Trade Policy Review - Higher School of Economics
Japan
2000
World Trade Organization
Geneva, 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 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
PART A
CONCLUDING REMARKS BY THE CHAIRPERSON
OF THE TRADE POLICY REVIEW BODY,
H.E. MR. IFTEKHAR AHMED CHOWDHURY
AT 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 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.
PART B
REPORT BY THE SECRETARIAT
This report was written by Masahiro Hayafuji with Michael Daly as supervisor.
Clemens Boonekamp
Director
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
(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 89
(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 12
I.2 Intra-industry trade of Japan by region, 1985-99 13
I.3 Merchandise trade by country, 1996 and 1999 15
I.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 40
III.2 Simple average applied MFN tariff rates, by HS section 43
III.3 Applied MFN tariff distribution, FY2000 44
IV. TRADE POLICIES BY SECTOR
IV.1 Changes in the Financial Regulatory System 97
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Selected macroeconomic indicators, 1990-99 1
I.2 Shares of GDP and employment by sector, 1990-99 3
I.3 Current and capital accounts, 1990-99 5
I.4 Inward and outward FDI flows by source and destination, FY1995-99 16
I.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 20
II.2 Principal notifications under WTO Agreements, as at 25 April 2000 25
II.3 Main beneficiaries of Japan's GSP scheme, 1997-98 31
II.4 Major arrangements between Japan and the United States 32
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Average time between import declaration and import permission in Japan, 1991-98 37
III.2 Structure of applied MFN tariffs in Japan 38
III.3 Allocation of import quota by item, FY1999 46
III.4 Import quotas on fisheries products, FY1995-99 47
III.5 Procurement composition by product and by origin, 1997 52
III.6 Major standards and technical regulations in Japan, March 2000 54
III.7 Overview of Japan's import promotion policy, 2000 58
III.8 Total budget for Japan's import promotion programmes and forgone tax revenues, FY1997-2000 59
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III.9 Measures for promoting imports and foreign direct investment into Japan, FY2000 61
III.10 National government tax revenue, FY1998 66
III.11 Legislation regarding intellectual property rights protection in Japan 68
III.12 Patent, utility model, design, and trade mark applications filed and registered, 1995-98 69
III.13 Suspension of imports likely to infringe intellectual property rights, 1990-99 70
III.14 Exemptions from the Anti-Monopoly Act, FY2000 73
III.15 Merger and acquisition notifications, 1995-99 75
III.16 Enforcement statistics related to competition policy, 1995-99 76
III.17 Industries monitored by the JFTC with respect to a "monopolistic situation", 1995-99 77
IV. TRADE POLICIES BY SECTOR
IV.1 Major indicators for Japanese agriculture, FY1990-98 81
IV.2 Protection in agriculture, FY2000 83
IV.3 Special safeguard (SSG) actions in agriculture by Japan, FY1997-99 85
IV.4 Procurement prices for all major crops subject to pricing and/or marketing
arrangements/price controls, 1997-99 87
IV.5 Manufacturing output and value added in Japan, 1992-98 89
IV.6 Employment in manufacturing, value added per employee, and wages per employee
in Japan, 1992-98 90
IV.7 Financial institutions in Japan, December 1999 94
APPENDIX TABLES
I. ECONOMIC ENVIRONMENT
AI.1 Exports by product group, 1995-99 119
AI.2 Imports by product group, 1995-99 120
AI.3 Exports by destination, 1995-99 121
AI.4 Imports by origin, 1995-99 122
AI.5 Composition of trade in services, 1995-99 123
III. TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Non-ad valorem tariffs applied by Japan, FY2000 124
AIII.2 Current and minimum access commitments by Japan under the Uruguay Round 133
AIII.3 Tariff quotas in Japan, FY1997, 1998 and 2000 139
AIII.4 Tariff escalation and tariff ranges in Japan, FY2000 141
AIII.5 Systems for reduction, exemption, refund, and repayment of customs duty, May 2000 144
AIII.6 Other end-use tariff concessions in Japan, FY2000 145
AIII.7 Import approval requirements in Japan, FY1999 147
AIII.8 Other laws and regulations related to mandatory technical regulations 149
AIII.9 Japan's SPS notifications, 1998-2000 151
AIII.10 Amended plant and animal quarantine regulations since 1997 153
AIII.11 Import volume of foreign accesses zones, 1997 and 2000 155
AIII.12 Subsidies notified under WTO provisions, FY1996-99 156
AIII.13 Stockholding by the Government of Japan 161
AIII.14 Regular staff of the Japanese Patent Office, FY1995-99 162
AIII.15 Merger notifications by sector, FY1994-99 163
AIII.16 Notifications of acquisitions by sector, FY1994-99 164
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 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.
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 Sector
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 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 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.
I. ECONOMIC ENVIRONMENT
(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.[i]1 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.[ii]2 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.[iii]3
Table I.1
Selected 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 |0.2 |
|Real domestic demand |5.2 |2.9 |0.4 |0.1 |0.1 |2.3 |5.7 |0.1 |-3.5 |1.5a |
|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 |
|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 |6.1 |6.2 |3.9 |2.5 |2.7 |1.9 |2.6 |1.3 |0.3 |.. |
|(changes in %) | | | | | | | | | | |
|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 |97.3a |105.4a |
|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 |12.2 |
|Current account (% of GDP) |1.5 |2.0 |3.0 |3.1 |2.8 |2.1 |1.4 |2.2 |3.2 |2.5 |
|Exports of goods and services (% of |10.9 |10.4 |10.3 |9.5 |9.5 |9.6 |10.2 |11.4 |11.4 |10.6 |
|GDP) | | | | | | | | | | |
|Imports of goods and services (% of |10.0 |8.8 |8.1 |7.2 |7.4 |8.2 |9.7 |10.2 |9.5 |9.1 |
|GDP) | | | | | | | | | | |
.. 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 FY2000[iv]4, 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.[v]5 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.2
Shares 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.
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"[vi]6; 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 policies
4. 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)).[vii]7 Negative rates of inflation in 1999 and early 2000 indicate that the real interest rate may have been somewhat higher, however.[viii]8 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.[ix]9
5. More specifically, some members of the Policy Board of the BOJ, which has price stability as its main goal[x]10, 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
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.
|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. |
(ii) Fiscal policy
10. 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.[xi]11 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.[xii]12 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 restructuring
13. 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 employment[xiii]13; private sector estimates are much higher than these official figures.[xiv]14 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).[xv]15 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.
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.[xvi]16 In the face of a deflationary environment, recent and planned changes in accounting rules[xvii]17, 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.[xviii]18
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.[xix]19 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 system
18. 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.[xx]20 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 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.[xxi]21 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)).[xxii]22 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) Competition
23. 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.[xxiii]23
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.[xxiv]24 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 policies
25. 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 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 reform
26. 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 study[xxv]25, 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.[xxvi]26
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.
[pic]
(i) Composition of merchandise trade
29. 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.
[pic]
(ii) Direction of merchandise trade
32. 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 services
35. 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 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.[xxvii]27
[pic]
[pic]
Table I.4
Inward and outward FDI flows by source and destination, FY1995-99
(¥ billion and per cent)
| |FY1995 |FY1996 |FY1997 |FY1998 |FY1999 |
|Inward FDI | | | | | |
|Total (¥ billion) |369.7 |770.7 |678.2 |1,340.4 |2,399.3 |
|By source (percentage) | | | | | |
|North America |48.3 |31.7 |22.4 |60.4 |17.4 |
|United States |47.9 |31.0 |22.4 |60.3 |10.4 |
|Canada |0.4 |0.7 |0.0 |0.1 |7.0 |
|Europe |34.5 |28.6 |45.4 |22.6 |58.9 |
|France |3.1 |1.4 |1.4 |1.3 |31.1 |
|Germany |4.5 |6.2 |8.1 |2.5 |1.9 |
|Netherlands |14.5 |10.4 |21.6 |9.6 |19.6 |
|Switzerland |2.7 |3.2 |2.8 |2.1 |1.6 |
|United Kingdom |3.1 |5.3 |6.6 |2.8 |3.7 |
|Asia |6.7 |17.8 |10.9 |1.6 |4.6 |
|Hong Kong, China |0.7 |2.3 |6.0 |0.4 |0.5 |
|Korea, Rep. of |2.5 |1.0 |1.2 |0.1 |0.4 |
|Singapore |0.2 |13.9 |2.8 |0.5 |3.1 |
|Chinese Taipei |2.7 |0.3 |0.7 |0.4 |0.6 |
|Table I.4 (cont'd) |
|Latin America |3.8 |8.5 |8.7 |2.6 |12.1 |
|Cayman Islands |0.1 |0.0 |7.8 |1.6 |10.5 |
|Virgin Islands (British) |0.5 |4.4 |0.7 |0.1 |1.0 |
|Outward FDI | | | | | |
|Total (¥ billion) |4,956.8 |5,409.4 |6,622.9 |5,216.9 |7,439.0 |
|By destination (percentage) | | | | | |
|North America |45.2 |47.9 |39.6 |26.9 |37.1 |
|United States |44.1 |45.8 |38.5 |25.3 |33.4 |
|Canada |1.1 |2.1 |1.1 |1.5 |3.7 |
|Latin America |7.5 |9.3 |11.7 |15.9 |11.2 |
|Panama |3.3 |2.1 |2.1 |2.6 |2.1 |
|Cayman Islands |1.3 |2.2 |4.7 |11.0 |3.4 |
|Brazil |0.6 |1.8 |2.2 |1.1 |1.0 |
|Virgin Islands (British) |0.3 |1.6 |1.3 |0.4 |1.6 |
|Asia |24.0 |24.2 |22.6 |16.0 |10.7 |
|Hong Kong, China |2.2 |3.1 |1.3 |1.5 |1.5 |
|Indonesia |3.1 |5.0 |4.7 |2.6 |1.4 |
|Korea, Republic of |0.9 |0.9 |0.8 |0.7 |1.5 |
|Malaysia |1.1 |1.2 |1.5 |1.3 |0.8 |
|Philippines |1.4 |1.2 |1.0 |0.9 |0.9 |
|Singapore |2.3 |2.3 |3.4 |1.6 |1.4 |
|Chinese Taipei |0.9 |1.1 |0.8 |0.6 |0.4 |
|Thailand |2.4 |2.9 |3.5 |3.4 |1.2 |
|China |8.7 |5.2 |3.7 |2.6 |1.1 |
|Middle East |0.3 |0.5 |0.9 |0.4 |0.2 |
|Europe |16.7 |15.4 |20.8 |34.4 |38.7 |
|France |3.1 |1.0 |3.2 |1.3 |1.7 |
|Germany |1.1 |1.2 |1.4 |1.4 |1.0 |
|Netherlands |2.9 |2.3 |6.1 |5.2 |15.5 |
|United Kingdom |6.7 |7.2 |7.6 |24.0 |17.6 |
|Africa |0.7 |0.9 |0.6 |1.1 |0.8 |
|Oceania |5.5 |1.9 |3.8 |5.4 |1.3 |
|Australia |5.2 |1.6 |3.1 |3.4 |1.3 |
|New Zealand |0.2 |0.1 |0.2 |1.9 |0.0 |
Source: Ministry of Finance.
