RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/107
9 October 2002
(02-5354)
Trade Policy Review Body Original:  English
TRADE POLICY REVIEW
JAPAN
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Japan is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Japan.Japan WT/TPR/G/107
Page 3
CONTENTS
Page
I. JAPAN'S TRADE POLICY 5
(1) C ONSOLIDATION OF THE MULTILATERAL SYSTEM 5
(2) R EGIONAL AND BILATERAL TRADE POLICY 5
II. TRADE AND ECONOMIC POLICY ENVIRONMENT 6
(1) J APAN 'S ECONOMIC ENVIRONMENT 6
(2) T REND IN FOREIGN TRADE 6
(3) T REND IN FOREIGN DIRECT INVESTMENT 7
III. TRADE POLICY DEVELOPMENT, 2000-2002 8
(1) R ELATIONS WITH OTHER COUNTRIES AND REGIONAL INITIATIVES 8
(2) D OMESTIC POLICY DEVELOPMENT 11
IV. DOHA DEVELOPMENT AGENDA 16Japan WT/TPR/G/107
Page 5
I. JAPAN'S TRADE POLICY
(1) CONSOLIDATION OF THE MULTILATERAL SYSTEM
1. For over 45 years, since its accession to the GATT in 1955, the Government of Japan has been
committed to maintaining and strengthening the free and non-discriminatory multilateral trading system
through the framework of the GATT/WTO.
2. From this standpoint, Japan has actively participated in the series of multilateral trade
negotiations, in particular, the Kennedy Round, the Tokyo Round and the Uruguay Round.  Japan has
always been an advocate for expanding multilateral rules to cover a wide sphere of world trade, and hasthus succeeded in contributing to the welfare of the world.  From its experiences, Japan can confirm the
importance of a rule-oriented world trade, upon which it and many other countries can rely.  Despite the
unfortunate failure of the Seattle Ministerial Conference in 1999, Japan took various initiatives, in co-
operation with its main economic partners, in order to facilitate the consensus-building efforts among
WTO Members for an early launch of the new round.  During the process, Japan claimed that the newround should include a broad agenda, such as in vestment and Anti-dumping.  Should the current
momentum for more liberalised and rule-oriented trade be lost, the whole world would be at the risk of
becoming embroiled in a protracted stagnation.  It is indeed gratifying for Japan, a trading nation, to
note that these efforts have been well recompensed by the successful launch of a new round of trade
negotiations at the 4
th Ministerial Conference in Doha, Qatar.
3. As can be seen in its numerous proposals and papers presented to each negotiating group, the
Government of Japan is actively engaged in this new round of negotiations, known as the Doha
Development Agenda.  It also has been considering the interests and concerns expressed by developing
countries so that Japan can move forward with these countries.
4. Furthermore, Japan believes it essential for the developing and the least-developed countries, as
well as the economies in transition, to share the benefits of the results of the negotiations.  In this
regard, an early conclusion of the accession negotiations by such applicants, in accordance with the
WTO rules, is important in order to facilitate th eir integration into the multilateral trading system.
Japan shall continue to play a leading role in sup porting the accession process of such future members
of the WTO.
(2) REGIONAL AND BILATERAL TRADE POLICY
5. Maintaining and strengthening the multilateral trading system under the WTO has been, as
mentioned above, the main pillar of Japan’s external  economic policy.  In view of the changes in the
trade environment surrounding Japan as well as the greater importance of Asian economies for Japan,
however, it has recently come to place more emphasis than before on its regional and bilateral trade
policies with possible elements of free trade agreements (FTAs), because we regard them as a means of
complementing the multilateral system.  Japan aims to use its regional and bilateral policies not only toenhance economic ties with its trade partners but also to achieve further liberalization and rule-making
in those areas that could be more effectively or e xpeditiously dealt with in the regional or bilateral
context than through WTO negotiations.  It was due to such considerations that Japan signed its first
free trade agreement with Singapore (the Japan-Singapore Economic Agreement for a New Age
Partnership) in January 2002, which covers not only trade and investment but also new areas such as
science and technology, human resource development and tourism.  Japan is also seeking to strengthen
its economic ties through similar arrangements with Mexico, the Republic of Korea and ASEAN
countries (for more details, see Chapter III.).  All of its regional and bilateral policies will continue to be
consistent with WTO rules.WT/TPR/G/107 Trade Policy Review
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II. TRADE AND ECONOMIC POLICY ENVIRONMENT
(1) JAPAN 'S ECONOMIC ENVIRONMENT
6. The Japanese economy has stagnated for more than ten years after the collapse of the so-called
"bubble economy".  In order to cope with the economic stagnation of the 1990's, the Government of
Japan repeatedly implemented economic measures and increased public investment and other
government spending.  As a result, budget deficits have substantially increased, while tax revenues have
declined due to the slow growth and the various tax cuts.  These measures, however, did not result in
any sustainable recovery of private demand and neither managed to shore up the stagnant economy.Besides, there is growing concern over the high level of the government debt outstanding.
7. On this background, the Government is now active ly promoting structural reforms in order to
strengthen the Japanese economy by, for example, shifting major Japanese resources, such as the
workforce, capital and technology, from sectors with low productivity to those with high productivity
and social needs.
8. As for the recent developments, while the economy c ontinues to be in a difficult situation, the
Japanese economy has managed to bottom out and movements of an incipient recovery can be seen in
some areas.  Like this, the outcome of the structural reform can be observed steadily.
(2) T
REND IN FOREIGN TRADE
9. Trade statistics show that Japan's trade surplus expanded in 1997 after four straight years of
decline by rising to its highest level in 1998 at ¥13.99 trillion.  In 1999, however, imports, and exports
in particular, decreased.  In 2000, Japan's imports again increased rapidly due to its economic recovery,
thus making the trade balance unstable.  As a result, Japan's total trade surplus in 2000 decreased to
¥10.72 trillion and then to \6.56 trillion in 2001.  We can thus witness three straight years of decline in
Japan’s total trade surplus.
