WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/TPR/M/107/Add.1
12 February 2003
(03-0907)
Trade Policy Review Body
6 and 8 November 2002Original: English/
               anglais/
               inglés
TRADE POLICY REVIEW
JAPAN
Minutes of Meeting
Addendum
Chairperson:  H.E. Mr. Milan Hovorka (Czech Republic)
This document contains the advance written questions, and replies provided by Japan.1
__________________________________________________________________________________
Organe d'examen des politiques commerciales
6 et 8 novembre 2002
EXAMEN DES POLITIQUES COMMERCIALES
JAPON
Compte rendu de la réunion
Addendum
Président:  S.E. M. Milan Hovorka (Républic Tchèque)
Le présent document contient les questions écrites communiquées à l'avance et les réponses
fournies par le Japon.1
__________________________________________________________________________________
Órgano de Examen de las Políticas Comerciales
6 y 8 de noviembre de 2002
EXAMEN DE LAS POLÍTICAS COMERCIALES
JAPÓN
Acta de la reunión
Addendum
Presidente:  Excmo. Sr. Milan Hovorka (República Checa)
En el presente documento figuran las preguntas presentadas anticipadamente por escrito,
junto con las respuestas facilitadas por Japón.1
                                                     
1 In English only./en anglais seulement./en inglés solamente.WT/TPR/M/107/Add.1
Page 3
ADVANCE WRITTEN QUESTIONS BY MEMBERS
AND REPLIES PROVIDED BY JAPAN
ARGENTINA
III. TRADE POLICIES AND PRACTICES BY MEASURE
(4) Measures directly affecting exports
(a) Voluntary exports restraints
Question 1
In paragraph 62 of the Secretariat Report, it is pointed out that the purpose of the export controls is to
ensure national security and public safety and to ensure adequate domestic supplies of certain agriculturaland other primary products.
Could Japan inform, specifically, about the measures of exports control it has adopted during the last year
(counted in the registry), with respect to agricultural products and other primary products?
Answer 1
There are no agricultural products or other primary products on which Japan newly carried out export
regulations in 2001.
Question 2
In paragraph 62 of the Secretariat Report, it is pointed out that in response to a surge in imports of certain
agricultural products, the Japan Seed Trade Association decided in 2001 to voluntarily restrain exports for
Japanese trading corporations' "development and export" schemes.
Could Japan explain the relation of causality exis ting between the decision of the Japan Seed Trade
Association and the increase of the imports of agricultural products?
Answer 2
The Government of Japan is not involved in the repo rted issue. Therefore, the Japanese Government is
not a position to give an explanation.
IV. TRADE POLICIES BY SECTOR
(2) Agriculture
Question 3
Regarding Table IV(ii).
Could Japan inform whether in accordance with its foresight of the agriculture policy, it envisages any
autonomous reduction in the accentuated tariff progression and tariff peaks noticed in the said Table?
Answer 3
Improving market access including tariffs should be discussed and realized in the course of current WTO
trade negotiations.
Question 4
Regarding Table IV(2).
Could Japan explain the reasons of the application dur ing FY2000 of special safeguard of article 5 of the
Agreement on Agriculture for the imports of butter, inulin and other dairy products when, according to
notification AG/N/JPN/66, the tariff quotas which in clude the said products seem to be underused.WT/TPR/M/107/Add.1
Page 4
Answer 4
Japan has invoked special safeguard measures based on clear criteria, by setting the trigger levels and
the amount of additional duty fully in conformity with the Agreement on Agriculture.  As for the relation
to the tariff quotas, this case has nothing to do wi th the fill rate of tariff quota, and as stipulated in
Article 5, Paragraph 2 of the Agreement, import s under access commitments are not subject to any
additional duty. Therefore, special safeguard measures taken by Japan would not affect imports under the
tariff quotas.
(ADDITIONAL VERSION)
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) Measures directly affecting imports
Question 5
III(2)(iii)(c) Tariffs quotas.
Could Japan inform whether there are plans for modi fying the assignment proceeding of quotas in order
to make it easier, more transparent and accessible?
Answer 5
Japan has already published the assignment proceedings of tariff-rated quotas on the website as well as
other public documents in order to make it easy, transparent and accessible.
We do not, therefore, consider it is necessary to modify the assignment proceeding of tariff quotas.Question 6
III(2)(viii) Standards, and sanitary and phytosanitary measures.
Could Japan explain what are the requirements or demands established in order to consider the adoption
of mutual recognition arrangements ?
Answer 6
To adopt a mutual recognition arrangement, it is necessary to ensure technical equivalence regarding
conformity assessment to fulfill legitimate objectives of technical regulations or standards, such as safety
and health. In addition, it is necessary to take into account various factors such as 　the effects on trade,
the market size of the country concerned, and the needs of the industry in Japan.
Question 7
Paragraph 55 of the Secretariat Report « Labelling and packaging requirements » mentions the
requirements for the accreditation of an organic product.
Could Japan inform what are the conditions established by the competent authorities so that an interested
country can accreditate a product as such?
Answer 7
There are three following ways to attach an organic -JAS mark to imported organic foods in Japan.
The foreign producers or manufacturers certified by the registered certification organization in Japan
carry out grading in accordance with the JAS standard and attach the organic-JAS mark to theirWT/TPR/M/107/Add.1
Page 5
products. (Data of inspection and certification prepared by a foreign organization that meets certain
requirements can be used in the certification of the foreign producers or manufacturers.)
The foreign producers or manufacturers certified by the registered foreign certification organization
carry out grading in accordance with the JAS standard and attach the organic-JAS mark to their
products.(3) The importers certified by the registered certif ication organizations (RCOs) attach the organic-JAS
mark to organic foods with the certificate issued by the export country’s government agency that the
organic foods are graded based on the export country’s system.
The application of cases (2) and (3), however, are limited to foreign countries where the grading system
is equivalent to the JAS system.
Question 8
III(4)(iii)(a) « Subsidies, tax concessions, export finance, insurance, and guarantees » : The Secretariat
Report points out that Japan has crea ted a new export credit insurance company, which administrates the
credit insurances, which previously were authorised by the Ministry of Economy, Trade and Industry.
Could Japan inform how does this new company work and what is its functional link with the above
mentioned Ministry ?
Answer 8
Please refer to the answer in the first paragraph of III(4)iii of the question posed by the United States.WT/TPR/M/107/Add.1
Page 6
AUSTRALIA
I. Trade Policy
Strengthening economic ties
Question 1
Japan is “seeking to strengthen its economic ties through similar arrangements (to the Singapore
agreement) with Mexico, the Republic of Korea and ASEAN countries.”  Can Japan advise how progress
with Mexico, Korea and the ASEAN countries is proceeding and how negotiation of these arrangements
will impact on the Doha Round?
Answer 1
The following is the current situation regarding Japan’s FTA policy, including the progress achieved vis-
à-vis Mexico, the Republic of Korea and the ASEAN countries. It is our view that these arrangements will
complement as well as promote the Doha Round.
(Mexico)
During the summit meeting held in Tokyo in June  2001, Prime Minister Koizumi and President Fox
decided to establish a Joint Study Group, comprised of individuals from business, academic and
government circles. (Japan-Mexico Joint Study Group on the Strengthening of Bilateral EconomicRelation). The Joint Study Group held a total of seven meetings from September 2001 to July 2002 and
published a report proposing that “the two governmen ts, while endeavoring to gain understanding from
both the Japanese and Mexican public, overcome various problems identified in the process of
discussions of the Joint Study Group, and promptly  start working with the aim of concluding an
agreement for strengthening their bilateral economic partnership, which includes the elements of an FTAas a concrete measure for strengthening bilateral economic relations.” Against this background, Prime
Minister Koizumi and President Fox met again in October on the fringe of the APEC summit in Los
Cabos, Mexico, and formally launched negotiations to  conclude an agreement between the two countries.
(Republic of Korea)The then-Prime Minister Mori and President Kim decided to establish a Japan-Korea FTA business
forum at their meeting in September 2000. The Forum published a joint statement in January 2002
advising that the two countries should conclude a bilateral FTA as a comprehensive economic
partnership agreement as early as possible. Follo wing this statement, Prime Minister Koizumi and
President Kim agreed to establish an industry-government-academia joint study group on a Japan-ROK
FTA. The group has held two meetings since then.
(ASEAN)Following the Initiative for Japan-ASEAN Comprehens ive Economic Partnership that Prime Minister
Koizumi proposed in January 2002, meetings such as the Japan-ASEAN Forum and the Japan-ASEANCEP (Closer Economic Partnership) Experts’ Group have been held with a view to materializing the
Initiative. Through exchanges in such meetings, Japan and ASEAN have come to a consensus on an
approach that, while considering a framework for the realization of a Comprehensive Economic
Partnership between Japan and ASEAN as a whole, any ASEAN member country and Japan could initiate
works to build up a bilateral economic partnership. (A joint declaration to this effect, indicating that theWT/TPR/M/107/Add.1
Page 7
implementation of measures for the realization of th e partnership, including elements of a possible free
trade area, should be completed as soon as possible within 10 years, was announced at the Japan-ASEAN
summit meeting held in November 2002.)
As for bilateral arrangements, Prime Minister Koiz umi and Prime Minister Thaksin of Thailand decided
at their meeting in April 2002 to launch a Working Group, which would use the Japan-Singapore
Economic Partnership Agreement as a reference to review a partnership between Japan and Thailand in
a broad range of areas. Since then, two preparatory meetings have been held and the first working group
was held in September 2002.
As for the Philippines, Prime Minister Koizumi an d President Arroyo agreed to establish a Working
Group for a bilateral economic partnership, whose first meeting was held in Manila in October 2002.
Question 2
Australia notes that in its report to the WTO, the Go vernment of Japan commits itself to maintaining and
strengthening the multilateral trading system.  The Govern ment of Japan also states that it is beginning to
place greater emphasis on regional and bilateral trade policies with possible elements of free tradeagreements.  Could Japan clarify what it means by “elements of FTAs”?  Does Japan intend to conclude
FTAs that are WTO-consistent?
Answer 2
This question relates to the definition of FTAs. In ne gotiating bilateral or regional economic agreements,
Japan regards it as beneficial to aim at a wide-ra nging agreement which includes provisions of trade in
services, investment, movement of natural persons and economic cooperation such as financial services,
information and communication technology (which was the case with the Japan-Singapore Economic
Partnership Agreement) in addition to a free trade agreement in a narrow sense (i.e., those defined by
GATT Article 24). This is what is meant by a ”trade  agreement with possible ’elements of FTAs’” and
Japan intends to conclude FTAs that are WTO-consistent.
Competition
Question 3
What measures has the Japan Free Trade Commission (FTC) adopted to prevent anti-competitive activity
in Japan since the last Trade Policy Review?  What new measures are being planned?  How independentis the FTC and what enforcement powers does it have? How many successful cases has the FTC
prosecuted?
Answer 3
The amendment of the Antimonopoly Act, which to ok into effect on June 29, 2002, has improved
procedures on the service of documents, introduced pr ovisions for the service of documents to overseas
parties, increased the upper limit on criminal fines against a juridical person who breaches Article 3
(private monopolization or unreasonable restraint of trade, etc) from 100 million yen to 500 million yen,
and extended the scope of violations on which the FTC may take necessary measures to eliminate, even
when the violations have already ceased to exist.
As of October 2002, a meeting of the Study Group on a comprehensive review of AMA’s current system of
administrative and criminal measures, including the st udy of a leniency program, will take place once a
month.WT/TPR/M/107/Add.1
Page 8
While the Chairman and the Commissioners of the Fair Trade Commission are appointed by the Prime
Minister, Section 28 of the Antimonopoly Act stipulates that they perform their duties independently.
The Fair Trade Commission has prosecuted 13 cases to date, and six such cases have been carried out
since FY 1990.
II. Sectoral Issues
Agriculture
Question 4
Australia welcomes Japan’s efforts at agricultural reform, in particular the ‘action plan for revitalizing
Japanese food and agriculture’.  In particular, Australia is interested in Japan’s efforts to encourage rural
communities to depart from traditional agricultural practices.  We also note the vigorous reform of price
support measures on a range of key agricultural product s, complemented by safety net mechanisms.  Does
Japan believe that prices will continue to fall to better reflect world prices for commodity items such as
wheat, rice and sugar?  When is this likely to occur?  What is Japan’s estimate for the total amount ofdomestic support measured according to total A ggregate Measurement of Support (AMS) for 2001?
What does Japan predict this level will be after the full implementation of the agricultural action plan?
Answer 4
The Government abolished in 1998 the market price support system for rice as well as government
control on all rice in distribution. It also changed in 2000, the wheat distribution system into one in which
transactions are conducted directly in the private sector, reflecting the quality evaluation. We are
convinced that as a result of these reforms, agricultural product prices are a proper reflection of their
market situation.
As for the AMS, Japan is preparing for the DS:1 notification for FY 2000. The total AMS in FY 1999
accounted for less than about 20 percent of the final commitment level in 2000. The levels of the total
AMS in FY 2000 and FY 2001 are being calculated and need further scrutiny.
Question 5
Australia notes that Japan has claimed that the reform process stipulated in Article 20 of the WTO
Agreement on Agriculture resulted in domestic support provided to agricultural producers, measuredaccording to the total AMS in 1999 declining to less  than 20 per cent of the final commitment level of
2000.  The bulk of distorting domestic support is to the rice sector, which, in AMS terms, constituted over
75 per cent of domestic support prior to 1998.  How does Japan reconcile its claims with the OECD
producer support estimate for rice increasing from 78 per cent in 1997 to 84 per cent in 1998, to 87 per
cent in 1999 and 88 per cent in 2000?
Answer 5
The difference in the methods of AMS and PSE calculation means that the results obviously differ.Question 6
Can Japan specify what real and substantial policy changes implemented in the rice sector since 1998
have led to the AMS decline, given that the market price for rice in Japan is still several times the world
price?  Australia considers that the removal of the administered price is not a policy reform but rather
exposes a serious flaw in the AMS calculation met hodology whereby the elimination of the administeredWT/TPR/M/107/Add.1
Page 9
price can result in a major change to the AMS where no significant policy change has actually taken
place.
Answer 6
The distribution system for rice was drastically re formed, with the half-century old practice of
government control on all distributed ricebeing replaced with a private-sector unrestricted distribution
system, which is based on market mechanisms and has  no government intervention in the formation of
prices.
As the obligation of government to purchase all distributed rice was abolished, the government’s role and
function became limited and it now only purchases a limited amount of rice indispensable to the
management of reserve stock.
The government’s purchase of rice for reserve purposes is done at the level of the market price.Question 7
How does the agricultural revitalizing action plan accord with the Doha mandate?Answer 7
All measures included in the Action Plan are consistent with the WTO Agriculture Agreement.  If
necessary, measures under the Action Plan will be amended according to the results of the negotiations
under the Doha mandate.
Question 8
Japan has stated that it has been “actively” engaged in the WTO agricultural negotiations.  Will Japan
inform members how its various submitted papers contribute to “substantial improvements in market
access; reductions of, with a view of phasing out, all forms of export subsidies; and substantial reductionsin trade-distorting domestic support” as required by the Doha mandate?
Answer 8
Let us first underline that the Doha mandate lays down not only to pursue the traditional three pillars but
also to address non-trade concerns and special and differential treatment. In this regard, the Australian
question is neglecting important components of the agriculture negotiations.
 Having said that, there is no doubt that our nego tiating proposal and supplementary papers concerning
the three pillars are perfectly consistent with the Doha mandate. For instance, Japan proposes the
reduction of tariffs and non-exempt domestic support by  the UR formula. We are convinced that this must
be the most realistic approach to pursue progressive reductions in support and protection in this round of
negotiations, with non-trade concerns of each Member being duly addressed.
Question 9
The Japan-Singapore Economic Agreement contained provisions for the binding of a number of
agricultural commodities to zero tariffs.  De spite trade in those commodities between Japan and
Singapore being very low and in some cases zero, Japan’s decision to bind itself to those agricultural
commodities indicates a willingness to depart from long-standing practice.  For those commodities listedunder the Japan-Singapore agreement, which ones are produced in Japan and in what volumes?
Answer 9
Japan's agricultural list of zero tariffs can be provided later.  The production volumes, however, are not
calculated in each tariff line.WT/TPR/M/107/Add.1
Page 10
Question 10
The safeguard measures implemented in April 2001 and expiring in November 2001 sought to protect
Japan from an influx of three agricultural commodities.  How effective was the safeguard mechanism in
limiting trade in those commodities?  What price fluctuations occurred?  Did the domestic industriessuffer significantly?  Now that the safeguard has been removed, what is the current status of the domestic
industries which produce those commodities?  What has happened to the domestic price?  Has the
government implemented any safety net income support or price support mechanism for the producers?
Answer 10
Before introducing provisional safeguard measures on three commodities, namely welsh onion, shiitake
mushrooms and tatami-omote, the volume of imports  rapidly increased and domestic indicators such as
prices and producers’ profitability fell sharply, leadi ng to a preliminarily determination that the relevant
domestic industries suffered serious injury.
For these three commodities, during the implementation of the provisional safeguard measures, the
volume of imports decreased and the domestic price level recovered to the past 5 year average. Followingthe provisional safeguard measures, the domestic prices have been rather stable.
Regarding the relevant agricultural sectors, structural reforms through a reduction of production costs
and promotion of value-added products have been promot ed to establish international competitiveness in
the domestic production and distribution of these commodities.
To stabilize these producers’ economies, Japan has been supporting such structural reforms.Question 11
Australia notes that most government assistance to the agricultural sector seems to consist of measures
which distort production and trade.  To what extent will the agricultural revitalisation plan address these
distortion measures and will these practices be consistent with the WTO agricultural agreement?  Has
Japan tried to model the long term impact of the plan on the volume of domestic production and trade?  If
so, what are the results?
Answer 11
All the measures included in the Action Plan are consis tent with the WTO Agriculture Agreement.  As the
plan covers a wide range of policy measures from food safety to rural development, no modeling work
has been attempted concerning the long-term impact of the plan.
Question 12
Within the WTO Committee on Agriculture, Japan has stated that the reason for under-fill of some of its
tariff quotas limited by end-use provisions is the low level of domestic demand.  What provision does the
current system of allocation of quota access to importers, based on specific eligibility requirements, make
for exporters seeking to develop new markets within Japan?
Answer 12
Information about holders, such as names and contact points, is published through the MAFF website, so
as to assist exporters develop new customers within Japan.WT/TPR/M/107/Add.1
Page 11
Question 13
Japan advocates the importance of non-trade concerns and insists that they be taken into account in the
negotiations.  Japan has not provided any concrete proposals on how non-trade concerns would be taken
into account.  Could Japan elaborate on any specific proposal?  Will Japan confirm that its proposal on
non-trade concerns can be accommodated within the existing Green box?
Answer 13
We repeatedly made clear in the agricultural negotiations that the maintenance of the existing framework
of the Agreement on Agriculture and the pursuit of progressive reductions in support and protection will
facilitate Members’ efforts for further policy reforms and make it possible for Members to address non-
trade concerns properly. More specifically, it is our firm belief that, for instance, reductions in tariffs and
non-exempted domestic support by the UR formula will enable Members to duly address non-trade
concerns in light of different priorities among products.
As for the question on the Green Box in relation to non-trade concerns, Japan believes that it is necessary
to maintain the current framework of the Green Bo x but it is not sufficient. Considering the strong
interconnection between agriculture and those outputs and their public goods characteristics, Amber andBlue Boxes and other means also contribute to addressing non-trade concerns. As discussed in the NTC
Ministerial Conference in which 54 WTO Member countr ies participated, a variety of policy instruments
should be allowed as a mean to realize non-trade concerns in response to each country’s specific
conditions and priorities.
Question 14
The discovery of BSE in the Japanese herd in September 2001 resulted in a dramatic fall in the demand
for beef as consumers avoided the product over health concerns.  Since the effective implementation of
testing by the Japanese Government and measures to promote the industry and restore confidence,
including the many millions of dollars spent by Japan’s major beef suppliers to promote beef, includingAustralia - that has assisted both domestic producer and foreign suppliers – beef consumption is once
again on the rise.  As the market returns to its pre-BSE level, the return to normal import levels is
expected to trigger the beef safeguard.  Is Japa n concerned about imposing measures that may disrupt
beef consumption recovery?  Has the Japanese Govern ment undertaken any analysis of the likely effects
of a tariff increase on domestic prices?  Given that the production of domestic beef has apparently fully
recovered from BSE, what impacts on that industry does the Government foresee should imports recover
to the very low level sufficient to trigger the safeguard mechanism?  Can the Government provide
outcomes of modelling which demonstrate these impacts?
Answer 14
The measure has been introduced in accordance with an agreement by interested Member countries,
including Canada, in conjunction with the conclusion of the Uruguay Round. Japan accepted a voluntarytariff reduction on beef beyond the bound rate in spite of difficult situations for the domestic beef sector.
This reduction was introduced together with an emergen cy tariff measure set to  raise the tariff to the
bound rate automatically when beef imports exceeded a certain level. It is an indispensable tool to ease
the negative impact on domestic production. The meas ure and the voluntary tariff reduction constitute a
package, as agreed upon by all interested Member countries.
Australia does not believe that the safeguard should be implemented.  We do not consider that Japan is
experiencing a surge in imports.  The market is simply recovering to pre-BSE levels.  We do not believe
that the Japanese domestic industry will be harmed by the return to normal trading patterns.WT/TPR/M/107/Add.1
Page 12
Question 15
Should beef safeguards be implemented next year, what effect would the safeguard tariff have in
determining the level of government support provided to beef producers in Japan?
Answer 15
The Japanese government generally decides on support measures related to beef production taking into
consideration all relevant conditions, including the conditions of production and supply and demand in
the beef market..
Question 16
We note Japan’s food self-sufficiency ratio was 40 per cent in 2000 on a calorie basis and that Japan
intends to raise this to 45 per cent by 2010.  Australia acknowledges Japan’s concerns about food securityand recognises the importance of ensuring there is sufficient food.  But we believe that self-sufficiency is
not the best way to achieve this – trade is a crucial element.  For instance, Japan recognises this itself with
respect to energy policy – and relies heavily on imports to fill its energy requirements and maintain its
energy security.  Does Japan plan to introduce policy measures in order to meet its self-sufficiency target
by 2010?  What policies and programs have been implemented since the last Trade Policy Review toachieve this?
Answer 16
Food is the most basic substance for human beings and, therefore, it is a fundamental responsibility of the
Government to ensure a stable supply of safe food.To this end, it was stated in the Basic Law that a stable food supply shall be secured primarily through
the promotion of domestic agricultural production together with an appropriate combination of imports
and stockpiles.
We determined the target for the self-sufficiency rati o as 45 per cent in the Basic Plan. In order to meet
the target, we are promoting a structural adjust ment of agriculture through securing farmland and a
workforce and developing and diffusing new technologies, as well as  encouraging supplies of
agricultural products that meet consumers' needs.
We will make efforts to meet the food self-sufficiency ratio target by accelerating structural adjustment
and by undertaking measures for securing food safety and quality while ensuring conformity with the
international disciplines on agricultural trade. We do not envisage imminent changes in our agricultural
trade policies since agriculture negotiations are still underway.
Question 17
According to the WTO Secretariat, the high cost of agricultural inputs may have been a factor in
encouraging Japan’s food processing industries to locate offshore.  How will this affect the food
sufficiency targets contained in the Basic Law?  Has Japan considered the option of increasing self-sufficiency by increasing agricultural efficiency and competitiveness?
Answer 17
The food self-sufficiency ratio will rise only if mo re consumers and the food industry choose domestic
products.
The target of the self-sufficiency ratio has, therefore,  been determined by taking into account such issues
as an improvement in productivity and quality to attract more consumers and the food industry. The
target is also set at a practical level, which is achi evable provided all relevant parties including farmers
meet all challenges with positive efforts.WT/TPR/M/107/Add.1
Page 13
We, therefore, take into account the efforts toward increasing agricultural productivity and
competitiveness when determining the target of self-sufficiency.
Question 18
Can Japan provide data on the productivity of the rural sector over the period since the last Trade Policy
Review and explain the trend?
Answer 18
We do not have data on productivity. But as for the laboring hour per 10a of rice, the productivity has
been improved owing to the progre ss of mechanization and infrastructure for agricultural production,
and so on.
Laboring hours of rice and production of paddy field rice (yield per 10a)
Production year Laboring hours of rice
(Laboring hours per 10a)Production of paddy field rice
(yield per 10a)
1999 33.96 h 515 kg.
2000 33.00 h 537 kg.
2001 32.58 h 532 kg.
Source: "Production Cost of Rice" "Statistics on Crop", Ministry of Agriculture, Forestry and Fisheries.
Question 19
Could Japan provide an update on developments in implementing the 1999 Basic Law on Food,
Agriculture and Rural Areas, and any implications th at this has for international trade in agricultural
products?  What measures has Japan undertaken since its last Trade Policy Review to implement reform
under the WTO Agreement on Agriculture?
Answer 19
With regard to the recent developments in the implem entation of the Basic Law, please refer to page 15 of
the government report 　.  Japan has been duly implementing its commitments under the WTO Agreement
on Agriculture.  For example, the total AMS in 19 99 declined to less than 20 percent of the final
commitment level of 2000, mainly as a result of reform of rice price policy .  Reform has also been
undertaken in regard to a number of other key agricultural products, including wheat, soybeans, dairy
products, fruit, vegetables, beef calf, sugar cane and beets and sugar.
Question 20
We note Japan’s support to the agricultural sector is double that of the OECD average.  With Japan’s
change from production support to income support for the agricultural sector has Japan set a target for
agricultural support, in terms of percentage and years, that it would like to see reached, i.e. to reach the
OECD average by 2010?  Is there any plan to reduce the price-support element of Japan’s agricultural
support (estimated by the OECD to be 90 per cent in 2001), in line with the international trend towards
greater decoupling?
Answer 20
We do not have any numerical target concerning support to the agricultural sector.  Concerning price
support, as stated in the government report, the general principle is described in the Basic Law that “theState shall take necessary measures for allowing th e prices of farm products to form appropriately
reflecting the real supply/demand situation and quality evaluation.”WT/TPR/M/107/Add.1
Page 14
Financial Services
Question 21
To what extent has Japan sought to minimise the administrative burden of reporting requirements in the
financial sector, for example through eliminating overlaps in reporting rules and permitting reliance onelectronic records?
Answer 21
In accordance with “e-Japan Priority Policy Program 2002,” which was launched in June 2002 by IT
Strategic Headquarters, the Financial Services Agency (FSA) plans to enable on-line administrative
procedures such as applications and notifications from the general public as well as financial institutions.
The FSA plans to make half of all administrative procedures available on-line (as well as in writtenforms) by the end of FY 2002.On-line procedures will be made available as early as possible in FY 2003
for all remaining administrative procedures.
Relevant regulations were also amended in FY 2001 to enable digitalization of relevant documents by
financial institutions, thus enabling them to produce required documents electronically. This has alsoallowed financial institutions and their shareholders to provide information electronically.
Question 22
What criteria does the Financial Services Agency (FSA) use when deciding to conduct an audit of a
financial institution?  What is the frequency of audits of Japanese institutions and foreign institutionsrespectively?
Answer 22
The Financial Services Agency (FSA) makes case-by-case decisions on which financial institutions it will
inspect, taking into consideration various factors such as the type of business, size of financial institution,frequency of inspections, financial condition, resu lts of former inspections and inspection authority’s
structure. Therefore, there are no clear-cut criteria for its decisions.
The frequency of inspections (average cycle of inspections for each business sector) varies between
business sectors. For instance, domestic bank inspections are carried out approximately every two and a
half years, while the FSA aims to inspect foreign financial institutions approximately every three years.
Intellectual Property
Question 23
We understand that Japan is working on a mutual research project for patents with the United States.
How is this proceeding?  What discussions has Japan held with other countries to jointly-exploit patentexamination results?
Answer 23
In June 2002, the JPO and the USPTO decided in princi ple to initiate the near term project for the
exploitation of the other side’s search results within this year, and simultaneously a separate project forthe exploitation of the other side’s examination results. The effective measures will be elaborated to
exploit the examination results.  To this end, the JPO and the USPTO have held discussions since
June 2002 to detail the procedures and schedule for the above mentioned projects of mutual exploitation
of search / examination results.WT/TPR/M/107/Add.1
Page 15
Since a large number of applications have been filed w ith both Offices, the JPO and the USPTO initiated
discussions regarding mutual exploitation of search and examination results, which is expected to help
reduce the workload.  With other countries than the U.S., we also exchange information about mutual
exploitation of search / examination results.
Question 24
What mechanisms are in place in Japan to ensure that government and government related entities protect
the intellectual property of private firms?
Answer 24
The Government and Government related entities of Japan support measures to protect intellectual
property rights of private firms. As an example, the Patent Office of Government of Japan set up acounterfeit hotline to offer advice. In addition to this, a variety of, reference handbooks were also made
available..
The Government also takes internal measures by petitioning other countries to protect intellectual
property rights against infringements. These me asures are based on suggestions and proposals from
private firms and affiliated organizations, such as the International Intellectual Property Protection
Forum, which consists of companies and as sociations from many industries in Japan.
Legal Services
Question 25
Japan is a significant legal services market for Australia.  Australian legal services exports are also
generated in respect of advice concerning Japanese investment in third countries.  Australia’s regulation
of foreign lawyers is liberal, in contrast to Japan’s regulations which are relatively restrictive.  Australia
therefore has a number of regulatory concerns with Japan’s approach to legal services.  These are:
(i) the long and usually bureaucratic processing of seeking Gaikokuho-Jimubengoshi
Jimusho (GJB) – registration as a foreign lawyer
(ii) restrictions on most forms of commercial association between foreign and Japanese
lawyers and law firms
(iii) a three year minimum period of professional experience (i.e. considerably more than the
one year’s supervised professional practice, in addition to articles of practical legaltraining, for an Australian lawyer to be eligible for an unrestricted practising certificate in
Australia)
(iv) a minimum period of 180 days residence in Japan each year
We would welcome Japan’s comments on these concerns.Answer 25
The Minster of Justice, unless any exceptional circumstances exist, endeavors to make a decision on an
application for recognition as a Gaikokuho-Jimu-Bengoshi (a foreign lawyer qualified under Japanese
law, hereinafter referred as GJB) within approximately two months. Therefore, we believe that this is nottoo long.
To promote cooperation and collaboration between a lawyer
　qualified as Bengoshi under Japanese law
(hereinafter referred to as Bengoshi) and GJB, the Go vernment of Japan plans to submit legislation to the
ordinary session of the Diet in 2003 for the deregulation of the requirements for specified jointWT/TPR/M/107/Add.1
Page 16
enterprises (tokutei kyodo jigyo), including liberalization of association between Bengoshi and GJB and
review of the regulation that prohibits a GJB from employing a Bengoshi.
Necessary measures will be taken while maintaining fu ll respect for the views of the Internationalization
Study Group of the Office for Promotion of Justice System Reform.
The system of GJB in Japan means that foreign lawyers are able to provide legal services pertaining to
their own country's laws without taking any special ex aminations, provided that the foreign lawyers meet
the requirement of having practiced for a total period of three years or more in the country in which they
acquired their qualification.
This system is intended to ensure that foreign lawyers have sufficient ability and competence and that
there are no ethical problems.
Japan believes that the requirement of three years’ experience for practicing foreign lawyers is
appropriate from the viewpoint of protecting clients.
Therefore, no consideration is being given to removing the abovementioned requirement.
iv. GJB should themselves be engaged in legal practice in Japan concerning the laws of the country in
which they acquired their qualification,.
Therefore, Japan believes that a GJB should be required to stay in Japan not less than 180 days per year,
from the viewpoint of protecting clients and ensuring that clerks or others do not engage in legal practice
without a GJB.
Question 26
Why are foreign legal consultants required to have written advice from a foreign lawyer qualified in a
third country before being permitted to advise on the law of that country, while Japanese lawyers are not
subject to the same restriction?
Answer 26
Ordinarily, a GJB can only engage in legal business in Japan which is limited to the laws concerning the
laws of the country of acquisition of qualification, and therefore when a GJB handles legal services in
third country law, the GJB must do so only after having received written advice from a lawyer qualifiedin the third country. On the other hand, Bengoshi may engage in legal business without any restrictions.
The requirement for a GJB is necessary from the viewpoint of protecting clients, because GJB and
Bengoshi are totally different concepts. All clients may not be able to gather information and form
decisions about foreign lawyers' ability, competence or ethics and there is the possibility that a client willincur irreversible damage after legal services have been rendered. Japan believes that the
abovementioned is necessary from th e viewpoint of protecting the client. Therefore, no consideration is
being given to removing the abovementioned requirement.
Question 27
How does Japan justify imposing experience and minimum residency requirements on foreign lawyers or
legal consultants providing advice on the law of their home country which the competent authority in
their home country itself would not impose on such practitioners?WT/TPR/M/107/Add.1
Page 17
Answer 27
The system of GJB in Japan means that foreign lawyers are able to provide legal services pertaining to
their own country's laws without taking any special examinations provided that the foreign lawyers meet
the requirement for approval of experience of practice in the country of acquisition of qualification, for a
period of three years or more in total.
This system is intended to ensure that the foreign lawyers have sufficient abilities and competence and
that there are no ethical problems.
Japan believes that the three years experience requirement for practicing foreign law is appropriate from
the view point of protecting clients.
Therefore, no consideration is being given to removing the abovementioned requirement.
GJB should themselves be engaged in legal business on the laws of the country of acquisition of
qualification, in Japan.
Therefore, Japan believes that a GJB should be required to stay in Japan not less than 180 days in a year
from the viewpoint of protecting clients and ensuring that clerks or others do not engage in legal business
without a GJB.
Question 28
What restrictions does Japan place on commercial association between foreign and Japanese lawyers/law
firms, nationally and by particular Japanese Bar Association(s), including on the use of firms’ names?
How will Japan promote cooperation between foreign and Japanese lawyers?
Answer 28
Association between Bengoshi and GJB is generally banned, and specified joint enterprises are
exceptionally permitted. GJB is banned to employ Bengoshi.
Regarding name of GJB’s office, use of firm’s name is unrestricted.
To promote cooperation and collaboration between Bengoshi and GJB, the Government of Japan plans to
submit legislation to the ordinary session of the Diet  in 2003, for the deregulation of the requirements for
specified joint enterprises (tokutei kyodo jigyo), including the liberalization of association between
Bengoshi and GJB and the review of the regulation t hat prohibits a GJB from employing a Bengoshi.
Necessary measures will be taken in full respect fo r the views of the Internationalization Study Group of
the Office for Promotion of Justice System Reform.
Phytosanitary
Question 29
What is Japan’s position in relation to the new definition of the concept of “official control” adopted by
the Interim Commission for Phytosanitary Measures in April 2001?  Will Japan be reviewing the Plant
Protection Law to more precisely define what is or is not a quarantine pest?
Answer 29
Japan considers that the international guidelines of ‘official control’ adopted at the Interim Commission
for Phytosanitary Measures should be one of the bases for considering a future plant quarantine system
in the country. Japan is examining whether it would be possible to maintain “the appropriate level of
protection on plant quarantine” by applying the plant quarantine measures based on the new definition,WT/TPR/M/107/Add.1
Page 18
while ensuring that these measures would fit Japan’s climate conditions and are designed for handling a
huge amount of import.
State Trading Enterprises
Question 30
What is the policy rationale behind the role of the Food Agency and the Agriculture and Livestock
Industries Corporation as monopsony importers of in-quota amounts for certain of the tariff quotas for
grains and dairy products established in accordance with Japan’s obligations under the WTO?  How are
funds raised by these bodies used?
Answer 30
Japan's import state trading for certain dairy products is to ensure a  stable supply of these products for
the domestic market. This is the responsibility of the government, as there is a background of strong
public concern over food security. The funds raised by these import STEs are used to fund projects such
as, promoting the consumption of milk and dairy products.
The Japanese government is responsible for a stable food supply, in particular grain and dairy products.
The government carries out its responsibility thr ough Import State Trade Enterprises such as Food
Agency and ALIC which are operated in perfect accordance with Article XVII of GATT.
Question 31
How are domestic resale prices determined for rice, wheat and barley imported by the Food Agency and
for dairy products imported by the Agriculture and Livestock Industries Corporation? Specifically how is
the mark-up rate determined and what have been the mark-up percentages for these commodities since the
last review period?  How often does Japan review the mark-ups?  Have these mark-ups declined as a
result of Japan’s “vigorous reform of price support measures”?
Answer 31
The selling price of dairy products handled by ALIC is  determined through a competitive tender. Mark-up
is collected as a result of each tender within the committed level of our country schedule.
The maximum levels of mark-up have been reduced as agreed under the Uruguay Round.
The domestic sales price of rice, wheat and barley is  determined on the basis of demand. Mark-up is
collected as a result of each tender in compliance with our schedule.
Tariff Measures
Question 32
Since the end of the Uruguay Round, what reductions has Japan made to import tariffs on food and
agricultural products, beyond those mandated by Japan’s WTO obligations?
Answer 32
Japan has been fulfilling faithfully its commitments under the URAA. In this regard, we are not in a
position to further reduce tariffs on agricultural products beyond the current commitments.
Question 33
Please specify where Japan maintains tariffs on non-agricultural products that are not imposed for
protection of a sensitive domestic industry. What is the purpose of maintaining such tariffs?WT/TPR/M/107/Add.1
Page 19
Answer 33
In the function of tariffs, a “financial tariff” is imposed on raised revenue and a “protective tariff” is
imposed to protect domestic sensitive industries. Cu rrently in Japan, financial tariffs are mainly imposed
on crude oil and the oil products.
It has been decided to assign the income from tariffs on crude oil and oil products to the fund for
rationalization and structural adjustment of the coal industry. This is based on the  "cause payment
principle,” which stipulates that a rapid increase of petroleum consumption in the 1950’s, known as the
“energy revolution,”  caused a structural crisis in coal industry.
Question 34
We have discussed Japan’s tariff quotas for agricultural products many times, in particular access to tariff
quotas that are restricted for specific end uses.  Australia is well aware that we, and other countries,
agreed to these quotas at Uruguay – however, given the changes that have occurred in Japan since
Uruguay, does Japan have any flexibility to modify the operation of the quotas where they are not filled?
Answer 34
As for tariff quotas for specific end-uses, which were agreed to in the UR, Japan, as Australia rightly
pointed out, made such commitments on the premise that the same conditions as those applied before the
UR agreement would be maintained. Therefore, Japan is not in a position to modify the operation with
regard to such conditions. 　
Question 35
Australia is aware that Japan has been reducing the tariff rates on footwear as part of its Uruguay Round
commitments.  However, the tariff rate quota (TRQ) allocation or “pooled quota” for leather footwear has
remained unchanged at 12,019,000 pairs since 1996.  Has Japan considered amending the TRQ allocation
to take account of increased consumer demand and potential trade?  If not, on what grounds would Japanconsider amending the TRQ allocation?  Australia is aware that each year there is a percentage of the
“pooled quota” which is not used.  Can Japan provide an explanation for this?  Can Japan supply data on
the utilisation rate of the TRQ on footwear since 1996?
Answer 35
The tariff rate quota of leather footwear is set up in consideration of the business of domestic industries.
In view of the recent severe business climate of domes tic industries, the quota amount is maintained, and
for the moment, this fundamental view will not change.
Although all quantity of the guota is allocated to the would-be importers, some are not actually used due
to their individual circumstances. Accordingly, a few percentage of the tariff quota is under-filled every
year.
To decrease the percentage of under-fill rates, the following measures are being taken.
(1) Warnings are given to importers with a quota,  so that return of an unused portion may be made
as early as possible.
(2) A penalty is imposed on importers who do note pr operly return  unused portions, the penalty is
imposed in calculating the allocated qua ntity for the following fiscal years.
(3) Unused portions that are returned in the middle of the fiscal year are re-allocated to other would-
be importers.WT/TPR/M/107/Add.1
Page 20
Question 36
How is access to the tariff quota for “natural cheese intended for use as material for processed cheese”
allocated?  What are the eligibility requirements for applicants for quota?  Do allocated quotas holders
have to have purchased domestic cheese in order to get quota?  Are these allocations WTO consistent?
Answer 36
This is a system of allocation for entities equipped with processed-cheese manufacturing facilities.
Details of the application procedure are published in  the form, “Publication for Tariff Quota Allocation."
This system is consistent with WTO provisions.
Telecommunications
Question 37
Australia notes the reforms that have been occurring in the telecommunications sector of Japan and that
new carriers have entered the market.  Could Japan name these new participants and their country of
origin?  What benefits has reform delivered to Japanese consumers of telecommunications?