Table I.5
Inward and outward FDI flows by activity, FY1995-99
(¥ billion and per cent)
| |FY1995 |FY1996 |FY1997 |FY1998 |FY1999 |
|Inward FDI | | | | | |
|Total (¥ billion) |369.7 |770.7 |678.2 |1,340.1 |2,399.3 |
|By activity (percentage) | | | | | |
|Manufacturing |38.2 |40.4 |39.4 |23.3 |40.8 |
|Chemicals |29.6 |9.0 |10.9 |3.0 |2.5 |
|Machinery |4.9 |20.2 |21.4 |15.9 |36.1 |
|Non-manufacturing |61.8 |59.6 |60.6 |76.7 |59.2 |
|Communications |1.4 |0.3 |0.5 |1.3 |13.8 |
|Commerce and trading |18.4 |21.6 |14.7 |13.1 |14.5 |
|Financial services and insurance |27.1 |3.5 |23.8 |34.1 |21.3 |
|Outward FDI | | | | | |
|Total (¥ billion) |4,956.8 |5,409.4 |6,622.9 |5,216.9 |7,439.0 |
|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 |22.4 |
|Chemicals |4.2 |4.3 |5.6 |5.5 |2.5 |
|Ferrous and non-ferrous metals |3.0 |5.1 |2.6 |3.0 |2.2 |
|Machinery |3.7 |3.0 |2.4 |2.0 |1.5 |
|Electrical machinery |10.5 |13.6 |12.4 |8.4 |24.5 |
|Transport equipment |3.9 |8.1 |5.4 |3.9 |7.2 |
|Non-manufacturing |61.3 |55.7 |63.1 |69.1 |36.3 |
|Mining |2.1 |3.3 |5.0 |2.1 |1.4 |
|Commerce and trading |10.4 |10.0 |8.1 |9.3 |5.8 |
|Financial services and insurance |10.6 |16.2 |22.2 |40.2 |14.8 |
|Transportation |4.5 |3.7 |4.3 |4.7 |4.2 |
|Real 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.[xxviii]28 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.
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(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 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)).[xxix]1 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.[xxx]2 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 regulations
6. 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.[xxxi]3 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.1
Japan's major trade-related laws and regulations
(Date of most recent amendment in square brackets)
|Foreign trade and exchange restrictions |
| 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 regulations |
| Customs 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 promotion |
| International 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 regulations |
| 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 rights |
| Patent 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] |
|Agriculture |
| The 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] |
|Others |
| Law 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) |
Source: Information provided by the Japanese authorities.
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 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 implementation
9. 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 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 policies
17. 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.[xxxii]4
18. A cabinet decision on Ideal Socio-economy and Policies for Economic Rebirth[xxxiii]5, 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.[xxxiv]6 However, Japan is considering regional or bilateral trade agreements and arrangements to complement the multilateral trading regime.[xxxv]7 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.
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) WTO
22. 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 WTO
23. 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.[xxxvi]8 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.2
Principal 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 |IP/N/1/JPN/C/1, Rev.1/Add.1, |Japan has notified a number of amendments to |
|Intellectual Property Rights (TRIPS) |25.02.1998 and 07.08.1998 |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, 15.12.1997 |Notification under Article 5 of the |
| |G/AG/N/JPN/28, 06.05.1998 |Agreement: special safeguard: volume-based.|
| |G/AG/N/JPN/30, 17.06.1998 | |
| |G/AG/N/JPN/32, 16.11.1998 | |
| |G/AG/N/JPN/39, 29.06.1999 | |
| |G/AG/N/JPN/44, 16.11.1999 | |
| |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, 14.01.1998 |Notification under Article 16:2 of the |
| |G/AG/N/JPN/33, 08.12.1998 |Agreement in the context of action taken |
| |G/AG/N/JPN/46, 03.03.2000 |within the framework of the decision on |
| | |measures concerning the possible negative |
| | |effects of the reform programme on |
| | |least-developed and net food-importing |
| | |countries. |
| |G/AG/N/JPN/34, 02.03.1999 |Domestic support commitments |
| |G/AG/N/JPN/47, 21.02.2000 | |
| |G/AG/N/JPN/29, 06.05.1998 |Export subsidy commitments |
| |G/AG/N/JPN/36, 10.05.1999 | |
| |G/AG/N/JPN/31, 28.10.1998 |Tariff and other quota commitment |
| |G/AG/N/JPN/43, 22.09.1999 | |
| |G/AG/N/JPN/35, 29.04.1999 |Price-based special safeguard. |
| |G/AG/N/JPN/38, 11.06.1999 | |
| |G/AG/N/JPN/40, 12.08.1999 | |
| |G/AG/N/JPN/41, 25.08.1999 | |
| |G/AG/N/JPN/45, 27.01.2000 | |
| |G/AG/N/JPN/48, 09.03.2000 | |
| |G/AG/N/JPN/49, 30.03.2000 | |
| |G/AG/N/JPN/50, 05.04.2000 | |
| |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, 15.09.1997 |Notification of Japan's first stage |
| |G/TMB/N/39/Add.2, 17.09.1997 |integration programme of textiles and |
| | |clothing products under Article 2, paragraphs|
| | |6 and 7(b) of the Agreement. |
|Agreement on Trade-Related Investment | |No notification. |
|Measures (TRIMs) | | |
|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, 15.09.1999 |Semi-annual report under Article 16.4 of the |
| |G/ADP/N/59/JPN, 29.03.2000 |Agreement. |
|Agreement on Customs Valuation | |No notification. |
|Table II.2 (cont'd) |
|Agreement on Rules of Origin | |No notification. |
|Agreement on Subsidies and Countervailing|G/SCM/N/25/JPN, 17.11.1997 |Updating notifications pursuant to |
|Measures |G/SCM/N/25/JPN/Suppl.1, 04.12.1997 |Article XVI.1 of the GATT 1994 and Article 25|
| | |of the Agreement. |
| |G/SCM/N/38/JPN, 17.08.1998 |New and full notifications pursuant to |
| |G/SCM/N/38/JPN/Suppl.1, 23.09.1998 |Article XVI.1 of the GATT 1994 and Article 25|
| |G/SCM/N/48/JPN, 07.09.1999 |of the Agreement. |
|Agreement on Safeguards | |No notification. |
|Agreement on Sanitary and Phytosanitary |G/SPS/N/JPN/29, 12.03.1998 |Notification pursuant to Article 7 and the |
|measures |G/SPS/N/JPN/30, 12.03.1998 |provisions of Annex B. |
| |G/SPS/N/JPN/30/Corr.1, 20.03.1998 | |
| |G/SPS/N/JPN/31, 12.03.1998 | |
| |G/SPS/N/JPN/32, 25.03.1998 | |
| |G/SPS/N/JPN/33, 01.04.1998 | |
| |G/SPS/N/JPN/34, 01.04.1998 | |
| |G/SPS/N/JPN/35, 08.05.1998 | |
| |G/SPS/N/JPN/36, 09.06.1998 | |
| |G/SPS/N/JPN/37, 23.07.1998 | |
| |G/SPS/N/JPN/38, 02.09.1998 | |
| |G/SPS/N/JPN/39, 19.10.1998 | |
| |G/SPS/N/JPN/40, 03.02.1999 | |
| |G/SPS/N/JPN/41, 03.02.1999 | |
| |G/SPS/N/JPN/42, 15.02.1999 | |
| |G/SPS/N/JPN/43, 15.02.1999 | |
| |G/SPS/N/JPN/44, 28.05.1999 | |
| |G/SPS/N/JPN/44/Corr.1, 04.06.1999 | |
| |G/SPS/N/JPN/45, 29.07.1999 | |
| |G/SPS/N/JPN/46, 30.07.1999 | |
| |G/SPS/N/JPN/47, 25.10.1999 | |
| |G/SPS/N/JPN/48, 25.10.1999 | |
| |G/SPS/N/JPN/49, 06.12.1999 | |
| |G/SPS/N/JPN/50, 08.02.2000 | |
| |G/SPS/N/JPN/51, 08.02.2000 | |
| |G/SPS/N/JPN/52, 08.02.2000 | |
|Agreement on Import |G/LIC/N/2/JPN/2 04.09.1998 |Notification pursuant to paragraphs 1 and 3, |
|Licensing Procedures | |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 Technical |G/TBT/CS/N/94, 24.03.1998 |Notification under paragraph C of the WTO TBT|
|Barriers to Trade |G/TBT/CS/N/99, 22.04.1998 |code of good practice. |
| |G/TBT/CS/N/106, 18.02.1999 | |
| |G/TBT/CS/N/107, 01.03.1999 | |
| |G/TBT/Notif.97.734-736, 03.12.1997 |Notification under Article 2.9.2, 2.10.1, |
| |G/TBT/Notif.97.764, 12.12.1997 |5.6.2, 5.7.1 and other. |
| |G/TBT/Notif.97 776-781, 794, 30.12.1997 | |
| |G/TBT/Notif.98.62-64, 06.02.1998 | |
| |G/TBT/Notif.98.81, 24.02.1998 | |
| |G/TBT/Notif.98.107, 05.03.1998 | |
| |G/TBT/Notif.98.128, 09.03.1998 | |
| |G/TBT/Notif.98.150, 25.03.1998 | |
| |G/TBT/Notif.98.159, 25.03.1998 | |
| |G/TBT/Notif.98.291, 30.06.1998 | |
| |G/TBT/Notif.98.292, and 293, 02.07.1998 | |
| |G/TBT/Notif.98.294, 25.06.1998 | |
| |G/TBT/Notif.98.322, 03.07.1998 | |
| |G/TBT/Notif.98.328, 06.07.1998 | |
| |G/TBT/Notif.98.340-342, 06.07.1998 | |
| |G/TBT/Notif.98.348, 08.07.1998 | |
| |G/TBT/Notif.98.376 and 377, 04.08.1998 | |
| |G/TBT/Notif.98.449, 02.09.1998 | |
| |G/TBT/Notif.98.450, 01.09.1998 | |
| |G/TBT/Notif.98.465, 21.09.1998 | |
|Table II.2 (cont'd) |
|Agreement on Technical |G/TBT/Notif.98.565-568, 16.11.1998 | |
|Barriers to Trade (cont'd) |G/TBT/Notif.98.619, 11.12.1998 | |
| |G/TBT/Notif.98.619/Corr.1, 23.12.1998 | |
| |G/TBT/Notif.99.3, 11.01.1999 | |
| |G/TBT/Notif.99.38, 05.02.1999 | |
