 MPT may order carriers to revise their charges in order to assure fair and reasonable end-user charges.23675

77. Since November 1998, a price-cap regulation has been applied to end-user charges for basic telecommunications services, including subscribed telephone services, ISDN, and leased circuit services in the regional telecommunications market, all of which are provided within prefectural boundaries where "competition is not necessarily sufficient", that is, when Type-I carriers that have fixed transmission-line facilities account for more than half of the number of subscriber lines in a prefecture.

Interconnection78. The MPT established a "Basic Rules of Interconnection", which outlines the obligation for Type-I carriers to interconnect with Type-II operators, and transparency requirements for interconnection rates and accounting. Under the TBL, as amended, ministerial authorization is required for contracts establishing interconnection charges. The criteria for authorization include, inter alia, that the calculation of interconnection charges must be based solely on costs of recovering management and operation expenses for local communications networks. Interconnection charges by NTT concerning designated telecommunication facilities were initially authorized on 20 March 1998; current interconnection contracts involving NTT East and West companies were both authorized on 1 July 1999. As a result of recent consultations between Japan and the United States on NTT's interconnection charges, Japan is to voluntarily introduce measures including a reduction of interconnection charges collected by both NTT East and NTT West.

79. The Government is in the process of determining the details of a long-run incremental costing (LRIC) system, which it intends to introduce in accordance with an amendment to the TBL authorized by the Diet in May 2000. The interconnection of both ends of international leased circuits with public switched networks has been completely liberalized since December 1997. International internet telephony services have been liberalized since August 1997, and call back companies are, in principle, allowed to operate.23776 Number portability is not permitted.


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Mobile telephony80. Mobile telephony has continued to show significant development since Japan's previous Trade Policy Review; subscribers to cellular telephony expanded from 25.3 million in August 1997 to 52.8 million by the end of May 2000.23877 All mobile service providers have been classified as Type-I carriers.

Cable TV81. Cable TV service providers have recently been offering, through their cable networks, local telephony services, which had previously been the monopoly of NTT. The Cable Television Broadcast Law requires ministerial permission and the Wire Telecommunications Law requires ministerial notification for entry into the market. Criteria for the granting of permission include appropriateness of the plan to install broadcasting facilities, meeting technical standards prescribed in an MPT ordinance, sound financial basis and technical capability, and necessity and appropriateness of the installation of the facilities in the light of natural, social, and cultural conditions in the local area. The regulations on foreign equity participation and non-Japanese officers for cable TV were abolished in June 1999.23978

Appeals82. Users and carriers may file complaints and petitions with MPT about telecommunications service charges, other conditions and terms of services, and their manner of operation. MPT investigates the case by, inter alia, hearing from the carriers concerned and examining information provided by the carriers to justify their charges. Petitioners and the public are advised of the results of the investigation and the underlying reasoning behind MPT's decision.

Other issues (electronic commerce)83. With a view to fostering electronic commerce, the Diet approved the Law Concerning Electronic Signatures and Certification Service on 24 May 2000. The Law stipulates that electronic records containing electronic signatures are presumed to be authentic; it introduces a voluntary accreditation scheme, by the Government, for private certification, without discriminating between domestic and foreign businesses. The authorities indicate that they are in the process of establishing a ministerial ordinance accrediting certification services, according to provisions in the Law. The Law also introduces a system that enables mutual recognition of certification services between Japanese and foreign accreditation systems, where a mutual recognition agreement exists between the two countries.

84. With the advancement of technology and blurring of the distinction between broadcasting and telecommunications services, requests for the establishment of comprehensive rules and regulations for these services have been received from various domestic and foreign sources24079; while no concrete measures have yet been announced by the Government on the introduction of such measures, the MPT held a forum in June 2000 and has been exploring policy issues in this regard.

(iv) Transportation services(a) Maritime transport85. Almost all of Japan's internationally traded goods are shipped by maritime transport. In addition, coastal shipping accounted for 8.1% of domestic goods transported in 1998. In 1998, the share of Japanese-flag carriers in Japan's ocean-borne international trade was 43.4% for exports, a decrease of 3.4 percentage points since 1990, and 71.8% for imports, an increase of 4.6 percentage points. Port services were provided by some 1,000 firms at the end of March 1998, employing around 60,000 persons.

86. The Maritime Transport Bureau and the Maritime Technology and Safety Bureau of the Ministry of Transport are the main authorities regulating Japan's maritime transport sector. There are cabotage restrictions; only Japanese-flag carriers are permitted to carry cargo and passengers between Japanese ports.


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87. The authorities state that there are no monopolies in the maritime services sector; moreover, there are no quotas for suppliers or arrangements for cargo allocation. Agreements between operators on freight rates or other conditions of transportation, e.g. routes, are exempt from the Anti-Monopoly Act (AMA).

88. Japan's GATS Schedule of Commitments covers a range of maritime transport services, including maritime auxiliary transport services and internal waterways transport services, but excludes cabotage. International maritime transport services, concerning both passenger and freight, are unbound. Japan participated actively in the WTO negotiations on maritime transport services, which were suspended in 1996.

Domestic water-borne trade89. Like many maritime nations, Japan's domestic maritime transportation services market is shielded from foreign competition by cabotage legislation.24180 For national security reasons, cabotage is prohibited, except where non-Japanese vessels obtain permission from the Minister of Transport.

90. With respect to coastal maritime passenger services, scheduled domestic services must be approved by the Minister of Transport.24281 Prior notification is required regarding fares, fees and other conditions for the services. An economic needs test requirement is contained in the Coastal Shipping Law.

91. A Japanese flag-carrier must be manned by a certain number of officers holding Japanese certificates under the Law for Ship Officers. A foreigner who has a certificate issued by foreign authorities may take Japanese certificate examinations with the approval of the Minister of Transport.24382

92. Under the Marine Transportation Law, agreements between operators in domestic maritime transport for joint ship operations to maintain vital lifeline services or to improve user convenience are exempt from the AMA, provided approval is obtained from the MOT; the latter must consult with the Fair Trade Commission before giving such approval. The national government and local governments also provide subsidies to coastal passenger shipping businesses in order to maintain vital lifeline routes to isolated islands; these businesses must continuously improve their performance, in terms of revenue-cost rates, in order to remain eligible for the subsidies.

International water-borne trade93. The authorities maintain that there are no discriminatory measures affecting foreign participation in international maritime services.

94. Japan's bilateral agreements on passenger or cargo shipping apparently provide national treatment to partners on a reciprocal basis.24483 Bilateral discussions on maritime transportation have been held with the United States as well as with the European Union since 1998. Reciprocity provisions can be invoked under the terms of the Law on Special Measures against Unfavourable Treatment to Japanese Ocean-going Ship Operators by Foreign Governments and Others.

95. According to the authorities, no exclusive rights or subsidies are given to Japanese-flag carriers.24584 Nonetheless, in order to cope with a decrease in numbers, the Government has introduced support measures for Japanese-flag carriers (the so-called "International Ship Regime"). Under the regime, certain Japanese-flag ships are entitled to preferential tax treatment, and to employ foreign officers (other than the captain and chief engineer).24685 According to the authorities, the International Ship Regime has no distortionary effects on trade in maritime transport services; it aims to place Japanese vessels on an equal footing for with those of other countries that provide preferential tax treatment for their ships registered.

96. Under the Marine Transportation Law, a Japanese national intending to operate scheduled international passenger services must notify the MOT at least 30 days prior to the commencement of service24786; publication and prior notification are also required regarding terms and other conditions for international passenger liner services. Rates and fees for such services are required to be published before their commencement. A


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Japanese national intending to operate scheduled international cargo liner services must notify the MOT at least ten days prior to the commencement of service. Rates and fees must be made public before such commencement. For international tramp services, a prospective supplier of cargo services must notify the MOT within 30 days of commencement; for passenger services, a supplier must notify the Minister at least 30 days before commencement.24887 Fares must be made public before such commencement. Foreign persons, firms or organizations are exempted from these requirements.

97. Conferences and other agreements among shipping lines are exempted from the AMA. The MOT may issue an order of prohibition or alteration of an individual agreement if it judges that the agreement unduly restricts competition or unduly discriminates against others.

Auxiliary services98. According to the authorities, there are no discriminatory measures affecting foreign participation in auxiliary services. The Port Transportation Business Law is the regulatory basis for port services in 94 major ports in Japan. Ports in Japan are generally planned, constructed and managed by port management bodies under local governments; private-sector bodies, such as oil or steel industries, sometime construct and own wharves.

99. Both entry into and exit from the port-service sector requires a ministerial licence.24988 An economic needs test (demand-supply adjustment clause) is an element of the approval criteria. The authorities indicate that an average of about 20 new licences have been issued per year since Japan's previous Trade Policy Review. Pilotage services are mandatory in some ports.25089 It is common practice in Japan's port sector for carriers to notify the Japan Harbour Transport Association (JHTA) in advance of a request for, or change in, stevedore works (prior consultations). According to the authorities, the number of consultations has decreased by more than 80% since 1997. Stevedore charges require ministerial approval. Unified charges are applied in the major container terminals.

100. The authorities indicate that the number of container ships using Japanese ports has been decreasing recently on the main routes connecting East Asia and western countries; this is partly because the existing port transportation services are costly and do not meet the needs of users.25190

101. The Port Transport Business Law was amended in May 2000, to replace a licensing requirement (involving an economics needs test25291) with permission as regards entry into port transport business in nine major ports25392; the amendment also replaced the fee approval system concerning certain port services with a registration system involving prior notification. At the same time, regulations concerning fees and employment standards were strengthened.

(b) Air transport102. Japan has 22 national scheduled passenger airlines, while a total of 84 scheduled passenger airlines, domestic and foreign, operate in the country.

103. Japan's international air transportation market is mainly regulated by Japan's Civil Aeronautics Law (CAL) and numerous bilateral agreements. The Civil Aviation Bureau of the Ministry of Transportation (MOT) administers the entry, pricing, and routes of airlines, as well as safety regulations.

Domestic air transport services104. Under the CAL, any person intending to provide domestic airline services must obtain permission from the Minister of Transport.25493 The appropriateness of the company's business plan is among the approval criteria for such permission. Aircraft must be registered with the Minister of Transport to carry the Japanese flag.25594

105. As in most other countries, the provision of Japanese domestic air services is restricted to Japanese carriers (cabotage restrictions). An ownership restriction prohibits foreign investors from holding more than one third of voting rights of domestic airlines.


Trade Policy Review

106. While maintaining cabotage restrictions, the Government has promoted deregulation in domestic air services to a certain extent. The economic needs test (demand-supply adjustment clause) concerning the licence system of domestic scheduled services was abolished in the February 2000 amendment to the CAL. Japanese air carriers must notify their fares and fees to the authorities.25695 They must generally notify the MOT of domestic flight schedules; permission by MOT is required for use of certain congested airports that are specified in a ministerial order.

107. Agreements on cooperative management necessary to maintain domestic essential routes are exempted from the Anti-Monopoly Act. Tax incentives, consisting of reduction in the aircraft fuel tax and the municipal property tax on aircraft, are provided in order to maintain necessary airline routes to remote areas, such as solitary islands.

International air transport services 108. In FY1998, Japanese airlines accounted for 36% of Japan's scheduled international passenger market and 40% of Japan's international freight market, in terms of the number of passengers and tonnes of freight, respectively. Imports of air transport services in 1999 were ¥0.9 trillion (13.0% of total service imports), 1.8% lower than in 1998. Exports in the same year were ¥1.3 trillion (9.6% of total services exports), 11.3% higher than in 1998.

109. International air services are governed by a series of bilateral agreements that traditionally grant each country's flag carriers specific traffic rights, covering such matters as the routes to be flown, the number of airlines that fly the route, and the number of flights that can be operated. Since March 1997, Japan has concluded bilateral air service agreements with eight economies (Ethiopia, Papua New Guiana, Bahrain, Oman, Qatar, the United Arab Emirates, Israel, and Hong Kong, China); the number of air service agreements amounted to 55 as of March 2000. In addition, following discussions on the expansion of air services with the United States, Japan concluded a new Memorandum of Understanding (MOU) with the United States; according to the Japanese authorities, traffic rights for both countries' airlines on capacity and routes were equalized as a result of the MOU. Japan has not accepted "open skies" air services agreements; the authorities believe that such arrangements may entail oligopoly and other adverse effects on competition in Japan's international air services market.

110. In addition to traffic rights, Japan has concluded bilateral arrangements on code sharing with many countries; such arrangements are subject to approval under the CAL. These and other agreements between airline companies for improving user convenience on international routes from/to Japan are exempted from the Anti-Monopoly Act (AMA), provided such agreements do not involve unfair transactions or adversely affect competition. According to the authorities, while private agreements such as the IATA air fare agreement and code-sharing agreements have the potential to restrict competition, they are indispensable to the maintenance of a stable and broad international air transport network for the benefit of users.

111. Traffic rights, together with services directly related to the exercise of traffic rights, are outside the scope of the GATS.25796 In its GATS Schedule of Commitments, Japan has listed aircraft repair and maintenance services, the selling and marketing of air transportation services, and the operation and regulation of computer reservation systems (CRS) services. The number of licences for the establishment (mode 3) of aircraft repair and maintenance services is subject to limits, with a view, according to the authorities, to ensuring high quality of services. Japan made full commitments for the selling and marketing of air transport services and CRS services in mode 1 and mode 2; mode 4 and limitations on national treatment in mode 3 are bound by the horizontal provisions of its GATS Schedule.

112. Airplanes cannot be registered in Japan if the owner is any one of the following: a foreign national; a foreign government or public entity; a judicial entity established under foreign laws; a judicial entity whose representatives are foreign nationals or whose board is composed of one third or more of foreign


Trade Policy Review

nationals, or one third or more of whose voting interest are owned by such an entity.

113. In Japan, the setting and changing of fares and fees for international airline services require ministerial approval. Licences or certificates are required for the operation of aircraft; a foreigner who holds a certificate issued by a foreign government may be exempted from taking the whole or parts of the certificate examinations, subject to ministerial approval. With regard to foreign aircraft flown between Japan and a foreign country, or between points within Japan, licences or certificates issued by a foreign government are regarded as licences issued by Japan in accordance with the CAL.

114. Japan grants no exclusive rights, such as an obligation on government officials to use specific carriers for official duties. According to authorities, the Government does not provide any subsidies or government guarantees for Japanese airlines.

Other related services115. The two major international airports, New Tokyo (Narita) and Kansai, are mainly government owned. Narita airport is a government corporation, Kansai airport has a majority government shareholding, and other major airports are operated through Special Accounts for Airport Developments. Landing fees are significantly higher than at major airports in other developed countries.25897

116. It is often pointed out that airport capacity constraints, especially at Narita, are a severe barrier to the expansion of Japan's international civil aviation sector.25998 Both Narita and Kansai airports have only one runway. According to the authorities, Japan's airport slot allocation system for international civil aviation services is based upon guidelines issued by the IATA.26099 Japan Airlines is the coordinator (as stipulated in the IATA Worldwide Scheduling Guidelines). The allocation of slots takes place twice yearly.

117. Aerodrome operators must enact the administrative regulations regarding the conditions for the utilization of public aerodromes and other items for operation of services, in accordance with the CAL.261100 The Airport Regulations, an MOT ministerial ordinance, stipulate matters relating to the management of facilities and operational services of airports, and other related matters deemed necessary to ensure the efficient operation and maintenance of the airport. Any person who intends to provide auxiliary services, such as ground handling services, in airports operated by the Government, must submit an application for approval by the Director of the Regional Civil Aviation Bureau. As of 1 August 2000, 16 companies provide ground handling services in the New Tokyo Airport and 12 in Kansai Airport.

(v) Other services(a) Legal services118. The Ministry of Justice (MOJ) is the regulatory authority for legal services in Japan; self-regulation by the Japan Federation of Bar Associations also governs the sector, as prescribed in the Practising Attorney Law (PAL). Foreign participation in the sector is regulated by the PAL and the Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers. Practising attorneys (Bengoshi) in Japan must have completed the official programme for a legal apprentice. Passing the Japanese bar examination is required for entry into apprenticeship, both for Japanese and foreign nationals.

119. Foreign lawyers, with the approval of the MOJ and the necessary registration, are allowed to set up a law firm and handle certain matters of foreign law as Gaikokuho-jimu-bengoshi (GJB, attorney in charge of foreign legal affairs) in Japan, without any further qualification exams. However, it is forbidden for GJBs to employ Bengoshi. Among the criteria for approval of a GJB licence is at least three years of practice as a lawyer. No reciprocity is required concerning approval for GJBs from countries and economies that are WTO Members. GJBs must stay in Japan for not less than 180 days per year.

120. Recent regulatory changes in the sector include an amendment to the Special Measures Law Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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Concerning the Handling of Legal Business by Foreign Lawyers, which came into force in August 1998. The amendment relaxed restrictions on the objectives of a joint enterprise involving a GJB and a Bengoshi, lifted a ban on a GJB undertaking legal business concerning the third country law, and relaxed experience requirements for GJB qualification.

121. Since 1998, no change has been made to the eligibility criteria for patent attorney licences, which can be obtained by passing the patent attorney examination. The qualification to be eligible for becoming a patent attorney includes reciprocity requirements for foreign nationals, unless overruled by Japan's international obligations or by the Minister of International Trade and Industry. Since 1 January 1998, there have been no instances of these requirements being overruled by the Minister. The reciprocity requirement will be abolished on 6 January 2001, when the revised Patent Attorney Law is to enter into force.

(b) Education services122. Recent progress in the globalization of business activities and increase in foreign direct investment into Japan calls for education that suits individuals with diverse background and needs.262101 A recent survey by MITI shows a shortage of about 200,000 IT engineers; this shortage is due in large part to the failure of an inflexible academic system to nurture skilled IT professionals.263102 In addition, positive feedback through cooperation between academics and business sector would benefit the development of technology and innovation.

123. Recognizing the demand for diversity in education, in 1997 Japan announced a reform in education services, which was one of six main items of the Government's reform programme in that year. The Government is currently implementing the Program for Educational Reform, which aims to clarify specific problems and schedules for educational reform. In the Three-Year Program for Promoting Deregulation, a few measures regarding education were included.264103 These reform measures have not concerned market access by foreign entities.

124. Japan's GATS Schedule of Specific Commitments includes education services supplied by "formal education institutions" in Japan, and foreign language tuition service. 265104 Services supplied by formal education institutions require commercial presence, and must be provided by school judicial persons.266105 Both cross-border supply (mode 1) and consumption aboard (mode 2) are unbound due to the alleged lack of technical feasibility. No market access or national treatment restrictions exist for foreign language tuition services, except for horizontal restrictions applied to the movement of natural persons (mode 4).

Education services provided by universities125. Japan's education system consists of six years of primary education, three years each of lower and higher secondary education, four years of university-level education (including two-year junior colleges), and post-graduate education.267106 The first nine years, from the first grade in the elementary level up to the final year in the lower secondary level, is obligatory for Japanese citizens.268107 The share of private schools in the total number of students enrolled in formal education institutions is large; for example, as of 1 May 2000, 74% of university students were enrolled in private universities.269108

126. The Ministry of Education (MOE) is responsible for formulating policy and implementing measures concerning formal education in Japan. Major legislation includes the Fundamental Law of Education, the School Education Law, and the Private School Law. The establishment or abolition of private universities, together with changes in the number of personnel in faculties in private universities, inter alia, must be authorized by the MOE in accordance with the University Establishment Standard and other standards; the standards include regulations on curriculum.270109 The Minister of Education consults with the University Establishment and School Judicial Person Council before authorizing the establishment or abolition of a university.

127. Authorization to establish a new university depends on fulfilment of various requirements, such as organization of faculty, facilities and equipment, and funds needed for establishment.


Trade Policy Review

128. Formal educational institutions must be non-profit organizations, and their commercial activities are legally limited271110; the MOE has the discretion to define the scope of commercial activities. Formal educational institutions are eligible for government subsidies to the extent that they do not generate profits. All expenses in the first year of establishment must be secured in cash. The MOE does not authorize the establishment of a new university if the potential entrant plans to finance expenses by loans.

129. The Private School Law and its relevant ordinances require in principle that a university possess its own school buildings and stipulated minimum area of land. In addition, laws restricting the establishment of factories and other facilities in some designated large urban district, such as Tokyo and Osaka, also prohibit the establishment and enlargement of school premises in urban areas, except when authorized by a head of the local government concerned. 272111 In the past three years, two universities have been established by new entrants in the Tokyo metropolitan area.273112

130. New entry entails compliance with complex requirements stipulated in the standards such as organization of facility, facilities and equipment, and funds needed for establishment.274113 Amendments to the standards must go though public comment procedures. The authorities indicate that the time required for the authorization procedure is to be reduced to eight months in 2002, as a result of a change in the rules (March 2000). A standard processing period for approval is not published; according to Keidanren, authorization procedures require at least eight months for courses, and fifteen months for the establishment of faculties.275114

131. No legislation restricting foreign participation in formal education services appears to exist.276115 Nevertheless, under the Fundamental Law of Education, only central and local governments and "school judicial persons"277116 established in Japan are allowed to establish a formal de jure school in Japan, which must be approved by MOE in accordance with Establishing Guidelines or National Curriculum Standards. During the past decade, there has been no entry into Japan by foreign institutes, such as universities, as a formal de jure school; according to the authorities, there has been no application by foreign institutes for the establishment of school judicial persons. On the other hand, various foreign-affiliated universities in Japan have been established as "other schools (kakushu gakko)". Diplomas and certificates issued by these schools may not be regarded as equivalent to those issued by formal de jure schools; for example, foreign university graduates may need additional pre-qualification requirements to obtain professional licences, such as lawyers and medical doctors.278117

132. The 1992 Law on Extraordinary Measures on Employment of Foreign Teachers in National or Public Universities permits national or public universities to employ foreigners (except as executive members).279118

133. The Law for Promoting Technology Transfer form University to Industry was enacted in May 1998 in order to accelerate the transfer of technology from universities to business sectors. The Law promotes the establishment of Technology Licensing Organizations, which engage in obtaining patents, marketing, and licensing on behalf of university researchers. There are no foreign entry restrictions under the law, except that eligible foreign entities must reside in Japan.280119

REFERENCES

American Chamber of Commerce in Japan (2000), Making Trade Talks Work 2000, Tokyo.

APEC (1999), Japan Individual Action Plan [Online]. Available at: http://www.apecsec.org.sg/iap/99.

Bank of Japan (2000), Chosa Geppo, various issues, (Monthly statistics – in Japanese), Tokyo.

EPA (2000a), Economic Outlook and Basic Policy Stance on Economic Management for 2000, Economic Planning Agency, Tokyo.


Trade Policy Review

EPA (2000b), Economic Survey of Japan 1999-2000.

GATT (1995), Trade Policy Review – Japan, Geneva.

IMF (2000), International Financial Statistics, various issues, Washington D.C.

Industrial Structure Council (2000), 2000 Report on the WTO Consistency of Trade Policies by Major Trading Partners, Tokyo.

Japan Automobile Manufacturers Association, Inc. (1999), 1999 The Motor Industry of Japan, Tokyo.

Japan Productivity Center for Socio-economic Development (1999), Rodo Seisansei no Kokusai Hikaku (International comparison of labour productivity – in Japanese), Tokyo.

Japan Tariff Association (1999), Kanzei Nenpo Heisei 11-nen ban, Tokyo.

JFTC (2000), Competition policy issues in the telecommunications sector, Japan Fair Trade Commission, Tokyo.

Keidanren (2000a), Preliminary Recommendations on the Restructuring of the Legal System Governing Telecommunications to Propel the IT Revolution, Tokyo.

Keidanren (2000b), 1999-nendo Kisei Kaikaku Yobo, Vol. III, Tokyo.

MAFF (1999), Nogyo Hakusho – FY1998 (FY 1998 Annual Report on Agriculture – in Japanese), Ministry of Agriculture, Forestry and Fisheries, Tokyo.

MCA (1999), Kisei Kanwa Hakusho (White paper on deregulation – in Japanese), Management and Coordination Agency, Tokyo.

MOF (1998), Ministry of Finance Statistics Monthly, October, Ministry of Finance, Tokyo.

MOF (1999), Customs Administration in Japan 1999, Tokyo.

MITI (2000a), Overview of Japan's Import Policy, Ministry of International Trade and Industry, Tokyo.

MITI (2000b), Tusho Hakusho (White paper on international trade – in Japanese), Tokyo.MPT (1999), Tsushin Hakusho (White paper on telecommunications – in Japanese), Ministry of Posts and Telecommunications, Tokyo.

MPT (2000), Outline of the Telecommunications Business in Japan, Tokyo.

OECD (1996), Tax Expenditures: Recent Experiences, Organization for Economic Cooperation and Development, Paris.

OECD (1999a), OECD Economic Surveys – Japan, Paris.

OECD (1999b), Economic Outlook, December, Paris.

OECD (1999c), Regulatory Reform in Japan, Paris.


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OECD (1999d), Recent Trends in Foreign Direct Investment, Financial Market Trends, June, Paris.

OECD (2000), Agricultural Policies in OECD Countries – Monitoring and Evaluation 2000, Paris.

Prime Minister's Office (1999), Japan's Government Procurement: Policy and Achievements – annual Report (FY 1998), Tokyo.

Regulatory Reform Committee (1998), The First Opinion regarding Deregulation, Tokyo.

Shiratsuka (1999), "Measurement errors in Japanese Consumer Price Index", Federal Reserve Bank of Chicago, Working Paper No.2.

Takayama et. al. (1998), "Generational Accounting in Japan", in Alan J. Auerbach et al. (eds.), Generational Accounting Around the World, University of Chicago Press.

Trewin, R. and M. Bosworth (2000), Moving Japanese Agriculture Forward – Issues, Options and Strategies, Australia-Japan Research Centre, Canberra.

WTO (1998), Trade Policy Review – Japan, Geneva.

WTO (1999), TRADE POLICY REVIEW – UNITED STATES, GENEVA.

APPENDIX TABLES

Table AI.1Exports by product group, 1995-99(US$ million and per cent)

1995 1996 1997 1998 1999

Total (US$ million) 442,937.4 410,947.0 421,002.5 388,136.2 417,138.0

Total primary products 2.7 2.6 2.7 2.6 2.5

Agriculture 1.1 1.1 1.1 1.1 1.0

Mining 1.6 1.6 1.6 1.5 1.5

Manufactures 95.2 94.8 94.5 94.2 94.1

Iron and steel 4.0 3.7 3.8 3.8 3.2

Chemicals 6.8 7.0 7.1 7.0 7.4

Other semi-manufacturers 4.6 4.7 4.6 4.4 4.4

Machinery and transport equipment 70.3 69.5 69.1 69.2 68.7

Power generating machines 1.4 1.3 1.3 1.6 1.3

Other non-electrical machinery 14.0 14.5 13.6 12.3 12.0

7284 Mach. appl. special industry, nes 2.0 2.1 2.0 1.6 1.9

Office machines & telecom. equip. 24.1 22.9 22.6 21.9 21.9

7764 Electronic microcircuits 6.0 5.4 4.8 4.5 4.9

7599 Parts, data processing etc. machinery 2.9 3.1 3.0 3.0 2.8

Other electrical machines 7.0 7.0 7.1 7.3 7.7

Automotive products 18.2 18.3 19.0 20.0 19.8

7812 Motor vehicles for the transport of persons 9.4 9.7 11.3 12.9 13.1

7843 Other parts and accessories (…) 4.2 4.0 3.5 3.2 3.4

7821 Motor vehicles for the transport of goods 2.0 2.0 2.0 1.9 1.5

Other transport equipment 5.6 5.6 5.5 6.1 5.9


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Textiles 1.6 1.7 1.6 1.5 1.6

Clothing 0.1 0.1 0.1 0.1 0.1

Other consumer goods 7.8 8.1 8.2 8.1 8.8

Other 2.1 2.5 2.8 3.2 3.3

Source: UNSD, Comtrade database (SITC Rev.3).


Trade Policy Review

Table AI.2Imports by product group, 1995-99(US$ million and per cent)

1995 1996 1997 1998 1999

Total (US$ million) 336,094.2 349,186.1 338,830.5 280,633.9 309,915.2

Total primary products 44.8 43.9 44.4 41.6 40.8

Agriculture 22.2 21.0 19.8 20.2 19.3

Food 16.0 15.5 14.6 15.8 15.1

0342 Fish, frozen (excl. fillets and minced fish) 1.2 1.2 1.1 1.1 1.3

0361 Crustaceans, frozen 1.5 1.2 1.1 1.2 1.1

Agricultural raw material 6.2 5.5 5.2 4.3 4.1

Mining 22.6 22.9 24.6 21.4 21.6

Ores and other minerals 3.4 2.9 3.1 3.1 2.9

Non-ferrous metals 3.2 2.6 2.9 2.8 2.6

Fuels 16.0 17.4 18.5 15.4 16.1

3330 Crude petroleum 8.8 9.5 10.2 7.9 8.6

3431 Natural gas, liquified 2.3 2.5 2.8 2.8 2.7

3212 Other coal whether or not pulverized 1.9 1.9 2.0 2.1 1.7

Manufactures 52.9 54.3 53.9 56.6 57.3

Iron and steel 1.7 1.3 1.3 1.1 1.0

Chemicals 7.2 6.5 6.8 7.3 7.3

Other semi-manufacturers 4.9 5.0 4.7 4.3 4.4

Machinery and transport equipment 22.6 24.4 24.7 26.7 27.5

Power generating machines 0.9 0.9 1.1 1.3 1.2

Other non-electrical machinery 2.9 3.3 3.5 3.7 3.2

Office machines & telecom. equip. 11.2 12.4 12.4 13.0 14.2

7764 Electronic microcircuits 3.2 3.4 3.3 3.3 3.8

7599 Parts, data processing etc. machinery 1.5 1.7 1.9 2.2 2.3

Other electrical machines 2.7 3.0 3.2 3.5 3.7

Automotive products 3.5 3.6 3.0 2.8 2.8

Other transport equipment 1.3 1.2 1.6 2.4 2.4

Textiles 1.8 1.7 1.7 1.6 1.5

Clothing 5.6 5.6 4.9 5.2 5.3

Other consumer goods 9.2 9.7 9.8 10.3 10.3

Other 2.2 1.8 1.7 1.9 1.9

Gold 1.0 0.5 0.4 0.3 0.3



Trade Policy Review

Table AI.3Exports by destination, 1995-99(US$ million and per cent)

1995 1996 1997 1998 1999

Total (US$ million) 442,937.4 410,947.0 421,002.5 388,136.2 417,138.0

APEC 74.8 75.1 74.2 70.1 72.7

America 33.0 32.8 34.3 37.6 37.0

United States 27.5 27.5 28.1 30.9 31.1

Canada 1.3 1.2 1.4 1.6 1.7

Other America 4.2 4.1 4.7 5.0 4.3

Panama 1.6 1.4 1.6 1.6 1.6

Mexico 0.8 0.9 0.9 1.1 1.1

Europe 17.4 17.0 17.5 20.5 19.5

EU15 15.9 15.4 15.6 18.5 17.9

Germany 4.6 4.4 4.3 4.9 4.5

United Kingdom 3.2 3.0 3.3 3.8 3.4

Netherlands 2.2 2.3 2.3 2.8 2.9

France 1.4 1.3 1.4 1.6 1.7

Other Europe 1.4 1.6 1.9 2.0 1.6

Asia 45.6 46.4 44.5 38.0 39.6

Middle East 2.0 2.4 2.5 3.3 2.4

East Asia 42.5 42.9 41.1 33.7 36.3

Chinese Taipei 6.5 6.3 6.5 6.6 6.9

China 5.0 5.3 5.2 5.2 5.6

Korea, Rep. of 7.0 7.1 6.2 4.0 5.5

Hong Kong, China 6.3 6.2 6.5 5.8 5.3

Singapore 5.2 5.1 4.8 3.8 3.9

Malaysia 3.8 3.7 3.4 2.4 2.7

Thailand 4.5 4.4 3.5 2.4 2.7

Philippines 1.6 2.0 2.1 1.9 2.1

South Asia 1.1 1.1 0.9 1.0 0.9

Oceania 2.4 2.4 2.4 2.5 2.5

Australia 1.8 1.8 1.9 2.1 2.0

Africa 1.7 1.4 1.3 1.5 1.3



Trade Policy Review

Table AI.4Imports by origin, 1995-99(US$ million and per cent)

1995 1996 1997 1998 1999

Total (US$ million) 336,094.2 349,186.1 338,830.5 280,633.9 309,915.2

APEC 69.7 69.5 69.3 70.6 70.4

America 29.2 28.9 28.7 30.0 27.4United States 22.6 22.8 22.4 24.0 21.8Canada 3.2 2.9 2.9 2.7 2.6Other America 3.4 3.2 3.3 3.2 3.0

Europe 17.8 17.0 16.3 16.8 16.9EU15 14.5 14.1 13.3 13.9 13.8

Germany 4.1 4.1 3.7 3.8 3.7France 2.0 1.8 1.7 2.0 2.0United Kingdom 2.1 2.1 2.1 2.1 1.9

EFTA 1.6 1.4 1.4 1.5 1.6Eastern Europe 1.7 1.4 1.5 1.3 1.5

Former USSR 1.5 1.2 1.3 1.1 1.3Other Europe 0.1 0.1 0.1 0.1 0.1

Asia 46.1 47.5 48.3 46.2 49.4Middle East 9.4 10.1 11.3 9.1 9.8

United Arab Emirates 3.0 3.3 3.6 3.0 2.8Saudi Arabia 2.9 3.1 3.5 2.6 2.7

East Asia 35.5 36.3 36.0 36.1 38.7China 10.7 11.6 12.4 13.2 13.8Korea, Rep. of 5.1 4.6 4.3 4.3 5.2Indonesia 4.2 4.4 4.3 3.9 4.1Chinese Taipei 4.3 4.3 3.7 3.6 4.1Malaysia 3.1 3.4 3.4 3.1 3.5Thailand 3.0 2.9 2.8 2.9 2.9

South Asia 1.2 1.1 1.1 1.0 0.9

Oceania 5.5 5.1 5.3 5.6 5.0Australia 4.3 4.1 4.3 4.6 4.1

Africa 1.4 1.4 1.4 1.4 1.3



Trade Policy Review

Table AI.5Composition of trade in services, 1995-99(¥ billion and per cent)

1995 1996 1997 1998 1999

Imports

Total (¥ billion) 11,547.1 14,144.9 14,930.7 14,619.2 13,085.9

Transportation (%) 29.3 25.8 25.2 25.4 26.6

Travel (%) 30.0 28.5 26.7 25.7 28.4

Communications (%) 0.7 1.4 1.4 1.4 1.2

Construction (%) 2.6 3.7 4.4 4.9 3.8

Insurance (%) 2.0 1.5 1.6 2.1 2.8

Financial services (%) 0.4 2.3 2.2 1.9 2.4

Computer and information services (%) .. 1.9 2.8 3.2 2.6

Royalties and licence fees (%) 7.7 7.6 7.8 8.0 8.6

Other business services (%) 26.0 25.4 25.9 25.1 22.6

Personal cultural and recreational services (%) 0.4 0.9 0.9 1.1 1.0

Government services, n.i.e. (%) 0.9 1.0 1.1 1.0 0.9

Exports

Total (¥ billion) 6,157.3 7,365.7 8,388.4 8,164.7 6,935.4

Transportation (%) 34.5 31.9 31.5 34.1 37.6

Travel (%) 5.0 6.0 6.2 6.0 5.6

Communications (%) 0.8 2.0 2.0 1.9 1.3

Construction (%) 10.1 8.8 11.3 12.4 9.5

Insurance (%) 0.5 0.7 0.5 0.1 -0.1

Financial services (%) 0.5 4.2 2.7 2.6 3.3

Computer and information services (%) .. 1.8 2.0 2.1 2.1

Royalties and licence fees (%) 9.2 9.9 10.5 11.8 13.4

Other business services (%) 37.4 32.5 31.2 27.3 25.9

Personal cultural and recreational services (%) 0.2 0.3 0.3 0.7 0.4

Government services, n.i.e. (%) 2.0 2.0 1.7 1.0 1.1

.. Not available.

Source: Bank of Japan.


Trade Policy Review

Table AIII.1Non-ad valorem tariffs applied by Japan, FY2000(Value/unit, per cent)

HS Code Item Applied duty rate 2000 Final Uruguay Round rate

Specific duties

010111099 Light-breed horses (pregnant mare) ¥3.4 million/each ¥3.4 million/each

010119099 Light-breed horses (for purposes of horse-races) ¥3.4 million/each ¥3.4 million/each

010290092 Live bovine animals weighing 300 kg. ¥38,250/each ¥38,250/each

010290099 Live bovine animals > 300 kg. ¥63,750/each ¥63,750/each

010392011 Live swine weighing 50 kg. or more ¥19,508/each ¥19,508/each

020311020, 020321020 Meat of swine, carcasses and half-carcasses ¥361/kg. ¥361/kg.

020312023, 020319023, 020322023, 020329023, 020630093, 020649093

Meat of swine, other than carcasses or half-carcass.

¥482/kg. ¥482/kg.

021020000 Meat of bovine animals (other) ¥161.5/kg. ¥161.5/kg.

021090020 Meat of bovine animals (salted, (...) or smoked) ¥161.5/kg. ¥161.5/kg.

071290039 Sweetcorn ¥9/kg. ¥9/kg.

100110090, 100190092, 100190093, 100190099

Wheat and meslin ¥9.8/kg. ¥55/kg.a

100300091, 100300099 Barley ¥10.4/kg. ¥39/kg.a

100510020 Maize (corn) ¥9/kg. ¥9/kg.

100610ex, 100620ex, 100630ex, 100640ex

Rice ¥49/kg. ¥341/kg.a

100890029 Triticale ¥9.8/kg. ¥55/kg.a

110100019, 110100092, 110100099

Wheat or meslin flour ¥27.4/kg. ¥90/kg.a

110230ex Rice flour ¥54/kg. ¥375/kg.a

110290190 Barley flour ¥31/kg. ¥83/kg.a

110290290 Triticale flour ¥27.4/kg. ¥90/kg.a

110311090 Groats and meal of wheat ¥27.4/kg. ¥90/kg.a

110314ex Groats and meal of rice ¥54/kg. ¥375/kg.a

110319190 Groats and meal of barley ¥31/kg. ¥83/kg.a

110319290 Groats and meal of triticale ¥27.4/kg. ¥90/kg.a

110321090 Pellets of wheat ¥27.4/kg. ¥90/kg.a

110329290 Pellets of rice ¥54 /kg. ¥375/kg.a

110329390 Pellets of barley ¥31/kg. ¥83/kg.a

110329490 Pellets of triticale ¥27.4/kg. ¥90/kg.a

110411090 Rolled or flaked grains of barley ¥33.2/kg. ¥91/kg.a

110419119, 110419129 Rolled or flaked grains of wheat/triticale ¥31.4/kg. ¥112/kg.a

110419290 Rolled or flaked grains of rice ¥49/kg.¥341/kg.

a

110421090 Other worked grains of barley ¥38.6/kg. ¥111/kg.a

110429119, 110429129 Other worked grains of wheat/triticale ¥27.4/kg. ¥90/kg.a


Trade Policy Review

110429290 Other worked grains of rice ¥49/kg. ¥341/kg.a

110811090 Wheat starch ¥34.4/kg. ¥134/kg.a

121220110 Edible seaweeds ¥1.50/piece Unbound

130231010, 130231090 Agar-agar ¥112/kg. ¥112/kg.

Table AIII.1 (cont'd)

150100120 Pig fat of an acid value 1.3 ¥8.5/kg. ¥8.5/kg.

150710100 Soybean (crude oil) of an acid value > 0.6 ¥10.9/kg. ¥10.9/kg.

150710200 Soybean (crude oil) of an acid value 0.6 ¥13.2/kg. ¥13.2/kg.

150790000 Soybean (other) ¥13.2/kg. ¥13.2/kg.

150810100 Ground- nut oil (crude oil) of an acid value > 0.6

¥8.5/kg. ¥8.5/kg.

150810200 Ground-nut oil (crude oil) of an acid value 0.6 ¥10.4/kg. ¥10.4/kg.

150890000 Ground-nut oil (other) ¥10.4/kg. ¥10.4/kg.

151211110, 151211210 Sunflower seed/safflower oil (...) , acid value > 0.6

¥8.5/kg. ¥8.5/kg.

151211120, 151211220 Sunflower seed/safflower oil (...), acid value 0.6

¥10.4/kg. ¥10.4/kg.

151219010, 151219090 Sunflower seed or safflower oil (other) ¥10.4/kg. ¥10.4/kg.

151221090 Cotton seed oil (crude oil) ¥8.5/kg. ¥8.5/kg.

151229090 Cotton seed oil (other) ¥8.5/kg. ¥8.5/kg.

151410100 Rape, colza/mustard oil (...) of an acid value > 0.6

¥10.9/kg. ¥10.9/kg.

151410200 Rape, colza/mustard oil (crude oil), acid value 0.6

¥13.2/kg. ¥13.2/kg.

151490000 Rape, colza or mustard oil (other) ¥13.2/kg. ¥13.2/kg.

151521100 Maize (corn) oil (crude oil) of an acid value > 0.6

¥5/kg. ¥5/kg.

151521200 Maize (corn) oil (crude oil) of an acid value 0.6

¥10.4/kg. ¥10.4/kg.

151529000 Maize (corn) oil (other) ¥10.4/kg. ¥10.4/kg.

151550100, 151590410, 151590510

Sesame, rice bran and other oils and their fractions of an acid value > 0.6

¥8.5/kg. ¥8.5/kg.

151550200, 151590420, 151590520

Sesame, rice bran and other oil and their fractions of an acid value 0.6

¥10.4/kg. ¥10.4/kg.

151790020 Mixture of vegetable fats + oils + their fractions

¥13.2/kg. ¥13.2/kg.

170111190, 170112100 Cane sugar (centrifugal), beet sugar whose content of sucrose by weight, in the dry state, corresponds to a polarimetric reading of less than 98.5°C

¥35.3/kg. ¥35.3/kg.b

170111110 Cane sugar (other), whose content of sucrose by weight, in the dry state, corresponds to a polarimetric reading of less than 98.5 C

¥35.3/kg. ¥35.3/kg.

170111200, 170112200 Cane sugar (other), beet sugar (other) ¥21.5/kg. ¥103.1/kg.b

170191000 Refined sugar cont. added flavouring/colouring matter

¥39.98/kg. ¥106.2/kg.b

170199100 Rock candy, cube sugar, loaf sugar and similar sugar

¥39.98/kg. ¥106.2/kg.b

170199200 Refined sugar (other) ¥21.5/kg. ¥103.1/kg.b

170220100 Maple sugar ¥20.8/kg. ¥20.8/kg.

190120128,190120168, 190190148

Mixes and dough for the prep. of bakers' wares (…)

¥54/kg. ¥375/kg.a


Trade Policy Review

190120139, 190190159 Mixes and dough for the prep. of bakers' wares (…)

¥27.4/kg. ¥90/kg.a


¥31/kg. ¥83/kg.a


¥34.4/kg. ¥134/kg.a

190190588 Other food preparations (…) ¥54/kg. ¥375/kg.a

190211000 Uncooked pasta, (…), (containing eggs) ¥30/kg. ¥30/kg.

190219010 Uncooked pasta, (...), (other), biefun ¥27.2/kg. ¥27.2/kg.


190219092 Uncooked pasta, (...), (other), udon, somen and soba

¥34/kg. ¥34/kg.

190219093, 190219094 Uncooked pasta, (...), (other), macaroni + spaghetti

¥30/kg. ¥30/kg.

190219099 Uncooked pasta, (...), (other), other ¥34/kg. ¥34/kg.

190240000 Couscous ¥24/kg. ¥24/kg.

190410212 Prepared foods obtained by the swelling or roasting of cereals or cereal prod. (…)

¥49/kg. ¥341/kg.a


¥26.2/kg. ¥85/kg.a


¥26.6/kg. ¥64/kg.a

190420212 Prepared foods obtained from unroasted cereal flakes or form mixtures (…)

¥49/kg. ¥341/kg.a


¥26.2/kg. ¥85/kg.a


¥26.6/kg. ¥64/kg.a

190490130 Prepared foods, other ¥49/kg. ¥341/kg.a

190490290 Prepared foods, other ¥26.2/kg. ¥85/kg.a

190490390 Prepared foods, other ¥26.6/kg. ¥64/kg.a

210690518 Food preparations n.e.s. (...) ¥49/kg. ¥341/kg.a

210690215 Food preparations n.e.s. (...) ¥26.2/kg. ¥85/kg.a

210690219 Food preparations n.e.s. (...) ¥26.6/kg. ¥64/kg.a

210690282 Food preparations n.e.s. (...) ¥76.5/kg. ¥76.5/kg.

220410000 Sparkling wine ¥182/l. ¥182/l.

220421010 Sherry, port and other fortified wines, in containers holding 2 litres or less

¥112/l. ¥112/l.

220429090 Other wine in containers holding over 150 litres

¥45/l. ¥45/l.

220430200 Other grape must of an alcoholic strength by volume 1%

¥45/l. ¥45/l.

220510000, 220590200 Vermouth and other wine of fresh grapes (...) ¥69.3/l. ¥69.3/l.

220600210 Sake (Seishu and Dakushu) ¥70.4/l. ¥70.4/l.

220600221 Mixtures of fermented beverages (ex. Seishu) and prod. of heading No. 20.09 or 22.02

¥27/l. ¥27/l.

220600229 Other fermented beverages ¥42.4/l. ¥42.4/l.

220720200 Undenatured ethyl alcohol of an alcoholic strength by vol. of 80% or higher; ethyl alcohol and other spirits, denatured, of any strength

¥38.1/l. ¥38.1/l.


Trade Policy Review

220820100 Spirits obtained by distilling grape wine or grape marc (alcoholic strength by vol. of 50% vol. or higher, excl. those in containers holding less than 2 litres)

¥131.98/l. 0

220820200 Spirits obtained by distilling grape wine or grape marc (other)

¥156/l. 0

220830031 Rye whisky (...) (alcoholic strength by vol. of 50% vol. or higher, excl. those in containers holding less than 2 litres)

¥133.81/l. 0

220830032 Rye whisky (other) ¥111.2/l. 0

220870000 Liqueurs and cordials ¥63/l. ¥126/l.


220890111 Fruit brandy (of an alcoholic strength by vol. of 50% or higher, excluding those in containers holding < 2 litres)

¥131.98/l. 0

220890119 Fruit brandy (other) ¥156/l. 0

220890220 Imitation sake and white sake ¥70.4/l. ¥70.4/l.

220890240 Other spirituous beverages ¥88/l. ¥88/l.

230910010 Preparations of kind used in animal feed ¥59.5/kg. + ¥6 for every 1% exceeding 10% by

weight of lactose contained

¥59.5/kg. + ¥6 for every 1% exceeding 10% by weight of

lactose contained

230990219 Preparations of kind used in animal feed ¥52.5/kg. + ¥5.3 for every 1% exceeding 10% by


¥52.5/kg. + ¥5.3 for every 1% exceeding 10% by


230910099, 230990299 Preparations of a kind used in animal feeding ¥36/kg. ¥36/kg.

270900010 Petroleum oils and oils obtained from bituminous minerals, crude (...)

¥63/kl Unbound

270900090 Petroleum oils and oils obtained from bituminous minerals, crude (...)

¥215/kl Unbound

271000131 Petroleum spirits, for aviation use (of a specific gravity not more than 0.8017 at 15°C)

¥2,090/kl ¥3,033/kl

271000132 Petroleum spirits, for aviation use (other) ¥2,360/kl Unbound

271000136 Petroleum spirits, for use as fuels ¥750/kl Unbound

271000137, 271000139 Petroleum spirits, other ¥1,400/kl Unbound

271000143, 271000149 Kerosene's not including mixed alkylenes with a very low degree of polymerization

¥570/kl Unbound

271000150 Gas oils ¥1,270/kl Unbound

271000161, 271000162 Heavy fuel oils and raw oils of a specific gravity not more than 0.9037 at 15°C, intended for use as raw materials in oil refining

¥215/kl Unbound

271000165, 271000166 Heavy fuel oils and raw oils of a specific gravity not more than 0.9037 at 15°C, containing by weight more than 0.3% of sulphur

¥2,620/kl Unbound

271000167, 271000169 Heavy fuel oils and raw oils of a specific gravity not more than 0.9037 at 15°C, containing by weight 0.3% or less of sulphur

¥3,410/kl Unbound

271000171, 271000172 Heavy fuel oils and raw oils of a specific gravity exceeding 0.9037 at 15°C, intended for use as raw materials in oil refining

¥215/kl Unbound

271000173, 271000174 Heavy fuel oils and raw oils of a specific gravity exceeding 0.9037 at 15° C, containing by weight more than 0.3% of sulphur

¥2,400/kl Unbound


Trade Policy Review

271000175, 271000179 Heavy fuel oils and raw oils of a specific gravity exceeding 0.9037 at 15°C, containing by weight 0.3% or less of sulphur

¥3,410/kl Unbound

271000181 For use in the manufacture of petrochemical products

¥12/kl ¥12/kl

271114010 Ethylene ¥624/MT ¥624/MT

290516100 2-Ethylhexyl alcohol ¥7.49/kg. 5.50%

390110020, 390110060, 390120010, 390120090

Polymers of ethylene, in primary forms ¥12.53/kg. 6.50%

390210010, 390210090 Polymers of propylene/other olefins, primary forms

¥14.82/kg. 6.50%

500200221, 500200222, 500200223, 500200226, 500200227

Raw silk (not thrown) ¥3,068/kg. ¥6,978/kg.a


750120100 Nickel oxide sinters containing by weight not

less than 88% of nickel

¥44/kg. ¥44/kg.

750210000 Nickel not alloyed ¥44/kg. ¥44/kg.

750400210 Nickel powders and flakes (of nickel, not

alloyed)

¥41/kg. ¥41/kg.

780110010, 780199221 Unwrought lead, not more than ¥172/kg. in

value for customs duty

¥2.70/kg. ¥2.70/kg.

790111010, 790112010 Zinc, not alloyed, ¥242/kg. in value for

customs duty

¥4.30/kg. ¥4.30/kg.

790120010 Zinc alloy containing by weight > 3% of

aluminium

¥4.30/kg. ¥4.30/kg.

790120021 Zinc alloys (other) ¥4.20/kg. ¥4.20/kg.

811000010, 811000090 Antimony and articles thereof ¥8.80/kg. ¥8.80/kg.

Alternative duties

(whichever is greater)

040819000 Egg yolks, not dried 20% or ¥48/kg. 20% or ¥48/kg.

040899000 Bird's eggs, not in shell 21.3% or ¥51/kg. 21.3% or ¥51/kg.

150420000 Fats and oil of fish 7% or ¥4.20/kg. 7% or ¥4.20/kg.

151311000, 151319000 Coconut oil 4.5% or ¥5/kg. 4.5% or ¥5/kg.

151511000, 151519000 Linseed oil 5% or ¥5.5/kg. 5% or ¥5.5/kg.

170220200 Maple syrup 17.5% or ¥13.5/kg. 17.5% or ¥13.5/kg.

170230100 Glucose and glucose syrup, containing in the

dry state < 20% by weight of fructose

(containing added flavouring or colouring

matter)

29.8% or ¥23/kg. 29.8% or ¥23/kg.

170230210 Glucose and glucose syrup, containing in the

dry state < 20% by weight of fructose

(containing added sugar)

50% or ¥25/kg. 85.7% or ¥60.9/kg.b


Trade Policy Review

170230229 Glucose and glucose syrup, containing in the dry state < 20% by weight of fructose (other)

50% or ¥25/kg. 50% or ¥25/kg.

170240100 Glucose and glucose syrup, containing in the dry state 20% but < 50% by weight of fructose (containing added flavouring or colouring matter)

29.8% or ¥23/kg. 29.8% or ¥23/kg.

170240210 Glucose and glucose syrup, containing in the dry state 20% but < 50% by weight of fructose (containing added sugar)

50% or ¥25/kg. 78.5% or ¥53.70/kg.b

170240220 Glucose and glucose syrup, containing in the dry state 20% but < 50% by weight of fructose (other)

50% or ¥25/kg. 50% or ¥25/kg.

170260100 Glucose and glucose syrup, containing in the dry state > 50% by weight of fructose (containing added flavouring or colouring matter)

29.8% or ¥23/kg. 29.8% or ¥23/kg.

170260210 Glucose and glucose syrup, containing in the dry state > 50% by weight of fructose (containing added sugar)

50% or ¥25/kg. 85.7% or ¥60.90/kg.b

170260220 Glucose and glucose syrup, containing in the dry state > 50% by weight of fructose (other)

50% or ¥25/kg. 50% or ¥25/kg.

170290211 Other, inc. invert sugar (of sugar centrifugal) 24.6% or ¥13.3/kg. 35.4% or ¥47/kg.b

170290219, 170290510 Other, inc. invert sugar (other) 29.8% or ¥23/kg. 29.8% or ¥23/kg.

170290290, 170290300 Artificial honey and caramel 50% or ¥25/kg. 50% or ¥25/kg.

170290521 Other, inc. invert sugar (containing added sugar)

50% or ¥25/kg. 114.2% or ¥89.5/kg.b

170290529 Other sugar 50% or ¥25/kg. 50% or ¥25/kg.


200911190, 200919190, 200920190, 200930190, 200940190, 200960190, 200980119, 200990119

Fruit juices, vegetable juices, unfermented (...) (excluding apple juice)

29.8% or ¥23/kg. 29.8% or ¥23/kg.

200970190 Apple juice, containing added sugar (...) 34% or ¥23/kg. 34% or ¥23/kg.

210690221 Food preparations not elsewhere specified 24.6% or ¥13.3/kg. 52.5% or ¥49.7/kg.b

210690229, 210690246 Food preparations not elsewhere specified 29.8% or ¥23/kg. 29.8% or ¥23/kg.

220430119 Other grape must, containing added sugar (> 10% by weight of sucrose …)

29.8% or ¥23/kg. 29.8% or ¥23/kg.

220600100 Other fermented beverages (of an alcoholic strength by volume of less than 1% vol.)

29.8% or ¥23/kg. 29.8% or ¥23/kg.

220890230 Beverages with a basis of fruit juices, of an alcoholic strength by volume of less than 1% vol.

29.8% or ¥23/kg. 29.8% or ¥23/kg.

290611000 Menthol 14.5% or ¥431.6/kg. 5.50%

350510200 Dextrines and other modified starches 21.3% or ¥25.5/kg. 21.3% or ¥25.5/kg.

350520000 Glues 21.3% or ¥25.5/kg. 21.3% or ¥25.5/kg.

380910000 Finishing agents, dye carriers to accelerate the dyeing or fixing of dyestuffs and other products (…)

21.3% or ¥25.5/kg. 21.3% or ¥25.5/kg.

5111ex Woven fabrics of carded wool or of carded fine animal hair

9.1% or ¥151/m2

7.9% or ¥130/m2

5112ex Woven fabrics of combed wool or of combed fine animal hair

9.1% or ¥151/m2

7.9% or ¥130/m2

5205ex Cotton yarn (other than sewing thread), 2.2% or ¥15.1/kg., 2.5% 1.9% or ¥13/kg., 2.3% or


Trade Policy Review

containing 85% by weight of cotton, not put up for retail sale

or ¥17.9/kg. ¥17/kg.

5206ex Cotton yarn (other than sewing thread), containing less than 85% by weight of cotton, not put up for retail sale

2.2% or ¥15.1/kg. 1.9% or ¥13/kg.

5207ex Cotton yarn (other than sewing thread), put up for retail

2.2% or ¥15.1/kg. 1.9% or ¥13/kg.

5208ex, 5209ex, 5210ex, 5211ex, 5212ex

Woven fabrics of cotton 4.3% or 3.4%+¥1.16/m2

3.7% or 2.9%+ ¥1.01/m2

560490021 (...) other of cotton 2.2% or ¥15.1/kg. 1.9% or ¥13/kg.

581100023 Quilted textile products in the piece composed of one/more layers of textile materials (…), of cotton

4.3% or 3.4%+¥1.16/m2

3.7% or 2.9%+ ¥1.01/m2

780191040 Unwrought lead, not refined, containing by weight antimony as the principal other element, not used for electrolytic refining

3% or ¥3.10/kg. 3% or ¥3.10/kg.

780199100 Unwrought lead, not refined, containing by weight antimony as the principal other element, other, of alloyed

3% or ¥4.50/kg. 3% or ¥4.50/kg.

960810090 Ball point pens (other) 5% or ¥1.25/piece 5% or ¥1.25/piece

960860000 Refills for ball point pens, comprising the ball point and ink reservoir

5% or ¥0.50/piece 5% or ¥0.50/piece

Alternative duties (whichever is smaller)

220421020, 220429010 Other wine excluding sherry, port and other fortified wines, (...)

15% or ¥125/l, subject to a minimum customs duty of

¥67/l.

15% or ¥125/l, subject to a minimum customs duty of

¥67/l.

220600225 Sparkling beverages made, in part, from malt 3.8% or ¥6.4/l. ¥42.4/l.

220850000 Gin and Geneva 8.8% or ¥38.5/l. 17.5% or ¥77/l.


Tariff quotas

040110190 Milk and cream, not concentrated not containing added sugar or other sweetening matter

21.3%+ ¥54/kg. 21.3% + ¥54/kg.

040120190 21.3%+ ¥114/kg. 21.3% + ¥114/kg.

040130119 21.3% + ¥635/kg. 21.3% + ¥635/kg.

040130129 21.3%+ ¥1,199/kg. 21.3%+ ¥1,199/kg.

040210129 Milk and cream, concentrated or containing added sugar or other sweetening matter

29.8% + ¥92/kg. 29.8% + ¥396/kg.

040210212, 040210217 ¥92/kg. ¥396/kg.a

040210229 21.3% + ¥92/kg. 21.3% + ¥396/kg.a

040221119 25.5% + ¥123/kg. 25.5% + ¥612/kg.a

040221129 25.5% + ¥189/kg. 25.5% + ¥1,023/kg.a

040221212, 040221217 ¥99/kg. ¥425/kg.a

040221229 21.3% + ¥99/kg. 21.3% + ¥425/kg.a

040229119 25.5% + ¥123/kg. 25.5% + ¥612/kg.a

040229129 25.5% + ¥189/kg. 25.5% + ¥1,023/kg.

040229291 29.8% + ¥99/kg. 29.8% + ¥425/kg.a

040291129 25.5% + ¥509/kg. 25.5% + ¥509/kg.

040291290 21.3% + ¥254/kg. 21.3% + ¥254/kg.


Trade Policy Review

040299129 25.5% + ¥104/kg. 25.5% + ¥509/kg.a

040299290 25.5% + ¥55/kg. 25.5% + ¥254/kg.a

040310190 Buttermilk, curded milk + cream, yoghurt, kephir (…)

29.8% + ¥915/kg. 29.8% + ¥915/kg.

040390113 29.8% + ¥92/kg. 29.8% + ¥396/kg.a

040390118 29.8% + ¥396/kg. 29.8% + ¥396/kg.a

040390123 29.8% + ¥123/kg. 29.8% + ¥582/kg.a

040390128 29.8% + ¥582/kg. 29.8% + ¥582/kg.a

040390133 29.8% + ¥189/kg. 29.8% + ¥1,023/kg.a

040390138 29.8% + ¥1,023/kg. 29.8% + ¥1,023/kg.a

040410129, 040410139, 040410149

Whey, whether or not concentrated (...) 29.8% + ¥99/kg. 29.8% + ¥425/kg.a

040410169, 04010179, 040410189

29.8%+¥135/kg. 29.8% + ¥687/kg.a

040490112, 040490118 29.8% + ¥400/kg. 29.8% + ¥400/kg.

040490122, 040490128 29.8% + ¥679/kg. 29.8% + ¥679/kg.

040490132, 040490138 29.8% + ¥1,023/kg. 29.8% + ¥1,023/kg.

040510129, 040520090, 040590190

Butter and other fats and oils derived from milk; (...)

29.8% + ¥179/kg. 29.8% + ¥985/kg.a

040510229, 040590229 29.8% + ¥210/kg. 29.8% + ¥1,159/kg.a

071310229, 071332090, 071333229, 071339222, 071339227, 071350229, 071390229

Dried leguminous vegetables shelled, whether or not skinned or split

¥354/kg. ¥354/kg.

100590099 Maize (corn) (...) 50% or ¥12/kg. 50% or ¥12/kg.


110710019, 110710029, 110720020

Malt, whether or not roasted ¥21.3/kg. ¥21.3/kg.

110812090, 110813090, 110814090, 110819019, 110819099, 110820090

Other starches ¥119/kg. ¥119/kg.

120210099, 120220099 Ground nuts ¥617/kg. ¥617/kg.

121299190 Other (…) ¥2,796/kg. ¥2,796/kg.

170310099, 170390099 Molassed resulting from the extraction or refining of sugar

¥15.3/kg. ¥15.3/kg.

180620319, 180690319 Chocolate and other food prep. containing cocoa 23.8% + ¥679/kg. 23.8% + ¥679/kg.

190110119 Food prep. for infant use, put up for retail sale 23.8% + ¥679/kg. 23.8% + ¥679/kg.

190110129 Food prep. for infant use, put up for retail sale 23.8% + ¥1,159/kg. 23.8% + ¥1,159/kg.

190120112 Mixes and doughs for the preparation of bakers' wares of heading No. 19.05

23.8% + ¥679/kg. 23.8% + ¥679/kg.


23.8% + ¥1,159/kg. 23.8% + ¥1,159/kg.


¥119/kg. ¥119/kg.

190190132 Other food preparation 29.8% + ¥679/kg. 29.8% + ¥679/kg.

190190137 Other food preparation 29.8% + ¥1,159/kg. 29.8% + ¥1,159/kg.


Trade Policy Review

190190179 Other food preparation ¥119/kg. ¥119/kg.

200820119, 200820219 Pineapples in airtight containers 10 kg. ¥33/kg. ¥33/kg.

210112232 Preparations with a basis of extracts, essences or concentrates or with a basis of coffee

29.8% + ¥679/kg. 29.8% + ¥679/kg.

210112237 29.8% + ¥1,159/kg. 29.8% + ¥1,159/kg.

210120232 Extracts, essences + concentrates, of tea or maté, (...)

29.8% + ¥679/kg. 29.8% + ¥679/kg.

210120237 29.8% + ¥1,159/kg. 29.8% + ¥1,159/kg.

210610140 Food preparations n.e.c. 29.8% + ¥1,155/kg. 29.8% + ¥1,155/kg.

210690119 29.8% + ¥679/kg. 29.8% + ¥679/kg.

210690123, 210690129 29.8% + ¥1,159/kg. 29.8% + ¥1,159/kg.

220710290 Undenatured ethyl alcohol of an alcoholic strength by vol. of 80% or higher; ethyl alcohol and other spirits, denatured, of any strength

¥38.1/l. ¥38.1/l.

220890123 Other ethyl alcohol ¥48/l. ¥82.5/l.

500100090 Silk-worm cocoons suitable for reeling ¥2,523/kg. ¥2,523/kg.

6403ex, 6404ex, 6405ex Footwear 33.8% or ¥4,632.5/pair, 33.8% or ¥2,700/pair

30% or ¥4,300/pair, 30% or ¥2,400/pair

Differential tariffs

010392012 Live swine weighing 50 kg. or more (X1 – c.i.f.)/kg. ¥19,508/each

020311030, 020321030 Meat of swine, carcasses and half-carcasses (X2 – c.i.f.)/kg. ¥361/kg.

020312021, 020319021, 020322021, 020329021, 020630092, 020649092

Meat of swine, other than carcasses and half-carcass

(X3 – c.i.f.)/kg. ¥482/kg.

021011010, 021012010, 021019010, 021090011, 160241011, 160242011, 160249210

Meat of swine salted, etc. (1.5X4 - 0.6 c.i.f.)/kg. ¥1,035/kg.


Sliding duty

070310012 Onion, fresh or chilled (¥73.70 - c.i.f.)/kg. 8.5%

740200020 Unrefined cooper; copper anodes for electrolytic refining

(¥490 – c.i.f.)/kg. 3%

740311020, 740312020, 740313020, 740319021, 740319029, 740322020, 740323020, 740329020

Refined copper and copper alloys unwrought (¥500 - c.i.f.)/kg. 3%

780110020, 780199222 Unwrought lead (¥180 – c.i.f.)/kg. ¥2.70/kg.

780191020, 780199212 (¥170 – c.i.f.)/kg. 2.80%

790111020, 790112020 Unwrought zinc (¥250 – c.i.f.)/kg. ¥4.30/kg.

a Tariff plus levies collected by the Government of Japan or its agent.b Tariff plus levy.

c.i.f. Value for customs duty: cost, insurance and freight.X1 Standard import prices for live swine: ¥20,081.67 each.X2 Standard import prices for pig carcasses: ¥ 371.67 each.X3 Standard import prices for pig hams, shoulders and cuts thereof: ¥496.17 each.X4 Standard import prices for processed meat of swine: ¥1,065.5 each.

Source: Data provided by the Japanese authorities.


Trade Policy Review

Table AIII.2Current and minimum access commitments by Japan under the Uruguay Round(Thousand tonnes, per cent and value/unit volume) Tariff Description number

a Tariff quota

quantityIn-quota tariff rate

Initialbound rate

AVE 1986-88

bFinal

bound rate

Initial Final

Current access commitments

0402.10 Skimmed milk powder (for school lunches) 7.3 7.3

-110 Free ¥466/kg. 374 ¥396/kg.

.21-200 Free ¥500/kg. 390 ¥425/kg.

0402.10 Skimmed milk powder (for other purposes) 85.9 85.9

-100 35.0 35+¥466/kg. 374 29.8+¥396/kg.

-110 Free ¥466/kg. 374 ¥396/kg.

-190 25.0 25+¥466/kg. 374 21.3+¥396/kg.

.21-200 Free ¥500/kg. 390 ¥425/kg.

-290 25.0 25+¥500/kg. 390 21.3+¥425/kg.

.29-200 35.0 35+¥500/kg. 390 29.8+¥425/kg.

0402.21 Milk powder .0003 .0003

-100 30.0 30+¥720/kg. 477 25.5+¥612/kg.

-100 (Fat > 30%) 30.0 30+¥1,204/kg. 599 25.5+¥1023/kg.

.29-100 30.0 30+¥720/kg. 477 25.5+¥612/kg.

-100 (Fat > 30%) 30.0 30+¥1,204/kg. 599 25.5+¥1023/kg.

0402.91 Evaporated milk 1.6 1.6

-010 30.0 30+¥599/kg. 439 25.5+¥509/kg.

-090 25.0 25+¥299/kg. 413 21.3+¥254/kg.

0402.99 Condensed milk .013 .013

-010 30.0 30+¥599/kg. 439 25.5+¥509/kg.

-090 30.0 25+¥299/kg. 413 21.3+¥254/kg.

0404.10 Whey & modified whey (for feeding purposes) 18.5 45.0

-010 Free 35+¥500/kg. 390 29.8+¥425/kg.

-010 (Fat > 5%) Free 35+¥808/kg. 505 29.8+¥687/kg.

0404.10 Prepared whey (for infant formula) 12.0 25.0

–010 10.0 35+¥500/kg. 390 29.8+¥425/kg.

-010 (Fat > 5%) 10.0 35+¥808/kg. 505 29.8+¥687/kg.

.90-011 10.0 35+¥470/kg. 374 29.8+¥400/kg.

-019 (Fat > 1.5%, 30%) 10.0 35+¥799/kg. 445 29.8+¥679/kg.

-019 (Fat > 30%) 10.0 35+¥1,204/kg. 599 29.8+¥1,023/kg.

0404.10 Mineral concentrated whey 1.3 14.0

-010 35.0 35+¥500/kg. 390 29.8+¥425/kg.

-010 (Sugar added, fat > 5%) 35.0 35+¥808/kg. 505 29.8+¥687/kg.

-010 (No sugar added, fat 5%) 25.0 35+¥500/kg. 390 29.8+¥425/kg.

-010 (No sugar added, fat > 5%) 25.0 35+¥808/kg. 505 29.8+¥687/kg.

0405.00 Butter and butter oil 1.9 1.9

-000 35.0 35+¥1,159/kg. 614 29.8+¥985/kg.

-000 (Fat > 85%) 35.0 35+¥1,363/kg. 614 29.8+¥1,159/kg.

2106.90 Prepared edible fat 17.1 19.0


Trade Policy Review

-019 25.0 35+¥1,363/kg. 614 29.8+¥1,159/kg.

Other dairy products for general use 124.6 133.9


0401.10 Milk and cream

-000 25.0 25+¥63/kg. 401 21.3+¥54/kg.

.20-000 25.0 25+¥134/kg. 462 21.3+¥114/kg.

.30-000 25.0 25+¥747/kg. 508 21.3+¥635/kg.

-000 (Fat > 45%) 25.0 25+¥1,411/kg. 508 21.3+¥1,199/kg.

0403.10 Yoghurt, other fermented milk

-010 35.0 35+¥1,076/kg. 481 29.8+¥915/kg.

-010 (No sugar added) 25.0 35+¥1,076/kg. 481 29.8+¥915/kg.

.90-011 35.0 35+¥466/kg. 374 29.8+¥396/kg.

-021 35.0 35+¥685/kg. 465 29.8+¥582/kg.

-029 35.0 35+¥1,204/kg. 599 29.8+¥1,023/kg.

-011 (No sugar added) 25.0 35+¥466/kg. 374 29.8+¥396/kg.


-029 (No sugar added) 25.0 35+¥1,204/kg. 599 29.8+¥1,023/kg.

0404.90 Milk constituents

-011 35.0 35+¥470/kg. 374 29.8+¥400/kg.

-019 35.0 35+¥799/kg. 445 29.8+¥679/kg.

-019 (Fat > 30%) 35.0 35+¥1204/kg. 599 29.8+¥1,023/kg.



-019 (No sugar added, fat > 30%) 25.0 35+¥1,204/kg. 599 29.8+¥1,023/kg.

1901.10 Infant food preparations

-010 25.0 28+¥799/kg. 445 23.8+¥679/kg.

-090 25.0 28+¥1,363/kg. 614 23.8+¥1,159/kg.

.20-011 25.0 28+¥799/kg. 445 23.8+¥679/kg.

-019 25.0 28+¥1363/kg. 614 23.8+¥1,159/kg.

.90-011 21.0 35+¥799/kg. 445 29.8+¥679/kg.

-019 21.0 35+¥1363/kg. 614 29.8+¥1,159/kg.

2101.10 Coffee- or tea-based preparations

-210 25.0 35+¥799/kg. 445 29.8+¥679/kg.

-290 25.0 35+¥1363/kg. 614 29.8+¥1,159/kg.

.20-210 25.0 35+¥799/kg. 445 29.8+¥679/kg.

-290 25.0 35+¥1,363/kg. 614 29.8+¥1,159/kg.

2106.10 Protein concentrate preparations

-100 25.0 35+¥1,359/kg. 373 29.8+¥1,155/kg.

-100 (Of vegetable protein) 12.5 35+¥1,359/kg. 373 29.8+¥1,155/kg.

.90-011 12.0 35+¥799/kg. 445 29.8+¥679/kg.

-011 (Other) 21.0 35+¥799/kg. 445 29.8+¥679/kg.

-019 12.0 35+¥ 1363/kg. 614 29.8+¥1,159/kg.

-019 (Other) 21.0 35+¥1,363/kg. 614 29.8+¥1,159/kg.

Designated dairy products for general usec 137.2 137.2

0402.10 Skimmed milk powder

-100 35.0 35+¥466/kg. 374 29.8+¥396/kg.

-190 25.0 25+¥466/kg. 374 21.3+¥396/kg.


Trade Policy Review


.21-290 25.0 25+¥500/kg. 390 21.3+¥425/kg.

.29-200 35.0 35+¥500/kg. 390 29.8+¥425/kg.

.21-100 Milk powder 30.0 30+¥720/kg. 477 25.5+¥612/kg.

-100 (Fat > 30%) 30.0 30+¥1,204/kg. 599 25.5+¥1,023/kg.

.29-100 30.0 30+¥720/kg. 477 25.5+¥612/kg.

-100 (Fat > 30%) 30.0 30+¥1,204/kg. 599 25.5+¥1,023/kg.

.99-010 30.0 30+¥599/kg. 439 25.5+¥509/kg.

-090 30.0 30+¥299/kg. 413 25.5+¥254/kg.

0403.90 Buttermilk powder

-011 35.0 35+¥466/kg. 374 29.8+¥396/kg.

-021 35.0 35+¥685/kg. 465 29.8+¥582/kg.

-029 35.0 35+¥1,204/kg. 599 29.8+¥1,023/kg.


-021 (No sugar added) 25.0 35+¥ 685/kg. 465 29.8+¥582/kg.

-029 (No sugar added) 25.0 35+¥1,204/kg. 599 29.8+¥1,023/kg.

0404.100

Whey and modified whey

-010 35.0 35+¥500/kg. 390 29.8+¥425/kg.

-010 (Fat > 5%) 35.0 35+¥808/kg. 505 29.8+¥687/kg.

-010 (No sugar added, fat 5%) 25.0 35+¥500/kg. 390 29.8+¥425/kg.

-010 (No sugar added, fat > 5%) 25.0 35+¥808/kg. 505 29.8+¥687/kg.

0405.00 Butter

-000 35.0 35+¥1,159/kg. 614 29.8+¥985/kg.

-000 (Fat > 85%) 35.0 35+¥1,363/kg. 614 29.8+¥1,159/kg.

0713.10 Dried leguminous vegetables 120.0 120.0

-020 10.0 ¥417/kg. 531 ¥354/kg.

.32-000 10.0 ¥417/kg. 531 ¥354/kg.

.33-020 10.0 ¥417/kg. 531 ¥354/kg.

.39-021 10.0 ¥ 417/kg. 531 ¥354/kg.

-029 10.0 ¥417/kg. 531 ¥354/kg.

.50-020 10.0 ¥417/kg. 531 ¥354/kg.

.90-020 10.0 ¥417/kg. 531 ¥354/kg.

Wheat, meslin, triticale and their processed products

c 5,565.0 5,740.0

1001.10 Durum wheat

-000 Free ¥65/kg. 413 ¥55/kg.

.90-010 Meslin, etc. 20.0 ¥65/kg. 413 ¥55/kg.

-091 Free ¥65/kg. 413 ¥55/kg.

-099 Free ¥65/kg. 413 ¥55/kg.

1008.90 Triticale

-090 Free ¥65/kg. 413 ¥55/kg.

1101.00 Wheat or meslin flour

-010 12.5 ¥106/kg. 482 ¥90/kg.

-090 25.0 ¥106/kg. 482 ¥90/kg.


1102.90 Triticale flour


Trade Policy Review

-000 25.0 ¥106/kg. 482 ¥90/kg.

1103.11 Groats, etc.

-000 25.0 ¥106/kg. 482 ¥90/kg.

.19-000 20.0 ¥106/kg. 482 ¥90/kg.

.21-000 25.0 ¥106/kg. 482 ¥90/kg.

.29-300 20.0 ¥ 106/kg. 482 ¥90/kg.

1104.19 Rolled or flaked grains

-100 25.0 ¥132/kg. 455 ¥112/kg.

-200 20.0 ¥132/kg. 455 ¥112/kg.

.29-100 25.0 ¥106/kg. 482 ¥90/kg.

-200 20.0 ¥106/kg. 482 ¥90/kg.

1108.11 Wheat starch

-000 25.0 ¥158/kg. 451 ¥134/kg.

1901.20 Food preparations

-020 25.0 ¥106/kg. 482 ¥90/kg.

-051 25.0 ¥158/kg. 451 ¥134/kg.

.90-020 25.0 ¥106/kg. 482 ¥90/kg.

-051 25.0 ¥158/kg. 451 ¥134/kg.

1904.10 Prepared foods

-000 19.2 ¥100/kg. 476 ¥85/kg.

.90-000 25.0 ¥100/kg. 476 ¥85/kg.


-030 25.0 ¥100/kg. 476 ¥85/kg.

Barley and its processed productsc 1,326.5 1,369.0

1003.00 Barley, including for feeding purposes

-010 Free ¥46/kg. 306 ¥39/kg.

-090 Free ¥46/kg. 306 ¥39/kg.

1102.90 Barley flour

-000 25.0 ¥98/kg. 338 ¥83/kg.

1103.19 Groats and meal of barley

-000 20.0 ¥98/kg. 338 ¥83/kg.

.29-300 20.0 ¥98/kg. 338 ¥83/kg.

1104.11 Rolled or flaked barley

-000 20.0 ¥107/kg. 334 ¥91/kg.

.21-000 20.0 ¥130/kg. 325 ¥111/kg.


–030 25.0 ¥98/kg. 338 ¥83/kg.

.90-030 25.0 ¥98/kg. 338 ¥83/kg.


-000 19.2 ¥75/kg. 357 ¥64/kg.

.90-000 25.0 ¥75/kg. 357 ¥64/kg.


-090 25.0 ¥75/kg. 357 ¥64/kg.


Starches, inulin and their preparations 157.0 157.0

1108.12 Maize, potato and other starches

-000 25.0 ¥140/kg. 480 ¥119/kg.

.13-000 25.0 ¥140/kg. 480 ¥119/kg.


Trade Policy Review

.14-000 25.0 ¥140/kg. 480 ¥119/kg.

.19-010 25.0 ¥140/kg. 480 ¥119/kg.

-090 25.0 ¥140/kg. 480 ¥119/kg.

.20-000 25.0 ¥140/kg. 480 ¥119/kg.

1901.20 Preparations of starches

-059 25.0 ¥140/kg. 480 ¥119/kg.

.90-059 25.0 ¥140/kg. 480 ¥119/kg.

.20-059 (Other) 16.0 ¥140/kg. 480 ¥119/kg.

.90-059 (Other) 16.0 ¥140/kg. 480 ¥119/kg.

1202.10 Groundnuts 75.0 75.0

-090 10.0 ¥726/kg. 516 ¥617/kg.

.20-090 10.0 ¥726/kg. 516 ¥617/kg.

1212.99 Tubers of konnyaku 0.3 0.3

-100 40.0 ¥3,289/kg. 485 ¥2,796/kg.

Silk-worm cocoons and raw silkc 0.8 0.8

5001.00 Silk-worm cocoons

-000 ¥140/kg ¥2,968/kg. 171 ¥2,523/kg.

5002.00 Raw silk

-210 7.5 ¥8,209/kg. 212 ¥6,978/kg.

-291 7.5 ¥8,209/kg. 212 ¥6,978/kg.

-292 7.5 ¥8,209/kg. 212 ¥6,978/kg.

-293 7.5 ¥8,209/kg. 212 ¥6,978/kg.

-299 7.5 ¥8,209/kg. 212 ¥6,978/kg.

Minimum access commitments

Rice and its worked and/or prepared productsc 379.0 682.2

1006.10 Rice in the husk

-000 Free ¥402/kg. n.a. ¥341/kg.

.20-000 Husked rice Free ¥402/kg. n.a. ¥341/kg.

.30-000 Milled rice Free ¥402/kg. n.a. ¥341/kg.

.40-000 Broken rice Free ¥402/kg. n.a. ¥341/kg.

1102.30 Rice flour

-000 25.0 ¥442/kg. n.a. ¥375/kg.

1103.14 Groats and meal of rice

-000 25.0 ¥442/kg. n.a. ¥375/kg.

.29-200 Rice pellet 25.0 ¥442/kg. n.a. ¥375/kg.

1104.19 Rolled or flaked rice

-100 25.0 ¥402/kg. n.a. ¥341/kg.


.29-100 … worked rice 25.0 ¥402/kg. n.a. ¥341/kg.

1901.20 Food preparations of rice

-040 25.0 ¥442/kg. n.a. ¥375/kg.

-090 25.0 ¥442/kg. n.a. ¥375/kg.

.90-040 25.0 ¥442/kg. n.a. ¥375/kg.

-090 25.0 ¥442/kg. n.a. ¥375/kg.


Trade Policy Review


-000 19.2 ¥402/kg. n.a. ¥341/kg.

.90-000 25.0 ¥402/kg. n.a. ¥341/kg.


-020 25.0 ¥402/kg. n.a. ¥341/kg.

n.a. Not applicable.

a 1988 tariff descriptions.b AVE = Ad valorem equivalent (in per cent).c State-trading items.

Source: Government of Japan (Uruguay Round Schedules).


Trade Policy Review

Table AIII.3Tariff quotas in Japan, FY1997, 1998 and 2000(Per cent, value/unit)Tariff item Description Tariff rates

FY2000Quota level Above-

quota importsFY1998

In-quota imports FY1998

SP EP

Below quota Above quota FY1997 FY1998

0406.10, 40, 90

Natural cheese intended for use as material for processed cheese

Free 29.8 56,300 t. 56,600 t. .. 49,700 t. No Yes

1005.90 Maize intended for manufacturing use

- corn starch Free 50% or ¥12/kg.a 3,951,000 t. 4,012,600 t. .. 3,747,800 t. Yes Yes

- animal feed Free 50% or ¥12/kg.a

-- stipulated by a cabinet order (steam flaked corn)

91,600 t. 20,600 t. .. 4,100 t. Yes Yes

-- for feeding purpose, stipulated by a cabinet order (whole shelled corn)

295,600 t. 231,800 t. .. 131,300 t. Yes Yes

- corn flakes, ethyl alcohol or distilled alcoholic beverages

Free 50% or ¥12/kg.a 108,200 t. 122,100 t. .. 122,000 t. Yes Yes

- other 10 50% or ¥12/kg.a 300,100 t. 273,100 t. .. 208,800 t. Yes No

1107.10, 20 Malt Free ¥21.3/kg. 810,000 t. 832,900 t. .. 741,900 t. Yes No

1703.10, 90 Molasses from sugar refining or extraction intended for manufacturing alcohol

Free ¥15.3/kg. 35,700 t. 34,800 t. .. 27,800 t. Yes Yes

1806.20 Cocoa preparations intended for chocolate manufacture

Free 21.3% 18,700 t. 18,400 t. .. 17,000 t. Yes Yes

2002.90 Tomato puree and paste intended for manufacturing tomato sauces

Free 16% 36,000 t. 36,500 t. .. 32,800 t. Yes Yes

2008.20 Preserved pineapple in airtight containers

Free ¥33/kg. 50,000 t. 48,300 t. .. 46,100 t. Yes No

2207.10 Ethyl alcohol (80-90%)b Free ¥38.10/litre 263,800 kl 251,400 kl .. 249,600 kl Yes Yes

90% or higher Free 27.2% Included in above

Included in above

.. Included in above

Yes Yes

2208.90 Ethyl alcohol (<80%)b Free ¥82.5/litre Included in

aboveIncluded in

above.. Included in

aboveYes Yes

Distilled alcoholic beverages

Free 16.0 Included in above

Included in above


Yes Yes

4104.10, 31, 39

Bovine and equine leather (dyed)

16.5 37.5 1,466,000 m2

1,466,000 m2 .. 563,000 m

2 No No

4104.31 Bovine and equine leather (dyed)

14.1 33.8 Included in above

Included in above


4104.10, 21, 22, 29,

Bovine and equine 12.4 33.8 214,000 m2

214,000 m2 .. 136,000 m

2 No No


Trade Policy Review

31, 39 leather (other)

4105.20 Sheep leather 16.5% 33.8% 1,070,000 m2

1,070,000 m2 .. 187,000 m

2 No No


4106.20 Goat leather 16.5% 33.8% Included in above

Included in above


No No

6403.20, 30, 40, 51, 59, 91, 99, 6404.19,20, 6405.10,90

Leather footwear 17.8~24.8% 33.8% or

¥4,362.5/paira,

33.8% or

¥2,700/paira

12,019,000 pairs

12,019,000 pairs

.. 10,817,000 pairs

No No

0402.10, 21 Skimmed milk powder (for school lunches)

Free ¥92/kg., ¥99/kg. 7,264 t. 7,264 t. .. 3,783 t.

0402.10, 21, 29

Skimmed milk powder (for other purposes)

Free~35% ¥92/kg., 29.8%+ ¥99/kg.

85,878 t. 85,878 t. .. 32,569 t.

0402.21, 29, 91, 99

Milk products, evaporated milk and milk products

25%, 30% 21.3%+¥99/kg., 25.5%+¥104/kg.

1,585 t. 1,585 t. .. 1,429 t.

0404.10 Whey & modified whey (for feeding purposes)

Free 29.8%+¥99/kg., 29.8%+¥135/kg.

45,000 t. 45,000 t. .. 20,913 t.

0404.10 Prepared whey (for infant formula)

10% 29.8%+¥99/kg., 29.8%+¥135/kg.

25,000 t. 25,000 t. .. 8,432 t.

0404.10 Mineral concentrated whey

25%, 35% 29.8%+¥99/kg., 29.8%+¥135/kg.

14,000 t. 14,000 t. .. 3,185 t.

0405.00 Butter and butter oil 35% 29.8%+¥179/kg., 29.8%+¥210/kg.

1,873 t. 1,873 t. .. 372 t.

2106.90 Prepared edible fat 25% 29.8%+¥1,159/kg. 18,977 t. 18,977 t. .. 18,641 t.

0401.10, 300403.10, 900404.90 1901.10,20, 902101.10, 202106.10, 90

Other dairy products for general use

12~35% 21.3%+¥54/kg.,~29.8%+¥1,159/kg.

128,360 t. 130,220 t. .. 120,841 t.

0713.10, 32, 33, 39, 50, 90

Dried leguminous vegetable

10% ¥354/kg. 120,000 t. 120,000 t. .. 113,385 t.

1108ex1901ex

Starches, inulin andtheir preparations

Free~25% ¥119/kg. 157,000 t. 157,000 t. .. 108,656 t.

1202.10ex, 20ex

Groundnuts 10% ¥617/kg. 75,000 t. 75,000 t. .. 42,666 t.

1212.99ex Tubers of konnyaku 40% ¥2,796/kg. 267 t. 267 t. .. 156 t.

5001 Silkworm cocoons Free ¥2,523/kg. 2,500 t. 1,995 t. .. 900 t.

.. Not available.

a Whichever is greater.b Intended for use in distilling alcohol for making alcoholic beverages.

SP Shortfall provisions.EP End-use provisions.



Trade Policy Review

Table AIII.4Tariff escalation and tariff ranges in Japan, FY2000(Per cent)

ISIC Product and processing stage Frequency (No. of lines, HS nine-digit)

Average Range Standard deviation

Primary products

111 Agricultural and livestock production 353 8.0 (3.4) 0-690.3 (0-50) 48.2 (5.2)

121 Forestry 38 2.8 (2.8) 0-17 (0-17) 4.5 (4.5)

122 Logging 35 0.1 (0.1) 0-3.5 (0-3.5) 0.6 (0.6)

130 Fishing 138 5.0 (5.0) 0-15 (0-15) 3.6 (3.6)

210 Coal mining 9 0.0 (0.0) 0-0 (0-0) 0.0 (0.0)

220 Crude petroleum and gas 5 0.5 (0.0) 0-1.9 (0-0) 0.8 (0.0)

230 Metal ores 27 0.0 (0.0) 0-0 (0-0) 0.0 (0.0)

290 Mineral ores 82 0.1 (0.1) 0-2.5 (0-2.5) 0.4 (0.3)

Industrial products

311 Food products

- 1st stage of processing 155 22.7 (3.8) 0-983.7 (0-15) 110.4 (3.3)

- semi-processed 141 16.0 (13.1) 0-121.6 (0-25) 15.7 (7.1)

- fully processed 728 19.1 (14.1) 0-490.7 (0-50) 38.0 (10.5)

312 Food manufacturing

- 1st stage of processing 31 23.4 (8.9) 0-458.6 (0-21.3) 81.2 (8.5)

- semi-processed 26 32.8 (33.3) 2.3-50 (3-50) 16.1 (9.3)

- fully processed 176 29.9 (18.2) 0-465.2 (0-29.8) 63.7 (9.4)

313 Beverages

- fully processed 52 20.0 (13.8) 0-68 (0-29.8) 14.6 (9.4)

314 Tobacco manufactures

- fully processed 8 7.0 (7.0) 0-29.8 (0-29.8) 10.6 (10.6)

321 Textiles


- semi-processed 1,162 6.7 (6.6) 0-13.9 (0-13) 2.4 (2.5)

- fully processed 584 8.6 (8.6) 0-16.7 (0-16.7) 3.5 (3.5)

322 Clothing

- fully processed 274 10.9 (10.9) 3.4-16.5 (3.4-16.5) 2.7 (2.7)

323 Leather products

- 1st stage of processing 1 3.1 (3.1) 3.1 (3.1) 0.0 (0.0)

- semi-processed 72 13.3 (13.3) 0-33.8 (0-33.8) 12.7 (12.7)

- fully processed 43 11.4 (11.4) 2.9-20 (2.9-20) 6.1 (6.1)

324 Footwear

- fully processed 64 51.4 (24.6) 3.5-258.1 (3.5-33.8) 59.8 (11.8)

331 Wood products

- 1st stage of processing 5 0.0 (0.0) 0-0 (0-0) 0.0 (0.0)

- semi-processed 116 3.9 (3.9) 0-10 (0-10) 3.1 (3.1)

- fully processed 47 3.2 (3.2) 0-10 (0-10) 2.5 (2.5)

332 Furniture except metal


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- fully processed 43 0.6 (0.6) 0-3.8 (0-3.8) 1.4 (1.4)


341 Paper products


- semi-processed 84 1.3 (1.3) 0-3.6 (0-3.6) 0.9 (0.9)

- fully processed 33 0.9 (0.9) 0-2.6 (0-2.6) 0.6 (0.6)

342 Printing

- fully processed 31 0.4 (0.4) 0-1.4 (0-.14) 0.6 (0.6)

351 Industrial chemicals


- semi-processed 820 3.0 (2.9) 0-26.3 (0-17) 2.2 (1.8)

- fully processed 25 3.5 (3.5) 2.5-4.4 (2.5-4.4) 0.6 (0.6)

352 Other chemicals

- 1st stage of processing 5 1.9 (0.0) 0-4.9 (0-0) 2.6 (0.0)

- semi-processed 80 2.8 (2.5) 0-41.8 (0-21.3) 4.9 (2.9)

- fully processed 269 1.2 (1.2) 0-26.9 (0-21.3) 2.9 (2.7)

353 Petroleum refineries


- semi-processed 6 1.1 (1.1) 0-3.9 (0-3.9) 1.7 (1.7)

- fully processed 41 6.5 (2.9) 0-34 (0-7.9) 8.2 (1.9)

354 Petroleum and coal products


- semi-processed 6 0.1 (0.1) 0-0.8 (0-0.8) 0.3 (0.3)

- fully processed 2 0.0 (0.0) 0-0 (0-0) 0.0 (0.0)

355 Rubber products


- semi-processed 21 0.5 (0.5) 0-2.5 (0-2.5) 1.0 (1.0)

- fully processed 59 2.9 (2.9) 0-27 (0-27) 5.7 (5.7)

356 Plastic products

- fully processed 25 3.9 (3.9) 0-4.8 (0-4.8) 0.9 (0.9)

361 Pottery and china

- fully processed 18 0.6 (0.6) 0-2.3 (0-2.3) 1.1 (1.1)

362 Glass and products

- semi-processed 26 1.3 (1.3) 0-4.2 (0-4.2) 1.9 (1.9)

- fully processed 54 1.2 (1.2) 0-8 (0-8) 2.1 (2.1)

369 Non-metallic mineral products


- semi-processed 16 2.1 (2.1) 0-3.3 (0-3.3) 1.1 (1.1)

- fully processed 76 1.1 (1.1) 0-3.5 (0-3.5) 1.3 (1.3)

371 Iron and steel products


- semi-processed 369 1.4 (1.4) 0-6.3 (0-6.3) 0.7 (0.7)

372 Non-ferrous metal



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- semi-processed 229 1.8 (1.8) 0-7.5 (0-7.5) 2.0 (2.0)

- fully processed 1 3.0 (3.0) 3 (3) 0.0 (0.0)

381 Metal products

- semi-processed 5 1.8 (1.8) 0-3 (0-3) 1.6 (1.6)

- fully processed 230 1.0 (1.0) 0-3.9 (0-3.9) 1.4 (1.4)

382 Non-electrical machinery

- semi-processed 1 1.0 (1.0) 1 (1) 0.0 (0.0)

- fully processed 612 0.2 (0.2) 0-8.4 (0-8.4) 1.1 (1.1)

383 Electrical machinery

- fully processed 383 0.2 (0.2) 0-6.1 (0-6.1) 0.9 (0.9)

384 Transport equipment

- fully processed 171 0.0 (0.0) 0-8.4 (0-8.4) 0.6 (0.6)

385 Professional and scientific equipment

- fully processed 290 0.2 (0.2) 0-16.5 (0-16.5) 1.4 (1.4)

390 Other manufactured products


- semi-processed 5 0.5 (0.5) 0-1.6 (0-1.6) 0.7 (0.7)

- fully processed 254 2.8 (2.8) 0-30 (0-30) 4.5 (4.5)

Note: Including AVEs, as available. In case of missing AVEs, specific rates have been excluded from the tariff analysis and averages for compound and alternate rates have been calculated on the basis of the ad valorem component of such rates. Data in brackets exclude specific rates and include ad valorem components of compound and alternate duties. Excluding in-quota rates.

Source: WTO Secretariat estimates, based on data provided by the Japanese authorities.


Trade Policy Review

Table AIII.5Systems for reduction, exemption, refund, and repayment of customs duty, May 2000

Customs Tariff Law

Unconditional reduction of and exemption from customs duty

Reduction for deterioration and damage (Art. 10)Reduction and exemption for commodities, pork, sugar, etc. (Art. 12)

Unconditional exemption (in a narrow sense) (Art. 14, 1-8, 16-18)

Reduction and exemption for re-importation

Reduction for goods exported for processing or repair (Art. 11)

Exemption for re-importation (Art. 14, 9-11, 13 and 14)

Reduction for re-importation (Art. 14-2)

Reduction and exemption for marine products, etc. collected or caught in foreign countries (Art. 14-3)

Exemption for goods, etc. for diplomats (excluding automobiles, liquors, and tobacco) (Art. 16)

Exemption for exportation of goods manufactured from duty-paid raw materials (Art. 19-2)

Conditional reduction of and exemption from customs duty (general)

Exemption for special uses (Art. 15)Exemption on goods for diplomats (automobiles, liquors, tobacco) (Art. 16)

Reduction and exemption for re-exportation

Exemption for re-exportation (Art. 17)

Reduction for re-exportation (Art. 18)

Conditional reduction of and exemption from customs duty (restrictive)

Reduction and exemption on raw materials for use in manufacturing (Art. 13)Reduction and exemption on raw materials for use in production of export goods (Art. 19)

Refund of duty Refund on disasters, etc. (Art. 10)

Refund on raw materials for manufacturing export goods (Art. 19)

Refund when products manufactured by duty-paid materials are exported (Art. 19-2)

Refund on goods to be exported without any change in the nature and form at the time of their importation (Art. 19-3)

Refund for claimed merchandise (Art. 20)

Temporary Tariff Measures Law

Unconditional reduction of and exemption from customs duty

Reduction for products manufactured from goods exported for processing or assembling (Art. 8)

Conditional reduction of and exemption from customs duty (restrictive)

Exemption for aircraft and parts thereof, etc. (Art. 4)Exemption for goods for space development, etc. (Art. 5)

Exemption for petroleum spirits for manufacture of petrochemical products (Art. 6)

Repayment of duty Repayment for petroleum spirits for manufacture of petrochemical products (Art. 6)

Repayment for increased production on middle distributors of petroleum products, etc. (Art. 7)

Note: In addition to the above-mentioned systems for reduction and exemption, there are systems for reduction and exemption under the Law Concerning Special Measures for the Return of Okinawa and under certain international conventions and agreements.



Trade Policy Review

Table AIII.6Other end-use tariff concessions in Japan, FY2000(Per cent, value/unit, ¥ million)

HS Number

Nominated end-use End-use rate

Non-concessional rate

Final Uruguay Round

bound rate (non-

concessional)

Import value under concession

1997 1998

0714.10-310 Frozen manioc for animal feed Free 12.0% 12% 0 0-110 Manioc pellets of flour or meal for animal

feedFree 15.0% 15% 0 4

-210 Other manioc for animal feed Free 9% 9% 184 2301005.90-010 Maize for animal feed Free 50%

or ¥12/kg.a50%or

¥12/kg.a

205,964 190,458

1007.00-091 Sorghum for animal feed Free 3% 3% 44,590 39,1871101.00-011 Wheat or meslin in flour for making

monosodium glutamate12.50% 25% 25% 0 0

-019 Wheat or meslin in flour for making monosodium glutamate

¥27.4/kg. ¥90/kg. ¥90/kg. 0 0

1104.23-010 Other worked maize used for manufacture of corn flakes

16.20% 18.00% 18% 169 94

1106.20-110 Flour of manioc roots for animal feed Free 15% 15% 0 030-110 Flour of bananas for animal feed Free 15% 15% 0 01202.10-010 Groundnuts in shell used for oil extraction Free ¥617/kg. ¥617/kg. 0 020-010 Groundnuts unshelled used for oil

extractionFree ¥617/kg. ¥617/kg. 0

1512.21-010 Crude cottonseed oil used for manufacture of canned fish or shellfish for export

Exempt ¥8.5/kg. ¥8.5/kg. 0 0

.29-010 Crude cottonseed oil used for manufacture of canned fish or shellfish for export

Exempt ¥8.5/kg. ¥8.5/kg. 0 0

1702.90-410 Hi-test molasses used to make glutamic acid and its salts, etc.

3.0% 21.3% 21.3% 0 0

1703.10-010 Cane molasses for animal feed Free ¥15.3/kg. ¥15.3/kg. 931 1,011-020 Cane molasses used to make glutamic acid

and its salts, etc.3.0% ¥15.3/kg. ¥15.3/kg. 234 37

1703.90-010 Molasses for animal feed Free ¥15.3/kg. ¥15.3/kg. 0 0-020 Molasses for making glutamic acid and its

salts, etc.3.0% ¥15.3/kg. ¥15.3/kg. 0 0

2208.60-010 Vodka intended for making alcoholic beverages

Free 8% 16% .. ..

2709.00-010 Crude petroleum oils for making petrochemicals

¥63/kl. ¥215/kl. unbound 4,177,579

..

2710.00-136 Petroleum spirits for fuels used in power generation

¥750/kl. ¥1,400/kl. unbound 8 ..

-161 Heavy fuel oils used for oil refining, of a ¥215/kl. ¥2,620~3,410 unbound 52 ..


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specific gravity not more than 0.9037 at 15°C

/kl.

-162 Raw oils used for oil refining, of a specific gravity not more than 0.9037 at 15°C

¥215/kl. ¥2,620~3,410/kl.

unbound 21,003 ..

-163 Heavy fuel oils used for agriculture, forestry and fisheries, of a specific gravity not more than 0.9037 at 15°C

Free ¥2,620~3,410/kl.

unbound 21,091 ..

-164 Raw oils used for agriculture, forestry and fisheries, of a specific gravity not more than 0.9037 at 15°C

Free ¥2,620~3,410/kl.

unbound 0 ..

-171 Heavy fuel oils used for oil refining, of a specific gravity more than 0.9037 at 15°C

¥215/kl. ¥2,400~3,410/kl.

unbound 7,585 ..

-172 Raw oils used for oil refining, of a specific gravity more than 0.9037 at 15°C

¥215/kl. ¥2,400~3,410/kl.

unbound 7,835 ..

-181 Petroleum spirits for making petrochemicals

¥12/kl. ¥1,400/kl. unbound 558,178 ..


7504.00-100

Nickel powders for making gutters for vacuum tubes, alkaline accumulators or welding fluxes, or used for powder metallurgy

Free 3% or ¥41/kg. 3% or ¥41/kg.

5,166 6,555

7506.10-100

Nickel plates for making gutters for vacuum tubes or alkaline accumulators

Free 3% 3% 0 0

7606.12-010

Aluminium alloy plates for use as roofs of large containers

Free 2% 2% 0 0

7606.92-010

Aluminium alloy plates for use as roofs of large containers

Free 2% 2% 0 0

7801.91-010

Unwrought lead used for electrolytic refining with value not more than ¥165.37/kg.

2.80% 3% or

¥3.1/kg.a3% or

¥3.1/kg.a27 0

-020 Unwrought lead used for electrolytic refining with value more than ¥165.37/kg. but not more than ¥170/kg.

¥170/kg. less value per kg.

3% or

¥3.1/kg.a3% or

¥3.1/kg.a0 0

-030 Unwrought lead used for electrolytic refining, with value more than ¥170/kg.

Free 3% or

¥3.1/kg.a3% or

¥3.1/kg.a0 0

7801.99-211

Unwrought lead used for electrolytic refining, not alloyed, with value not more than ¥165.37/kg.

2.8% ¥2.7/kg. ¥2.7/kg. 235 40

-212 Unwrought lead used for electrolytic refining, not alloyed, with value more than ¥165.37/kg. but not more than ¥170/kg.

¥170/kg. less value per kg.

¥2.7/kg. ¥2.7/kg. 0 0

-219 Unwrought lead used for electrolytic refining, not alloyed, with value more than ¥170/kg.

Free Free-¥2.7/kg. Free-¥2.7/kg.

262 211

.. Not available.

a Whichever is greater.



Trade Policy Review

Table AIII.7Import approval requirements in Japan, FY1999

Area Heading No. of the Customs Tariff Schedule

Description of goods

I. Goods mentioned in the right column of the table below having originated in or been shipped from the areas mentioned in the left column

The countries or the areas excluding the countries listed in item 25 of paragraph III

01.06; 0208.90; 0210.90; 1504.30; 1521.90; 16.01; 1602.10; 1602.20; 1602.31; 1602.39; 1602.49; 1602.50; 1602.90; 2301.10; 2309.10; 2309.90

Whales and their preparations, excluding those shipped from the sea outside of the territorial waters of Japan (excluding those shipped from inside of harbours of foreign countries) and those listed in item 2 of the table of paragraph I

Belize, Honduras and Panama (only shipped from those countries)

0301.10-2; 0301.99-1; 0303.99-2-(2); 0302.39; 0302.70-2; 0303.49; 0303.80-3; 0304.10-1-(2); 0304.10-2-(2); 0304.20-2; 0304.90-2; 0305.10; 0305.20-4; 0305.30-2; 0305.49; 0305.59-2; 0305.69-2; 1604.14; 1604.20-1-(2); 1604.20-2; 2301.20; 2309.10; 2309.90

Bluefin tuna and their preparations

China, Dem. People's Rep. of Korea and Chinese Taipei

0301.91-2; 0301.99-2; 0302.11; 0302.12; 0302.19; 0302.70; 0303.10; 0303.21; 0303.22; 0303.29; 0303.80; 03.04; 0305.10; 0305.20; 0305.30; 0305.41; 0305.49; 0305.59; 0305.69; 1604.11; 1604.19; 1604.20

Salmon and (salmon) trout and preparations made of the same

The sea outside of the territorial waters of Japan (in case of shipment only) (excluding the case of shipment from harbors of foreign countries and the case of import by fishing boats having left Japanese territory except when the goods were trans-shipped from fishing boats having left places other than Japanese territory)

01.06; 0208.90; 0210.90; 1504.30; 1521.90; 16.01; 1602.10; 1602.20; 1602.31; 1602.39; 1602.49; 1602.50; 1602.90; 2301.10; 23.09

Marine animals and preparations made of the same

0208.90; 0210.90; 03.01; 03.02; 03.03; 03.04; 03.05; 03.06; 03.07; 1504.10; 1504.20; 15.06; 16.04; 16.05; 2106.90; 2301.20; 23.09

Fish, crustaceans, other aquatic and preparations made of the same

05.04; 05.06; 05.07; 05.08; 05.09; 0511.91; 0511.99

Products of animal origin (marine animal, fish, crustaceans and mollusc)

1212.20; 2106.90 Seaweeds and preparations made of the same

Brazil; Bulgaria; France (including French Guyana); Greece; Hong Kong, China; India; Italy; Dem. People's Rep. of Korea; China; Rep. of Korea; Rumania; Chinese Taipei; United Kingdom and Viet Nam

5007.20; 5007.90; 51.11; 51.12; 52.08; 52.09; 52.10, 52.11, and 52.12 (excluding having either the warp or the weft of flax, ramie, synthetic fibres or acetate fibres); 53.09; 53.10; 53.11; 54.01; 54.02 and 54.03 (containing more that 10% by weight of silk); 54.06; 54.07; 54.08; 55.12; 55.13; 55.14; 55.15; 55.16; 56.03; 56.07; 58.01; 5802.11 and 5802.19

Yarn of man-made fibres (continuous), fabrics of silk and other fibre mixtures (excluding textures fabrics and scoured fabrics), woven pile fabrics, cordage (including twine, ropes and cables), bonded fibre fabrics and knitted or crocheted fabrics and warp knit fabrics) using raw silk, and also that will be used as raw silk by unsewing


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(excluding having either the warp or the weft of synthetic fibres or acetate fibres); 5802.20 (excluding impregnated, coated, covered or laminated with plastics, rubber or other substances); 5802.30; 5803.90; 5804.30-2; 58.06; 58.09; 59.02; 59.11 (excluding endless felts for paper-making); 6002.10-2; 6002.20-2; 6002.30-2; 6002.99-2


China and Rep. of Korea 50.04; 5006.00-1; 5007.20; 5007.90; 51.11; 51.12; 52.08; 52.09; 52.10, 52.11 and 52.12 (excluding having either the warp or the weft of flax, ramie, synthetic fibres or acetate fibres); 53.09; 53.10; 53.11;

Silk yarn, excluding yarn spun from noil and other waste silk, but including those defined in item 26 of paragraph III which will be used as silk yarn by unsewing

54.01; 54.02 and 54.03 (containing more that 10% by weight of silk); 54.06; 54.07; 54.08; 55.12; 55.13; 55.14; 55.15; 55.16; 56.03; 56.07; 58.01; 5802.11 and 5802.19 (excluding having either the warp or the weft of synthetic fibres or acetate fibres; 5802.20 (excluding impregnated, coated, covered or laminated with plastics, rubber or other substances); 5802.30; 5803.90; 5804.30-2; 58.06; 58.09; 59.02; 59.11 (excluding endless felts for paper-making); 6002.10-2; 6002.20-2; 6002.30-2; 6002.99-2

China, Japan, Rep. of Korea and Chinese Taipei (in case of origin only) (including the case of being woven in China or Japan and then being dyed, resined, embossed or processed by other similar methods outside of China

5007.20 Woven fabrics of silk (excluding fabrics of noil silk and of silk and other fibre mixture) (excluding the case of shipment from China, Rep. of Korea or Chinese Taipei)

China (in case of origin only) (including the case of being woven in China or Japan and then being dyed, resined, embossed or processed by other similar methods outside of China)

5803.90 Gauze of silk (excluding the case of shipment from China)

China and Japan (in case of origin only) (including the case of being woven in China or Japan and then being sewn or processed for other silk manufacture outside of China and Japan)

63.01; 6302.29-2; 6302.39-2; 6302.59-2; 6302.99; 6303.99-2; 6304.19-3; 6304.99-2; 6305.90; 6306.19; 6306.29; 6306.39; 6306.49; 6306.99; 63.07

Lap robe, bedlinen, table linen, curtain, bag for packing, tarpaulin and other products used woven fabrics of silk (excluding fabrics of noil silk and of silk and other fibre mixture) and will be used as woven fabrics of silk

Iraq All cargoCambodia 44.03 Raw lumber, whether or not peeled,

stripped or roughly processedAngola (only shipped from its country) 7102.10; 7102.21; 7102.31 Diamonds


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II. Animals and plants, and their derivatives within the scope of the Washington Convention, products listed in Annex D of the Montreal Protocol, other wastes, and specified substances mentioned in the Law on the Prohibition of Chemical Weapons and Regulation

1. Animals and plants originating in or shipped from countries and regions not mentioned in (1) and (2) of item 28, paragraph III, and belonging to species listed in Appendix II of the Washington Convention (excluding animals originating in or shipped from countries and regions mentioned in item 25 of paragraph III), plus their parts and derivatives (for plants, only those parts and derivatives specified in Appendix II).In addition, animals and plants belonging to species in Appendix III of the Washington Convention, and parts and derivatives specified in Appendix III shipped from regions and countries not mentioned in (1) and (2) of item 28, paragraph III and moreover, originating in countries and regions mentioned in Appendix III.

2. Products shipped from countries and regions not mentioned in items 29, paragraph III and listed in Annex D of the said Protocol.

3. All nations or territories shipping goods to Japan are subject to the conditions specified in Item 1 of Section 2 of the Law for the Control of the Export and Import of specified Hazardous Wastes and Other Wastes, as well as subject to the regulations appearing in Items 1 of Section 2 of the Waste Management 6 Public Cleansing Law.

4. All nations or territories shipping specified substances to Japan are subject to the conditions specified in Item 3 of Section 2 of the Law on the Prohibition of Chemical Weapons and Regulation.

Source: MITI Official Bulletin, 17 December 1999.


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Table AIII.8Other laws and regulations related to mandatory technical regulations

Law Purpose Product coverage

Brief description HS four-digit line

Law Concerning Wild Life Protection and Hunting

Prevention of the extinction of native species from international trade

Live animals; eggs; feathers; raw, tanned or dressed furskins and furskin clothing; bird products; collectors' pieces.

01.06, 04.07-08, 05.05, 43.01-03, 67.01, 97.05

Law for the Conservation of Endangered Species of Wild Fauna and Flora

Prevention of the extinction of endangered species from international trade

Live birds; bird products; collectors' pieces.

01.06, 67.01, 97.05

Food Sanitation Law Public health protection Meat and meat products; fish and crustaceans; milk and milk products; eggs; honey; animal products; fruits and vegetables; nuts; herbs and spices; tea and coffee; cereals; cereal flours and grouts; malts; starches; groundnuts; oilseeds; animal and vegetable fats and oils and their products; prepared meat and seafood products; sugars and sugar confectionery; cocoa and cocoa preparations; cereal preparations; food preparations; beverages; tableware and kitchenware; starches; and enzymes.

02.01-10, 03.01-07, 04.01-06, 05.04, 05.11, 07.01-13, 08.01-14, 09.01-10, 10.01-08, 11.01-08, 12.01-02, 12.06-08, 12.10, 12.12, 13.01-02, 15.01-04, 15.06-17, 16.01-05, 17.01-04, 18.01-02, 18.05-06, 19.01-05, 20.01-09, 21.01-06, 22.01-09, 25.01, 29.40, 30.02-04, 33.01-02, 34.02, 35.02-03, 35.05, 35.07, 38.23, 39.24, 44.15-16, 44.19, 48.23, 69.11-12, 70.13, 71.14, 73.23, 74.18, 76.15, 82.15, 95.03

Pharmaceutical Affairs Law

.. Products of animal origin n.e.c.; plants for perfume, etc.; lac and vegetable saps; sugars; animal feed n.e.c.; petroleum products; organic chemicals; pharmaceutical products; cosmetics; soaps and organic surface active agents; enzymes; insecticides; medical and surgical instruments.

05.10, 12.11, 13.01-02, 17.02, 23.09, 27.10, 27.12, 29.32-37, 29.39, 29.41, 30.01-06, 32.01, 33.03-07, 34.01-02, 34.07, 35.04, 35.07, 37.01, 38.08, 40.14, 90.01, 90.04, 90.18-22, 94.02

Law of Opium .. Live plants. 06.02Forest Seeding Law Ensure supply of

superior seeds and seedlings

Seeds for sowing. 12.09

Poisonous and Deleterious Substances Control Law

.. Inorganic chemicals; organic chemicals; miscellaneous chemical products.

12.11, 13.02, 25.30, 27.07, 28.01, 28.04-08, 28.11-16, 28.19, 28.24-27, 28.29-30, 28.33-38, 28.41-44, 28.47-48, 28.50, 29.02-05, 29.07-10, 29.12, 29.14-21, 29.23-34, 29.39, 29.41, 32.06, 38.08, 38.11, 38.13-14, 38.22-23

Narcotics and Psychotropics

.. Organic chemicals and narcotics. 12.11, 29.05, 29.21-22, 29.24, 29.26, 29.32-34, 29.39


Trade Policy Review

Control LawLiquor Tax Law .. Alcoholic beverages;

medicaments.13.02, 20.08, 22.03-08, 30.03-04

Law Concerning Screening of Chemical Substances and Regulation of their Manufacture

.. Glycerol; undenatured ethyl alcohol; petroleum products; inorganic compounds; tanning extracts of vegetable origin; soaps; polymers of ethylene; natural rubber.