Answer 37
Many new telecommunications carriers have entered the Japanese market and many consumer benefits,
such as a sharp rate reduction, diversification and development of services, and a reduction in the
interconnection rate, have improved due to increased competition.
As of October 1, 2001, there are 395 TypeTelecommunications carriers, of which 40 have one-third or
more of their shares held by overseas parties. Belo w is a list of examples of such carriers, with the
corresponding nationality of the main shareholders (including indirect investment):
Cable & Wireless IDC Inc.
Great Britain
Singapore Telecom Japan, Co., Ltd.
Singapore
Reach Networks Japan K.K.
Australia, Hong Kong
T Systems Japan K.K.
Germany
Genuity Japan K.K.
United States of America
AT&T Communications Service Japan Ltd.
United States of America
Sprint International Japan Co., Ltd.
United States of America
Qwest Communications Japan Co., Ltd.
United States of AmericaWT/TPR/M/107/Add.1
Page 21
Question 38
We understand considerable progress has been made in the unbundling of services over the last two years.
Does the government monitor the way in which unbundled services are made available to new carriers in
order to ensure equitable access to fibre-optic networks?
Answer 38
Based on the report “‘Review over Interconnection Rules,” which was presented by the
Telecommunications Council Report on 21 December, 2000 and which proposed that fiber optic facilities
including dark fiber should be unbundled, the MPHPT amended a ministerial ordinance in April 2001 to
unbundle optical subscriber line and optical inter-office transmission line.
In August 2001, the MPHPT authorized the change of interconnection tariffs of NTT East and West
regarding the unbundling of fiber optic facilities.
Furthermore, an MPHPT Notice requires NTT East and We st to make publicly available over the Internet
or in other ways the information necessary for other telecommunications carriers that wish tointerconnect with their fiber optic facilities. Such information encompasses the status of the deployment of
optical fibers and the availability of dark fibers.
Question 39
Interconnection charges in Japan have been the focus of concerns of new carriers in the Japanese market.
We appreciate that Japan has put considerable effort in recent years into reducing interconnection fees.
What measures does the government have in place to ensure that interconnection fees are as low as
possible?  How do Japan’s interconnection rates compare with those of other OECD nations?
Answer 39
With respect to the GC and ZC interconnection ra tes of NTT East and West, the Telecommunications
Business Law was amended in 2000 and the LRIC model has been introduced.
This has resulted in a 22.5 percent reduction in GC interconnection rates and a 60.1 percent reduction in
ZC interconnection rates in FY 2002 compared with FY 1998.
The revision of the LRIC model was discussed at th e LRIC Model Study Group, and following the study, a
report on the calculation of interconnection rates based on the new model was submitted by the
Telecommunications Council to  the Minister of MPHPT.
MPHPT is now examining the issues raised in this  report, such as input data (including traffic).
Question 40
What mechanism is in place to regulate interconnection charges in Japan?  Would Japan consider giving
these functions to the Free Trade Commission?
Answer 40
The TBL stipulates, among other things, that interconnection charges of designated essential facilities are
to be formulated for respective functions.  Assigni ng the regulatory functions of interconnection charges
to JFTC has not been considered.WT/TPR/M/107/Add.1
Page 22
Question 41
How independent is Japan’s telecommunications regulator?  How is independence guaranteed if the
policy maker is also the regulator?  Australia believes that a separate independent authority would
promote competition and protect users’ interests.
Answer 41
The independency from service supplier, required in  the Reference Paper of the GATS, has already been
implemented in Japan.
Administrative organizations should be established and based on the types of organizations that are
deemed to be effective and best suited to the conduc t of administrative affairs in the political system of
each country.
Technical innovation in the info rmation and communications sectors occurs at a rapid pace in Japan,
and administrative organizations are required to im plement national strategic action accordingly. As
such, Japan considers that a regime that enables a mutually cooperative exercise between policy-
planning and regulation-supervision functions is necessary and appropriate to ensure swift, flexible,
strategic and comprehensive pursuance of functions.
Question 42
What steps has Japan taken to reduce the administrative burden for providers of telecommunications
services, such as in relation to licenses?
Answer 42
To reduce the administrative burden for telecommunications carriers, for example, the approval system
for the telecommunications service fee was abolished in November 1998 (instead, only notification is
required regarding the telecommunications service fee) . In addition, the amendment of the TBL came into
effect in November 2001; the law no longer requires ex- ante approval of tariffs or of formulation of
facilities-sharing agreements with telecommunications carriers other than those with designated regional
fixed networks.
Question 43
A Japanese Government Study Group has recently recommended abolishing the distinction between
Type 1 and Type 2 Carriers. What is the status of this recommendation?
Answer 43
Based on “the final report on Desirable Pro-Competitive Policies in the Telecommunications Business
Field for Promoting the IT Revolution” which the Telecommunications Council presented on 7 August,
2002, MPHPT plans to submit the Bill to amend the Telecommunications Business Law at the next
regular session of the Diet, which includes the a bolition of Type-1 and Type-2 business categories.
Question 44
Australia advocates the promotion of an telecomm unications industry forum that would comprise all
operators in Japan.  The forum would provide input to the regulator and the policy setter on
telecommunication matters.  Has Japan considered the formation of such a forum?
Answer 44
The Telecommunications Carriers Association was established in 1987, the Telecom Services Associa
tion was established in 1988, and the Japan Internet Providers Association was recently established in
2001.WT/TPR/M/107/Add.1
Page 23
Transport
Question 45
Could you explain the purpose of “advance consultation scheme”, which we understand provides that all
port and harbour-related labour issues involving loading and unloading functions are negotiated among
the Japan Harbour Transport Association, shipping companies and port and harbour labour unions?
Answer 45
The “Prior Consultation System” was established on a non-governmental basis in the aim of
coordinating the employment issue in the port transport business in the case where certain changes in a
shipping company’s business strategy, such as bert h changes, might affect the employment situation.
This system is based on the agreement among four  private organizations, namely, the Japan Harbor
Transportation Association (JHTA), the Japanese Shipowners’ Association (JSA), the Japan Foreign
Steamship Association (JFSA) and the Harbor Worker’s Union, in accordance with a request from
shipping companies. JHTA intervenes in negotiati ons between shipping companies and the labor union in
this system.
This system has already been simplified and its transparency increased since the interested parties
reached an agreement in October 1997 (refer to note).
As a result of the agreement, the number of prio r consultations through JHTA has decreased by more
than 95%.
The other day, JFSA expressed their appreciation to the efforts made by JHTA. Japan recognizes that up
to now there have not been any problems concerning the Prior Consultation System.
(Note)
The agreement between JHTA , JSA, JFSA and MOT was established in 1997.
Contents:
(a) reducing items requiring consultation th rough JHTA(from seven items to three items
(b) reply by documentation
(c) establishment of settlement mechanism
The agreement between JSA, JFSA  and MOT was established in 1997.
Contents:
(a) establishment of a separate system free of JHTA intervention
Welfare
Question 46
Can Japan identify what major reforms have occurred in the areas of medical care and welfare, including
childcare?  What impact have these reforms had on trade in goods and services?
Answer 46
In Japan, the financial condition of medical care insurance is severe, due to the rapid aging of the
population, the decrease in the number of children and low economic growth. The GOJ is promoting
healthcare reform in order to sustain the univ ersal medical insurance system and provide necessary
medical care services.WT/TPR/M/107/Add.1
Page 24
(Reform of medical care insurance)
The Government revised the medical insurance cover age for each system and generation, for example
standardizing all medical insurance coverage at 70% and improving the coverage to 80% for infants
younger than 3 years old. The Government prioritizes measures for elderly people in advanced years,
including, for example, an increase in public support for the medical costs for these people. And we makeefforts to rationalize increases in health expenditure for the elderly and strengthen the financial
foundations of National Health Insurance. The Japanese government is making efforts to revise the
system of medical fees, and in FY2002 decreased medical fees for the first time, by 1.3%.
(Reform of the healthcare system)
In its healthcare reform, the Government is promoting patient-oriented medicine thorough provision of
information, evidence-based medicine and comprehens ive medical safety measures. To provide health
care of higher quality and efficiency, the Government is endeavoring to promote functional differentiation
of hospital beds, train medical professionals and improve their quality. To make the medical
infrastructure more stable, we are promoting use of  information technology in medical care and building
necessary care systems in communities.
This reform shaped the outline of Japanese healthca re reform, but we need drastic reform in order to
ensure the stability of the healthcare system into the future when aging and the decrease in the number of
children become more advanced. Currently, the Govern ment is investigating a revision of the framework
of the medical insurance system, reform of the medical system for the elderly, revision of the medical fees
system and making the healthcare system more qualified and efficient.
Child care reforms
In Japan, the need for day care services for children is growing and diversifying due to the process of
urbanization, the increase in nuclear families and the change in women’s work arrangements. GOJ ispromoting child care reforms and various measures, depending on the situation in local communities and
the various needs of users.
(Introduction of the admission system)
Previously, local governments assigned children to day nurseries. But revision of the Child Welfare Law
in June 1997 has enabled users to choose a suitable day nursery for their child, utilizing the information
about day care nurseries provided by local governments.
(Abolition of regulations on bodies permitted to establish day care nurseries and promotion of PFI)
Previously, only local governments and social welfare organizations could set up licensed day nurseries.
But from March 2000 approval has been given for bodies such as NPOs, private companies and school
juridical persons to set up licensed day nurseries.
Furthermore, GOJ has been promoting the establishment of licensed day nurseries by using PFI, which
was enabled by revision of the Child Welfare Law  in November 2001.
It has thereby become easy for both domestic and foreign private sector service suppliers to establish and
operate licensed day nurseries.WT/TPR/M/107/Add.1
Page 25
Other
Question 47
What arrangements does Japan have in place to work towards the development of common international
approaches to food safety, the harmonisation of standards and mutual recognition of scientific riskassessment, on the multilateral, regional and bilateral levels?
Answer 47
For the development of common international approach es to food safety, GOJ is actively participating in
CODEX activities. In doing so, GOJ always strives to harmonize domestic standards with international
ones.  GOJ also respects the work of international assessment, such as JECFA and JMPR, and considers
this to be important when setting standards.
Question 48
As part of Japan’s regulatory reform program, encompassing agricultural reform and the establishment of
a new food safety agency, has Japan considered adopting the Codex listing of approved food additives
and processing aids?
Answer 48
As with most other developed countries, only food additives designated as safe by the Minister of Health,
Labour and Welfare may be used in foods under the Food Sanitation Law in Japan.
Any person who wishes to use any undesignated food additive can submit a petition for designation to the
Minister of Health, Labour and Welfare  with the re quired data, including data regarding safety. When a
proposed petition is reviewed, an extensive evaluation is made concerning the safety and usefulness of it
on the grounds of sound science, which takes CODEX standards and the evaluation by JECFA into
serious consideration.WT/TPR/M/107/Add.1
Page 26
BRAZIL
TRADE POLICIES BY SECTOR
Agriculture
Question 1
Japan applies tariff quotas (TRQs) to many agricu ltural products, including dairy products, rice and
wheat. These TRQs are important instruments restricting access to the Japanese market, as they cover 2,1
per cent of all tariff lines. Nevertheless, eligibility for quota allocation in many cases requires prior
approval by the Ministry of Agriculture, Forestry and Fisheries (MAFF). This is usually, according to the
Secretariat Report on page 56, an intricate process, requiring consultations with other organizations andthe gathering of numerous documents. Besides, many in-quota imports are handled by state-trading
entities. How is this practice consistent with Japa n’s obligations under Article XVII of the GATT 1994,
particularly as regards its transparency provisions?
Answer 1
State trade enterprises have operated in full accordance with commercial considerations and all other
requirements in  Article 17 of GATT and all other relevant WTO rules.
Question 2
With regard to special safeguard (SSG) actions, the Secretariat Report mentions in paragraph 10, page 57,
that "Japan also invoked separate emergency measures on pork products between 1 August 2001 and 31
March 2002, by raising farm gate price levels". Were these emergency measures special safeguard
actions? Were these measures notified? Could the Japanese delegation give more details on the
justification of these measures and on their economic effects, especially for pork products imports?
Answer 2
The measure has been introduced in accordance with the agreements between interested Members in
conjunction with the conclusion of the Uruguay R ound.  Japan accepted a voluntary tariff reduction of
pork below the bound rate in spite of difficult in the domestic pork sector as well as the introduction of
the emergency tariff measure, which is set to be triggered to raise the Gate Price to the levels set forth in
the Schedule which was annexed to GATT in 1994 automatically when pork imports exceed a certain
level. It is an indispensable tool in order to ea se negative impact on domestic production. The measure
and the voluntary tariff reduction constitute a package.
The measure is different from the special safeguard system. It was circulated to the Members through the
GATT document L/7621, dated 16 February 1995.
Question 3
The full implementation of the WTO Agreement on Sanitary and Phytosanitary Measures is essential to
avoid unjustified barriers to trade in agricultural products. Article 6 of the SPS Agreement establishes that
member countries should adapt their SPS measures to the sanitary and phytosanitary characteristics of the
area from which the product is originated (regionalization). How has Japan implemented Article 6 of the
SPS Agreement, especially for the importation of meat from disease free areas?
Answer 3
Japan takes animal quarantine measures in considera tion of the condition of animal disease outbreaks,
the implementation of animal health measures, and also based on the OIE international animal health
code and scientific evidence consistent with the SPS agreement.WT/TPR/M/107/Add.1
Page 27
Question 4
Although the Japanese economy is considered quite open, according to the Secretariat Report, the tariffs
for some agricultural products varies from 47.2 per cent to 1,739 per cent due to the use of specific rates.
Since the average MFN tariff applied is 6.9 per cent, these rates can be seen as extremely high andprevent agricultural exports of developing countries. Furthermore, there is widespread occurrence of
escalation in the Japanese tariff regime, affecting also, albeit not exclusively, agricultural products.
Is Japan considering, in the context of the Doha Development Agenda (DDA), binding its tariffs only on
“ad valorem” basis, thus giving more transparency to its concessions and favouring developing countries’
exports?
Answer 4
Ad valorem duties are proportionate to price (or value), while specific duties are proportionate to
quantity (or volume).  Ad valorem duties may amplify the effect of price fluctuations but specific duties
are more neutral towards them.  Therefore Japan does not think specific duties are less transparent and
less predictable than ad valorem duties.  Japan is therefore not in a position to support the conversion ofspecific duties to ad valorem duties.
MEASURES DIRECTLY AFFECTING IMPORTS
Tariff regime
Question 5
Does the Japanese government agree that the data reported by the Secretariat regarding the use of specific
rates mainly on oils, footwear, textiles, food and vegetables (Chart III, page 30) imply significant barriers
to exports? As for the frequent occurrence of tariff escalation in these products, is Japan considering arelaxation of these barriers in the DDA? What are the criteria to sustain the adoption of specific rates to
certain products?
Answer 5
Whether the form of tariff is ad valorem duty or spec ific duty, the tariff form and its level is determined by
taking account of characteristics of a good and market situation surrounding the good. Therefore it
should not always be concluded as significant barriers.In fact, specific rate varies dependent on volume and ad valorem duty varies dependent on value,
implying that both duties have merits and demerits.  So, we think there is no reason to think that specific
duty should not be sustained.
Anyway, improvement in market access including tariffs should be discussed and realized in the course of
the current trade negotiations.
Question 6
Chapter III, item 30, of document WT/TPR/S/107, record s that Japan maintains import quotas on various
items, including certain fish products, organic chemicals,   pharmaceuticals, rubber adhesives, military
equipment and firearms, and silk yarn and silk fabric made in China and South Korea. What are thereasons to justify the use of import quotas to certain products? What are the criteria used to determine the
allocation of import quotas among exporting countries? Please explain the operation and the rationale
behind the administration of import quotas. What has Japan has been doing to eliminate or reform this
system?WT/TPR/M/107/Add.1
Page 28
Question 7
Please provide detailed information about the operation of the rules governing the distribution of import
quotas among State and private trading entities.
Question 8
Is Japan prepared to eliminate the tariff peaks comprised in 7.6 per cent of its tariff lines, as pointed out
by the Secretariat Report, in the context of the DDA?
Question 9
We see that, under Chapter III,  item 18, note 12, of document WT/TPR/S/107, a differential duty involves
a specific rate charged per kg of imports that varies directly with the difference between the standard
import price, set by the authorities, and the actual import price. Which would be these standard importprices set by the authorities? Is this system compatible with article 7 of the Agreement on implementation
of article VII of the General Agreement on Tariffs and Trade 1994?
Answer 9
Tariffs on swine, pork and its processed products are classified as differential duties in Japan. The
differential duty system does not affect customs value because the actual prices in the system means
customs value. Therefore, it does not matter about co mpatibility of the system with Article 7 of the
Agreement on implementation of arti cle VII of the General Agreement on Tariffs and Trade 1994, which
rules the method not to be used in determining customs value.
The following are standard import prices that are set by the law for swine, pork and its processed
products.
For live swine: \22,134.60 per head
For carcass: \409.90 per kg.
For cut meat: \546.53 per kg.For processed pork products: \409.90 per kg.
Question 10
We see that, under Chapter III, ite m 21, of document WT/TPR/S/107, in FY2002 the simple average in-
quota MFN tariff rate is 18.3 per cent and the co rresponding average out-of-quota MFN tariff rate is
125.5 per cent. Does Japan intend to reduce the tariff rate out-of-quota?
Answer 10
Japan does not have any plan to reduce out-of-quota tariff rates now.  This might be discussed in the new
round of trade negotiations with a balanced and sufficiently broad-based agenda.
Question 11
Chapter III, item 22, of  document WT/TPR/S/107, mentions that 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 per cent
of the annual quota) and a “reserved quota” (remaining 5 per cent). Japan is working on a tariff quota
administration system that makes difficult the competitiveness of foreign industries. If Japan intends to
improve the quotas allocation system, how would that occur? Why hasn’t Japan used the method “first
come, first served” yet?
Question 12
With regard to footwear leather quotas, how is th e total amount of imports determined? Are the Japanese
importers consulted about their purchasing needs?WT/TPR/M/107/Add.1
Page 29
Question 13
The Japanese government informs, under chapter III,  item 28, of document WT/TPR/S/107, that since the
previous Trade Policy Review, in 2000, there has been little change in its import prohibitions, import
licensing, and quantitative restrictions. Could the Japanese government inform the range of productssubject to non-automatic import licensing and which would be the current restriction(s) applied to these
items?
Question 14
Must Japanese importers have a previous registration to license their imports? What are the required
procedures?
Rules of Origin
Question 15
Does Japan grant the benefit of GSP for goods produced in a Free Trade Zone of a beneficiary country
using non-original materials, when complying current rules of origin?
Answer 15
In application of GSP rules of origin, Japan does not distinguish goods produced in a Free Trade Zone of
a beneficiary country from those produced outside the FTZ.
Question 16
In order to be accorded the GSP preferential treatment,  it is necessary for goods to be directly transported
to Japan. However, the Japanese GSP scheme does not mention the possibility of consignment when it is
indirectly performed, namely by a third operator (consignee). Are there any restrictions concerning such
operations?
Question 17
Must the consignee listed in box number 2 of the Form A be necessarily the responsible for handling the
Certificate of Origin to Japanese Customs Authority during the Customs Clearance Process?
Question 18
Japan applies the Donor Country Conten t rule to a certain set of products. In order to be accorded the
benefits of such mechanism, the exporters must present to the Form A issuer the Certificate of Materials
Imported from Japan. However, the Japanese scheme does not mention whether such imported materials
must be originated from Japan. Are there any restrictions regarding the origin of these imported
materials? Must the issuer of the above mentioned Certificate — the same issuer of the Form A —
demand solely the documents that prove the import, such as the commercial invoice and the bill oflading?
Answer 18
Under the Donor Country Content rule of Japan’s  GSP scheme, materials imported from Japan are
regarded as wholly obtained in a beneficiary countr y, whether the materials are originating from Japan
or not. Therefore, the issuer of the Certificate of  Materials Imported from Japan must demand proof to
ensure that goods used as materials are imported from Japan.WT/TPR/M/107/Add.1
Page 30
Question 19
Under the DCC mechanism of the Japanese GSP sche me, materials imported from Japan are considered
to be wholly obtained in the beneficiary country. In such cases, are imports exempted of the minimal
processes required for other cases?
Answer 19
As you point out, under the DCC rule, materials im ported from Japan are considered to be wholly
obtained in the beneficiary country.
Also, under the rule, goods are accepted to be wholly obtained in a beneficiary country when they are
produced in the beneficiary from materials only  imported from Japan or wholly obtained in the
beneficiary. In this case, the “minimal processes” provision does not matter.
However, except for the preceding case, goods must meet the substantial transformation criteria, to which
the “minimal processes” provision applies, even if materials imported from Japan are accepted as wholly
obtained in the beneficiary country.
Customs Procedures
Question 20
What is the average time for the effective custom s clearance and the methodology used? Are there two
import permissions for the same import operation? After the cargo arrival, must the goods continue undercustoms control? To which extent costs are imputed to the trader? Is the time between import declaration
and import permission within the time between cargo arrival and import permission?
Question 21
To apply to MFN tariff rates, the country of origin of 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 to the goods. How does the customs authority control rules of origin in case of doubts
about authenticity and veracity related to a specific certificate? Is this control performed during customs
clearance procedure, or after the issuance of an import permission? In case of penalties, does the Japanese
administration grant appeal instances to exporters?
Question 22
According to document WT/TPR/S/107, Japan does not apply minimum import prices. Pursuant to
customs valuation, how does the customs authority select import operation to control the c.i.f. prices of
imports? Does the Japanese administration calculate an average time spent in the procedure of customs
valuation control? May importers have their goods released before the conclusion of customs valuation
control?
Answer 22
Japan has established a Self-Assessment System with regard to Customs duties. Customs authorities may
check the declared value of imported goods at the border and, if necessary, by post-clearance audits.
We have no data on the average time spent in checking the declared value of imported goods at the
border. However, we have data on the average time spent in customs procedures, from the declaration of
imported goods to the clearance of the goods, which includes the average time spent in checking the
declared value. The average time is 4.9 hours for sea cargos and 0.6 hours for air cargos.WT/TPR/M/107/Add.1
Page 31
In general, an importer is not allowed to have import ed goods released before payment of customs duties.
However, under the Simplified Declaration Procedures, an importer who has received the approval of
any Director General of Regional Customs in advance can have the designated imported goods released
before payment of customs duties.
Question 23
According to Chapter III, item 12, of document WT/T PR/S/107, the Japanese government has introduced
“simplified import procedures” since March 2001. Could this operation system be explained with more
details?
Trade Remedies
Question 24
On paragraph 36 of Chapter III of WT/TPR/S/107, it is said that the Japanese authorities will introduce
domestic legislation, in accordance to safeguard provisions stipulated in the Japan-Singapore Economic
Agreement for a New Age Partnership (JSEPA), which would allow an emergency tariff increase on a
duty-free item bound in the JSEPA within the level of the general tariff for the item concerned. CouldJapan describe the mechanism of preferential safeguards stipulated in the JSEPA?
Answer 24
In Article 18 of the JSEPA, it is stipulated that ea ch party may take emergenc y measures if originating
goods of a party, are being imported into the territory of the other party in such increased quantities as aresult of the reduction or elimination of a customs duty, and under such conditions that the imports of
those originating goods alone constitute a substantial cause of serious injury, or threat thereof, to a
domestic industry of the latter party.
Emergency measures stipulated in the JSEPA are, (a) the suspension of further reductions of any customs
duty on goods provided for in the JSEPA, or, (b) an increase a customs duty on goods to a level not to
exceed the lesser of the MFN applied rate of the customs duty in effect at the time when the measure is
taken, and the MFN applied rate of the customs duty in effect on the day immediately preceding the date
of entry into force of the JSEPA. A party may take a measure only after an investigation has been carried
out by the competent authorities of that party. Measures shall not be maintained for more than a period of
one year, but in very exceptional circumstances, a measure may be maintained for up to a total maximum
period of three years.
Services
Distribution services
Question 25
Japan’s specific commitments on Market Access and National Treatment in this sector under the GATS
explicitly exclude the following products: rice, tobacco, salt, alcoholic beverages, and all products supplied
at public wholesale markets, including fruits and vege tables. Could Japan explain to which extent these
exclusions affect the capacity of subsidiaries of fo reign distribution companies established in Japan (both
wholesale and retail) to import these products for ma rketing and sale in Japan? Conversely, do these
exclusions restrict, in any way, the foreign estab lished distributors capacity to market and sell the same
products when produced in Japan? Could Japan explain what is the rationale behind the product exclusions?WT/TPR/M/107/Add.1
Page 32
Answer 25
Japan did not bind the distribution services of those products mentioned in your question because there
exist in the relevant laws provisions on supply-demand adjustments for various policy objectives, such as
the assurance of a stable supply of basic daily commodities.
Japan has so far not conducted analyses concerning its effect on foreign distributors in Japan.WT/TPR/M/107/Add.1
Page 33
CANADA
Secretariat Report, Chapter II. Trade Policy Regime: Framework and Objectives; (1) Trade Policy
Objectives; paras 2, 17, 24, 25 ,26, 27;  and Government Report, Chapter III. Trade Policy
Development, 2000-2002; paras 25-33:
Question 1
In the pursuit of bilateral and regional FTAs, apart from Singapore-like FTA partners where there is very
little in the way of agricultural trade, how will Japan deal with the agricultural question?
Question 29
Japan is starting to place more emphasis on regional and bilateral trade policies with elements of free
trade agreements (FTAs). In Chapter II, Section 3(iii) c, para. 23, it is stated that “Many agricultural
products have been excluded from the JSEPA (Jap an-Singapore Economic Agreement)”. How does Japan
intend to treat agricultural products in future regional and bilateral agreements?
Answer 1&29
In negotiating FTAs, Japan intends not to exclude any specific sectors such as agriculture.On that basis, concerning the agricultural field, it is necessary to aim at mutually beneficial FTAs for
both parties concerned in line with international rules, giving due consideration to the issue of food
security as well as efforts on structural reform im plemented in the domestic agricultural sector in Japan.
Secretariat Report (WT/TPR/S/107)
II. Trade Policy Regime: Framework and Objectives: (3) Trade Agreements and Arrangements;
(i) WTO; para 8; and IV. Trade Policies by Sector ; (2) Agriculture; (ii) Border measures; para 10:
Japan argues that the discussions on further liberalization in agriculture should be based on five main
points including consideration for the concerns of cons umers and civil society. This is important in the
context of Japan’s special safeguards on pork and beef.  For example, as a result of unusual low beef
imports due to the reduction of demand in Japan after the finding of BSE,  the special safeguard on beef
could potentially be automatically triggered in the coming year.  This would significantly increase the
tariff on imported beef, which in turn could lead to higher prices to consumers, slowing the recovery ofthe domestic market and affecting both domestic producers and beef exporting countries. The automatic
application of the beef special safeguard under the current market conditions would not be in line with its
intent, which is the protection of Japan’s domestic industry from import surges.
Question 2
In this context, will Japan give due consideration to the extraordinary market conditions and impact on
consumers that could result from the automatic application of the safeguard on beef?
Answer 2
A measure has been introduced in accordance with the agreement with interested Member countries,
including Canada, in conjunction with the conclusion of the Uruguay Round. Japan accepted a voluntary
tariff reduction of beef beyond the bound rate, in spite of a difficult situation in the domestic beef sector.
This reduction was introduced, together with the emergency tariff measure set, to be triggered to raise the
tariff to the bound rate automatically when beef imports exceed a certain level. It is an indispensable toolWT/TPR/M/107/Add.1
Page 34
in order to ease the negative impact on domestic production. The measure and the voluntary tariff
reduction constitute a package, as agreed upon by all interested Member countries.
III. Trade Policies and Practices by Measure; (2) Measures Directly Affecting Imports;
(vi) Government Procurement; para 38:
Question 3
Despite improvements in tendering policies for public works (providing integrated tender information
through the Internet and plans to permit Internet tenders), there remains a very low number of foreign
companies engaged in public works projects in Japan. Will the Government of Japan consider increasing
transparency of qualification criteria and introducing harmonized guidelines for procurement in all public
works and construction, including standard forms for bids and contracts?
Answer 3
Japan has properly implemented the Agreement on Government Procurement (GPA) and the 1994 Action
Plan on Reform of the Bidding and Contracting Procedures for Public Works (i.e., harmonized guidelines
for procurement in all publics works and construction for the entities in Annexes 1 and 3 of the GPA) so
the transparency of qualification criteria has been achieved. In addition, the Government of Japan, from
the standpoint of a commissioning entity of public work s, believes that thorough enforcement of the Act
for Promoting Proper Tendering and Contracting for Public Works (the Act), which came into effect in
April 2001, is a fundamental measure for increasing further fairness and transparency in the government
procurement sector. From that standpoint, the Minist ry of Land, Infrastructure and Transport, the
Ministry of Finance and the Ministry of Public Administration, Home Affairs, Posts and
Telecommunications request each central governm ent, quasi-governmental and local government
commissioning entity to submit a report on the measures the commissioning entity has taken as of the end
of the last fiscal year to comply with the “Guiding Principle” based on the Act.
Regarding standard forms, the Central Council for Construction Contracting Business has introduced the
standard forms of contract for construction works.
Question 4
With respect to footnote 34, with the implementation of a unified list of qualified suppliers for
procurements at the central government level, what are the detailed criteria for a supplier to become
qualified?
Answer 4
A supplier who wants to become qualified under the unified qualification system shall submit to any one
central Government entity an application with the following documents:
- registration certificate (for corporations);- financial statements (for corporations) or documents related to net operational capital and
income-outlay statements (for individuals);
- historical record of the business; and
- tax payment certificates for the followi ng taxes or other equivalent documents:
(a) consumption tax or local consumption tax;(b) corporate tax (for corporations); and
(c) income tax (for individuals).
Following this, a central Government entity to wh ich an application has been submitted marks the
applicant’s capability on a 100-point system. The points of each application are determined based onWT/TPR/M/107/Add.1
Page 35
criteria such as yearly average outputs and sales, owned capital, floating ratio, number of years in
business, value of machinery equipment, etc.  The applicants are divided into four grades (A, B, C or D)
according to their points. For example, suppliers who receive high points are assigned to Grade A and
may participate in procurement contracts without a li mitation in the value of the contracts. Suppliers
assigned to Grades B, C or D may participate in procurement contracts subject to certain respectiveupper limits in the value of contracts specified under this qualification system. For each notice of
proposed procurement, a central government entity specifies the grade(s) of qualified suppliers who can
participate in the tender.
Question 5
Where would a supplier be able to find out about the detailed criteria and how they would apply?
Answer 5
The public notice concerning the unified list of qualified suppliers (effective for FY 2001-2003) was
published in the official gazette “Kanpo,” issued on January 10, 2001. It includes the details of this
qualification system, including inform ation on how suppliers apply. Suppliers can find the text of the
notice and its English translation in Appendix 3 of the “Guide to the Government Procurement Market of
Japan,” available at http://www.mofa.go.jp/mofa j/annai/shocho/chotatsu/q_a/index.html (Japanese) and
http://www.mofa.go.jp/j_info/japan/procurement (English).
III. Trade Policies and Practices by Measure; (2) Measures Directly Affecting Imports;
(vi) Government Procurement; para 40:
Question 6
Paragraph 40 states that “procurement from foreign suppliers has always been low”. What are the reasons
for this? With reference to Table III.2, Item 6, please explain why none of Japanese government
procurement of this category, which includes wood and paper products, were of foreign origin?
Answer 6
Japan has no rules or regulations that discriminate against foreign suppliers, goods or services in
government procurement covered by the Agreement on Government Procurement (GPA). As a matter of
fact, the Japanese government has been making efforts to ensure non-discriminatory, transparent and fair
procurement procedures by implementing additiona l measures beyond the obligations under the GPA.
For example, to facilitate the participation of foreign suppliers, the Action Program on GovernmentProcurement extends the 40-day tendering period of the GPA to 50 days where entities in Annexes 1 and
3 of the GPA procure goods and services (excluding construction work, architectural, engineering and
other technical services).
As for the procurement ratio from foreign supplie rs pointed out by Canada, Japan can indicate that
according to the statistical data below, the ratio of foreign suppliers’ tenders has been lower than the
ratio of tenders awarded to them. The low procuremen t ratio from foreign suppliers seems to result from
the even lower ratio of foreign tenders.
As for Table III.2, Item 6 (including wood and paper products), the zero share of foreign products in 2000
seems to be an exceptional case. For example, the share of foreign products for Item 6 in 1996-1999 was
1.0%, 0.1%, 0.5% and 0.1%, respectively. Products in Item 6 (including wood and paper products) are
procured through open tender in most cases.WT/TPR/M/107/Add.1
Page 36
Ratio of foreign suppliers’ tenders and awards through open tender
1996 1997 1998 1999 2000
Ratio of tenders 1.1% 0.8% 1.6% 1.0% 1.2%
Ratio of awards 2.2% 1.5% 1.8% 1.6% 1.7%
(Note)
Ratio of tenders: number of foreign tenders / total number of tendersRatio of awards: number of contracts awarded to foreign tenders / total number of contracts
Question 7
Does the Government of Japan plan to implement any changes that would encourage procurement from
foreign suppliers?
Answer 7
Besides the measures mentioned in the response to Canada’s first question regarding government
procurement, Japan adopted from 1990–1996, volunt ary measures in the areas of government
procurement of super computers, computer pr oducts and services, non-research and development
satellites, telecommunications products and services, medical technology products and services, and
construction services, with a view to further prom oting procurement through procedures based on non-
discrimination, transparency and the principle of fair and open competition. Japan has been
implementing each of these measures since then, in cluding the setting of a lower threshold (100,000 SDR
except construction work, architectural, engineering and other technical services) and undertaking
additional procedures that go beyond Japan's obligations and commitments under the Agreement on
Government Procurement (GPA).
Although the procedures under the GPA and the above-mentioned measures offer non-discriminatory,
transparent and competitive opportunities for foreign suppliers to participate in tendering, these
measures cannot guarantee results. Since the average ratio of foreign suppliers’ tenders has remained
low, as explained in the response to Canada’s preceding question, foreign suppliers are invited to take
advantage of these opportunities and participate more in tendering in Japan.
With respect to mineral products as well as aircraft and associated equipment, Japan would like to note
that Japanese procuring entities purchased over 90% of such products from abroad in 2000 (cf. Table
III.2 on page 37 of the Secretariat Report).
III. Trade Policies and Practices by Measure; (2) Measures Directly Affecting Imports;
(vi) Government Procurement; para 42:
Question 8
Please explain the roles and interrelationship betw een the Office of Government Procurement Review
(OGPR) and the Government Procurement Review Board.
Answer 8
The Government Procurement Review Board reviews complaints filed in regard to government
procurement. The office for Government Procurement Review Challenge System, which is located in the
Cabinet Office, serves as the secretariat of the Government Procurement Review Board.WT/TPR/M/107/Add.1
Page 37
Question 9
Paragraph 42 refers to the fact that procuring entities may voluntarily implement recommendations of the
Government Procurement Review Board. What further steps can suppliers take if the procuring entity
does not follow the recommendations of the Government Procurement Review Board?
Answer 9
A Procuring Entity shall, in principle, and on its own accord, duly follow the recommendations of the
Board with respect to any complaints brought appropriately before the Board. Should the Procuring
Entity decide not to comply with the Board’s recommendations, it shall report to the Board its reasons
therefor within 10 days (or within 60 days in the case of a complaint pertaining to public works) of
receiving the Board's recommendations. The Board shall send a copy of these reasons to the Office of
Government Procurement Review (whose head is the Chief Cabinet Secretary) immediately upon
receiving such a report.
"The Review Procedures for Complaints Concerning Government Procurement," as decided by the Office
of Government Procurement Review on 14 December 1995, does not provide for any appeal procedures
for suppliers in the event that a procuring entity fails to comply with the Board’s recommendations. Inthis case, suppliers may file a suit against the procurement decision with a judicial court in accordance
with judicial procedures in Japan.
III. Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade;
(v) Trade-related Intellectual Property Rights; para 75:
Question 10
We laud the amendment of the Unfair Competition Prevention Law to include protection for domain
names, but note that other electronic commerce and Internet-related legal issues appear to remain. Are
there legal measures being contemplated for trademarks and metatags, cybersquatting, e-commercepatents including business method patents, Internet service provider liability (injunctive relief,
contributory liability issues etc.) and Napster-like IP infringement issues?
Answer 10
-  Trademarks
The Trademark Law was amended to stipulate that acts of selling goods and providing services the
network would be protected under the Trademark Law, in order to deal with new network-based businessactivities that have emerged due to the rapid progress in information technology.
-  ISP Liability
The Law on Restrictions on the Liability for Damages of Specified Telecommunications Service Providers
and the Right to Demand Disclosure of Identity Information of the Sender was enacted in May 2002 inorder to clarify the scope of ISPs' liabilities regarding information distribution over the Internet so that
ISPs can take prompt and appropriate measures against some parties infringing others' rights and
benefits through delivering information on websites, etc.
-  E-commerce Patents Including Business Method Patents
JAPAN published revised patent examination guidelines on computer software-related inventions in
December 2000 in order to clarify standards for patentability regarding computer software-related
inventions, including business method-related inventions.WT/TPR/M/107/Add.1
Page 38
Napster-like IP Infringement Issues
The Copyright Law of Japan gives right-holders the exclusive right to transmit software. Accordingly,
file-exchange via Internet-like applications such as Napster can be prevented under this law
III. Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade;
(vii) Competition Policy; paras 82, 87, 88, 89 ; and Government Report, Chapter III. Trade Policy
Development, 2000-2002; Domestic Policy Development; paras 56, 57, 59:
Comment: Under recent developments, the Report makes no mention of the negotiations launched on
June 26, 2002 between Japan and Canada to establish a cooperation agreement on competition law
enforcement. These negotiations have been made public.
Question 11
We note that increased resources have been allocated to Japan Fair Trade Commission enforcement
activity, resulting in modest increases in investigation personnel. Will the Government of Japan continue
to increase resources for investigation activity sufficie nt to ensure that the structure, authority, and
capacity of the JFTC are strengthened, which will be necessary to assure a fair and efficient marketplace(particularly as regards new entrants)?
Answer 11
Several Cabinet decisions, including the Three-year Program for Promotion of Regulatory Reform
(revised in March 2002), have stated that the Government of Japan will strengthen the enforcementpower of the Antimonopoly Act, including the streng thening of the investigation section of the FTC.
Question 12
Are there plans to abolish the statutory cap on fines for anti-competitive behaviour (and further increasing
these fines), so that companies are less inclined to factor these costs into their overall budget?
Answer 12
We have no plans to abolish or increase the statutory cap on criminal fines.Question 13
How are measures to deal with issues of competition policy in the Internet context progressing, including
issues of B2B competition policy?
Answer 13
The Japan Fair Trade Commission publicizes prior consultation cases concerning B2B transactions to
clarify views under the Antimonopoly Act.
Question 14
What measures are being taken to deal with issues of oligopoly and collective dominance in the Japanese
context?
Answer 14
Effective competition cannot be expected under an oligopolistic market structure when competing firms
easily form interdependent relationships where th ey canpredict each other's actions. In the event that
there is no effective competition in a particular industry, or adverse effects arise in a highly oligopolistic
industry where one or two firms have an extremely large market share (e.g., over 50%), the AntimonopolyWT/TPR/M/107/Add.1
Page 39
Act deems the case to be a monopolistic situation and provides necessary measures against a firm to
restore competition, including the transfer of a part of its business (Section 8-4).
Question 15
How is the Government dealing with issues of t echnological innovation and competition policy (i.e.,
allowance of co-operation between competitors in the interests of technological innovation), as well as
issues of access to essential facilities?
Answer 15
In terms of joint research and development, the JFTC  clarifies views under the Antimonopoly Act in the
“Guidelines Concerning Joint Research and Development (April 20, 1993).”
Essential facilities are necessary for market participants to provide their services, and fair competition in
a relevant market will not be realized without ensuring access to such facilities. For example, in the
telecommunications sector, access is ensured through such measures as a TBL-imposed obligation of
interconnection to subscriber lines.
Question 16
There is concern that the Japan Fair Trade Commission (JFTC), in order to be fully independent, needs to
be positioned separately from the ministries with jurisdiction over industries that the JFTC could be called
on to investigate. Calls have been made, for example, to place the JFTC under the Cabinet Office or
Cabinet Secretariat. In particular, insofar as telecommunications are concerned, the fact that the JFTC isunder the umbrella of the Ministry of Public Mana gement, Home Affairs, Posts and Telecommunications
(MPHPT) is deemed as a drawback for fair competition within the telecom market, as the OECD has
warned. How does Japan reconcile this apparent conflict?