| |G/TBT/Notif.99.44 and 45, 11.02.1999 | |
| |G/TBT/Notif.99.112-116, 23.03.1999 | |
| |G/TBT/Notif.141, 30.03.1999 | |
| |G/TBT/Notif.141/Corr.1, 12.05.1999 | |
| |G/TBT/Notif.99.159 and 174, 19.04.1999 | |
| |G/TBT/Notif.99/314, 28.06.1999 | |
| |G/TBT/Notif.99/314/Rev.1, 14.07.1999 | |
| |G/TBT/Notif.99/335, 16.07.1999 | |
| |G/TBT/Notif.99/359, 30.07.1999 | |
| |G/TBT/Notif.99/364, 05.08.1999 | |
| |G/TBT/Notif.99/443, 01.09.1999 | |
| |G/TBT/Notif.99/492 and 493, 06.10.1999 | |
| |G/TBT/Notif.99/539-542, 22.10.1999 | |
| |G/TBT/Notif.99/553 and 554, 05.11.1999 | |
| |G/TBT/Notif.99/555, 10.11.1999 | |
| |G/TBT/Notif.99/565, 19.11.1999 | |
| |G/TBT/Notif.99/667-669, 23.12.1999 | |
| |G/TBT/Notif.00/21, 13.01.2000 | |
| |G/TBT/Notif.00/39, 31.01.2000 | |
| |G/TBT/Notif.00/56, 07.02.2000 | |
| |G/TBT/Notif.00/57, 07.02.2000 | |
| |G/TBT/Notif.00/63, 09.02.2000 | |
| |G/TBT/Notif.00/109, 02.03.2000 | |
| |G/TBT/Notif.00/135-140, 14.03.2000 | |
| |G/TBT/Notif.00/147, 22.03.2000 | |
| |G/TBT/Notif.00/158-161, 24.03.2000 | |
| |G/TBT/Notif.00/169, 07.04.2000 | |
| |G/TBT/Notif.00/193, 14.04.2000 | |
| |G/TBT/Notif.00/203, 19.04.2000 | |
|Understanding on the Interpretation of |G/STR/N/3/JPN, 13.11.1997 |Notification of Laws and regulations under |
|Article XVII of the GATT | |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, 09.07.1999 |Notification under Article XXIV:6(a) |
| |GPA/W/91, 06.09.1999 | |
| |GPA/W/93, 29.09.1999 | |
| |GPA/W/94, 30.09.1999 | |
| |GPA/W/98, 04.10.1999 | |
Source: WTO Notifications.
(b) Involvement in WTO dispute settlement
25. 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.[xxxvii]9
(ii) Other multilateral agreements
26. 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 agreements
27. 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) APEC
28. More than 70% of Japan's external trade is with fellow APEC members.[xxxviii]10 Japan participates fully in the work of the APEC Forum.[xxxix]11 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 Leaders Meeting in Vancouver in November 1997 for the Early Voluntary Sectoral Liberalization (EVSL) market opening action[xl]12; 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.[xli]13
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) ASEM
31. 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 countries
34. 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).[xlii]14
(iv) Preferential arrangements
Generalized 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 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 list[xliii]15, 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). |
|Source: Information provided by the Japanese authorities. |
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.[xliv]16 Imports from LDCs accounted for about 1.3% of total imports receiving GSP treatment in FY1999.
Table II.3
Main 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.[xlv]17 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.[xlvi]18 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 relationship
41. 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 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.4
Major arrangements between Japan and the United States
|Date of initiation |Product/Service |Arrangement |Measures taken |
|I. Arrangements and | | | |
|measures affecting exports | | | |
|1998 |Aviation (Cargo) |New Arrangement based on the |Equalization of opportunities between Japanese |
| | |Civil Air Transport Agreement |and U.S. airlines |
|II. Arrangements and | | | |
|measures affecting imports | | | |
|(1) Trade liberalization | | | |
|and deregulation | | | |
|1986 |Medical equip. and |The Report on Talks on Medical |Relaxation of legal approval system and tariff |
| |pharmaceutical prod. |Equipment and Pharmaceuticals |revision |
|1988 |Beef and oranges |.. |Abolition of import quotas and tariffication |
|1990 (June) |Wood products |Measures to be taken by the |Relaxation of standards and revision of tariff |
| | |Government of Japan Relating to|category |
| | |Wood Products | |
|1994 (Oct.) |Insurance |Measures by the Government of |Measures by both governments to increase market |
| | |Japan and the Government of the|access of foreign insurance suppliers and |
| | |United States Regarding |intermediaries |
| | |Insurance | |
|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 parts |
| | | |Measures 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 |Further deregulation in the non-life insurance |
| | |Government of the United States|sectors and mitigation measures in the "third |
| | |and the Government of Japan |sectors" to medium-sized and foreign insurers |
| | |Regarding Insurance | |
|(2) Public procurement | | | |
|procedures | | | |
|1990 (June) |Supercomputers |Procedures to Introduce |Streamlining of procedures and improvement in |
| | |Supercomputers |transparency |
|1990 (June) |Satellites |.. |Streamlining of procedures and improvement in |
| | | |transparency |
|1992 (Jan.) |Computer products and |Measures Related to Japanese |Streamlining of procedures and improvement in |
| |services |Public Sector Procurement of |transparency |
| | |Computer Products and Services | |
|1994 (Jan.) |Public works |Action Plan on Reform of the |Streamlining of procedures and improvement of |
| | |Bidding and Contracting |transparency |
| | |Procedures for Public Works | |
|1994 (Nov.) |Telecommunications |Measures on Japanese Public |Streamlining of procedures and improvement in |
| |products and services |Sector Procurement of |transparency |
| | |Telecommunications | |
|1994 (Nov.) |Medical technology |Measures Related to Japanese |Streamlining of procedures and improvement in |
| |products and services |Public Sector Procurement of |transparency |
| | |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 procurement | | | |
|1997 (Sept.) |Telecommunications |Improvement Arrangement on NTT |Streamlining of procedures and improvement in |
|(terminated July 1999) |equipment |Procurement Procedures |transparency |
|1999 (July) |Telecommunications |New measures on NTT Procurement|Accepting new procurement policy |
| |equipment | | |
|(4) Import facilitation | | | |
|1990 (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 |Announcements by Japanese auto manufacturers to |
| | |Action |increase parts imports, government support for |
| | | |promoting design-ins and receiving sales missions|
|1992 (Jan.) |Automobiles |Global Partnership Plan of |Announcements by Japanese auto manufacturers to |
| | |Action |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 |Government encouragement for establishing |
| | |Action |internal Anti-Monopoly Act compliance programmes |
| | | |by the private sector, and for establishing |
| | | |buyer-supplier relationship with foreign |
| | | |producers |
|1995 |Flat glass |Measures by the Government of |Measures by both governments to increase market |
|(terminated Dec. 1999) | |Japan and the Government of the|access for competitive foreign flat glass, |
| | |United States Regarding Flat |efforts by manufacturers to export to Japan |
| | |Glass | |
|1996 |Semiconductors |Joint Statement by the |Measures by both governments to support |
|(terminated July 1999) | |Government of the United States|cooperative efforts of private sectors to face |
| | |and the Government of Japan |challenges posed by structural changes in the |
| | |concerning semiconductors |semiconductor industry |
|1992 (Jan.) |Structural issues |Structural Impediments |(Japanese measures) |
| | |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 |Framework for a New Economic |Sectoral and structural consultations and |
| |issues |Partnership |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 relationship
45. 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.[xlvii]19 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 agreements
47. 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.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) Introduction
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 2000[xlviii]1, 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. 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 clearance
12. 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)).[xlix]2
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.[l]3 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.1
Average 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.
Source: Information provided by the Japanese authorities.