15.20, 22.07-08, 27.07, 27.15, 28.51, 32.01, 34.01, 36.06, 37.07, 38.01, 39.01, 40.01

Alcohol Monopoly Law

Prevent industrial alcohol from diversion to use in alcoholic beverages

Undenatured ethyl alcohol. 22.07-08

Tobacco Excise Law Cigars and cigarettes. 24.02-03


High-Pressure Gas Control Law

Public safety Gases; high-pressure gases of chlorine, bromide and iodine; hydrogen and rate gases; inorganic compounds; halogenated derivatives of hydrocarbons; reservoirs and tanks; iron and steel containers for compressed or liquified gas.

27.05, 27.11, 28.01, 28.04, 28.51, 29.01, 29.03, 29.10, 38.23, 73.09, 73.11

Petroleum Industry Law

Stabilization of supply Petroleum oils and gases. 27.09-11

Taxation Law for Special Measures

..

- Gasoline Tax Law Petroleum oils; gasoline; solvents. 27.10, 38.11, 38.14, 38.23- Local Road Tax Law

Petroleum oils; gasoline; solvents. 27.10, 38.11, 38.14, 38.23

Liquified Petroleum Gas Tax Law

.. Petroleum gases and other gaseous hydrocarbons.

27.11

Explosives Control Law

Public safety Organic chemicals; explosives; munitions.

28.38, 28.50, 29.04, 29.08-09, 29.20-21, 29.24-25, 36.01-04, 36.06

Industrial Safety and Health Law

.. Organic chemicals; matches; compounded rubber; articles of vulcanized rubber.

29.09, 36.05, 40.05, 40.16

Awakening Drug Control Law

.. Organic chemicals; medicaments. 29.14, 29.16, 29.21, 29.26, 29.39, 30.03-04

Cannabis Control Law

.. Medicaments; hemp. 30.03-04, 53.02

Fertilizer Law Stabilization of supply and ensuring fair trade through standards, registration and other measures

Fertilizers. 31.01-05

Firearms and Swords Control Law

.. Swords; firearms; military weapons.

82.11, 93.01-02, 93.07

Mine Security LawElectrical Appliance and Material Control Law

To prevent fire, electrical shock and radio interference

Cables; cords; wiring devices; home electrical appliances.

85.08-13, 85.15-16, 85.18-21, 85.27-28, 85.31-42, 85.44-48


Trade Policy Review

Consumer Product Safety Law

Prevention of injury to consumers

Consumer products. 22.02-10, 22.02-90, 65.06-10, 70.10-90, 73.23-93, 76.15-10, 94.03-60, 94.03-70, 94.03-80, 95.06-70, 95.06-99

.. Not available.



Trade Policy Review

Table AIII.9Japan's SPS notifications 1998-2000

No. Products covered Objective and rationale Relevant legislation

199829 Milk products, surimi (fish paste) Implementation of the

Plan to Promote Deregulation

Food Sanitation Law

30 Milk and milk products Implementation of the Plan to Promote Deregulation

Food Sanitation Law

31 Meat products Implementation of the Plan to Promote Deregulation

Food Sanitation Law

32 Shell eggs and liquid eggs To secure complete sanitation of eggs in order to prevent salmonella foodborne disease

Food Sanitation Law

33 Cat, racoon, fox, skunk, etc. Human health protection Rabies Prevention Law

34 Non-human primates Human health protection Rabies Prevention Law

35 Potassium, gluconate, sodium gluconate Human health protection Food Sanitation Law

36 Edible vegetable and certain roots and tubers (HS:07), edible fruit and nuts (HS:08.01, 08.02, 08.03, 08.04, 08.05, 08.06, 08.07, 08.09, 08.10, 08.11 and 08.12), coffee (HS:09.01), tea (HS:09.02, ginger (HS:0910.10), cereals (HS:10), oil-seeds and oleaginous fruits, miscellaneous seeds and fruit (HS:12.01, 12.02, 12.04, 12.05, 12.06, 12.07, 12.10, 1212.91, 1212.92 and 1212.99), cocoa beans (HS:18.01).

Public health Food Sanitation Law

37 Plants and plant products Plant health Plant Protection Law

38 Food additives Protection of public health Food Sanitation Law

39 Oysters for raw consumption Food safety and public health

Food Sanitation Law

199940 Sucralose Public health protection Food Sanitation

Law41 Cattle (muscle, fat, liver, kidney), Pigs (muscle, fat,

liver, kidney), Sheep (muscle, fat, liver, kidney), Deer (muscle, fat, liver, kidney), Chickens (muscle, fat, liver, kidney), Fish, Milk

Public health protection Establishment of maximum residue limits for veterinary drugs in food of animal origin

42 Soft drinks Protection of public health Food Sanitation Law

43 Soft drinks Protection of public health Food Sanitation Law


Trade Policy Review

44 Edible vegetables and certain roots and tubers (HS:07), edible fruits and nuts (HS:08.01, 08.02, 08.03, 08.04, 08.05, 08.06, 08.07, 08.09, 08.10, 08.11, 08.12), coffee (HS:09.01), tea (HS:09.02), ginger (HS:0910.10), cereals (HS:10), oilseeds and oleaginous fruits; miscellaneous seeds and fruit (HS:12.01, 12.02, 12.04, 12.05, 12.06, 12.07, 12.10, 1212.91, 1212.92 and 1212.99), cocoa beans (HS:18.01)

Food safety Food Sanitation Law

45 Cat, racoon, fox and skunk. All countries which export cat, racoon, fox or skunk

Animal health Amendment of the Regulation for the Export-Import Quarantine of dogs

46 Non-human primates. All countries exporting non-human primates to Japan

Protect humans from animal/plant pest or disease

Law for Prevention and Medical Service of Infectious Disease

47 Cattle (muscle, liver, kidney), pigs (muscle, liver, kidney), sheep (muscle, fat, liver, kidney), chickens (muscle, fat, liver, kidney), ducks (muscle, fat, liver, kidney), turkeys (muscle, fat, liver, kidney), fish, eggs and milk


48 Imported meat, meat products, poultry and poultry products



49 Acesulfame potassium Food safety Food Sanitation Law

200050 Methyl acetyl ricinolate, Choline phosphate, Ferrous

pyrophosphateFood safety Food Sanitation

Law51 Foods and food additives produced by recombinant DNA

techniquesFood safety Food Sanitation

Law52 Foods and food additives produced by recombinant DNA

techniquesFood safety Food Sanitation

Law53 Edible vegetable and certain roots and tubers (HS:07),

edible fruits and nuts (HS:08.01, 08.02, 08.03, 08.04, 08.05, 08.06, 08.07, 08.09, 08.10, 08.11 and 08.12), coffee (HS:09.01), tea (HS:09.02), ginger (HS:0910.10), cereals (HS:10), oil seeds and oleaginous fruits; miscellaneous seeds and fruit (HS:12.01, 12.02, 12.04, 12.05, 12.06, 12.07, 12.10, 1212.91, 1212.92 and 1212.99), cocoa beans (HS:18.01)


Source: WTO documents.


Trade Policy Review

Table AIII.10Amended plant and animal quarantine regulations since 1997

Plant quarantine regulations

1. Determination of non-quarantine pests (1 April 1997)Injurious animals

Trogoderma varium, Bruchus pisorum, Gnathocerus cornutus, Heterobostrychus hamatipennis, Oryzaephhilus mercator, Armadillidium vulgare, Ptilineurus marmoratus, Minthea rugicollis, Nemapogon granellus, Sitophilus zeamais, Tenebroides mauritanicus, Tribolium castaneum Martyringa xeraula, Sitophilus oryzae, Rhizopertha dominica, Stegobium paniceum, Bruchus rufimanus, Lasioderma serriacorne, Dinoderus minutus, Dysaphis tulipae, Hemiberlesia rapax, Ptinus japonicus, Oryzaephilus surinamensis, Sitotroga cerealella, ptinus clavipes, Trogoderma inclusum, Lyctus brunneus, Trobolium confusum, Lophocateres pusillus, Lepidosaphes gloverii

Injurious plantsGeotrochum candidum, ceratocystis paradoxa, Botrytis allii, Aspergillus spp., Penicillium spps, Rhizopus spp.

2. Lifting the import ban on 25 varieties (R248, R284, R418, Agriset761, Olympic, Cobia, Colonial, Sunny, Sunbeam, Shady lady, Solar set, Devine ripe F505, PSX19392, BHN2, BHN22, BHN95, BHN153, BHN270, PJX6015, Bonita, Merced, 68, 77, 88 and 246) of U.S. tomatoes (24 April 1997)

3. Lifting the import ban on golden delicious variety of French apple (10 September 1997)4. Permission for in-transit cold treatment on board or container for Israeli sweet orange, grapefruit and

sweetie (16 September 1997)5. Lifting the import ban on Kyoho and Italia varieties of Taiwan grape (19 December 1997)6. Lifting the import ban on Canadian hay contaminated culms and leaves of plants of the genera Hordeum,

Triticum, Secale and Agropyron (19 December 1997)7. Lifting the import ban on strawberry, cucumber, pepper, eggplant, grape, zucchini and melon of the

Netherlands (5 January 1998)8. Additional non-quarantine pests (1 December 1998)

Injurious animalsGeisha distinctissima, l'anessa indica, Diostrombus politus, Thyestilla gebleri, Callosobruchus chinensis, Brahmaea wallichii, Rhodinia fugax, Actias artemis, Actias gnoma, Urophorus humeralis, Bactrocera depressa, Aphis nerii, Aleurocanthus cinnamomi, Carpophilus hemipterus, Cinara piceae, Fulmekiola serrata, Diaspis echinocacti, Eriococcus coccineus, Dactylispa issikii, Everes argiades, Dinoderus japonicus, Chirothrips manicatus, Antheraea yamamai

Injurious plantsAlternaria citri, Macrophomina phaseolina, Trochothecium spp., Nigrospora spp.

9. Lifting the import ban on pomelo of Israel (10 December 1998)10. Lifting the import ban on Fuji variety of Australian apple (25 December 1998)11. Lifting the import ban on Imperial, Ellendale, Murcott and Minneola of Australia (15 April 1999)12. Lifting the import ban on Yellow pitaya of Colombia (15 April 1999)13. Permission for in-transit cold treatment on container for sweet orange, lemon and grapefruit of South

Africa and sweet orange and grapefruit of Swaziland (16 July 1999)14. Lifting the import ban on Gala, Grannysmith, Jonagold, Fuji and Braeburn varieties of U.S. apples (30

July 1999)15. Lifting the import ban on Sweetheart and Lapin varieties of U.S. sweet cherry (30 July 1999)16. Lifting the import ban on rice straw of China (30 July 1999)17. Removal of Chile from the occurred area of Mediterranean fruit fly (6 September 1999)18. Lifting the import ban on tomatoes of Canada and U.S.


Trade Policy Review

19. Lifting the import ban on pomelo of Taiwan (17 December 1999)20. Lifting the import ban on R2E2, keitt, kent and palmer varieties of Australian mangoes (17 December

1999)21. Abolishing the varietal testing requirement accompanied with disinfestation test for eight commodities

which are host of codling moth in accordance with the rulings and recommendations adapted by the DSB


Animal quarantine regulations22. Introducing non-human primates' quarantine primarily based on standards established by the

International Office of Epizootics (OIE), in order to prevent Ebola hemorrhagic fever and marburg disease from being brought into Japan (1 January 2000)

23. Introducing import and export quarantine for cat, racoon, fox and skunk to prevent the introduction of rabies (in addition to dog, which had been subject to quarantine), based on standards established by the OIE

24. Including the following countries to the list of countries or areas eligible for importation of cloven-hoofed animals and their meat products: Italy (9 February 1999), Spain (9 February 1999), and Hungary (30 November 1998). The current number of countries and areas in the list amounts to 34

25. Amending the Domestic Animal Infectious Diseases Control Law to prevent diseases of higher risk (April 1998)



Trade Policy Review

Table AIII.11Import volume of foreign accesses zones, 1997 and 2000(Tonnes)

Area 1997 2000 (est.)

Approved as FAZ in FY1992Kansai international airport 319,903 314,000Osaka port 24.42 million 24 millionKobe port 22.83 million 39.88 millionMatsuyama port 860,648 1.32 millionKitakyushu port 23.99 million 29.28 millionNagasaki airport 959 3,900

Approved as FAZ in FY1993Yokohama port 44.22 million 43.95 millionOita port 31.36 million 36.86 millionKawasaki port 54.56 million 50.33 millionShimonoseki port 1.35 million 3.50 millionHiroshima port 1,464 4,200

Approved as FAZ in FY1994

Sendai porta 6.83 million 9.56 million

Sendai airporta 3,087 5,000

Komatsu airport 6,600 8,500Maizuru port 874,003 1.81 millionSakai port 1.30 million 1.76 millionKochi port 286,842 491,000Kumamoto port 3,841 170,000

Approved as FAZ in FY1995Hachinohe port 7.84 million 7.29 millionNügata port 13.08 million 15.10 millionShimizu port 6.63 million 8.88 million

Approved as FAZ in FY1996Okayama airport 97 3,600

a Sendai port and Sendai Airport are designated as one area.

Note: Projections take into account harbour and airport improvement plans.



Trade Policy Review

Table AIII.12Subsidies notified under WTO provisions, FY1996-99(¥ million)

1996 1997 1998 1999a

COAL AND OTHER NATURAL RESOURCES-RELATEDSubsidy for Research on Technologies for Exploring Deep Seafloor Mineral Resources

46 31 25 ..

Subsidy for Basic Research on Technologies for Offshore Oil Field Development

583 639 571 ..

Contract for Technology Development of Mineral Resource Exploration 182 165 131 ..System Development of Energy Saving in Mines .. 210 267 ..Subsidy for Exploration of Underground Non-Ferrous Metal Resources 667 582 694 ..Subsidy for Promotion and Guidance to Small- and Medium-Sized Mine Enterprises

953 880 796 ..

Support to Structural Adjustment of the Coal Mining Industry 7,453 16,910 3,941 ..Subsidy for Overseas Coal Development Feasibility Survey 42.6 22.0 22.3 ..Contract for Research and Study to Promote Coal Supply from Foreign Countries

676 738 807 ..

Subsidy for Promotion of Coal Production and Utilization Technology 7,277 7,360 8,259a

..

Subsidy for Exploration of Natural Gas 3,048 4,344 3,581a

..

Subsidy for the Drilling Cost of an Exploratory Well for a Geothermal Power Plant

0 0 0a ..

Subsidy for Loans to the Pollution Prevention Fund (in relation to the Law on the Metal Mining Agency of Japan)

66 58 55 ..

Special Deduction for Expenditure on Prospecting for Domestic or Overseas Mineral Deposit n.a.b n.a.b n.a.b n.a.b

Special Depreciation on the Drift for the Mining Industry n.a.b n.a.b n.a.b n.a.b

Reserve for Prevention from Mineral Pollution of Metal Mining n.a.b n.a.b n.a.b n.a.b

Provision for the Disposal of the Offshore Oil and Natural Gas Field n.a.b n.a.b n.a.b n.a.b

Reserve for Preventing Specific Disasters (disasters from quarrying) n.a.b n.a.b n.a.b n.a.b

Reserve for Searching Out New Mineral Beds in and out of Japan n.a.b n.a.b n.a.b n.a.b

POWER GENERATIONSubsidy for the Cost of Development of Waste Power Generation 39 206 137 ..Subsidies for Small- and Medium-Scale Hydropower Development 2,066 2,199 2,585 ..Interest Subsidies for Small- and Medium-Scale Hydropower 993 135 13 ..Committee Verification Tests for the Coal Fired Power Generation 1,454 2,132 2,290 ..Geothermal Energy Programme 6,110 4,548 3,945 ..Subsidy for the Technology Development of the Coal Fired Power Generation 193 279 265 ..Subsidy for Power Application Technology Development of Superconducting Magnetic Technology etc.

850 965 717 ..


Trade Policy Review

Development on Interconnection Reinforcement of Remote Located and Varied GenerationsSubsidy for Technology Development of High Efficiency Gas Turbine etc. Development of Power Generation Technology using new RDF (Refuse Derived Fuel)

634 1,416 1,237 ..

Subsidy for Technology Development of High Efficiency Gas Turbine, etc. Research on Technology to Introduce Waste-Fired Power Generation

93 160 221 ..

Subsidy for Technology Development of High Efficiency Gas Turbine etc. Development of High-Efficiency Waste Power Generation Technology

2,487 1,808 1,117 ..

Contract for Investigation of Promoting the Development and Introduction of Hydro Power

681 1,526 1,180 ..

Contract for Verification Test for Establishing a Centralized Load Control System Verification Test for Establishing a Centralized Load Control System

834 818 386 ..

Subsidy for the Technology Development of Integrated Coal Gasification Combined Cycle Power Generation Plant

2,240 838 802 ..


Subsidy for Technology Development of High Efficiency Gas Turbine etc. Budget for the Control of the Generation of the Higher Harmonic Currents

199 187 171 ..

Subsidy for Development of Load Levelling Technology etc. Verification Tests for Establishment of Photovoltaic Generation Load Levelling Technologies for Residences

64 69 0 ..

Contract for Demonstration Test for New-Type Power-Generation Reactor Technologies

364 472 294 ..

Contract for New Power Reactor Research and Investigation 411 265 238 ..Contract for Verification Tests on Decommissioning Technology for Commercial Nuclear Power Facilities

2,760 3,508 2,912 ..

Contract for the Advancement of the Light Water Reactor Technology Confirmation Test and Others

3,284 14,550 7,678 ..

Grant for the Technical Development of a Full MOX-ABWR Plant System 514 1,105 855 ..Contract for Improvement of Safety Analysis Codes Technologies 2,108 2,104 2,761 ..Subsidy for Technology Development of Solar Power Generation, etc. 41,040 41,254 36,965 ..Subsidy for the Development of Support Systems for Nuclear Electric Power Generation

494 480 423 ..

Subsidy for Development of Fuel Cells Power Generation (Verification tests for establishment of the next-generation dispersed power supply system)

602 369 0a ..

Subsidy for Development of Fuel Cells Power Generation (Development of fuel cell power generation technology urban energy centre)

783 229 0a ..

PETROLEUMSubsidy for the Rationalization of Petroleum Refinery 922 703 570 ..Subsidy for the Promotion of Gas Oil Desulphurization 790 607 400 ..Subsidy for the Promotion of Petroleum Industrial Point of Sales System 208 110 54 ..Interest Rate Subsidy for the Promotion of Petroleum Industrial Facilities 153 79 15 ..Subsidy for Restructuring the Retailing Business of Petroleum Products 1,709 11,716 1,359 ..Subsidy for Ensuring Petroleum Products Quality 2,254 2,299 1,944 ..Subsidy for Promoting Introduction of Drastic High-Efficiency Energy Use Equipment for Civil Use(Promoting Task for LP Gas High-Efficiency Use, Promoting Task for Increasing LP Gas Engine Heat Pump Type Air-conditioner)

344 264 153 ..


Trade Policy Review

Subsidy for Loans to Construct Petroleum Storage Facilities .. 37 41 37a

Subsidy for Loans to Purchase Petroleum and LPG to be Stored 6,444 4,346 3,354 ..Subsidy to the Cost of Projects for Improving Refining Technology of Oil Purchasing Countries and for Related Purposes

3,630 2,602 2,987 ..

Subsidy for Major Oil-Spill Response Programme 991 847 1,395 ..Commission Fees Concerning R&D for New Fuel Oil 707 600 394 ..Contract for Verification Tests for the Coal Fired Power Generation 1,454 2,132 4,737

a..

TEXTILESSubsidy for Measures to Promote the Textile Industry 402a 396a 357a ..

Loan Guarantee for Promotion of Textile and Apparel Industry 191 80 45 ..Equity Capital Scheme for the Advanced Promotion Facility of the Textile Industry

0 0 0 ..

Subsidy for the Technical Assistance to Small Sized Enterprises (through the Textile Industry Restructuring Agency (TIRA))

17 17 .. ..

Subsidy for the Projects to Develop New Silk Products 32a 32a .. ..

Additional Depreciation on Machinery (in relation to the Temporary Law on Structural Improvement of Textile Industry) n.a.b n.a.b n.a.b n.a.b


TRADITIONAL CRAFTS AND OTHERSEquity Capital Scheme for the Promotion of Traditional Craft Products 0 0 0 ..Subsidy for Promoting the Manufacture of Traditional Craft Products 201a 161a 111a ..

Subsidy for the Bekko and Ivory Industries 337a 340a 312a ..

LEATHERSubsidy for the Leather and Leather Goods Industries 312a 322a 327a ..

ENERGYResearch for the Promotion of Natural Gas in Regional Areas 878 952 814 ..Subsidy for the Unused Energy Use District Heating and Cooling .. 1,123 934 235a

Subsidies for Measures Taken for Promoting the Conversion to Natural Gas Consumption by Local City-Gas Suppliers

1,810 1,920 1,854 ..

Subsidies for Interest Required for Local City-Gas Suppliers to Provide Specific Facilities for Converting to Natural Gas Consumption

28 35 40 ..

Subsidy for Technology Development of Oil-Alternative Energy 29,320 27,288 25,620 ..Contract for Technology and System Development for Rationalization of Energy Use

4,473 5,692 7,533 ..

Subsidy for Promotion of Facilities for the Rationalization of Energy Use 13,245 12,103 27,178 ..Subsidy for Technology Development of Rationalization of Energy Use 35,330 45,668 51,542 ..Subsidy for Facilities of Oil-Alternative Energy 875 808 682 ..

HOUSING


Trade Policy Review

Project for High-Quality Living 1,526 1,687 1,381 ..Subsidy for the Popularization, Enlightenment and Promotion of Solar Systems (Limited to the installation of solar houses, for exhibition)

.. 61 61 58a

Subsidy for the Promotion of Utilization of Solar System .. 54 36 25a

AEROPLANES AND SATELLITESSubsidy of Expenses to Investigate the Development of Next Generation Airplanes

610 380 169 ..

Assistance for Promoting International cooperative Development of Civil Aircraft

3,934 3,798 3,629 ..

The Commission on the Research and Development of Next Generation Airplanes

191 289 189 ..

The Commission on the Research and Development of Remote Sensing Technology to be Applied to Exploration for Oil Resources

6,599 6,142 5,826 ..

SHIPBUILDINGGrant for promotion of research and development of future ships 750 430 220 ..

AGRICULTURE AND FISHERIES (Based on Japan's notifications to the WTO Committee on Agriculture (¥ Billion))Wheat 59.6 69.3 .. ..Barley 26 21.1 .. ..Rice 2,557.

42,397.

5.. ..

Soyabeans 2.6 4.9 .. ..Sugar 49 53.8 .. ..Starch 17.6 20.8 .. ..Milk 153.3 149.6 .. ..Beef and veal 171 166.4 .. ..Meat of swine 291.8 285.8 .. ..Silkworm Cocoons 1.4 1.8 .. ..Eggs 1.6 1.6 .. ..Vegetables 8.9 9.6 .. ..

Table AIII.12 (cont'd)Fruits 0.9 0.5 .. ..Dried legumes/Konnyaku 0.005 0.005 .. ..(Based on Japan's notifications to the WTO Committee on Subsidies and

Countervailing Measures (¥ Million))c

Measures for Rice, Wheat and Barley 177.9 .. .. ..Measures for Soybean and Rapeseed 2,637 .. .. ..Measures for Sugar 15,011 .. .. ..Measures for Milk and Dairy Products 38,173 .. .. ..Measures for Bovine Meat and Pigmeat 67,879 .. .. ..Measures for Eggs 1,597 .. .. ..Measures for Vegetables 8,873 .. .. ..Measures for Fruits 877 .. .. ..Resource Propagation Programme for Salmon .. 479 .. ..Measures for Cocoons 1,369 .. .. ..


Trade Policy Review

Farmers' Pension Fund Subsidy 98,404 .. .. ..Farming Modernization Fund Interest Subsidy 50,662 .. .. ..Fisheries Modernization Fund Interest Subsidy 2,815 .. .. ..Agriculture, Forestry and Fisheries Finance Corporation Subsidy 55,878 .. .. ..Fisheries Trust Fund Subsidy 144 .. .. ..Wood Industry Upgrading Funds 3,500

a.. .. ..

Financial Measures for Shochu B Manufacturers .. 1.6 .. ..Special Depreciation on Facilities (in relation to the Law on Temporary Measures for Improvement of Agricultural Products Processing Industry) n.a.b n.a.b n.a.b n.a.b

Additional Depreciation of Fishing Boats (in relation to the Extraordinary Law on Reconstruction of the Fishing Industry) n.a.b n.a.b n.a.b n.a.b

Additional Depreciation on Machinery of Corporations which Carry Out the Plans for Improvement of Agricultural Management n.a.b n.a.b n.a.b n.a.b

RESEARCH Development Expenditure Subsidies for the Commercialization of Energy-Related Technology .. 2,899 2,616 741The Industrial Science and Technology Frontier Programme (ISTF) .. 29,570 27,085 32,92

2The New Sunshine Programme (inc. Subsidy for Modernizing Chemical Processes)

.. 44,782 46,680 52,661

Capital Investment and Loan for R&D Projects concerning Key Technology .. 21,096 19,163 23,900

Programme to Promote Research and Development of Regional Technology .. 1,674 1,707 1,878Subsidies for International Research and Development Cooperation .. 1,849 1,931 1,780Ultra Super-Advanced Electronics Technology Development Programme 1,000 1,700 7,279 ..Subsidy for Research and Development of AVLIS Technology (AVLIS: Atomic Vapour Laser Isotopic Separation) 2,856 2,905 2,836

a..

The Real World Computing (RWC) Programme .. 6,735 5,439 5,777International Demonstration Research on Photovoltaic Power Generation Systems

188 137 243 ..

Subsidy for Research and Development of House Technology Creating Life Values

183 150 .. ..

Consignment Experimental and Research Expenses of Survey on Criteria of Radioactive Waste Disposal 1,631 1,840 2,098 ..Tax Credit for the Increased Expense of Research (in relation to the Law on the Temporary Measures to Facilitate Business Innovation) n.a.b n.a.b n.a.b n.a.b

Special Depreciation on Certain Machinery used for High-Technology Industries in the Designated High-Technology Industrial Development Areas ("Technopolis") n.a.b n.a.b n.a.b n.a.b


Small- and Medium-sized EnterprisesSubsidy to Promote and Foster New Enterprises of the Research and Development Type or Knowledge-intensive Type 0 0 0 ..Support for Business Innovation (in relation to The Law on Temporary Measures to Facilitate Business Innovation) 2,600 0 32,330 ..


Trade Policy Review

Interest Subsidy, Equity Capital Infusions and Loan Guarantees (in relation to the Law on Temporary Measures to Facilitate Industrial Structural Adjustment) 0 .. .. ..Tax measures to Strengthen the Management of Small and Medium-Sized Corporations n.a.b n.a.b n.a.b n.a.b

Special Depreciation or Tax Credit on the Manufacturing Machines when Import of Products Increases n.a.b n.a.b n.a.b n.a.b

Special Depreciation on Machinery (in relation to the Law of Temporary Measures to Facilitate business Innovation) n.a.b n.a.b n.a.b n.a.b

Special Depreciation on Machinery for Business Innovation n.a.b n.a.b n.a.b n.a.b

Special Depreciation on Machinery (in relation to the Law on Promotion of Small- and Medium-sized Enterprises Modernization) n.a.b n.a.b n.a.b n.a.b

Special Depreciation on the Payment to Specific Association (in relation to the Law on Promotion of Small- and Medium-sized Enterprises Modernization) n.a.b n.a.b n.a.b n.a.b

OtherGrants for Promoting Rationalization and Discontinuance or Change of Business of Salt Industry .. 902 .. ..The Development of Fuelification of Plastic Waste 260 260 .. ..

.. Not available.n.a. Not applicable.

a Budgeted amount.b Tax credit and/or tax deferral.c The most recent notification concerning Japan's subsidies in agriculture sectors made to the Subsidy Committee is contained

in WTO document G/SCM/N/25/JPN, 17 November 1997.

Source: WTO documents G/SCM/N/25/JPN, 25/JPN/Suppl.1, 38/JPN, 38/JPN/Suppl.1 and 48/JPN.


Trade Policy Review

Table AIII.13Stockholding by the Government of Japan(¥ billion)

Companies Capital Share of stocks held by the Government

(%)

Share of stocks held by local public

bodies (%)

Japan Tobacco Inc. (JT)(As of 29 February 2000)

100 (2.0) 66.6 0.0

Electric Power Development Co. Ltd.(As of 29 February 2000)

70.6 (70.6) 66.6 0.0

Kansai International Airport Company Ltd.(As of 31 March 2000)

547.8 (11.0) 66.6 19.5

Nippon Telegraph and Telephone Corporation (NTT)(As of 30 March 2000)

795.6 (15.8) 53.15 0.15

Central Japan International Airport Company Ltd. (As of 29 February 2000)

11.1 (0.2) 40.0 10.0

Notes:

1. Numbers in parentheses indicate the number of stocks (unit: million stocks).2. The Government must hold, for the time being, at least two-thirds of the total stocks of JT, as stipulated by the Japan

Tobacco Inc. Law.3. The Government must hold at least one half of the total stocks of the Electric Power Development Co. Ltd., as stipulated by

the Electric Power Development Promotion Law.4. The Government must hold at least one half of the total stocks of the Kansai International Airport Co. Ltd., as stipulated by

the Law of Kansai International Airport Company Ltd.5. The Government must hold at least one third of the total stocks of NTT, as stipulated by the NTT Law.



Trade Policy Review

Table AIII.14Regular staff of the Japanese Patent Office, FY1995-99(Number of persons)

Fiscal year 1995 1996 1997 1998 1999

Total staff 2,502 2,521 2,529 2,531 2,534Examiners 1,271 1,249 1,251 1,264 1,275

Patent 1,102 1,073 1,070 1,078 1,084Design 43 45 47 49 51Trade mark 126 131 134 137 140

Appeal examiners 316 358 377 383 389Clerical staff 915 914 901 884 870



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Table AIII.15Merger notifications by sector FY1994-99(Number of cases, percentage)Industry/Sector 1994 1995 1996 1997 1998 1999

Agriculture/forestry/fisheries 9 (0.4) 7 (0.3) 11 (0.5) 8 (0.4) 8 (0.5) 0 (0.0)Mining 1 (0.1) 7 (0.3) 4 (0.2) 5 (0.2) 5 (0.3) 0 (0.0)Construction 129 (6.4) 205 (8.1) 175 (7.7) 181 (8.3) 122 (8.1) 5 (3.3)Manufacturing 417 (20.9) 468 (18.6) 482 (21.2) 391 (18.0) 325 (21.5) 38 (25.2)

Foods 45 (2.2) 51 (2.0) 41 (1.8) 37 (1.7) 25 (1.7) 3 (2.0)Textiles 36 (1.8) 41 (1.6) 49 (2.2) 22 (1.0) 14 (0.9) 1 (0.7)Wood/wood products 11 (0.6) 23 (0.9) 18 (0.8) 11 (0.5) 6 (0.4) 0 (0.0)Paper/pulp 5 (0.3) 10 (0.4) 6 (0.3) 11 (0.5) 5 (0.3) 3 (2.0)Publishing/printing 29 (1.5) 39 (1.6) 40 (1.8) 31 (1.4) 19 (1.3) 2 (1.3)Chemicals/oil/coal 34 (1.7) 56 (2.2) 53 (2.3) 35 (1.6) 37 (2.4) 5 (3.3)Rubber/leather 6 (0.3) 3 (0.1) 7 (0.3) 2 (0.1) 3 (0.2) 0 (0.0)Ceramics/earth/stone 24 (1.2) 31 (1.2) 42 (1.8) 24 (1.1) 33 (2.2) 4 (2.6)Steel 6 (0.3) 15 (0.6) 32 (1.4) 12 (0.6) 8 (0.5) 1 (0.9)Non-ferrous metals 13 (0.6) 8 (0.3) 6 (0.3) 2 (0.1) 10 (0.7) 0 (0.0)Metal products 29 (1.5) 24 (1.0) 32 (1.4) 18 (0.8) 24 (1.6) 8 (5.3)Machinery 127 (6.3) 130 (5.2) 135 (5.9) 134 (6.2) 87 (5.7) 10 (6.6)Others 52 (2.6) 37 (1.5) 21 (0.9) 52 (2.4) 54 (3.6) 1 (0.7)

Wholesaling/retailing 540 (27.0) 717 (28.4) 680 (29.9) 626 (28.8) 467 (30.8) 50 (33.1)Real estate 219 (11.0) 307 (12.2) 210 (9.2) 229 (10.5) 160 (10.5) 12 (7.9)Transportation/communications/warehousing

104 (5.2) 117 (4.6) 106 (4.7) 119 (5.5) 65 (4.3) 6 (4.0)

Services 352 (17.6) 428 (17.0) 348 (15.3) 388 (17.8) 204 (13.5) 19 (12.6)Finance/insurance 45 (2.2) 45 (1.8) 43 (1.9) 52 (2.4) 47 (3.1) 17 (11.3)Public utilities 4 (0.2) 3 (0.1) 1 (0.1) 5 (0.2) 1 (0.1) 0 (0.0)Others 180 (9.0) 216 (8.6) 211 (9.3) 170 (7.8) 110 (7.3) 4 (2.6)Total 2,000

(100.0)2,520

(100.0)2,271

(100.0)2.174 (100) 1.514 (100) 151 (100.0)

Note: As the amended Antimonopoly Act was effective from 1 January 1999, the scope of notification requirements concerning merger was reduced. The classification by industry and sector refers to those to which the company belongs.



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Table AIII.16Notifications of acquisitions by sector FY1994-99(Number of cases, percentage)Industry/Sector 1994 1995 1996 1997 1998 1999

Agriculture/forestry/fisheries 1 (0.1) 5 (0.3) 4 (0.3) 1 (0.1) 1 (0.1) 0 (0.0)Mining 1 (0.1) 2 (0.1) 2 (0.1) 0 (0.0) 2 (0.2) 0 (0.0)Construction 35 (2.8) 38 (2.6) 45 (3.0) 42 (2.7) 42 (3.6) 3 (1.9)Manufacturing 178 (14.2) 187 (12.7) 198 (13.4) 171 (11.1) 144 (12.2) 42 (23.5)

Foods 13 (1.0) 18 (1.2) 21 (1.4) 16 (1.0) 8 (0.7) 4 (2.2)Textiles 16 (1.3) 8 (0.6) 16 (1.1) 7 (0.5) 10 (0.9) 0 (0.0)Wood/wood products 3 (0.2) 5 (0.3) 7 (0.5) 1 (0.1) 3 (0.2) 0 (0.0)Paper/pulp 4 (0.3) 4 (0.3) 5 (0.3) 4 (0.3) 4 (0.3) 1 (0.6)Publishing/printing 8 (0.6) 5 (0.3) 6 (0.4) 6 (0.4) 6 (0.5) 1 (0.6)Chemicals/oil/coal 32 (2.6) 44 (3.0) 39 (2.7) 33 (2.1) 25 (2.1) 11 (6.1)Rubber/leather 4 (0.3) 1 (0.1) 2 (0.1) 3 (0.2) 1 (0.1) 0 (0.0)Ceramics/earth/stone 12 (1.0) 25 (1.7) 27 (1.8) 19 (1.2) 16 (1.4) 0 (0.0)Steel 2 (0.2) 2 (0.1) 5 (0.3) 3 (0.2) 4 (0.3) 2 (1.1)Non-ferrous metals 3 (0.2) 3 (0.2) 5 (0.3) 6 (0.4) 1 (0.1) 1 (0.6)Metal products 8 (0.6) 7 (0.5) 10 (0.7) 6 (0.4) 6 (0.5) 2 (1.1)Machinery 55 (4.4) 53 (3.6) 47 (3.2) 53 (3.4) 27 (2.3) 14 (7.8)Others 18 (1.5) 12 (0.8) 8 (0.6) 14 (0.9) 33 (2.8) 6 (3.4)

Wholesaling/retailing 305 (24.3) 519 (35.4) 436 (29.5) 490 (31.7) 392 (33.3) 45 (25.1)Real estate 27 (2.1) 27 (1.9) 34 (2.3) 27 (1.7) 23 (2.0) 4 (2.2)Transportation/communications/warehousing

81 (6.5) 93 (6.3) 94 (6.4) 133 (8.6) 81 (6.9) 3 (1.7)

Services 128 (10.2) 117 (8.0) 140 (9.5) 134 (8.7) 104 (8.8) 29 (16.2)Finance/insurance 23 (1.8) 26 (1.8) 19 (1.3) 35 (2.3) 45 (3.8) 19 (0.6)Public utilities 0 (0.0) 1 (0.1) 1 (0.1) 1 (0.1) 0 (0) 0 (0.0)Others 476 (37.9) 452 (30.8) 503 (34.1) 512 (33.1) 342 (29.1) 34 (19.0)Total 1,255

(100.0)1,467

(100.0)1,476

(100.0)1,546

(100.0)1,176

(100.0)179 (100.0)

Note: As the amended Antimonopoly Act was effective from 1 January 1999, the scope of notification requirements concerning acquisition was reduced. The classification by industry and sector refers to those to which the acquiring company belongs.



Trade Policy Review

PART C

REPORT BY THE GOVERNMENT OF JAPAN

CONTENTS[Page number references are to the corresponding print version.]

Page

I. JAPAN IN THE MULTILATERAL SYSTEM 169

(1) Progress of Globalization and Japan's Policy Efforts 169

(2) Consolidation of the Multilateral System 169

II. THE TRADE AND ECONOMIC POLICY ENVIROMENT 170

(1) Japan's Economic Environment 170

(2) Trend in Foreign Trade 171

(3) Trend in Foreign investment 172

III. TRADE POLICY DEVELOPMENT, 1998-2000 172

(1) The Uruguay Round and Implementation 172

(2) Relations with Other Countries and Regional Initiative 173

(A) JAPAN-U.S. RELATIONS 173

(b) Relations with Europe 173

(c) APEC 174


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(d) ASEM 175

(e) Regional Trade Agreements 175

(3) Domestic Policy Developments Affecting Trade Policy 175

(a) Reforms of the Economic Structure 175

Economic Plans 175

Action Plan for the Economic Structural Reform 176

Economic Strategy Council 176

Economic Policy Measures 176

Benefit of regulatory reforms 177

(b) Fiscal Structural Reform 177

(c) Competition Policy 177

(d) Financial System Reform 180

(e) Current Progress in the Deregulation Process 182

(f) Agricultural Policy Reform 183

IV. FUTURE POLICY DIRECTIONS 185

(1) Further Development of the Reform Process 185

(2) Seattle and After 185

I.I. JAPAN IN THE MULTILATERAL SYSTEM

(1) Progress of Globalization and Japan's Policy Efforts

1. The intensification of globalization offers both benefits and challenges. A globalized world could create further market access and extended opportunities for business activities. The growth of information technologies (IT) is intensifying the pace of globalization. IT will be one of the most potent forces in shaping the 21st century.

2. This trend could be beneficial to many enterprising individuals, firms and communities. A large firm which already has international networks can further take advantage of IT and the Internet. Small business operators can also create a networks with relatively low cost due to the progress of IT.

3. The potential benefits of IT in spurring competition, promoting enhanced productivity, and creating and sustaining economic growth and jobs hold significant promise.

4. In order to share the benefits of globalization and IT, it is important to seize "Digital Opportunities" by laying various key foundations, such as economic and structural reforms, sound macroeconomic


Trade Policy Review

management, development of information networks, development of human resources and active utilisation of IT by the public sector.

5. In this context the Government of Japan has intensified its policy efforts by implementing extensive reforms through deregulation and improved market-access measures, which enhances Japan's attractiveness as an arena for economic activities as described in the latter section of this report.

(2) Consolidation of the Multilateral System

6. For more than 40 years since its accession in 1955, the Government of Japan has been committed to maintaining and strengthening a free and non-discriminatory multilateral trading system under the framework of GATT/WTO.

7. Japan has participated actively in the multilateral trade negotiations, including the Kennedy Round, the Tokyo Round, and the Uruguay Round, and it has benefited to a great extent from multilateral system of world trade within the rule-based system. Japan on its part has contributed to the sustained growth of the world economy through its progressive liberalization and elimination of tariff and non-tariff barriers to trade.

8. Japan has been actively engaged in promoting further trade and investment liberalization in the WTO, as shown in the presentation of numerous proposals and papers in the context of the third Ministerial Conference, including on numerous issues of competition policy, investment rules, trade facilitation and E-commerce.

9. Japan also believes that it is important for the developing and least-developed countries as well as the economies in transition to share the benefits of the results of the negotiations. In this sense a broad-ranged negotiations are necessary to create an environment in which both developing and developed countries enjoy the benefits and achieve sustainable development. Also early accession of acceding countries to the WTO is important to facilitate their integration into the multilateral trading system. Japan is determined to continue to play a leading role in supporting the accession process of applicant countries and economies.

10. Furthermore, Japan attaches great importance to the multilateral trading system, the primacy of which has been reaffirmed in the Singapore Ministerial Declaration. It is, therefore, indispensable to ensure that regional trade agreements are complementary to the multilateral system, and consistent with its rules.

11. The mission of WTO has been and will be to achieve through dialogue and negotiations within a rule-based multilateral trade system the enhancement of standards of living. The Government of Japan, fully recognizing its responsibilities, is prepared to address various challenges it may encounter.

II. THE TRADE AND ECONOMIC POLICY ENVIRONMENT

(1) Japan's Economic Environment

12. The Japanese economy had been in recession since the spring of 1997, but the recession came to an end around the spring of 1999, owing to the implementation of various policy measures such as additional public investment, income tax reduction, accommodative monetary policy, and measures for stability of the financial system. Since then, economic activities have continued to improve moderately. The Asian economic recovery has also contributed to the improvement after the second half of 1999. In the process of recovery, as the inventory adjustment progressed, industrial production and corporate profits increased. These developments provided a good background for the recovery in investment in plant and equipment since the end of 1999. Exports continue to increase due to the good economic condition of Asia, Europe, and the United States. Imports, especially those from Asia, are increasing.


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13. Although the employment situation remains severe with the unemployment rate staying at a high level, overtime hours worked and job offers have been increasing. The business perception of excessive employment is decreasing although the level is still high. On the other hand, with respect to the household sector, private consumption has not yet shown a clear trend of improvement despite the fact that decrease in income is coming to the end. In short, although the Japanese economy is improving moderately, it is still not on an autonomous path of recovery.

14. The Government of Japan will continuously carry out economic and fiscal management measures focusing on economic recovery, and will operate appropriately in order to attain autonomous economic recovery, carefully taking into account the trend of the economy. The government of Japan will compile a new set of policies to implement the Plan for the Rebirth of Japan.

15. With regard to the financial situation, overall the accommodative monetary condition has been maintained. A zero interest rate policy had been in place since February 1999, but on 11 August 2000 the targeted overnight call rate was raised to an average of around 0.25%. Long-term interest rates have been lower than 2% except in February 1999. Short-term interest rates had remained stable except for the temporary rise because of Y2K problems. However, since August 2000, they have increased somewhat. The money supply (M2+CDs) has been increased at the year-on-year change of about 2.0-3.0% from February to July in 2000. The accommodative monetary policy has contributed to the economic recovery by stimulating investment in housing and equipment, while money demand by private sector still remains weak. On the other hand, stock prices had shown a rising trend due to the removal of uneasiness in the financial system and continuing economic improvement. However, partly due to the influence of stock price adjustments in the United States, they fell in mid-April of 2000, and have remained weak.

16. With regard to the dollar-yen exchange rate from 1998 to August 2000, the dollar depreciated from ¥147.64 in August 1998 to ¥101.25 in November 1999. The dollar has traded in a tighter range since the turn of 2000, mainly between ¥104 and ¥110.

(2) Trend in Foreign Trade

17. Trade statistics indicate that Japan's trade surplus expanded in 1997, after four straight years of decline, and rose to its highest level of ¥13.99 trillion in 1998. In 1999, both exports and imports, but especially exports decreased, and as a result, the trade surplus decreased to ¥12.28 trillion. In the first half of 2000, the imports largely increased reflecting the recovery of the Japanese economy, and the trade surplus declined by 4.6%.

18. The total value of exports decreased two straight years from 1998 onwards, due mainly to the economic crisis in East Asian countries. In the first half of 2000, the total value of exports has been recovering.

- The total value of exports in 1999 amounted to ¥47.55 trillion (a decrease of 6.1% as against 1998).

- A year-to-year increase in the first half of 2000 up by 8.9% (as against the first half of 1999).

- Increase or decrease of the total value of exports in 1999 on a regional basis (as against 1998).

NIEs (incl. Korea, Singapore, Hong Kong and Taiwan) up by 0.2%China up by 1.4%The Association of Southeast Asian Nations (ASEAN) up by 1.3%


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The United States down by 5.6%The European Union (EU) down by 9.2%The Middle East down by 31.3%

19. The total value of imports likewise decreased for two straight years from 1998 onwards, due mainly to the slump of the Japanese economy and the yen’s appreciation. In the first half of 2000, the total value of imports has been recovering.

- The total value of imports in 1999 amounted to ¥35.27 trillion (a decrease of 3.8% as against 1998).

- A year-to-year increase in the first half of 2000 up by 13.7% (as against the first half of 1999).

- Increase or decrease of the total value of imports in 1999 on a regional basis (as against 1998).

NIEs up by 9.2%The Middle East up by 3.6%ASEAN up by 1.3% China up by 0.6%The United States down by 13.0%EU down by 4.6%

20. The share of manufactured goods in total imports has also been increasing steadily, reaching in 1999 a record level of 62.5% (a 12.3% point increase as against 1990).

(3) Trend in Foreign investment

21. Japan’s outward foreign direct investment (FDI) on an MOF reported basis amounted to ¥7,439.0 billion in FY1999, which represents an increase of 42.6% as against FY1998. The FDI largely increased after the decrease (21.2%) in FY1998. The major characteristics of outward FDI in FY1999 were:

(i) FDI in the manufacturing industry in FY1999 swelled to ¥4,719.3 billion three times the amount for FY1998 (¥1,568.6 billion) mainly because of several large FDIs such as in the food sector. FDI in FY1999 in the non-manufacturing industry decreased by ¥900 billion to ¥2,698.8 billion, mainly due to the decline of FDI in the finance and insurance sector.

(ii) On the whole FDI in developed countries sharply increased due to several big M&As in these countries. About 76% of all FDI therefore was concentrated in FDI in North America and Europe. The tendencies in Asia vary among the countries. FDI in Korea was boosted to ¥109.3 billion from ¥38.7 billion in FY1998, which was the largest FDI in Asia in FY1999, while FDI in Thailand shrank to ¥91.0 billion, a half of the amount in FY1998.

22. FDI flows into Japan in FY1999 almost doubled for two consecutive years to ¥2,399.3 billion from ¥1,340.4 billion in FY1998. The growth rate of inflow (+79.0%) was larger than that of outflow (+42.6%). Therefore, the gap between outward and inward FDI flows was reduced from a 4:1 in FY1998 ratio to a 3:1 ratio in FY1999. The major characteristics of inward FDI in FY1999 were:

(i) FDI in the manufacturing industry increased to ¥979.7billion (+213.4%) mainly because of a rapid increase of FDI in the machinery sector. FDI in the non-manufacturing industry also


Trade Policy Review

increased to ¥1,491.6 billion (+38.1%) with increases of FDI in the telecommunications sector and the trading sector.

(ii) The amount of inward FDI from every other region except North America and Japan increased.2811 There were particularly dramatic increases of FDI from France (+4,341.1%), Canada (+9,648.8%), Netherlands (+268.2%) and Cayman (+1,058.6%).

III. TRADE POLICY DEVELOPMENT, 1998-2000

(1) The Uruguay Round and Implementation

23. The Government of Japan has faithfully implemented the results of the Uruguay Round negotiations. The following are some of the examples which demonstrate policy efforts of the Government in this regard. Average tariff rates were, as a result of the Uruguay Round negotiations, reduced to 1.5% for industrial products, 1.0% for forestry products, 4.1% for fisheries’ products, and 9.3% for agricultural products. The average tariff rate for non-agricultural products was thus reduced to an overall 1.7% level, one of the lowest in the world. And 50.9% of all tariff lines are duty free, the highest in the world (6-digit bases).

24. Japan has put weight on increasing export earnings for developing countries, promoting their industrialization and encouraging their economic growth. Furthermore, Japan is one of the countries that proposed to implement tariff-free and quota-free treatment, consistent with domestic requirements and international agreements, under its preferential scheme, for essentially all products originating in least-developed countries.

25. Japan had applied a special treatment on rice imports under the WTO Agreement on Agriculture since 1995. But it has been replaced by a tariff scheme since April 1999, in accordance with Annex 5 of the Agreement on Agriculture.

26. Japan completed the elimination of customs tariffs on all information technology products in January 2000 in accordance with the Information Technology Agreement (ITA) at the WTO Singapore Ministerial Conference in 1996. Regarding the Tariff Elimination Initiative on pharmaceuticals, Japan expanded the number of tariff lines to cover an additional 639 products in May 2000 based on the Second review results.

27. The "Benrishi-ho" (Patent Attorney Law) is to be revised. Requirements concerning nationality and residence are to be abolished from the current "Benrishi-ho" (Patent Attorney Law) with the aim of expanded recruiting of patent attorneys regardless of nationality. The revised law, which will come into effect on 6 January 2001, is also expected to help "benrishi" (patent attorneys) more smoothly carry out their tasks in the recent globalized business environment.

(2) Relations with Other Countries and Regional Initiative

(a) Japan-U.S. Relations

28. Japan's trade surplus with the United States has increased since 1996. This is mainly due to the robust domestic demand of the U.S. economy which has caused a surge of the trade deficit for the U.S. and also because Japan’s imports from the U.S. have decreased due to Japan’s weak private-sector demand. However, although Japan’s trade surplus with the United States has increased, Japan’s share within the total U.S. trade deficit has been declining.

29. The Governments of Japan and the United States have been exchanging views in the Japan-U.S. deregulation dialogue since 1997 concerning deregulation in such areas as telecommunications, housing,


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medical devices and pharmaceuticals, financial services, energy, and structural issues including competition policy.

30. In July 2000, the Governments of Japan and the United States issued the Third Joint Status Report on the Japan-U.S. Enhanced Initiative on Deregulation and Competition Policy as a result of the dialogue. This report contains deregulatory measures taken by both governments which are expected to improve market access for competitive goods and services in order to enhance consumers’ interests and to increase efficiency and promote economic activity. Consistent with international obligations, these measures will provide non–discriminatory treatment to competitive foreign goods and services. Sector-specific consultations have also been held between Japan and the United States regarding various issues.

(b) Relations with Europe

31. Japan and the EU have been conducting regular meetings at various levels, and exchanging views on their respective economic situations, and on bilateral trade and investment issues, including those of regulatory reform. Sector-wise consultations have also taken place to deal with various issues, such as telecommunications, agriculture, etc., when necessary. All results of these consultations have been applied on an MFN basis. Such a cooperative approach based on intensive dialogues has contributed to the resolution of various bilateral trade disputes in an amicable manner.

32. In the 9th Summit Meeting between Japan and the EU held on 19 July 2000, in which Japan and the EU leaders discussed the strengthening of overall Japan-EU relations, including economic and trade relations, the leaders agreed to establish a new cooperative framework for a stronger partnership by issuing a new political document that is to be implemented by an action plan at the Japan–EU Summit Meeting in 2001.

33. In the action plan for economic and trade affairs, Japan and the EU will jointly seek to utilize the dynamism of globalization for the benefit of the whole world and to this end will continue to work towards strengthening the multilateral system. Areas for co-operation will include, inter alia, the WTO, the international monetary and financial system, regulatory reform, improving market access, improving the investment environment through promotion and facilitation of investment, competition policy, customs co-operation, information technology including electronic commerce and telecommunications, business dialogue, dialogue among consumers' organizations.

34. The negotiations on two agreements have recently made a great progress for the facilitation of the economic partnership between Japan and the EU. First, regarding the Mutual Recognition Agreement, a mutual understanding has been reached between the negotiating teams of both sides, and they are to undertake the necessary domestic consultations, bearing in mind the obligations as Members of the WTO. Second, as for an cooperation agreement in the area of competition policy, Japan and the EU have also reached a mutual understanding on substantive elements of the future agreement.

35. Concerning the euro, Japan has expressed its hope that the confidence in the euro should establish as an international currency and that the euro should contribute to the stability of the international financial and monetary system.

(c) APEC

36. Japan believes that the promotion of cooperative economic relations with the economies in the Asia-Pacific Region through forums, such as the Asia-Pacific Economic Cooperation (APEC), will foster an open regional economic community in the region. Japan believes that this would stimulate world trade and thereby contribute to the development of the global economy.


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37. Japan has conducted its activities in line with the three pillars of APEC activities: trade and investment liberalization and facilitation, and economic and technical cooperation. As for liberalization and facilitation, Japan attaches great importance to the IAP (Individual Action Plan) process and will continue to actively participate in it. As for economic and technical cooperation (Ecotech), Japan is one of the most vigorous members in initiating a number of Ecotech activities to attain sustainable growth and equitable development amongst members in the region, while reducing economic disparities and improving economic and social well-being. For instance, this year Japan proposed the review of Joint Activities stipulated in the Ecotech part of the Osaka Action Agenda, which was adopted in 1995 as the guideline of APEC’s activities. APEC endorsed the proposal and is now in the process of conducting the review.

38. Furthermore, taking into consideration lessons learned from the Asian crisis, APEC has expanded its activities to macro-economic coordination and the support for the structural reform efforts of APEC members. Accordingly, Japan has responded positively to such expansion of activities.

(d) ASEM

39. Measures have been taken in the field of trade policy within the framework of the Asia-Europe Meeting (ASEM) since the inaugural meeting held in March 1996. In addition to the two summit meetings, the Foreign Ministers' Meeting, the Economic Ministers' Meeting, and the Finance Ministers' Meeting have been held twice, respectively. The ASEM partners adopted the Trade Facilitation Action Plan (TFAP) and the Investment Promotion Action Plan (IPAP) at the Second Asia-Europe Meeting (ASEM 2), and have been carrying out various works under them. The Asia-Europe Business Forum has been held annually since 1996 to promote interaction between the business sectors of the two regions.

(e) Regional Trade Agreements

40. Regional trade agreements (RTAs), which have increased in recent years in terms of both numbers and scope, have a potential to contribute to the development of the overall global economy, if they genuinely facilitate trade liberalization within the region and are fully consistent with the WTO. However, in reality Japan is seriously concerned that some RTAs have raised barriers to trade with non-member countries, and that they have effectively weakened the free, non-discriminatory, and open multilateral system formed under the WTO.

41. Japan believes that, under such conditions, the WTO should examine properly the RTAs with regards to their consistency with the WTO agreements. Japan has, therefore, assumed the initiative and presented proposals to the WTO, especially during the preparation phase of the Ministerial last year, in order to improve the organization's capacity to review regional trade agreements, and is actively contributing to the work of the Committee on Regional Trade Agreements.

42. Japan does not belong to any preferential regional agreements, and offers no preferential tariffs to any country or region, except those extended to developing countries under the Generalized System of Preferences (GSP). However, the RTAs could play a complementary role to the multilateral trading system both in the field of liberalization and in the process of rule making, on the condition that they are consistent with the WTO rules. On this basis, the possibility and the desirability of free trade agreements are being examined by various sectors (by the joint study group composed of business representatives, academics, and the Government officials in the case of Singapore; by the non-governmental sectors in the case of Korea and Mexico). Having said that, Japan continues to attach great importance to strengthening the multilateral trading system as embodied in the WTO as the basis for its policies, and it considers that the RTAs should be complementary to the multilateral trading system and fully consistent with the WTO rules.

(3) Domestic Policy Developments Affecting Trade PolicyTextual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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(a) Reforms of the Economic Structure

Economic Plans

43. Since December 1995 until 1998, the Government had promoted economic structural reforms based on the "Social and Economic Plan for Structural Reforms". The progress of the reforms was reviewed annually and reported to the Cabinet by the Economic Council, which is an advisory body to the Prime Minister. The review report of December 1998, however, pointed out that the plan was outdated because of changes in economic conditions, and requested the formulation of a new plan.

44. The new plan "Ideal Socioeconomy and Policies for Economic Rebirth" was formulated in July 1999. It sets forth a fundamental reform of the socioeconomic system, and indicates the direction toward the ideal socioeconomy in the early 21st century, which should be consistent with four major socioeconomic trends: transition to the knowledge-based society; low-birth rate and aging of population; globalization; and increasing environmental restrictions. The plan then clarifies the important policy objectives and measures over the next ten years, and offers guidelines for household and corporate activities.

45. The review report of the plan issued in June 2000 not only reports on the progress of the implementation of the indicated policy measures, but also specifies three strategic policy issues which the Government should work on immediately (within three years or so). They are, promotion of the IT revolution, development of a recycle-based socio-economy, and creation of a vital and less-anxious society under aging population.

Action Plan for the Economic Structural Reform

46. The Government adopted as a Cabinet Decision in May 1997 the Action Plan for the Economic Structural Reform. The Action Plan aims at revitalizing the Japanese economy by the creation of new businesses and business environment that is attractive to Japanese as well as foreign companies. This is to be achieved by reducing Japan’s high-cost structure through the regulatory reform and restraint of the public burden. The Government followed up on the Action Plan in December 1997 and in January 1999. And the Government also established Competitive Commission in March 1999 and it was succeeded by the Industrial Rebirth Council in July 2000, which seeks to realize reforms based on the opinion of business leaders. The concrete reforms which the Government has proceeded with so far are as follows: System Reform for Corporate Structure, Labor Market Reform, Creation of new business, Technological innovation and its transfer to industry, and Deregulation.

Economic Strategy Council

47. The Economic Strategy Council, another advisory board to the then Prime Minister Keizo Obuchi, was inaugurated in August 1998 to discuss and propose ideas for reviving the Japanese economy and building a prosperous socio-economy in the 21st century. Its final report "Strategies for Reviving the Japanese Economy" submitted in February 1999 calls for fundamental structural reforms in both the public and private sectors to build a new economic system of Japan.

Economic Policy Measures

48. The Government has tackled economic structural reforms based on these plans and reports. Economic policy packages consecutively formulated since 1998 (the Comprehensive Economic Measures of April 1998, the Emergency Economic Package of November 1998, and the Policy Measures for Economic Rebirth of November 1999) also contain structural reform measures (such as regulatory reforms and social


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infrastructure investment for the 21st century) as a major component of the packages, in addition to usual demand stimulating measures.

49. In order to create the new basis for development in the 21st century, the Government of Japan will focus on four areas - the promotion of the IT Revolution, measures for environmental issues, measures for the aging society, and provision of city infrastructure - in a new set of policies to be compiled for implementing the Plan for the Rebirth of Japan.

Benefit of regulatory reforms

50. According to the analysis by the Economic Planning Agency, the regulatory reforms which have been carried out in the eight sectors (including domestic and international telecommunications services, domestic custom air transportation, etc.) have created a large benefits in terms of increased consumer's surplus, through substantial declines in prices and charges. The estimated benefits amount to 8.6 trillion yen (cumulative total up to the FY1998), which is equal to 2.3% of Japanese national income in FY1998. Supply side effects such as increased productivity, decreased production costs, and greater technical progress, should add further to the benefits.

(b) Fiscal Structural Reform

51. On 28 November 1997, the Fiscal Structural Reform Act was passed by the Diet to bring about fiscal consolidation. The two pillars of this act were to bring down the general government (central and local government excluding the social security funds) fiscal deficits to 3% of GDP or less by FY2003, and to terminate the issuance of central government deficit-financing bonds (as distinct from "construction bonds" which finance public works, investments etc.) by FY2003.

52. After the enactment of the Fiscal Structural Reform Act, however, the government faced numerous unanticipated adversities such as bankruptcies of several major financial institutions in the course of carrying out its economic management policies. These worsened the domestic economy, and the Diet first postponed the fiscal consolidation target to FY2005 (29 May 1998) and then suspended the law (11 December 1998). The timing for lifting of this suspension will be decided by taking into consideration overall economic and fiscal conditions, and after the Japanese economy is put on to the recovery track.

53. The general government fiscal deficit for FY2000 is expected to reach approximately 9.4% of GDP, which is much worse than for any other major industrial country, putting Japan’s fiscal situation into a critical phase. It is envisaged that the general government gross debt outstanding at the end of FY2000 will reach approximately 132.9% of GDP, which is the worst among major industrial countries.

54. Under these circumstances and projections, there is no doubt that an utmost priority should be given to fiscal structural reform. However, an important and necessary precondition for such a reform is to make sure that the economy is getting back onto a path towards full recovery led by private demand. As the Japanese economy has begun to show positive signs, the Government of Japan will strive to tackle the issues related to the fiscal structural reform including the modalities for the tax and social security systems.

(c) Competition Policy

55. In parallel with deregulation, exemption systems from the application of the Antimonopoly Act have been reviewed step by step since 1995. Exemption provisions under respective laws were repealed or reduced in 1997. A bill that eliminated the exemption systems under the AMA was submitted to the Diet on 16 February 1999 and was enacted on 15 June 1999. (It was promulgated on 23 June 1999 and took effect on 23 July 1999.)


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56. The enactment included that the abolition of depression and rationalization cartels under the AMA and the abolition of the Exemption Act. In addition, based on the results of deregulation in the electric and gas sectors, a bill amending the AMA was submitted to the Diet on 21 March 2000. The bill included the deletion of Section 21 which is the exemption of natural monopolies, and was enacted on 12 May 2000. (It was promulgated on 19 May 2000 and took effect on 19 June 2000).

57. As for private-sector remedies, the Government of Japan established study groups (MITI in September 1997 and FTC in March 1998) to consider systems to permit private parties to sue for injunctions against unfair business practices, including AMA violations.

- MITI’s study group issued its final report in June 1998, which concluded that it is necessary to permit private parties to bring injunctions against unfair business practices. The FTC's Study Group's discussions covered 1. introduction of injunctive relief through civil litigation against the AMA violations as well as 2. improvement of the damage compensation system against the AMA violations. In October 1999, the FTC received a final report from the Study Group and made it public.

- Taking account of the above reports and opinions from various parties, the Government of Japan submitted a bill to the Diet on 21 March 2000 that permits private parties to seek and obtain injunction orders from the courts against parties engaged in activities that violate unfair trade practice set forth by the AMA and that improves the damage compensation system against the AMA violations, and the bill was enacted on 12 May 2000 (it was promulgated on 19 May 2000).

58. A bill aiming at reducing the scope of reporting and notification, requirements regarding mergers and stockholding and improving examination procedures, was enacted on 22 May 1998, promulgated on 29 May 1998 and came into force on 1 January 1999. (Some parts of the bill were put into force immediately when it was promulgated.) In addition, a bill calling for an amendment to the AMA regarding the stipulation of the regulations for spin-off, which are similar to the regulations for mergers and acquisitions, etc. was enacted. (It was promulgated on 31 May 2000.)

59. The FTC has conducted many medium and long-term reviews of the Government’s regulatory system from the point of view of competition policy and held meetings of the Study Group on Government Regulations and Competition Policy since July 1988, which consist of scholars and others, in order to review government regulations and study ways to promote competition policies in the related sector.

60. Since June 1999 the Study Group has investigated ways to promote new entries into the public utilities and safeguard of conditions for fair competition between new entry entrepreneurs and existing ones. The Study Group is also studying other ways to ensure fair competition, the problem of government regulations and the direction of reforms in each sector where deregulation is in under way. Recently, the Study Group has released its reports on some utilities.

61. Moreover, the FTC, in cooperation with the Ministry of International Trade and Industry, worked out and released "guidelines on appropriate trade of electricity" in December 1999 and "guidelines on appropriate trade of gas" in March 2000 in order to promote competition in electric and gas sector, based on these reforms of electric power and gas service sector.

62. The FTC takes rigorous legal actions against the violation of the Antimonopoly Act. The number of legal cases against such violations was 27 cases in 1998, and 32 cases in 1999. The breakdown of these cases is as follows:


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1998 1999

Private monopolization 3 0

Bid-rigging 15 22

Cartels (excluding bid-rigging) 3 3

Unfair Trade Practices 5 5

Others 1 2

Total cases 27 32

63. Surcharge payments contained in orders over the last two years has been estimated to total about ¥26.7 billion (equivalent to about US$247 million).

64. Among them, surcharge payment orders in certain cases, amounting to about 11.1 billion (equivalent to about US$101 million), were nullified due to the initiation of hearing procedures in accordance with Article 49 of the AMA.

65. The FTC has been making efforts to eliminate bid-rigging. Big-rigging cases account for more than half of the legal actions. The FTC filed for criminal accusations with the Public Prosecutor General in the following two cases:

(1) Market allocation agreements among seamless pipe makers (1999); and

(2) Big-rigging of petroleum products ordered by the Central Procurement Office of the Defense Agency (1999).

66. In 1990, the FTC adopted policy to actively bring accusations in order to seek criminal penalties against violations that substantially restrain competition in a particular field of trade, such as price cartels, supply restricting cartels, market allocation agreements, bid-rigging, and boycotts which:

(1) Constitute serious violations that are likely to have a widespread influence on people’s lives; or

(2) Involve firms or industries that are repeat offenders, or that do not abide by the measures to eliminate the violation, and where the administrative measures of the Fair Trade Commission are not considered to fulfill the aims of the Antimonopoly Act.

67. The FTC conducted a follow-up survey to fully determine the actual conditions of competition in the flat glass market concerning foreign and domestic firms, and published the survey report in 1999. The results of the survey indicated that there have been substantial changes in flat glass trade among companies in Japan as a result of actions taken by domestic flat glass manufactures in response to problems pointed out by the FTC in its 1993 survey, and that the openness of the distribution market for flat glass has increased.

68. The Government of Japan and the Government of the U.S. signed a bilateral agreement concerning cooperation on anti-competitive activities on 7 October 1999. The agreement entered into force upon its signature. This agreement is expected to strengthen the enforcement of the competition laws against anti-competitive activities having international aspects as well as to develop the cooperative relationship between the competition authorities of Japan and the U.S.

69. In the field of technical cooperation, the FTC has been holding several training courses on competition policy. One of the training courses invites operational-level staff members of the competition


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authorities in developing countries and countries with economies in transition. Other training courses of the FTC are held by country.

70. The FTC has also been sending its experts for more in-depth technical assistance on competition policy to some developing countries and countries with economies in transition.

71. In the framework of the "PFP" (Partners For Progress) initiative of APEC, the FTC has been coordinating a five-year training program on competition policy with the Royal Thai Government since FY1996. The fourth program was held in Bangkok in March 2000, with intensive discussions on specific topics in sub-group meetings.

(d) Financial System Reform

72. In the period 1998-2000, the Japanese government continued to implement the financial system reform plan formulated in June 1997 (known as the Big Bang), while taking measures to restore the stability of the financial system. This reform covered all areas of the financial sector, and it drastically removed restrictions on financial products, services and organizational structures of financial institutions, as well as improved fair trading rules for customer protection.2822

73. It also strengthened the framework for dealing with corporate failures. To date, the plan has been implemented as initially scheduled, and is nearing completion. The reforms have been highly effective, as can be seen, for example, in the active movement towards consolidation and restructuring of financial institutions, new entrants (including prospective ones) into the financial sector from other business sectors, and the introduction of new financial products.

74. In 1998, two laws vital for restoring the stability of the financial system were enacted. One of them was the Financial Revitalization Law, which improved the financial resolution schemes for the protection of depositors and sound borrowers in good faith. The temporary nationalization of troubled banks was also made possible. The other law was the Financial Function Early Strengthening Law, which established a new system for capital injection into financial institutions using public funds. Both laws have been quite effective in dealing with problems leading to under-capitalization and the failure of large banks and other deposit-taking institutions.

75. In this period, the Japanese government fundamentally reorganized its financial regulatory framework. In June 1998, the Financial Supervisory Agency (FSA) was established to take over the financial supervisory and inspection functions of the Ministry of Finance (MOF), leaving the MOF with planning and policy formulation functions regarding the financial system. The Financial Reconstruction Commission (FRC) was established in December 1998, with the responsibility of formulating the government’s policies for restoring the soundness of the financial system through capital injection and the resolution of failed institutions. The FSA was mandated by the FRC to implement measures to restore the soundness of the financial system by taking prompt corrective action against undercapitalized institutions, along with other administrative measures.

76. The FSA swiftly carried out financial supervision and inspection based on clear and transparent rules, through adherence to market discipline and the principle of self-responsibility. The most significant measures taken by the FSA up to June 2000 included: (a) intensive inspection of financial institutions to secure confidence in the financial conditions and management of those institutions and to expedite the disposal of bad loans; (b) the adoption of "Financial Inspection Manuals" which set out the approach to inspections of deposit-taking institutions as well as the adoption of "Insurance Inspection Manuals" which take into account the particular characteristics of insurance companies; and (c) the introduction of a computerized off-site monitoring system to continuously and accurately monitor the financial and other


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conditions of banks and other financial institutions.

77. The FRC and the FSA also deliberated on the issue of new entrants into the banking business from other business sectors. After going through the public hearing procedures, the FRC and the FSA issued in August 2000 basic principles and operational guidelines regarding the licensing and supervision of new types of banks including entrants into the banking business from other business sectors. In addition, supervisory issues arising from electronic sales of financial services were studied by a study group consisting of experts on financial law and electronic commerce created under the auspices of the FSA. The study group issued a report in April 2000 entitled, "Electronic Sales of Financial Services and Supervisory Policy". The report contained a large number of proposals to adapt the existing regulatory framework to the electronic environment.

78. Meanwhile, the Financial System Planning Bureau of the Ministry of Finance prepared draft legislation, which were all enacted by the Diet in May 2000, with the purpose of reforming the safety net for depositors and insurance policyholders, and for developing new infrastructure of financial markets and services. As part of the measures to enhance the safety-net for depositors and policyholders: (a) the Deposit Insurance Law was amended to terminate the emergency full protection of all deposits currently in force as of end-March 2002, and at the same time to provide additional funds for resolving failed financial institutions and to reform the deposit insurance system for application from April 2002; and (b) the Insurance Business Law was amended to simplify the process of demutualization, to apply bankruptcy legislation to insurance companies, and to provide additional funding to the Life Insurance Policyholders Protection Corporation through additional contributions from the insurance industry and the introduction of fiscal support.

79. As part of the efforts to develop new infrastructure of financial markets and services: (a) the Law on Securitization of Specified Assets by Special Purpose Companies (SPC Law) as well as the Securities Investment Trust Law were amended to expand the range of products eligible for investment under these laws and to facilitate the use of SPCs and collective investment schemes; (b) the Law on Sales of Financial Products was legislated to require financial service suppliers to provide customers with material information concerning financial service products; and (c) the Securities and Exchange Law and the Financial Futures Trading Law were amended to allow stock exchanges and financial futures exchanges to be organized in the form of joint-stock companies as well as in the form of membership organizations as at present, and to introduce an electronic disclosure system for corporate financial information.

80. These reforms are complemented by the introduction of the revised accounting standards that aim to increase the transparency of financial accounts. Consolidated accounting became mandatory in FY1999, and financial instruments are to be evaluated at market value in FY2000. These significant accounting changes help to improve financial disclosure and to bring Japanese accounting standards in line with international standards.

81. Most recently, on 1 July 2000, the Financial Services Agency (new FSA) was established, with the integration of the Financial Supervisory Agency and the Financial System Planning Bureau of the Ministry of Finance. The six basic policy principles of the newly-created FSA are to:

(a) establish a reliable and vigorous financial system; (b) develop a state-of-the-art financial infrastructure; (c) develop and properly implement regulations to protect users; (d) ensure transparency and fairness in financial administration based on clear rules under market discipline and the principle of self-responsibility; (e) enhance the expertise of the staff and improving the administrative structure; and (f) reinforce cooperation with foreign regulators and contribute to international rule-setting.

Following these principles, the new FSA strives to make the financial system reliable and vigorous, and the Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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financial markets fair and efficient.

82. With considerable effort by both government and industry, the financial system has largely regained stability in Japan. However, further efforts to restructure financial institutions and to promote efficiency in the financial system are still ongoing. The new FSA is determined to pursue its goals through exercising accountability and ensuring transparency in its activities. At every stage of its implementation of policies in the financial sector, the Japanese Government has worked in full conformity with the commitments made under the General Agreement on Trade in Services (GATS), and will continue to do so in the future.

(e) Current Progress in the Deregulation Process

83. Since 1993, successive Japanese Governments have attached outstanding importance to the deregulation issue. The Cabinet decided on "the Program for Promoting Deregulation" (FY1995 to FY1997) in 1995 and "the Three-Year Program for Promoting Deregulation" (FY1998 to FY2000) in 1998 as a comprehensive program that covered all ministries and agencies.

84. For further deregulation measures, the final revision of "the Three-Year Program for Promoting Deregulation" was decided for in March 2000, which took the requests and comments coming from overseas and within Japan into account, and in which incorporated the contents of the Regulatory Reform Committee's Report.

85. The basic goals of this Program are outlined as follows:

(1) Through a drastic structural reform of Japan's society and economy, to create a free and fair socio-economic system that is fully opened to the international community and based on the rules of self-responsibility and market principles; and

(2) To shift emphasis in public administration from ex ante facto regulations to ex post facto monitoring of compliance with general rules.

86. To achieve these goals, deregulation will be promoted along with this Program during the three-year period from FY1998 to FY2000, while emphasizing the following points:

(1) Regulations will be abolished or otherwise relaxed under the principle of minimization of economic regulations and social regulations minimized;

(2) Regulatory arrangements will be rationalized by, for example, the introduction of inspection by the private sector;

(3) Regulations will be made simpler and clearer;

(4) International harmonization of regulations;

(5) Speeding up of regulatory procedures; and

(6) Transparency in procedures for formulating regulations.

87. In pursuing the objectives above and in parallel with the promotion of deregulation, i.e. relaxation and lifting of regulations, the Government will tackle the tasks of regulatory reform as follows:

(1) Competition policies will be actively developed to promote the functioning of competitive


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market forces;

(2) New rules will be established in support of the transition from ex ante facto regulations to ex post facto monitoring; and

(3) New systems of information disclosure and consumer policy will be instituted for the establishment of the principle of self-responsibility.

88. This Program will expire at the end of March 2001. However, the Government will continue to promote deregulation and regulatory reform in order to put the economy on a track to self-sustained recovery, and will move ahead with the formulation of a Three-Year Program for the Advancement of Regulatory Reform.

89. In addition, in Japan, all restrictions on foreign investment in the telecommunications sector apart from NTT have been lifted in accordance with the WTO basic telecommunications agreement. As a result of deregulation of telecommunications charges and the adjustment of minute rules regarding interconnection fees, competition among carriers has been promoted and significantly contributed to the development of telecommunications.

(f) Agricultural Policy Reform

90. Japan’s agricultural policy had been based on the 1961 Agricultural Basic Law, and had aimed to improve agricultural productivity by increasing the farming scale, fostering the independent management, and promoting the transfer of production to those crops increasing in demand, in order to reduce the gap in productivity and income between agriculture and other industries. The government had pursued these goals through production policy, price and distribution policy and structure policy.

91. However, since that time Japan’s economy and society have experienced major changes, spurred by factors such as rapid economic growth and the significant advance of globalization. Conditions affecting Japan’s food, agriculture and rural areas have also undergone profound changes. Some of the objectives of the Basic Law have been achieved, but there also have arisen problems, such as: (a) a substantial decline in the food self-sufficiency ratio; (b) ageing of the farming population and reduction in farmland area; and (c) depopulation of hilly and mountainous areas.

92. At the same time, people’s expectations for agriculture and rural areas have been on the rise. There has been an increasing demand that the agricultural sector should fulfil its multifunctional role: a stable supply of high-quality food; maintenance of the viability of rural areas; conservation of land and the environment; fostering of water resources; formation of rural landscape; and preservation of cultural traditions etc.

93. In order to cope with these situations, the government has pursued agricultural policy reform to establish new policies toward the 21st century. And in July 1999, the new Agricultural Basic Law (the Basic Law on Food, Agriculture and Rural areas) was enacted for the first time in nearly 40 years.

94. The new Basic Law provides four basic principles for policies to stabilize and improve people’s lives and promote the sound development of the national economy: (a) securing of a stable food supply; (b) fulfilment of the multifunctionality of agriculture; (c) sustainable agricultural development; and (d) the development of rural areas.

95. Based on the new Basic Law, the Basic Plan for Food, Agriculture and Rural Areas was adopted by the Cabinet in March 2000. The Basic Plan indicates concrete directions of the policies to be taken over the


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next ten years concerning the stable supply of food, sustainable development of agriculture and rural development. For example, the plan calls for the following measures:

(1) Expanding the scale of farm management through promoting the efficient use of farmland to establish a desirable agricultural structure;

(2) Review of the price policies for major products in such a way as to make them properly reflect supply/demand situations and quality evaluation, complemented with measures to mitigate adverse effects of price fluctuation on farm management supposed to be encouraged;

(3) Proper use of agricultural chemicals and fertilizers and improvement of soil fertility through the effective use of organic substances such as livestock manure, rice straw and food residues, in order to maintain and promote cyclical functions of agriculture;

(4) Promoting the incorporation of farm management, since corporate farming plays an important role in improving farmer’s management and promoting new entrants into the business; and

(5) Support to make up for any disadvantages in agricultural production conditions of hilly and mountainous areas to enable continued proper agricultural production activities.

The Basic Plan should be reviewed about every five years and amended, if necessary, in light of changes in food, agriculture and rural areas and the results of the evaluation of the effectiveness of each measure.

96. Some of the direction provided in the Basic Law and the Basic Plan have already been realised in concrete policy measures, with some of them actually implemented before the formal enactment of the Basic Law. These include:

(1) Price policies for major products have been under review with a view to increasing market orientation. With regard to rice, the volume of government purchases was reduced substantially, and a new direct payment by a fund co-financed by the Government and producers was introduced in 1998 to compensate part of the loss of income caused by a fall in the market price of voluntarily marketed rice. The payment is provided only to producers who completely fulfil the required crop diversion target. Wheat, which used to be exclusively distributed through the government, is now distributed through private sector, complimented with a new Stabilization Fund commenced in 2000. Price policies for soybean, sugar and dairy products were also reformed;

(2) The Law for Promoting the Introduction of Sustainable Agricultural Production Practices was enacted in 1999 with a view to taking further steps to promote sustainable agricultural production harmonised with the environment. The new law requests all prefectural governments to establish the guideline for introducing sustainable agricultural production practices for main crops, fully taking into consideration the differences in natural conditions; and

(3) Area-based direct payment for farmers in hilly and mountainous areas was introduced in 2000, to support agricultural production activities in disadvantaged area and thus maintain the multifunctional role of agriculture.

97. Another feature of the Basic Plan is the setting of a target for the food self-sufficiency ratio. The target was set in light of its usefulness as a guideline 1) in evaluating to what extent domestic agriculture is


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responding to people’s demand, and 2) in endeavour to ensure food supply capacity in case of unexpected events. With consideration of the declining trend of food self-sufficiency which is now the lowest among developed countries, and the feasibility of achieving the target through various measures included in the Plan, the target was set to improve the ratio to 45% in 2010.

98. Improving the food self-sufficiency ratio requires the efforts of all the people concerned, including farmers, the food industry and consumers. The Government is to take various measures concerning production mentioned above, but also those concerning consumption, including the establishment of a dietary guideline which encourages consumers to review their dietary patterns, such as improving the nutritional balance and reducing the amount of unfinished or dumped food.

IV. FUTURE POLICY DIRECTIONS

(1) Further Development of the Reform Process

99. In the telecommunications sector, interconnection fees will be further lowered with the introduction of Long-Run Incremental Cost (LRIC) Methodology in FY2000. In addition to this, network access diversity will be promoted. As a result, competition will be further enhanced.

100. In order to promote IT, the IT Strategy Headquarters and IT Strategy Council were established in July 2000. Policy resources will be concentrated on IT-related matters such as further pro-competitive policies in the telecommunications sector, bridging the digital divide, information security and protection of personal information.

(2) Seattle and After

101. Although the WTO could not succeed in launching a new round of negotiations at Seattle, we must continue to work toward the early launch of a new round in order to enable the WTO to contribute to global economic development through the promotion of multilateral trading system.

102. In this connection, we must address the following points. First, we consider it necessary to further integrate developing countries into the WTO system. To this end, the implementation of Uruguay Round agreements should be properly addressed so that benefits of the negotiations are equitably shared among developing and developed countries. We also need to promote technical assistance to developing countries. In this regard, the adoption of the short-term package in Geneva, regarding implementation of Uruguay Round undertakings, increased market access for the LDCs, technical assistance for enhanced capacity building as well as improvement in WTO transparency, was an important first step in this direction and must be pursued expeditiously.

103. Second, we recognize the need to pay proper attention to the concerns of the civil society such as question on environment. We believe it is necessary to address not only market access but also the issues of global environment and the sustainable utilization of exhaustible natural resources, which are also the concerns of the civil society.

104. Third, we consider that the strengthening of rules and disciplines and further liberalization are essential. In this connection, we should work on the disciplines on anti-dumping rules, multilateral rules on investment, electric commerce, etc.

105. Japan believes that the next round of WTO negotiations should cover an ambitious, balanced, and inclusive agenda in order to enable the WTO to properly address the above issues and to respond to the various concerns of all members in a well-balanced manner.


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106. The Government of Japan will try to contribute to the multilateral trade system with other members so that it will continue to play a central role in world trade well into the 21st century for further global economic development.

PART D

MINUTES OF THE TPRB MEETING

CONTENTS[Page number references are to the corresponding print version.]

Page

I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 191

II. OPENING STATEMENT BY THE REPRESENTATIVE OF JAPAN 192

III. STATEMENT BY THE DISCUSSANT 197

IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 200

V. REPLIES BY THE REPRESENTATIVE OF JAPAN AND ADDITIONALCOMMENTS 216

ADDENDUM(WT/TPR/M/76/Add.1)

ANNEX I ADVANCE WRITTEN QUESTIONS 231

ANNEX II JAPAN'S RESPONSES TO QUESTIONS POSED AT ITS WTOTRADE POLICY REVIEW 293

The Concluding Remarks by the Chairperson of theTrade Policy Review Body are reproduced in Part A.


Trade Policy Review

I. INTRODUCTORY REMARKS BY THE CHAIRPERSON

1. The fifth Trade Policy Review of Japan was held on 14 and 16 November 2000. The Chairperson welcomed the delegation of Japan, led by Mr. Yoshiyuki Motomura, and the discussant, Ambassador Walter Lewalter (Germany). As usual, the discussant would speak in his personal capacity and not as representative of his country. In accordance with the established procedures, the discussant had made available, in advance, outlines of the main issues he intended to raise.

2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of the procedures for the meeting. The report by the Government of Japan was contained in document WT/TPR/G/76 and that of the WTO Secretariat in document WT/TPR/S/76; the main issues to be raised by the discussant were contained in document WT/TPR/D/55. Copies of advance questions, submitted by Argentina; Chile; Hong Kong, China; Canada; New Zealand; Korea; Malaysia; Peru; EU; Switzerland; Australia; Colombia; Uruguay; India; Brazil, Norway; Mauritius; Thailand; and the United States (WT/TPR/M/76/Add.1, Annex I) were transmitted to the delegation of Japan.

II. OPENING STATEMENT BY THE REPRESENTATIVE OF JAPAN

3. The representative of Japan, Mr. Yoshiyuki Motomura stated that the TPRM process greatly contributed to enhancing the transparency of the trading systems of member countries, which was essential for promoting the multilateral trading system. He hoped that through the discussions in the fifth Trade Policy Review of Japan, WTO Members would have a better and clearer understanding of Japan’s trade policy in the international community. In this context, he touched upon some of the salient points of the recent actions taken by Japan in trade and investment.

4. Since the early 1990s, the Japanese economy had been in a severe situation, one of the most concerned elements in the world economy. Thus, it had been the highest priority of Japan's economic policy to overcome the recession. The recession that Japan had experienced was not an ordinary cyclical economic recession, but rather was characterized by economic stagnation caused by structural problems. Three major problems the Japanese economy faced were non-performing loans, excessive capital stock, and excessive labour. These were closely interrelated. Corporations and households suffered from the collapse of the bubble economy, which brought down the value of assets, including stocks and properties. Domestic demand shrank, triggering a further fall in asset prices and creating a vicious cycle of asset decline and economic slowdown. Consequently, the corporate sector had maintained excessive capital stock, labour, and loans. Many companies tried to reduce these by cutting employment cost and investment. Restructuring in the corporate sector resulted in significantly weaker levels of household confidence and consumption.

5. He briefly explained the major points of various macroeconomic measures and structural reform implemented by the Japanese Government:

(a) considerable tax reduction had been undertaken to stimulate demand, while public spending, including public works, was aimed at stimulating private investment to create lasting demand;

(b) to respond to the reluctance of financial institutions to supply funds, the Government undertook financial reforms as well as creating systems that would facilitate the provision of funds for entrepreneurs to stimulate private investment;

(c) programmes to provide training for entrepreneurs and workers were being improved. Providing skills and education would create more jobs and employment, and thus increase income, which would lead to increased consumption and effective demand;


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(d) responding to the sense of insecurity, the Government was aiming to create a society where all people, including the aged, women, and people seeking jobs as a result of restructuring of firms, were able to work; and

(e) the Government continued to make efforts to revitalize private industries. Various deregulation measures were taken. These would reduce barriers to market entry and revitalize the economy. The deregulation would also reduce prices and thus increase consumption and effective demand. The Government also attached importance to promoting promising industries, including those related to the protection of the environment, medical care, bio-technologies, building of urban infrastructure, solar and other alternative energies, and housing.

6. In addition, the Government developed an economic plan and introduced a number of policy packages. As detailed in the Government Report, in July 1999 the Government developed a new plan entitled “Ideal Socio-economy and Policies for Economic Rebirth”, which set forth a fundamental reform of the socio-economic system in order to respond to four major socio-economic trends: i.e. transition to a knowledge-based society, low birth-rate and aging of the population, globalization, and increasing environmental restrictions. Under the direction of the Prime Minister, in October 2000 the Government adopted "A Policy Package for New Economic Development toward the Rebirth of Japan", which was the fourth policy package since the previous TPR. The package aimed to place the economy on a self-sustained recovery path and to provide the basis for launching a society fitting for the era of diverse knowledge, focused on rapid promotion of the IT revolution, responding to environmental issues, the aging of society, and upgrading the urban infrastructure as well as measures for life-related infrastructure, disaster prevention, financial measures for small and medium-sized enterprises, and housing.

7. The economic situation began to show signs of recovery. After posting negative GDP growth in 1998, economic growth reached 1.4% in FY1999. The economic prospect of real growth in FY2000 was 1.2 %, as announced by the Government on 19 October 2000. The Government intended to continue to undertake a broad range of reform measures and hoped that such efforts would support an upward trend in Japan’s economy.

8. The trade balance indicated that Japan's exports and imports, particularly exports, decreased in 1999, and as a result, the trade surplus decreased to ¥14.02 trillion. However, in the first half of 2000, imports largely increased, reflecting a recovery of the Japanese economy as well as high oil prices, and the trade surplus declined by 5.1% compared with the first half of 1999. According to recent monthly statistics, both exports and imports increased for ten consecutive months up to August 2000. Japan’s outward foreign direct investment (FDI) amounted to ¥7,439 billion in FY1999, an increase of 42.6 % over FY1998. FDI flows into Japan almost doubled for two consecutive years to ¥2,399.3 billion in FY1999 from ¥1,340.4 billion in FY1998. The figure indicated a positive influence, by the Government’s structural adjustment measures, on Japan's investment environment.

9. The representative mentioned some improvements made so far in several areas:

(a) in parallel with deregulation, systems for exemption from the application of the Antimonopoly Act (AMA) had been reviewed step by step since 1995. A Bill to eliminate the exemption systems under the AMA was submitted to the Diet and enacted in 1999. A Bill submitted to the Diet in March 2000 and enacted on 12 May 2000 permitted private parties to seek and obtain injunction orders from the courts against parties engaged in activities that violated the unfair trade practices set forth by the AMA. This would improve the damage compensation system against AMA violations.

(b) during 1998-2000, the Government continued to implement a financial system reform plan


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formulated in June 1997, known as the Big Bang, while taking measures to restore the stability of the financial system. In 1998, two laws vital for restoring the stability of the financial system were enacted. One was the Financial Revitalization Law, which improved the financial resolution schemes for the protection of depositors and borrowers in good faith. The other was the Financial Function Early Strengthening Law, which established a new system for capital injection into financial institutions using public funds. Both laws had been effective in dealing with problems leading to under-capitalization and the failure of large banks and other deposit-taking institutions.

Monetary policy fell under the jurisdiction of the Bank of Japan, and its independence was respected. While tax reduction to stimulate demand might be conducted in the context of overall fiscal and other economic policies, as suggested in the Secretariat Report paragraph 12, due respect was needed for the basic tax principles (i.e. fairness, neutrality and simplicity) when examining tax reductions.

(c) Until July 1999, Japan's agricultural policy had been based on the 1961 Agricultural Basic Law. Some of the objectives of the Basic Law had been achieved. However, certain problems had arisen, such as a substantial decline in the food self-sufficiency ratio. At the same time, there had been an increasing recognition that the agricultural sector had its multifunctional roles such as food security and conservation of land. In order to meet the changing environment, the new Agricultural Basic Law was enacted in July 1999. The new Law established four basic principles, i.e. securing a stable food supply, fulfilling the multifunctionality of agriculture, promoting sustainable agricultural development, and developing rural areas.

Based on the new Law, policy reform had been conducted through various measures, including substantial changes of price policies for rice, wheat and other products, and the introduction of an area-based direct payment scheme for farmers in hilly and mountainous areas.

(d) A series of bills were passed by the Diet, based on the Law on Central Government Reform enacted in June 1998. In April 1999, the Plans to Expedite the Administrative Reform of the Central Government were adopted to set directions on matters including the streamlining of administrative organizations. The legislative framework was further consolidated in 2000 by enacting necessary cabinet orders and ordinances.

Furthermore, the Government was trying to promote the reform process in other areas, which would contribute to revitalizing the Japanese economy.

10. Japan was committed to the multilateral trading system, and had steadily promoted domestic liberalization since its accession to GATT in 1955. Japan's basic trade policy had been, and would be, to maintain and strengthen a free and non-discriminatory trade policy for the sustainable development of the global economy.

11. Japan had made significant contributions to strengthening the multilateral trading system. Since the establishment of the WTO, Japan had implemented fully and faithfully all the Uruguay Round Agreements. As a result, Japan's tariff level continued to be the lowest among developed countries, with an average tariff on industrial goods of 1.5%. Furthermore, Japan had been implementing the ITA and moving forward with chemical harmonization. Since its previous Review, tariff reductions had been implemented in accordance with the schedule in the areas of agriculture, forestry and fishery products. Japan had tarrified rice in accordance with the Agriculture Agreement. Before the Seattle Ministerial Conference, Japan submitted various proposals aimed at further promoting the multilateral trading system. Japan had been contributing constructively to the activities of the WTO in order to ensure the proper functioning of the system. Japan’s strong commitment to the multilateral trading system would not change in the 21st century.


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12. The priority for Japan's economic policy was the revitalization of its economy and society, not only for its own sake, but also for the development of the world in the age of globalization. To that end, Japan had been making utmost efforts to create a framework in which people, goods, services, and capital could flow more freely. While the Government placed the highest priority on maintaining and strengthening the multilateral trading system, bilateral and regional economic cooperation had the potential to bring about great success as long as it was developed in a manner that complemented and strengthened the multilateral trading system and contributed to the development of the world economy. From that point of view, Japan had developed cooperative economic relationships with major countries and regions:

(a) Japan had conducted a series of bilateral consultations and dialogue with the United States and the European Union regarding issues such as deregulation, competition policies and regulatory reform. Measures taken as a result of these consultations had been applied on an MFN basis, and were expected to facilitate trade and investment with all economic partners.

(b) Japan was also involved in regional economic cooperation in both the Asia-Pacific Economic Cooperation (APEC) and the Asia-Europe Meeting (ASEM) fora. Trade liberalization in the APEC process benefited members and non-members alike as it had been implemented on an MFN basis. The members of the ASEM had adopted the Trade Facilitation Action Plan (TFAP) and the Investment Promotion Action Plan (IPAP). The promotion of cooperative economic relationships among the APEC and ASEM members would invigorate world trade and promote the development of the world economy.

(c) Japan decided to launch negotiations from January 2001 to achieve a wide-ranging economic partnership between Japan and Singapore. The Japan-Singapore Economic Agreement for a New Age Partnership would not be a traditional free-trade agreement, but rather a new type of economic agreement that could strengthen the broad range of economic ties between the two countries. It would include new economic fields such as capital flows, the harmonization of electronic commerce regulations, cooperation on paperless trade, financial services, media and broadcasting, the movement of professionals, and the development of human resources. The future agreement between Japan and Singapore would further promote trade and investment liberalization and institutionalize regulatory and other policy reforms in both countries. It would also facilitate smooth transborder flow of management resources, create a larger market, provide greater opportunities and larger economies of scale, and contribute to the prosperity of the world economy. The partnership agreement would enhance the creativity of both nations as well as encourage technological innovation, especially in information and communication technologies. When deciding to launch the negotiations, both countries reaffirmed the primacy of the multilateral trading system and shared the view that regional trade agreements had to be consistent with WTO rules and complementary to the multilateral trading system. Both countries recognized the catalytic role that regional trade agreements should play in accelerating liberalization and rule-making in the framework of the multilateral trading system. Japan aimed to achieve an economic agreement that would serve as a model framework for other countries.

13. Japan was committed to the multilateral trading system and had played a leading role in strengthening it. All Members of the WTO had to continue to work hard toward the early launch of a broad-based round to enable the WTO to continue to contribute to global economic development and increase standards of living, through the promotion of the multilateral trading system.

14. The next round of WTO negotiations should cover a balanced and inclusive agenda to enable the WTO to properly address broad issues in the age of globalization and of new technologies, to tackle the growing gap between countries, face up to environmental constraints, and to respond positively to the various challenges in a well-balanced manner.

15. The Government was determined to enhance the multilateral trading system in collaboration with other Members. In the 21st century, Japan wished to play a pivotal role in a joint endeavour to cope with


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these challenges.

III. STATEMENT BY THE DISCUSSANT

16. The discussant (Ambassador Walter Lewalter) stated that, as the second largest economy of the world and one of the world’s biggest trading nations, Japan's economic performance was of key importance to the recovery of the Asian region and to the development of world trade as a whole.

17. Having gone through a number of difficult years, Japan's economy might have reached the path of growth again. In 1999, real GDP rose by 0.2%; there were differing opinions about the growth rate in 2000, however it was the unanimous view that the Japanese economy was growing. The Japanese Economic Planning Agency forecast a real growth of 1.5%. In its forecast of 31 October 2000, the Bank of Japan expected the growth figure to attain 1.9% to 2.3% in FY2000. Some analysts even expected a solid growth between 2.0% and 2.7% of GDP.

18. By the end of October 2000, the Economic Planning Agency had revised its GDP calculation method according to the commonly agreed UN standard of 1993. That had significant consequences; for 1997 the new calculation resulted in a change in GDP to +0.2% instead of -0.1% and for 1998 to -0.7% instead of -1.9%. The negative growth record of two consecutive years no longer seemed to represent a correct picture.

19. These figures were encouraging, but it would be premature to assume that the economic situation was fully satisfying again. Significant challenges remained, as became apparent to the public by recent breakdowns of insurance and distribution companies. The breakdowns might well have been influenced by the recent structural changes. The discussant asked the Japanese delegation to elaborate on latest projections for future economic growth, taking into consideration the aforementioned phenomena.

20. The Japanese Government sought to support economic recovery by expansionary macroeconomic policies. It recently announced another fiscal package, amounting to ¥11 trillion. On the other hand, the Bank of Japan ended its long-practiced "zero interest-rate" policy in August 2000 by introducing an interest rate of 0.25%. Although this was a very moderate rise, it was under intensive discussion in Japan because it seemed to point in the opposite direction.

21. Over the years, public expenditure had increased steadily. Government debt amounted to about 130% of GDP. As early as 1997 Japan had tried to terminate the issuance of central government deficit-financing bonds by FY2003. However, due to prevailing adversities, the Japanese Parliament first postponed the target to 2005 and then suspended the law in December 1998. For the first time in four years, however, deficit-spending bonds were not used in the supplementary budget approved by the Cabinet in the week previous to the current TPR. The discussant expressed interest in hearing from the Japanese delegation about the future Japanese policy in a time of economic stabilization and renewed growth.

22. Private consumption was still sluggish. There had been endeavours by the Japanese Government to provide incentives for more private expenditure. Thus far, results did not seem to be that positive, but this had to be seen against the background of a level of unemployment unprecedented in Japan in recent years. The unemployment rate was declining; it fell from 4.9% in March 2000 to 4.5% in August. Some analysts, however, expected a new increase, to roughly 5% in 2001, due to restructuring measures taken by companies. A further reason for limited private expenditure was uncertainties over the future of the Japanese pension system in the context of an aging society.

23. Japan accounted for a large proportion of world-wide foreign direct investment. However, there had been only a relatively small foreign direct investment inflow into Japan. According to OECD statistics, Japan ranked only 19th in this respect. A good deal of the reluctance to invest in Japan might be explained by


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insufficient recognition of the opening up of the Japanese economy in the past. Lately, however, it appeared that a number of companies had been investing. In 1998 and 1999 FDI inflow increased considerably, by 97% and 79%. Some reforms undertaken to attract FDI might have contributed considerably to the development: Japan introduced ex post notification for mining investment, the elimination of limits on foreign capital participation in certain types of telecommunication carriers, and the abolition of regulations on foreign investment and employment of non-Japanese executives in the cable television industry. The discussant asked the Japanese delegation to share its views on possible further developments in this respect.

24. The domestic Japanese market was still regulated in many areas. Small-scale companies were producing only for the internal market with a low level of productivity. Especially in the services sector, there was a lot of potential for deregulation. Recently, a study by the McKinsey Global Institute concluded that by further deregulation Japan could achieve an annual growth rate of 4%.

25. Japanese exports decreased for two years from 1998, mainly due to the economic crisis in the Asian countries. Imports had also decreased since 1998 because of the low performance of the Japanese economy and the appreciation of the yen. However, export and import figures recovered in the first half 2000. International competition would increase further once China acceded to the WTO. The answer to those challenges would not be a policy of restraint against imports, but to encourage companies to improve their competitiveness. Japan had a policy of keeping its market open. Since 1998, Japan had notified only few anti-dumping measures. It had not taken any countervailing action; nor had it introduced measures under the agreement on safeguards, although Japan had taken special safeguard measures in agriculture.

26. Deregulation policy in Japan had to be viewed from two complementary angles. One was the strengthening of internal demand, the other was providing better opportunities for foreign trade. Given the limited growth of GDP, and even negative growth in 1998, the Japanese Government had tried to provide additional impetus to economic development. It promoted a policy of deregulation and abolition of trade barriers. A revised version of the Three-year Program for Promoting Deregulation (1998–2000) was adopted in March 2000. A new three-year programme for the years to follow was planned to be set up in March 2001. The Japanese Government had discussed potential areas of further deregulation with various States. Substantial input was provided, inter alia, through consultations with the United States and the European Union. The Japanese Government should continue actively to engage in that process. Deregulation was not primarily a short-term means for improving economic growth, but mainly a strategy with medium- and long-term benefits. All WTO Members would benefit from deregulation, because Japan was strictly committed to implementation on an MFN basis.

27. The discussant was interested in hearing more details on plans for further deregulation in the services sector. Whereas Japan’s performance in the manufacturing sector had always been impressive, productivity data concerning services indicated that there was further potential. This comprised many issues such as banking, insurance, telecommunication, and transport. To give an example, telecommunications interconnection rates had been adjusted to improve competition among different carriers.

28. Efficient enforcement of competition legislation, including the Anti-Monopoly Act, was part of the deregulation policy. Although Japan stressed its commitment to an active competition policy, more could be done. The new Bill permitting private parties to seek and obtain injunction orders from the courts would perhaps further improve competition enforcement. In December 1999 and March 2000 the Japanese Fair Trade Commission issued guidelines for an appropriate trade in electricity and gas.

29. On technical norms and standardization, Japan was working towards greater international harmonization of regulations. The discussant was encouraged that Japan was trying to increase the use of bilateral agreements on mutual recognition of the equivalence of certification in order to facilitate trade.


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30. Strengthening of public procurement procedures seemed to be a useful tool for increasing competition and public welfare. Many foreign companies had not yet found a place in the government procurement sector of Japan. In 1998, the share of foreign suppliers in the total value of government procurement amounted to 5.7%.

31. Japan was an active supporter of the multilateral trading system. However, regional trade agreements seemed to be of greater interest to Japan. At the end of October 2000, the Singaporean Prime Minister visited Japan to initiate consultations on a bilateral economic partnership agreement. The Prime Ministers reaffirmed the primacy of the multilateral trading system. The partnership agreement was an attempt to attain closer cooperation, including on many issues as yet not covered by the WTO, such as investment protection and transborder flow of management resources.

32. Reforms had also been undertaken in agriculture. Japan had introduced a new Basic Law for Food, Agriculture and Rural Areas, which was a major reform since the 1960s. Some measures had already been taken, such as direct payments to farmers in hilly and mountainous regions. Wheat was now distributed through the private sector. Price policies for soybean, sugar, and dairy products were also reformed.

33. The WTO had been dealing with the challenges of electronic commerce for quite some time. At the WTO General Council meeting on 10 October 2000, all Members stressed the importance of electronic commerce for economic development. The enhancement of information technology was one of the focal areas of the new Japanese plan, “Ideal Socio-economy and Policies for Economic Rebirth”, of 1999. The Japanese Government began discussion about a whole set of measures including electronic signatures, intellectual property right law, illicit competition prevention law, and laws referring to consumer protection. Additionally, the information infrastructure would be improved. The new draft supplementary budget allocated ¥643 billion to IT-related projects. The discussant asked the Japanese delegation for further details of the measures Japan would take to promote information technology.

34. The discussant highlighted the continuous efforts of the Japanese delegation to strengthen the WTO dispute settlement system.

35. The discussant’s general impression was that Japan had a remarkable record of positive achievements in its trade policy. However, there was not as much certainty as might be anticipated regarding the self-sustaining nature of the economic recovery.

IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY

36. Members thanked the Japanese Government and the Secretariat for their Reports. They looked forward to receiving any outstanding replies to their advance written questions.

37. Many Members noted that their bilateral trade and investment ties with Japan had been strengthened over the recent period.

38. Members were encouraged by the signs of Japan's economic recovery, with official government forecasts of 1.5% growth for FY2000. They attributed this nascent recovery largely to macroeconomic policies and structural reforms Japan had implemented. Some Members noted that, while the Government's fiscal stimulus packages appeared to have helped economic growth, there was limited scope for further fiscal stimulus due to Japan's high level of government debt.

39. Members recognized that the openness of the multilateral trading system had positively contributed to the improved economic outlook for Japan, by keeping foreign markets open to its exports. They appreciated Japan' commitment to the multilateral trading system, and its contribution to the sustained growth


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of the world economy through implementing its Uruguay Round commitments. They urged Japan's strong leadership in the strengthening of the multilateral trading system, including the launch of a new round of trade negotiations.

40. Many Members noticed that Japan, historically not an active participant in bilateral and regional free-trade agreements, was exploring bilateral agreements, and hoped that such agreements would cover substantially all sectors, and be WTO consistent. They hoped that Japan would not exclude politically difficult sectors such as agriculture.

41. Members appreciated the progress made since Japan's previous Review in deregulation and structural reform, including in financial services and telecommunications, and the implementation of the Three-year Program for Promoting Deregulation. Some Members were concerned that, despite the progress in structural reform and deregulation, some signs of "reform fatigue" were appearing. Members strongly urged Japan to continue its reform process and improve access to its markets for goods and services; in this context, some Members welcomed Japan's decision to extend its programme of promoting deregulation for another three years.

42. Members appreciated that most imports (of industrial products) to Japan were either duty free or subject to low tariff rates. Nevertheless, some distortions remained, such as Japan's complex tariff and tariff quota structure, particularly in agriculture; despite the low productivity of the agricultural sector, Japan continued to provide high protection, such as the high average tariff rates, very high non-ad valorem duties on many agricultural products, and intricate tariff quota administration, as well as high tariff peaks, which, on an ad valorem equivalent basis, could range up to nearly 1,000%.

43. Many Members appreciated Japan's initiative to further open its foreign direct investment regime. However, they pointed out the low level of inward FDI into Japan, which ranked, only 19th amongst OECD members regarding inward FDI, as the Secretariat Report noted.

44. Some Members raised concern about the complexity and seeming lack of transparency of government procurement practices. Many Members were concerned about the complexity of Japan's sanitary and phytosanitary regulations, including quarantine procedures. They also hoped that Japan would further bring its standards into line with international standards.

45. Members noted that the overall level of domestic support for agriculture was higher than for other sectors and had increased since 1997; it was well above the OECD average. According to the OECD, total transfers to agriculture were higher than the sector's value added during 1990–98. Average retail prices of food in Tokyo were between 20% and 30% more expensive than other cities in the world. Many Members noted, and supported, Japan's introduction of a new Basic Law on Food, Agriculture and Rural Areas since July 1999, under which Japan was moving away from price to income support. They urged Japan to engage actively and constructively in the mandated negotiations on agriculture. Referring to the multifunctionality of agriculture, they generally recognized that non-trade concerns did arise in agriculture. Some Members urged Japan to address these concerns in a manner that would not unduly distort trade.

46. The representative of Norway stated that despite the considerable cultural and geographic differences with Japan, Norway was benefiting from a close cooperation between the two nations in a number of fields, including agriculture, anti-dumping, maritime transport.

47. The representative expressed interest in following future developments in the liberalization of the foreign direct investment regime and deregulation in telecommunications. As a whole, the representative believed that market access was considered to be fairly satisfactory by Norwegian companies who did business in Japan.


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48. As an active member of EFTA, Norway was interested in receiving more information about the regional and bilateral free-trade agreements Japan was considering.

49. Japan was the second largest market for Norwegian exports of seafood. Japan had liberalized the system of import quotas for some seafood products, which the representative regarded as positive, and hoped that Japan would consider further liberalization in this area.

50. Japan and Norway shared an interest within the WTO in increasing the level of commitments regarding international shipping. Both countries had liberal regimes reflecting the importance they attached to this sector for world trade. Nevertheless, Norwegian shipping companies had met problems of restrictive working practices in Japanese ports, which limited competition and raised the cost of doing business. According to Norwegian shipping companies, the newly adopted Harbor Transport Business Act did not appear to improve the situation.

51. Like Norway, Japan promoted the multifunctional role of agriculture. The representative noted that the new Agricultural Basic Law in Japan was based on this approach. Norway fully agreed that such concerns needed to be taken into account when designing agricultural policy.

52. The representative of Chile stated that bilateral trade between Chile and Japan amounted to about US$3 billion. Japan was the second main destination of Chilean exports and first in Asia. In contrast, the level of Japanese investments in Chile was low, representing about 4% of the stock of foreign investments.

53. Chile, like Japan, was interested in broad comprehensive trade negotiations, which should include competition policy, trade facilitation, foreign investment, and electronic trade. The two countries had also been working closely to fight against the abusive use of anti-dumping duties.

54. There had been a study between Japan and Chile to explore the possibility of free-trade agreements.

55. The representative was concerned that Japan’s agricultural policy was not oriented towards greater opening or to achieving trade in agriculture products under market rules. The sector represented only 2% of GDP and, according to the OECD, had government support distorting the market, together with tariff protection three times higher than the general average of around 16%. He hoped there would be a proposal by Japan to liberalize agriculture trade to eliminate distortions. Other areas of interest to Chile included restrictions in fisheries and forestry.

56. The representative of Hong Kong, China noted that Hong Kong was Japan's sixth largest trading partner, and Japan was Hong Kong's third largest. Two-way trade in 1999 amounted to about US$30 billion. The level of trade was on a downward trend in the late 1990s owing to the Asian financial crisis, but rebounded no less than 23.1% in the first half of 2000. The balance of trade had consistently been in Japan's favour, around US$11.6 billion in 1999. He was not unduly concerned about any particular bilateral trade deficit.

57. Japan, as the second largest economy in the world, was a major destination for Hong Kong’s exports and investment. Japan was Hong Kong’s seventh largest source of inward direct investment, and Hong Kong, China took almost 10% of Japan's total investment in the region. While Hong Kong businessmen had invested in Japan, with a total stock of about US$1 billion, the figure was not as high as one might expect, pointed to continuing difficulties in penetrating the Japanese market, both in terms of exports and investment.

58. He was pleased to see Japan's support for "broad-ranged negotiations" for a new round, but these negotiations had to be manageable to succeed. He welcomed Japan's commitment to addressing fully


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implementation issues, so that the benefits of negotiations were shared equally among developing and developed countries.

59. On regional trade agreements, the representative fully agreed with the statement in paragraph 10 of the Government Report that regional trading arrangements must be complementary to the multilateral system. He welcomed Japan's initiative to review its regulatory measures, and looked forward to further opening of services, the largest and growing sector in the Japanese economy, which would bring new momentum to its economic development.

60. The representative of New Zealand applauded Japan's ongoing commitment to assisting developing and least developed countries, as well as economies in transition, to achieve sustained development and enjoy the benefits of integration into the multilateral trading system.

61. The representative urged Japan to maintain the momentum of reform in financial services and telecommunications, and to extend the reform process to other areas that remained largely insulated from international competition and foreign participation, such as transport, legal, and education services.

62. FTAs had been a useful means of advancing domestic reform and raising the competitiveness of key industries for New Zealand.

63. The representative was pleased to note from the Secretariat Report (page xi, para. 17) that Japan was continuing to bring its standards into line with international standards, and had taken steps to ensure acceptance of foreign test data and conformity assessments. He welcomed the new Japanese Housing Quality Assurance Law and its non-discriminatory standards, which gave competitive access to the Japanese wood housing market for rapidly expanding use of structural engineered radiata pine products from New Zealand.

64. The tariff structure effectively discriminated against forestry products from some coniferous species (including New Zealand pinus radiata) while products from other coniferous species enjoyed duty-free entry to Japan. He saw no reasonable justification for this discrimination, and emphasized that the tariff could not be in place as protection for Japan's domestic industry, because significant quantities of wood from other species that competed directly with Japanese timbers were imported duty free.

65. Japans tariff quota allocation methods, which tended to be "intricate", was a major factor in the persistent quota under-fill in, for example, dairy products. He encouraged Japan to make its tariff quota administration systems, particularly for dairy products and fish and fish products, more transparent and to enable end-users to obtain the quantity and specification of imported products they required.

66. The representative was concerned about the pest categorization and enforcement system employed by the Japanese plant quarantine authorities; many pests present in Japan but not under an effective, mandatory official control programme became "quarantine pests", resulting in unreasonably high fumigation rates and consequent increased costs and reduced shelf-life for most imported fresh produce, particularly for New Zealand kiwi fruit.

67. He noted that a stable food supply could be guaranteed more effectively through a policy mix that placed open and effective markets at its core rather than through an emphasis on self-sufficiency involving heavy subsidization of domestic producers. Regarding the new Basic Law's emphasis on the multifunctional role of agriculture, he believed that Japan should introduce only measures that were decoupled, transparent, targeted, and did not distort production or trade. Government support for agriculture increased the costs faced by Japanese consumers and domestic food processors and had spillover effects on other countries, particularly developing countries, reducing the benefits of international trade liberalization for all.


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68. More needed to be done in sectors that were still heavily protected, such as agriculture, to demonstrate Japan's ongoing commitment to implementing comprehensive reforms. He encouraged Japan to continue to seek ways in which to make its economy even more competitive across the board, including through improving market access for foreign goods and services.

69. The representative of Uruguay noted that during 1997-99, Uruguay exported to Japan a total of US$74 million while it imported from Japan US$259 million, a surplus for Japan of over US$185 million over the period.