Answer 16
The JFTC is currently positioned as an affiliated organ of the Ministry of Public Management, Home
Affairs, Posts and Telecommunications. However, the Government of Japan is considering whether to
transfer the JFTC to an affiliated organ of the Cabinet Office and is making an effort to introduce a bill
for the transition to the next ordinary session of th e Diet, pursuant to the Cabinet Decision stating that
consideration should be given to transferring the JF TC to a more appropriate position from the viewpoint
of its neutrality and independency from regulatory agencies.
III.  Trade Policies and Practices by Measure; (5) Measures Affecting Production and Trade;
(viii) Corporate Governance; para 94:
Question 17
We would like to know the success of new Commerci al Code provisions allowing for the introduction of
external directors, given the inherent resistance from vested interests and given that the provisions are
permissive, not mandatory. Initial indications are that few companies are adopting this option. Does the
Government of Japan monitor the number of companies adopting the system of boards with external
directors? If these numbers remain low, will mandatory provisions be considered?
Answer 17
Japan does not monitor the number of companies adop ting the new system of external directors (A
Company with Committees System).
Japan does not intend to make the provisions of the new system mandatory, whether the number of
companies adopting this system is high or low, si nce the system was introduced with intention thatWT/TPR/M/107/Add.1
Page 40
companies should be given a broad range of alternatives regarding the governance system they adopt. In
the Diet proceedings of May 2002, during which th e revisions of the Commercial Code including the
introduction of the Company with Committees System we re enacted, the Committees of Judicial Affairs of
both Houses adopted an additional resolution that, from the point of view mentioned above, the autonomy
of companies to choose their own governance system must be respected.
IV. Trade Policies by Sector; (4) Services; (i) Financial services; paras 24-28:
Question 18
Government-backed financial institutions play an important role in Japan’s economy.   The Government
of Japan has stated firmly its intent to revitalize the financial sector, and Prime Minister Koizumi has
stated his commitment to “put an end to the bad loan problem” by the end of FY 2004 (March 31, 2005)through “every possible measure.”  One important measure to help the banks and life insurance
companies to become more profitable is to eliminat e services provided by government-backed financial
institutions which compete with private financial institutions, particularly the services of the postal
savings and life insurance systems (commonly known as yucho and kampo, respectively ).  In particular,
kampo benefits from many advantages over private financial institutions (e.g., does not pay taxes; doesnot pay into the Policyholders Protection Corporation; is not subject to the insurance law; does not require
product approval). How does Japan respond to the view that kampo's advantages over foreign and
domestic life insurers violate the GATS?
Answer 18
Kampo falls within the category of “services supplied in the exercise of governmental authority,” which
is defined as an exception to “service” in the GATS Article 1.3(b) and Annex on Financial Services.
Therefore, Kampo cannot violate of the GATS obligation.
The objective of both Kampo and Yucho are to provide easily accessible and reliable means of life
security and savings for everyone in Japan. As state-run businesses, Kampo and Yucho have different
systems and management philosophies from those of private financial institutions, and, therefore, are
subject to a different Japanese law, and specific regulations, such as:
1) universal service obligation;
2) insurance and deposit ceiling regulations;
3) limitations on the scope of products and services; and
4) restrictions on asset management.
Therefore, we are confident that Kampo and Yucho have never been treated more favorably than private
financial institutions.
IV. Trade Policies by Sector; (4) Services; (ii) Telecommunications:
Question 19
According to para 37, we understand that Japan has adopted an “e-Japan” national strategy for
information technology. Please provide more informati on as to the progress in implementing this strategy,
in particular, the extent of its measures. Are any other regulatory reforms planned or underway?
Answer 19
In March 2001, in order to implement the“e-Japan strategy,” the IT Strategy Headquarters decided
upon the “e-Japan Priority Policy Program,” including five priority policy areas as formation of the
world’s most advanced information and telecommuni cations networks, promotion of education andWT/TPR/M/107/Add.1
Page 41
development of human resources, facilitation of  e-commerce, digitization of administration and
application of IT in other public areas, and ensuring security and reliability on advanced information and
telecommunications networks.
In June 2002, following up on above the program, th e Headquarters decided to implement the “e-Japan
Priority Policy Program 2002”, and as such, is now implementing 318 measures. This program includes
regulatory reforms and measures that encourage further fairness and a competitive environment relating
to IT.
IV. Trade Policies by Sector; (4) Services; (ii) Telecommunications; and Government Report;
Chapter III. Trade Policy Development, 2000-2002; Domestic Policy Development; para 55:
Question 20
There is concern that the amendment of Telecomm unications Business Law proposed by Ministry of
Public Management, Home Affairs, Posts and Telecommunications (MPHPT), may not enhance
deregulation. The Anti-Monopoly Law is the main tool to supervise industry and prevent misconduct. In
light of this, how does Japan respond to the view that the Anti-Monopoly Law is sufficient to ensure fair
practices in the telecommunications sector?
Answer 20
Based on “the final report on Desirable Pro-Competitive Policies in the Telecommunications Business
Field for Promoting the IT Revolution”, which the Telecommunications Council presented on 7th August
2002, MPHPT starts working on amendments to th e TBL in order to promote further significant
deregulation, such as abolishing permission scheme for Type telecommunications business, detariffing
telecommunications services, and so on.
In addition, it is necessary to take measures for prom oting fair competition in telecommunications sector
by the TBL, such as  competitive safeguards and interconnection rules, because the telecommunicationsbusiness is in a transition period from a monopoly to competitive market and there are
telecommunications carriers that are assumed to have significant market power due to controlling
essential facilities or using its position in the market.
Japan would note that there are no countries where the telecommunications sector is regulated only by a
general competition law
IV. Trade Policies by Sector; (4) Services; (iii) Transport; (b) Air Transport; paras 44-48:
Airlines in Japan have commented that changes in both air traffic control procedures and the management
of runway capacity could bring about an increase in the number of slots available on the existing runways
at Narita. This could be done within internationally recognised noise limits and without compromising
safety.
Not only foreign airlines operating in Japan but Japanese airlines as well, have commented negatively on
issues relating to capacity and costs (e.g., landing fees in Japan are among the highest in the world).  The
pricing of international air fares in Japan and the ways in which they may be publicised are all matters of
deep concern to the airline industry.  The same applies to the setting of fees for navigation in Japaneseairspace and the setting of charges applied for the use of common spaces at Japanese international
airports.WT/TPR/M/107/Add.1
Page 42
Question 21
Please comment on why landing fees at Narita are significantly higher that at major airports in other
developed countries – including countries where the cost of land is high.
Answer 21
Just looking at the landing fee, the fee at Narita airport is higher than at other airports, due to the
massive amount of expenditures on the measures that are required for a landlocked airport much as
environmental protection measures. However, the actual airport users’ charges per international
passenger at Narita (i.e., the sum of the landing fee and other charges paid by passengers and airlines
per person) are lower than at London Heathrow and New York John F. Kennedy airports. Thus, it is not
necessarily correct to say that Narita’s charges are significantly high.
Since landing fees are just a part of many airport users’ charges,  it is not appropriate to focus only on
landing fees. The entire airport users’ charges, in cluding charges and taxes directly paid by passengers,
should be examined.
Question 22
There is a concern of the lack of transparency on how fees are set. In light of this, what assurances can
Japan provide that international airports are not subsidizing domestic or other international airports?
Answer 22
As for the landing fee at Narita airport, the Narita Airport Authority (NAA) has been negotiating with the
IATA in an open and transparent manner, providing information on calculation grounds, so that both
parties can agree on the setting of a landing fee.
The NAA is operating on self-supporting basis, with operating expenditures at Narita covered by its own
earnings, including the landing fee and other charges, so it is not possible for Narita airport to subsidizedomestic and other international airports in Japan.
Question 23
While Japan’s slot allocation procedures may be set according to IATA scheduling guidelines, certain
rules specific to Japan=s Ministry of Land, Infrastructure, and Transport (MLIT), e.g., the hourly, 3-
hourly and daily limits on slot numbers, continue to limit the freedom of the slot co-ordinator to meet
demand. Please comment on the need for these additional requirements.
Answer 23
The Coordinator of the International Air Transport Association (IATA) makes slot allocation at congested
Japanese airports (Narita and Kansai) in a fair and neutral manner. The Coordinator bears full
responsibility for acts in accordance with IATA guidelines and rules approved by the group.
Narita Airport, a major international airport located in an inland area, faces severe noise issues in the
surrounding area. Therefore, the most drastic environmental measures among Japanese airports have
been taken, and based on agreements with residents in the surrounding area, upper limits on takeoffs and
landings per day have been set. Also, handling capability per a certain time frame is set to ensure safeairport operations under such constraints as those related to air spaces and runway operations.WT/TPR/M/107/Add.1
Page 43
Question 24
In light of APEC’s Open Skies initiative, please co mment on Japan’s refusal to accept “Open Skies” air
services agreements. Para 46 indicates that Japan has not accepted because to do so may entail oligopoly.
Please further explain the reasons for this viewpoint.
Answer 24
Regarding APEC’s Open Skies initiative, Japan believes it is important to develop a more competitive
market environment with fair and equal opportunities in order to enhance passengers’ convenience.
Considering the different levels of economic devel opment and the diverse soci al environment among the
APEC economies, we should be able to choose flexibly and voluntarily the means to facilitate more
competitive air transport services. Accordingly, we should not choose a radical and uniform way forliberalization by overlooking such circumstances.
Question 25
Paragraph 45 states that Japan prohibits cabotage and restricts foreign ownership of domestic airlines. Is
the Japanese air market otherwise deregulated? If so, when did the deregulation take place?  If not, whatregulation remains?
Answer 25
In Japan, the Ministry of Land, Infrastructure and Transport administers the entry, pricing and routes of
airlines, as well as safety regulations in the area of international air transportation. These are providedin the Civil Aeronautics Law as well as bilateral agreements, and are recognized as internationally
established practices or rules.
IV. Trade Policies by Sector; (4) Services; (iv) Other Services; para 50:
What are the plans of the Government of Japan to deal with the following issues of discriminatory
treatment and impediments to practising law in Japan:
Question 26
under Japanese law, gaiben (foreign lawyer qualified by Japanese law) cannot employ bengoshi (lawyer
qualified by Japanese law);
Question 28
restrictions on partnership and employment between bengoshi and gaiben make it difficult for gaiben to
provide adequate services and advice
Answer 26&28
To promote cooperation and collaboration between a lawyer qualified as Bengoshi under Japanese law
(hereinafter referred to as Bengoshi) and GJB, the Go vernment of Japan plans to submit legislation to the
ordinary session of the Diet in 2003 for the deregulat ion of requirements for specified joint enterprises
(tokutei kyodo jigyo), including the liberalization of association between Bengoshi and GJB and the
review of the regulation that prohibits a GJB from employing a Bengoshi.
Necessary measures will be taken in full respect fo r the views of the Internationalization Study Group of
the Office for Promotion of Justice System Reform.WT/TPR/M/107/Add.1
Page 44
Question27
gaiben cannot give advice on third country legal matters without written advice from a bengoshi or a
lawyer admitted to practise in the third country, while bengoshi (who are not necessarily any better
qualified to do so) can;
Answer 27
With respect to Canada's question regarding restrictions on performing legal services on third country
law by GJB (Gaikokuho-Jimu-Bengoshi, a foreign lawyer qualified under Japanese law),a GJB can
ordinarily only engage in legal practice in Japan that is limited to legal services concerning the laws of
the country in which he or she acquired his or her qualification. Therefore, when a GJB handles legal
services on third country law, the GJB must do so only after having received written advice from a lawyer
qualified in the third country. On the other hand, Bengoshi can engage in legal practice without anyrestrictions.
The requirement for a GJB is necessary from the viewpoint of protecting clients, because GJB and
Bengoshi are totally different concepts. All clients may not be able to gather information and form
decisions about a foreign lawyer's ability, competence or ethics and there is the possibility that a clientwill incur irreversible damage after legal services have been rendered. Japan believes that the
abovementioned is necessary from th e viewpoint of protecting the client. Therefore, no consideration is
being given to removing the abovementioned requirement.
Government Report WT/TPR/G/107
I. Japan’s Trade Policy; (2) Regional and Bilateral Trade Policy; para 5:WT/TPR/M/107/Add.1
Page 45
CHILE
1) Regarding the fruit market access, Japan has a case-by-case authorization system. Consequently,
for each fruit product that one would like to export to Japan, and which figures as prohibited on the
quarantine list of this country, the local Ministry of Agriculture should make a technical study whichestablishes the conditions for the exports to Japan, that is an exportation protocole. When the previous is
agreed, the protocole is submitted to a public hearing.
The process mentioned above is applied for each product and each country in a separate manner, for there
is no uniformity in the administrative processes and neither respect of the conclusions, including when it
deals with fruit and homogeneous varieties.
Question 1
When will Japan establish a clear and homogeneous administrative process, with pre-established time
limits for the access to its market?
Answer 1
Japan's administrative procedures for lifting the import ban with regard to the Plant Quarantine are
transparent and indiscriminate among countries and products, implemented according to the means
determined by the “Standard Procedures of the Exam ination for the Request for the Lifting of the Import
Ban in the Plant Quarantine,” which was issu ed on September 22, 1999 (Government report on the
gazette).
Question 2
When will Japan adopt the international standards?Answer 2
Japan considers that the international standard on the definition of “official control” adopted at the
Interim Commission for Phytosanitary Measures should be one of the bases for establishing a possible
future plant quarantine system for our country. Japan is examining whether the country can maintain
“the appropriate level of protection on plant quar antine” by applying plant quarantine measures based
on the new definition, while ensuring that these measures would fit with Japan’s climate conditions and
are well designed to handle huge amounts of imports.
Question 3
When will these unnecessary fumigations be eliminated?
Answer 3
Japan’s list of non-quarantine pests will be properly revised, where necessary, based on a scientific and
technical point of view. However, Japan will maintain the appropriate phytosanitary measures applicable
to imported plants and plant products that are recognized to be infested with quarantined pests.
3) The Government of Japan through the Ministry of Agriculture made a list of no-quarantine
plagues ( pests ). This is a positive step. Without prejudice to that, this list left out plagues ( pests ) which
exist in Japan. It has been proved that there are 10 plagues ( pests ) which are present in fruit and
vegetables in the United States and which are also common in Japan:
1. Frankliniella occidentalis (western flower thrips)
2. Pieris rapae (imported cabbageworm)WT/TPR/M/107/Add.1
Page 46
3. Brevicoryne brassicae (cabbage aphid)
4. Aphis fabae (bean aphid)
5. Myzus persicae (green peach aphid)
6. Macrosiphum euphorbiae (potato aphid)
7. Aonidiella aurantii (California red scale)8. Chrysomphalus aonidum (Florida red scale)
9. Aulacorthum solani (glasshouse potato aphid)
10. Aphis gossypii (cotton aphid)
Question 4
When will Japan create a transparent and complete list of no-quarantine plagues ( pests )?
Answer 4
Japan will review the current list for non-quarantine pests, where necessary, and thereby continue to
operate its plant quarantine measures on the basis of an appropriate risk assessment.
4) Certain fertilizers (sodium and potassium nitrates) are considered as dangerous products in Japan.
The Chilean exporters have developed a process of quality improvement of the sodium nitrate, which they
export, fulfilling the legal norms in force in the Fire Law. In this manner, they obtained a certificate of the
Fire Agency which recognizes a special quality ("Japanese Grade") for the sodium nitrate exported from
Chile, as it would be classified as a non-dangerous product. In spite of what mentioned before, it
continues to be classified in the same tarif range, which includes other products considered as dangerous.In this manner, as there is no discrimination, the Japanese Port Law applies restrictions to the Chilean
sodium nitrate consisting in the fact that a ship can not carry more than 500 TM per shipment, except in
the case of exportation in the island of Hokkaido, for which the limit is exceptionnally of 3500 TM. In
addition to these restrictions related to maximum quantity per shipment, there are some measures which
limit the ports of reception to three: Yokohama, Nagoya and Kobe, for other ports can not be used.
The impact of these restrictions is to increase artifici ally the cost of the Chilean nitrates in the Japanese
market, affecting therefore in a direct manner its competitiveness in the said market.
Question 5
Is Japan going to recognize the special situation of the Chilean sodium nitrate, avoiding to apply these
unjustified restrictions?
Answer 5
It is not true that a ship is limited to carrying and unloading dangerous goods weighing less than 500 MT
and it is also incorrect that  ports of reception are limited to three under Japanese Port Regulations Law
in Japanese ports.
Companies can check themselves whether or not products are classified as dangerous products, as
defined by the Fire Service Law, based on the results of their experiments. In general, there are three
steps in this procedure. First, the Fire and Disaster Management Agency examines the results of
experiments submitted by companies and registers th em on the database of dangerous products. Next, the
Hazardous Materials Safety Techniques Association issues a certificate of registration to products that
the Fire and Disaster Management Agency judges to be classified properly. Lastly, the judgment and
determination of the danger classification of  products is done by local governments and other entities.WT/TPR/M/107/Add.1
Page 47
5) In many cases, the eligibility for quotas in the agriculture sector requires bothersome processes of
approval from the MAFF (Ministry of Agriculture, Fish eries and Forestry), as restrictions for the final
use, the opinion of other organizations and various documents as negotiations accounts and plans.
Question 6
Is Japan considering to move forward in trade facilitation through improvements in those procedures?Answer 6
Japan sets up minimum requirements necessary to qualify appropriate applicants for the TRQ allocations
of agricultural products, taking into account the specific characteristics and actual situations of the
distribution of the products concerned, while bearing in mind the importance of trade facilitation.
Therefore, Japan does not consider that it is necessary to further simplify the current procedures.WT/TPR/M/107/Add.1
Page 48
CHINA
China welcomes this sixth Trade Policy Review of Japan by the WTO and its members. As Japan’s
second largest trading partner and one of the primary destinations of Japanese products, services and
investment, China has always been attaching great importance to Sino-Japan trade relations, andstrengthening of the communications and contacts between our two countries in the multilateral trading
system is certainly one significant part of it. China believes that through this review process, Japan would
understand better China’s concerns over the direction in which the trade policy of Japan is evolving, and
also China’s concerns regarding some of the specific issues in our bilateral trade relations at this stage. At
the mean time, China would like to seek some clarifications regarding some aspects of Japan’s trade
regime. It is our hope that this exchange of views will  contribute to satisfactory solutions to some of the
problems and further promotion of the trade relations between our two countries.
Apart from that, please note that the comments and questions presented here are not exhaustive and may
be supplemented with follow-up questions and comments.
I. Inspection and quarantine measures and technical regulations
China notes that there has been increasing and frequent use of TBT and SPS measures by Japan in recent
years. Recognizing that Japan has the legitimate right to apply these measures on a reasonable and
necessary ground, as is stated in the SPS and TBT Agreements, however, China has to express its great
concerns when looking at the justifications of many of these measures and their severe negative impact ontrade. At this moment, the negative effects from this kind of measures on export of Chinese agricultural
products are what we are most concerned.
1. On 31 July 2002, the revised Food Sanitation Law was adopted in Japan, and after that, the Ministry of
Health adopted the Guideline for Implementing the Revised Food Sanitation Law. According to these
legislation, import of a food product shall all be prohibited if 5% or more of the inspected commodities
fail to conform to relevant standards of Japan.
Question 1
Article 7, Annex A and B of the SPS Agreement states that if “the content of a proposed sanitary or
phytosanitary regulation is not substantially the same as  the content of an international standard, guideline or
recommendation, and if the regulation may have a sign ificant effect on trade of other Members”, Members
shall notify the regulation “at an early stage, when amendments can still be introduced and comments taken
into account”. China deeply regrets that Japan didn't fulfil its obligation in this case and would like to
request Japan to provide justifications.
Question 2
As stated in Article 10.2, paragraph 2 of Annex B of the SPS Agreement and the Decision on
Implementation-Related Issues and Concerns at the Doha Ministerial Conference, a period of no less than
six months for compliance shall be accorded between publishing and implementing a SPS measure on
products of interest to developing members, so as to  maintain opportunities for their exports. China takes the
view that the revision of Food Sanitation Law wasn't an  urgent case and would therefore like to know how
Japan is going to fulfil this obligation. In view of the tremendous potential impact of this revision to Food
Sanitation Law on exports of China and many other deve loping members, China would like to request that a
period of 12 months for compliance be provided for all the developing members.WT/TPR/M/107/Add.1
Page 49
Question 3
The revised Food Sanitation Law replaces the case by case treatment concerning food sanitation with an
overall prohibition of all imports on single finding of inconformity. Please explain how this revision
conforms to Article 2.2, 3.1, 5.1 and 5.4 of the SPS Agreement.
Question 4
The Guideline for Implementing the Revised Food Sanitation Law by the Ministry of Health sets forth
conditions for application of prohibition on import of food products, items to be inspected, criteria for
judgment as to whether the prohibition should be invoked, procedures to invoke and lift the prohibition,
etc., but does not state clearly the time frame for lifting the prohibition. Please provide the time frame for
lifting the prohibition.
Answer 1&2&3&4
Annex B, Paragraph 5 of the SPS Agreement states that Members shall ensure that all sanitary and
phytosanitary regulations which have been adopted are published promptly in such a manner as to enable
interested Members to become acquainted with them. However, we published a notice concerning this
Amendment of the Food Sanitation Law for other WTO members as an emergency measure on July 18,2002, in accordance with the provisions of Ann ex B, Paragraph 6, based on Recommended Procedures
for Implementing the Transparency Obligati ons of the SPS Agreement (Article 7).
Annex B of the SPS Agreement states that except  in urgent circumstances, Members shall allow a
reasonable interval between the publication and entry into force of regulations. However, considering
recent circumstances concerning the sale and importation of food and so on which have a considerable
probability of causing a food sanitation hazard as we ll as the considerable number of illegal foods being
found, it is necessary to introduce provisions urgently that would enable the Minister of Health, Labour
and Welfare to prohibit the sale, manufacturing and importation of specific foods, food additives,
apparatus and containers/packages from a specific country, region or plant. Because the said recentcircumstances shall be deemed “urgen t circumstances” , it is difficult to phase in the framework that can
prevent damage to people’s health.
As identified above, the revised Food Sanitation Law and Guideline describing procedural details for
implementing the revised Food Sanitation Law shall not constitute a violation of Annex B, Article 10.2 of
the SPS Agreement.
In the revised Food Sanitation Law, the Minister of Health, Labour and Welfare may prohibit the sale,
manufacturing and importation of specific foods, food additives, apparatus and containers/packages from
a specific country, region or plant, by notification in the Official Government Gazette, after consulting
with the head of related ministries/agencies and hearing opinions of the Pharmaceutical Affairs and Food
Sanitation Council, in cases where:
(i) it is recognized that considerable amounts of foods that do not conform to the provisions
of the Food Sanitation Law (violation rate is 5% or more) are assumed to exist, in light of
the detection of a considerable number of violations during a sampling examination, due
to circumstances of food sanitation management in production areas and other relatedfactors; and
(ii) it is recognized that the necessity for prohibition is particularly high, considering the
degree of the potential hazardous effect on human health and other related factors.WT/TPR/M/107/Add.1
Page 50
As identified above, when implementing the revised Food Sanitation Law, all the various factors shall be
considered together. Therefore, violation is not the only factor in implementing the revised Food
Sanitation Law.
The Minister of Health, Labour and Welfare shall lift all or a part of this prohibition by notification in the
Official Government Gazette after hearing the opinions of the Pharmaceutical Affairs and Food
Sanitation Council, in cases where it is recognized that there is no probability of the occurrence of a food
sanitation hazard arising from the foods, food additives, apparatus and containers/packages concerned
based on the application of interested parties, or as the need arises.
The framework of the revised Food Sanitation Law sha ll comply with the purpose of the WTO Agreement
to avoid trade friction. In addition, the same framew ork has already been introduced in the EU and is
described in 35 of the Codex Alimentarius Commission guideline CAC /GL 26.
As identified above, the revised Food Sanitation Law and Guideline describing procedural details for
implementing the revised Food Sanitation Law shall not constitute a violation of the Article 2.2, 3.1, 5.1
and 5.4 of the SPS Agreement.
Considering field surveys, inspections, consultations  and so on with an exporting country, the timeframe
for lifting the prohibition is made on a case-by-case basis.
2. On question concerning Pesticide Residue Level, Japan requests that the Chiorpyifos Residue Level of
spinach imported from China shall be maintained under 0.01ppm, which is far more strict than relevant
international standard as well as the that of US and EU. Meanwhile, Japan permits a 300 times looser
level of 3ppm for radish, which is widely plante d and consumed in the country, and 1ppm for cabbage
and 0.5ppm for tomato. China views that such a difference is not justifiable.
Question 5
Please explain whether such a difference is in conformity with the national treatment principle.
Question 6
Please explain whether such a requirement as Chiorpyifos Residue Level is consistent with the provisions
set forth in Article 2.2, 3.1, 5.4 and 5.6 of the SPS Agreement, as well as the relevant international
standards and guidelines.
Question 7
The competent authorities in China would like to request that Japan provide test reports and other related
scientific evidences for proposing Chiorpyifos Residue Level, and explain whether there is evidence, if
any, to justify that the existing international standard  is insufficient to achieve the expected protection
level.
Answer 5&6&7
Because MRLs of pesticides in Japan are applied to domestic and imported products, these standards are
in conformity with the national treatment principle.(1) We establish MRLs based on the principle that the sum (total exposure level) of the estimated
dietary exposure of a pesticide and the exposure of that pesticide from environment can be below
the corresponding ADI, which is established based on various toxicity data. The estimated dietary
exposure is calculated based on both the daily consumption of each crop and the corresponding
MRL. This principle is the same as the international standard.WT/TPR/M/107/Add.1
Page 51
(2) In addition, we take account of international standards, residue data for homegrown crops and
other countries’ standards in the allocation of individual MRLs.
(3) We recognize that the CODEX committee has not established any residue limit (MRL) of
chlorpyrifos for spinach.
With regard to Japan’s MRL of chlorpyrifos for spinach, it was established in 1992 following aconsideration of Australia’s MRL. When we established the MRL, we found no inappropriate
manner in the process of establishing MRLs at that time.
(4) Based on the above mentioned, Japan’s MRLs of chlorpyrifos comply with the provisions of
Article 2.2, 3.1, 5.4, and 5.6 of the SPS Agreement. In addition, there are no international
standards or guidelines for those MRLs.
Because, as mentioned above, there are no international standards for chlorpyrifos on spinach,
the question’s demand for “evidence to justify  that the existing international standard is
insufficient to achieve the expected protection level” lacks a premise.
3. The Ministry of Agriculture, Forestry and Fishing (MAFF) of Japan instructed that since 1 April 2001,
quarantine institutions at the Customs and airports where fresh vegetable is imported shall set a
quantitative limit on the maximum inspections they deal with per day, and those applications beyond theset limit shall be postponed. China believes that such a measure has dramatically increased the cost and
risk of exporters, and constitutes disguised restriction on trade.
Question 8
Please provide justifications for consistency of such a measure with Article 2.2 and 2.3 of the SPS
Agreement.
Question 9
When the workload of some inspection institutions in creases, to avoid inspections being postponed, it is
the normal international practice that inspection staff shall be transferred from other institutions. That wasalso the practice in Japan before the MAFF’s instruction. China would like to request that Japan change
its current practice so as to eliminate the restrictive effects to trade.
Answer 8&9
Recently, Japan has been facing substantial increase in  plant imports. To cope with this situation, the
plant quarantine authority of Japan has been making every effort to increase the number of inspection
officers; however, it is not easy to increase quarantin e staff immediately, especially when a streamlining
of the governmental organization is underway.
The aim of the initiative introduced in April 2001 is to avoid the introduction of injurious pests as a result
of on insufficient import quarantine inspection due to on excessive workload beyond the capacity of the
inspections. We thus instructed plant protection stat ions to pay due attention to maintaining the proper
procedures.
4. On 11 April 2002, Japan suspended import of straw from China due to the inspection result discovering
in two containers shipped to Japan the living grubs of striped rice borer, which is also widely found in
Japanese rice stalks. Direct loss resulted from this suspension is USD 4 million around per month. The
Chinese enterprises affected took effective measures promptly to make improvement and relevantinvestigation results have been available for quite so me time. However, China hasn’t received an explicit
timing for lifting the suspension yet.WT/TPR/M/107/Add.1
Page 52
Question 10
China believes that this is not in line with the principle of minimum negative effect of SPS measures on
trade and therefore would like to request an explicit time frame for lifting of the suspension.
Answer 10
As for the condition to allow the importation of rice stalks from China, disinfestation by vapor treatment
is required in order to prevent the introduction of rice pests that do not existent in Japan, or diseases
such as foot and mouth disease. The reason for the suspension of importation was that live pests, which
should have been completely killed if the prescribed procedure had been applied properly, were found in
rice stalks imported from China.
Japan has requested that, to reopen the importation of rice stalks, China investigate the cause of the
incident, and submit a plan of improved measures based on the results of the investigation. The new
measures must be approved by Japan.
Japan has dispatched Japanese quarantine experts to carry out an on-site investigation in
November 2002.
In Japan, it is illegal to use food additives not approved by the Japanese government, and the production
and sale of such food is prohibited, according to Article 6 of the Food Sanitation Law of Japan.
Question 11
Please explain the procedures for approving food additives. How long does each step take? What are the
charges or fees involved?
Question 12
Is Japan considering approving those additives that have been prevalently used internationally or have
been assessed by relevant international organizations to be safe? Will the approving procedures be
simplified and the time for approval shortened?
Answer 11&12
As is the case in most other developed countries, only food additives designated as safe by the Minister of
Health, Labour and Welfare may be used in foods under the Food Sanitation Law in Japan.
Any person who wishes to use any undesignated food additive can submit a petition for designation
without any charges or fees to the Minister of Health, Labour and Welfare, attached with the required
data including data for safety.
Designation of food additives is normally based on the procedure given below.
(1) Where a petition for designation of an additive is submitted to the Minister of Health, Labour and
Welfare with the required documents, such as safety data, the Minister will consult the
Pharmaceutical and Food Sanitation Council about the adequacy of designation.
(2) The Council will make strict scientific evaluations on the safety and effectiveness of the additive,
taking into account international standards and evaluations, such as the CODEX standards and
evaluation by JECFA.
(3) If the evaluation proves that the additive is safe and effective, it will be designated as an additive
approved for use.WT/TPR/M/107/Add.1
Page 53
It takes normally one year from the receipt of a petition to the designation as a new food additive.
However, this period does not include any time required for the completion of incomplete applications or
documents submitted, or any time needed for replies to inquiries by the Council.
Basically there is no difference in the approval procedures and the time required for approval between
the food additives that are evaluated by JECFA and th ose that are not. However, we think that we can
evaluate the same data as having been provided and scientifically evaluated by JECFA and avoid any
unnecessary duplication of doing the safety test for those additives that have been prevalently used
internationally or have been assessed by JECFA to be safe.
Question 13
China is deeply concerned with those inspection measures that exceed the necessary level on Chinese
products like eel, poultry meat, vegetable and etc. For example, Japan requires examinations on 11antibiotics with eel. But some of these antibiotics have never been used for eel. Restrictive technical
measures applied by Japan are raising concerns among Members, and have affected Members’ export to
Japan, especially the agricultural products. China therefore would like to request that Japan re-examine
the rational of these inspection and quarantine measures, abide by the multilateral principles set forth in
provisions relevant to inspection, quarantine and technical regulations, and take effective measures toeliminate the negative effect of these measures on trade so as to facilitate a healthy development of
bilateral economic and trade relations. China will follow  closely future development in this regard and
keep contact with Japan through both bilateral and multilateral channels.
Answer 13
Regarding the foods Japan imports from China, monitoring inspections are conducted as they are for
foods imported from other countries.
The monitoring inspections on antibiotic and synthetic antibacterial medicine residue, which does not
interfere with customs formalities, is carried out by a simultaneous analyzing method, which enables theinspection of various substances at one time.
Although the meaning of the question by China is not clear, the above-mentioned inspection method is
also applied to foods imported from all other countr ies as well as domestic foods, further, the inspection
does not interfere with customs form alities, and importers should not feel any increased burden by this
monitoring inspection.
Question 14
On 2 August, 2002, the Ministry of Health prohibit ed the use of DEHP and DINP in the packaging
materials for toys and utensils by its No.267 Decree. Though the related enterprises in China have already
started using environmental-friendly and non-polluting ma terials for the toy production, it’s our view that,
the arbitrary initiation of the long-term import ba r against toys containing DEHP or EINP is not
consistent with WTO principle and may have negative effects on the trade with China.
Answer 14
Newly established specifications, which were published on August 2, 2002
China notes in its questionnaire that the Ministry of Health used Decree No. 267 to prohibit the use of
DEHP and DINP in the packaging materials for toys and utensils. .  China’s understanding of the phrase
“the packaging materials for toys and utensils,” however, is not correct. The established specifications
are for raw materials of toys and food containers and apparatus. The following are established
specifications.WT/TPR/M/107/Add.1
Page 54
<Food containers and packages>
Synthetic resins consisting mainly of polyvinyl chloride (PVC) including bis(2-ethylhexyl) phthalate
(DEHP) may not be used as ingredients in any apparat us, container or package that may come into direct
contact with fats/oils or foods containing oily foods.
This provision is not applied to cases where the apparatus, container or package is processed so that no
DEHP will dissolve or leach and migrate into foods.
<Toys for young children>
Synthetic resins consisting mainly of PVCs, including DEHP, may not be used as ingredients in toys for
infants and young children.
Synthetic resins consisting mainly of PVCs, including diisononyl phthalate (DINP), may not be used as
ingredients in toys that are intended for direct contact with children’s mouths.
3. The specifications were based on scientific grounds obtained from the study findings below.
These regulations are limited to the scope determined necessary to maintain the safety of the products.
They do not mean a total ban on the use of the two plasticizers, DEHP and DINP.In addition, these
regulations were not established arbitrarily.
The findings underlying the specifications are:<The tolerable dairy intake (TDI)>
- The TDI of DEHP has been confirmed as 40–140 mg/kg body weight/day, applying 3.7–14 mg/kg/day as
non-observed adverse effect levels (NOAELs) in testicular toxicity studies and reproductive toxicity
studies and an uncertainty factor of 100.- The TDI of DINP has been determined as 150 mg/kg body weight/day, applying 15 mg/kg/day as
NOAEL in two-year dosing toxicity studies and an uncertainty factor of 100.
<Food containers and packages>
- Large amounts of DEHP equivalent to the TDI we re detected in marketed boxed meals per serving.
- DEHP easily migrated into foods containing fat or oil through direct contact for a short time with these
foods. Amounts of migration were found proportional to the duration of contact.
<Toys for young children>
- There was no correlation between in vivo and in vitro elution study results.
- Based on observation studies on mouthing time, when toys intended for direct contact with children’s
mouths are made of PVCs containi ng DEHP or DINP, estimates of exposure of these compounds can
exceed the corresponding TDI.
- For other toys for young children, when they are made of PVC containing DEHP, estimates of exposure
can exceed the corresponding TDI.
3. It cannot be said that there is no possibility that these measures will affect trade between China and
Japan. However, Japan recognizes that these measures are minimum and necessary ones and there is no
problem with them in the context of the WTO AgreeWT/TPR/M/107/Add.1
Page 55
II. Safeguard measures
On 16 April 2001, the Ministry of Economy, Trade and Industry and Ministry of Finance of Japan
launched a safeguard investigation against towels of HS lines of 5802.110, 5802.19, 6301.30-090,
6302.60, and the investigation period has been extended three times on 16 October 2001 and 16 April2002.
Question 15
Japan requested that China maintain the export to be  “at least lower than the current level”, which is, in
China’s view, inconformable with the increase le vel provided in Article 6.13 of the Agreement on
Textiles and Clothing. China would like to request Japan’s explanation in this regard.
Answer 15
The Japanese Government is currently conducting a transitional safeguard investigation on towels that is
consistent with WTO rules and Japan’s statutes relating to the ATC and there is no fact that Japan
requested that China keep its exports “at least lower than the current level.” In addition, ATC 6.13
stipulates the restraint level of the measure after applying a transitional safeguard measure and is notrelated to the investigation.
Question 16
The government of China believes that the initiation and repeated extensions of the investigation were
based on inadequate evidence, and has created barriers against the normal bilateral trade in towels. Wehope that Japan can provide reasons for initiation of these measures and the three extensions, and in the
same vein, take immediate actions to eliminate the WTO inconsistent measures.
Answer 16
A transitional safeguard investigation on towels has been initiated because there is sufficient evidence to
show that towels are being imported in such increa sed quantities as to cause serious damage, or the
actual threat thereof, based on official statistics and other related information.
The investigation period has been extended because it is necessary to watch the future trend of imports,
having considered that recent imports from China, which total about 80 percent of all imports, increased
rapidly (the growth rate for the corresponding month last year was 17.6% in July and 13.3% in August).
In addition, since determining the extension of the investigation period, the trend of imports from China
has been watched with maximum attention because imports from China increased drastically by 27.7% in
September.
An investigation period and its extension are not regulated by WTO rules.
III. Trade in services
1. Foreign shipping companies are only permitted to rent wharves in Japan, rather than providing services
of loading and unloading. However, Japan’s Law of Port and Shipping doesn’t have any restrictions on
the nationality of service suppliers.
Question 17
Please explain the legal basis for the restriction that foreign shipping companies are unable to provide
loading and unloading services at the Japanese ports.WT/TPR/M/107/Add.1
Page 56
Question 18
In view of the ongoing round of the services negotiations, does Japan plan to open the operation of
wharves to foreign services suppliers, with loading and unloading services including?
Answer 17&18
Under the Port Transportation Business Law, those who intend to start loading and unloading services at
the nine major ports should obtain permission, and those at the other ports should obtain a license.
There are no discriminatory measures preventing foreign participation in loading and unloading
services; while regulations for the Economic Needs Test exist at the ports other than the above mentioned
nine major ports.
2. It is noted that the Japanese government permits  freight-forwarding agency companies of other WTO
Members to issue their own B/L. However, principle of reciprocity is applied to 100% Chinese-invested
freight-forwarding agency companies, that is, Japa n will not permit these Chinese companies to issue
their own B/L unless China approves certain Japanese companies in China to issue relevant B/L.
Question 19
Please confirm whether the situation mentioned above is true and provide related detailed background
information.
IV. State trading
It is said that Japan imports rice in two ways, namely, general import and SBS.
Question 20
Please provide detailed background information rega rding how these two ways of import operate in
practice.
Question 21
After importation, how is the rice imported by way of SBS priced for domestic sale?Answer 21
SBS tender is operated simultaneously, hidd en by both import traders and wholesalers.
Question 22
In both of the two SBS bidding invitations this y ear, the amount of winning are lower than that of
offering. Furthermore, in the second bidding invitati on, even the amount of bidding is lower than that of
offering. Please explain why this situation happened.
Answer 22
Due to BSE, the lead contaminated rice bag, pesticide overuse and diet food issues, consumers’ concern
for food safety has grown and demand of imported rice has decreased.
Question 23
Please provide a list of all the products which are subject to state trading in Japan.Answer 23
(1) Leaf tobacco, (2) Opium, (3) Alcohol, (4) Rice, wheat and barley, (5) Milk products, and (6) Raw silk.WT/TPR/M/107/Add.1
Page 57
COLOMBIA
In paragraphs 50 to 54 of document WT/TPR/S/107, the phytosanitary measures adopted in Japan are
mentioned.
The high requirements in matter of animal and plant health of the Columbian products, especially for fruit
and meat, prevent the development of the exportation capacity of the Columbian exportations.
To this respect Colombia would like to pose the following questions:Question 1
Has the Government of Japan in mind to soften its requirements and to consider the suppression of the
restrictions for the areas in Colombia free from aphthous fever?
Answer 1
FMD is classified as an "official disease" under Japanese law and a List A designated disease in the OIE
international animal health code. The Government of Japan prohibits the importation of cloven-hoofanimals and their products from countries that Jap an does not designate as a FMD-free country zone.
In the case of examining the removal of the ban on the importation of the animals and their products from
the mentioned area in Colombia, we need to confirm as prerequisites that the area certainly meets the
following conditions:i) there has been no outbreak of FMD for a certain period in the area;
ii) the FMD vaccination has been prohibited in the area and FMD vaccinated animals have not been
introduced from outer areas; and
iii) veterinary authorities in the area have impl emented appropriate animal health measures.
Question 2
Has Japan studied the possibility to establish some alternatives to the use of the VHT machine for dry
fruit?
Answer 2
Japan is in a position to review if a specific proposal on an alternative disinfestation method to replace
the vapor heat treatment has been made with relevant scientific data from the exporting country.
Question 3
Why are fresh flowers and bananas, which only contain insects already existing in Japan, fumigated,
taking into account the high costs for the Columbian exporters?