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.[li]4 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 origin
17. 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.[lii]5 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 features
18. Japan's FY2000 tariff schedule consists of 9,029 tariff lines at the Harmonized System (HS) 9-digit level.[liii]6
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.[liv]7 In the case of statutory rates, the "temporary", but apparently open-ended, rate is normally used instead of the higher general rate[lv]8; 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.[lvi]9
Table III.2
Structure of applied MFN tariffs in Japan
(Per cent)
| |Indicators |FY1998a |FY1999 |FY2000b |U.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 |0.3 |0.6 |0.4 |0.0 |
| |lines) | | | | |
|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|6.8 |2.0 |2.0 |1.9 |
| |tariff lines) | | | | |
| | 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 |
| | 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).[lvii]10 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 bindings
21. 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.[lviii]11 Bound rates exceed applied rates only on certain agricultural items, food products, alcohol beverages, tobacco, chemicals and petroleum.
(c) Duty-free items
22. 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 duties
23. 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 duties[lix]12, alternate duties[lx]13, differential duties[lxi]14, and sliding duties[lxii]15, 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 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.[lxiii]16 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.
[pic]
|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.[lxiv]17 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.[lxv]18
(e) Tariff quotas
26. 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)).[lxvi]19
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 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 averages
29. In FY2000, the overall simple applied MFN tariff average was 6.5%, down from 6.7% in 1999.[lxvii]20 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 dispersion
30. 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 escalation
31. Tariff escalation is evident in a number of sectors, most notably processed food, textiles, other chemicals, and leather products (Table AIII.4).
[pic]
(i) Tariff concessions and exemptions
32. 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.[lxviii]21 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 adjustments
33. 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.
[pic]
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.[lxix]22 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.[lxx]23
(v) Non-tariff border measures
37. 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 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 sanctions
38. 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.[lxxi]24 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 requirements
39. 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).[lxxii]25 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.[lxxiii]26 Imports requiring approval are listed in Table AIII.7.
(c) Import quotas
41. 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.3
Allocation of import quota by item, FY1999
| |Ratio of allocated quota to the total quota amount (%) |Total quota |Unit |
| | |amount | |
| |Trading |Designated |Fishery |First-come-fir|Other | | |
| |companies |corporations |industries |st-served | | | |
| | | | |basis | | | |
|Fish and shellfish (HS 0301.99.2; |6.8 |11.6 |74.1 |4.9 |2.7 |180.0 |US$ million |
|03.02; 03.03; 03.04; 03.05; 03.07) | | | | | | | |
|Fish and shellfish imported from the |97.5 |n.a. |n.a. |2.5 |n.a. |40.0 |US$ million |
|Republic of Korea | | | | | | | |
|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 |
|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 |n.a. |100.0 |n.a. |n.a. |n.a. |0.1 |TMT |
|Monostroma species) | | | | | | | |
|Preparation of Kombu (Kjellemaniella |96.0 |n.a. |n.a. |4.0 |n.a. |0.5 |TMT |
|spp. and Laminaria spp.) | | | | | | | |
|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 |n.a. |n.a. |n.a. |n.a. |n.a. |n.a. |n.a. |
|nuclear power generation | | | | | | | |
|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 |n.a. |n.a. |n.a. |n.a. |n.a. |n.a. |n.a. |
|treaty | | | | | | | |
|Products made of species registered to |n.a. |n.a. |n.a. |n.a. |n.a. |n.a. |n.a. |
|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.4
Import 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 (..) |
|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.[lxxiv]27 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.[lxxv]28 Information concerning the quota application procedures and requirements for individual items subject to import quota is published.[lxxvi]29 Quotas are allocated to applicants who meet various criteria and, for some items, on a first-come first-served basis[lxxvii]30; 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.[lxxviii]31 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 surveillance
47. 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.[lxxix]32 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.[lxxx]33 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.[lxxxi]34
48. Changes in Japan's import surveillance system include the elimination in January 2000 of the import confirmation requirement for wakame seaweed.
(e) Administrative guidance
49. 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.[lxxxii]35 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 cartels
50. No authorized import cartels remain in Japan.
(vi) Anti-dumping, countervailing, and safeguard measures
51. 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 actions
52. An anti-dumping duty on Chinese ferro-silico-manganese, imposed by Japan in 1993, ended in January 1998.[lxxxiii]36 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.[lxxxiv]37
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".[lxxxv]38
(b) Safeguard measures
55. 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"[lxxxvi]39, and certain public corporations.[lxxxvii]40 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.[lxxxviii]41
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 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.[lxxxix]42 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.[xc]43 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.[xci]44 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.[xcii]45
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.[xciii]46 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.[xciv]47 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 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.[xcv]48 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.5
Procurement 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 |40.2 |99.2 |0.8 |
| |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 | | | |
|6. |Wood and articles of wood; wood charcoal; cork and articles of cork; paper making |407.1 |99.9 |0.1 |
| |material; paper and paperboard and articles thereof; manufactures of straw of esparto | | | |
| |and of other planting materials, basketwork and wickerwork | | | |
|7. |Textiles and textile articles, footwear, headgear, umbrellas; sunshades; walking sticks,|106.8 |98.8 |1.2 |
| |whips, riding crops and parts thereof; travel goods; hand-bags and similar containers; | | | |
| |articles of apparel and clothing accessories, of leather or composition leather | | | |
|8. |Articles of stone, plaster, asbestos, mica and similar materials; ceramic products, other|14.6 |100.0 |0.0 |
| |than sanitary fixtures; glass and glassware, other than illuminating and signalling | | | |
| |glassware and optical elements of glass, not optically worked nor of optical glass | | | |
|9. |Iron and steel and articles thereof, other than boilers and radiators for central |167.1 |99.2 |0.8 |
| |heating, air heaters and hot air distributors not electronically heated | | | |
|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 |
Source: Information provided by the Japanese authorities.
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 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.[xcvi]49
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).[xcvii]50 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 trading
69. State trading in Japan involves leaf tobacco[xcviii]51, salt for common use, opium, alcohol, rice, wheat and barley, milk products, and raw silk.[xcix]52 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 alcohol[c]53. 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 assessment
70. 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.6
Major standards and technical regulations in Japan, March 2000
| |Number of |Percentage |Percentage |Percentage |Percentage |
| |standards or |corresponding to |equivalent to |acceptance of |acceptance of |
| |regulations |international |international |overseas |overseas test |
| | |standardsa |standards |certificationb |datab |
|A. Mandatory technical regulations | | | | | |
|Pharmaceuticals Affairs Law |2,557 |.. |.. |.. |.. |
|Food Sanitation Law |377 |.. |.. |.. |.. |
|Electrical Appliance and Materials Control |498 |100 |.. |.. |100 |
|Law | | | | | |
|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 |151 |n.a. |n.a. |n.a. |100 |
|Quality Improvement of Feed | | | | | |
|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.
Source: Information provided by the Japanese authorities.
Voluntary standards
71. 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.[ci]54 Japan also established standards, in January 2000, for organic plant products and processed foods made from organic plant products, in accordance with Codex guidelines.[cii]55 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.[ciii]56 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 regulations
74. Approximately 7% of all JIS were quoted in 1996 as mandatory technical regulations.[civ]57 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 arrangements
76. 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).[cv]58 Japan unilaterally provides technical cooperation to developing countries, including training programmes for officials and the dispatching of Japanese experts on-site.
(b) Sanitary and phytosanitary measures
79. 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".[cvi]59 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.[cvii]60
(c) Labelling and packaging requirements
82. 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.[cviii]61 Inspection certification and a labelling system for organic food was newly introduced under the amendment[cix]62; 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 measures
Countertrade
84. Since its previous Trade Policy Review, Japan has not been involved in any countertrade arrangements.
(3) Import and Inward Investment Promotion Measures
(i) Overview
85. 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.
(ii) Import promotion
86. The Import Board plays an important role in the formulation of Japan’s import promotion policy.[cx]63 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) [cxi]64, 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.7
Overview 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 |
Source: Information provided by the Japanese authorities.
Table III.8
Total 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|19.0 |25.0 |14.0 |.. |
| |Manufactured Product Imports): total amount of tax breaka | | | | |
.. Not available.
a MOF's estimated value, not based on accumulated data on tax breaks.
Source: Information provided by the Japanese authorities.
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.[cxii]65 Tax incentives offered under Japan's import promotion programmes are applied only to manufactured products already entering Japan on a duty free basis.[cxiii]66
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 measures
90. 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.[cxiv]67 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.[cxv]68
(a) Regulatory regime
91. 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.[cxvi]69 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.[cxvii]70 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 management[cxviii]71, air and maritime transport. In addition, some other sectors require prior notification on the grounds of public order and national security.[cxix]72
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, 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 Japan[cxx]73; reciprocity requirements exist in banking and other financial services under the Banking Law[cxxi]74; cabotage in maritime transport is generally prohibited[cxxii]75; and in the air transport sector, foreign participation in equity and management is restricted.[cxxiii]76
93. Although a notified inward FDI project may be rejected by the Government, the authorities state that this has never happened.[cxxiv]77 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 notification[cxxv]78; 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)[cxxvi]79; 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 measures
95. 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 incentives[cxxvii]80, 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".[cxxviii]81 A total of 151 economic sectors are open to approval as sectors for Designated Inward Investors[cxxix]82; many sectors are excluded, however, including agriculture, leather, footwear, and many other low-productivity sectors.
Table III.9
Measures for promoting imports and foreign direct investment into Japan, FY2000
|I. |Tax incentives – extension of loss carry-over period |
| |Designated 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 projects |
| |Former 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) |
| |(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 enterprises |
| |Training 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. |
| |(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. |
Source: Information provided by the Japanese authorities.
96. The Development Bank of Japan (DBJ) has programmes providing low-interest loans to foreign companies and foreign affiliates.[cxxx]83 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.[cxxxi]84
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.[cxxxii]85
(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 charges
101. Japan has no export taxes or levies. Exports are normally exempt from consumption tax.
(ii) Export restrictions, licensing, and cartels
102. 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 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.[cxxxiii]86 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 restraints
103. 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 cartels
104. 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 concessions
105. The authorities indicate that Japan has no subsidy or tax concession schemes to promote its exports.[cxxxiv]87
(b) Export finance, insurance and guarantees
106. Long-term official export credits for exports of plant and technology to developing countries are handled by the Japan Bank for International Cooperation (JBIC).[cxxxv]88 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 schemes
108. 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 taxes
109. A consumption tax (value-added tax) of 5% is levied on goods and services transactions in Japan.[cxxxvi]89 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 taxes
110. 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 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 incentives
112. 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.[cxxxvii]90 The FY2000 amendment included special taxation measures, concerning public welfare, the energy sector, and housing.