70. Uruguay's position on agriculture was opposite to Japan's. The representative fully shared Chile's statement on agriculture, and was concerned that Japan had merely listened during the preparations for the Seattle Ministerial, as well as in the Agriculture Committee. Its interventions were limited to highlighting the

11 OECD (1999a), p. 37.22 EPA (2000a). Fiscal year (FY) runs from April to March.33 For example, after peaking at 4.92% in March 2000, the unemployment rate fell to 4.56% in May 2000.44 Central and local government debt.55 Bond markets have reacted negatively to the prospect of the Central Government issuing large amounts of

bonds. Moody's, the U.S. credit rating agency, for example, cut Japan's debt rating by a notch in November 1998 and September 2000 because of a high level of public debt (in combination with low GDP growth and deflation); as a consequence, Japan's yen-denominated debt is currently rated "Aa2", two notches below the highest rating of "Aaa". In June 2000, Fitch reduced Japan's local currency rating from "AAA" to "AA+", again citing concern over the health of Japan's public finances. By contrast, Standard and Poor has maintained its top ("AAA") rating for Japan's debt, demonstrating the degree of confusion among the major international credit rating agencies concerning the Japanese economy.

66 Services other than construction, electricity, gas and water, wholesale and retail trade, financial services and insurance, real estate, and transportation and communications.

77 The official discount rate has been maintained at 0.5% since 1995. The BOJ lowered the targeted uncollateralized overnight call rate from a level just below 0.5% to around 0.25% in September 1998. The BOJ further encouraged the rate to move "as low as possible", to virtually zero, in February 1999.

88 Price deflation is probably significantly higher than that indicated by CPI, which is thought to suffer from an upward bias of 0.9 of percentage point (Shiratsuka, 1999).

99 Governor's reply to questions at a press conference on 12 April 2000. The Bank of Japan Online information. Available at: http://www.boj.or.jp/press/kisha058.htm.

1010 According to the Bank of Japan Law, the objective of the Bank is "to issue banknotes and to carry out currency and monetary control" and "to ensure smooth settlement of funds among banks and other financial institutions, thereby contributing to the maintenance of an orderly financial system." (Article 1). The Law also stipulates that currency and monetary control must pursue price stability for "the sound development of the national economy" (Article 2).

1111 As a result of these and previous fiscal packages, the Government has reportedly spent an estimated ¥100 000 billion during the past decade.

1212 The small business loan guarantees around ¥60 trillion (12% of GDP). The Ministry of Finance announced in 1999 that the Government would need to inject an estimated ¥5 trillion into state-run infrastructure and other projects as subsidies; the Japan Highway Corporation (¥3.4 trillion) and Housing Loan Corporation (¥1.2 trillion) as well as the Export-Import Bank (¥188 billion) are among the entities most in need of such assistance; these organizations are financed by the Fiscal Investment and Loan Program. In addition, there are the debts of so-called "third-sector companies", which are generally considered to be local public corporations.

1313 EPA (2000b).1414 OECD (1999a), p. 47.


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"multifunctional" elevator of agriculture and insistence that nothing could be achieved outside the framework of a new round. In Uruguay's view, the only objective behind this position was to maintain inefficient agricultural policies, which would transfer the cost of these measures to efficient agri-economic countries, in particular, to developing countries.

71. The representative was interested to hear Japan's comments on the Secretariat Report statement, that Japan's average MFN tariff was 18.2%, against an overall average of 6.5%, and as a result, 16% of duties applicable to agricultural products were non-ad valorem. He also requested Japan's comments on paragraphs 2 and 35 of the Secretariat Report, which stated that 90 of the top 100 tariffs entailed non-ad valorem duties, whose AVEs ranged from 40 to 983%. He was interested in hearing further from Japan regarding a Japanese press article stating that the Japanese Government might be considering reducing its commitments under the Uruguay Round regarding rice, in order to strengthen the protection of local rice producers.

72. The representative of Malaysia stated that Japan was Malaysia's second largest trading partner in 1999, accounting for 15.6% of its total trade. Japan was Malaysia's third largest export destination as well as its largest source of imports. Malaysia's trade with Japan comprised mainly manufactured goods, particularly electrical and electronic products, as well as natural resource products.

1515 OECD (1999a), pp. 54-55.1616 OECD (1999a), p. 55.1717 These changes include: a move towards fiscal consolidation over a three-year period beginning in

FY1999; and a shift from book-value to market-based accounts in 2001 in accordance with International Accounting Standards.

1818 According the Teikoku Data Bank, about 17,500 firms faced bankruptcy involving debts of ¥10 million or more in 1998; the total debts of these firms amounted to ¥15.2 trillion.

1919 OECD (1999a), p. 202.2020 The Prime Minister decided on 23 October 1998 to place the Long-Term Credit Bank of Japan, Ltd.

(LTCB) under special public management, or temporary nationalization, based on the report submitted by the LTCB to the Prime Minister according to the Law concerning Emergency Measures for the Revitalization of the Functions of the Financial System (Financial Services Agency online information. Available at: http://www.fsa.go.jp/danwa/danwae/ dan-e-1023.html).

2121 OECD (1999c). Surveys of price differences by MITI and the EPA show that Tokyo citizens paid 8% to 30% more (for purchases) than citizens of other major international cities in 1997. In addition, Japanese industries pay almost twice as much for non-manufacturing intermediate inputs compared with their competitors, and three or four times as much as those in emerging Asian countries. According to the EPA, deregulation contributed to a substantial increase in domestic demand between FY1990 and FY1997 (OECD, 1999a, p. 208).

2222 Deregulation measures affecting distribution, financial services, and telecommunications are thought to have increased GDP by 1.7% (OECD, 1999a, p. 249).

2323 Between 1995 and 1997, labour productivity in manufacturing increased by 7.1%, while that in agriculture increased by 3.0% (MAFF, 1999).

2424 The remaining 22 exemptions (Table III.14) include: cartels concerning air and maritime transport; cartels to prevent excessive competition in dry-cleaners, barbers, public bath houses, etc. cartels on exports by exporters and trade associations; rationalization cartels by liquor businesses; and cartels on fees for secondary use of commercial phonograms.

2525 Takayama et al. (1998).2626 The Ministry of Health and Welfare [Online]. Available at: http://www.mhw.go.jp/

topics/nenkin/zaisei_20/00/ 0004.html.2727 OECD (1999d).


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73. Japan was also a major source of FDI for Malaysia; from 1995 to June 2000, Japan was the second largest investor in Malaysia. The well-being of the Japanese economy was an issue of importance to Malaysia given these strong trade and investment links. The representative appreciated the efforts of the Japanese Government in implementing accommodative macroeconomic polices and an expansionary fiscal policy to stimulate growth in the economy, as strong growth in the Japanese economy could only augur well for Malaysia and the other Asian economies engaged in difficult recovery efforts.

74. Considering the projection of 1% growth in FY2000 to be still low, he urged the Japanese Government to intensify its efforts to further enhance growth, which was crucial in assisting Asian economies in their economic recovery and to prevent any repeat of the Asian crisis. In this context he urged Japan to redouble its efforts for appropriate economic and fiscal management measures to facilitate a speedier economic recovery. He welcomed Japan's new Plan for the Rebirth of Japan.

2828 These anomalies include: insufficient seasonal adjustment - no adjustment was made in the first quarter of 2000 for the additional day (29 February), for example; and capital investment figures do not fully include fast growing computer software. GDP figures have sometimes been revised to reflect differences in the estimation method between quarterly and annual figures.

291 The original Plan was adopted in April 1998 and first revised in April 1999.302 The disputes included are those where action began between 1 January 1998 and 1 May 2000.313 Article 98 of the Constitution.324 OECD (1999a), p. 121.335 The document, which is a report by the Economic Council to the Prime Minister, may be regarded as a new

Economic Plan, a term no longer officially used by the authorities.346 See GATT (1995), Vol. 1, p. 19 and WTO (1998), p. 24. 357 See, for example, statements made on 7 December 1999 by the Minister of International Trade and Industry

[Online]. Available at: http://www.miti.go.jp/topic-j/e500001j.html.368 WTO documents S/C/W/116 and 117, 16 and 26 July 1999.379 For details of each, see WTO documents WT/DS/139, 162, 184, and 147, respectively.3810 Based on the 1998 trade data.3911 The members, besides Japan, are: Australia; Brunei Darussalam; Canada; Chile; China; Chinese

Taipei; Hong Kong, China; Indonesia; Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru, the Philippines; Russia; Singapore; Thailand; the United States; and Viet Nam.

4012 The nine sectors are: chemicals; energy; environmental goods and services; fish and fish products; forest products; gems and jewellery; medical equipment; toys; and conclusion of a mutual recognition agreement on telecommunications.

4113 Ministry of Foreign Affairs, "On-the-Record Briefing 13 November 1998" [Online]. Available at http://www.mofa.go.jp/policy/economy/apec/1998/brief13.html.

4214 See the Joint Press Statement from the First Meeting of the ASEAN Economics Ministers and the Ministers of the People's Republic of China, Japan, and the Republic of Korea, 2 May 2000, Yangon, Myanmar (ASEAN Secretariat [Online]. Available at: http://www.asean.or.id/asecjk01.htm.)

4315 These items include crude petroleum, certain textiles, plywood, and certain furskins and footwear.

4416 The special treatment for the LDCs began on 1 April, 1980.4517 MOF (1998), October, p. 6.4618 When the product imported from the country or territory exceeded 25% of Japan's global imports of the

product, and the imported value exceeded ¥1 billion, in the previous year.Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

75. One of the measures that Japan should take was to increase its off-take of goods and services from the affected Asian economies. In this context, Malaysia requested improved access for goods and services into Japan's market, and an indication of the measures it intended to take to ensure continued strong domestic market access. While recognizing that Japan's average applied MFN rate was low, at 6.7% in 1999, it represented an increase over the average applied rate of 5.4% in 1998. He hoped the increase in tariffs was not in sectors of export interest to Malaysia and other developing countries.

76. The representative urged Japan to review its policy of tariff discrimination against processed products, particularly goods of export interest to developing countries, such as textiles, rubber, and wood products. Malaysian products, such as processed timber products, attracted higher duties of 10-15% compared with duty-free access for timber and logs, while duty on cocoa-based products ranged from 7.5% to 31.5%, compared with duty-free entry for cocoa beans.

4719 Japan also made requests to the European Commission, and to each Member State, in such areas as telecommunications, legal services, environment and construction.

481 The fiscal year (FY) runs from April to March.492 MCA (1999), p. 120.503 Currently, Japan’s customs procedures require the import declarations for cargo release and for customs

duty payment to be filed simultaneously.514 In the period 1997-99, complaints to the Director-General of Customs totalled 60 cases, appeals to the

Minister of Finance 14 cases, and judicial proceedings three cases (data from the Ministry of Finance).525 For example, in the Customs-related Laws and Regulations, Director-General’s Directives, and APEC

Compendium on Rules of Origin.536 The total number of tariff lines excluding the in-quota rates of tariff quotas is 8,851.547 These are defined in the Customs Law, the Customs Tariff Law, the Temporary Tariff Measures Law and

the Schedule of Tariff Concession.558 Although temporary rates are, in principle, subject to annual review, most are rolled over from one year to

the next. Under a tariff line, there may be multiple temporary rates (e.g. applied temporary rates may differ between April-December and January-March) for a particular fiscal year; the Secretariat used the lowest rate in each line for the calculation of tariff averages for each fiscal year.

569 The ITA was fully implemented in 2000, while the Uruguay Round tariff cuts are to be fully implemented in 2009.

5710 WTO (1998), p. 41.5811 In FY2000, some 95% of Japan's applied tariffs are identical to the bound rates. 5912 A compound duty involves a combination of both ad valorem and specific rates. 6013 An alternate duty involves either an ad valorem or specific rate; usually the higher of the two is applied.6114 A differential duty involves a specific rate charged per kg. of imports with the rate varying directly with

the difference between the standard import price, set by the authorities, and the actual import price. It would appear that differential duties are designed to protect domestic producers from surges in low-priced imports.

6215 Sliding duties are apparently intended to protect domestic consumers of the product concerned from a surge in import prices. They involve a specific tariff rate for imports whose value is no more than a certain threshold; the rate declines as the value exceeds the threshold and becomes zero at certain point. For example, the applied rate on refined lead is ¥2.70/kg. when the value for customs duty does not exceed ¥172/kg., (¥180 – the value for customs duty)/kg. when the value is more than ¥172/kg. but less than ¥180/kg., and zero when the value exceeds ¥180/kg.

6316 The lack of estimates for the remaining one third of specific duties is seemingly due in some instances to the absence of imports, which may suggest that the specific rates in question may be prohibitive. The most recent estimates of AVEs available were for 1999.


Trade Policy Review

77. Japan still maintained a large number of specific duties in several sectors, such as textiles, processed food, and vegetable products. Malaysia would welcome any move by Japan to convert these rates to ad valorem, as these products were of export interest to developing countries.

78. Only four tropical fruit items, namely green bananas, durians, coconuts, and pineapples were allowed entry into Japan as fresh agricultural products for which fumigation was not required. New varieties had to undergo extensive and costly testing. Export of cut-flowers into the Japanese market also faced stringent quarantine requirements while airport facilities were inadequate to cope with the imports. In addition, expensive costs involved in application of health certificates, testing fees and other related costs were not conducive for trade.

79. The representative of the United States stated that as the second-largest economy in the world, Japan's sustained economic recovery was good not only for Japan, but also for the strength of the world economy.

80. Japan's global current account surplus represented nearly 2.5% of GDP, considerably above the levels of most industrialized countries. Its trade surplus with the United States topped at US$73 billion in 1999, an all-time record. Annualized expected figures for 2000 showed a further rise to over US$80 billion. The surplus Japan enjoyed with its Asian neighbours was showing a similar trend, registering a rise of over 30% during the first half of 2000. Meanwhile, Japan continued to maintain significant barriers to imports. Japan had to open its markets to foreign goods and services and end its reliance on exports to boost domestic growth.

81. Japan's recovery was slow and subject to considerable downside risk. The representative strongly supported the Secretariat's statement that a sustained economic recovery could be achieved only through more aggressive structural reform that enhanced competition. Thus, the United States had made deregulation and structural reform the primary focus of its bilateral trade agenda since 1997.

82. The United States had read the Secretariat Report with great interest; one theme that emerged was

6417 Japan's import prices fell by 5.4% in 1998, and, according to estimates by the OECD (1999b), dropped by a further 12.6% in 1999; commodity price falls were even larger in 1998. These decreases in import prices during the period under review were subsequent to a 20.9% increase during the period 1995-97, when the Yen depreciated against the U.S. dollar, from ¥96.3 to ¥122.6.

6518 Some such instances have been found recently in the case of the United States, for example. (WTO, 1999).6619 Tariffication refers to a conversion of all import restrictions to tariff measures.6720 WTO Secretariat calculation, based on data provided by the Japanese authorities. The averages include

FY1999 AVEs of non-ad valorem duties, insofar as they are available, and ad valorem components of compound and alternate duties, where AVEs are not available; it excludes in-quota rates of tariff quotas, and an average of a seasonal ad valorem duty (i.e. different rates applicable during "high" and "low" seasons) is included as a single line.

6821 MOF (1999).6922 MOF (1999).7023 WTO document WT/DS8/2, 12 January 1998.7124 Article 21 of the Customs and Tariff Law.7225 Japan notified its import licensing procedures, as well as the products concerned, in WTO documents

G/LIC/N/3/JPN/1 and Corr.1, 20 November 1996 and 9 April 1998.7326 The measure was introduced in May 1999; prior confirmation, instead, became a requirement.


Trade Policy Review

the continued opaque and barrier-ridden nature of the Japanese economy, which had hindered recovery, and raised questions about Japan's commitment to WTO rules. The Report also noted that, while the Japanese Government had taken some steps to promote deregulation in the telecommunications sector, Japan's rate for telephone and internet services were still well above developed-country standards. Japan's willingness to protect the largest carrier, rather than promote competition in this sector was hampering growth in information technology for Japan and for the rest of the world. The United States continued to urge Japan to establish a strong independent regulator, whose mandate was to spur competition in the market.

83. In various sectors, such as telecommunications, energy, and flat glass, foreign suppliers were faced with many examples of barriers to the Japanese market caused by the lack of effective enforcement of competition laws. She called for more criminal prosecution, higher penalties for violations, and increased resources at the Japan Fair Trade Commission (JFTC), as mentioned in the Secretariat Report, and urged the JFTC to become more proactive in encouraging the establishment and maintenance of competitive market structure in addition to the enforcement of the Anti-Monopoly Act.

84. Under the reorganization of the Japanese Government, scheduled for January 2001, the JFTC would be folded under the new Ministry of General Affairs, linking its operations with the current Ministry of Posts and Telecommunications and the Management and Coordination Agency. She strongly urged the Japanese Government to take formal steps to safeguard the JFTC's independence and bolster its role in the Japanese economy following this administrative reform.

85. The WTO Agreement on Agriculture helped establish the necessary conditions for long-term agricultural reform, but it was important to accelerate the process of reducing trade distortions. The WTO negotiations on agriculture offered an opportunity to lower tariffs and bind them, and substantially reduce trade-distorting domestic supports in the process. The representative urged the Japanese Government to support proposals in the agricultural talks to reduce substantially or eliminate disparities in tariff levels among countries and reduce substantially the disproportionate levels of support used by Members.

86. The persistently low levels of FDI revealed the complex web of structural and regulatory obstacles that presented large barriers to foreign firms wishing to gain access to Japan's economy. Lack of rules on investment was not the problem. Though the FDI into Japan rose significantly in FY1999, by 79%, Japan's stock of inward FDI relative to the size of its overall economy appeared small in comparison to that of other industrialized nations.

87. Opaque government procurement practices continued to impede access to the Japanese market and raised questions about Japan's commitment to the Government Procurement Agreement. Since Japan's previous Review, the number of reports involving questionable government procurement deals had increased. The U.S. suppliers continued to face barriers, including a lack of transparency, questionable standards and technical specifications in favour of domestic firms, and excessive use of single tendering. Public works procurement was of particular concern. From July 1998 to July 1999, foreign design and construction firms won only US$50 million of Japan's US$250 billion public works market. A more competitive tendering system might have reduced the costs of these projects.

88. Japanese suppliers of services were considerably protected from foreign competition through internal regulations, state-ownership, and the Government's tolerance of anti-competitive private practices. The various barriers that inhibited foreign penetration into the sector carried a heavy cost, particularly given the increasing importance of the sector as a contributor to output and employment in the Japanese and the world economy.

7427 In addition, about 18% of FY1999 quotas on fish and shellfish was allocated solely to imports from the Republic of Korea.


Trade Policy Review

89. Japan's inefficient distribution system drove up the prices for consumer goods, and could be a factor leading Japanese businesses to relocate abroad. She urged the Japanese Government to support proposals in the WTO services talks to reduce current restrictions, and to support proposals to improve regulatory practices across industries to ensure that domestic regulations did not undermine efforts to increase market access.

90. She welcomed the measures undertaken to increase the transparency of Japan's regulatory regime.

91. According to a study by Japan's Economic Planning Agency in 2000, deregulation steps implemented since 1989 had resulted in savings of roughly US$82 billion in real terms for Japanese consumers. The study also found that in 1998 alone, an average Japanese family of four saved approximately US$450 in domestic telecommunication and electricity charges as a result of regulatory reform measures. She urged Japan to

7528 The quota amount for silk products from China is decided in bilateral negotiations annually held with China; an understanding was reached on the following import levels for 1999: silk yarn, etc. 16,755 bales; and silk fabrics, 7,365 thousand square meters. Quotas on CFC and HCFC are decided in the light of the Montreal Protocol.

7629 The information is published in the Government (Official Gazette), MITI Official Bulletin, and the JETRO International Trade Bulletin.

7730 An applicant must generally be: an importer who in the past has obtained certificates of import quota and actually imported the item; an importer who is delegated by a government-approved industrial association to obtain materials for food processing; or an importer who plans to import items subject to the import quota (JETRO International Trade Bulletin, various issues.)

7831 There are no hard and fast rules in this regard; the situation varies between commodities. When determining allocations, continued under-usage of past import entitlements by an importer may result in a reduction in quota allocations.

7932 For example, animals and plants covered by CITES require an export permit issued by a management authority of the exporting country.

8033 Import surveillance is also operated through the customs confirmation system, which requires lodging of specified documents with customs authorities, such as visa documents for silk fabrics covered by the bilateral agreement with the Republic of Korea.

8134 WTO documents G/TMB/N/82, 28 April 199, G/TMB/N/82/Add.1, 15 February 1996, and G/TMB/N/175, 13 June 1996. Products with origin markings found to be fraudulent under the confirmation procedures are not permitted to enter into Japan.

8235 A letter concerning the dealing of catch pursuant to the ICCAT (International Commission for the Conservation of Atlantic Tunas) resolution, which called for "further action against illegal, unreported and unregulated fishing activities by large-scale long-line vessels", was issued on 15 December 1999.

8336 WTO document G/ADP/N/41/JPN, 15 September 1998.8437 WTO documents G/ADP/N/22/JPN and 53/JPN, 19 February 1997 and 15 September 1999.8538 See, for example, statements by the Minister of International Trade and Industry, 7 December 1999,

[Online]. Available at: http://www.miti.go.jp/topic-j/e500001j.html; and Industrial Structure Council (2000).8639 Twelve cities with populations over 500,000 designated by a relevant Cabinet Order.8740 Exceptions to GPA coverage include the National Space Development Agency and, at the central

government level, contracts awarded to cooperatives or associations.8841 For details, see WTO document GPA/W/91, 6 September 1999. Other changes in Japan's GPA coverage

since the previous Review can be found in WTO documents GPA/W/74, 78, 79, 88, 93, 94, and 98. The Japanese authorities indicated that these changes are of "a purely formal nature" or "a purely formal or minor nature", mainly due to the restructuring of government ministries, or the consolidation of government-related entities.

8942 Since the previous Trade Policy Review, there have been no changes in the contents of these programmes.Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

renew its commitment to reform to show that the Government was resolved to getting the Japanese economy back on track.

92. The United States was heartened by recent news that Prime Minister Mori's administration was placing a priority on fostering an "IT revolution" in Japan within five years. She agreed with the statement in the Government Report that IT would be one of the most potent forces in shaping the 21st Century. There was no better way for Japan to demonstrate its determination to become a major IT player than by working constructively, bilaterally and multilaterally, including through our WTO e-commerce work.

93. Another new action that would have far-reaching implications for foreign firms operating in Japan was the Japanese Government's announcement of a major initiative to reform its Commercial Code, the first such revision in over half a century. She believed the revisions should help Japan further integrate into the international economy and looked forward to providing input into this process. The comprehensive review would strengthen Japanese firms and improve the business environment for foreign firms.

94. As a very strong participant in a number of FTAs, the United States fully recognized the value of the free-trade agreements Japan was considering. The United States would be closely monitoring Japan's participation in these arrangements, particularly in light of the sensitivities of one particular sector in Japan.

9043 Bidding for individual projects is open to firms that have previously completed registration procedures with the specific entity concerned. According to the authorities, no foreign suppliers have ever been denied listing. In 1997, 2,016 foreign suppliers – only 0.6% of the total number – were listed (Prime Minister's Office, 1999, p. 29).

9144 Since its previous Review, the framework of Japan’s voluntary measures based on Japan – U.S. bilateral dialogues have remained unchanged. Progress since 1998 in the Japan – U.S. dialogue on government procurement (construction, architecture and engineering, medical technology, satellites, supercomputers, telecommunications), is detailed in the Prime Minister's Office online information. Available at: http://www.sorifu.go.jp/english/whitepaper/procurement/99/index.html.

9245 Japan's thresholds for GPA coverage have remained unchanged since its previous Trade Policy Review. Japan has notified its thresholds expressed in national currency for 2000-02 (WTO document GPA/W/101/Add.2, 2 March 2000).

9346 The measure was introduced in view of the Second Joint Status Report on the U.S. – Japan Enhanced Initiative on Deregulation and Competition Policy, 3 May 1999.

9447 The shares of selective tendering and single tendering were 4.2% and 19.7%, respectively, in 1995.9548 Domestic and foreign suppliers are required to apply for qualification to each procuring entity and be

included in the list of qualified suppliers, in order to participate in open or selective tendering procedures. In 1998, the share of foreign suppliers in the total number of qualified suppliers was 0.6%.

9649 The secretariats for the Office for Government Procurement Challenge System and for the Government Procurement Review Board are both in the Office for Market Access Improvement, Coordination Bureau, the Economic Planning Agency.

9750 WTO document GPA/W/90, 11 August 1999. Before revision, the Review Board did not accept complaints when the procuring entity insisted that the procurement at issue fell under an exception to the coverage of the GPA.

9851 The domestic manufacture of tobacco is monopolized by the Japan Tobacco Inc. (JTI), and the importation of leaf tobacco for tobacco manufacturing in Japan, though liberalized on 1 April 1985, effectively depends upon purchases by the JTI.

9952 WTO document G/STR/N/4/JPN, 24 March 1999.10053 MITI holds a monopoly for the production, sale and import of alcohol of an alcoholic strength by volume

of 90% or higher (WTO document G/STR/N/4/JPN, 24 March 1999).Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

Trade Policy Review

95. The representative of Australia stated that Japan had been Australia's largest export market for many years. In the past year, around 20% of Australia's total merchandise exports went to Japan. Despite a sluggish Japanese economy in recent years, bilateral trade had continued to grow at a modest pace.

96. Japan's growth prospects appeared to be critically dependent on further structural reform aimed at creating more open and transparent markets. Japan's largely unregulated and unprotected manufacturing industries remained highly competitive by world standards and, on the whole, continued to deliver profitable results at a time of relative weakness in the Japanese economy.

97. Australia welcomed the Japanese Prime Minister's initiative to make Japan a world leader in information technology and communications within five years. Comprehensively implemented, this initiative could be a catalyst for essential reforms in a range of sectors of the Japanese economy, increase efficiency and productivity, and improve Japan's international competitiveness. As an essential part of these reforms, he urged Japan to address concerns raised by Members in relation to the telecommunications sector.

98. While Japan's trade policy regime was among the most open in overall terms, its agriculture sector was among the most highly protected and supported. Australia sought fair, open, and equitable access to markets for all commodities, substantial reductions in trade-distorting domestic support, and the elimination of export subsidies. This was no more than what Japan sought from other countries for its exports of manufactured goods and services.

99. Australia encouraged the Japanese Government and agricultural lobby groups to look for new solutions to old problems, and to consider new possibilities and alternatives. To the extent that Japan had legitimate non-trade concerns in agriculture, it needed to work with others in the negotiations to find non-production and non-trade distorting means by which to pursue these objectives. While recognizing Japan's various policy objectives, the representative regarded the use of protectionist policy instruments that shifted

10154 The amendment also introduced a grading system by private companies as well as a self-grading system by manufacturers or production process managers.

10255 Other changes in JAS since the previous Trade Policy Review of Japan include the 1999 revision in JAS for dried fish and powdered dried fish, kezuribushi (shaved dried fish), structural plywood, ordinary plywood, concrete from plywood, and structural laminated veneer lumber; the establishment of standards for raw silk (1998) and for jidoriniku (native fowl) (1999); and the elimination of standards for candied cherry and vegetable protein foodstuffs (corned beef style) in 1999.

10356 Since 1987, 14 FTOs have been designated in seven countries.10457 Based on the most recent data available, as provided by the authorities.10558 The JISC, a deliberation committee established under the Agency of Industrial Science and Technology

attached to MITI, has been the ISO member since 1952. The JISC discusses and makes recommendations regarding the establishment and maintenance of JIS, the administration of accreditation and certification, participation in international standardization activities, and the development of measurement standards and technical infrastructure for standardization, as stipulated by the 1949 Industrial Standardization Law, as amended in 1997.

10659 See WTO document series WT/DS76.10760 For example, the Animal Quarantine Service at Sendai International Airport has extended its opening

hours until 21:00 (from 19:30).10861 Before the amendment took effect, 64 food and beverage items required labelling and nine perishable food

items required place of origin labelling.10962 Livestock products are excluded from this system.11063 The MITI acts as secretariat to the Import Board.11164 Measures include import fairs and market research.


Trade Policy Review

the cost of these policies on to other countries both as inequitable and ultimately unsustainable.

100. The representative encouraged Japan to engage fully in the ongoing services negotiations. Removal of unnecessary and remaining barriers, particularly in legal and financial services, would foster greater dynamism in these services and bolster economic growth within Japan.

101. Australia acknowledged the potential role of the free-trade agreements Japan was considering in supporting multilateral trade liberalization, but had concerns about the potential for distortion of trade and investment flows to the detriment of other countries. He urged Japan to ensure that third parties were not disadvantaged as a result of the formation of any agreement.

102. Australia believed that commitment to a new round of multilateral trade negotiations should be made at the earliest opportunity. This message was reinforced by APEC Ministers meeting in Brunei. In particular, the representative urged Japan to join other Members in their efforts to accelerate work on industrial tariffs in preparation for launching a new round as soon as possible. For a major industrial power like Japan not to be actively engaged in this work raised questions about Japan's commitment to a new round and weakened an area of work that should be part of the WTO's core business.

103. The representative of the European Union stated that the political links between the EU and Japan remained extremely important for the EU and were set to evolve even further. Crucially, EU and Japan were united in the drive for a new round of comprehensive trade negotiations.

104. To reflect the increasing depth and breadth of the overall political relations between the two economies, at the 9th EU-Japan Summit held in Tokyo in July 2000, the EU and Japan decided to take forward their cooperation significantly. The EU and Japan were revising the 1991 Political Declaration and developing an Action Plan for reinforced cooperation over the next ten years.

105. The EU and Japan together accounted for around two-fifths of the combined world economy. Bilateral trading relations were just under _100 billion a year. With growth in the U.S. expected to slow down in the short term, prospects for the world economy and for world trade would depend crucially on whether the EU and Japan could together maintain a stable expansion in economic activity. The EU and Japan also represented an important destination for each other's investments with the EU providing an estimated 59% of total FDI in Japan in 1999.

106. Despite the sharp rise of EU investment flows into Japan in 1999, the continuation of this trend was not assured. The EU was concerned about the possibility of a widening investment gap between the EU and Japan. High costs and over-regulation continued to be major disincentives for European firms wanting to invest in Japan, depriving EU firms of business opportunities and Japanese consumers and economic operators of access to competitive European goods and services. In this context, overall foreign investment in Japan tended to be greatest in sectors that had benefited, or were in the process of benefiting, from significant deregulation. Financial services, which had seen a considerable inflow of foreign capital in the light of the "Big Bang", was an instructive example. The successful pursuit of deregulation was the key element in Japan's efforts to improve its environment for foreign investment. The measures the EU proposed would benefit domestic operators as well. Japan's business startup ratio, at 4.6%, was the lowest amongst leading industrialized countries (compared for instance with 13% in the UK and 11% in Germany).

107. Attempts to increase the level of competition in the Japanese economy constituted a major element in the regulatory reform process. Progress had been made in a number of areas but additional efforts would be needed to make enforcement more proactive and sanctions more deterrent. Within the framework of international cooperation agreements between the JFTC and the competition authorities in the EU, as well as in the U.S., the EU hoped that the JFTC would use the full potential of the legal powers at its disposal and


Trade Policy Review

that the Government of Japan would ensure more vigorous and proactive implementation of competition policy.

108. The telecommunications sector was another example where the determined pursuit of reform would provide benefits for domestic and foreign operators. The forthcoming reductions in interconnection rates were welcome, but they constituted only a first step. Measures to allow the free play of competitive forces in the telecommunications sector were now necessary, which meant redrawing the designated carrier regulation to reflect effectively the market dominance of the NTT Group and NTT DoCoMo. As recommended in the GATS/WTO Agreement, the establishment of an independent and impartial telecommunications regulator would be essential.

109. Partnerships between Japanese and foreign lawyers and employment of Japanese lawyers by foreign lawyers were prohibited. In practice, this prevented the creation in Japan of integrated international law firms able to provide the advice clients required on deals with multi-jurisdictional aspects, such as initial public offerings and mergers and acquisitions. It also had negative effects on investment in Japan and on the economy as a whole. Abolishing restrictions on partnership and employment between Japanese lawyers and foreign lawyers licensed in Japan would be a recommendable step.

110. Japan maintained limited volumes of tariff quotas for leather, and the complexity of the management of the quota system created a wall of protection, effectively restricted market access, and shielded the domestic leather industry from more competitive imports from the EU. The EU urged Japan to proceed to a meaningful change of the existing quota system and to commit itself to eliminating progressively these import restrictions.

111. As key actors in international trade, the EU and Japan reached the same conclusions on how to harness globalization for the benefit of both developing and developed countries. These included trade liberalization, adapting WTO rules to current economic realities, the full integration of developing countries in the global economy, and addressing the expectations of civil society around the globe.

112. The representative of the Republic of Korea stated that two-way trade between Korea and Japan amounted to US$40 billion in 1999 and would increase in 2000. He hoped that bilateral trade would keep expanding and that both countries would continue to explore ways to deepen their mid- and long-term economic cooperation.

113. The Republic of Korea had a trade deficit with Japan since the 1960s. To redress this situation, the representative hoped that the Japanese Government would improve market access for Korean products through the reduction of tariffs and non-tariff measures on items of Korean interest.

114. The Republic of Korea joined Japan in its support of an early launch of a round of multilateral trade negotiations that would have a sufficiently broad-based agenda and allowed various Members' interests to be reflected. Korea agreed with Japan that disciplines on anti-dumping rules and multilateral rules on investment and electronic commerce should be included in the new round.

115. The Republic of Korea shared Japan's philosophy underpinning its agricultural policies, which emphasized four basic principles, namely, a stable food supply, agriculture's multifunctional role, sustainable agricultural development, and the development of rural areas. It supported Japan's guidelines for food self-sufficiency ratio indicated in its Basic Plan; each country should be allowed to pursue its optimal combination of domestic production and trade for food security purposes. Korea also shared Japan's view

11265 MITI (2000a).11366 Products listed in SITC, Sections 5 to 8.


Trade Policy Review

that agriculture had unique characteristics and roles in each society and that international trade disciplines should be flexible enough to allow the coexistence of various types of agriculture.

116. Japan's low average applied MFN tariff rate was a sign of its sustained efforts to lower overall tariff rates. However, Japan still maintained high tariff rates for some products of particular interest to Korea. The representative was interested to know whether Japan had any plans to lower the tariff rates for these products. He asked why the percentage of foreign suppliers in Japan's government procurement remained as low as 5.6% in 1997 (Secretariat Report, p. 51). He also wished to know more about the measures taken by Japan to encourage foreign participation in Japan's government procurement.

117. Japan would implement a recycling system for home electronic appliances in May 2001, under which foreign manufacturers bore higher costs than domestic producers, given that they had to entrust their

11467 Based on MITI's 32nd Survey of Trends in Business Activities of Foreign Affiliates (the latest available data).

11568 According to MITI (2000b), p. 38, the ratios of the stock of inward FDI to GDP in 1996, based on IMF data, were 16.0% in the United States, 3.8% in Germany, and 21.6% in the United Kingdom.

11669 The Law was previously named Foreign Exchange and Foreign Trade Control Law. Among the most important orders are the Foreign Exchange Order (Cabinet Order No. 260 of 11 October 1980, as amended) and the Order on Inward Foreign Direct Investment (Cabinet Order No. 261 of 11 October 1980, as amended).

11770 Detailed regulations regarding inward FDI are stipulated mainly in Articles 27 and 55-5 of the Foreign Exchange and Foreign Trade Law.

11871 Investment trust management by locally established corporations in Japan does not appear to require prior notification.

11972 These include aircraft, arms, explosives, nuclear power, space, electric utilities, gas utilities, water, heat generation, rail transport, passenger transport, vaccine, security guard services, Type-I telecommunications, radio, television and cable television, and broadcasting sectors.

12073 Fishing activities in the Exclusive Economic Zones and the continental shelf of Japan by foreign nationals or foreign-controlled enterprises are also regulated under the 1996 Law concerning the Exercise of Sovereign Rights concerning Fisheries in Exclusive Economic Zones. Various international agreements on fisheries confer rights on fisheries, including licensing of fishermen, fishing vessels, and equipment.

12174 For a bank wholly or partly owned by a foreign bank, the Banking Law stipulates that Japanese banks in the foreign bank's home country should receive treatment substantially equal to domestic banks. According to the authorities, given Japan's WTO commitments, the reciprocity provisions do not apply to WTO Members. See Chapter IV(5)(ii) for FDI restrictions in other financial services sectors, such as insurance and securities.

12275 Under the Ship Law, only national flag vessels may engage in cabotage; permission may exceptionally be granted by the Minister of Transport. Bilateral treaties may allow reciprocal cabotage (Chapter IV(5)(iv)).

12376 One third of voting rights or of board members is the threshold under the Civil Aeronautics Law and the Freight Forwarding Business Law.

12477 For example, FDI notified by a national of a country that does not extend comparable access to Japanese investors may be rejected (Article 27-3 of the Foreign Exchange and Foreign Trade Law).

12578 As a result of the amendment of the Foreign Exchange and Trade Law in 1998.12679 As a result of the abolition of the Kokusai Denshin Denwa (KDD) Law in April 1998 and 1998

amendments to the Telecommunications Business Law and the Radio Law.12780 Including an extension of the carry-forward period of losses, offered to foreign companies certified by the

law (Designated Inward Investors), from the usual five years to seven years.12881 Parties desiring eligibility for preferential treatment must be certified as a Designated Inward Investor,

with certification valid for up to one year. To be certified, an applicant must be a Japanese branch or office of a foreign enterprise or a Japanese corporation whose foreign capital ratio exceeds one third of the total capital; and have operated


Trade Policy Review

recycling responsibilities to local recycling businesses, which imposed higher fees on foreign manufactured goods. The representative asked Japan to address this difficulty faced by foreign manufactures.

118. The representative of Argentina noted that certain problems would persist, such as a high unemployment rate as well as high fiscal deficit and government debt, if there was not more aggressive structural reform that enhanced competition.

119. Tariff levels on agriculture were underestimated due to the lack of ad valorem equivalents in the case of certain duties; ad valorem equivalents for some products could not be calculated because there was no importation, which would suggest that the rates might be prohibitive.

120. The high cost of agricultural inputs contributed to food processing industries' moving abroad.

less than eight years in Japan. The standard processing time is one month or less.12982 The sectors remain unchanged since the previous Trade Policy Review (WTO, 1998, p. 205).13083 The Japan Development Bank and the North East Finance of Japan merged on 1 October 1999 to become

the Development Bank of Japan.13184 The report argues that FDI in Japan would: create new management and technological systems as well as

new employment opportunities; increase benefits to consumers; and establish multi-faceted international economic relations. According to the report, Japan always had a great potential for inward investment, as it is a large and affluent market with high educational standards, diligent workforce, sophisticated infrastructure, stable political and economic environment, and geographical proximity to Asian markets. A gradual manifestation of the stated potential, together with the lowered investment costs such as land and stock prices as well as interest rates, large-scale reorganization initiatives in various sectors, the progress in deregulation and investment promotion measures, is believed to lie behind the recent increase in inward FDIs.

13285 WTO document WT/WGTI/W/34, 8 April 1998.13386 According to Article 48 of the Foreign Exchange and Foreign Trade Law. The Article also stipulates that

the Minister of International Trade and Industry may impose on exporters the obligation to obtain export approval for the purpose of maintaining the balance of payments as well as to ensure sound development of external trade and the national economy. Article 51 of the Law also empowers the Minister of International Trade and Industry to stop shipments, within a limit of one month, for particular goods or destinations.

13487 WTO documents G/SCM/N/38/JPN and /JPN/Suppl.1, 17 August 1998 and 23 September 1998, contain Japan's latest notification concerning subsidies and countervailing measures.

13588 JBIC was established on 1 October 1999 as a result of a merger between the Export-Import Bank of Japan and the Overseas Economic Cooperation Fund of Japan.

13689 The 5% consists of the national consumption tax (4%) and a local consumption tax (1%). Exempted transactions include the sale and lending of land, rent for residential buildings, the sale of securities, fees paid for public services, interest received, foreign exchange businesses, medical care, welfare and certain educational services, and school textbooks.

13790 Such estimates are published in the form of tax expenditure accounts in 14 other OECD countries (OECD, 1996).

13891 The Tax Convention between Japan and the Soviet Union, signed on 18 January 1986, is applied to Armenia, Belraus, Kyrgyz, Georgia, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

13992 The Tax Convention between Japan and Czechoslovakia, signed on 11 October 1977, is applied to the Czech Republic and Slovak Republic.

14093 The Tax Convention between Japan and the United Kingdom, signed on 4 September 1962, is applied to Fiji.

14194 WTO document G/SCM/N/38/JPN/Suppl.1, 23 September 1998.14295 APEC (1999).


Trade Policy Review

Consumers, in general, bore part of the high negative impact of aid to farmers. These practices deeply affected and distorted international trade in the agriculture sector. Gross agricultural income including subsidies was three times higher than it would have been without subsidies. Budget outlays had increased alongside the price support for agricultural products, in order to alleviate the effects of the Uruguay Round in the national economy.

121. Argentina was interested in finalizing as quickly as possible extensive negotiations to allow the access of fresh fruit, particularly citrus fruit into the Japanese market.

122. The representative of Canada stated that, as Canada's experience had shown, regional and bilateral free-trade agreements could complement multilateral trade liberalization. He was confident that Japan's commitment to the WTO would not diminish as it took steps to establish a more multi-layered trade policy.

123. Canada looked forward to receiving details of the new regulatory reform action plan anticipated in the spring of 2001, and was particularly pleased with Japan's move towards performance-based standards for building products, and the recently revised Japan Agricultural Standards Law allowing foreign organizations to obtain Registered Certification Organization status. Canada was working with Japan to ensure that Canadian organizations could obtain this designation as soon as possible, and looked forward to the introduction of further performance-based standards in fire codes, the removal of unnecessary size restrictions on wood-frame housing, and fire prevention and fighting techniques.

124. In Canada's telecommunications experience, a liberalized interconnection regime and a healthy,

14396 Japan's major IPR-related laws and regulations have been notified to the WTO. See, for example, WTO document IP/N/1/JPN/1, 1 March 1996.

14497 The measures included provisions concerning orders issued by the courts to the defendant to submit required documentations in order to reduce the plaintiff's requirements in patent infringements actions; the introduction of an "expert witness system" in patent damage assessment; and an expansion of the legal scope of patent damages in order to cover not only facts proved convincingly, but also facts that are sufficiently probable, such as an unavoidable price reduction by the right owner; and heavier penalties on patent infringement by corporations.

14598 These amended provisions on the Patent Law are to be applied mutatis mutandis to the Trademark Law and the Design Law.

14699 Article 2-4 of the Unfair Competition Prevention Law. The Government regards it difficult to limit the rule of public trials to protect corporate secrets or technical information, or to amend existing laws, in the light of Article 82 of the Japanese Constitution, which stipulates, for example, that a trial may be privately conducted only where a court unanimously determines publicity to be dangerous to public order or morals.

147100 Based on data provided by the Japanese authorities.148101 Details of Japan's judicial measures regarding IPR enforcement are provided in WTO document

IP/N/P/JPN/1, 18 February 1997.149102 The penalty for infringement of patent, exclusive licensing, or trade mark rights is either imprisonment

not exceeding five years or fines not exceeding ¥5 million; infringement by corporations of these rights results in fines not exceeding ¥150 million. False marking is penalized either by imprisonment not exceeding three years or fines not exceeding ¥3 million; penalties against false marking by corporations result in fines not exceeding ¥100 million.

150103 WTO (1998), p. 70. A similar view is expressed in an OECD report on Japan's regulatory reform, which "will not succeed without effective competition policies, but competition enforcement is not yet strong enough" (OECD, 1999c).

151104 The OECD revised in July 1995 the Recommendation of the Council of the Organization for Economic Co-operation and Development concerning Cooperation Between Member Countries on Anticompetitive Practices Affecting International Trade, and adopted in March 1998 the Recommendation of the Council of the Organization for Economic Co-operation and Development Concerning Effective Action Against Hard Core Cartels.


Trade Policy Review

competitive market for the provision of leased lines encouraged growth of domestic Internet, e-commerce, and information technology industries. Canada was encouraged that Japan was addressing high interconnection costs, and looked forward to further progress on the resulting work of the Ministry of Post and Telecommunications Study Group.

125. The Financial Services Agency (FSA) could make more progress in improving transparency, despite a positive direction of deregulation in financial services. By communicating more explicitly its plans and individual regulatory actions, both to the public and to the institutions that it supervised, the FSA could increase the efficiency and stability of financial services and further encourage internationalization in this increasingly integrated market.

126. Concerning Japan's environment for investment, Canadian firms had expressed increasing frustration with the current legal services market. Canada urged Japan to carefully consider its proposals for lifting restrictions on foreign lawyers. In addition, as the Secretariat Report mentioned Japan's negotiation of social security agreements with some of its trading partners, Canada hoped to commence negotiations with Japan in this area as soon as possible.

152105 A holding company whose value of assets, together with that of its subsidiaries, is greater than ¥300 billion must submit a report for the business of the holding company and the subsidiaries to the JFTC within three months from the end of each business year; the authorities indicate that two reports have been submitted since FY1998. On 8 December 1997, the JFTC issued its interpretations of holding companies that are deemed to constitute an excessive concentration of economic power (JFTC online information. Available at: http://www.jftc.admix.go.jp/guidline/9guide.html).

153106 The amendment took effect on 1 January 1999.154107 For example, any foreign company that wishes to become a party to a merger must file a report with the

JFTC in advance, in cases where domestic sales of one company exceed ¥10 billion and domestic sales of one of the other companies exceeds ¥1 billion.

155108 The amendment took effect in October 1999. The exchange or transfer now requires the approval of shareholders at a shareholder meeting; by a majority decision, opposition by minority shareholders is overruled and minority shares must be exchanged or sold.

156109 The guidelines outline the cases of M&As requiring examination under the AMA, for example, when the shares owned by the acquiring company, which is a sole leading shareholder, exceed 25% of the total outstanding stocks of the acquired company; criteria used to define a particular field of trade concerning M&As; and criteria used to define M&As that may substantially restrict competition.

157110 JFTC online information. Available at: http://www.jftc.admix.go.jp/e-page/agree/usagree.htm.158111 Under the principle of positive comity, a party that believes itself to be affected by anti-competitive

behaviour occurring in the territory of another party may request that party to take appropriate action.159112 The JFTC has published "Guidelines Concerning Particular Fields of Business Among the Provisions of

the Definition of Monopolistic Situations" in order to implement the regulation. According to the authorities, the JFTC has not issued an order to restore competition, under Section 8-4 of the AMA, since 1997.

160113 WTO (1998), p. 76.161114 The threshold of 1,000 square meters was stipulated by an ordinance to the law on 6 October 1999.1621 Farm ownership is restricted to certain corporations, including agricultural cooperatives, unlimited

partnerships, limited partnerships, or limited responsibility companies; a majority of members of a corporation must be farmers, and over three quarters of the total capital of the corporation and the majority of directors should be farmers. To legally own farmland, the activities of the corporations must be limited to agriculture and related activities.

1632Trewin and Bosworth (2000). According to the authorities, wages in Japan as well as the appreciation of the yen are among the other factors contributing to the food-processing industry's relocation offshore.


Trade Policy Review

127. Canada reiterated its call for the reduction of tariff duties, especially those applied to vegetable oils (particularly canola), processed foods, forest products, red meats, fish, non-ferrous metals, and leather footwear. An outstanding example was that of Spruce-Pine-Fir lumber imports, which were mentioned in more detail in the remarks of the representative of New Zealand.

128. The representative of Peru stated that Japan was one of Peru's most important trading partners, and its primary partner in Asia. There was also important capital investment in production and service activities in Peru.

129. The representative requested clarification on whether the structural reform had yielded beneficial results. He asked whether the Japanese Government intended to continue this reform in more depth in the medium term.

1643 "Article 30 – 1. The State shall take necessary measures for allowing the prices of farm products to form appropriately reflecting the real supply/demand situation and quality evaluation, in order to promote agricultural production responsive to consumer demands. 2. The State shall take necessary measures for mitigating the adverse effects of significant price changes of farm products on farm management supposed to be encouraged."

1654 Production of these items requires feed grains and oil seeds, whose domestic production is deemed limited owing to Japan's farming scale.

1665 The average applied MFN tariff for agriculture (HS 1-24) was 17.0% in FY2000.1676 Rice, wheat, and barley are imported by the Food Agency attached to the Ministry of Agriculture, Forestry

and Fisheries; milk products and raw silk by the Agriculture and Livestock Industries Corporation; leaf tobacco by the Japan Tobacco Inc.; and salt for common use by the Salt Industry Centre of Japan (WTO document G/STR/N/JPN, 24 March 1999).

1687 Japan's rice imports had been given a special treatment under the WTO Agreement on Agriculture. As at 1 August 2000, the reservation made by Uruguay on the amendment of Japan's modifications and rectifications to its Schedule concerning the tariffication of rice has not been withdrawn.

1698 The Food Agency is an affiliate of MAFF.

1709 MAFF online information. Available at: http://mf003u.maff.go.jp/wto/wto07-ex1.html. The authorities note that the duty was calculated in accordance with the WTO Agreement on Agriculture.

17110 MAFF (1999), p. 27.17211 Under the SBS system, pairs of importers and domestic users jointly participate in the tender conducted by

the Food Agency. The rice actually imported under the system is sold to the Food Agency, and is immediately delivered to domestic users. The SBS system has been established to collect information on domestic demand for imported rice and to meet specific needs for small quantities of rice (i.e. 17 tonnes per bid). The authorities confirm that the MFN principle is applied to the SBS system. The announcement of the tender is made about three weeks in advance.

17312 OECD (2000).17413 According to the authorities, in 1997 retail prices of food items in Tokyo were about 10% to 20% higher

than prices in other major cities in the world.17514 As noted in the 1998 Secretariat Report, caution is necessary in interpreting PSEs, CSEs, and NACs as

changes in exchange rate may produce significant fluctuations in the three indicators, and border prices may be artificially reduced owing to the presence of export subsidies in international agricultural trade (WTO, 1998).

17615 Although domestic producer prices fell in 1999, the appreciation of the yen (against the U.S. dollar) made imports even cheaper (OECD, 2000, p. 87).

17716 The total budget for agricultural price support amounted to ¥320.4 billion in FY1997, compared with ¥313.1 billion in FY1996. Of the total budget, support for rice, and wheat and barley had the largest shares (about 55%


Trade Policy Review

130. On tariff structure, the representative enquired about Japan's plans to reduce tariff escalation. He also wished to know whether trade unions and consumer associations were consulted or participated in any adjustment process regarding tariff rates.

131. Japan's support to agriculture, which was higher than the OECD average, undermined the purchasing power and the well-being of consumers. He wished to know if Japan had considered substituting the price support system by direct support to producers and consumers in order to correct any distortions and increase competition.

132. The representative asked about the access conditions for the official training programme for foreign lawyers, and whether there were any exemptions based on reciprocity within the framework of bilateral agreements for any services that foreign lawyers could render in the Japanese market.

133. The representative of Switzerland stated that the Japanese market ranked first among Asian destinations for Swiss industrial exports, taking a total of Sw F 3.8 billion. Switzerland imported industrial products from Japan worth almost the same amount in 1999. He highlighted the two countries' strong common belief that the agricultural policy of a country should reflect the intrinsic multifunctional nature of the sector.

134. Switzerland was interested in knowing more about the continuation of the deregulation and regulatory reforms. Despite the considerable number of reform measures taken over the past three years, Keidanren had noted that no measures were taken on almost 62% of their requests, which would leave room for additional measures to be taken. Switzerland was interested in receiving more information on the new Three-year Program for the Advancement of Regulatory Reform, which was to be formulated, particularly on the procedure for presenting requests for deregulation and on how they would be treated.

135. Regarding parallel imports of patented products into Japan, the Secretariat Report (para. 123) mentioned that there was "no legislation prohibiting parallel imports into Japan of products subject to intellectual property protection. In addition, a Japanese Supreme Court decision of 1 July 1997 did not prohibit the import of patented products except for cases where individual sales contracts prohibited it." Switzerland asked the Japanese authorities to clarify the effect of the Supreme Court's argument in the cited decision on the patentholder's rights in Japan.

and 57%) in FY1997 and FY1996.17817 According to data collected by the International Energy Agency. The major objective of Japan's energy

policy is to attain simultaneously energy security, economic growth and environmental protection (so called "3-Es").17918 Regulatory reform in petroleum and petroleum products notably concerns the retail of gasoline. In

January 1998, Japan abolished a requirement that new service stations must submit to the authorities a certificate indicating its supplier of gasoline (i.e. the refining companies). A ban on unmanned self-service gasoline stations was lifted on 1 April 1998, following the amendment of Ordinances Concerning the Regulation of Dangerous Articles.

18019 MITI is mainly responsible for the general framework regulating electricity. Domestic or foreign entities wishing to invest in electric utilities must notify their intention to the competent authorities, including MITI; permission for investment is not denied, except on grounds of national security.

18120 See WTO (1998), p. 105.18221 Electricity transmission is allowed only for the incumbent regional electric companies.18322 Gas supplies for large volume customers (i.e. over 2 million cubic metres of gas per year) was liberalized

in 1995. At the end of March 1998, there were eight new gas suppliers other than incumbent regional gas suppliers that supplied for large volume customers.

18423 Changes involving an increase in user rates still require approval.18524 The rule is specified in Article 22-2 of the Gas Industry Law.


Trade Policy Review

136. Switzerland had taken note of the section in the Secretariat's Report on government procurement, which stated that the procurement of overseas goods and services accounted for only 13.2 % and that open contracting was about 70% in 1997. He asked when more recent data could be expected, and whether Japan expected an increase in the procurement of overseas goods and services since 1997.

137. The representative also sought clarification about the procedures applicable to goods or agencies that were not subject to the provisions of the Agreement on Government Procurement (GPA). He asked if the rules and procedures regarding the submission, receipt, and opening of tenders, and the awarding of contracts were similar to those applicable to goods or agencies subject to the GPA, and if there were procedures similar to those in the GPA for providing additional information to unsuccessful tenderers and for complaints, or if different, the extent to which they differed.

138. The representative of Colombia stated that its bilateral trade with Japan was US$637 million in 1999, although in 1995 it was over US$1,400 million. Colombian exports to Japan decreased in 1998, and this trend continued until August of 2000; the rate of decrease had been diminishing in the first eight months of 2000.

139. The main reasons for the negative performance of Colombian exports was the low prices of coffee on the international market and the drop in the sales of emeralds, which jointly accounted for more than 80% of Colombian exports to Japan. Imports from Japan had dropped from US$1,045 million in 1995 to US$392 million in 1999; this was partly explained by a fall in imports of Japanese car industry products.

140. Japan had expressed the benefits of regional agreements and closer ties with Singapore and Korea. Colombia hoped that Latin America might be seen as a potential trading partner in the framework of a free-trade agreement.

141. On agriculture, Colombia believed that Japan's non-commercial concerns were legitimate but should be dealt with from a perspective of not creating distortions in the production and trade of agricultural products.

142. The representative of India stated that Japan was India's fifth largest trading partner. A bilateral trade agreement, signed in 1958, guided commercial exchanges between the two countries. Bilateral trade in 1999 amounted to US$4.0 billion; the share of exports from India was US$1.7 billion. There was great scope for further increasing and diversifying bilateral trade, which had been hampered by various factors, including quarantine formalities in respect of agricultural products, less-than-transparent procedures, a withholding tax of 20% on Indian software services, etc.

143. India and Japan had been holding bilateral talks regularly, covering not only bilateral and global trade issues, but also investment and other issues of economic importance to both countries. In early 2000, the

20241 Each branch or agency requires a separate licence.20342 On licensing a bank that is completely or partly owned by a foreign bank, FRC must examine whether

Japanese banks in the foreign bank's home country receive treatment substantially equal to domestic banks. (Banking Law Article 4-3)

20443 Japan has made no MFN exemptions in its GATS Schedule of Commitments. 20544 Prudential requirements have generally remained the same since the previous Review; the requirements

include capital adequacy ratios, liquid-asset and real estate ratios, and disclosure requirements. Capital requirements based on the Bank of International Settlements rules on capital adequacy are applied to Japanese financial institutions with overseas branches and/or subsidiaries, but not to branches or agencies of foreign banks in Japan. Current disclosure requirements in the financial services sector are contained in Articles 20 and 21 of the Banking Law.


Trade Policy Review

Prime Minister of Japan visited India, when the talks covered economic and commercial issues. The 14 th

Round of Trade Talks was held in Tokyo in February 1999. The first dialogue between the Indian Ministry of Industry and the Japanese Ministry of International Trade and Industry was held in New Delhi in August 1999, which established a forum to facilitate exchange of ideas between the two sides with the participation of the private sector. It was also decided to set up working groups on information technology, food processing and infrastructure.

144. Despite a seeming recovery of the Japanese economy, the Secretariat had noted the fragility of the financial system, which it saw as a threat to sustained economic recovery, and so-called "reform fatigue", which could endanger economic recovery. The representative was interested in the views of the Japanese delegation on these observations.

145. The representative hoped that Japan's seeming interest in regional free-trade arrangements would not mean a lesser commitment to the multilateral system.

146. India was interested to know if Japan intended to autonomously liberalize its agriculture sector as

20645 The Development Bank of Japan and the Japan Bank for International Cooperation.20746 Policy-based finance involves various incentives to induce private-sector activities; the main incentive

involves the provision of long-term loans, at fixed and low interest rates, directed to, for example, areas characterized by low profitability, high-risk, and long periods for recovery of investment.

20847 The authorities maintain that the Postal Savings System fulfils roles that are not met by the market or by private financial institutions; it aims to provide financial services throughout Japan, including in unprofitable remote areas. Postal savings are subject to a ¥10 million deposit-ceiling per person.

20948 One of the largest insurance schemes in the world, the Postal Life Insurance had total funds of ¥111.7 trillion at the end of March 1999, about half of which were transferred to the Fiscal Investment and Loan Program (FILP) managed by MOF.

21049 The basic organization of a company, the minimum assets required to begin business, the existence of favourable anticipated income and expenditure, basic human resources and social credibility are included in the criteria for the review of licence applications.

21150 The criteria for permitting new insurance products include secure protection of policyholders.21251 WTO document S/C/N/84, 18 November 1998. 21352 The agreement was later incorporated into the additional commitments of Japan's Schedule of Specific

Commitments as a result of the WTO financial services negotiations.21453 Since 1 December 1998, licensing requirements for securities companies have been eliminated and

replaced by registration requirements. Investment trust companies require authorization of the FRC.21554 Except for the NTT Corporation, whose foreign ownership is restricted to less than one fifth of voting

rights. Restrictions on foreign equity and the nationality of board members and auditors that had been applied to Kokusai Denshin Denwa (KDD), the largest international communication carrier in Japan, were abolished as a result of the company's complete privatization on 30 July 1998 in accordance with the repeal of the KDD Law.

21655 The rule is applied to end-user charges for subscriber telephone, "Integrated Services Digital Network" (ISDN), and leased circuit services in the regional telecommunications market.

21756 The ratification was promulgated on 4 February 1998.21857 WTO document GATS/SC/46/Suppl.2, 11 April 1997.21958 Foreign capital participation must be less than one fifth, and board members and auditors must be of

Japanese nationality.22059 MPT (1999).22160 Bank of Japan, Monthly Statistics, various issues.


Trade Policy Review

part of its reform process under its Basic Law, without waiting for the conclusion of the on-going mandated negotiations on agriculture. The presence of non-ad valorem duties, accounting for nearly 6.9% of all tariff lines, concealed high ad valorem equivalent rates. The Secretariat Report noted the complex nature of tariff quota allocation of about 200 agricultural items and the import quota system. India requested the Japanese authorities to review the situation with a view to simplifying the present systems so that these measures did not result in restricting its external trade.

147. India urged Japan to extend MFN and national treatment for the auctioning of flowers from India, and requested Japan to arrange for preshipment inspection of flowers in India, so as to avoid delays at the time of entry into Japan.

148. The Japanese authorities had imposed a ban on Indian mangoes and grapes due to the alleged presence of insects. In the case of mangoes, treatment as suggested by Japan was carried out, and the results

22261 MPT (2000).22362 See NTT [Online]. Available at: http://www.ntt.co.jp/ir/finance.html for annual balance sheets of the

NTT.22463 OECD [Online]. Available at: http://www.oecd.org/dsti/sti/it/cm/stats/isp-4ohrs.htm.22564 Type-I carriers install and operate their own telecommunications circuit facilities, and Type-II carriers

provide services with the use of leased circuit facilities equipment from Type-I carriers. Special Type-II are defined as carriers offering services to many unspecified users through the interconnection at both ends of leased circuits with public switched networks, or with those that provide facilities for international communications. All other Type-II carriers are classified as General Type-II carriers.

22665 The criteria for approving entry include sound and proper financial and technical capability, predictable and rational business plans, and that the commencing of the business is deemed proper for the sound development of the telecommunications sector.

22766 A 1997 amendment to the TBL, and the 1998 abolition of the KDD Law removed limitations on foreign equity participation in Type-I carriers, except for NTT.

22867 The MPT authorized the Implementation Plan Concerning the Transfer of the Business Activities and the Succession of the Rights and Obligations of the Nippon Telegraph and Telephone Corporation (Implementation Plan) on 21 May 1999, based on Article 3 of the Supplementary Provisions of the Law to Amend Part of the Nippon Telegraph and Telephone Corporation Law (Law No. 98 of 1997 ("Law to Amend")).

22968 NTT Law Article 5. The issuance of stocks by the regional companies requires ministerial authorization.23069 According to the OECD (1999c), p. 96, before the reorganization, NTT had 99.5% market share in the

local fixed telephony service by the percentage of access lines.23170 JFTC (2000).23271 MPT online information. Available at: http://www.mpt.go.jp/pressrelease/english/telecomm/

news990621_1.html.23372 Article 3 of the NTT Law.23473 The TBL stipulates that Type-I carriers installing "designated telecommunications facilities" must

maintain the accounts of costs associated to interconnection with such facilities, and establish a "model agreement" that must be authorized by the MPT Minister. Designated telecommunication facilities are defined under TBL Article 38-2 (and its relevant ordinances) as transmission facilities, held by a carrier, that exceed half of existing relevant facilities in a prefecture. The TBL also stipulates a price-cap regulation over carriers that possess more than a certain fraction of the number of subscriber lines in a region (paragraph 77).

23574 The notification requirement concerns new charge plans, the date of implementation, reasons for changes in the charge, and applied areas and period. Exceptions to such requirement include charges that "minimally" affect users, transaction charges, and exemplary charges, as stipulated by a ministerial ordinance concerning the Telecommunication Business Law.


Trade Policy Review

had been submitted to the Japanese authorities, who had reportedly expressed satisfaction. However, they wanted the results to be verified by a technical team of experts. Even three years after submission of the results and extension of an invitation for a technical team to visit India, the Japanese authorities were yet to respond. He requested the Japanese authorities to look urgently into this matter, which was being seen as a disguised barrier to trade.

149. The representative of Brazil stated that its bilateral trade with Japan in 1999 amounted to US$5 billion, with some deficit for Brazil.

150. Although the reforms taken by Japan had moved in the direction of more liberal trade policies, the agricultural sector continued to be extremely protected by high tariff levels and other border measures,

23675 Such action may be taken where: the calculation methods for charges are deemed neither appropriate nor clear; the charges may unfairly discriminate against any person; or charges might cause anti-competitive behaviour between telecommunications carriers or impair the interests of users because the charges are inappropriate in current socio-economic circumstances (TBL Article 31-2).

23776 Call-back services using a polling or answer suppression technique have been prohibited in line with the October 1996 decision of the World Telecommunications Standards Council in the International Telecommunication Union (ITU).

23877 In addition to the cellular telephony subscribers, there were 5.8 million subscribers to the Personal Handy-phone System (PHS) at the end of May 2000. MPT, Press release [Online]. Available at: http://www.mpt.go.jp/policyreports/english/stats/Handy-phone-imm-e.html.

23978 APEC (1999).24079 See, for example, Keidanren (2000a).24180 Cabotage was not part of the WTO negotiations on maritime transport services.24281 Article 3 of the Marine Transportation Law.24382 Article 14.2 of the Law for Ship Officers.24483 Japan has bilateral agreements related to maritime transport with the following countries: Argentina,

Bulgaria, China, Cuba, Denmark, El Salvador, Finland, France, Germany, Greece, Haiti, Hungary, Italy, India, Malaysia, the Netherlands, Norway, the Philippines, Poland, Portugal, Romania, Russian Federation, Spain, Sri Lanka, Sweden, Thailand, Turkey, the United Kingdom, and the United States.

24584 To qualify for a national flag, the vessel must be owned by the Government, a Japanese public office, a Japanese national, or a judicial person that is established in accordance with Japanese laws, and it must be registered with the Minister of Transport, in accordance with the Ship Law.

24685 These include tax breaks in ship-registration tax and local property tax.24786 Articles 19-4, 19-5 of the Marine Transportation Law.24887 Article 20 of the Marine Transportation Law. A supplier for domestic tramp passenger services in a

routine route requires prior approval of the Minister (Article 21 of the Maritime Transportation Law).24988 Articles 4 and 20 of the Port Transportation Business Law.25089 A person supplying pilot services must be of Japanese nationality and obtain a ministerial licence.25190 MOT online information. Available at: http://www.motnet.go.jp/ns/kanwa_e/port.htm.25291 Whereas under the licence system, entries into the business have been limited by an economic needs test

(or demand-supply adjustment), there is no such test under the permission system; instead any company that satisfies certain conditions will be allowed to enter the market. The abolition of the economic needs test is expected to stimulate competition among operators.

25392 The nine major ports are: Keihin Ports (Tokyo, Yokohama and Kawasaki Ports), Chiba Port, Shimizu Port, Nagoya Port, Yokkaichi Port, Osaka Port, Kobe Port, Kanmon Port, and Hakata Port.


Trade Policy Review

particularly in the sanitary and phytosanitary areas, as well as internal support measures.

151. The level of tariff peaks for agricultural products was particularly high on processed products. These peaks had a direct impact on the access of Brazilian exports of sugar, orange juice, and mango. Brazil urged Japan to improve market access for agriculture, not only through the reduction or elimination of the many types of barriers but also through the adoption of a more simplified and transparent tariff regime, based on ad valorem terms.

152. The representative of Mauritius noted that Japan’s economic recovery was largely attributable to domestic measures adopted by the Japanese Government as well as regional Asian economic recovery. The latter element and the greater access to the Japanese market of goods from Asia were clear signs of increasing

25493 Article 100.25594 Article 3-2.25695 Article 105.1.25796 The Annex on Air Transport Services further specifies that the GATS shall not reduce or affect a

Member's obligations under bilateral or multilateral agreements that are in effect on the date of entry into force of the WTO Agreement.

25897 According to the Ministry of Transport, the landing fee levied on international air transport for a B747-400 aircraft, for example, is ¥950,000 for Narita, ¥910,000 for Kansai, ¥290,000 for Charles de Gaule (Paris) and ¥310,000 for JFK (New York) airports.

25998 American Chamber of Commerce in Japan (2000), p. 229. 26099 The IATA guidelines include, inter alia, general criteria to allocate slots, such as the use of historical

precedence where appropriate, allocation of slots to incumbent and new airlines, and reallocation of unused slots. 261100 Article 54-(2).262101 Regulatory Reform Committee (1998).263102 Financial Times, 10 August 2000, "Japan finds the powerhouse empty of skilled IT workers," p. 12.264103 These concerned, for example, accelerating approval procedures for new university curriculum, and

allowing universities to recognize credits earned by a student elsewhere.265104 Formal education institutions consist of elementary schools, lower and upper secondary schools,

universities, technical colleges, schools for the blind, deaf and handicapped, and kindergartens.266105 Formal education institutions must be established by school judicial persons. A school judicial person is

a non-profit judicial person established for the purpose of supplying educational services under Japanese Law.267106 In FY1995 the percentage of students entering four-year university education reached 45.8% of the

Japanese citizens of appropriate cohort. During the period 1975–85, the number of graduate students increased from 48,464 to 69,688.

268107 In addition, the nursery system and kindergarten education are optional as pre-schools. The nursery system, which is not aimed at providing education but mainly to promote public welfare, e.g. reducing parents' burden through day care services is regulated by the Ministry of Health and Welfare.

269108 MOE online information. Available at: http://www.monbu.go.jp/aramashi/1999eng/e04/e04-2.htm.270109 Up to the secondary level of formal education, the Establishment Standards apply. The Enforcement

Regulation of the School Education Law further requires elementary and secondary schools and kindergartens to observe the National Curriculum Standards, a ministerial ordinance.

271110 The Fundamental Law of Education and the Private School Law.272111 For example, the 1959 Law on Restriction of Factories and Other Facilities in the Urban District in the

Tokyo Metropolitan Areas and the 1964 Law on Restriction of Factories and Other Facilities in the Urban District in the Osaka Metropolitan Areas.


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regional interaction and integration.

153. Mauritius applauded the Japanese Government for its seeming willingness to pursue reform measures despite recent signs of "reform fatigue". It was gratifying to see that side by side with the objectives of promoting the information technology revolution and the development of a recycle-based socio-economy, the Japanese Government was also keen to ensure the creation of a vital and less anxious society under an aging population. She also commend the adoption of specific economic and fiscal management measures to address the fragility of the financial system, and general structural reform with a view to ensuring sustained economic recovery.

154. Mauritius appreciated Japan's view that developing and least developed countries as well as economies in transition should share the benefits of the results of multilateral negotiations. Such equitable

18625 Japan Automobile Manufacturers Association, Inc. (1999), p. 4.18726 Japanese automakers had affiliated plants in Hungary, the Netherlands, Portugal, Spain and the United

Kingdom, at the end of 1998.18827 Volvo (trucks) has held 5% of Mitsubishi's shares since October 1999.

18928 Toyota and GM now have an agreement for a fuel-cell technology development, and Honda and GM cooperate in engine supply and technology development.

19029 Among the measures resulting from the consultations, Japan committed to: provide information, exhibition space, and import promoting finance to foreign vehicle manufacturers; support Japanese vehicle manufacturers' efforts to expand research and development in foreign countries; increase suppliers' sales opportunities without adverse discrimination based on capital affiliation; continue open design-in and procurement processes to foreign parts suppliers in Japan and to suppliers in other countries; initiate deregulation of the auto-parts after-sales market in Japan; and review regulations upon request by foreign vehicle manufactures and auto-parts suppliers, to improve market access.

19130 Data according to a survey by the Ministry of Health and Welfare, based on reports from enterprises. The data do not include exports or imports through trading companies.

19231 Ministerial licence is not required for individuals to import or bring medication into Japan for personal use; this is subject to certain quantitative limitations as follows: drug or "quasi-drug" (a product that has restricted purpose or use, and has a mild reaction on the human body, e.g. hair tonics and bath preparations) - up to 2 months' supply; prescription drug - up to 1 month's supply; vitamins - up to 4 months' supply; drug or quasi-drug for external use (excluding prescription drug), e.g. ointments and eye drops - up to 24 pieces; cosmetics - up to 24 pieces per item; and medical devices for home use – one set. Medication imported or brought into Japan for personal use must not be sold or given to others.

19332 The two notifications are "The Handling of Clinical Data on Pharmaceuticals Generated in Foreign Countries" (Notification No. 739 of the Director-General of the Pharmaceutical and Medical Safety Bureau), dated 11 August 1998, and "Ethnic Factors in the Acceptability of Foreign Clinical Data" (Notification No. 672 of the Director-General of the Pharmaceutical and Medical Safety Bureau), dated 11 August 1998.

19433 Under the Public Health Insurance Reimbursement System, patients pay medical doctors or pharmacies a certain fraction of fees; the remainder is reimbursed directly to doctors or pharmacies by the System.

19534 In Japan, medical doctors may provide prescribed drugs to patients, and are reimbursed by the Public Health Insurance Reimbursement System.

19635 In 1999, Japanese banking and securities firms generated cross-border exports of ¥232 billion, up from ¥224 billion in 1997; imports in banking and securities amounted to ¥309 billion in 1999 (¥324 billion in 1997).

19736 The law largely abolished the prior authorization or notification system for capital transactions and liberalized international securities and foreign exchange transactions, which have been limited to Authorized Foreign


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distribution could be achieved only through the acknowledgement of the diverse economic realities of the WTO Members and a common will to address the varying concerns of all Members.

155. Mauritius fully supported the four basic principles enunciated by Japan for the elaboration of its agricultural policy; these were important goals to be achieved also in the broader context of negotiations.

156. The representative of Hungary commended Japan for the liberalization and deregulation that had been taken, and awaited with interest, in particular, the liberalization of wine distribution, which seemed to have been pushed back by more than a year.

157. According to data by the Hungarian veterinary and phytosanitary authorities, Japan had lifted the import ban on Hungarian fresh meat in 1999; he expected similar steps for fresh fruit and vegetables in the

Exchange Banks. Money changing business was also liberalized. An ex-post notification system was introduced regarding capital transactions in order to collect data for balance-of-payments statistics.

19837 For details of measures under the "Big Bang" programme, see FSA [Online]. Available at: http://www.fsa.go.jp/p_mof/english/big-bang/big-bang.htm.

19938 The Financial System Reform Law stipulated revisions of other laws including the Banking Law, the Securities and Exchange Law, and the Insurance Business Law.

20039 Responsibility was transferred from MOF to the Financial Supervisory Agency, established on 22 June 1998, as a result of a reform of MOF; MOF's Banking and Securities Bureaux were abolished, and the Financial System Planning Bureau was established to be solely responsible for planning and formulation of the financial system. FRC was established on 15 December 1998. On 1 July 2000, the Financial Supervisory Agency was replaced by the Financial Services Agency, and the Financial System Planning Bureau was abolished.

20140 In January 2001, FRC is to be abolished and its role is to be succeeded by FSA, which is to be a subsidiary of the new Cabinet Office.

273112 The two universities include the Tokyo Metropolitan University of Health Sciences, authorized in 1998; the university (four years) replaced an existing junior college (two years).

274113 Keidanren (2000b).275114 The standard period of authorization to establish new faculties by private two-year colleges was

reportedly reduced as stipulated in the Three-Year Program for Promoting Deregulation.276115 Educational services are not included in Japan's reservation to national treatment instruments in regard to

investment by established foreign-controlled enterprises in either the OECD Code of Liberalization of Capital Movements or the OECD Code of Liberalization of Current Invisible Operations.

277116 The establishment of school judicial persons requires ministerial approval. 278117 According to the Law for Medical Doctors, foreign-university graduates must be approved by the

Minister of Health and Welfare to be eligible to take Japan's National Medical Examination; a successful result in the examination is a requirement to practice medicine in Japan. The preliminary examination of the National Base Examination is exempted for graduates of four-year Japanese universities. Graduates of foreign universities may be exempted from the preliminary examination, provided that official approval is given.

279118 Article 3.1 allows foreigners to be employed as advisers.280119 The Guideline of implementation of business activities on specific technology transfer from universities

issued in August 1998. 281 1 Investments from Japan are those by foreign owned companies in Japan.2822 Examples of the measures taken after 1998 were: in December 1998, over-the-counter sales of investment

trusts by banks were allowed, corporate-type investment trusts and privately-placed investment trusts were introduce, and the licensing system for establishing securities companies was replaced by a registration system. In October 1999, brokerage commissions of securities companies were fully liberalized, restrictions on the range of businesses allowed to securities subsidiaries of banks were eliminated, and insurance companies were allowed to set up banking subsidiaries.


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near future.

158. Hungary welcomed the marked change in Japan's approach to RTAs and expected that on this basis Japan's support for Hungary's EU accession would become even more articulate.

159. Japan was an important economic partner for Hungary, ranking ninth among its trading partners. In 1999, two-way trade exceeded US$1.2 billion, with an overwhelming Japanese surplus. Japan was also an important source of FDI for Hungary. He hoped that the investment ties between Japan and Hungary would grow stronger while bilateral trade flows became somewhat more balanced.

160. The representative of Brunei Darussalam, on behalf of ASEAN noted that the continued robustness of the Japanese economy remained an issue of importance to ASEAN, whose trade with Japan was high. ASEAN relied on strong Japanese imports to assist in its recovery process. In this respect, she urged Japan to continue its strong commitment to strengthening economic growth, hence ensuring a sustained economic recovery. She appreciated Japan's continued involvement in assistance in the region notwithstanding its own domestic difficulties.

161. She was encouraged that the total value of imports from ASEAN had shown an increasing trend, and hoped this trend would continue. She was pleased that Japan was embarking on a strategy to ensure benefits of globalization and information technology. ASEAN was confident that Japan would continue to liberalize its import regime, which would enhance trade between ASEAN and Japan. In this context, she highlighted the strengthening of relations between Japan and ASEAN in the "ASEAN plus three" arrangement.

162. The representative of Thailand stated that further to the views reflected in the statement by ASEAN, Japan was Thailand's major trading partner, with bilateral trade for the first eight months of 2000 totaling more than US$15.6 billion, marking a 24% increase over the same period of 1999. Japan enjoyed a trade surplus with Thailand of over US$2 billion, accounting for over 3% of Japan's total trade surplus with the rest of the world. He thanked the Government of Japan for the leadership and instrumental role Japan played in helping to revitalize Thailand's economy through fiscal stimulus packages following the crisis.

163. Thailand wished to be assured that Japan's multifunctional policies would not be used in any way that could distort trade in agriculture.

164. Although Japan had changed to a tariff scheme for rice imports since 1999, Thailand found the out-of-quota import duty on rice to be prohibitively high. In addition, both the administration of tariff quota and the Simultaneous Buy-Sell systems were complex and lacked transparency.

165. Many of the standards and procedures required under Japan's Food Sanitation Law were more stringent than those prescribed by Codex, especially in the case of pesticide residue in fresh vegetables. Thailand hoped that Japan's constructive participation in the ongoing negotiations on agriculture would result in greater market access opening for developing countries.

166. The representative of the Czech Republic was of the view that a comprehensive round was essential to address many challenges facing the multilateral trading system in a bold and well-balanced manner.

167. Agriculture’s importance for the domestic economy was much more important than it might appear when looking at its share in Japan's GDP. In this area, he welcomed the authorities' determination to pursue agricultural policy reforms as reflected in the new Basic Law for Food, Agriculture and Rural Areas enacted in July 1999. Though the principles embodied in the law had no specific reference to market-oriented agriculture, it seemed, from the measures already taken under the new Law, that this policy orientation was also present. He believed that more could and should be done to improve access to Japan’s agriculture


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market, while addressing legitimate non-trade concerns.

168. A system of investment incentives was applied by the Japanese authorities to encourage foreign investors. The Secretariat qualified the assistance, in the form of tax breaks and low interest loans provided for certain types of imports and investment, as an interesting anomaly. He asked if the delegation of Japan could comment on this aspect and put into broader perspective its systemic interest in attracting foreign investors.

169. The representative of Slovak Republic noted that Slovak Republic and Japan shared the view that a new round should cover an advanced and ambitious agenda to enable WTO Members to address broader issues, and bring benefit to all of them.

170. The representative of Turkey believed that the trade protection provisions, in relevant legislation, on certain agricultural products, such as cut flowers, should be removed, and the Food Sanitation Law should be reviewed in accordance with international standards and should be adapted to the SPS and TBT Agreements of the WTO. He also urged Japan to eliminate the complex structure of and barriers in the construction services market, as well as the favourable treatment extended to domestic companies in Japanese government procurement.

171. He asked whether Japan had any intention of reducing the high customs tariff rates on textile and footwear products, an important export item of Turkey.

172. The representative of Japan stated that the Government had been taking drastic reform procedures, which were still going on. Despite the Secretariat’s mention of possible "reform fatigue", he emphasized that Japan's commitment to the regulatory reform and deregulation remained unchanged. Japan was one of the largest importers of agricultural products; Japan's food self-sufficiency ration was about 40%. On the discrepancy between inward and outward FDI, Japan was one of the most open markets for FDI and there were many successful foreign companies that had made much profit in the Japanese market. They had made efforts to penetrate the market despite language and cultural difficulties; the same efforts were required of those wishing to invest in Japan. The Japan-Singapore economic agreement for a new age partnership would be WTO consistent. However, no similar concerns had been expressed by Members, when other regional agreements were examined in one of the committees in the WTO.

V. REPLIES BY THE REPRESENTATIVE OF JAPAN AND ADDITIONAL COMMENTS

173. The representative of Japan stated that he would concentrate on the substantial points of Japan's written replies, focussing in particular on the comments expressed by the member countries on the first day of the meeting.

174. A number of delegations had commented that the real GDP growth forecast was 1.5% for FY2000; and it was somewhat gratifying to note that Japan’s economy was showing some signs of recovery. Japan should further promote structural reform and the deregulation process, which had been implemented so far, and should further strengthen competition in the Japanese market. He reiterated that the commitment by the Japanese Government to promote supportive macroeconomic policy, structural reforms, deregulation, and economic rebirth, remained solid.

175. Economic activities in Japan continued to improve moderately and there seemed to be a gradual movement, mainly in the corporate sector, toward a self-sustained recovery. In 1999, there was a 0.2% growth, and there had been two quarters marked by consecutive positive growth, mainly due to domestic demand, while the contribution of external demand had not been so large recently. However, he did not wish to be too optimistic about the current economic situation. The labour market conditions remained severe, and


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personal consumption had remained more or less inactive. Self-sustained recovery had yet to be achieved; economic recovery was still fragile.

176. Furthermore, there existed some downside risks to the future economic prospects. These could include a slowdown in the U.S. economy, a hike in crude oil prices, and the effect of restructuring the corporate sector with regard to the economy. There were uncertainties in the over-spill of recovery trends in the corporate sector into the household sector, and the spread of IT-related demands in other sectors.

177. In terms of economic management, based on the current judgement, the Japanese Government would continue to focus on economic recovery. At the same time, it was necessary to undertake some swift and bold action to change its economic structure into one suited for the 21st century. Therefore, a new economic package, "A Policy Package for a New Economic Development toward the Rebirth of Japan", was formulated on 19 October 2000.

178. This package featured, not only the traditional expansionary fiscal stimulus, but also comprehensive policy measures for promoting a forward-looking structural reform, such as regulatory reform. The Government fully acknowledged the importance of structural reform for the benefit of the Japanese economy.

179. Regarding public projects, Japan had set down priorities, which had been assigned to four major areas in view of preparing the foundations for the 21st century. These priority areas were: a rapid promotion of the IT revolution, a response to environmental issues, and to the aging society, and improvement in the urban infrastructure. The overall scale of the work to be promptly implemented under this basic policy direction would be in the order of ¥11 trillion.

180. To implement this package, the Government had decided to create a supplementary budget. The scale of this budget would be about ¥3.9 trillion, of which approximately ¥2.5 trillion would go to social infrastructure development. The effect of the package on the economy was expected to be an increase of around 1.2% in real GDP within one year.

181. Bearing in mind the effect of the new fiscal package, the Economic Planning Agency made public a revised forecast of the real economic growth in FY2000, of 1.5%. The forecast for FY2001 was not yet available, but would be announced during the course of budget preparations in December 2000. The forecast for real economic growth for FY2001 and thereafter would be based on the new system of calculating GDP, which was known as the 93 System of National Account (SNA).

182. The revised figures of Japan’s real GDP growth rates had resulted from the adoption of the new calculation method mentioned above, which had already been adopted by a number of countries. The new figures for Japan based on the 93 SNA would be +0.2% instead of -0.1% for FY1997, and -0.7% instead of -1.9% for FY1998; figures for FY1999 had not yet been calculated.

183. In the area of monetary policy, it was expected that the monetary authority would maintain mainly relaxed monetary conditions, by conducting monetary policy in an appropriate and flexible manner to support economic recovery consistent with price stability.

184. In terms of fiscal deficit and gross government debt, Japan’s situation was probably the worst among all major industrialized countries. Under these circumstances, fiscal consolidation was a serious challenge that had to be overcome. However, the Government's priority was to put the economy back on the track of self-sustained recovery; it would then proceed to reform the fiscal structure, taking into account broad issues such as tax structure and social security systems, as well as the relations between central and local governments. Therefore, the efforts should be of a comprehensive undertaking.


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185. The importance of structural reform and deregulation was stressed by the discussant and several Members: some quoted the term "reform fatigue", which could endanger Japan's economic recovery. However, the Government's commitment to further promote structural reform remained unchanged. The Government had been faithfully implementing the Three-Year Program for Promoting Deregulation since March 1997, which covered a broad range of sectors including IT, medical care and welfare, employment and education. Moreover, the Government planned to adopt a new Three-Year Program for Advancement of Regulatory Reform in March 2001 and intended to continue making the utmost efforts toward revitalizing the domestic economy through its structural reform.

186. In recent years, the Government of Japan had implemented a number of measures aimed at regulatory reform and the deregulation of sectors that had been subject to governmental intervention. As a result, the flow of foreign direct investment had increased dramatically.

187. The deregulation of the distribution sector was currently in the headlines. The Large-Scale Retail Store Law, which had been in force since 1973, was abolished in 2000, and a prior economic needs test (the so-called “supply and demand adjustment”) was no longer required in this sector. A number of foreign investors had already entered the distribution business in Japan, in anticipation of this move towards deregulation.

188. This trend was clearly demonstrated in the current statistics: inward investment amounted to US$21.5 billion for FY1999, nearly double the figure for the previous year. For FY2000, the figure seemed to be even more promising: during five months, from April to August, the figure already stood at US$16.8 dollars, far exceeding the FY1999 level.

189. Regarding the discrepancy pointed out by many delegations, as well as the discussant, the current ratio between outward and inward investment was roughly four to one; compared with the ratio of ten to one in 1997, it could be regarded as a significant achievement.

190. Vigorous implementation of competition policy had been required, in combination with the promotion of deregulation. The role of competition policy was becoming ever more important from the viewpoint of promoting free and fair competition among Japanese and foreign businesses, and protecting the benefits of consumers. Japan's Fair Trade Commission (JFTC) had been actively implementing competition policy, besides making reforms to the competition law, as mentioned in Japan's opening statement.

191. The JFTC has cracked down on price cartels, bid-rigging, and other Anti-Monopoly Act (AMA) violations, by taking legal action, including filing a prosecution. With regard to criminal enforcement, in 1990 the JFTC announced a policy to bring active criminal accusations against serious violations of the AMA, which were likely to have a widespread influence on consumers. In 1999, 14 firms and 19 persons were prosecuted in two cases. The JFTC would work closely with public prosecuting authorities by exchanging information and opinions. When the JFTC considered that concrete facts made prosecution suitable, it would bring the criminal accusation to the public prosecuting authorities.

192. In order to promote deregulation, the JFTC had been engaged in various activities, including conducting surveys and making public the results of the examination by the study group that it had established. As mentioned in Japan's Report, the study group had released an indication of the reforms for some public utilities. Furthermore, the guidelines on appropriate trade in the electricity and gas subsector was another of the JFTC’s accomplishments to establish rules on fair competition in public utility sectors.

193. With regard to some Members’ concerns about the JFTC’s status, the AMA clearly secured the independence of the Chairman and the Commissioners in enforcement or policy decisions, and further guaranteed their status. The AMA also stipulated that the Chairman and the Commissioners were appointed


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by the Prime Minister with the consent of the Diet, as had always been the case. Thus, the JFTC's independence and neutrality as an independent administrative commission would continue to be guaranteed by the AMA in the future, even after its integration into the Ministry of General Affairs. In addition, though the Government had conducted administrative and fiscal reforms, the JFTC had been allowed to staff especially the investigation sector. The JFTC would continuously be expected to play a more active and crucial role in enforcing competition law and policy.

194. Japan concurred that the economic agreement for a new age partnership between Japan and Singapore had to be consistent with the WTO rules and should cover "substantially all trade".

195. The discussant stated that, although the Japanese economy was recovering, doubts remained as to whether the recovery process was self-sustained. The areas of uncertainty were especially in fragile private consumption and high government debt and public expenditure. He welcomed the strong commitment expressed by the Japanese representative to deregulation policy, and was reassured to hear that there was no reform fatigue and that the Government was committed to further action. On competition policy, whether the JFTC would remain independent might need further discussion. On FDI, the discussant took note of the Japanese statement that there were promising developments taking place and much depended on the individual entrepreneur to ensure success. On systemic interest in attracting FDI, the regulatory environment could be simplified. On regional trade agreements, he welcomed comments by Japan that recent moves on bilateral agreements would not undermine WTO commitments.

196. The representative of Canada noted that the experience Japan cited in the retail subsector, in terms of attracting FDI, underlined the importance of deregulation and regulatory reform. He asked for comments by Japan on the suggestion that regulatory reform could take a more cross-cutting approach as opposed to sector-by-sector approach.

197. The representative of the European Union emphasized that a key issue was the translation and management of regulatory reform, new regulations, and their implementation, into actual changes on the market-place, in order to affect the overall economic effectiveness of competition and of reform.

198. The representative of the United States stated that the use of administrative guidance made the operation of significant parts of Japan's trade policy non-transparent. The introduction of public comment procedures prior to the adoption of some regulations had improved the transparency of some policy-making, but the system was still limited both in applicability and effectiveness. He asked Japan to outline the plans for expanding the public comment procedures, making them more effective, and enacting such procedures into statute.

199. He was pleased to hear Japan reaffirm that no major commodities would be left out of the regional trade agreements, and requested further details of the sectoral coverage of the agreements.

200. The representative of Japan stated that, on the question of a cross-cutting rather than sectoral approach in regulatory reform, the Structural Reform Council was set up at the Cabinet Office and under its leadership various ministries collaborated. Each ministry had its own expertise and knowledge, thus, a sectoral approach was taken, and no cross-cutting approach had been introduced.

201. The Administrative Procedures Law stated that administrative guidance had to be made public, and the Information Disclosure Act would be in effect from April 2001. It was important for the Japanese Government to increase transparency in the field of administrative guidance; at the same time, when certain policies needed to be changed, a public comment system was introduced.

202. Negotiation of the free-trade agreement, had not started yet; it would begin some time in Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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January 2001. Japan envisaged an agreement that would be WTO consistent and would cover substantially all trade. Japan did not define this agreement as a traditional free-trade agreement, wishing to cover many new sectors, such as collaboration between the two capital markets, the free movement of professionals between the two countries, and mutual acceptance of educational units in certain universities in Japan and Singapore.

203. Japan’s trade policies had been further liberalized, especially in recent years, and many foreign manufacturers and service providers had taken advantage of opportunities resulting from such liberalization. At the same time, Japan was trying to promote the liberalization process and to make its measures more transparent to all trade partners for easier access to the Japanese market.

204. Japan had been fully and faithfully implementing the UR Agreements, including tariff reductions and, as a result, Japan’s tariff level continued to be the lowest among the WTO Members, with an average tariff rate on industrial goods at 1.5%.

205. The Customs Tariff Council, which reviewed the proposed changes, consisted of various parties, including producers, intermediaries, and consumers. The relevant ministries also consulted with interested parties before requesting changes to the Ministry of Finance.

206. The increase in the simple average applied tariff rate in FY1999 compared with FY1998 was mainly because the applied MFN tariff rate in FY1998 did not include the ad valorem equivalents (AVEs) of non-ad valorem duties, whereas those of FY1999 did (see footnote (a) of Table III.2, and para. 24 of the Secretariat Report).

207. Japan had made significant efforts to reduce tariff escalation. For some products, however, it was very difficult to further reduce the tariff rates.

208. The Government of Japan applied non-ad valorem duties, taking into account the specific situation of each product, which could be subject to market fluctuations. Moreover, the respective tariff rates were set, regardless of the types of duties, taking into consideration the domestic and overseas price differential, situation of domestic industries, and whether or not non-ad valorem duties are applied.

209. Japan did not believe that the overall tariff level of agricultural products and of other products should be the same. Agriculture has its own specificity in that it was directly related to the survival and health of human beings and its production was significantly affected by natural conditions. Given this specificity, it was difficult for Japan to understand the claim that the tariff level of industrial products should automatically be considered the norm for agricultural tariffs.

210. The current tariff level was the result of a series of trade negotiations based on such factors as domestic geographical and natural conditions, as well as on situations regarding the respective products. As a result of the UR Agreement, tariffs were the only legitimate border measures for adjusting the differences in the natural and economic conditions among countries. In this respect, due consideration should be given to the production conditions of each product, as well as to the necessity to maintain a certain level of domestic production and to fulfil the multifunctionality of agriculture.

211. The overall level of agricultural tariffs in Japan was not high compared with that of a number of other developed members. According to the OECD, the average agricultural tariff for Japan was 12% while that for some countries was 50%, 100%, etc.

212. The administration of tariff quotas was conducted in consistency with Japan’s commitment under the WTO rules. The administration methods of allocation were selected taking into account the characteristics


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and market conditions of each product. These were then made public by the related ministries; this was adequate as regards transparency. In this context, what Members had committed in their own schedules was the opportunity to access, and not the actual volume of imports. The fill rates might vary according to the situation of the products concerned.

213. Japan was open to discussion on this issue, as well as on other related issues in the ongoing negotiations on agriculture.

214. On customs administration, for the purpose of supporting capacity-building on the facilitation of international trade and the prevention of the smuggling of social contraband, the Japanese customs authority had been providing technical assistance to customs administrations in developing countries.

215. The central and local government entities, as well as public institutions, had been faithfully implementing government procurement through fair, open, and transparent procedures in compliance with the Government Procurement Agreement.

216. The Government had been taking a series of action programmes to improve access to government procurement markets since 1985. These measures were genuinely voluntary, and designed to increase access opportunities for foreign suppliers to the Japanese market. Owing to such efforts, the rate of procurement from foreign suppliers had been increasing over recent years, although Japan had yet to see real vigorous efforts by many foreign suppliers towards penetrating the Japanese market. The representative wondered if any other Member published similar figures, as he was not aware of such availability; he asked for the penetration ratio of foreign suppliers in other Members' government procurement.

217. The most recent data on Japan’s government procurement of foreign goods and services, was for 1998 and was scheduled to be published in Japan at the end of November 2000; it would be available in English by March 2001.

218. Regarding procurement for which the exception clause of Article 23 of the Agreement was deemed to apply, the procuring entity concerned was not prevented from taking any action, nor from disclosing any information for national security reasons, etc. If a complaint was lodged by an interested supplier involved in the procurement case concerned, the independent Government Procurement Board would judge whether the complaint was to be dismissed as falling under the exception clause.

219. Japan’s SPS measures were applied only to the extent necessary for the protection of human, animal or plant life or health, in full consistency with the SPS Agreement based on scientific principles. Under the Japanese plant protection system, quarantine pests were defined as those liable to cause damage to economic plants if they were to spread, and which met either of following conditions: those which were not confirmed as existing in Japan, or those which were already present in some part of Japan, but for which official controls were undertaken. This definition was based on the standards provided by the International Plant Protection Convention.

220. Under the Plant Protection Law, the importation of plants that served as hosts for pests, such as the Mediterranean fruit fly and Tobacco blue mold were prohibited. Such a quarantine measure was based on scientific evidence and was consistent with the WTO/SPS Agreement. At the same time, Japan approved the importation of these prohibited plants on the condition that the exporting country had developed an effective method to prevent the invasion of such pests. If a country had a specific request for lifting an import ban, Japan was ready to discuss it from a technical viewpoint.

221. For the sake of transparency, Japan translated into English the requirements and procedures for lifting the import ban and this was distributed to the various countries’ embassies in Tokyo. Japan also provided


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information on import-prohibited pests and diseases. Furthermore, Japan was prepared to explain at length the details of such requirements, upon request.

222. With regard to plant quarantine, the number of requests for lifting the import ban was increasing. The Standard Examination Procedures regarding Request for the Lifting of the Import Ban on Plant Quarantine were determined by the Agriculture Minister in September 1999 and were published in the Tsusho Koho, as well as on the MAFF website. The current status of the examination of such requests had also been published in the Tsusho Koho. As to animal quarantine, the information on the status of requests had been provided to foreign authorities.

223. On international technical cooperation concerning plant and animal quarantine, Japan dispatched approximately 80 experts abroad every year and invited around 200 experts from developing countries every year for both training and capacity building. Japan also conducted group training programmes for plant quarantine techniques, e.g. for fruit flies, in Okinawa. Sixty-six trainees from 25 countries participated in this programme between 1988 and 2000.

224. A detailed answer had been given regarding a question on parallel imports. As noted in the Secretariat Report, in a decision in July 1997 involving certain German-patented products, the Supreme Court held that a patent-holder might not ask for an injunction against parallel imports, nor claim damages for the infringement of his rights under certain circumstances. However, it was premature to discuss in general the effect of this decision on a patent-holder’s right in Japan, because the Court also held that patent rights were not always immediately exhausted if a patent-holder distributed patented products outside its territory. The issue of international exhaustion was a sensitive one, yet without a consensus view, as reflected in Article 6 of the TRIPS Agreement.

225. The discussant asked whether Japan intended to facilitate customs procedures, which was pointed out by many delegations to be lengthy, involving a lot of paperwork. Although average tariff levels were low, a number of delegations expressed concerns on the many non-ad valorem duties and tariff peaks. He invited the Japanese delegation to elaborate in more detail on these issues. He asked if Japan would further address this issue in the context of ongoing negotiations on agriculture or be in a position to reduce or abolish such tariffs autonomously.

226. On SPS and TBT-related issues, the discussant appreciated Japan's willingness to comply with relevant international standards, maintaining that in the interest of consumer health and safety the precautionary principle required very high standards. He noted that further discussion would possibly show whether there was room for improvement.

227. On government procurement, many delegations expressed concerns that the Japanese market was not open due to specific procurement practices of Japanese authorities, especially at the sub-central level. The discussant appreciated detailed answers by Japan on this topic, but believed that this query was also a question of culture; it might need a continued and proactive effort by the Japanese Government, which would not be entirely limited to regulation but would need additional follow-up in the future. He wondered whether there were further questions on this point.

228. The representative of India looked forward to the resolution of the specific problems raised by India, especially with regard to the barriers affecting exports of flowers and fruit from his country.

229. The representative of Uruguay wished to hear from Japan on tariff peaks and non-ad valorem rates. He was also interested to know what Japan would feel if the specificity of agriculture were applied by other countries in connection with other sectors such as the industrial sector, automobile sector or the services sector.


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230. The representative of Malaysia, referring to the comments made by the discussant, hoped that Japan could provide detailed replies on customs procedures, tariff peaks and some specific duties, and SPS and TBT issues.

231. The representative of the United States noted Japan's point that efforts were required for anyone to succeed in a market, and was interested in knowing why the trend in foreign procurement continued to fall. There were some areas in the Japanese market where businesses showed a fair degree of success in selling in a private market but they had not had the same level of success in the corresponding sector in the government market. He wondered if Japan could provide more details to their observations on what might lie behind this trend. He stressed he was not referring to compliance with agreements but trying to understand the underlying economic dynamics.

232. Regarding Japan's apparent failure to provide protection against unauthorized temporary copying of works of sound recordings, the TRIPS agreement incorporated Article 9 of the Bern Convention, which stated that right-holders should have the exclusive right of authorizing reproduction of works in sound recordings in any manner or form. This appeared to include temporary reproduction. He asked Japan to confirm whether it provided protection against such reproduction, if it was not authorized.

233. The representative of the European Union noted that the implementation of procurement by sub-entities, the managing of tenders, etc. tended to diminish the likelihood of success and to prohibit the normal course of business.

234. On standards and certification, he regretted that the Japan's explanation had not addressed the general attitude of the Japanese Government, notably those reasons that would explain the deviation from international standards that existed. He asked why Japan, having adhered to the 1995 UNECE agreement on cars, had signed only a few of the relevant conventions. On recognition of foreign conformity assessment bodies, he asked if there was a general drive to help cooperation, such as easier data sharing on conformity assessment.

235. The representative of Canada was interested in hearing how Japan would address non-trade concerns, noting the heavy reliance on trade policy solutions; there might be other ways to address these concerns. He was also interested in hearing why there were some sharp differences in tariff rates within the wood sector, as pointed out by the representative of New Zealand.

236. On the questions raised by the EU with regard to standards, he supported the approach that standards should be based on scientific results, and hoped that Japan would consider explicit performance-based standards within its Building Standards Law to recognize new building designs, and fire prevention and fighting techniques that were based on scientific evidence.

237. The representative of Japan stated that Article 21 of Japan's copyright law granted authors exclusive right to reproduce the works in a manner consistent with Article 9 of the Bern Convention. Japan therefore fully complied with the obligations under the TRIPS Agreement.

238. On the question of customs procedures, the fumigation of cut flowers usually took half an hour to two hours, and any delay was related to cargo handing. On fruit, for instance mangoes, technical discussion had already been held between India and Japan, and in October 2000 a specialist's conference discussed scientific data for fruit fly suggested by India.

239. Japan had an open system of government procurement and wondered why the ratio of foreign penetration was low in Japan.


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240. On specific duties, it might be one-sided to infer that ad valorem duties were good while specific duties were bad: specific duties would not be so affected by price fluctuations, and could be more appropriate for agricultural products.

241. Japan believed that agriculture was more affected by natural conditions, and that in the manufacturing sector it would be difficult to cover certain elements of the multifunctionality of agriculture, such as preservation of natural environment or landscape. The high tariffs on certain agricultural products were the result of the UR Agreement. The Japanese Government was prepared to discuss market access and other questions in the ongoing agricultural negotiations.

242. There was a Hozei (bonded) area system in which certain cargo was kept; under this system cargo management operations were entrusted primarily to the private sector. There were no lengthy customs procedures: the average clearance time for marine cargo was about 0.2 days in 1998.

243. As explained in both of the Reports prepared for this Review, the main feature of agriculture since the last TPR, was the enactment of the new Basic Law on Food, Agriculture and Rural Areas in 1999, which described the broad direction of agricultural policy reform.

244. Japan had been implementing faithfully its agricultural policy reform based on its UR commitments and the Agreement on Agriculture. Among recent developments was the decline in official purchase prices of major agricultural products every year since 1997; substantial changes had been made on the price policies of a number of agricultural products, such as rice, wheat, and soybeans with a view to establishing an agriculture sector that could properly respond to consumer demand.

245. Many comments from delegations referred to the target of the food self-sufficiency ratio announced as a part of the Basic Plan published in March 2000. The representative emphasized that all measures that Japan might take would be consistent with its commitments under the WTO Agreements. Whatever the Government action, the self-sufficiency ratio would not rise, unless consumers favoured the quality and price of domestic agricultural products, and chose them, in preference, at the market. Over the past years, in line with a long-term change in the food consumption pattern, imports of a number of agricultural products had increased substantially; this had led to a decline in the food sufficiency ratio to around 40%, which was the lowest among developed countries. On the other hand, Japan was the largest net food importer in the world, which was why the main objective of the Government was to establish domestic agriculture that could properly respond to consumer need. Changes in the price policy on a number of major agricultural products had also been made as part of the agricultural policy reform, in order to allow prices to properly reflect the supply/demand situation and quality evaluation. In this regard, the target of the food self-sufficiency ratio was a guidance in various stakeholders' efforts toward making domestic agriculture more attractive to consumers.

246. Another main gist of Japan's agricultural policy reform was consideration for the multifunctionality of agriculture. Several countries had commented that, whatever the purpose of the policy, it must not distort trade. He reiterated that any policy measure that Japan took was consistent with the WTO rules. However, at the same time, he pointed out, as the multifunctionality of agriculture had a good public aspect, a certain level of policy intervention was required for its fulfilment, and as the multifunctionality of agriculture was closely related to, and could not be separated from, agricultural production, discussion on policy measures should duly reflect this point.

247. Referring to a comment by Uruguay on the ongoing agricultural negotiations, Japan had been actively participating in the discussions on agriculture. In the process of the General Council in the lead-up to Seattle, Japan had made a proposal for the framework of agricultural negotiations. Furthermore, there was an extremely lively discussion on 15 November 2000, based on the paper submitted by Japan together with


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25 other countries, at the Special Session of the Committee on Agriculture. The basic philosophy of Japan regarding the negotiations on agriculture was that the agricultural trade rule of the 21st century should allow the co-existence of various types of agriculture. Currently, Japan was preparing a negotiating proposal to submit to the Committee on Agriculture by the end of 2000. The Government had been conducting a number of consultations with various stakeholders, including farmers, consumers, the food industry, and policy makers. It had also collected a wide range of opinions from the general public through the website of the MAFF. Japan was willing to explain and discuss its proposal with other Members at the Committee on Agriculture, once it had been finalized.

248. In the textiles sector, the import volume had risen steadily, particularly in the area of apparel, while demand in the domestic market had remained stagnant throughout the 1990s. Consequently, domestic production had shown a downward trend, and the import penetration ratio stood at 60.6% in 1999, compared with 34.4% in 1990. As a result, the textile industry had been facing many difficulties and there was mounting pressure to introduce import relief measures through the use of transitional safeguards (TSG). Despite this, the Government of Japan had firmly abided by the Agreement on Textiles and Clothing (ATC), and was implementing an integration programme under the ATC in good faith.

249. Furthermore, based on the Uruguay Round Agreement, Japan had implemented the phased reduction of tariff levels, resulting in a significant reduction of high tariffs and tariff escalation. Large portions of Japan's textiles industry were small and medium-sized firms, which had been severely affected by the stagnant consumption, as well as the increased imports. It was therefore very difficult to engage in any further reductions of the tariff levels.

250. Application of specific duties in the textiles sector was limited to a selected number of products, where market prices were volatile. In Japan's view, the use of specific duties alongside ad valorem duties, in limited areas of textiles products, was perfectly WTO-consistent, and Japan had no plans to change the system. However, Japan had no intention of excluding these goods from the scope of the negotiation of a comprehensive coverage as long as the industrial tariff negotiation was launched as a part of a new round with a balanced and sufficiently broad-based agenda.

251. Leather manufacturers in Japan were located in regions facing difficult challenges due to their historic and social backgrounds. Most were small or medium-sized companies with little competitiveness in the international arena; this was why the current tariff rate quota system had been introduced.

252. In allocating tariff rate quotas for leather products, the Government of Japan had set out detailed procedural rules for quota allocation, which had been published in the MITI Bulletin. The holders of quota licences had, in principle, also been published therein. Thus, the operation of the tariff rate quota system had been carried out in an equitable and transparent manner, fully consistent with Japan's obligations under the WTO.

253. As was the case for textiles, Japan had no intention of excluding these products from the scope of the negotiation as long as the comprehensive industrial tariff negotiation was launched as a part of a new round with a balanced and sufficiently broad-based agenda.

254. Japan had made every effort to liberalize and deregulate the financial services sector, and had put a maximum effort into stabilizing the financial system since its previous Trade Policy Review in January 1998. Japan appreciated the fact that many delegates had acknowledged how much it had done in this sector.

255. The fragility of the financial system was no longer a worry. In the banking subsector, non-performing loans had been steadily disposed of. In insurance, statistics were showing positive signs, and Japan had developed a system to deal promptly with insurers undergoing difficulties in continuing their


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businesses.

256. Since the establishment of the Financial Supervisory Agency in June 1998, all regulatory requirements had been made public in the form of Cabinet Orders, Ministerial Ordinances, or guidelines. These would undergo public comment procedures when changes were to be made.

257. Japan had already realized most of the measures originally planned for the "Big-Bang". Japan's efforts had indeed been fruitful, as seen, for example, by the entry into the Japanese market of many foreign entities; 11 foreign bank branches, 21 foreign securities companies, and 11 foreign insurance companies had entered Japan since March 1997. Japan intended to continue its efforts to further promote deregulation based on the backbone of the "Big-bang".

258. Japan had been promoting deregulation in the field of telecommunications. The deregulation issue had brought about many effective changes: rates had been lowered sharply, and various advanced services had emerged. Furthermore, more than 8,000 new entrants were in the market.

259. Regarding interconnection rates, a steady reduction had been made so far. In addition, the Telecommunications Business Law was amended in May 2000 and, as a result, interconnection rates based on the Long-Run Incremental Cost Methodology had already been introduced. Therefore, a further reduction of the rates was expected in the future.

260. Regarding the promotion of diverse network access, Japan recognized the importance of promoting competition in the regional telecommunications market. Japan was actively promoting the creation of a competitive environment through the positive use of new technologies and through the development of diverse network access, such as DSL, FWA, and CATV. For example, new rules were adopted in September 2000 regarding the unbundling of local loops, where NTT competitors were provided with convenient means to connect their networks directly to the NTT subscriber lines in order to offer DSL services.

261. Regarding the regulation of dominant carriers, Type-I telecommunications carriers that owned local bottleneck facilities, namely NTT East and NTT West, were obliged to formulate and disclose articles of the interconnection agreement. A price-cap regulation on the particular type of telecommunication services was applied to these carriers. These regulations were special obligations imposed on dominant carriers and were not applied to any other telecommunications carriers. The desirable pro-competitive policy in the telecommunications field was being discussed in the Telecommunications Council, and a strengthened regulation of the dominant carriers was one of the main issues.

262. With regard to the issue of an independent regulator, Japan abided by the stipulation of the Reference Paper, which stated that "the regulatory body is separate from, and not accountable to, any supplier of basic telecommunications services. The decisions of and the procedure used by regulators shall be impartial with respect to all market participants." Japan was prepared to study various measures in order to maintain the fair competitive environment and to promote further competition in telecommunications.

263. The amended Port Transportation Business Law was approved by the Diet in May 1999 and entered into force on 1 November 2000. In nine major ports, where 95% of container cargo in Japan was handled, the amended law substantially liberalized port transport business and provided the environment for actual competition. Through this amendment, the economic needs test was lifted from the requirement when approving new entrants into the port transport business, and the fee approval system was also replaced by a filing system. Japan believed that this new system would provide users with a more flexible service.

264. The prior consultation system was based on an agreement among associations related to the port transport businesses, including shipping lines, labour unions, and port transport companies. The system was


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used when changes in a shipping line's business plans might affect the employment and working conditions of port workers. The prior consultation system had been vastly improved, based on the agreement made among these associations in October 1997, and the number of consultations, which had been seen as problematic, had decreased by more than 80%.

265. Japan was energetically trying to define the basic architecture of a new economy, based on information technology, by gathering the knowledge and experience of the most qualified people in this area. For this purpose, the IT Strategic Headquarters was set up in the Cabinet. It was assisted by the IT Strategic Council, consisting of top executives from leading companies as well as other experts.

266. As a result of such initiatives, the Diet passed the Electronic Signature Law in May 2000, which recognized the validity of electronic signatures in legal documents as the equivalent of hand-written signatures or signature seals. At the current session of the Diet, a bill was being considered which recognized the validity of electronic procedures in 50 laws in which the provision of a written legal instrument was required to conclude a transaction between private parties. Furthermore, an amendment to the Contract Law was also under preparation, taking into account the specific characteristics of information technology.

267. Japan attached great importance to the role of the WTO in promoting electronic commerce. To this end, Japan was encouraging support for the idea of establishing a horizontal task force to assist the e-commerce work programme from comprehensive and future perspectives.

268. The discussant, referring to Japan's remarks on its self-sufficiency ratio, stated that the ratio of a country with the geographic configuration of Japan could not be compared with that of a large surface country, which had other constraints in terms of servicing its own people and in terms of gardening the country. The common denominator should not be the self-sufficiency rate but rather the trade-incidence of any measures taken, and their compatibility with obligations under the WTO Agreements. He noted that the special session of the Committee on Agriculture had been convened at the same time as the TPR of Japan, and asked about the future intentions of the Japanese Government.

269. On information technology and telecommunications, an open market-oriented approach was a key issue. He looked forward to a proactive attitude of the Japanese Government to improve control of the behaviour of dominant telecommunication carriers. Concerning the future role of the Ministry of Post and Telecommunications, which had to level the playing field for competitors, he believed that there should be an independent regulator to ensure equal opportunities for all service providers. In addition, the recently planned substantial infrastructure investments in telecommunications should be made in accordance with WTO obligations. Regulations on telecommunications services should be less cumbersome.

270. Japan's financial services sector had potential for further deregulation. An example could be a possible simplification of licensing requirements for banking and insurance. Transparency could be further improved.

271. There had been some deregulation and market opening in maritime transport, however, a number of delegations pointed out there was potential for improvement. Further deregulation in legal services was requested by some delegations, especially regarding restriction of partnership and the employment of Japanese lawyers by foreign lawyers licensed in Japan.