Answer 3
Japan defines that “quarantine pests” are pests which are not confirmed to exist in Japan or ones
already present in a part of Japan and for which offi cial controls are being undertaken. Japan maintains
appropriate phytosanitary measures when importing plants and plant products that are infested with
quarantine pests.
Question 4
In the specific case of bananas, could you explain what would be the reasons for fumigating the loads
which have been transported in containers with a controlled atmosphere, in which obviously insects can
not survive?WT/TPR/M/107/Add.1
Page 58
Answer 4
In cases where living quarantine pests are found during an import inspection, proper measures including
fumigation are required, even if fresh bananas are under a controlled atmosphere within containers.
Question 5
In the case of foods and granted that the steps before these are commercialized are so expensive, have you
thought about any way of softening the procedures in force related to the compulsory analysis in
specialised laboratories?
Answer 5
Animal and plant quarantine measures are applied only to the extent necessary to protect animal or
plant life/health based on scientific evidence consistent with SPS agreement. Therefore, the necessary
measures are not to be simplified merely from the viewpoint of reducing costs and disregarding
necessary technical and scientific considerations.
In the sectorial section in paragraph 8 of document WT/TPR/S/107, the Secretariat mentions that the tariff
level appliable to sugar is relatively high. Likewise, we know that despite the nonexistence of bananas
production, the high tariffs applied to this product in certain periods put unfairly up the price of it.
Colombia would like to pose the following question regarding the above:
Question 6
Are you thinking about introducing decreases for tariffs set to those products?Answer 6
Japan’s position is that we should discuss market access of agricultural products, including tariffs, in a
comprehensive manner in WTO agricultural negotiations. Therefore, it is impossible at this time torespond to the individual request on the impr ovement of market access for each product.WT/TPR/M/107/Add.1
Page 59
EUROPEAN UNION
Report by the Secretariat (WT/TPR/S/107)
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(2) Trade Policy Formulation and Evaluation
Question 1
To what extent does Japan take environmental issu es and impacts into account when developing and
implementing its trade policy?
Answer 1
Japan believes that mutual supportiveness of trade and environment should be enhanced.  Reflecting the
Japanese public’s concern about environment, Japan continuously formulates trade policy while
considering environmental factors. For example, th e Government of Japan intends to promote further
consultations with domestic stakeholders by holding briefing sessions for a civil society and instituting a
public comment process.And in respect to international fora that deal with  trade and environment, especially in the WTO, Japan
has been also actively participating in the discussion in the CTE and making a good contribution to
vitalize the argument through submitting various papers. Japan also continues to make efforts to realize
sustainable development.
Question 2
(para 6) With regard to the newly introduced policy evaluation system, to what extent does the Committee
for the Evaluation of Policies and Independent Administrative Institutions consider environmental
impacts when conducting ex-ante and ex-post policy assessments?
Answer 2
When the Commission on Policy Evaluation and Eval uations of Independent Administrative Institutions
deliberates the policy evaluation conducted by “Somus ho,” it can consider an environmental impact to
the extent that the characteristics of the policy require.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) Measures Directly Affecting Imports
(iii) Tariffs
(e) Tariff quotas for leather and leather products
Question 3
(para 22) Could the Japanese Government please provide the amounts over the last 5 years of the quotas
their utilisation rates, and the tariffs applied within the quotas as compared with the normal MFN tariffs
for the same products?
Answer 3
Please see the following sheetWT/TPR/M/107/Add.1
Page 60
Amount of Tariff Quota
Leather Footwear (Pairs)Bovine and Equine
Leather
(Dyed or Colored) (m2)Bovine and Equine
Leather (Other) (m2)Goat or Kid Skin Leather
and Sheep or Lamb Skin
Leather (Dyed or
Colored)(m2)
1998 12,019,00 1,466,00 214,000 1,070,000
1999 12,019,00 1,466,00 214,000 1,070,000
2000 12,019,00 1,466,00 214,000 1,070,000
2001 12,019,00 1,466,00 214,000 1,070,000
2002 12,019,00 1,466,00 214,000 1,070,000
Utilization Rates(%)
1997 1998 1999 2000 2001
Leather Footwear 84.1 90.0 97.6 97.9 95.8
Bovine and Equine Leather (Dyed or
Coloured)53.6 38.4 47.5 63.4 62.6
Bovine and Equine Leather (Other) 85.5 63.6 65.4 72.9 49.5
Goat or Kid Skin Leather and Sheep or
Lamb Skin Leather (Dyed or Coloured)28.6 17.5 20.7 41.2 37.7
Tariff Rates
1998 1999 2000 2001 2002
Leather Footwear
In-quota rates
Out-of-quota rates27%, 24.3%, or
19.5%
45% or \4550/pair
45% or \3600/pair26.3%, 23.6%, or
18.9%
41.3% or
\4487.5/pair
41.3% or \3300/pair25.5%, 23%, or
18.4%
37.5% or \4425/pair
37.5% or \3000/pair24.8%, 22.3%, or
17.8%
33.8% or
\4362.5/pair
33.8% or \2700/pair24%, 21.6%, or
17.3%
30% or \4300/pair
30% or \2400/pair
Bovine and Equine Leather
(Dyed or Colored)
In-quota rates
Out-of-quota rates18%
16.7%
45%17.5%
15.8%
41.3%17%
15%
37.5%16.5%
14.1%
33.8%16%
13.3%
30%
Bovine and Equine Leather
(Other)
In-quota rates
Out-of-quota rates13.5%
45%13.1%
41.3%12.8%
37.5%12.4%
33.8%12%
30%
Goat or Kid Skin Leather and
Sheep or Lamb Skin Leather(Dyed or Colored)
In-quota rates
Out-of-quota rates18%
45%17.5%
41.3%17%
37.5%16.5%
33.8%16%
30%
Question 4
What is the share of these quotas of total imports into Japan of the products covered by the quotas?
Answer 4
The share of those quotas of total imports into Japan for the products covered by the quotas.WT/TPR/M/107/Add.1
Page 61
Import Share (2001)
Unit:  Leather m2
Leather shoes thousand pairs
　　　　　　　　　　　　 In-Quota　 World Total Share
Bovine or equine leather (dyed) 969,095 1,630,394 　　 59.4
Bovine or equine leather (others) 145,220 295,067 　 49.2
Goat or sheep skin leather (dyed) 481,849 729,286 66.1
Leather shoes 　　　　　　　　　 10,008 16,331 61.3
Question 5
What is the share of those quotas of total consumption in Japan of the products covered by the quotas?Answer 5
The share of those quotas of total consumption in Japan for the products covered by the quotas.Consumption Share (2000)
Unit:  Leather thousand m
2
Leather shoes thousand pairs
In-Quota Domestic Demand Share
Leather (total) 1,320 13,987 　　 9.4
Leather shoes 10,882 49,802 　 21.9
Question 6
Are the quotas distributed equally to all countries exporting to Japan? Are there countries which can
import without quota at the preferential tariff?
Answer 6
There is no country-specific allocation in Japan’s tariff quotas for leather and leather footwear.
However, under its GSP scheme, Japan applies duty-free and quota-free treatment to those goods
originating from LDCs.
Question 7
What are the criteria for the distribution of quotas? What conditions must an applicant meet to bid for the
quotas? Are newcomers able to get quotas and how much? What are the costs of issuance of the quotas?
Answer 7
Please see the following sheetWT/TPR/M/107/Add.1
Page 62
Outline of the Tariff Quota Allocation (Leather Footwear)
1. Required Documents and Qualifications:
Application FormCertification of the authenticity of the corporate seal
Certified copy of the corporate register
Chart of the performance of import prepared by the certificates of TQ allocationDocuments which show that the applicants' past import was conducted in its own name for its own business (import 
declaration, etc.)
2. Method of Allocation
General Quota Reserved Quota Reallocation
98% of the whole quota 2% of the whole quota Residuals of the general and reserved
quotas
This quota is allocated to experiencedimporters and non-experienced importers uponapplication.This quota is allocated five times a year (2%
÷5) to importers who did not apply for thegeneral quota or previous reserved quota
upon application.Residuals of the general and reserved
quotas together with returned quotas areallocated upon application.
April May, July, October, November and January Twice a month from May to December.
Every week from January to March
General Quota ≧Sum of amount applied for
Application amount is allocated to every
applicant
General Quota<Sum of amount applied for
Calculation for TQ allocation will be necessaryReserved Quotas ≧Sum of standard amount
Standard amount is allocatedReserved Quotas<Sum of standard amountCalculation for TQ allocation will be
necessaryResidual Quota ≧Sum of amount applied
for
Application amount is allocated to every
applicant
Residual Quota <Sum of amount applied
for
Calculation for TQ allocation will be
necessary
The application can be submitted to MITI (the head office in Tokyo) or its local bureaus throughout Japan.
* The application and issuance of the quotas are free.
Question 8
Could Japan please provide a list of those companies which have obtained quotas over the last 10 years
and how much has been attributed to each of them?
Answer 8
METI can offer lists of names, addresses and allocated quantities of those companies (TQ holders) for the
last three years.
However, regarding lists that were  made earlier than three years ago, METI can only offer lists of their
names because the legitimate preservation period for lists is three years and METI only keeps the namesof TQ holders.
Those lists are written in Japanese. METI spends much time collecting and arrangeing suitable lists,
which have more than 3,000 TQ holders per year. For this reason, METI wishes to supply lists for the last
three years through diplomatic channels in the future.
Note:  Names and addresses of TQ holders are announced in JETRO Daily when TQs are allocated.Question 9
Are there any mechanisms to ensure that those comp anies that get the quotas are the ultimate importers
(the company which is the ultimate purchaser of the leather of the shoes for selling them into Japan) inWT/TPR/M/107/Add.1
Page 63
order to avoid that intermediaries which have obtained the quotas traditionally may act as an obligatory
channel for the imports charging the ultimate importers high fees for selling them the possibility to use
the quotas?
Answer 9
Those who are allocated a tariff quota import li cense have to import the product in their own name.
In order to comply with this, METI requires th e license applicants to submit customs clearance
documents, etc. when they apply for a tariff quota.
In addition, METI may seek and oversee a required account book and other relevant documents and
furthermore make a site investigation as necessary.
(f) Tariff averagesQuestion 10
(para 23) Could the Japanese Government indicate when it will consider bringing its tariffs for leather and
footwear products more in line with its average tariffs for industrial products?
Answer 10
Since most domestic producers of leather and leather footwear are medium to small-sized companies and
less competitive on the world market, we consider it very difficult to implement further tariff reductionson such goods, which could cause serious damages to the domestic producers.
Japan, however, does not intend to exclude such goods from the product coverage in negotiations on
market access for non-agricultural goods as long as the coverage is comprehensive under the current
WTO new round.
(vii) Government procurement
Question 11
(para 38) Although this paragraph states that the government has established since January 2001 a unified
list of qualified suppliers for all central government en tities, it seems in reality that to participate in open
or selective tendering procedures in public works, domestic and foreign suppliers are required to apply forqualification to each procuring entity. How and when does Japan plan to establish a unified list for public
works and what sort of criteria does a supplier need to fulfil in order to obtain official qualification?
With regard to public works, it is our common understanding that every procuring entity should
reasonably execute a list of qualified suppliers, because types of construction vary greatly depending onthe  procuring entity, and abilities that suppliers need for execution also  vary depending on the category
of the building work. In addition, under the Construction Business Act,  a construction business license
must also be obtained. Therefore, it does not seem that there is any action  to establish a unified list for
public works at this point.
Answer 11
There are two criteria that a supplier needs to fulfil in order to obtain official qualification. First, a
supplier needs to acquire a construction license, as per the Construction Business Act. Second, a supplier
needs to acquire a business evaluation indicating that the administrative authority has checked objectiveWT/TPR/M/107/Add.1
Page 64
criteria such as business size, financial standing, and technological ability (the number of professional
engineers).
Upon completing the above two objective criteria, a supplier  can obtain official qualification.
Question 12
When does Japan plan to create a unified list for sub-central entities?
Answer 12
Whether or not the Agreement on Government Procur ement (GPA) applies to the tendering of intended
procurement, local governments can establish necessa ry qualification systems for suppliers participating
in open tendering, based on the criteria of the scale and state of management including the actual resultsof work, production or sales, the number of employee s and the amount of capital, according to the values
and types of contracts. In the case of selective tendering, local governments are required to establish
necessary qualification systems, which are similar to those for open tendering. The above-mentioned
qualification systems are published.
(cf. Article 167:5 and 167:11 of the Ordinance for Enforcement of the Local Autonomy Law)
It is difficult, however, to create a unified list for all the local governments because each local
government, as mentioned above, can establish necessary qualifications according to its size and
characteristic, and naturally the contents of them will be different. Therefore, there is no plan to create aunified list for local governments,
Question 13
Also, could the Japanese government elaborate on its plans to allow the opening and submission of
tenders through the internet by FY 2003 ? In particular, will this apply to all central government entitiesand would all kinds of goods and services be included?
Answer 13
The Ministry of Public Management, Home Affairs, Posts and Telecommunication launched an electronic
system for the submission and opening of tenders for the procurement of particular goods and services in
October 2002., All central government entities plan to initiate and use this system  by the end of fiscal
year 2003.
Question 14
(para 39) Could Japan explain how Initiatives on Future Management of Government Procurement
confirmed at the annual Voluntary Review Meetings are implemented and how they promote transparent
and fair government procurement for all suppliers?
Answer 14
An Initiative on Future Management of Government Procurement, decided at each annual review
meeting, is notified to all procurement entities covered by the Action Program (which are those in
Annexes 1 and 3 of the GPA), and they are required to strictly observe it. A follow-up on theimplementation of the Initiative is conducted when statistics do not show a si gn of improvement in the
situation. For example, in 2000, considering there was no decrease in the ratio of single tenders against
the Initiative decision, a follow-up inquiry was conducted and entities in question were requested to
improve their procurement procedures.WT/TPR/M/107/Add.1
Page 65
The Initiatives have promoted transparent and non-dis criminatory procurement, mainly by reconfirming
entities to observe the procedures in the Action Pr ogram. For example, in 1997, the Initiative called for
the further promotion of procurement seminars held by entities. Since then, attendance at seminars for
not only domestic but also foreign suppliers has steadily increased. (Please refer to the table below.)
Total Attendance at Procurement Seminars
1998 1999 2000
Domestic suppliers 675 791 908
Foreign suppliers 121 140 161
Total 796 931 1069
Question 15
Moreover does Japan have any plans to include procur ement under the Action Plan on Reform of Bidding
and Contracting Procedures for Public Works under the Voluntary Review Meetings and if so can an
approximate time be given?
Answer 15
Under the Voluntary Review Meeting held on the Action Program on Government Procurement, there is
currently no plan to include procurement under the Action Plan on Reform of Bidding and Contracting
Procedures for Public Works..
(See also the response to the similar US question under III(2) (iv) Government procurement)
Question 16
(para 40) Are there any differences between the statistics presented in Table III.2  and those transmitted to
the WTO in the context of Article XIX:5 of the GPA?
Answer 16
In addition to the statistics for XIX 5 of the G PA, the Japanese Government has implemented another
statistical research under the Action Program for procurement of 100,000 SDR or more every year,
which excludes construction work, architectural, engi neering, and other technical services.. Table III.2
represents one of the research results and includes data of less than threshold in the GPA (130,000 S
Question 17
(para 41) Does the Japanese Fair Trade Commission review Japan’s procurement and tendering activities
or only in the case of complaints/reports of infringements ? Moreover, under what circumstances would
the JFTC penalise offenders with more than disqualification from the bid?
Answer 17
In addition to investigations into bid-rigging and other improper actions based on complaints/reports of
infringement, the JFTC conducts surveys on tendering and other procurement activities and provides
necessary guidance to procuring entities. The JFTC imposes a surcharge on bid-rigging offenders and,
where appropriate, makes criminal accusations to the prosecutor-general. (Disqualification of suppliers
from particular bids is made by individual procuring entities themselves; the JFTC is not responsible for
these decisions, nor is it empowered to carry out disqualifications.)WT/TPR/M/107/Add.1
Page 66
Question 18
(para 42) Do procuring entities usually follow the recommendations of the independent examining body,
known as the Government Procurement Review Board in the consideration of complaints against the
former? How does Japan ensure fair procurement when entities do NOT follow these recommendations?
Answer 18
A Procuring Entity shall, in principle, and on its own accord, duly follow the recommendations of the
Board with respect to any complaints brought appropriately before the Board. Should the Procuring
Entity decide not to comply with the Board’s recommendations, it shall report to the Board its reasons
therefor within 10 days (or within 60 days in the case of a complaint pertaining to public works) of
receiving the Board's recommendations. The Board shall send a copy of these reasons to the Office of
Government Procurement Review (whose head is the Chief Cabinet Secretary) immediately upon
receiving such a report.
(viii) Standards, sanitary and phytosanitary measures
(a) Standards
Question 19
With regard to the use of adhesives in laminated wood the EC would like to request Japan to explain what
steps, if any, it has taken to ensure that the use of melamine-urea-formaldehyde-resins is approved on a
generic basis as equivalent to the more traditional japanese glues used in laminated wood. If no steps have
been taken to ensure this, EC would like to reques t Japan to explain the justification of not doing so.
(b) Sanitary and phytosanitary measures
Food additives
Question 20
Could Japan confirm that it recognises the scientific assessment of JECFA and the decisions adopted by
the Codex Alimentarius Commission on food additives?
Question 22
Does Japan intend to authorise the food additives appr oved by Codex Alimentarius (and the EU) to bring
it into line with international standards?
Question 23
If not, could Japan provide the scientific justification in accordance with Article 2.2 of the SPS
Agreement.
Answer 20&22&23
Japan is a member of international organizations such as the WTO and Codex, and constantly strives to
harmonize its standards and regulations with relevant international organizations.
Under the Food Sanitation Law in Japan, only food additives designated as safe by the Minister of
H.L.W. may be used in food, as is the case in most other developed countries.
Any person who wishes to use any undesignated food additives can submit a petition for designation to
the Minister of Health, Labour and Welfare, attached  with the required data including data for safety.WT/TPR/M/107/Add.1
Page 67
When we review the proposed petition on a food additive, we make an extensive evaluation concerning
the safety, effectiveness, and usefulness of it on the grounds of sound science, taking the CODEX
standards and the evaluation by the JECFA into serious consideration.
We recognize that the main reason there are some discrepancies between the list of the designated food
additives in Japan and that of Codex stems from the fact that, so far, no concrete petitions been
submitted. Therefore, if concrete petitions for new food are submitted with required data, we will
consider designating them.
Question 21
Does Japan recognise that its definition of food additives, by including compounds and products which
are considered as food ingredients by many countries, is acting as a barrier to trade? Will Japan amend itsdefinition of food additives to bring it into line with Codex Alimentarius?
Answer 21
Although the substances added to food for maintaining or improving nutritional qualities are not handled
as food additives under the CODEX definition, we handle those substances as food additives under theFood Sanitation Law in Japan.
We already provided, however, the specific guideline for the designation of food additives mainly used for
dietary supplements, such as vitamins and minerals, apart from the general guideline. This means that the
safety evaluation of these substances are handled in a different manner from that of other general foodadditives.
In addition, judging from the fact that “the guideli nes for vitamins and mineral supplements,” which are
now under serious discussion at the CODEX committ ee, mentions that the selection of admissible
vitamins and mineral sources should be based on th e criteria of safety, bioavailability and purity, we
understand that the importance of quality and safety  of these substances are commonly recognized
internationally, irrespective of the regulatory handling of these substances by other countries.
Taking the above mentioned points into consideration, that similar handling seems to be taken
internationally in terms of the safety requirement, we do not necessarily recognize that the difference in
the definition of food additives is acting as a barrier to trade.
Regionalisation
Question 24
Does Japan agree that a policy of regionalisation is appropriate for the establishment of trade rules for
imports of products from countries where animal and/or plant diseases occur?
Question 25
Will Japan accept EU legislation as a basis for regionalisation decisions in the animal and plant health
sectors.
Answer 24
Japan has already introduced a view for regionalisation in the Plant Protection Law and the Domestic
Animal Infectious Disease Control Law. We can lift  the ban from an area as well as a whole country
where the sanitary situation is adequate.WT/TPR/M/107/Add.1
Page 68
As for the EU, Japan cannot automatically apply the quarantine measure approved for one member state
to another member state for the following reasons:
(i) the EU has wide territory, and there are different varieties and situations of animal
diseases and plant pests among EU member states; and
(ii) the quarantine authority in each EU me mber state has its own quarantine inspection
system, and the quarantine systems and technical levels are not uniform.
Plants and flowers - non-quarantine organismsQuestion 26
Does Japan agree that organisms which are present in Japan should not be regarded as quarantine
organisms.
Answer 26
Japan defines “quarantine pests” as those pests that are not confirmed to exist in Japan or ones already
present in a part of Japan for which official control is being undertaken.
Question 27
Is Japan willing to extend their list of non-quarantine organisms to include the 9 non-harmful organisms
in cut flowers, plants in growing media and fruit and vegetables, as specifically requested by the EU. IsJapan willing to consider inclusion of all non-harmful organisms in the list of non-quarantine organisms.
If not, could Japan provide the rationale for this decision?
Answer 27
Japan does not consider it possible to add the nine organisms requested by EU to the list of non-
quarantine pests because they are considered to be quarantine pests.
Question 28
Is Japan willing to establish tolerance levels for quality viruses not on the quarantine list?Answer 28
Japan takes appropriate plant quarantine measures for viruses based on their risk assessment.
Quality viruses have been accepted by Japan based on proposals from exporting countries. Therefore,
Japan is ready to examine any specific requests regarding this.
Varietals issue
Question 29
Will Japan confirm that it has reviewed the scientific  data provided by Spain on treatment of oranges
against Medfly?
Answer 29
Japan understands that U.S. authorities asked for an ex pansion in the regulated time of cold treatment
because Medfly were found in the U.S. from Span ish clementines subject to the cold treatment.
Japan initiates to re-examine the scientific data provid ed by Spain so as to confirm whether the treatment
is appropriate or not.WT/TPR/M/107/Add.1
Page 69
Question 30
Will Japan now permit import of oranges from countries where Medfly is present on the basis of cold
treatment?
Answer 30
Japan will lift the import ban if the scientific data submitted by exporting countries successfully proves
that the measures are sufficiently effective for preventing the introduction of Medfly into Japan.
(3) Import and Inward Investment Promotion Measures
(ii) Investment regulation and promotion measures
Question 31
(para 57) The December 2001 EU-Japan Investment Symposium pointed to best practice among EU
investment promotion agencies, and the concept of a “one-stop shop” where a foreign direct investor can
find not only all the information he needs to have, but also facilitation in the sense of easy and simple
registration and access to services, site, qualified labour sources, etc. Does Japan plan to create a “one-
stop shop” for potential investors, which would provide a single point of access for information andfacilitating the process of establishment in Japan? In this respect, we would in particular be grateful to
receive further information on the JETRO initiative to set up a “one-stop shop Invest Japan” organisation?
Answer 31
JETRO (Japan External Trade Organization) is planning to establish “Invest Japan One-Stop Service
Center (tentative)” in Tokyo next spring.JETRO will retain more investment advisors who are
specialized in areas such as Japanese tax, accounting, labor system, and specific markets for the purpose
of supporting foreign investors in this facility.
And in order to increase investment in regional areas, JETRO will also supply Japanese regional
investment information to foreign investors.
Question 32
M&A methods used by foreign companies - notably tax-neutral share-for-share exchanges-, common
practice in other major markets, are not yet possible in Japan. The EU welcomes and supports METI’s
recently announced proposals to allow, in a tax-neutral manner, the use as consideration by a 100%
Japanese subsidiary of its foreign parent compan y’s shares when merging with/acquiring another
Japanese company (so-called “triangular merger” model). Could the Japanese government elaborate on itsplans in this area?
Answer 32
As a special treatment under the “Industrial Revitalization Law”, concerned ministries are now
considering M&A methods used by foreign com panies, including so-called “triangular merging”.
(5) Measures Affecting Production and Trade
(iii) State-owned companies and privatization
Question 33
The EU welcomes the ongoing reform of postal services and the conversion of the Postal Services
Agency into the Postal Services Public Corporation (PSPC). Would Japan agree that the Government
should aim at ensuring the independence of the regulator? And could Japan confirm that licenses and
authorisation be granted on the basis of reasonable, transparent, and non discriminatory criteria?WT/TPR/M/107/Add.1
Page 70
Answer 33
Governmental structures for the postal services field are not uniform and vary depending on the
historical circumstances of each country, political organization, etc.  Regulation by an independent
regulator is not a final goal and it would be sufficient if fair and impartial supervision is eventually
secured. To ensure fair and impartial control/supervision, the foundation of an independent regulatorybody is merely one means and it would not deny any other means for the purpose.
The regulatory system we propose separates the re gulatory body, the Ministry (MPHPT), from the
operator, the Postal Services Public Corporation, though the details of this system are still under
discussion.
Licenses and authorizations will be granted to applicants for the correspondence delivery business based
on rational, transparent and non-discriminatory criteria, including entry requirements that ensure auniversal postal service.
(v) Trade-related intellectual property rights
Question 34
(para 74) Please indicate under which conditions computer programs and business models will be
patented. What precisely will be the subject-matter of such protection? Please explain in more detail the
changes in the Design Examination Standards. How is  the goal of strengthening protection going to be
realised?
Answer 34
Patent
Computer software-related inventions, which include “computer programs,” are patented if they are
qualified as a "statutory invention" prescribed in the Patent Law. To be qualified as a "statutoryinvention" prescribed in the Patent Law, the claime d invention shall be “a creation of technical ideas
utilizing a law of nature.” The basic concept to determine whether a software-related invention
constitutes “a creation of technical ideas utilizing a law of nature” is as follows.
Where “information processing by software is concretely realized by using hardware resources,” the said
software is deemed to be "a creation of technical ideas utilizing a law of nature.”
Business methods, however, are not patented by them selves. To qualify as “statutory invention,” the
business methods are judged as a whole, considering whether the claimed invention utilized a law of
nature.
Design
The “Examination Guidelines for Designs” (January 2002) are the compilation of examination standards
that incorporated two sets of operational standards for design examinations, which were previously
prepared in compliance with the revisions to the Design Law in 1998 and 1999, into the former
examination standards. The guidelines have subsequently been made open to the public.
The revision to the Design Law  in 1998 aimed for the most part to strengthen protection for creative
designs. For example, the protection of partial design (protection of design for the part of an article with
distinctive features) and the system of related design registration (strengthened protection for variation
designs by the same person) were introduced and the level of creation (required level of creation forWT/TPR/M/107/Add.1
Page 71
protectable designs) was raised. In the 1999 revision, it was clarified that designs made available to the
public through the Internet also constituted a reason for a lack of novelty.
The ratios of applications for partial designs and related designs in 2001 were about 20% and 17% of the
total number of design applications respectively. Both systems have shown favorable progress since their
introduction.
Question 35
(para 75) The report states that “the law introduced a registration system for those who wish to engage in
copyright and neighbouring rights management…”. Does this mean that there is now full competition
between collecting societies? How many new businesses have been registered and what is their respective
scope of activities?
Answer 35
Japan has enforced the Copyright Management Business Law since October, 2001, which allows any
organization to engage in the fields of copyright and neighboring rights management business.
There are currently 28 entities registered as manag ement businesses and the variety of work under their
management includes a wide range of activities, such as arts and literature, scripts, music, records,pictures and performances.
(vi) Regulatory reform
Question 36
An area of continuing concern is the transparency, accountability, predictability and independence of the
regulatory process. Transparency means diffusion of information to all interested operators in order to
ensure fairness as well as economic efficiency. The “Public Comments” procedure and the “No Action
Letter” system are instruments to promote transp arency and accountability. Could the Government of
Japan elaborate on the enforcing and monitoring mechanisms to ensure an effective implementation ofsuch procedures?
Answer 36
- Public Comments ProcedureIn order to bring about the proper implementation of this procedure, the Government of Japan conducts
surveys on the implementation of the procedure wi thin the Government and makes it public each year,
which also contributes to ensuring the effectiveness of the procedure.
The Government of Japan will continue to make every effort to encourage the utilization of the Public
Comment Procedure through measures such as surveys on the implementation of the procedure.
- No Action Letter system 
（Prior Confirmation Procedures on the Application of Laws and
Regulations by Administrative Agencies ）
In order to bring about the proper implementation of this new procedure, the Government of Japan has
conducted surveys on the implementation of the pro cedure and has just made its findings public.
The Government of Japan will continue to make every effort to encourage the utilization of the No ActionLetter procedure through measures such as surveys on the implementation of the procedure.WT/TPR/M/107/Add.1
Page 72
(vii) Competition policy
Question 37
The European Union welcomes the Japan Fair Trade Commission’s (JFTC) positive ongoing efforts to
eliminate exceptions and exemptions from the Anti- Monopoly Act (AMA), the new civil litigation system
for those who are harmed by anti-competitive pr actices, and renewed efforts to clamp down on bid-
rigging. It would be important to ensure that the resour ces of the JFTC are equal to the reinforced role that
it should be playing, inter alia by ensuring adequate staff numbers. In addition, the impact of the increased
penalties should be monitored as part of an ongoing process of upwards review of sanctions and penalties.
The EU also welcomes the recommendation of 28 August 2002 by the Council on Economic and Fiscal
Policy (CEFP) that the JFTC be moved to a more independent position in the Cabinet Office, outside the
administrative remit of MPHPT, which still retains responsibilities for the promotion of certain sectors ofthe economy. Will this change be achieved within FY 2003, as the CEFP recommends?
Answer 37
The Government of Japan is considering whether to transfer the JFTC to an affiliated organ of the
Cabinet Office and making efforts to introduce a bill for the transition to the next ordinary session of theDiet, pursuant to the Cabinet Decision stating that consideration should be given to transferring the
JFTC to a more appropriate position from the vi ewpoint of its neutrality and independency from
regulatory agencies..
IV. TRADE POLICIES BY SECTOR
(4) Services
(i) Financial services
Question 38
Although much has been done to open the Japanese pension funds market to Investment Advisory
Companies (IACs) some restrictions still prevent a significant part of Japanese public assets from being
managed by IACs. Regarding the management of yucho and kampo funds under the Postal Services
Public Corporation by when does Japan intend to grant IACs full access to advisory and discretionary
investment services? Are there any plans to make operational rules more transparent, and to provide all
interested parties with the opportunity to make public comments?
Answer 38
For postal savings and postal life insurance funds, the methods of investment are limited and prescribed
by law from the viewpoint of the need to ensure  both sound business management and the safety of
investments, and any addition of new investment method s must be considered from this same viewpoint.
Based on this viewpoint, we would like to consider examining the utilization of investment advisory
companies (via discretionary contracts) by the Japan Postal Services Public Corporation.
Question 39
Does Japan intend to abolish the provisions of Article 65 of the Securities and Exchange Law which
prohibit integrated management of banking and securities businesses? Would Japan agree that as a
minimum, holding companies should be allowed to operate as an integrated business in both banking andsecurities? Does Japan think that the inspection guidelines under the “Securities Market Reform
Promotion Programme” could by implemented by th e FSA in a way which would diminish reporting
requirements?WT/TPR/M/107/Add.1
Page 73
Answer 39
Article 65 of the Securities and Exchange Law (SEL) prohibits, in principle, banks from engaging in the
securities business. Therefore, cross-entry between the banking and securities sectors is currently
permitted upon the establishment of firewall measures, which are necessary to prevent abuses, from such
viewpoints as preventing conflicts of interest or ensuring fair transactions.
In view of the progress of Financial System Reform, firewall measures were drastically reviewed in April
1999 in accordance with the Government’s Three-Ye ar Program for Promoting Regulatory Reform,
including the abolishment of so-called main-bank firewall restrictions. Also in June 2000, relevant
amendments were enacted to relax firewall rest rictions between securities companies and banks on
certain internal control operations. In September 2002, the relevant regulation was amended to allow
common space sharing between banks and securities companies, provided that preventive measures werein place to avoid customers’ misperceptions.
We consider the current regulations as a minimum requirement to be observed in the relationship
between securities companies and their parent or subsidiary banks (which have close ties with their
securities affiliates), from such viewpoints as preventing a conflict of interest or ensuring fair
transactions.
While the SEL provides reporting requirements such as reports on changes in registration documents
(Article 30(1)), submission of business reports (Article 49(1)) and notification of discontinuance of the
securities business (Article 55), we consider each of them to be minimum requirements for the supervisionof the securities business.
(ii) Telecommunications
Question 40
(para 31) How is the independence of the regulator (MPHPT) ensured considering the link with the NTT
group detailed in the NTT law?
Answer 40
Regulations under the NTT Law are solely impose d on NTT (NTT East, NTT West and their holdings
company) in order to secure an appropriate and reliable execution of its public obligation (i.e. providing
universal service and promoting, as well as disseminating, the results of research and development).These regulations, however, do not stipulate governmental participation in NTT’s management.
Although the Ministry of Finance (MOF) holds a part of the shares of the NTT holdings company, the
responsibility and authority of the MOF and the MPHPT is  clearly distinguished by law. Accordingly, the
MPHPT is independent from any telecommunications service supplier.This situation in Japan is fundamentally different from that in some European countries, where the
government is a major shareholder of the tele communications company formerly owned by the
government, and it participates in the management of the carrier by dispatching officials to the
managerial board.
Question 41
(para 32) Why is the notion of dominant operator different in the fixed and mobile markets? Why is Japan
not assessing market power, pursuant to the notion of major supplier under the reference paper?WT/TPR/M/107/Add.1
Page 74
Answer 41
Japan’s asymmetric regulation system establishes an appropriate framework for designing a dominant
carrier and necessary regulations based on the current status of Japan’s telecommunications market,
where there is clear difference between fixed-line market and mobile market.
Under the GATS Reference Paper, there are two-fold criteria regarding a “major supplier”: (a) control
over essential facilities; or (b) use of its position in the market. Japan asses market power pursuant to the
notion of major supplier under the reference paper.
Question 42
(para 33) Is Japan envisaging to have a simpler system of licences compared to the system of types I and
II, rendered more complex by the notions of categories?
Answer 42
Based on “the final report on Desirable Pro-Competitive Policies in the Telecommunications Business
Field for Promoting the IT Revolution”, whic h the Telecommunications Council presented on7th August
2002, MPHPT plans to submit the Bill to amend the Telecommunications Business Law to the nextregular session of the Diet for general relaxation of regulation, including the abolition of Type-1 and
Type-2 business categories.
Question 43
(para 34) Why are notifications, approvals, conditions, etc imposed on all operators and not only on
dominant operators?
Answer 43
Notifications and approvals are necessary requirements for protecting users and securing fair
competition.
Question 44
(para 35) Why is the NTT law mandating that NTT provide universal service now that the TBL foresees
the non-discriminatory selection of the universal service provider (to which NTT may apply)?
Answer 44
While the liberalization of the telecommunications market proceeds and competition becomes brisk in the
local communications market, inter alia such profitable areas as urban areas, there is a prospect for
difficulty in securing funds for inter-local subsidization in the provision of universal service. In light of
this situation, it is difficult to maintain universal service only by internal subsidization of each NTT East
and NTT West. Accordingly, a new system has been  introduced in amendment of the TBL in 2001.
Under the new system, the Minister of MPHPT de signates a telecommunications carrier from among
those providing universal telecommunications service that meets given requirements as an eligible
telecommunications carrier (ETC) upon its applica tion. The ETC can receive compensation from this
universal service fund.
If there was no single application, no carrier would be eligible to become an ETC and that would mean
no carrier could provide universal service. To avoid such a situation, NTT East and NTT West are
obliged to provide universal service as a last resort.
Accordingly, since the mere existence of the system and a guarantee of universal service are not identical,
universal service obligations under the NTT Law are necessary.WT/TPR/M/107/Add.1
Page 75
(iii) Transport
(a) Maritime transport
Question 45
(para 43) Does Japan have any plans to ensure that the prior consultation and alternative prior
consultation procedures become more transparent, equitable and swift? Would Japan agree that the role of
the JHTA in dealing with applications for changes to shipping line operations should be further reviewed
with a view to elim inating all vestiges of undue influence on the free play of competition in the provision
of harbour transport services in Japan?
Answer 45
The “Prior Consultation System” was established on a non-governmental basis in the aim of
coordinating the employment issue in the port transport business in the case where certain changes in a
shipping company’s business strategy, such as bert h changes, might affect the employment situation.
This system is based on the agreement among four  private organizations, namely, the Japan Harbor
Transportation Association (JHTA), the Japanese Shipowners’ Association (JSA), the Japan Foreign
Steamship Association (JFSA) and the Harbor Worker’s Union, in accordance with a request from
shipping companies. JHTA intervenes in negotiati ons between shipping companies and the labor union in
this system.
This system has already been simplified and its transparency increased since the interested parties
reached an agreement in October 1997 (refer to note).
As a result of the agreement, the number of prio r consultations through JHTA has decreased by more
than 95%.The other day, JFSA expressed their appreciation to the efforts made by JHTA. Japan recognizes that up
to now there have not been any problems concerning the Prior Consultation System.
(Note)
The agreement between JHTA , JSA, JFSA and MOT was established in 1997.
Contents:
(a) reducing items requiring consultation th rough JHTA(from seven items to three items
(b) reply by documentation
(c) establishment of settlement mechanism
The agreement between JSA, JFSA  and MOT was established in 1997.
Contents:
(a) establishment of a separate system free of JHTA interventionWT/TPR/M/107/Add.1
Page 76
HONG KONG, CHINA
Government Procurement (GP)
(WT/TPR/S/107, P. 37-38, Para. 40)
Question 1
Note that Japan’s procurement from foreign suppliers has remained low.  In 2000, procurement of
overseas goods and services accounted for only 17.4% of total procurement.  Interested to know if Japan
has any ideas on the reasons for the low share of foreign suppliers in its GP market and whether Japan
will explore ways to encourage or facilitate participation by foreign suppliers in its GP activities.
Answer 1
Japan has no rules or regulations that discriminate against foreign suppliers, goods or services in
government procurement covered by the Agreement on Government Procurement (GPA). As a matter of
fact, the Japanese government has been making efforts to ensure non-discriminatory, transparent and fair
procurement procedures by implementing additiona l measures beyond the obligations under the GPA.
For example, in order to facilitate the participation of foreign suppliers, the Action Program onGovernment Procurement extends  the 40-day tendering period of the GPA to 50 days where entities in
Annexes 1 and 3 of the GPA procure goods and services (excluding construction work, architectural,
engineering and other technical services).
As for the procurement ratio of foreign goods and services that Hong Kong, China pointed out, Japan can
indicate that according to the statistical data below, the ratio of foreign suppliers’tenders has been lower
than the ratio of tenders awarded to them. The low proc urement ratio seems to result from the low ratio
of foreign tenders.
Ratio of foreign suppliers’ tenders and awards through open tender
1996 1997 1998 1999 2000
Ratio of tenders 1.1% 0.8% 1.6% 1.0% 1.2%
Ratio of awards 2.2% 1.5% 1.8% 1.6% 1.7%
(Note)
Ratio of tenders:  number of foreign tenders / total number of tenders
Ratio of awards:  number of contracts awarded to foreign tenders / total number of contracts
Technical Regulations
(WT/TPR/S/107, P. 40, Para. 45 and Table III.3; and P. 41, Para. 47)
Question 2
Commend Japan’s continual efforts to align its voluntary industrial standards (Japan Industrial Standards
or JIS in short) with international standards.  Note that about 90% of JIS were brought into line with
international standards.  Note also that about 20% of all JIS were quoted by Japanese Laws and
government/ministerial ordinances as mandatory technical regulations.  Interested to know the percentage
of these technical regulations being aligned with international standards, and whether Japan has any planto further the alignment process.
Answer 2
As was indicated in the Secretariat report, Japan/JISC has aligned the JIS with international standards,
where necessary.WT/TPR/M/107/Add.1
Page 77
Japan promotes the adoption of the JIS to techni cal regulations as performance-based technical
specifications if necessary, as well as harmonization between technical regulations and international
standards, where appropriate, through the Three-Year  Program for Promoting Deregulation and its
follow-up process.
As a result, technical specifications in technical regulations adopting the JIS, which is aligned with
international standards, are increasing. We can simply say that those technical specifications are aligned
with the corresponding international standards.
Japan will continue to promote its harmonization process based on the direction in the above program.
Competition Policies
(WT/TPR/S/107, P. 50, Para. 83)
Question 3
Note that 22 systems are exempted from prohibition of cartels under the Anti-Monopoly Act.  Interested
to know the details and the reasons of these exemptions.
Answer 3
During the 1950s, when the Japanese economy was we ak, exemptions from the Antimonopoly Act were
instituted to deal with policy agendas such as the stabilization and rationalization of corporatemanagement aimed at fostering and strengthening i ndustries as well as at enhancing international
competitiveness. Under this initiative certain co nduct and associations were exempted from the
application of prohibition-rules in the Antimonopoly Act.