10. In 2001, the total value of exports from Japan decreased, mainly due to the weaker world
economy:
- the total value of exports from Japan in 2001 amounted to ¥48.98 trillion (a decrease of
5.2 percent from 2000);
- regional trends of total values of exports in 2001 (compared to 2000):
• Middle East up by 22.0 percent
• China up by 14.9 percent
• United States down by 4.2 percent
• European Union (EU) down by 7.4 percent
• Association of Southeast Asian Nations (ASEAN) down by 10.7 percent
• NIEs (inc. Korea, Singapore, Hong Kong and Taiwan) down by 14.0 percent
11. On the other hand, in 2001, the total value of imports into Japan was noted at having been on
the increase for the past two straight years, althoug h the rate of increase had slowed down due to the
domestic recession:
- the total value of imports in 2001 amounted to ¥42.42 trillion (an increase of 3.6 percent from
2000);Japan WT/TPR/G/107
Page 7
- regional trends of certain total values of imports in 2001 (compared to 2000):
• China up by 18.3 percent
• EU up by 7.3 percent
• ASEAN up by 2.8 percent
• Middle East up by 1.4 percent
• United States down by 1.4 percent
• NIEs down by 7.3 percent
12. The share of manufactured goods out of the total amount of imports increased to 61.4 percent in
2001 (11.0 percent higher than in 1990).
(3) TREND IN FOREIGN DIRECT INVESTMENT
13. According to a Ministry of Finance report, Japa n's outflow of foreign direct investment (FDI)
has shrunk for the second year in a row reaching ¥3,954.8 billion in FY2001, which represents adecrease of 26.3% from FY2000.  The major character istics of Japan's outward FDI in FY2001 were as
follows:
(i) Industry
14. In FY2001, FDI in the manufacturing industry increased to ¥1,744.9 billion, i.e. 35.2% more
than in the previous fiscal year, which was mainly  due to the increase of FDI in the electrical and
transport sectors.  However, FDI in the non-manufacturing industry decreased to ¥ 2,174.4 billion (i.e.
by 46.3%), due to the drastic decrease of FDI in the transport sector.
(ii) Region
15. In FY2001, the total FDI from Japan to North America and Europe sharply decreased to
¥2,130.9 billion (i.e. by 47.4%) compared with FY2000, due to the decrease in the margins and
acquisitions' level (M&As).  As a result, the share of  these regions among the total amount of FDI flows
from Japan fell from 75.5% to 53.9%, compared to the previous fiscal year.
16. Although the FDI flow to Japan also fell by 30.3% to ¥2177.9 billion in FY2001, it still
maintained the ¥2,000 billion mark.  The major charac teristics of inward FDI to Japan in FY2001 were:
(i) Industry
17. FDI in the manufacturing industry decreased to ¥328.0 billion (i.e. by 58.5%), mainly due to a
rapid shrink of FDI in the machinery sector, which occupied the largest share in the previous fiscal year.FDI in the non-manufacturing industry also decreased to ¥l,849.9 billion (i.e. by 20.8%) due to the
sharp fall of FDI in the financial and insurance sectors.
(ii) Region
18. The amount of inward FDI to Japan from Europe increased to ¥1,096.2 billion in FY2001.  On
the other hand, in FY2001, the amount of inward FDI from foreign-owned companies in Japan dropped
by 76.9% from the previous fiscal year to reach ¥263.8 billion.WT/TPR/G/107 Trade Policy Review
Page 8
III. TRADE POLICY DEVELOPMENT, 2000-2002
(1) RELATIONS WITH OTHER COUNTRIES AND REGIONAL INITIATIVES
(a) Relations with the United States
19. Japan's trade surplus with the United States has been on the decrease since 2000, partly due to
the overall slump in the global economy.  Japan’s share within the total U.S. trade deficit has also been
steadily declining.
20. Prime Minister Koizumi and President Bush announced the establishment of the "Japan-U.S.
Economic Partnership for Growth" (hereinafter "Partnership") in June 2001.  This Partnership aims atpromoting sustainable growth by addressing such issues as sound macroeconomic policies, structural
and regulatory reforms, financial and corporate restructuring, foreign direct investment, and an open
market.  It also aims at providing a structure for the cooperation and engagement on bilateral, regional
and global economic and trade issues.  Through this Partnership, the governments of Japan and the
United States have maintained dialogue under the following newly-created fora:  Sub-cabinet EconomicDialogue;  Private Sector/Government Commission;  Regulatory Reform and Competition Policy
Initiative;  Financial Dialogue;  Investment Initiative;  and a Trade Forum.
21. Under the Japan-U.S. Regulatory Reform and Competition Policy Initiative, in particular, the
Governments of Japan and the United States have been exchanging views concerning regulatory reform
in such areas as telecommunications, information technology, medical devices and pharmaceuticals,financial services, energy and cross-sectoral structural issues, including competition policy.  In
June 2002, the two governments issued their First Report  to Leaders, regarding this Initiative, as a result
of the dialogues.
(b) Relations with Europe
22. Since the last trade policy review, a further in tensification of relations between Japan and the
EU has been observed.  Regular meetings have been organized at various levels on such economic
issues as trade and investment, as well as regulatory reform.  Consultations have also been carried out,
as and when required, on specific issues, for example agriculture.  All the results from these
consultations have been applied on an MFN basis.
23. Aside from that, during the first year of the "D ecade of Japan-Europe corporation", an "Action
Plan for EU-Japan corporation" was adopted at the 10
th Japan-EU Summit held in December 2001.
This Action Plan sets out four major objectives and specific measures for the purpose of consolidating
Japan-EU relations.  One of the four objectives is entitled, "strengthening the economic and trade
partnership utilising the dynamism of globalization for the benefit of all".  In this context, Japan and the
EU will co-operate in such areas as WTO issues, the international monetary and financial system,
information and communication technology, and bilateral trade and investment.  At the 11th Summit
meeting held in Tokyo in July 2002, a steady implementation of the Action Plan was confirmed, and asteering group was set up to follow the progress of the Action Plan.