272. The representative of the United States stated that Japan has made much of the benefits of the multifunctional character of agriculture. To the extent that it employed trade distorting measures, he wondered whether any thought had been given to the impact that these measures might have on the ability of other countries to enjoy these multifunctional benefits.


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273. Japan had established income stabilization measures for wheat, barley, rice, and soybeans, but these measures appeared to continue to insulate domestic producers from market signals. He wondered how Japan would attempt to increase the productivity of its farming sector when its policies continued to isolate producers from economic factors that yielded increases in efficiency and productivity. He was also interested in what new agricultural policy measures Japan envisioned in the coming year, whether the thrust of these measures would be to reform price policies for other agricultural commodities, thereby lowering the existing burden on Japanese consumers, and whether new income support programmes to farmers might be envisaged.

274. There was still widespread concern, for both Japanese and foreign industries, that the new Large-scale Retail Store Law left local authorities with too much power and too much latitude in dealing with new store openers; he wondered how MITI planned to monitor local implementation of the law, particularly if implementation was being frustrated locally by unwritten administrative guidance, and the imposition of voluntary guidelines.

275. With respect to Japan's response regarding the postal system and public corporation, he sought further details, particularly as to what specific steps Japan planned to take to ensure that plans for the transition were devised and implemented in as open and transparent a manner as possible.

276. He had concerns that NTT was not yet feeling the full impact of market forces. When a government owned a substantial stake as an operator there was a clear incentive not to take action that could affect the business interest of that operator, which in this case included the maintenance of its market position. Thus, the United States was interested in hearing about any plans to move from the current situation where the law required 33% ownership. He wondered whether there were not other means of achieving laudable objectives, for example universal service and avoidance of management abuse, without maintaining a level of control that might interfere with the full integration of NTT into the play of market forces. NTT had been, and continued to be a large player in the Japanese economy, and insulated from market forces; he was therefore interested in further details on how Japan would dealt with the issue.

277. The representative of the European Union regretted that negotiations on leather had been left for a future round. He did not agree with Japan's interpretation that management of tariff quotas for leather was in full compliance with the rules. He hoped that further consultations with Japan would yield some progress.

278. He noted that some points did not appear to be answered in Japan's written responses: a question on the positive-list system of quarantine pests, which most OECD governments were using but was not used by Japan; and a question regarding varietal testing, which the WTO appellate body found inconsistent with the requirements of the SPS, 19 March 1999. He looked forward to receiving answers on these points.

279. He was interested in hearing why Japan still had not brought its legislation regulating engine output for fishing vessels in line with the relevant international standards, ISO 3046.

280. He requested figures on market share by foreign financial institutions in key sectors, to illustrate the development in recent years; and asked for more concrete details of what measures were actually being planned by the FSA to improve or to liberalize the notification system for insurance products.

281. In regard to asset management, he had raised a specific question regarding investment advisory companies, which was relevant to competition in the pension sector. This did not appear to be covered in Japan's written answers.

282. The representative of Hong Kong, China was pleased to hear Japan reaffirm the primacy of the multilateral trading system, and the importance of WTO consistency of the regional trade agreement, which was to be initiated. He was still concerned, however, about coverage of all sectors, and hoped that Japan


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would fully take into account systematic implications of the position it took.

283. The representative of Brazil referred to Japan's quarantine requirements against Mediterranean fruit flies and tobacco mold. Brazil adopted measures and methods to control these specific diseases, which were rigid and detailed and were accepted by other importing countries, but not by Japan. He asked for further clarification on the reasons for this quarantine measure.

284. Regarding trade barriers in certain products, for example soybean oil, prepared coffee, cigarettes, and footwear, Japan had specified in its answer that the temporary tariff rate on cigarettes was zero, and indicated that would not, therefore, be correct to say that cigarettes were facing barriers. However, according to the Brazilian industry, Japan imposed specific duty on the importation of cigarettes; this was also indicated in the Secretariat Report (Table AIII.4, p. 141).

285. The representative of Australia noted that some questions raised by Australia on agriculture and telecommunications had not been answered and looked forward to receiving responses. While comprehensive answers had been provided in the area of legal services, Australia was disappointed with these responses.

286. The representative of Uruguay noted that with respect to the multifunctionality of agriculture, for developing countries, the industrial and services sectors were also sensitive, and had their own specificities. If Japan's concept were to be applied then these sectors should also be considered as being multifunctional.

287. On Japan's participation in the current negotiations on agriculture, Uruguay was concerned that Japan's position seemed to be that these negotiations concerned trading concerns, which should also take account of market access. It appeared that Article 20 established quite the contrary, in other words, agricultural negotiations were intended to help take greater account of market access and also should take account of non-trade concerns. Uruguay wished to emphasize this point because it was important for Uruguay to be clear from the outset.

288. The representative of Japan stated that, on the question of SPS, Japan had no intention to avoid importation without scientific reasons. The question of quarantine was very technical, and for certain specific questions, one solution was to hold bilateral consultations between Japan and the countries concerned so that issues could be solved in an amicable manner. The Ministry of Agriculture had made efforts to hold bilateral consultations with a number of countries on fumigation and certain other issues, and certain measures had already been taken.

289. Japan had been accelerating efforts to align its standards and technical regulations to international standards. According to the TBT Agreement, a certain amount of flexibility could be taken into account, and Japan had taken into account fundamental climatic and geographic factors. Nevertheless, Japan would do its utmost so that its standards could be aligned with international standards as far as possible.

290. According to Article 30 of Japan's Agricultural Law, on price formation of farm products and stabilization of farm management, the State "shall take necessary measures for allowing the prices of farm products to form appropriately reflecting the real supply-demand situation and quality evaluation in order to promote agricultural production responsive to consumer demands".

291. On the market share of foreign companies in financial services, there were no official data, however, about 10% of the insurance market had been taken by foreign companies. A fuller response would require further investigation.

292. The question of NTT, had been discussed in the Telecommunication Council, and 33% of NTT's Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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shares had been held by the Government in order to pursue universal service, etc. The representative was not in the position to provide a specific answer on how the telecommunications regulations would evolve. At the same time, the Japanese Government had been abiding by the GATS. The Ministry of Posts and Telecommunications was one entity and the NTT was another. The regulatory body was separate from and not accountable to any supplier of basic telecommunications services and the decision and the procedures used by the regulator should be impartial with respect to all market participants.

293. With regard to the point raised by the EU delegation regarding panel recommendations on the SPS matter, Japan was of the view that measures subject to the panel recommendation and appellate body report had been abolished as of 31 December 1999, and the Japanese Government was in discussion with the U.S. Government about measures replacing this abolished measure. Unlike French apples, Spanish oranges had not been subject to the measure in question. An explanation was clearly provided in Japan's written answers. The same applied to the points raised by the EU with regard to the TBT matter on fishery engines and on Japan's rationale for not adopting the "positive list" method for SPS.

294. With respect to the argument that Japan's claim for multifunctionality was hurting the multifunctionality of other countries, especially developing countries, as the largest net-importer in the world, Japan was the best customer of many agriculture exporters. The discussion or claim of multifunctionality was not necessarily what was hurting the interest of some developing countries, especially some agriculture exporting developing countries. Developing countries had stated that the UR negotiations had not led to an upsurge of their agricultural exports to overseas markets, but rather an increase of agriculture exports from a limited number of countries.

295. It has been mentioned that it was not appropriate for Japan to compare its low self-sufficiency ratio with that of large agricultural countries. However, compared with major agriculture exporters as well as with other developed nations such as Germany, the United Kingdom and Switzerland, Japan's food self-sufficiency rate was extremely low. As far as the self-sufficiency rate of grains was concerned, Japan's ratio was 29%, whereas figures for the United Kingdom, Germany and Switzerland were 130%, 118%, and 70%, respectively, and the figure for France was 198%.

296. Under the Law concerning the Measures for Large-scale Retail Stores for the Preservation of Living Environment, MITI established a detailed guideline providing national standards for regulating entities intending to establish a large-scale retail store with regard to preserving the living environment, such as traffic and noise. MITI was closely monitoring local governments' implementation of the law to ensure that the aim of the new law was not impeded. The MITI would take appropriate measures in accordance with the Local Autonomy Law, including the provision of technical advice and recommendations to the local governments, with regard to the implementation of the law. MITI would also publish the necessary information for the implementation of the law.

297. On the question of fishing vessel engines, the Japanese Government was trying to make Japanese standards consistent with international standards. He was not aware of how much this request had been studied within the Japanese Government and would return to this mater later.

ANNEX I

ADVANCE WRITTEN QUESTIONSARGENTINA

1. During the period 1997-1999, Japan frequently applied special safeguard measures (SSG). As the purpose of the SSG mechanism is to prevent a rapid increase in imports that distorts domestic markets, could Japan please explain what conditions in the markets for products such as wheat flour and milk made it


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necessary to apply the SSG? Japan has also applied the SSG to specific products in a "basket of quotas". Could Japan please explain how this measure complies with the provisions of the Agreement on Agriculture?

2. Regarding the application of tariff quotas, please provide further information on the "own capital" requirement to be met by importers in order to be able to obtain a share on fair terms.

3. In March 1999, the Dispute Settlement Body approved the conclusions of the Panel and the Appellate Body on the dispute "Japan – Measures Affecting Agricultural Products". Although Japan announced in December last year that the testing requirement for plant varieties applicable to eight products was abolished, it is still holding consultations with the United States on quarantine methodology for these products. In view of the time that has elapsed since these conclusions were adopted by the DSB, we should like to know when Japan will notify full implementation?

4. In para. 123, the Secretariat indicates that Japan allows parallel imports of products subject to intellectual property protection. Could the Delegation of Japan confirm this statement?

CHILE

Report by the Secretariat

Section II: Trade Policy Regime: Framework and Objectives

1. Report indicates that free-trade agreements are attracting greater interest in Japan and that study groups with various countries have been set up. The press states that it has already been decided to negotiate a free-trade agreement with Singapore. We should like to know the reasons for this change in Japan's policy, which we naturally endorse, and whether it is intended that future free-trade agreements should be comprehensive. We should also like to know whether it has been decided to negotiate free-trade agreements with other economies, particularly in the context of the APEC commitment to liberalize trade in the region in 2010.

Section III: Trade Policies and Practices by Measure

Although there is no special reference to the fisheries sector, Japan explained its position on fisheries subsidies to the Committee on Trade and Environment (WT/CTE/W/173). In this document, Japan indicates that the over-exploitation of fisheries resources, the lack of adequate fishery management, and illegal, unreported and unregulated (IUU) fishing activities, are due to several factors. Chile, together with other countries, has stated that fisheries subsidies contribute to over-capacity and ultimately to over-exploitation of marine resources with harmful effects on the marine environment.

In this connection, we should like to know:

2. What form of government support, if any, and what amount is given to the long-distance fishing industry, particularly the deep sea fishing fleet?

3. What measures does Japan apply to its deep sea fishing fleet for the management of fisheries resources and conservation measures and what measures are applied to control IUU deep sea fishing, in addition to the administrative guidance letter on flag-of-convenience vessels mentioned in para. 49?

4. In para. 95, it is mentioned that the measures to promote investment include financing measures at low interest rates granted by the Japanese Development Bank for eligible projects. What are the criteria for deciding which projects are eligible for these benefits? Are they granted on the basis of national treatment?


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Section IV: Trade Policies by Sector: Agriculture

5. In para. 8, it is stated that a system of direct payment to farmers in hilly and mountain regions has been implemented under the Basic Plan for Food, Agriculture and Rural Areas. We should like to have further information about this direct payment programme for farmers in hilly and mountain regions, for example, the number of farmers benefiting from it, the features or size of the land in order to be eligible for the benefits, the types of crops eligible, the annual amount involved and the purpose and objective of this aid.

Section IV: Trade Policies by Sector: Services

6. Does Japan have any type of agreement with third countries on recognition of education, experience, degrees or certificates for the supply of professional services? If so, what are the countries?

7. Are Japanese professional associations public or private bodies? Is it mandatory for Japanese professionals to belong to a professional association? If so, what is the situation of foreign professionals?

HONG KONG, CHINA

Services in General - (WT/TPR/S/76, p. xii, para. 23; WT/TPR/G/76, pp. 17-18, paras 83-89)

1. Foreign entry to services sectors in Japan has been discouraged to a certain extent by regulatory measures like licensing and restrictions in foreign investment. It is noted that Japan has launched "the Three-Year Program for Promoting Deregulation" during 1998-2000 to address the issue. Apart from deregulation arrangements concerning financial services which are well covered in the TPR reports, would Japan give an account of major achievements in deregulation/streamlining of regulatory procedures in other services sectors? What has been the perceived impact on the level of services imports? We would also be glad to hear from Japan any further plans for deregulation.

Free Trade Agreements - (WT/TPR/G/76, p. 10, para. 42; WT/TPR/S/76, p. 24, para. 20)

2. We would like to know the latest progress of the study/examination on the possibility and desirability of free trade agreements with Korea and Mexico. Will formal negotiations begin soon?

Administrative Guidance - (WT/TPR/S/76, pp. 48-49, para. 49)

3. It is mentioned that the Japanese Government employs administrative guidance to implement its trade policy. The request to importers relating to tuna caught by vessels that do not abide by an international treaty was cited as an example.

We would like to know if there is a list of all such administrative guidance and whether such information is available to the public. It is also mentioned that it is up to importers whether to abide by the request. We are interested to know if the Japanese Government has any record of the importers who did not abide by such requests.

State Trading - (WT/TPR/S/76, p. 53, para. 69)

4. We appreciate Japan's effort in abolishing the monopoly on production and distribution of certain industrial alcohol by 1 April 2001. We would like to know whether there is a schedule for liberalizing the trading of other items that are still monopolised by the state trading enterprises.

Labelling - (WT/TPR/S/76, p. 57, para. 83)


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5. It is noted that the Genetically Modified Food Labelling Standard has been enforced since June 2000 while mandatory labelling regarding GMOs for several products will be implemented in April 2001. We note that a number of SPS/TBT notifications have been made by Japan. Could the Japanese authorities share with us information, if available, as to the value of trade that may be affected by the mandatory labelling scheme? Will the list of products subject to the requirements be expanded?

Foreign Investment Regime - (WT/TPR/S/76, p. 63, para. 98)

6. It is observed that inward investment in Japan has traditionally been lower than its outward investment. However, we note that Japan has been stepping up efforts to improve its investment climate. Does this reflect that the Japanese government is attaching more importance to attracting inward investment? Among the measures undertaken by Japan, to what extent are the investment incentives effective in attracting foreign investment? If possible, we would like to have an estimate of the total budgetary cost of Japan's investment promotion programs, including forgone tax revenues.

Competition Policy - (WT/TPR/S/76, pp. 80-81, paras 4-5)

7. It is mentioned that Japanese suppliers of services have been considerably protected from foreign competition. Concerns have also been raised about the adequacy and effectiveness of competition policy in various service sectors as deregulation proceeds. Moreover, certain activities, notably maritime and air transport, are still exempted from the Anti-Monopoly Act. In this regard, we would like to know whether Japan has any plans to further enhance competition in its services sector; and if yes, what these plans or measures are.

Financial Services - (WT/TPR/S/76, p. 98, para. 51)

8. Foreign banks are required to obtain separate licences for the establishment of branch, agency or subsidiary. Would Japan advise if the same requirement is applied to domestic banks and whether Japan has any plan to streamline the requirement?

(WT/TPR/S/76, pp. 98-99, paras 52, 53 & 55)

9. Japan seems to have quite an active state participation in the banking and insurance sectors, for instance, the establishment of Government Financial Institutions to implement policy-based finance, the operation of the Postal Savings System as well as state-owned insurance schemes. Would Japan consider trimming down the share of state involvement so as to encourage further a participation by private sector suppliers?

Telecommunications Services - (WT/TPR/S/76, pp. 102-103, para. 73)

10. It is noted that Japan is considering whether to enhance competition in the mobile telecommunications market through the reduction of share-holding in NTT Docomo by the NTT Corporation. We would be interested in knowing the latest progress and whether there is any concrete implementation plan.

Cable TV - (WT/TPR/S/76, p. 104, para. 81)

11. It is noted that permission for the provision of cable TV services is subject to considerations concerning, inter alia, the necessity and appropriateness of the installation of the facilities in light of natural, social, and cultural conditions in the local area. Would Japan elaborate on the relevant natural, social and cultural conditions and advise whether there is any quantitative restriction or restriction concerning foreign


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participation?

Maritime Transport Services - (WT/TPR/S/76, p. 108, para. 101)

12. It is noted that Japan has replaced licensing requirement with permission for entry into port transport business in nine major ports. We would be interested in knowing whether Japan has any plan to extend the relaxation arrangement to other ports as well.

Air Transport Services - (WT/TPR/S/76, p. 110, para. 117)

13. It is mentioned that provision of auxiliary services in airports operated by the government is subject to approval by the Director of the Regional Civil Aviation Bureau. We would be interested in knowing the criteria for approval and whether foreign and domestic suppliers are subject to the same set of criteria.

Legal Services - (WT/TPR/S/76, p. 111, para. 120)

14. We welcome the various relaxation measures concerning the handling of legal services by foreign lawyers (GJB) which were introduced in 1998 and would like to know if there are plans to further liberalise the sector.

CANADA

WTO Secretariat Report (WT/TPR/S/76)

Section II: Trade Policy Regime: Framework and Objectives; 1) Introduction; para. 2 and Section III: Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade: (vi) Deregulation and regulatory reform

As the Secretariat points out, the Three-Year Programme for Promoting Deregulation has made great strides thanks to the able direction of the Regulatory Reform Committee (RRC). Please provide some details on the new regulatory reform program Japan intends to implement when the current three-year plan draws to a close on March 31, 2001 and what body will be created to succeed the RRC.

Many have criticized the incremental, item-by-item approach to Japan’s efforts in regulatory reform. It has been suggested that Japan could give greater consideration to cross-cutting issues, such as the problem in several sectors of a lack of independent regulatory authority. Reform in areas such as telecommunications (for example, rights of way) may be hampered by the fact that the Ministry of Posts and Telecommunications has both regulatory and promotional functions. Other sectors might be aided by the establishment of an independent regulator, as is the case with MITI in electricity, or the Japan Harbour Transport Authority for sea transport. What are Japan’s intentions to address cross-cutting issues, such as the independence of regulatory authorities, as part of its new regulatory reform initiative?

Section II: Trade Policy Regime: Framework and Objectives; (4) Trade Agreements and Arrangements; (i) WTO; para. 22

According to the Report, Japan applies MFN tariffs to all except a few countries it lists. Please clarify if these few countries get preferential tariffs or non-MFN treatment.

Table II.2: Principal notifications under WTO Agreements (as at 25 April 2000) includes the notification to the WTO of the first phase of integration under the Agreement on Textiles and Clothing. However, no reference is made to the notification of the second phase, which was due on 31 December 1996 and which


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took effect on 1 January 1998. Please explain.

Section III: Trade Policies and Practices by Measure; (2) Measures Directly Affecting Imports; (iii) Tariffs

The Report notes some tariff adjustments initiated by the Ministry of Finance. In the past Japan has reported that tariff rates are reviewed every year on the basis of requests from foreign and domestic entities. Japan’s system of tariff classification distinguishes between the species and dimensions of lumber, regardless of its end use. As a consequence, Spruce-Pine-Fir (SPF) imports, key building components, are subject to duties ranging from 4.8% to 6%, whereas hemlock imported for the same purpose enters duty free. Please provide some examples of tariff adjustment which may have arisen as a result of requests from foreign entities. Also, please clarify how one can point out such tariffs as the SPF tariff or the tariff on cooking oil (currently between 20-25% when translated into an ad valorem basis).

Section III: Trade Policies and Practices by Measure; (2) Measures Directly Affecting Imports; (vii) Government procurement; para. 57

We refer to Japan’s proposal to withdraw certain activities of NTT and its successor companies, including NTT Communications, from coverage under the WTO Agreement on Government Procurement. Considering that Japan appears to retain effective influence and control over many of the NTT companies, please provide information on Japan’s plans for ensuring that its proposal meets its commitments under the Agreement on Government Procurement.

Section III: Trade Policies and Practices by Measure; (2) Measures Directly Affecting Imports; (ix) Standards and SPS measures; (a) Standards, testing and conformity assessments

Canada welcomes the move by Japan to further examine the application of performance-based standards to the regulations within the Building Standards Law (BSL) relating to fire. However, many aspects of the BSL relating to fire remain prescriptive, thereby limiting wood construction and rendering wood-frame buildings more costly. In order to provide safe and more affordable housing for its citizens, will Japan consider explicit performance-based standards within the BSL to recognize new building designs, and fire prevention and fighting techniques?

Section III: Trade Policies and Practices by Measure; (3) Import and Inward Investment Promotion Measures; (iii) Investment regulation and promotion measures; para. 91

The Report indicates that prior notification is, in principle, required for inward FDI for a number of sectors including agriculture, forestry and fisheries, petroleum, leather and leather products, investment trust management, air and maritime transport, as well as Type 1 telecommunications, radio television and cable television, and broadcasting. What is the purpose of these notification requirements and what information must companies provide pursuant to these notifications?

Section III: Trade Policies and Practices by Measure; (3) Import and Inward Investment Promotion Measures; (iii) Investment regulation and promotion measures; para 93

The Report states that although a notification of an FDI project may be rejected, this has never happened. Please clarify whether any conditions have been placed on any of these investments as a condition for approval.

Section III: Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade; (iii) State-owned companies and privatization


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Para. 115 and the accompanying Table AIII.13 reference several major companies where the government of Japan retains an ownership share. We note that the government of Japan currently holds 53% of stocks in Nippon Telegraph and Telephone Corporation (NTT) and that the government is required by law to hold at least one third of these stocks. What is the rationale for the legal requirement that the government retain one-third ownership share? The government is slated to drop its ownership to 46.7% in November. What further plans does the government have to divest the remaining ownership share in the corporation which would be allowable under the current law?

From para. 115 and Table AIII.13 we also note that the Government of Japan holds a 66.6% ownership share in the Electric Power Development company and that the government is required by law to hold at least one half of these stocks. What is the rationale for the legal requirement that the government retain a fifty per cent ownership share in the corporation? What is the government’s plan to divest the remaining ownership share which is allowable under the current law?

Section III: Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade; (vii) Competition policy and regulatory issues; para. 134

The Report indicates that the May 2000 amendment to the Anti-Monopoly Act (AMA) will allow private actions commencing 2001. Please indicate Japan’s expectations with respect to the impact this will have in terms of effective enforcement of the AMA. Will foreign parties be allowed to pursue private remedy? Will foreign law firms be allowed to represent private parties in such actions?

Section III: Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade; (vii) Competition policy and regulatory issues; para. 145

With respect to the distribution measures, Canada notes that the Large Scale Retail Store Law was abolished in June 2000 and replaced by the Law Concerning the Measures by Large Scale Retail Stores for Preservation of Living Environment. Please elaborate on how this new law will integrate non-economic criteria, e.g., reduction of noise, with economic/business considerations? Will the Central Government's technical assistance or recommendations to the local governments be made public? Does the Government of Japan expect an acceleration in the number of applications to open large stores of Category II? A number of studies have suggested that the old law contributed to a small scale and fragmented distribution system. What impact will the new law have on the Japanese distribution system?

Section IV: Trade Policies By Sector; (2) Agriculture

The Report states that the support received by farmers in Japan and the costs to consumers of agricultural products remain above the OECD average and have increased since 1997. Moreover, despite the progressive ongoing reforms in other areas of its economy, agriculture remains unproductive as to actually constitute a drag on economic growth. What assurances can Japan provide that its targeted food self-sufficiency ratio of 45% will be primarily aimed at increasing domestic productivity, and will not be achieved by discouraging competitive imports of food, fish, and fish and food products that are now growing in response to consumer demand?

We remain concerned about the Japanese snapback safeguard measure on pork in the form of an increased minimum import price. As currently administered, this measure creates considerable uncertainty for suppliers and Japanese importers. What steps will Japan consider to allow suppliers and importers to operate with greater business certainty?

Section IV: Trade Policies By Sector; (3) Energy and Utilities; (ii) Electricity


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The Report notes that Japan has introduced wheeling rules; however, we note that these rules are administered by MITI, rather than by an independent authority. Given the market conditions which have allowed for regional monopolization by vertically-integrated firms, how will Japan ensure that wheeling rules and other deregulation measures are implemented so as to not place new entrants, especially smaller firms, at a disadvantage?

Section IV: Trade Policies By Sector; (4) Manufacturing; (ii) Sectoral developments; (c) Pharmaceuticals

The Report points out that while foreign clinical test data is increasingly accepted by the Ministry of Health and Welfare, in many cases, the unique nature of Japanese standards requires supplementary documentation and testing. Will Japan continue to increase the range of foreign test data acceptable by ensuring that domestic testing standards are in line with international standards where those exist?

Section IV: Trade Policies By Sector; (5) Services: (iii) Telecommunications

According to the Report, the telecommunications sector is characterized by dominant market players; for example, the two local NTT companies in the local communications market. What steps will Japan take in order to ensure that an asymmetric regulatory system is established to deal with dominant carriers? For example, will new entrants be freed from some of the more onerous reporting requirements that the Ministry of Posts and Telecommunications now sets out?

Will Japan establish rights-of-way regulations to ensure fair access to the land and facilities owned or controlled by utilities and to adopt measures to facilitate construction and expansion of infrastructure over public land and facilities?

Section IV: Trade Policies by Sector; (5) Services; (iii) Telecommunications; (c) Regulatory Framework; Entry Regulations; para. 72

The Report states that for Type-I and Special Type-II carriers to conclude, modify, or abolish contracts with foreign governments, citizens, or corporations, ministerial authorization is required. Please outline what criteria are used in determining whether ministerial authorization is granted in such a case.

Section IV: Trade Policies by Sector; (5) Services; (iv) Transportation services; (a) Maritime transport; Domestic water-borne trade; para. 89

The Report states that generally cabotage is closed to foreign competition, except where non-Japanese vessels obtain permission from the Minister of Transport. Please detail under what circumstances such permission is granted and what criteria are applied. Also, please indicate how often is permission granted by the Minister of Transport to operate in the coasting trade of Japan. To which flags is such permission granted?

Section IV: Trade Policies by Sector; (5) Services; (iv) Transportation services; (a) Maritime Transport; Domestic water-borne trade; para. 91 and (b) Air transport; International air transport services; para. 113

The Report states that under the Law for Ship Officers a Japanese flag vessel must be manned by a certain number of officers holding Japanese certificates. A foreigner who holds a certificate issued by foreign authorities may take the Japanese certificate examinations, with the approval of the Minister of Transport. Similar provisions apply to holders of foreign certificates for the operation of aircraft. Please clarify when such Ministerial approval is granted for ship officers and aircraft operators. Also, with reference to the number or scope of examinations required, is there any recognition of foreign certification granted to pilots and ship officers who hold foreign certificates?


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Section IV: Trade Policies By Sector; (5) Services; (iv) Transportation; Air transport

The Report points out the problem of airport capacity constraints. The WTO Secretariat notes that the present airport slot allocation system is based upon IATA guidelines. In accordance with those guidelines, what additional efforts will Japan undertake to ensure that the slot allocation system at Narita is made more transparent, fair, and equitable?

Section IV: Trade Policies By Sector; (5) Services; (v) Other services; Legal services

According to the Report, FDI levels are still low despite some recent efforts at attracting foreign direct investment. In assessing how the business environment can be improved, Japan has identified legal reform as a prime component, and has taken some tentative steps to loosening the restrictions on foreign lawyers operating in Japan. However, many in the legal and business community have stated that the remaining restrictions (for example, regarding partnerships with Japanese lawyers) are an impediment to the delivery of high quality transnational integrated legal services necessary to encourage foreign direct investment. What does Japan intend to do to further reform the area of legal services, especially regarding restrictions on foreign lawyers?

Appendix Tables

This refers to Table AI.1:Exports by product groups, 1995-99. Noting that the Yen lost value to the U.S. Dollar from 1995 to August 1998, Japan’s level of textiles and clothing exports did not vary substantially since the beginning of the Agreement on Textiles and Clothing. However, according to Table IV.6 on Employment in manufacturing, value added per employee and wages per employee in Japan, 1992-98, employment in these sectors fell nearly one fifth over this period. Is this result attributable to the loss of the domestic market, or to the increased mechanization of the manufacturing process used for these products?

Government Report (WT/TPR/G/76)

Trade Policy Development, 1998-2000; (2) Relations with Other Countries and Regional Initiatives; (b) Relations with Europe; para. 33

Reference is made to cooperation with the EU on improving market access and facilitating investment, "for the benefit of the whole world", including in telecommunications. With respect to this issue, Canada has encouraged Japan to take further measures to ensure fair access to land and facilities, including rights of way, owned or controlled by utilities, and to adopt measures intended to facilitate construction and expansion of such infrastructure. In its report of September 2000, the Japanese "Study Group on Measures to Realize Effective Competition in Local Access Network Markets" suggested measures which would address our concerns in this area. What are Japan’s intentions to adopt and implement the recommendations of this study group?

We also note, with interest, initiatives by Japan’s local service providers to offer billing services to telecommunications service providers that provide long-distance services to end-users over the local service providers’ facilities. We encourage the Ministry of Posts and Telecommunications (MPT) to ensure that Japan’s local service providers offer this service at a fair price and in a non-discriminatory manner. What steps has Japan taken to address concerns on this issue, which has a significant practical impact on market access?


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Trade Policy Development, 1998-2000; (2) Relations With Other Countries and Regional Initiative; (e) Regional Trade Agreements; para. 42

The Government Report explains that Japan may possibly change its approach towards regional free-trade agreements (FTAs) and that Japan may pursue an FTA with Singapore and perhaps other trading partners. Would it be the intention of the Japanese Government to seek significant liberalization in the agricultural sector as part of potential FTA negotiations?

NEW ZEALAND

Deregulation

The Secretariat Report notes (p. ix, para. 5) that Japan remains committed to the promotion of deregulation and improved transparency. The Ministry of International Trade and Industry has taken steps to evaluate the costs and benefits of trade and trade-related measures, including regulations.

1. Will these evaluations be published?

2. What further steps will be taken to promote deregulation and improve transparency?

The Secretariat Report notes (p. ix, para. 2) the view that sustained economic recovery can only be achieved through more aggressive structural reform which encourages competition. There appears to be a gap between this assessment and recent decisions by the government to defer certain reforms in the finance and related sectors (Secretariat Report, p. xiv, para. 29).

3. Can Japan confirm that the government remains committed to a comprehensive regulatory reform programme, including in the agriculture and services sectors?

4. If so, can Japan advise when the deferred reforms will be implemented?

Standards and Conformance

The Secretariat notes (p. xi, para. 17) that Japan continues to bring its standards into line with international standards, and has taken steps to ensure acceptance of foreign test data and conformity assessments.

5. What further steps will be taken to bring existing non-conforming standards into line with international norms and over what timeframe will this occur?

We note that no data was available on the percentage of standards or regulations under the Food Sanitation Law, Building Standard Law, or relating to Japan Agricultural Standards, which correspond to international standards (Secretariat Report, p. 54; table III.6). These standards and regulations have a significant effect on market access.

6. Will the Japanese authorities be able to complete this information, and if so when?

7. If not, we would be grateful to know why this data is not available.


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Competition Policy

We welcome steps taken by the Japanese Fair Trade Commission to increase competition including the abolition of a number of exemptions from the Anti-Monopoly Act. We note that some exemptions still remain.

8. What steps are being taken to remove the remaining exemptions and over what timeframe will this occur?

Services

The Secretariat's Report notes that recent regulatory changes in the legal sector have resulted in the relaxation of some conditions for foreign lawyers practising in Japan but there continue to be restrictions on the types of law that may be practised by foreign lawyers in Japan.

9. Has consideration been given to extending the scope of practise available to foreign lawyers beyond aspects of foreign law?

The Secretariat's Report states that there is little foreign participation in services, including education services.

10. Has Japan given consideration to expanding market access opportunities for foreign education services providers as a means of providing the flexibility it seeks in the education sector? Is Japan for example looking to establish systems for formal recognition of degrees/qualifications earned by Japanese students at "other schools" (kakushu gakko)?

11. Do professional bodies in Japan recognise qualifications gained overseas for the purposes of registration, certification and licensing?

12. How does the Japanese Government encourage students to study overseas in order to have access to a wider range of educational opportunities and develop new skills?

Tariffs

While most imports to Japan are either duty free or subject to low tariff rates the agriculture sector remains highly protected from foreign competition. The Secretariat Report notes (p. 83, para. 9) that many agricultural subsectors, including dairy products, benefit from relatively high levels of MFN tariff protection, and in addition are subject to a number of tariff peaks. For example, 90% of the tariff lines under HS Chapter 4 (which includes dairy products) are subject to tariff peaks and 60% are subject to non-ad valorem tariffs.

New Zealand continues to be concerned with the excessive use of specific duties in agriculture, which lead to very high ad valorem equivalent tariffs, up to 987.3% and often over 300%.

13. What consideration has Japan given to the impact of these high specific duties on end-users, both processors and consumers?

14. How does Japan justify the disproportionate impact of specific duties on levels of protection afforded to the agricultural sector?

Tariffs are generally low in the forestry sector, however the tariff structure discriminates in practice against certain coniferous species (notably the 4.8% tariff on radiata pine and some other coniferous woods) while


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other coniferous species (for example douglas fir) enjoy duty-free entry to Japan.

15. Can Japan explain the economic justification for this tariff differentiation, when it is prepared to grant duty-free access to substantial quantities of woods from the other coniferous species (such as douglas fir)?

SPS Measures

Japan's regulations for enforcing phytosanitary controls mean that, by default, action is taken against pests on imported produce that do not meet the FAO definition of "quarantine pest", if the pests are not included in a schedule, even if those pests ate present in Japan and not under an effective mandatory official control programme.

16. Does Japan have any plans for reviewing its enforcement regulations to make them more flexible, for example by listing pests against which action is taken rather than listing on the schedule the 63 "non quarantine" pests against which no action is taken?

17. Can Japan confirm that any changes which may be introduced will be applied in a way which is transparent and does not have the effect of discriminating arbitrarily among supplying countries?

18. Is Japan considering a change in its definition of "official control" in phytosanitary regulations, to align with the new international definition that is likely be adopted by the Interim Commission on Phytosanitary Measures in April 2001?

Agriculture

We welcome Japan's move away from market price support to direct payments in agriculture. However, the sector continues to be heavily supported by government and highly protected at the border. The Secretariat notes (p. 86, para. 15) that "[t]he support received by farmers in Japan and the costs to consumers of agricultural products remain above the OECD average and have increased since 1997", and that high costs have forced certain food processing businesses to relocate out of Japan (p. 81, para. 6).

19. How does Japan ensure that end-users, both processors and consumers, have the opportunity to purchase quality agricultural products at internationally competitive prices?

New Zealand is concerned at the consistently low quota fill rate for dairy products. We note the Secretariat's comment (p. 42, para. 28) that "[t]he quota allocation method tends to be intricate". "In the case of agricultural products, ... [s]ome qualification requirements for applicants are stipulated taking into account the characteristics of the product and the market, with a view to ensuring that the licensed goods are supplied to end users".

20. Can Japan explain the process it went through in "taking into account the characteristics of the product and the market" in designing the qualification requirements for dairy product quota.

21. What steps is Japan taking to ensure that administration of the tariff quotas enables end-users to be able to obtain the quantity and specification of imported dairy product that they require?

22. What further steps does Japan intend to take to improve the transparency of its tariff quota administration in dairy and to facilitate quota fill? For example, what steps is Japan proposing to take to fill the quota for Skim Milk Powder for the School Lunch Programme?


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The Secretariat Report notes (p. 82, para. 8) that under the new Basic Law on Food, Agriculture and Rural Areas, the government plans (inter alia) to expand the scale of production and improve agricultural infrastructure to raise the productivity of the sector, and develop and disseminate technology to improve the quality of products. The Report also notes (p. ix, para. 2) that "the view is taking hold that a sustained economic recovery can be achieved only through more aggressive structural reform that enhances competition".

23. Does Japan also apply the notion of "enhancing competition" to the agricultural sector? How does Japan plan to raise productivity and improve technology in the agricultural sector in this regard?

State Trading

The Secretariat notes (p. 53, para. 69) that "[t]he stated aims of [state] trading include: stabilising supplies to consumers; controlling imports to assist domestic producers; and protection of consumers' interests."

24. What factors does the Agriculture and Livestock Improvement Corporation (ALIC) take into account when choosing the type and quantity of products to import? What weight is given to considering consumer demand for a supply of quality, cost-effective products as opposed to assisting Japan's dairy producers?

25. How does ALIC ensure that consumers' interests in terms of price, quality and quantity are met for dairy products?

26. How does Japan ensure that the stated aims for STEs, as noted in the Secretariat Report (p. 53) are consistent with WTO provisions, including Article XVII of the GATT which requires non-discriminatory treatment and adequate opportunity of competition?

Fisheries

Tariffs on fish and fish products at the frontier can be seen to have a significant impact on prices compared with those for domestic product.

27. Given Japan's strong reliance on imported seafood, what purpose is served by Japan maintaining its comprehensive import tariff regime?

A clear description of Japan's import quota regime for certain fish and marine products is provided in the Secretariat Report.

28. What is the basis in the WTO Agreements for a government to:

- place QRs on non-agricultural commodities;

- impose QRs in order to avoid effects of disorderly trade on domestic supply and demand permits QRs to be imposed on the fish species identified in Japan's quota system; and

- avoid adverse effects of disorderly trade on stock status of the species identified?

Regional Trade Arrangements (RTAs)

New Zealand shares Japan's concern (Government of Japan report, p. 10, para. 40) that some RTAs have raised barriers to trade with non-member countries, and effectively weakened the free, non-discriminatory


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and open multilateral trading system under the WTO. New Zealand also believes that RTAs should contribute to trade liberalisation, rather than become stumbling blocks. We note that Japan and Singapore agreed in October to launch negotiations for a Economic Partnership Agreement, including free trade in goods.

29. Can Japan confirm that it will eliminate tariffs and remove market access restrictions on substantially all goods in any FTA it may negotiate with Singapore and that there will be no sectoral exclusions?

REPUBLIC OF KOREA

I. Economic Environment

(4) Developments in trade and foreign direct investment

(iv) Foreign direct investment (FDI)

1. According to para. 38 (p. 14), "despite recent regulatory reforms and rising FDI, inflows are still low by OECD countries' standards." The Secretariat's Report cites regulatory barriers as a factor behind the low level of FDI into Japan. One example is the regulatory criteria for issuing visas for investment and business administration purposes. The ordinance of the Ministry of Legal Affairs stipulates that visas for investment and business administration purposes may be issued for businesses that hire at least two Japanese nationals or permanent residents who live in Japan, in addition to the manager. This requirement makes it difficult for foreign investors to acquire a visa for investment purposes. Does Japan have any plan to abolish or relax this requirement?

II. Trade Policy Regime: Framework and Objectives

(1) Introduction

2. In relation to the U.S.-Japan bilateral arrangements (para. 4, p. 19), a recent report mentions that Japan's Ministry of Foreign Affairs and Ministry of Industry and Trade are considering signing the tentatively named "Economic Linkage Agreement" with the United States (Nihon Keizai Shimbun, front page, October 29). Could the Japanese Government provide the details of this proposed agreement, in particular its nature and coverage?

(4) Trade agreements and arrangements

(iv) Preferential arrangements

3. In relation to para. 37 (p. 30), Japan, along with Canada, the EU and the United States, has proposed to implement tariff-free and quota-free treatment for essentially all products originating in least-developed countries (Director-General's Report on Consultations, General Council, 3 May 2000). Please provide a specific schedule on the implementation of the proposal.

III. Trade Policies and Practices by Measure


(iii) Tariffs

4. According to para. 29 (p. 42), Japan has maintained a low average applied MFN tariff rate of 6.5% in


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fiscal year 2000, which Korea appreciates and considers it as a sign of Japan's sustained efforts to lower overall tariff rates. However, Japan still maintains high tariff rates for some products, such as petrochemicals (polypropylene, high-density polyethylene and polystyrene, etc.), leather goods, textile goods, shoes, and food products, which are of particular interest to Korea. Does Japan have any plan to lower the tariff rates for these products?

5. It is understood that the Japanese Government has decided to abolish the import tariffs on whisky by 2002. However, there seems to be no announced schedule for the abolishing or lowering of the tariffs on So-ju which is substitutable for whisky. Does the Japanese Government have an intention to abolish or lower the tariffs on So-ju?

6. Japan maintains a very unique tariff system for certain products by imposing differential duties. According to footnote 14 (p. 39), "a differential duty involves a specific rate charged per kg. of imports with the rate varying directly with the difference between the standard import price, set a priori by the authorities, and the actual import prices." Technically speaking, this kind of duty may meet Japan's WTO obligations based on specific bound rates. However, this tariff regime seems to be directly contradictory to the principle of a market-based economy, in that the differential duty can adversely affect price competitiveness of imported goods, regardless of their original price level. Does the Japanese Government have any plan to reform this regime towards a more market-oriented tariff system?

(v) Non-tariff border measures

7. As para. 41 (p. 45) indicates, Japan still maintains strict quotas on various items, including 14 fisheries products which are of particular interest to Korea. It is noted that Japan has not increased its import quotas on fisheries products for Korea since 1983, although it has increased them for other countries. Could Japan provide a detailed explanation of the rationale for maintaining this restrictive regime? Will the Japanese Government increase or abolish the import quotas on fisheries products?

8. As para. 43 (p. 47) states, a quota system is applied to the imports of dried laver and certain edible seaweed from Korea. In addition to this quantitative restriction, Japan is applying very high tariff rates on laver in contrast with its average tariff rate of 4.1% on fisheries products. Korea appreciates the various measures the Japanese Government has taken since the last TPR of Japan to address Korea's concerns on this matter, including the abolition of the requirement for import licenses from the domestic producers association. It is strongly hoped, however, that Japan will increase the import quota and lower the tariff rates on laver, and eventually fully liberalize import of laver. Are there any initiative currently being considered that would go in that direction?

(vii) Government procurement

9. With regard to para. 57 (p. 49), Japan still excludes NTT Communications from the Lists of the GPA Annexes. In this regard, the relevant provision of the present Government Procurement Agreement requires Members to consider compensatory adjustment. Some argue that the requirement for compensatory adjustment may discourage the privatization of public corporations and movement towards a more market-driven economy. Could the Japanese Government comment on this point?

10. As para. 59 (p. 50) points out, government procurement in Japan is highly decentralized. As a result, local governments in Japan seem to require excessively strict qualifications, which is incompatible with Japan's obligations under the WTO Government Procurement Agreement and often makes foreign bidders' participation difficult. Does Japan have any plan to redress this situation? Is Japan considering setting up a single inquiry point which would collect and provide information on procurement in the decentralized Japanese procurement market?


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11. According to para. 64 (p. 51), the percentage of foreign suppliers in Japan's government procurement was 5.6% in terms of value in 1997. Could the Japanese Government explain such low percentage? What measures is Japan taking to encourage foreign participation in Japan's government procurement?

(ix) Standards, sanitary and phytosanitary measures

12. Korea understands that Japan will implement a recycling system for home electronic appliances (refrigerators, washing machines, air conditioners, television sets, etc.) in May 2001. Korea fully understands the concern Japan has over the preservation of the environment. Under this system, however, foreign manufacturers bear higher costs than domestic producers, given that they have to entrust their recycling responsibilities to local recycling businesses which impose higher fees on foreign manufactured goods. Can we expect Japan to address this difficulty faced by foreign manufactures?

13. In relation to para. 79 (p. 56), Japan conducts a strict toxic analysis test prior to the customs clearance of imports of fresh shellfish, which results in a lengthy customs clearance process and high costs for exporters. Does Japan have any plan to address this situation and curtail the period of analysis?

14. Japan applies strict quarantine measures to fresh vegetables and flowers imported from Korea. Japanese authorities even request a fumigation of pests that are common in Japan. This measure leads to the reduction of product value and additional costs to exporters. Could Japan improve its quarantine process so that it will not pose as an impediment to trade?

(3) Import and Inward Investment Promotion Measures

(iv) Foreign access zones (FAZs)

15. According to para. 100 (p. 63), Japan had approved a total of 22 foreign access zones (FAZs) by January 1999. Can the Japanese Government provide information on the FAZs' contribution to the increase of imports from Japan's major trade partners? Are the Japanese authorities conducting studies on the specific trade-creation effects of FAZs? If so, please provide details.

(5) Measures Affecting Production and Trade

(vi) Deregulation and regulatory reform

16. In relation to para. 124 (p. 71), the "Distance Standard Regarding the License for the Retail of Alcoholic Beverages" was originally to be abolished by September 2000, as part of the Three-Year Program for Promoting Deregulation. The abolition, however, has been postponed to next January. Could the Japanese Government confirm that the distance standards will be abolished as of January 1, 2001? As a related matter, does the Japanese Government have any plan to simplify the documentation requirements for the licensing and approval of the retail of alcoholic beverages?


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IV. Trade Policies by Sector

(5) Services


17. As para. 47 (pp. 95-96) indicates, bank holding companies and banks' entry in other businesses through subsidiaries have been allowed in the context of the "Big Bang" reform in 1998. Are foreign banks also allowed to enter other businesses by establishing a bank holding company and its subsidiaries? The Japanese government has recently put off the implementation of the partial deposit insurance system until March 2002, and, in addition, submitted a bill to fully insure liquid deposits. It seems possible that the postponement of the partial deposit insurance system would bring about moral hazard in financial institutions, thereby impeding early financial reform. We would appreciate it if the Japanese government could comment on this matter.

18. According to para. 48 (p. 96), in Japan's GATS schedule of specific commitments, "the deposit insurance system does not cover deposits received by branches of foreign banks." Is there any specific reason for excluding the deposits received by branches of foreign banks from the coverage of the deposit insurance system? Also, "commercial presence, as a juridical person established in Japan, is required for investment trust management services." Are branches or affiliates of a foreign investment trust management company not allowed to be established in Japan?

19. Restrictions on cross-border capital transactions have been removed by the revision of the Foreign Exchange and Foreign Trade Law in April 1998. Does the revision allow cross-border transactions under Mode 1 and 2 in the GATS? Are there restrictions on Japanese nationals' investment in overseas securities? If so, please specify them. Does Japan intend to abolish them?

20. As footnote 43 under para. 51 (p. 98) points out, Japan has made no MFN exemption in its GATS Schedule of Commitments. It seems problematic to include "reciprocity" provisions in the Banking Law with regard to licensing a foreign bank without making the MFN exemption. Is the Japanese government considering abolishing the "reciprocity" provisions?

(iii) Telecommunications

21. According to footnote 54 under para. 62 (p. 100), foreign ownership of the NTT Corporation is restricted to less than one fifth of voting rights. Footnote 54 also mentions that restrictions on the nationality of board members and auditors, which had been applied to Kokusai Denshin Denwa (KDD), were abolished as a result of the company's complete privatization. Does the Japanese Government have any plan to liberalize the limitation on foreign ownership and abolish the restrictions on the nationality of board members and auditors of the NTT Corporation?

22. According to para. 70 (p. 102), the Ministry of Posts and Telecommunications (MPT) is to become a part of the Ministry of General Affairs (MGA), "which is to be established as part of a comprehensive administrative reform scheduled to take place on January 1, 2001." Will the regulations for fair competition in the telecommunications sector be transferred to the Japan Fair Trade Commission in that case?

23. As para. 73 (pp. 102-103) indicates, "the NTT Corporation must, at all times, hold all stocks issued by the East and West NTT regional companies." As a result, foreign investors can participate in the regional NTT Corporations only in the form of indirect investment. However, according to Japan's Schedule of Specific Commitments, which was submitted to the WTO Basic Telecommunications negotiations before the reorganization of the NTT, foreign direct investment in the NTT regional companies should be allowed up to


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20%. Please provide Japanese Government's comments on this.

24. Para. 75 (p. 103) states that "telecommunications business is not exempt from the application of the Anti-Monopoly Act." Does this mean that telecommunications business, with regard to fair competition, is regulated by both the Telecommunications Business Law (TBL) and the Anti-Monopoly Act? Please explain how the two laws share the regulatory jurisdiction for telecommunications business.

(v) Other services

25. As paras 119-120 (p. 111) indicate, according to the Special Measure Law Concerning the Handling of Legal Business by Foreign Lawyers, it is not allowed for the Gaigokuho-jimu-bengoshi(GJB - attorney in charge of foreign legal affairs) to employ Bengoshi. Instead, GJBs are only allowed to establish joint enterprises with Bengoshis. Is there any clear-cut criteria for distinguishing employment of a Bengoshi from establishment of a joint enterprise with a Bengoshi? Could Japan clarify the legal nature of "joint enterprise", particularly in the context of taxation and liabilities of the entity?

26. In relation to paras 119-120 (p. 111), what is the difference between the GJB and the "Foreign legal consultancy" which is currently under discussion in the WTO Committee on Specific Commitments?

27. According to para. 128 (p. 112), "formal education institutions must be non-profit organizations, and their commercial activities are legally limited". Para 128 also states that the Ministry of Education(MOE) "has the discretion to define the scope of commercial activities." Please provide the general criteria which the MOE applies or specific cases to clarify the scope of commercial activities.

MALAYSIA

1. Tariff escalation for a number of products remains discriminating against processed products particularly in textiles, rubber and wood sectors. Could Japan elaborate why this is necessary and would there be a possibility of downward revision in the near future?

2. Weak domestic demand has contributed to the reduction in Japanese imports, coinciding with the downturn in the Asian economies. What measures has Japan taken or will take to ensure continued strong uptake of imports to further the Asian recovery process?

3. We note that Japan's simple average applied MFN rate has increased from 5.6% in FY1998 to 6.7% in FY1999 (Table 111.2, p. 38). Could Japan provide an explanation why there was an increase and in what sectors have tariffs increased?

4. Japan still maintains a large number of non-ad valorem duties in several sectors such as textiles (245 lines), processed food (123 lines) and vegetable products (60). These affect mainly processed manufactured goods that are of export interest to developing countries. The report noted that this practice does not lend itself to transparency and predictability and result in imports of cheaper goods being taxed more heavily (Box III.I, p. 41). Would Japan comment on whether they envisage converting these rates to ad valorem in the near future?

5. Secretariat's Report in p. 92 on pharmaceuticals, while highlighting certain concerns over Japan's stringent rules, does not mention other difficulties such as the need to get local government approval in addition to import licensing approvals. The process involves some 26 documents. Could Japan explain why these cumbersome measures are necessary and whether there is a possibility of simplifying the procedures through a single authority?


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6. The section on sanitary and phytosanitary measures mentioned that there is no change in Japan's Food Sanitation Law. Does this mean that Japan's complex phytosanitary protocols particularly on the import of tropical fruits will remain? Only a few tropical fruits from Malaysia are allowed entry for which fumigation measures are required. New varieties have to undergo additional costly and time-consuming scientific testing before entry.

Exports of cut flowers to Japan also face difficulties in entering the Japanese market, with stringent quarantine procedures and inadequate airport facilities. Has Japan adopted the FAO pest risk analysis system which distinguished between quarantine and non-quarantine pests?

Would Japan clarify whether the above measures are applied only to the extent necessary to protect human, plant and animal life or health and are based on scientific evidence and what steps will they be taking to ensure that these measures are not barriers to trade. Japan's elaboration of how they would resolve these problems are also appreciated.

7. Could Japan provide a more detailed explanation why it is seeking to conclude bilateral/regional agreements given its long-standing concerns over regional trading arrangements?

PERU

Report by the Secretariat (WT/TPR/S/76)

Summary Observations

1. Economic Environment(P. ix, paras 2 and 3)

In paras 2 and 3, it is indicated that sustained economic recovery requires more aggressive structural reform that enhances competition so as to reduce costs and prices to world levels and lessen State intervention in the economy. In this connection, has Japan obtained sufficiently beneficial results to pursue deregulation? Will the Government of Japan intensify the reform process in the medium term?

III. Trade Policies and Practices by measure

1. Measures Directly Affecting Imports

(P. 42, para. 31)As mentioned in the Report by the Secretariat, there is clear escalation in the tariff structure which discourages the export of products with high value added to the Japanese market. Does the Government of Japan have any medium-term plans to reduce this tariff escalation?

(P. 43, para. 33)As indicated in the Report by the Secretariat, there are procedures for tariff revisions between the Ministry of Finance and other ministries concerned. Proposed changes are reviewed by the Customs Tariff Council, after which the Ministry of Finance prepares legislation for Diet approval.

Peru would like to receive further information on participation by producers' associations and associations of intermediate and final consumers in these decisions. Are there any regulations providing for such consultations? In this connection, at what stage of the procedure do they participate?


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IV. Trade Policies by Sector

(P. 86, para. 15)Based on the information in the Report by the Secretariat, Japan is considering reducing domestic support to agriculture because it is prejudicial to the purchasing power and welfare of consumers and the Japanese economy in general, as well as causing marked distortions in the allocation of resources. Is the Government of Japan taking any measures in this regard?

(P. 87, para. 18)Based on the information in the Report by the Secretariat, is it considered that these measures, including a direct income support scheme in place of price support schemes, will be effective in remedying the distortions and increasing competition? Have any studies been carried out to quantify the price reduction?

(Pp. 110 – 111, para. 118)

Peru would like detailed information concerning the criteria for access by foreign attorneys to the official programme for legal apprenticeship. Are there any exceptions based on reciprocity in the context of a bilateral services agreement that can be supplied by foreign attorneys in the Japanese market?

EUROPEAN UNION


1. MACROECONOMIC POLICIESGiven the problem of excess capital in various industrial sectors in Japan, coupled with the problem of low returns on equity and the rising incidence of bankruptcies in the private sector, how does the Japanese government explain the strong return to profitability by the corporate sector in recent months, and the increase in private sector investment? Is the new investment only part of the "New Economy" phenomenon, i.e. investment in information-technology? Are these recent investment trends sustainable?

How strong is Japan’s attachment to "lifetime employment"? What measures have the Japanese authorities undertaken to reduce inflexibilities in the labor market?

On 10th October, the Japanese Ministry of Finance published a report entitled "The Japanese Government Balance Sheet". This report showed that the Japanese government has negative net worth to the tune of between 132.6 and 776.5 trillion yen. Would the Japanese authorities care to comment on these figures, within the context of the sustainability of the Japanese national debt?

The national debt burden has been cited by commentators as one of the reasons why Japanese household consumption is sluggish. For example, Japanese citizens may increase their current saving, and thus reduce current consumption, in anticipation of future increases in taxes that may be required to service a large national debt burden. Some commentators consider that the recently-announced fiscal stimulus package aggravates the already poor state of Japan’s public finances. Does Japan think that the fiscal stimulus programme may actually negatively affect household consumption, thus stifling the fragile economic recovery?

The Japanese government says that it will embark upon fiscal structural reform once the economy is "getting onto a path towards full recovery led by private demand" [quoted from para. 54 of the Report by the Government]. How does the Japanese government define such a "full recovery"? What are the precise conditions which would convince the Japanese authorities to conclude that the time for carrying out fiscal structural reform has come?


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The examples of fiscal reform in other countries, such as Sweden, indicate that fiscal reform need not negatively affect the economy, especially if the reforms improve the effectiveness of public expenditure. The expenditure multiplier of the Japanese fiscal stimulus programmes has been low, and appears to be on a declining trend. What measures has the Japanese government undertaken to ensure that this year’s fiscal stimulus programme will have a bigger, longer-lasting impact than previous programmes?

The small increase of interest rates to 0.25% which occurred once the Bank of Japan (BoJ) abandoned its zero interest rate policy cannot really be called "fiscal tightening". Does the Bank of Japan nevertheless consider that it was sufficient to combat the moral hazard problem mentioned at para. 4 of the Secretariat’s Report? Alternatively, even this small rate rise was criticised by opponents of the BoJ. Do the Japanese authorities consider that the interest rate hike was premature and that it might harm the fragile recovery?

2. STRUCTURAL POLICIESIn GoJ report III (3) – Domestic Policy Developments Affecting Trade Policy, regarding the question of public comments procedure, we welcome the introduction of a public comments procedure in 1999, allowing all interested parties to comment on administrative measures and draft regulations. It is, however, important that enough time is left for well-substantiated comments to be taken into account before finalisation of the legislative measure in question.

- What steps does Japan intend to take to ensure that this is the case?

3. FOREIGN DIRECT INVESTMENTDespite recent increases in inward flows of FDI into Japan, in Japanese Fiscal Year 1999 outflows of direct investment still exceeded inflows by a factor of 3.1. The disparity in the accumulated stock of direct investment also remains huge. This imbalance points to structural factors which act as a disincentive to inward investment and which make it more costly and time consuming to set up a business or get new products or services approved than is the norm in other industrialised economies. Japan’s business start-up ratio, at 4.6%, is the lowest amongst leading industrial nations. This indicates that the current business environment is a hindrance to the rational allocation of investment, be it domestic or foreign, within the economy.

- What concrete measures does the Government of Japan plan to take to create a more attractive environment for investment?

- Recent large percentage increases in inward investment are mostly a result of a small number of huge corporate deals. What measures are proposed in order to ensure (a) that the current increase in inward investment is sustained and (b) that the benefits of greater inward investment are felt throughout all layers of the economy? In this context, are there initiatives to strengthen investment links between SME’s?


4. DEVELOPMENT AND ADMINISTRATION OF TRADE POLICYJapan mentions in para. 103 of the GoJ report that a new round should also address "the issues of global environment and the sustainable utilization of exhaustible natural resources". What means does Japan use to make its trade policy supportive of sustainable development? To what extent does Japan use, or is planning to use, instruments such as sustainability impact assessments, as a tool in this sphere? In particular, what other mechanisms is Japan using to promote synergies between its trade policy and its environmental policy?

What are the priorities of Japan in relation to consultations with domestic stakeholders? How does Japan consult with civil society (NGOs, business community, etc) on the formulation of its trade policy? What are


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Japan's views on improving WTO transparency?

5. TRADE AGREEMENTS AND ARRANGEMENTSThe EC appreciates the clear presentation (in paras 40-42 of the GoJ Report) of the evolution in Japan’s policy towards participation in preferential regional trade agreements. The EC agrees that compliance with relevant WTO rules is an important safeguard to ensure that any such regional initiatives support and are complementary to the open multilateral trading system. The report makes reference to the Joint Study Group that has recently undertaken a feasibility study on a Japan/Singapore FTA. The report of this group includes the statement that "during the joint study, a concern was expressed from the Japanese side on agricultural, forestry and fishery sectors. A statement was made from the Japanese side that it was not prepared for further tariff reduction in these sectors in the framework of the JSEPA"2831.

- Notwithstanding the above recorded statement in the report of the Joint Study Group, can the Government of Japan confirm that any future Free Trade Area between Japan and Singapore will nonetheless comply with the requirements of GATT Article XXIV:8(b), in that it will cover substantially all trade and that no major sector will be excluded? Can Japan give the same commitment for any other future FTA it may participate in (e.g. with Korea or Mexico)? When does GoJ expect to take a decision whether to pursue negotiations for preferential regional agreements with countries other than Singapore and on the basis of which criteria?

- Has Japan's change in policy as regards preferential regional agreements had any implications on its policy in the framework of APEC? In particular what has Japan's position been in the discussions it has held with other participants in APEC on the possibility of further liberalisations on an MFN basis within selected sectors?

- As indicated in the Report by the Secretariat (section II, para. 42 including table II.4, and section IV, para. 33), measures introduced as a result of the 1995 Japan-U.S. Autos and Auto Parts Consultation are to terminate by the end of 2000. Could the Government of Japan indicate whether an extension of the measures is envisaged and, if yes, what are the concrete modalities of such an extension?

- Para. 36: Could Japan clarify what the position of Japan is and what stage Japan is in as regards the possibility of granting duty and quota-free access for products from LDCs?


6. TARIFFSCould Japan please indicate whether it intends to bind the remaining 1-% of its tariff lines?

Non-ad valorem duties: Could Japan please identify the non-agricultural tariff lines subject to non-ad valorem duties that have (a) ad valorem equivalents at international tariff peak levels (15% or more) and (b) no trade (suggesting that the duties are prohibitive)?

The EC notes that the average tariff rate for non-agricultural products is low, at 1.7%. However, high tariffs are prevalent in certain sectors (e.g. footwear and headgear) and there is a considerable degree of tariff escalation. Could Japan please indicate whether and how it intends to reduce high tariffs and tariff escalation?

2831 Section II, para. 9, p. 17 of the Report of the Joint Study Group, published on 28 September 2000.Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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The Japanese import regime on leather for years has been an unresolved problem in the bilateral relations with the EU. Further to the very limited volumes of the tariff quotas for leather, the complexity of the management of the Japanese tariff quota system creates a wall of protection to the benefit of the domestic leather industry, against more competitive imports from the EU, and restricts market access. The Japanese licensing system, which the EC has found not to be in compliance with the WTO Agreement on Import Licensing Procedures, has negatively affected Community’s exports within the tariff quota applied for leather, leading to a constant under utilisation of the quota.

- Will Japan make new proposals for a meaningful change of the existing quota system and commitments to eliminate progressively import restrictions?

- Would Japan consider dismantling the current allocation system and its replacement by an automatic allocation system in accordance with the WTO Agreement on Import Licensing Procedures?

Japanese authorities used to provide data on imports of leather under tariff quotas until 1998. Why has Japan suspended provision of such data thereafter? Can Japan provide the data on imports of leather under tariff quotas since 1998?

P. 34, paras 47 (and previous headings): Could Japan indicate the international agreements in place, multilateral and bilateral, that provide for a co-operation between customs administrations or that would allow the exchange of information.

P. 37, para. 16: Could Japan indicate how many times a year complaints against customs valuation and other customs measure are filed and how long, in average, each of the procedural steps is likely to take.

P. 37, para. 17: It appears that Japan has rules in place defining the non-preferential origin of goods. Would it be possible to outline the general principles? Furthermore, could Japan confirm that any member of the WTO could be named as country of origin in a customs declaration on an ordinary MFN importation.

7. STANDARDS AND TECHNICAL REGULATIONS In relation to Standards (pp. 54 and following of Secretariat report), para. 70 states that "Japan has moved toward increased international harmonisation of its standards and technical regulations. The three-year Program for Promoting Deregulation (TYPPD), as amended for FY2000, re-emphasised ministries and agencies endeavour to achieve greater international harmonisation of standards…"

- Could you please explain what are the on-going activities to further align national standards, technical regulations and certification systems to international standards?

- Para. 72 emphasises the growing percentage of national standards being aligned to international standards. (62% in 1999). Notwithstanding, a substantive number of standards still deviate from international standards.

- Could you please develop the reasons for this remaining divergence?

- Para. 74 indicates that "approximately 7% of all Japan Industrial Standards (JIS) were quoted in 1996 as mandatory technical regulations".

- Could the Japanese Authorities provide more updated figures and more detailed information as regards the national standards that have been incorporated in the national laws, or alternatively, that are being referred to by national laws and are consequently (de


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facto or de jure) of a mandatory nature.

The EU believes that the international harmonisation of automobile regulations is in the fundamental interest of all producing nations. The EU welcomes Japan’s accession to 1958 UN-ECE Agreement and trusts that the Japanese side will sign up quickly to a significant number of the annexed regulations as previously agreed.

- What schedule does Japan envisage for the adoption of the specific regulations annexed to the UN-ECE Agreement in the near future?

In relation to conformity assessments, paras 73 and 75 mention the modification in the accreditation system of certification bodies (Industrial Standardisation Law in 1997).

- Could you please provide more information about the situation as regards the recognition of foreign conformity assessment bodies? In this respect, we would appreciate information in relation to:

- The Japanese laws and regulations that open the possibility for foreign conformity assessment bodies to be recognised under these laws;- the conformity assessment functions these bodies can fulfil in the context of these laws;- the procedures that foreign manufacturers that would like to submit their production facilities or their products to assessment by these conformity assessment bodies must fulfil to have the results of conformity assessment be

recognised by the relevant Japanese administration;- the procedures for the recognition of these bodies;- the conformity of these procedures with relevant international standards and guides (for instance ISO/IEC Guide 25 and 65) or, alternatively, if the standards

are not aligned to international standard, the relevant national standard(s);- the period of validity of the recognition and procedures for re-evaluation after expiry of the validity period;- the costs involved for the recognition, the maintenance of the recognition and the re-evaluation;- the time frame for the recognition;- the role of accreditation in the process of recognition: can accreditation replace any of the procedural steps of the recognition procedure;- the impact of the forthcoming Mutual Recognition Agreement on the recognition under the respective Japanese laws.

8. MEASURES DIRECTLY AFFECTING EXPORTExport Restrictions, Licensing and Cartels, in para. 102 of the Secretariat Report: The report does not comment on U.S. attempts to get Japanese steel producers to voluntarily limit steel exports to the US? Could the GoJ please clarify the current situation as well as its position and responses in relation to these attempts?

P. 64, para. 101: Could Japan explain the procedures for exempting goods from consumption taxes that are exported. Is there also a refund available to tourists and other non resident visitors to Japan that take goods which they have bought in Japan in their luggage out of the country.

9. MEASURES AFFECTING PRODUCTION AND TRADEP. 65, para. 109: Could Japan explain the tax rates and the tax base for the application of the motor vehicle tax.


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P. 71, para. 123: Article 69, 3rd sentence of the TRIPS agreement calls on the members to promote the exchange of information and cooperation between the customs authorities with regard to trade in counterfeit trademark goods and pirated goods. Could Japan explain the action undertaken for implementing this obligation.

P. 10, para. 24 of Secretariat Report: In hard core cartel cases the firms involved often succeed in maintaining considerably higher price levels (sometimes considerably more than 20-30%).

- How does Japan intend to tackle the problem that a relatively modest overall level of fines or a statutory cap on the amount of pecuniary fines makes it easy for firms to calculate the cost of the highest fine possible if they were caught and factor this into their budget plans?

The new civil remedy system which will come into force in 2001 as a result of the amendment of the AMA in May 2000 is welcome. However, both as regards core infringements by private firms as well as administrative guidance which may encourage or tolerate such practices, civil litigation is in itself not sufficient to replace a tough enforcement policy by relevant government agencies.

What measures does Japan intend to implement in order to advocate competition at all government levels and to eliminate administrative guidance which has anticompetitive effects?

Criminal prosecutions under Japan’s Anti-Monopoly Act currently run at an average of one or none per year. This appears to indicate that the JFTC does not use the full potential of the legal powers at its disposal. What are the concrete steps envisaged by the Government of Japan to ensure more vigorous and pro-active implementation of competition policy?

Why is the JFTC being merged into a General Affairs Ministry (along, for instance, with core regulatory functions of the Ministry of Posts and Telecommunications), and how is it intended to maintain its independence?

Para. 130 of the Secretariat Report: We note that attempts to increase the level of competition in the Japanese economy constitute a major element in the regulatory reform process. Could Japan indicate how these efforts have affected outcomes, for example, via increased foreign penetration, prices, concentration ratios, or the number of successfully prosecuted cases.

Para. 144 of the Secretariat Report: We note that the Japanese Fair Trade Commission (JFTC) intends to continue to monitor the six major corporate groupings and feels the need to continue to do so. Could Japan clarify what the JFTC is looking for and the sort of action Japan might be envisaging?

It appears that there are plans to merge the three leading Japanese banks into one. Can Japan confirm this? Could Japan inform of the part such a bank would have of the domestic market as well as other relevant foreign markets? Would such a concentration of market power be contrary to Japanese merger control rules?

10. REGULATORY REFORMPp. 71-72 of the Secretariat Report: The EC acknowledges that a number of measures and regulatory changes have been introduced in the framework of the Regulatory Reform Programmes. However, in many cases, the industry is complaining that new regulations or new approaches do not deliver the expected degree of progress, notably due to either procrastination by relevant authorities or bodies, or to reference of unpublished administrative guidelines which put actual liberalisation in question.

- Since GoJ recognised in this exercise two years ago that "to make sure, Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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administrative guidance are not released in general" (see WT/TPR/M/32/Add.1, p. 4 - in that case concerning JFTC), could Japan report whether this attitude (non publication) and practice (to accompany regulatory changes, even when more liberal, by restrictive administrative guidance) continues? In case it does, how does this reconcile with the intended drive toward a more positive and liberal regulatory framework? How is it possible to check whether steps or additional procedures to be implemented according to administrative guidelines put or do not put foreign firms at a comparative disadvantage compared to Japanese firms? Or is it Japan's intention to reform this practice or to make it completely transparent?

- More specifically, would Japan envisage to:

- Introduce a formal ruling process in cases where a company wishes to have written clarifications regarding a planned business situation or a particular regulatory situation?

- Publish regulatory decisions, including official guidance to individual companies, so as to provide a reliable body of administrative precedent?

In GoJ Report III (3) – Domestic Policy Developments Affecting Trade Policy, regarding postponement of regulatory reforms, in a number of areas where essential reforms have been announced, these have been delayed. The reclassification of a number of quasi-drugs as cosmetics or the introduction of a consolidated taxation system are cases in point.

- Can Japan provide an indication when the measures in question will be realised?

- More generally, does Japan consider the introduction of a fixed timetable for regulatory reform to ensure that the process stays on track and is not deflected by, for example, vested interests?

In GoJ Report III (3) – Domestic Policy Developments Affecting Trade Policy, regarding implementation of regulatory reform, we would like to underline that the assessment we are interested in does not refer to the number of issues taken up in the Deregulation Programme, but should provide information about actual change on the ground and concrete benefits of reform measures being felt by economic operators.

- Could Japan provide its assessment of the real rate of implementation of regulatory reforms?

- Which measures does Japan intend to take to ensure that regulations simplified in one area are not replaced by new ones elsewhere, in particular at the local level?

The EU welcomes Japan’s announcement that it will launch a new Deregulation Programme from the end of March 2001. However, the means by which it is intended to continue to promote regulatory reform across government remain unclear, especially in the context of the general reorganisation of government ministries, which will come into effect in January 2001.

- What mechanisms are foreseen within government to continue to promote regulatory reform, especially in view of the fact that the Management and Co-ordination Agency, which is currently responsible for this task, will be subsumed within a new General Affairs Ministry?


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- Is it intended to enhance the role of the Regulatory Reform Committee, in effect currently an advisory body to the Prime Minister, for instance by giving it a broader remit and legal powers under more direct prime ministerial authority?

- Is it intended to make greater use of cross-cutting policy approaches in the formulation of future Deregulation Programmes, for instance along the lines of the approaches currently being followed by the Regulatory Reform Committee to IT-related issues and environmental regulations?


11. AGRICULTUREPara. 72, p. 55 of the Secretariat Report: We note that, "according to MITI, about half of JIS [standards] were equivalent to international standards in FY1997".

- Could Japan indicate what proportion of JAS standards are considered to be equivalent to international standards, and for what period of time this assessment is made?

- If the above figure is less than 100%, could Japan indicate what measures it proposes to take in FY2000 and FY2001 to bring JAS standards into line with international standards?

Para. 79, p. 56 of the Secretariat Report: Why does Japan continue to operate - contrary to the practice of other OECD partners such as EU - a positive list system for quarantine pests, where all pests are considered harmful unless on the positive list?

Does Japan propose to change this system to a negative list system, where Pest Risk Analyses have been performed for all designated quarantine organisms?

Often shipments of cut flowers, pot plants, fruit, and vegetables are refused permission for import or are required to be fumigated, when they contain only organisms, which are not harmful and/or already commonly present in Japan. What measures will the Government of Japan take to overcome such problems, which are created by the Plant Quarantine Law?

Para. 80, p. 56 of the Secretariat Report: As far as Japan’s policy on "varietal testing" is concerned, the WTO appellate body has found it to be inconsistent with the requirements of the SPS agreement (19 March 1999). Could Japan, then, explain why varietal testing is still being applied to EU produce, in particular to Spanish oranges and French apples, 18 months after the adoption of the WTO Panel and Appellate Body findings.

Para. 81, p. 57 of the Secretariat Report: Could Japan give full details of all of the plant and animal quarantine procedures whose operating hours have been extended since the previous Review.

Para. 2, p. 80 of the Secretariat Report: It is stated in the report that, "Japan is moving away from price to income support." What effect does Japan estimate that this will have on overall levels of agricultural expenditure?

"Productivity in Japanese agriculture … remains low by national standards." What specific measures is Japan taking to improve agricultural productivity? Are funds being specifically targeted for this purpose, and are such funds being directed to particular sectors, or to agriculture as a whole?

Para. 6, p. 81 of the Secretariat report: The report states, "Land scale per farmer in Japan has remained roughly the same during 1997-99." Given that the small scale of production is a major contributor to


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inefficiency, as is recognised in the fist indent of para. 8, p. 82, is Japan implementing any measures to encourage the consolidation of farm sizes?

Para. 7, p. 81 of the Secretariat Report: Why is it that transport and distribution costs are considered to be so high by the Japanese authorities, in a society, which is as, developed and modernised as is Japan’s?

12. MANUFACTURINGIn relation to pharmaceuticals: The reasons why the Japanese market is predominately supplied by Japanese firms remains unclear. Why, in contrast to the EU and U.S. markets, is the Japanese market predominately supplied by domestic firms? What role does licencing by foreign companies play in the market and does it disguise a more significant foreign presence in the Japanese market than is suggested by the raw market share data? What role does the Japanese system of pharmaceutical price regulation play in limiting foreign presence in the market?

13. OVERVIEW OF SERVICESPara. 23 in the Secretariat Report "Summary observations": Please provide examples of concrete cases of where, inter alia, anti- competitive practices have helped shield Japanese service suppliers from competition. Please also give the GoJs assessment of to what extent the more aggressive competition policy is tackling these practices.

Para. 38 of the Secretariat Report: Could Japan indicate which share of GDP is generated by commercially traded services (as opposed to the figures including public services)? Could Japan also indicate the share of services in Japanese foreign direct investment (on the side of Japanese investors and foreign investment objects)?

Para. 39 of the Secretariat Report: Is it official Japanese policy to allow increasing services imports as a contribution to the intended enhancement of competition in the supply of services, and which measures are taken to implement that policy?

14. FINANCIAL SERVICES"Big bang" reform has brought about wide-ranging changes in Japan’s financial sector and has considerably reduced the regulatory burden for operators. However, concerns remain with regard to (a) continued application of prior product and rate approval to many insurance products, especially personal lines: (b) excessively strict regulation regarding the separation of brokers and agents in the insurance industry, hampering the ability of brokers to act independently to offer their clients the best deal; (c) the degree to which Investment Advisory Companies can have access to pension, mutual aid association, postal savings and postal life insurance funds in order to offer both advice and discretionary management services.

"Big Bang" reform appears also to include "opening the door to foreign institutions wishing to operate in Japan". Could Japan detail the progress made as regards the entry of foreign institutions?

What concrete measures are planned by the Government of Japan to ensure that the current notification system for insurance products (so-called "file and use"), already applicable to some commercial lines is extended to cover all personal and commercial lines? What action is planned to reduce the processing period?

What action is planned in order to allow brokers to sell insurance products directly to consumers, to collect premiums, and to submit their policies for approval directly to FSA?

Also, every single insurance product requires a license: what are the reasons for not having class of business license available at present.


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P. 9, para. 19 of the Secretariat Report: It is stated that "Provisioning standards [re banks] have also been tightened". How are foreign institutions affected in this respect?

P. 9, para. 20 of the Secretariat Report: It is indicated that "life insurance companies are attracting increased regulatory attention from the FSA". What does this mean exactly, notably as regards foreign companies?

What steps is the Government of Japan planning to ensure access to all pension, mutual aid association, postal savings and postal life insurance funds for Investment Advisory Companies (both advisory and discretionary)?

P. 98, Para. 51 of the Secretariat Report: It is stated that "Foreign banks may enter the Japanese market by establishing branches, agencies or subsidiaries; a license from the FRC is requires in each case". A footnote mentions that each branch or agency requires a separate license. Why is it necessary to do so?

15. TELECOMMUNICATIONSP. 20, para. 100 of the GoJ report mentions that "policy resources will be concentrated on IT related matters such as further pro-competitive policies in the telecommunications sector…". Which pro-competitive policies will Japan implement for this purpose?

P. 101 para. 69: According to the commitments made by Japan (reference paper), the regulatory authority should be separate from, and not accountable to, any supplier of basic telecommunications services. How is this ensured taking into account that the Japanese Government owns a 53% majority of the shares of Nippon Telegraph and Telephone Co. (NTT holding company) and that the MPT approves nominations of directors at NTT Holding?

Para. 69: According to Japan’s additional commitments (para. 6 of the reference paper), "any procedures for the allocation and use of scarce resources, including rights of way, will be carried out in an objective, timely, transparent and non-discriminatory manner." Could the Japanese government provide those procedures? Why is it necessary for the MPT to allow a company to negotiate a right of way with a private landowner?

Is JFTC the competent competition authority for the telecommunications sector? If not, which is the competent authority?

Para. 72: why is a Ministerial authorisation required in order for Type-I and Special Type-II carriers to conclude, modify or abolish contracts with foreign corporations (what is the rationale)?

Para. 73: which safeguards are put in place so that these four NTT companies do not behave, alone or together, in an anti-competitive manner (including engaging in anti-competitive cross-subsidisation, or using information obtained from competitors with anti-competitive results), as per Japan’s commitments in the WTO?

Para. 74: what is the scope of the universal service? How is it funded? How is it ensured that it is transparent and competitively neutral, as per Japan’s commitments in the WTO?

Para. 76: why do Type-I carriers need to notify to MPT, charges and their modification? What is the rationale for MPT to order carriers to revise their charges in order to assure fair and reasonable end-user charges: is this part of the universal service? More generally, it is the understanding of the EC that all carriers’ tariffs, business plans (and changes in business plans or service offered), network plans (and changes thereto), etc. require prior notification to and approval from the MPT: is this the case, and, if so, what is the rationale for such a burden on operators?


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Para. 78: the para. mentions only requirements for Type-I carriers to interconnect with Type-II operators: aren’t there any requirement for type I operators to interconnect with each other? Does NTT publish a reference interconnection offer or all its interconnection agreements, as per Japan’s commitments in the WTO? How is it ensured that NTT East & West interconnection terms (including rates) are then no less favourable than those provided for their own like services or for like services of their subsidiaries or other affiliates, as per Japan’s commitments in the WTO?

Para. 79: the EC understands that Number portability will be possible by December 31, could Japan confirm?

Para. 80: which safeguards are put in place so that NTT-DoCoMo does not behave, alone or with other NTT companies, in an anti-competitive manner (including engaging in anti-competitive cross-subsidisation, or using information obtained from competitors with anti-competitive results), as per Japan’s commitments in the WTO?

Para. 83: what is the legal responsibility of a telecommunications operators for temporary storing data (in terms of intellectual property or criminal offenses for instance)? Are there any specific requirements on e-commerce service providers (in terms of information to the seller, data protection, …)?

16. MARITIME TRANSPORTPara. 95. What are the shares of the total Japanese tonnage, and number of vessels, under the International Ship Regime (most recent statistics)?

It appears that the Japan Harbour Transportation Association (JHTA) is imposing that shipping lines consult with them before any operational changes can be implemented. What is the rationale for that and in particular for the fact that a shipping line cannot change its contractor unless the JHTA specifically sanctions such a change"?

As regards the 80% decrease in the number of consultations mentioned in this paragraph, it appears to the EC more appropriate to say "some 80% of such consultations have since 1997 been categorised as so called 'minor matters' and are relatively quickly processed by the JHTA". Also, the EC had been told and would like confirmation that Stevedore charges will from 1st November, 2000 merely need to be filed with the Ministry of Transport.

Pp. 107-8, para. 99, Harbour services: The revised Harbour Transportation Business Law entered into force on 1 November 2000 and is aimed at liberalising the provision of harbour services at nine of Japan’s most important ports. The EC welcomes this development, but believes that the system by which carriers must still consult with the Japan Harbour Transportation Association (JHTA) before requesting changes in stevedore works (known as "prior consultation") represents an artificial constraint on competition, reduces operational flexibility and raises the costs of doing business. Alternative arrangements concluded in 1997 with a view to improving the prior consultation system remain have yet to be implemented.

- Can the government outline how far the implementation of the new (May 2000) Port Transport Business Law has progressed, in terms of securing transparency and certainty of operation, mainly concerning stevedoring services and in particular what concrete actions will the Government of Japan take to implement fully the agreements on improving the prior consultation system and establishing a system which is transparent, equitable and swift?

- What criteria for establishing whether “price dumping” have been adopted?

- What steps have been taken to communicate the rules following the new law to the (foreign) operators and shipping lines and what auxiliary services are open to foreigners and


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under which conditions can foreigners establish?

17. AIR TRANSPORTPp. 109-110 of Secretariat Report: The number of slots available at Narita airport is severely limited, and thus the allocation system is of the utmost importance to airlines which wish to fulfil the considerable demand generated in the Tokyo metropolitan area for international flights. Although there have been recent improvements in the transparency of slot allocation, the slot co-ordinator’s freedom to meet demand is still constrained by hourly, three-hourly and daily limits on slot numbers. In addition, the criteria to which the slot co-ordinator works do not fully apply IATA guidelines.

- What measures does Japan intend to take in order to make its system of slot allocation fully compatible with IATA guidelines?

- Para. 116: What is the percentage of slots allocated to foreign airlines granted under the last two (half-yearly) allocations. What is the total share?

- Para. 116: What measure does Japan intend to undertake in order to enable an increase of the number of slots available from the existing single runway at Narita Airport?

- Japan states that its slot allocation system is based on IATA guidelines. However, the system does not fully correspond to IATA guidelines. Please clarify the allocation criteria to which the slot allocator works and explain clearly the extent to which IATA guidelines are not applied. What are the reasons?

- Para. 117: What auxiliary services are open to foreigners and under which conditions can foreigners establish? What is the market-share of foreign ground-handling services operators in the two main international airports (Narita, Kansai)?

18. LEGAL SERVICESRegarding foreign lawyers, pp. 110-111. Although the implementation of a so-called "joint enterprise scheme", in place since 1995, allows joint work on specific cases between Japanese lawyers and foreign lawyers licensed in Japan, partnership between Japanese and foreign lawyers and employment of Japanese lawyers by foreign lawyers are prohibited. This in effect prevents the creation in Japan of integrated international law firms able to give the advice clients require on deals with multi-jurisdictional aspects such as initial public offerings and mergers/acquisitions. As such it has knock-on negative effects on investment in Japan and on the economy as a whole.

- What concrete action is planned by Japan in order to abolish restrictions on partnership and employment between Japanese lawyers and foreign lawyers licensed in Japan?

- Para. 120: it says that there was an amendment to the Special Measures Law, which "lifted the ban on a GJB undertaking legal business concerning third country law." Does this mean that a Foreign Lawyer is now allowed to give legal advice on third country law? Do the 'relaxed experience requirements', also mentioned in that paragraph, imply a shorter period of required prior practice than the currently mandatory five-year-period?

ADDITIONAL QUESTIONS FROM THE EUROPEAN UNION

Regarding public procurement: Secretariat Report p. 49, para. 56 onward: The Secretariat Report describes a number of action plans and initiatives taken by Japan to improve the "future management of Government


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procurement" or to avoid bid-rigging and promote effective competition. It also states that Government practice in Japan is highly decentralised, with no coordinating agency, with procurement entities maintaining their own list of "registered suppliers".

- In these circumstances, and beyond major procurement cases (big ticket items and procurement by central authorities), how does Japan implement the action plans and measures for more transparency and open competition including foreign suppliers?

- How does the Ministry of FA "seek to assure the consistency of procurement policies and practices with the GPA" as stated in para. 59?

There are contentions that the Government sets a ratio for public works orders placed with smaller firms. This could entice public entities to splitting projects into small segments with the result of bringing each single call for tenders or offers under the GPA thresholds, and making it in-economical for foreign firms to get accredited and to bid.

- Does Japan confirm that such a policy and resulting practice exist and in the affirmative, is there an annual review of the smaller firm ratio and the effectiveness of such a policy?

- If such a policy exists what would be the additional cost to the public budget and to Japan's modernisation due to inevitable higher prices and lesser technological upgrade linked with such uncompetitive fragmentation and a de facto exclusion of foreign bidders?

Two years ago the EC asked the following: "Could Japan comment on footnote 89 of document WT/TPR/S/32 that quasi governmental entities and joint ventures between the private sector and the Japanese government, which are outside of the scope of Japan's commitments under the WTO Procurement Code, are increasingly purchasing services and goods that formally were the responsibility of national and local governments?" We do not seem to have received a full answer we would therefore want to address this question again to Japan.

Regarding standards, p. 54 and para. 70 of the Secretariat Report. The report states that "Japan has moved toward increased international harmonization of its standards and technical regulations … The Three-Year Program for Promoting Deregulation (TYPPD), as amended for FY2000, re-emphasized ministries and agencies endeavour to achieve greater international harmonization of standards …"

What are the reasons why Japan still has not brought its legislation regulating engine output for fishing vessels in line with the relevant international standard ISO 3046 (equivalent to JIS B 8002), i.e. measurement of actual real engine output expressed in horsepower or Watts/H.

SWITZERLAND

WT/TPR/S/76



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1. In para. 72 (p. 55) you record that Japan is continuing to bring its standards in line with international counterparts. Could you specify which standards, other than the ones established by Codex, have been of relevance for the establishment of the Japan Agricultural Standards for organic plant products and processed foods made from organic plant products?

2. Could you explain whether there are deviations to the Codex Standards and if yes, what they are?

3. We understand that the JAS Organic Standards only apply for organic plant products and processed foods made from organic plant products. On its last session (May 2000) the Codex Committee on Food Labelling (CCFL) has agreed to advance the Draft Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods (livestock production) to Step 8 (adoption as a Codex Standard). In this regard could you provide us with the information on whether Japan is considering to extend its standards to livestock production as well? If yes, are there any major deviations from the Codex Standard to be expected? Please specify.

4. In para. 82 (p. 57) you mention that an inspection certification and a labelling system for organic food has newly been introduced under the amendment of the JAS-Law. Could you give us a detailed description of this system with regard to the import of foreign products?

5. As we understand it will be necessary to obtain accreditation from an authorised accreditation body in order to be allowed to label food "organic". Which are the necessary qualifications for Registered Foreign Certification Organisations and for Registered (domestic) Certification Organisations? Which normative documents are being used to assess these organisations (domestic and foreign)? Will there be any differences in terms of requirements and assessment between RFCOs and RCOs? Are the qualifications of Certifications Organisations, accredited according to ISO Guide 65 by the competent national authorities, considered equivalent? If no, please specify additional requirements not covered by this guide.

6. In Japan there is a marking system in place for voluntary standards covering about 700 products (both in the area of industrial and agricultural products). In the Japan Industrial Standards (JIS) marking system an accreditation system of private certification bodies was introduced in 1997. As of today no foreign certification bodies were accredited in Japan as JIS mark certification bodies (p. 55 of the Report by the Secretariat).

- What is the rationale for such a marking scheme for voluntary JIS standards?

- What are the requirements for this kind of accreditation which need to be met by the bodies applying and how will the competence of these bodies be assessed?

- What is the reason why no foreign body is accredited as JIS mark certification body as of today? Are domestic and foreign certification bodies subject to the same requirements when applying for accreditation in this area?

7. Japan is about to take further steps to ensure acceptance of foreign test data and conformity assessments. So far, as indicated in the Report by the Secretariat on p. 56, this has been implemented in the areas of telecommunications equipment (acceptance of foreign test results and foreign certifications) and clinical data. In the area of medical devices foreign test results are only recognised when there is a regulatory co-operation arrangement in place between Japan and the exporting country in question (actually this is only the case for exports from the United States, the European Union and Australia).

- What are the criteria for accepting test data in the areas mentioned above? Are there other product sectors where foreign test data is accepted? What further steps are envisaged by Japan to ensure the acceptance of foreign test data in other product areas?


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- Why are foreign test data in the area of medical devices only accepted upon the conclusion regulatory co-operation arrangement?

- What are the conditions to enter into such a regulatory co-operation arrangement with the Ministry of Health and Welfare which would allow the Japanese importer to confirm the records of the testing of the medical device performed by the manufacturer in the exporting country?

(5) Services


1. From October 2000, banks have been allowed to provide insurance services through subsidiaries. Is it also possible for an insurance company to provide banking services through a subsidiary (para. 47, p. 96)?

2. The report indicates that it is possible to access the Japanese market by establishing a branch or subsidiary (para. 51, p. 98). Is it also possible for a foreign bank/insurance to acquire and control a Japanese financial institution?

AUSTRALIA

Food/Agricultural products

1. The Three Year Program for Promoting Deregulation (as revised in April 2000) aims at creating a "free & fair Japanese economy fully open to the international community". Why is this policy limited to certain sectors and in particular when will the agriculture sector experience such reforms?

2. What benefits has the Three Year Program for Promoting Deregulation made to the Japanese agricultural sector? Will the extension to the Three Year Program for the Advancement of Regulating Reform have implications for the Japanese agricultural sector?

3. What future measures will Japan undertake to address issues such as exceptionally high tariff peaks, given that they are of particular concern to developing countries, particularly for differing forms of agricultural produce?

4. Is the Basic Law on Food, Agriculture and Rural areas inconsistent with Japan’s commitment to deregulation and freer trade, especially Japan’s obligation to implement fundamental reform under the WTO Agreement on Agriculture? What measures has Japan undertaken since its last Trade Policy Review to implement reform under the WTO Agreement on Agriculture?

5. If there is a long term change in Japanese food consumption patterns, shouldn’t this be addressed (at least to some degree) by the market forces of international trade?

6. What is the current level of Japan’s food self-sufficiency? What changes in trade policy will be required for Japan to meet its 45% food self sufficiency target by 2010?

7. Despite government assistance, productivity in Japanese agriculture remains low by international standards. With problems such as an ageing agriculture sector population and the extremely small average size of farms, isn’t it time to re-evaluate the considerable financial and resource costs in maintaining protection for the agriculture sector? Can Japan provide data on the productivity of rural sector over the past few years and explain the trend? Can Japan additionally provide figures on the actual costs, including to


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consumers, of providing protection to the agricultural sector?

8. The high cost of agricultural inputs has been a factor in Japan’s food processing industries considering offshore relocation. How will this affect the food sufficiency targets contained in the Basic Law? Has Japan considered the option of increasing self-sufficiency by increasing agricultural efficiency and competitiveness?

9. Given that Government support to agriculture in Japan is higher than agriculture’s contribution to Japanese GDP, that two thirds of farm income is derived from government support and that consumers pay twice the cost of goods that would apply in the absence of such support, can Japan provide information that demonstrates that the Government’s support to the agricultural sector is achieving the objective of stabilising farm incomes?

Has the Government considered restricting farming to efficient enterprises and paying farmers to take inefficient farms out of production entirely? This would end the inherent internal conflicts in the policy of multifunctionality that have led to its failure.

10. We are interested in the relationship between new free trade agreement initiatives by Japan, specifically with Singapore, and Article XXIV of the GATT. We note that the Joint Study Group report on the "Japan-Singapore Economic Agreement for a New Age Partnership" highlighted that Japan was not prepared to liberalise tariffs in the agricultural, forestry and fishery sectors in the framework for the Agreement. In light of this how will Japan address these sectors and potential trade-offs in its free trade agreement negotiations with Singapore and other potential free trade agreement partners? We are particularly interested in Japan’s views regarding comprehensive coverage of all sectors in free trade agreements.

TELECOMMUNICATIONS (P. 100 OF SECRETARIAT REPORT)11. Australia welcomes moves by the Japanese Government to eliminate restrictions on foreign ownership restrictions for Type I telecommunications services and cable TV service providers but we note the exclusion of NTT to restrict foreign ownership to less than one fifth (20%). Does Japan envisage an easing of this restriction?

12. Deregulation of telecoms markets in Australia has led to new entrants and lower charges, which has boosted national IT literacy rates. In pursuing efforts to increase its own IT penetration rates, has Japan considered addressing interconnection charges paid by Type II carriers to access facilities owned by Type I carriers?

13. We note under Entry Regulations (p. 102 of Secretariat Report) the distinction of Type I and Type II carriers. The distinction between the two carrier types artificially divides and restricts the market from operating at its most efficient level by creating an economic and operational market entry barrier. To provide a combination of services using its own and other networks, a company must acquire both a Type I and Type II licence. Australia understands that some relaxation of the existing regulations on Type I and Type II carriers is planned.

Can Japan provide details of the current situation, and of the planned relaxation of these regulations.

14. The cumbersome current system of approvals and notifications administered by the Ministry of Posts and Telecommunications (MPT) imposes heavy administrative burdens on wholesale and retail telecommunications. Why are these administrative requirements necessary? Does Japan have any plans to remove or streamline the current requirements for interconnection, or to make the terms and conditions of sales more clearly defined?


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- For example, when a carrier interconnects with another carrier the interconnection agreement is subject to approval by MPT (Telecommunications Business Law, Article 38-3), a process that can lead to unnecessary delays.

- On the retail side, under Article 31 of the Telecommunications Business Law, Type I and Type II carriers are required to submit ‘Articles of Agreement’ to MPT detailing services they are offering to customers and the terms and conditions of the customer agreement. The absence of clear guidelines as to what should be included in the Articles of Agreement can cause delays in processing licence applications.

- Article 10 of the Telecommunications Business Law requires that the business plan of a Type I carrier must be "firmly based and rational". The requirement for interpretation of these terms by MPT, rather than through a clear definition, can lead to delays in approval of licence applications.

These administrative processes are costly and time-consuming, and have the effect of creating a restriction on entry into the Japanese market. Does Japan have any plans to change these processes, and improve transparency in line with its WTO obligations?

15. Australia notes that users and carriers may file complaints and petitions with the MPT about telecommunications issues (see p. 105 of Secretariat Report). However, the MPT is also responsible for the policy and regulatory functions for telecommunications. Australia considers that the creation of a fully independent regulatory entity would help to ensure that non-discriminatory and transparent processes exist within the telecommunications market.

What are Japan's views on this subject, and are there any plans to create a fully independent regulatory entity.

16. Para. 83 of the Secretariat Report notes that the Diet has approved the Law Concerning Electronic Signatures and Certification Services as a means of advancing electronic commerce within Japan. The demands that electronic commerce will place on the regulatory environment of many industries cannot be underestimated. It is therefore essential for Japan, and other members, to ensure that the practices of other sectors of the economy be regulated in such a way to ensure that goods traded electronically do not face unnecessarily barriers. What are Japan's views on this issue?

LEGAL SERVICES (P. 110 OF SECRETARIAT REPORT)17. Japan ranks among the top five legal services market for Australia. Although Japan's regulation of foreign is relatively restrictive, Australian lawyers and law firms have been able to access Japan’s legal services market to service the needs of Australian, Japanese and international clients - but generally do so other than as registered foreign lawyers. (Gaikukokuho-Jimubengoshi Jimusho (GJB))

Australia has a number of concerns relating to Japan’s approach to legal services. These include:

(i) the long and usually bureaucratic process of seeking GJB status;

(ii) restrictions on most forms of commercial association between foreign and Japanese lawyers and law firms;

(iii) a three year minimum period of professional experience (i.e. considerably more than the one year’s supervised professional practice, in addition to articles or practical legal training, for an Australian lawyer to be eligible for an unrestricted practising certificate in Australia);


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(iv) a minimum period of 180 days residence in Japan each year; and

(v) discriminatory regulation concerning the practice of third country law (through the additional requirement imposed on foreign lawyers in relation to the practice of foreign law)

The 3-year minimum professional experience requirement (item iii above) works against newly qualified Australian lawyers who wish to gain overseas experience early in their career. The additional requirement concerning the practice of foreign law (item v above) imposes a cost only on foreign lawyers and amounts to a differential and discriminatory standard.

What is Japan's approach towards the issues identified in (i) to (v) above, and what action, if any, is Japan prepared to take in order to address the concerns specified?

18. The appropriate role of the Japanese professional/ regulatory bodies should be to establish that a foreign lawyer has good standing with his or her home country professional/regulatory bodies. These regulatory bodies should not specify additional experience or other professional requirements concerning practise of the law of another jurisdiction (i.e. the foreign lawyer's own jurisdiction or the law of another jurisdiction). This is a function that is best performed by the admitting and professional/regulatory bodies in those other jurisdictions, as those bodies are in the best position to properly determine competency and experience requirements - not Japanese bodies.

In Australia, the requirements for admission to practice and issue of an unrestricted practising certificate have been developed to provide for a high standard of professional competence and consumer protection. No additional requirement, other than the maintenance of a high standard of professional conduct and continuing legal education, is considered necessary by the competent authorities in Australia. In so far as the practice of the law of Australia in Japan is concerned, it is unclear why the Japanese authorities might consider they are in a better position to determine adequate experience requirements for Australian lawyers or legal consultants. Australia has no such additional requirement for foreign lawyers practising home country law in Australia who are in good standing with their home country professional or regulatory body - including foreign lawyers from Japan.

Against this background, can Japan provide an explanation for its current approach concerning regulation of foreign lawyers practicing home country law?

19. The Ministry of Justice also imposes more burdensome requirements for foreign lawyers providing advice on third country law than for Japanese lawyers providing advice on third country law (i.e. foreign lawyers are required to obtain a confirmatory letter from a lawyer in the third country concerning the matter on which advice or an opinion is provided; Japanese lawyers have no such obligation imposed on them in regard to third country law.).

Once again, where advice by a lawyer or legal consultant on third country law is involved, the admitting and professional/regulatory bodies of the third country are the proper bodies to determine competence and experience in that body of law, rather than a regulatory authority in the host country where the advice is being given. This is the position in many countries, including Australia.

Can Japan explain how these requirements meet its obligations under the GATS Agreement concerning National Treatment? Does Japan have any plans to change the current situation?

FINANCIAL SERVICES20. Australian welcomes the Japanese Government’s progress in liberalising its financial sector in


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particular the desegmentation of Japan’s financial markets through progressive removal of barriers between different types of financial institutions. New regulation, new competitors, new techniques and approaches, and new technologies are empowering customers and allowing freer trade in financial services.

We note the decision outlined on p. 98, para. 53 of the Secretariat's report that in April 2001, the mandatory re-depositing of savings with the Fiscal Investment and Loan Program is to be terminated. Are there any plans to make a similar change in relation to Postal Life Insurance?

21. There have been complaints that Japanese regulatory authorities often make foreign entrants comply with many administrative requirements for even the simplest of approvals. Legal, administrative and regulatory requirements are also seen as changing arbitrarily, and compliance with one requirement may reveal a request for compliance with further requirements.

What measures has Japan undertaken to ensure the simplification and transparency of regulatory requirements in the financial services sector?

22. Japanese companies often work in business groups - Keiretsu (supporting each other across business processes), concentrating economic power in a small group of companies. The market power from this practice enables the companies to constrain fair competition, infringe the interests of foreign firms and tie up distribution channels.

What measures will the Japanese Government implement to prevent restrictive trade practices that unreasonably restrict trade in the financial services sector? Will the Japan Fair Trade Commission be able to investigate such restrictive trade practices?

COLOMBIA

REPORT BY THE GOVERNMENTIn paras 90 to 98 Japan describes its agricultural policy reform, particularly the new Agricultural Basic Law. According to the report this new Law has four policy objectives: a) securing of a stable food supply; b) fulfilment of the multifunctionality of agriculture; c) sustainable agricultural development and d) the development of rural areas. From our perspective this new Law will increase trade distorting domestic support of Japan considering the fact that it includes new price support policies and will introduce blue box measures that Japan has not provided in the past.

Could the Japanese authorities explain why the multifunctional role of agriculture should be addressed with trade and production distorting domestic support and not with green box measures?

Since the new Law was enacted this year, could the Japanese authorities explain what are the plans to avoid surpassing the year 2000 commitments in the area of domestic support? Is the idea to shift domestic support from amber box to blue box?

Taking into account the objectives of the ongoing negotiations in agriculture and the objectives of the Agricultural Basic Law, could the Japanese authorities explain how they reconcile with each other?

SECRETARIAT REPORTIII. TRADE POLICIES AND PRACTICES BY MEASURE(2) MEASURES DIRECTLY AFFECTING IMPORTS(II) CUSTOM VALUATIONIn para. 12, the Secretariat Report states that "Japan does not employ minimum import prices". However in footnote 14 the Secretariat Report describes the differential duty as a specific rate charged per kg. of imports


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with the rate varying directly with the difference between the standard import price (precio oficial de importación in the Spanish version of the Report), set by the authorities, and the actual import price.

Could the Japanese delegation explain this policy against its commitments in the Custom Valuation Agreement, particularly, Article 7.2 and in the Agreement on Agriculture, particularly, the footnote of Article 4.2?

(III) TARIFFSThe Secretariat report acknowledges Japan’s liberalization of trade and investment regimes. However, the complex tariff scheme has potential distorting effects to competition. The presence of non-ad valorem duties, compound duties, alternate duties, differential duties and sliding duties, all of them include specific duties which generally are intended to provide consistent levels of protection to domestic products facing fluctuations in import prices.

In the case of the alternate duty, which involves either ad valorem or specific rates, the custom authorities usually apply the higher of the two. Chart AIII.1 listed the products that are subject to the alternate duty as well as other goods subjected to the smaller duty.

Could the Japanese delegation provide more information regarding the decision-Making process involved in the application of the alternate duty?

Are there any specific or fixed criteria in the application of the alternate duty in order to avoid discretionary managing during the importation process?

What are the plans of the Japanese authorities to reduce the list of merchandises subjected to the alternate duties?

In relation with Tariff Rate Quotas TRQ’s, Japan has applied a system of autonomous TRQ with the aim to provide low-cost inputs for industrial purposes. Many of the TRQ’s with end-use provisions (FY2000) were related with agriculture, while TRQ’s for leather were linked to regional and social policies.

In the case of agricultural products, quota allocation is based upon historical imports and current and future plans for imports. Some specific requirements need to be met by the applicants taking into account the characteristics of the products and the market, with a view to ensuring that the licensed goods are supplied to end-users.

Could the Japanese authorities explain how the objectives of the autonomous TRQ’s, the linkage of the leather TRQ to regional and social policies and the end-use provisions are compatible with the TRIMS Agreement?

IV. TRADE POLICIES BY SECTOR(2) AGRICULTUREParas 6 to 18

The Secretariat Report states that governmental transfers to the agricultural sector exceeded the contribution of the agriculture in the Japanese GDP (Table IV.1). In addition, the support received by farmers and the costs to consumers of agricultural products remain above the OECD average and have increased since 1997. According to the producers nominal assistant coefficient NAC and consumers NAC, the high levels of support provided by the Government have increased the costs to the consumers and at the same time, have increased the income of farmers.


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Could the Japanese delegation explain the rationale behind this domestic support policy in agriculture that transfers the inefficiency costs of farmers to consumers and, by doing so, increases the retail prices of food?

Despite the large agricultural trade imbalance of Japan, the high level of protectionism in this sector persists. It is very common to encounter the presence of tariff peaks, tariff escalation, complex tariff quota regimes, mixed duties and specific duties whose ad valorem equivalents are prohibited in the most cases. These elements make the tariff regime in agriculture non-transparent and less predictable and increase the cost of food in Japan.

Could the Japanese Government explain whether there is any plan towards the simplification of the tariff regime?

Taking into account the high levels of protectionism in agriculture, what are the Japanese objectives in the ongoing negotiations on agriculture in the area of market access?

URUGUAY

Report by the Government (WT/TPR/G/76, para. 34, p. 9)

1. Para. 34 of the Government Report express that, with respect to a cooperation agreement in the area of competition policy, Japan and the EU have reached a mutual understanding on substantive elements of the future agreement. Could Japan mention what are these substantive elements?

Report by the Secretariat (WT/TPR/S/76)

Summary Observations, p. xii

2. Para. 7 of the Government Report express that Japan has benefited to a great extent from multilateral system of world trade. Taking this into account, could Japan comment on para. 20 of the Secretariat Report (Summary Observations) that notes that the agricultural sector remains relatively well protected from foreign competition, the average tariff on imports of agricultural products remains high, tariff quotas can be intrincate, and as a consequence, the overall level: of government assistance for apiculture is well above the OECD average, and appears to have risen since 1997?

Part I - Economic Environment, para. 23, p. 10

3. Could Japan comment on para. 23 which express that some sectors, particularly agriculture, have been largely exempt from liberalization efforts and therefore competition, at considerable cost to the economy, and not surprisingly, productivity in agriculture has lagged behind that in manufacturing?

Part III - Trade Policies and Practices by Measure

Para. 2, p. 35

4. Could Japan comment on para. 2 that notes that non-ad valorem duties are an important feature of the tariff, particularly in agriculture and such duties which account for 6.9% of all lines can result in high ad valorem equivalents (AVE)? Could you also comment on the same para. which notes that these AVE estimates show that 90 of the top 100 tariffs entailed non-ad valorem duties whose AVEs ranged from 40.1% to 983.7%?

Para. 69, p. 53


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5. Could Japan comment on para. 69 which express that the stated aims of state trading include stabilizing supplies to consumers, controlling imports to assist domestic producers and protection of consumers' interests?

Part IV - Trade Polices by Sector

Agriculture

Para. 6, p. 81

6. Could Japan comment on para. 6 that express that agriculture accounts for a small and declining share of GDP, about 1,3% in FY1998, and the OECD estimates indicate that the total transfers to agriculture were higher than the sector's value-added during the period 1990-1998 (Table IV.1)?

Para. 9, p. 83

7. In relation to para. 9, could Japan explain why the average applied MFN tariff for agriculture (WTO definition) was 18.2% in FY2000 compared with an overall average of 6.5%, and why some 16% of duties applied to agricultural goods were non-ad valorem?

Rice

8. Could Japan comment on para. 12 that notes that "According to the authorities, an increase in rice imports is unlikely"?

9. Could Japan comment on the press release dated October 20, 2000 (Kyodo News International Inc), which express that, according to government sources, "Japan is considering a proposal to shelve its promise to open its rice market gradually in order to protect Japanese rice farmers from cheap imports"?

INDIA

1. Para. 20 of the Summary Observations in the report by the Secretariat notes the high protection offered to the agricultural sector in Japan by maintaining high tariffs on imports, grant of domestic support to a number of products and by operation of a complex tariff quota system. It notes that the overall level of government assistance for this sector is well above the OECD average. In spite of the high protection, productivity in Japanese agriculture is low by national standards. Para. 21 notes the enactment of a new Basic Law for Food, Agriculture and Rural Areas in July 1999 in order to meet the current challenges and to lay out the future direction for Japanese agriculture.

Keeping in view the fact that agriculture is one of the most important sectors of great interest to a vast majority of developing countries, we would like to know the details of the Basic Law. Does Japan have any plans to reduce the domestic support to the various agricultural commodities? We would like to know if Japan intends to carry out autonomous liberalisation of this sector without linking it with the ongoing negotiations.

2. Para. 2 suggests that more aggressive structural reform that enhances competition would be needed for a sustained economic recovery. In para. 3, the Secretariat notes the fragility of the financial system which is also seen as a threat to the economic recovery.

Will the delegation of Japan comment on these observations?


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3. While para. 4 states that Japan's trade policy priorities include the strengthening of the multilateral trading system, para. 7 notes the greater interest now being shown by Japan towards regional free-trade agreements. It further notes the possibility of forging free trade agreements with Singapore and Korea.

We would like to know Japan's perspectives on regionalism.

4. Para. 10 notes that while nearly 99% of the tariff lines are bound and most applied rates coincide with bound rates thereby allowing a predictable regime, non-ad valorem duties, especially in agriculture accounting for 6.9% of all tariff lines in financial year 2000 concealed a high ad valorem equivalent rates. Further, this para speaks of the complex nature of tariff quota allocation of about 200 agricultural items. In addition, para. 11 notes that certain aspects of the import quota system can also be complex like the tariff quota administration.

We would like to have the comments of the delegation of Japan on these observations. Further, we are interested to know if any plans are underway to simplify the tariff quota and import quota administrations.

5. Para. 19 notes the introduction of a three-year programme for promoting deregulation as a positive step in creating a free and fair Japanese economy fully open to the international community. Further, it notes the strengthened role of the Japan Fair Trade Commission (JFTC). However, it notes that the operation of the JFTC is hampered by its lack of resources and expertise in pursuing complex cases.

The delegation of Japan may comment on these observations.

6. Para. 25 notes the fragility of the financial system in Japan and again states that this poses a threat to the economic recovery. It points out that some life insurance companies face the threat of bankruptcy and hence are attracting increased regulatory attention from the Financial Services Agency.

The delegation of Japan may like to comment on these observations.

7. We understand that Japan has imposed zero tolerance clause on insects, which poses market access problems for flower imports into Japan. We understand further that the insects in question, namely, thrips and aphids, are present in Japan itself. Further, it has been pointed out that the Plant Quarantine Authorities at the Japanese airports take a longer time in clearing the consignments keeping in view the elaborate fumigation procedures. This delay creates difficulties as flowers are highly perishable.

We would request the Japanese authorities to look into this problem and take steps to remove the market access barriers.

8. Another problem faced by flower exporters, especially from India, is that the Japanese auction houses bring the Indian roses towards the end of the auction process after the entire domestic supply and the supplies from other supplier countries are auctioned.

We would request the Japanese authorities to look into this matter and take steps to ensure that the system of auctioning is in conformity with MFN and National Treatment obligations.

9. We are told of difficulties faced by exporters due to application of strict SPS standards and delay in conducting tests and issuing certificates by the Japanese laboratories.

We would request the Japanese authorities to explain their SPS system and also to take steps to speed up their process of conducting tests and issuing certificates.


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10. Para. 26 notes that even though measures aimed at promoting further deregulation in the telecommunications sector have been taken, the sector still remains monopolistic and the prices of some services, like the internet access charges are still high by developed country standards. It has been pointed out that this will have an adverse impact on the development of electronic commerce.

We would like to hear the response from the Japanese delegation on these observations. Further, we would like to know if Japan has any plans to make some autonomous liberalisation in this sector, without linking it to on-going services' negotiations.

11. While para. 28 begins by saying that there are signs of recovery, the subsequent observations therein indicate a pessimism concerning the strength of such a recovery and its durability. Para. 29 speaks of wavering in the Government resolve to continue in its pursuance of structural reforms. It also notes some signs of "reform fatigue".

We are interested to know the response from the delegation of Japan on these observations.

BRAZIL

1. According to the Report by the Secretariat, "although Japan has traditionally eschewed regional free trade agreements on the grounds that they could lead to exclusive, discriminatory trading blocs and thereby undermine the multilateral trading system, such agreements now seem to be attracting greater interest to Japan" (p. 19, para. 4).

Could Japan clarify what kind of agreements are being negotiated with Singapore and Korea?

Is Japan negotiating agreements with other countries?

In view of this new scenario, what is the position of Japan in the Committee of Regional Agreements, specially as regards the so called "systemic issues"?

2. According to the Report by the Secretariat, "Tariff escalation is evident in a number of sectors, most notably processed food, textiles, chemicals and leather products" (p. 42, para. 31). There are important export products from Brazil that are facing this trade barrier in having access to the Japanese market as soybean oil, prepared coffee and cigarettes, and also footwear. Could Japan provide any explanation to the continuation of this kind of protection?

3. As indicated in the report of the Secretariat, Non-ad valorem duties consist of compound duties, alternate duties, differential duties and sliding duties, all of which include specific rates. There is a significant number of products from Brazil that is facing such type of specific duty as sugar, ethylic alcohol, orange juice and footwear.

Since this type of duty provides a greater nominal protection as the price of the product is reduced, is Japan planning to change the use of non ad valorem duties to ad valorem duties in the future?

4. As mentioned in the Report by the Secretariat, "since 1998, no change has been made to the Food Sanitation Law" (p. 56, para. 79). Brazilian exporters of tropical fruits are facing increasing barriers in terms of phytosanitary and quarantine measures to the following products: mangos, oranges, papayas, melons, watermelon and tomatoes. Brazil’s concerns are related to the practice of limiting SPS protocols to specific varieties of fruits and the non acceptance of Brazilian methods of treating fruits to control specific diseases. Could Japan offer some kind of explanation about this practice?


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5. Other issues (electronic commerce) – p. 105, para. 83. With regard to the Law Concerning Electronic Signatures and Certification Service, approved on 24 May 2000, the Secretariat Report states that the "Law also introduces a system that enables mutual recognition of certification services between Japanese and foreign accreditation systems, where a mutual recognition agreement exists between the two countries". Has Japan signed any such agreements and if so with which WTO Members? Could Japan provide information on the system used for recognition and accreditation of electronic signatures?