To institute drastic structural reforms of the Japanese economy that will lead to an internationally open
economic society based on the self-responsibility principle and the market mechanism, it is crucial to
pursue deregulation and conduct a sweeping review of cartel exemptions and other exemptions from the
application of the Antimonopoly Act in promoting fair and free competition.
Under these circumstances, the Government has been pursuing initiatives to conduct a review based on
successive Cabinet Decisions.
As the result of abolishment of the Exemption Act, there exist exemptions related to the following:
intangible property rights, publications (resale price maintenance), non-life insurance, transportation
(marine, airline and bus service), liquor business associations (rationalization cartels), hygienically
regulated business, agricultural cooperative associations, associations of small and medium-sized
business groups, export cartels, and companies under reorganization.
(WT/TPR/S/107, P. 50, Para. 84)
Question 4
The Japan Fair Trade Commission (JFTC) considers that while the resale price maintenance system for
copyrighted works should be abolished from the view point of competition policy, it is not appropriate to
do so for the time being as a national consensus has not yet been reached.  In this regard, interested to
know more about the significance of national consensu s to JFTC in making a competition policy decision.
What are other factors that JFTC would consider when it decides not to take actions to address non-
competitive practices?WT/TPR/M/107/Add.1
Page 78
Answer 4
We need to submit to the Diet an amendment to the Antimo nopoly Act in order to abolish the exemption
system for the resale price maintenance of copyrighted works. However, as a national consensus has not
yet been reached on such an amendmen t, the JFTC has decided to maintain the system for the time being.
On the other hand, without such an exemption system, the JFTC must decide on whether to address non-
competitive business practices in accordance with the provisions of this act.
Postal Services
(WT/TPR/S/107, P. x, Para. 25)
Question 5
Note that Japan has recently conducted postal reforms on mail delivery.  Would like to know more details
about the reforms, especially on the rationale behind the market entrance requirements i.e. to set up a
minimum of 100,000 post boxes.  Would also appreciate more information on the operation of the postal
savings system.
Answer 5
Opening postal operations to private sector participation
Liberalization in all areas with certain conditions
From the standpoint of promoting competition, ev en the delivery of correspondence items should be
opened across the board to competition, and companies will be allowed to provide all types ofcorrespondence delivery services at the same time the public corporation is established.
Under this scenario, as it is clear from the experien ce of other countries, only large-scale users and users
in urban areas, the likely focus of private-sector operators entering the market to provide postal services,
will benefit from an all-out and unconditional liberalization since private-sector operators tend to skim
the cream of the market.  At the same time, such  liberalization could well have a fatal impact on the
ability of the public corporation to continue serving as a safety net, placing a heavier burden on
individual/small-scale users and users in local areas not expected to be targeted by private-sector
operators.*
* Opening up all areas to co mpetition would likely reduce revenue in FY 2005 by at least \700 billion vis-à-vis
the total of \1.8 trillion in revenue for those areas  of service opened up (based on the premise that 40% ofbusiness will shift to private-sector operators).
More specifically, the public corporation might be compelled, for example, to: (1) close post offices
(especially smaller post offices in remote areas), (2) suspend postal counter service on Saturdays andSundays, (3) abolish policy-based fee reductions/exemptions (third-/fourth-class postal items, etc.), (4)
lower fees for postal items with non-affixed postage  fees or deferred-payment (lowering handling costs
principally for large-scale users) while increasing fe es for stamped postal items (raising handling costs
principally for individual users), and (5) remove infrequently used postboxes.
To circumvent these negative effects and ensure universal service, market entrance should only be
permitted in business formats that do not allow private-sector operators to engage in cream-skimming,
and private-sector operators should be required to consider the entire country as their zone of business
and to provide delivery services nationwide and equitably so that as broad as possible a segment of users
can enjoy the benefits of introducing competition.WT/TPR/M/107/Add.1
Page 79
Specifically, a system is needed that would at a minimum impose on private-sector operators market
entrance requirements ensuring: (1) that services will be easy to use at the same rates nationwide, (2)
daily pickup and delivery even for one item throughout Japan, and (3) means of sending mail at any time
whenever necessary, conveniently and in a manner that protects the privacy of correspondence.
To ensure that prohibitively high prices are not set for small-scale users that would essentially skim the
cream of large-scale users, measures should be taken so that the benefits of competition accrue not just to
large-scale users but to small-scale users as well, and these measures might include having private-sector
operators set basic rates per piece of mail and a minimum rate of no more than the existing rate for a
letters (\ 80).
Stipulations must be set to ensure that private-sector operators accept even a piece of mail without
advance contracts and that they maintain a certain quality of service by accepting and delivering mail
everyday in principle.
Postboxes for sending postal items should, as at present, be robustly built and lockable and satisfy certain
specifications/standards to protect the privacy of correspondence, and these postboxes must also beinstalled equitably throughout the country, at convenient distances allowing people to deposit postal
items easily.
A Ministerial ordinance related to the details of this is currently being prepared.
Detailed information on the postal savings system.
With regard to the operation of the postal savings system, please refer to the following
website: http://www.yu-cho.yusei.go.jp/disclo_e/ps_index.htm
Telecommunications
(WT/TPR/S/107, P. 64, Para. 32)
Question 6
Pleased to note that the limit on foreign ownership restrictions of Nippon Telegraph and Telephone
(NTT) Corporation has been relaxed from less than 20% to less than one third since 30 November 2001.
Interested in knowing whether Japan would consider reflecting this measure in the GATS context.  DoesJapan have any future plan to do the same for Kokusai Denshin Denwa Company (KDD) Ltd. as well
and/or to remove the nationality requirements for board members and auditors in NTT and KDD?
Answer 6
With regard to KDD, foreign ownership restrictio ns and nationality requirements for board members and
auditors have already been abolished.
NTT, NTT East and NTT West are obliged to pr ovide universal services. Communications involving
national security also depend on NTT East and N TT West, which are essential telecommunications
carriers that underpin the safety and livelihood of the people. Accordingly, foreign capital restrictions
imposed on NTT prevents the NTT holding company, which owns all NTT East and NTT West shares,
from being dominated by a foreign country, thereby preventing national security problems.WT/TPR/M/107/Add.1
Page 80
As NTT, NTT East and NTT West are essential telecommunications carriers supporting the safety and
livelihood of the people, they have public obligations such as the provision of universal services and the
duty to promote and disseminate the results of resear ch and development. Therefore, it is necessary to
ensure that board members and auditors are subject to nationality requirements to prevent any foreign
countries from affecting the management of NTT and to ensure management autonomy.WT/TPR/M/107/Add.1
Page 81
INDIA
Question 1
It is seen that Japan’s bound duty rates for leather products of Chapter 41 are 4 to 10 times higher than the
average bound rate of 3.5%.  Does Japan propose to bring down the bound duties for leather products toits existing average levels of tariff for other products?
Answer 1
Since most domestic leather manufacturers are small and medium-sized companies and are not
internationally competitive, we consider it very difficult to implement further tariff reductions which will
cause serious damage to this industry.
Japan, however, does not intend to exclude leather products from the  object of negotiations on market
access for non-agricultural products as long as the coverage is comprehensive under the current WTO
round.
Question 2
It is requested to inform the procedure for allocating TRQs for products of  Chapter 64.  Does Japan
intend to remove TRQs on these products or to bring the tariff down on the out of quota rates for such
products?
Answer 2
Japan’s leather footwear manufacturers are important industries in regions with historical and social
problems. Also, they are mostly small and medi um-sized businesses that lack international
competitiveness. Therefore, a tariff quota has been introduced in this sector.
We consider Japan’s tariff quota to be in accordance with the WTO Agreement on Import Licensing
Procedures.
Japan does not have any plan to revise this regime at present.Question 3
It is reported that export of mangoes from India to Japan remains banned even after satisfactory
completion of small-scale and large-scale Vapour Heat Treatment trials of mangoes.  By when does Japanpropose to remove the ban on import of Indian mangoes?
Answer 3
Japan prohibits the import of mangoes from India due to Bactorocera spp. occurring in India.
Therefore, in order to lift the import ban, effective disinfestation techniques for preventing theintroduction of the species need to be developed.
Japan has requested additional data on the disinfestation, because that submitted so far contains many
insufficient reports, such as survival pests being observed, ever after the proposed disinfestation
treatment.
Question 4
Japan has banned import of grapes from India on account of a non-existent fruit fly, Bactrocera caryede .
By when does Japan propose to lift the ban on import of grapes from India?WT/TPR/M/107/Add.1
Page 82
Answer 4
Japan prohibits the import of grapes from India based on the scientific papers which point out the
describing occurrence of Bactorocera spp. in India.
Plant quarantine measures to prevent the introduction of the species are required for lifting the import
ban. However, India has not yet provided the data for consideration.
Question 5
Would Japan elaborate on reasons for imposing zero tolerance clause on all types of insects for imported
flowers including thrips and aphids which are reported to be also present in abundance in Japan?
Answer 5
Japan defines “quarantine pests” as the pests which are not confirmed to exist in Japan, or the ones
which already exist in a part of Japan and for which on official control is undertaken. Japan maintains
appropriate phytosanitary measures on imported plants and on plant products that are infested with
quarantine pests.
Question 6
Though the average tariff in Japan is low, substantial concealed tariff peaks and non-ad valorem duties
exist in the agricultural sector, and calculation of AVEs for all of these are well high impossible, also in
part because of limited/prohibited imports by the country.  Does the Government of Japan propose to take
action to reduce the tariff and elimination non-ad valorem duties that exist in the agricultural sector?
Answer 6
Improving market access, including tariffs, should be discussed and realized in the course of the current
WTO trade negotiations. Ad valorem duties may amplify the effect of price fluctuations, but specific duties
are more neutral against them. Japan therefore does not think that specific duties tend to be less
transparent and less predictable than ad valorem duties. Japan is thus not considering converting specificduties to ad valorem ones.
Question 7
Whether the Government of Japan is aware that Indi an flower exporters have been facing considerable
difficulty due to the inordinate delay in clearing consignments at Japanese airports on account of
elaborate fumigation procedures.  Would Japan consider exempting Indian exporters from this
requirement since Indian follows a similar fumigation procedure and would thus be able to need Japan’squarantine requirement?
Answer 7
Cut flowers from India can be imported to Japan as long as they pass the import plant inspection at the
port of entry.
In the case where cut flowers imported to Japan are f ound to be infested with any living quarantine pests,
quarantine measures are applied to these flowers.
Although such measures as thorough pest control, export inspection and disinfecting, prior to shipment,
may reduce the risk of the existence of the pest, if any quarantine pests are found in the plants, despise
that they have gone through the preceding measures, quarantine measures, including fumigation, must be
applied.WT/TPR/M/107/Add.1
Page 83
Question 8
Despite repeated requests from Indian flower exporters , Indian roses are brought on to the auction floors
for sale only after entire domestic supply as well as the supply from other countries has been auctioned.
Would Japan explain the reasons for such discrimination against Indian flower exporters?
Answer 8
There is nothing which discriminates against flowers of foreign origin, or against flowers from specific
exporting countries, in terms of the order of auctioning in the auction houses. In principle,
Japan’s auction system is conducted according to the order of arrival.
In addition, in Japan, there is no rule which requires flower products to be distributed through auction
houses.
Question 9
Japan requires authorisation for import of all products of synthetic and rayon textiles items.  Does the
Government of Japan propose to relax this provision to avoid the procedural difficulties?
Answer 9
The Government of Japan has imposed restrictions on ce rtain silk products imported from the People's
Republic of China and the Republic of Korea. To prevent illegitimate origin marking on silk products,
including fabrics of silk and other fabric mixtures  imported from other than China and Korea, the
Government of Japan also applies a Prior Confirmation System. The Government of Japan has notifiedthe Textile Monitoring Body (TMB) of this measure and it has been justified under the Agreement on
Textiles and Clothing (ATC).
This measure will be eliminated on January 1, 2005, at which point the ATC will be fully integrated into
GATT 1994, as notified to the TMB.
Question 10
In case of cut-flower, India’s exports to Japan face a number of non-tariff barriers.  Clearing the
shipments in Japan takes a lot of time.  The delay caused by plant quarantine inspection is the major
reason for slow clearing procedures.  While it takes only a few hours to clear shipments at many airports
in other developed countries, but at Narita Airport, Japan Airlines takes 3-7 hours to unload shipments
and get documents ready to pick-up.  The average actual clearing time for cut-flower shipments at NaritaAirport is 27.3 hours.  Further, fumigation and cold st orage fees at Narita Airport are approximately five
times higher than those at other major international airports.  Would the Government of Japan take
suitable action to cut down delay and reduce fees in clearing the shipments at Narita Airport on the lines
of the action taken by other developed countries so that exports of cut-flowers do not unnecessarily face
this non-tariff barrier?  Also refer to Question 5 and 8.
Answer 10
An import inspection procedure for cut flowers from India takes 15 to 30 minutes, depending on the size
of the consignment.
A fumigation treatment for cut flowers infested with quarantine pests takes 30 minutes to 2 hours.However, the time needed for handling before and after the fumigation, and for waiting for the use of the
fumigation facility is not under the control of the quarantine authority, since such matters belong to
private companies managing the fumigation.WT/TPR/M/107/Add.1
Page 84
Furthermore, the airport facility fees are not under the control of the quarantine authority that is
providing the free quarantine service. They are charged based on the contracts with the airport-related
private sector.
Question 11
Japan is following a system of pre-certification of imported products under its Food Sanitation Law
(FSL).  Under this system, manufacturers of processed food, food additives, equipment, package and toys
for infants can register for 3 years at a time with Japan’s Ministry of Health and Welfare (MHW) with
MHW reserving the right to carry out random inspections.  The system provides for authorised agency of
the exporting country to forward applications for registration and deliver notices of registration back to
the manufacturers.  Japan does not seem to have a spec ific provision for having an arrangement with the
official agency of exporting countries to carry out random monitoring of registered manufacturers onbehalf of Ministry of Health & Welfare of Japan.  This does not seem to be in consonance with the
provisions of TBT Agreement on recognition of export  control of member’s trading partners.  India has
approached Japan for developing an MOU to desi gnate Export Inspection Council of India as the
authorised body in India to carry out such monitoring on behalf of Japan’s Ministry of Health & Welfare.
Does Japan propose to have a provision under its Food Sanitation Law to authorise agencies in exportingcountries to carry out random monitoring of registered manufacturers on behalf of Ministry of Health &
Welfare of Japan?
Answer 11
Japan’s Ministry of Health, Labour and Welfare may carry out the Random Monitoring shown in the Pre-
Certification System under the Japanese Food Sanitation Law to check institutional suitable employment
practices at the time of import. The implementation of inspections by the government or non-government
bodies of an exporting country is not required
Question 12
The Ministry of Economy, Trade and Industry of Japan has introduced an advisory called “Catch All
Controls” in April 2002.  The advisory, which aims at targeting companies, which manufacture defence
related, or dual-use technology products, has adversely affected multi-product companies where some
subsidiaries of the company may have no connection with dual-use technology or products at all.  Like
software subsidiaries of an Indian company L&T has faced immense difficulties in partnering Japanese
companies due to the advisory.  The Japanese companies are, in fact, afraid of doing business with
subsidiaries of Indian companies on the entities list even in cases where product or the technology inquestion fall well outside the target zone of the advisory.  We would request the Japanese authorities to
look into these concerns and take step to remove the unnecessary constraints on the affected Indian
companies.
Question 13
Japanese tax authorities are imposing 20% withholding tax on software exports from India due to their
classification of software as a technical service.  This has caused hardship to Indian software exporters.
We would request the Japanese delegation to explain the rationale of this tax and to seriously consider its
abolition.
Question 14
The drug approval procedure of Japan is rather complicated and time consuming.  “Approval” in the case
of a new drug means that the drug has undergone a review of its quality and efficacy based on submitted
data.  Approval must be given for each new drug.  On the other hand, a license for the manufacture and
sale of a new drug requires that the plant where the drug is to be manufactured meets the legal standardsWT/TPR/M/107/Add.1
Page 85
of a drug manufacturing facility and that the qualified personnel necessary to carry out the manufacturing
process are employed.  This licensing process is necessary for every manufacturing facility and for every
preparation.  In Japan, both approval and license of a new drug must be completed before it is
commercially manufactured.  Apart from this, Japan follows regulatory pricing policies.  The applicant is
required to obtain a permit for the production process from the Health Policy Bureau in the HealthMinistry.  Health Policy Bureau conducts hearing and also calculates price of a pharmaceutical product.
These highly complicated formalities adversely affect the export of Indian pharmaceutical products into
Japan.  We would request the Japanese delegation to explain the rationale behind the burdensome system
being practiced in this regard and also to take step s to make the approval/licensing process simpler and
more practical.
Answer 14
The Government of Japan regulates pharmaceuticals and their manufacturers/importers as needed to
ensure the safety, efficacy and quality of pharmaceuticals. Since individual pharmaceutical and
manufacturing facilities are also regulated by competent authority in many other developed countries, we
do not think that Japanese regulations are too excessive or too complicated to conduct.
In addition, the time period for approval review is decreasing to levels comparable to that of the United
States and the EU by improving the capacity of re viewing organization, among other things. In fact, the
median processing time of approval review for new drugs was reduced to about 10 months in 2000.
Question 15
Rice attracts a very high import duty of Yen 341 per Kg in Japan.  Moreover, it is understood that there
are also certain restrictions on the sale of imported rice to the Japanese consumers.  We would like to
have the comments of the Japanese delegation on this issue and also request them to consider lowering of
tariffs on rice.
Answer 15
The import tariff of rice is set in full conformity with the formula set out in Annex of  the Agreement on
Agriculture.
As to the sales of imported rice, these are conducte d by taking account of the actual demands in the
market.WT/TPR/M/107/Add.1
Page 86
INDONESIA
Question 1
Indonesia has some difficulties to fulfil Japan’s quarantine and standard procedures especially for food
and agricultural products. We would like to know  whether Japan has intention to provide technical
assistance for developing countries’ producers in this matter.
Answer 1
According to the interested area, the Government of Japan holds two group training courses, namely,
“Plant Quarantine” and “Researc h on Veterinary Technology”.
Furthermore, a "Training Course on WTO Agricultural Agreements, including the Application of
Sanitary and Phytosanitary Measures" will be held in early spring 2003 with participants from
developing countries, including the ASEAN countries.
Question 2
According to para 46 of the Secretariat Report, Japan introduced a new JAS (Japan Agricultural Standard)
grading system for foreign products. Indonesia concerns for the new system that will in force effectively
on 9 June 2003 on updating certification for plywood producers, since it is very costly to get that new
certification. As far as Indonesia concern we would be very grateful if the previous certification still could
be used.
Answer 2
Based on the request to the opening JAS grading system  to the foreign countries, the JAS system was
revised in order to introduce Registered Foreign Certification Organization. The revised JAS system
makes it possible for foreign producers and manufacturers, certified by the Registered foreign
certification organization, to append the JAS symbol on their products. In this new system, foreign producers no longer need to carry out any procedures with the Registered
Certification Organization in Japan. As a result, this will lead to curtailing expenses for receiving a new
certification and improving import  access from a foreign country.
However, applications to the Registered Foreign Certification Organization are limited to such  foreign
countries where the grading system in that country has on equivalence with the JAS system. We have
received the request of examination about equivalen ce between grading system in your country and JAS
system for forestry products, and are in the process of examination based on the submitted data andinformation.
Question 3
Japan would also abolish Foreign Testing Organization (FTO) in 2003. In view of the fact that the
existence of the organization has been very helpful for Indonesian exporters, we would be very appreciateif Japan can consider that decision again.
Answer 3
Based on the request to the opening JAS grading system  to the foreign countries, the JAS system was
revised in order to introduce Registered Foreign Certification Organization. The revised JAS systemmakes it possible for foreign producers and manufacturers, certified by the Registered foreign
certification organization, to append the JAS symbol on their products.
However, applications to be Registered Foreign Certification Organization are limited to such foreign
countries where the grading system in that country has on equivalence with the JAS system. We haveWT/TPR/M/107/Add.1
Page 87
indeed received a request for examination on the equi valence between the grading system in your country
and the JAS system for forestry products, and are in the process of examination, based on the data and
information submitted.
In addition the Foreign testing and certification body, designated as a Foreign Testing Organization
(FTO), can apply to the Registered Foreign Certification Organization.
Question 4
According to Housing Qual ity Assurance Act that has been in force since April 2000, the suppliers must
insure 10 years for the housing component products. Could Japan clarify why the plywood
producers/supplier who has already have JAS certification is also included? Is that possible for those
producers to be excluded?
Answer 4
Ten years enforcement of liability for defects in the structural components of a new house, based on the
Housing Quality Assurance Act, is applied to:
(i) a contract for the construction work when newly constructing a house; and
(ii) a selling agreement for the new house.
Precisely, this liability is imposed not on the mere material producers/suppliers but on the
constructor/seller of the house, regardless of the materials or the method used to build the house.
Question 5
According to para 45 of the Secretariat Report, the Ministry of Agriculture, Forestry and Fisheries
(MAFF) is currently in the process of reviewing JA S. Could Japan explain which JAS is under review?
We hope Japan would consider our concerns above.
Answer 5
It has become mandatory to review the JAS standard s every five years in view of their revision or
abolishment under the JAS Law, as amended in July 1999.
Question 6
We have also concerns regarding General Safeguar ds Proposal proposed by MAFF since November 2000
to Ministry of Economy, Trade and Industry (METI) and Ministry of Foreign Affairs (MOFA). We do
hope that the Government of Japan consider does not take decision to that measures, in such away that
would create unnecessary obstacles to trade
Answer 6
A safeguard measure is permitted under the WTO Agreement as the right to prevent or remedy serious
injury to domestic industries due to an abrupt import surge under certain conditions. It is an emergency
measure taken on a temporary basis for adjustment of domestic industries. In deciding the application of
safeguard measures, Japan will take necessary action in accordance with the Agreement on Safeguards
and other relevant provisions under the WTO Agreement.Upon request by the MAFF, safeguard investigations were initiated in December 2000 on three
agricultural products (welsh onion, shiitake mushroom, and tatami-omote), resulting in the application of
provisional measures in April 2001. The investiga tions, however, were terminated in December 2002,
with no definitive measures being applied. Currently, there are no ongoing safeguard investigations.WT/TPR/M/107/Add.1
Page 88
REPUBLIC OF KOREA
III.  TRADE POLICIES AND PRACTICES BY MEASURE
P. 31-32 (para. 23-24)
Question 1
In contrast to the relatively low average tariff rates of 6.9 %, tariff rates on sports footwear (27%) and
some textile products (8-12%), which Korean exporters are interested in, are very high. Some Korean
food products such as Ramen (21.3%), Prepared edible laver (25%) and Kimchi (9-12%) are also subject
to high tariffs, which damages price competitiveness of those products.
Does Japan have any plan to further reduce the tariff rates on these products ?
Answer 1
Current tariff rates on all the products identified in the question are the results of UR negotiations.
Improving market access including tariffs should be discussed and realized over the course of current
WTO trade negotiations.
Question 2
While tariffs on some alcohol beverages such as Whiskey, Brandy, Vodka and Rum has been abolished
since April 2002, high tariff rates of 16% are still imposed on Spirits including Korean Soju.
Please provide the concrete criteria for classification of alcoholic beverages and the rationale for the
difference in the tariffs among them.
Answer 2
Japan implements tariff classifications on alcoholic b everages based on the criteria in the HS convention.
Japan has maintained compliance in implementing ta riff concessions on alcoholic beverages in the
Uruguay Round Agreement and with the tariff compensa tion agreement in respect to WTO Panel taxes on
alcoholic beverages. Current tariff rates on those products identified in the question are the result of
implementing such agreements.
P. 35 (para. 30)
Question 3
With regard to the import quota of certain fishery products such as Mackerel and Yellow tail, Japan
divided the products into two groups according to the origin; from Korea and from any one of another 101
countries. In case of Korean products, the quota has been fixed at 40 million dollars, while the quota forother countries have been increased since 1998 from 56 million dollars to 60 dollars in 2001.
Does Japan have any plan to increase the quota for Korean products to address the discriminatory nature
of the system?
Answer 3
Korea is situated adjacent to Japan, and the countries exploit common resources. Under such
circumstances, Japan imposes on its fishermen co nservation and management measures such as catch
quotas and restrictions on fishing effort. Certain import restrictions are necessary in order to conserveWT/TPR/M/107/Add.1
Page 89
the common fisheries resources in which Japan regulates Japanese fishermen as well as to maintain the
stability of the domestic market.
The quantity of the said import quota is decided from the viewpoint of m eeting these objectives.
P. 36 (para. 32-36)
Question 4
The report published by the Japanese Fair Trade Commission on September 24, 2002, recommended that
competition or fair trade aspects should be considered in the process of initiating contingency measures.
Does Japan have any detailed plan to accommodate those recommendations?
Answer 4
This report issued by the “Study Group on International Affairs of the Antimonopoly Act and Competition
Policy,” consisting of several advisory scholars, proposed to accommodate the recommendations in
implementing competition policy.  Japan has not a dopted any detailed plan about the recommendations to
date.
P. 39 (para. 42)
Question 5
It is reported that local governments of Japan set limitations on the status of participants in the
international bidding for projects covered by the WTO GPA on the grounds of a “qualification
requirement on the basis of [an] overall evaluation on corporate management system”.
Please explain the specific contents of the “qualification requirement on the basis of overall evaluation on
corporate management system”. In addition, what measures has the Central government taken to ensurethat local governments comply with the WTO GPA in international bidding procedures?
Answer 5
Whether or not the Agreement on Government Procur ement (GPA) applies to the tendering of intended
procurement, local governments can establish necessa ry qualification systems for suppliers participating
in open tendering, based on the criteria of the scale and state of management including the actual results
of work, production or sales, the number of employee s and the amount of capital, according to the values
and types of contract. In the case of selective tendering, local governments are required to establish
necessary qualification systems, which are similar to those for open tendering. The above-mentioned
qualification systems are published
(cf. Article 167:5 and 167:11 of the Ordinance for Enforcement of the Local Autonomy Law).
In order to implement the provisions of the GPA,  the central Government  enacted the Cabinet Order
Stipulating Special Procedures for Government Procurem ent of Products or Specified Services in Local
Government Entities (Cabinet Order No. 372, November 1, 1995), which stipulates the necessary
procedures for procurement contracts covered by the GPA
P. 39-41 (para. 44-48)
Question 6
It is reported that some standard certification procedures are so burdensome that they in fact work as trade
obstacles. For instance, JIS for stainless steel plate sets the standard for facility apart from the quality ofWT/TPR/M/107/Add.1
Page 90
the products. Accordingly, exporters without the required facility cannot export to Japanese market. Also
for certification by JHOSPA (Japan Hygienic Olefin and Stylene Plastics Association) required for PE
and PP food containers, membership should be obtained first, which requires the payment of an expensive
fee.
Does Japan have any plan to simplify the certification procedures and enhance transparency and fairness
of the criteria? Please explain whether the JIS certification procedures are made public through a
government gazette or other official media.
Answer 6
Japan generally promotes the elimination of duplic ate inspection and transition to self-declaration and
third-party certification systems from governmental certification systems. As a member of the WTO,Japan also secures transparency of its governmental procedures, including conformity assessment
procedures.
Japan has a website for Japanese Industrial Standards Committee (JISC). The JIS certification procedure
is detailed on the website and there is also information on application forms, the list of designatedcertification bodies (including two bodies in Korea), and specific examination items.
Question 7
The report by the Secretariat explained that about 90% of the JIS was aligned with international
standards. Does that mean that about 8,000 of th e 8,932 JIS standards are equivalent to international
standards? If possible, please provide the list of JIS standards which are aligned with international
standards. Can the factories with the certification of an international standard, such as ISO 9000, be
exempt from the required JIS procedures when they want to get the JIS certifications?
Answer 7
Having experienced more than a decade of stagnated economic condition, being faced with the changes
in social and economic environment, and conscious of the large amount of the government debt, the
Government of Japan has strengthened its efforts in pr omoting structural reforms with a view to restore
vitality to the economy. The Government firmly belie ves that the structural reforms are indispensable to
realize the restoration of the Japanese economy, and has been pursuing “structural reforms without
sanctuary.”
In response to the recent growing uncertainty con cerning the nation’s financial and economic conditions,
the government of Japan announced “Comprehensive Meas ures to Accelerate Reforms” on October 30 to
reinforce its policy measures to bring greater stabil ity to the financial system by working for the rapid
recovery of financial intermediary functions via accelerating the disposal of non-performing loans, to
facilitate the smooth reallocation of resources to new growth fields, and to realize a rapid recovery ofJapan’s finance and industry. The Government will make every possible effort to reinforce the nation’s
employment and small- and medium-sized enterprise safety nets, making best use of policies taken by
local governments, to minimize the harmful effect s from accelerating non-performing loans disposal.
The Government will work in one with the Bank of Japan in taking strong and comprehensive measures
towards overcoming deflation and stabilizing the financial system.
Question 8
According to the Secretariat report, currently seve n inspection bodies including two foreign ones, are
designated by METI for testing for the mandatory technical regulations.WT/TPR/M/107/Add.1
Page 91
Do the test results by the two foreign institutions have the same legal effects as those of domestic bodies
with regard to the mandatory standard certifications ? Please provide the list of seven inspection bodies
and specific duties of each of them.
Answer 8
The two foreign institutes are designated as "approved conformity assessment bodies," according to the
Electrical Appliance and Material Safety Law. According to the law, test results by these two institutes
have the  same effects as designated domestic conformity assessment bodies.
The list of designated conformity assessment bodies based on the Law is in the Appendix. At the present,
eight conformity assessment bodies are designated.
Appendix: Designated Conformity Assessment Bodies
*Last updated 31 Oct 2002
Name Type of designation Address
Authorized Conformity Assessment Bodies
(for Japanese bodies)
Japan Electrical Safety and EnvironmentTechnology Laboratories (JET)1. Cables, Cords
2. Fuses
3. Wiring Devices4. Current Limiters
5. Single-phase Small Power  Transformers
6. Electric Heating Appliances7. Electric Motor-operated of Magnetically 
Driven Appliances
8. Electronic Appliances9. Other AC Electric Appliances
10. Portable Engine Generators5-14-12 Yoyogi, Shibuya-ku, Tokyo,
151-8545 Japan
Japan Quality Assurance Organization (JQA) 1. Wiring Devices
2. Single-phase Small Power Transformers
3. Electric Heating Appliances4. Electric Motor-operated of Magnetically
Driven Appliances
5. Electronic Appliances6. Other AC Electric Appliances
7. Portable Engine Generators1-9-15 Akasaka, Minato-Ku, Tokyo,
105-0052 Japan
Japan Electric Cable Technology Center,Inc.(JCT)1. Cables, Cords 1-4-4, Shinmiyakoda, Hamamatsu-Shi
Shizuoka Prefecture,
431-2103 Japan
TÜV Rheinland Japan Ltd. 1. Single-phase Small Power Transformers
2. Electric Heating Appliances3. Electric Motor-operated of Magnetically 
Driven Appliances
4. Other AC Electric Appliances3-19-5 Shin-yokohama, kita-ku,
yokohama-shi, Kanagawa-Prefecture,
222-0033 Japan
Cosmos Co., Ltd. 1. Current Limiters
2. Single-phase Small Power Transformers
3. Electric Heating Appliances
4. Electric Motor-operated of MagneticallyDriven Appliances
5. Electronic Appliances
6. Other AC Electric Appliances
7. Portable Engine Generators319 Akeno,Obata-cho, Watarai-gun,
Mie-Prefecture, 519-0501,
Japan
A-PEX International Co, Ltd. 1. Single-phase Small Power Transformers
2. Other AC Electric Appliances4383-326 Asama-cho, Ise-shi, Mie-
prefecture,
516-0021, JapanWT/TPR/M/107/Add.1
Page 92
Name Type of designation Address
Approved Conformity Assessment Bodies
(for foreign bodies)
Underwriters Laboratories' Co., Ltd. 1. Cables, Cords
2. Fuses
3. Wiring Devices
4. Current Limiters
5. Single-phase Small Power Transformers
6. Electric Heating Appliances7. Electric Motor-operated of Magnetically
Driven Appliances
8. Electronic Appliances9. Other AC Electric Appliances
10. Portable Engine Generators333 Pfingsten Road
Northbrook, IL
60062-2096 USA
UL International Demko A/S 1. Cables, Cords
2. Wiring Devices
3. Single-phase Small Power Transformers4. Electric Heating Appliances
5. Electric Motor-operated of Magnetically
Driven Appliances
6. Other AC Electric AppliancesLyskaer 8 P.O. Box 514 DK – 2730
Herlev
Denmark
Question 9
Please provide information on the current or future MRA negotiations with other countries other than
those explained in the Secretariat report.
P. 41-42 (para. 50-52)
Question 10
In Japan “polysorbate” is not recognized as a food additive, which is contrary to the case in most other
countries. In addition, the introduction in April 2001 of indices of maximum inspection capacity per day
has in fact made the Japanese inspection system more burdensome.
It is our view that it is necessary to recognize polysorbate as a food additive at an early stage and ensurethat the maximum inspection capacity indices system do not function as a trade barrier. What is the view
of the Japan on this?
Answer 10
(Food Additives)
In line with most other developed countries, only food additives designated as safe by the Minister of
Health, Labour and Welfare may be used in foods under the Food Sanitation Law in Japan.
Any person who wishes to use any undesignated food additives can submit a petition for designation to
the Minister of Health, Labour and Welfare with the required data including safety data attached.
With respect to ‘polysorbate,’ which is not yet designa ted as safe by the Minister of Health, Labour and
Welfare, we have already received the petition for the designation of ‘polysorbate.’ However, this petition
is in the midst of the preliminary inspection process.
When all necessary data are prepared appropriatel y, we will make an extensive evaluation concerning
the safety, effectiveness, and utility of ‘polysorbate’ on the grounds of sound science, giving the greatest
possible consideration to the CODEX standards and the evaluation by JECFA.WT/TPR/M/107/Add.1
Page 93
(Plant Quarantine)
Recently, Japan has seen a drastic increase in plant imports. To cope with this situation, the plant
quarantine authorities have been making every effort to increase the number of inspection officers.
However, it is has not been easy to increase quarantine staff numbers immediately, with the streamlining
of administrative structure underway.
The aim of the initiative introduced in April 2001 was to avoid introduction of injurious pests as a result
of insufficient import quarantine inspection due to excessive workloads beyond the capacity of inspectors.
Thus we have instructed Plant Protection Stations to give due attention to the maintenance of proper
inspections.
P. 42-43 (para. 54)
Question 11
As of November 2001, Japan allows the use of domestic animal skin powder for fertilizer.  However, it
still prohibits the import of animal skin powder from Korea where BSE never broke out and so far no
technical review has been taken on this issue.
Please provide the rationale for maintaining the import prohibition and explain what is the view of
Japanese government on the WTO/SPS consistency of the export prohibition?
Answer 11
In October 2001, the Government of Japan suspende d the importation and use of processed animal
protein for feed and fertilizer.
As for the use of domestically-produced steamed ground leather for fertilizer, its safety was assured
based on the results of a risk assessment, and this restriction was removed in November 2001.
At present, the Government is carrying out a risk as sessment of BSE status by country and by item. The
quarantine measures against BSE will be reviewed on the basis of the results of this risk assessment and
the advice of the BSE technical committee.
IV.  TRADE POLICIES BY SECTOR
P. 64 (para. 32)
Question 12
According to the Secretariat report, dominant tel ecommunication carriers can be divided into four
categories. Please inform us which companies belong to each of the four categories.
Answer 12
The dominant telecommunications carriers can be divided into two categories: Type I
telecommunications carriers who have Category designated telecommunications facilities and Type I
telecommunications carriers who have Category designated telecommunications facilities and whoseratio of profit concerning business activities of providing the same type of telecommunications service in
the same area is more than 25% and for whom the Minister of Public Management, Home Affairs, Posts
and Telecommunications deems it necessary to ensure proper competition with other telecommunications
carriers in consideration of the trend of the said ratio and other conditions. NTT East and NTT WestWT/TPR/M/107/Add.1
Page 94
belong to the former carrier category and NTT DoCoMo and eight regional NTT DoCoMo companies
belong to the latter carrier category.
P. 48 (para. 83)
Question 13
As of April 2001, the Government of Japan introduced new regulations for the recycling of refrigerators,
washing machines, air conditioners and television sets. According to the new regulations, foreign
exporters without recycling facilities in Japan have to use domestic reproducers of disused electronic
home appliances. It is reported that those reproducers are imposing uniform charges without transparent
information on real cost for reproduction.
The Korean Government is of the view that this is sue should be seen in perspective of competition law.
What is the view of the Japanese government on this matter?
Answer 13
The JFTC clarifies views under the Antimonopoly Act in the “Guidelines Concerning Joint Activities for
Recycling” (June 26, 2001).  The Guidelines state that competitors jointly determining specific charges
against each other might violate the Antimonopoly Act.
Question 14
Currently, Japanese authorities are conducting review s on the existence of domestic sales network for
allowing the retail sale of alcoholic beverage Such reviews have an effect of protecting established
domestic manufactures from foreign exporters who are trying to newly access the Japanese market.
Does Japan have any plan to moderate or abolish this condition?
Answer 14
The content of the first sentence of the question is not clear. Japan has established a license system for
liquor sales in order to secure liquor tax revenue. It is necessary for domestic liquor sales to be licensed
by the District Director of the Tax Office.WT/TPR/M/107/Add.1
Page 95
MALAYSIA
Question 1
The Secretariat Report noted that both monetary and fiscal policies have not been successful to a certain
extent in reflating the economy and a sustained recovery will have to be based on structural reforms.Japan’s recent policies have concurred with this approach.  What are Japan’s views on the effectiveness
of its recent economic policies  and its impact on a more sustained recovery?
Answer 1
Having experienced more than a decade of stagnated economic condition, being faced with the changes
in social and economic environment, and conscious of the large amount of the government debt, the
Government of Japan has strengthened its efforts in pr omoting structural reforms with a view to restore
vitality to the economy. The Government firmly believes  that the structural reforms are indispensable to
realize the restoration of the Japanese economy, and has been pursuing “structural reforms without
sanctuary.”
In response to the recent growing uncertainty con cerning the nation’s financial and economic conditions,
the government of Japan announced “Comprehensive Meas ures to Accelerate Reforms” on October 30 to
reinforce its policy measures to bring greater stabil ity to the financial system by working for the rapid
recovery of financial intermediary functions via accelerating the disposal of non-performing loans, to
facilitate the smooth reallocation of resources to new growth fields, and to realize a rapid recovery of
Japan’s finance and industry. The Government will make every possible effort to reinforce the nation’semployment and small- and medium-sized enterprise safety nets, making best use of policies taken by
local governments, to minimize the harmful effect s from accelerating non-performing loans disposal.
Under these measures, the Government will work in one with the Bank of Japan in taking strong and
comprehensive measures towards overcoming deflation and stabilizing the financial system.
Question 2
It is noted that 27.6 % of Japan’s tariff lines have applied rates of below 5%.  These are generally
considered nuisance duties.  Would Japan be considering removing these either in the near future or part
of future liberalization efforts?
Answer 2
There is generally no definition for “nuisance duties.” At any rate, improvement to market access
including tariffs should be discussed and realized in the current WTO trade negotiations.
Question 3
Tariff escalation continues to remain high for a number of products of export interest to developing
countries, including textiles, footwear, wood and rubber pr oducts.  This clearly indicates that bias against
processed products in these sectors exist.  What are the reasons for the continued high tariffs in these
sectors?
Answer 3
Generally speaking, tariff rates on products reflect the sensitivity of domestic sectors.  The more sensitive
a certain sector in the country is, the higher the tariff rate on a product related to that sector tends to be.WT/TPR/M/107/Add.1
Page 96
Question 4
We welcome the move by Japan to towards increased deregulation and international harmonization of
standards and technical regulations. However, we note that none of the technical regulations in the area of
food, pharmaceuticals and electrical appliances as reported in Table III.3 correspond to any international
standards. Are these regulations more stringent than necessary?  Is there a timeframe for bringing these
regulations to be in line with international standards?
Answer 4
(Foods)In establishing standards based on the Food Sanitation Law in Japan, we take account of international
standards established by the CODEX committee and c onsider international harmonization. We also hear
opinions of other countries, based on the WTO Agreement in the process of establishing standards. We
set necessary standards from the viewpoint of food sa fety. Therefore, the standards established are not
more stringent than necessary.