Table III.10
National 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 |
|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.
Source: Information provided by the Japanese authorities.
(d) Bilateral tax treaties
113. As of 31 March 2000, Japan maintains tax treaties with Armenia[cxxxviii]91, Australia, Austria, Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic[cxxxix]92, Denmark, Egypt, Fiji[cxl]93, 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 assistance
114. 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).[cxli]94
(iii) State-owned companies and privatization
115. 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 measures
116. 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.[cxlii]95
(v) Trade-related intellectual property rights
117. 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).[cxliii]96 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 procedures
118. 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.[cxliv]97 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.[cxlv]98 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.[cxlvi]99
Table III.11
Legislation 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) |National Tax Administration |
| |The Special Measures Law concerning the Stability of| |
| |Sake Brewing and Related Industries | |
|Layout designs of integrated circuits |Law concerning the Circuit Layout of Semiconductor |Japanese Patent Office, MITI |
| |Integrated Circuits | |
|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 |Code of Civil Procedure – Law of Civil Execution |Ministry of Justice |
|remedies | | |
| |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 |MITI |
| |Integrated Circuits | |
| |Anti-Monopoly Act |Fair Trade Commission |
|Border measures |Customs Tariff Law |Ministry of Finance |
| |Export & Import Trading Law |MITI |
Source: Information provided by the Japanese authorities.
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.[cxlvii]100 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.12
Patent, 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 |
| |(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.
Source: Information provided by the Japanese authorities.
(b) International harmonization and cooperation
120. 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) Enforcement
122. Statistics detailing Japan’s efforts since 1990 to combat violations of intellectual property rights at the border are provided in Table III.13.[cxlviii]101 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.[cxlix]102
Table III.13
Suspension of imports likely to infringe intellectual property rights, 1990-99
|Category |Main items |
|Shoes |Sports |21 |17 |22 |13 |5 |0.2 |12 |7 |0.5 |
| |shoes | | | | | | | | | |
| |(tennis | | | | | | | | | |
| |shoes, | | | | | | | | | |
| |sneakers| | | | | | | | | |
| |) | | | | | | | | | |
|(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 |
|1. Exemptions under the AMA (3 systems) | |
|Japan Fair Trade Commission |Section 23 |Enforcement of intellectual property |
| | |rights |
| |Section 24 |Activities of cooperatives |
| |Section 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 |
| | |reorganization |
|Ministry of Finance |Insurance Business Law |Insurance cartels |
| |Law Concerning Non-Life Insurance Rating |Rating of standard ratio concerning |
| |Organizations |compulsory automobile insurance and |
| | |earthquake insurance |
| |Law Concerning Liquor Business Associations and |Rationalization cartels |
| |Measures for Securing Revenue from Liquor Tax | |
|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 |Cartels to prevent excessive competition |
| |Hygienically Regulated Business | |
|Ministry of Agriculture, Forestry and |Agriculture Cooperative Association Law |Central Associations of Agriculture |
|Fisheries | |Cooperatives |
| | |Corporation of Farmers' cooperative |
| | |organization |
|Ministry of International Trade and |Export-import Trading Law |Cartels on exports by exporters and |
|Industry | |exporters' trade associations |
| |Law Relating to Organization of Small and |Economic business by cooperatives |
| |Medium-Sized Business Associations | |
| |The Cooperative Societies of Minor Enterprises Act|Central Associations of Small and Medium |
| | |Business Groups |
| |Law on Investment Companies for the Development of|Underwriting and possession of shares of |
| |Small and Medium-sized Companies |small and medium-sized companies |
|Ministry of Transport |Marine Transportation Law |Maritime transportation cartels (coastal |
| | |shipping) |
| | |Maritime transportation cartels (ocean |
| | |shipping) |
| |Road Transportation Law |Transportation cartels |
| |Civil Aeronautics Law |Aviation cartels (domestic) |
| | |Aviation cartels (international) |
| |Coastal Shipping Association Law |Coastal shipping cartels |
| | |Joint shipping cartels |
Source: Information provided by the Japanese authorities.
(c) Private remedies
134. 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 system
135. 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".[clii]105
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.[cliii]106 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.[cliv]107 The Commercial Code was amended in August 1999 to introduce a system that allowed shares swaps between existing companies[clv]108; 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.
Table III.15
Merger 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.
Source: Information provided by the Japanese authorities.
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.[clvi]109 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.[clvii]110 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.[clviii]111
(g) Enforcement
141. 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.16
Enforcement 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 Act |
|Number of legal measures |31 |21 |31 |27 |27 |
|Private monopoly |0 |1 |3 |1 |1 |
|Cartels |24 |15 |19 |19 |20 |
|Price cartels |4 |10 |3 |1 |1 |
|Collusive tendering |20 |5 |16 |17 |18 |
|Other types of cartelsb |0 |0 |0 |1 |1 |
|Unfair trading practices |4 |2 |9 |6 |3 |
|Others |3 |3 |0 |1 |3 |
|(B) Surcharge payment orders |(¥ billion) |
|Payment order | | | | | |
|Number of cases |24 |14 |16 |16 |16 |
|Number of enterprise operators |741 |368 |369 |576 |315 |
|Surcharge amount |6.45 |7.49 |2.83 |3.15 |5.96 |
|Decision to initiate hearings |0 |2 |1 |2 |1 |
|(C) Recently processed investigation cases | | | | |
|Cases investigated | | | | | |
|Carry-over from the previous fiscal year |70 |68 |70 |45 |50 |
|New cases begun during the current fiscal year |128 |112 |155 |125 |82 |
|Total |198 |180 |225 |170 |132 |
|Processed Cases | | | | | |
|Legal 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 |27 |
|Others | | | | | |
|Warnings |13 |17 |19 |17 |20 |
|Cautions |60 |61 |123 |62 |36 |
|Discontinuede |26 |11 |7 |14 |10 |
|Sub-total |99 |89 |149 |93 |66 |
|Total |130 |110 |180 |120 |93 |
|Carry-over to the next fiscal year |68 |70 |45 |50 |39 |
|Criminal 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.
Source: Information provided by the Japanese authorities.
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".[clix]112 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.[clx]113 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.17
Industries monitored by the JFTC with respect to a "monopolistic situation", 1995-99
| |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 |
Source: Information provided by the Japanese authorities.
(h) Keiretsu
144. 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 concentration, as the groups include many leading companies in various industries.
(i) Distribution measures
145. 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 plan[clxi]114, 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.
IV. TRADE POLICIES BY SECTOR
(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 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) Overview
6. 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.[clxii]1 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.[clxiii]2
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.
Table IV.1
Major 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 |25.6 |
|Vegetables |22.5 |24.4 |21.9 |25.4 |22.2 |22.9 |22.3 |23.3 |26.3 |
|Fruit |9.1 |9.6 |8.5 |7.7 |8.5 |8.7 |9.0 |8.1 |9.0 |
|Flowers |3.3 |3.6 |3.8 |4.1 |3.8 |4.2 |4.3 |4.6 |4.7 |
|Livestock |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 |4.4 |
|Pigs |5.5 |5.6 |5.6 |5.4 |4.7 |4.8 |5.3 |5.3 |4.9 |
|Eggs 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 |8.7 |
|Percentage 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 products | | | | | | | | | |
|Rice |100 |100 |101 |75 |120 |103 |102 |99 |95 |
|Wheat |15 |12 |12 |10 |9 |7 |7 |9 |9 |
|Soybeans |5 |4 |4 |2 |2 |2 |3 |3 |3 |
|Vegetables |91 |90 |90 |88 |86 |85 |86 |86 |84 |
|Fruit |63 |59 |59 |53 |47 |49 |47 |53 |49 |
|Milk and dairy products |78 |77 |81 |80 |72 |72 |72 |71 |71 |
|Beef |51 |52 |49 |44 |42 |39 |39 |36 |35 |
|Pork |74 |70 |68 |69 |65 |62 |59 |62 |61 |
|Chicken eggs |98 |97 |97 |96 |96 |96 |96 |96 |96 |
|Self-sufficiency ratio on a calorie |47 |46 |46 |37 |46 |43 |41 |41 |40 |
|basis | | | | | | | | | |
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 policies[clxiv]3; 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 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 fats[clxv]4; 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 measures
9. The average applied MFN tariff for agriculture (WTO definition) was 18.2%[clxvi]5 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.2
Protection in agriculture, FY2000
(Per cent)
|HS Chapter/Description |AVE-tariff |Max. tariff |Tariff peaksa |Non- |
| | | |(% of lines) |ad valorem |
| | | | |tariff |
| | | | |(% of lines) |
|01 |Live animals |4.5 |40.1 |7.4 |22.2 |
|02 |Meat and edible meat offal |12.1 |80.2 |17.8 |20.6 |
|03 |Fish and crustaceans, molluscs and other aquatic invertebrates|5.5 |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; cut | | | | |
| |flowers and ornamental foliage |0.5 |3.0 |0.0 |0.0 |
|07 |Edible vegetables and certain roots and tubers |32.1 |983.7 |6.5 |8.3 |
|08 |Edible fruit and nuts; peel of citrus fruit; melons |7.9 |24.0 |6.5 |0.0 |
|09 |Coffee, tea, maté and spices |3.5 |17.0 |0.0 |0.0 |
|10 |Cereals |3.9 |69.7 |4.9 |31.7 |
|11 |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 |8.7 |
|14 |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 |55.3 |
|18 |Cocoa and cocoa preparations |19.3 |29.8 |64.3 |7.1 |
|19 |Preparations of cereals, flour, starch or milk; pastry cooks'| | | | |
| |products |22.8 |301.6 |50.8 |26.6 |
|20 |Preparations of vegetables, fruit, nuts or other parts of |16.3 |46.8 |30.3 |4.8 |
| |plants | | | | |
|21 |Miscellaneous edible preparations |27.8 |465.2 |47.8 |16.3 |
|22 |Beverages, spirits and vinegar |19.2 |68.0 |38.8 |57.1 |
|23 |Residues and waste from the food industries; prepared animal | | | | |
| |fodder |0.8 |12.8 |0.0 |9.5 |
|24 |Tobacco and manufactured tobacco substitutes |5.1 |29.8 |9.1 |0.0 |
|1-24 |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 simultaneous buy-sell system for rice (see below)).[clxvii]6
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.3
Special 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 |Volume-based |1 December 1997 to 31 March 1998 |
|sugar or other sweetening matter | | |
|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% |Price-based |16 March 1999 |
|natural milk constituents on the dry matter | | |
|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 |Price-based |13 August 1999 |
|sweetening matter | | |
|Peas (Pisum sativum) |Price-based |6 January 2000 |
| | |25 February 2000 |
|Food preparations by weight not less than 30% natural milk|Price-based |7 March 2000 |
|constituents on the dry matter | | |
|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.[clxviii]7 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.[clxix]8 The applied out-of-quota duty was reduced to ¥341/kg. in FY2000. According to the authorities, an increase in rice imports is unlikely.[clxx]9
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 so that the unsold rise would not affect domestic markets.[clxxi]10 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.[clxxii]11 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 programmes
15. 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.[clxxiii]12 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.[clxxiv]13 These producer and consumer NACs were, on average, 1.7 and 1.4 times as much as the respective OECD averages.[clxxv]14 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.[clxxvi]15 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).[clxxvii]16 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.4
Procurement 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 |.. |.. |.. |.. |.. |
.. Not available.