24. To give an example of part of the progress made under the Action Plan, the Mutual Recognition
Agreement (MRA) came into force in January 2002 and the Joint Committee took charge of its
implementation.  In the area of competition policy, an agreement concerning the co-operation on anti-
competitive activities has also been initiated.Japan WT/TPR/G/107
Page 9
(c) FTA
25. As we explained in Chapter I, Japan is now placing more emphasis than before on its regional
and bilateral trade policies with possible elements of FTAs, while continuing to maintain consistency
with WTO rules.
26. In pursuing its FTA, Japan sees its merits as including:
(1) the expansion of trade and investment through further liberalisation;
(2) receiving more inexpensive, and higher-quality imports from its FTA partners;
(3) having more active economic transaction through, for example, the effective regulation
of anti-competitive practices or the harmonization of standards;
(4) rule-based dispute settlement.
27. In January 2002, Japan signed its first free trade agreement with Singapore (the Japan-
Singapore Economic Agreement for a New Age Partnership).  Japan is also currently working towards
strengthening economic partnership including a possi ble FTA with Mexico, the Republic of Korea and
ASEAN countries.
(i) ASEAN
28. During his round trip to five ASEAN coun tries in January 2002, Prime Minister Koizumi
proposed an "Initiative for Japan-ASEAN Comprehensive Economic Partnership".  This Initiative seeks
to strengthen economic partnerships in as broad-ranged areas as possible, including not only theliberalisation of bilateral trade and investment, but also collaboration in a variety of areas, such as the
ICT, science and technology development, culture, education and human resource development, as well
as tourism.  Japan and the whole of ASEAN are studying the possible areas and frameworks for
partnership through the various official-level meetings existing between Japan and the ASEAN (e.g. the
Japan-ASEAN Forum, the Closer Economic Partne rship Experts Group Meeting, the Japan-ASEAN
Expanded Consultative Group Meeting, etc.).  Feasible areas and ways to realise a comprehensive
economic partnership are also being explored.  Furthermore, Japan has begun work on building up
economic partnerships in bilateral frameworks with  countries ready for consultations, for example
Thailand and the Philippines.  (By using the framework of the Japan-Singapore Economic Partnership
Agreement as a basis, or at least having it as reference, Japan is now considering the possibility ofestablishing a comprehensive economic partnership with ASEAN country.)  A report of the progress of
work in bilateral and multilateral frameworks will be made at the Japan-ASEAN ministerial-level
meetings in 2002 (i.e. the Foreign Ministers' and Economic Ministers’' meetings), and then at the Japan-
ASEAN Summit Meeting in November, so as to enable  Leaders to agree on the basic elements of such
economic partnerships, for example, scope and time-frames.
(ii) JSEPA
29. The Japan Singapore Economic Agreement for a New Age Partnership (JSEPA) was signed by
the Prime Ministers of Japan and Singapore on 13 January 2002.  The JSEPA is not a conventional free
trade agreement, as it focuses not only on the liberalization of investment and trade in goods and
services, but also encompasses cooperation in key growth areas, such as information and
communications technology, science and technology, financial services cooperation, and human
resources development.  Based on the monetary value of the year 2000, over 98% of tariffs on itemstraded between the two countries will be eliminated in  the final stages of the entering into force of the
JSEPA.  In general, we can thus see Japan's firm determination to respect at a high level all the relevant
GATT/WTO rules when establishing a RTAs.WT/TPR/G/107 Trade Policy Review
Page 10
(iii) Korea
30. A joint research report was released by "the 21st Century Japan-Korea Economic Relations
Study Team", after its establishment in December 1998.  On the basis of this report, as well as on a
symposium held in May 2000, the Prime Minister of Japan and the President of the Republic of Korea
agreed to establish a Japan-Korea FTA Business Forum in September 2000.  The Forum held two joint
meetings, one in September 2001 and another in January 2002, and issued a recommendation requesting
the two governments to proceed immediately with  a FTA in the form of a comprehensive economic
partnership agreement.  On the basis of this recommendation, Japan and Korea agreed to establish anindustry-government-academia linked research group (the Japan-Korea FTA Joint Study Group) in
March 2002 for a future Japan-ROK FTA.  The 1
st Meeting of the Joint Study Group was held in Seoul
on July 9 and 10, where were discussed the benefits of a FTA, the scope of the Joint Study Group and
the future work plan.  The 2nd Meeting is scheduled in Tokyo on October 1 and 2, 2002.
(iv) Mexico31. The Japan-Mexico Joint Study Group on the Strengthening of Bilateral Economic Relations,
which is composed of government members, academics, and people from business sectors, held a total
of seven meetings from September 2001 to July 2002 and published a Final Report in July 2002.
32. The Joint Study Group proposed, inter alia , that the two governments, while endeavouring to
gain the understanding from both the Japanese and Mexican publics, should overcome the variousproblems identified in the process of its discussions .  Furthermore, it proposed that work should be
started promptly with the aim of concluding an  agreement for strengthening a bilateral economic
partnership, which includes elements of a FTA, as a concrete measure for strengthening bilateral
economic relations.
33. The Government of Japan and Mexico will study on how to proceed with this matter, taking
into account the elements included in the Final Report.
(d) Regional initiative
(i) APEC
34. Japan believes that the promotion of co-operative economic relations among economies in the
Asia-Pacific Region through such forums as th e Asia-Pacific Economic Cooperation (APEC) will
enable an open regional economic community in the region and will stimulate world trade, thereby
contributing to the development of the global economy.  Japan shall continue its efforts towards making
such visions become reality by cooperating closely with other member economies in search of this
objective.