(Pharmaceuticals)Japan has been working actively and attained positive results such as the development of harmonized
guidelines in the International Conference on Harmonization (ICH) that was founded by competent
authorities and representatives of pharmaceutical industries in Japan, the United States and the
European Union. Japan also has applied these ICH guidelines to domestic legislation in order toharmonize regulations on new drug approval.
The ICH is an open forum and its transparency of discussions is ensured for non-ICH countries.(Electrical appliances)This question may be the result of a misinterpretat ion on the table. Table .3 shows “N/A” in the some
cells on the electrical appliances. For example, there is a cell of “the percentage corresponding to
international standards” showing “N/A.” This means “not available,” as it is difficult to calculate the
exact number of standards for 452 items of regulated electrical appliances. But almost all standards for
these appliances are harmonized to ISO or IEC standards except for cases where ISO or IEC standards
do not exist.
Question 5
The Japanese government has promulgated a new recycling law for electrical and electronic equipment.
Are these new regulations applicable to SMEs and how will SMEs be assisted in undertaking these
measures?
Answer 5
The Home Appliance Recycling Law, effective as of April 1, 2001, requires the manufacturers and
importers of air conditioners, TVs, electric refrigerators and electric washing machines to take back the
end-of-life appliances which they had sold in the past and carry out recycling. If the manufacturer orimporter was an SMEwith sales in Japan not exceeding a certain number of units, they may contract the
designated body to carry out their receiving and recycling obligations.WT/TPR/M/107/Add.1
Page 97
The Association for Home Electric Appliances, a non-profit public organization, has been designated
under the Law. The numbers of units for each appliance under this special measure are:
1) Air conditioners: 900,000 units in the last 3 years
2) TVs: 900,000 units in the last 3 years3) Electric refrigerators: 450,000 units in the last 3 years
4) Electric washing machines: 450,000 units in the last 3 years
Question 6
Japan’s phytosanitary protocols particularly on the import of tropical fruits remain complex.  Tropical
fruits from Malaysia are subject to costly sanitary measures while new varieties have to undergo
additional costly and time-consuming risk assessment.  Similar rigorous measures apply to cut flowers.Has international standards which distinguished between quarantine and non-quarantine pests been
adopted to avoid these overly stringent measures?
Answer 6
Japan considers that the international guidelines of official control, adopted at the Interim Commission
for Phytosanitary Measures, should be a basis for the consideration of a future plant quarantine system in
our country. Japan is examining whether it can maintain “the appropriate level of protection on plant
quarantine” by applying plant quarantine measures based on the new definition, while ensuring that
those measures would fit to Japan’s climatic conditions and are well designed for handling huge amounts
of imports.Japan understands that neither any technical data has been provided for the purpose of lifting the import
ban of tropical fruits from Malaysia,  nor any request has been raised for additional varieties.WT/TPR/M/107/Add.1
Page 98
MEXICO
Tariffs
Question 1
With reference to what is described in paragraph 16 of the Secretariat Report (III)2)iii)), Japan mentions
that 1.1% of its HS 9-digit tariff bounds are still u nbound. To this respect, Mexico wishes to know what
are the specific products which tariffs are still unbou nd and also to know if it is Japan's intention to
consolidate these tariffs in the new round of negotiations.
Standards, and sanitary and phytosanitary measures
Concerning the voluntary standards and technical regulations (included the sanitaries and phytosanitaries)
referred in Chapter III)2)viii) of the Secretariat Report, Mexico would like to pose the following
questions:
Question 2
What are the procedures for the elaboration, modification and cancellation of the said standards and
technical regulations?
Answer 2
In general, voluntary standards and technical regulations are established, revised or abolished through
procedures that consist of consultation with the industries concerned, including foreign ones, and the
public; TBT or SPS notifications for comments or questions by WTO Member countries; deliberation at
Councils concerned; and so on.
The adopted standards and regulations are made public promptly in the official gazettes, etc.Question 3
Are there some annual or periodical programmes, in which are listed the themes to be regulated and/or
standardized by Japan and where are these programmes published?
Question 4
The development of a technical regulation implies the elaboration of an analysis with a regulatory impact,
as preliminary requirement and, if any, can this document be consulted by every WTO Members
nationals?
Question 5
Is there any legal measure, which obliges the government and/or standardization organizations to revise
periodically the content of rules and technical standards?
Question 6
Can the nationals of the WTO Members participate in the elaboration, modification or cancellation of
technical regulations, both national and state level, as well as in the elaboration, modification orcancellation of voluntary standards and describe the pr ocedure to follow to obtain this right or, if the
response is negative, justify the reasons why such participation is not allowed.WT/TPR/M/107/Add.1
Page 99
Question 7
Are the national standardizations organizations part of the Code of Good Practice annex to the Agreement
on Technical Barriers to Trade?
Answer 7
Japanese standardizing bodies that have accepted the Code of Good Practice for the Preparation,
Adoption and Application of Standards in Annex 3 of the TBT Agreement are listed in TBT document
G/TBT/CS/2/Rev.8.
Question 8
What is the percentage of the total tariffs fractions included in the Harmonized System and
which are found regulated through standards and technical regulations?
Answer 8
There is no information regarding question 2. (vii) at this time.Question 9
The Secretariat Report omits the measures which rule the elaboration, modification or cancellation of
regulations and technical standards by the State, municipal or provintial authorities. In this sense, could
Japan describe what are the legal orders which describe such procedure, what principles have to observe
such juridictions (that is public consultation, consensus, etc.) and , in its case, describe briefly the
procedure?
Answer 9
In general, voluntary standards and technical regulations are established, revised or abolished through
the procedures that consist of consultation with th e industries concerned, including foreign ones, and the
public; TBT or SPS notifications for comments or questions by WTO Member countries; deliberation atCouncils concerned; and so on.
The adopted standards and regulations are made public promptly in the official gazettes, etc.Depending on sanitary and phytosanitary measures, voluntary standards and technical regulations, the
laws that stipulate the procedures mentioned above are different.
Regarding the procedures of conformity evalutation, could Japan:
Question 10
Indicate if such procedures are general or if they are established in relation with every regulation?
Question 11
Indicate how many procedures of conformity eval utation are in force in its territory, how many
products it includes and in which legal order are they established?
Question 12
Indicate if such procedures are submitted to a public consultation?Question 13
Answer if the nationals of the WTO Members countries can participate in the elaboration of such
procedures of conformity evaluation?WT/TPR/M/107/Add.1
Page 100
Question 14
Inform what is the procedure to recognize a foreign standard or a procedure of conformity evaluation as
equivalent, and in its case, how many standards, regulations or procedures of conformity evaluation has
Japan recognised?
Question 15
Describe the procedure for the accreditation of organizations which carry out the conformity evaluation of
standards and technical regulations?
Question 16
Indicate in which cases the evaluation of the conformity with technical regulations can be carried out by
accredited organizations and, in its case, if it is necessary to have an additional authorization from the
governmental authority in charge of the application of the said regulation?
Question 17
Point out if it is possible that a conformity evalutation organization (laboratory, registration
organization, inspection unity, etc.) accredited in a WTO Member could carry out the said
conformity evalutation with regard to Japanese regulations or technical standards.
Question 18
In this section of the Secretariat Report, it is also indicated that Japan has not notified its materials in the
matter of phytosanitary. In this sense, Mexico would li ke to know if there have been any change in Japan
in this matter, in relation with the prevailing situation during the previous period of the trade policy
review?
Question 19
Finally, Japan has indicated that it plans to realize structural changes in the matter. To this respect,
Mexico wishes to know: What do the said changes consist in  and when are they planned to be realised?
Answer 18&19
The revised regulations for recent years have been published.  Please ask the SPS enquiry point, TBT
enquiry point or Japanese Ministries and Agencies concerned for necessary documents.
The proposed dates of entry into force for new or revised regulations are described in SPS or TBT
notifications.
Financial Services
Question 20
In paragraph 22 (corresponding to Chapter IV)4)i) of the Secretariat Report), it is pointed out that the
prudential requirements that are demanded for nationally licenced subsidiaries of foreign banks are no
more onerous than that demanded for domestic banks. In this sense, Mexico wishes to know what are the
requirements requested from the nationally subsidiaries of foreign banks.
In paragraph 25 of the same section of the Secretariat Report, it is pointed out that the changes in the
regulatory regime of Japan's insurance sector are mainly associated with the establishment of the
Financial Services Agency (FSA), whereas in the footnote of page 32, various requirements necessary to
realize certain operations are described. In this sense, Mexico wishes to pose the following questions:WT/TPR/M/107/Add.1
Page 101
Question 21
What are the requirements and validity of the licence approved by the FSA in order to carry out insurance
operations?
Question 22
Does the commercial presence have any restriction to offer insurance services?
Question 23
What are the criteria applied to grant a licence?
Other services
In relation with what is pointed out in paragraph 50 (Chapter IV)4)iv) of the Secretariat Report), Mexico
would like to know:
Question 24
If other professions and other specialised lawyers have been considered for the elimination of
requirements for residency and nationality and, in case of an informative response, what would they be?
Answer 24
As you may see in the Japanese Schedule of Specific Commitments, Japan does not maintain any
nationality requirements for professional services in its Schedule. As for residency requirements,
reservations are made only for a foreign lawyer qualified as a Gaikokuho-Jimu-Bengoshi under Japanese
law (hereinafter referred as GJB).
GJBs should themselves be engaged in legal practice in Japan concerning the laws of the country in
which they acquired their qualification.
Therefore, Japan believes that a GJB should be required to stay in Japan not less than 180 days per year,
from the viewpoint of protecting clients and ensuring that clerks or others do not engage in legal practice
without a GJB.
Question 25
If Japan would be disposed to negotiate reciprocal recognition agreements with Mexico for the
professions such as architecture, ingeneering or lawyer?
Answer 25
At this juncture, Japan does not have any concrete plan to negotiate reciprocal recognition agreements
with Mexico for professions such as architect, engineer or lawyer, without prejudice to any possible
discussion in the course of the negotiation to conclude a bilateral agreement, including the elements of a
free trade agreement, to strengthen the bilateral economic partnership with Mexico.WT/TPR/M/107/Add.1
Page 102
NORWAY
Maritime transport
Japan is the next largest market for Norwegian shipping services. In the report it is stated that "cabotage
restrictions allow only Japanese-flag carriers to carry cargo and passengers between Japanese ports." 
Question 1
 In this context, Norway would be  pleased to know whether it is possible for foreign shipping companies
to register ships in the Japanese ship register directly or by establishing a Japanese subsidiary and
participate in domestic maritime transport? 
Answer 1
In Japan, the requirements of ships allowed to fly the Japanese flag are defined by the Ship Law.
In cases where company owns Japanese ships, the company shall comply with the following requirements
described in Section 3 of Article 1 of the Ship Law:1. The company shall be established in accordance with the laws and ordinances of Japan;  and
2. All representatives and no less than two-thirds of the company’s officers must be Japanese
national.
Macroeconomic policy
Norway acknowledges Japan's continuous efforts to reform the economy and put an end to the economic
slowdown.
Question 2
Norway would be interested to know which measur es the Japanese government has taken in order to
increase private demand, solve the problems of non-performing loans (NPLs) and combat deflation?
Answer 2
In response to the recent growing uncertainty con cerning the nation’s financial and economic conditions,
the government of Japan has compiled “the Compre hensive Measures to Accelerate Reforms” to
reinforce its policy measures to realize a rapid recovery of Japan’s finance and industry.
The government will accelerate structural reforms via th e four main pillars of “financial system reform”,
“tax reform,” “regulatory reform,” and “reform of th e government expenditure structure;” strengthen its
efforts toward the revitalization of the Japanese economy; and aim at the realization of self-sustaining
economic growth led by private-sector demand while overcoming deflation.
Under these measures, The Government will work in one with the Bank of Japan in taking strong and
comprehensive measures towards overcoming deflation and stabilizing the financial system.
About the contents of this ”Comprehensive Measures”;
(1) The government has decided to tackle the following policies to revitalize industries and
businesses.
- Accelerate the disposal of non-performing loans
- Promote the sale of non-performing loans to the Resolution and Collection Corporation
(RCC)WT/TPR/M/107/Add.1
Page 103
- Revitalize industry and enterprises as quickly as possible
- Support formations and start-ups of new business
(2) The government has decided to tackle the follow ing policies to accelerate the structural reform
toward the promotion of economic revitalization.- Advance tax reform
- Revitalize the securities and real estate markets
- Promote urban renewal
- Accelerate regulatory reform
(3) The government has decided to tackle the follow ing policies to mitigate effects from accelerating
non-performing loan disposal.- Upgrade the safety nets of small and me dium-size enterprises (SMEs) and employment
As to financial system reform, the Government will resolve the problems of non-performing loans by the
end of FY 2004, through reducing the ratio of major banks' non-performing loans to approximately half
the level of the current ratio. "Program for Financial Revival " which is part of "ComprehensiveMeasures to Accelerate Reforms," comprehensively strengthens government policies to provide strong
boost for the disposal of non-performing loans by (a ) developing a financial system which the people can
rely on without anxiety, (b) creating a new framework for corporate revival, and (c) creating a
framework of the New Financial Administration.
Import control (Market access fish)
Only a fraction of the import quotas and licenses are granted to new traders or foreign companies.
Question 3
Recent liberalisation in the system is positive. However, we would like to know what steps Japan is
taking to end the quantitative import restrictions.
Answer 3
The IQ system plays an important role to conserve fish resources in waters adjacent to Japan. It is
necessary to properly handle this system in order to  promote sustainable use of the resources.WT/TPR/M/107/Add.1
Page 104
NEW ZEALAND
Question 1
What steps is Japan taking in the financial sector to bring about reform, in particular to address the effects
on the economy caused by the issue of non-performing loans?
Answer 1
On October 30, the Government announced “Comprehensi ve Measures to Accelerate Reforms,” to bring
greater stability to the financial system by working for the rapid recovery of financial intermediary
functions, to facilitate the smooth reallocation of re sources to new growth fields, and to realize a rapid
recovery of Japan’s finance and industry. Under these measures, the Government will work in one with
the Bank of Japan in taking strong and comprehensive measures towards overcoming deflation andstabilizing the financial system.
As to financial system reform, the Government will resolve the problems of non-performing loans by the
end of FY 2004, through reducing the ratio of major banks’ non-performing loans to approximately half
the level of the current ratio. “Program for Financi al Revival, ” which is part of “Comprehensive
Measures to Accelerate Reforms,” comprehensively strengthens government policies to provide strong
boost for the disposal of non-performing loans by (a ) developing a financial system which the people can
rely on without anxiety, (b) creating a new framework for corporate revival, and (c) creating a
framework of the New Financial Administration.
Agriculture
Question 2
The Secretariat’s report notes (page 54, para 5) that the agricultural sector continues to receive substantial
government support, with provisional OECD indications  that total transfers to agriculture exceed the
sector’s contribution to GDP.  Given this low productiv ity of the agricultural sector, when, and in what
way will Japan undertake further structural reform in the agricultural sector?
Answer 2
Building on the basic principles of the Basic Law on Food, Agriculture and Rural Areas, the “Action
Plan for Revitalizing Japanese Food and Agriculture”, announced in April 2002, includes the following
directives for the purpose of accelerating the structural reform of agriculture:1) facilitation of incorporating of agricultural businesses
2) reform of the rice production adjustment policy;
3) development of a non-commodity-specific safety-net measure; and
4) introduction of a new framework for land use in rural areas.
These specific measures are currently under consideration, or are in the process of legislation.
Question 3
Japan has argued that the use of specific duties in agriculture (which lead to very high ad valorem
equivalent tariffs) benefits end-users, both processors and consumers, due to fewer price fluctuations.
However, the Secretariat’s report notes that the high cost of agricultural inputs may be contributing to therelocation off-shore of the Japanese food processing industry (page 55, para 5).  Has Japan considered
ways to retain the food processing industry within its economy including through the reduction of the cost
of agricultural inputs by lowering tariffs and specific duties?WT/TPR/M/107/Add.1
Page 105
Question 4
Despite Japan’s claims that it has vigorously reformed price support measures (Report by the Government
of Japan, page 15, para 63), the Secretariat notes (page 55, para 5) that food prices in Tokyo in 2000 were
25 to 100 percent higher than in other major cities in the world.  Could Japan explain how its reform of
price support has influenced market mechanisms given that consumers still pay over twice as much foragricultural products as they would without price supports?
Answer 4
The Basic Law stipulates that the government shall ta ke necessary measures to allow the prices of farm
products to appropriately reflect the actual supply/demand situation and quality evaluation.  With the
reform of price support mechanisms based on this guideline, producers are motivated to be more
responsive to consumer demands.  For example, concerning wheat, which used to be distributed throughthe government, but which is now left to private trading, the market price difference among rice brands
and producing regions has widened.
It should also be noted that, as  indicated in the Se cretariat’s report (page 55, para 5), retail prices are
affected by various factors other than the agricultural price policy.
Question 5
The Secretariat’s report notes that more than 95 percent of Japan’s total support for agricultural producers
consists of measures that potentially distort agricultural production (page 58, para 11).  Could Japan
advise if its structural reform efforts will include consideration of making transfer payments to farmers in
ways which do not distort production and trade?
Answer 5
The TSE indicated by the OECD is one of the estimates  of transfer arising from agricultural policies and
is not necessarily an indicator of distortion. Japan ha s been duly implementing its commitments under the
WTO Agreement on Agriculture, and its total AMS in 19 99 declined to less than 20 percent of the final
commitment level of 2000.
Question 6
The Secretariat notes that Japanese manufacturing has traditionally been much more exposed to
international competition than agriculture and certain services (page 54, para 3).  The reduction of tariffs
on industrial goods has meant that Japan’s manufacturing sector has benefited substantially from
exposure to international competition and access to imported inputs.  Has Japan considered any similarreforms to enhance the efficiency of its agricultural se ctor?  If so, when will this occur?  If not, why not?
Answer 6
As suggested by the fact that the food sufficiency ratio of Japan has been declining to around 40%,
Japanese agriculture is indeed facing international competition, especially as Japan is one of the world’slargest net-food importing countries. As agriculture is strongly influenced by the geographical and
natural conditions of each country, however, the enhancement of the efficiency of the sector cannot be
achieved by market forces alone.
Question 7
The Secretariat (page 55, para 6) notes that the Basic Law on Food, Agriculture and Rural Areas, and the
Basic Plan for Food, Agriculture and Rural Areas have continued to provide the framework and policy
direction for agriculture in Japan.  In what ways have these policies changed the direction of agriculture
production in Japan and enhanced agriculture’s competitiveness?WT/TPR/M/107/Add.1
Page 106
Answer 7
The policies stipulated in the Basic Law and the Basic Plan aim at, among other things, promoting
agricultural production in order to be more responsive to consumers’ needs.  As the Basic Plan was only
established in March 2000, the effects on production and the competitiveness of the policy changes based
on the Basic Plan have yet to be confirmed.
Question 8
Japan’s response to the discovery of BSE did not allow for different treatment for BSE-free countries with
a proven track record of successful BSE risk management, nor does it follow accepted international
procedures as agreed in the OIE world organisation for animal health.  Does Japan intend to implement a
straightforward programme for identifying different levels of BSE risk and if so, when will Japan
implement this?
Answer 8
At present, the Government of Japan is carrying out risk assessment on BSE status by country and item,
including the study of risk assessment for New Zealand. We estimate the completion of risk assessment by
around the end of the fiscal year 2002.
Question 9
Could Japan indicate when the “temporary” ban on im ports of processed animal protein, including pet
food, and meat and bone meal (e.g. for non-ruminant (pig and poultry) use) will be lifted or a sound risk-
based approach instituted to replace it?
Answer 9
The Government of Japan is carrying out a risk asse ssment of BSE status by country and item. Therefore,
we cannot prejudice the possibility and prospect of lifting the temporary ban on the importation of
processed animal protein at the moment.
Bilateral/Regional FTAs
Question 10
The Secretariat’s report states (page 23, para 23) that many agricultural products have been excluded from
the JSEPA.  Analysis by the Fuji Research Institute shows that out of 2,277 agricultural product lines,
Japan only included 486, all of which were already at zero.  Given the significance accorded toagriculture liberalisation in the Doha Development Agenda, how will the JSEPA, which has no
meaningful commitments in this sector, contribute to  "strengthening the multilateral trading system", one
of Japan's underlying trade policy goals?
Answer 10
Under the JSEPA, Japan eliminated 94% of the dutie s on its trade in goods with Singapore on a trade
value basis including agricultural products. Japan regards such arrangements as consistent with WTO
rules.
Moreover, the JSEPA achieved liberalization in the area of trade in services that exceeded the level of
concession agreed to under the WTO. In addition, the JSEPA contains new rules on investment that wereof a leading nature in comparison with existing invest ment agreements. In this context, it is worth noting
that this is one area the WTO has not been able to develop comprehensive rules on.
In short, the JSEPA achieved far more extensive liberalization and rule-making than under the WTO and
as such it did contribute to strengthening the multilateral trading system.WT/TPR/M/107/Add.1
Page 107
Fish and Fish Products
Question 11
Japan says that it continues to maintain a quota and tariff regime on fish and fish products to maintain
domestic production for the purpose of stable supply.  Domestic supply however is only 50% of totalconsumption.  Has Japan considered ensuring stable supply for its consumers through greater facilitation
of trade in these commodities (ie by reducing tariffs and eliminating quotas)?
Answer 11
Japan has been the world’s largest importer of fish and its tariff rate on fish products has been the lowest
level in the world. Fish and fish products, which account for about 40% of animal protein intake in
Japan, are important foods for this nation.
Japan believes that it is necessary to supply fish pr oducts in a stable manner for its people by promoting
the recovery of fish resources in waters adjacent  to Japan, which can be achieved by implementing
Resource Restoration Plans, as well as securing appropriate imports.
Education Services
Question 12
The Secretariat’s report says Japan is reviewing its education services (page 68, para 52).  We welcome
this review and the indication that there may be increased access to education for graduates ofinternational schools.  When will this review be concluded, and will it include consideration of increased
access opportunities for foreign education services providers?
Answer 12
‘International schools’ are primary or secondary education level-schools,  established mainly for foreign
students staying in Japan, without Japanese governm ent approval as formal education institutions.
The review regarding increased access for graduates of ‘international schools’ to higher education will
be concluded by the end of FY2002.
SPS Regulations
New Zealand considers that Japan’s quarantine systems and procedures of ‘Official Control’ are
inconsistent with its obligations under the SPS Agreement and the IPPC definition of ‘Official Control’.
Under Japan’s current quarantine system, if any pest, other than those designated by Japan as non-
quarantine pests, is found on imported plant products, quarantine action such as fumigation or destruction
is taken regardless of technical justification.
Question 13
When will Japan change its phytosanitary regulations to bring them into line with the IPPC definition of
‘Official Control’?
Answer 13
Japan considers that the international guidelines of official control, adopted at the Interim Commission
for Phytosanitary Measures, should be a basis for considering a future plant quarantine system in its
country. Japan is examining whether it can maintain  “the appropriate level of protection on plant
quarantine” by applying the plant quarantine measures based on the new definition, while ensuring thatWT/TPR/M/107/Add.1
Page 108
those measures would fit to Japan’s climatic conditions and are well designed for handling a huge
amount of imports.
Question 14
Given the high rate of fumigation or destruction action which Japan undertakes regardless of its technical
justification, does Japan still consider that the current system functions effectively (as it stated at the last
Trade Policy Review)?
Answer 14
Japan defines “quarantine pests” as those not confirmed to exist in Japan or those that are officially
controlled. Japan maintains appropriate phytosanitary measures to import plants and plant products that
are infested with quarantine pests and believes thats the current system functions effectively.
Question 15
Does Japan have in place a mechanism for reviewing its  enforcement regulations to ensure that they are
based on the relevant international standards, recommendations and guidelines where they exist and that
their measures are flexible and not overly burdensome?
Answer 15
Japan considers that international standards, recommendations and guidelines are some of the bases for
considering a future plant quarantine system of our country, and will properly consider them when
reviewing plant quarantine measures.
Forestry
Question 16
While tariffs are generally low in the forestry sector, Japan’s 4.8% tariff on radiata pine and some other
coniferous sawn wood imports stands out against the duty free access granted to imports of other product
such as Douglas fir which also compete against domestic  product.  Given that radiata pine is not grown in
Japan, and the level of tariff protection is uneven, what is the purpose in maintaining this particular
discriminatory tariff against radiata pine specifically, resulting only in adding costs to Japanese users of
this product?
Answer 16
The GATT panel regarding Japan's tariff on Spruce-Pine-Fir lumber concluded that the GATT left wide
discretion to the contracting parties in relation to the classification on goods, and that it was not
inconsistent with the General Agreement to impose different tariffs on goods in accordance with the
different domestic circumstances faced.
As for Japan's tariff on Spruce-Pine-Fir lumber, Japan imposes a certain level of tariff becauseimported Spruce-Pine-Fir lumber strongly competes with domestic Spruce-Pine-Fir lumber.
 Accordingly, we are of the view that Japan's tariff on Spruce-Pine-Fir lumber is not discriminative
against any countries' products.
Dairy
Question 17
The Secretariat notes (page 56, para 9) that the extent to which tariff quotas are filled varies by product
and that the quota allocation method tends to be intricate (page 31, para 22).  Can Japan explain why, if aWT/TPR/M/107/Add.1
Page 109
quota is consistently underfilled, the unused quota can not be reallocated or transferred between
suppliers?
Answer 17
As of this fiscal year, Japan has introduced a system of reallocation for "Other Dairy Products for
General Use" and "Evaporated Milk" within the same fiscal year, if the allocated quota is returned from
the quota holder.
Question 18
Where a tariff quota has been consistently underfilled due to a lack of demand (which Japan has cited in
the past) has Japan considered simplifying the import process by moving to a tariff only regime at the in-
quota tariff rate?
Answer 18
The tariff quota administration (TQA) system of Ja pan succeeded to the import quota system, on the basis
of the Uruguay Round Agreement on agriculture. Ja pan continues to carry out its TQA system in good
faith based on the Uruguay Round Agreement on agriculture.
Standards
Question 19
The Secretariat’s report notes that Japan MAFF is currently in the process of reviewing Japan
Agricultural Standards (JAS) (page 39, para 45).  These standards have a significant effect on market
access.  What are the objectives of this review and when is it likely to be completed?
Answer 19
It has become mandatory to review the JAS standa rds every five years under the JAS Law amended in
July 1999. The purpose of the review is to revise or abolish the JAS standards, taking into account not
only the changing situations and the prospect of  production, distribution and consumption of the
concerned products, but also the trends in international standards such as Codex standards.
Question 20
To what extent will this review increase the percentage of JAS aligned to international standards?
Answer 20
We are reviewing the JAS standards and will, take in to account changing situations and the prospect of
production, distribution and consumption of the concerne d products, as well as trends in international
standards such as Codex standards.
While we think that the national standards should be set by taking into account conformity to the
international standards, it is difficult to set the numerical targets for conformity because of condition
differences, such as climatic or geographical factors, and technological problems.
Competition Policy
Question 21
The Secretariat comments that the enforcement of the Anti-Monopoly Act may not impose effective
deterrents for violations, and penalties may be being treated as a cost of business by some firms (page 49,
para 87).  Has the Fair Trade Commission considered imposing administrative penalties on individualsWT/TPR/M/107/Add.1
Page 110
within the firms, who are the decision-makers respons ible for the anti-competitive conduct, to strengthen
deterrence?
Answer 21
We have no plans to introduce a legal mechanis m empowering the JFTC to impose administrative
penalties on individuals, because criminal penalties against individuals are already provided.
Government Procurement
Question 22
Commentary in the Secretariat’s report notes that no preferences are grant to domestic suppliers on
government procurement covered by the Agreement on Government Procurement (page 26, para 7).  Aredomestic preferences or other discriminatory measures applied to procurement which is outside the
coverage of the WTO Agreement on Government procurement?
Answer 22
Regarding the procurement contracts above the respective thresholds specified in Japan’s Appendix I of
the Agreement on Government Procurement (GPA), the principles of national treatment and non-
discrimination apply to goods, services and suppliers from both Parties and Non-Parties to the GPA,
based on national laws and regulations, such as the Accounts Law and the Local Autonomy Law.WT/TPR/M/107/Add.1
Page 111
SWITZERLAND
Report Secretariat (WT/TPR/S/107):
Economic Environment
(3.iv) Foreign Direct Investment (FDI)
Question 1
(§33, page 12) Foreign direct investment in Japan has been traditionally lower than its outward FDI.
Direct investment in Japan has increased the most in sectors where regulatory reform and economic
restructuring were put high on the agenda. New deregulation initiatives could possibly contribute to apick-up of direct investment. Which measures are be ing pursued in order to attract more foreign direct
investment into Japan, e.g. with regard to the facilitation of cross-border mergers?
Answer 1
The Japanese Government considers foreign direct investment (FDI) policies, as formed by Cabinet
decision, to be essential y for the vitalization of the Japanese economy.
Japan acknowledges  that the expansion of FDI will lead to greater employment opportunities, increased
efficiency of management, and the promotion of a competitive environment through the introduction of
new technology, management experience and know -how, and other measures. Japan is now making
efforts to eliminate obstructive factors in order to promote the inflow of FDI and corresponding influx of
talented human resources.
In an effort to remove obstructive factors against FDI, concerned ministries will improve the system
regarding cross-border merger and acquisition, promote one-stop service of government relatedinformation, initiate measures to attract companies of  local government, encourage FDI into the types of
business with strict regulations, and facilitate mutual approval of medical license and pension
agreements.
Concerned ministries will improve the business environment by engineering strategic entry to
employment, academics,, training programs, relocation, etc., in order to attract talented people from
overseas .
The Cabinet Office plans to formulate, finalize and enforce concrete measures aimed at FDI and human
resource expansion in Japan approximately by the end of fiscal year 2002. This will be done in
cooperation with each ministry, particularly the Ministry of Economy, Trade and Industry.
Trade Policy Regime: Framework and Objectives
(3) Trade Agreements and Arrangements
Question 2
(§ 19ff., page 22ff.) Japan's new external economic policy, based on a multi-layered approach, puts
apparently more emphasis than before on regional and bilateral trade cooperation. In January 2002, Japan
signed its first bilateral free trade agreement with Sing apore. Several similar initiatives with e.g. Mexico,
Korea, Thailand, the Philippines, Chinese Taipei, Chile, Brazil, Australia, the ASEAN are seemingly
under discussion.WT/TPR/M/107/Add.1
Page 112
Could Japan elaborate on the strategy followed with regard to the selection of potential bilateral or
regional free trade partners?
Are the Japanese Authorities already in the position to share with Members the very first experiences with
regard to the Economic Partnership Agreement with Singapore?
Answer 2-1
In selecting potential bilateral or regional free trade partners, Japan carefully considers economic,
strategic and domestic factors. On this basis, Japan signed its first FTA with Singapore in January this
year, which was followed by a decision made with Mexico at a meeting in October to launch negotiations
to conclude a bilateral agreement that will include elements of an FTA. In January 2002,  Japanestablished an industry-government-academia research  group with Korea in a Japan-ROK FTA. As for
ASEAN, leaders at the Japan-ASEAN  summit meeting held on November 5
th decided to implement
measures for the realization of a Japan-ASEAN Comprehensive Economic Partnership that should be
completed as soon as possible within 10 years.
Answer 2-2
The agreement is expected to enter into force at the end of November, following the preparatory work
currently under way. Japan will shortly notify the Members of the Agreement in accordance with the
relevant procedures.
Trade Policies and Practices by Measure
(vi) Government procurement
(§41, page 38) Switzerland welcomes the introduction of legislation regarding the prevention of bid
rigging and “other improper actions” as mentioned in this §. Switzerland remains concerned with the at
times low transparency in the procedures for calls for tenders, in particular those launched by Japanese
authorities not covered by the GPA. We submit the following questions in this regard:
Question 3
Which criteria should be used to consider that a privatised purchasing entity can be excluded from the
GPA commitments?
Answer 3
In the negotiations under Article XXIV:7 of the Ag reement on Government Procurement, Japan submitted
a revised proposal regarding this issue to the Committee on Government Procurement in September
2002. The relevant part of the proposal is as follows:
Where a Party wishes, in exercise of its rights, to withdraw an entity from Appendix I on the grounds that
government control or influence over it has been e ffectively eliminated, that Party shall notify the
Committee of such modification …
The notification shall contain evidence that the requirement under the preceding subparagraph is met,
including information on th e following criteria:
- the government does not control a majority of the entity's capital nor voting rights;WT/TPR/M/107/Add.1
Page 113
- the government does not appoint more than half of the members of the entity's managing board,
which has the power to decide on operations;
- the operation of the entity is financed by its business revenue, not by government subsidies;
- the government does not have control or influe nce over the entity's procurement decisions;
- the government does not provide the entity with any special or exclusive rights to operate; and- there is more than one entity that engages in the provision of goods or services on the market.
Question 4
Which measures are currently planed in order to increase further fairness and transparency in the
government procurement sector?
Answer 4
The Government of Japan, from the standpoint of a co mmissioning entity of public works, believes that
thorough enforcement of the ActFor Promoting Prope r Tendering and Contracting for Public Works (the
Act), which came into effect in April 2001, is a fundamental measure for increasing further fairness and
transparency in the government procurement sector . From that standpoint, the Ministry of Land,
Infrastructure and Transport, the Ministry of Finance and the Ministry of Public Administration, HomeAffairs, Posts and Telecommunications request that  each central government, quasi-governmental and
local government commissioning entity submit a report on the measures the respective commissioning
entity has taken as of the end of the last fiscal year to comply with the ”Guiding Principle” based on the
Act.
(cf. The summary of the Act (including the Guiding Principle (Section 7)   is attached to the WTO
document GPA/61.)
Question 5
Are the qualified list of suppliers and the planned procurement as invitations to tender often used in
Japan?
Answer 5
In Japan, neither a notice regarding a qualification system nor a notice of planned procurement is used
as an invitation to tender, while Article IX:3  of the Agreement on Government Procurement (GPA)
provides for such a possibility. The reasons for not using these notices are as follows:
The Accounts Law and related regulations, which apply to central government entities, do not provide for
the procedures stipulated in Article IX:3 of the GPA. In general, the same refers to the entities listed in
Annex 3 because they prescribe procurement procedures  by following the central government's model. It
is reasonable to publish an invitation to participate at the point of time when a planned procurement is
decided upon because the timing of the procurement is often not determined when a notice of plannedprocurement or a qualification system is published.  It is also appropriate with a view to minimize
uncertainty for suppliers, since there is a possibility that the planned procurement may be changed,
suspended or postponed.
Regarding sub-central government entities, the Local Autonomy Law and relevant regulations also do not
provide for the procedures stipulated in Article IX:3 of the GPA.  The procedures have not been adopted
because information to be included in a notice of planned procurement and a notice regarding a
qualification system under Article IX:7 and 9 is less than that to be contained in a notice of proposed
procurement under Article 167:6 of the Ordinance for Enforcement of the Local Autonomy Law. It would
lessen the transparency under the current system if the procedures under Article IX:3 were adopted.WT/TPR/M/107/Add.1
Page 114
Question 6
What are the reasons that raised the share of using single tendering procedures to 30, 8% in the year 2000,
compared with 26,7% three years earlier (cf. §40, page  36f.)?
Answer 6
In the statistics for 1998-2000, there is an increa sing trend of the numbers and shares of the limited
tendering cases under Article XV:1(b) (i.e. protection of exclusive rights) and XV:1(d) (i.e.
interchangeability with already existing equipment or services) of the Agreement on Government
Procurement (GPA). This seems, in part, to result  from the fact that Japanese entities have been
procuring more and more Information Technology (IT) systems  in recent years.
When a Japanese entity needs to commission additional changes, development, operation or maintenance
of an IT system, which was initially procured via open tendering, it is often unreasonable and costly if the
entity commissions suppliers to deliver such services who did not win the original contract for that
system. Therefore, depending on the nature of each contract, procuring entities often  enter into such
contracts under Article XV:1 (b) or XV:1(d).
(viii) Standards, and sanitary and phytosanitary measures
(§ 45, 46 and 47, page 39ff.) These paragraphs refer to voluntary standards, to voluntary marks of
conformity like the JAS or the JIS symbols, to organizations that are allowed to affix these marks as wellas to mandatory technical regulations. Switzerland would like to receive from Japan supplementary
information on the following subjects:
Question 7
What is the relation between the voluntary JAS and JIS to corresponding mandatory technical
regulations? Does the application of voluntary standards lead to a presumption of conformity to technical
regulations? Are products (domestic or foreign) granted market access even if they are produced
according to standards differing from JAS or JIS but satisfying equivalent safety requirements as required
in mandatory technical regulations?
Answer 7
(1) JIS
Japan promotes harmonization between technical regulations and JIS, and adoption of JIS for guiding
specifications that satisfy the relevant performance-based technical regulations if necessary.
Since JIS is a voluntary standard, there is no limitation on market access due to conformance to
standards differing from JIS.
(2) JAS
The so-called JAS Law provides two separate individual schemes: one is the JAS standard and the other
is quality labelling. While the  JAS standard  one set of voluntary standards, the standard for quality
labelling is a variety of mandatory technical regulation. Agricultural and forestry products are prohibited
from being marketed without quality labelling under the JAS Law.
The fact that some products satisfy the JAS standard does not necessarily mean they meet the quality
labelling standard. They have different objectives with different requirements and criteria.WT/TPR/M/107/Add.1
Page 115
Products not in conformity to the standard for quality labelling cannot be marketed in Japan. (While the
standard for quality labelling addresses consumer preferences, the Food Sanitary Law is working to
protect consumer health. Products should meet the requirements not only of the standard for quality
labelling but of the Food Sanitary Law, with a view to marketing.)
Question 8
If a foreign (innovative) product is neither covered by a JAS nor a JIS but produced according to other
national or internationally harmonized standards: What is the required procedure to receive market access
in Japan? For example in the field of adhesives, there are no JAS available for certain foreign products
technologically more advanced than the traditiona l glues used in Japan. Alternatively, harmonized
standards for the same products have been devel oped in Europe according to a mandate from the
European Community. Nevertheless, Swiss products tested according to these harmonized Europeanstandards are not recognized in Japan. Instead, complicated and time-consuming examinations are
required to verify equivalent performance of the Swiss products to the performance of products allowed
under JAS. Switzerland would like to know if harmonized European standards will be accepted in future
as an alternative to JAS (especially in those areas where the JAS do not cover a specific product) and if
results of conformity assessment based on these Europ ean standards are recognized in Japan. If this will
not be the case, Switzerland is interested in some information on the procedure required to obtain market
access in Japan for products not covered by JAS.
Answer 8
Since the JAS standard is voluntary, products not in accordance with the JAS standard can be marketed
without any restriction.
Even products that qualify for foreign standards may not necessarily meet requirements for consumption
or use in Japan, because of climatic or geographical di fferences. In this regard, we cannot accept mutual
recognition between foreign standards and JAS standards.
In the field of adhesives, applicants are required by JAS standards to submit data and information
regarding the strength and durability so that their products can be evaluated for suitability to climatic
factors in Japan.
As previously noted, JAS standards are voluntary and products not in accordance with these standards
can be marketed without any restriction.
Question 9
Paragraph 46 explains that also Registered Foreig n Certification Organizations (RFCOs) can certify
foreign producers and manufacturers to affix JAS symbols. What are the requirements for foreign
organizations to become a RFCO? As Japan is a member of ILAC and IAF, Switzerland would like to
know if Certification Bodies accredited in ILAC or IAF member states other than Japan are also
authorized to certify producers and manufacturers to affix JAS (or JIS) symbols.
Answer 9
In October 2001, the Government of Japan suspende d the importation and use of processed animal
protein for feed and fertilizer.
As for the use of domestically-produced steamed ground leather for fertilizer, its safety was assured
based on the results of a risk assessment, and this restriction was removed in November 2001.WT/TPR/M/107/Add.1
Page 116
At present, the Government is carrying out a risk as sessment of BSE status by country and by item. The
quarantine measures against BSE will be reviewed on the basis of the results of this risk assessment and
the advice of the BSE technical committee.
Government Report (WT/TPR/G/107):
Question 10
Paragraph 24 deals with the Mutual Recognition Agreement (MRA) between Japan and the European
Community (EC). Not included in this MRA is the medical devices sector. Nevertheless, Japan already
recognizes quality certificates issued by Certification Bodies in the EC in the field of medical devices due
to a special bilateral arrangement.
The legislation with regard to medical devices is deemed equivalent between Switzerland and the EC.
Furthermore, due to the entering into force of the MRA between the EC and Switzerland including also
medical devices, Swiss Certification Bodies will be authorized to issue quality certificates that are fully
valid in Switzerland and in the EC. Therefore, quality certificates in the field of medical devices issued in
Switzerland are equivalent to the ones issued in the EC. Seen from such a perspective, Switzerland doesnot understand why quality certificates issued in the EC are recognized in Japan whereas equivalent Swiss
certificates are not. Switzerland would like to know the exact reasons for such a different treatment and is
interested in some proposals how this problem could be solved.