6. In Japan’s schedule of specific commitments with regard to "placement and supply services of personnel (1.F.k) the limitation on market access in mode 3 states that "the number of licences conferred to service suppliers may be limited". Is this limit permanent or has it been subject to modifications? What are the criteria for the establishment of limits for the number of licences?

ADDITIONAL QUESTIONS FROM BRAZIL

7. Does the Government of Japan maintain any exceptions to the principles of MFN and NT with regard to FDI? If that is the case, what are the sectors/activities and are there any plans to reduce or eliminate these exemptions?

8. Could Japan explain how its tariff quotas and autonomous tariff quotas are administrated?

9. With regard to state trading (Secretariat Report p. 53, para. 69) what are the plans of the Japanese Government to reduce or eliminate these practices in the light of their trade distortive effects? Can the Government of Japan confirm the abolition of the MITI's monopoly on import, production and sale of industrial alcohol by 01 April, 2001 as stated in the Secretariat Report?

10. Could Japan provide more detailed information about how ifs non-automatic import licencing system works? Please provide an updated list of the products/tariff lines subject to the system?

11. With regard to government procurement, the Secretariat Report mentions (p. 50, para. 58) that "the authorities state that government procurement is conducted without any restrictions on suppliers' nationality or on the origin of products and services, based on the principle non-discrimination". Does this mean that suppliers from countries that are not members of the GPA are accorded the same treatment given to suppliers from GPA member countries?

12. Could Japan explain the reasons for restricting the use of nicarbazine in poultry meat?

13. We would like to know Japan's views on the recognition of disease or pest free areas in the light of the mechanisms set out in Article 6 of the SPS Agreement to that effect.

NORWAY

1. Japan presented a study (AIE/60) in the AIE-process of the Committee on Agriculture, which indicated the value of multifunctionality in Japan in terms of land and water resource conservation provided by paddy fields. Do you have any new or updated figures in this regard? Have you undertaken any other studies to identify the value of multifunctionality in Japan?

2. Norway is pleased to note that Japan has taken steps to open the foreign direct investment regime and introduced measures to further deregulation in the telecommunications sector. Does Japan have any plans to allow greater competition with regard to local network access and thereby stimulate broadband multimedia and high speed Internet access?


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3. In paras 85 and 89 the cabotage prohibition is mentioned. Under what conditions will the Minister of Transport grant exemptions from this rule? Do any of the bilateral agreements between Japan and foreign countries contain provisions on reciprocal access to cabotage? If so, with which countries?

4. With reference to para. 90, would it be possible for foreign companies to obtain approval from the Minister of Transport to conduct scheduled domestic services? Are any foreign companies engaged in such activities in Japan?

5. Do the conditions for obtaining Japanese certificates, as referred to in para. 91, differ from the international standards as provided for in IMO regulations?

6. Have there been any recent changes to the prior consultation system mentioned in para. 99? If so, could you please explain how the system now functions.

MAURITIUS

(i) At para. 24 of its report, Japan has indicated that it is proposing to implement tariff-free and quota-free treatment, consistent with domestic requirements and international agreements, under its preferential schemed, for essentially all products originating in LDCs. Could Japan indicate which products would be excluded from this scheme?

(ii) Could Japan provide more information on the reform of its price policy for sugar since 1998 (Para. 96(i) of Government Report)?

(iii) Could Japan provide a list of major export products from the Pacific islands to the Japanese market and indicate the level (%) of such imports as part of total imports?

THAILAND

1. Para. 8, p. 82 of the Report by the Secretariat: Concerning the Basic Plan for Food, Agriculture and Rural Areas which was adopted by the Cabinet in March 2000, the Government of Japan has indicated that the guideline under the Plan is to achieve a food self-sufficiency ratio of 45% (on a calorie basis) by 2010.

Thailand would like to know the detailed products coverage to be included in the guideline, particularly whether rice, rice products and fruits are covered under this guideline.

2. Para. 8, p. 82 of the Report by the Secretariat: Concerning the Basic Law on Food, Agriculture and Rural Areas, enacted on 16 July 1999, establishing four principles/goals, one of the four is to fulfill agriculture’s multifunctional roles.

Thailand is interested to learn what, in practice, the Japanese Government intends to do in order to achieve this policy objective?

Thailand hopes that measures to be put in place by the Government of Japan in order to achieve the above-mentioned goals will be consistent with the Agreement on Agriculture and would not be used in a way that would distort trade in agriculture.

3. Para. 12-13, p. 85 of the Report by the Secretariat: Thailand maintains its view on the importance of Japan’s market access for the imported rice.

In order to address the problem of quota administration and transparency in the allocation of rice quotas,


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under the current new round of agriculture negotiations, Thailand wishes to underline the need for a multilateral rule and discipline in this area so as to ensure that the quota administration is transparent and non-discriminating.

In addition, the applied out-of-quota duty on rice which is higher than 1000% is considered as a prohibitive tariff which needs to be eliminated in this new round of agriculture negotiations. Does Japan has any plan to substantially reduce its import tariff on rice in the near future?

4. Para. 13, p. 85 of the Report by the Secretariat: Concerning Japan’s implementation of minimum access commitments for rice by sending a certain amount of rice imported to developing countries in the form of economic assistance. This practice affects Thailand’s rice exports in the overseas market.

Would the Government of Japan consider using other means of implementing minimum access commitments that would not affect or undermine Thailand’s rice export in the future?

5. Para. 15, p. 86 of the Report by the Secretariat: Domestic measures and support programs

Japan is considered to be one of the developed countries that highly subsidize their agriculture sector. Does the Japanese Government intend to reduce the level of subsidies given to agricultural sector in the future?

6. The report did not touch on the problems confronted by foreign exporters of agriculture products caused by Japanese SPS measures.

Does the Japanese Government ever receive any complaints from other agriculture exporting countries regarding the Japanese SPS measures? If so, could the Japanese Government provide us some information as to the nature of the complain and issues involved?

7. Para. 55, p. 99 of the Report by the Secretariat: Thailand is interested in additional information regarding the business model of "Postal Life Insurance" in Japan including the administering government agency and legislation involved. Who are the insured party? What is the difference between postal life insurance and life insurance in general?

UNITED STATES

Report by the Government of Japan

I. Japan in the Multilateral System

(1) Progress of Globalization and Japan’s Policy Efforts

The report notes that information technology is intensifying the pace of globalization. The United States and Japan share a strong interest in stimulating investment and growth in information technology. We both also support the G-8 Okinawa Charter on the Global Information Society, part of which calls for facilitating cross border e-commerce by promoting further liberalization and improvement in networks and related services and procedures in the context of a strong World Trade Organization framework, continued work on e-commerce in the WTO and other international fora, application of existing WTO trade disciplines to e-commerce and continuing the practice of not imposing customs duties on electronic transmissions. What concrete steps is Japan taking to bring these things about?

(2) Consolidation of the Multilateral System


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The report notes that the mission of the WTO has been and will be achieved through dialogue and negotiations within a rule-based multilateral trade system the enhancement of standards of living. What does Japan think should be done to further demonstrate the mutually reinforcing relationship between labor standards and trade liberalization?

III. Trade Policy Development 1998-2000

(1) The Uruguay Round and Implementation

The report notes that Japan has proposed to implement tariff-free and quota-free treatment under its preferential scheme for essentially all products originating in least developed countries. What is the status of this proposal?

Japan has completely eliminated customs tariffs on all information technology products covered in the information technology agreement. What sort of product expansion for further duty elimination does Japan support?

(3) Domestic Policy Developments Affecting Trade Policy

(a) Reforms of the Economic Structure

We are very concerned with the lack of reference to any labor market policies in the GoJ submission. In our view, barriers to labor mobility (i.e., the difficulty in re-allocating human resources from one firm or industry to another) are among the largest impediments to structural change in the Japanese economy.

(c) Competition Policy

What plans does the JFTC have to more vigilantly monitor potentially problematic business practices in the photographic film and paper market, including various forms of retaliation and intimidation of retailers that sell or use non-Fuji products?

In September 1998, the JFTC issued a warning to the Photosensitive Materials Manufacturers Association and its members to cease their exchange of production, sales, and inventory data, which the JFTC found to constitute a potential AMA violation. What follow-up action will the JFTC take regarding this warning?

(e) Current Progress in the Deregulation Process

The Regulatory Reform Committee and its predecessor, the Deregulation Committee, were established by the Prime Minister’s "Administrative Reform Promotion Headquarters" – i.e., the RRC does not have a legal foundation as did the original reform body, the Administrative Reform Committee. The recent political intervention delaying implementation of liquor licensing deregulation suggests that until its role is supported by legislation, the Regulatory Reform Committee will continue to be vulnerable to political interference, thus weakening the deregulation program. Is it likely that under the new three-year deregulation initiative, the powers of the Regulatory Reform Committee will be strengthened through legislation?

The GoJ recently established two additional groups, one named the "Industrial Rebirth Committee" and the other called the "IT Panel", which we hope will foster healthy debate and innovative ideas that can affect change in all segments of the Japanese economy. What authority do these committees have to ensure that their recommendations and suggestions are enacted?

What are the GoJ’s plans regarding deregulation for the next three years given that the "Three-Year Program


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for Promoting Deregulation" is set to expire at the end of March 2001? What is the GoJ doing to ensure that the proposals included in the Three-Year Program are being implemented?

(f) Agricultural Policy Reform

The report notes that Japan has replaced the 1961 Agricultural Basic Law with the Basic Law on Food, Agriculture and Rural Areas in July 1999 and some measures (e.g., new price policy for wheat and payments to farmers in mountain regions) have already been implemented.

The GOI has established income stabilization measures for wheat, barley, rice, and soybeans. The stabilization measures, however, appear to continue to insulate domestic producers from market signals. How does Japan intend to increase the productivity of its farming sector when its policies continue to isolate producers from the economic factors that yield increases in efficiency and productivity?

What, if any, new agricultural policy measures does Japan envision in the coming year? Will the thrust of these measures be to reform price policies for other agricultural commodities, thereby lowering the existing burden on Japanese consumers? Are new income support programs for farmers envisioned? What steps is Japan taking to ensure that the programs will be consistent with the provisions in Annex 2 of the WTO Agreement on Agriculture?

Could Japan provide estimates of the taxpayer costs associated with its new policy measures? How do the costs for the new measures compare with previous years’ taxpayer outlays for agriculture?

The report indicates that one goal of its new Plan for Agriculture is to increase the food self-sufficiency ratio by 2010.

What proportion of the inputs used in agricultural production (e.g., machinery, fertilizer, fuel) are imported? If domestic production of agricultural products were to increase, what would be the impact on imported agricultural inputs?

Does this mean that Japan intends to maintain or raise its border protection or expand its domestic production through additional domestic support measures in order to achieve this objective?

The report notes that consumer taste appears to be shifting away from rice to livestock products and products with higher fat content and that the government intends to develop a campaign to encourage consumers to review dietary patterns. Does the government intend also implement new measures that would restrict consumer choice of food products as part of this endeavor?

Japan characterizes a "decline in the food self-sufficiency ratio" as a problem, rather than just the result of international trade along the lines of comparative advantage. Does Japan advocate the return to "self-sufficiency" by its trading partners for the industrial products that Japan exports?

What is the meaning of the statement in the report concerning agriculture (para. 92), "... people’s expectations for agriculture and rural areas have been on the rise"? How are these expectations measured? Are there published measurements that show a change in expectations over recent years?

Similarly, what is the meaning of the statement that "there has been an increasing demand that the agricultural sector should fulfil its multifunctional role"? What evidence exists to document this? What methodology was used to measure the “increasing demand"?

With respect to the Basic Plan adopted in March 2000, the statement is made that the plan calls for "review of


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the price policies for major products in such a way as to make them properly reflect supply/demand situations..." Does this mean that there will be a major reform in the price policies that affect domestic rice production and consumption?

The report states that Japan’s average applied MFN tariff for agriculture was 18.2% in FY2000 compared with an overall average of 6.5%. Table IV.2 also demonstrates that Japan’s average tariffs in many agricultural sectors are considerably above the average rate for agriculture with maximum tariffs in these sectors exceeding 100%. For example, vegetables, products of the milling industry, dairy products, oilseeds have average rates of 32.1%, 33%, 68.1% and 26.4%, respectively, with maximum tariffs for these sectors of 984%, 386%, 491% and 690% respectively.

- Do these figures account for the "mark-up" on the import price that Japan imposes in sectors like cereals and dairy? What is the cost to consumers of these "mark-ups"?

- Does Japan anticipate any changes in its border protection for agricultural products as a result of its new Plan? If so, please provide details.

Border protection is one reason that Japanese consumers paid, on average, more than twice as much as they would have paid in the absence of Japan’s agricultural programs, and, according to the report, this implicit tax on consumers may have risen in recent years.

- Does Japan anticipate any reduction in the implicit tax on consumers as a result of its new Plan? Please provide details.

IV. Future Policy Direction

(2) Seattle and After

The report notes that improvement in WTO transparency must be pursued expeditiously. We would be interested in Japan’s views on improving transparency beyond activities such as further de-restriction of documents and more timely release of dispute panel reports, which Japan has supported.

Report by the Secretariat

Section I: Economic Environment

(1) Main Economic Developments

What is the GoJ’s assessment of the prospects for economic growth in the coming year? How does the GoJ intend to respond if the economy slows as some analysts have projected?

(2) Macroeconomic Policies

The report says that some members of the Bank of Japan Policy Board believe that the low cost of credit acts as an effective subsidy to companies, allowing them to waylay their problems and continue operations. Please provide more information about the types of low-cost credits that are provided. Specifically, who is eligible for these credits? Are these credits directed at specific industries? Are any of these low-cost credits contingent on companies’ export performance?

Footnote 12 of para. 10 states that it is expected the GoJ will have to inject further funds into various corporations in order to grow the economy. The Export-Import Bank of Japan (JEXIM) is mentioned as one


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of the possible companies that would need such "subsidies". Please explain the means through which JEXIM would receive an injection of funds. What companies or industries would be eligible for funds from JEXIM?

(3) Structural Policies

(i) Corporate restructuring

The Industrial Revitalization Law (IRL) was only briefly mentioned in this report. Can the GoJ please provide more details about the IRL and its implementation, as well as its effects on trade or its expected effects on trade? Which industries have received funding from the IRL? Are there plans to revise and/or build on this law?

We commend the efforts of Japan’s corporate sector to restructure and regain profitability. What is the GoJ doing to support and foster these efforts, particularly to encourage steps to trim excess capacity in certain sectors, including steel, and boost low capacity utilization rates?

In 1999, the Development Bank of Japan (JDB) extended credit to several steel companies when Japanese private commercial banks significantly reduced lending to industrial clients, including integrated steel producers. Such lending raises concerns about government financing to mature private industries. Can you provide us with information about these loans and what role the JDB continues to play in financing the steel industry and other mature industries?

(iv) Competition

The report states that with reference to cartels in Japan "...the number of exemptions under the AMA (and other laws) dropped from 89 in 1996 to 22 in 2000". In the footnote to this sentence, it says that "cartels on exports by exporters and trade associations" are one of the remaining 22 exemptions". Please provide details about how this sort of cartel operates. Has the GoJ (or the Japan Fair Trade Commission) written any studies on said cartels?

(v) Labor market policies

The GoJ has traditionally supplied subsidies through the Employment Adjustment Subsidy program (EAS), including "..financial subsidies to help companies overcome temporary demand shortfalls." We are concerned by this program, as it does not stimulate either new employment creation nor facilitate the movement of workers out of declining sector and into new industries. Moreover, the government assistance scheme for hiring by new start-ups in high unemployment areas appears very bureaucratic and cumbersome, resulting in the fact that most of the funds allocated/budgeted for this program go unspent.

Can you please provide more information on these subsidies and give specific examples of when they are used? Is there a time frame under the EAS after which said subsidies will be suspended?

The report notes that measures have been taken concerning labor market polices. Do these measures include the ILO Convention 105 on forced labor and ILO Conventions 111 on discrimination? If not, when might they be ratified?


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(vi) Public and private pension reform

In 1999, the GoJ announced plans to reform the public pension system, including increases in contributions, reductions in benefits and an increase in the age eligibility. Have these plans been clearly articulated since then? In particular, has the GoJ decided how to fund a revamped public pension system that could include even more government subsidies?

We note that GoJ plans to introduce defined-contribution pension plans keep getting delayed. In addition, under the current draft bill, the limits on tax-advantaged contributions seem low, administrative costs seem high, and there are no provisions for investor education. What are the prospects for passage of the bill? Does the GoJ have any plans to consider additional revisions to the system?

What are the GoJ’s plans related to the establishment of private pension funds? Does the GoJ have plans to allow kampo and yucho to offer their own defined-contribution pension products? If so, how does this fit in with the GoJ’s commitment to deregulation and to stay out of services that the private sector can provide?

Section II: Trade Policy Regime: Framework and Objectives

(1) Introduction

We welcome GoJ efforts to pursue regional trade pacts in a manner that will strengthen, not undermine, the WTO trading system. As noted in its TPR report (para. 10), Japan believes it is indispensable to ensure that regional trade agreements are complimentary to the multilateral system and consistent with its rules. However, we remain concerned that Japan’s policy of protecting sensitive sectors will hamper its ability to form agreements that will encompass "substantially all trade" between nations, as required by WTO rules. How is Japan moving to liberalize trade in currently protected sectors, and what liberalizing steps does Japan believe it will need to take in order to encompass "substantially all trade" in such agreements with trading partners? Will Japan include all agricultural products in future FTA pacts? What transition periods are being considered? What other countries is Japan exploring FTAs with?

(2) Development and Administration of Trade Policy

(i) Main trade law and regulations

The use of administrative guidance makes the operation of significant parts of Japan's trade policy non-transparent. While the introduction of public comment procedures prior to the adoption of some regulations has improved the transparency of some policy making, the system is still limited in both it applicability and its effectiveness. Can Japan outline its plans for expanding the public comment procedures, making them more effective, and enacting such procedures into statute?

(ii) Trade policy formulation and implementation

How will Japan’s administrative reform plans, set to be implemented in January 2001, alter its trade policy formulation and implementation procedures? What will be the newly-created Cabinet Office’s role in trade policymaking?

(iii) Evaluation of trade and trade-related policies

Could you clarify Japan’s intentions with regard to the introduction of "cost-benefit and regulatory impact analyses" (RIA)? We certainly support Japan’s adoption of an RIA and have called on Japan to introduce such a system under the U.S.-Japan Enhanced Initiative. We note that Japan is introducing a Policy


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Evaluation System, which will become effective in January 2001.

(v) Bilateral agreements

When the USG and the GoJ established the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy in 1997, the two governments agreed that "The progress under the Enhanced Initiative will be reported to the leaders of the two countries since the strengthening of dialogue on deregulation is based on the decision between the leaders of Japan and the United States, and the promotion of deregulation and active implementation of competition policy are issues of major importance to the GoJ". With the Enhanced Initiative in its fourth year, can we expect the GoJ to fulfill this commitment by cooperating with us to write a Fourth Joint Status Report, as has been done in all previous years under this initiative?

Section III: Trade Policies and Practices by Measure


(i) Customs administration and clearance

The United States has urged Japan to improve its Customs recordation and information submission procedures to make it easier for foreign rightholders to avail themselves of intellectual property rights protection from Japan’s Customs authorities. Further, concerns have been raised over the need to aggressively enforce the interdiction of infringing articles. Please provide additional information on Japan Customs’ border control efforts related to protection of IPR; the number of cases resulting in imprisonment since last year and the actual sentences; and the dollar amount of fines actually imposed.

The U.S. has long been concerned about the time it takes to clear goods for entry into the Japanese market. Part of the delay is due to Customs procedures. However, the principal factor is the "hozei" system, whereby all goods must be subjected to a complete reconciliation or "match-up" against documents before they can be released from the bonded area. This involves a lot of double and even triple handling. Is there any prospect for modifying this system in the interests of streamlining clearance procedures (e.g., by allowing post facto reconciliation)? How does Japan justify such procedures in an era of multilateral commitment to improve the trade facilitation environment to meet the needs of today’s just-in-time global economy?

(iii) Tariffs

The U.S. notes that Japan still maintains a number of non-ad valorem duties, particularly on imports of agricultural products, and that these translate into very high ad valorem equivalents (AVE’s) where such equivalents have been calculated. Japanese authorities have not provided AVEs for about a third of non-ad valorem duties, representing a serious transparency issue. Does Japan plan to move away from non- ad valorem duties for agricultural products? Does Japan intend to calculate AVEs for all non ad-valorem duties?

(vii) Government procurement

The report notes that each procuring entity maintains its own list of registered suppliers. Does each procuring entity establish its own requirements for suppliers to become registered?

Can you explain why the trend in foreign share of government procurement continues to fall?

Regarding the history of complaint filings under the Office of Government Procurement Review and the Board, does this figure include the most recent complaint which was filed in July of 2000? Given that only


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two complaints have been filed, why does Japan believe that so few suppliers have utilized the bid challenge process?

According to this report, the Complaint Review Board "acts as an intermediary" in the event that a complaint exists between a supplier and a procuring entity, and that, as a result of the Board’s involvement, "many complaints have been resolved through consultation". Please indicate the percentage of complaints that have been resolved in this manner, whether foreign suppliers have been party to such consultations, and if so, whether complaints filed by foreign suppliers have been resolved with the same success as those filed by domestic suppliers.

Regarding the statement that authorities of the Board encourage "consultation between a complainant and procuring entity" prior to the filing of a complaint, please describe how Japan encourages parties to engage in consultations in a timely manner.

Please indicate how long it takes to resolve a complaint through the consultation mechanism, and what type of complaints are brought to the Board for consultations. Have any complaints not been resolved that have been brought for consultation to the Board?

The report states that "according to the authorities, the procuring entities of public works are required to decide proper and clear criteria for, inter alia, the selection of construction works undertaken by joint ventures and the organization of joint ventures by contractors". Please indicate what "proper and clear criteria" are used for the selection of works to be undertaken by joint ventures, and for the organization of joint ventures by contractors. Are these criteria made available, and if so, where? How does Japan ensure that these criteria are not applied in a manner to disadvantage foreign suppliers?


We welcome Japan’s statement that it is continuing to bring its standards into line with international standards. What criteria does the GoJ use when it chooses not to adopt an international standard?

Japan cites that a new grading system for foreign products was introduced in June 2000. Can you please explain this new system and if it also applies to domestically produced products? If not, why not?

The U.S. notes with interest that no foreign inspection bodies have been designated by MITI for testing based on the MITI standards and certification system. Have any foreign inspection bodies applied? If so, what is the status? If they were not approved, can you explain why not?

(4) Measures Directly Affecting Exports

(v) Trade-related intellectual property rights

Concerns have been raised by our industry regarding Japan's apparent failure to provide protection against unauthorized temporary copying of works or sound recordings. The TRIPs Agreement incorporates Article 9 of the Berne Convention, which states that rightholders "shall have the exclusive right of authorizing the reproduction of [works and sound recordings], in any manner or form". Reproduction "in any manner or form" appears to include temporary reproduction. Therefore, please confirm whether or not Japan provides protection against such reproduction if unauthorized.

We are concerned about Japan’s imposition of a single, rigid evidentiary requirement for joint authorship. This policy is particularly prejudicial to authors from the United States and other countries where authorship statements on published sheet music have no legal effect and do not conform to any prescribed set of rules.


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This requirement also appears to be a mere formality that hampers the enjoyment and exercise of copyright rights, which is inconsistent with the TRIPs agreement. In light of Japan's international obligations and prevailing international practice, does Japan plan to review its policy on joint authorship?

As indicated in the WTO Secretariat’s Report, Japan has taken important steps to improve the protection of patents. While we are pleased by these efforts, the U.S. remains concerned with several aspects of Japan’s patent administration, including the relatively slow process of patent litigation in Japanese courts, and the lack of adequate protection for confidential information produced relative to discovery. Please describe Japan’s actions to address these concerns.

According to the report, Japan’s copyright law was amended with a view to comply with the WIPO Copyright Treaty. Key provisions of the revised law include criminal penalties for producing and distributing devices designed to circumvent copyrights. We remain concerned that the penalties for copyright circumvention devices will seldom be applied since the law covers only devices whose sole purpose is circumvention. Focusing only on devices whose sole purpose is circumvention will make your anti-circumvention law too easy to evade if protection-defeating functions can safely be packaged with other components that have innocent purposes. What steps is Japan taking to address this concern?

(vii) Competition policy and regulatory issues

(a) Recent developments

The report notes that in January 2001, the JFTC will become part of the Ministry of General Affairs, which also includes regulators of telecommunications services. What actions does the GoJ plan to take to ensure that the JFTC’s independence in antimonopoly enforcement and in the promotion of competition policy will be preserved?

What is the JFTC doing to ensure that officials responsible for monitoring electricity and gas deregulation and for enforcing the AMA in these sectors have sufficient expertise?

(c) Private remedies

According to the Report, in May 2000, the Antimonopoly Act was amended to permit private parties to seek a court injunction against violators engaged in certain "unfair trade practices". Please explain why serious antimonopoly violations, such as monopolization and price-fixing and market allocation agreements, were not covered by these amendments and when the GoJ will seek to extend private injunctive remedies to this serious conduct as well.

(e) Holding companies, and mergers and acquisitions (M&As)

The competitive analysis of mergers and acquisitions, including stock acquisitions, is often very complex, and requires significant staff resources in order to conduct such an analysis fully and expeditiously. How can the JFTC analyze the transactions reported to it in a sound and expeditious manner with a total staff in the responsible division of less than 20 people?


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(g) Enforcement

In recent years the JFTC appears to have significantly increased its enforcement activities against firms that engage in "unjust low pricing" in Japan, particularly in the retail liquor, electric appliance and gasoline markets. Please describe how this policy promotes price competition and ensures that pro-competitive pricing practices are not discouraged.

In order to deter anti-competitive practices, it is crucial that firms perceive that engaging in such practices will be more costly than the potential profits. Please explain how Japan's current system of administrative surcharges and limited criminal enforcement raises the costs of engaging in hard core anti-competitive conduct to a sufficiently high level to deter violations of the Antimonopoly Act.

Agreements among distributors not to carry imported products, especially when supported by the efforts of competing domestic suppliers, can restrict competition and distort international trade. These practices need to be deterred through active antimonopoly enforcement and heavy monetary consequences. Please explain the JFTC’s enforcement policy with regard to these activities, and the circumstances in which surcharge orders will be imposed on the participants of such group boycotts.

Financial and other ties between producers and distributors in highly oligopolistic industries can, in certain circumstances, have exclusionary effects on the ability of new entrants to successfully compete in the market. Please describe the actions the JFTC plans to take to monitor and examine such ties and to ensure that they are not foreclosing competition from potential new entrants in the Japanese market.

(i) Distribution measures

There is widespread belief in both the Japanese and foreign industry that the new Large-Scale Retail Store Law leaves local authorities with too much power and too much latitude in dealing with new store openers. How does MITI plan to monitor local implementation of the new law, particularly if implementation is being frustrated locally by unwritten administrative "guidance" and the imposition of "voluntary" guidelines?

Section IV - Trade Policies by Sector

(1) Introduction

How does the GoJ reconcile the continued existence and possible expansion of the kampo (postal insurance) and yucho (postal savings) systems, in light of deregulation in the financial services area?

(3) Energy and Utilities

(i) Overview

The report states that "more emphasis has been placed on economic efficiency in Japan’s energy policy, as observed in various deregulation measures implemented since its previous Trade Policy Review". Can the GoJ document greater economic efficiency achieved as a result of deregulatory steps in the energy sector thus far?

The secretariat report mentions MITI’s regulatory role in the energy sector in para. 20. No mention is made, however, of MITI’s regulatory role after the GoJ reorganizes in January 2001. The USG understands that new regulatory bodies for electricity and gas will be established in MITI. What is the Ministry doing to ensure these bodies are fully independent of the policy and industry promotion divisions of MITI? What is MITI doing to ensure that the staff in these new bodies have sufficient expertise and numbers to effectively


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regulate these industries?

This section implies that Japan’s electric and gas utilities are no longer full regional monopolies. However, we are not aware that such a significant change has yet occurred. What share of Japan’s retail electricity and gas are provided by non-utility firms? Given this, what evidence is there to date of any meaningful deregulation in the small portion of the market (28%) actually deregulated?

(ii) Electricity

According to the report, Japan has promoted deregulation in the electricity sector to promote competition. By doing this, the GoJ "aims to realize internationally comparable cost levels in 2001". Is this objective still within reach? If not, does this suggest Japan must move more quickly to deregulate this important sector? Hasn’t liberalization of wholesale power generation been limited to auctions?

Along with partially liberalizing the retail supply of electricity in Japan, MITI has committed to implementing and enforcing rules on transmission rate calculations, fair, transparent and non-discriminatory access to transmission lines and other terms and conditions that were established in December 1999. The USG, however, understands that rate calculations remain unnecessarily opaque (and high by international standards), which is discouraging potential competitors from entering the electricity market. Does MITI plan to take additional steps to remedy this problem?

(iii) Gas

The report notes that Japan "aims to realize internationally comparable cost levels in the gas sector by the year 2001". Is this objective still within reach? How can this objective be achieved without establishing laws and regulations that would allow open and non-discriminatory access to both new and existing Liquified Natural Gas (LNG) terminals, which are primarily owned by regional electricity companies?

(4) Manufacturing

(ii) Sectoral developments

(c) Pharmaceuticals

There is no mention of medical devices, which is an important sector for foreign suppliers in Japan. What plans does the GoJ have to improve the consistency and speed of the approval process for innovative medical devices?

We remain concerned that the liberalization of vitamins and minerals is a slow-moving process. What are the prospects for additional reform in this market?

(5) Services

(ii) Financial services – Insurance

Foreign companies continue to be concerned that they will be tapped yet again to contribute more to the Policyholder Protection Fund to cover future failures of Japanese insurance firms. How firm is the GoJ’s commitment to inject public funds in the event that the fund is again depleted?

As referenced in para. 53, the Japanese postal system will become a public corporation in 2003. What specific steps will the Government of Japan (MPT) take to ensure that plans for this transition are devised and


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implemented in as open and transparent a manner as possible? Will public hearings be held? Will plans be subject to public comment procedures? Will interested foreign entities be afforded equal opportunities to participate in any study groups, etc., created to provide input to MPT during the process?

The Financial Services Agency (FSA) has indicated that they support further transparency in and deregulation of the insurance product and rate approval system. What are FSA’s plans in this regard? Regarding the statement that "life and non-life insurance companies may enter each other’s markets only by means of subsidiaries", we understand that as of July 1, 2001, FSA will allow “direct mutual entry” for sales of third sector insurance products. Is this correct? If so, how will the current regulations be modified to allow this to occur? What is FSA’s timeline for this? Will foreign companies be afforded equal opportunities to provide input into this process?

(iii) Telecommunications

(a) Overview

The key fact emerging from this section is the remarkable fact that NTT, in 1999, still controls 87.5% of Japan’s domestic telecom revenue–despite the fact that Japan’s market has ostensibly been fully open to competition since 1985. We suspect that no other industrialized country with a telecom market ostensibly open to competition has such a degree of concentration.

If a competitive marketplace is a goal of the Japanese government, this result can only be attributed to regulatory failure.

The overview notes the MPT’s dual role as promoter of the telecommunications sector as well as regulator. This is at the heart of our serious concern with Japan’s regulatory regime in this sector: policies which are designed to promote telecommunications in Japan (ISDN, 3G wireless, fiber to the home, flat-rate Internet) appear to be designed to solidify NTT’s dominant position in the market rather than promoting competition.

Since industrial promotion and regulatory impartiality are often incompatible, almost all major telecommunications markets have established independent regulators. This also helps shield the regulator from political pressure exerted by the incumbent.

(c) Regulatory framework

Is Japan considering establishing an independent regulator? If not, why not? How does the GoJ ensure that regulation is impartial?

Does the GoJ have a mechanism for settling disputes among carriers or responding to carriers’ problems regarding interconnection rules?

How does the GoJ ensure that the policy changes it is undertaking effectively promote competition, as envisaged?

Is the Government of Japan concerned about the way NTT exerts its political influence to advocate its interests, and how that affects the regulator’s impartiality?

One indication of the ability of a regulator to regulate effectively is its willingness and ability to take measures to address anti-competitive abuses of incumbents. Has the MPT ever fined NTT for its anti-competitive acts? Sanctioned NTT in any other way? If not, why not?


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Where a government owns a substantial stake in the telecom operator, there is a clear incentive not to take action that could affect the business interests of this operator–which, in this case, include maintenance of its market position. Full privatization is the only clear way to remove that potential conflict of interest. What progress has Japan made toward privatizing NTT? What plans does the Government of Japan have to review the requirement that it maintain a 33 percent ownership in NTT?

What progress has Japan made in developing dominant carrier regulations to better discipline NTT?

What is the status of the Government of Japan’s review of the structure of NTT?

How has the GoJ followed up on the findings in the JFTC study group report that the enhanced competition expected from the reorganization of NTT has not materialized? What does the GoJ think explains this conclusion? In light of this conclusion, is the GoJ taking any additional steps to comply with the competitive safeguards provision of the WTO telecommunications reference paper?

What percentage reductions in interconnection rates does Japan currently foresee introducing within the next year? Within the next two years?

Permitting all carriers to build, buy or lease facilities in any combination necessary to facilitate business maximizes innovation and competition. What steps has Japan taken to increase market competition by liberalizing resale/unbundling and co-location restrictions?

Does the GoJ have any definite plans for pro-competitive policy reform aside from introducing LRIC-based interconnection pricing and promoting network diversity? If so, what are the policy changes that you are considering? How soon do you expect to implement these changes?

(iv) Transportation services

(a) Maritime transport

The description of the auxiliary services regime does not include continuing problems with restrictions on port activities that the amendments to the Port Transport Business Law do not address. The prior consultation system practiced by the Japan Harbor Transportation Association (JHTA), an association of stevedoring and terminal operating companies gives the group extensive control over port operations that the GoJ is not willing to challenge.

How does the exemption from the Antimonopoly Act apply to liner shipping in Japan?

According to the report, "Japanese authorities claim that there are no discriminatory measures affecting foreign participation in international maritime services". In fact, the waterfront industry is dominated by the JHTA which represents all licensed waterfront stevedores when dealing with the labor unions and determines the working conditions under which the industry operates. Japanese carriers are members of the JHTA through their stevedoring subsidiaries, but foreign carriers have no representation in it. How can the GoJ reconcile these two points?

The prior consultation system set up by the JHTA remains cumbersome and arbitrary. How does the Japanese Government intend to make the process transparent, equitable and timely? Although prior consultations by the JHTA have decreased, why are foreign carriers still required to get JHTA’s permission when engaging in minor changes?

The amendments to the Port Transportation Law increase the required minimum number of people employed


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by a stevedore by 150%, with the aim of encouraging economies of scale. Doesn’t Japan fear that the measure will instead increase labor costs and discourage efficient operation? How will the new minimum manning requirement affect new entrants?

Foreign carriers may now apply for licenses to operate at terminals but labor unions have implied that they will strike if they do. How will the Transport Ministry address this issue and ensure reform in the industry?

The revised Port Transportation Business Law changes the system of prior permission of fees to prior notification of fees, but the GoJ reserves the right to "correct" fees as it sees fit. In what circumstance would fees be corrected? What standards will the GoJ use to regulate fees charged by port companies?

(b) Air transport

How will the GoJ address the exorbitant landing fees charged at Japan’s airports? What are the GoJ’s plans for internationalization of Haneda airport and will the GoJ ask for foreign input to such plans?

(v) Other services

(a) Legal services

Improving the delivery of international legal and other professional services is essential if Japan is to develop as an international business and financial center. It is important that Japan address the aspects of its legal system that are limiting the ability of Japanese and foreign businesses to obtain in Japan the high quality and fully integrated international legal services that they find in London, Hong Kong, New York and other major financial centers.

The Regulatory Reform Committee recommended in 1999 that the Ministry of Justice (MOJ) examine the removal of the ban on partnerships between gaiben and bengoshi. When does the MOJ plan to issue recommendations related to the removal of this ban? The Regulatory Reform Committee also expressed the concern that the ban on gaiben employing bengoshi does not have a rational basis. What is the MOJ response on this issue?

Five years ago, Japan established the "specified joint enterprise" system rather than allow foreign lawyers to enter into partnerships with or hire bengoshi. This system has numerous deficiencies and has not an adequate substitute for allowing partnerships. As of August 2000, only ten specified joint enterprises have been created, and the foreign law firms affiliated with these ten enterprises comprise less than one-fourth of the foreign law firms with offices in Tokyo. What plans does Japan have to allow freedom of association between gaiben and bengoshi?

Japanese and foreign businesses in Japan have inadequate access to legal services because there are too few lawyers to serve them – one-seventh the proportion in France, the next-lowest of the G-7 economies. How does the GoJ plan to significantly increase the number of lawyers in Japan in order to be commensurate with other major economies?

ANNEX II

JAPAN'S RESPONSES TO QUESTIONS POSED

AT ITS WTO TRADE POLICY REVIEW(CONSOLIDATED VERSION SUPPLIED BY JAPAN ON 23 JANUARY 2001)


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ARGENTINA

Argentina Question 1

Japan appealed to the Special Safeguard provisions (SSG) during 1997-99. Remembering that the mechanism of the SSG was created to prevent a rapid increase of imports which would have disrupted the internal markets, could Japan comment the conditions that have been applied to the markets of products such as wheat flour and milk of Japan, that carried to the necessity to apply the SSG?

In the same way, Japan applied the SSG to concrete products in a "basket of quotas". Could Japan explain the compatibility of this measure with the provisions of the Agreement on Agriculture?

Response to Argentina Q. 1 regarding the special safeguard provisions

The Special Safeguard (SSG) was agreed as a package with tariffication implemented as a part of the reform process at the UR negotiations. Japan has applied the SSG to some products which are designed with the symbol “SSG” in its schedule in order to prevent the potential disruption of their domestic markets. SSG is applied either when the volume of imports of products exceeds trigger level or when the import price of the products falls below a trigger price. All the applications of SSG are fully consistent with the provisions of Article 5 of the Agreement of Agriculture.


With regard to the administration of tariff quotas, we would like to receive the information regarding the request of "invested capital" that the importers have to reach in order to participate in fair conditions of offer.

Response to Argentina Q. 2 regarding tariff quotas

In the case of wheat, barley and rice imports, importers who want to participate in the Food Agency’s competitive bidding are required to be capitalized at more than 1 billion yen for an ordinary tender or 0.1 billion yen for the SBS tender system. These requirements are necessary to preserve credit under contracts. The requirements for importers are published by the Director-General of the Food Agency. Certifications of loans issued by foreign exchange banks are also acceptable for participation in the bidding.


In March 1999, the Dispute Settlement Body approved the conclusions of the Special Group and of the Appellate Body on the dispute "Japan - Measures affecting agricultural products". If Japan announced on December of that year the abolition of the requirements of evidence on plants varieties that were applied on eight products, it still has consultations with EU regarding the methodology of quarantine for these products. Considering the time elapsed since the approval of the conclusions by the DSB, we would like to know when Japan will notify the total implementation.

Response to Argentina Q. 3 regarding DSB

On 31 December, Japan abolished the varietal testing requirement as well as the Experimental Guide that were in force until that date, in accordance with the rulings and recommendations adopted by the DSB regarding the dispute "Japan - Measures Affecting Agricultural Products(DS76)". Japan has conducted consultations with the United States regarding a new methodology to replace the former varietal testing requirement. Japan expects that Japan and the United States will reach a mutually satisfactory solution in the


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near future.

We would like to point out further, that the member country with which Japan is consulting regarding the methodology of quarantine for these products is not the European Union. It is the United States which is the party to this dispute.


In paragraph 123, the Secretariat notes that Japan authorizes the parallel imports of products liable to protection of intellectual property. Could Japan confirm this information?

Response to Argentina Q. 4 regarding the parallel importation of products liable to intellectual property protection

In July 1997, the Supreme Court made a judgment to permit the parallel import of German patented products into Japan. The Supreme Court judged that, "when a patent holder in Japan or a person who has the rights equivalent to those of a patent holder sells patented products outside the country, the patent holder may not exercise its patent rights with respect to the products against a transferee, unless the patent holder and the transferee agreed to exclude Japan from the territory of sale or use of the products, and against the third party transferee who purchased the products from the first transferee or any subsequent transferee, unless the patent holder and the transferee agreed to exclude Japan from the territory of sale or use of the products and such an agreement is expressly indicated on the products," because "in cases where a patent holder sells patented products outside the country, it is naturally assumed that a transferee or a third party, a subsequent transferee, would import these products to Japan for its business, use or sell these products to another party in Japan."

This judgment established that, given the international trade practices, a patent holder may not suspend the parallel import, or claim compensation for damage caused by the parallel import based on the infringement of the patent rights, in such cases stated in the judgment, even though the judgment upheld that patent rights are not always immediately exhausted when a patent holder transfers his products outside of the country.

AUSTRALIA

Australia Question 1

The Three Year Program for Promoting Deregulation (as revised in April 2000) aims at creating a ‘free & fair Japanese economy fully open to the international community’. Why is this policy limited to certain sectors and in particular when will the agriculture sector experience such reforms?

Response to Australia Q. 1 on whether or not the agriculture sector is covered by the Three Year Program for Promoting Deregulation

The Three Year Program for Promoting Deregulation includes the agricultural sector. It was revised in March 2000. The New Program for Promoting Deregulation (including the agricultural sector) will be established in 2001.


What benefits has the Three Year Program for Promoting Deregulation made to the Japanese agricultural sector? Will the extension to the Three Year Program for the Advancement of Regulating Reform have implications for the Japanese agricultural sector?


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Response to Australia Q. 2 on benefits of the Three Year Program for Promoting Deregulation

The Three Year Program for Promoting Deregulation aims at realizing a brisk Japanese economic society, which includes the agricultural sector.


What future measures will Japan undertake to address issues such as exceptionally high tariff peaks, given that they are of particular concern to developing countries, particularly for differing forms of agricultural produce?

Response to Australia Q. 3 regarding high tariff peaks

Agricultural Products

Current tariff levels were established as a result of the several negotiations taking into account the geographical and natural conditions of each country and situation of each product. Out of quota duties of tariffied roducts were established at the UR negotiations based on the price gap between domestic and international markets.

Tariff levels should be set considering these situations and backgrounds, as well as the necessity to maintain a certain level of agricultural production and its multifunctionality.


Is the Basic Law on Food, Agriculture and Rural areas inconsistent with Japan’s commitment to deregulation and freer trade, especially Japan’s obligation to implement fundamental reform under the WTO Agreement on Agriculture? What measures has Japan undertaken since its last Trade Policy Review to implement reform under the WTO Agreement on Agriculture?

Response to Australia Q. 4 regarding agricultural policy reform

1. After the last Trade Policy Review on Japan in January 1998, the Basic Law on Food, Agriculture and Rural Areas was enacted in July 1999. Consequently, the Basic Plan for Food, Agriculture and Rural Areas was adopted by the Cabinet to indicate concrete directions of the new Basic Law. The basic directions demonstrated in the Basic Plan are the following: (1) improvement of the food self- sufficiency ratio, (2) establishment of a desirable agricultural structure, and (3) development of hilly and mountainous areas. In line with these directions, Japan has been carrying out agricultural policy reform.

2. Japan has been faithfully implementing its agricultural policy reform based on its UR commitments and the agreements on agriculture as described in the report by the Secretariat: official purchase prices of major agricultural products have declined every year since FY 1997; and substantial revisions have been made on price policies towards a number of agricultural products such as rice, wheat and soybeans, with a view to facilitating the transition of consumers’ needs to producers through market signals.


If there is a long term change in Japanese food consumption patterns, shouldn’t this be addressed (at least to some degree) by the market forces of international trade?


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Response to Australia Q. 5

In line with a long-term change in food consumption, imports of a number of agricultural products such as meat have increased, which has led to the decline in food sufficiency ratio to the recent figure of around 40%. In this way, market mechanism of international trade has responded to the changes in food consumption patterns.

In the other hand, domestic production so far has not sufficiently responded to the needs of consumers, which made production of a number of products decline. That is why the Government is currently vigorously engaged in the agricultural policy reform, through the New Basic Law and other measures, in order to establish domestic agriculture that can promptly respond to consumers' needs.


What is the current level of Japan’s food self-sufficiency? What changes in trade policy will be required for Japan to meet its 45 per cent food self sufficiency target by 2010?


The current level of Japan's food self-sufficiency (total food self-sufficiency ratio on a supplied calorie basis) is 40% (FY 1998).

In determining the target for food self-sufficiency ratio in FY 2010, changes in Japanese trade policy are taken into account because the outcome of the WTO negotiations on agriculture is not clear at this moment, but it goes without saying that Japanese trade policies should be in conformity with the international rules and disciplines. The objective of agricultural policy is to establish the domestic agricultural sector that can promptly respond to the needs of consumers. The target of food sufficiency ratio has been set as a guideline for various stakeholders in pursuing this objective.


Despite government assistance, productivity in Japanese agriculture remains low by international standards. With problems such as an ageing agriculture sector population and the extremely small average size of farms, isn’t it time to re-evaluate the considerable financial and resource costs in maintaining protection for the agriculture sector? Can Japan provide data on the productivity of rural sector over the past few years and explain the trend? Can Japan additionally provide figures on the actual costs, including to consumers, of providing protection to the agricultural sector?


In 1996 and 1997, physical labor productivity in the agricultural industry increased, due to the decrease in the farming population while agricultural production slightly declined in 1996, then leveled off in 1997. In 1998, on the other hand, physical labor productivity decreased by 3.5%, due to the decreased in agricultural production caused by factors such as cold weather and long period of rain. (see attached table, page 468)

Japan’s AMS (total amount of domestic support subject to reduction commitment provided for in WTO Agreement on Agriculture) in 1997 was 3,170.8 billion yen (2,967.9 billion yen for price support and 202.9 billion yen for direct payment to be reduced); The figure is below the scheduled level of AMS for 1997.


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The high cost of agricultural inputs has been a factor in Japan’s food processing industries considering offshore relocation. How will this affect the food sufficiency targets contained in the Basic Law? Has Japan considered the option of increasing self-sufficiency by increasing agricultural efficiency and competitiveness?


The food self-sufficiency ratio will rise only if more consumers and food industry choose domestic products.

Therefore, the target of self-sufficiency ratio has been determined through clarifying the issues such as improvement of productivity and quality to attract consumers and food industry, and it has been set at a practical level that is achievable if all relevant issues are to be solved by the positive efforts by all relevant parties including farmers.

Therefore, we take into account the efforts toward increasing agricultural productivity and competitiveness when determining the target of self-sufficiency ratio.


Given that Government support to agriculture in Japan is higher than agriculture’s contribution to Japanese GDP, that two thirds of farm income is derived from government support and that consumers pay twice the cost of goods that would apply in the absence of such support, can Japan provide information that demonstrates that the Government’s support to the agricultural sector is achieving the objective of stabilising farm incomes?

Has the Government considered restricting farming to efficient enterprises and paying farmers to take inefficient farms out of production entirely? This would end the inherent internal conflicts in the policy of multifunctionality that have led to its failure.


So far, the supporting measures for major farm products such as rice have been playing certain roles in promoting the stabilization of the farm incomes, according to the actual situation of production, distribution and consumption.

The government has considered policies focusing on and encouraging efficient agricultural management, and has in fact taken such measures. And the new basic law made another clear step forward to that end.

However, questions arise from various reasons including the point of view of multi-functionality if we are to neglect small-sized farmers because of their economic inefficiency.

The multi-functionality of agriculture is considered as function, which is closely related to, and cannot be separated from, agricultural production activities that have generally been observed. For example, agriculture on paddy fields heavily depends on the irrigation system maintained and managed collectively by the farmers of the region. It needs substantial time and cost to let the small-sized farmers leave the sector while maintaining the irrigation system.


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We are interested in the relationship between new free trade agreement initiatives by Japan, specifically with Singapore, and Article XXIV of the GATT. We note that the Joint Study Group report on the ‘Japan-Singapore Economic Agreement for a New Age Partnership’ highlighted that Japan was not prepared to liberalise tariffs in the agricultural, forestry and fishery sectors in the framework for the Agreement. In light of this how will Japan address these sectors and potential trade-offs in its free trade agreement negotiations with Singapore and other potential free trade agreement partners? We are particularly interested in Japan’s views regarding comprehensive coverage of all sectors in free trade agreements.

Response to Australia Q. 10 regarding FTA

Japan believes that the Economic Agreement for a New Age Partnership between Japan and Singapore must be consistent with WTO rules.

As to the coverage of free trade agreements, Japan believes that an FTA must fulfill the requirements stipulated in Article XXIV of GATT and Article V of GATS, as well as the other relevant parts of WTO agreements.


Australia welcomes moves by the Japanese Government to eliminate restrictions on foreign ownership restrictions for Type I telecommunications services and cable TV service providers but we note the exclusion of NTT to restrict foreign ownership to less than one fifth (20 per cent). Does Japan envisage an easing of this restriction?

Response to Australia Q. 11 regarding foreign ownership in NTT

The status of NTT, including restrictions on foreign ownership on NTT, is now being discussed as part of the broad considerations in the Telecommunications Council.


Deregulation of telecoms markets in Australia has led to new entrants and lower charges, which has boosted national IT literacy rates. In pursuing efforts to increase its own IT penetration rates, has Japan considered addressing interconnection charges paid by Type II carriers to access facilities owned by Type I carriers?

Response to Australia Q. 12 regarding interconnection rates

As for the interconnection charges, steady reduction has been made so far. In addition, the Telecommunications Business Law was amended in May 2000, and as a result, interconnection chareges based on Long-Run Incremental Cost Methodology have already been introduced. Therefore, further reduction of the charges will be expected in the future.


We note under Entry Regulations (Page 102 of Secretariat Report) the distinction of Type I and Type II carriers. The distinction between the two carrier types artificially divides and restricts the market from operating at its most efficient level by creating an economic and operational market entry barrier. To provide a combination of services using its own and other networks, a company must acquire both a Type I and Type II licence. Australia understands that some relaxation of the existing regulations on Type I and


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Type II carriers is planned.

Can Japan provide details of the current situation, and of the planned relaxation of these regulations.

Response to Australia Q. 13 regarding planned relaxation of regulations on Type I and Type II carriers

Given that Type I telecommunications carriers that install their own circuit facilities provide an essential infrastructure that have fundamental functions for supporting the national economy and livelihood of the people, Ministerial authorization is required to secure the stability and reliability of such businesses.

As for Type II telecommunication carriers, simple regulation such as registration and notification are applied that enable them to provide diverse telecommunications services through the interconnection of both ends of leased circuits.

The distinction between Type I and Type II carriers was established in order to provide a clear telecommunications framework and a competition rules. The Government of Japan considers it appropriate to deal with demands for new services in accordance with this framework.

The regulation applied to companies intending to manage both Type I and Type II telecommunications service was abolished in September 2000. In addition, resale of lines by Type I carries will be possible. These examples indicate that the flexibility to build networks is expected to be enhanced even in the current framework of carrier categories.


The cumbersome current system of approvals and notifications administered by the Ministry of Posts and Telecommunications (MPT) imposes heavy administrative burdens on wholesale and retail telecommunications. Why are these administrative requirements necessary? Does Japan have any plans to remove or streamline the current requirements for interconnection, or to make the terms and conditions of sales more clearly defined?

- For example, when a carrier interconnects with another carrier the interconnection agreement is subject to approval by MPT (Telecommunications Business Law, Article 38-3), a process that can lead to unnecessary delays.

- On the retail side, under Article 31 of the Telecommunications Business Law, Type I and Type II carriers are required to submit ‘Articles of Agreement’ to MPT detailing services they are offering to customers and the terms and conditions of the customer agreement. The absence of clear guidelines as to what should be included in the Articles of Agreement can cause delays in processing licence applications.

- Article 10 of the Telecommunications Business Law requires that the business plan of a Type I carrier must be “firmly based and rational”. The requirement for interpretation of these terms by MPT, rather than through a clear definition, can lead to delays in approval of licence applications.

These administrative processes are costly and time-consuming, and have the effect of creating a restriction on entry into the Japanese market. Does Japan have any plans to change these processes, and improve transparency in line with its WTO obligations?

Response to Australia Q. 14 regarding authorization of interconnection agreement


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Regarding interconnection agreement and articles of agreement, authorization is required for articles to secure fair competition in the telecommunications market and consumers benefit.

The criteria for the authorization is defined clearly in the Regulation for Enforcement of the Telecommunications Business Law. Examination for the authorization is taken without delay in standard processing period.


Australia notes that users and carriers may file complaints and petitions with the MPT about telecommunications issues (see Page 105 of Secretariat report). However, the MPT is also responsible for the policy and regulatory functions for telecommunications. Australia considers that the creation of a fully independent regulatory entity would help to ensure that non-discriminatory and transparent processes exist within the telecommunications market.

What are Japan's views on this subject, and are there any plans to create a fully independent regulatory entity.

Response to Australia Q. 15 regarding independent regulators

As for an independent regulator in the telecommunications sector, the Reference Paper of the Fourth Protocol to the GATS stipulates, “The regulatory body is separate from, and not accountable to, any supplier of basic telecommunications services.” and Japan has abided by the rule.


Paragraph 83 of the Secretariat Report notes that the Diet has approved the Law Concerning Electronic Signatures and Certification Services as a means of advancing electronic commerce within Japan. The demands that electronic commerce will place on the regulatory environment of many industries cannot be underestimated. It is therefore essential for Japan, and other members, to ensure that the practices of other sectors of the economy be regulated in such a way to ensure that goods traded electronically do not face unnecessarily barriers. What are Japan's views on this issue?

Response to Australia Q. 16 regarding e-commerce

In order to promote electronic commerce, the IT Strategy Council is now implementing an overall examination and prompt review of factors hindering the IT revolution and preparing rules suited to the specific requirements of electronic commerce and other information transactions.

For example, the Bill for the Comprehensive Amendments to the Laws that Require as Conditions the Delivery of Documents is presently being discussed in the current session of the Diet in order to enable the employment of electronic media.


Japan ranks among the top five legal services market for Australia. Although Japan's regulation of foreign is relatively restrictive, Australian lawyers and law firms have been able to access Japan’s legal services market to service the needs of Australian, Japanese and international clients - but generally do so other than as registered foreign lawyers. (Gaikukokuho-Jimubengoshi Jimusho (GJB))

Australia has a number of concerns relating to Japan’s approach to legal services. These include:


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(i) the long and usually bureaucratic process of seeking GJB status;

(ii) restrictions on most forms of commercial association between foreign and Japanese lawyers and law firms;

(iii) a three year minimum period of professional experience (ie considerably more than the one year’s supervised professional practice, in addition to articles or practical legal training, for an Australian lawyer to be eligible for an unrestricted practising certificate in Australia);

(iv) a minimum period of 180 days residence in Japan each year; and

(v) discriminatory regulation concerning the practice of third country law (through the additional requirement imposed on foreign lawyers in relation to the practice of foreign law)

The 3 year minimum professional experience requirement (item iii above) works against newly qualified Australian lawyers who wish to gain overseas experience early in their career. The additional requirement concerning the practice of foreign law (item v above) imposes a cost only on foreign lawyers and amounts to a differential and discriminatory standard.

What is Japan's approach towards the issues identified in (i) to (v) above, and what action, if any, is Japan prepared to take in order to address the concerns specified?


The appropriate role of the Japanese professional/ regulatory bodies should be to establish that a foreign lawyer has good standing with his or her home country professional/regulatory bodies. These regulatory bodies should not specify additional experience or other professional requirements concerning practise of the law of another jurisdiction (ie the foreign lawyer's own jurisdiction or the law of another jurisdiction). This is a function that is best performed by the admitting and professional/regulatory bodies in those other jurisdictions, as those bodies are in the best position to properly determine competency and experience requirements - not Japanese bodies.

In Australia, the requirements for admission to practice and issue of an unrestricted practising certificate have been developed to provide for a high standard of professional competence and consumer protection. No additional requirement, other than the maintenance of a high standard of professional conduct and continuing legal education, is considered necessary by the competent authorities in Australia. In so far as the practice of the law of Australia in Japan is concerned, it is unclear why the Japanese authorities might consider they are in a better position to determine adequate experience requirements for Australian lawyers or legal consultants. Australia has no such additional requirement for foreign lawyers practising home country law in Australia who are in good standing with their home country professional or regulatory body - including foreign lawyers from Japan.

Against this background, can Japan provide an explanation for its current approach concerning regulation of foreign lawyers practicing home country law?


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The Ministry of Justice also imposes more burdensome requirements for foreign lawyers providing advice on third country law than for Japanese lawyers providing advice on third country law (ie foreign lawyers are required to obtain a confirmatory letter from a lawyer in the third country concerning the matter on which advice or an opinion is provided; Japanese lawyers have no such obligation imposed on them in regard to third country law.).

Once again, where advice by a lawyer or legal consultant on third country law is involved, the admitting and professional/regulatory bodies of the third country are the proper bodies to determine competence and experience in that body of law, rather than a regulatory authority in the host country where the advice is being given. This is the position in many countries, including Australia.

Can Japan explain how these requirements meet its obligations under the GATS Agreement concerning National Treatment? Does Japan have any plans to change the current situation?

Response to Australia Q. 17 – Q. 19 regarding GJB

Q. 17-(i)

It takes approximately two months for an application for approval to be approved after it has been received by the MOJ, unless any extraordinary grounds exist. Therefore, the MOJ believes that this is not too long.

Q. 17-(ii)

According to the final revision of the Three-Year Program for Promoting Deregulation decided on by the Cabinet on March 31, 2000, "From the viewpoint of providing an environment where citizens and corporations can receive overall, comprehensive legal services concerning both Japanese and foreign law, the Government of Japanese will give consideration to whether some measures, including the review of regulations on the objectives of specific joint enterprises, are required so that fully integrated legal services based on a comprehensive cooperation between Gaikokuho-Jimu-Bengoshi and Bengoshi may be provided in all cases".

Therefore, the Government of Japan is continuing examination of specific joint enterprises to assess whether there are any points that may be improved.

Q. 17-(iii) and Q. 18

The system of Gaikokuho-Jimu-Bengoshi in Japan means that foreign lawyers are able to provide legal services pertaining to their own country's laws without taking any special examinations, provided that the foreign lawyers meet the requirement for approval of experience of practice in the country of acquisition of qualification, for a period of three years or more in total.

This system is intended to ensure that the foreign lawyers have sufficient abilities and competence and that there are no ethical problems.

Japan believes that the three years’ experience requirement for practising foreign law is appropriate from the viewpoint of protecting clients.

Therefore, no consideration is being given to removing the above-mentioned requirement.


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Q. 17-(iv)

Gaikokuho-Jimu-Bengoshi in Japan should themselves be engaged in legal business concerning the laws of the country of acquisition of qualification.

Therefore, Japan believes that a GJB should be required to stay in Japan not less than 180 days in a year, from the viewpoint of protecting clients and to ensure that clerks or others do not engage in legal business without a GJB.

Q. 17-(v) and Q. 19

Ordinary, a Gaikokuho-Jimu-Bengoshi in Japan can only engage in legal business which is limited to laws concerning the laws of the country of acquisition of qualification, and therefore when a GJB handles legal services in third country law, the GJB must do so only after receiving written advice from a lawyer in the third country.

On the other hand, Bengoshi can engage in legal business without any restrictions.This requirement for GJB is necessary from the viewpoint of protecting clients, because GJB and Bengoshi are totally different in concept.Clients will not be able to gather information and form decisions about foreign lawyers' ability competence or ethics and there is the possibility that a client will incur irreversible damage after legal services have been rendered.

Japan believes that the above-mentioned requirement is necessary from the viewpoint of protecting the client.Therefore, no consideration is being given to removing the above-mentioned requirement.Further, the above-mentioned condition also applies to Japanese GJB, which means thiis condition is not applied based on nationality. Therefor, Japan believes that there are no problems under the GATS Agreement concerning National Treatment.


Australian welcomes the Japanese Government’s progress in liberalising its financial sector in particular the desegmentation of Japan’s financial markets through progressive removal of barriers between different types of financial institutions. New regulation, new competitors, new techniques and approaches, and new technologies are empowering customers and allowing freer trade in financial services.

We note the decision outlined on page 98, paragraph 53 of the Secretariat's report that in April 2001, the mandatory re-depositing of savings with the Fiscal Investment and Loan Program is to be terminated. Are there any plans to make a similar change in relation to Postal Life Insurance?

Response to Australia Q. 20 regarding the Postal Life Insurance Service (Kampo) Funds

The Postal Life Insurance Service (Kampo) Funds have been managed and invested directly by the Minister of Posts and Telecommunications since their inception in 1919. Therefore, FILP Reform will not bring about a great change in the scheme of their management.

Regarding the management of Kampo Funds, after the FILP Reform, the direct loans to FILP institutions, except for local governments, will be abolished, and the system in which bonds such as FILP bonds and FILP Institution bonds, are purchased through the market will be adopted.


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There have been complaints that Japanese regulatory authorities often make foreign entrants comply with many administrative requirements for even the simplest of approvals. Legal, administrative and regulatory requirements are also seen as changing arbitrarily, and compliance with one requirement may reveal a request for compliance with further requirements.

What measures has Japan undertaken to ensure the simplification and transparency of regulatory requirements in the financial services sector?

Response to Australia Q. 21 regarding Financial Services

The Financial Supervisory Agency was established in June 1998 with the objective of conducting financial supervision in a fair and transparent manner. At the time of establishment, the FSA abolished all administrative notifications that contained regulatory requirements and put them in Cabinet Orders, ministerial ordinances and guidelines, which are open to the public and subject to pubic comment when amended. These regulations are applied in a non-discriminatory manner, and do not impose unfair requirements on foreign entrants.


Japanese companies often work in business groups - Keiretsu (supporting each other across business processes), concentrating economic power in a small group of companies. The market power from this practice enables the companies to constrain fair competition, infringe the interests of foreign firms and tie up distribution channels.

What measures will the Japanese Government implement to prevent restrictive trade practices that unreasonably restrict trade in the financial services sector? Will the Japan Fair Trade Commission be able to investigate such restrictive trade practices?

Response to Australia Q. 22 regarding Keiretsu

1. The Japan Fair Trade Commission has surveyed distribution and trade practices, including those in the financial sector, and has pointed out problems, from the viewpoint of competition policy, concerning trade practices which restrict fair and free competition.

BRAZIL

Brazil Question 1

According to the Report by the Secretariat, “although Japan has traditionally eschewed regional free trade agreements on the grounds that they could lead to exclusive, discriminatory trading blocs and thereby undermine the multilateral trading system, such agreements now seem to be attracting greater interest to Japan” (page 19, para. 4).

Could Japan clarify what kind of agreements are being negotiated with Singapore and Korea?

Is Japan negotiating agreements with other countries ?

In view of this new scenario, what is the position of Japan in the Committee of Regional Agreements, specially as regards the so called “systemic issues” ?


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Response to Brazil Question 1 regarding FTA

Negotiations with Singapore will begin in January 2001. "Japan-Singapore Economic Agreement for New Age Partnership" will not be a traditional free trade agreement but a new type of economic agreement which can strengthen the broad range of the economic ties. It will include new economic fields, such as capital flows, harmonization of electronic commerce regulations, cooperation on paperless trade, financial services and media/broadcasting, movement of professionals and development of human resources. We believe that the future agreement between Japan and Singapore will further liberalize trade and investment and institutionalize regulatory and other policy reforms in both countries. It will also facilitate the smooth transborder flow of management resources, create a larger market, provide greater opportunities and larger economies of scale and contribute to the prosperity of the world economy in the 21st century. The partnership agreement will enhance the creativity of the people of both nations as well as encourage innovation in the age of technological progress, especially in the area of information and communication technologies.

Japan is not negotiating with Korea, nor with other countries. Please see the answer to the question from Chile. We continue to place the highest priority on maintaining and strengthening the multilateral trading system as enbodied in the WTO. The primacy of the multilateral trading system was reaffirmed by the Prime Ministers of Japan and Singapore when deciding on the launch of the negotiations. We believe that FTAs must be consistent with WTO rules and must be complementary to the multilateral trading system. We continue to contribute actively to the work of the CRTA, including the work on so-called systemic issues.

Brazil Question 2

According to the Report by the Secretariat, “ Tariff escalation is evident in a number of sectors, most notably processed food, textiles, chemicals and leather products” (page 42, para.31). There are important export products from Brazil that are facing this trade barrier in having access to the Japanese market as soybean oil, prepared coffee and cigarettes, and also footwear.Could Japan provide any explanation to the continuation of this kind of protection?

Response to Brazil Q. 2 regarding trade barriers to access to the Japanese market for soybean oil, prepared coffee, cigarettes and footwear

(1) Soybean Oil and Prepared Coffee

The tariff rates of both products have been determined through the past trade negotiations, and were based on various circumstances and are not high, compared with other products.

(2) Cigarettes

The temporary tariff rate of them is zero. As such it is not correct to describe cigarettes in this way.

(3) Footwear

It is very difficult to reduce tariffs further because most of the manufacturers’ scales are very small, and they are less competitive in the global markets. Further reduction of their tariffs would cause serious damage to the manufacturers.

However, Japan does not intend to exclude these products from industrial tariff negotiations of comprehensive coverage in the WTO new round with a balanced and sufficiently broad-based agenda.


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Brazil Question 3

As indicated in the Report of the Secretariat, “Non ad valorem duties consist of compound duties, alternate duties, differential duties and sliding duties, all of which include specific rates.There is a significant number of products from Brazil that is facing such type of specific duty as sugar, ethylic alcohol, orange juice and footwear.

Since this type of duty provides a greater nominal protection as the price of the product is reduced, is Japan planning to change the use of non ad valorem duties to ad valorem duties in the future ?

Response to Brazil Q. 3 regarding specific duty

Japan does not have any plan to reform these regimes now. But it should be noted that the Japanese government applies non ad-valoem duties restrictively and selectively for the items with large market-price fluctuations and so on. Also, the tariff rates are set taking into consideration the domestic and oversees price differentials and vulnerable situation of domestic industries regardless of types of duties.

AVE estimates of non ad-valorem duties are high not because non ad-valorem duties are applied but because the respective industries are vulnerable.This regime might be discussed in a WTO new round of trade negotiations with a balanced and sufficiently broad-based agenda.

Brazil Question 4

As mentioned in the Report by the Secretariat, “since 1998, no change has been made to the Food Sanitation Law” (page 56, para.79).Brazilian exporters of tropical fruits are facing increasing barriers in terms of phytosanitary and quarantine measures to the following products: mangos, oranges, papayas, melons, watermelon and tomatoes. Brazil’s concerns are related to the practice of limiting SPS protocols to specific varieties of fruits and the non acceptance of Brazilian methods of treating fruits to control specific diseases. Could Japan offer some kind of explanation about this practice?

Response to Brazil Q. 4 regarding SPS

Under the Plant Protection Law (not the Food Sanitation Law), Japan prohibits the importation of plants which serve as hosts for Mediterranean fruit fly (Medfly) and Tobacco blue mold which are not present in Japan but have been found in Brazil, in order to prevent their introduction into Japan.

In detail, we prohibit the importation of mangoes, oranges, papaya, melons, watermelons as the host plants of the Medfly, and tomatoes as the host plants of the Medfly as well as Tobacco blue mold.Such a plant quarantine measure is based on scientific evidence and consistent with the WTO/SPS Agreement.

On the other hand, Japan approves the importation of these prohibited plants on the condition that the exporting country has developed an effective method to prevent the invasion of pests whose import is prohibited.

We are currently holding discussions with Brazil about the lifting of the import ban for mangoes from a technical viewpoint, but we have not received any requests for the lifting of the import ban for other fruits

If Brazil has a specific request for lifting an import ban, Japan is ready to discuss it from a technical viewpoint.

Brazil Question 5


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Other issues (electronic commerce) – page 105, par. 83. With regard to the Law Concerning Electronic Signatures and Certification Service, approved on 24 May 2000, the Secretariat report states that the “Law also introduces a system that enables mutual recognition of certification services between Japanese and foreign accreditation systems, where a mutual recognition agreement exists between the two countries. Has Japan signed any such agreements and if so with which WTO Members? Could Japan provide information on the system used for recognition and accreditation of electronic signatures?

Response to Brazil Q. 5 regarding the Law Concerning Electronic Signatures and Certification Service

Japan has not signed any mutual recognition agreements concerning accreditation systems of certification services yet. Reference can be made to the Law given in tentative English at the website as follows.

http:// www. mpt. go.jp/eng/Resources/Legialation/eSignLaw/eSignLaw.pdf

Brazil Question 6

In Japan’s schedule of specific commitments with regard to “placement and supply services of personnel (1.F.k) the limitation on market access in mode 3 states that “the number of licences conferred to service suppliers may be limited”. Is this limit permanent or has it been subject to modifications? What are the criteria for the establishment of limits for the number of licences?

Response to Brazil Q. 6 regarding the labor supply and demand condition and the limitations on service suppliers

Based on the revision of the Employment Security Law and the Law for Securing the Proper Operation of Worker Dispatching Undertakings and Improved Working Conditions for Dispatched Workers in 1999, the labor supply and demand adjustment condition was abolished. This condition is described in the schedule of specific commitments as “the number of licenses conferred to service suppliers may be limited.” Notification of the revision pursuant to Article III, Paragraph 3 of the General Agreement on Trade in Services, has already been made (S/C/N/129 and S/C/N/130).

Brazil Question 7

Does the Government of Japan maintain any exceptions to the principles of MFN and NT with regard to FDI? If that is the case, what are the sectors/activities and are there any plans to reduce or eliminate these exemptions?

Answer to Question Q. 7 by Brazil regarding exemption from MFN in Japan

Japan has exemptions from MFN on fisheries, freight forwarding business and air transport industries based on the Law Concerning the Exercise of Sovereign Rights Concerning Fisheries in Exclusive Economic Zones, Law for Regulation of Fishing Operation by Foreign Nations, Freight Forwarding Business Law and Civil Aeronautics Law.

Besides the above-mentioned MFN exemption measures, Japan has exemptions from and limitations to NT on agriculture, forestry, fisheries, water supply, transportation, warehousing related to oil storage, vaccine manufacturing, leather and leather products manufacturing, aircraft manufacturing, defense products manufacturing, space, security, explosives, nuclear energy, oil, electric utility, gas utility, heat supply, mining, telecommunications, broadcasting and financial services (deposit insurance) industries based on the following laws:


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- Foreign Exchange and Foreign Trade Law

- Seeds and Seedlings Law

- Mining Law

- Ship Law

- The Law Concerning Nippon Telegraph and Telephone Corporation, etc

- Radio Law

- Broadcast Law

- Deposit Insurance Law

Concerning the industries which require prior notification for foreign direct investment, Japan is promoting further liberalization so that regulations on access by foreign capital will be minimized except those for security purposes, considering negotiations with and regulations in other countries and social economic situations.

Brazil Question 8

Could Japan explain how its tariff quotas and autonomous tariff quotas are administrated?

Response to Brazil Q. 8 regarding tariff quota

The tariff quota volume, in principle, is determined by subtracting the domestic production volume from the domestic demand volume in each product to which this scheme applies. Allocation for each product category is administered by respective ministries. The administration methods of allocation are selected taking into consideration the characteristics of demand and supply movements and other market conditions respectively. They are made public from the related ministries. Japan thinks that it has enough transparency. There is no difference between tariff quotas introduced under the WTO Agreement on Agriculture and the autonomous ones.

Brazil Question 9

With regard to state trading (Secretariat report page 53, par. 69) what are the plans of the Japanese Government to reduce or eliminate these practices in the light of their trade distortive effects? Can the government of Japan confirm the abolition of the MITI’s monopoly on import, production and sale of industrial alcohol by 01 April, 2001 as stated in the Secretariat report?

Response to Brazil Q. 9 state trading

The Government of Japan confirms that MITI’s monopoly on the import, production and sale of industrial alcohol shall be abolished by 01 April 2001, under the Alcohol Business Law which was established in March 2000.


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Brazil Question 10

Could Japan provide more detailed information about how its non-automatic import licencing system works? Please provide an updated list of the products/tariff lines subject to the system?

Response to Brazil Q. 10 regarding the non-automatic import licensing system

The non-automatic import licensing system in Japan works with import quota and import approval.

The goods, and their countries of origin and/or shipment where applicable, that are subject to import quota or import approval system are specified in a list and made public in the Official Gazette whenever changes are made.

The updated list is attached.

Brazil Question 11

With regard to government procurement, the Secretariat report mentions (page 50, par. 58) that “the authorities state that government procurement is conducted without any restrictions on suppliers’ nationality or on the origin of products and services, based on the principle non-discrimination”. Does this mean that suppliers from countries that are not members of the GPA are accorded the same treatment given to suppliers from GPA member countries?

Response to Brazil Q. 11 regarding the treatment extended to those who are not parties to the GPA

As a Party to the WTO Agreement on Government Procurement (GPA), Japan has conducted its government procurement without any restrictions on suppliers’ nationality or the origin of products or services, based on the principle of non-discrimination, to the extent it is required by the GPA.

Naturally, the GPA applies to those governments that have accepted the GPA and whose agreed coverage is contained in Annexes 1 through 5 of Appendix I of the Agreement (cf. Article 24:1 of the GPA). This means that, as a matter of course, only suppliers of parties to the GPA are able to enjoy non-discriminatory treatment under the GPA. Therefore, it is outside of the scope of Japan’s commitments under the GPA to accord suppliers from countries that are not parties to the GPA the same treatment given to suppliers from Parties to the GPA.

Brazil Question 12

Could Japan explain the reasons for restricting the use of nicarbazine in poultry meat?

Response to Brazil Q. 12 regarding poultry meat

The Ministry of Health and Welfare of Japan has established MRLs (Maximum Residue Limits) for veterinary drugs at levels low enough to ensure that there is no adverse/undesireble effect on human health, should people consume foods containing such drugs.

In June 2000, Japan established MRLs for nicarbazine in poultry meat. This standard will be effective on 1 January 2001.

In the future, MHW will establish MRLs for veterinary drugs with all necessary documents required for a safety evaluation, based on opinions of the Food Sanitation Investigation Council, and on scientific grounds.


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Brazil Question 13

We would like to know Japan’s views on the recognition of disease or pest free areas in the light of the mechanisms set out in Article 6 of the SPS Agreement to that effect.

Response to Brazil Q. 13 regarding SPS

Japanese Government has already recognized free regions of countries, taking into account, inter alia, the level of prevalence of specific disease or pests, the existence of eradication or control programs, and appropriate criteria or guidelines which may be developed by the relevant international organizations according to the Article 6 of SPS Agreement.

CANADA

Canada Question 1

As the Secretariat points out, the Three-Year Programme for Promoting Deregulation has made great strides thanks to the able direction of the Regulatory Reform Committee (RRC). Please provide some details on the new regulatory reform program Japan intends to implement when the current three-year plan draws to a close on March 31, 2001 and what body will be created to succeed the RRC.

Response to Canada Q. 1 regarding Japan’s regulatory reform program

The Three-Year Program for Promoting Deregulation will expire at the end of March 2001. In order to promote regulatory reform initiatives, the Government is to draft a new Three-Year Program. However, details of the new program are yet to be decided.

The Regulatory Reform Committee was established without a fixed term of mandate, and the establishment of another body to succeed it is uncertain.

Canada Question 2

Many have criticized the incremental, item-by-item approach to Japan’s efforts in regulatory reform. It has been suggested that Japan could give greater consideration to cross-cutting issues, such as the problem in several sectors of a lack of independent regulatory authority. Reform in areas such as telecommunications (for example, rights of way) may be hampered by the fact that the Ministry of Posts and Telecommunications has both regulatory and promotional functions. Other sectors might be aided by the establishment of an independent regulator, as is the case with MITI in electricity, or the Japan Harbour Transport Authority for sea transport. What are Japan’s intentions to address cross-cutting issues, such as the independence of regulatory authorities, as part of its new regulatory reform initiative?

Answer to Canada Q. 2 regarding cross-cutting issues

First of all, the Government of Japan does not currently address the issue of independence of regulatory authorities as a cross-cutting issue.

As for an independent regulator in the telecommunications sector, the Reference paper of the Fourth Protocol to the GATS stipulates, "The regulatory body is separate from, and not accountable to, any supplier of basic telecommunications services," and Japan has abided by this rule. Apart from the rule requested by WTO, it is each country that determines the institutional system, including its regulatory body.


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As for the independent regulator for electricity, policy-making and regulation are carried out independently by two divisions in the Public Utilities Department, Agency of Natural Resources and Energy (ANRE), MITI: policy-making by the Planning Division, and regulation by the Electric power Administration Division. As a result of government structural reform to be started from January 2001, the Policy Planning Division will carry out the policy-making and the Electricity Market Division will carry out the regulation in the Electricity and Gas Industry Department, ANRE, MITI.

In response to the last point, Japan does not have a "Japanese Harbor Transport Authority."

Canada Question 3

According to the Report, Japan applies MFN tariffs to all except a few countries it lists. Please clarify if these few countries get preferential tariffs or non-MFN treatment.

Response to Canada Q. 3

Japan grants preferential treatment to Albania, Eritrea, Lebanon, Lithuania, Nepal, and the Republic of Equatorial Guinea (II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES (Box II.1)). The MFN tariff rate is not applied to imported goods from Andorra and North Korea.

Canada Question 4

Table II.2: Principal notifications under WTO Agreements (as at 25 April 2000) includes the notification to the WTO of the first phase of integration under the Agreement on Textiles and Clothing. However, no reference is made to the notification of the second phase, which was due on 31 December 1996 and which took effect on 1 January 1998. Please explain.

Response to Canada Q. 4 regarding notification of the second phase of integration under the Agreement on Textiles and Clothing

On 19 December 1996 Japan notified the TMB of the second phase of integration under Article 2, paragraph 8 (a) and 11 of the Agreement on Textiles and Clothing. It is so stated in the document: G/TMB/N/215, 14 February 1997.

This refers to Table AI.1: Exports by product groups, 1995-99. Noting that the yen lost value to the US Dollar from 1995 to August 1998, Japan's level of textiles and clothing exports did not vary substantially since the beginning of the Agreement on Textiles and Clothing. However, according to Table IV.6 on Employment in manufacturing, value added per employee and wages per employee in Japan, 1992-98, employment in these sectors fell nearly one fifth over this period. Is this result attributable to the loss of the domestic market, or to the increased mechanization of the manufacturing process used for these products?

Canada Question 5

The Report notes some tariff adjustments initiated by the Ministry of Finance. In the past Japan has reported that tariff rates are reviewed every year on the basis of requests from foreign and domestic entities. Japan’s system of tariff classification distinguishes between the species and dimensions of lumber, regardless of its end use. As a consequence, Spruce-Pine-Fir (SPF) imports, key building components, are subject to duties ranging from 4.8% to 6%, whereas hemlock imported for the same purpose enters duty free. Please provide some examples of tariff adjustment which may have arisen as a result of requests from foreign entities. Also, please clarify how one can point out such tariffs as the SPF tariff or the tariff on cooking oil (currently between 20-25% when translated into an ad valorem basis).


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Response to Canada Q. 5 regarding tariff adjustment

Japan has been implementing tariff reductions taking into consideration requests from foreign entities. For example, the request from Canada in relation to tariff revision of happoshu in 1996 was implemented in the following annual tariff revision, as were the requests from the Philippines in relation to bananas, and from Peru in relation to camucamu in 1981 and 1997, respectively.

The customs tariff review process of Japan regarding requests from foreign entities are as follows:

The customs tariff review process of Japan

1. Specific requests on customs tariff review from foreign governments are to be received by the Ministry of Foreign Affairs or other ministries in charge of industries concerned. Requests from domestic parties concerned (including foreign-affiliated parties in Japan) are to be received by each ministry in charge of industries concerned.

2. Requests received by the Ministry of Foreign Affairs are proceeded occasionally to ministries in charge of industries concerned and discussed between the ministries if necessary.

3. Once those requests are received by ministries concerned, their reasonability and acceptability are examined. If accepted, they are proceeded to the Ministry of Finance as requests for customs tariff review for the next financial year.

4. The Ministry of Finance begins discussions on the requests with the ministries concerned usually in September to review the customs tariff in the next financial year.

5. The function of the Customs Tariff Council is to examine and consider a review of the Customs Tariff Schedule annexed to the Customs Tariff Law and other important matters pertaining to customs tariff rates. It begins deliberations responding to a reference from the Finance Minister usually in September and submits a report to the minister usually in mid- or late-December.

6. Attaching importance to the report submitted by the Customs Tariff Council, the Ministry of Finance prepares bills to revise the Customs Tariff Law and Temporary Tariff Measure Law. Approved by the Cabinet meeting, the bills are generally proclaimed in the end of March and basically come into force on April 1.

7. Requests on customs tariff review from foreign governments have been negotiated mainly in successive multilateral forums provided by GATT or WTO and are to be dealt with primarily in negotiations under WTO forum.

In case that the bound rates are to be modified as the result of the negotiations in the multilateral forums, the Ministry of Foreign Affairs takes charge of domestic procedures to modify the “schedule XXXVIII-Japan” in the Diet, so that the result of the tariff negotiations are reflected in the Schedule.

Response to Canada Q. 5 regarding oilseed tariffs

Japan imports a large amount of oilseeds in order to crush them into vegetable oil, of which soy bean oil and rapeseed oil are dominant. This is the reason why relatively high tariffs are levied on these types of oil (soybean and rapeseed).

On the other hand, the tariff rates of oils made from sunflower, cotton, corn, andsesame, which are regarded


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as rather minor oils, are relatively low compared to those of soybean and rapeseed. Furthermore, the tariff rates of tropical oils suchas palm oil, most of which have to be imported in the form of oil, are set at quite a low level, including a rate of zero in the case of developing countries.

As is mentioned above, the structure of Japanese vegetable oil tariff is subject tothe structure of the supply of oil, and therefore tariff rates do not distinguished based on their countries of origin.

(As for the valerom calculation which Canada presented at the end of this question, Japan would like to point out that translation of a specific duty to an ad valorem duty differs greatly depending on the basic data to be used for such a calculation and it is not appropriate to refer to such a calculation without sufficient explanation thereof.)

Response to Canada Q. 5 on Spruce-Pine-Fir imports

The GATT panel on Japan's tariff on Spruce-Pine-Fir lumber has concluded that GATT left wide discretion to the contracting parties in relation to the classification of goods and it was not inconsistent with the General Agreement to impose different tariffs on goods according to different domestic circumstances they result from.

As for Japan's tariff on Spruce-Pine-Fir lumber, Japan imposes a certain level of tariff because imported Spruce-Pine-Fir lumber strongly competes with domestic Spruce-Pine-Fir lumber, of which the price/cost ratio is extremely low.

Again, Japan's tariff on Spruce-Pine-Fir lumber does not discriminate against the products of any specific country’s products.

Canada Question 6

We refer to Japan’s proposal to withdraw certain activities of NTT and its successor companies, including NTT Communications, from coverage under the WTO Agreement on Government Procurement. Considering that Japan appears to retain effective influence and control over many of the NTT companies, please provide information on Japan’s plans for ensuring that its proposal meets its commitments under the Agreement on Government Procurement.


NTT Communications Corporation is a private company established in accordance with the Japanese Commercial Law, and as such is not regulated by the NTT Law at all. Thus, there is no effective influence or control by the Government of Japan and it is considered that the proposal to withdraw NTT Communications from coverage under the Agreement on Government Procurement meets Japan’s commitments under the Agreement.

Canada Question 7

Canada welcomes the move by Japan to further examine the application of performance-based standards to the regulations within the Building Standards Law (BSL) relating to fire. However, many aspects of the BSL relating to fire remain prescriptive, thereby limiting wood construction and rendering wood-frame buildings more costly. In order to provide safe and more affordable housing for its citizens, will Japan consider explicit performance-based standards within the BSL to recognize new building designs, and fire prevention and fighting techniques?


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In the 1998 amendment of the BSL, which came into effect as of June 1, 2000, Japan applied performance-based standards to provisions in relation to wood-frame buildings, including those regarding fire-resistant structures, fireproof materials and fire prevention equipment. In addition, Japan established technical standards for required performance levels. The use of wood as a primary component of buildings had normally been prohibited for tall buildings in excess of 13m in height (or more than 9m in height up to their eaves) and buildings more than 3,000 m2 in total surface area. However, through the 1998 amendment Japan abolished the provisions of the BSL prohibiting the use of wooden structures and, instead, applied performance-based standards which require the examination of the main structures of such tall or large-scale buildings to determine whether or not they are sufficiently fire-resistant. Thus, explicit performance-based standards have already been implemented in the BSL.

Canada Question 8

The Report indicates that prior notification is, in principle, required for inward FDI for a number of sectors including agriculture, forestry and fisheries, petroleum, leather and leather products, investment trust management, air and maritime transport, as well as Type 1 telecommunications, radio television and cable television, and broadcasting. What is the purpose of these notification requirements and what information must companies provide pursuant to these notifications?

Canada Question 9

The Report states that although a notification of an FDI project may be rejected, this has never happened. Please clarify whether any conditions have been placed on any of these investments as a condition for approval.

Response to Canada Q. 8 and Q. 9

Prior notification is required for industries from national security’s and public order’spoints of view. The regulations of these industries are recognized by the OECD. The purpose of these notification requirements in the Foreign Exchange and Foreign Trade Law is as follows: (1) A transaction should not endanger national security, disturb the maintenance of public order, or hamper the protection of public safety. (2) A transaction should not adversely and seriously affect the smooth management of the Japanese economy.

As procedure, investors must provide the information concerning their business in which the investment will be made, such as types (acquisition of stocks or shares, money lending, etc.), country, industry and value in accordance with the Ministerial Ordinance. As for screening, it depends on each case. (There is no general standard applying to all cases.)

As regards investment trust management companies are in charge of managing securities assets with investors’ fund. In order to secure that the asset management is conducted appropriately, authorization system (notification requirements) has been introduced to examine qualifications of the company both from its property basis and personnel structure. Whether a company’s head office is located within or outside Japan does not affect the examination results of the authorization system.

There has not been any case filed with MITI which is recommended modification or suspension of proposed investment for the last 10 years.


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Canada Question 10

Paragraph 115 and the accompanying Table AIII.13 reference several major companies where the government of Japan retains an ownership share. We note that the government of Japan currently holds 53 per cent of stocks in Nippon Telegraph and Telephone Corporation (NTT) and that the government is required by law to hold at least one third of these stocks. What is the rationale for the legal requirement that the government retain one-third ownership share? The government is slated to drop its ownership to 46.7% in November. What further plans does the government have to divest the remaining ownership share in the corporation which would be allowable under the current law?

Response to Canada Q. 10 regarding Japanese Government ownership share in NTT

The NTT Law obligates the Government of Japan to hold at least one third of the issued shares of the NTT Holding Company, with the objective of ensuring the public good by preventing the domination of NTT management and the abuse of shareholders’ rights by any specific parties.

The obligation of the Government to hold the NTT shares is one of the issues concerning the status of the NTT currently being discussed in the Telecommunications Council.

Canada Question 11

From paragraph 115 and Table AIII.13 we also note that the Government of Japan holds a 66.6 per cent ownership share in the Electric Power Development company and that the government is required by law to hold at least one half of these stocks. What is the rationale for the legal requirement that the government retain a fifty per cent ownership share in the corporation? What is the government’s plan to divest the remaining ownership share which is allowable under the current law?

Response to Canada Q. 11 regarding Electric Power Development Promotion

The EPDC is regarded as a statutory company because the company’s basic role is to complement the regional territoriality and the limitations of the private sector of the nine electric power companies in view of the Government’s electric power and energy policy. For this reason, the Government is requested to participate in the basic decision-making on EPDC management, as a shareholder equipped with a special voting right.

The Government is scheduled to divest its ownership share in EPDC after it has amended the Electric Power Development Promotion Law.

Canada Question 12

The Report indicates that the May 2000 amendment to the Anti-Monopoly Act (AMA) will allow private actions commencing 2001. Please indicate Japan’s expectations with respect to the impact this will have in terms of effective enforcement of the AMA. Will foreign parties be allowed to pursue private remedy? Will foreign law firms be allowed to represent private parties in such actions?


The Government of Japan submitted a bill to the Diet on 21 March 2000 to permit private parties to seek and obtain injunction orders from the courts against parties engaged in activities that violate unfair trade practices set forth in the AMA and to improve the damage compensation system against AMA violations. The bill was enacted on 12 May 2000 and was promulgated on 19 May 2000.


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The Fair Trade Commission hopes that victims of Anti-Monopoly Act violations will make full use of the newly established injunction relief system and damage system so that they can be compensated for losses. Furthermore, the use of newly established systems will help to deter such illegal practices.

If the party in question has suffered or is likely to suffer serious damages resulting from Anti-Monopoly Act violations (relating to unfair trade practices ), it can file a lawsuit to demand an injunction order against such practices without regard to its nationality.

Gaikokuho-Jimu-Bengoshi, are not allowed to engage in legal transactions by themselves in the exercise of their functions regarding procedures before a court in Japan.

Canada Question 13

With respect to the distribution measures, Canada notes that the Large Scale Retail Store Law was abolished in June 2000 and replaced by the Law Concerning the Measures by Large Scale Retail Stores for Preservation of Living Environment. Please elaborate on how this new law will integrate non-economic criteria, e.g., reduction of noise, with economic/business considerations? Will the Central Government's technical assistance or recommendations to the local governments be made public? Does the Government of Japan expect an acceleration in the number of applications to open large stores of Category II? A number of studies have suggested that the old law contributed to a small scale and fragmented distribution system. What impact will the new law have on the Japanese distribution system?


The Government of Japan introduced the Daiten-Ricchi-Ho (Law Concerning the Measures by Large-Scale Retail Stores for Preservation of Living Environment) from the viewpoint of abolishing the supply/demand adjustment (as an economic needs test) concerning the opening and operation of large-scale retail stores and preserving the living environment surrounding such stores. The Large-Scale Retail Store Law was abolished when the new Law came into effect on 1 June 2000.

1. MITI established a detailed Guideline as a national standard regulating entities intending to establish a large-scale retail store with regard to the preservation of the living environment (such as traffic and noise). The Law and the Guideline require store owners to take action to an appropriate and reasonable extent.

2. Store owners submit notification to local governments in accordance with the procedures of the new Law. It is difficult to predict the number of the large-scale stores that will be established, as it is dependent on various business environments.

3. MITI is observing local governments' implementation of the Law to ensure that the purpose of the new Law is not impeded. MITI will take appropriate measures as necessary, based on the Local Autonomy Law, including giving technical advice and recommendations to local governments regarding the implementation of the Law. MITI will also publish the information which is necessary for the implementation of the Law.


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Canada Question 14

The Report states that the support received by farmers in Japan and the costs to consumers of agricultural products remain above the OECD average and have increased since 1997. Moreover, despite the progressive ongoing reforms in other areas of its economy, agriculture remains unproductive as to actually constitute a drag on economic growth. What assurances can Japan provide that its targeted food self-sufficiency ratio of 45% will be primarily aimed at increasing domestic productivity, and will not be achieved by discouraging competitive imports of food, fish, and fish and food products that are now growing in response to consumer demand?


Based on Article 15 of the Basic Law on Food, Agriculture and Rural Areas, the target for the food self-sufficiency ratio was set in the Basic Plan for Food, Agriculture and Rural Areas determined by the Cabinet, after hearing opinions from the Council of Food, Agriculture and Rural Area Policies.

The Basic Plan outlines challenges with which consumers and farmers must contend. The target self-sufficiency ratio in the Basic Plan is expected to be achieved in the event that those challenges are met by the target year (FY2010). Issues and preconditions described in the Basic Plan include the following:

- "Desirable Food Consumption" will be accomplished if food consumption in FY2010 meets the following conditions:

a. Regarding nutritional balance, the ratio of calories supplied by fat declines to the appropriate level for public health.

b. Regarding the ratios of each commodity, consumption of glycolipids (carbohydrates) is expected to increase with the steady consumption of grains, including rice, while consumption of food containing fat is expected to decline.

c. Food waste and leftovers are expected to be reduced.

- "Agricultural production Targets" will be accomplished on the following assumptions:

a. The percentage of total food consumed supplied by domestic agricultural production will only rise if more consumers and the food industry choose domestically produced farm products.

b. Consequently, issues such as the improvement of productivity and quality that are specified for respective commodities in the Basic Plan are expected to be improved in order to attract consumers.

Improvement in the food self-sufficiency ratio is intended to be realized through the efforts of all the people concerned, such as farmers, members of the food industry, consumers, local governments and the State. Needless to say, the Japanese Government will implement

Canada Question 15

We remain concerned about the Japanese snapback safeguard measure on pork in the form of an increased minimum import price. As currently administered, this measure creates considerable uncertainty for suppliers and Japanese importers. What steps will Japan consider to allow suppliers and importers to


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operate with greater business certainty?


The pork import system of Japan is in accordance with the results of negotiations with relevant countries in the Uruguay Round. Moreover, as the emergency trade measures (so-called "snapback safeguard measures") are in conformity with the WTO agreements, Japan has no intention to make any change to these measures.

Canada Question 16

The Report notes that Japan has introduced wheeling rules; however, we note that these rules are administered by MITI, rather than by an independent authority. Given the market conditions which have allowed for regional monopolization by vertically-integrated firms, how will Japan ensure that wheeling rules and other deregulation measures are implemented so as to not place new entrants, especially smaller firms, at a disadvantage?


A unified rule has been stipulated by a ministerial ordinance in order to ensure that the wheeling charge is calculated on an equitable basis and thereby exclude lopsided competition between new entrants and utility companies. In this way, fair charging is ensured by making the wheeling charge for the new entrant comparable to the transmission cost incurred by the utility company. Before ordinances are established, wide-ranging public comments are collected in order to increase its transparency. It is specified that the Minister can order a transmission rule to be modified if it is deemed to disadvantage new entrants. Moreover, the Ministry has the authority to order electricity companies to wheel electricity for new entrants in such a situation.

In collaboration with the Fair Trade Commission of Japan, MITI has established Guidelines for Fair Trade of Electric Market in order to ensure a fair and competitive market. MITI also published Guidelines on Settlement of Dispute, which allow anyone to complain of unfair trade practices to MITI, and the case reports will be published. The other Guidelines stipulate that all necessary information must be discussed to new entrants in order to ensure an environment for fair competition.

GOJ is making every effort to promote equitable competition through the appropriate operation of the existing system.

Canada Question 17

The Report points out that while foreign clinical test data is increasingly accepted by the Ministry of Health and Welfare, in many cases, the unique nature of Japanese standards requires supplementary documentation and testing. Will Japan continue to increase the range of foreign test data acceptable by ensuring that domestic testing standards are in line with international standards where those exist?


We have obeyed the ICH E5 guideline regarding "ethnic factors in the acceptability of foreign clinical data" since its adoption. This guideline was adopted in Japan in august 1998 (PMSB/ELD Notification No. 672, PMSB Notification No. 739). In view of this guideline, we have handled foreign and domestic clinical data without discrimination. We have accepted foreign clinical data, and will continue to do so, particularly when such data satisfies ICH guidelines.


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Canada Question 18

According to the Report, the telecommunications sector is characterized by dominant market players; for example, the two local NTT companies in the local communications market. What steps will Japan take in order to ensure that an asymmetric regulatory system is established to deal with dominant carriers? For example, will new entrants be freed from some of the more onerous reporting requirements that the Ministry of Posts and Telecommunications now sets out?

Response to Canada Q. 18 regarding dominant carriers in the telecommunications market

As for the regulation of dominant carriers in the telecommunications sector, asymmetrical regulations have already introduced, such as: i) an obligation for a Type I telecommunications carrier to install designated telecommunications facilities (currently NTT East and NTT West) to keep accounts related to the interconnection with designated telecommunications facilities in order and to establish and disclose articles of interconnection agreement, and ii) a price-cap regulation on the particular type of telecommunications services provided by the Type I telecommunications carriers mentioned above.

The desirable pro-competitive policy in the telecommunications sector is being discussed from various angles in the Telecommunications Council. The enhancement of asymmetrical regulations, including that for dominant carriers, is one of the main issues being deeply investigated.

Canada Question 19

Will Japan establish rights-of-way regulations to ensure fair access to the land and facilities owned or controlled by utilities and to adopt measures to facilitate construction and expansion of infrastructure over public land and facilities?

Canada Question 26

Reference is made to cooperation with the EU on improving market access and facilitating investment, “for the benefit of the whole world,” including in telecommunications. With respect to this issue, Canada has encouraged Japan to take further measures to ensure fair access to land and facilities, including rights of way, owned or controlled by utilities, and to adopt measures intended to facilitate construction and expansion of such infrastructure. In its report of September 2000, the Japanese “Study Group on Measures to Realize Effective Competition in Local Access Network Markets” suggested measures which would address our concerns in this area. What are Japan’s intentions to adopt and implement the recommendations of this study group?

Response to Canada Q. 19 and Q. 26 regarding regulations on rights of way

With regard to rights of way, the Government of Japan is implementing more opening telephone poles and ducts and facilitating the laying of lines on public land and facilities such as roads in order to promote to the establishment of optical fiber networks, which is essential to the development of broadband internet.

As a concrete measure, the Government of Japan will set up and publish a set of indiscriminatory, transparent, and fair supply guidelines, by the end of FY2000, which prescribe the opening of telephone poles and ducts to telecommunication service suppliers as long as it does not hinder their original purposes, such as telecommunication and electricity. The Government of Japan will also endeavor to ensure prompt procedures in order to facilitate the construction of networks over public land and facilities such as roads.


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Canada Question 20

The Report states that for Type-I and Special Type-II carriers to conclude, modify, or abolish contracts with foreign governments, citizens, or corporations, ministerial authorization is required. Please outline what criteria are used in determining whether ministerial authorization is granted in such a case.


The criteria used in determining whether ministerial authorization is granted are as follows:

1) It is considered appropriate to form a contract with a foreign corporation.

2) It is appropriate and there is no fear that the handling of international accounting rate between contractors will hamper fair competition.

3) Conditions concerning responsibility between contractors are appropriately and clearly defined.

4) The contract is made in a non-discriminatory manner in comparison with contracts previously concluded by the contracting parties with other entities.

5) The security and reliability of communications are secured.

6) Contractors faithfully abide by duties imposed by international treaties, agreements or arrangements.

7) There is no fear that the content of the contract will obstruct the increase in public benefits or hamper fair competition in the telecommunications market.

Canada Question 21

The Report states that generally cabotage is closed to foreign competition, except where non-Japanese vessels obtain permission from the Minister of Transport. Please detail under what circumstances such permission is granted and what criteria are applied. Also, please indicate how often is permission granted by the Minister of Transport to operate in the coasting trade of Japan. To which flags is such permission granted?

Response to Canada Q. 21 concerning the conditions governing the granting of permission for cabotage

Permission by the Minister of Transport is granted to cabotage service that does not pose any particular concerns to the securing of the nation. Each year permission is granted to more than 1,700 vessels from a great number of country. Public notification of the names of those countries is not made.

Canada Question 22

The Report states that under the Law for Ship Officers a Japanese flag vessel must be manned by a certain number of officers holding Japanese certificates. A foreigner who holds a certificate issued by foreign authorities may take the Japanese certificate examinations, with the approval of the Minister of Transport. Similar provisions apply to holders of foreign certificates for the operation of aircraft. Please clarify when such Ministerial approval is granted for ship officers and aircraft operators. Also, with reference to the number or scope of examinations required, is there any recognition of foreign certification granted to pilots


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and ship officers who hold foreign certificates?

Response to Canada Q. 22 regarding certification of officers operating ships and aircraft

(Answer 1. Ship)

Article 14.2 of the Law for Ship Officers refers to the exemption of the requirement for sea-going experience in order to take the examination. A foreigner who holds a certificate issued by foreign authorities and receives an evaluation and approval of said certificate issued by a foreign authority may take the same examination as Japanese nationals even without the requisite sea-going experience. This exemption is not limited to any certifications issued by specific foreign authorities.

Furthermore, Article 23-2 of the Law for Ship Officers, a foreigner who holds a certificate issued by the authorities of a Party to the Standard for Training, Certification and Watching (STCW) Convention may be recognized as a ship officer to board Japanese-registered ships, after having passed a medical fitness test and oral examinations conducted to evaluate whether or not he or she possesses the knowledge and ability necessary for a ship officer.

(Answer 2. Aircraft)

The approval to exempt the requirement to pass all or part of the examinations required for the issuance of a Japanese license is granted in instances in which an applicant has a foreign license issued by a foreign state which is a contracting state of the Convention on International Civil Aviation and when said license has been issued in accordance with the provisions of the annex to the Convention on International Civil Aviation. The range of exemption varies according to the kind of license possessed by the applicant. Applicants seeking an Airline Transport Pilot License or Commercial Pilot License, will be required to pass written examinations relating to aeronautical law and a portion of the practical examination.

Canada Question 23

The Report points out the problem of airport capacity constraints. The WTO Secretariat notes that the present airport slot allocation system is based upon IATA guidelines. In accordance with those guidelines, what additional efforts will Japan undertake to ensure that the slot allocation system at Narita is made more transparent, fair, and equitable?

Response to Canada Q. 23 regarding the slot allocation system at Narita

In order to make the slot allocation system more transparent, fair and equitable, Japan has already made efforts by taking advantage of every opportunity to explain the procedures to any airline or government which has sought for clarification. Such efforts will continue to be undertaken.

Canada Question 24

According to the Report, FDI levels are still low despite some recent efforts at attracting foreign direct investment. In assessing how the business environment can be improved, Japan has identified legal reform as a prime component, and has taken some tentative steps to loosening the restrictions on foreign lawyers operating in Japan. However, many in the legal and business community have stated that the remaining restrictions (for example, regarding partnerships with Japanese lawyers) are an impediment to the delivery of high quality transnational integrated legal services necessary to encourage foreign direct investment. What does Japan intend to do to further reform the area of legal services, especially regarding restrictions on foreign lawyers?


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Response to Canada Q. 24 concerning the further reform of the area of legal services

According to the final revision of the “Three-Year Program for Promoting Deregulation” decided on by the Cabinet on March 31, 2000, "From the viewpoint of providing an environment where citizens and corporations can receive overall, comprehensive legal services concerning both Japanese and foreign law, the Japanese government will give consideration to whether some measures, including the review of regulations on the objectives of specific joint enterprises, are required so that fully integrated legal services based on a comprehensive cooperation between Gaikokuho-Jimu-Bengoshi and Bengoshi may be provided in all cases".

Therefore, the government of Japan is continuing examination of specific joint enterprises to assess whether there are any points but may be improved.

Canada Question Q. 25

This refers to Table AI.1: Exports by product groups, 1995-99. Noting that the Yen lost value to the US Dollar from 1995 to August 1998, Japan’s level of textiles and clothing exports did not vary substantially since the beginning of the Agreement on Textiles and Clothing. However, according to Table IV.6 on Employment in manufacturing, value added per employee and wages per employee in Japan, 1992-98, employment in these sectors fell nearly one fifth over this period. Is this result attributable to the loss of the domestic market, or to the increased mechanization of the manufacturing process used for these products?

Response to Canada Q. 25 regarding growth in the Japanese textiles and clothing sectors and related employment trends

In the textiles and clothing sector, although the domestic market has not expanded, the amount of imports continues to increase. On the other hand, export volumes are unchanged. Due to this situation, nearly all domestic manufacturers are facing a difficult situation and are forced to reduce their production scale. The decrease of employment in these sectors is due to closures and employment adjustments caused by such reduction in production scale.

Canada Question 27

We also note, with interest, initiatives by Japan’s local service providers to offer billing services to telecommunications service providers that provide long-distance services to end-users over the local service providers’ facilities. We encourage the Ministry of Posts and Telecommunications (MPT) to ensure that Japan’s local service providers offer this service at a fair price and in a non-discriminatory manner. What steps has Japan taken to address concerns on this issue, which has a significant practical impact on market access?

Response to Canada Q. 27 regarding billing service offered by local service providers

Billing and collection services offered to third parties by NTT East and NTT West are stipulated by an interconnection agreement authorized by the Ministry of Posts and Telecommunications, and price is calculated based on cost. The service is offered not only to long-distance telecommunications carriers, but to all carriers who wish to use it.

Canada Question 28

The Government Report explains that Japan may possibly change its approach towards regional free-trade agreements (FTAs) and that Japan may pursue an FTA with Singapore and perhaps other trading partners. Would it be the intention of the Japanese Government to seek significant liberalization in the agricultural


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sector as part of potential FTA negotiations?


As to the intention of new developments in our policy, Japan has found that, recognizing the catalytic role that regional trade agreements could play in accelerating liberalization and rule making in the framework of the multilateral trading system, it may be meaningful to give consideration to regional trade agreements as one of the means to complement the multilateral trading system and to revitalize our economy and society. In this context, Japan decided to consider utilising RTAs, such as FTAs, and to start negotiations towards establishing an Economic Partnership Agreement with Singapore.

CHILE

Chile Question 1

The report points out that the Free Trade Agreements draw more and more interests to Japan and that groups of studies have been organized with different countries. In the same way, the press informs that there should already be a decision to negotiate an ALC (?) with Singapore. In this sense, we would like to know the reasons of this change of policy in Japan, which we obviously sustain, and if it is considered that the Free Trade Agreements which will be approved in the future will be comprehensive. In the same way, we would like to know if there is any decision to negotiate Free Trade Agreements with other economies, especially within the commitment of APEC to liberalize trade in that region in 2010.

Response to Chile Q. 1 regarding FTA

- The reasons for the new developments in our policy have been stated in our opening statement. Please see the answer to Canada, question 28.

- Concerning the "comprehensiveness" of future FTAs, Japan's views are as follows.

In some cases, it may be appropriate to consider "traditional" FTAs whose scope is limited to liberalization of trade in goods (and services). In other cases, it may be appropriate to consider "new age" agreements which provide wide-ranging, comprehensive arrangements for economic partnership,as reported by the Japan-Singapore Free Trade Agreement Joint Study Group. Furthermore, there may be a case where it is appropriate to consider a framework to strengthen the economic relationship through, for example, harmonization of economic regulations, without including elements of traditional FTAs. These options should be examined by taking well into account the characteristics of the partner countries and other factors.

- Regarding the decision on negotiations with other economies, only a decision to negotiate with Singapore has been taken so far.

Chile Question 2

Even if there is no specific reference in the fishing sector, Japan presented its position in matter of fishing subsidies (WT/CTE/W/173) in the Committe on Trade and Environment. In the said document, Japan points out that many factors engender the over exploitation of the fishing resources, such as the lack of satisfactory system of administration of the fishing resources and the illegal, not announced and not regulated activities(IUU). Chile, together with other countries, stated that the fishing subsidies contribute to an over capacity of fishing and to an over exploitation of marine resources with prejudicial/disastrous effects on the


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marine environment.

In this sense, we would like to know:

Which type of governmental support, if there is one, and which amount are given to the industry of afar fisheries, especially the one in high seas?

Response to Chile Q. 2 on Japanese government support extended to far seas fisheries

Although the definition of government support is not clear, the government support specific to far seas fisheries amounted to an expenditure of more than 20 billion yen last year in order to reduce long-distance tuna long-line fleets. Based on the FAO International Plan of Action for the Management of Fishing Capacity, Japan confiscated licenses of 132 fishing vessels and at the same time scrapped those vessels. This expenditure could be considered as a government support to ensure that the remaining tuna long-liners can utilize tuna resources in a sustainable manner.

Chile Question 3

Which systems of administration of fishing resources and measures of preservation is Japan demanding to its fishing boats that operate in high seas, and which measures is Japan applying in order to control the IUU fishing in high seas, in addition of the administrative bulletin on ships with (the complaisance pavilion), mentioned in paragraph 49?

Response to Chile Q. 3 on how Japan administers fishing resources and what measures of preservation it takes

In Japan, fishing vessels which fish on the high seas must obtain a permit under government laws. Under this scheme, fishery management is implemented for high seas fishing by the government. Also, for the purpose of resource conservation, regulatory measures, by which fishing vessels must abide, are stipulated, together with penalties in case of violation. Regulatory measures are introduced by many regional fishery management organizations. These measures are also implemented by government laws.

Japan is gravely concerned about IUU (illegal, unregulated and unreported) fishing on the high seas, especially by FOC (flag-of-convenience) vessels. It is of particular importance to eliminate FOC fishing vessels in tuna long-line fisheries because Japan is the destination of their tuna products. Accordingly, Japan is currently taking the following measures towards the elimination of FOC fishing vessels :

(1) Prohibition on import and port call

In accordance with ICCAT recommendations, import of Atlantic bluefin tuna and Atlantic swordfish from certain countries is prohibited. Also, tuna long-line fishing vessels which are registered in these countries are prohibited to call at Japanese ports.

(2) Request regarding FOC products

In accordance with an ICCAT resolution, the Japanese Government requested related companies and industries not to buy or transport tuna products caught by FOC fishing vessels, and not to sell, install or repair equipment on FOC fishing vessels.


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(3) Collection and dissemination of information on FOC fishing vessels

In order to monitor the actual circumstances of FOC fishing vessels, the Japanese Government collects information on them from importers, and publicizes such information (names of vessels, vessel registrations, importers, etc).

(4) Restriction on engagement of Japanese fishermen

When Japanese fishermen want to work for foreign tuna fishing vessels that catch tuna in the Atlantic Ocean and the areas where southern bluefin tuna is caught, they must obtain permission of the Minister for Agriculture, Forestry and Fisheries in order to ensure that their engagement does not support activities of FOC fishing vessels.

Chile Question 4

In paragraph 95, it is pointed out that the measures for the Promotion of Investments include measures of financing with low interest rates authorized by Japan Development Bank for chosen projects. Under which criteria are defined those projects which benefits from these measures? Its authorization is given on the basis of a national agreement?

Response to Chile Q. 4 regarding projects chosen by the Japan Development Bank

The eligible projects are:

- first significant investment,

- exchange of technology and know-how,

- business alliances (e.g. business transfers) including M&A,

- other projects helping to expand and vitalize the Japanese economy,

- joint-use facilities for foreign-affiliated companies,

- basic facilities for the promotion of foreign direct investment in Japan.

These loan programs are based on the 1992 Law on Extraordinary Measures for the Promotion of Imports and Facilitation of Foreign Direct Investment In Japan.

Chile Question 5

In paragraph 8 it is pointed out that a direct payment to farmers from mountainous regions has been implemented and that this would be in the framework of a Basis Programme of Food, Agriculture and Rural regions. In particular, we would like to know more details regarding the said programme of direct payment to the farmers from mountainous regions, for example: the number of beneficiary farmers, the characteristics or size of the properties to have the benefit, the types of culture that benefit, the annual amounts implied and the objectives of this support.

Response to Chile Q. 5 regarding agriculture

This program was developed consistent with the terms and conditions stipulated in Paragraph 13 (payments


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under regional assistance programmes) of Annex 2 in the Agreement on Agriculture.

The ultimate goal of this program is to maintain multifunctionality of agricultural activities in hilly and mountainous regions such as preservation of land and development of water resources. For this purpose, the program aims to partially redress disadvantages of agricultural activities in disadvantaged regions, based on Paragraph 13. The total budget is estimated to be approximately 70 billion yen.

All farmers in disadvantaged regions are eligible for the program regardless of the types of production. This condition is stipulated in Paragraph 13.

The number of farmers applying for the program has yet to be determined, since application for this program is still open. For reference, the average farm size in these regions is around 0.8 ha. Owners of land with characteristics disadvantageous to agriculture, such as steepness, are eligible for payments.

Chile Question 6

Has Japan any type of agreement on the acknowledgement of education, experience, licenses, certificates for the supplying of professional services with third countries? If it is the case, with which countries?

Response to Chile Q. 6 regarding licenses for professional services with third counties

No, Japan has not concluded such agreements with any countries.

Chile Question 7

Are the Japanese Professional Associations public or private bodies? In this regard, is it compulsory for the Japanese professionals to belong to any Professional Association or Body? In this sense, what is the situation with the foreign professionals?

Response to Chile Q. 7 regarding Japanese Professional Associations

The definition of the words “public” and “private” in Chile’s question is not clear, but in Japan professional associations are considered “private,” even if some of them are established under special laws. However, there are some types of professional employment which do not have an association. It is compulsory for some professionals to belong to their respective associations, and in these cases, foreign professionals with qualifications which is acknowledged in Japan are also required to belong to them.