35. Japan continues to conduct activities in accordance  with the main pillar s of the APEC:  trade
and investment liberalization and facilitation (TILF), and economic and technical cooperation
(Ecotech).  This year, Japan has put a particular emphasis on trade facilitation, which could providetangible benefits to the business community.  It is also preparing the "APEC Trade Facilitation Action
Plan" through concertation with the US.  In view of achieving the Bogol Goal, Japan proposed to
strengthen the IAP (Individual Action Plan) Peer Review Process and thus volunteered to be reviewed
this year.  Japan also suggested last February that an "IPR Service Center" be established.  As for
Ecotech, Japan proposed to draw up an "Ecotech Action Plan", which would aim at improvedcoordination and the enhancement of Ecotech activities.Japan WT/TPR/G/107
Page 11
(ii) ASEM
36. Since the inaugural session of the Asia-Europe Meeting (ASEM) held in March 1996, measures
have been taken in the field of trade policy within that framework.  Foreign Ministers Meetings,
Economic Ministers’ Meetings, Finance Ministers’ Meetings, as well as other ministerial meetings,
have been held in addition to the summit meetings.  Indeed, the ASEM partners have been carrying out
various projects under both the Trade Facilitation Action Plan (TFAP) and the Investment Promotion
Action Plan (IPAP).  Furthermore, the Asia-Europe Business Forum has been held annually since 1996
for the purpose of promoting interaction between business sectors of both regions.
(2) DOMESTIC POLICY DEVELOPMENT
(a) Reform of the Economic Structure
37. As to the economic and fiscal policy, the Council on Economic and Fiscal Policy was set up in
the Cabinet Office in January 2001.  Its aims are to enable the Prime Minister to fully demonstrate his
leadership in economic and fiscal policies and, at the same time, to adequately reflect the opinions ofthe private-sector when formulating policy measures.  The Council is chaired by the Prime Minister and
comprised of the interested state ministers, private sector businesspersons and academics.  It is to be
noted that more than 40% of the members of the Council are from the private sector.
38. Based on the report of the Council in June 2001, the Cabinet has advanced a wide range of
structural reforms, starting from the "Basic Policies for Macroeconomic Management and the StructuralReform of the Japanese Economy" (Cabinet decision of 26 June 2001).  As a result, although
employment and income conditions remain in a difficult state, the Japanese economy has reached the
lowest point in its cyclical change, reflecting  the rapid economic recovery witnessed in the
United States and other Asian countries, and the progress of inventory adjustments.
39. Conquering deflation is the most important issue on the agenda of the intensive adjustment
phase.  In an effort to promote structural reform, the Government devised the Front-loaded Reform
Program in October 2001, as well as the Emer gency Program for Structual Reform and Global
Recession in December.  These two reform programs were followed by the Emergency
Countermeasures to Deflation, introduced late February this year, which emphasised the financial
aspects of reform.
40. In order to further solidify the trend towards economic and fiscal improvement and to build a
sound economy and society in which people can have confidence in the future, the Japanese
Government considered it necessary to move on to a new stage.  Thus on 25
th June this year, the
Cabinet adopted the program on "Basic Policies for Economic and Fiscal Policy Management and
Structural Reform 2002" which clarifies the second stage of reform, and is recognized as "Basic
Policies No. 2".
41. Under "Basic Policies No. 2":
- First, the Cabinet will advance the "Economic Revitalization Strategies", which include
the establishment of "special structural reform areas".
- Second, a comprehensive and fundamental tax reform, having the utmost emphasis on
restoring the vitality of the Japanese economy, will be implemented.  With a view to
ensuring that the tax system is "broad, light and simple", consideration will be given tothe structure whereby the balance among income tax, inhabitant tax and tax on
corporations can be optimised.WT/TPR/G/107 Trade Policy Review
Page 12
- Third, the Cabinet will accelerate the reform of government expenditure to achieve "a
small government of high quality, worthy of the burden required".
42. By advancing these policies in trinity, the Government should achieve a steady economic
growth over the medium-term due to private demand.
43. Concerning medium-term economic and fiscal reform, in January 2002, the Government
adopted a Cabinet Decision, Structural Reform and Medium-term Economic and Fiscal Perspectives
("Reform and Perspectives"), which shows a visi on of the Government’s medium-term (FY2002-2006)
economic and fiscal policies centring on structural reforms.
44. As the Government puts top priority on overcoming deflation, structural reform shall be
implemented by putting emphasis on expanding pr ivate-sector demand and increasing employment
opportunities.  Furthermore, the elimination of non-performing loans will be expedited.  The "Reform
and Perspectives" shows that, although growth at first will be near to zero, the economy will begin to
recover, and will see some positive growth in  FY2003.  From FY2004 onwards, growth driven by
demand in the private sector should be realized at a steady pace of at least 1.5 percent in real terms and
2.5 percent in nominal terms.
45. Public spending should be concentrated in those sectors where the need is greatest, and its cost
effectiveness should be improved.  During the target period, the goal should be to hold the size of
government at or below its present level.
(b) Fiscal Structural Reform
46. As part of the policies presented in the "Basic Policies for Macroeconomic Development"
adopted by the Cabinet in June 2001, a goal was set to limit the amount of government bond issues to
less than 30 trillion yen in the FY2002 budget, and th en to achieve a primary surplus thereafter.  This
decision was made to show that there exists a real necessity to undertake on full-scale measures towardsfiscal consolidation.
47. As the first step towards fiscal structural reform, it was decided to thoroughly review all
expenditures, with a view to reducing spending and achieving prioritized allocations, when formulating
the FY2002 budget.  In addition, the basic stance on the FY2002 budget formulation, such as
prioritizing allocations by using the guidelines of the "7 key prioritization areas" 
1.
48. Furthermore, the "Structural Reform and Medium-Term Economic and Fiscal Perspectives",
adopted by the Cabinet in January 2002, set down the following mid-term target and projection:
1. the goal for the size of the Government (i.e., the ratio between general government
expenditures and the GDP) is to maintain it at, or below, its current level until 2006;
2. the ratio of the primary balance deficit of central and local governments to GDP is expected
to decline from 4.3% in FY2000 to approximately half of that amount around FY2006.  A
primary balance surplus is expected to be posted in the early 2010s.