Answer 10
In order to recognize quality certificates issued in any foreign country, the MHLW first needs to confirm
that the foreign country’s regulatory system and its actual operation are equivalent to that of Japan. The
MHLW in Japan has not evaluated the equivalence of Japan’s medical devices quality certification
system to that of Switzerland.
In the future, there could be a possibility of reciprocal cooperation in the area of medical devices between
Japan and Switzerland, through such evaluation of equivalence.WT/TPR/M/107/Add.1
Page 117
TAIWAN, PENGHU, KINMEN AND MATSU
Financial reform
Question 1
Central banks are not usually in a position to purchase shares from lending institutions. However, the
“Central Bank Law” of Japan stipulates that the Bank of Japan may purchase bank shares with the
permission of the Prime Minister and the Finance Minister. What progress has been made on the intended
purchase by the Bank of Japan of shares owned by co mmercial banks and to what extent has the goal of
this measure been achieved?
Answer 1
The purpose of the stock purchasing plan announced by the Bank of Japan is to enhance banks’ efforts to
reduce their exposure to market risk pertaining to their stockholdings while, at the same time,
maintaining financial system stability and preparing banks to deal with the non-performing loan problem.
Since September, the Bank of Japan has been preparing for the purchase of stocks. For example, the Bank
has set the basic guidelines, which were announced on October 11, and also selected a trust company to
manage the trust. As a result, the Bank will start buying stocks by the end of this year.
Currency exchange
Question 2
The 1997 Asian financial crisis underlined the importance of regional efforts in combating contagious
financial turmoil.  Japan’s former Prime Minister Miyazawa therefore proposed to establish an “Asian
Monetary Fund”, dubbed the “Miyazawa Initiative,” an Asian version of the IMF, on the basis that
through cooperative financing, financial crises may be averted in the region. As regional cooperation isbecoming more and more important in today’s world, it could be useful to know what progress has been
made on this proposal? Does Japan intend to proceed with these plans?
Answer 2
This proposal was not realized due to the opposition from some other countries. Japan currently has no
intention to proceed with the Asian Monetary Fund.
Structural reform
Question 3
As a major world economy, Japan’s economic performance has a significant impact on its neighbours.
We have noted that several structural reform measures have been introduced by the Koizumiadministration. It would be appreciated if Japan could further elaborate on their objectives and what these
measures have achieved so far.
Answer 3
Under the slogan of "No gains without reforms,", the Koizumi Cabinet is exerting a full effort to
undertake structural reform in order to realize economic benefits, based on the dynamism of the private
sector combined with local identity, to further accelerate the shift "from public to private sector" and
“from central to local government.".WT/TPR/M/107/Add.1
Page 118
Accelerated measures of structural reform seek to address the realization of special structure reform
zones, regarded as the breakthrough of economic  revitalization, and radical tax reform toward
construction of "the taxation system which should exist" to realize long-term revitalization of the
economy. Examples of these measures area financial sy stem stabilization policy, regulatory reforms and
urban rejuvenation, all of which correspond to the present economic situation.
Based on the reform scheme developed by Cabinet ministers at the Council on Economic and Fiscal
Policy, arguments about important subjects, such  as the relationship between national and local
government, will be discussed and elaborated upon as the direction of reform takes shape..
Although the economy of Japan is on the path of struct ural reform, a severe situation persists, but every
effort for structural reform will have to be made for the sake of economic revival in the future.
Foreign direct investment (FDI)
Question 4
Japan requires that foreign investors must hire at least two Japanese nationals or permanent residents
living in Japan in order to be able to obtain visa s with working and residence permits thus and to do
business in Japan. This requirement creates an invest ment barrier, especially to small-and-medium-sized
investors. We would like to know whether or not Japan plans to relax this requirement.
Answer 4
The criteria for landing permission concerning the status of residence “Investor/Business Manager” is
provided by the Ministry of Justice Ordinance, and states that “The business concerned has capacity to
employ at least two full-t ime employees in Japan (excluding foreign nationals residing under the status of
residence enlisted in Annexed Table 1 of the Immigration Control and Refugee Recognition Act), in
addition to those who operate and/or manage the business”. This provision does not require theemployment of two persons, but refers to the scale of the business. Japan established an interpretative
guideline in December 2000 stating that an annual capital inflow of 5,000,000 yen or more can fulfill the
requirement of establishing a business. Japan does not plan to relax this requirement.
Free Trade Agreements
Question 5
Considering the fact that Japan is a strong supporter of APEC's "open regionalism" goals, we would like
to know whether it plans to put the “accession” provision into the FTAs that are being negotiated, so that
other countries may have a channel through which they can participate in the free trade zones created by
Japan and its FTA partners.
Answer 5
Whether or not to include accession provisions in future FTAs will be decided on a case-by-case basis.
The Japan-Singapore Economic Partnership Agreement, for example, does not have an accession
provision. It is however worth noting that in the Joint Statement published on the occasion of the signing
of the agreement, it is stated that “recognising the catalytic role which the JSEPA could play inaccelerating global and regional trade,investment liberalisation and rule-making, the Prime Ministers note
the possibility of associating other economies with th e JSEPA” and that “they affirmed that the terms of
such association could be negotiated between the parties to the JSEPA (i.e. Japan and Singapore) and the
economy seeking this association, taking into account the individual circumstances of that economy.”WT/TPR/M/107/Add.1
Page 119
Trade policy
Question 6
With regard to agricultural imports, we note that Japan still maintains a number of non-ad valorem duties,
particularly on imports of agricultural products, and that these translate into very high ad valoremequivalents (AVE’s) where such equivalents have been calculated. However, the Japanese authorities
have not provided any detailed information on the AVEs for about one third of the goods that have non-ad
valorem duties. Therefore, could Japan please provide this information on the remaining AVE’s? We
would also like to know how Japan will ensure the tr ansparency of the process of converting from non-ad
valorem duties to ad valorem equivalents. Furthermore, could Japan please advise us whether it plans to
move away from non-ad valorem duties for agricultural products?
Answer 6
There are no calculated AVEs for about one-third of non －ad valorem duties because of a lack of import
records.
Ad valorem duties are proportionate to price (or value), while specific duties are proportionate to
quantity (or volume).  Ad valorem duties may amplify the effect of price fluctuations but specific dutiesare more neutral against them. Therefore, Japan does not think specific duties are less transparent and
less predictable than ad valorem duties, and Japan is not considering converting specific duties to ad
valorem ones
Customs clearance
Question 7
We welcome Japan’s introduction of “simplified import procedures” from March 2001.  Please advise us
what the specific simplified procedures are and what the schedule of implementation is.
Answer 7
At present, as a general rule, Japan’s customs procedures require that an import declaration (declaration
for the release of goods) and a declaration for customs duty payment be lodged simultaneously.
In March 2001, Japan Customs introduced the Simplified Declaration Procedure for imports.
The scheme allows approved importers who meet criter ia specified by Customs to use simplified cargo
release procedures, including paperless declarations.
1. Gist of the Simplified Declaration Procedure
An importer who has received the approval of any Director General of Regional Customs in advance will
be able to use the Simplified Declaration Procedure for designated types of goods, which will make it
possible to have goods released prior to lodging a declaration for customs duty payment by separatingthe import and duty payment declarations, on the condition of a guarantee of compliance with the law.
After being approved, the importer will be able to choose whether to use the Simplified Declaration
Procedure or the conventional import declaration procedure, in which an import declaration and a
declaration for customs duty payment are lodged simultaneously.
2.  Objectives of the Simplified Declaration Procedure
(1) Greater convenience for the importer
The Simplified Declaration Procedure makes it possible to release goods before the
lodging of a declaration for customs duty payment, while simplifying and increasing theWT/TPR/M/107/Add.1
Page 120
efficiency of declaration procedures. Consequently, there will be greater convenience for
the importerand a reduction in costs, as it will be possible to receive imported goods
more quickly and smoothly.
(2) Effective management of customs administration
The adoption of the Simplified Declaration Procedure will require the establishment of
new tasks, such as screening for approval. On the other hand, it will make it possible to
basically omit the examinations and inspections for the purpose of customs duty payment
at the time of declaration for release of goods. As a result, it will be possible to more
effectively manage customs administration, beca use more effort can be put into carrying
out inspections for high risk goods, such as stimulant drugs, narcotics and firearms, etc.
(3) International harmonization of customs procedures
 A similar system is used in the U.S. and European countries. Therefore, the adoption of
the Simplified Declaration Procedure in Japan can be considered a move that will
contribute to promoting international harmo nization of customs procedures, facilitating
trade.
Tariffs on Agricultural Products
Question 8
We noticed an increase in the simple average bound rate and the simple average applied rate of
agricultural products from 1998 to 2000 in Table III.1 in the Secretariat’s Report. It would help us to
further understand Japan’s tariff structure on agricultural products if Japan could please explain the
reasons for the upsurge in the tariff rates.
Tariff adjustment
Question 9
We have noted that in 2001 Japan enlarged the duty-free and quota-free market access under the GSP for
LDC’s exports. Please could we be provided with detailed information about this adjustment?
Answer 9
In 2001, Japan expanded the country and product coverage of duty-free/quota-free treatment for LDC’s
exports under the GSP scheme. For further detailed information, please see the Secretariat’s Report at
http://www.mofa.go.jp/policy/economy/gsp/index.html .
Import quota
Question 10
Referring to Table A III.3, Japan listed some fish import quota data together with the figures for actual
fish imports from 1996 to 1998. However, for the y ears 1999 to 2001 the Table did not show the figures
for actual fish imports. Please could Japan explain the reason for this omission and provide the figures?
Answer 10
The figures shown in the table are final. The import quotas issued from 1999 to 2001 are still valid, which
means there is still a possibility that more products will be imported within these quotas. Therefore, it is
impossible to determine the final figures at this moment.WT/TPR/M/107/Add.1
Page 121
State trading
Question 11
State trading activities in Japan include tobacco, rice and milk products. Please could Japan provide
detailed information on the relevant state trading administrative measures applying to milk products?
Answer 11
Among dairy products, the quota established in the Uruguay Round for "designated dairy products for
general use" (skimmed milk powder, butter, etc.) is imported by the ALIC (as state trading).  The ALIC
imports and resells designated dairy products, taking into account domestic supply and demand
situations through a competitive tender.  Further deta ils are reported in Japan's notifications on state
trading and on market access.
Standards, testing and conformity assessment -bilateral, regional and multilateral arrangements
Question 12
In paragraphs 48 and 49, Japan mentioned that it has signed legally- binding Mutual Recognition
Agreements (MRAs) on conformity assessment procedures with the EU and Singapore, respectively. In
order to help us improve our understanding of how  these two bilateral MRAs are working, we would
appreciate it if Japan could share with us its experiences regarding the implementation effects of these
two MRAs on trade in the telecommunication sector . We would also like to have Japan’s views on how
these legally-binding bilateral MRAs compare with non legally-binding multilateral arrangements onconformity assessment procedures, such as the AP EC Telecommunication MRA. If Japan also supports
non legally-binding multilateral arrangements, how does its trade policy handle the differences between
the two types of MRAs?
Answer 12
With regard to the implementation effects of MR As on trade in the telecommunications sector, our
comments are as follows.
The Japan-EC MRA and the Japan-Singapore MRA
- The Japan-EC MRA went into effect on January 1, 2002. Since the registration of Conformity
Assessment Bodies on both sides is  still currently underway, the implementation effect of the
MRA cannot be evaluated at this time.
- The Japan-Singapore MRA is scheduled to take  effect on November 30, 2002, after which, we will
take actions to implement
- the agreement.
Japan considers that a legally binding MRA is necessar y to implement a mutual recognition of conformity
assessment with other economies, and this agreement may be either bilateral or multilateral. Japan also
recognizes that APEC TEL MRA, which is not legally binding, should provide a "model" among the
APEC member economies. Japan is now examini ng how to implement APEC TEL MRA Phase I.
Standards, testing, and conformity assessment -Mandatory technical regulations
Question 13
Japan has stated that in 2001, approximately 20% of all Japan Industrial Standards (JIS) were quoted in
Japanese Laws and government/ministerial ordinances as mandatory technical regulations. Could Japan
please explain what percentage of all these mandatory technical regulations is derived directly fromWT/TPR/M/107/Add.1
Page 122
international standards? And specifically, of the mandatory technical regulations on computers and
household electronic goods, what percentage is derived directly from international standards?
Answer 13
Japan/JISC has aligned JIS with international standards where necessary, as stated in the Secretariat
report.
Japan is advancing the adoption of JIS for technical regulations as performance-based technical
specifications if necessary, and harmonization between technical regulations and international standards
where appropriate, through the Three-Year Programme for Promoting Deregulation and its follow-up
process.
As a result, the number of technical specifications in technical regulations adopting JIS, which are
aligned with international standards, is increasing. We can simply say that those technical specifications
are aligned with their corresponding international standards.
As for electronic products, the Electrical Appliance and Material Safety Law covers some of them and
provides technical requirements. All standards for these electronic products are harmonized to IEC
standards except where IEC standards do not exist.
Japan has no technical regulations concerning to personal computers.
Standards, food safety inspections, and sanitary and phytosanitary measures
Following Japan’s previous trade policy review, many regulations under the Food Sanitation Law were
revised. However, we have noticed that some of its new regulations on food additives, spices and residual
pesticides are inconsistent with Codex international standards. Would Japan please clarify how it intends
to bring its laws into line with international standards? Concerning those foods for which additive or
residual pesticide standards have not yet been established in Japan, could Japan perhaps consider using
the Codex standards at least as temporary standards in order to avoid adverse trade effects? As a major
trading partner of Japan, we have two questions regarding food additives and basic standards on residual
pesticides in food:
Food additives
Question 14
Japan’s regulations on food additives are inconsistent with Codex international standards. Many food
additives that have been used perfectly legally worldwide are not granted a food safety permit by Japan
(e.g. castor oil). Businesses in exporting countries are therefore forced to make products for Japanseparately in order to comply with Japanese regulations, which we consider to be a barrier to trade. We
suggest that Japan amends the above-mentioned regulati ons by aligning them with the standards used for
those internationally permitted food additives.
Answer 14
As with most other developed countries, only food additives designated as safe by the Minister of Health,
Labour and Welfare may be used in foods under the Food Sanitation Law in Japan.
Any person who wishes to use any undesignated food additive can submit a petition for designation to the
Minister of Health, Labour and Welfare with the required data including data regarding safety.WT/TPR/M/107/Add.1
Page 123
When a proposed petition is reviewed, an extensive evaluation is made concerning the safety and
usefulness of it on the grounds of sound science, which takes CODEX standards and the evaluation by
JECFA into serious consideration.
Basic standards on residual pesticides in food
Question 15
Japan has a detailed list of standards on the levels of residual pesticides permitted in all food items, but
the levels vary per item and the classifications are extremely complex. It is difficult for foreign producers
to follow the guidelines. For example, the “edible be ans” category contains “subdivisions” for green peas,
small beans, broad beans, soybeans, peanuts, and other beans. However, beans, four season bean pods andpea pods are classified under “vegetables,” which do not belong to the category of “edible beans.” Could
Japan please explain by what criteria its standards on residual pesticides were established, and advise
what proportion of its standards corresponds to Codex international standards?
If the Japanese classification regarding papilionaceous seed (and pods) is compared with the Codex
classification, the commodities that belong to “Codex Group 014 Legume Vegetable (Code VP)” are
generally classified as “vegetable”, and the commodities that belong to “Codex Group 015 Pulse (Code
VD)” are generally classified as “beans and peas.”
Answer 15
Crop classifications adopted in each country often differ from the Codex classification,  not only because
of the application of pesticides but also because dietary habits and crop production are different in each
country. The level of correspondence between the Codex classification and the Japanese classification is
equal to the level of correspondence between the C odex classification and ones used in other countries,
including the United States and EU.
The Japanese classifications are based on plant taxonomy and refer to the Codex classification. As such,
the knowledge of plant taxonomy can help in the understanding of the Japanese classification.
Inspection of agricultural imports
Question 16
We understand that the Japanese government has revised the “Food Sanitation Law” so that pesticide-
tainted agricultural products are prohibited from import.  What is the content of this revision to the “Food
Sanitation Law?” Does it conform to the WTO principle of transparency?
Answer 16
Considering recent circumstances on the sale and importation of food and food-related products that
haves a considerable probability of causing a food sanitation hazard, it was necessary to introduce
provisions to enable the Minister of Health, L abour and Welfare to prohibit the sellng, manufacturing
and importation of specific foods, food additives , apparatus and containers/packages from a specific
country, region or plant. It was also necessary to strengthen the penalties applied to a person whoviolates the provisions of the “Food Sanitation Law”. These are the main reasons for the amendments in
the law
We published a notice concerning this “Amendment of the Food Sanitation Law” to other WTO members
as emergency measures on July 18, 2002, in accordance with the provisions of Paragraph 6 of Annex BWT/TPR/M/107/Add.1
Page 124
based on “Recommended Procedures for Implementing The Transparency Obligations of The SPS
Agreement(Article 7).”
As an outline of the Amendment, it is stated that: 1.the Minister of Health, Labour and Welfare may
prohibit the sale, manufacturing and importation of specific foods, food additives, apparatus andcontainers/packages from a specific country, region or plant, by notification in the Official Government
Gazette after consulting with the head of related ministries/agencies and hearing opinions of the
Pharmaceutical Affairs and Food Sanitation Council. This applies to cases where:
(i) it is recognized that considerable amounts of foods that do not conform to the provision of Food
Sanitation Law are assumed to be contained, in light of the detection of considerable number of
violation as a result of sampling examination, ci rcumstances of the food  sanitation management
in the production areas, and other related factors; and
(ii) it is recognized that the necessity for the prohibition is particularly high, considering the degree
of potential hazardous effect on human health and other related factors.
The Minister of Health, Labour and Welfare shall lift all or a part of this prohibition by notification in the
Official Government Gazette after hearing opinions of the Pharmaceutical Affairs and Food Sanitation
Council, in cases where it is recognized that there is no probability of occurrence of food sanitation
hazard arising from the foods, food additives, appar atus and containers/packages concerned based on
application of the interested parties, or as the need arises.
The Minister of Health, Labour and Welfare and the prefectural governor shall endeavor to publish the
name and other information of a person who has violated the provisions of Food Sanitation Law, and to
clarify the situation of food sanitation hazard.
Provisions for administrative disposition and penalties (penal servitude equal to or less than six months
or a fine equal to or less than 300,000 yen) for violation of the provisions will be established/amended.
The date of effectuation is one month after the date of proclamation.(September 7, 2002)
Investment regulations and promotion measures
Question 17
The WTO Secretariat Report indicates that prior registration is required, in principle, for inward FDI in a
number of sectors including agriculture, forestry and fisheries, petroleum, leather and leather products,
investment trust management, air and maritime tran sport, Type 1 telecommunications, cable television,
and broadcasting. Please indicate what are the procedures that foreign investors must follow? What kind
of documentation must foreign companies provide? What are the criteria for deciding whether to acceptor reject an application? Please also provide us with the relevant documentary references.
Answer 17
As for the procedure in the Foreign Exchange and Foreign Trade Law relating to Inward Direct
Investment 　Where a prior notification is required for an inward direct investment, a foreign investor
must send a notification to the Minister of Finance and the Minister in charge of the industry involved,
through the Bank of Japan, three months prior to the intended investment being made.
The party providing the notification must not execute the relevant investment until at least 30 days after
receipt of the notification (no-action period).WT/TPR/M/107/Add.1
Page 125
However, if the Minister of Finance and the Minister in charge of the industry involved see no special
problem with the investment, they can shorten the no-action period and allow execution of the transaction
two weeks after receipt of the notification.
On the other hand, if problems are perceived after screening, recommendations or orders may be made to
change or cancel the details of the notification.
A foreign company is required to give a prior notification 　prescribed on the Foreign Exchange and
Foreign Trade Law. It notifies the involved of the ma tters, such as the objective of business, amount, and
time of performance.
The criteria for deciding whether to accept or reject a foreign company is based on a prior notification
that is screened by two points
(a) The first is whether it endanger ｓ national securities, disturbs the maintenance of public order,
or hampers the protection of public safety.
(b) The second point considered is whether it adve rsely and seriously affe cts smooth management of
the Japanese economy.
Export restrictions
Question 18
We have noted that since its previous Review, Japan has made some changes in its export controls.
However, Japan still maintains export controls on some products, which might not be fully in compliance
with WTO rules. For instance, concerning the export control on eel fry, Japan’s regulation on export
administration stipulates that “Except for the permission of the Minister of Economy, Trade and Industry,it would not be allowed to export eel fry due to the Japanese domestic needs during the annual production
period of eel fry from 1 December to 30 April next year.” Please explain how this regulation is justified
under WTO rules.
Answer 18
Japan prohibits, in principle, catching eel fry so as to maintain the sustainable use of eel resources,
based on the Fishery Resources Conservation Law and the Act of Fisheries. But, for the purpose ofresearch and cultivation, the Government specially pe rmits catching a limited am ount of the eel fry within
a given period of time (from 1 December to 30 April). Therefore, regulation is in place under the Foreign
Exchange and Foreign Trade Control Law.
In terms of the sustainable use of eel resources, the rationale lies in this regulation.
Fishery subsidies
Question 19
Japan has reported five kinds of subsidies that it applies to its fishing industry. These are: (1) Additional
Depreciation on Fishing Boats; (2) Fisheries Modernization Fund Interest Subsidy; (3) Fisheries TrustFund Subsidy; (4) Fund for the Projects Implemented by Regional Governments for Promoting
Sustainable Fisheries; and (5) Fund for the Activiti es Implemented by Non-governmental Organizations
for Promoting Sustainable Fisheries. Of these, coul d Japan please provide details of the status of (4)
above, the Fund for the Projects Implemented by Regional Governments for Promoting Sustainable
Fisheries, including information on what amounts of funds are allocated to which kinds of items?WT/TPR/M/107/Add.1
Page 126
Answer 19
This fund supports comprehensive activities implemen ted by regional governments to promote sustainable
fisheries.  They include research activities by prefectural research laboratories, dissemination of policy
guidance, and assorted information, such as pamphlets and seminars, designed for persons related tofisheries. As for subsidy allocations, 3,226 million yen was designated to the area of capture fishery, 460
million yen to aquaculture, and 57 million yen to fishery processing.
Patent-expired pesticides
Question 20
Many developed countries permit the use of pesticides whose patents have expired because these more
competitively-priced items can be beneficial to their farmers. However, Japan’s Ministry of Agriculture,
Forestry and Fisheries forbids the import of public domain pesticides to Japan, citing safety concerns. My
delegation considers that patent-expired pesticides are competitive in the market. As long as their
methods of use and the standards on their residual presence on foods comply with international standards,
they should surely be permitted to compete fairly in the Japanese market alongside other agriculturalpesticides for sale in Japan. It would be appreciate d if Japan could explain how this import prohibition is
in compliance with WTO rules.
Answer 20
Japan does not forbid the import of patent-expire d pesticides. Under the Agricultural Chemicals
Regulation Law, however, it is necessary to register pesticide products, including the item in question, in
order to market them in Japan.
Competition policy
Question 21
Japanese suppliers of services have been considerably protected from foreign competition. Certain
activities, notably maritime and air transports, are still exempted from the Anti-Monopoly Act. In this
regard, we would like to know whether Japan has any plans to further enhance competition policy in its
services sector, and delete maritime and air transport services from the exemption list.
Answer 21
In the field of international maritime transport, conferences and other agreements among shipping lines
have been exempt from the “Anti- Monopoly Act” in Japan, as they have been in other nations. In Japan,
the “Anti-Monopoly Law” immunity applies to all sh ipping cartel participating companies that call at
Japanese ports. This not only applies to Japanese shi pping companies, but to foreign shipping companies
as well..
In order to further promote fair and free competition among carriers, as well as to secure a stable supply
of oceangoing shipping service, Japan reviewed the previous exemption system and amended the “Marine
Transportation Law” to introduce a new system in 1999. Therefore, Japan currently considers that this
exemption does not need to be amended.
As for air transportation in Japan, any kind of air transport agreement among air carriers used to be
exempt from the “Anti-Monopoly Act.” Since the amendment of the “Civil Aeronautics Law” in 1997,
however, the exemption of domestic air services has been limited to such agreements as those on island
routes. On the other hand, the exemption of international air services was maintained for the purpose  ofWT/TPR/M/107/Add.1
Page 127
consumer benefit as well as international harmonization. Therefore, Japan currently considers that those
exemptions do not need to be amended.
Agriculture
Question 22
We have the following questions for Japan concerning its agricultural policies:
Why does Japan set itself a target of a 45% level of food self-sufficiency by 2010? What measures and
programmes will be adopted to reach this goal?
Please explain the status of Japan’s TRQ system for ag ricultural products. Is there any plan to make the
administration of the TRQ system for agricultural products more transparent? If so, what is the timetable?
Answer 22
(i) The Japanese food self-sufficiency ratio is 40, which is the lowest level among major advanced
countries. The global food supply/demand balance is  likely to become unbalanced and cause serious
problems in the medium and long term because of the increasing population, restrictions on the
expansion of arable area, environmental problems, and so on. Given the situations above, Japan willcontribute to the stabilization of the world food supply/demand by making effective use of its domestic
resources.
Therefore, in the Basic Plan, it is stipulated that 45% will be appropriate as a target for the food self-
sufficiency ratio, provided that the problems will be tackled and solved by producers and consumers by2010.
In order to meet the target, we have been promoting a reform of the agricultural structure by securing
productive farmland and efficient farmers, developing and disseminating technologies, and providing
farm products that meet consumers' needs.
We consider that Japan’s current TRQ system possesses sufficient transparency, through the notifications
to the WTO on TRQ administration and in-quota impo rts. Furthermore, we also domestically publish
relevant information, such as the necessary procedures for applying for a license, together with the
names and contact points of the license holders. J apan therefore has no plan to change its TRQ system in
view of improving transparency.
Border measures
Question 23
In August 2001, the Ministry of Agriculture, Forestry and Fisheries (MAFF) announced a Priority Plan
for Stable Food Supply and Aesthetic Land Development. We request Japan to please provide moredetails of the plan, such as what is the eligibility for applicants receiving grants and for how long is it
envisaged that the plan will be implemented? In addition, according to footnote 8 of page 55, Japan is also
investigating the possibility of introducing safety -net measures. Is there any investigation report
available? If so, please provide the details.
Answer 23
The Priority Plan for Stable Food Supply and Aestheti c Land Development summarized 10 priorities for
the direction of agricultural policy, building on th e Basic Law as well as Basic Policies for Structural
Reform of the Japanese Economy announced in June 2001.  The content of the Plan was furtherWT/TPR/M/107/Add.1
Page 128
developed into the Action Plan for Revitalizing Japanese Food and Agriculture announced in April 2002.
Please refer to page 15 of the report by the Government.
With regard to safety net measures, the MAFF report in August 2001 concluded that safety net measures
against a fluctuation of farm income should be introduced for farmers certified by municipalities.  Thespecific measures are currently under consideration.
Agricultural Policy Reform
Regarding agricultural policy, it is stated in the Ja pan Government Report that it has vigorously reformed
price support measures on a number of key agricultural products – rice, wheat and soybean – in order to
allow prices to reflect the market signals. We would like to raise the following questions:
Question 24
Does Japan think that these reforms have achieved the policy goal? Are any problems being experienced
with these reforms and, if so, what kind of problems are they, and how does Japan intend to deal with
them?
Answer 24
With the reform of price support mechanism, commodity-specific safety net measures against fluctuation
of prices have been introduced for several products.  Instead of these safety nets, the government is
currently considering the introduction of a non-commodity-specific safety net measure to stabilize thetotal farm income.
Question 25
In order to alleviate the adverse effects on farmers caused by policy reform, Japan has designed the
safety-net mechanism to protect farmers’ income. We would like to know the details of how thismechanism works. Does Japan think that the mechanism is effective or efficient in safeguarding farmers’
income?
Answer 25
While we recognize the need to introduce some mechanism to mitigate adverse effects on farm
management caused by the price fluctuation of fa rm products, details of a safety-net mechanism to
stabilize total farm income are still under consideration.
Question 26
As we know, Japan has abolished the price support for rice and implemented the price difference subsidy
measure. Could Japan please describe what its policy goals are in this respect and provide details of the
relevant measures and their effects?
Answer 26
A series of measures so far taken are aimed at fully reflecting the market-oriented formation of rice prices
as well as mitigating the negative impact of price fluctuations against farm management.WT/TPR/M/107/Add.1
Page 129
Trade Insurance
Question 27
Japan is considering using trade insurance to compensate for losses incurred by Japanese businesses
resulting from intellectual property rights infringement  by foreign businesses. What steps is Japan taking
to implement the measures and how would th e proposed measures comply with WTO rules?
Answer 27
This question may be based on a misunderstanding; yet the details are as follows: Japan (Nippon Export
and Investment Insurance) has decided to cover the lo sses incurred in cases where after an insured party
has made an investment, the gover nment of the country concerned introduces measures that contravene
international agreements such as TRIPs and this causes the insured party a cessation of operations.
This measure, however, does not imply that insurance will be paid to cover the actual losses resulting
from intellectual property rights infringement by foreign businesses.
E-commerce
Question 28
At present, e-commerce is an important area of focus for many countries. Therefore, my delegation hopes
to learn how the Japanese government promotes e-commerce and its current progress.
Answer 28
In order to facilitate e-commerce, regulations have been revised and recently new rules have been
created promptly and intensively
Necessary measures have been taken to prepare an environment where private-sector entities can freely
engage in various economic activities, through electronic means such as the Internet. For instance, the
“Commercial Code” was revised to enable Internet us e in sending summons to shareholders’ meetings. A
“No-action Letter” has also been introduced.
As for the creation of new rules, closing times of electronic contracts has been provided, and the rules on
the scope of liabilities on the part of Internet service providers were also formulated. With these
measures, the primary framework for electronic co mmerce is almost complete. According to “e-Japan
Priority Policy Program-2002,” which was adopted at IT Strategic Headquarters on June 18, 2002., we
are now implementing measures such as further enhancement of e-commerce frameworks, promotion of
IT utilization in private companies, facilitation of distribution of digital content, and enhancement of
consumer protection,.
Please refer to http://www.kantei.go.jp/foreign/policy/it/index_e.html  for an outline of “e-Japan Priority
Policy Program-2002”.
Telecommunications
Question 29
We understand that Japan has enacted the IT Basic Law (the Basic Law for the Formation of a Highly
Networked Society) to accelerate the pace of Japan’s knowledge-based socioeconomic transformation.
We would like to be advised how Japan will ensure fair competition in a networked society and ensure the
protection of IPRs.WT/TPR/M/107/Add.1
Page 130
Answer 29
Based on the “IT Basic Law,” the IT Strategic Headqua rters decided “e-Japan Priority Policy Program”
designated five priority areas for policy formation. The first is formation of the world’s most advanced
information and telecommunications networks, second is the promotion of education and development of
human resources, third is the facilitation of e-commerce, fourth is digitization of administration and
application of IT in other public areas, and the fifth and last area is security and reliability of advanced
information and telecommunications networks.
Following up on the above program, Headquarters implemented “e-Japan Priority Policy Program
2002” in June 2002. This program includes regulatory reforms and measures that further encourages
fairness and a competitive environment relating to  IT. This program will also implement proper
intellectual property protection measures and encourage utilization and facilitation of digital content
distribution. An example of our commitment to this can be seen in the Government revisions of the
“Telecommunications Business Law” and the “Patent Law.”
For more information, please refer to “e-Japan Priority Policy Program 2002 (summery)” on internet
(http://www.kantei.go.jp/foreign/policy/it/index_e.html).
Telecom interconnection fees
Question 30
Japan’s telecom interconnection fees are very high and present a barrier to new players wishing to enter
the market. We would like to know how Japan decide s on interconnection fees and we ask Japan to please
explain how the setting of such high interconnection fees is not in violation of the spirit of fair market
competition.
Answer 30
Interconnection charges have been decreasing steadily recently. The procedure to decide on
interconnection charges is appropriate and highly transparent: a telecommunications carrier with the
essential facilities shall apply to the MPHPT for authorization of its interconnection tariff and the
MPHPT shall grant authorization after consultation with the Telecommunications Council and receipt of
a report thereof.
Type-I telecommunication
Question 31
Permission is required to enter or withdraw from the operation of a Type-I telecommunication business in
Japan. Please could Japan clarify what are the criteria used in deciding to approve or reject applications?Furthermore, could Japan please explain how the setting of these review standards conforms to the
principle of transparency and why the criteria do not create barriers to market access?
Answer 31
Permission to enter into a Type -I telecommunications businesses
(1) The criteria are as follows:
- The applicant shall have an adequate financial base and the technical capability to
properly conduct his or her telecommunications business.
- The plan of the telecommunications business shall be reliable and feasible.WT/TPR/M/107/Add.1
Page 131
- In addition, the introduction of that telecommunications business shall be appropriate for
the sound development of telecommunications in general.
(2) These criteria are stipulated in the TBL (Article 10), so transparency is ensured.
(3) These criteria are the minimum to protect the interests of users, which is the purpose of the TBL,
and it does not create barriers to market access as stipulated in GATS Article 16.
Permission to suspend or discontinue the business
(1) The Minister of Public Management, Home Affairs, Posts and Telecommunications shall grant
the permission unless the Minister determines t hat suspension or discontinuation may impair the
public interest to a significant extent.
(2) These criteria are stipulated in the TBL (Article 18), so transparency is ensured.
(3) These criteria are the minimum to protect the interests of users, which is the purpose of the TBL,
and it does not create barriers to market access, as stipulated in GATS Article 16.
Question 32
In addition, a Type-I telecommunications carrier that holds more than a 25% share of subscribers in the
mobile market (except for PHS) must compile, notify and publicize its interconnection fees. Does thatmean that Japan thinks that a telecommunication carrier that holds more than a 25% share of the
subscribers has market influencing power and must therefore be regulated? Are there any regulations on
the standards by which Type-I telecommunication carriers calculate interconnection fees? Should the fees
be calculated by long-run incremental cost (LRIC)? Will the interconnection fees be openly announced on
the Internet? Are the interconnection arrangements between the Type-I telecommunication carriers andother businesses posted on the Internet? What are the relevant websites?
Answer 32-a
With respect to interconnection with telecommunications carriers, which have a number of subscribers in
the mobile market, obligations of notification and publication are imposed on such telecommunicationscarriers from the viewpoint of securing transparency.
Answer 32-b
Standards for interconnection charges for facilities, designated as essential facility are prescribed in the
Interconnection Charges Regulations (MPT Ordinance No.64 of 2000), in order to ensure fairness and
reasonableness in regard to cost.
Interconnection charges for facilities, designated as essential facility, have been steadily falling due to
the introduction of LRIC-based costing methodology up to FY 2002, which we consider a notable
accomplishment.
There has also been cost reduction at NTT East and West as a result of providing incentives aimed at
making their business structure more efficient.
Continuous efforts toward th e elimination of inefficiency are necessary; therefore we basically consider it
appropriate to calculate interconnection charges for the said facilities by LRIC.
Answer 32-c
Interconnection tariffs of NTT East and West as well as those notified as mentioned in 32-A shall be made
public over their Internet websites or in other ways.WT/TPR/M/107/Add.1
Page 132
With respect to individual interconnection agreements, which are not subject to interconnection tariffs,
there is no obligation of publication over the Internet or in any other way.
Air transport
Question 33
Among Japan’s commitments on air transport services, there is a provision in which Japan commits to
open marketing and sales services. However, our Airlines are currently not permitted to set up a branch
company in Japan to engage in marketing and sales — they are forced instead to  authorize local airline
companies, travel agencies, or air shipping companies to handle marketing and sales on their behalf. We
would like to be advised how this complie s with Japan’s WTO services commitments.
Answer 33
The relevant authority of the Government of Japan has maintained the measures, based upon the
arrangement to which both the Japanese and Taiwanese sides agreed.
Legal services
The WTO Secretariat Report mentions that residency and nationality requirements for patent attorneys
(Benrishi) were abolished on 6 January 2001. It woul d be appreciated if Japan could provide further
information on:
Question 34
- the current qualification requirements for Benrishi;
Answer 34
The current qualification requirements for Benrishi are;
1. to pass examination of Benrishi, or
2. to be qualified as a lawyer under Japanese lawBengoshi, or
3. to work as a examiner/appeal examiner for more than seven years in JPO.
Question 35
the licensing restrictions that apply for foreigners seeking to be Benrishi (e.g. restrictions applying to
foreigners on the entrance examination for Benrishi);
Answer 35
Japan has no licensing restriction that applies only to foreigners seeking to become Benrishi.Question 36
the current requirements applying to a foreign patent attorney seeking to establish a patent corporate body
together with a Japanese Benrishi.
Answer 36
Those who are qualified as Benrishi in Japan can become a corporate managing member of a patent
corporate body.WT/TPR/M/107/Add.1
Page 133
Educational services
Question 37
The WTO Secretariat Report indicates that Japan has recently reformed several regulations on the
establishment of universities and their faculties, including the introduction of a system of accreditation bythird parties. Please could Japan explain how the accreditation system works in greater detail? We would
also like to learn more about the third parties. Is it possible, for example, for a foreign organization to be
the third party? Please could Japan provide us with a description of the qualification requirements for
third parties?
Answer 37
Japan will introduce the third-party evaluation system for universities. The details of the evaluation
system are now under consideration.WT/TPR/M/107/Add.1
Page 134
URUGUAY
Summary Observations, Trade Policies and Practices by Measure.
Question 1
Could you comment paragraphs 9,10 and 14 of the Summary Observations of the WTO Secretariat
Report, which emphasize the fact that the governmental assistance to agriculture continues to be
substantial and of wide range, adding that the said assistance is superior to the contribution of the sector
to the GDP and that most part of the assistance seems to consist of measures that distort production and
trade. Likewise, could you inform about what measures are you thinking to adopt in matter of agricultural
reforms in line with the commitments assumed by your Government in the Doha Declaration on
« substantial reductions of the domestic support ».
Answer 1
The description in the Summary Observations, para 14, is a summary of para 11 of Chapter IV, where the
Secretariat quotes the figure of the TSE (total transfer) by the OECD.   The TSE is one of the estimates of
transfer arising from agricultural policies and not necessarily on indicator of distortion.  Japan has beenduly implementing its commitments under the WTO Ag reement on Agriculture and the total AMS in 1999
declined to less than 20 percent of the final commitment level of 2000.  Japan intends to further pursue its
agricultural policy reform in line with its Basic Law, as is explained in the Government Report.
Part IV. Trade Policies by Sector, ii) Boarder Measures (paragraph 8)
Question 2
Could you elaborate the comments on the final part of  paragraph 8 of the Secretariat Report when you
express that « The average applied MFN tariff fo r agriculture is 20.1% (FY2002) compared with an
overall average of 6.9% (Chapter III) ; some 15% of duties applied to agricultural goods are non- ad
valorem . Many agricultural subsectors benefit from relatively high levels of MFN tariff protection ;
several of these subsectors are also subject to a number of tariff peaks ; for example, the duty rate payable
on out-of quota imports of rice is one of the highest rates in Japan’s customs tariff, at 406% in terms of ad
valorem  equivalent », product, which is of particular interest for my country and with a difficult access to
this market. Taking this into account and considering, likewise, that even in matter of trade in services, in
your present list of Specific Commitments to the WTO, Japan has excluded rice, among other goods,
from its commitments in distribution services.Could Japan comment what are the measures Japan is thinking to adopt in order to improve the access to
its market with regard to rice, in the framework of the objectives agreed in the Ministerial Declaration of
Doha.
Answer 2
Japan has been actively participating in the ongoing agricultural negotiations.
Japan has been making its position clear through a series of negotiation proposals, including the main
one submitted in Dec.2000.
To be specific, regarding access opportunities,
the current system, which requires Members to provide a certain level of access opportunities, has the
fundamental problem of imbalance be tween importing and exporting countr ies in terms of their rights
and obligations.  Such aspects of the system need to be improved.WT/TPR/M/107/Add.1
Page 135
the level of access opportunities should be decided giving sufficient consideration for such factors as
securing the benefits of the multifunctionality of agriculture and ensuring food security.  The level should
also be decided according to the actual agricultural situation and the progress made through the
structural reform of each country.  Consideration shou ld also be given to the different situations of the
international supply and demand of each respective product in order to provide flexibility whendetermining the appropriate level of access opportunities.
3. besides the above-mentioned points, the system, whic h requires Members to provide a certain level of
access opportunities, has the following problems.  It is, therefore, important to make the necessary
improvements to the system.