COLUMBIA

Columbia Question 1

Could the Japanese authorities explain why the multifunctional role of agriculture should be addressed with trade and production distorting domestic support and not with green box measures?

Response to Colombia Q. 1 regarding multifunctionality

As the multifunctionality of agriculture is considered to be a public good, a certain level of policy intervention is required for the fulfillment of multifunctionality. On the other hand, the multifunctionality of agriculture is closely related to, and cannot be separated from, agricultural production. In this respect, policy intervention cannot be completely removed from production.


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Therefore, with a view to ensuring multifunctionality, relevant policy measures should not be confined to green box measures.

Columbia Question 2

Since the new Law was enacted this year, could the Japanese authorities explain what are the plans to avoid surpassing the year 2000 commitments in the area of domestic support? Is the idea to shift domestic support from amber box to blue box?

Response to Columbia Q. 2 agriculture

Regarding the domestic support in Japan, it is scheduled that the total AMS of the base period (5 trillion yen) shall be reduced by 20 %, to reach 4 trillion yen in 2000. Japan has notified that its AMS has already been reduced to 3,170.8 billion yen in 1997, which is already below the scheduled level of the schedule of 2000 as well as that of 1997.

Under this circumstance, Japan does not expect that the level of AMS in 2000 will exceed the scheduled level of AMS in 2000 because of the enactment of the new law.

Columbia Question 3

Taking into account the objectives of the ongoing negotiations in agriculture and the objectives of the Agricultural Basic Law, could the Japanese authorities explain how they reconcile with each other?

Response to Colombia Q. 3

Japan considers that the objectives for the newly initiated agricultural negotiations are to establish a set of rules and disciplines which allow a coexistence of the various types of agriculture among member countries. And the following should be achieved in such rules and disciplines: 1. due consideration to the importance of the multifunctionality of agriculture, 2. to redress the imbalance in rights and obligations under the WTO rules between exporting and importing countries.

On the other hand, the Basic Law on Food, Agriculture and Rural Areas provides four basic principles: (1) securing of a stable food suply,(2) fulfilment of the multifunctionality of agriculture,(3) sustainable agricultural development, and (4) the development of rural areas.

We consider that the objectives of the negotiations of agriculture is in consistent with the objectives of the Basic Law on Food, Agriculture and Rural Areas.

Columbia Question 4

In paragraph 12, the Secretariat reports states that “Japan does not employ minimum import prices”. However in footnote 14 the Secretariat report describes the differential duty as a “specific rate charged per kg of imports with the rate varying directly with the difference between the standard import price (precio oficial de importación in the Spanish version of the Report), set by the authorities, and the actual import price.

Could the Japanese delegation explain this policy against its commitments in the Custom Valuation Agreement, particularly, Article 7.2 and in the Agreement on Agriculture, particularly, the footnote of Article 4.2?


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Response to Colombia Q. 4 regarding customs valuation

“The standard import price” has no relation to the customs value. “The actual import value” stated in footnote 14 is the customs value per kg. This customs value is calculated fully consistently with the WTO Customs Valuation Agreement.

Columbia Question 5

Could the Japanese delegation provide more information regarding the decision-Making process involved in the application of the alternate duty?

Columbia Question 6

Are there any specific or fixed criteria in the application of the alternate duty in order to avoid discretionary managing during the importation process?

Response to Colombia Q. 5 - Q.6 regarding customs valuation and alternate duty

In Japan, the customs valuation is fully consistent with WTO agreement.

Relating to the goods subject to the alternate duty, the type of the duty is definitely determined according to the customs value.

Columbia Question 7

What are the plans of the Japanese authorities to reduce the list of merchandises subjected to the alternate duties?

Response to Colombia Q7 regarding alternate duty

Japan does not have any plan to reduce the list of merchandises subjected to the alternate duties now. They might be discussed in the new round of negotiations with a balanced and sufficiently broad-based agenda.

Columbia Question 8

Could the Japanese authorities explain how the objectives of the autonomous TRQ’s, the linkage of the leather TRQ to regional and social policies and the end-use provisions are compatible with the TRIMS Agreement?

Response to Colombia Q. 8

The Government of Japan has not notified WTO of any TRIMs, and there are no TRIMs in Japan. The Government of Japan believes that our policy and measures are compatible with the TRIMs Agreement.

Columbia Question 9

Could the Japanese delegation explain the rationale behind this domestic support policy in agriculture that transfers the inefficiency costs of farmers to consumers and, by doing so, increases the retail prices of food?

Response to Colombia Q. 9 regarding agriculture


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In Japan, domestic support to agriculture has been provided from the viewpoint of ensuring stable food supply to consumers. This is based on the result of the public opinion poll that majority of people prefer domestically produced food while recognising the need to reduce the production cost.

Moreover, one of the aims of domestic support is to fulfil the multifunctional role such as conservation of national land and water resources through maintenance and development of domestic production. The domestic support is thus provided not only for the re-distribution of resources, but also for the externalities of agriculture.

In accordance with the basic thoughts of domestic support noted above, the Government has been reducing the administered support prices for major agricultural products from a viewpoint of returning benefits accrued from the improvement of productivity as much as possible to consumers.

In addition, based on “The Basic Law on Food, Agriculture and Rural Areas” enacted in July 1999, the Government has been introducing more market-orientated price policy, in order that agricultural product prices will appropriately reflect the supply / demand situations and the market evaluation of the product quality, which in turn will promote the agricultural production which is responsive to the needs of consumers.

Columbia Question 10

Could the Japanese Government explain whether there is any plan towards the simplification of the tariff regime?

Response to Colombia Q. 10 regarding the simplification of the tariff regime

Japan is of the view that the issues on tariffs should be addressed in a new round of trade negotiations, including the negotiations on agriculture that started this year.

Columbia Question 11

Taking into account the high levels of protectionism in agriculture, what are the Japanese objectives in the ongoing negotiations on agriculture in the area of market access?

Response to Colombia Q. 11 regarding market access

Japan has been faithfully implementing its UR commitments, and thus it is not appropriate to describe Japan's agriculture as "the high levels of protectionism".

This basic philosophy of Japan toward the ongoing negotiations on agriculture is that we should establish trade rules that will allow "the coexistance of various types of agriculture".

Tariffs are the only legitimate border measures to adjust differences in natural or economic conditions regarding agricultural trade under the Agreement on Agriculture. In this respect, regarding border measures, it is necessary to examine production conditions of each product, as well as to take into consideration of the necessity of maintaining a certain level of agricultural production and of fulfilling its multifunctionality.

EUROPEAN UNION

EC Question 1

Given the problem of excess capital in various industrial sectors in Japan, coupled with the problem of low


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returns on equity and the rising incidence of bankruptcies in the private sector, how does the Japanese government explain the strong return to profitability by the corporate sector in recent months, and the increase in private sector investment? Is the new investment only part of the ‘New Economy’ phenomenon, i.e. investment in information-technology? Are these recent investment trends sustainable?

Response to EC Q. 1

As for the manufacturing sector, corporate profits continue to improve markedly by increasing the amounts of sales and exports, in the course of controlling the labour cost by restructuring, mainly in large firms. As for the non-manufacturing sector, a prominent recovery could not be seen in sales. However, as a result of promoting efficiency in business, they are improving profits by cutting variable costs down and elevating the rate of ordinary profit to net sales.

Although the problems of excess debt still remain, cash flow of the corporate is increasing markedly because of improving profits, and the corporate, mainly IT related companies such an those in electric machinery and service industries, for which future demand is expected to increase, are increasing investments actively in plants and equipment.

EC Question 2

How strong is Japan’s attachment to “lifetime employment”? What measures have the Japanese authorities undertaken to reduce inflexibilities in the labour market?

Response to EC Q. 2

Long-term employment has given both labor and management the benefits of long-term security of management and employment. On the other hand, recently, there has been a trend towards reviewing long-term employment in light of the changing economy and society. A decision on what kind of employment system would be desirable should be made through consultations between labor and management.

EC Question 3

On 10th October, the Japanese Ministry of Finance published a report entitled “The Japanese Government Balance Sheet”. This report showed that the Japanese government has negative net worth to the tune of between 132.6 and 776.5 trillion yen. Would the Japanese authorities care to comment on these figures, within the context of the sustainability of the Japanese national debt?

Response to EC Q. 3

There is no particular reason for the difference between assets and liabilities being negative. Moreover, there is no connection between the negative figures in the government balance sheet and the actual state of the Japanese national debt. Hence, it is difficult to comment on the figures contained in the balance sheet within the context of the national debt.

EC Question 4

The national debt burden has been cited by commentators as one of the reasons why Japanese household consumption is sluggish. For example, Japanese citizens may increase their current saving, and thus reduce current consumption, in anticipation of future increases in taxes that may be required to service a large national debt burden. Some commentators consider that the recently-announced fiscal stimulus package aggravates the already poor state of Japan’s public finances. Does Japan think that the fiscal stimulus


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programme may actually negatively affect household consumption, thus stifling the fragile economic recovery?

Response to EC Q. 4 regarding national debt

The Japanese economy continues to improve moderately and the performance in the corporate sector has been particularly favorable toward a self-sustained recovery path. Nevertheless, employment conditions are still severe, personal consumption remains generally flat, and the number of business failures has been somewhat high, with gross the debt of failed firms rising. Therefore, the economy has not been placed onto a self-sustained recovery path yet.

The Japanese Government compiled "A Policy Package for New Economic Development towards the Rebirth of Japan" in October this year. Our goal is to place the Japanese economy onto a self sustained recovery path led by private-demand including personal consumption and to reform the structure of the Japanese economy suitable for the 21st century. The Government intends to actively carry out the new package to accomplish this goal, (as we mentioned in the government report and in the opening statement).

EC Question 5

The Japanese government says that it will embark upon fiscal structural reform once the economy is “getting onto a path towards full recovery led by private demand” [quoted from paragraph 4 of the Report by the Government]. How does the Japanese government define such a “full recovery”? What are the precise conditions which would convince the Japanese authorities to conclude that the time for carrying out fiscal structural reform has come?

Response to EC Q. 5 regarding conditions for fiscal structural reform

We consider that a "full recovery" may be defined as a condition where a smooth shift from public to private demand is realized; where private demand, such as personal consumption and private investment, shows sustained and steady growth; and where autonomous economic growth has been established for the future based on private demand. However, it is difficult to concretely describe the state in which this condition would occur.

EC Question 6

The examples of fiscal reform in other countries, such as Sweden, indicate that fiscal reform need not negatively affect the economy, especially if the reforms improve the effectiveness of public expenditure. The expenditure multiplier of the Japanese fiscal stimulus programmes has been low, and appears to be on a declining trend. What measures has the Japanese government undertaken to ensure that this year’s fiscal stimulus programme will have a bigger, longer-lasting impact than previous programmes?

Response to EC Q. 6 regarding fiscal reform

There may be some factors that weaken the effect of fiscal multiplier in 1990's, however, the influence of the factors has not been strong so as to dampen the effect of the public expenditure.

The main thrust of economic and fiscal policy of the Japanese Government has been to sustain domestic economy so as to establish an autonomous recovery path, and to make bold reforms of economics structure for the 21st century. The Government, for this sake, has compiled "A Policy Package for New Economic Development towards the Rebirth of Japan" on October 19th this year to implement "The Plan for the Rebirth


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of Japan". The government intends to carry out the new package actively.

In the area of public works, the government has introduced a system including cost-benefit analysis for evaluating newly adopted projects as well as the on-going projects. The efficiency and transparency of public works should be further improved through continuing effort to steadily carry out and properly disclose information of the evaluation.

Note:

According to "Economic Survey of Japan (FY 2000)", historical transition of fiscal multiplier itself has been largely influenced by the structure of macro models (by the theory of the model), and comparison of multiplier of 80's and 90's with exactly the same model specification shows that they don't significantly differ. Thus the multiplier effect has not necessarily decreased.

EC Question 7

The small increase of interest rates to 0.25% which occurred once the Bank of Japan (BoJ) abandoned its zero interest rate policy cannot really be called “fiscal tightening”. Does the Bank of Japan nevertheless consider that it was sufficient to combat the moral hazard problem mentioned at paragraph4 of the Secretariat’s report? Alternatively, even this small rate rise was criticised by opponents of the BoJ. Do the Japanese authorities consider that the interest rate hike was premature and that it might harm the fragile recovery?

Response to EC Q. 7 regarding the abolition of the Bank of Japan’s zero interest rate policy,

When terminating the zero interest rate policy, the Bank of Japan stated in its press release that this decision was made in line with the improvement of the Japanese economy. Therefore, the ending of the zero interest rate policy was not intended to address moral hazard problems.

With regard to the recovery of economic conditions, the Bank enunciates, in its report published at the end of October, that "Japan's economy will continue to trace a gradual recovery mainly led by private demand during fiscal 2000 and 2001".

EC Question 8

In GoJ report III (3) – Domestic Policy Developments Affecting Trade Policy, regarding the question of public comments procedure, we welcome the introduction of a public comments procedure in 1999, allowing all interested parties to comment on administrative measures and draft regulations. It is, however, important that enough time is left for well-substantiated comments to be taken into account before finalisation of the legislative measure in question.

What steps does Japan intend to take to ensure that this is the case?

Response to EC Q. 8 regarding a public comments procedure

The Public Comment Procedure for Formulating, Amending or Repealing a Regulation (Cabinet decision) refers to “about one month” as a guide for the time period of receiving public comments.

On 21 July, the Government opened to the public the results of a survey on the application periods of public comments procedures in FY1999. According to the results, in more than 70% of the cases it was “over 22 days” (in more than 40% of the cases, “over one month”).


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It would be essential that suitable periods are to be decided by each ministry after considering the characteristics of each proposal, for example, importance, urgency, etc.

Reference

Results of research on the periods taken before formulating, amending or repealing regulation in FY1999

Period Number of cases Percentage

From 1 day to 7 days 1 0.4

From 8 days to 14 days 23 9.0

From 15 days to 21 days 48 18.8

From 22 days to 1 month 77 30.1

From 1 month to 2 months 106 41.4

More than 2 months 1 0.4

EC Questions 9 and 10

Despite recent increases in inward flows of FDI into Japan, in Japanese Fiscal Year 1999 outflows of direct investment still exceeded inflows by a factor of 3.1. The disparity in the accumulated stock of direct investment also remains huge. This imbalance points to structural factors which act as a disincentive to inward investment and which make it more costly and time consuming to set up a business or get new products or services approved than is the norm in other industrialised economies. Japan’s business start-up ratio, at 4.6%, is the lowest amongst leading industrial nations. This indicates that the current business environment is a hindrance to the rational allocation of investment, be it domestic or foreign, within the economy.

EC Q.9 What concrete measures does the Government of Japan plan to take to create a more attractive environment for investment?

EC Q.10 Recent large percentage increases in inward investment are mostly a result of a small number of huge corporate deals. What measures are proposed in order to ensure (a) that the current increase in inward investment is sustained and (b) that the benefits of greater inward investment are felt throughout all layers of the economy? In this context, are there initiatives to strengthen investment links between SME’s?

Response to EC Q. 9, Q. 10 regarding foreign investment in Japan

The Japanese Government has held ministerial meetings called the “Japan Investment Council”, chaired by the Prime Minister, and taken various measures such as favourable tax treatments and low interest loans offered by the Development Bank of Japan. As a result, the balance between outward and inward investment has been improving steadily from 10:1 in FY1994, when the Japan Investment Council was established, to 3:1 in the last fiscal year (FY1999). However, inward investment in Japan remains relatively low. To make Japan’s economy vigorous and open to the world for the 21st century, it is still necessary to continue to endeavour to improve the investment environment.

The report of the Experts Committee of the Japan Investment Council in 1999 proposed the following seven recommendations to further promote foreign investment in Japan:

1. Make further efforts to improve various systems relating to enterprise management


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2. Make further efforts to promote deregulation

3. Facilitate the establishment and operation of international schools

4. Provide more extensive information on health and medical care for foreigners

5. Promote closer coordination between national and local governments through the Meetings on Promoting Inward Direct Investment in Regional Areas

6. Establish a comprehensive system for providing information concerning inward direct investment

7. Respond quickly to complaints and requests

In July this year, Japan opened a portal site home page, “Investment in Japan Information Center (http://www.investment-japan.net/invest/index.asp)”, through which investors can access, using a search function, various kinds of information regarding foreign investment in Japan. This home page is aimed at establishing a comprehensive information-providing system related to investment in Japan. This system is expected to help promote foreign investment in Japan.

Concerning SMEs, the Credit Guarantee Association guarantees loans for small and medium-sized firms which have a certain degree of interaction with designated inward investors.

EC Question 11

Japan mentions in paragraph 103 of the GoJ report that a new round should also address "the issues of global environment and the sustainable utilization of exhaustible natural resources". What means does Japan use to make its trade policy supportive of sustainable development? To what extent does Japan use, or is planning to use, instruments such as sustainability impact assessments, as a tool in this sphere? In particular, what other mechanisms is Japan using to promote synergies between its trade policy and its environmental policy?

Response to EC Q. 11 (Regarding the relationship between Japan’s trade policy and sustainable development)

To make its trade policy supportive of sustainable development, the GOJ believes that taking environmental aspects more into consideration in trade policy is crucial. To achieve this objective, GOJ intends to promote further consultation with domestic stakeholders, through such measures as holding briefing sessions for civil society and instituting a public comment process. Environmental impact assessments of trade policy could be a useful tool to promote mutual supportiveness between trade and the environment. Concerned ministries and agencies are currently studying methodologies for the assessment. To make synergies between trade policies and environmental policies, it is also important to respect activities in various international fora and agreements by the international community.

EC Question 12

What are the priorities of Japan in relation to consultations with domestic stakeholders? How does Japan consult with civil society (NGOs, business community, etc) on the formulation of its trade policy? What are Japan's views on improving WTO transparency?

Response to EC Q. 12 regarding consultations with domestic stakeholders


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Regarding consultations with domestic stakeholders, the Government of Japan (GOJ) provides information, keeps the process transparent, and exchanges views through conferences/symposia or other media such as the Internet.

GOJ consults with civil society by holding conferences/symposia where governmental officials exchange views with other participants from various backgrounds, including business associations, agricultural associations and non-governmental organizations.

Information is provided via the Internet on homepages of various ministries (Ministry of Foreign Affaires, Ministry of Agriculture, Forestry and Fishery, Ministry of International Trade and Industry) and members of civil society are invited to share their opinions and requests.

Japan's views on WTO transparency are as follows: Japan believes that improvement of internal and external transparency is important. Regarding internal transparency, it is important, for example, to improve the preparatory process for the Ministerial Conference and negotiation process, through such measures as coordination between the informal consultation process and open-ended meetings, and clarification of the roles played by the Director-General and the Secretariat. Regarding external transparency, it is important to promote a better public understanding of the WTO's activities through such means as improvement in derestriction procedure of WTO documents and building constructive relations with NGOs.


The EC appreciates the clear presentation (in paragraphs 40-42 of the GoJ report) of the evolution in Japan’s policy towards participation in preferential regional trade agreements. The EC agrees that compliance with relevant WTO rules is an important safeguard to ensure that any such regional initiatives support and are complementary to the open multilateral trading system. The report makes reference to the Joint Study Group that has recently undertaken a feasibility study on a Japan/Singapore FTA. The report of this group includes the statement that “during the joint study, a concern was expressed from the Japanese side on agricultural, forestry and fishery sectors. A statement was made from the Japanese side that it was not prepared for further tariff reduction in these sectors in the framework of the JSEPA”.

EC Q. 13 Notwithstanding the above recorded statement in the report of the Joint Study Group, can the Government of Japan confirm that any future Free Trade Area between Japan and Singapore will nonetheless comply with the requirements of GATT Article XXIV:8(b), in that it will cover substantially all trade and that no major sector will be excluded? Can Japan give the same commitment for any other future FTA it may participate in (e.g. with Korea or Mexico)? When does GoJ expect to take a decision whether to pursue negotiations for preferential regional agreements with countries other than Singapore and on the basis of which criteria?

EC Q. 14 Has Japan's change in policy as regards preferential regional agreements had any implications on its policy in the framework of APEC? In particular what has Japan's position been in the discussions it has held with other participants in APEC on the possibility of further liberalisations on an MFN basis within selected sectors?

Response EC Q. 13 regarding FTA

Japan believes that the economic agreement for a new age partnership between Japan and Singapore must be consistent with WTO rules.

As Japan recognizes that regional or bilateral trade agreements could play a complementary role to the multilateral trading system on the condition that they are consistent with the WTO rules, any FTA must


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comply with the requirements of relevant WTO rules.

There has not been any decision on entering into negotiations for the creation of RTAs with countries other than Singapore. The criteria on which we make a decision as to whether or not to pursue negotiations for RTAs varies according to the characteristics of the partner countries and other factors.(Please see the answer to the corresponding question from Chile.)

Response to EC Q. 14 regarding RTA

The Government of Japan continues to place the highest priority on maintaining and strengthening the multilateral trading system. We believe that bilateral and regional economic cooperation has potential to bring about great success as long as it is developed in a manner that complements and strengthens the multilateral trading system and contributes to the development of the world economy.

EC Question 15

As indicated in the Report by the Secretariat (section II, paragraph 42 including table II.4, and section IV, paragraph 33), measures introduced as a result of the 1995 Japan-US Autos and Auto Parts Consultation are to terminate by the end of 2000. Could the Government of Japan indicate whether an extension of the measures is envisaged and, if yes, what are the concrete modalities of such an extension?'

Response to EC Q. 15 regarding Japan-US measures on auto parts

As indicated in the Report by the Secretariat (section II, paragraph 42 including table II.4 , and IV, paragraph 33), measures introduced as a result of the 1995 Japan-US Auto and Auto parts Consultation are to terminate by the end of 2000. Could the Government of Japan indicate whether an extension of the measures is envisaged and, if yes, what are the concrete modalities of such an extension?

In the letter exchanged in 1995 between the Government of Japan and the Government of the U.S. on the measures taken by both governments regarding autos and auto parts, it has stated that “each Government is to take the respective measures beginning as of this letter and lasting until the end of 2000, at which time the two Governments will decide whether it is necessary to continue the measures.”

The Japanese Government considers that the two governments need to decide such measures on the basis of the dramatic change of the structural environment surrounding the world automotive industry/market which has occurred since 1995, as observed by the number of global and borderless capital/business alliances; for example seven out of eleven Japanese auto companies have pursued business alliances with foreign manufactures.

EC Question 16

Paragraph 36: Could Japan clarify what the position of Japan is and what stage Japan is in as regards the possibility of granting duty and quota-free access for products from LDCs?

Response to EC Q. 16 regarding reform of GSP

Japan is considering the reform of GSP including the implementation of tariff-free and quota-free treatment for essentially all products originating in LDC.


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EC Question 17

Could Japan please indicate whether it intends to bind the remaining 1-% of its tariff lines?

Response to EC Q. 17 regarding Japan’s intentions on its remaining tariff lines

The GOJ has bound all agricultural products since 1 April 1999. As for industrial tariffs, with the exception of the forestry and fishery sectors, Japan made the following proposal (WT/GC/W/243). It is crucially important to negotiate on industrial tariffs and to conclude negotiations under the principle of improving bound rates on a line-by-line basis by binding all products, if possible.


Non ad valorem duties: Could Japan please identify the non-agricultural tariff lines subject to non ad valorem duties that have (a) ad valorem equivalents at international tariff peak levels (15% or more) and (b) no trade (suggesting that the duties are prohibitive)?

The EC notes that the average tariff rate for non-agricultural products is low, at 1.7%. However, high tariffs are prevalent in certain sectors (e.g. footwear and headgear) and there is a considerable degree of tariff escalation. Could Japan please indicate whether and how it intends to reduce high tariffs and tariff escalation?

Response EC Q. 18

The number of non-agricultural tariff lines subject to non ad valorem duties that have ad valorem equivalents of 15% or more is 39 (HS9-digit).

The number of non-agricultural tariff lines subject to non ad valorem duties that have no trade is 92(HS9-digit). It implies that there were lack of domestic demand for some items. In fact, similar goods with nearly the same tariff rate have been imported.

Response to EC Q. 19 regarding further tariff reduction by Japan

As for the specific sectors contended by the EC, Japan has made significant efforts to reduce high tariffs and tariff escalation. It is very difficult to further reduce tariffs on these goods since most of the producers of these goods are small and less competitive internationally, and further reduction on these goods could cause serious damage to them.

However, Japan does not intend to exclude these goods from industrial tariff negotiations of comprehensive coverage under the a new round of the WTO with a balanced and sufficiently broad-based agenda.


The Japanese import regime on leather for years has been an unresolved problem in the bilateral relations with the EU. Further to the very limited volumes of the tariff quotas for leather, the complexity of the management of the Japanese tariff quota system creates a wall of protection to the benefit of the domestic leather industry, against more competitive imports from the EU, and restricts market access. The Japanese licensing system, which the EC has found not to be in compliance with the WTO Agreement on Import Licensing Procedures, has negatively affected Community’s exports within the tariff quota applied for leather, leading to a constant under utilisation of the quota.


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EC Q. 20 Will Japan make new proposals for a meaningful change of the existing quota system and commitments to eliminate progressively import restrictions?

EC Q. 21 Would Japan consider dismantling the current allocation system and its replacement by an automatic allocation system in accordance with the WTO Agreement on Import Licensing Procedures?

Response to EC Q. 20 regarding the leather sector

As for the leather sector, the issues of the existing quota system and commitment are matters that could be dealt in the next round. Japan does not intend to exclude leather from industrial tariff negotiations of comprehensive coverage under the a new round of the WTO with a balanced and sufficiently broad-based agenda.

Response to EC Q. 21 regarding the allocation system of Japan’s leather tariff quota

The allocation system of Japan’s leather tariff quota is in accordance with the WTO Agreement on Import Licensing Procedures.

EC Question 22

Japanese authorities used to provide data on imports of leather under tariff quotas until 1998. Why has Japan suspended provision of such data thereafter? Can Japan provide the data on imports of leather under tariff quotas since 1998?

Response to EC Q. 22 on how Japan provides data on the import of leather

Japan provides data on the import of leather under tariff quotas throughits Internet site.

http://www.mof.go.jp/trade-st/tr-index.htmlhinkuni

HS1996 code TQ imports (FY1999 base)

Bovine Leather (dyed colored etc.) 4104.10-3114104.10-3134104.31-2114104.31-2134104.39-2114104.39-213

657,144 m2

Bovine Leather (other) 4104.10-1214104.10-3214104.21-0104104.22-0214104.29-0214104.31-2214104.39-211

137,473 m2

Sheep/Goat Skin Leather (dyed colored etc.)

4105.20-2114106.20-211

204,261 m2

EC Question 23

Page 34, paragraphs 47 (and previous headings): Could Japan indicate the international agreements in place, multilateral and bilateral, that provide for a co-operation between customs administrations or that would allow the exchange of information.


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Response to EC Q. 23 on what agreements exist to provide co-operation among customs administrations

In order to exchange information among Customs administrations, Customs Mutual Assistance Agreements and Note Verbal (for furthering mutual cooperation between the customs administrations) are possible channels.

The Government of Japan has concluded “Agreement between the Government of Japan and the Government of the United States of America regarding Mutual Assistance between Customs Administrations” with the US Government and has exchanged a Note Verbal with the Indonesian Government.

EC Question 24

Page 37, paragraph 16: Could Japan indicate how many times a year complaints against customs valuation and other customs measure are filed and how long, in average, each of the procedural steps is likely to take.

Response to EC Q. 24 regarding customs valuation

1997 1998 1999 Against/lodged with

Complaints 19 24 17 Director-General of Customs

Appeals 3 7 4 Minister of Finance

In most cases, decisions/rulings upon the complaints/appeals were given within 3 months.

EC Question 25

Page 37, paragraph 17: It appears that Japan has rules in place defining the non-preferential origin of goods. Would it be possible to outline the general principles? Furthermore, could Japan confirm that any member of the WTO could be named as country of origin in a customs declaration on an ordinary MFN importation.

Response to EC Q.25 regarding MFN

For the purpose of the application of MFN rates, the country of origin of imported goods from WTO Members need to be: (a) the country where the goods are wholly obtained or produced; or (b) in cases where two or more countries are involved in the production of the goods, the country where the last substantial transformation which confers a new character to the goods has been carried out. The above- mentioned “last substantial transformation” basically consists of the transformation accompanied by the change of HS headings (4-digit level).

EC Questions 26 -30

In relation to Standards (pages 54 and following of Secretariat report), Paragraph 70 states that “Japan has moved toward increased international harmonisation of its standards and technical regulations. The three-year Program for Promoting Deregulation (TYPPD), as amended for FY2000, re-emphasised ministries and agencies endeavour to achieve greater international harmonisation of standards…”

EC Q. 26. Could you please explain what are the on-going activities to further align national standards, technical regulations and certification systems to international standards?


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EC Q. 27. Paragraph 72 emphasises the growing percentage of national standards being aligned to international standards. (62% in 1999). Notwithstanding, a substantive number of standards still deviate from international standards.

EC Q. 28. Could you please develop the reasons for this remaining divergence?

EC Q. 29. Paragraph 74 indicates that “approximately 7% of all Japan Industrial Standards (JIS) were quoted in 1996 as mandatory technical regulations”.

EC Q. 30. Could the Japanese Authorities provide more updated figures and more detailed information as regards the national standards that have been incorporated in the national laws, or alternatively, that are being referred to by national laws and are consequently (de facto or de jure) of a mandatory nature.

Response to EC Q. 26 regarding Standards

Regarding Food Sanitation Law, Japan is making constant efforts to ensure that it conforms to the international standards outlined in Codex and elsewhere. Regarding pharmaceutical products and medical devices, Japan has adopted the ICH guidelines (for pharmaceuticals) and the GHTF guidelines (for medical devices) in order to integrate international standards into the Japanese system. In terms of cosmetics, Japan participates in the CHIC meetings. We are also currently promoting the GMP and GLP mutual recognition system with the EU.

It has become mandatory to review Japan Agricultural Standards (JAS) every five years and consider international standards in the establishment, revision and abolishment of JAS under the Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (the JAS Law) which was revised in July 1999, and MAFF is currently engaged in reviewing JAS.

The MITI has been conducting harmonization with international standards for technical regulations and certification systems based on the Three-Year Deregulation Promotion Plan. The adoption of “performance-based standards” for technical regulations is currently underway.

Response to EC Q. 26.regarding food, Japan is making constant efforts to ensure that the Food Sanitation Law conforms to the international standards outlined in Codex and elsewhere.

Regarding pharmaceutical products and medical devices, Japan has adopted the ICH guidelines (for pharmaceuticals) and the GHTF guidelines (for medical devices) in order to integrate international standards into the Japanese system. In terms of cosmetics, Japan participates in the CHIC meetings. We are also currently promoting the GMP and GLP mutual recognition system with the EU.

It has become mandatory to review Japan Agricultural Standards (JAS) every five years and consider international standards in the establishment, revision and abolishment of JAS under the Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (the JAS Law) which was revised in July 1999. MAFF is currently engaged in reviewing JAS.

MITI has bees conducting harmonization with international standards for technical regulations and certification systems based on the Three-Year Deregulation Promotion Plan. The adoption of “performance-based standards” for technical regulations is currently underway.


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Response to EC Q.27, Q. 28, Q. 29 and Q. 30 regarding JIS

Currently, approximately 90% of JIS standards are aligned with international standards. (The ratio of aligned JIS standards is the sum of IDT and MOD according to the revised ISO/IEC Guide 21.)

It is anticipated that the rate of JIS standards used as technical regulations has not changed as compared with the results of the survey in 1996, although the results have not been updated since 1996.

EC Question 31

The EU believes that the international harmonisation of automobile regulations is in the fundamental interest of all producing nations. The EU welcomes Japan’s accession to 1958 UN-ECE Agreement and trusts that the Japanese side will sign up quickly to a significant number of the annexed regulations as previously agreed.

What schedule does Japan envisage for the adoption of the specific regulations annexed to the UN-ECE Agreement in the near future?

Response to EC Q. 31 regarding UN-ECE

Japan has adopted 11 of the 110 regulations subject to the UN-ECE 1958 Agreement since its accession to the agreement in November 1998. Regarding the adoption of ECE regulations in the future, Japan plans to adopt about 5 or 6 regulations every year in order to meet its goal of adopting approximately 30 regulations by the end of fiscal year 2003.

Regulations will be adopted on the precondition that they do not lower Japan’s safety and environmental standards, and on a priority basis in light of considerations such as requests from both inside and outside Japan, giving priority to items for which there are few disparities in regulations and on items which permit rationalization of testing.

EC Question 32

In relation to conformity assessments, Paragraphs 73 and 75 mention the modification in the accreditation system of certification bodies (Industrial Standardisation Law in 1997).

Could you please provide more information about the situation as regards the recognition of foreign conformity assessment bodies? In this respect, we would appreciate information in relation to:

The Japanese laws and regulations that open the possibility for foreign conformity assessment bodies to be recognised under these laws;

the conformity assessment functions these bodies can fulfil in the context of these laws; the procedures that foreign manufacturers that would like to submit their production facilities or their

products to assessment by these conformity assessment bodies must fulfil to have the results of conformity assessment be recognised by the relevant Japanese administration;

the procedures for the recognition of these bodies; the conformity of these procedures with relevant international standards and guides (for instance

ISO/IEC Guide 25 and 65) or, alternatively, if the standards are not aligned to international standard, the relevant national standard(s);

the period of validity of the recognition and procedures for re-evaluation after expiry of the validity period;

the costs involved for the recognition, the maintenance of the recognition and the re-evaluation;


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the time-frame for the recognition; the role of accreditation in the process of recognition: can accreditation replace any of the procedural

steps of the recognition procedure; and the impact of the forthcoming Mutual Recognition Agreement on the recognition under the respective

Japanese laws.

Response to EC Q. 32 regarding conformity assesment

Some Japanese laws and regulations have already recognized foreign conformity assessment bodies and accepted their test results or certificates.

The functions of conformity assessment bodies are to inspect the conformity of products which are subjected to conformity inspection by a third-party conformity assessment body, and to certify that they comply with technical regulations.

Foreign manufacturers are required to apply for conformity assessment according to the procedure specified by the approved conformity assessment body, and to be certified.

The conformity assessment body is approved after the application is accepted and the necessary assessment is conducted.

The assessment for approval is conducted based on the assessment criteria, which are in line with International Guide.

Some laws and regulations specify the period of validity of the recognition, in which case the re-assessment will be conducted in the same manners as the initial assessment after the expiration of the validity period.

Some of the laws and regulations require payment of the cost of the recognition, surveillance and re-evaluation.

In general, the laws and regulations stipulate a standard processing period of recognition.

The results of accreditation in other regulations or voluntary schemes are not accepted under most laws and regulations.

In order to implement the Japan-EC MRA, the necessity of establishment as well as revision of related domestic laws has been found. These laws that are necessary for the implementation of the Agreement are currently under preparation.

(JAS)

THE NAME OF THE LAWThe Law Concerning Standardization and Proper Labeling of Agricultural and Forestry Products (JAS Law)

THE CONFORMITY ASSESSMENT FUNCTIONS & THEIR PROCEDURES(1) A Registered Foreign Grading Organization (RFGO) carries out the grading of agricultural and forestry products in a foreign country in accordance with Japanese Agricultural Standards.

(2) Foreign manufacturers of foreign production process managers (e.g. farmers) certified by a Registered Foreign Certification Organization (RFCO) carry out the grading of agricultural and forestry products in a foreign country in accordance the Japanese Agricultural Standards.


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(3) RFGOs and RFCOs need to be registered by the Minister for Agriculture, Forestry and Fisheries

PROCEDURE FOR RECOGNITIONA grading organization or a certification organization in a country which has a grading system equivalent to the JAS system can apply to the Minister for Agriculture, Forestry and Fisheries for registration as an RFGO or RFCO of the JAS system.

CONFORMITY OF THE PROCEDUREThe procedure for the recognition is based on the JAS Law.

PERIOD OF VALIDITYRFGOs and RFCOs must renew their registration every 5 years. RFGOs and RFCOs need to apply to the Minister of Agriculture, Forestry and Fisheries for renewal of their registration.

COST(1) The fee for the registration of a RFGO (RFCO) is 39,900 (51,200) yen plus the equivalent of the sum paid to two officials as traveling expenses in the case that they make business trips for the examination of the registration. If the applicant is engaging in grading (certification) business in accordance with the grading system of the applicant’s home country, the fee is 55,900 (60,500) yen only.

(2) The fee for the renewal of registration of a RFGO (RFCO) is 30,600 (37,200) yen plus the equivalent of the sum paid to two officials as traveling expenses in the case that they make business trips for the examination of the renewal registration. If the applicant is engaging in grading (certification) business in accordance with the grading system of the applicant’s home country, the fee is 43,200 (45,500) yen only.

TIME FRAMEThe decision to register a RFGO or RFCO will be made within a reasonable time frame.

ROLE OF ACCREDITATIONAs mentioned under “COST”, if the applicant is accredited in accordance with the grading system of the applicant’s home country, the equivalent of the sum paid to two officials as travelling expenses in the case that they make business trips for the examination of the registration is deducted from the registration fee, as there is no need for such business trips.

IMPACT OF MRAJAS is beyoned the scope of the forthcoming Mutual Recognition Agreement

EC Question 33

Export Restrictions, Licensing and Cartels, in Paragraph 102 of the Secretariat report. The report does not comment on US attempts to get Japanese steel producers to voluntarily limit steel exports to the US? Could the GoJ please clarify the current situation as well as its position and responses in relation to these attempts?

Response to EC Q. 33 regarding voluntary limitations on Japanese steel exports

Japanese steel producers do not voluntarily limit their steel exports to the US. Furthermore, the Government of Japan has not received any request from the US Government to limit its steel exports to the US.

On the other hand, due to the filing of anti-dumping and safeguard petitions by the US steel industry and labor unions, Japanese steel exports to the US have been falling drastically since 1999.


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EC Question 34

Page 64, paragraph 101: Could Japan explain the procedures for exempting goods from consumption taxes that are exported. Is there also a refund available to tourists and other non resident visitors to Japan that take goods which they have bought in Japan in their luggage out of the country.

Response to EC Q. 34 concerning exemptions from the consumption tax

The consumption tax on articles in Japan, like the VAT in European countries, is an indirect tax imposed at each stage of manufacturing, wholesale and retail.

In accordance with international taxation rulings, exports from Japan are exempted subject to possession of documents issued by customs authorities that prove the articles are for export purposes. Consumption tax on articles which are purchased at specified “duty free” shops may be exempted on the condition that the articles will be taken out of Japan. There is no other special consumption tax refund system for tourists or other non-resident visitors.

EC Question 35

Page 65, paragraph 109: Could Japan explain the tax rates and the tax base for the application of the motor vehicle tax.

Response to EC Q. 35 regarding the motor vehicle tax

Tax base: Weight of motor vehicle

Tax rate: Determined by type and weight of motor vehicle

(Example)Class 1Motor vehicles with a three-year inspection certificate

1. Private passenger vehicles, excluding light motor vehicles

(1) Vehicle weight of not more than half a ton: JPY 18,900(2) Vehicle weight in excess of half a ton: JPY 18,900 for each half-ton or fraction thereof

2. Light motor vehicles (private passenger vehicles): JPY 13,200

EC Question 36

Page 71, paragraph 123: Article 69, 3rd sentence of the TRIPS agreement calls on the members to promote the exchange of information and cooperation between the customs authorities with regard to trade in counterfeit trademark goods and pirated goods. Could Japan explain the action undertaken for implementing this obligation.

Response to EC Q. 36 regarding cooperation among customs authorities

The Japanese customs administration has been providing data concerning the suspension of release in Japan under the TRIPS Agreement to other customs authorities.


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EC Question Q. 37

Page 10, paragraph 24 of secretariat report: In hard core cartel cases the firms involved often succeed in maintaining considerably higher price levels (sometimes considerably more than 20-30%).

How does Japan intend to tackle the problem that a relatively modest overall level of fines or a statutory cap on the amount of pecuniary fines makes it easy for firms to calculate the cost of the highest fine possible if they were caught and factor this into their budget plans?

Response to EC 37

In principle, 6% of the sales amount during the period of cartel shall be imposed as the amount of surcharge, and this is by no means a low level. In addition, the JFTC has received no information indicating that firms had calculated the amount of surcharge before implementing price-fixing. The highest amount of criminal fines, which will be imposed in criminal cases, are provided by the AMA; however, such clear-cut and fixed amounts are required by the Constitution from the viewpoint of protecting the rights of the defendant. On the other hand, the highest amount of surcharge will not be provided as the fixed amount and, in this sense, there are no differences between the penalty provided by EU competition law and the surcharge provided by the AMA.

EC Question 38

The new civil remedy system which will come into force in 2001 as a result of the amendment of the AMA in May 2000 is welcome. However, both as regards core infringements by private firms as well as administrative guidance which may encourage or tolerate such practices, civil litigation is in itself not sufficient to replace a tough enforcement policy by relevant government agencies.

Response to EC Q. 38 regarding administrative guidance

Basically, core infringements by private firms are handled by the JFTC, a specialized administrative office.

On the other hand, under the ongoing deregulations, it is indispensable, from the viewpoint of establishing the basic conditions for deregulation, to further enhance measures to remedy damages from AMA violations. Since the JFTC enforces AMA with a view to ensuring free and fair competition, it is not always for the JFTC to take care of the remedies for loss or damages. Accordingly, the injunction relief system was introduced to improve and fulfill the legal system by which any person that is suffering or is likely to suffer damages may obtain the remedy by his own initiative. As a result, the injunction system is not a system intended to replace a tough enforcement policy by the JFTC.

Since administrative guidance itself does not violate the AMA, it will not be a subject of the injunction system. If the JFTC finds administrative guidance anti-competitive during its investigations into Anti-monopoly Act violation cases, it will request relevant ministries and government offices to take corrective measures.

EC Question Q. 39

What measures does Japan intend to implement in order to advocate competition at all government levels and to eliminate administrative guidance which has anticompetitive effects?

Response to EC 39 regarding administrative guidance


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The Fair Trade Commission (FTC), following deregulation policies outlined in the revised new program, continues to address Anti-Monopoly Act violations strictly and vigorously with a view to promoting fair and free competition in the Japanese market. The FTC also continues its efforts to ensure and promote fair and free competition in both public and private systems, including regulations.

Relevant ministries and government offices, following the Guidelines concerning Administrative Guidance under the Anti-monopoly Act, are required to hold prior consultations with the FTC to ensure that deregulation does not give way to anti-competitive administrative guidance.

EC Question 40

Criminal prosecutions under Japan’s Anti-Monopoly Act currently run at an average of one or none per year. This appears to indicate that the JFTC does not use the full potential of the legal powers at its disposal. What are the concrete steps envisaged by the Government of Japan to ensure more vigorous and pro-active implementation of competition policy?

Response to EC Q. 40 regarding fines

Whenever the Japan Fair Trade Commission (hereinafter “JFTC”) discovers violations of the Antimonopoly Act (hereinafter “AMA”), the JFTC will issue cease and desist orders against such violations. Moreover, the JFTC will order the payment of surcharges imposed on any profits earned by price cartels. The JFTC has essentially been taking these administrative measures against violations, and has adopted the policy of vigorously making criminal accusations to penalize such vicious and serious violations as price-fixing and bid-rigging, which are considered to have widespread influence on people’s lives. Accordingly, it is not appropriate to discuss enforcement activities of the AMA based solely on the number of criminal accusations.

EC Question 41

Why is the JFTC being merged into a General Affairs Ministry (along, for instance, with core regulatory functions of the Ministry of Posts and Telecommunications), and how is it intended to maintain its independence?

Response to EC Q. 41 regarding the future of the IFTC

Both the Basic Law on the Administrative Reform of the Central Government (1998), based upon the final report of the Administrative Reform Council, and the Establishment Law of Somusho (1999) stipulates that the JFTC will be an external organ of Somusho (the Ministry of General Affairs).

The AMA clearly secures the independence of the Chairman and Commissioners in enforcement or policy decisions and guarantees their status. The Act also provides that the Chairman and the Commissioners are appointed by the Prime Minister and approved by the Diet. Thus, the JFTC’s independence and neutrality as an independent administrative commission will continue to be guaranteed by the AMA after the government reorganization in 2001.

EC Question 42

Paragraphs 130 of the Secretariat report: We note that attempts to increase the level of competition in the Japanese economy constitute a major element in the regulatory reform process. Could Japan indicate how these efforts have affected outcomes, for example, via increased foreign penetration, prices, concentration ratios, or the number of successfully prosecuted cases?


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Response to EC Q. 42

Please see paragraph 50 of the Government Report.

EC Question 43

Paragraph 144 of the Secretariat report: We note that the Japanese Fair Trade Commission (JFTC) intends to continue to monitor the six major corporate groupings and feels the need to continue to do so. Could Japan clarify what the JFTC is looking for and the sort of action Japan might be envisaging?

Response to EC Q. 43 regarding JFTC’s monitoring of major corporate groups

The JFTC regularly conducts surveys on the six major corporate groups to monitor the ties within those corporate groups, because if the ties are strengthened among group members through capital and personnel, business transactions could become closed, and if economic power is concentrated, it could have negative effects on the Japanese economy.

The JFTC works to monitor that business transactions based on the background of Keiretsu relationships do not restrain fair competition, and to enforce the AMA more aggressively in addressing anti-competitive practices.

EC Question 44

It appears that there are plans to merge the 3 leading Japanese banks into one. Can Japan confirm this? Could Japan inform of the part such a bank would have of the domestic market as well as other relevant foreign markets? Would such a concentration of market power be contrary to Japanese merger control rules?

Response to EC Q. 44 regarding bank mergers

Dai-ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan established a common holding company to control the three banks at the end of September this year.

The combined market share of deposits, loans etc. of the three banks accounted for more than 20%. However, the Fair Trade Commission concluded that the consolidation would not limit competition in the financial market, considering that several other major banks existed as strong competitors and progressive deregulation was accelerated in the financial sector, and so on.


Pages 71-72 of the Secretariat Report: The EC acknowledges that a number of measures and regulatory changes have been introduced in the framework of the Regulatory Reform Programmes. However, in many cases, the industry is complaining that new regulations or new approaches do not deliver the expected degree of progress, notably due to either procrastination by relevant authorities or bodies, or to reference of unpublished administrative guidelines which put actual liberalisation in question.

Q. 45. Since GOJ recognised in this exercise two years ago that "to make sure, administrative guidance are not released in general" (see WT/TPR/M/32/Add.1, page 4 - in that case concerning JFTC), could Japan report whether this attitude (non publication) and practice (to accompany regulatory changes, even when more liberal, by restrictive administrative guidance) continues? In case it does, how does this reconcile with the intended drive toward a more positive and liberal regulatory framework? How is it possible to check


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whether steps or additional procedures to be implemented according to administrative guidelines put or do not put foreign firms at a comparative disadvantage compared to Japanese firms? Or is it Japan's intention to reform this practice or to make it completely transparent?

Q. 46. More specifically, would Japan envisage to:

Introduce a formal ruling process in cases where a company wishes to have written clarifications regarding a planned business situation or a particular regulatory situation?

Publish regulatory decisions, including official guidance to individual companies, so as to provide a reliable body of administrative precedent?

Response to EC Q. 45 regarding disclosure of administrative guidance

Based on the Administrative Procedures Law, “the person imposing the Administrative Guidance in question shall, if so requested by the subject party, provide the matters stipulated in the preceding paragraph in writing.” Ministries and government offices concerned, following the “Guidelines concerning Administrative Guidance under the Antimonopoly Act,” are required to hold prior consultations with the JFTC to ensure that deregulation does not give way to anti-competitive administrative guidance.

Response to EU Q. 46 regarding disclosure of administrative guidance

Regarding the handling of individual issues involving regulations, the Government of Japan does not currently require the regulatory authorities to provide a written explanation. However, the relevant ministries and agencies do provide explanations of the content and legal foundation of regulations which fall under their respective jurisdiction. Based on the Administrative Procedures Law, “the person imposing the Administrative Guidance in question shall, if so requested by the subject party, provide the matters stipulated in the preceding paragraph in writing.”

Each of the central government ministries and agencies is responsible for the introduction of relevant regulations involving individual corporations. For example, the Fair Trade Commission makes public notification of responses issued in prior consultations with businesses and others based on various guidelines, and publishes case studies of instances involving important consultations related to the Anti-Monopoly Act.


In GoJ report III (3) – Domestic Policy Developments Affecting Trade Policy, regarding postponement of regulatory reforms, in a number of areas where essential reforms have been announced, these have been delayed. The reclassification of a number of quasi-drugs as cosmetics or the introduction of a consolidated taxation system are cases in point.

Q. 47. Can Japan provide an indication when the measures in question will be realised?

Q. 48. More generally, does Japan consider the introduction of a fixed timetable for regulatory reform to ensure that the process stays on track and is not deflected by, for example, vested interests?

Response to EC Q. 47 regarding the timing to realize two specific measures

Notification of the revision of the range of effectiveness that cosmetics may claim will be made by the end of fiscal year 2000 and will come into force from fiscal year 2001.


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In the corporate tax area, Japan is examining the possibility of introducing a system for consolidated taxation and a system for corporate spin-offs and corporate splits.

Response to EC Q. 47 regarding the timing to realize two specific measures

Notification of the revision of the range of effectiveness that cosmetics may claim will be made by the end of fiscal year 2000 and will come into force from fiscal year 2001.

In the corporate tax area, Japan is examining the possibility of introducing a system for consolidated taxation and a system for corporate spin-offs and corporate splits.

Response to EC Q. 48 on the possibility of a fixed timetable for regulatory reform

Schedules are clearly stated in measures relevant to respective items of The Three-Year Program for Promoting Deregulation. By amending this program, schedules, content and processes of deregulation are clarified and made concrete for each deregulatory measure, and measures are being implemented surely. The Government of Japan is to draft and adopt The Three-Year Program for the Advancement of Regulatory Reform by the end of FY2000, and to conduct regulatory reform firmly.

EC Questions Q. 49 and Q. 50

In GoJ report III (3) – Domestic Policy Developments Affecting Trade Policy, regarding implementation of regulatory reform, we would like to underline that the assessment we are interested in does not refer to the number of issues taken up in the Deregulation Programme, but should provide information about actual change on the ground and concrete benefits of reform measures being felt by economic operators.

Q. 49. Could Japan provide its assessment of the real rate of implementation of regulatory reforms?

Q. 50. Which measures does Japan intend to take to ensure that regulations simplified in one area are not replaced by new ones elsewhere, in particular at the local level?

Response to EU Q. 49 on the rate of implementation of regulatory reform

Japan believe that the program has been implemented properly.

The result of follow-up survey on measures relevant to respective items of The Three-Year Program for Promoting Deregulation (up to 1 October 1999) shows that measures relevant to 734 items (about 80%) out of 917 items have been either completed or partly conducted.

Response to EC Q. 50 regarding regulatory reforms

It is essential that deregulation be promoted at the local level as well as at the national level; local governments shall be expected to play active roles in promoting deregulation in accordance with the purpose of the Program. Where necessary, the national government shall study and review regulations that are independently enforced by local governments as well as those based on national laws and ordinances, while paying due respect to the principles of local autonomy and decentralisation.

EC Questions 51, 52 and 53

The EU welcomes Japan’s announcement that it will launch a new Deregulation Programme from the end of March 2001. However, the means by which it is intended to continue to promote regulatory reform across


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government remain unclear, especially in the context of the general reorganisation of government ministries, which will come into effect in January 2001.

Q. 51. What mechanisms are foreseen within government to continue to promote regulatory reform, especially in view of the fact that the Management and Co-ordination Agency, which is currently responsible for this task, will be subsumed within a new General Affairs Ministry?

Q. 52. Is it intended to enhance the role of the Regulatory Reform Committee, in effect currently an advisory body to the Prime Minister, for instance by giving it a broader remit and legal powers under more direct prime ministerial authority?

Q. 53. Is it intended to make greater use of cross-cutting policy approaches in the formulation of future Deregulation Programmes, for instance along the lines of the approaches currently being followed by the Regulatory Reform Committee to IT-related issues and environmental regulations?

Response to EC Q. 51 regarding how regulatory reform will be promoted

The organisation, mandate, etc. of the body to promote regulatory reform after the restructuring of the central government has completed is under consideration. However, even after the Management and Coordination Agency is integrated into the Ministry of Public Management, Home Affairs, Posts and Telecommunications, the Government is to draft and adopt a new Three-Year Program for the Advancement of Regulatory Reform, which will succeed The Three-Year Program for Promoting Deregulation, in order to further advance regulatory reform initiatives.

Response to EC Q. 52 regarding the Regulatory Reform Committee

The organisation, mandate, etc. of the body to promote regulatory reform in the near future is under consideration.

Response to EC Q. 53 regarding deregulation programs

The Government is to draft and adopt The Three-Year Program For the Advancement of Regulatory Reform by the end of FY2000. This program shall be drafted based upon a report of the Regulatory Reform Committee expected by the end of this year. Discussion or arguments of the IT Strategy Council, etc., and details of the new program are to be considered.


Paragraph 72, page 55 of the Secretariat report: We note that, “according to MITI, about half of JIS [standards] were equivalent to international standards in FY1997.

Q. 54. Could Japan indicate what proportion of JAS standards are considered to be equivalent to international standards, and for what period of time this assessment is made?

Q. 55. If the above figure is less than 100%, could Japan indicate what measures it proposes to take in FY2000 and FY2001 to bring JAS standards into line with international standards?

Response to EC Q. 54 and Q. 55 regarding JIS

The data on the percentage of all Japan Agricultural Standards including those for wood products that are equivalent to international standards is not available as of today, because ongoing establishment and review


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of ISO Standards on wood products will be completed in 3 to 5 years.

According to the latest survey in October 1998, the percentage of Japan Agricultural Standards (JAS) on food items which correspond to Codex Standards is 38%, of which about 98% are considered to be almost aligned, or aligned except for some modifications, to Codex Standards.

It has become mandatory to review JAS every five years and consider international standards in the establishment, revision and abolishment of JAS under the Law Concerning Standardisation and Proper Labelling of Agricultural and Forestry Products (the JAS Law) which was revised in July 1999, and MAFF is currently engaged in reviewing JAS.


According to the final revision of the Three-Year Program for Promotion Deregulation decided on by the Cabinet on March 31, 2000, “Concerning an increase to about 1,500 of successful applicants of the Bar Examination, our Government continuously researches and examines improvements of the training program or methods as well as conditions for receiving those successful applicants as legal apprentices, and will come to a conclusion and take necessary action, taking into consideration the conclusions reached by the Judicial Reform Counsel (JRC) which will take into account the various opinions of the general public.”

In addition, at the JRC meeting held on this August 2000, a discussion was held on the numbers in the legal profession and, as our target hereafter, have, for the most part, agreed on the point that we are systematically and as early as possible going to secure approximately 3,000 new lawyers, paying due attention to improvements in the new legal training system including the realization of Japanese-style law schools now under consideration.

Our government will work on this matter appropriately and quickly taking into account the deliberations of the JRC.

EC Question 56

Paragraph 79, page 56 of the Secretariat report: Why does Japan continue to operate - contrary to the practice of other OECD partners such as EU - a positive list system for quarantine pests, where all pests are considered harmful unless on the positive list?

Response to EU Q. 56 regarding pests

There are an enormous amount of pests in the world (approximately 100,000 species) and sufficient information for many species has not been obtained. Under these circumstances, we consider that the completion of a positive list that includes all quarantine pests is, in fact, impossible.

On the other hand, a negative list system for quarantine pests covers all pests that are not listed, including those which we are not able to judge due to the lack of sufficient information, and excluding only those which do not pose risks to our domestic agriculture. This system is appropriate in the respect that pests for plant quarantine are clearly indicated.

In any case, as there are differences between the Japanese and European quarantine systems, it is not appropriate for this discussion to involve only the creation of such a list.

EC Question 57


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Does Japan propose to change this system to a negative list system, where Pest Risk Analyses have been performed for all designated quarantine organisms?

Response to EC Q. 57 regarding pests

As we believe that the Japanese system for plant quarantine is currently functioning effectively, we have no plans to change it at this time.

EC Question 58

Often shipments of cut flowers, pot plants, fruit, and vegetables are refused permission for import or are required to be fumigated, when they contain only organisms, which are not harmful and/or already commonly present in Japan. What measures will the Government of Japan take to overcome such problems, which are created by the Plant Quarantine Law?

Response to EC Q. 58 regarding pests

Japan will review the current list for non-quarantine pests whenever necessary, and thereby continue to operate our plant quarantine system according to the degree of risk posed by the pests.

EC Question 59

Paragraph 80, page 56 of the Secretariat report: As far as Japan’s policy on “varietal testing” is concerned, the WTO appellate body has found it to be inconsistent with the requirements of the SPS agreement (19 March 1999). Could Japan, then, explain why varietal testing is still being applied to EU produce, in particular to Spanish oranges and French apples, 18 months after the adoption of the WTO Panel and Appellate Body findings.

Response to EC Q. 59 regarding varietal testing requirement

On 31 December, Japan abolished the varietal testing requirement as well as the Experimental Guide that were in force until that date, in accordance with the rulings and recommendations adopted by the DSB regarding the dispute "Japan - Measures Affecting Agricultural Products (DS76)." Japan has conducted consultations with the United States regarding a new methodology to replace the former varietal testing requirement.

The abolished varietal testing requirement and the Experimental Guide covered eight products (apples, cherry, nectarine, walnut, plums, pear, apricot and quince), which act as host plants of the codling moth, for which fumigation using methyl bromide is or could be applied as a disinfecting treatment.

French apples are included in the eight products at issue, and if France requests the lifting of the import ban for additional new varieties, we are prepared to discuss it with France from a scientific and technical viewpoint.

Moreover, after the completion of consultations between Japan and the US on a new quarantine methodology, if France wishes to have the same methodology applied, the methodology will be adopted where appropriate as the result of scientific and technical consideration.

On the other hand, Spanish oranges are possible host plants of the Mediterranean fruit fly, of which cold treatment applied to disinfect. They are obviously not included in the eight products, nor are they directly related to the varietal testing requirement and the Experimental Guide which were abolished in accordance


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with the rulings and recommendations adopted by the DSB. In this regard, quarantine measures for Spanish oranges must continue to be considered from a scientific and technical point of view.

EC Question 60

Paragraph 81, page 57 of the Secretariat report: Could Japan give full details of all of the plant and animal quarantine procedures whose operating hours have been extended since the previous Review.

Response to EC Q. 60 regarding the quarantine

Plant and animal quarantine stations, in principle, operate whenever freight is imported.

At airports, the opening hours of Plant Protection Stations and Animal Quarantine Services are set so that the freight brought by the final flight of the day is properly dealt with. For example, the operating hours of the Station at Narita International Airport is from 6:00 am to 2:00 am the next day, and that for Kansai International Airport, which is a 24 hour airport, is 24 hours.

At seaports, operating hours on weekdays, in principle, are during the time when harbor facilities are operating, namely, from 8:30 am to 5:00 pm. However, Plant Protection Stations and Animal Quarantine Services will operate when necessary after closing hours, such as on weekends, national holidays and at the end and the beginning of the year.

EC Question 61

Paragraph 2, page 80 of the Secretariat report: It is stated in the report that, “Japan is moving away from price to income support.” What effect does Japan estimate that this will have on overall levels of agricultural expenditure?

Response to EC Q. 61 regarding the shift from price to income support

A budget is being drawn up, taking into account various factors such as the scale of budget, financial situation, overall economic policy and budget allocation among the ministries and agencies concerned. Thus, it is difficult to estimate what effect the shift from price to income support will have on the overall level of agricultural expenditures.

EC Question 62

“Productivity in Japanese agriculture … remains low by national standards.” What specific measures has Japan taken to improve agricultural productivity? Are funds being specifically targeted for this purpose, and are such funds being directed to particular sectors, or to agriculture as a whole?

Response to EC Q. 62 regarding agriculture

As for improvement of productivity, the Basic Plan for Food, Agriculture and Rural Areas (adopted by the Cabinet in March 2000) indicates the following measures to be taken, based on the new Basic Law on Food, Agriculture and Rural Areas. Although there is no specific fund to implement these measures, we are considering to change the allocation of general budgets in accordance with the Basic Plan.

(1) Establishment of desired agricultural structure and development of farm management measures(2) Securing and effectively utilizing farmland, and improvement of agricultural production

infrastructure


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(3) Securing and fostering the workforce, by measures such as encouraging new recruits of farmers to acquire knowledge of agricultural technologies and management skill

(4) Developing practical technologies to support fieldwork such as technologies to improve the quality of wheat and innovative technologies such as genomic sequencing

(5) Formation of farm product prices appropriately reflecting the real supply/demand situation and stabilization of farm management etc.

EC Question 63

Paragraph 6, page 81 of the Secretariat Report: The report states, “Land scale per farmer in Japan has remained roughly the same during 1997-99.” Given that the small scale of production is a major contributor to inefficiency, as is recognised in the first indent of paragraph 8, page 82, is Japan implementing any measures to encourage the consolidation of farm sizes?

Response to EC Q. 63 on consolidation of farms in Japan

The consolidation of farm sizes has been encouraged through the promotion of the intensive use of farmlands by efficient and stable farm management.

Based upon the Agricultural Management Framework Reinforcement Law, an institution has been established as a measure to facilitate such intensive use by efficient and stable farm management.

This institution can be summarized as the following:

(1) A municipality draws up an Agricultural Land Use Integration Plan (ASUIP) regarding farmlands within its jurisdiction, which incorporates the names of all parties, lot numbers and rents concerned with creation or transfer of farmland utilization rights.

(2) The ALUIP is publicized after the agricultural committee of the municipality has approved it. Farmland-utilization rights are created on the part of or transferred to farmers having an intention to use farmlands, as a result of this publication.

EC Question 64

Paragraph 7, page 81 of the Secretariat report: Why is it that transport and distribution costs are considered to be so high by the Japanese authorities, in a society, which is as, developed and modernised as is Japan’s?

Response to EC Q. 64 regarding Japan’s high transportation and distribution costs

Transportation and distribution costs are affected by many highway fees, truck, railroad and air cargo freights fees. According to a survey conducted by the Ministry of Agriculture, Forestry and Fisheries of Japan, these are higher in price in Japan than in the US, France or Germany. In addition, transportation and distribution costs often increase in response to various consumer buying behaviors such as a “more-frequent lower quantity” delivery system. This is why the Ministry cited transportation and distribution costs as one of the factors responsible for price discrepancies.

Reference

Table 1Comparison of elements of transportation and distribution costs

The U.S. / Japan France / Japan


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Highway fees (100 km) Almost free in the U.S. 2.6(2.6 times higher in Japan than in France)

(almost free in Germany)

Truck freight (10t, 1000 km) 1.4 1.6

Railroad freight (container 20f, 400 km or 425 km ) 1.5 1.4

Air cargo freight (1t, 600 km) 1.5 1.1

Source: Survey on retail food prices in Tokyo and five major cities abroad (New York, London, Paris, Hamburg and Geneva) released on 6 June 2000 by the Ministry of Agriculture, Forestry and Fisheries of Japan.

Table 2Number of times consumers go shopping for groceries in a week

Consumers in Tokyo 5.30 times

Consumers in New York 1.76 times

Source: Survey on retail food prices in Tokyo and five major cities abroad (New York, London, Paris, Hamburg and Geneva) released on 6 June 2000 by the Ministry of Agriculture, Forestry and Fisheries of Japan.

EC Question 65

In relation to pharmaceuticals: The reasons why the Japanese market is predominately supplied by Japanese firms remains unclear. Why, in contrast to the EU and US markets, is the Japanese market predominately supplied by domestic firms? What role does licencing by foreign companies play in the market and does it disguise a more significant foreign presence in the Japanese market than is suggested by the raw market share data? What role does the Japanese system of pharmaceutical price regulation play in limiting foreign presence in the market?

Response to EC Q. 65 regarding pharmaceuticals

As seen in the chart below, the share of the Japanese pharmaceutical market held by foreign companies is increasing, due in part to the recent deregulation of the approval process.

There are quite a few products sold by Japanese companies under license from foreign companies, although we do not have data precisely indicating their effect on the Japanese market.

There is no distinction made between Japanese and foreign firms in the Drug Reimbursement Pricing System under the National Health Insurance Program.

(Unit:\100 million)Year 1994 1995 1996 1997 1998

Sales of main foreign companies (A) 9,783 10,516 12,205 12,325 12,189

Drug expenses as a part of national medical expenses (B) 70,151 75,482 73,869 72,372 64,422

(A)/(B) 13.9% 13.9% 16.5% 17.0% 18.9%


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EC Question 66

Paragraph 23 in the Secretariat report "Summary observations": Please provide examples of concrete cases of where, inter alia, anti- competitive practices have helped shield Japanese service suppliers from competition. Please also give the GoJs assessment of and to what extent the more aggressive competition policy is tackling these practices.

Response to EU Q. 66 regarding how the Government of Japan assesses the results of more aggressive competition policy

The JFTC has not acknowledged any concrete cases in the service sector that violate the Anti-Monopoly Act, such as would be the case if Japanese entrepreneurs in the service sector were protected from competition with foreign entrepreneurs. As a reference, there are several domestic cases in service sector, for example, bid-rigging in medical work entrepreneurs (recommendation decision issued in April 2000), Ishikawa Prefecture Barbers and Hairdressers Association Kanazawa Branch restrained its members’ activities (recommendation decision issued in April 2000). The JFTC continues to address Anti-Monopoly Act violations strictly and vigorously.

The revision of the New Three Year Program for the Promotion of Deregulation shows that efforts shall be made to strengthen the enforcement of the Anti-Monopoly Act, including such measures as reinforcing the structure of the Fair Trade Commission in terms of its investigative and other resources. In addition strict and vigorous measures shall be taken against Anti-Monopoly Act violations.

EC Question 67

Paragraph 38 of the Secretariat report: Could Japan indicate which share of GDP is generated by commercially traded services (as opposed to the figures including public services)? Could Japan also indicate the share of services in Japanese foreign direct investment (on the side of Japanese investors and foreign investment objects)?

Response to EC Q. 67 on the share of commercially traded services in GDP

The share of commercially traded services to GDP (based on 93 SNA) is: (i) 68.0% in 1995 (including public services); (ii) 60.0% in 1995 (excluding public services); (iii) 69.9% in 1998 (including public services); and (iv) 61.4% in 1998 (excluding public services).

According to Japanese FDI statistics, in FY1999 the share of services in inward direct investment was 8.6%, and in outward direct investment it was 6.5% of the total value.

EC Question 68

Paragraph 39 of the Secretariat report: Is it official Japanese policy to allow increasing services imports as a contribution to the intended enhancement of competition in the supply of services, and which measures are taken to implement that policy?


Japan, being the net importer of trade in services, is of the view that the liberalisation of trade in services and the expansion of such trade contributes to economic growth even in service importing countries through the strengthening of the competitiveness of domestic service industries. Based on such assessment, the Government of Japan is actively participating in the WTO services negotiations.


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EC Questions Q. 69 - Q. 76

“Big bang” reform has brought about wide-ranging changes in Japan’s financial sector and has considerably reduced the regulatory burden for operators. However, concerns remain with regard to: (a) continued application of prior product and rate approval to many insurance products, especially personal lines; (b) excessively strict regulation regarding the separation of brokers and agents in the insurance industry, hampering the ability of brokers to act independently to offer their clients the best deal; and (c) the degree to which Investment Advisory Companies can have access to pension, mutual aid association, postal savings and postal life insurance funds in order to offer both advice and discretionary management services.

Q. 69. "Big Bang" reform appears also to include "opening the door to foreign institutions wishing to operate in Japan". Could Japan detail the progress made as regards the entry of foreign institutions?

Q. 70. What concrete measures are planned by the Government of Japan to ensure that the current notification system for insurance products (so-called “file and use”), already applicable to some commercial lines is extended to cover all personal and commercial lines? What action is planned to reduce the processing period?

Q 71. What action is planned in order to allow brokers to sell insurance products directly to consumers, to collect premiums, and to submit their policies for approval directly to FSA?

Q. 72. Also, every single insurance product requires a license: what are the reasons for not having class of business license available at present.

Q. 73. Page 9, Paragraph 19 of the Secretariat report: It is stated that "Provisioning standards [re banks] have also been tightened". How are foreign institutions affected in this respect?

Q. 74. Page 9, Paragraph 20 of the Secretariat report: It is indicated that "life insurance companies are attracting increased regulatory attention from the FSA". What does this mean exactly, notably as regards foreign companies?

Q. 75. What steps is the Government of Japan planning to ensure access to all pension, mutual aid association, postal savings and postal life insurance funds for Investment Advisory Companies (both advisory and discretionary)?

Q. 76. Page 98, Paragraph. 51 of the Secretariat report: It is stated that "Foreign banks may enter the Japanese market by establishing branches, agencies or subsidiaries; a license from the FRC is requires in each case". A footnote mentions that each branch or agency requires a separate license. Why is it necessary to do so?

Response to EC Q. 69 regarding the entry of foreign institutions into Japan

Based on the principle of market discipline and self-responsibility, the reform of the financial system (the so-called “Big Bang”) is promoting the sweeping liberalization of products and services offered by both Japanese and foreign banks, and a framework for management strategy (including reorganizations) such as the use of holding companies, has been established for all financial institutions.

Between March 1997 and October 2000, 11 bank branches, 21 securities companies, and 11 insurance companies entered the Japanese market for the first time. At present, there are 122 foreign bank branches, 54 foreign securities companies, and 42 foreign insurance companies in Japan.


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Response to EC Q. 70 regarding the notification system for insurance products

As for the insurance products for corporations, a system based on the principle of notification was introduced in August 1999. On the other hand, as the notification system is applicable to only some part of the insurance products for individuals. FSA is considering further deregulation, taking into account the protection of policyholders, among other things.

As far as the processing procedures, FSA has been striving to make it speedy by trying to enhance the processing scheme within the Agency, as simplification of the administrative organizations is requested.

Response to EC Q. 71 regarding insurance brokers

As brokers must be independent from insurance companies, the Insurance Business Law allows brokers only to intermediate between consumers and insurance companies. Brokers cannot underwrite insurance policies or conduct insurance policy transactions with consumers on their own accounts under the Law.

Consequently, brokers cannot be permitted “to sell insurance products directly to consumers” and “to submit their policies for approval directly to FSA” due to the reason above.

The law prohibits the collection of premiums from customers because it can create in customers the misunderstanding that brokers are liable for insurance policies.

Response to EC Q. 72 regarding the necessity of licenses for insurance

Although it is not clear what is meant by the phrases “every single insurance product requires a license” and “the reasons for not having class of business license,” in light of the complicated nature of insurance products, we consider a certain degree of regulation such as authorization by the proper regulatory authority with regard to the insurance products to be necessary to protect policyholders, who might not have sufficient knowledge of insurance products, as well as to ensure the soundness of the insurance companies’ management.

Response to EC Q. 73 regarding provisions made by financial institutions

Although it is not clear what is meant by the phrase “Provisioning standards [re banks] have also tightened,” generally speaking, financial institutions asseses their assets by their own independent standards. Based on the result of the assessment, they are to make appropriate provisions, taking into account the estimated loss in case of the failure of debtors. This practice is required of all financial institutions engaged in banking activities in Japan.

Response to EC Q. 74 regarding regulations of life insurance companies

Due to the low interest rates, the asset management environment for life insurance companies has worsened, resulting in a so-called "negative spread". It may take some time to resolve this problem.

Under these circumstances, insurance companies are restructuring management and reducing costs. The FSA expects that each insurance company will build a sufficient management base by increasing their capitalization and their management efficiency.

The FSA is striving toward properly grasping the financial and business conditions of each company by conducting inspection and monitoring, as well as ensuring the soundness of life insurance companies by taking prompt corrective measures when deemed appropriate.


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During the last Diet session, the Law on Special Measures for Reorganization of Financial Institutions was amended from the viewpoint of expediting the resolution of failed life insurance companies at an early stage as well as protecting policyholders. These measures are expected to contribute to the protection of policyholders and restrain the amount of funds disbursed from the Policyholder Protection Corporation.

Response to EC Q. 75 regarding access to pension, mutual aid association, postal savings and postal life insurance funds

1. Investment Advisory Companies can access Employees Pension Funds and National Pension Funds without restriction. They will also be able to access the Nenkin-shinkin-unyou-kikin, which will succeed the Pension Welfare Service Public Corporation (Nempuku) in April 2001, without restriction.

2. The operation of reserve funds from the public worker's mutual aid association is managed by the Mutual Aid Association Joint Party, which is an independent entity from the national government. Investment Advisory Companies can access the reserve funds operated by this joint party.

3. Investment Advisory Companies can access postal savings and postal life insurance funds as potential users of their advisory services. On the other hand, regarding access to discretionary management of postal savings and postal life insurance funds by Investment Advisory Companies, the Government of Japan is of the opinion that further examination will be needed to come to a conclusion.

Response to EC Q. 76 regarding licensing of foreign banks

Under the Japanese Banking Law, a license can not be given directly to the head office of a foreign bank if it is located abroad, whereas it can be given directly to a head office of a domestic bank which is located in Japan. This is why branches of foreign banks are treated as a separate legal entity, resulting in the granting of a separate license to each branch.


Q. 77. Page 20, paragraph 100 of the GoJ report mentions that "policy resources will be concentrated on IT related matters such as further pro-competitive policies in the telecommunications sector…". Which pro-competitive policies will Japan implement for this purpose?

Q. 78. Page 101 paragraph 69: According to the commitments made by Japan (reference paper), the regulatory authority should be separate from, and not accountable to, any supplier of basic telecommunications services. How is this ensured taking into account that the Japanese Government owns a 53% majority of the shares of Nippon Telegraph and Telephone Co. (NTT holding company) and that the MPT approves nominations of directors at NTT Holding?

Response to EC Q. 77 regarding deregulation measures taken in the telecommunications sector

The Ministry of Posts and Telecommunications has taken many deregulation measures that promote competition as follows: enhancement of rule to ensure fair competition such as the interconnection rule between telecommunications carriers; elimination of regulation of charges and elimination of foreign ownership restrictions.

At present, the status of competition policy in the IT era is being discussed in the Telecommunications Council, taking into account the environment concerning the telecommunications sector.

Response to EC Q. 78 regarding independence of regulating authorities from suppliers


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The Ministry of Posts and Telecommunications, which is in charge of regulations in the telecommunications sector, is independent of NTT. Japan faithfully abides its obligations in the Reference Paper.

The approval of nominations for directors at the NTT Holding Company is required because it plays the public role of providing appropriate universal service and the promotion and dissemination of R&D.

EC Question 79

Paragraph 69: According to Japan’s additional commitments (paragraph 6 of the reference paper), “any procedures for the allocation and use of scarce resources, including rights of way, will be carried out in an objective, timely, transparent and non-discriminatory manner.” Could the Japanese government provide those procedures? Why is it necessary for the MPT to allow a company to negotiate a right of way with a private landowner?

Response to EC Q. 79 regarding procedures for the allocation of scarce resources

The following is the procedure for assigning frequencies in Japan, which is carried out in an objective, timely, transparent and non-discriminatory manner.

(1) Decision of national allocation

The national allocation in Japan is decided based on the results of the World Radiocommunication Conferences of ITU subject to the demand for frequencies. The national allocation is described in the Frequency Assignment Plan, which is published as a public notice and also available on the Internet. In addition to the national allocation, the Frequency Assignment Plan stipulates the purposes of radio stations to which each frequency band is assignable and the conditions on the use of the frequency band. In case the Frequency Assignment Plan needs to be amended, the MPT will seek public comments beforehand and consult the Radio Regulatory Council, and via these procedures MPT ensures objectivity, transparency and impartiality.

(2) Establishment of technical regulations

In Japan, only minimum technical regulations are established in the Ministerial Ordinances of the Radio Law, etc. in order to avoid interference and enhance efficiency of spectrum usage. These conditions are discussed at the committees of the Telecommunications Technology Council in order to ensure transparency and fairness. Members of those committees include not only specialists of Japanese companies but also those of companies owned totally by foreigners and representatives of European and the U.S. industries.

When the MPT establishes the technical regulations as the Ministerial Ordinances, etc., the MPT consults the Radio Regulatory Council beforehand to judge their appropriateness.

In addition, the MPT seeks public comments during the discussion of both Councils.

(3) Establishment of license policy and examination criteria

In Japan, license policies and examination criteria are established before issuing licenses for new systems including the Frequency Assignment Plan. The MPT seeks public comments before the establishment. The policies and criteria are open to public.

(4) Issuance of licenses


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Following the license policies and the examination criteria mentioned above, applications for radio stations are examined and licenses are issued by the MPT. As for radio stations such as base and mobile stations for cellular phone and communication satellites, the applications are accepted within a term announced publicly and the licenses are issued through comparative examination based upon the published criteria.

(5) Disclosure of assigned frequencies

Except for radio stations assigned to the organizations related to national security and maintenance of order, all the frequencies assigned are available on the Internet or at the office of the MPT.

As for radio stations for telecommunications services, the regulations on foreign ownership restriction were abolished in 1998, following the agreement of the Negotiations on Basic Telecommunication. As a result, more and more foreign-affiliated firms have been entering the telecommunications service market in Japan. For example, two fully-foreign-affiliated firms have entered FWA services so far.

When a Type I telecommunications carrier uses another person’s land, for the establishment of lines for the use of its Type I telecommunications business, the right to use the land, is ensured by a contract between the Type I telecommunications carrier and a landowner.

However, in case a negotiation fails to come to an agreement and it is necessary and reasonable to use land, the Type I telecommunications carrier may request the owner to negotiate the creation of a right to use the land subject to the authorization of the Minister of Posts and Telecommunications.

EC Question 80

Is JFTC the competent competition authority for the telecommunications sector? If not, which is the competent authority?


The JFTC possesses the authority to apply the Anti Monopoly Act not only to the telecommunication sector but to all business sectors.

EC Question 81

Paragraph 72: why is a Ministerial authorisation required in order for Type-I and Special Type-II carriers to conclude, modify or abolish contracts with foreign corporations (what is the rationale)?

Response to EC Q. 81 regarding the need for Ministerial authorization for Type-I and Special Type-II carriers to conclude contracts with foreign corporations

Contracts with foreign corporations require a ministerial authorization because they could greatly influence the interests of consumers.

EC Question 82

Paragraph 73: which safeguards are put in place so that these four NTT companies do not behave, alone or together, in an anti-competitive manner (including engaging in anti-competitive cross-subsidisation, or using information obtained from competitors with anti-competitive results), as per Japan’s commitments in the WTO?


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Response to EC Q. 82 regarding safeguards to ensure competition in the telecommunication sector

In order to maintain fair competition, the Implementation Plan regarding the reorganization of NTT authorized on 21 May 1999 stipulates concrete measures as firewalls such as: the prohibition on serving as executives of the regional companies and the long-distance company at the same time; a limit on the exchange of employees; and a requirement that the conditions of interconnections, transactions, provision of customers’ information and disclosure of the results concerning R&D between the regional companies and the long-distance company must be consistent with those between the regional companies and other telecommunications carriers. Fair competition between the regional companies and the long-distance company is ensured through these measures.

EC Question 83

Paragraph 74: what is the scope of the universal service? How is it funded? How is it ensured that it is transparent and competitively neutral, as per Japan’s commitments in the WTO?

Response to EC Q. 83 regarding universal service

The NTT Law obligates the NTT Holding Company, NTT East and NTT West to impartially provide stable nationwide telephone services throughout Japan at appropriate conditions. Telephone, public telephone and emergency calls are defined as the scope of universal service. The cost to provide universal service is borne by NTT East and West. Universal service, including its scope and the funding of its cost is one of the issues being discussed in the Telecommunications Council as an issue to be considered taking account of technological innovation and competition policy.

The Government of Japan considers it essential that universal service be provided in a transparent, non-discriminatory and competitively neutral manner in accordance with the Reference Paper of the Fourth Protocol to the GATS.

EC Question 84

Paragraph 76: why do Type-I carriers need to notify to MPT, charges and their modification? What is the rationale for MPT to order carriers to revise their charges in order to assure fair and reasonable end-user charges: is this part of the universal service? More generally, it is the understanding of the EC that all carriers’ tariffs, business plans (and changes in business plans or service offered), network plans (and changes thereto), etc. require prior notification to and approval from the MPT: is this the case, and, if so, what is the rationale for such a burden on operators?

Response to EC Q. 84 regarding the requirements for Type-I carriers to notify MPT of charges

From the viewpoint of ensuring the interests of users, the Minister of Posts and Telecommunications may order a Type I carrier to change the charges, including any provision that unfairly discriminates against any person, or which may give rise to unfair competition. From this point of view, notification is needed.

Article 31 of the Telecommunications Business Law stipulates issues concerning charges of Type I Telecommunications carriers.

In order to ensure the benefit and convenience of users, business plans require prior notification to and approval from the Ministry of Posts and Telecommunications in order to ensure the security and reliability as a public business supplier.


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EC Question 85

Paragraph 78: the paragraph mentions only requirements for Type-I carriers to interconnect with Type-II operators: aren’t there any requirement for type I operators to interconnect with each other? Does NTT publish a reference interconnection offer or all its interconnection agreements, as per Japan’s commitments in the WTO? How is it ensured that NTT East & West interconnection terms (including rates) are then no less favourable than those provided for their own like services or for like services of their subsidiaries or other affiliates, as per Japan’s commitments in the WTO?

Response to EC Q. 85 regarding interconnection rates in Japan

Although Chapter IV Paragraph 78 only mentions interconnection between Type I carriers and Type II carriers, Article 38 of the Telecommunications Business Law stipulates that Type I carriers shall agree to requests for interconnection of telecommunications facilities not only from Type II carriers, but from Type I carriers in the same way as well. Article 38-2 of the Law stipulates that the conditions of interconnection shall be no less favorable than those applicable when a Type I telecommunications carrier installing designated telecommunications facilities accomplishes interconnection between the designated telecommunications facilities and its own telecommunications facilities.

EC Question 86

Paragraph 79: the EC understands that Number portability will be possible by 31 December could Japan confirm?

Response to EC Q. 86 regarding number portability

Number portability is scheduled to be introduced in early 2001.

EC Question 87

Paragraph 80: which safeguards are put in place so that NTT-DoCoMo does not behave, alone or with other NTT companies, in an anti-competitive manner (including engaging in anti-competitive cross-subsidisation, or using information obtained from competitors with anti-competitive results), as per Japan’s commitments in the WTO?

Response to EC Q. 87 regarding safeguards to prevent anti-competitive actions

Just as with other telecommunications carriers, the measures which ensure that there is no anti-competitive behavior on the past of NTT DoCoMo are incorporated in the Telecommunications Business Law, such as orders to change inappropriate charges or to improve business activities.

EC Question 88

Paragraph 83: what is the legal responsibility of a telecommunications operators for temporary storing data (in terms of intellectual property or criminal offenses for instance)? Are there any specific requirements on e-commerce service providers (in terms of information to the seller, data protection, …)?

Response to EC Q. 88 regarding temporary storing data

It is highly probable that telecommunications operators will not be presumed to be responsible for temporary data if it is stored in automatic process and they do not treat it intentionally. There are no specific


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requirements on e-commerce service providers.

EC Question 89

Paragraph 95. What are the shares of the total Japanese tonnage, and number of vessels, under the International Ship Regime (most recent statistics)?

Response to EC Q. 89 regarding the International Ship Regime

The number of vessels subject to the International Ship Regime was 124, accounting for a total gross tonnage of 9,950,000 tons (as of 1 July 1999). Respectively, these figures account for 6.2% and 14.8% of the Japanese merchant fleet.

EC Question 90

It appears that the Japan Harbour Transportation Association (JHTA) is imposing that shipping lines consult with them before any operational changes can be implemented. What is the rationale for that and in particular for the fact that a shipping line cannot change its contractor unless the JHTA specifically sanctions such a change"?

Response to EC Q. 90 regarding the JFTA

The prior consultation system is utilised when changes in carrier’s business plans may affect the employment and working conditions of port labourers, based on an agreement among associations related to port transport business including shipping lines, labour unions and companies.

EC Question 91

As regards the 80% decrease in the number of consultations mentioned in this paragraph, it appears to the EC more appropriate to say "some 80% of such consultations have since 1997 been categorised as so called 'minor matters' and are relatively quickly processed by the JHTA". Also, the EC had been told and would like confirmation that Stevedore charges will from 1 November 2000 merely need to be filed with the Ministry of Transport.

Response to EC Q. 91 regarding the number of consultations

The prior consultation system has been vastly improved. The number of consultations which are disputed have virtually decreased by more than 80%. (These improvements have been welcomed by the EU). Through the implementation of the amended Port Transportation Business Law, the fee approval system was replaced by a filling system in the nine major ports where 95% of all container cargo in Japan is handled.

EC Questions Q. 92 – Q. 94

Pages 107-8, paragraph 99, Harbour services: The revised Harbour Transportation Business Law entered into force on 1 November 2000 and is aimed at liberalising the provision of harbour services at nine of Japan’s most important ports. The EU welcomes this development, but believes that the system by which carriers must still consult with the Japan Harbour Transportation Association (JHTA) before requesting changes in stevedore works (known as “prior consultation”) represents an artificial constraint on competition, reduces operational flexibility and raises the costs of doing business. Alternative arrangements concluded in 1997 with a view to improving the prior consultation system remain have yet to be implemented.


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Q. 92. Can the government outline how far the implementation of the new (May 2000) Port Transport Business Law has progressed, in terms of securing transparency and certainty of operation, mainly concerning stevedoring services and in particular what concrete actions will the Government of Japan take to implement fully the agreements on improving the prior consultation system and establishing a system which is transparent, equitable and swift?

Q. 93. What criteria for establishing whether “price dumping” have been adopted?

Q. 94. What steps have been taken to communicate the rules following the new law to the (foreign) operators and shipping lines and what auxiliary services are open to foreigners and under which conditions can foreigners establish?

Response to EC Q. 92 regarding the Port Transportation Business Law

As the prior consultation system is not conducted based on the Port Transportation Business Law, there is no relation between the implementation of the amended Port Transportation Business Law and the improvement of the prior consultation system.

Response to EC Q. 93 regarding the criteria for “price dumping”

In the event that fees filed are lower than variable costs, including labour costs, and there is a concern that this could result in unfair competition with other general port transporters in a deregulated port, the Minister of Transport may deem that price dumping has occurred and issue an order to revise the filed fee.

Response to EC Q. 94 regarding foreign operators/shipping lines

The Cabinet Order and the ministerial ordinance which describe the detailed procedures in the implementation of the amended Port Transportation Business Law were proclaimed after inviting comments from the public. As the Port Transportation Business Law does not at all restrict foreigners from entering the port transport business, the permission standard for foreigners to enter business is the same as for Japanese nationals.

EC Questions Q. 95 – Q. 99

Pages 109-110 of the Secretariat Report: The number of slots available at Narita airport is severely limited, and thus the allocation system is of the utmost importance to airlines which wish to fulfil the considerable demand generated in the Tokyo metropolitan area for international flights. Although there have been recent improvements in the transparency of slot allocation, the slot co-ordinator’s freedom to meet demand is still constrained by hourly, three-hourly and daily limits on slot numbers. In addition, the criteria to which the slot co-ordinator works do not fully apply IATA guidelines.

Q. 95. What measures does Japan intend to take in order to make its system of slot allocation fully compatible with IATA guidelines?

Q. 96. Paragraph 116: What is the percentage of slots allocated to foreign airlines granted under the last two (half-yearly) allocations. What is the total share?

Q. 97. Paragraph 116: What measure does Japan intend to undertake in order to enable an increase of the number of slots available from the existing single runway at Narita Airport?

Q. 98. Japan states that its slot allocation system is based on IATA guidelines. However, the system does not


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fully correspond to IATA guidelines. Please clarify the allocation criteria to which the slot allocator works and explain clearly the extent to which IATA guidelines are not applied. What are the reasons?

Q. 99. Paragraph 117: What auxiliary services are open to foreigners and under which conditions can foreigners establish? What is the market-share of foreign ground-handling services operators in the two main international airports (Narita, Kansai)?

Response to EC Q. 95 regarding slot allocation and IATA guidelines

Slot allocation and coordination at Narita Airport is already fully compatible with IATA guidelines.

Response to EC Q. 96 regarding slot allocation to foreign airlines

Foreign airlines’ slots accounted for 63% of the existing slots for international scheduled services at Narita Airport in the IATA 1999 Winter season. The share was 63% in the IATA 2000 Summer season, as well.

Response to EC Q. 97 regarding an increase in the number of slots at Narita

The Ministry of Transport of Japan has been making every effort to complete on-going construction of the provisional second runway with a view to increasing the airport’s capacity.

Response to EC Q. 98 regarding slot allocation and IATA guidelines

When the additional slots became available for new allocation at Narita Airport in 1998, the slot coordinator applied all the relevant provisions of IATA guidelines, including precedence for year-round operations as well as that for airlines with new-entrant status. At that stage, because the coordinator found that there were still additional slots even after applying all the relevant provisions of IATA guidelines, he allocated them to the airlines by applying the local rule. According to the local rule, when there are slots available for allocation even after application of all the provisions of IATA guidelines, slots should be allocated in proportion to unused capacity entitlements held by the countries to which the airlines belong.

Response to EC Q. 99 regarding auxiliary services at Japanese airport

All auxiliary services are open to foreigners and there are no conditions which apply only to foreigners.

The market-share of foreign ground-handling services operators is 0% in Narita Airport and about 20% in Kansai Airport.


Regarding foreign lawyers, pages 110-111. Although the implementation of a so-called “joint enterprise scheme”, in place since 1995, allows joint work on specific cases between Japanese lawyers and foreign lawyers licensed in Japan, partnership between Japanese and foreign lawyers and employment of Japanese lawyers by foreign lawyers are prohibited. This in effect prevents the creation in Japan of integrated international law firms able to give the advice clients require on deals with multi-jurisdictional aspects such as initial public offerings and mergers/acquisitions. As such it has knock-on negative effects on investment in Japan and on the economy as a whole.

Q. 100. What concrete action is planned by Japan in order to abolish restrictions on partnership and employment between Japanese lawyers and foreign lawyers licensed in Japan?


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Q. 101. Paragraph 120: it says that there was an amendment to the Special Measures Law, which "lifted the ban on a GJB undertaking legal business concerning third country law." Does this mean that a Foreign Lawyer is now allowed to give legal advice on third country law? Do the 'relaxed experience requirements', also mentioned in that paragraph, imply a shorter period of required prior practice than the currently mandatory five-year-period?

Response to EC Q. 100 regarding restrictions on partnership and employment between Japanese lawyers and foreign lawyers licensed in Japan

According to the final revision of the Three-Year Program for Promoting Deregulation decided on by the Cabinet on March 31, 2000, "From the viewpoint of providing an environment where citizens and corporations can receive overall, comprehensive legal services concerning both Japanese and foreign law, the Government of Japan will give consideration to whether some measures, including the review of regulations on the objectives of specific joint enterprises, are required so that fully integrated legal services based on comprehensive cooperation between Gaikokuho-Jimu-Bengoshi and Bengoshi may be provided in all cases."

Therefore, the Government of Japan is continuing examination of specific joint enterprises to assess whether there are any points that may be improved.

Response to EC Q. 101 regarding the Special Measures Law concerning the Handling of Legal Business by Foreign lawyers

The Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers has been revised in August 1998 as follows:

(1) Lifting the ban on performing legal business regarding third country law

A gaikokuho-jimu-bengoshi is allowed to perform legal business regarding third country law according to written advice on matters from competent persons prescribed in the aforementioned Special Measures Law (e.g., lawyers qualified in the third country and engaging in legal business concerning the law of that country).

Previous system

Concerning legal services by gaikokuho-jimu-bengoshi in Japan, the handling of legal business related to third country law other than the law of the country of primary qualification or designated laws was prohibited.

(2) Relaxation of the requirement for experience as a practising lawyer

Regarding the practical experience requirement for qualification, which is one of the standards for approval as a gaikokuho-jimu-bengoshi (a foreign lawyer qualified by Japanese law), the necessary period during which an applicant has to engage in practice as a foreign lawyer in the foreign country where he/she acquired the qualification to become a lawyer of that country ("home country") has been shortened to three years or more.

The period during which a foreign lawyer who, on the basis of qualifying as a foreign lawyer of his/her "home country," engages in legal business concerning that country in a foreign country other than his/her "home country" may be included in the above period.

Up to one year of the period during which a person, after qualifying as a lawyer of his/her "home country,"


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was employed by a bengoshi or a gaikokuho-jimu-bengoshi in Japan, during which, as an employee, he/she rendered services regarding the law of the "home country" to a bengoshi or a gaikokuho-jimu-bengoshi, may be included in the period of his/her having engaged in practice as a lawyer in the "home country."

Previous system

The law previously required experience engaging in practice as a foreign lawyer for five years or more in total after becoming a foreign lawyer.

Previously up to two years of the period of employment by a bengoshi or gaikokuho-jimu-bengoshi in Japan could be counted towards the five-year experience requirement.

However, practical experience in a foreign country other than the "home country" could not be included in the above period.


Regarding public procurement: Secretariat report page 49, paragraph 56 onward): The Secretariat Report describes a number of action plans and initiatives taken by Japan to improve the "future management of Government procurement" or to avoid bid-rigging and promote effective competition. It also states that Government practice in Japan is highly decentralised, with no coordinating agency, with procurement entities maintaining their own list of "registered suppliers".

In these circumstances, and beyond major procurement cases (big ticket items and procurement by central authorities), how does Japan implement the action plans and measures for more transparency and open competition including foreign suppliers?

How does the Ministry of FA "seek to assure the consistency of procurement policies and practices with the GPA" as stated in para. 59?

Response to EC Q. 102 concerning how Japan implements its action plans and measures for transparency and open competition including foreign suppliers

Based on the Cabinet Decision of 13 August 1993, the Action Program Committee was established in the Cabinet, with the Chief Cabinet Secretary as the Chairperson. Each member of the Committee: all Administrative Vice-Ministers, Commissioner-General of the National Police Agency and Commissioner of the Financial Services Agency, is responsible for the implementation of the adopted voluntary measures.

Moreover, implementation of the measures has been reviewed in the annual voluntary review meetings, using statistics, opinions of foreign and domestic suppliers and other relevant information. The annual reviews have resulted in the Initiative on Future Management of Government Procurement, which has been approved by the Action Program Committee.


Based on the Ministry of Foreign Affairs Establishment Law and the Cabinet Order for the Organization of the Ministry of Foreign Affairs, the Ministry is authorized to implement multilateral treaties and agreements including the WTO Agreement on Government Procurement. Therefore, the Ministry is able to take necessary steps to secure the consistency of procurement practices by the covered entities with the GPA.

In addition, the GPA has been transposed into relevant national laws and regulations with regard to central


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and sub-central government entities. All of those laws and regulations are consistent with the provisions of the GPA. With regard to Annex 3 entities, the GPA also has been transposed into their respective accounting or internal statutes whose consistency with the GPA is secured through responsible ministers' control over the entities.


There are contentions that the Government sets a ratio for public works orders placed with smaller firms. This could entice public entities to splitting projects into small segments with the result of bringing each single call for tenders or offers under the GPA thresholds, and making it in-economical for foreign firms to get accredited and to bid.

Does Japan confirm that such a policy and resulting practice exist and in the affirmative, is there an annual review of the smaller firm ratio and the effectiveness of such a policy?

If such a policy exists what would be the additional cost to the public budget and to Japan's modernisation due to inevitable higher prices and lesser technological upgrade linked with such uncompetitive fragmentation and a de facto exclusion of foreign bidders?"

Response to EC Q. 104 – Q. 105 regarding tendering procedures for procurement contracts

In Japan, entities covered by the WTO Agreement on Government Procurement do not select the valuation method and do not divide any procurement contracts with the intention of avoiding the application of the Agreement. With regard to public works project, therefore, covered entities of the GPA do not conduct unnecessary segmentation of the contract value of any project. In case certain entities have to divide one project into more than one contract or into contracts being awarded in separate parts for some special reason, consistency with the provisions of Article 2 of the GPA is fully secured.

Based on the Law on Securing the Receipt of Orders from the Government and Other Public Agencies by Small and Medium Enterprises (Act No. 97, 1966), the Government of Japan is implementing a policy that contributes to development of small and medium enterprises through promotion of the procurement of goods, services or construction by the Central Government and public corporations. This policy is implemented by the operational guideline (Cabinet decision) which ensures the conformity with the GPA.

EC Question 106

"Two years ago the EC asked the following:" Could Japan comment on footnote 89 of document WT/TPR/S/32 that quasi governmental entities and joint ventures between the private sector and the Japanese government, which are outside of the scope of Japan's commitments under the WTO Procurement Code, are increasingly purchasing services and goods that formally were the responsibility of national and local governments?" We do not seem to have received a full answer we would therefore want to address this question again to Japan.


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The WTO Agreement on Government Procurement applies to any law, regulation, procedure or practice regarding any procurement by entities covered by this Agreement, as specified in its Appendix I (Article 1 of the GPA). Members of the GPA generally may, pursuant to negotiations, decide which entities (and procurement covered by those entities) are included in their Appendices and in which Annex they will be included.

Japan includes all central government entities (32 state organs, all their internal sub-divisions, independent organs, attached organizations and other organizations and local branch offices provided for in the National Government Organization Law) in Annex 1, sub-central government entities (47 prefectures and 12 cities designated by Cabinet Order) in Annex 2, and public corporations or government-related corporations (70 corporations, as of October 1, 1999) in Annex 3 of Appendix I.

Within the meaning of Article 1 of the GPA, therefore, procurement conducted by the entities not included in the Appendix is outside of the scope of Japan’s commitments under the GPA.

EC Question 107

Regarding standards, page 54 and paragraph 70 of the Secretariat report. The report states that "Japan has moved toward increased international harmonization of its standards and technical regulations. The Three-Year Program for Promoting Deregulation (TYPPD), as amended for FY2000, re-emphasized ministries and agencies endeavour to achieve greater international harmonization of standards…"

What are the reasons why Japan still has not brought its legislation regulating engine output for fishing vessels in line with the relevant international standard ISO 3046 (equivalent to JIS B 8002), i.e. measurement of actual real engine output expressed in horsepower or Watts/H?

Response to EC Q. 107 regarding standards

The Study Group on the Evaluation of Engine Performance for the Control of Fishing Efforts was set up in response to a request from the EU and the Regulatory Reform Committee of Japan in March, and this Study Group made an evaluation of the engine performance of fishing vessels. This Group was comprised of a broad range of members, including engine manufacturers such as Volvo Penta Japan, academics and members of the fishing industry.

The Study Group’s report states that a performance evaluation in terms of actual engine power would be desirable, but that it is not reasonable at present because enforcement officials or fishermen subject to the regulations are unable to easily confirm actual engine power without special equipment. On the other hand, the report points out that a performance evaluation in terms of displacement volume and engine speed can be easily performed on the spot, and that these figures are considered to be an appropriate index for the performance evaluation of fishing vessels’ engine for controlling fishing vessels.

In accordance with the Study Group’s report, we are now working to prepare new evaluation methods and related rules on engine power control for fishing vessels. We intend to provide information in advance and continue talks with the EU (the contact agency for this issue) as well as with the Regulatory Reform Committee in Japan.


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HONK KONG

Hong Kong Question 1

Foreign entry to services sectors in Japan has been discouraged to a certain extent by regulatory measures like licensing and restrictions in foreign investment. It is noted that Japan has launched "the Three-Year Program for Promoting Deregulation" during 1998-2000 to address the issue. Apart from deregulation arrangements concerning financial services which are well covered in the TPR reports, would Japan give an account of major achievements in deregulation/streamlining of regulatory procedures in other services sectors? What has been the perceived impact on the level of services imports? We would also be glad to hear from Japan any further plans for deregulation.

Response to Hong Kong Q. 1 regarding efforts towards deregulation

The Government of Japan is surely implementing and conducting The Three-Year Program for Promoting Deregulation (further revised on 31 March 2000). This program consists of wide-ranging list in 16 areas (listed below) with 1268 items, including finance, securities and insurance, and the Government is to promote regulatory reform actively based upon this program.

Also, the Government is to draft and adopt The Three-Year Program For the Advancement of Regulatory Reform on March 2001, and to push forward with regulatory reform in wide-ranging areas actively.

Areas in the Three-Year Program for Promoting Deregulation (further revised)

1. Competition and Consumer Policies

2. Housing, Land Use, and Public Works

3. Information and Telecommunications

4. Distribution

5. Transportation and Traffic

6. Product Standards and Certification

7. Finance, Securities, and Insurance

8. Energy

9. Employment and Labour

10. Pollution, Waste, and Environmental Preservation

11. Explosives and Combustibles, Disaster Prevention and Safety

12. Education

13. Medical Care and Welfare

14. Legal Affairs


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15. Public/Official Qualifications

16. Others


We would like to know the latest progress of the study/examination on the possibility and desirability of free trade agreements with Korea and Mexico. Will formal negotiations begin soon?

Response to Hong Kong Q. 2 regarding FTA

Regarding the situation with Korea, in May 2000, the Institute of Developing Economies (IDE) / JETRO and the Korea Institute for International Economic Policy (KIEP), non-governmental institutes of each country, concluded their joint study and presented a joint communique. Two symposiums on the issue were held in May and September. In September, President Kim Dae Jung of the Republic of Korea proposed to Prime Minister Yoshiro Mori of Japan that it would be beneficial to set up a Japan-Republic of Korea FTA Business Forum. Preparations are currently underway for the establishment of said forum. Regarding the situation with Mexico, JETRO (a Japanese non-governmental institute) and the Ministry of Commerce and Industrial Development of Mexico published their respective reports on the feasibility and desirability of a FTA in April 2000. In May, the "NEW JAPAN-MEXICO COMMISSION FOR THE 21st CENTURY", a committie established after the talks between heads of Japan and Mexico,proposed the launch of a governmental study.

In each case, it is still premature to decide whether or not to enter into formal negotiations.


It is mentioned that the Japanese Government employs administrative guidance to implement its trade policy. The request to importers relating to tuna caught by vessels that do not abide by an international treaty was cited as an example. We would like to know if there is a list of all such administrative guidance and whether such information is available to the public. It is also mentioned that it is up to importers whether to abide by the request. We are interested to know if the Japanese Government has any record of the importers who did not abide by such requests.

Response to Hong Kong Q. 3 regarding administrative guidance

There is no list of administrative guidance. There is also no record of the importers who did not abide by such requests.


We appreciate Japan's effort in abolishing the monopoly on production and distribution of certain industrial alcohol by 1 April 2001. We would like to know whether there is a schedule for liberalizing the trading of other items that are still monopolised by the state trading enterprises.

Response to Hong Kong Q. 4 regarding a schedule for liberalizing state trading

At this moment, we do not have any specific plans to revise measures regarding agricultural products that are handled by the state trading enterprises.


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It is noted that the Genetically Modified Food Labelling Standard has been enforced since June 2000 while mandatory labelling regarding GMOs for several products will be implemented in April 2001. We note that a number of SPS/TBT notifications have been made by Japan. Could the Japanese authorities share with us information, if available, as to the value of trade that may be affected by the mandatory labelling scheme? Will the list of products subject to the requirements be expanded?

Response to Hong Kong Q. 5 - Labelling

The mandatory labelling scheme may affect both producers and consumers in various ways, such as consumers’ choice. Therefore it is impossible to make a quantitative evaluation of what products may be affected by the scheme.

At this moment, we are not considering expanding the list of products subject to the labelling requirement.


It is observed that inward investment in Japan has traditionally been lower than its outward investment. However, we note that Japan has been stepping up efforts to improve its investment climate. Does this reflect that the Japanese government is attaching more importance to attracting inward investment? Among the measures undertaken by Japan, to what extent are the investment incentives effective in attracting foreign investment? If possible, we would like to have an estimate of the total budgetary cost of Japan's investment promotion programs, including forgone tax revenues.

Response to Hong Kong Q. 6 Regarding measures to increase foreign investments in Japan

It is important to increase foreign investment in Japan in order to make the Japanese economy vigorous and open to the world for the 21st century. For this reason, Japan has taken several measures to promote investment in Japan, such as favourable tax treatments and low interest loans offered by the Development Bank of Japan.

In July this year, Japan opened a portal site home page, “Investment in Japan Information Center (http://www.investment-japan.net/invest/index.asp)”, through which investors can access and refer to various kinds of information regarding foreign investment in Japan. The objective of this home page is to establish a comprehensive information providing system related to investment in Japan. This system is expected to help foreign investment in Japan.

The balance between outward and inward investment has been improving steadily, from 10:1 in FY1994, when the Japan Investment Council was established, to 3:1 in FY1999. This is due to a variety of measures taken by Japan such as the holding of the Japan Investment Council.

The total budget for the measures to promote foreign investment in Japan is not available.


It is mentioned that Japanese suppliers of services have been considerably protected from foreign competition. Concerns have also been raised about the adequacy and effectiveness of competition policy in various service sectors as deregulation proceeds. Moreover, certain activities, notably maritime and air transport, are still exempted from the Anti-Monopoly Act. In this regard, we would like to know whether Japan has any plans to further enhance competition in its services sector; and if yes, what these plans or


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measures are.

Response to Hong Kong Q. 7 regarding competition in the services sector

In various service sectors, including maritime and air transport, the Government has taken measures towards deregulating market entry regulations that require balancing of supply and demand, and has amended the Anti-Monopoly Act exemptions to limit their scope. The Government has also taken measures to keep competition in the exempted activities on those sectors, for example as stated in paragraph 97 in the Secretariat Report. In order to promote fair and free competition in deregulated sectors, it will be important to strictly crack down on Anti-Monopoly Act violations.


Foreign banks are required to obtain separate licences for the establishment of branch, agency or subsidiary. Would Japan advise if the same requirement is applied to domestic banks and whether Japan has any plan to streamline the requirement?

Response to Hong Kong Q. 8 regarding banking

If a foreign bank wishes to engage in banking in Japan by establishing a branch or an agency in Japan, it shall obtain, for each branch or agency, a banking license pursuant to Article 4, Paragraph 1 of the Banking Law (Banking Law, Article 47, Paragraph 1). If a domestic bank wishes to establish a branch or agency in Japan, it shall obtain an authorization for each branch or agency.

If a foreign bank wishes to engage in banking in Japan by establishing a subsidiary in Japan, it shall obtain a license for the subsidiary. The same holds true for a domestic bank planning to establish a subsidiary in Japan (Banking Law, Article 4, Paragraph 1).

Japan has no specific plan to simplify the requirement regarding the establishment of foreign banks at this time.


Japan seems to have quite an active state participation in the banking and insurance sectors, for instance, the establishment of Government Financial Institutions to implement policy-based finance, the operation of the Postal Savings System as well as state-owned insurance schemes. Would Japan consider trimming down the share of state involvement so as to encourage further participation by private sector suppliers?

Response to Hong Kong Q. 9 regarding Japan's state participation in the banking and insurance sectors

The Japanese postal savings system plays the public role of providing small-lot individual savers with equitable basic financial services that are indispensable to people's lives. This system is provided throughout the country, including in areas where private financial institutions do not deem it profitable to operate.

The current size and share of the postal savings system reflects the fact that it has gained customers' confidence and popularity over the past 120 years. We are of the opinion that the postal savings system should continue to steadily fulfil its given mission.

The Postal Life Insurance (Kampo) system is operated in accordance with Article1 of the Postal Life Insurance Law (This law aims to help stabilize the economic livelihood of people and secure their welfare by


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providing people living in Japan with easily accessible life insurance and annuities at the lowest possible premiums, realized as result of efficient operation to the people of Japan.), and enjoys vast support from the Japanese people. The Government of Japan considers it important to fulfill all duties to the people of Japan set out by law and to meet the expectations of the people.

Regarding Government Financial Institutions, the role of Government Financial Institutions (GFIs) is to supplement market-based finance for the purpose of supplying public goods/quasi-public goods or encouraging private sector to supply public goods/quasi-public goods through providing policy-based finance. Therefore, the fields of GFIs financing are limited to socially important programs and projects which have low profitability, entail high risks, and/or extend over a long period of time.

The Japanese government and GFIs are constantly reviewing the targets and the priorities of the policy-based finance in accordance with government policies.


It is noted that Japan is considering whether to enhance competition in the mobile telecommunications market through the reduction of share-holding in NTT Docomo by the NTT Corporation. We would be interested in knowing the latest progress and whether there is any concrete implementation plan.

Response to Hong Kong Q. 10 regarding NTT

The Japanese Government is considering the issue of the reduction of shares in NTT DoCoMo held by NTT, in light of the situation of competition among mobile telecommunications carriers and between NTT DoCoMo and NTT East and West.

In addition, desirable pro-competitive policy, including the status of NTT, is now being widely discussed in the Telecommunications Council, which is an advisory body to the Minister of Posts and Telecommunications.


It is noted that permission for the provision of cable TV services is subject to considerations concerning, inter alia, the necessity and appropriateness of the installation of the facilities in light of natural, social, and cultural conditions in the local area. Would Japan elaborate on the relevant natural, social and cultural conditions and advise whether there is any quantitative restriction or restriction concerning foreign participation?

Response to Hong Kong Q. 11 regarding cable TV

Any person who intends to install cable television broadcasting facilities with 501 or more drop terminals and to provide cable television broadcasting service through said facilities is required to receive permission from the Minister of Posts and Telecommunications (Article 3 of the Cable Television Broadcast Law).

(Filing of a notification to the Minister of Posts and Telecommunications is required for the installation of cable television broadcasting facilities having 500 or fewer drop terminals.)


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The conditions for such permission being granted are as follows:

1. The installation plan for the cable television broadcasting facilities shall be reasonable , and its implementation shall be feasible.

2. The cable television broadcasting facilities shall conform to the technical conditions stipulated in the applicable ordinance of the Ministry of Posts and Telecommunications.

3. The applicant shall possess the financial basis and technical capabilities sufficient to ensure reliable installation and operation of such cable television broadcasting facilities.

4. In addition, installation of cable television broadcasting facilities shall be necessary and suitable in light of the natural, social and cultural circumstances of the area in question (Article 4 of the Cable Television Broadcast Law).

Concerning (4) the specific criteria that must be met for permission to be granted are as follows: The installation of the facilities shall be deemed necessary and appropriate in light of, among other things, the geographical identity of the area involved, the extent of interference with television broadcasting, the demand for a means of local communication, and the local lifestyle and cultural identity; a person who intends to establish cable television broadcasting facilities, such as a private broadcaster or local public entity or some other entity controlled by the preceding, shall be permitted to do so assuming, there is no other potential provider of the facilities, or that there are strong demands from local residents for installation of cable television broadcasting facilities.

The regulation on foreign ownership and on the executives who do not have Japanese nationalities is abolished in June 1999.


It is noted that Japan has replaced licensing requirement with permission for entry into port transport business in nine major ports. We would be interested in knowing whether Japan has any plan to extend the relaxation arrangement to other ports as well.

Response to Hong Kong Q. 12 regarding licensing

In light of the fact that 95% of container cargo shipment in Japan are handled in nine major ports where the port transport business has been deregulated, we consider the deregulation of the port transport business on container cargo in Japan to have been virtually achieved. We will examine whether or not to deregulate port transport business in other ports on the basis of results in the nine major ports where deregulation has already been implemented.


It is mentioned that provision of auxiliary services in airports operated by the government is subject to approval by the Director of the Regional Civil Aviation Bureau. We would be interested in knowing the criteria for approval and whether foreign and domestic suppliers are subject to the same set of criteria.


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Response to Hong Kong Q. 13 regarding auxiliary

The criteria for granting approval for auxiliary services are the degree to which they are necessary for the management of airports and the reliability of their services. Foreign and domestic suppliers are subject to the same set of criteria.


We welcome the various relaxation measures concerning the handling of legal services by foreign lawyers (GJB) which were introduced in 1998 and would like to know if there are plans to further liberalise the sector.

Response to Hong Kong Q. 14 regarding legal services

According to the final revision of the "Three-Year Program for Promoting Deregulation" decided on by the Cabinet on 31 March 2000, "From the viewpoint of providing an environment where citizens and corporations can receive overall, comprehensive legal services concerning both Japanese and foreign law, the Japanese government will give consideration to whether some measures, including the review of regulations on the objectives of specific joint enterprises, are required so that fully integrated legal services based on a comprehensive cooperation between Gaikokuho-Jimu-Bengoshi and Bengoshi may be provided in all cases".