Source: Information provided by the Japanese authorities.
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) Overview
19. 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.[clxxviii]17 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 petroleum[clxxix]18; the measures introduced concerned, inter alia, partial liberalization of the retail business of electric and gas utilities.
(ii) Electricity
21. 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.[clxxx]19
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.[clxxxi]20
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").[clxxxii]21 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) Gas
24. 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 under regional monopolies.[clxxxiii]22 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 rates[clxxxiv]23; "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.[clxxxv]24
(4) Manufacturing
(i) Overview
25. 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.5
Manufacturing 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 |
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.6
Employment in manufacturing, value added per employee, and wages per employee in Japan, 1992-98
|JSIC and description |Number of employees |Value added per employee |Wages per employee |
| |('000) |(million yen) |(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)).
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 vehicles
30. 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.[clxxxvi]25 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.[clxxxvii]26
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)[clxxxviii]27; and General Motors (GM) has long held substantial shares of Isuzu, Suzuki, and Subaru (49%, 10% and 20%, respectively, as of April 2000).[clxxxix]28
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.[cxc]29
(b) Semiconductors
34. 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) Pharmaceuticals
35. 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%.[cxci]30 Pharmaceutical imports are duty free. Ministerial licence is required to manufacture or import pharmaceuticals[cxcii]31; 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.[cxciii]32 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 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 System[cxciv]33, 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.[cxcv]34
(5) services
(i) Overview
38. 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
(a) Overview
45. 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.[cxcvi]35 The number of financial institutions by category are indicated in (Table IV.7).
Table IV.7
Financial institutions in Japan, December 1999
|1. Banks |Number of banks |Total funds |Related laws |
| | |(¥ trillion) | |
|City bank |9 |254 |Banking Law |
|Long-term credit bank |3 |42.1 |Long-Term Credit Bank Law |
|Trust bank |33 |157.5 |Banking Law, Trust Business Law |
|Regional bank |64 |174.6 |Banking Law |
|Second regional bank |60 |61.1 |Banking Law |
|Foreign owned bank |84 |6.8 |Banking Law |
|2. Cooperative financial institutions |Number of |Total funds |Related laws |
| |organizations |(¥ trillion) | |
|Zenshinren Bank |.. |16.2 |Shinkin Bank Law |
|Shinkin Bank |392 |103.5 |Shinkin Bank Law |
|Shinkumi Federation Bank |.. |3.0 |Law on Financial Business by Cooperatives |
|Mutual Federation of Labor Credit Association |.. |2.9 |Labour Credit Association Law |
|Labour Credit Associations |41 |11.6 |Labourer's Cooperative Law |
|Shoko-Chukin Bank |.. |12.8 |Shoko-Chukin Bank Law |
|Norinchukin Bank |.. |38.6 |Norinchukin Bank Law |
|Credit Federation of Agricultural Cooperatives |47 |48.2 |Agricultural Cooperative Law |
|Agricultural Cooperatives |1,558 |71.0 |Agricultural Cooperative Law |
|Credit Federation of Fishery Cooperatives |35 |2.4 |Fishery Cooperative Law |
|Fishery Cooperatives (including Processed Marine |893 |1.4 |Fishery Cooperative Law |
|Products Cooperatives | | | |
|Credit Guaranty Association |.. |.. |Credit Guaranty Association Law |
|3. Insurance companies |Number of |Total assets |Related laws |
| |companies |(¥ trillion) | |
|Life insurance: Domestic |41 |185 |Insurance Business Law |
| Foreign |3 |2.8 | |
|Non-life insurance: Domestic |36 |24 |Insurance Business Law |
| Foreign |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|
|Table IV.7 (cont'd) |
|4. Non-banks and other |Number of |Number of reported|Related laws |
| |registered |companies | |
| |companies | | |
|Loan companies |31,668 |.. |Regulatory Law for Loan Business |
|Housing Loan Companies |.. |1 |Old Investment Law |
|Money Market Brokers |.. |14 |Old Investment Law |
|Mortgage companies |125 |.. |Act concerning Regulation of Mortgage Backed |
| | | |Securities Business |
|Prepaid voucher issuers |2,055 |363 |Law on Regulation of Prepaid Voucher |
|Commodity investment brokers |111 |.. |Law on Regulation of Commodity Investment |
| | | |Business |
|Special credit brokers |45 |.. |The Business Asset Securitization Law |
|Denominated credit brokers |21 |.. | |
|Real-estate syndications |21 |.. |Real Estate Syndication Act |
|Financial futures brokers |199 |.. |Law on Financial Futures Trade |
|5. Government's financial institutions |Aggregated | |Related laws |
| |balance of loans| | |
| |(¥ trillion) | | |
|Japan Development Bank |15.5 |Japan Development Bank Law |
|Export-Import Bank of Japan |9.1 |Export-import Bank of Japan Law |
|People's Finance Institution |8.9 |People's Finance Institution Law |
|Housing Loan Corporation |70.1 |Housing Loan Corporation Law |
|Agriculture, Forestry and Fisheries Finance |4.5 |Law on Agriculture, Forestry and Fisheries |
|Corporation | |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 |1.0 |Environmental Sanitation Business Financial |
|Corporation | |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 | |Bank of Japan Law (as of December 1996) |
| |¥61.9 trillion | | |
|Deposit Insurance Corporation |.. | |Deposit Insurance Law |
.. Not available.
Source: Information provided by the Japanese authorities.
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.[cxcvii]36 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.[cxcviii]37 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.[cxcix]38 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 framework
49. 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.[cc]39 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.[cci]40 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".
Banking
50. 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.
[pic]
51. Foreign banks may enter the Japanese market by establishing branches, agencies, or subsidiaries; a licence from the FRC is required in each case.[ccii]41 Under the Banking Law, foreign banks with Japanese branches or agencies are subject to regulations no less favourable than those applied to domestic banks. While the Law includes "reciprocity" provisions with regard to licensing[cciii]42, the authorities maintain that these do not apply to WTO Members, given Japan's WTO commitments.[cciv]43 The authorities consider that prudential requirements are no more onerous for nationally licenced subsidiaries of foreign banks than for domestic banks.[ccv]44 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 banks[ccvi]45, 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.[ccvii]46 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.[ccviii]47 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.
Insurance
55. 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.[ccix]48
56. A licence from the FRC is required to conduct insurance business in Japan.[ccx]49 Insurance policies, both for new products and modifications to existing ones, as well as premium rates, require approval.[ccxi]50 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).[ccxii]51 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.[ccxiii]52 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 confirm that the measures under the agreement have been steadily implemented.
Securities
59. 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.[ccxiv]53 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) Overview
62. 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 providers[ccxv]54; the elimination of the authorization requirement for end-user charges; the introduction of a price-cap regulation for certain end-user charges[ccxvi]55; 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.[ccxvii]56 Its GATS Schedule of Commitments includes all telecommunications services subsectors except telegraph services.[ccxviii]57 Limitations on market access and on national treatment remain in Mode 3 (commercial presence) with regard to the Nippon Telegraph and Telephone (NTT) Corporation.[ccxix]58
(b) Market structure
65. 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.[ccxx]59 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 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.[ccxxi]60
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.[ccxxii]61
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.[ccxxiii]62 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.)[ccxxiv]63
(c) Regulatory framework
69. 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 regulations
71. 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.[ccxxv]64 Ministerial permission is required for entry into and exit from Type-I businesses.[ccxxvi]65 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 no foreign ownership or management restriction in the telecommunications services sector, except in the case of the NTT Corporation[ccxxvii]66; 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.[ccxxviii]67 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.[ccxxix]68 The two local NTT companies have a de facto monopoly of the local communications market.[ccxxx]69 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.[ccxxxi]70 The authorities state that the MPT will continue to monitor the situation of NTT companies in accordance with relevant laws.[ccxxxii]71
74. In accordance with the NTT Law, the NTT Corporation is required to provide universal service.[ccxxxiii]72 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.[ccxxxiv]73 Telecommunications business is not exempt from the application of the Anti-Monopoly Act (Chapter III(5)(vii)).