                                                     
1 (1) Addressing environmental issues, such as esta blishing a “recycling” society where resources are
fully reused in the future. (2) Coping with problems rising from an aging population. (3) Developing local
facilities suitable for regional needs. (4) Revitalizing cities by making them more attractive and by enhancing their
international competitiveness. (5) Promoting science and technology. (6) Developing human resources.(7) Developing the nation into one of the most advanced IT states in the world.Japan WT/TPR/G/107
Page 13
49. Finally, the "Basic Policies No. 2" which was adopted by the Cabinet on 25th June this year,
presents guidelines for tax reform and expenditure reform.  As for FY2003 budget, which is being
formulated based on the "Basic Policies No. 2", the total amount of the expenditures will be kept equal
to or below the level of the current fiscal year.  At the same time, the Government will make every
effort to enhance efficiency of government expenditures and prioritise the “New Four Priority Areas2”.
Through these measures, the Government will continue to advance fiscal structural reform.
(c) Regulatory Reform
50. In April 2001, the Council for Regulatory Reform was established as an advisory body to the
Prime Minister.  The mission assigned to the Council is not only for respectively relaxing and
abolishing the existing regulation, but also for pr omoting comprehensive regulatory reform in terms of
improvement of the whole system per se .
51. The Council selected 6 priority spheres – medical care, welfare and childcare, human resources
(labour), education, environment, and urban renaissance.  By focusing its consideration on thesespheres, it submitted the "First Report Regarding th e Promotion of Regulatory Reform" to the Prime
Minister in December 2001.
52. In March 2002, the Three-Year Program for Regulatory Reform was revised, and in this
process, the above-mentioned First Report was fully incorporated into the Program.  In addition, the
results of the consideration regarding the requests by various sectors, including domestic privateorganizations, enterprises, and overseas governments and organizations, were also taken into account.
The Program covers a wide range of areas, including the above 6 priorities.
53. Since April 2002, the Council for Regulatory Reform has adopted the "Revitalization of the
Economy" plan as a fundamental guideline, and has intensively considered regulatory reform measures
based on the 5 cross-sectional themes, including the creation of new businesses, the development ofpublic-sector dominated markets through the entrance of the private sector, and the improvement of
business infrastructures.  The Council will submit a report to the Prime Minister this year, based on the
"Interim Report" published in July.
54. In the telecommunications sector, Japan has been continuously carrying out various regulatory
reforms through measures for promoting fair competition, including the amendment of theTelecommunications Business Law.  As a result, ma ny new telecommunications carriers have entered
the market and consumer benefit has been improved (such as the sharp rate reduction, the
diversification and development of services, and a reduction in the interconnection rate) due to
increased competition.
55. On 7
th August 2002, a special department of the Telecommunications Council presented the
final report on "Desirable Pro-Competitive Policies in the Telecommunications Business Field for
Promoting the IT Revolution".  This report covers such measures as the "promotion of pro-competitive
policies to open up networks", the "improvement of  consumer protection administration", and the
"direction of new competition frameworks (such as the abolition of Type I and Type II business
categories)".  The Government of Japan shall implement the necessary measures based on this report.
                                                     
2 (1) Enhancing and Making good use of "People Power" (Human Resources)- Education/Culture,
Science/Technology, IT. (2) Building Attractive Cities and Highly Unique Local Communities. (3)  Making a fair
and Secure aging society, and coping with the declining birth rate. (4) Creating a Recycling-based society, and
solving global environmental problems.WT/TPR/G/107 Trade Policy Review
Page 14
(d) Competition Policy
56. At the 154th Diet session, the Fair Trade Committee (FTC) brought up the bill concerning the
amendment of the Antimonopoly Act (AMA), including the repeal of the restriction on the total amount
of stockholding by a major company (Article 9-2), the increase of the upper limit of a criminal fine
against a juridical person (Article 95), etc., the amendment of which was promulgated in May 2002.
57. The FTC has been taking rigorous legal action for any violations of the AMA.  The number of
legal cases regarding such violations was 18 in 2000 and 42 in 2001.  Details of these cases can be
found below:
2000 2001
Private Monopolization 1 0
Bid-rigging 9 36
Cartels (excluding bid-rigging) 2 3
Unfair Trade Practices 5 3
Others 1 0
Total Cases 18 42
58. The surcharge payment contained in orders over the last two years has been estimated at a total
amount of around ¥13 billion (equivalent to about US$112 million).  Of that amount, some cases,
totalling approximately ¥2.7 billion (about US$23 million), were nullified due to the initiation of
hearing procedures.
59. The FTC is expected to serve as the guardian of the market and to establish competition
policies appropriate for the 21st century.  In this context, the number of personnel in the FTC has
increased, being assigned mainly to the investigation section.
60. The FTC considers that the resale price maintenance system for copyrighted works (books,
magazines, newspaper, records, music tapes and music CDs) should be abolished from the viewpoint ofcompetition policy.  However, it was concluded appropr iate to maintain that sy stem for the time being,
mainly because a national consensus could not be achieved due to, many people being against the
abolition, arguing that it may adversely affect the cultural or public aspect of copyrighted work.
61. In May 2002, the Government of Japan and the European Commission (EC) signed the draft
text of an agreement concerning co-operation on an ti-competitive activities.  This agreement is the
second such bilateral agreement for Japan, followin g that already concluded between Japan and the US.
This new agreement is expected to have the effect of strengthening the enforcement of competition laws
against international anti-competitive activities, and of developing the co-operative relationship
between the competition authorities of Japan and the EC.  In the Japan-Singapore Economic Partnership
Agreement, which was signed in January 2002, the two countries agreed to promote cooperation when
controlling anti-competitive activities, in order to facilitate trade and investment flows between the
two countries.
62. In the field of technical cooperation, the FTC has been holding several training courses on
competition policy for the expert-level staff members of competition authorities, particularly in
developing countries.  In addition, the FTC has sent experts to conduct more in-depth technical
assistance in the field of competition policy to se veral developing countries.  For example, in the
framework of the "PFP" (Partners For Progress) initiative of the APEC, the FTC organized five annualtraining programs on competition policy with the Royal Thai Government from FY1996 to FY2000.
The fifth and last program was held in Bangkok in March 2001, with intensive discussions being had on
specific topics of the sub-group meetings.  After conclusion of the PFP initiative as originally planned,Japan WT/TPR/G/107
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the FTC, in collaboration with the Royal Thai Government and the Government of the Socialist
Republic of Vietnam, proposed a new series of training programs on competition policy within the
framework of the APEC for the coming three years.  The first seminar was successfully conducted in
August 2002 in Bangkok and the second will be held in Vietnam early 2003.