Therefore, the Japanese government is continuing examination of specific joint enterprises to assess whether there are any points to improve.

INDIA

India Question 1

Para 20 of the Summary Observations in the Report by the Secretariat notes the high protection offered to the agricultural sector in Japan by maintaining high tariffs on imports, grant of domestic support to a number of products and by operation of a complex tariff quota system. It notes that the overall level of government assistance for this sector is well above the OECD average. In spite of the high protection, productivity in Japanese agriculture is low by national standards. Para 21 notes the enactment of a new Basic Law for Food, Agriculture and Rural Areas in July 1999 in order to meet the current challenges and to lay out the future direction for Japanese agriculture.

Keeping in view the fact that agriculture is one of the most important sectors of great interest to a vast majority of developing countries, we would like to know the details of the Basic Law. Does Japan have any plans to reduce the domestic support to the various agricultural commodities? We would like to know if Japan intends to carry out autonomous liberalisation of this sector without linking it with the ongoing negotiations.

Response to India Q. 1 regarding aguriculture

The Basic Law on Food, Agriculture and Rural Areas provides four basic principles: (1) securing of a stable food suply, (2) fulfilment of the multifunctionality of agriculture, (3) sustainable agricultural development, and (4) the development of rural areas. In order to realise the objectives of the Basic Law, the Basic Plan on Food, Agriculture and Rural Areas was made.

Regarding the domestic support provided in Japan, the total AMS of the base period(5 trilion yen) is scheduled to be reduced by 20%, and reach 4 trilion yen in 2000. Japan's notified AMS, however, already


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reached 3,170.8 billion yen, below the level of the schedule for 2000 as well as that of 1997.

Japan has been faithfully implementing what was agreed to at the UR negotiations on agriculture. Moreover, at the ongoing negotiations on agriculture, Japan's basic philosophy is to establish trade rules that will allow "the coexistance of various types of agriculture".

India Question 2

Para 2 suggests that more aggressive structural reform that enhances competition would be needed for a sustained economic recovery. In para 3, the Secretariat notes the fragility of the financial system which is also seen as a threat to the economic recovery.

Will the delegation of Japan comment on these observations?

Response to India Q. 2 regarding the state of economic recovery in Japan

The financial system in Japan has become much more stabilized as compared to before. This is because the disposal of non-performing loans has progressed through the strict inspection and supervision of financial institutions, the speedy resolution of failed financial institutions based on the Financial Revitalization Law, and the injection of public capital based on the Financial Function Early Strengthening Law. Keeping in mind that the full protection of deposits through deposit insurance ends in March 2002, the FSA will make maximum efforts to build a financial system that is firm and reliable for depositors and markets.

Financial system reform is being implemented as scheduled. What was planed to be accomplished by 2001 is either completed or close to completion. The FSA is striving toward further implementation of financial system reform, including the promotion of further deregulation.

India Question 3

While para 4 states that Japan’s trade policy priorities include the strengthening of the multilateral trading system, para 7 notes the greater interest now being shown by Japan towards regional free-trade agreements. It further notes the possibility of forging free trade agreements with Singapore and Korea.

We would like to know Japan’s perspectives on regionalism.

Response to Q. 3 from India

- Our perspectives on regionalism have been shown in the governmental report as well as in the answers to the questions from Chile and Canada on this matter.

- Japan has found that, recognizing the catalytic role that regional trade agreements could play in accelerating liberalization and rule making in the framework of the multilateral trading system, it may be meaningful to give consideration to regional trade agreements as one of the means to complement the multilateral trading system and to revitalize our economy and society. In this context, Japan decided to consider utilising RTAs, such as FTAs, and to start negotiations towards establishing an Economic Partnership Agreement with Singapore.

Regarding the form of regional integration, Japan's views are as follows. In some cases, it may be appropriate to consider "traditional" FTAs whose scope is limited to liberalization of trade in goods (and services). In other cases, it may be appropriate to consider "new age" agreements which provide wide-ranging, comprehensive arrangements for economic partnership,as reported by the Joint Study Group on


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Japan-Singapore Economic Agreement for A New Age Partnership. Furthermore, there may be a case where it is appropriate to consider a framework to strengthen the economic relationship through, for example, harmonization of economic regulations, without including elements of traditional FTAs. These options should be examined by taking well into account the characteristics of the partner countries and other factors.

- Regarding the decision on negotiations with other economies, only a decision to negotiate with Singapore has been taken so far.

India Question 4

Para 10 notes that while nearly 99% of the tariff lines are bound and most applied rates coincide with bound rates thereby allowing a predictable regime, non-ad valorem duties, especially in agriculture accounting for 6.9% of all tariff lines in financial year 2000 concealed a high ad valorem equivalent rates. Further, this para speaks of the complex nature of tariff quota allocation of about 200 agricultural items. In addition, para 11 notes that certain aspects of the import quota system can also be complex like the tariff quota administration.

We would like to have the comments of the delegation of Japan on these observations. Further, we are interested to know if any plans are underway to simplify the tariff quota and import quota administrations.

Response to India Q. 4 regarding tariff

Current tariff levels were established as a result of the several negotiations taking into account the geographical and natural conditions of each country and situation of each product. Out of quota duties of tariffied products were established at the UR negotiations based on the price gap between domestic and international markets.

Tariff levels should be set considering these situations and backgrounds,as well as the necessity to maintain a certain level of agricultural production and its multifunctionality.

India Question 5

Para 19 notes the introduction of a three-year programme for promoting deregulation as a positive step in creating a free and fair Japanese economy fully open to the international community. Further, it notes the strengthened role of the Japan Fair Trade Commission (JFTC). However, it notes that the operation of the JFTC is hampered by its lack of resources and expertise in pursuing complex cases.

The delegation of Japan may comment on these observations.

Response to India Q. 5 regarding the role of the JFTC

The role of competition policy is more important than ever from the viewpoint of promoting fair and free competition among Japanese and foreign businesses and protecting the benefit of consumers. Therefore, the Basic Law on the Reform of Central Government Ministries and Agencies and the Three-Year Program of Deregulation (3rd Version: Cabinet Decision in March 2000) include efforts to strengthen the JFTC’s investigation system and so on.

Recognizing these circumstances, the JFTC has been improving and strengthening its systems and functions, mainly those of the investigation department. In order to fulfill the role that it is expected to play, the JFTC will continue to improve and strengthen the investigation system and so forth.


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The Japanese Anti-Monopoly Act is one of the oldest competition laws in the world, and the JFTC is a group of experts that has been addressing Anti-Monopoly Act violations for more than 50 years. Therefore the JFTC can definitely address complex cases. In addition, the JFTC has been vigorously conducting training for officials to improve their specialized knowledge and skill. In any case, when the JFTC gets information of Anti-Monopoly Act violations in any sector, it initiates an investigation and strictly addresses the violations.

The number of officials of the JFTC

FY’1996 FY’1997 FY’1998 FY’1999 FY’2000

General Secretariat 534 545 552 558 564

The investigation department of the General Secretariat

236 248 254 260 263

India Question 6

Para 25 notes the fragility of the financial system in Japan and again states that this poses a threat to the economic recovery. It points out that some life insurance companies face the threat of bankruptcy and hence are attracting increased regulatory attention from the Financial Services Agency.

The delegation of Japan may like to comment on these observations.

Response to India Q.6 regarding the regulation of life insurance companies

Due to the low interest rates, the asset management environment for life insurance companies has worsened, resulting in a so-called "negative spread". It may take some time to resolve this problem.

Under these circumstances, insurance companies are restructuring management and reducing costs. The FSA expects that each insurance company will build a sufficient management base by increasing their capitalization and their management efficiency.

The FSA is striving toward properly grasping the financial and business conditions of each company by conducting inspection and monitoring, as well as ensuring the soundness of life insurance companies by taking prompt corrective measures when deemed appropriate.

During the last Diet session, the Law on Special Measures for Reorganization of Financial Institutions was amended from the viewpoint of expediting the resolution of failed life insurance companies at an early stage as well as protecting policyholders. These measures are expected to contribute to the protection of policyholders and restrain the amount of funds disbursed from the Policyholder Protection Corporation.

India Question 7

We understand that Japan has imposed zero tolerance clause on insects, which poses market access problems for flower imports into Japan. We understand further that the insects in question, namely, thrips and aphids, are present in Japan itself. Further, it has been pointed out that the Plant Quarantine Authorities at the Japanese airports take a longer time in clearing the consignments keeping in view the elaborate fumigation procedures. This delay creates difficulties as flowers are highly perishable.

We would request the Japanese authorities to look into this problem and take steps to remove the market access barriers.


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Response to India Q. 7 regarding plant protection system

Under the Japanese plant protection system, "quarantine pests" are defined as those which are liable to cause damage to economic plants should they spread, and which meet either of the following conditions:

i) those that are not confirmed to exist in Japan.

ii) those that are already present in a part of Japan and for which official controls are being undertaken.

The above definition is based on international standards provided by the International Plant Protection Convention (IPPC).

The fumigation procedures for cut flowers normally require only approximately 30 minutes to 2 hours. The delays in clearance, if any, are caused by the time for handling of consignments or waiting time for the fumigation chamber. These handlings are conducted purely by the private sectors, and are beyond the control of the quarantine authorities.

Therefore, the comment made by India that plant quarantine measures create a market access barrier is not appropriate.

India Question 8

Another problem faced by flower exporters, especially from India, is that the Japanese auction houses bring the Indian roses towards the end of the auction process after the entire domestic supply and the supplies from other supplier countries are auctioned.

We would request the Japanese authorities to look into this matter and take steps to ensure that the system of auctioning is in conformity with MFN and National Treatment obligations.

Response to India Q.8 regarding SPS

Prices of auctioned commodities are determined by the supply of and demand for each commodity, not by the order of auction process of the Japanese auction houses. (In some cases commodities auctioned at a later time can be priced higher than those auctioned earlier).

There are no rules or regulations that require domestic flowers to be auctioned prior to imported flowers. Flowers are usually sold on a first-come-first-serve basis at Japanese auction houses.

There are also no rules or regulations in the distribution process that require flowers to be auctioned at the Japanese auction houses.

India Question 9

We are told of difficulties faced by exporters due to application of strict SPS standards and delay in conducting tests and issuing certificates by the Japanese laboratories.

We would request the Japanese authorities to explain their SPS system and also to take steps to speed up their process of conducting tests and issuing certificates.

Response to India Q. 9 regarding SPS


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Japanese SPS measures are applied only to the extent necessary to protect human, animal or plant life or health in fully consistent manner with SPS Agreement based on scientific principles. Moreover, we believe our system for plant and animal quarantine is currently functioning effectively.

Regarding the testing of foods, plants and animals at their import, we conduct testing as the need arises. We are making efforts to do it promptly.

India Question 10

Para 26 notes that even though measures aimed at promoting further de-regulation in the telecommunications sector have been taken, the sector still remains monopolistic and the prices of some services, like the internet access charges are still high by developed country standards. It has been pointed out that this will have an adverse impact on the development of electronic commerce.

We would like to hear the response from the Japanese delegation on these observations. Further, we would like to know if Japan has any plans to make some autonomous liberalisation in this sector, without linking it to on-going services’ negotiations.

Response to India Q. 10 regarding telecommunications charges in Japan

Japan recognizes that telecommunications charges in Japan have been by no means inferior to international standards as a consequence of the enhancement of competition and deregulation. However, Japan is promoting the improvement of the environment through the introduction of diverse Internet access to further encourage wide use of the Internet.

India Question 11

While para 28 begins by saying that there are signs of recovery, the subsequent observations therein indicate a pessimism concerning the strength of such a recovery and its durability. Para 29 speaks of wavering in the Government resolve to continue in its pursuance of structural reforms. It also notes some signs of ‘reform fatigue’.

We are interested to know the response from the delegation of Japan on these observations.

Response to India Q. 11 regarding the structural reforms

The Japanese economy continues to improve moderately and the performance in the corporate sector has been particularly favorable toward a self-sustained recovery path. Nevertheless, employment conditions are still severe, personal consumption remains generally flat, and the number of business failures has been somewhat high, with the gross debt of failed firms rising. Therefore, the economy has not been placed on a self-sustained recovery path yet.

The Japanese Government compiled A Policy Package for New Economic Development toward the Rebirth of Japan in October. Our goal is to place the Japanese economy on a self-sustained recovery path and to reform the structure of the Japanese economy in accordance with the demand of the 21 st century. The Government intends to actively implement the new package actively to accomplish this goal.

In the midst of rapid and fundamental changes in the economic environment such as the IT revolution, globalization and global warming, structural reforms in our economy are inevitable. The Government has been making, and will continue its best efforts to facilitate reforms for the purpose of establishing a sound environment for vigorous business activities. Issues mentioned in Para. 29 are now under intensive


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deliberations.

Prime Minister Mori has repeatedly stressed in his Diet statements the necessity for and his strong intention to execute economic structure reforms. He has established the IT Strategy Council and the Industrial Rebirth Council as vehicles for structural reforms, where ministers and business leaders discuss various issues necessary to improve productivity and expand business opportunities. Based on deliberations in these Councils, the Government will compile a new action plan on economic structural reform by the end of this year.

KOREA

Korea Question 1

According to para 38 (page 14), "despite recent regulatory reforms and rising FDI, inflows are still low by OECD countries' standards." The Secretariat's Report cites regulatory barriers as a factor behind the low level of FDI into Japan. One example is the regulatory criteria for issuing visas for investment and business administration purposes. The ordinance of the Ministry of Legal Affairs stipulates that visas for investment and business administration purposes may be issued for businesses that hire at least two Japanese nationals or permanent residents who live in Japan, in addition to the manager. This requirement makes it difficult for foreign investors to acquire a visa for investment purposes. Does Japan have any plan to abolish or relax this requirement?

Response to Korea Q. 1 regarding the investor/business manager Visa category

Foreign nationals who intend to engage in activities for investment and business administration are permitted to enter and reside in Japan with the status of residence Investor/Business Manager, in accordance with the Immigration Control and Refugee Recognition Act.

One of the criteria for Investor/Business Manager is that the investment concerned should be of a scale to employ at least two full-time employees who are Japanese, Permanent residents, or others in Japan.

Although the Republic of Korea expresses its understanding that it is necessary to employ two local nationals to obtain the status of Investor/Business Manager, in reality, applicants will be granted permission to land in Japan under the Investor/Business Manager status if it is acknowledged that the business has invested in Japan in such a scale, regardless of whether the business actually employs two local nationals.

Korea Question 2

In relation to the U.S.-Japan bilateral arrangements (para 4, page 19), a recent report mentions that Japan's Ministry of Foreign Affairs and Ministry of Industry and Trade are considering signing the tentatively named "Economic Linkage Agreement" with the United States (Nihon Keizai Shimbun, front page, October 29). Could the Japanese Government provide the details of this proposed agreement, in particular its nature and coverage?

Response to Korea Q. 2 regarding FTA

This has been misreported. There is no such fact.

Korea Question 3

In relation to para 37 (page 30), Japan, along with Canada, the EC and the United States, has proposed to


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implement tariff-free and quota-free treatment for essentially all products originating in least-developed countries (Director-General's Report on Consultations, General Council, 3 May 2000). Please provide a specific schedule on the implementation of the proposal.

Response to Korea Q. 3 regarding reform of GSP


Korea Question 4

According to para 29 (page 42), Japan has maintained a low average applied MFN tariff rate of 6.5% in fiscal year 2000, which Korea appreciates and considers it as a sign of Japan's sustained efforts to lower overall tariff rates. However, Japan still maintains high tariff rates for some products, such as petrochemicals (polypropylene, high-density polyethylene and polystyrene, etc.), leather goods, textile goods, shoes, and food products, which are of particular interest to Korea. Does Japan have any plan to lower the tariff rates for these products?

Response to Korea Q. 4 regarding high tariff rate in Japan

As for food sector, current tariff standards were established as a result of the several negotia-tions taking into account the geographical and national condition of each country and situation of each product. Out of quota duties of tariffied products at the UR negotiations were established based on the price gap between domestic and international markets.

Tariff standards should be set considering this situation and background, maintaining certain level of agricultural production and careful attention to the multifunctionality enhanced through this maintaining.

Response to Korea Q4 regarding tariffs on leather goods, textiles and clothing and petrochemicals

As for leather goods, shoes and so on, it is very difficult to further reduce the tariffs of these goods since most of the producers of these goods are small and less competitive international, and further reduction on these goods could cause serious damage to them.

As for textiles and clothing , compared to the low tariffs in Japan on other manufactured goods, tariffs on textile and textile products may be relatively high, but even low compared to other countries. Japan committed itself to substantial tariff reductions on the items indicated during the Uruguay Round negotiations, and continues to steadily implement these commitments. The domestic textile industry works from a weak management base due to the very small scale of the companies in this sector. Since rising imports and sluggish consumption are aggravating the situation still further, tariff reductions beyond Japan’s Uruguay Round commitments would be difficult in these very tough circumstances.

As for petrochemicals, Japan has reduced the tariffs of these items with the other countries based upon the Agreement of Chemical Harmonization at the Uruguay Round Negotiation since 1995, and achieved substantial reduction of in this area.

However, Japan does not intend to exclude these goods from industrial tariff negotiations of comprehensive coverage under the WTO new round with a balanced and sufficiently broad-based agenda.

Korea Question 5


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It is understood that the Japanese Government has decided to abolish the import tariffs on whisky by 2002. However, there seems to be no announced schedule for the abolishing or lowering of the tariffs on So-ju which is substitutable for whisky. Does the Japanese Government have an intention to abolish or lower the tariffs on So-ju?

Response to Korea Q. 5 regarding tariffs on shouchu.

The Japanese Government has no schedule to lower the tariffs on “ Shouchu.” This matter could be discussed in the next round of WTO negotiations.

Korea Question 6

Japan maintains a very unique tariff system for certain products by imposing differential duties. According to footnote 14 (page 39), "a differential duty involves a specific rate charged per kg of imports with the rate varying directly with the difference between the standard import price, set a priori by the authorities, and the actual import prices." Technically speaking, this kind of duty may meet Japan's WTO obligations based on specific bound rates. However, this tariff regime seems to be directly contradictory to the principle of a market-based economy, in that the differential duty can adversely affect price competitiveness of imported goods, regardless of their original price level. Does the Japanese Government have any plan to reform this regime towards a more market-oriented tariff system?

Response to Korea Q. 6 regarding the differential duty

The differential duty does meet Japan’s WTO obligations. Japan does not have any plan to change this regime now. This regime might be discussed in a new round of negotiations with a balanced and sufficiently broad-based agenda.

Korea Question 7

As para 41 (page 45) indicates, Japan still maintains strict quotas on various items, including 14 fisheries products which are of particular interest to Korea. It is noted that Japan has not increased its import quotas on fisheries products for Korea since 1983, although it has increased them for other countries. Could Japan provide a detailed explanation of the rationale for maintaining this restrictive regime? Will the Japanese Government increase or abolish the import quotas on fisheries products?

Response to Korea Q. 7 regarding Japan’s import quotas on fisheries products

As Korea is situated adjacent to Japan, both countries use the same resources. Under such circumstances, Japan imposes on its fishermen conservation and management measures such as restrictions on catch amount and fishing effort. It is therefore necessary to have certain import restrictions in order to conserve the same fishery resources on which Japan applies regulations on Japanese fishermen, as well as to avoid adverse effects on domestic demand and supply.

Also, we consider that it is essential to give consideration to objectives such as maintenance of rural communities and the stable supply of fishery products to our people when fishery trade issues are considered.

Korea Question 8

As para 43 (page 7) states, a quota system is applied to the imports of dried laver and certain edible seaweed from Korea. In addition to this quantitative restriction, Japan is applying very high tariff rates on laver in contrast with its average tariff rate of 4.1% on fisheries products. Korea appreciates the various measures


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the Japanese Government has taken since the last TPR of Japan to address Korea's concerns on this matter, including the abolition of the requirement for import licenses from the domestic producers association. It is strongly hoped, however, that Japan will increase the import quota and lower the tariff rates on laver, and eventually fully liberalize import of laver. Are there any initiative currently being considered that would go in that direction?

Response to Korea Q. 8 on the outlook for the import quota on dried laver and the tariff on dried laver

The import quota for dried laver is decided, taking into account domestic supply and demand and import trends. The tariff on dried laver was decided based on the UR agreement.

Korea Question 9

With regard to para 57 (page 49), Japan still excludes NTT Communications from the Lists of the GPA Annexes. In this regard, the relevant provision of the present Government Procurement Agreement requires Members to consider compensatory adjustment. Some argue that the requirement for compensatory adjustment may discourage the privatization of public corporations and movement towards a more market-driven economy. Could the Japanese Government comment on this point?

Response to Korea Q. 9 regarding government procurement

The WTO Agreement on Government Procurement requires Parties to notify the Committee of the proposed withdrawal of entities from Appendix I. The first sentence of Article 24:6(b) of the GPA stipulates a Party's right to withdraw an entity from Appendix I if governmental control or influence over it has been effectively eliminated.

The exercise of this right, however, might be frustrated by the lack of clear guidance on what would constitute effective elimination of governmental control or influence. Even if such a withdrawal is appropriate in light of the nature of the entity, the current text might give rise to some disagreement between Parties regarding the extent to which the removal of government control or influence has actually occurred and the privatized entity is being managed on the basis of market economy principles.

The objective of privatization is to apply market economy principles in the daily conduct of business, including in the application of procurement procedures. The removal of government control or influence makes it impossible to impose the discipline of the GPA on the entity in question. However, market forces, rather than the discipline of the GPA, could be relied on to ensure market access.

The Government of Japan, therefore, proposed more transparent, operational and privatization–friendly criteria for the withdrawal of privatized entities. The privatization of government–influenced activities facilitates the market–oriented functioning of the entity and is in itself a positive development in furthering the purpose of the GPA.

Such modifications would benefit the current GPA Parties, and will also facilitate accession to the GPA. The requirement on a compensatory adjustment might deter developing countries or economies from acceding to the GPA if they expect to remove certain entities from government control or influence as a part of the process of rationalization of the government. Clarification of the notion of "effective elimination of governmental control or influence" may help avoid possible difficult disputes over which entities are considered to be already free from government control and influence.

Korea Question 10


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As para 59 (page 50) points out, government procurement in Japan is highly decentralized. As a result, local governments in Japan seem to require excessively strict qualifications, which is incompatible with Japan's obligations under the WTO Government Procurement Agreement and often makes foreign bidders' participation difficult. Does Japan have any plan to redress this situation ? Is Japan considering setting up a single inquiry point which would collect and provide information on procurement in the decentralized Japanese procurement market?

Response to Korea Q. 10 concerning practices regarding government procurement by local government

Those local government entities that procure in accordance with the WTO Agreement on Government Procurement (hereinafter "the Agreement"), are implementing government procurement through fair, open and transparent procedures.

These entities are governed by the Local Autonomy Law and relevant regulations. All of these law and regulations are consistent with the provisions of the Agreement. The Local Autonomy Law and relevant regulations, from a viewpoint of ensuring fairness and strict neutrality and equal opportunity, provide for procurement procedures in line with the national treatment and non-discrimination commitments of the Agreement.

Each procuring entity has a contact point for the provision of information on particular government procurements of that entity. Information on government procurement procedures in general is also available at the Ministry of Foreign Affairs.

Korea Question 11

According to para 64 (page 51), the percentage of foreign suppliers in Japan's government procurement was 5.6% in terms of value in 1997. Could the Japanese Government explain such low percentage? What measures is Japan taking to encourage foreign participation in Japan's government procurement?

Response to Korea Q. 11 regarding the government procurement

The fiscal amount of government procurement from foreign suppliers accounted for 5.6% in terms of value in 1998 (not 1997). It has been steadily rising in recent years (1996: 4.1%, 1997: 4.7%).

In addition, as a voluntary measure to increase access opportunities for foreign suppliers to the Japanese market with regard to the procurement of products and services by the entities subject to the WTO Agreement on Government Procurement, since 1985, Japan has taken a series of Action Programs to improve access to government procurement markets. The voluntary measures include: lowering threshold of goods and services procurements from 130,000SDR to 100,000SDR, extending the period for the receipt of tenders from 40 days to 50 days, disseminating relevant information at the early stage of tenders, and so on.

Korea Question 12

Korea understands that Japan will implement a recycling system for home electronic appliances (refrigerators, washing machines, air conditioners, television sets, etc.) in May 2001. Korea fully understands the concern Japan has over the preservation of the environment. Under this system, however, foreign manufacturers bear higher costs than domestic producers, given that they have to entrust their recycling responsibilities to local recycling businesses which impose higher fees on foreign manufactured goods. Can we expect Japan to address this difficulty faced by foreign manufactures?


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Response to Korea Q 12

Japan’s Electronic Appliance Recycling Law, which was enacted in May 1998 and will be enforced from 1 April 2001, obliges every manufacturer and importer to recycle these products without discriminating between domestic and foreign companies.

During this three-year preparation period, manufacturers and importers have been preparing to meet recycling obligations. In order to meet said obligations, the law allows manufacturers and importers the choice either to develop their own infrastructure (for example, a recycling plant) or to commission other companies to do so. Commissions are based on contracts between private companies.

Certain enterprises whose volume of products and/or imports is less than a specified level (regardless of nationality) are allowed to, if they wish, commission authorized entities to implement all obligations imposed by law.

Based on the above, it is clear that Japan’s Electronic Appliance Recycling Law does not discriminate between domestic and foreign companies. Moreover, the law accommodates every enterprise, including foreign ones, by providing necessary measures to implement legal obligations in a manageable way. In short, there are no discriminatory elements.

Korea Question 13

In relation to para 79 (page 56), Japan conducts a strict toxic analysis test prior to the customs clearance of imports of fresh shellfish, which results in a lengthy customs clearance process and high costs for exporters. Does Japan have any plan to address this situation and curtail the period of analysis?

Response to Korea Q. 13

Due to the fact that there was an instance of shellfish poisoning in Korea and as a result of tests conducted at the time of import indicating excessive levels of toxins, since May 1996 all shipments of Korean bivalves have been subject to testing for paralytic shellfish poisoning (PSP), in accordance with the provision of Paragraph 3, Article 15 of the Food Sanitation Law.

However, based on a report subsequently issued by the Government of Korea describing the situation of shellfish poisoning and the regime established to investigate the presence of toxins, a decision was taken to exempt shipments of shellfish from such testing when said shipments are accompanied by a certificate of origin issued by the Korean Fishery Inspection Authority attesting to the fact that such shellfish was harvested in areas demonstrating free of toxins.

Korea Question 14

Japan applies strict quarantine measures to fresh vegetables and flowers imported from Korea. Japanese authorities even request a fumigation of pests that are common in Japan. This measure leads to the reduction of product value and additional costs to exporters. Could Japan improve its quarantine process so that it will not pose as an impediment to trade?

Response to Korea Q. 14 regarding SPS

Under the Japanese plant protection system, "quarantine pests" are defined as those which are liable to cause damage to economic plants should they spread, and which meet either of the following conditions:


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Therefore, there is no ground for the point made by Korea regarding the impediment to trade caused by the quarantine process in Japan

Korea Question 15

According to para 100 (page 63), Japan had approved a total of 22 foreign access zones (FAZs) by January 1999. Can the Japanese Government provide information on the FAZs' contribution to the increase of imports from Japan's major trade partners? Are the Japanese authorities conducting studies on the specific trade-creation effects of FAZs? If so, please provide details.


Foreign Access Zones have contributed significantly to an increase in imports; between the inception of the FAZ scheme in 1992, and 1999, the import value in Foreign Access Zones increased 31.5%, compared to 19.4% nationwide. The number of international container line services involving Foreign Access Zones has increased since their approval as Foreign Access Zones, from 486 to 586, and many newly established ones are with Asia, especially Korea and China.

Various import promotion projects supported by MITI have been conducted, in Foreign Access Zones, including the Korean Food Fair in Yamaguchi Prefecture. Among other projects, import fairs alone are estimated to have resulted in a total contract value of five billion yen in FY1999. Kitakyushu City, Osaka Prefecture and Ehime Prefecture, with support from MITI, provide office space to official trade promotion organizations and private companies from Korea, China and other trade partners, continuously facilitating marketing and import promotion in Japan.

Korea Question 16

In relation to para 124 (page 71), the "Distance Standard Regarding the License for the Retail of Alcoholic Beverages" was originally to be abolished by September 2000, as part of the Three-Year Program for Promoting Deregulation. The abolition, however, has been postponed to next January. Could the Japanese Government confirm that the distance standards will be abolished as of January 1, 2001? As a related matter, does the Japanese Government have any plan to simplify the documentation requirements for the licensing and approval of the retail of alcoholic beverages?

Response to Korea Q. 16 regarding licensing for the sale of alcohol

The Japanese Government policy of deregulating "the demand-supply balance standard regarding the license for the retail of alcoholic beverages," including the distance standard, is to be preserved as planned in the "Three-Year Program for Promoting Deregulation" and the Cabinet Decision on August 30, 2000.

The Japanese Government is promoting the digitalization of administrative procedures aimed at realizing e-Government as a whole, which includes the revision to simplify the application for liquor licensing.


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Korea Question 17

As para 47 (pages 95-96) indicates, bank holding companies and banks' entry in other businesses through subsidiaries have been allowed in the context of the "Big Bang" reform in 1998. Are foreign banks also allowed to enter other businesses by establishing a bank holding company and its subsidiaries? The Japanese government has recently put off the implementation of the partial deposit insurance system until March 2002, and, in addition, submitted a bill to fully insure liquid deposits. It seems possible that the postponement of the partial deposit insurance system would bring about moral hazard in financial institutions, thereby impeding early financial reform. We would appreciate it if the Japanese government could comment on this matter.

Response to Korea Q. 17 regarding deposit measure system

As is the case with Japanese banks, foreign banks, are allowed to enter other businesses by establishing a bank holding company or a subsidiary of a bank based on the Japanese Banking Law.

The treatment of liquid deposits following the expiration of the special measure to fully insure deposits has been one of the crucial points of discussion at the Financial Council of the Financial Services Agency. Some supported full protection to prevent the settlement problem regarding corporations and individuals, whereas some pointed out that it would increase the risk of moral hazard and that it is difficult to discriminate between liquid deposits and other deposites. Others argued that the settlement issue should be resolved by the speedy resolution of failed institutions and by diversifying settlement services supplied by the private sector.

Ultimately, it was concluded that “ it could not be helped to take a temporary measure for liquid deposits, until the speedy resolution of failure and diversification of settlement services in the private sector are ensured, so that the financial system is not seriously affected by the difficulty in settlement”. A period of two years was considered appropriate for the temporary measure.

This temporary measure was adopted based on the need for a transitional period until information regarding deposits of financial institutions, which is necessary for the speedy resolution of failed institutions, could be sufficiently prepared.

Korea Question 18

According to para 48 (page 96), in Japan's GATS schedule of specific commitments, "the deposit insurance system does not cover deposits received by branches of foreign banks." Is there any specific reason for excluding the deposits received by branches of foreign banks from the coverage of the deposit insurance system? Also, "commercial presence, as a juridical person established in Japan, is required for investment trust management services." Are branches or affiliates of a foreign investment trust management company not allowed to be established in Japan?

Response to Korea Q. 18 regarding deposit measure system and subsidiaries of foreign investment companies in Japan

The deposit insurance system does not cover deposits received by branches of foreign banks because the issue of jurisdiction makes it difficult to dispose of the failures of institutions in a timely and appropriate manner.

As pointed out by the report of the financial council, it is necessary to reach a conclusion on the issue of deposit insurance for branches of foreign banks in Japan by comprehensively taking into account comprehensively the regulations over those branches, the scheme of inspection and supervision, the


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resolution of failed institutions, and the significance of branches of foreign banks in Japan's financial system.

The establishment of a subsidiary of a foreign investment trust management company in Japan has long been allowed, and entry into the Japanese market in the form of a branch has been allowed since December 1998.

Korea Question 19

Restrictions on cross-border capital transactions have been removed by the revision of the Foreign Exchange and Foreign Trade Law in April 1998. Does the revision allow cross-border transactions under Mode 1 and 2 in the GATS? Are there restrictions on Japanese nationals' investment in overseas securities? If so, please specify them. Does Japan intend to abolish them?

Korea Q. 19 regarding restriction on cross-border transactions

Regarding market access in the financial sector, in the Fifth Protocol to the GATS, Japan made a commitment to abolish all restrictions of consumption abroad in accordance with the revision of the Foreign Exchange and Foreign Trade Law in April 1998. Concerning cross-border transactions, Japan has committed no limitations except for discretionary investment management services. Therefore, at present, there are no restrictions on cross-border transactions under the Foreign Exchange and Foreign Trade Law, and no restrictions are imposed on Japanese nationals' investment in overseas securities.

Korea Question 20

As footnote 43 under para 51 (page 98) points out, Japan has made no MFN exemption in its GATS Schedule of Commitments. It seems problematic to include "reciprocity" provisions in the Banking Law with regard to licensing a foreign bank without making the MFN exemption. Is the Japanese government considering abolishing the "reciprocity" provisions?

Response to Korea Q. 20 regarding banking in Japan

Although Paragraph 3, Article 4 of the Banking Law stipulates reciprocal screening procedures to ensure reciprocity, it contains a proviso that the procedures are not applicable in cases where they would hamper the performance of obligations under international agreements such as treaties. (Article 2 of the Cabinet Order implementing the Banking Law)

The Korean Delegation seems to assert that the existence of the reciprocity provision per se is in conflict with MFN under WTO. However, given the fact that there are countries that are not members of WTO, we believe that the reciprocity provision has not lost its significance.

Korea Question 21

According to footnote 54 under para 62 (page 100), foreign ownership of the NTT Corporation is restricted to less than one fifth of voting rights. Footnote 54 also mentions that restrictions on the nationality of board members and auditors, which had been applied to Kokusai Denshin Denwa (KDD), were abolished as a result of the company's complete privatization. Does the Japanese Government have any plan to liberalize the limitation on foreign ownership and abolish the restrictions on the nationality of board members and auditors of the NTT Corporation?


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Response to Korea Q. 21 regarding limitations on foreign ownership in NTT

The status of NTT, including restrictions on foreign ownership on NTT, is now being discussed as part of the broad considerations in the Telecommunications Council.

Korea Question 22

According to para 70 (page 102), the Ministry of Posts and Telecommunications (MPT) is to become a part of the Ministry of General Affairs (MGA), "which is to be established as part of a comprehensive administrative reform scheduled to take place on January 1, 2001." Will the regulations for fair competition in the telecommunications sector be transferred to the Japan Fair Trade Commission in that case?

Response to Korea Q. 22 on who will be responsible after the reorganization of the GOJ

After administrative reform, the General Telecommunications Foundation Bureau of the Ministry of Public Management, Home Affairs, Posts and Telecommunications will be responsible for regulations to ensure fair competition in the telecommunications sector.

Korea Question 23

As para 73 (pages 102-103) indicates, "the NTT Corporation must, at all times, hold all stocks issued by the East and West NTT regional companies." As a result, foreign investors can participate in the regional NTT Corporations only in the form of indirect investment. However, according to Japan's Schedule of Specific Commitments, which was submitted to the WTO Basic Telecommunications negotiations before the reorganization of the NTT, foreign direct investment in the NTT regional companies should be allowed up to 20%. Please provide Japanese Government's comments on this.

Response to Korea Q. 23 regarding foreign direct investment in NTT

Japan states in its schedule of specific commitments that, "Foreign capital participation, direct and/or indirect, in NTT must be less than one-fifth". That is to say, Japan has committed that foreign capital direct participation in the NTT Corporation must be less than one-fifth and that foreign capital indirect participation in NTT regional companies must be less than one-fifth. Therefore, para 73 in the Report by the Secretariat is consistent with Japan's schedule of specific commitments under the GATS.


Condition of fair and effective competition in the telecommunications sector has been already established under the Telecommunications Business Law. Establishment of interconnection rule, price-cap regulation for certain end-user charges, arbitration and complaint lodging are the examples.

On the other hand, the Anti-Monopoly Act stipulates the common competition rules applied to all sector markets, and basically aims at removing the anti-competitive activities after the fact.

Korea Question 24

Para 75 (page 103) states that "telecommunications business is not exempt from the application of the Anti-Monopoly Act." Does this mean that telecommunications business, with regard to fair competition, is regulated by both the Telecommunications Business Law (TBL) and the Anti-Monopoly Act? Please explain how the two laws share the regulatory jurisdiction for telecommunications business.


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Condition of fair and effective competition in the telecommunications sector has been already established under the Telecommunications Business Law. Establishment of interconnection rule, price-cap regulation for certain end-user charges, arbitration and complaint lodging are the examples.

On the other hand, the Anti-Monopoly Act stipulates the common competition rules applied to all sector markets, and basically aims at removing the anti-competitive activities after the fact.

Korea Question 25

As paras 119-120 (page 111) indicate, according to the Special Measure Law Concerning the Handling of Legal Business by Foreign Lawyers, it is not allowed for the Gaigokuho-jimu-bengoshi(GJB - attorney in charge of foreign legal affairs) to employ Bengoshi. Instead, GJBs are only allowed to establish joint enterprises with Bengoshis. Is there any clear-cut criteria for distinguishing employment of a Bengoshi from establishment of a joint enterprise with a Bengoshi? Could Japan clarify the legal nature of "joint enterprise", particularly in the context of taxation and liabilities of the entity?

Response to Korea Q. 25 regarding joint enterprises between Bengoshi and GJB

Employment in legal terms means that the employee must obey the instructions or orders of the employer. The range of business for Gaikokuho-Jimu-Bengoshi is limited to legal business other than that regarding Japanese law. If such a Gaikokuho-Jimu-Bengoshi is to be allowed to employ a Bengoshi, it becomes legally possible for a Gaikokuho-Jimu-Bengoshi who is not permitted to practice Japanese law to decide the policies of business related to Japanese law dealt with by the Bengoshi concerned and order him or her to carry out such business according to those policies. Such a situation would cause serious problems in relation to our qualification system under which unqualified persons are strictly prohibited from practicing law.

However, regarding the "specified joint enterprise", no such problems arise with regards to the legal system.

In addition, in the case of a Gaikokuho-Jimu-Bengoshi and a Bengoshi running a "specific joint enterprise", a GJB is not allowed to perform legal buisiness which is not permitted to him or her, and furthermore, a GJB is prohibited from inproper participation in the legal business of a Bengoshi.

The "specified joint enterprise" means that the Gaikokuho-Jimu-Bengoshi and Bengoshi run a joint enterprise to conduct legal business based on a Kumiai contract.

Korea Question 26

In relation to paras 119-120 (page 111), what is the difference between the GJB and the "Foreign legal consultancy" which is currently under discussion in the WTO Committee on Specific Commitments?

Response to Korea Q. 26 regarding the difference between GJB and “foreign legal consultancy”

The "GJB" in legal terms refers to the title given to a person who is qualified as a foreign lawyer to handle legal business concerning foreign law in Japan.

On the other hand, "foreign legal consultancy", which is currently under discussion in the WTO Committee on Specific Commitments, refers to the legal business itself.

Therefore, the two are totally different in concept.


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Korea Question 27

According to para 128 (page 112), "formal education institutions must be non-profit organizations, and their commercial activities are legally limited". Para 128 also states that the Ministry of Education(MOE) "has the discretion to define the scope of commercial activities." Please provide the general criteria which the MOE applies or specific cases to clarify the scope of commercial activities.

Response to Korea Q. 27 regarding the general criteria applied by MOE for the scope of commercial activities permitted to judicial school persons

The following is the list of the commercial activities permitted to judicial school persons who establish universities authorized by the Education Minister. The Private School Law stipulates these twelve activities from the Standard Industrial Classification for Japan, which is in accordance with the International Standard Industrial Classification of All Economic Activities.


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1. Agriculture2. Forestry3. Fishing4. Mining5. Construction6. Manufacturing (Manufacture of weapons is excluded)7. Electricity, gas, heat supply and water supply8. Transport and communication9. Wholesale, retail trade and eating places (Bars, cabarets and night clubs are excluded)10. Insurance agents and brokers, insurance service institution11. Real estate (Sales agents of buildings and houses and land subdividers and developers

are excluded) 12. Service (Play scene is excluded)

MOE does not permit judicial school persons to engage in any commercial activities that are considered inappropriate activities.

MALAYSIA

Malaysia Question 1

Tariff escalation remain for a number of products remain, discriminating against processed products particularly in textiles, rubber and wood sectors. Could Japan elaborate why this is necessary and would there be a possibility of downward revision in the near future?

Response to Malaysia Q. 1 regarding textiles and clothing

As for textiles and clothing, Japan has made significant effort to reduce high tariff escalation. It is very difficult to further reduce tariffs on these goods since most of the producers of these goods are small and less competitive internationally, and further reduction on these goods could cause serious damages to them.

However, Japan does not intend to exclude these goods from industrial tariff negotiations of comprehensive coverage under the WTO new round with a balanced and sufficient.

Response to Malaysia Q. 1 regarding Wood sectors

As a result of UR negotiations, Japan implemented tariff reduction of 51% in terms of base rate and tariff peak was reduced from 20% to 10%. Tariff escalation was also improved significantly. As results of such efforts, Japan has become one of the largest wood importing countries in the world. At the same time, Japan's wood self sufficiency ratio dropped drastically to 21% in 1998 and Japan's forestry and forest products industry are facing harsh situations. On the other hand, many wood exporting countries restrict log exports and such measures exert pressures on Japan's wood industry. Japan is deeply concerned about the fact that such unfair measures are distorting wood products markets.


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Malaysia Question 2

Weak domestic demand has contributed to the reduction in Japanese imports, coinciding with the downturn in the Asian economies. What measures has Japan taken or will take to ensure continued strong uptake of imports to further the Asian recovery process?

Response to Malaysia Q. 2

To promote imports to Japan, we plan and implement import promotion measures such as tax incentives and policy financing for foreign companies that establish sales bases in Japan.

Various measures are also conducted through JETRO, such as imported Goods Exhibitions.

Measures to be taken next fiscal year are currently under discussion.

Malaysia Question 3

We note that Japan's simple average applied MFN rate has increased from 5.6% in FY 1998 to 6.7% in FY 1999 (Table lll.2 pg 38). Could Japan provide an explanation why there was an increase and in what sectors have tariffs increased?

Response to Malaysia Q. 3 regarding simple average applied MFN rate

We are not aware how each figure was calculated by WTO secretariat. The main reason may be because the applied MFN tariffs in FY1999 do not include AVEs while those of 1998 do and because the AVEs of non-ad valorem duties are relatively very high. (See footnote (a) on Table III.2 and paragraph 24).

Malaysia Question 4

Japan still maintains a large number of non ad valorem duties in several sectors such as textiles (245 lines), processed food (123 lines) and vegetable products (60). These affect mainly processed manufactured goods that are of export interest to developing countries. The report noted that this practice does not lend itself to transparency and predictability and result in imports of cheaper goods being taxed more heavily (Box lll.1 pg 41). Would Japan comment on whether they envisage converting these rates to ad valorem in the near future?

Response to Malaysia Q. 4 regarding textile and clothing

As for textiles and clothing, the Government of Japan applies non advalorem duties restrictively and selectively only for items with large market price fluctuations. Moreover, the tariff rates are set taking into consideration the domestic and oversees price differentials and the vulnerable situation of domestic industries in determining whether or not non ad valorem duty is applied.

Using both ad valorem and non ad valorem duties on the part of textile does meet Japan’s WTO obligations. Japan does not have any plan to reform this regime now.

However, Japan does not intend to exclude these goods from industrial tariff negotiations of comprehensive coverage under a new round of the WTO with a balanced and sufficiently broad-based agenda.


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Response to Malaysia Q. 4 regarding processed food and vegetable products

Processed food and vegetable products

Instincally, ad valorem duties are proportionate to price (or value), while specific duties are proportionate to quantity (or volume). Ad valorem duties may amplify the effect of price fluctuations but specific duty is more neutral against them. Therefore, we do not think specific duties tend to be less transparent and less predictable than ad valorem duties. So we are not considering to convert them to ad valorem.

Malaysia Question 5

Secretariat's report in page 92 on pharmaceuticals while highlighting certain concerns over Japan's stringent rules, does not mention other difficulties such as the need to get local government approval in addition to import licensing approvals. The process involves some 26 documents. Could Japan explain why these cumbersome measures are necessary and whether there is a possibility of simplifying the procedures through a single authority?


In Japan, according to the Pharmaceutical Affairs Law, any party wishing to import (manufacture) pharmaceuticals must obtain approval for each item and must also possess a (importer’s) manufacturer’s license for each import office (manufacturing plant) and for each item. The pharmaceutical product’s efficacy and safety is confirmed by a process of review for approval, and the import office’s (manufacturing plant’s) facility and the quality control system are checked out during the licensing process. Importer’s (manufacturer’s) licenses, which were previously granted by the Minister of Health and Welfare, have been granted by prefectural governors since 1995 with a view to promoting the decentralization of power.

Malaysia Question 6

The section on sanitary and phytosanitary measures mentioned that there is no change in Japan's Food Sanitation Law. Does this mean that Japan's complex phytosanitary protocols particularly on the import of tropical fruits will remain? Only a few tropical fruits from Malaysia are allowed entry for which fumigation measures are required. New varieties have to undergo additional costly and time-consuming scientific testing before entry.

Exports of cut flowers to Japan also face difficulties in entering the Japanese market, with stringent quarantine procedures and inadequate airport facilities. Has Japan adopted the FAO pest risk analysis system which distinguished between quarantine and non-quarantine pests?

Would Japan clarify whether the above measures are applied only to the extent necessary to protect human, plant and animal life or health and are based on scientific evidence and what steps will they be taking to ensure that these measures are not barriers to trade. Japan's elaboration of how they would resolve these problems are also appreciated.


Under the Plant Protection Law, Japan prohibits the importation of plants which serve as hosts for fruit flies (e.g. Bactrocera dorsalis species complex and B. cucurbitae) which are not present in Japan but have been found in Malaysia, in order to prevent their introduction into Japan.

Such a plant quarantine measure is based on scientific evidence and consistent with the WTO/SPS


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Agreement.

On the other hand, Japan approves the importation of these prohibited plants on the condition that the exporting country has developed an effective method to prevent the invasion of pests whose import is prohibited.

There is no precedent for Japan’s approval of the importation of tropical fruit from Malaysia assuming fumigation treatment. However, if Malaysia has any specific requests for lifting the import ban, Japan is ready to discuss it from a technical viewpoint.

In addition, Japan applies its plant quarantine system according to the degree of the risk for pests, designating pests as quarantine and non-quarantine, based on the Guidelines for Pest Risk Analysis provided by IPPC.

Malaysia Question 7

Could Japan provide a more detailed explanation why it is seeking to conclude bilateral/regional agreements given its long-standing concerns over regional trading arrangements?

Response to Question Q. 7 from Malaysia

Please see the answer to the corresponding question from Canada.

MAURITIUS

Mauritius Question 1

At paragraph 24 of its report, Japan has indicated that it is proposing to implement tariff-free and quota-free treatment, consistent with domestic requirements and international agreements, under its preferential schemed, for essentially all products originating in LDCs. Could Japan indicate which products would be excluded from this scheme?

Response to Mauritius Q. 1 regarding reform of GSP



Could Japan provide more information on the reform of its price policy for sugar since 1998 (Paragraph 96(i) of Government Report)?

Response to Mauritius Q. 2 regarding revision of sugar price policies in Japan

(major revised points)

1. Tariffs for raw sugar and refined sugar were reduced in 1998.

(15 yen/kg.?10 yen/kg., 32 yen/kg.?28.5 yen/kg.)

2. In addition, tariff for raw sugar was eliminated and tariff for refined sugar was further reduced in 2000.


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(10 yen/kg.?0, 28.5 yen/kg.?21.5 yen/kg.)

3. The Law for Sugar Price was amended in order to reduce the domestic sugar price and maintain and increase the demand for sugar in 2000.


Could Japan provide a list of major export products from the Pacific islands to the Japanese market and indicate the level (%) of such imports as part of total imports?

Response to Mauritius Q. 3 regarding the list of major export products from the Pacific islands

Japanese major import products from Oceania (1999) are as follows: Coal (1.0%), Iron ore and concentrates (0.5%), Petroleum gases (0.4%), Meat and meat preparations (0.4%), Aluminum and aluminum alloys (0.3%).

1. (%): the level of such imports as part of total imports

2. Oceania: Australia, Papua New Guinea, Other Australian Territories, New Zealand, Cook Islands (N.Z.), Tokelau Group (N.Z.), Niue (N.Z.), Samoa, Republic Vanuatu, Fiji, Solomons, Tonga, Kiribati, Pitcairn (U.K.), Republic of Nauru, New Caledonia (Fr.), French Polynesia, Guam (U.S.A), American Samoa, American Oceania, Tuvalu, Marshall Islands, Federated States of Micronesia, Northern Mariana Islands (U.S.A), Palau.

NEW ZEALAND

New Zealand Questions 1 and 2

The Secretariat Report notes (page ix, para 5) that Japan remains committed to the promotion of deregulation and improved transparency. The Ministry of International Trade and Industry has taken steps to evaluate the costs and benefits of trade and trade-related measures, including regulations.

1. Will these evaluations be published?

2. What further steps will be taken to promote deregulation and improve transparency?

Response to New Zealand Q. 1 regarding trancparency

The Ministry of International Trade and Industry (MITI) established “Policy Appraisal - Evaluation Guide” in December 1999, which it began employing this year. This guide covers programs that involve budgeting, policy financing and taxing, but does not include regulations. Based on this guide, new programs are analyzed according to the necessity of administrative intervention; goals, performance indicators and target deadlines are set; and comparisons with potential alternatives are made (mainly qualitative analysis). From this information, MITI compiles its preliminary evaluations, which are available on the MITI homepage (Japanese language only).


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Response to New Zealand Q. 2 regarding efforts towards deregulation and transparency

The Three-Year Program for Promoting Deregulation will expire at the end of March 2001. In order to promote regulatory reform initiatives, the Government is to draft and adopt a new Three-Year Program. Also, the Government is going to make great effort to advance transparency in the establishment of regulations, etc. through active promotion of the Public Comment Procedure for Formulating, Amending or Repealing a Regulation (decided by the Cabinet on 23 March 1999), which has been in effect since April 1999.


The Secretariat Report notes (page ix, para 2) the view that sustained economic recovery can only be achieved through more aggressive structural reform which encourages competition. There appears to be a gap between this assessment and recent decisions by the government to defer certain reforms in the finance and related sectors (Secretariat Report, page xiv, para 29).

Can Japan confirm that the government remains committed to a comprehensive regulatory reform programme, including in the agriculture and services sectors?

If so, can Japan advise when the deferred reforms will be implemented?

Response to New Zealand Q. 3 regarding regulatory reforms

Regulatory reform has great importance in promoting drastic structural adjustment of the socio-economic situation in Japan. Therefore, the Government of Japan is surely implementing The Three-Year Program for Promoting Deregulation (further revised on 31 March 2000). This program consists of a wide-ranging list of deregulation plans in 16 areas as well as an introductory chapter that describes basic principles of regulatory reform. The Government is also to compile a new Three-Year Program for the Advancement of Regulatory Reform to advance the initiatives further.

Response to New Zealand Q. 4 regarding ongoing regulatory reforms being pursued by the Government of Japan

The Government of Japan is currently pursuing regulatory reforms in various sectors.

As regards the deposit insurance, the Japanese Government decided to postpone the termination of special measures to fully protect deposits by one year (until the end of March 2002) and also decided that liquid deposits would be fully protected for another year (until the end of March 2003). This decision was made because of the need to build a firm financial system by grasping the conditions of small and medium sized financial institutions and ensuring that those conditions are improved until the country’s economy is fully stabilized. As regards the entry of non-financial groups into the banking business, FRC and the Financial Services Agency issued in August 2000 basic principles and operational guidelines regarding the licensing and supervision of new types of banks, including entrants and entries by non-financial entities, and is committed to promptly reviewing applications when submitted.

A bill to perform the pension system was enacted in March 2000. As the result of pension reform, the Government believes that the premium rates of the Employee’s Pension Insurance in the future will be restrained to approximately 20% of annual income and the system will be kept stable in the long run.

In the corporate tax area, introducing a system for consolidated taxation and a system for corporate spin-offs and corporate splits are being examined.


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New Zealand Question 5

The Secretariat notes (page xi, para 17) that Japan continues to bring its standards into line with international standards, and has taken steps to ensure acceptance of foreign test data and conformity assessments.

What further steps will be taken to bring existing non-conforming standards into line with international norms and over what timeframe will this occur?

Response to New Zealand Q. 5 regarding SPS

Regarding Food Sanitation Law, Japan is making constant efforts to ensure that it conforms to the international standards outlined in Codex and elsewhere.

Regarding pharmaceutical products and medical devices, Japan has adopted the ICH guidelines (for pharmaceuticals) and the GHTF guidelines (for medical devices) in order to integrate international standards into the Japanese system. In terms of cosmetics, Japan participates in the CHIC meetings. We are also currently promoting the GMP and GLP mutual recognition system with the EU.

It has become mandatory to review Japan Agricultural Standards (JAS) every five years and consider international standards in the establishment, revision and abolishment of JAS under the Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (the JAS Law) which was revised in July 1999, and MAFF is currently engaged in reviewing JAS.

The MITI has been conducting harmonization with international standards for technical regulations and certification systems based on the Three-Year Deregulation Promotion Plan. The adoption of “performance-based standards” for technical regulations is currently underway.


We note that no data was available on the percentage of standards or regulations under the Food Sanitation Law, Building Standard Law, or relating to Japan Agricultural Standards, which correspond to international standards (Secretariat Report, page 54, table III.6). These standards and regulations have a significant effect on market access.

Q. 6. Will the Japanese authorities be able to complete this information, and if so when?

Q. 7. If not, we would be grateful to know why this data is not available.

Response to New Zealand Q. 6 and Q. 7 regarding Standards

(Japan Agricultural Standards)

According to the latest survey conducted in October 1998, the percentage of Japan Agricultural Standards (JAS) on food items that corresponds to Codex Standards was about 38%. It has become mandatory to review JAS every five years and to consider international standards in the establishment, revision and abolishment of JAS under the Law Concerning Standardization and Proper Labeling of Agricultural and Forestry Products (the JAS Law) which was revised July 1999. MAFF is currently engaged in reviewing JAS.

Ongoing establishment and review of ISO Standards on wood products will be completed in 3 to 5 years. Therefore, the data on the percentage of all Japan Agricultural Standards including wood products which


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correspond to international standards is not available as of today.

(Food Sanitation Law)

Unfortunately, we do not have data which shows to what degree the standards and regulations under the Food Sanitation Law conform to corresponding standards of foreign countries. However, Japan is a member of international organizations such as the WTO and Codex, and constantly strives to harmonize its standards and regulations with relevant international standards.

(Building Standard Law)

Japan does not have data concerning harmonization of the Building Standard Law (BSL) with international standards. Japan is, however, making efforts to harmonize the BSL with international standards, taking such opportunities as the amendment of the BSL in 1998.


We welcome steps taken by the Japanese Fair Trade Commission to increase competition including the abolition of a number of exemptions from the Anti-Monopoly Act. We note that some exemptions still remain.

What steps are being taken to remove the remaining exemptions and over what timeframe will this occur?

Response to New Zealand Q. 8 regarding FTC

In recent years, all of the anti-monopoly exemption systems have been reviewed based on series of Cabinet Decisions, and were settled accordingly (except for the resale price maintenance system).

As a result, the number of anti-monopoly exemption systems has decreased from 89 systems under 30 laws in March 1996 to 22 systems under 16 laws in June 2000.

The JFTC is considering whether to abolish the resale price maintenance exemption system for copyright works in order to reach a conclusion on the issue by the spring of 2001.


The Secretariat's Report notes that recent regulatory changes in the legal sector have resulted in the relaxation of some conditions for foreign lawyers practising in Japan but there continue to be restrictions on the types of law that may be practised by foreign lawyers in Japan.

Has consideration been given to extending the scope of practise available to foreign lawyers beyond aspects of foreign law?

Response to New Zealand Q. 9 on the scope of practice available to foreign lawyers

No consideration is being given to extending the scope of practice available to foreign lawyers beyond aspects of foreign law.


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New Zealand Questions 10, 11 and 12

The Secretariat's Report states that there is little foreign participation in services, including education services.

Q. 10. Has Japan given consideration to expanding market access opportunities for foreign education services providers as a means of providing the flexibility it seeks in the education sector? Is Japan for example looking to establish systems for formal recognition of degrees/qualifications earned by Japanese students at "other schools" (kakushu gakko)?

Q. 11. Do professional bodies in Japan recognise qualifications gained overseas for the purposes of registration, certification and licensing?

Q. 12. How does the Japanese Government encourage students to study overseas in order to have access to a wider range of educational opportunities and develop new skills?

Response to New Zealand Q. 10 regarding expanding market access opportunities for foreign education service providers

In order to provide formal university education in Japan, a party has to establish a school judicial person authorized by the Ministry of Education, and then the judicial person has to establish a university authorized by the Ministry of Education (MOE). This process is required for all parties, regardless of nationality.

MOE has simplified and given flexibility to the authorization procedure so that at any time universities can take their own initiative in order to keep up with the progress of academic research and the change in the needs of society. However, the authorization system itself is indispensable in terms of assuring the quality of education and research in universities in Japan, and this system is applied not only to foreign providers but also to all domestic providers under the principle of National Treatment.

MOE is studying the possibility for Japanese universities to recognize credits and degrees acquired through distance education given by foreign universities with the use of Internet or other communication measures to cross national borders.

At present, branch schools of foreign universities in Japan do not have the authorization of MOE as Japanese formal universities and therefore cannot confer degrees under the Japanese education system. However, as to the eligibility to enter graduate schools in Japan, Japanese graduate schools can admit graduates of those branch schools through the examination of their individual ability.

Furthermore, needless to say, those branch schools can, under their own initiative, seek authorization of MOE by establishing school judicial persons and universities under the Japanese education system, and, if authorized, are treated exactly the same as other Japanese universities.

Response to New Zealand Q. 11 regarding the legal services

For example, the Japan Federation of Bar Associations (Nichibenren) registers the qualifications of Gaikokuho-Jimu-Bengoshi (GJB) and the Japan Federation of Certified Public Accountants registers the qualifications of C.P.A. of other countries, However, in principle, professional bodies in Japan do not have the right to register, certify and licence qualifications gained overseas.


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Response to New Zealand Q. 12 on what measures the Government of Japan takes to encourage students to study overseas

The Ministry of Education (MOE) has systems to dispatch students abroad such as the Student Dispatch System to Asian Countries and the Short-term Student Exchange Promotion Program (Outbound). In FY 2000, MOE started a new student exchange program, The Japanese Funds-in-Trust for the Promoting of International Co-operation and Mutual Understanding.

Moreover, MOE is supporting students who wish to study abroad with scholarships from foreign governments by cooperating with foreign embassies in Japan in the process of recruiting and selecting students.


While most imports to Japan are either duty free or subject to low tariff rates the agriculture sector remains highly protected from foreign competition. The Secretariat Report notes (page 83, para 9) that many agricultural subsectors, including dairy products, benefit from relatively high levels of MFN tariff protection, and in addition are subject to a number of tariff peaks. For example, 90% of the tariff lines under HS Chapter 4 (which includes dairy products) are subject to tariff peaks and 60% are subject to non-ad valorem tariffs.

New Zealand continues to be concerned with the excessive use of specific duties in agriculture, which lead to very high ad valorem equivalent tariffs, up to 987.3% and often over 300%.

Q. 13. What consideration has Japan given to the impact of these high specific duties on end-users, both processors and consumers?

Q. 14. How does Japan justify the disproportionate impact of specific duties on levels of protection afforded to the agricultural sector?

Response to New Zealand Q. 13 regarding the impact of high specific duties on end-users

Specific duties are transparent and predictable for importers, because the amount of the tariff can be calculated easily regardless of price fluctuations, which is especially so for products with large price fluctuations, such as agricultural products. Furthermore, we consider that end-users, both processors and consumers, merit from these specific duties due to fewer price fluctuations.

Response to New Zealand Q. 14 regarding protection of the Japanese agricultural sector

Intrinsically, ad valorem duty is proportionate to price while specific duty is proportionate to quantity. Ad valorem duty may amplify the effect of price fluctuations while specific duty is more neutral to them.

Therefore, generally speaking, specific duties are suitable for those goods where prices tend to fluctuate, such as agricultural products.

Ad valorem duty is one of the forms of duty, and the form of duty that is implemented on a certain product is a decision to be taken by each government, which takes into account the characteristics of that product. Japan believes that there is no direct relation between the form of duty and the level of protection.


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Tariffs are generally low in the forestry sector, however the tariff structure discriminates in practice against certain coniferous species (notably the 4.8% tariff on radiata pine and some other coniferous woods) while other coniferous species (for example douglas fir) enjoy duty-free entry to Japan.

Can Japan explain the economic justification for this tariff differentiation, when it is prepared to grant duty-free access to substantial quantities of woods from the other coniferous species (such as douglas fir)?

Response to New Zealand Q. 15 regarding tariffs on lumber

The GATT panel on Japan's tariff on Spruce-Pine-Fir lumber has concluded that GATT left wide discretion to the Members in relation to the classification of goods and that it was not inconsistent with the General Agreement to impose different tariffs on goods according to different domestic circumstances.

As for Japan's tariff on Spruce-Pine-Fir lumber, Japan imposes a certain level of tariff because imported Spruce-Pine-Fir lumber strongly competes with domestic Spruce-Pine-Fir lumber, which has an extremely low price/cost ratio.

Again, Japan's tariff on Spruce-Pine-Fir lumber does not discriminate against any particular countries' products.


Japan’s regulations for enforcing phytosanitary controls mean that, by default, action is taken against pests on imported produce that do not meet the FAO definition of ‘quarantine pest’, if the pests are not included in a schedule, even if those pests are present in Japan and not under an effective mandatory official control programme.

Q. 16 Does Japan have any plans for reviewing its enforcement regulations to make them more flexible, for example by listing pests against which action is taken rather than listing on the schedule the 63 ‘non quarantine’ pests against which no action is taken?

Q. 17 Can Japan confirm that any changes which may be introduced will be applied in a way which is transparent and does not have the effect of discriminating arbitrarily among supplying countries?

Q. 18 Is Japan considering a change in its definition of ‘official control’ in phytosanitary regulations, to align with the new international definition that is likely be adopted by the Interim Commission on Phytosanitary Measures in April 2001?

Response to New Zealand Q. 16 – Q. 18 regarding SPS

(general remark)

1. Under the Japanese plant protection system, "quarantine pests" are defined as those which are liable to cause damage to economic plants should they spread, and which meet either of the following conditions:




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2. Therefore, there is no ground for the comment made by New Zealand that our phytosanitary regulations do not meet the FAO definition.

Response to New Zealand Q. 16

As we believe that the Japanese system for plant quarantine is currently functioning effectively, we have no plans to change it at this time.


We confirm that point.


The definition of “official control” is now under consideration in the IPPC. Japan, along with other parties, is actively participating in the working process for its development, and will fully take account the new definition of “official control” when it is clearly established in the IPPC.


We welcome Japan’s move away from market price support to direct payments in agriculture. However, the sector continues to be heavily supported by government and highly protected at the border. The Secretariat notes (page 86, para 15) that “[t]he support received by farmers in Japan and the costs to consumers of agricultural products remain above the OECD average and have increased since 1997”, and that high costs have forced certain food processing businesses to relocate out of Japan (page 81, para 6).

How does Japan ensure that end-users, both processors and consumers, have the opportunity to purchase quality agricultural products at internationally competitive prices?

Response to New Zealand Q. 19 regarding agriculture

According to an opinion poll conducted by the Prime Minister’s Office in July 2000, more than 80% of the people in Japan think that even if the price of domestic food is higher than imported food, Japan should produce as much food as possible and make efforts to reduce costs. This trend has risen compared to the previous survey in November 1996.

The Basic Law on Food, Agriculture and Rural Areas was made based on such public opinions. Therefore, in order to meet the expectations of the people, it is indispensable to form reasonable prices for domestic agricultural products and to supply safe and high quality food in a stable manner based on the Basic Law by implementing the following measures;

Creation of a pricing price policy which ensures price formation that appropriately reflects supply/demand situations and market evaluation of quality.

Enhancing productivity by changing the agricultural structure.



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New Zealand is concerned at the consistently low quota fill rate for dairy products. We note the Secretariat’s comment (page 42, para 28) that “[t]he quota allocation method tends to be intricate”. “In the case of agricultural products, …[s]ome qualification requirements for applicants are stipulated taking into account the characteristics of the product and the market, with a view to ensuring that the licensed goods are supplied to end users.”

Q. 20 Can Japan explain the process it went through in “taking into account the characteristics of the product and the market” in designing the qualification requirements for dairy product quota.

Q. 21 What steps is Japan taking to ensure that administration of the tariff quotas enables end-users to be able to obtain the quantity and specification of imported dairy product that they require?

Q. 22 What further steps does Japan intend to take to improve the transparency of its tariff quota administration in dairy and to facilitate quota fill? For example, what steps is Japan proposing to take to fill the quota for Skim Milk Powder for the School Lunch Programme?

Response to New Zealand Q. 20 regarding tariff quotas on dairy products

Although qualification requirements for the dairy products quota differ by quota, in the case of skimmed milk powder provided for school lunches, for example, the requirement is that the product is truly intended for the consumption in school lunches.


Japan applies tariff quotas on dairy products in a fair and transparent manner consistent with Japan’s tariff schedule, and we think that the current administration adequately responds to the various demands of end-users.


The tariff quota administration in Japan is transparent enough to respond to domestic demand. The principal reason for the relatively low rate of quota fill of Skim Milk Powder for the School Lunch Program is the decline of demand due to the decrease in the number of children in recent years compared with the base period in Japan.


The Secretariat Report notes (page 82, para 8) that under the new Basic Law on Food, Agriculture and Rural Areas, the government plans (inter alia) to expand the scale of production and improve agricultural infrastructure to raise the productivity of the sector, and develop and disseminate technology to improve the quality of products. The Report also notes (page ix, para 2) that “the view is taking hold that a sustained economic recovery can be achieved only through more aggressive structural reform that enhances competition”.

Q. 23 Does Japan also apply the notion of “enhancing competition” to the agricultural sector? How does Japan plan to raise productivity and improve technology in the agricultural sector in this regard?


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Response to New Zealand Q. 23 regarding agriculture

Japan intends to apply the notion of “enhancing competition” to the agricultural sector in the following context.

The Government of Japan is conducting agricultural policy reforms to establish new policies for the 21th century. One of the fundamental principles of the new basic law is to promote the sustainable development of agriculture by measures such as establishing desired agricultural structure and ensuring price formation which reflect appropriate market evaluation. This approach is consistent with structural reforms that enhance competition.

As for raising productivity and improving technology, relevant measures provided for in the Basic Plan for Food, Agriculture and Rural Areas (adopted by the Cabinet in March 2000) include the following:

(1) Establishing the desired agricultural structure and developing of farm management policies

(2) Securing and effectively utilizing farmland, and improving infrastructure for agricultural production

(3) Securing and fostering a workforce by measures such as encouraging new farmers to acquire knowledge of agricultural technologies and management skills

(4) Developing practical technologies such as nourishing the quality of wheat, soybeans and feed crops, and promoting research and development of innovative technologies such as genome sequencing

(5) Setting appropriate prices for agricultural products reflecting supply/demand situations and stabilizing farm management


The Secretariat notes (page 53, para 69) that “[t]he stated aims of [state] trading include: stabilising supplies to consumers; controlling imports to assist domestic producers; and protection of consumers’ interests.”

Q. 24 What factors does the Agriculture and Livestock Improvement Corporation (ALIC) take into account when choosing the type and quantity of products to import? What weight is given to considering consumer demand for a supply of quality, cost-effective products as opposed to assisting Japan’s dairy producers?

Q. 25 How does ALIC ensure that consumers’ interests in terms of price, quality and quantity are met for dairy products?

Q. 26 How does Japan ensure that the stated aims for STEs, as noted in the Secretariat Report (page 53) are consistent with WTO provisions, including Article XVII of the GATT which requires non-discriminatory treatment and adequate opportunity of competition?

Response to New Zealand Q. 24 regarding the ALIC

The Agriculture and Livestock Industry Corporation (ALIC) considers the demand and supply situation in the Japanese market when choosing the type and quantity of products to import. Specifically, factors such as domestic prices, level of stock, and seasonal consumption trends, as well as the international market price, are taken into account.


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Needless to say, the ALIC fully takes into account the consumers’ high appreciation for the quality of domestic dairy products as well as industries’ demand for lower-priced products.

Response to New Zealand Q. 25 regarding the ALIC

The Agriculture and Livestock Industries Corporation (ALIC) duly responds to consumer demands by selling imported products through an open bidding system, placing them in categories.

Response to New Zealand Q. 26 regarding state trading

The existence of the State Trading Enterprises (STE) is recognized by Article 17 of GATT. We ensure that the activities of each State Trading Enterprise are consistent with WTO provisions by reporting them to the working party on STEs, which reviews their consistency in respect to the relevant provisions such as “in accordance with commercial considerations.”


Tariffs on fish and fish products at the frontier can be seen to have a significant impact on prices compared with those for domestic product.

Q. 27 Given Japan’s strong reliance on imported seafood, what purpose is served by Japan maintaining its comprehensive import tariff regime?

A clear description of Japan’s import quota regime for certain fish and marine products is provided in the Secretariat Report.

Q. 28 What is the basis in the WTO Agreements for a government to:place QRs on non-agricultural commodities; impose QRs in order to avoid effects of disorderly trade on domestic supply and demand permits QRs to be imposed on the fish species identified in Japan’s quota system; and avoid adverse effects of disorderly trade on stock status of the species identified?

Response to New Zealand Q. 27 regarding Japan’s comprehensive import tariff regime

As a result of the Uruguay Round, Japan reduced tariffs on fishery products, resulting in the present weighted average tariff rate being 4.1% on fishery products.

Japan is the world’s largest fish importing country and imports about 30% of the world fishery trade in value. At the same time, Japan is one of the largest fishing countries and produced about 7 million metric tons of fish in 1998.

In order for Japan to supply fish and fish products to our people in a stable manner in the future, it is necessary for us to maintain domestic production. For this reason, we need to maintain certain border measure.

Response to New Zealand Q. 28 on the basis in the WTO Agreements for governments to take actions regarding QRs

The basis is GATT Article 11(2)(c) and Article 20(g).



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Can Japan confirm that it will eliminate tariffs and remove market access restrictions on substantially all goods in any FTA it may negotiate with Singapore and that there will be no sectoral exclusions?

Response to New Zealand Q. 29 regarding FTA

Japan believes that the economic agreement for a new age partnership between Japan and Singapore must be consistent with WTO rules.

NORWAY

Norway Question 1

Japan presented a study (AIE/60) in the AIE-process of the Committee on Agriculture, which indicated the value of multifunctionality in Japan in terms of land and water resource conservation provided by paddy fields. Do you have any new or updated figures in this regard? Have you undertaken any other studies to identify the value of multifunctionality in Japan?

Response to Norway Q. 1 regarding multifunctionality of agriculture

We have not updated figures regarding the value of the multifunctional role played by paddy fields in terms of land conservation and water resource conservation.

We have not yet undertaken any other studies to identify the numerical value of multifunctionality.

Norway Question 2

Norway is pleased to note that Japan has taken steps to open the foreign direct investment regime and introduced measures to further deregulation in the telecommunications sector. Does Japan have any plans to allow greater competition with regard to local network access and thereby stimulate broadband multimedia and high speed internet access?

Response to Norway Q. 2 regarding local network access

In order to promote competition in regional telecommunications markets, the Ministry of Posts and Telecommunications promotes measures such as 1) promotion of the unbundling of the subscribers network that is owned monopolistically by NTT, and 2) promotion of the introduction of diverse network access such as DSL and FWA.

Norway Question 3

In paragraphs 85 and 89 the cabotage prohibition is mentioned. Under what conditions will the Minister of Transport grant exemptions from this rule? Do any of the bilateral agreements between Japan and foreign countries contain provisions on reciprocal access to cabotage? If so, with which countries?

Response to Norway Q. 3 regarding cabotage services

Permission from the Minister of Transport is granted to a cabotage service that raises no concerns mainly from the viewpoint of national security. No bilateral treaty contains a provision to permit cabotage services without such permission.

Norway Question Q. 4


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With reference to paragraph 90, would it be possible for foreign companies to obtain approval from the Minister of Transport to conduct scheduled domestic services? Are any foreign companies engaged in such activities in Japan?

Response to Norway Q. 4 regarding approval for scheduled domestic services

It is possible for foreign companies to obtain approval; however, no foreign company has applied for it. As for the third sentence in paragraph 90 of the report, while an economic needs tests requirement was previously contained not in the Coastal Shipping Law but in the Marine Transportation Law, the requirement was abolished on 1 October 2000.

Norway Question 5

Do the conditions for obtaining Japanese certificates, as referred to in paragraph 91, differ from the international standards as provided for in IMO regulations?

Response to Norway Q. 5 regarding conditions for obtaining Japanese certificates

Japan ratified the STCW Convention amended in 1995, which prescribes the requirements for certification for seafarers. In Japan's Law for Ship Officers, the provision for issuing a certificate of competency is based on the standards of the Convention.

Norway Question 6

Have there been any recent changes to the prior consultation system mentioned in paragraph 99? If so, could you please explain how the system now functions.

Response to Norway Q. 6 regarding the prior consultation system

The categories of subjects of the prior consultation system have been reviewed and procedures have been simplified based on the agreement reached among associations related to port transport business including shipping lines, labour unions and companies in 1997. At present, the system is working smoothly.

PERU

Peru Question 1

In paragraphs 2 and 3 it is mentioned that to obtain a sustained economic adjustment, a more aggressive structural reform is needed, which would intensify the competition and thus reach a reduction of costs and prices at international levels and in addition, would reduce the intervention of the government in the economy. In this sense, has Japan obtained sufficiently profitable results so as to continue with the deregulation? Will the Government of Japan continue in deepening the reforms in middle term?

Response to Peru Q. 1 regarding tariff escalation

Japan has made significant effort to reduce high tariff escalation. Japan does not intend to exclude this matter from the WTO new round with a balanced and sufficiently broad-based agenda.


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Response to Peru Q. 1 regarding the Customs Tariff Council

The Customs Tariff Council consists of various parties including producers, intermediaries and consumers. The related ministries also consult with interested parties when they submit the request of changes to the Ministry of Finance. (There is no formal regulation on the issue.)

Peru Question 2

As it is mentioned in the Secretariat report, there is clear tariff rates escalation which discourage the exports of products with a major gathered value into the Japanese market. Are there middle term programs in Japan's Government in order to reduce the tariff escalation?

Response to Peru Q. 2 regarding tariff escalation

Japan has made significant effort to reduce tariff escalation. Japan does not intend to exclude this matter from the WTO new round with a balanced and sufficiently broad-based agenda.

Peru Question 3

As it is mentioned in the Secretariat report, there are procedures for tariff adjustments between the Ministry of Finance and other interested ministries. The offered changes are investigated by the Tariff Council, and after that the Ministry of Finance prepares the legislation to be approved by the Diet.

Peru would like to have explanations regarding the participation of the producer's corporations and the associations of intermediate and final consumers in these decisions. Is there any regulation, which gives the possibility to organize consultations? In this sense, in which part of the process are they participating?

Response to Peru Q. 3 regarding the Customs Tariff Council

The Customs Tariff Council consists of various parties including producers, intermediaries and consumers. The related ministries also consult with interested parties when they submit the request of changes to the Ministry of Finance. (There is no formal regulation on the issue.)

Peru Question 4

On the basis of the information presented in the Secretariat report, Japan is considering to reduce the internal support to agriculture as it decreases the purchasing capacity (power) and the well-being of the consumers and of the Japanese economy in general, and in addition it causes strong distortions for the resources allowance. Is the Government of Japan taking any measures with this respect?

Response to Peru Q. 4 regarding agriculture

In Japan, domestic support to agriculture is provided from the viewpoint of ensuring stable food supply to consumers. This is based on the result of the public opinion poll that the majority of people prefer domestically produced food while recognizing the need to reduce the production costs.

Moreover, one of the aims of domestic support is to fulfill the multifunctional role such as conservation of national land and water resources through maintenance and development of domestic production. The domestic support is thus provided not only for the re-distribution of resources, but also for the externalities that farmers create.


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In accordance with the basic thoughts of domestic support noted above, the Government has been reducing the administered support prices for major agricultural products with a view to returning benefits accrued from the improvement in productivity as much as possible to consumers. As a result, “Amber” measures which are subject to reduction commitment decreased by 4.8% from 3,329.7 billion yen in 1996 to 3,170.8 billion yen in 1997.

In addition, based on “The Basic Law on Food, Agriculture and Rural Areas” enacted in July 1999, the Government is introducing more market-orientated price policy, in order that agricultural prices will appropriately reflect he supply/demand situations and the quality of the product, which in turn will promote the agricultural production that will respond to the needs of consumers.

Finally, along with the review of price policies, the Government is introducing the management stabilization programmes in order to mitigate the effects that price fluctuations impose on farm management.

Peru Question 5

On the basis of the information presented in the Secretariat report, is it considered that these measures, among them, a program of support for direct income instead of programs of support for prices, will be effective/efficient to redress the distortions and increase the competition? Could Japan indicate if any studies for quantifying the price reduction have been already made?

Response to Peru Q. 5 regarding price policy changes

Japan has been implementing reviews of the price policies for main agricultural products such as rice, wheat and soybeans, so that prices appropriately reflect the real supply/demand situation and market evaluation of quality from the viewpoint of promoting agricultural production that meets consumer demands.

In addition Japan has introduced a safety net for farm management (in other words, direct income support), to mitigate the adverse effects of price fluctuation.

These policy changes have been made in order to introduce market mechanisms into the pricing of agricultural products. Japan thinks the combination of these policies is more effective than a price support policy from the viewpoint of “redressing the distortion” and “increasing the competition.”

Such changes of policy are based on the Basic Law on Food, Agriculture and Rural Areas, which was enacted as recently as 1999. The data requested by this question is not available yet.

Peru Question 6

Peru would like to have specific information on the conditions of accession to the official program of training for foreign lawyers. In the same way, could Japan explain if there is any extension based on the reciprocity within the framework of a bilateral agreement for the services, which could be supplied by foreign lawyers in international market?

Response to Peru Question 6 regarding the situation for training of foreign lawyers in Japan

There are no official programs for legal training of foreign lawyers in Japan.284*

There are no bilateral agreements for legal services in Japan.


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SWITZERLAND

Switzerland Questions 1 and 2

Q. 1 In paragraph 72 (page 55) you record that Japan is continuing to bring its standards in line with international counterparts. Could you specify which standards, other than the ones established by Codex, have been of relevance for the establishment of the Japan Agricultural Standards for organic plant products and processed foods made from organic plant products?

Q. 2 Could you explain whether there are deviations to the Codex Standards and if yes, what they are?

Response to Switzerland Q. 1, Q. 2 regarding Standards

Japanese Agricultural Standards of Organic Agricultural Products and Organic Agricultural Product Processed Foods have been established based on Codex Guidelines for the Production, Processing, Labeling and Marketing of Organically Produced Foods.

Switzerland Question 3

We understand that the JAS Organic Standards only apply for organic plant products and processed foods made from organic plant products. On its last session (May 2000) the Codex Committee on Food Labelling (CCFL) has agreed to advance the Draft Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods (livestock production) to Step 8 (adoption as a Codex Standard). In this regard could you provide us with the information on whether Japan is considering to extend its standards to livestock production as well? If yes, are there any major deviations from the Codex Standard to be expected? Please specify.

Response to Switzerland Q. 3 regarding the JAS

Japan would like to consider the necessity of standardization for organically produced livestock products based on the opinions from relevant groups, including producers, distributors and consumers.

If standardization is deemed necessary, the JAS standard for organically produced livestock products will be developed based on the Codex guideline.


In paragraph 82 (page 57) you mention that an inspection certification and a labelling system for organic food has newly been introduced under the amendment of the JAS-Law. Could you give us a detailed description of this system with regard to the import of foreign products?


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Response to Switzerland Q. 4 regarding JAS

The way to attach organic JAS Mark labels to imported organic foods in Japan is as follows:

(1) The importers certified by a Registered Certification Organization attach the organic JAS Mark labels to organic agricultural products and organic agricultural product processed foods, graded under the grading system recognized, on the Ministerial Ordinance, to be equivalent to the JAS system and accompanied by a certificate of grading issued by the governmental organizations or those designated quasi-governmental organizations of the country concerned.

(2) The foreign producers or manufacturers certified by a Registered Foreign Certification Organization (limited to organizations whose office is located in a country recognized, on the Ministerial Ordinance, to have a grading system equivalent to JAS system) carry out grading in accordance with the JAS standards and attach the organic JAS Mark labels to their products.

(3) The foreign producers or manufacturers certified by a Registered Certification Organization in Japan carry out grading in accordance with the JAS standards and attach the organic JAS Mark labels to their products. (In this case, data of inspection and certification prepared by a foreign organization which fulfills certain requirements can be used for certification of the producers or manufacturers.)


As we understand it will be necessary to obtain accreditation from an authorised accreditation body in order to be allowed to label food "organic". Which are the necessary qualifications for Registered Foreign Certification Organisations and for Registered (domestic) Certification Organisations? Which normative documents are being used to assess these organisations (domestic and foreign)? Will there be any differences in terms of requirements and assessment between RFCOs and RCOs? Are the qualifications of Certifications Organisations, accredited according to ISO Guide 65 by the competent national authorities, considered equivalent? If no, please specify additional requirements not covered by this guide.

Response to Switzerland Q. 5 regarding certification

Necessary qualifications for Registered Foreign Certification Organization (RFCO) and for Registered Certification Organization (RCO), Differences in terms of requirements and assessment between RFCO and RCO

The requirements and assessment between RFCO and RCO in Japan are the same.

The necessary qualifications for RFCO/RCO are as follows:

1) The qualification and number of those who are to be engaged in certification work and the matters concerning the management of certification work must conform to the criteria provided by the Minister of Agriculture, Forestry and Fisheries;

2) The party who has made the application must be a legal person which has enough financial foundation to carry out appropriately and smoothly the certification of the agricultural and forest covered by the application;

3) The members or the composition of personnel by the Ministerial Ordinance of Agriculture, Forestry and Fisheries as to the kind of the officers and legal person are not likely to impede the fair execution of the certification;


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4) If any business other than the certification business is being done, the execution of such business must not be likely to make the certification unfair.

Normative documents to assess organizations

The normative documents are a follows:

1. Application form for the registration of RFCO/RCO (the following items are included; name and address, location of the place of business, classification of agricultural and forest products to be covered by the certification, area where it intends to implement the certification, number of employees with qualifications, matters relating to the management of certification business, past violations against JAS law and past cancellations of the registration, other business than the certification business and its relationship with organic food) with documents mentioned below (These requirements are the same for RFCO and RCO in Japan.):

1. Personal histories of the personnel who are engaged in such certification must conform to the criteria provided by the Minister of Agriculture, Forestry and Fisheries

2. The articles of incorporation or the articles of association of incorporated foundations and a certified copy of its commercial register (or equivalent if the applicant is a legal person established under foreign legislation)

3. Document carrying the names and addresses of the directors

4. The latest general inventory and balance sheet

5. Documents concerning the business planning and the budgeted revenue and expenses for the fiscal year to which the date of application belongs and the next fiscal year

6. Names or trade names of the members stipulated in the corresponding item according to the type of legal person

7. If there are any members engaging in a business among those provided in the preceding item, outline of said business and the relationship between said business and the agricultural and forest products to be covered by the certification.

2. Application form for authorization of the fees pertaining to the certification (following items are included; the amounts of fees, the basis for their calculation, the method for the calculation) (This requirement is the same for RFCO and RCO in Japan.)

3. Application form for authorization of the certification business rules (with the certification business rules) (This requirement is the same for RFCO and RCO in Japan.)

Are the qualifications of the Certifications Organizations accredited according to ISO guide 65 considered equivalent?

Satisfying ISO Guide 65 alone is not regarded as sufficient to meet the requirements for registration under the JAS Law. For example, while ISO Guide 65 requires “a sufficient number of personnel” as the number of personnel of an organization. JAS has a more specific requirement, that is, two or more persons for inspection and one or more persons for judgement of certification.


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In Japan there is a marking system in place for voluntary standards covering about 700 products (both in the area of industrial and agricultural products). In the Japan Industrial Standards (JIS) marking system an accreditation system of private certification bodies was introduced in 1997. As of today no foreign certification bodies were accredited in Japan as JIS mark certification bodies (page 55 of the Report by the Secretariat).

What is the rationale for such a marking scheme for voluntary JIS standards?

What are the requirements for this kind of accreditation which need to be met by the bodies applying and how will the competence of these bodies be assessed?

Response to Switzerland Q. 6

The main purpose of the certification scheme is to provide the market with credible proof that a product bearing the certification mark complies with the relevant standard(s). The specific nature of the JIS mark scheme is that it is based on a manufacturing process control in authorized factories, rather that being based on an inspection of the products concerned.


Japan is about to take further steps to ensure acceptance of foreign test data and conformity assessments. So far, as indicated in the Report by the Secretariat on page 56, this has been implemented in the areas of telecommunications equipment (acceptance of foreign test results and foreign certifications) and clinical data. In the area of medical devices foreign test results are only recognised when there is a regulatory co-operation arrangement in place between Japan and the exporting country in question (actually this is only the case for exports from the United States, the European Union and Australia).

What are the criteria for accepting test data in the areas mentioned above? Are there other product sectors where foreign test data is accepted? What further steps are envisaged by Japan to ensure the acceptance of foreign test data in other product areas?

Why are foreign test data in the area of medical devices only accepted upon the conclusion regulatory co-operation arrangement?

What are the conditions to enter into such a regulatory co-operation arrangement with the Ministry of Health and Welfare which would allow the Japanese importer to confirm the records of the testing of the medical device performed by the manufacturer in the exporting country?

Response to Switzerland Q. 7 regarding ISO

Japan uses the ISO/IEC Guides as a basis for the accreditation system of JIS mark certification bodies, including the assessment of the competence of applicant bodies.


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What is the reason why no foreign body is accredited as JIS mark certification body as of today? Are domestic and foreign certification bodies subject to the same requirements when applying for accreditation in this area?

Response to Switzerland Q. 8 regarding JIS

The reason that no foreign bodies are accredited as JIS mark certification bodies is that, until recently, none had applied for accreditation.

At present, a number of bodies are undergoing the accreditation process.

Domestic and foreign certification bodies are subject to the same requirements when applying for accreditation in this area.

Switzerland Questions 9-11

Japan is about to take further steps to ensure acceptance of foreign test data and conformity assessments. So far, as indicated in the Report by the Secretariat on page 56, this has been implemented in the areas of telecommunications equipment (acceptance of foreign test results and foreign certifications) and clinical data. In the area of medical devices foreign test results are only recognised when there is a regulatory co-operation arrangement in place between Japan and the exporting country in question (actually this is only the case for exports from the United States, the European Union and Australia).

Q. 9 What are the criteria for accepting test data in the areas mentioned above? Are there other product sectors where foreign test data is accepted? What further steps are envisaged by Japan to ensure the acceptance of foreign test data in other product areas?

Q. 10 Why are foreign test data in the area of medical devices only accepted upon the conclusion regulatory co-operation arrangement?

Q. 11 What are the conditions to enter into such a regulatory co-operation arrangement with the Ministry of Health and Welfare which would allow the Japanese importer to confirm the records of the testing of the medical device performed by the manufacturer in the exporting country?

Response to Switzerland Q. 9-11 regarding foreign test data

(1) Telecommunications

In March 1999, amendment to the Telecommunications Business Law (TBL) and Radio Law (RL) with regards to conformity assessment systems in the field of telecommunications went into effect, and the Attested Foreign Examiners/Attested Foreign Inspectors system as well as the Recognized Approval Bodies/Recognized Certification Bodies system were introduced to accept the results of tests conducted by foreign testing laboratories and the results of conformity assessments performed by foreign certification bodies, respectively.

The Ministry of Posts and Telecommunications (MPT) has recognized two foreign testing laboratories as Attested Foreign Examiners/Attested Foreign Inspectors. Certification of Attested Foreign Examiners/Attested Foreign Inspectors is performed in accordance with the provisions of Article 50.3 of the TBL/Article 24.9 of the RL.


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Recognized Approval Bodies/Recognized Certification Bodies are recognized in accordance with the provisions of Article 72.3 of the TBL/Article 38.17 of the RL.

The provision of criteria for the recognition of domestic Examiners/Inspectors and criteria for designating Approval Bodies/Certification Bodies are applied to the provisions above mutatis mutandis. Therefore, the criteria for the recognition of foreign testing laboratories and the criteria for recognizing foreign certification bodies are almost same as the criteria for domestic Attested Examiners/Attested Inspectors and the criteria for Designated Approval Bodies/Designated Certification Bodies.

For a provisional English translation of these laws, please refer to the MPT official website at www.mpt.go.jp/eng/Resources/. (However, the official text is in Japanese.)

(2) Medical devices

Results of tests performed by manufacturers in the exporting country will be accepted based on Article 6 Paragraph 1 of the Regulations for imported Medical Devices Management and Quality Control (MHW Ordinance, No. 63), when standards for manufacturing and quality control as well as procedures for conformity assessment are recognized to be equivalent. The importer may confirm the records of the testing of the medical device performed by the manufacturer in the exporting country instead of performing testing; this special provision for quality control applies only when the device was manufactured in a country recognized by Japan under international governmental negotiations.

Switzerland Questions 12 and 13

Q. 12 From October 2000, banks have been allowed to provide insurance services through subsidiaries. Is it also possible for an insurance company to provide banking services through a subsidiary (§47, page 96)?

Q. 13 The report indicates that it is possible to access the Japanese market by establishing a branch or subsidiary (§51, page 98). Is it also possible for a foreign bank/insurance to acquire and control a Japanese financial institution?

Response to Switzerland Q. 12 regarding banks and insurance companies

An insurance company may possess a bank as a subsidiary, and is allowed to provide banking services through the subsidiary.

Response to Switzerland Q. 13 regarding possibility of a foreign bank/insurance institution owing a Japanese financial institution

It is possible for a foreign bank/insurance to own and control a Japanese financial institution.

THAILAND

Thailand Question 1

1) Para. 8, page 82 of the Report by the Secretariat: Concerning the Basic Plan for Food, Agriculture and Rural Areas which was adopted by the Cabinet in March 2000, the Government of Japan has indicated that the guideline under the Plan is to achieve a food self-sufficiency ratio of 45% (on a calorie basis) by 2010.

Question/Comment


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- Thailand would like to know the detailed products coverage to be included in the guideline, particularly whether rice, rice products and fruits are covered under this guideline.

Response to Thailand Q. 1 regarding the food self-sufficiency ratio

Under the Basic Plan, food product targets for the total food self-sufficiency ratio were established, including rice, rice products and fruits.

Product-specific targets, for the food self-sufficiency ratio were set up for rice, wheat, barley/rye, sweet potatoes, soybeans, vegetables, fruits, milk/dairy products, meats, eggs, sugar, tea, fish and shellfish, seaweed and mushrooms.

Thailand Question 2

Para. 8, page 82 of the Report by the Secretariat: Concerning the Basic Law on Food, Agriculture and Rural Areas, enacted on 16 July 1999, establishing four principles/goals, one of the four is to fulfill agriculture’s multifunctional roles.

Questions/Comments

- Thailand is interested to learn what, in practice, the Japanese Government intends to do in order to achieve this policy objective?

- Thailand hopes that measures to be put in place by the Government of Japan in order to achieve the above-mentioned goals will be consistent with the Agreement on Agriculture and would not be used in a way that would distort trade in agriculture.

Response to Thailand Q. 2 regarding multifunctionality of agriculture

Agriculture’s multifunctional role, such as national land preservation, natural environmental conservation, and formation of good landscapes, is fulfilled through stable agricultural production activities in rural areas.

Therefore, the Government of Japan is promoting the development of agriculture and the development of rural areas as the base of agricultural production so as to bring such functions of agriculture into full play.

The following specific measures will be taken:

To promote sustainable development of agriculture:

Measures necessary for strengthening the base of farm management through the promotion of the integrated use of farmland, improvement of agricultural production infrastructure giving consideration to the harmony with the environment, and so on

Measures for maintaining and improving the natural cyclical functions inherent in agricultural activities


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To achieve the development of rural areas:

Measures for creating pleasant and resident-friendly rural areas with beautiful landscapes through the comprehensive improvement of rural living infrastructure in line with better agricultural production infrastructure

Measures for preventing the further abandonment of cultivated land and ensuring the multifunctional roles of agriculture in hilly and mountainous

Thailand Question 3

Para. 12-13, page 85 of the Report by the Secretariat: Thailand maintains its view on the importance of Japan’s market access for the imported rice

Questions/Comments

- In order to address the problem of quota administration and transparency in the allocation of rice quotas, under the current new round of agriculture negotiations, Thailand wishes to underline the need for a multilateral rule and discipline in this area so as to ensure that the quota administration is transparent and non-discriminating.

- In addition, the applied out-of-quota duty on rice which is higher than 1000% is considered as a prohibitive tariff which needs to be eliminated in this new round of agriculture negotiations. Does Japan has any plan to substantially reduce its import tariff on rice in the near future?

Response to Thailand Q. 3 regarding quota

Japan properly allocates its rice quota under the minimum access commitments based on domestic demand. We believe that transparency is assured and there is no discriminately treatment of any exporting countries. Japan's out-of-quota tariff on rice is calculated faithfully based on the difference between internal and external prices in accordance with the WTO Agreement on Agriculture; therefore, it is not appropriate to see it as prohibitive.

The issue of market access, including tariff quota administration and import tariffs, will be discussed during the current agricultural negotiations. However, considering the importance of rice and rice farming in Japan, as it is necessary to stabilize the supply/demand situation and the price of rice by ensuring food security and to exibit multifunctionality by maintaining a rice farming, Japan has no plans to reduce tariffs on rice.

Thailand Question 4

Para.13, page 85 of the Report by the Secretariat: Concerning Japan’s implementation of minimum access commitments for rice by sending a certain amount of rice imported to developing countries in the form of economic assistance. This practice affects Thailand’s rice exports in the overseas market.

Question:

- Would the Government of Japan consider using other means of implementing minimum access commitments that would not affect or undermine Thailand’s rice export in the future?


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Response to Thailand Q. 4 regarding MA

Food aid is important contribution made by Japan for those countries in need of food.

Japan has been conducting food aid in conformity with the WTO Agreement and other international disciplines; responding to requests from recipient countries and international organizations. To be specific, the procedures of the FAO Principle of Surplus Disposal, such as advance notification or consultation, are followed to avoid having food aid displace normal commercial imports and discourage agricultural production in the recipient countries. Also, when using rice imported under the minimum access commitment for food aid, attention is paid to ensure consistency with the relevant parts of the WTO Agreements including those on market access opportunity and national treatment. Therefore, Japan believes that its food aid practices do not affect commercial rice exports from Thailand.

Thailand Question 5

Para 15, page 86 of the Report by the Secretariat: Domestic measures and support programs

Question/Comment

- Japan is considered to be one of the developed countries that highly subsidize their agriculture sector. Does the Japanese Government intend to reduce the level of subsidies given to agricultural sector in the future?

Response to Thailand Q. 5

Japan has already substantially reduced the level of subsidies given to agricultural sector through faithful implementation of the UR agreements.

According to the UR agreements concerning the domestic support, the total AMS of the base period should be reduced by 20% during the implementation period from 1995 to 2000. As is notified to the WTO Secretariat, however, Japan’s total AMS, which was 5 trillion yen during the base period, was already reduced to 3170.8 billion yen in the FY1997, which is considerably below the scheduled level of 2000.

Thailand Question 6

The report did not touch on the problems confronted by foreign exporters of agriculture products caused by Japanese SPS measures.

Does the Japanese Government ever receive any complaints from other agriculture exporting countries regarding the Japanese SPS measures? If so, could the Japanese Government provide us some information as to the nature of the complain and issues involved?

Response to Thailand Q. 6 regarding SPS

Government of Japan notifies other members of WTO through the Secretariat, of introduction of SPS regulations in order to ensure their transparency. Except for the case where urgent problems arise, GOJ studies comments of the other agriculture exporting countries on request and takes the result of the study into account, when adopting the regulation.

For example, in the case of sanitary measures, GOJ respects the Article 6 of SPS Agreement and has recognized disease or pest free regions of countries, based upon international criteria or guidelines developed


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by relevant international organizations. As for the phytosanitary measures, the last September, GOJ has established standard procedures to lift import bans and published the status of each case, in order to deal with the complaints arisen from some exporting countries against the lack in transparency regarding procedures and status of the lifting of the import ban.

GOJ will appropriately handle requests from other countries.

Thailand Question 7

Para. 55, page 99 of the Report by the Secretariat: Thailand is interested in additional information regarding the business model of “Postal Life Insurance” in Japan including the administering government agency and legislation involved. Who are the insured party? What is the difference between postal life insurance and life insurance in general?

Response to Thailand Q. 7 regarding the postal insurance system

The Postal Life Insurance (Kampo) system is operated by the Government of Japan based on the objectives of Article 1 of the Postal Life Insurance Law (to stabilize the economic livelihood of people and to secure their welfare by providing them with easily accessible life insurance and annuities at the lowest possible premium through efficient operation).

URUGUAY

Uruguay Question 1

Paragraph 34 of the Government Report express that, with respect to a cooperation agreement in the area of competition policy, Japan and the EU have reached a mutual understanding on substantive elements of the future agreement. Could Japan mention what are these substantive elements?

Response to Uruguay Q. 1

At present, we are in the process of preparing to sign a cooperation agreement and we should refrain from mentioning the detailed substance of it. What we can explain at this junction is that the future cooperation agreement will possibly include “notification”, “cooperation”, “coordination”, “positive comity”, “traditional comity” and other elements.

Uruguay Question 2

Paragraph 7 of the Government Report express that Japan has benefited to a great extent from multilateral system of world trade. Taking this into account, could Japan comment on paragraph 20 of the Secretariat Report (Summary Observations) that notes that the agricultural sector remains relatively well protected from foreign competition, the average tariff on imports of agricultural products remains high, tariff quotas can be intrincate, and as a consequence, the overall level of government assistance for agriculture is well above the OECD average, and appears to have risen since 1997?

Response to Uruguay Q. 2 on protection of the Japanese agriculture sector

Japan has been faithfully implementing its UR commitments, and thus it is not appropriate to describe Japan’s agriculture as having “high levels of protectionism.”

It is not appropriate to conclude that the protection level of agriculture in Japan is high judging only from the


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OECD figures on domestic support, because OECD figures are just one of the indicators of transfer rising from agricultural policies.

Furthermore, Japan would like to point out that there is a number of other OECD Member countries which maintain higher tariffs compared to those of Japan.

Uruguay Question 3

Could Japan comment on paragraph 23 which express that some sectors, particularly agriculture, have been largely exempt from liberalization efforts and therefore competition, at considerable cost to the economy, and not surprisingly, productivity in agriculture has lagged behind that in manufacturing?

Response to Uruguay Q. 3 regarding whether or not agriculture has been exempt from liberalization

Japan has been faithfully implementing its UR commitments, and thus it is not appropriate to describe Japan as not having made any effort toward liberalization and increased competition in agriculture.

Regarding productivity, the Basic Law on Food, Agriculture and Rural Area stipulates that necessary measures must be taken to improve the productivity of agriculture.

Uruguay Question 4

Could Japan comment on paragraph 1 that notes that non-ad valorem duties are an important feature of the tariff, particularly in agriculture and such duties which account for 6.9% of all lines can result in high ad valorem equivalents (AVE)? Could you also comment on the same paragraph which notes that these AVE estimates show that 90 of the top 100 tariffs entailed non-ad valorem duties whose AVEs ranged from 40.1% to 983.7%?

Response to Uruguay Q. 4 regarding AVE

Figures of the report by the secretariat are based on facts.

But it should be noted that the Japanese government applies non ad-valorem duties restrictively and selecticely for the items with large market-price fluctuations and so on. Also, the tariff rates are set taking into consideration the domestic and oversees price differentials and vulnerable situation of domestic industries regardless of types of duties.

AVE estimates of non ad-valorem duties are high not because non ad-valorem duties are applied but because the respective industries are vulnerable.

Uruguay Question 5

Could Japan comment on paragraph 69 which express that the stated aims of state trading include stabilizing supplies to consumers, controlling imports to assist domestic producers and protection of consumers’ interests?


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The existence of the State Trading Enterprises (STE) is recognized by Article 17 of GATT. We ensure that the activities of each State Trading Enterprise are consistent with WTO provisions by reporting them to the working party on STEs, which reviews their consistency in respect to the relevant provisions such as “in accordance with commercial considerations”.

Uruguay Question 6

Could Japan comment on paragraph 6 that express that agriculture accounts for a small and declining share of GDP, about 1.3% in FY1998, and the OECD estimates indicate that the total transfers to agriculture were higher than the sector’s value-added during the period 1990-1998 (Table IV.1)?

Response to Uruguay Q. 6 regarding the importance of agriculture

Japan believes that the importance of agriculture cannot be evaluated simply by its share in GDP.

Uruguay Question 7

In relation to paragraph 9, could Japan explain why the average applied MFN tariff for agriculture (WTO definition) was 18.2% in FY2000 compared with an overall average of 6.5%, and why some 16% of duties applied to agricultural goods were non-ad valorem?


The current tariff level was determined through trade negotiations in the past bearing in mind individual country’s geographic and natural condition as well as various situations of each product. The out-of-quota tariff level of products, which were tariffied as a result of Uruguay Round, was set on the basis of the difference between domestic and external price of each product.

In considering the tariff level of products, it is necessary to give full consideration to the importance of maintaining agricultural production at a certain level and the multifunctional role of agriculture as well as the past trade negotiating history.

Uruguay Question 8

Could Japan comment on paragraph 12 that notes that “According to the authorities, an increase in rice imports is unlikely?

Uruguay Question 9

Could Japan comment on the press release dated October 20, 2000 (Kyodo News International Inc), which express that, according to government sources, “Japan is considering a proposal to shelve its promise to open its rice market gradually in order to protect Japanese rice farmers from cheap imports”?


The Secretariat Report quoted the MAFF online information which stated that “the tariff equivalents are calculated based on the difference between internal and external prices, therefore, a large increase in rice imports doesn’t seem to happen.”


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MAFF online information explained the view that whereas Japan has set the applied out-of-quota duty on rice as 351.17.yen/kg from April 1999 faithfully in accordance with the Agreement on Agriculture, the tariffication doesn’t seem to cause a large increase of imports, since this tariff based on price difference will be added to the external price when import rice enters the domestic market.

UNITED STATES

U.S. Question 1

What is the GOJ’s assessment of the prospects for economic growth in the coming year? How does the GOJ intend to respond if the economy slows as some analysts have projected?

Response to U.S. Q. 1

The Japanese government compiled A Policy Package for New Economic Development toward the Rebirth of Japan in October this year. Our goal is to place the Japanese economy on a self-sustained recovery path and to reform the structure of the Japanese economy suitable for the 21st century. The Government intends to actively implement the new package to accomplish this goal.

As for the Economic Outlook for FY 2001, we will be engaged in its estimation toward the end of this year, and therefore, we are not in a position to present specific figures at this moment.

U.S. Question 2

The report says that some members of the Bank of Japan Policy Board believe that low-cost of credit acts as effective subsidies to companies, allowing them to waylay their problems and continue operations. Please provide more information about the types of low-cost credits that are provided. Specifically, who is eligible for these credits? Are these credits directed at specific industries? Are any of these low-cost credits contingent on companies’ export performance?

Response to U.S. Q. 2 regarding Japan’s monetary policy

In previous Monetary Policy Meeting held by the Ban of Japan, some members have pointed out that the zero-interest rate policy might reduce corporate incentives to promote structural adjustment, as mentioned in the U.S. question.

However, the Bank of Japan has never discussed the relationship between the corporate structural adjustments and the “low-cost credit system”, the meaning of which is not clear to us.

The Bank of Japan conducts monetary policy with the primary attention being given to the economic conditions as a whole.

U.S. Question 3

Footnote 12 of paragraph 10 states that it is expected the GOJ will have to inject further funds into various corporations in order to grow the economy. The Export-Import Bank of Japan (JEXIM) is mentioned as one of the possible companies that would need such “subsidies.” Please explain the means through which JEXIM would receive an injection of funds. What companies or industries would be eligible for funds from JEXIM?


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The question states that the GOJ will have to inject additional funds into public entities "in order to grow the economy." We are afraid that this statement is induced by an inaccurate footnote mentioned in the secretariat report. The JEXIM, or its successor, the Japan Bank for International Cooperation (JBIC), has never received such injection of additional funds in the context of the ¥5 trillion subsidies for state-run infrastructure not for any other project announced by the GOJ in 1999. Furthermore, the JBIC will not receive such funds in the near future. Therefore, no industries or companies benefit from such funds from the JEXIM or the JBIC.

U.S. Question 4

The Industrial Revitalization Law (IRL) was only briefly mentioned in this report. Can the GOJ please provide more details about the IRL and its implementation, as well as its effects on trade or its expected effects on trade? Which industries have received funding from the IRL? Are there plans to revise and/or build on this law?

Response to U.S. Q. 4 regarding the Japanese IRL

The Industrial Revitalization Law (IRL) facilitates the efforts by the firm to re-allocate and re-utilize management resources, through such measures as reducing procedural and tax burdens on corporate restructuring. The following measures are available to any firm, regardless of its business sector, as long as its business-restructuring plan meets the conditions clearly stipulated by the IRL.

- Exemptions of Commercial Law requirements in regard to administrative procedures associated with divestiture and goodwill transferring

- Simplification of inspection requirements in the case of investment in-kind

- Introduction of the system for transferring debt in a package

- Raising the upper limit to the amount of preferred stock in the case of debt for equity swaps

- Support for management buy-outs and employee buy-outs by facilitating stock purchases by managers or employees

- Tax measures such as providing a longer period to carry forward loss (increase from 5 years to 7 years), reducing the Registration and License Tax, accelerating depreciation allowances (18%-30%),and deferring the transfer tax.

The IRL includes no measures on imports or exports. Although the IRL is expected to contribute to overall productivity growth, we expect that it will have no effect on trade.

As of Nov. 14, 2000, the IRL as been applied to 57 business restructuring plans. As the IRL is not a sector-specific law, applicant firms belong to various business sectors: manufacturers (including steel, machinery, textile and food processing) and services (including banking, transportation and broadcasting)

There is no plan to revise and /or build on this law.


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U.S. Question 5

We commend the efforts of Japan’s corporate sector to restructure and regain profitability. What is the GOJ doing to support and foster these efforts, particularly to encourage steps to trim excess capital in certain sectors, including steel, and boost low capacity utilization rates?

Response to U.S. Q. 5 regarding what efforts are being made by the Government of Japan to support corporate restructuring

The Japanese Government has been facilitating corporate restructuring through the Industrial Revitalization Law and through such measures as removing the ban on holding companies and revising the corporate law. These measures are not sector-specific. (Firms in the sectors mentioned above can apply for these measures.)

U.S. Question 6

In 1999 the Development Bank of Japan (JDB) extended credit to several steel companies when Japanese private commercial banks significantly reduced lending to industrial clients, including integrated steel producers. Such lending raises concerns about government financing to mature private industries. Can you provide us with information about these loans and what role the JDB continues to play in financing the steel industry and other mature industries?


In 1999 the Development Bank of Japan (DBJ) loaned 29 billion yen to the steel industry. However, this represents a significant reduction compared to 1998.

The role of the DBJ is to supplement market-based finance for the purpose of supplying public goods/quasi-public goods or encouraging the private sector to supply public goods/quasi-public goods through providing policy-based finance and it is not a main concern for the DBJ loan programs which sector the debtor belongs.

U.S. Question 7

The report states that with reference to cartels in Japan “...the number of exemptions under the AMA (and other laws) dropped from 89 in 1996 to 22 in 2000." In the footnote to this sentence, it says that “cartels on exports by exporters and trade associations” are one of the remaining 22 exemptions.” Please provide details about how this sort of cartel operates, including which exporting industries are exempt. Has the GOJ (or the Japan Fair Trade Commission) written any studies on said cartels?

Response to U.S. Q. 7 regarding export cartel

Export cartels under the Export and Import Transaction Law are exempted from application of the Anti-Monopoly Act in cases where exporters and exporters’ trade associations need to organize export cartels in order to make export transactions methodical.

There have been no export cartels under the Export and Import Transaction Law since Jan 1999.

U.S. Question 8

The GOJ has traditionally supplied subsidies for the Employment Adjustment Subsidy program (EAS) under which subsidies are for “...financial subsidies to help companies overcome temporary demand shortfalls.” We are concerned by this program, as it does not stimulate either new employment creation nor facilitate the


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movement of workers out of declining sector and into new industries. Moreover, the government assistance scheme for hiring by new start-ups in high unemployment areas is very bureaucratic and cumbersome, resulting in the fact that most of the funds allocated/budged for this program go unspent.

U.S. Question 9

Can you please provide more information on these subsidies and give specific examples of when they are used? Is there a time frame under the EAS after which said subsidies will be suspended?

Response to U.S. Q. 9 regarding the Employment Adjustment Subsidy

The Employment Adjustment Subsidy is a subsidy of part of workers’ wages paid to employers who try to secure employment of their workers. Recently, admidst socio-economic changes, sectors whose business situations have worsened over a long-term period due to structural factors are excluded from the Employment Adjustment Subsidy. This exclusion is performed in line with the policy that it is important not only to maintain employment but also to promote labor mobility. This subsidy is being discussed in relevant deliberative councils in the review of the direction of employment policy in response to changes in economic and industrial structures.

U.S. Question 10

In 1999, the GOJ announced plans to reform the public pension system, including increases in contribution, reductions in benefits and an increase in the age eligibility. Have these plans been clearly articulated since then? In particular, has the GOJ decided how to fund a revamped public pension system that could include even more government subsidies?

Response to U.S. Q. 10 regarding pension reform

A bill to reform the pension system was enacted in March 2000. As a result of pension reform, the Government believes that the contribution rate of the Employee's. Pension Insurance in the future will be restrained to approximately 20% of annual income and the system will be kept stable over the long term. The Government thinks that raising the share of government outlays to the basic pension from one third to 50% has to be considered together with the measures to find stable financial sources, because an enormous amount of financial resources will constantly be needed under the severe financial conditions.

U.S. Question 11

We note that GOJ plans to introduce defined-contribution pension plans keep getting delayed. In addition, under the current draft bill, the limits on tax-advantaged contributions seem low, administrative costs seem high, and there are no provisions for investor education. What are the prospects for passage of the bill? Does the GOJ have any plans to consider additional revisions to the system?

Response to U.S. Q. 11 regarding defined contribution pension plans

The bill to introduce Defined-Contribution Pension Plans was approved by the Cabinet and submitted to the Diet on 14 November 2000. The Government will continue to make efforts to introduce the scheme as soon as possible. It took more than two years to draft this bill after deliberation including hearing opinions from the industrial sector, financial sector and elsewhere. Thus, the Government considers that the scheme to be introduced is the best one at this moment.

U.S. Question 12


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What are the GOJ’s plans related to the establishment of private pension funds? Does the GOJ have plans to allow kampo and yucho to offer their own defined-contribution pension products? If so, how does this fit in with the GOJ’s commitment to deregulation and to stay out of services that the private sector can provide?

Response to U.S. Q. 12 regarding private pension funds

The Government regards private pension funds as a supplement to the public pension, and will continue to make efforts to promote them.

In the Defined-Contribution Pension scheme, all kinds of financial products, including kampo and yucho, will be treated as a defined-contribution pension product. Insured persons will benefit from competition among many financial products in the scheme.

U.S. Question 13

We welcome GOJ efforts to pursue regional trade pacts in a manner that will strengthen, not undermine, the WTO trading system. As noted in their own TPR report (para 10), Japan believes it is indispensable to ensure that regional trade agreements are complimentary to the multilateral system and consistent with its rules. However, we remain concerned that Japan’s policy of protecting sensitive sectors will hamper its ability to form agreements that will encompass substantially all trade between nations, as required by WTO rules. How is Japan moving to liberalize trade in currently protected sectors, and what liberalizing steps does Japan believe it will need to take in order to encompass “substantially all trade” in such agreements with trading partners? Will Japan include all agricultural products in future FTA pacts? What transition periods are being considered? What other countries is Japan exploring FTAs with?