Regulations on charges
76. For Type-I carriers, charges and their modification must be notified to MPT at least a week in advance.[ccxxxv]74 MPT may order carriers to revise their charges in order to assure fair and reasonable end-user charges.[ccxxxvi]75
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.
Interconnection
78. 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.[ccxxxvii]76 Number portability is not permitted.
Mobile telephony
80. 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.[ccxxxviii]77 All mobile service providers have been classified as Type-I carriers.
Cable TV
81. 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.[ccxxxix]78
Appeals
82. 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 sources[ccxl]79; 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 transport
85. 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.
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 trade
89. Like many maritime nations, Japan's domestic maritime transportation services market is shielded from foreign competition by cabotage legislation.[ccxli]80 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.[ccxlii]81 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.[ccxliii]82
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 trade
93. 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.[ccxliv]83 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.[ccxlv]84 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).[ccxlvi]85 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 service[ccxlvii]86; 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 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.[ccxlviii]87 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 services
98. 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.[ccxlix]88 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.[ccl]89 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.[ccli]90
101. The Port Transport Business Law was amended in May 2000, to replace a licensing requirement (involving an economics needs test[cclii]91) with permission as regards entry into port transport business in nine major ports[ccliii]92; 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 transport
102. 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 services
104. Under the CAL, any person intending to provide domestic airline services must obtain permission from the Minister of Transport.[ccliv]93 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.[cclv]94
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.
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.[cclvi]95 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.[cclvii]96 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 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 services
115. 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.[cclviii]97
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.[cclix]98 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.[cclx]99 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.[cclxi]100 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 services
118. 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 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 services
122. 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.[cclxii]101 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.[cclxiii]102 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.[cclxiv]103 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. [cclxv]104 Services supplied by formal education institutions require commercial presence, and must be provided by school judicial persons.[cclxvi]105 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 universities
125. 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.[cclxvii]106 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.[cclxviii]107 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.[cclxix]108
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.[cclxx]109 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.
128. Formal educational institutions must be non-profit organizations, and their commercial activities are legally limited[cclxxi]110; 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. [cclxxii]111 In the past three years, two universities have been established by new entrants in the Tokyo metropolitan area.[cclxxiii]112
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.[cclxxiv]113 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.[cclxxv]114
131. No legislation restricting foreign participation in formal education services appears to exist.[cclxxvi]115 Nevertheless, under the Fundamental Law of Education, only central and local governments and "school judicial persons"[cclxxvii]116 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.[cclxxviii]117
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).[cclxxix]118
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.[cclxxx]119
REFERENCES
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EPA (2000a), Economic Outlook and Basic Policy Stance on Economic Management for 2000, Economic Planning Agency, Tokyo.
EPA (2000b), Economic Survey of Japan 1999-2000.
GATT (1995), Trade Policy Review – Japan, Geneva.
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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.
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OECD (1999c), Regulatory Reform in Japan, Paris.
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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.1
Exports 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 |
|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).
Table AI.2
Imports 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 |
Source: UNSD, Comtrade database (SITC Rev.3).
Table AI.3
Exports 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 |
Source: UNSD, Comtrade database (SITC Rev.3).
Table AI.4
Imports 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 |27.4 |
|United States |22.6 |22.8 |22.4 |24.0 |21.8 |
|Canada |3.2 |2.9 |2.9 |2.7 |2.6 |
|Other America |3.4 |3.2 |3.3 |3.2 |3.0 |
|Europe |17.8 |17.0 |16.3 |16.8 |16.9 |
|EU15 |14.5 |14.1 |13.3 |13.9 |13.8 |
|Germany |4.1 |4.1 |3.7 |3.8 |3.7 |
|France |2.0 |1.8 |1.7 |2.0 |2.0 |
|United Kingdom |2.1 |2.1 |2.1 |2.1 |1.9 |
|EFTA |1.6 |1.4 |1.4 |1.5 |1.6 |
|Eastern Europe |1.7 |1.4 |1.5 |1.3 |1.5 |
|Former USSR |1.5 |1.2 |1.3 |1.1 |1.3 |
|Other Europe |0.1 |0.1 |0.1 |0.1 |0.1 |
|Asia |46.1 |47.5 |48.3 |46.2 |49.4 |
|Middle East |9.4 |10.1 |11.3 |9.1 |9.8 |
|United Arab Emirates |3.0 |3.3 |3.6 |3.0 |2.8 |
|Saudi Arabia |2.9 |3.1 |3.5 |2.6 |2.7 |
|East Asia |35.5 |36.3 |36.0 |36.1 |38.7 |
|China |10.7 |11.6 |12.4 |13.2 |13.8 |
|Korea, Rep. of |5.1 |4.6 |4.3 |4.3 |5.2 |
|Indonesia |4.2 |4.4 |4.3 |3.9 |4.1 |
|Chinese Taipei |4.3 |4.3 |3.7 |3.6 |4.1 |
|Malaysia |3.1 |3.4 |3.4 |3.1 |3.5 |
|Thailand |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 |5.0 |
|Australia |4.3 |4.1 |4.3 |4.6 |4.1 |
|Africa |1.4 |1.4 |1.4 |1.4 |1.3 |
Source: UNSD, Comtrade database (SITC Rev.3).
Table AI.5
Composition 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.
Table AIII.1
Non-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, |Meat of swine, other than carcasses or |¥482/kg. |¥482/kg. |
|020322023, 020329023, |half-carcass. | | |
|020630093, 020649093 | | | |
|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, |Wheat and meslin |¥9.8/kg. |¥55/kg.a |
|100190093, 100190099 | | | |
|100300091, 100300099 |Barley |¥10.4/kg. |¥39/kg.a |
|100510020 |Maize (corn) |¥9/kg. |¥9/kg. |
|100610ex, 100620ex, |Rice |¥49/kg. |¥341/kg.a |
|100630ex, 100640ex | | | |
|100890029 |Triticale |¥9.8/kg. |¥55/kg.a |
|110100019, 110100092, |Wheat or meslin flour |¥27.4/kg. |¥90/kg.a |
|110100099 | | | |
|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 |
|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 |¥8.5/kg. |¥8.5/kg. |
| |> 0.6 | | |
|151211120, 151211220 |Sunflower seed/safflower oil (...), acid value ≤ |¥10.4/kg. |¥10.4/kg. |
| |0.6 | | |
|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 > |¥10.9/kg. |¥10.9/kg. |
| |0.6 | | |
|151410200 |Rape, colza/mustard oil (crude oil), acid value |¥13.2/kg. |¥13.2/kg. |
| |≤ 0.6 | | |
|151490000 |Rape, colza or mustard oil (other) |¥13.2/kg. |¥13.2/kg. |
|151521100 |Maize (corn) oil (crude oil) of an acid value > |¥5/kg. |¥5/kg. |
| |0.6 | | |
|151521200 |Maize (corn) oil (crude oil) of an acid value ≤ |¥10.4/kg. |¥10.4/kg. |
| |0.6 | | |
|151529000 |Maize (corn) oil (other) |¥10.4/kg. |¥10.4/kg. |
|151550100, 151590410, |Sesame, rice bran and other oils and their |¥8.5/kg. |¥8.5/kg. |
|151590510 |fractions of an acid value > 0.6 | | |
|151550200, 151590420, |Sesame, rice bran and other oil and their |¥10.4/kg. |¥10.4/kg. |
|151590520 |fractions of an acid value ≤ 0.6 | | |
|151790020 |Mixture of vegetable fats + oils + their fractions|¥13.2/kg. |¥13.2/kg. |
|170111190, 170112100 |Cane sugar (centrifugal), beet sugar whose content|¥35.3/kg. |¥35.3/kg.b |
| |of sucrose by weight, in the dry state, | | |
| |corresponds to a polarimetric reading of less than| | |
| |98.5°C | | |
|170111110 |Cane sugar (other), whose content of sucrose by |¥35.3/kg. |¥35.3/kg. |
| |weight, in the dry state, corresponds to a | | |
| |polarimetric reading of less than 98.5 C | | |
|170111200, 170112200 |Cane sugar (other), beet sugar (other) |¥21.5/kg. |¥103.1/kg.b |
|170191000 |Refined sugar cont. added flavouring/colouring |¥39.98/kg. |¥106.2/kg.b |
| |matter | | |
|170199100 |Rock candy, cube sugar, loaf sugar and similar |¥39.98/kg. |¥106.2/kg.b |
| |sugar | | |
|170199200 |Refined sugar (other) |¥21.5/kg. |¥103.1/kg.b |
|170220100 |Maple sugar |¥20.8/kg. |¥20.8/kg. |