(e) Agricultural Policy Reform
63. As mentioned in its previous Government Report prepared for Japan's Trade Policy Review in
2000, the Basic Law on Food, Agriculture and Rural Areas was enacted in July 1999, providing a new
framework legislation for Japan’s agricultural policy by replacing the Agricultural Basic Law of 1961.This Basic Law stipulates, inter alia , that the price of agricultural products should reflect the supply and
demand situation, as well as the quality of the goods.  In this regard, Japan has reviewed its agricultural
policies and has vigorously reformed price support m easures on a number of key agricultural products –
rice, wheat, soybeans, dairy products, fruit, vegetables, beef calf, sugar cane and beets and sugar – in
order to allow prices to reflect the market signals.   These reforms are complemented by the safety-net
mechanisms, which are designed to alleviate the adverse effects on farmers caused by the substantial
fall in prices.
64. Such developments prove Japan's willingness to duly implement the reform process stipulated
in Article 20 of the WTO Agreement on Agriculture.  As a result of the above-mentioned policy
reforms, the total amount of domestic support provided to agricultural producers, measured according tothe total AMS in 1999, declined to less than 20 percent of the final commitment level of 2000.
65. Since September 2001, various problems relating to "Food" and "Agriculture" have emerged in
connection with the outbreak of BSE and with the false labelling of food in Japan.  In response to these
challenges, the Ministry of Agriculture, Forestry and Fisheries (MAFF) proposed in April 2002 an
"Action Plan for Revitalizing Japanese "Food" and "Agr iculture"".  This was designed as a blueprint for
implementing the drastic reforms of agricultural, forestry and fishery policies, with a view to securing
food safety and consumers' confidence.  To ensure the transparency of the policy-making process for
restoring the confidence of the general public on Japan's agricultural policy, the Action Plan was
proposed, followed by a process of seeking the views and comments from the various stakeholders
across the nation.  The Action Plan focuses on the following three policy challenges, which build on thebasic principles of the Basic Law on Food, Agriculture and Rural Areas:
1) to engage vigorously in reform policies as th e first priority, in order to secure food safety
and consumer confidence;
2) to accelerate the structural reform of agriculture;  and
3) to promote the interchange of people and information between urban and rural areas to
create a beautiful country, in which humans and nature are in  perfect harmony.
66. To summarize, Japan is not only pursuing furthe r reforms, including agricultural price policy
reforms and regulatory reforms, but is also addressi ng challenges to make its agricultural policies more
responsive to consumers' concerns on food safety and quality, and more able to secure the rural
environment and the various other roles of agriculture.WT/TPR/G/107 Trade Policy Review
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IV. DOHA DEVELOPMENT AGENDA
67. As mentioned in Chapter I above, Japan has been actively participating in the new round of
negotiations in order to pursue further trade liberalization and to strengthen the WTO rules.
68. In the process leading up to the start of the new round, Japan insisted that the negotiations be
comprehensive, i.e. not limited to the so-called Bu ilt-In-Agenda (agriculture and services) and some
market access issues, but to include, among others, rule-related issues (anti-dumping, subsidies, etc.),
the strengthening of the DSU and Singapore issues.  This stance reflected Japan's long-standing position
for the negotiations to proceed in a balanced and equitable manner, thereby not favouring the interestsof just a limited number of members.
69. Thus, Japan sincerely welcomed that its above stance was to be fully considered when kicking
off the new round, which includes a wide range of issues.  Now that the negotiations have successfully
started in ardency, Japan appreciates the progress so far reached in spite of some delays found in its
working programme.  Japan's solid commitment to ensuring the success of the 5
th Ministerial
Conference in Cancun, as well as its smooth conclusion not later than 1st January 2005 is irreversible.
Japan strongly hopes that all members show the same level of determination in order to accelerate the
negotiations, the fault of whish the momentum toward s achieving an open and fair multilateral trading
system would be in peril.
70. Furthermore, Japan is perfectly aware, bearing in mind the failure of the Seattle Ministerial
Conference, that the interests of developing countries should not at all be left out in the new round.
Without considering difficulties faced by the developing countries, which themselves constitute a
majority in the number of WTO Members, the negotiations cannot and shall not move forward.  As the
world economy becomes more and more integrated, developing countries should achieve more and
more capability towards implementing the existing and future WTO rules, which are of their own
interest, and gain more momentum towards fully participating in the round.  Japan has been reiterating
its own conviction that the further development of developing countries lies in the promotion of trade,
and that it is of mutual benefit to both developed and developing countries if the latter can achieve an
independent development through trade and investment, as the stability of the world economy relies on
a harmonious development throughout the world.  In this context, Japan recognizes that thedevelopment issues such as Implementation-Related Issues and Concerns, Special and Differential
treatment are of particular importance for developing members.  Japan will examine these important
issues in earnest in cooperation with the related committees.
71. Based on the above thought, Japan has been entirely committed to the trade-related technical
assistance/capacity building (TRTA/CB) and the concrete measures of duty-free quota-free for LDC
products.  As for TRTA/CB, Japan has already made a contribution of 1.5 million CHF (0.9 million
US$) to the Doha Development Agenda Global Trust Fund.  By trying to respond to the requests ofdeveloping countries, Japan is providing TRTA/CB activities through the Japan International
Cooperation Agency (JICA) project, the APEC Trad e and Investment Liberalization and Facilitation
(TILF) fund, and the Asia Development Bank (ADB).
72. When moving forward, Japan enumerates the fo llowing main, but not exhaustive, objectives.
- Strengthening the WTO rules to prevent arbitrary trade measures.
- Further liberalizing  world trade.
- Promoting the participation of developing countries.Japan WT/TPR/G/107
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- Assuring the co-existence of various types of agriculture, taking account of, inter alia ,
multi-functionality.
- Not only liberalizing trade but also considering other values such as intellectual
property rights, environment, etc.
73. More concretely, Japan has been addressing each negotiation area from the following
viewpoints.