Response to U.S. Q. 13 regarding FTA

- Regarding an agreement with Singapore, such matters as steps to be taken in order to encompass "substantially all the trade" and transition periods would be decided in future negotiations, which are to commence next January, ensuring consistency with WTO rules.

- As to agreements with other countries, only a decision to negotiate with Singapore has been taken so far. As has been said in our governmental report, the possibility and desirability of free trade agreements are being examined by non-governmental sectors in the case of Korea and Mexico.

U.S. Question 14

The use of administrative guidance makes the operation of significant parts of Japan's trade policy non-transparent. While the introduction of public comment procedures prior to the adoption of some regulations has improved the transparency of some policy making, the system is still limited in both its applicability and its effectiveness. Can Japan outline its plans for expanding the public comment procedures, making it more effective, and enacting it into statute?

Response to U.S. Q. 14 on how Japan will expand its public comment procedures

It is quite essential to understand that the Government of Japan makes great effort to improve transparency of administrative guidance based upon Administrative Procedure Law.

However, the reasons have to be clarified, if the U.S. Government insists that, “the system (public comment procedures) is still limited in both its applicability and its effectiveness.”


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Japan continues to conduct public comment procedures for formulating, amending and repealing regulations, and problems in the system are expected to be clarified in accordance with a survey on application of the system. Therefore, no enlargement of areas or legislation of public comment procedures are not being considered.

U.S. Question 15

How will Japan’s administrative reform plans, set to be implemented in January 2001, alter its trade policy formulation and implementation procedures? What will be the newly-created Cabinet Office’s role in trade policymaking?


Reorganization of national administrative organs will take effect in January, 2001. For example, the Ministry of Posts and Telecommunications and the Japan Fair Trade Commission will become the Ministry of Public Management, Home Affairs, Posts and Telecommunications, Ministry of Health and Welfare – Ministry of Health, Labour and Welfare, Ministry of International Trade and Industry – Ministry of Economy, Trade and Industry, Ministry of Construction and Ministry of Transport – Ministry of Land, Infrastructure and Transport. However, the trade policy formulation and implementation procedures will basically remain unchanged.

Generally speaking, the Cabinet Office assists the Cabinet on its important policy matters.

U.S. Question 16

Could you clarify Japan’s intentions with regard to the introduction of “cost-benefit and regulatory impact analyses” (RIA)? We certainly support Japan’s adoption of an RIA and have called on Japan to introduce such a system under the U.S.-Japan Enhanced Initiative. We note that Japan is introducing a Policy Evaluation System, which will become effective in January 2001.

Response to Question 16 on Japan’s intentions with regard to the introduction of cost-benefit and regulatory analysis.

In formulating regulations, based upon the principle of minimum regulation, the Government of Japan believes that the relevant ministry and administrative organisation in charge of legislative, budgeting or administrative system should examine such regulations.

The necessity, benefit and burden placed on the people by regulations have to be considered and clarified in examination. These considerations must be conducted properly.

Japan continues to collect information and data to evaluate regulations and implement those evaluations that are feasible.

Furthermore, basically, public comment procedures are applied to formulating, amending and repealing regulations and Japan promotes appropriate implementation of this system.

U.S. Question 17

When the USG and the GOJ established the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy in 1997, the two governments agreed that “The progress under the Enhanced Initiative will be reported to the leaders of the two countries since the strengthening of dialogue on deregulation is


Trade Policy Review

based on the decision between the leaders of Japan and the United States, and the promotion of deregulation and active implementation of competition policy are issues of major importance to the GOJ.” With the Enhanced Initiative in its fourth year, can we expect the GOJ to fulfill this commitment by cooperating with us to write a Fourth Joint Status Report, as has been done in all previous years under this initiative?

Response to U.S. Q. 17 regarding Fourth Joint Status Report

The issue of writing a Fourth Joint Status Report will be discussed between the Government of Japan and the US Government in due course.

U.S. Question 18

The United States has urged Japan to improve its Customs recordation and information submission procedures to make it easier for foreign rightholders to avail themselves of protection from Japan’s Customs authorities. Further, concerns have been raised over the need to aggressively enforce the interdiction of infringing articles. Please provide additional information on Japan Customs’ border control efforts; the number of cases resulting in imprisonment since last year and the actual sentences; and the dollar amount of fines actually imposed.

Response to U.S. Q. 18 regarding IPR enforcement

Japan’s recording and information submission procedures are fully compatible with the TRIPS Agreement and do not burden rightsholders with any additional procedures. Japan’s customs authorities are duly enforcing laws and regulations aiming at the interdiction of infringing articles. One additional example of our efforts in border control is that we sometimes invite people in charge of IPR matters from rightsholders as lecturers and hold training sessions for customs officials, supplying a sufficiently detailed description of infringing articles to make them readily recognizable to customs officials.

Japanese customs disposed of 103 cases regarding the infringement of intellectual property rights during the period from January 1999 to June 2000, three of which were prosecuted for violations of the Customs Law.

A guilty verdict was returned on all three cases, and the defendants were punished with a 2 1/2-year imprisonment on probation; 1.3 million yen in fines; and a 10-month imprisonment on probation with a fine of 400 thousand yen, respectively.

U.S. Question 19

The U.S. has long been concerned at the time it takes to clear goods for entry into the Japanese markets. Part of the delay is due to Customs procedures. However, the principal factor is the “hozei” system whereby all goods must be subjected to a complete reconciliation or “match-up” against documents before they can be released from the bonded area. This involves a lot of double and even triple handling. Is there any prospect for modifying this system in the interests of streamlining clearance procedures (e.g., by allowing post facto reconciliation)?

Response to Q. 19 regarding border control

The reconciliation or “match-up” is required to ensure appropriate clearance.

It should be, however, part of normal business operations that an agent managing goods in its warehouse (designated as a hozei area) checks accuracy of handling the goods.


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Since the above reconciliation requirement is within the scope of such checking operations, Japan does not believe that the requirement itself causes an additional delay.

The Japanese Customs has been addressing trade facilitation through various measures including simplification of customs procedures. As the result, according to the survey conducted in 1998, the average clearance time was 0.2 days for maritime cargoes and 0.7 hours for air-cargoes respectively. In addition, Simplified Declaration Procedures are introduced in March 2001 as referred to in the Secretariat Report.

U.S. Question 20

The Secretariat’s report states that complaints regarding valuation or other customs measures must be filed within two months of importation. In the United States, importers have three months after Customs makes its final decision regarding the value and duty status of an article (called “liquidation”) to file a protest. This final decision by Customs may take place more than two months after importation. In regard to the description of Japanese customs practice in this regard, does Japanese Customs always make its decision (value or otherwise) within two months of importation? If not, does the importer have the right to file a complaint more than two months after importation in those instances?

U.S. Question 21

Japan states that it is continuing to bring its standards into line with international counterparts. Various industries in our country still find it difficult to identify when a standard is proposed in Japan and do not understand the Japanese process. Can you explain the process which Japan undertakes to adopt these international standards? Does it include a public comment period? If so, where are these changes notified?


Public announcement is made to provide for a comment submission period (at least 60 days) before establishment and revision of JIS, based on Article 4.1 and Annex 3 of the WTO/TBT Agreement.

Information is addressed to domestic and foreign readers of Standardization Journal (monthly magazine) issued by the Japanese Standards Association.

U.S. Question 22

Also, Japan states that “some international standards are not appropriate to be adopted as JIS because of technological progress and regional characteristics.” The United States supports adoption of international standards which meet the needs of an industry or government, but it is unclear what Japan is referring to in this statement. Can you please explain this statement further, including the reference to “regional characteristics”?


Japan is merely referring to the “flexibility” existing in Article 2.4, 5.4, and Annex 3 F of the TBT Agreement, such as the clause “…except when such international standards or relevant parts would be an ineffective or inappropriate means for the fulfillment of the legitimate objectives pursued, for instance because of fundamental climatic or geographical factors or fundamental technological problems“ as in Article 2.4. In the recent TBT Committee, as evidence of the widely shared view on this flexibility, WTO Members, including the United States, agreed to adopt the Second Triennial Review report, which includes a paragraph (paragraph 21), saying that “…In this regard, the Committee recognized that Articles 2.4 , 5.4 and paragraph F of Annex 3 provided Members with the flexibility to avoid having to use inappropriate or ineffective


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international standards as the basis for their technical regulations, standards and conformity assessment.”

U.S. Question 23

Japan cites that a new grading system for foreign products was introduced in June 2000. Can you please explain this new system and if it also applies to domestically produced products? If not, why not?


Under the Japanese Agricultural Standard system, the way to attach JAS Mark labels to imported agricultural products in Japan is as follows, and it also applies to domestically produced products:

A Registered Grading Organization in Japan or a Registered Foreign Grading Organization (limited to the organization whose office is located in the country recognized, on the Ministerial Ordinance, to have a grading system equivalent to the JAS system) carries out grading in accordance with the JAS standards and attaches the JAS Mark labels to the products;

The foreign producers or manufactures certified by a Registered Certification Organization in Japan or a Registered Foreign Certification Organization (limited to the organization whose office is located in the country recognized, on the Ministerial Ordinance, to have a grading system equivalent to the JAS system) carry out grading in accordance with the JAS standards and attach the JAS Mark labels to their products.

U.S. Question 24

The U.S. notes with interest that no foreign inspection bodies have been designated by MITI for testing based on the MITI standards and certification system. Have any foreign inspection bodies applied? If so, what is the status? If they were not approved, can you explain why not?


Some of the standards and certification systems of MITI have already designated 50 foreign conformity assessment bodies and have accepted test data or certificates since 1984.

U.S. Question 25

How does the GOJ reconcile the continued existence and possible expansion of the kampo (postal insurance) and yucho (postal savings) systems, in light of deregulation in the financial services area? We would also note that the report neglects to point out that these institutions are exempt from Japan’s Antimonopoly Act and other government oversight to which private insurers are subject.

Response to U.S. Question 25 regarding the postal insurance/saving system

The postal savings system holds around 20% of household financial assets, and this ratio has remained stable in recent years. Given recent growth in financial product diversity at private financial institutions and an expansion in the scope of investment opportunities for depositers, it is unlikely that there will be a sizeable increase in the outstanding balance of the postal savings system.

284* Note: Page 110, paragraph 118, the "official programs for a legal apprentice" refers to an official legal programme for a person who passed the Japanese bar examination.


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The Japanese postal savings system plays the public role of providing small-lot individual savers with equitable basic financial services that are indispensable to people's lives. They are made available all across the country, including in unprofitable areas where private financial institutions do not operate. Therefore, the Government of Japan is of the opinion that the postal savings system should continue to carry out its given mission.

The Postal Life Insurance (Kampo) system operates based on the objectives of Article 1 of the Postal Life Insurance Law (to stabilize the economic livelihood of people and to secure their welfare by providing them with easily accessible life insurance and annuities at the lowest possible premium through efficient operation) and enjoys vast support from the Japanese people.

The Government of Japan considers it important to fulfill the duties assigned to it by the Japanese people, and to meet their expectations.

U.S. Question 26

The report states that “more emphasis has been placed on economic efficiency in Japan’s energy policy, as observed in various deregulation measures implemented since its previous Trade Policy Review.” Can the GOJ document greater economic efficiency achieved as a result of deregulatory steps in the energy sector thus far?

Response to U.S. Q. 26 regarding the liberalizing of electricity supply

On March 2000, the revised Electric Utility Industry Law was enforced, and partial liberalization of electricity supply at the retail level was introduced in Japan’s electricity market. Since June 2000, three new entrants filed notifications as specific-scale electric enterprises. Furthermore there are some companies that are considering entry this business. There will be an active trend of new entrants in the near future. Some public agencies enforced public tenders for purchasing electric power. DIAMOND POWER CO. LTD., a new entrant, made a successful bid on MITI’s public tender. The electricity cost of public agencies that enforced public tenders compared 4 to 9% down with electricity cost before public tender. We are now investigating the electricity cost through partial liberalization of electricity. Additionally, the regulated retail charge was cut 5.42% on ten electric power companies’average. Also transmission fees were cut 7.3% on ten electric power companies’average. On the basis of these facts, we believe that the new system is effective for making Japan’s electric industry more efficient.

General gas suppliers can supply gas to large-volume customers beyond their service area by obtaining prior permission from MITI .

Other gas suppliers (other than general gas suppliers) can also supply gas to large-volume customers by obtaining prior permission from MITI (in the case of entering service areas of general gas suppliers) or prior notification to MITI (in the case of entering non-service areas).

The share of the liberalized area of the total volume of gas consumption provided by general gas suppliers is increasing:

1995 1999

28% 33%

The above facts indicate the economic efficiency has been achieved as a results of deregulatory steps in the


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gas sector.

U.S. Question 27

The Secretariat report mentions MITI’s regulatory role in the energy sector in paragraph 20. No mention is made, however, of MITI’s regulatory role after the GOJ reorganizes in January 2001. The USG understands that new regulatory bodies for electricity and gas, respectively, will be established in MITI. What is the Ministry doing to ensure these bodies are fully independent of the policy and industry promotion divisions of MITI? What is MITI doing to ensure that the staff in these new bodies have sufficient expertise and numbers to effectively regulate these industries?

Response to U.S. Q. 27 regarding MITI’s regulatory role

From January 2001, the Policy Planning Division will carry out the function of policy, the Electricity Market Division will carry out the function of electricity regulation and the Gas Market Division will carry out the function of gas regulation. The Electricity Market Division and the Gas Market Division will focus exclusively on the function of regulation. The total number of staff of these divisions will be increased and these divisions’ expertise will be improved. Additionally, the Agency of Natural Resources and Energy has a certain degree of independence, so a considerable number of this division’s staff will acquire a career in the energy sector. These divisions will be clearly independent in terms of funding, and the Electricity Market Division and the Gas Market Division will be clearly independent from Japan’s electricity and gas market participants.

U.S. Question 28

This section implies that Japan’s electric and gas utilities are no longer full regional monopolies. However, we are not aware that such a significant change has yet occurred. What share of Japan’s retail electricity and gas are provided by non-utility firms? Given this, what evidence is there to date of any meaningful deregulation in the small portion of the market (27 percent) actually deregulated?

Response to U.S. Q. 28 regarding the deregulation of electric and gas utilities

Since the enforcement of the revised Electric Utility Industry Law on March 2000, it has been possible to supply electricity for special high voltage users by new entrants. The share of the electricity supply for the special high voltage users is about 30% of total electricity usage in Japan. Since June 2000, three new entrants have filed notifications with MITI as specific-scale electric enterprises. Currently, two of these three new entrants have started to operate electricity businesses, with total generating capacity of these two new entrants at 87,200kW.

Regulations on entry and rate setting of gas suppliers for large volume customers have been partially liberalized.

Large-volume customers can freely negotiate their gas prices with their suppliers (1995).

The range of a large-volume customer (a customer whose annual contract volume exceeds a certain level) has been expanded:

Two million cubic meters (1995)

One million cubic meters (1999)


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General gas suppliers can supply gas to large-volume customers beyond their service area by obtaining prior permission from MITI (1995).

Other gas suppliers (other than general gas suppliers) can also supply gas to large-volume customers by obtaining prior permission from MITI (in the case of entering service areas of general gas suppliers) or prior notification to MITI (in the case of entering non-service areas)(1995).

The share of the liberalized area of the total volume of gas consumption provided by general gas suppliers is 33%(1999).

The share of the liberalized area of the total volume of gas consumption provided by other gas suppliers (other than general gas suppliers) is 2.51%(1999).

The number of other gas suppliers (other than general gas suppliers) of large-volume gas suppliers is 5 companies, and the total volume is 189,390,000m3/46MJ.

U.S. Question 29

According to the report, Japan has promoted deregulation in the electricity sector to promote competition. By doing this, the GOJ “aims to realize internationally comparable cost levels in 2001.” Is this objective still within reach? If not, does this suggest Japan must move more quickly to deregulate this important sector? Hasn’t liberalization of wholesale power generation been limited to auctions?

Response to U.S. Q. 29 regarding deregulation in the electricity sector

MITI recognizes that structural reform, which aims to lower the cost of electricity supply through the introduction of competition, is still incomplete and has the intention of accelerating appropriate competition in the electricity market.

After the enforcement of the revised Electric Utility Industry Law in 1995, Wholesale Power Generation Auction System was introduced. After the enforcement of the revised Electric Utility Industry Law in March 2000, the Overall Thermal Power Generation Auction System was introduced. In principal, under this new system even new thermal power stations can be built by both utilities and EPDC (Electric Power Development Company), and these projects should be tendered.

U.S. Question 30

Along with partially liberalizing the retail supply of electricity in Japan, MITI has committed to implementing and enforcing rules on transmission rate calculations, fair, transparent and non-discriminatory access to transmission lines and other terms and conditions that were established in December 1999. The USG, however, understands that rate calculations remain unnecessarily opaque (and high by international standards), which is discouraging potential competitors from entering the electricity market. Does MITI plan to take additional steps to remedy this problem?

Response to U.S. Q. 30 regarding the electricity market

A unified rule has been stipulated by a ministerial ordinance in order to ensure that the wheeling charge is calculated on an equitable basis and thereby exclude lopsided competition between new entrants and utility companies. In this way, fair charging is ensured by making the wheeling charge for the new entrant comparable to the transmission cost incurred by the utility company. Before ordinances are established, wide-ranging public comments are collected in order to increase its transparency. It is specified that the


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Minister can order a transmission rule to be modified if it is deemed to disadvantage new entrants. Moreover, the Ministry has the authority to order electricity companies to wheel electricity for new entrants in such a situation.

In collaboration with the Fair Trade Commission of Japan, MITI has established Guidelines for Fair Trade of Electric Market in order to ensure a fair and competitive market. MITI also published Guidelines on Settlement of Dispute, which allow anyone to complain of unfair trade practices to MITI, and the case reports will be published. The other Guidelines stipulate that all necessary information must be discussed to new entrants in order to ensure an environment for fair competition.

GOJ is making every effort to promote equitable competition through the appropriate operation of the existing system.

U.S. Question 31

The report notes that Japan “aims to realize internationally comparable cost levels in the gas sector by the year 2001.” Is this objective still within reach? How can this objective be achieved without establishing laws and regulations that would allow open and non-discriminatory access to both new and existing Liquified Natural Gas (LNG) terminals, which are primarily owned by regional electricity companies?

Response to U.S. Q. 31 regarding deregulation of the Gas Market

Structural reform of the gas market is underway with a view to realizing internationally comparable cost levels in the gas sector by the year 2001. MITI is currently giving consideration to what policy measures must be promoted to further advance this process.

Electric and gas utility laws do not regulate LNG terminals in Japan. Third party access to LNG terminals can be secured through agreement negotiated by private enterprises.

U.S. Question 32

Foreign companies continue to be concerned that they will be tapped yet again to contribute more to the Policyholder Protection Fund to cover future failures of Japanese insurance firms. How firm is the GOJ’s commitment to inject public funds in the event that the fund is again depleted?

Response to U.S. Q. 32 regarding the Policyholder Protection Fund

The Government intends to inject public funds into the Policyholder Protection Corporation, namely, the successor of the Policyholder Protection Fund, in the event that the costs for the protection of policyholders with policies belonging to bankrupt insurance companies exceeds the burden of the private sector (560 billion yen). The budget, including injections of such public fund, must be approved by the Diet, but the GOJ will make the utmost effort to realize this.

U.S. Question 33

As referenced in paragraph 53, the Japanese postal system will become a public corporation in 2003. What specific steps will the Government of Japan (MPT) take to ensure that plans for this transition are devised and implemented in as open and transparent a manner as possible? Will public hearings be held? Will plans be subject to public comment procedures? Will interested foreign entities be afforded equal opportunities to participate in any study groups, etc., created to provide input to MPT during the process?


Trade Policy Review

Response to U.S. Question 33 regarding the transition of the Japanese postal system to a public corporation

The Postal Life Insurance (Kampo) system operates based on the objectives of Article 1 of the Postal Life Insurance Law (to stabilize the economic livelihood of people and to secure their welfare by providing them with easily accessible life insurance and annuities at the lowest possible premium through efficient operation). New legislation for the establishment of a public corporation will be determined based on discussion in the Diet, which reflects various public opinion, in much the same way as Postal Life Insurance products are developed and improved.

U.S. Question 34

The Financial Services Agency (FSA) has indicated that they support further transparency in and deregulation of the insurance product and rate approval system. What are FSA’s plans in this regard? Regarding the statement that “life and non-life insurance companies may enter each other’s markets only by means of subsidiaries,” we understand that as of July 1, 2001, FSA will allow “direct mutual entry” for sales of third sector insurance products. Is this correct? If so, how will the current regulations be modified to allow this to occur? What is FSA’s timeline for this? Will foreign companies be afforded equal opportunities to provide input into this process?

Response to U.S. Q. 34 regarding transparency and the entry into the third sector

As for the insurance products for corporations, the notification system was introduced in principle in August 1999. On the other hand, the notification system is applicable to a part of the insurance products for individuals. FSA is considering further deregulation, taking into account the protection of policyholders. The processing standards are clearly stated in the Insurance Business Law and the relevant Cabinet Orders so that the highly transparent processing is conducted based on the laws.

With regard to the entry into the third sector by life and non-life insurance companies, a restriction contained in a bilateral agreement on insurance with the U.S. (so-called “a measure to avoid radical change”) and in the additional commitments in the financial sector under the GATS is to be lifted in January 2001. FSA expects the insurance market in Japan to be revitalized by the new entrants into the third sector. “Direct mutual entry” is to be allowed from July 1, 2001, as pointed out by US. It is necessary for interests of policyholders to be protected in accordance with the nature of the third sector, and FSA is planning to prepare necessary rules applicable to insurance products in third sector by that time.

When new rules are introduced, we need to go through the public comment procedures and the hearing in the Financial System Council. FSA is considering hearing opinions from various people, especially the policyholders and would-be policyholders in the third sector, by following the routine procedures with regard to the rules-making in the this sector.

U.S. Question 35

The key fact emerging from the overview in this section is the remarkable fact that NTT, in 1999, still controls 87.5% of Japan’s domestic telecom revenue–despite the fact that Japan’s market has ostensibly been fully open to competition since 1985. We suspect that no other industrialized country with a market open to competition has such a degree of monopolization.

U.S. Question 36

If a competitive marketplace is a goal of the Japanese government, this result would appear to indicate Textual Content © WTO, 1999 & 2000; CD-ROM © WTO & Bernan, 2002

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regulatory failure.

U.S. Question 37

The overview notes the MPT’s dual role as promoter of the telecommunications sector as well as regulator. This is at the heart of our serious concern with Japan’s regulatory regime in this sector: policies which are designed to promote telecommunications in Japan (ISDN, 3G wireless, fiber to the home, flat-rate Internet) appear to be designed to solidify NTT’s monopoly position in the market rather than promoting competition.

U.S. Question 38

Since industrial promotion and regulatory impartiality are often incompatible, almost all major telecommunications markets have established independent regulators. This also helps shield the regulator from political pressure exerted by the incumbent.

Regulatory Framework

U.S. Question 39

Is Japan considering establishing an independent regulator? If not, why not? How does the GOJ ensure that regulation is impartial?

Response to U.S. Q. 39 regarding independent regulators

As for an independent regulator in the telecommunications sector, the Reference Paper of the Fourth Protocol to the GATS stipulates, "The regulatory body is separate from, and not accountable to, any supplier of basic telecommunications services." and Japan has abided by this rule.

U.S. Question 40

Does the GOJ have a mechanism for settling disputes among carriers or responding to carriers’ problems regarding interconnection rules?

Response to U.S. Q. 40 regarding a mechanism for settling disputes of interconnection rules

Article 39 of the Telecommunications Business Law stipulates that a telecommunication carrier may apply to the Minister of Posts and Telecommunications for opening negotiation or arbitration in case negotiations regarding interconnection between telecommunications carriers fails to come to an agreement.

U.S. Question 41

How does the GOJ ensure that the policy changes it is undertaking effectively promote competition, as envisaged?

Response to U.S. Q. 41 regarding the competition principle in the telecommunications sector

The competition principle was introduced in 1985 in the telecommunications sector. Since then, 8500 telecommunications operators have entered the market. Competition among carriers has been promoted through the introduction of diverse access networks and arrangement of the interconnection rule and deregulation of foreign ownership restrictions and market entry.


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U.S. Question 42

Is the Government of Japan concerned about the way NTT exerts its political influence to advocate its interests, and how that affects the regulator’s impartiality?

Response to U.S. Q. 42 regarding NTT's political influence

Consistent with the Agreement on Basic Telecommunications of WTO, the regulatory body in Japan (Ministry of Posts and Telecommunications) is separate from, and independent of the supplier (NTT). The decisions of and the procedures used by the Ministry of Posts and Telecommunications are impartial with respect to all market participants.

U.S. Question 43

One indication of the ability of a regulator to regulate effectively is its willingness and ability to take measures to address anti-competitive abuses of incumbents. Has the MPT ever fined NTT for anti-competitive acts? Has it sanctioned NTT in any other way? If not, why not?

Response to U.S. Q. 43 regarding MPT regulation of NTT

The NTT Law and the Telecommunications Business Law stipulate that a penalty shall be imposed if an entity violates a directive to change anti-competitive rates, to improve its business, and violations against approval and authorization. NTT has neither violated the law nor received any administrative disposition from the Minister of Posts and Telecommunications.

U.S. Question 44

Where a government owns a substantial stake in the telecom operator, there is a clear incentive not to take action that could affect the business interests of this operator–which, in this case, include maintenance of its monopoly. Full privatization is the only clear way to remove that potential conflict of interest. What progress has Japan made toward privatizing NTT? What plans does the Government of Japan have to review the requirement that it maintain a 33% ownership in NTT?

U.S. Question 46

What is the status of the Government of Japan’s review of the structure of NTT?

Response to U.S. Q . 44 and Q. 46 regarding the policy of the GOJ toward privatization of NTT

1. The NTT Law obligates the Government of Japan to hold a certain share of the NTT Holding Company in order to prevent domination of management of NTT and abuse of shareholders’ rights by any specific parties, in light of the fact that NTT was established with the public objective of ensuring the provision of universal service and promoting research and development.

2. Active discussions involving various views are under way in the Telecommunications Council in order to determine the most desirable pro-competitive policy and the best organization for NTT.

U.S. Question 45

What progress has Japan made in developing dominant carrier regulations to better discipline NTT?


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Response to U.S. Q. 45 regarding dominant carrier regulations in Japan

Active discussions involving various views are under way in the Telecommunications Council in order to determine what is the most desirable pro-competition policy in the telecommunication sector.

In these discussions, various opinions have been expressed from interested domestic and foreign entities that a fair competitive environment should be established and competition should be promoted by introducing dominant carrier regulation.

The Ministry of Posts and Telecommunications recognizes that the introduction of dominant carrier regulation is an important issue in light of competition policy. The Ministry of Posts and Telecommunications is going to deal with this issue based on the first Telecommunications Council report, to be issued at the end of this year.

U.S. Question 47

How has the GOJ followed up on the findings in the JFTC study group report that the enhanced competition expected from the reorganization of NTT has not materialized? What does the GOJ think explains this conclusion?

U.S. Question 48

In light of this conclusion, is the GOJ taking any additional steps to comply with the competitive safeguards provision of the WTO telecommunications reference paper?

Response to U.S. Q. 47 and Q. 48 regarding the JFTC study group report

The Government of Japan would like to refrain from giving any comments on the report from JFTC since it is authorized by the Government of Japan.

U.S. Question 49

What percentage reductions in interconnection rates does Japan currently foresee introducing within the next year? Within the next two years?

Response to U.S. Q. 49 regarding reductions in interconnection rates

The Third Joint Status Report on the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy states that GC interconnection charges will be reduced by 22.5% and ZC interconnection charges will be reduced by 60.1% in 3 years gradually. Regarding the percentage reductions, it is considered that alternation of interconnection agreement by NTT East and NTT West will be applied in December 2000 in accordance with the related law and ordinances enforced on November 18, 2000.

U.S. Question 50

Permitting all carriers to build, buy or lease facilities in any combination necessary to facilitate business maximizes innovation and competition. What steps has Japan taken to increase market competition by liberalizing resale/unbundling and co-location restrictions?

Response to U.S. Q. 50 regarding liberalization resale/unbundling and co-location restrictions


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The rule regarding the unbundling of the subscriber lines (announced publicly and implemented on 12 September 2000), and regarding the collocation (announced publicly on 13 September, and implemented on 1 October 2000) was established by the amendments of the Ministerial Ordinance of MPT. Then, NTT East and NTT West applied for the authorization on the alternation of the articles of their interconnection agreements to the MPT on 20 October 2000.

U.S. Question 51

Does the GOJ have any definite plans for pro-competitive policy reform aside from introducing LRIC-based interconnection pricing and promoting network diversity? If so, what are the policy changes that you are considering? How soon do you expect to implement these changes?

Response to U.S. Q. 51 regarding plans for pro-competitive policy reform

As one of the pro-competitive policies, the Government of Japan is opening telephone poles and ducts and facilitating the laying of lines on public land and facilities such as roads.

U.S. Question 52

Improving the delivery of international legal and other professional services is essential if Japan is to develop as an international business and financial center. It is important that Japan address the aspects of its legal system that are limiting the ability of Japanese and foreign businesses to obtain in Japan the high quality and fully integrated international legal services that they find in London, Hong Kong, New York and other major financial centers.

U.S. Question 53

The Regulatory Reform Committee recommended in 1999 that the Ministry of Justice examine the removal of the ban on partnerships between gaiben and bengoshi. When does the Ministry of Justice (MOJ) plan to issue recommendations related to the removal of this ban? The Regulatory Reform Committee also expressed the concern that the ban on gaiben employing bengoshi does not have a rational basis. What is the MOJ response on this issue?

U.S. Question 54

Five years ago, Japan established the “specified joint enterprise” system rather than allow foreign lawyers to enter into partnerships with or hire bengoshi. This system has numerous deficiencies and does not have an adequate substitute for allowing partnerships. As of August 2000, only ten specified joint enterprises have been created, and the foreign law firms affiliated with these ten enterprises comprise less than one-fourth of the foreign law firms with offices in Tokyo. What plans does Japan have to allow freedom of association between gaiben and bengoshi?

Response to U.S. Q. 53, Q. 54

According to the final revision of the Three-Year Program for Promoting Deregulation decided on by the Cabinet on March 31, 2000, "From the viewpoint of providing an environment where citizens and corporations can receive overall, comprehensive legal services concerning both Japanese and foreign law, the Japanese government will give consideration to whether some measures, including the review of regulations on the objectives of specific joint enterprises, are required so that fully integrated legal services based on a comprehensive cooperation between Gaikokuho-Jimu-Bengoshi and Bengoshi may be provided in all cases".


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Therefore, the government of Japan is continuing examination of specific joint enterprises to assess whether there are any points that may be improved.

The Regulatory Reform Committee is totally different from the government authorities in concept. It is a type of council those opinions are given from various viewpoints and as reference by the government and not as an ultimate decision.

Therefore, the recommendation of the Regulatory Reform Committee are not the direct opinion of the government.

The MOJ believes that it cannot permit Gaikokuho-Jimu-Bengoshi to employ a Bengoshi since this would cause serious problems for our qualification system.

U.S. Question 55

Japanese and foreign businesses in Japan have inadequate access to legal services because there are too few lawyers to serve them – one-seventh the proportion in France, the next-lowest of the G-7 economies. We understand that plans are underway to increase the number of lawyers in Japan significantly. How quickly will Japan increase the proportion to be commensurate with other major economies?


According to the final revision of the Three-Year Program for Promotion Deregulation decided on by the Cabinet on March 31, 2000, “Concerning an increase to about 1,500 of successful applicants of the Bar Examination, our Government continuously researches and examines improvements of the training program or methods as well as conditions for receiving those successful applicants as legal apprentices, and will come to a conclusion and take necessary action, taking into consideration the conclusions reached by the Judicial Reform Counsel (JRC) which will take into account the various opinions of the general public.”

In addition, at the JRC meeting held on this August 2000, a discussion was held on the numbers in the legal profession and, as our target hereafter, have, for the most part, agreed on the point that we are systematically and as early as possible going to secure approximately 3,000 new lawyers, paying due attention to improvements in the new legal training system including the realization of Japanese-style law schools now under consideration.

Our government will work on this matter appropriately and quickly taking into account the deliberations of the JRC.

U.S. Question 56

The report notes that information technology is intensifying the pace of globalization. The United States and Japan share a strong interest in stimulating investment and growth in information technology. We both also support the G-8 Okinawa Charter on the Global Information Society, part of which calls for facilitating cross border e-commerce by promoting further liberalization and improvement in networks and related services and procedures in the context of a strong World Trade Organization framework, continued work on e-commerce in the WTO and other international fora, application of existing WTO trade disciplines to e-commerce and continuing the practice of not imposing customs duties on electronic transmissions. What concrete steps is Japan taking to bring these things about?

Response to U.S. Q. 56 regarding electronic commerce


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Electronic commerce is a new and powerful medium which will enhance the benefit of global trade. To maximize the benefit of global e-commerce, it is important to establish an e-commerce friendly and reliable policy environment on a global scale. To this end, the WTO should play a central role in facilitating cross border e-commerce. However, e-commerce has an impact on many issues, such as trade in goods, services, trade-related intellectual property rights and developmental aspects. Therefore, it is important to discuss these things in a balanced and coherent manner. In light of this, we believe that it is appropriate to establish a horizontal task force (“HTF”) in the WTO to analyze how this new medium would affect all WTO disciplines. In this context, we appreciate the fact that APEC members have agreed on the establishment of an ad hoc analytical taskforce in the WTO that would examine how WTO rules are relevant to the evolution of electronic commerce.

U.S. Question 57

The report notes that the mission of the WTO has been and will be achieved through dialogue and negotiations within a rule-based multilateral trade system the enhancement of standards of living. What does Japan think should be done to further demonstrate the mutually reinforcing relationship between labor standards and trade liberalization?


While Japan fully recognizes the importance of proper labour standards, Japan believes that the issue on the relationship between labour standards and trade should not be used for disguised protectionism or for denying comparative advantage of developing countries. Japan also believes that we should deal with this issue, properly taking account the position of developing countries.

U.S. Question 58

The report notes that Japan has proposed to implement tariff-free and quota-free treatment under its preferential scheme for essentially all products originating in least developed countries. What is the status of this proposal?

Response to U.S. Q. 58 regarding reform of GSP


U.S. Question 59

Japan has completely eliminated customs tariffs on all information technology products covered in the information technology agreement. What sort of product expansion for further duty elimination does Japan support?

Response to U.S. Q. 59 regarding further duty elimination by Japan

Japan implemented the following tariff elimination initiatives as a result of the UR: Pharmaceuticals, Construction Equipment, Medical Equipment, Steel, Beer, Furniture, Agricultural Equipment, Distilled Spirits, Chemicals (Harmonization) ,Toys.

Japan also eliminated customs tariffs on products covered by the Agreement on Trade in Civil Aircraft

U.S. Question 60


Trade Policy Review

We are very concerned with the lack of reference to any labor market policies in the GOJ submission. In our view, barriers to labor mobility (i.e., the difficulty in re-allocating human resources from one firm or industry to another) are among the largest impediments to structural change in the Japanese economy.

Response to U.S. Q. 60 regarding trends in the Japanese Labor Market

The Law for Securing the Proper Operation of Worker Dispatch Undertakings and Improved Working Conditions for Dispatched Workers and the Employment Security Law were amended in 1999, and Japanese authorities have carried out deregulation in private employment placement projects and worker dispatching undertakings with special attention to protection of workers’ rights.

Japanese authorities also endeavor to support reemployment of middle-aged and older workers through, for example requesting employers and organizations of employers to be more flexible regarding age requirements for job vacancies, because of the important need to realize a society where workers who have the will and ability can work, regardless of their age.

Concerning restriction on the dismissal of workers, in the Labour Standards Law there is no basic stipulation which limits the reasons for dismissal, but established judicial precedents do function as a limitation on dismissal. We consider that new legislation for dismissal is not appropriate, since dismissal, whose reasons and circumstances are various, is a subject discussed by labour and management in response to specific circumstances in consideration of judicial precedents.

U.S. Question 61

What plans does the JFTC have to more vigilantly monitor potentially problematic business practices in the photographic film and paper market, including various forms of retaliation and intimidation of retailers that sell or use non-Fuji products?


The JFTC has been making efforts to grasp the actual conditions of the photographic film and paper markets, and will continue to watch business practices in these business fields. The JFTC will vigorously apply the laws when violations of the Antimonopoly Act are detected.

U.S. Question 62

In September 1998, the JFTC issued a warning to the Photosensitive Materials Manufacturers Association and its members to cease their exchange of production, sales, and inventory data, which the JFTC found to constitute a potential AMA violation. What follow-up action will the JFTC take regarding this warning?


The photosensitive materials markets have been monitored under Section 8-4 of the AMA concerning measures against a monopolistic situation and under Section 18-2 of the AMA concerning measures against a parallel price increases . The JFTC has been watching the business practices and will continue to monitor them.

U.S. Question 63

The Regulatory Reform Committee and its predecessor, the Deregulation Committee, were established by the Prime Minister's "Administrative Reform Promotion Headquarters" -- i.e., the RRC does not have a legal


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foundation as did the original reform body, the Administrative Reform Committee. The recent political intervention delaying implementation of liquor licensing deregulation suggests that until its role is supported by legislation, the Regulatory Reform Committee will continue to be vulnerable to political interference, thus weakening the deregulation program. Is it likely that under the new three-year deregulation initiative, the powers of the Regulatory Reform Committee will be strengthened through legislation?

Response to U.S. Q. 63 on the likelihood that the RRC will be made more powerful

The organisation, mandate. etc. of the body to promote regulatory reform in the near future is under consideration.

U.S. Question 64

The GOJ recently established two additional groups, one named the "Industrial Rebirth Committee" and the other called the "IT Panel," which we hope will foster healthy debate and innovative ideas that can affect change in all segments of the Japanese economy. What authority do these committees have to ensure that their recommendations and suggestions are enacted?

Response to U.S. Q. 64 on the authority of the “Industrial Rebirth Committee” and the “IT Panel”

Both the “Industrial Rebirth Council” and the “IT Strategy Council” were established and have been held by the Prime Minister. Their outcomes will be submitted directly to the Prime Minister, who will decide what measures are appropriate to be taken by the Government of Japan.

U.S. Question 65

What are the GOJ's plans regarding deregulation for the next three years given that the "Three-Year Program for Promoting Deregulation" is set to expire at the end of March 2001? What is the GOJ doing to ensure that the proposals included in the Three-Year Program are being implemented?

Response to U.S. Q. 65 on the steps to be taken by the Government of Japan to ensure that proposals in the three-year program are implemented

The Government is to draft and adopt The Three-Year Program For the Advancement of Regulatory Reform by the end of FY 2000.

This program shall be drafted based upon such things as a report of the Regulatory Reform Committee expected by the end of this year, and the details of the new program are to be considered.

Also, firm implementation of the program is secured, because the schedule of respective items is clearly stated and a follow-up survey on measures relevant to respective items shall be conducted.

U.S. Question 66

The GOI has established income stabilization measures for wheat, barley, rice, and soybeans. The stabilization measures, however, appear to continue to insulate domestic producers from market signals. How does Japan intend to increase the productivity of its farming sector when its policies continue to isolate producers from the economic factors that yield increases in efficiency and productivity?

Response to U.S. Q. 66 regarding price policy changes


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Japan has been implementing reviews of the price policies for main agricultural products such as rice, wheat and soybeans, so that prices appropriately reflect the real supply/demand situation and market evaluation of quality from the viewpoint of promoting agricultural production that meets consumer demands.

In addition Japan has introduced a safety net for farm management (in other words, direct income support), to mitigate the adverse effects of price fluctuation.

These policy changes have been made in order to introduce market mechanisms into the pricing of agricultural products. Japan thinks these changes will promote agricultural production responding to countries’ needs, and also encourage producers to make further efforts to improve the quality of their production and the productivity.

U.S. Question 67

What, if any, new agricultural policy measures does Japan envision in the coming year? Will the thrust of these measures be to reform price policies for other agricultural commodities, thereby lowering the existing burden on Japanese consumers? Are new income support programs for farmers envisioned? What steps is Japan taking to ensure that the programs will be consistent with the provisions in Annex 2 of the WTO Agreement on Agriculture?


For example, the new Basic Law, in its article 30,while directing price policy reform to allow prices to reflect supply/demand situation and quality evaluation, describes the necessity of "taking measures for mitigating the adverse effects of significant price changes of farm products on farm management".

These possible new measures will be in any way consistent with the commitment of Japan under the WTO rules and disciplines.

U.S. Question 68

Could Japan provide estimates of the taxpayer costs associated with its new policy measures? How do the costs for the new measures compare with previous years' taxpayer outlays for agriculture?


The expenditure associated with the new policy measures cannot be estimated since total budget for agricultural policy was reviewed so as to implement the new Law.

U.S. Question 69

The report indicates that one goal of its new Plan for Agriculture is to increase the food self-sufficiency ratio by 2010.

What proportion of the inputs used in agricultural production (e.g., machinery, fertilizer, fuel) are imported? If domestic production of agricultural products were to increase, what would be the impact on imported agricultural inputs?


Proportion of imported inputs domestic supply (A) imported (B) B/A


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Machinery (99 calendar year) 480 (billion yen) 23 5%

Fertilizer (99/00 fertilizer year) 1,442 (1000 N, P205, K20 ton) 874 61%

The use of agricultural inputs will naturally be increased If domestic agricultural production increase. However, it’s not predictable whether the share of imported inputs will increase.

U.S. Question 70

Does this mean that Japan intends to maintain or raise its border protection or expand its domestic production through additional domestic support measures in order to achieve this objective?


Based on Article 15 of the Basic Law on Food, Agriculture and Rural Areas, the target for the food self-sufficiency ratio was set in the Basic Plan for Food, Agriculture and Rural Areas determined by the Cabinet, after hearing opinions from the Council of Food, Agriculture and Rural Area Policies.

The Basic Plan outlines challenges with which consumers and farmers must contend. The target self-sufficiency ratio in the Basic Plan is expected to be achieved in the event that those challenges are met by the target year (FY2010). Issues and preconditions described in the Basic Plan include the following:

- Desirable Food Consumption" will be accomplished if food consumption in FY2010 meets the following conditions:

a. Regarding nutritional balance, the ratio of calories supplied by fat declines to the appropriate level for public health.

b. Regarding the ratios of each commodity, consumption of glycolipids (carbohydrates) is expected to increase with the steady consumption of grains, including rice, while consumption of food containing fat is expected to decline.

c. Food waste and leftovers are expected to be reduced.

- "Agricultural production Targets" will be accomplished on the following assumptions:

a. The percentage of total food consumed supplied by domestic agricultural production will only rise if more consumers and the food industry choose domestically produced farm products.

b. Consequently, issues such as the improvement of productivity and quality that are specified for respective commodities in the Basic Plan are expected to be improved in order to attract consumers.

Improvement in the food self-sufficiency ratio is intended to be realized through the efforts of all the people concerned, such as farmers, members of the food industry, consumers, local governments and the State. Needless to say, the Japanese Government will implement

U.S. Question 71


Trade Policy Review

The report notes that consumer taste appears to be shifting away from rice to livestock products and products with higher fat content and that the government intends to develop a campaign to encourage consumers to review dietary patterns. Does the government intend also implement new measures that would restrict consumer choice of food products as part of this endeavor?


The government never intends to implement new measures that would restrict consumers’ choice of food products.

However, in order to realize the coming aging society with healthy and active people, it is necessary to maintain a well-balanced diet with appropriate intake of fat. It is also important to reduce food waste and leftovers to make effective use of food and avoid adverse effect on the environment.

To this end, the government will be engaged in the following activities:

- prepare and disseminate a guideline for healthy dietary patterns,

- establish a comprehensive plan that specifies health improvement goals and relevant policies, on which national campaign to promote public health will be based,

- promote activities of relevant organizations relating to healthy dietary patterns, and

- provide the general public with information on the situation of food consumption and the supply of farm products, and/or the relationship between food consumption and dietary patterns.

U.S. Question 72

Japan characterizes a "decline in the food self-sufficiency ratio" as a problem, rather than just the result of international trade along the lines of comparative advantage. Does Japan advocate the return to "self-sufficiency" by its trading partners for the industrial products that Japan exports?

Response to U.S Q. 72

Japan supports the idea of improving self-sufficiency ratio on food, based on several reasons. First, it is essential to note the different characteristics of agricultural products compared to industrial goods. As agricultural goods are vital for human life and subject to irregular change of climate, the maintenance of food security is of great importance to every country. It is, therefore, necessary to maintain a certain level of food self-sufficiency ratio for each country: based on such understanding, Japan has set forth its own self-sufficiency ratio for agricultural products.

Second, the past negotiating history of agricultural goods in the multilateral trade negotiations should be duly considered. The importance of food security is explicitly stipulated in the WTO Agreement on Agriculture (see its preamble). Having taken into account the above-mentioned difference in characteristics between agricultural and industrial goods, a set of rules, namely the WTO Agreement on Agriculture, was established, separate from normal GATT rules.

As for specific policy measures to improve food self-sufficiency level, the ratio of food self-sufficiency could rise only if consumers and the food industry prefer to choose domestically produced farm products. An appropriate level of domestic agricultural production that corresponds to the self-sufficiency ratio target is


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expected to be achieved if all relevant issues, such as improvement of productivity and quality to attract consumers and the food industry, are solved through the efforts of relevant parties including farmers.

In order to determine a target for food self-sufficiency ratio, Japan does not intend to change its trade policies. Its primary focus will be set on improving various elements including improvement in productivity and quality of food. It is needless to mention that the government will ensure its policies’ consistency with international rules in implementing relevant measures to improve self-sufficiency on food.

U.S. Question 73

What is the meaning of the statement in the report concerning agriculture (para. 92), ... people's expectations for agriculture and rural areas have been on the rise"? How are these expectations measured? Are there published measurements that show a change in expectations over recent years?


According to the opinion poll by the Prime Minister's ffice in July of 2000, about 80% of the people in Japan feel anxious about the food supply in Japan, and more than 80% of the people in Japan think that even if the price of domestic food is higher than imported food, Japan should produce food as much as possible while making efforts to reduce their costs. This tendency has been on the rise every time the survey was conducted. (1987: 71.2% ? 1996: 83.4% ? 2000: 84.2%)

U.S. Question 74

Similarly, what is the meaning of the statement that "there has been an increasing demand that the agricultural sector should fulfil its multifunctional role?" What evidence exists to document this? What methodology was used to measure the "increasing demand?"


According to the opinion poll by the Prime Minister's Office in July of 2000, majority of people in Japan think agriculture play various roles besides production and supply of food. Multifunctionality of agriculture such as preservation of the natural environment, land conservation, fostering of water resource and food security shares high percentage as such roles.

And also according to this opinion pole, large number of people, more than 90% of the people in Japan think that agriculture with its multifunctionality should be maintained toward the future. Furthermore almost 90% of the people in Japan agree with the idea that maintenance and fulfilment of the multifunctionality of agriculture is necessary.

U.S. Question 75

With respect to the Basic Plan adopted in March 2000, the statement is made that the plan calls for review of the price policies for major products in such a way as to make them properly reflect supply/demand situations. Does this mean that there will be a major reform in the price policies that affect domestic rice production and consumption?


With UR Agriculture Agreement as a turning point, Japanese government abolished the Food Control Law and enacted the Staple Food Law in 1996 and implemented the New Rice Policy in 1998.


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As a result of that, the rice distribution, which had been under the control of government for more than half a century, has been drastically changed into market-oriented system where voluntarily marketed rice has become the main route of distribution without restriction on price formation. With abolishment of support policy, the Rice Farming Income Stabilization Program has been introduced, which the government assists to the loss compensation program by private sector which makes a fund for price decline of voluntarily marketed rice.

The Basic Plan reaffirmed the necessity to ensure that the price should be determined by supply-demand situation and quality evaluation, in order to make production respond to consumers demand properly. In line with the Basic Plan, the Action Program describes specific measures to be promoted in the near future for rice; 1) enhancement of price formation reflected supply-demand situation for voluntarily marketed rice; 2) promotion of the Rice Farming Stabilization Program.

U.S. Question 76

Do these figures account for the "mark-up" on the import price that Japan imposes in sectors like cereals and dairy? What is the cost to consumers of these "mark-ups"?


It seems that figures are averaged applied tariff rates to out-of-quota imports, therefore a mark-up which is collected by state trading enterprises (STEs) for sales of in-quota imports may not be accounted for.

While mark-up level differs from variety, quality and market condition, selling prices of STEs are set properly reflecting quality deference between domestic and imported products and market conditions, within the upper limit of mark-up which Japan committed in its Schedule.

U.S. Question 77

Does Japan anticipate any changes in its border protection for agricultural products as a result of its new Plan? If so, please provide details.

Response to U.S. Q 77

Japan has been faithfully implementing its UR commitments. Although the Basic Plan does not envisage any changes in border measures, all the measures Japan takes is consistent with international rules including its UR commitments.

U.S. Question 78

Does Japan anticipate any reduction in the implicit tax on consumer as a result of its new Plan? Please provide details.


Border protection is one reason that Japanese consumers paid, on average, more than twice as much as they would have paid in the absence of Japan’s agricultural programmes, and, according to the report, this implicit tax on consumers may have risen in recent years.

Does Japan anticipate any reduction in the implicit tax on consumers as a result of its new Plan? Please provide details.


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All the measures Japan takes is consistent with international rules including its UR commitment.

U.S. Question 79

The report notes that improvement in WTO transparency must be pursued expeditiously. We would be interested in Japan's views on improving transparency beyond activities such as further de-restriction of documents, and more timely release of dispute panel reports, which Japan has supported.

Response to U.S. Q. 79 regarding transparency

Japan’s views on WTO transparency are as follows: Japan believes that improvement of internal and external transparency is important. Regarding internal transparency, it is important, for example, to improve the preparatory process for the Ministerial Conference and negotiation process, through such measures as coordination between the informal consultation process and open-ended meetings, and clarification of the roles played by the Director-General and the Secretariat. Regarding external transparency, it is important to promote a better understanding of the WTO’s activities through such means as improvement in de-restriction procedure of WTO documents and building constructive relations with NGOs.

U.S. Question 80

The report notes that measures have been taken concerning labor market polices. Do these measures include the ILO Convention 105 on forced labor and ILO Conventions III on discrimination? If not, when might they be ratified?

Response to U.S. Q. 80 regarding core labor standards

In light of the fact that at the first WTO Ministerial Meeting held in Singapore in 1996, it was reaffirmed that the International Labour 0rganization is the competent body to set and deal with core labour standards, Japan believes that this is a matter that should be discussed at the ILO.

Regarding the Abolition of Forced Labour Convention (No. 105) and the Discrimination Convention (No.111), Japan intends to continue to consider this matter.

U.S. Question 81

The U.S. notes that Japan still maintains a number of non-ad valorem duties, particularly on imports of agricultural products, and that these translate into very high ad valorem equivalents (AVE's) where such equivalents have been calculated, Japanese authorities have not provided AVEs for about a third of non-ad valorem duties, representing a serious transparency issue. Does Japan plan to move away from non-ado valorem duties for agricultural products? Does Japan intend to calculate AVEs for all non ad-valorem duties?


There are no calculated AVEs for about a third of non-ad valorem duties because of the lack of import records.

Instincally, ad valorem duties are proportionate to price (or value), while specific duties are proportionate to quantity (or volume). Ad valorem duties may amplify the effect of price fluctuations but specific duty is more neutral against them. We do not think specific duties tend to be less transparent and less predictable than ad valorem duties. So we are not considering to convert specific duties to ad valorem.


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U.S. Question 82

The report notes that each procuring entity maintains its own list of registered suppliers. Does each procuring entity establish its own requirements for suppliers to become registered?

Response to U.S. Q. 82 regarding the requirements on suppliers imposed by procuring entities

At present, each procuring entity establishes its own requirements for suppliers to register. However, unified qualification for registered suppliers and a list of such suppliers are scheduled to be introduced on April 1, 2001 regarding procurement of goods and services by central government entities, except for public works.

U.S. Question 83

Can you explain why the trend in foreign share of government procurement continues to fall?

Response to U.S. Q. 83 regarding the foreign share of Japanese government procurement

The trend in the foreign share of government procurement in terms of the contract value is not falling; rather it has been rising in recent years.

As the report by the Secretariat (WT/TPR/S/76) clearly indicates, the ratio of foreign suppliers in Japan’s government procurement was 5.6% in terms of value in 1998, compared with 4.7% in 1997 and 4.1% in 1996.

U.S. Question 84

Regarding the history of complaint fillings under the Office of Government Procurement Review and the Board, does this figure include the most recent complaint which was field in July of 2000? Given that only two complaints have been field, why does Japan believe that so few suppliers have utilized the bid challenge process?

Response to U.S. Q. 84 regarding the low number of complaints filed under the Office of Government Procurement Review

Since the establishment of the Office of Government Procurement Review and the Government Procurement Review Board, two complaints have been filed to the Board, which includes the recent complaint filed in July 2000. Pursuant to Article 20 of the WTO Agreement on Government Procurement, the Board encourages consultations between a complainant and a procuring entity before a complaint is filed. Therefore, it is quite reasonable to assume that complaints, if any, have been settled through such consultations. Together with the natural consequence of the effort to ensure transparent, fair and non-discriminatory tendering procedures by the Government of Japan, this is also the reason why only two complaints have been filed to the Board since the establishment of the challenge procedure under the GPA.

U.S. Question 85

According to this report, the Complaint Review Board "acts as an intermediary" in the event that a complaint exists between a supplier and a procuring entity, and that, as a result of the Board's involvement, "many complaints have been resolved through consultation." Please indicate the percentage of complaints that have been resolved in this manner, whether foreign suppliers have been party to such consultations, and if so, whether complaints field by foreign suppliers have been resolved with the same success as those filed by domestic suppliers.


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Response to U.S. Q. 85 regarding the Japanese Complaint Review Board

The Government of Japan does not have any statistical figures regarding the percentage of complaints that have been resolved through consultations.

Regardless of whether or not foreign suppliers are party to certain consultations, all complainants are able to enjoy impartial treatment under Japan's challenge system, whose consistency with the GPA is fully ensured.

U.S. Question 86

Regarding the statement that authorities of the Board encourage "consultation between a complainant and procuring entity" prior to the filing of a complaint, please describe how Japan encourages parties to engage in consultations in a timely manner.

Response to U.S. Q. 86 regarding the manner in which Japan encourages timely consultations among the parties to a complaint

Pursuant to Article 20 of the WTO Agreement on Government Procurement, the Board encourages any supplier who has a complaint on Government Procurement to seek resolution through consultation with the procuring entity. The Board also encourages the procuring entities to accord impartial and timely consideration to any such complaint, in a manner that is not prejudicial to obtaining corrective measures under the challenge system.

U.S. Question 87

Please indicate how long it takes to resolve a complaint through the consultation mechanism, and what type of complaints are brought to the Board for consultations. Have any complaints not been resolved that have been brought for consultation to the Board?

Response to U.S. Q. 87 regarding the time needed to resolve complaints and the outcome of complaints brought to the Board in the past

It is outside of the scope of Japan's commitments under the GPA to establish such consultation mechanism. Therefore, there are no particular rules that the supplier should report the result of the consultation with the procuring entities to the Government Procurement Review Board. Thus the Government of Japan is not able to predict how long it takes to resolve a complaint through the consultation. Japan's challenge system, whose consistency with the GPA is fully ensured, guarantees non-discriminatory, timely, transparent and effective procedures. Under this system, any suppliers can challenge alleged breaches of the GPA arising in the context of procurement in which they have, or have had, an interest. Since the establishment of the current system, two complaints have been filed, and both cases have been closed.

U.S. Question 88

The report states that "according to the authorities, the procuring entitles of public works are required to decide proper and clear criteria for, inter alia, the selection of construction works undertaken by joint ventures and the organization of joint ventures by contractors." Please indicate what "proper and clear criteria" are used for the selection of works to be undertaken by joint ventures, and for the organization of joint ventures by contractors. Are these criteria made available and if so, where? How does Japan ensure that these criteria are not applied in a manner to disadvantage foreign suppliers?

Response to U.S. Q. 88 concerning criteria for the utilization of joint ventures by procuring entities


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Each procuring entity of public works, based on the recommendation of the Central Council for Construction Contracting Business, decides criteria for the utilization of joint ventures on its own responsibility.

The above-mentioned recommendation provides that these criteria should include rules such as the following: contractors should organize joint ventures of their own free will, and construction works executed by joint ventures should be large-scale and have technological difficulty.

With regard to public works to which the WTO Agreement on Government Procurement applies, each procuring entity conducts procurement based on the principle of non-discrimination, including the selection of construction works undertaken by joint ventures and the organization of joint ventures by contractors.

U.S. Question 89

Concerns have been raised by our industry regarding Japan's apparent failure to provide protection against unauthorized temporary copying of works of sound recordings. The TRIPs Agreement incorporates Article 9 of the Berne Convention, which states that rightholders 'shall have the exclusive right of authorizing the reproduction of [works and sound recordings], in any manner or form.' reproduction 'in any manner or form' appears to include temporary reproduction. Therefore, please confirm whether or not Japan provides protection against such reproduction if unauthorized.

Response to U.S. Q. 89 concerning protection against unauthorized temporary copying of works or sound recordings

Article 21 of the Copyright Law of Japan grants to authors the exclusive right to reproduce their works in a manner consistent with Article 9 of the Berne Convention. Japan, therefore, fully complies with obligations under the TRIPS Agreement.

U.S. Question 90

We are concerned about Japan's imposition of a single, rigid evidentiary requirement for joint authorship. This policy is particularly prejudicial to authors from the United States and other countries where authorship statements on published sheet music have no legal effect and do not conform to any prescribed set of rules. This requirement also appears to be a mere formality that hampers the enjoyment and exercise of copyright rights, which is inconsistent with the TRIPs agreement. In light of Japan's international obligations and prevailing international practice, does Japan plan to review its policy on joint authorship?

Response to U.S. Q. 90 concerning Japan's policy on joint authorship

Japan protects copyrights appropriately in accordance with international rules in the field of copyrights.

U.S. Question 91

As indicated in the WTO Secretariat's Report, Japan has taken important steps to improve the protection of patents. While we are pleased by these efforts, the U.S. remains concerned with several aspects of Japan's patent administration, including the relatively slow process of patent litigation in Japanese courts, and the lack of adequate protection for confidential information produced relative to discovery. Please describe Japan's actions to address these concerns.


In order to deal with cases concerning intellectual property rights properly and promptly, the judiciary has


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taken measures such as establishing sections specializing in this field at the Tokyo District Court and the Osaka District Court, increasing the number of judges and court officials belonging to these sections and introducing a specialized mediation system in which experts participate. The judiciary will continuously take necessary actions in order to resolve these cases more properly and promptly.

The Judicial Reform Council which was established under the Cabinet has taken up the matter of “coping with the cases requiring expert knowledge” and has also agreed, for the most part, on the point that it is necessary to reinforce the specialized sections and let experts participate in actions concerning intellectual property rights.

Japan has a system under which an order to produce documents can be issued in the Code of Civil Procedures as means of producing evidence. However, the holder of a document in which technical secrets are written may refuse the production of that document. Thus, confidential information is adequately protected in Japan.

U.S. Question 92

According to the report, Japan's copyright law was amended with a view to comply with the WIPO Copyright Treaty. Key provisions of the revised law include criminal penalties for producing and distributing devices designed to circumvent copyrights. We remain concerned that the penalties for copyright circumvention devices will seldom be applied since the law covers only devices whose sole purpose is circumvention. Focusing only on devices whose sole purpose is circumvention will make your anti-circumvention law too easy to evade if protection-defeating functions can safely be packaged with other components that have innocent purposes. What steps is Japan taking to address this concern?

Response to U.S. Q. 92 concerning regulation of copyright circumvention devices

Japan appropriately amended the Copyright Law in 1999, in order to comply with the WIPO Copyright Treaty. The revised Law regulates a device having a principal function for the circumvention of technological protection measures etc., as does the US legislation.

U.S. Question 93

The report notes that in January 2001, the JFTC will become part of the Ministry of General Affairs, which also includes regulators of telecommunications services. What actions does the GOJ plan to take to ensure that the JFTC's independence in antimonopoly enforcement and in the promotion of competition policy will be preserved?

Response to U.S. Q. 93 regarding how the Government of Japan will ensure the independence of the JFTC

The AMA clearly secures the independence of the Chairman and Commissioners in enforcement or policy decisions and guarantees their status in order to ensure the JFTC’s independence and neutrality after the government reorganization .The Act also provides that the Chairman and Commissioners are appointed by the Prime Minister and approved by the Diet, as is the current situation. Thus the independence and neutrality of the JFTC are guaranteed.

We do not think any action is needed to preserve the independence and neutrality of the Chairman and Commissioners in enforcement or policy decisions because the AMA clearly provides for their independence and neutrality.


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U.S. Question 94

What is the JFTC doing to ensure that officials responsible for monitoring electricity and gas deregulation and for enforcing the AMA in these sectors have sufficient expertise?

Response to U.S. 94

JFTC has actively conducted survey and submitted proposals for deregulation in the electricity and gas sector. JFTC continues to conduct survey and submit proposals like that.

U.S. Question 95

According to the Report, in May 2000, the Antimonopoly Act was amended to permit private parties to seek a court injunction against violators engaged in certain "unfair trade practices." Please explain why serious antimonopoly violations, such as monopolization and price-fixing and market allocation agreements, were not covered by these amendments and when the GOJ will seek to extend private injunctive remedies to this serious conduct as well.


In view of the newly established injunctive relief system, it is important chiefly for that system to be introduced smoothly and to function. For that purpose, it is appropriate that the subject of that system must be acts which best correspond to civil litigation and whose existence is easily proven.

Unfair trade practices easily correspond to civil litigation because they are related with daily trade. As such the victims can easily recognize the parties engaged in those activities and their damage is likely to appear on specific individuals.

Moreover, there are likely to be many cases in which the victims can easily prove the existence of illegal acts ( unfair trade practices ) since it is often the case that the person concerned is familiar with the fact in detail and the case in which the person concerned can easily get evidence.

On the other hand, monopolization and cartel practices such as price-fixing and market allocation often do damage to many members of the general public. Hence, it is unlikely that civil litigation by specific victims will be brought. Furthermore, cartels are usually conducted with secrecy. That is why it is very hard for an individual to prove the existence of illegal acts such as cartels.

From the reasons stated above, it is best that the initial subject of the injunctive relief system be unfair trade practices.

At last, we might consider adding serious antimonopoly violations, such as monopolization and price-fixing, to the target of the injunctive relief system in the future if it is needed as a result of change of economic situation.

U.S. Question 96

The competitive analysis of mergers and acquisitions, including stock acquisitions, is often very complex, and requires significant staff resources in order to conduct such an analysis fully and expeditiously. How can the JFTC analyze the transactions reported to it in a sound and expeditions manner with a total staff in the responsible division of less than 20 people?


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Response to U.S. 96 regarding the workings of the JFTC

To respond to the increasing number of M&A cases, from the viewpoint of ensuring more efficient and flexible enforcement, the Anti-Monopoly Act was amended to reduce the scope of reporting and notification requirements regarding mergers and stockholding. At the same time, the JFTC, in an effort to enhance the predictability of its interpretation of laws regarding corporate mergers, made public its position on stockholding and mergers cases that restrict competition in a particular field of trade.

In 2000, the JFTC increased the number of staff in the Mergers and Acquisitions Division from 19 to 22. Furthermore, more than 10 staff members in local offices engages in enforcement of the regulations on mergers and acquisitions.

U.S. Question 97

In recent years the JFTC appears to have significantly increased its enforcement activities against firms that engage in "unjust low pricing" in Japan, particularly in the retail liquor, electric appliance and gasoline markets. Please describe how this policy promotes price competition and ensures that pro-competitive pricing practices are not discouraged.

Response to U.S. Q. 97 regarding price competition and price policy

In 1984 the JFTC made the Guidelines Concerning Unjust Low Price Sales, and the JFTC’s enforcement of the unjust low pricing regulation is based on it. In these Guidelines the JFTC made clear the purpose of regulations as follows:

The objectives of regulations concerning unjust low price sales

The purpose of the Antimonopoly Act is to maintain and promote fair and free competition, and to help entrepreneurs devise creative means to provide high-quality, inexpensive products . In this sense, low prices are not considered inherently improper, of course , but on the other hand ,neither are they always looked upon favorably. There is nothing wrong with efficient operations allowing a business to offer inexpensive products, but if a firm cuts prices without any regard for profitability in order to attract customers , such behavior runs counter to the objectives of the Antimonopoly Act and, thus, regulation is required, because when a firm seeks to win away the customers of a competitor by selling a product at below cost - in other words , if it sells a product at a price which could not be maintained indefinitely unless the losses thereby incurred were not compensated for by profits from the sale of other products, or by other sources of funds - that firm is using unfair means of competition. Thus, the purpose of regulations concerning unfair price cutting is to maintain a fair competitive environment, not to protect inefficient businesses which are incapable of providing high-quality, inexpensive products.

U.S. Question 98



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U.S. Question 99

Agreements among distributors not to carry imported products, especially when supported by the efforts of competing domestic suppliers, can restrict competition and distort international trade. These practices need to be deterred through active antimonopoly enforcement and heavy monetary consequences. Please explain the JFTC's enforcement policy with regard to these activities, and the circumstances in which surcharge orders will be imposed on the participants of such group boycotts.


Agreements among distributors not to carry imported products, especially when supported by the efforts of competing domestic suppliers, can restrict competition and distort international trade. These practices need to be deterred through active antimonopoly enforcement and heavy monetary consequences. Please explain the JFTC's enforcement policy with regard to these activities, and the circumstances in which surcharge orders will be imposed on the participants of such group boycotts.

U.S. Question 100

Financial and other ties between producers and distributors in highly oligopolistic industries can, in certain circumstances, have exclusionary effects on the ability of new entrants to successfully compete in the market. Please describe the actions the JFTC plans to take to monitor and examine such ties and to ensure that they are not foreclosing competition from potential new entrants in the Japanese market.

Response to U.S. Q .100 regarding measures taken by the JFTC to monitor highly oligopolistic industries

In order to ensure that fair competition is not restrained the JFTC regularly conducts surveys (e.g. surveys on the six major corporate groups) in order to ensure that business transactions based on capital and personnel ties are not exclusive.

The JFTC continues to conduct surveys and strives to enforce the AMA more aggressively in addressing anti-competitive practices.

U.S. Question 101

There is widespread belief in both the Japanese and foreign industry that the new Large-Scale Retail Store Law leaves local authorities with too much power and too much latitude in dealing with new store openers. How does MITI plan to monitor local implementation of the new law, particularly if implementation is being frustrated locally by unwritten administrative "guidance" and the imposition of "voluntary" guidelines?


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Response to U.S. Q. 101 regarding the New Large-Scale Retail Store Law

MITI has explained to the relevant local governments the purpose and content of the Daiten-Ricchi Ho (the Law) by holding several meetings with prefectures and ordinance-designated (the 12 largest) cities, and has provided officials of such local governments with technical training.

MITI is observing local governments' implementation of the Law to ensure that the purpose of the new Law is not impeded.

Therefore, official contact points (Daiten-Ricchi Ho Contact Points) established within the MITI in Tokyo, and at its eight regional bureaus, are receiving and facilitating resolution of complaints from, and also give advice to, any interested party regarding the application of the new Law.

Under such circumstances, MITI will take appropriate measures, if necessary, based on the Local Autonomy Law, including giving technical advice and recommendations to local governments regarding the implementation of the Law.

U.S. Question 102

There is no mention of medical devices, which is an important sector for foreign suppliers in Japan. What plans does the GOJ have to improve the consistency and speed of the approval process for innovative medical devices?

U.S. Question 103

We remain concerned that the liberalization of vitamins and minerals is a slow-moving process. What are the prospects for additional reform in this markets?

Response to U.S. Q. 102, Q. 103

The Government of Japan re-categorized the previous categories for device applications into three categories in April 2000: "new medical devices;" "improved devices;" and "me-too devices." The Government of Japan has thereby exempted the applications for "new medical devices" and "improved devices" from the equivalence review conducted by the Japan Association for the Advancement of Medical Equipment (JAAME) and requires them to only be reviewed at the Pharmaceutical and Medical Devices Evaluation Center (PMDEC). The MHW makes an effort to conduct examinations in a prompt and consistent manner.

Response to U.S. 103

1. The MHW virtually lifted the regulation concerning the dosage form of products taken orally, including vitamins and minerals, under the condition that such products are labeled as "food." (April 5, 2000)

2. Also, the MHW is working to prepare a guideline for the legal status of dietary supplements and a safety evaluation of their ingredients, including food additives, based on the conclusion reached at the joint session on toxicity and food additives under the Food Sanitation Council held in March 2000.

3. This guideline is intended exclusively for dietary supplements in forms different from ordinary ones, such as capsule-form and tablet-form. The guideline generally follows the concept of the current guideline for designation of food additives. However, for additives having been used in pharmaceuticals, some documents required by the current guideline of food additives would be exempted if these substances have a history of safe use as pharmaceuticals in Japan and if toxicity data used in evaluating these pharmaceuticals is


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determined to be appropriate based on sound science.

4. The MHW announced the draft guideline to the public, giving them the opportunity to submit comments by 15 November. The MHW also explained the guideline to each embassy in Tokyo, including the US Embassy, on 8 November 2000.

5. The MHW has also announced its future schedule to the public. The MHW will report the new guideline to the WTO in late November, revise the related regulations by the end of this fiscal year, and enforce them starting on the first day of the next fiscal year.

In addition, the MHW has announced that many vitamins and minerals have already been permitted for use as food additives in Japan.

U.S. Question 104

The description of the auxiliary services regime does not include continuing problems with restrictions on port activities that the amendments to the Port Transport Business Law do not address. The prior consultation system practiced by the Japan Harbor Transportation Association (JHTA), an association of stevedoring and terminal operating companies gives the group extensive control over port operations that the GOJ is not willing to challenge.

Response to U.S. Q. 104 regarding maritime transport

1. The prior consultation system is not conducted based on the Port Transportation Business Law, but conducted based on the agreement reached among associations related to port transport business including shipping lines, labour unions and companies. Since it is conducted in the private sector, the Government does not intervene in this matter. However, if illegal actions are committed, the Government takes action against them based on laws.

2. In the field of international maritime transport, conferences and other agreements among shipping lines have been exempted from the Anti-Monopoly Act in Japan as they have been in other nations. In order to further promote fair and free competition among carriers as well as to secure a stable supply of oceangoing shipping services, Japan reviewed the previous exemption system and amended the Marine Transportation Law to introduce a new system last year. The United States is invited to refer to the details of the amendment on the website of the Japanese Ministry of Transport.

(http://www.motnet.go.jp/KOHO99/KAIUN.htm)

U.S. Question 105

According to the report, "Japanese authorities claim that there are no discriminatory measures affecting foreign participation in international maritime services." In fact, the waterfront industry is dominated by the JHTA which represents all licensed waterfront stevedores when dealing with the labor unions and determines the working conditions under which the industry operates. Japanese carriers are members of the JHTA through their stevedoring subsidiaries, but foreign carriers have no representation in it. How can the GOJ reconcile these two points?


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Response to U.S. Q. 105 regarding foreign subsidiaries

Each carrier should determine whether or not to have subsidiaries. Each subsidiary should determine whether or not to belong to JHTA. We are in no position to comment on this question.

U.S. Question 106

The prior consultation system set up by the JHTA remains cumbersome and arbitrary. How does the Japanese Government intend to make the process transparent, equitable and timely? Although prior consultations by the JHTA have decreased, why are foreign carriers still required to get JHTA's permission when engaging in minor changes?

Response to U.S. Q. 106 regarding the prior consultation system

The prior consultation system is being conducted in a transparent, equitable and timely manner based on the agreement reached among associations related to port transport business including shipping lines and companies in 1997. Subjects of prior consultation were agreed on by shipping lines at that time.

U.S. Question 107

The amendments to the Port Transportation Law increase the required minimum number of people employed by a stevedore by 150 percent, with the aim of encouraging economies of scale. Doesn't Japan fear that the measure will instead increase labor costs and discourage efficient operation? How will the new minimum manning requirement affect new entrants?

Response to U.S. Q. 107 regarding the new minimum manning requirement

The hike in the minimum standard for regular workers employed is necessary to prevent access to port transport business by illegal and detrimental operators. This hike does not impose an excessive burden on new entrants.

U.S. Question 108

Foreign carriers may now apply for licenses to operate at terminals but labor unions have implied that they will strike if they do. How will the Transport Ministry address this issue and ensure reform in the industry?

Response to U.S. Q. 108 regarding licensing of foreign carriers

The Japanese Government does not have any information on this matter.

U.S. Question 109

The revised Port Transportation Business Law changes the system of prior permission of fees to prior notification of fees, but the GOJ reserves the right to "correct" fees as it sees fit. In what circumstance would fees be corrected? What standards will the GOJ use to regulate fees charged by port companies?


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Response to U.S. Q. 109 regarding the correction of fees

The Minister of Transport can order a change in the fees in cases where they are used to unfairly discriminate against specific users or in cases where they are likely to cause unfair competition among other port transporters.

U.S. Question 110

How will the GOJ address the exorbitant landing fees charged at Japan's airports? What are the GOJ's plans for internationalization of Haneda airport and will the GOJ ask for foreign input to such plans?

Response to U.S. Q. 110 regarding landing fees

As the New Tokyo International Airport Authority (NAA) is an independent corporation, it obliged to make a profit on its own income. At present, NAA is in the red, so we think it would be very difficult to reduce landing charges. NAA and IATA, acting as representatives of users, have agreed on the landing charges at Narita Airport through negotiations. The NAA has not raised landing charges since April 1984. The situation concerning the landing charges is well-known to airlines.

Kansai International Airport is constructed 5 km offshore in order to provide the expected level of international and domestic air transport service without raising noise problem on the local community. Consequently, the cost to construct a man-made island on the sea was very high. In order to recover these costs, as all other available measures, such as capital investment from central and local governments and the private sector, have been taken, there was no alternative but to introduce the beneficiary payment principle.

Regarding the internationalization of Haneda Airport, the Japanese Government does not intend to open Haneda to international scheduled flights; those flights will continue to be serviced by Narita airport. However, it is examining a way to utilize Haneda Airport for only international passenger charter flights and business aviation during midnight and early-morning hours when Narita Airport is not available.


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TableChanges in physical labor productivity in the agricultural and manufacturing industries

(FY1995 = 100)Production index Working population index Physical labor productivity index

Agricultural industry

Manufacturing industry





1995 100.0 100.0 100.0 100.0 100.0 100.0

1996 98.0 102.3 97.3 99.2 100.7 103.1

1997 98.4 106.0 95.5 99.0 103.0 107.1

1998 92.5 98.5 93.1 94.9 99.4 103.8

Rates of increase and decrease compared to the same period in the previous year

1995-96 -2.0 2.3 -2.7 -0.8 0.7 3.1

1996-97 0.4 3.6 -1.8 -0.2 2.3 3.9

1997-98 -6.0 -7.1 -2.5 -4.2 -3.5 -3.1

Note: Physical labor productivity = Production index/Working population index X 100


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IMPORT NOTICE (As of 17 December 1999)

(translation, authentic in Japanese only)

[final amendment by MITI Notification No. 688, December 15, 1999]

MINISTRY OF INTERNATIONAL TRADE AND INDUSTRY NOTIFICATION No. 170 OF 1966

In accordance with the provision of article 3 of the Import Trade Control Order (Cabinet Order No. 414 of 1949), items of goods which are required to obtain import quota, areas of origin or shipment which are required to obtain import approval and other necessary matters concerning import of goods shall be noticed as follows. The notice shall apply as from 1 May 1966 and the MITI Notification No. 203 of 1964 shall be abolished.

I. The items for which import quotas are to be obtained which are required to obtain import quota are those listed in Item 1 of the table below (here in after referred to as "Non-liberalized items") and in Item 2 of the said table.

[Note: Import quota is required under the provision of paragraph 1, article 9 of Import Trade Control Order.]

1. Non-liberalized items

Heading No. of the Customs Tariff Schedule

Description of Goods

ex0301.99-2 Nishin (Clupea spp.), Tar (Gadus spp., Theragra spp. and Merluccius spp.), Buri (Seriola spp.), Saba (Scomber spp.). Iwashi (Etrumeus spp., Sardinops spp. and Engraulis spp.), Aji (Trachurs spp. and Decapterus spp.) and Sanma (Cololabis spp.), live.

ex03.02 Nishin (Clupea spp.), Tara (Gadus spp., Theragra spp. and Merluccius spp.), and its roes, Buri (Seriola spp.), Saba (Scomber spp.), Iwashi (Etrumeus spp., Sardinops spp. and Engraulis spp.), Aji (Trachurus spp. and Decapterus spp.) and Sanma (Cololabis spp.), fresh or chilled.

ex03.03 Nishin (Clupea spp.), Tara (Gadus spp., Theragra spp. and Merluccius spp.) and its roes, Buri (Seriola spp.), Saba (Scomber spp.), Iwashi (Etrumeus spp., Sardinops spp. and Engraulis spp.), Aji (Trachurus spp. and Decapterus spp.) and Sanma (Cololabis spp.), frozen.

ex03.04 Fish fillets and other fish meat (whether or not minced) of Nishin (Clupea spp.), Tara (Gadus spp., Theragra spp. and Merluccius spp.), Buri (Seriola spp.), Saba (Scomber spp.), Iwashi (Etrumeus spp., Sardinops spp. and Engraulis spp.), Aji (Trachurus spp. and Decapterus spp.) and Sanma (Cololabis spp.), fresh, chilled or frozen.

ex 03.05 Nishin (Clupea spp.), Tara (Gadus spp., Theragra spp. and Merluccius spp.), Buri (Seriola spp.), Saba (Scomber spp.), Iwashi (Etrumeus spp., Sardinops spp. and Engraulis spp.), Aji (Trachurus spp. and Decapterus spp.) and Sanma (Cololabis spp.), dried, salted or in brine; fish-meal fit of those fish, roes of Tara (Gadus spp., Theragra spp. and Merluccius spp.), "Niboshi" (small boiled and dried fish for seasoning use).

ex 03.07 Scallops; adductors of shellfish, cuttle fish and squid (excluding "Mongo ika").

ex1211.90-1 Coca leaves.

ex1212.20-1-(1) Edible seaweeds, fresh or dried, formed into rectangular (including square) papery sheets not more than 430 square centimeters per piece.

1212.20-1-(2) Edible Porphyra spp. and other seaweeds mixed with Porphyra, spp. other than those specifed in No. 1212.20-1-(1) of the Customs Tariff Schedule.

ex1212.20-1-(3) Other edible seaweeds (genus Enteromorpha, genus Monostroma, genus Kjellmanila and genus Laminaria).

ex1301. 90 Cannabis resins.

1302.11 Opium.

1302.19-2-(2) Extracts or tincture of cannabis and crude cocaine.

ex2106.90-2-(2)-E Food preparations of seaweeds (genus Porphyra, genus Enteromorpha, genus Monostroma, genus Kjellmanilla and genus Laminaria).

ex25.24 Amosite and crocidolite.

26.12 Uranium or thorium ores and concentrates.

(Cont'd)


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ex2844.10 Natural uranium and its compounds; alloys (other than ferro-uranium), dispersions (including cermets), ceramic products and mixtures containing natural uranium or natural uranium compounds.

ex2844.20 Uranium enriched in U 235 and its compounds: plutonium and its compounds; alloys (other than ferro-uranium), dispersions (including cermets), ceramic products and mixtures containing uranium enriched in U 235, plutonium or compounds of these products.

ex2844.30 Uranium depleted in from U 235 and its compounds; thorium and its compounds; alloys (other than ferro-uranium), dispersions (including cermets), ceramic products and mixtures containing uranium depleted in U 235, thorium or compounds of these products.

ex 2844.30 Compounds of fissile isotopes or alloys, dispersions (including cermets), ceramic products and mixtures containing these compounds.

2844.50 Spent (irradiated) fuel elements (cartridges) of nuclear reactors.

ex2903.59 1, 2, 4, 5, 6, 7, 8, 8-octachloro-2, 3, 3a, 4, 7, 7a-hexahydro-4, 7-methano-1H-indene; 1, 4, 5, 6, 7, 8, 8-heptachloro-3a, 4, 7, 7a-tetrahydro-4, 7-methano-1H-indene; and these mixture of analogous compounds (chlordane or heptachlor, here in after referred to as "chlordanes") and 1, 2, 3, 4, 10, 10-hexachloro-1, 4, 4a, 5, 8, 8a-hexahydro -exo-1, 4-endo-5, 8-dimet hanonaphthalene (aldrin. here in after referred to as "aldrin") (excluding those used for testing and research purposes).

ex2903.62 Hexachlorobenzene and 1, 1, 1-trichloro-2, 2-bis (4-chlorophenyl) ethane (DDT, here in after referred to as "DDT") (excluding those used for testing and research purposes).

ex2903-69 Polychlorobiphenyl, polychloronaphthalene (more than 3 chlorines) (excluding those used for testing and research purposes).

ex2904.20 4-Nitrodiphenyl and its salts.

ex2909.19 Bis (chloromethyl) ether.

ex2910.90 1, 2, 3, 4, 10, 10-Hexachloro-6, 7-epoxy-1, 4, 4a, 5, 6, 7, 8, 8a-octahydro –exo-1, 4-endo-5, 8-dimethanonaphthalene (dieldrin, here in after referred to as "dieldrin") and 1, 2, 3, 4, 10, 10-Hexachloro-6, 7-epoxy-1, 4, 4a, 5, 6, 7, 8, 8a-octahydro-endo-1, 4-endo-5, 8-dimethanonaphthalene (endrin, here in after referred to as "endrin") (excluding those used for testing and research purposes).

2914.31 1-phenyl-2-propanone (phenylacetone).

ex2921.45 -naphthylamine and its salts.

ex2921.49 4-aminodiphenyl, N-ethyl-1-phenycyclohexylamine (Eticyclidine), Phenyaminopropane, and these salts.

ex2921.59 Benzidine and its salts.

ex2922.19 3-acetoxy-6-dimethylamino-4, 4-diphenylheptane (acetylmethadol), a-3-acetoxy-6-dimethylamino-4 . 4-diphenylheptane (alphacetylmethadol), -3-acetoxy-6-dimethylamino-4 . 4-diphenylheptane (beta-acetylmethadol), a-3-acetoxy-6-methylamino-4, 4-diphenylheptane (noracymethadol), 6-dimethylamino-4, 4-diphenyl-3-heptanol (dimepheptanol), a-6-dimethylamino-4, 4-diphenyl-3-heptanol (alphamethadol), -6-dimethylamino-4, 4-diphenyl-3-heptanol (betamethadol), 4-dimethylamino-3-methyl-1, 2-diphenyl-2- (propionyloxy) butan (propoxyphen), and these salts.

ex2922.29 4-ethyl-2, 5-dimethoxy-a-dimethylphenethylamine (DOET), 2, 5-dimethoxy-4, a-dimethylphenetylamine (DOM), 2, 5-dimethoxy-4-, a-methylphenethylamine (DMA), 3, 4, 5-trimethoxyphenethylamine (mescaline), 3, 4, 5-trimethoxy-a-methylphenethylamine (TMA), 4-bromo-2, 5-demethoxyphenethylamine 4-bromo-2, 5-dimethoxy-a-methylphenethylamine (Brolamfetamine), 4-methoxy-a- methylphenethylamine (PMA), and these salts.

ex2922-30 6-dimethylamino-4, 4-diphenyl-3-hexanone (normethadone), 6-dimethylamino-4, 4-diphenyl-3-heptanone (methadone), 6-dimethylamino-5-methyl-4, 4-diphenyl-3-hexanone (isomethadone), 2-aminopropiophenon 2-(methylamino)-1-phenylpropan-1-one (methcathinone) and these salts.

ex2922.49 Trans-2-dimethylamino-1-phenyl-3-cyclohexene-1-carboxylic acid ethyl ester (tilidine) and its salts.

ex2922.50 (2-dimethylamino) ethyl-1-ethoxy-1, 1-diphenylacetate (dimenoxythadol) and its salts.

ex2924.29 N- (2- (methylphenethylamino) propyl) propionanilide(diampromide) and its salts.

ex2926.90 4-cyano-2-dimethylamino-4, 4-diphenylbutane (methadone-intermediate) and its salts.

ex29.31 Bis (tributyl tin) = oxide (excludig those used for testing and research purposes).

(Cont'd)


Trade Policy Review

ex2932.99 N-ethyl-a-methyl-3, 4-(methylenedioxy) phenethylamine (N-ethyl MDA), 3- (1, 2-dimethylheptyl)–7, 8, 9, 10-tetrahydro-6, 6, 9-trimethyl -6H- dibenzo (b, d) pyran-1-ol (DMHP), N –dimethyl-3, 4- (methylenedioxy) phenethylamine (MDMA), 6a, 7, 8, 9-tetrahydro-6, 6, 9-trimethyl-3-pentyl-6H-dibenzo (b,d) pyran-1-d(Delta 10 tetrahydrocannabinols), 6a, 7, 8, 10a –tetrahydro-6, 6, 9-trimethyl-3-pentyl-6 H-dibenzo (b, d) pyran-1-d (Delta 9 tetrahydrocannabinols) (only substances derived from the occurrence of the chemical reactions other than decomposition reactions, except for these chemical reactions necessary for the refining of cannabis plants which are defined in the law under article 1 of the Cannabis Controle Law (Law No. 124 of 1948 and for the refining of 6a, 7, 8, 10a-tetrahydro-6, 6, 9-trimethyl-3pentyl-6 H-dibenzo (b, d) pyran-1-d included in the above-mentioned cannabis plants products), 6a, 7, 8, 10a-tetrahydro-6, 6 . 9-trimethyl-3-pentyl-6H-dibenzo (b, d) pyran-1-d (Delta 8 tetrahydrocannabinols) (only substances derived from the occurrence of the chemical reactions other than resolved reactions, exceptions to these chemical reactions necessary for the refining of cannabis plants and the substances are necessary to manufacture 6a, 7, 10, 10a-tetrahydro-6.6 9-trimethyl-3-pentyl-6H-dibenzo (b, d) pyran-1-d included in the above-mentioned cannabis plants), 6a, 9, 10, 10a-tetrahydro-6, 6, 9-trimethyl-3-pentyl-6 H-dibenzo (b, d) pyran-1-d (Delta 7 tetrahydrocannabinols), 7, 8, 9, 10-tetrahydro-6, 6, 9-trimethyl-3-pentyl -6H-dibenzo (b, d) pyran-1-d (Delta 6a (10a) tetrahydrocannabinols), 8, 9, 10, 10a-tetrahydro-6, 6, 9-trimethyl-3-pentyl-6H-dibenzo (b, d) pyran-1-d (Delta 6a (7) tetrahydrocannabinols), 6a, 7, 8, 9, 10, 10a-hexahydro-6, 6-dimethyl-9-methylene-3-pentyl-6H-dibenzo (b, d) pyran-1-d (Delta 9 (11) tetrahydrocannabinols), 3-hexyl-7, 8, 9, 10-tetrahydro-6, 6, 9-trimethyl-6H-dibenzo (b, d) pyran-1-d (parahexyl), a-methyl-3, 4- (methylenedioxy) phenethylamine (MDA), N- (a-methyl-3, 4- (methylenedioxy) phenethyl) hydroxyamine (N-hydroxyMDA), 3-methoxy-a-methyl-4, 5- (methylenedioxy) phenethylamine (MMDA), and these salts.

ex 2933.39 1- (2- (4-aminophenyl) ethyl) –4-phenylpiperidine-4-carvone acid ethylester (anileridine), 3-allyl-1-methyl-4-phenyl-4- (propionyloxy) piperidine (allylprodine), a-3-ethyl-1-methyl-4-phenyl-4- (propionyloxy) piperidine (alphameprodine), -3-ethyl-1-methyl-4-phenyl-4- (propionyloxy) piperidine (betameprodine), 1- (3-cyano-3, 3-diphenylplopyl) –4-phenylpiperidine-4-carvoxylic acid ethyl ester (diphenoxylate), 4-cyano-1-methyl-4-phenylpiperidine (pethidine-intermediate-A), 4, 4-diphenyl-6-piperidino-3-heptanone (dipipanone), a-1, 3-dimethyl-4-phenyl-4- (proprionyloxy) piperidine (alphaprodine), -1 . 3-dimethyl-4-phenyl –4-4 (propionyloxy) piperidine (Betaprodine), 1, 2, 5-trimethyl-4-phenyl-4- (propionyloxy) piperidine (trimeperidine), 1- (2- (2-hydroxyethoxy) ethyl) -4-phenylpiperidine-4-carvoxylic acid ethyl ester (ethoxeridine), 1- (3-hydroxy-3-phenylpropyl) -4-phenylpiperidine-4-carvoxylic acid ethylester (phenoperidine), 4- (3-hydroxyphenyl) -1-methyl-4-piperidilethylketone (ketobemidone), 4- (3-hydroxyphenyl) –1-methylpiperidine-4-carvoxylic acid ethyl ester (hydroxyperydine), 4-phenylpiperidine-4-carvoxylic acid ethyl ester (pethidine-intermediate-B), 4-phenyl-1- (3-phenylaminopropyl) piperidine-4-carvoxylic acid ester, (piminodine), 1-(2- benzyloxy) ethyl) –4-phenylpiperidine-4-carvoxylic acid ester (benzethidine), N- (1-methyl-2-piperidinoethyl) propionanilide (phenampromido), 1-methyl-4-phenylpiperidine-4-carvoxylic acid ethyl ester, 1- (3-cyano-3, 3-diphenylplopyl)-4- (2-oxo-3-propionyl-1-benzimidazolinyl) piperidine (Bezitoramide), 1- (3-cyano-3, 3-diphenylplopyl) –4- (1-piperidino) piperdine-4-carvoxylic acid amide (piritramide), 1- (3-cyano-3, 3-diphenylplopyl) –4-phenylpiperidine-4-carvoxylic acid (difenoxin), 4, 4-diphenyl-6-piperidino-3-hexanone (norpipanone), N- (1-propioneanilide (Beta-hydroxyphentanyl), N- (1- (-hydroxyphenethyl) –3-methyl-4-piperidyl) propioneanilide (Beta-hydroxy-3-methylphentanyl), 1- (1-phenylcyclohexyl), piperidine (phencycridine), N- (1-phenethyl-4-piperidyl) propioneanilide (fentanyl), 1-phenethyl-4-phenyl-piperidinol acetate ester (PEPAP), 4-fluoro-N- (1-phenethyl-4-piperidyl) propionanilide (para-fluorofentanyl), N- (1-methyl-2- (piperidinoethyl)) –N-2-pyridylpropionamide (propiram), 1-methyl-4-phenylpiperidine-4-carvoxylic acid (pethidine-intermediate-C), N- (3-methyl-1-phenethyl-4-pyridyl) propionanilide (3-methylphentanyl), 1-methyl-4-phenyl-4-piperidinol propionate ester (MPPP), N- (1-(a-methylphenethyl) – 4-piperidyl) acetanilide (acetyl-alpha-methylphentanyl), N- (1- (a-methylphenethyl) –4-piperidyl) propionanilide (alpha-methylphentanyl), 1- (2-methoxycarbonylethyl) –4- (phenylpropionylamino) –piperidine-4-carboxylic acid methyl ester (remifentanil) 2-phenyl-2- (2-piperidyl) methylester acetate (methylphenidate), and these salts.

ex2933.51 5-allyl-5- (1-methylbutyl) barbitutric acid (secobarbital) and its salts.

ex2933.59 a- (a-methoxybenzyl) –4- (-methoxyphenethyl) –1-piperazinethanol (zipepral) and these salts.

(Cont'd)


Trade Policy Review

ex2933.90 2- (4-chlorobenzyl) -1- (diethylamino) ethyl-5-nitrobenzimidazole (clonitazene), 1- (diethylamino) ethyl-2- (4-ethoxybenzyl) –5-nitrobenzimidazol (etonitazene), 1, 3-dimethyl-4-phenyl-4- (propionyloxy) azacycloheptane (probeptazine) 3-hydroxy-N-phenacyl morphinane (excluding dextrorotatory), 3-hydroxy-N-phenethylmorphinane (phenonorphane), 3-hydroxy-N-methylmorphinane (excluding destrorotatory), 3-hydroxymorphinane (excluding dextrorotatory), 1, 2, 3, 4, 5, 6, -hexahydro-8-hydroxy-6, 11-dimethyl-3-phenethyl-2, 6-methyno-3-(phenazocine), 1 . 2, 3, 4, 5, 6-hexahydro-8-hydroxy-3, 6, 11-trimethyl-2, 6-methano-3-benzocine (metazocine), 3-metoxy-N-methyl morphinane (excluding dextrorotatory) 3-2-aminoburtyl) indole (etryptamine), N-(1- 2- (4-ethyl-5-oxyo-2-tetrazoline-1-yl) ethyl) –4- metoxymethyl) –4-piperidil) propioneaniride (alphentanil), 3- (2-(diethylamino) ethyl) indole (DET), 3- (2- (dimethylamino) ethyl) indole (DMT), 3- ((2-dimethylamino) ethyl) –indole-4-yl dihydrogen phosphate (psilocybine), 3- (2- (dimethylamino) ethyl) –indole-4-d (psilocine), 1- (1-phenylcyclohexyl) pyrrolidine (rolicyclidine)3- (2-chlorophenyl) –2-methyl-4(3H) –quinazolinone (mecloqualone), 3, 7-dihydro-1, 3-dimethyl-7- (2- ((a-methylphenethyl) amino) ethyl)-1H-purine-2, 6-dione (phenethyline), 2-methyl-3- (2-totyl)-4 (3H) –quinazolinone (methaqualone), and these salts.

ex2934.90 3- (N-ethyl-N-methylamino) –1, 1-di-(2-thienyl) –1-butene (ethylmethylthianbutene), 3-diethylamino-1, 1-di- (2-thienyl) –1-butene (diethylthianbutene), 3-dimethylamino-1, 1-di-(2-thienyl) –1-butene (Dimethylthiambutene), 4-phenyl-1- (2- (tetrahydrofuryloxy) ethyl) piperidine-4-carvoxylic acid ethyl ester (Furethidine), ((3-methyl-4-morpholino-2; 2-diphenyl) butyryl) pyrrolidine, 2-methyl-3-morpholino-1, 1-diphenylpropane carboxylic acid (moramido-Intermediate), 1- (2-monopholinoethyl) –4-phenylpiperidine-4-carvoxcylic acid ethyl ester (morpheridine), 6-morpholino-4, 4-diphenyl 3-heptanone (phenedoxone), 4-morpholino-2, 2-diphenyl propane carboxylic acid ethyl ester (dioxaphetyl butyrate), Cis-2-amino-4-metyl-5-phenyl-2-oxazoline (4-methylaminorex) N-(1-(2-(2-thienyl ethyl)-4-piperidil) propionanilide (thiofentanyl), 1-(1- (2-thienyl) cyclohexyl) piperidine (tenocyclidine), N-(1- (1-methyl-2- 2-thienyl) ethyl) –4-piperidil) propionanilide (alphamethylthiofentanyl), N- (3-methyl-1- (2- (2-thienyl) ethyl) –4-piperidil) propionanilide (3-methylthiofentanyl), N- 4-(methoxymethyl) –1- (2- (2-thienyl) ethyl) –4-piperidil) propionanilide (sufentanil), 3-methyl-2-pherrylmolpholine (Phenmetrazine), and these salts.

ex2939.10 The following and these salts (derivatives in case of s):a N-allylnormorphine (nalorphine) and its ethersb Codeine, ethylmorphine and other ethers of morphinec Diacethylmorphine (heroine) and other esters of morphined Dihydrocodeinone (hydrocodone) and its esterse Dihydrocodeine and its estersf Dihydrodeaxymorphine (desomorphine) and its estersg Dihydrohydroxy (oxycadone) and its estersh Dihydrohydroxymorphinone (oxymorphonone)I Dihydromorphine and its estersj Dihydromorphinone (hydromorphone) and its estersk Thebinel 6-nicotinylcodeine (nicocodine)m Normorphine (dimethylmorphine) and its ethersn 14-hydroxydihydromorphine (hydromorphinol)o 6-methyldihydromorphine (methyldidydromorphine)p Methyldihydromorphinone (metopone) and its estersq 6-methyl--6-deoxymorphine (methyldesorphine)r Morphines Morphine-N-oxide and other pentavalent nitrogen molphinest 3-0-acethyl-7, 8-dihydro-7 a – (1(R) –hydroxy-1-methylbutyl –6-0-methyl-6, 14-endo-

ethenomorphine (acetorphine)u Dihydrocodeinone-6-(corboxymethyl) oxime (codoxime)v 7, 8-dihydro-7-a-[1 – (R) –hydroxy-1-methylbutyl]-6,14-endo-ethanoter ahydrooripavine (dihydrootorphine)w 7, 8-dihydro-7a- (1 (R) –hydroxy-1-methylbutyl) –6-0-methyl-6, 14-en-do-ethe nomorphine (etorphine)x 3, 4-dimethoxy-17-methylmorphinan-6, 14-diol (drotebanol)


Trade Policy Review

2939.41 1-phenyl-2-methylaminopropanol-1 (ephedrine) and its salts

2939.42 1-phenyl-2-methylaminopropanol-1 (pseudoephedrine) and its salts

ex2939.49 1-phenyl-2-dimethylaminopropanol-1, and its salts

ex2939.63 Lysergic acid diethylamido (lysergide) and its salts

(Cont'd)

ex2939.90 Ecgonine, cocaine and other esters of ecgonine, phenylmethylaminopropane, 1-phenyl-1-chloro-2-methylaminopropane, 1-phenyl-1-choro-2-dimethylaminopropane, 1-phenyl-2-dimethylaminopropane, and these salts.

ex3002.10 Antisera for humans (excluding those for experimental use and investigational reagents for anrigen-antibody reaction).

ex3002.20 Vaccines for humans (excluding those for experimental use and yellow fever vaccine).

ex3002.30 Vaccine against foot and mouth disease (excluding those for experimental use)

ex30.03 Preparations containing goods of subheading Nos. 1211.90-1, 2921.49, 2922.19 to 2926.90 and 2932.90 to 2939.90 (excluding 4-aminodiphenyl and its salts), excluding the following:a preparations containing less than 1% by the weight of codeine, dihydrocodeinde or these salts, but

not goods other than articles (excluding codeine, dihydrocodeine, 4-aminodiphenyl and its salts)b plants (including their parts) specified in 1, 2, 3 or 4 other than these for materials of narcotic

drugsc goods containing less than 10% by the weight of 1-phenyl-2-methylaminopropanol-1d goods containing less than 10% by the weight of 1-phenyl-2-dimethylaminopropanol-1

ex30.04 Preparations containing goods of subheading Nos. 1211.90-1, 2921.49, 2922.19 to 2926.90 and 2932.90 to 2939.90 (other than 4-aminodiphenyl and its salts), excluding the following:a preparations containing less than 1% by the weight of Codeine, Dihydrocodeine or these salts, but

not containing goods other than articles (excluding Codeine, Dihydrocodeine, 4-aminodiphenyl and its salts)

b plants (including their parts) other than those for materials of narcotic drugsc goods containing less than 10% by the weight of 1-phenyl-2-methylaminopropanol-1d goods containing less than 10% by the weight of 1-phenyl-2-dimethylaminopropanol-1

ex3404.90 Polychlorobiphenyl and polychloronaphthalene excluding those used for testing and research purposes.

ex3506.91 Rubber adhesives, containing more than 5% of benzene by volume of its solvent (including diluent) used therein.

36.01 Propellent powders.

36.02 Prepared explosives, other than propellent powders.

ex36.03 Safety fuses, detonating fuses, percussion and detonating caps, igniters (excluding the igniters that use 0.1 gram or less, of the black gun powder and ignited by electric current) and detonators.

ex36.05 Yellow phosphor matches.

ex38.22 Preparations and other products containing more than 1% by weight of 4-nitrodiphenyl or its salts, bis (chloromethyl) ether, benzidine or its salts, 4-aminodiphenyl or its salts or –naphthylamine or its salts.

ex3824.90 Preparations and other products containing more than 1% by weight of 4-nitrodiphenyl or its salts, bis (chloromethyl) ether, benzidine or its salts, 4-aminodiphenyl or its salts or –naphthylamine or its salts; polychlorobiphenyl and polychloronaphthalene (excluding those used for testing and research purposes).

ex4005.20 Rubber adhesives, containing more than 5% of benzine by volume of its solvent (including diluent) used therein.

ex4016.99 Rubber adhesives, containing more than 5% of benzine by volume of its solvent (including diluent) used therein.

ex5007.20 refer to III 24-(8) Woven fabrics of silk (excluding fabrics of noil and of silk and other fiber mixture)

ex5803.90 refer to III.24-(3) Gouze of silk

ex68.11 Preparations and other products containing more than 1% by weight of Amosite and crocidelite.



ex8109.90 Tubes of zirconium.

8401.10 Nuclear reactors.

8401.30 Fuel elements (cartridges), non-irradiated.


Trade Policy Review

8401.40 Parts of nuclear reactors.

ex84.11 Engines and motors for military aircraft (excluding those parts).

ex8412.10 Engines and motors for military aircraft.

(Cont'd)



87.10 Tanks and other armoured fighting vehicles, motorized, whether or not fitted with weapons, and parts of such vehicles.

ex88.02 Military aircraft other than those of subheading No. 8802.60 of the Customs tariff Schedule.

ex89.06 Warships.

ex903.10 Instruments and apparatus containing nuclear fuel materials, for measuring or detecting ionising radiations.

ex9030.90 Parts and accessories containing nuclear fuel materials, of instruments and apparatus for measuring or detecting ionising radiations.

93.01 Military weapons

93.02 Revolvers and pistols.

93.03 Other firearms and similar devices which operate by the firing of an explosive charge.

93.04 Other arms.

ex93.05 Parts and accessories of articles of headings Nos. 93.01 to 93.04 of the Customs Tariff Schedule, excluding those of plastic, rubber, leather, composition leather or textile materials specified in subdivision [2] of subheading No. 9305.90.

93.06 Bombs, grenades, torpedoes, mines, missiles, and similar munitions of war and parts thereof; cartridges and other ammunition and projectiles and parts thereof, including shot and cartridge wads.

93.07 Swords, cutlasses bayonets, lances and similar arms and parts scabbards and sheaths thereof.

2. Animals and plants, and their derivatives of the Washington Convention and Controlled substances listed in the Montreal Protocol

1. Animals (excluding spermwhale, baird's baked whale, minke whale, seiwhale bryde's whale and finwhale) and plants included in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (hereafter referred to as "Washington Convention") and their parts.

2. Eggs, seeds, bulbs, fruits (including the peel), stuffed or processed products (hereafter referred to as "derivatives") of animals and plants subject to the Washington Convention.

3. Controlled substances listed in Annex A, Group I (excluding those used as raw materials for producing other substances and those used for laboratory and analytical), Annex A, Group II (excluding those used as raw materials for producing other substances), Annex B, (excluding those used as raw materials for producing other substances and those used for laboratory and analytical), and Annex C (excluding those used as row materials for producing other substances) of the Montreal Protocol on Substances that Deplete the Ozone Layer (hereafter referred to as "Montreal Protocol"), or controlled substances listed in Annex E (excluding those used as raw material for producing other substances and those used for quarantine of export or import of cargo).

II. Import approval is required for goods mentioned in paragraphs 1 and 2 of the table below under the provision of Item 2, paragraph 1, Article 4 of the Import Trade Control Order (here-after referred to as "Item 2 approval")

1. Goods mentioned in the right column of the table below having originated in or been shipped from the areas mentioned in the left column.

Area Goods

Item No. Heading No. of the Customs Tariff Schedule

Description of goods

The countries or the areas excluding the countries listed

01.06; 0208.90; 0210.90; 1504.30; 1521.90; 16.01; 1602.10; 1602.20;

Whales and their preparations, excluding those shipped from the sea outside of the


Trade Policy Review

in Item 25 of paragraph III 1602.31; 1602.39; 1602.49; 1602.50; 1602.90; 2301.10; 2309.10; 2309.90

territorial waters of Japan (excluding those shipped from inside of harbours of foreign countries) and those listed in Item 2 of the table of paragraph I

(Cont'd)

Belize, Honduras and Panama (only shipped from those countries)

0301.10-2; 0301.99-1; 0301.99-2-(2); 0302.39; 0302.70-2; 0303.49; 0303.80-3; 0304.10-1-(2); 0304.10-2-(2); 0304.20-2; 0304.90-2; 0305.10; 0305.20-4; 0305.30-2; 0305.49; 0305.59-2; 0305.69-2; 1604.14; 1604.20-1-(2); 1604.20-2; 2301.20; 2309.10; 2309.90

Bluefin tuna and their preparations

People's Republic of China, North Korea and Taiwan

0301.91-2; 0301.99-2; 0302.11; 0302.12; 0302.19; 0302.70; 0303.10; 0303.21; 0303.22; 0303.29; 0303.80; 03.04; 0305.10; 0305.20; 0305.30; 0305.41; 0305.49; 0305.59; 0305.69; 1604.11; 1604.19; 1604.20

Salmon and (salmon) trout and preparations made of the same

The sea outside of the territorial waters of Japan (in case of shipment only) (excluding the case of shipment from harbors of foreign countries ad the case of import by fishing boats having left Japanese territory except when the goods were trans-shipped from fishing boats having left places other than Japanese territory)

1 01.06; 0208.90; 0210.90; 1504.30; 1521.90; 16.01; 1602.10; 1602.20; 1602.31; 1602.39; 1602.49; 1602.50; 1602.90; 2301.10; 23.09

Marine animals and preparations made of the same

2 0208.90; 0210.90; 03.01; 03.02; 03.03; 03.04; 03.05; 03.06; 03.07; 1504.10; 1504.20; 15.06; 16.04; 16.05; 2106.90; 2301.20; 23.09

Fish, crustaceans, other aquatic and preparations made of the same

3 05.04; 05.06; 05.07; 05.08; 05.09; 0511.91; 0511.99

Products of animal origin (marine animal, fish, crustaceans and mollusk)

4 1212.20; 2106.90 Seaweeds and preparations made of the same

Brazil, Bulgaria, France (including French Guiana), Greece, Hong Kong, India, Italy, North Korea, People's Republic of China, Republic of Korea, Rumania, Taiwan, United Kingdom and Vietnam

5007.20; 5007.90; 51.11; 51.12; 52.08; 52.09; 52.10 (excluding having either the warp or the weft of flax, ramie, synthetic fibers or acetate fibers); 52.11 (excluding having either the warp or the weft of flax, ramie, synthetic fibers or acetate fibers); 52.12 (excluding having either the warp or the weft of flax, ramie, synthetic fibers or acetate fibers); 53.09; 53.10; 53.11; 54.01; 54.02 (containing more than 10% by weight of silk); 54.03 (containing more than 10% by weight of silk); 54.06; 54.07; 54.08; 55.12; 55.13; 55.14, 55.15, 55.16; 56.03; 56.07; 58.01 5802.11 (excluding having either the warp or the weft of synthetic fibers or acetate fibers); 5802.19 (excluding having either the warp or the weft of synthetic fibers or acetate fibers); 5802.20 (excluding impregnated, coated, covered or laminated with plastics, rubber or other substances); 5802.30; 5803.90; 5804.30-2; 58.06; 58.09; 59.02; 59.11 (excluding endless felts for paper-making); 6002.10-2; 6002.20-2; 6002.30-2; 6002.99

Yarn of man-made fibers (continuous), fabrics of silk and other fiber mixtures (excluding textured fabrics and scoured fabrics), woven pile fabrics, cordage (including twine, ropes and cables), bonded fiber fabrics and knitted or crocheted fabrics and warp knit fabrics) using raw silk, and also that will be used as raw silk by unsewing


Trade Policy Review

(Cont'd)

People's Republic of China and Republic of Korea

50.04; 5006.00-1; 5007.20; 5007.90; 51.11; 51.12; 52.08; 52.09; 52.10 (excluding having either the warp or the weft of flax, ramie, synthetic fibers or acetate fibers); 52.11 (excluding having either the warp or the weft of flax, ramie, synthetic fibers or acetate fibers; 52.12 (excluding having either the warp or the weft of flax, ramie, synthetic fibers or acetate fibers); 53.09; 53.10; 53.11; 54.01; 54.02 (containing more than 10% by weight of silk); 54.03 (containing more than 10% by weight of silk); 54.06; 54.07; 54.08; 55.12; 55.13; 55.14; 55.15; 55.16; 56.03; 56.07; 58.01; 5802.11 (excluding having either the warp or the weft of synthetic fibers or acetate fibers); 5802.19 (excluding having either the warp or the weft of synthetic fibers or acetate fibers); 5802.20 (excluding impregnated, coated, covered or laminated with plastics, rubber or other substances); 5802.30; 5803.90; 5804.30-2; 58.06; 58.09; 59.02; 59.11 (excluding endless felts for paper-making); 6002.10-2; 6002.20-2; 6002.30-2; 6002.99-2

Silk yarn, excluding yarn spun from noil and other waste silk, but including those defined in Item 26 of paragraph III which will be used as silk yarn by unsewing

People's Republic of China, Japan, Republic of Korea and Taiwan (in case of origin only (including the case of being woven in People's Republic of China or Japan and then being dyed, resined, embossed or processed by other similar methods outside or People's Republic of China))

5007.20 Woven fabrics of silk (excluding fabrics of noil silk and of silk and other fiber mixture) (excluding the case of shipment from China, Republic of Korea or Taiwan)

People's Republic of China, Japan, Republic of Korea and Taiwan (in case of origin only (including the case of being woven in People's Republic of China or Japan and then being dyed, resined, embossed or processed by other similar methods outside or People's Republic of China))

5803.90 Gauze of silk (excluding the case of shipment from People's Republic of China)

People's Republic of China and Japan (in case of origin only (including the case of being woven in People's Republic of China or Japan and then being sewing or processed for other silk manufacture outside of People's Republic of China and Japan))

63.01; 6302.29-2; 6302.39-2; 6302.59-2; 6302.99; 6303.99-2; 6304.19-3; 6304.99-2; 6305.90; 6306.19; 6306.29; 6306.39; 6306.49; 6306.99; 63.07

Lape robe, bedlinen, table linen, curtain, bag for packing, tarpaulin and other products used woven fabrics of silk (excluding fabrics of noil silk and of silk and other fiber mixture) and will be used as woven fabrics of silk

Iraq Al cargo

Cambodia 44.03 Raw lumber, whether or not peeled, stiripped or roughly processed

(Cont'd)


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Angola (only shipped from its country)

7102.10

7102.21

7102.31

Diamonds

2. Animals and plants, and their derivatives of the Washington Convention, belonging products listed in Annex D of the Montreal Protocol, Other Wastes and specified substances mentioned of Law on the Prohibition of chemical weapons and Regulation.

1. Animals and plants originating in or shipped from countries and regions not mentioned in (1) and (2) of Item 28, paragraph III, and belonging to species listed in Appendix II of the Washington Convention (excluding animals originating in or shipped from countries and regions mentioned in Item 25 of paragraph III), plus their parts and derivatives (for plants, only those parts and derivatives Specified in Appendix II).

In addition, animals and plants belonging to species in Appendix III of the Washington Convention, and parts and derivatives specified in Appendix III shipped from regions and countries not mentioned in (1) and (2) of Item 28, paragraph III and moreover, originating in countries and regions mentioned in Appendix III.

2. Products shipped from countries and regions not mentioned in Item 29, paragraph III and listed in Annex D of the said Protocol.

3. All nations or territories shipping goods to Japan are subject to the conditions specified in Item 1 of Section 2 of the Law for the Control of the Export and Import of Specified Hazardous Wastes and Other Wastes, as well as subject to the regulations appearing in Item 1 of Section 2 of the Waste Management & Public Cleansing Law.

4. All nations or territories shipping specified substances to Japan are subject to the conditions specified in Item 3 of Section 2 of Law on the Prohibition of Chemical Weapons and Reglation.


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Trade Policy Review