(i) Since the level of access opportunities was determined according to domestic consumption during the
past negotiations, such level should now be reviewed, taking into consideration the latest volume of
consumption in order to achieve fair treatment.
(ii) As for the products subject to the special treatment mentioned in paragraph 2 of Article 4 of the
Agreement on Agriculture, there is a problem whereby the additional level of access opportunities will bemaintained, even after the special treatment ceases to be applied during the implementation period.
There is, therefore, need for improvement.
Part IV. Trade Policies by Sector, iii) Domest ic measures and support programmes (paragraph 11)
Question 3
In paragraph 11, the report indicates that the support received by farmers and the consumer prices of
agricultural products in Japan remain above the OECD average. The net producer support estimates (PSE)
and consumer support estimates (CSE) for 2001 have been provisionally estimated at 59% and 53%,
against an OECD average of 31% and 24%.  To th is respect, the Cairns Group and other members made
concrete proposals in order to be able to correct the asymmetries and distorsions in international trade,
whereas Japan did not declare anything up to the deadline but expressed that it condemned our very
ambitious and little realistic proposals.
We would like to know what Japan considers as realistic and what type of alternative suggestions it will
propose in order to accomplish what it was assumed in the Doha Agenda for development.
Answer 3
1. Japan has already tabled specific suggestions through its negotiating proposal and supplementary
papers in the negotiations on agriculture. There is no doubt that they are perfectly consistent with Doha
mandate. For instance, Japan proposes a reduction of  tariffs and non-exempt domestic support by using
the UR formula. We are convinced that this must be the most realistic approach for pursuing progressive
reductions in support and protection in this round of negotiations, with non-trade concerns in eachMember being duly addressed.
2. We would like to point out that the OECD’s PSE is an indicator which includes exempt direct
payments, as well as market price support due to domestic and international price gaps.  It is therefore
completely different from the AMS, which is used in the WTO to measure non-exempt trade-distortingdomestic support.WT/TPR/M/107/Add.1
Page 136
UNITED STATES
I. Economic environment
II. Trade policy regime:  framework and objectives
(3) Trade Agreements and Arrangements
Question 1
We understand Japan is seeking to strengthen its economic ties with Mexico, the Republic of Korea, and
the ASEAN countries through possible free trade agreements.  What effort is Japan making to ensure that
any future FTAs liberalize trade in substantially all sectors, including agriculture, and are compliant with
WTO obligations (Article XXIV)?
Answer 1
Maintaining and strengthening the multilateral trading system under the WTO has been the main pillar of
Japan’s external economic policy. On this basis and with a view to ensuring that FTAs are consistentwith WTO rules, Japan does not intend  to exclude any specific sector, such as agriculture, in negotiating
FTAs. As part of its efforts to this end, the Government of Japan engage in discussions with as many
relevant domestic parties as possible with a view to  building a consensus on the necessity for forming an
FTA consistent with WTO rules with a particular country, as well as on how to proceed with the
negotiations including items to liberalize.
III. Trade policies and practices by measure
(1) Introduction
Question 2
Although Japan did not notify any export subsidies to the WTO SCM Committee in its most recent
notification (G/SCM/N/71/JPN and G/ SCM/N/71/JPN/Suppl.1), this report (para 5 and 6, pg. 26) explains
that Japan maintains export finance, insurance guarantees, drawback schemes and various other forms of
assistance.  For the sake of transparency, could Japan please provide complete information for any export
finance schemes, insurance guarantees, drawback schemes and various other forms of assistance?  Could
Japan please discuss these subsidy programs and explain whether or not each program is consistent withthe OECD arrangement to which it is a party?  With regard to the drawback schemes, could Japan please
explain whether these schemes operate in conformity with Annexes I and III of the SCM agreement?
Answer 2
First, with regard to the export finance schemes, Japan Bank for International Corporation, which is a
Japanese export credit agency, provides officially supported export credits for the exportation of
equipment from Japan that has repaym ent terms of two years or more.  This scheme is in compliance with
an OECD arrangement on the Guidelines for Officially Supported Exports Credits.  For more details on
this scheme, please see the following website: http://www.jbic.go.jp/english/index.php .
Second, with regard to insurance guarantees, the independent administrative institute of Nippon Export
and Investment Insurance(NEXI) took over the operati on of the Japanese Export Credit Insurance, which
had been administrated directly by the Japanese Government, on April 1, 2001.Please refer to the
following website for details of Nippon Export and Investment Insurance:
http://www.nexi.go.jp/e/index.htmlWT/TPR/M/107/Add.1
Page 137
Export Credit Insurance is consiste nt with the OECD arrangement.
Finally, regarding the drawback schemes, Japan does not possess any drawback schemes that are
inconsistent with WTO Agreement. A consumption ta x in Japan is an indirect tax, much like the value
added tax imposed in European countries, which adopts the principle of consumption ground taxation.On the one hand, a consumption tax is imposed on import goods through customs procedures. On the
other hand, consumption tax is not imposed on export goods. Consumption tax is not imposed on boarder
tax when a deduction (or refund) of the amount of consumption taxes, which has been imposed on the
initial stage of dealings, is held. This scheme is consistent with the International Consumption Taxation
rule and this does not constitute an export subsidy under WTO rules.
(2) Measures Directly Affecting Imports
(iii) Tariffs
Question 3
In this section of the report (para 22, pg. 31) it is stated that the “The in-quota amount is divided into sub-
quota amounts according to end-use requirements” and goes on to say that those eligible for quotas “must
undertake the production or sale (to particular end users) of the agricultural products concerned.”  It is not
clear what is being undertaken here.  What is the WTO basis for establishing and maintaining end-use
requirements for quota allocations?  Why are those allocated import quotas or sub-quotas required to
produce for or sell to particular end-users?
Answer 3
Japan has introduced a tariff quota system in order to  maintain a balance of interests between domestic
producers and end-users, and to stabilize supply and demand situations in accordance with market
conditions.From this point of view, Japan maintains alloca tion requirements to undertake production or sale to
particular end-users so as to secure a quota allocation for end-users. These measures, in fact, are
effective for the stability of supply and demand situations and the encouragement of the quota fill.
Japan believes that the present WTO provisions do not prohibit such measures.
Government procurement
Question 4
The report (para 37, pg. 36) states that "Japan notified the WTO Committee on Government Procurement
of the removal of three railway companies from the ‘L ist of Entities’ and from the ‘List of Entities which
procures the services, specified in Annex 4' following their recent privatization.”  Questions: (1) Given
that Parties to the WTO Agreement on Government Procurement have objected to the withdrawal of theseentities on the basis that government control or influence has not been effectively eliminated, are these
entities continuing to comply with the Agreement on Government Procurement?  (2) Does the Japanese
Government have any plans to remove the three Japan Railway Companies from the authority of the
“Guidelines Regarding Matters that New Companies Sh ould Consider for the Time Being in the Conduct
of their Business ”?  (3) Does JR East continue to coordinate common procurement for the other Japan
Railway Companies?
Answer 4
These entities are continuing to conduct procuremen t in accordance with the Agreement on Government
Procurement.WT/TPR/M/107/Add.1
Page 138
The government of Japan has, for the time being, no plan to remove the three companies from the
authority of the Guidelines.
Until now, JR East has coordinated common proc urement only for rails of other Japan Railways
Companies. It has not yet been decided whether JR East will continue to conduct common procurement of
rails in the future.
Question 5
The report (para 38, pg. 36) states: “In January 2001, the Government also unified the qualification for
participating in competitive contracts (excluding procurement involving public works) with central
government entities, and established a unified list of qualified suppliers”   Question: Why wereprocurements involving public works excluded?  Does Japan have plans to include such procurement in a
unified qualification system?  If not, why?
Answer 5
With regard to public works, it is our common understanding that every procuring entity should
reasonably execute a list of qualified suppliers, because types of construction vary greatly depending on
the procuring entity, and abilities that suppliers need for execution also vary depending on the category
of the building work. In addition, the Construction Business Act requires a construction business license..
It does not seem, therefore, that there is any action  to establish a unified list for public works at this
point.
Question 6
The report (para 39, pg. 36) states that "The Government carries out annual reviews of its voluntary
measures under, inter alia, the 1994 Action Prog ram on Government Procurement Procedures, as
amended."  At the same time, "Procurements under the Action Plan on Reform of Bidding andContracting Procedures for Public Works are not subj ect to this Voluntary Review Meeting."  Why are
the procurements of public works under the Action Plan not subject to the Voluntary Review Meeting?
Does the Japanese Government plan to include such procurements in future Voluntary Review Meetings?
Does the Japanese government provide any similar opportunities for domestic and foreign suppliers to
express opinions or raise concerns regarding public works procurements?  If not, why?  In the absence of
a formal review process, such as the consultativ e mechanism that was in the 1994 U.S.-Japan Public
Works Agreement, what assurances can the Japanese Government give that public works procurementsare "conducted without restriction on suppliers' nationality or on the origin of products or services, based
on the principle of non-discrimination"?
Question 7
The report (para 40, pg. 36) states that “The share ... of single tendering rose to 30.8%, compared with . . .
26.7% . . . in 1997.”  Questions: Can Japan explain why the share of single tendering continues to rise?
How does Japan ensure that the use of single tendering is consistent with the Agreement on Government
Procurement?
Answer 7
In the statistics for 1998-2000, there is an increa sing trend of the numbers and shares of the limited
tendering cases under Article XV:1(b) (i.e. protection of exclusive rights) and XV:1(d) (i.e.
interchangeability with already existing equipment or services) of the Agreement on Government
Procurement (GPA). This seems, in part, to result  from the fact that Japanese entities have been
procuring more and more Information Technology (IT) systems  in recent years.WT/TPR/M/107/Add.1
Page 139
When a Japanese entity needs to commission additional changes, development, operation or maintenance
of an IT system, which was initially procured via open tendering, it is often unreasonable and costly if the
entity commissions suppliers to deliver such services who did not win the original contract for that
system. Therefore, depending on the nature of each contract, procuring entities often  enter into suchcontracts under Article XV:1 (b) or XV:1(d).
In order to ensure that the use of single tendering is consistent with the GPA, Japan has adopted a
voluntary measure under the Action Program on Government Procurement, which states that each entity
in Japan’s Annexes 1 and 3 of the GPA shall publish a notice in the National Gazette of each planned
single tendering, under Article XV:1, at least 20 days before the scheduled date of contract award.This
notification system applies to procurement of goods and services over 100,000 SDR (except forconstruction works, architectural, engineering and other technical services).
Question 8
The report (para 40, pg. 66) states "For procurement above the threshold level of SDR 100,000 specified
under the 1994 Action Program, excluding procurement involving public works, open tenderingaccounted for 67.6% of the total procurement value of 1.04 trillion yen in 2000; procurement of overseas
goods and services accounted for 14.7% (17.4% for goods only) of the total."  However, "according to the
authorities, no data exist on the shares of open, selective, and single tendering, and shares of foreign
suppliers in public works contracts; almost all public works projects valued at or above the threshold of
the WTO Agreement on Government Procurement are subject to open competitive bidding."  Why does
the Japanese Government not collect data for public works contracts similar to the data that it collects for
other types of procurement?  Does the Japanese Government plan to collect this data in the future?
Answer 8
The Japanese Government does not collect public works data based on the 1994 Action Program on
Government Procurement Procedures, but we are prov iding WTO with annual statistics for procurement
of public works of the central government entities under article XIX:5 of WTO/GPA. According to those
statistics in 1999, competitive (open and selective) tendering accounted for 83.5%, limited tendering
accounted for 16.5%, and the share of foreign suppliers was 0.17%(two contracts).
Question 9
The report (para 42, pg. 66) states that "Since the previous Review of Japan, five complaints have been
filed. . ." and a footnote (No. 43) adds "The status of receipt and review of complaints is released every
quarter."  Please provide information on the three most recent complaints that were filed and the
Government Procurement Review Board's disposition of them.
Answer 9
Five cases have been filed with the Government Procurement Review Board since its establishment in
1996. The following are outlines of the three recent complaints disposed of by the Board. Further
information on the status of receipt and review of the complaints is available by Internet at
http:/www5.cao.go.jp/access_e.html.
Case No.1
1. Date of complaint filing: February 17,  2001.
2. Name of the complainant: Jobi Co.
3. Name of the procuring entity:  Yamaguchi University.
4. Products/services concerning the complaint: building-cleaning services.WT/TPR/M/107/Add.1
Page 140
5. Outline of the status of complaint reviewing:
The procurement contract concerned was not on build ing-cleaning services (CPC874), but on placement
and supply services of personnel (CPC872), which is not  covered by  Annex  4 of  Japan’s Appendix I.
Since the GPA does not apply to the contract, the Board decided on February 26, 2001, not to accept the
complaint.
Case No.2
1. Date of complaint filing: October 9, 2001.
2. Name of the complainant: IBM Japan Ltd.
3. Name of the procuring entity: Japan Atomic Energy Research Institute.
4. Products/services concerning the complaint: ITBL Computer System 1 Set.
5. Outline of the status of complaint reviewing:The Government Procurement Review Board reviewed the complaint based on “Review Procedures for
Complaints Concerning Government Procurement,” which was decided by the Office of Government
Procurement Review, on December 14, 1995. Upon doing  so they issued a report on December 21, 2001,
which was delivered to the complainant, IBM Japan,  Ltd., and the procuring entity, Japan Atomic Energy
Research Institute. In the report, the Board judged  that the procurement entity concerned committed a
violation of procurement procedures. However, since the system proposed by the complainant does not
meet the requirement in the specifications prepar ed by the procuring entity, the Board had no choice but
to approve the result of the procurement procedures and reject the complainant's petition demanding
correction measures from the procuring entity concerned.
Case No.3
1. Date of complaint filing: May 29, 2002.
2. Name of the complainant: LOTTE Construction Ltd.
3. Name of the procuring entity: The Tokyo Civil Aviation Bureau,  Ministry of Land, Infrastructure and
Transport.4. Products/services concerning the complaint: The Tokyo International Airport east side multi-level car
parking tower new-building construction
5. Outline of the status of complaint reviewing:
The Government Procurement Review Board reviewed the complaint based on “Review Procedures for
Complaints Concerning Government Procurement,” which was decided by the Office of Government
Procurement Review, on December 14, 1995, and issued a report on July 8, 2002. The report wasdelivered to the complainant, LOTTE construction, Ltd., the procuring entity, The Tokyo Civil Aviation
Bureau, Ministry of Land, Infrastructure and Transport, in addition to SHIMIZU construction Co,
TAKENAKA Co, and OBAYASHI Co, which were partic ipants. In the report, the Board decided not to
accept the complaint because it was filed later than the allowed time limit (i.e. within 10 days from when
the basis of the complaint was known, or should reasonably have been known, to the complainant).
(viii) Standards, sanitary and phytosanitary measures
Question 10
A list of Japanese products subject to mandatory labeling of place of origin are included in a footnote in
this report (No. 47, pg. 40).  Is it true that the GOJ is considering country of origin labeling for soy-based
foods such as tofu?WT/TPR/M/107/Add.1
Page 141
Answer 10
It should be noted that country of origin labelling differs from the labelling of place of origin of their
main ingredient in the footnote.
It has become mandatory to indicate country of  origin for the imported foods since April 2001.
Additionally it has become mandatory to indicate labelling of place of origin of their main ingredient for
the processed foods other than imported ones in the list  of the footnote with a view to responding to the
consumer’s request.
With regard to soy-based foods, it is mandatory to indi cate country of origin for the imported ones. It may
be examined by request whether labelling of place of origin of their main ingredient would be indicated
for soy-based foods.
Question 11
How does Japan determine its country-of-origin labeling requirements?Answer 11
It should be noted that country of origin labelling differs from the labelling of place of origin of their
main ingredient in the footnote.
 the JAS system stipulates that it is mandatory to indicate place of origin for all foods and to indicate
country of origin for imported foods.
The council for JAS has the authority to decide in which way the labelling of the main ingredient’s placeof origin is indicated for the processed foods other than imported ones listed in the footnote
Question 12
Has Japan fully adapted the IPPC standard on “official control” as approved by the OIE in April, 2001?
If so, please explain how Japan implements the standard, specifically as it regards to imported producefound to have pests that are also present in Japan.
Answer 12
Japan considers that the international guidelines of ‘official control’ adopted at the Interim Commission
for Phytosanitary Measures should be one of the bases for considering a future plant quarantine system
in the country. Japan is examining whether it would be possible to maintain “the appropriate level of
protection on plant quarantine” by applying the plant quarantine measures based on the new definition,while ensuring that these measures would fit Japan’s climate conditions and are well designed for
handling huge amount of import.
Question 13
Is Japan’s control of low-path avian influenza consistent with the OIE standard? If not, what is the
specific basis for having a standard different than the OIE standard?
Answer 13
In response to the proposal made by APHIS of the United States, a meeting on the issue of avian influenza
will be held at OIE in December 2002 between the animal health authorities of Japan and the United
States, with assistance from the OIE.WT/TPR/M/107/Add.1
Page 142
(3) Import and Inward Investment Promotion Measures
(iii) Foreign access zones (FAZs)
Question 14
Would Japan discuss in full any incentives, including tax breaks and low-interest loans, received by
companies located in FAZs?  Could Japan also explain whether benefits available to companies in FAZ’s
are typically available to all industries and companies located in an FAZ?
Answer 14
The Government of Japan has established a network of Foreign Access Zones (FAZ) around the country
under the Law on Extraordinary Measures for the Promotion of Imports and Facilitation of ForeignDirect Investment, enacted in 1992, to  attract imports and foreign investment.
A) Support for businesses which are considered to promot e imports such as wholesale, retail and import-
related services in FAZs
Low interest financing by the Development Bank of Japan
B) Support for entrepreneurs promoting the distribution of imported goods in special district areas (five
areas in Japan) within FAZs
1. Loan guaranty through the Industr ial Structure Improvement Fund
2. Small and medium-sized import enterprises can qual ify for credit insurance with preferential terms,
including increased amounts and reduced premiums.
3. Special depreciation allowances for facilities used for manufacturing, wholesale, retail and
transportation (depreciation rate for the first year is 20% for machines and 10% for building structures)
4. Reduction in the real estate acquisition tax and fixed asset tax in some areas5. Exemption from the special landholding tax for fa cilities used for processing, wholesale, retail and
transportation
(4) Measures Directly Affecting Exports
(ii) Export prohibitions, restrictions, and licensing
Question 15
The report states (para 64, pg. 44) that the Japan Seed Trade Association voluntarily restrained its export
of seeds because of a surge in imports grown from the exported seed.  It seems unusual that a group of
exporters would voluntarily curtail exports due to foreign competition to local producers of such products.
Does the Japanese government have a role in encouraging or requiring such “voluntary” actions?
Answer 15
The Government of Japan was not involved in the reported issue.
(iii) Export promotion schemes
Question 16
Could Japan please provide more detail regarding the recently created Nippon Export and Investment
Insurance?  In addition, could Japan explain whether any subsidies or financial assistance provided
through Nippon Export and Investment Insurance th at have not yet been notified to the WTO SCMWT/TPR/M/107/Add.1
Page 143
Committee?  If so, could Japan either provide complete notification for such assistance; or in the
alternative, discuss why said assistance is non-notifiable under the SCM agreement?
Answer 16
On April 1, 2002, Nippon Export and Investment Insurance (NEXI), an independent administrative
institute, took over the operation of the Japanese Export Credit Insurance, which had been administrated
directly by the Japanese Government. Please refer to the following website for more details regarding
NEXI  http://www.nexi.go.jp/e/index.html
NEXI establishes objective criteria or conditions governing the eligibility for, and the amount of, export
credit. Since we recognize that NEXI export credit has no specificity, we recognize that there is no
financial assistance by NEXI to be notified to the WTO SCM Committee.
Question 17
The report (para 67, pg. 44) mentions Japan External Trade Organization (JETRO) and its current export
promotion operations.  Does the Japan External Trad e Organization (JETRO) provide any direct financial
assistance to companies and/or industries?  Does JETRO provide assistance to all industries and/orcompanies?  If JETRO does not handle the export promotion and marketing assistance, as indicated in the
Secretariat’s Report, which organization or agency does handle these duties?
Answer 17
JETRO (Japan External Trade Organization) dose not provide any direct financial assistance to
companies or industries.
As indicated in the report, export promotion schemes by JETRO mainly include the provision of
information, market and company studies, and support for participation at international trade fairs.
(5) Measures Affecting Production and Trade
(i) Taxation and tax-related assistance
Question 18
The report also states that the Japanese government plans to introduce a consolidated corporate tax system
in FY2002.  Is this system now in effect?  If so, what changes were made that affect imported goods andservices, if any. 
Answer 18
The consolidated corporate tax system has been in effect since the business year, beginning April 1, 2002.
No data is available about its effect on imported goods and services.
Question 19
Could the GOJ please provide more detail on the operation of Japan’s Special Taxation Measures Law?
Could the GOJ also confirm all measures under this law that constitute subsidies have been included in its
Article 25 Notification as required under the SCM?
Answer 19
All special taxation measures that constitute subsidies have been included in our notifications. Please
refer to our Article 25 notifications under the SCM for more details.WT/TPR/M/107/Add.1
Page 144
(vii) Competition policy
Question 20
The report indicates (para 82, pg. 48) that “no decision has yet been reached” regarding the transfer of the
JFTC to an appropriate neutral organization and independent from regulatory authorities.  Is this true?  Oris legislation moving the JFTC from the Somusho to the jurisdiction of the Cabinet Office expected to be
introduced in the Diet in the near future?
Answer 20
The JFTC is currently positioned as an affiliated organ of the Somusho. However, the Government of
Japan is considering whether to transfer the JFTC to an affiliated organ of the Cabinet Office and is
making efforts to introduce a bill for the transition to the next ordinary session of the Diet,  pursuant tothe Cabinet Decision stating that consideration should be given to transferring the JFTC to a more
appropriate position from theviewpoint of its neut rality and independency from regulatory agencies.
Question 21
The report (para 89, pg. 50) states that "Under Secti on 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".  In 2001, 25 industries were being
monitored by the JFTC to assess the presence of a monopolistic situation (Table AIII.5).  Has the JFTC
ever taken action to correct a monopolistic situation as provided under Art. 8-4?
Answer 21
The JFTC has been monitoring industries that are characterized by the following market structure.
The aggregated total value of goods and services that are supplied within Japan during the past year
exceeds 100 billion yen.
The market share of the top firm exceeds 50% of the market or the combined market share of the top twofirms exceeds 75% of the market.
However, in order for the JFTC to take measures under Section 8-4 of the AMA, an industry must meet
other conditions as follows.
There exist conditions in a market that make it extremely difficult for any other firm to enter the market.
The decrease in the price has been slight for a considerable period of time despite a decrease in demand
or the cost of supply.There exist excessive profits or outlays, including advertising expenses.
Of the industries under monitored by the JFTC, there have been no industries that have met all the
conditions mentioned above.  Therefore, the JFTC has not taken action under section 8-4.
Corporate governance
Question 22
The report (paragraph 93) mentions the GOJ’s implementation of policy measures to reduce excess
capacity. How is excess capacity reduced through debt-equity swaps? In what ways, and through whatinstitutions does the Government of Japan facilitate debt-equity swaps? What types of companies have
been beneficiaries of these debt-equity swaps? How are tax incentives used to reduce excess capacity?WT/TPR/M/107/Add.1
Page 145
Answer 22
The main objective of the “Law on Special Measures  for Industrial Revitalization,” hereinafter referred
to as ‘the Law’, is to facilitate private companies to identify and to focus its core competencies. The Law
provides tax incentives, special exception of the Commercial Law, and other policy measures to those
companies that attempt to increase  productivity by redefining its core competencies and restructuring its
business portfolio and financial structure.
Debt-equity swap (DES) itself does not necessarily have direct effects on reduction of excess capacity, but
has more significant effects on financial restructur ing of companies with excessive debt. Facilitation
measures of DES, which include exception of the Commercial Law and tax incentives, was one of those
measures when the law was originally enacted in 1999. The total number of beneficiaries of DES
facilitation measures was one for exception of the Commercial Law, and ten for tax incentives measures.
A more direct facilitation measure for reduction of excess capacity includes tax incentives for disposal of
excessive production facility. When a company decreases its excess capacity under the Law and accounts
for an asset loss, the loss can be deducted from upcoming annual profits for as long as seven years, as
compared to five years for general cases.
IV. Trade policies by sector
(1) Introduction
Question 23
In the report (para 4, pg. 54), the dispute-settlement commission is characterized as "independent."  How
can the commission truly be independent when it operates under the auspices of MPHPT?
Answer 23
The Telecommunications Business Dispute Settlement Commission* does not operate under the control of
the Minister of MPHPT.
*The Commission was established on November 30, 2001, as a special body in order to expeditiously and
effectively settle disputes over issues such as interconnection between telecommunications carriers. The
Commission is independent of the MPHPT’s departmen ts, which are in charge of issuing permits and
approvals. The function of the commission is as follows:
(a) Mediation (assen) and Arbitration (chusai)
Mediation (assen) and arbitration (chusai) are c onducted by the Commission’s members who are
appointed by the Commission.
(b) Inquiry and Report
The Minister of MPHPT consults the Commission before making administrative dispositions,
such as orders or arbitrations (saitei) concerning interconnection of telecommunications
facilities. The Commission deliberates on the matters and submits a report to the Minister.
(c) Recommendation
The Commission makes recommendat ions on new competition rules to the Minister of MPHPT
based on knowledge gained in dealing with actual disputes.WT/TPR/M/107/Add.1
Page 146
(2) Agriculture
Border measures
Question 24
We understand that Japan will likely implement an emergency beef tariff measure on imports of fresh and
frozen beef in fiscal year 2003/04.  Such a measure will increase the tariff on imports of fresh and frozen
beef from 38.5 percent to 50 percent.  While we note that Japan has the technical right to impose such an
emergency tariff measure, we do not understand the rationale behind such a measure since there has been
neither evidence of a surge of beef imports into Japan nor any evidence that such imports threaten to
cause injury to the domestic industry.  Beef imports  into Japan are increasing only because they are
recovering from a period of unusually low beef consumption in Japan as a result of BSE. In light of thesespecial circumstances, could Japan please provide a rationale why it feels it needs to impose a higher
tariff on beef imports? Please explain how the likely imposition of the beef emergency tariff measure in
2003 is a proper use of safeguard measures in light of the fact that there is no import surge.
Answer 24
The measure has been introduced in accordance with the agreement between interested Member
countries including the US, in conjunction with the conclusion of the Uruguay Round. Japan accepted a
voluntary tariff reduction of beef below the bound rate in spite of difficulties in the domestic beef sector,
as well as the introduction of the emergency tariff measure which was set to be triggered to raise the
tariff to the bound rate automatically when beef imports exceed a certain level. It is an indispensable toolin order to ease negative impact on domestic produc tion.  The measure and the voluntary tariff reduction
constitute a package, as agreed upon by all interested Members. In addition, impact assessment on
domestic industry is not required to trigger th e measure, unlike the “Safeguard” system under
Article 19 of the 1994 GATT and WTO Agreement on Safeguards.
Domestic measures and support programmes
Question 25
Could Japan please provide information on the type s of input subsidies that are provided to the
agricultural sector in Japan?
Answer 25
As input subsidies are interpreted as payments to the input property, there are no input subsidies in Japan.Question 26
How has Japan reformed price support measures on key agricultural products – rice, wheat, soybeans,
dairy products, fruit, vegetables, beef calf, sugar cane, beets, and sugar?
Answer 26
As already notified, in accordance with the relative WTO provisions, the Government of Japan abolished
in 1998 the market price support system for rice, in addition to the government control on all rice in
distribution.
Then, for example, the Government of Japan also re formed wheat distribution system in 2000. In the new
system, transactions are privatized. The Government also changed the deficiency payments for soybean
producers into a fixed payment as of the 2000 crop. As another example, it has abolished selling and
purchasing scheme by the ALIC (Agriculture and Livestock Industry Corporation) for domestic sugar,WT/TPR/M/107/Add.1
Page 147
and has introduced a payment to sugar producers through the ALIC based on the applications from sugar
processors for sugar made from sugar beet and from sugar cane produced in specified areas.
In this way, price support measures have been reformed taking into account the actual conditions of each
key agricultural product.
Question 27
How does Japan measure food security?
Answer 27
Considering the fact that there are certain unstable factors in the world food trade and supply/demand,
the stable food supply to the people shall be secured with promotion of domestic agricultural production
as a basis,  in an appropriate combination with imports and stockpiles.
From the viewpoint of food security, the necessary food supply required for the people shall be secured,
even when domestic supply is insufficient to meet demand or is likely to be insufficient for a certain
period, due to unexpected situations, such as a bad harvest or interrupted imports.  It can be achieved
only by taking necessary measures, such as production promotion and distribution restrictions.
Question 28
We notice that Japan has notified vastly different amounts in its Aggregate Measures of Support (AMS)
between the 1997 and 1998 marketing years. In 1997, Japan notified an AMS level of approximately $26
billion but in 1998, Japan notified an AMS level of only $6 billion, 77% less.  Could Japan please explainthe reason for this difference i.e. why such support is not longer considered to be part of the AMS?
Answer 28
In Japan, the comprehensive government control over the distribution of rice, which had been in place for
more than half a century, has been abolished.  As a result of this total reform, the rice distribution systemhas been left to the private sector without government intervention.
As a result of these reforms, the market price support system for rice was entirely eliminated by the end of
FY1997. Consequently, administered price support for rice  became non-existent since FY1998. This is
the main factor of the difference in Japan’s AMS between FY1997 and FY1998.
Question 29
We understand that Japan will be eliminating the Food Agency.  Could Japan provide an overview of the
transformation of the food agency and the new divisi on’s responsibilities?  Who will manage this new
division and will the current administrators of grain import programs be retained in this new division?
Answer 29
Although the Food Agency will be abolished, its function of a state trading enterprise will be assigned to
a new organization of the MAFF, which will take up the work as before.WT/TPR/M/107/Add.1
Page 148
(4) Services
(i) Financial services
Question 30
We note that GDP calculations for the last two quarters of this year are not based on the new method of
GDP calculation, which started two quarters ago.  Would Japan please explain why the new method was
not used?
Answer 30
The point of the question is unclear. Although, for reference, we will introduce an overview of the change
in the estimation method for the preliminary quarterly GDP (QE).
The new estimation method was applied by estimating the 1st preliminary quarterly GDP (QE) for the
Apr.-Jun. 2002 period.
The new method intends to realize the following by using supply-side statistics:
- improve the accuracy of the estimation
to cope with environmental changes that surround statistics and evaluate economic trends more
accurately;
- release GDP estimates promptly
to publish the first estimate approximately one month earlier than under the previous system and make it
as timely as compared to data from other major developed countries (previously, the QE had been
published about 2 months and 7 days after the end of each quarter);
- to improve consistency between the method used in the QE and annual accounts.Question 31
Could Japan please provide information on the types of industries and companies that may benefit or that
have benefited under the incentives offered by the Government Financial Institutions?  Are any of these
benefits provided specifically to firms that export their products?  Are all types of industries and/or
companies eligible to apply for these benefits?  If not, could Japan please explain which types of
industries and/or companies are eligible to apply for said benefits?
Answer 31
The primary role of public financial institutions is to complement the functions of private financial
institutions through policy-based financing in areas where market failures could occur or where special
treatments are needed.
For example, all types of industries and companies  exporting equipment from Japan, with repayment
terms of two years or longer, are eligible to apply for export credits on a non-discriminatory base by
JBIC, in compliance with OECD arrangements.
Question 32
The GOJ’s funding commitment to the Life Insurance Policyholder Protection Corporation (Life PPC)
expires in March 2003.  Foreign life insurers are concerned that they will be tapped yet again to
contribute more to the Life PPC to cover future failures of Japanese insurance firms.  Will the GOJ extend
its funding commitment to the Life PPC? What steps is the GOJ taking to afford the insurance industryWT/TPR/M/107/Add.1
Page 149
(both domestic and foreign) and all interested parties meaningful opportunities to be informed of,
comment on, and exchange views with officials on proposed plans, draft legislation, amendments to
existing regulations and other regulatory measures related to the Life PPC prior to their
implementation and or submission to the Diet?
Answer 32
The relevant legislation provides for review of revisions to the safety net in the life insurance sector.
The Government intends to review the issue of the financing of the Life Insurance Policyholder
Protection Corporation (Life PPC) on the basis of th is provision, giving due attention to issues such
as the financial condition of the Life PPC and th e business conditions for life insurance companies.
In the review, while the Financial Services Agency  (FSA) has already exchanged views with domestic
and foreign insurers as well as relevant bodies, the FSA intends to continue to provide information
and hold consultations as appropriate.
Public comment procedures will be applied to amendments to regulations, which do not require
approval by the Diet.
Question 33
The process for the transfer of the postal services from the Postal Services Agency to a public postal
corporation and its possible effects on the private sector still remain unclear.  What steps is the GOJ
taking to sufficiently inform and seek input from the public (including foreign insurers) on all aspectsof the transfer that may affect private sector operati ons in the relevant sectors?  What steps is the GOJ
taking to afford the insurance industry and other interested parties (both domestic and foreign)
meaningful opportunities to be informed of, comm ent on, and exchange views with MPHPT officials
on 1)  proposed plans and draft legislation prior to their submission to the Diet and 2) draft guidelines
and other regulatory measures prior to their implementation.
Answer 33
With regard to the process for transfer to the Japan Postal Services Public Corporations in April
2003, the Japan Postal Services Public Corporation Law and the Japan Postal Services Public
Corporation Enforcement Law were promulgated in July 2002. In accordance with the provisions of
the Japan Postal Services Public Corporation Enforcement Law, the Minister for Public
Management, Home Affairs, Posts and Telecommunications appointed a president and the membersof the Founding Committee. The F ounding Committee held its first meeting on October 15 and plans
to meet once or twice each month thereafter to move ahead with preparations for establishing the
Japan Postal Services Public Cor poration. This will include receiving advance authorization from,
and reporting to, the Minister for Public Management, Home Affairs, Posts and Telecommunications.
As a measure to sufficiently inform the private sector and seek input from the public regarding the
transition process to the Japan Postal Services Public Corporation, MPHPT will provide an
opportunity, upon request, for the public sector to exchange views with MPHPT officials on
regulations related to the establishment of the Japan Postal Services Public Corporation. This
measure is documented in the First Report to the Leaders on the US-Japan Regulatory Reform andCompetition Policy Initiative.
Regarding the development of Kampo products, GOJ confirmed in the Third Joint Status Report on
the US-Japan Enhanced Initiative on Deregulation and Competition Policy in July 2000 that, “in
response to requests from private interested parties, including foreign insurance providers, it willmeet with those parties to explain matters regard ing the formulation of proposals to seek from the
Diet an amendment to the law to expand, or change, Kampo products.”WT/TPR/M/107/Add.1
Page 150
Question 34
In transferring the postal services and establishing a public corporation in 2003, what steps will the
GOJ take to level the playing field between the postal financial institutions and their private sector
competitors?  To what extent will the GOJ subject th e postal financial institutions to the same laws,
level of taxation, safety net contribution requirements and standards of regulation as their privatesector counterparts?
Answer 34
Kampo and Yucho have the policy objectives of offering an easily accessible and reliable means to
minimum security and savings for all people’s lives throughout Japan. As state-run businesses,
Kampo and Yucho have different systems and manag ement philosophies from those of private
financial institutions, and, therefore, are subject to different Japanese law, and specific regulations,such as:
1) a universal service obligation;
2) insurance and deposit ceiling regulations;
3) limitations on the scope of products and services; and
4) restrictions on asset management.
Besides, as is mentioned in the “First Report to the Leaders on the U.S.-Japan Regulatory Reform
and Competition Policy Initiative“ in June 2002, the draft postal legislation was intended to make
Kampo and Yucho subject to inspection and taxation requirements similar to those to which private
sector financial institutions are subject. Since then, the Diet has passed the law in its 154
th session,
under which Kampo and Yucho are scheduled to be subject to those requirements.
Telecommunications
Question 35
In the government procurement section of this report, it is noted that JFTC actions under AMA have
focused on bid-rigging.  With guidelines for competition on telecommunications in place, should we
expect to see more enforcement efforts by JFTC in the telecommunications sector?
Answer 35
The JFTC has set up the Task Force of Information Technology Business and Public Utility Business
in April, 2001 in order to collect information and to address AMA violations, efficiently and quickly inthese sectors. By that means, the JFTC is monitoring these sectors where competition by newcomers
is expected to become more active.
As a recent example in the telecommunications sector, the JFTC issued a warning on
25 December 2001 against NTT East and NTT West for possible violation of Section 19 of AMA,Paragraph 9 (unjust customer inducement)and Paragraph 15 (interference with  competitor’s
business transaction) under the Designation on Unfair Trade Practices.
The JFTC will continue to vigorously investigate violations in the telecommunications sector.
Question 36
Dominant carriers are referred to in the report (para 32, pg. 64) as operators that are defined "by what
the authorities regard as dominant."  Does this  mean that authorities are showing discretion in
applying dominant carrier regulation?  The reason we ask is that the report (para 34, pg. 64) indicates
that asymmetric regulation is applied to mobile carriers with 25% or more market share.  In fact, thereis discretion here.  Okinawa Cellular, for example, was found in one recent case not to be dominant,
based on market share TRENDS, although it does have 25% market share.WT/TPR/M/107/Add.1
Page 151
Answer 36
The Minister of MPHPT may designate Type I te lecommunication carriers as dominant carries when
they possess Category II designated telecommunications facilities* and hold more than 25% share of
profits, and when the Minister deems it necessary to ensure proper competition in consideration of the
trend of the said share of profits and other conditions.
The MPHPT draws up and publishes fundamental concepts regarding this designation, including how
to concretely deal with “other conditions”, when the system is put into practice.
In addition, it is stipulated in the Telecommunications Business Law that the Minister must consult
with the Telecommunications Council when desig nating the Type I telecommunications carriers
mentioned above, and when MPHPT designates NTT DoCoMo and eight regional NTT DoCoMocompanies, based on a report from the Council. (The minutes of the relevant meetings of the Council
and the reason for designating the nine companies are published on the website of the MPHPT)
*Category II designated telecommunications facilities mean the combined total of the
telecommunications facilities that are installed to provide mobile phone service and more than 25%of the mobile terminal facilities in the market (except for PHS) is connected to. Type I
telecommunications carriers installing the Category II designated telecommunications facilities have
to compile, notify and publicize their interconnection tariffs.
Question 37
The report (para 34, pg. 65) states that definition of "mobile market" does not include PHS.  Why is
PHS not included?
Answer 37
A majority of PHS network depends on local fixed networks and has little influence on the market,
since the number of subscribers is less than one-tenth of that of the mobile phone market.
Question 38
The report (para 35, pg. 65) states that "The two local NTT companies have more than 90% of the
local communications market."  Some may argue that, with the introduction of MyLine, more
competitors share the local market.  However, since NTT East/West control the local loop and a
majority of competitors are very dependent on these firms for interconnection, how does this improvecompetition?
Answer 38
The scope of business activities in which NTT East and NTT West are permitted to operate is
prescribed under the NTT Law. In addition, NTT East and NTT West are subject to asymmetricregulation including interconnection rules for bottleneck facilities, firewall regulations and charge
regulations. By strictly implementing these regu lations, MPHPT prevents NTT East and NTT West
from abusing their market dominance and promotes competition.
Question 39
The report (para 35, pg. 65) describes the rate reductions that were approved in February 2001.  The
USG may need to clarify for the record that the 22.5 and 60.1 percent reductions did not cover the
whole period of FY2000 to FY2002, as they were phase d in.  Furthermore, there has been a proposal
by the Ministry's advisory council to backslide on these reductions from FY2003.
Answer 39
It is a fact that the LRIC-based costing methodology was introduced in FY2000 and the
interconnection charge was reduced in a phased manner such that the charges for GCWT/TPR/M/107/Add.1
Page 152
interconnection and for ZC interconnection were reduced by 22.5% and 60.1%, respectively in FY
2002, compared to FY1998 levels.
Question 40
Is it true that the MPHPT is considering interconnection rate increases that could boost rates by up to
30% for some forms of interconnection?  How is th at justified in a deflationary environment, where
telecommunications costs in general have already been  declining due to competitive pressures?  Is this
not an outcome designed simply to favor NTT?
Answer 40
With regard to the interconnection charge to be applied from FY 2003, the Telecommunications
Council submitted a report on 13September 2002, in which it recommends that life of transmissionfacilities and other factors shall be revised and a necessary review shall take place regarding input
data (including traffic). Now, the MPHPT is examining the issues raised in this report, and the level
of the interconnection charge will be determined based upon the result of the examination.
__________