(a) Agriculture
74. Since the previous Review, Japan has been actively engaged in the WTO agricultural
negotiations, and has submitted various proposals with a view to establishing fair and equitable
multilateral trading rules on agriculture.  In the first phase of the negotiations, Japan submitted a
comprehensive negotiating proposal.  Based on the fundamental philosophy of "the coexistence of
various types of agriculture", the following five major priorities are identified:
(i) consideration of the multi-functionality of agriculture;(ii) ensuring food security, which is the basis of the society in each country;
(iii) redressing the imbalance between rules and disciplines applied to agricultural exporting
countries and those applied to importing countries;
(iv) consideration for developing countries;  and
(v) consideration for the concerns of consumers and the civil society.
75. In the second phase of the negotiations, Japan submitted a series of papers elaborating the rules
and disciplines, in order to deepen other Members' understanding on Japan's idea of a future agricultural
trading system.  These papers cover the following broad spectrum:
1) export competition ("export prohibitions and restrictions", "export enhancing measures"
and "a new framework for international food stockholding");
2) market access ("a new safeguard mechanism");
3) domestic support ("green box");
4) horizontal issues ("state trading enterprises", "consumers' concern on food safety and
quality", "importance of agriculture in rural areas (rural development)", "the role of
agriculture to provide environmental benefits" and "international environmentsurrounding agricultural trade and food security").
76. Throughout the negotiations, Japan advocates the importance of Non-Trade Concerns in
agriculture and insists that Non-Trade Concerns be taken into account in the negotiations, as provided
for in the Agreement on Agriculture, and as reaffirmed in the Doha Ministerial Declaration.  In this
regard, Japan organised, in collaboration with the EC, Korea, Mauritius, Norway and Switzerland, and
chaired the 4
th International Conference on Non-Trade Concerns in Agriculture at Ministerial Level,
held in Rome on 14th June 2002.  The Conference attracted participation from 54 WTO Members and
Observers, considerably exceeding the number of participating countries from the past three such
conferences.WT/TPR/G/107 Trade Policy Review
Page 18
77. During the Conference, participants co-ordin ated their views on the role that Non-Trade
Concerns should play in the WTO negotiations on agriculture.  Ministers emphasised that Non-Trade
Concerns cannot be adequately addressed unless combined with domestic agricultural production.  They
also underlined that the multilateral rules needed  to acknowledge and secure, through a variety of
instruments, the continued coexistence of the vari ous types of agriculture, both in high and low
potential areas, based on each country's specific conditions and historical and cultural backgrounds.
Furthermore, since the Doha Ministerial Declaration includes the provision stating that Non-Trade
Concerns will be taken into account in the WTO negotiations on agriculture, participants stressed theirdetermination to fully honour this commitment.
(b) Services
78. Regarding the negotiations on services, Japan has been actively participating in the WTO
services negotiations.  It submitted a comprehensive negotiating proposal in December 2000 and then
made additional proposals regarding MFN Exemptions, movement of natural persons, energy servicesand educational services.  Furthermore, the disciplines in domestic regulation are also highly considered
by Japan.
79. Japan is now partaking in the request-offer process, and hopes that all Members, including the
developing countries, will actively participate.  As one of the most liberalised economies in terms of the
number of the services sub-sectors, where specific commitments are made, Japan is prepared to takefurther steps to improve its commitment and encourages similar liberalisation efforts by other WTO
Members.  Under such view, Japan submitted its initial requests to all WTO Members on the 27
th and
28th of June 2002.  In general terms, Japan attaches great importance to the following issues.
- elimination or alleviation of horizontal (cross-sectoral) regulations, which constitute
substantial obstacles to the activities of foreign service suppliers, such as restrictions onthe participation of foreign capital, nationality requirements for the staff and
employees, restrictions on the acquisition of real estate, etc.
- improved commitments of liberalization in those services sectors which serve as an
infrastructure in support of various economic activities, such as telecommunication,
construction, distribution, financial, transport, etc.
- improved commitments of liberalization in those services sectors related to new
information and communication technology, such as computer and related services,
telecommunication, etc.
- improved commitments of liberalization in various professional services supporting
business activities, such as accounting and architectural services.
(c) Non-agricultural Market Access
80. Through the past several rounds of negotiations, tariffs on non-agricultural products have been
substantially reduced, market access has been improved, and accordingly, the predictability and
credibility of trade has been enhanced.  Since the Uruguay Round, Japan has achieved 1.7% of the
trade-weighted average tariff rate, which is one of the lowest among the WTO Members.  However, as
there is still room for improvement in market access among Members, Japan is prepared to engage itself
actively in these negotiations together with other WTO Members, in accordance with the DohaMinisterial Declaration, including its paragraph 16.
81. Japan has already submitted its contribution paper to the WTO (cf. document TN/MA/W/5).
As stated in that paper, Japan is of the view th at international trade can play a major role in theJapan WT/TPR/G/107
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promotion of economic growth and the alleviation of poverty, as  described in the Declaration;  and in
this context, the improvement of market access can play an important role.
82. Japan would like to point out that, while improving market access through negotiations on non-
agricultural market access is beneficial to all Members, several studies in the past have clearly shown
that developing countries, especially the LDCs, are also able to enjoy benefits, according to the
development needs, in the course of the world economic growth enhanced by the expansion of world
trade.  Members should thus make efforts to further stabilize the multilateral trading system and
promote negotiations in order to enable all Members to benefit.
83. The elements or ideas mentioned in the paper are as follows:  binding ratios, target tariff rates,
tariff peaks, high tariffs and tariff escalations, "zero-for-zero" and "Harmonization", the base rate for
negotiations, tariff schedule, implementation periods and staging, NTMs, S&D, capacity building and
the protection of the environment and sustainable development, including market access on
environmental goods.  Japan intends to submit additional proposals on the above elements as necessary.