|190120128,190120168, |Mixes and dough for the prep. of bakers' wares (…)|¥54/kg. |¥375/kg.a |
|190190148 | | | |
|190120139, 190190159 |Mixes and dough for the prep. of bakers' wares (…)|¥27.4/kg. |¥90/kg.a |
|190120149, 190190169 |Mixes and dough for the prep. of bakers' wares (…)|¥31/kg. |¥83/kg.a |
|190120152, 190190172 |Mixes and dough for the prep. of bakers' wares (…)|¥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. |
|Table AIII.1 (cont'd) |
|190219092 |Uncooked pasta, (...), (other), udon, somen and |¥34/kg. |¥34/kg. |
| |soba | | |
|190219093, 190219094 |Uncooked pasta, (...), (other), macaroni + |¥30/kg. |¥30/kg. |
| |spaghetti | | |
|190219099 |Uncooked pasta, (...), (other), other |¥34/kg. |¥34/kg. |
|190240000 |Couscous |¥24/kg. |¥24/kg. |
|190410212 |Prepared foods obtained by the swelling or |¥49/kg. |¥341/kg.a |
| |roasting of cereals or cereal prod. (…) | | |
|190410229 |Prepared foods obtained by the swelling or |¥26.2/kg. |¥85/kg.a |
| |roasting of cereals or cereal prod. (…) | | |
|190410239 |Prepared foods obtained by the swelling or |¥26.6/kg. |¥64/kg.a |
| |roasting of cereals or cereal prod. (…) | | |
|190420212 |Prepared foods obtained from unroasted cereal |¥49/kg. |¥341/kg.a |
| |flakes or form mixtures (…) | | |
|190420229 |Prepared foods obtained from unroasted cereal |¥26.2/kg. |¥85/kg.a |
| |flakes or form mixtures (…) | | |
|190420239 |Prepared foods obtained from unroasted cereal |¥26.6/kg. |¥64/kg.a |
| |flakes or form mixtures (…) | | |
|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 |¥112/l. |¥112/l. |
| |containers holding 2 litres or less | | |
|220429090 |Other wine in containers holding over 150 litres |¥45/l. |¥45/l. |
|220430200 |Other grape must of an alcoholic strength by |¥45/l. |¥45/l. |
| |volume ε 1% | | |
|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 |¥27/l. |¥27/l. |
| |prod. of heading No. 20.09 or 22.02 | | |
|220600229 |Other fermented beverages |¥42.4/l. |¥42.4/l. |
|220720200 |Undenatured ethyl alcohol of an alcoholic strength|¥38.1/l. |¥38.1/l. |
| |by vol. of 80% or higher; ethyl alcohol and other| | |
| |spirits, denatured, of any strength | | |
|220820100 |Spirits obtained by distilling grape wine or grape|¥131.98/l. |0 |
| |marc (alcoholic strength by vol. of 50% vol. or | | |
| |higher, excl. those in containers holding less | | |
| |than 2 litres) | | |
|220820200 |Spirits obtained by distilling grape wine or grape|¥156/l. |0 |
| |marc (other) | | |
|220830031 |Rye whisky (...) (alcoholic strength by vol. of |¥133.81/l. |0 |
| |50% vol. or higher, excl. those in containers | | |
| |holding less than 2 litres) | | |
|220830032 |Rye whisky (other) |¥111.2/l. |0 |
|220870000 |Liqueurs and cordials |¥63/l. |¥126/l. |
|Table AIII.1 (cont'd) |
|220890111 |Fruit brandy (of an alcoholic strength by vol. of |¥131.98/l. |0 |
| |50% or higher, excluding those in containers | | |
| |holding < 2 litres) | | |
|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 |¥59.5/kg. + ¥6 for every 1% |
| | |1% exceeding 10% by weight|exceeding 10% by weight of |
| | |of lactose contained |lactose contained |
|230990219 |Preparations of kind used in animal feed |¥52.5/kg. + ¥5.3 for every|¥52.5/kg. + ¥5.3 for every 1% |
| | |1% exceeding 10% by weight|exceeding 10% by weight of |
| | |of lactose contained |lactose contained |
|230910099, 230990299 |Preparations of a kind used in animal feeding |¥36/kg. |¥36/kg. |
|270900010 |Petroleum oils and oils obtained from bituminous |¥63/kl |Unbound |
| |minerals, crude (...) | | |
|270900090 |Petroleum oils and oils obtained from bituminous |¥215/kl |Unbound |
| |minerals, crude (...) | | |
|271000131 |Petroleum spirits, for aviation use (of a specific|¥2,090/kl |¥3,033/kl |
| |gravity not more than 0.8017 at 15°C) | | |
|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 |¥570/kl |Unbound |
| |very low degree of polymerization | | |
|271000150 |Gas oils |¥1,270/kl |Unbound |
|271000161, 271000162 |Heavy fuel oils and raw oils of a specific gravity|¥215/kl |Unbound |
| |not more than 0.9037 at 15°C, intended for use as | | |
| |raw materials in oil refining | | |
|271000165, 271000166 |Heavy fuel oils and raw oils of a specific gravity|¥2,620/kl |Unbound |
| |not more than 0.9037 at 15°C, containing by weight| | |
| |more than 0.3% of sulphur | | |
|271000167, 271000169 |Heavy fuel oils and raw oils of a specific gravity|¥3,410/kl |Unbound |
| |not more than 0.9037 at 15°C, containing by weight| | |
| |0.3% or less of sulphur | | |
|271000171, 271000172 |Heavy fuel oils and raw oils of a specific gravity|¥215/kl |Unbound |
| |exceeding 0.9037 at 15°C, intended for use as raw | | |
| |materials in oil refining | | |
|271000173, 271000174 |Heavy fuel oils and raw oils of a specific gravity|¥2,400/kl |Unbound |
| |exceeding 0.9037 at 15° C, containing by weight | | |
| |more than 0.3% of sulphur | | |
|271000175, 271000179 |Heavy fuel oils and raw oils of a specific gravity|¥3,410/kl |Unbound |
| |exceeding 0.9037 at 15°C, containing by weight | | |
| |0.3% or less of sulphur | | |
|271000181 |For use in the manufacture of petrochemical |¥12/kl |¥12/kl |
| |products | | |
|271114010 |Ethylene |¥624/MT |¥624/MT |
|290516100 |2-Ethylhexyl alcohol |¥7.49/kg. |5.50% |
|390110020, 390110060, |Polymers of ethylene, in primary forms |¥12.53/kg. |6.50% |
|390120010, 390120090 | | | |
|390210010, 390210090 |Polymers of propylene/other olefins, primary forms|¥14.82/kg. |6.50% |
|500200221, 500200222, |Raw silk (not thrown) |¥3,068/kg. |¥6,978/kg.a |
|500200223, 500200226, | | | |
|500200227 | | | |
|Table AIII.1 (cont'd) |
|750120100 |Nickel oxide sinters containing by weight not less|¥44/kg. |¥44/kg. |
| |than 88% of nickel | | |
|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 |¥2.70/kg. |¥2.70/kg. |
| |for customs duty | | |
|790111010, 790112010 |Zinc, not alloyed, ≤ ¥242/kg. in value for customs|¥4.30/kg. |¥4.30/kg. |
| |duty | | |
|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 |29.8% or ¥23/kg. |29.8% or ¥23/kg. |
| |state 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. |
|-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. |
|0404.90 |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. |
|-011 |(No sugar added) | | |25.0 |35+¥470/kg. |374 |29.8+¥400/kg. |
|-019 |(No sugar added) | | |25.0 |35+¥799/kg. |445 |29.8+¥679/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. |
|Table AIII.2 (cont'd) |
|.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. |
|-011 |(No sugar added) | | | 25.0 |35+¥466/kg. |374 |29.8+¥396/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 | | | | | | |
| |productsc |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. |
|Table AIII.2 (cont'd) |
|1102.90 |Triticale flour | | | | | | |
|-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. |
|2106.90 |Food preparations | | | | | | |
|-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. |
|1901.20 |Food preparations | | | | | | |
|–030 | | | |25.0 |¥98/kg. |338 |¥83/kg. |
|.90-030 | | | |25.0 |¥98/kg. |338 |¥83/kg. |
|1904.10 |Prepared foods | | | | | | |
|-000 | | | |19.2 |¥75/kg. |357 |¥64/kg. |
|.90-000 | | | |25.0 |¥75/kg. |357 |¥64/kg. |
|2106.90 |Food preparations | | | | | | |
|-090 | | | |25.0 |¥75/kg. |357 |¥64/kg. |
|Table AIII.2 (cont'd) |
| |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. |
|.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. |
|Table AIII.2 (cont'd) |
|.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. |
|1904.10 |Prepared foods | | | | | | |
|-000 | | | |19.2 |¥402/kg. |n.a. |¥341/kg. |
|.90-000 | | | |25.0 |¥402/kg. |n.a. |¥341/kg. |
|2106.90 |Food preparations | | | | | | |
|-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).
Table AIII.3
Tariff quotas in Japan, FY1997, 1998 and 2000
(Per cent, value/unit)
|Tariff item |Description |Tariff rates |Quota level |Above-quot|In-quota |SP |EP |
| | |FY2000 | |a imports |imports | | |
| | | | |FY1998 |FY1998 | | |
| | |Below quota |Above quota |FY1997 |FY1998 | | | | |
|0406.10, 40,|Natural cheese intended |Free |29.8 |56,300 t. |56,600 t. |.. |49,700 t. |No |Yes |
|90 |for use as material for | | | | | | | | |
| |processed cheese | | | | | | | | |
|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 | | |91,600 t. |20,600 t. |.. |4,100 t. |Yes |Yes |
| |cabinet order (steam | | | | | | | | |
| |flaked corn) | | | | | | | | |
| |-- for feeding purpose, | | |295,600 t. |231,800 t. |.. |131,300 t. | Yes |Yes |
| |stipulated by a cabinet | | | | | | | | |
| |order (whole shelled | | | | | | | | |
| |corn) | | | | | | | | |
| |- corn flakes, ethyl |Free |50% or ¥12/kg.a |108,200 t. |122,100 t. |.. |122,000 t. |Yes |Yes |
| |alcohol or distilled | | | | | | | | |
| |alcoholic beverages | | | | | | | | |
| |- 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 |Free |¥15.3/kg. |35,700 t. |34,800 t. |.. |27,800 t. |Yes |Yes |
| |refining or extraction | | | | | | | | |
| |intended for | | | | | | | | |
| |manufacturing alcohol | | | | | | | | |
|1806.20 |Cocoa preparations |Free |21.3% |18,700 t. |18,400 t. |.. |17,000 t. |Yes |Yes |
| |intended for chocolate | | | | | | | | |
| |manufacture | | | | | | | | |
|2002.90 |Tomato puree and paste |Free |16% |36,000 t. |36,500 t. |.. |32,800 t. |Yes |Yes |
| |intended for | | | | | | | | |
| |manufacturing tomato | | | | | | | | |
| |sauces | | | | | | | | |
|2008.20 |Preserved pineapple in |Free |¥33/kg. |50,000 t. |48,300 t. |.. |46,100 t. |Yes |No |
| |airtight containers | | | | | | | | |
|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 |Included in |.. |Included in |Yes |Yes |
| | | | |above |above | |above | | |
|2208.90 |Ethyl alcohol ( ................
................
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