(d) Rules
84. Japan has been actively participating in the negotiations on Rules, in particular the Anti-
Dumping negotiations.  The Government of Japan believes that the current rule should be clarified and
improved in order to prevent any misuse of anti-dumping measures.  For the purpose of facilitating the
discussions in the Rule negotiating group, Japan together with 10 more members, has submittedtwo consecutive papers to the group.  The Government of Japan appreciates the comments and
questions raised by other Members on these papers, Japan would like to continue taking an active role
in the negotiations in order to facilitating discussions with a view to achieving the improvement of the
current Anti-Dumping Agreement.  Japan reiterates the importance of enhancing the mutual
understanding of all Members through intensified informal, as well as formal discussions.
85. With regard to the negotiations on the Subsidies and Countervailing Measures Agreement,
Japan believes that the discussions on the rules governing Countervailing Measures should be consistent
with the Anti-Dumping negotiations from the outset stages.  Intensified rules on Countervailing and
Anti-Dumping, for preventing the misuse of these measures, would benefit both developed and
developing countries.  Japan is of the view that the outcomes of the negotiations should be applied toboth developed and developing countries equally.
86. Likewise to other Members, Japan is not satisfied with the fact that no examinations under the
Committee on Regional Trade Agreements have been completed due to the lack of clarity in the
disciplines under the existing WTO provisions which apply to existing and future regional trade
agreements.  Japan hopes that the active discussions in the rules negotiations will result in the
clarification of disciplines relating to the regional trade agreements.
(e) Singapore issues
87. With regard to the Singapore issues, i.e. investment, competition, trade facilitation and
transparency in government procurement, Japan has strongly insisted for some time that, considering
their respective importance, these items should be in cluded in the negotiation agenda with an explicit
consensus from all Members following the 5
th Ministerial Conference in Cancun.  In particular, if the
final conclusion of the Doha Development Agenda was to be relatively more focused on market accessissues, leaving behind the rules on the Singapore issues and others, Japan would feel obliged to regard
the outcome as poorly balanced.  For the negotiations to be comprehensive and balanced in its entire
structure, as repeated by Japan on every occasion, it is important to put priority on the inclusion of the
Singapore issues and a successful conclusion.WT/TPR/G/107 Trade Policy Review
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88. These 4 issues are all new challenges in the GATT/WTO regime, deriving from the changing
world trade and investment environment.  With the fast evolution and integration of the world economy,
the need to incorporate these issues in the GATT/WTO rules become ever more important.  Each of the
4 issues has the role of complementing and comple ting the current WTO rules.  For example, trade,
investment and competition policies are inextricably lin ked in order to ensure the free and fair character
of the world economy.  Furthermore, trade without a sound customs system (trade facilitation) would
not be able to guarantee stable trade relations, and government procurement policies and practices
without sufficient transparency would deprive the WTO Members of opportunities to improveeconomic governance, in order to build public confidence and to encourage long-term business
commitments.
89. The more concrete meanings of each of the Singapore issues, as well as Japan’s basic stance are
enumerated below:
(a) Investment
90. Japan has been giving priority to the establishment of a set of rules in order to secure
transparent, stable and predictable conditions that will facilitate long-term cross-border investment,
particularly foreign direct investment (FDIs), thereby contributing to the economic development of all
Members including developing members.  Japan seriously takes note of the concerns expressed by some
Members in that multilateral investment rules will prevent developing countries from adopting theirown development policies.  But we believe that prog ressive liberalization of investment with sound and
fair rules provides developing countries with greater opportunities to move from labour-intensive
industries to value-intensive industries, bolster up their competitiveness and facilitate the transfer of
technology.  Based on this conviction, Japan was a main advocate of including investment rules in the
negotiating agenda before Doha, and continues to be a main advocate for negotiation.  Japan believestechnical assistance and capacity building, which will contribute to the Members' understanding of the
issue, are important and has been active in this field as well
(i) Competition
91. With the globalization for business activities, there is an increasing need for each country to
properly deal with anti-competitive business practices which effect international trade.  Japan hopes thatthe multilateral framework shall be established for the purpose of strengthening cooperation in the
enforcement of competition laws so that each country may cope efficiently and effectively with those
anti-competitive practices.  Under this framework,  flexibility and progressivity should at least be
allowed the developing countries.
(ii) Trade Facilitation
92. The expansion of world trade necessitates more than ever a smooth, fair and transparent
customs system to complement the current GATT/WTO system.  Japan has been collaborating since1999 with members of the Colorado group, which aims at including trade facilitation in the negotiating
agenda.  Japan has submitted several contribution papers on trade facilitation with the belief that trade
facilitation plays an important role in promoting th e development of international trade and the world
economy, thereby benefiting all trading parties, including the private and government sectors of
developed and developing countries.
(iii) Transparency in Government Procurement
93. While the current plurilateral Agreement on Government Procurement contains the rules
applied to only a limited number of WTO Members (currently 27 Members), an agreement on the
transparency in government procurement will enable  the development of a framework of rules, ensuringJapan WT/TPR/G/107
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that a wide range of information on each WTO Member's government procurement policies and
practices, to be made available to suppliers and service providers in a WTO Member.  In addition, such
framework of rules will ensure that adequate information concerning procurement opportunities and the
relevant domestic procedures is made available, on a timely basis, to interested suppliers and service
providers.
94. Japan, therefore, has supported the idea of launching negotiations for establishing a framework
agreement on transparency in government procurement.  The negotiations should provide for the
allowing appropriate consideration on special and differential treatment for developing Members, andthe needs of those Members who require technical assistance and capacity building should be duly
taken into account.
95. Japan has a strong conviction that benefits could be brought to all WTO Members if one is to
remove the existing barriers in these 4 areas in order to facilitate the flow of trade and investment.  To
this end, Japan is conducting technical assistance and capacity building activities to assist thepreparations of developing countries.  In a variety of discussions with some developing countries, Japan
noticed that a part of their reticence for starting the negotiations came from certain misunderstandings,
which were in part justifiable, due to their lack of opportunity for learning these issues profoundly.
This is why Japan has repeatedly reinforced its sense of mission to deploy each and every effort to
inform developing countries, by the way of technical assistance and capacity building, of the merits andmeanings of the Singapore issues.  This process is still continuing, in cooperation with the other
like-minded countries.
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