Note: Advance written questions by WTO Members and replies by Japan are reproduced in
document WT/TPR/M/76/Add.1.WORLD TRADE
ORGANIZATIONWT/TPR/M/76
1 February 2001
(01-0507)
Trade Policy Review Body
14 and 16 November 2000
TRADE POLICY REVIEW
JAPAN
Minutes of Meeting
Chairperson: H.E. Dr. Iftekhar Ahmed Chowdhury (Bangladesh)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF JAPAN 4
III. STATEMENT BY THE DISCUSSANT 9
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 12V. REPLIES BY THE REPRESENTATIVE OF JAPAN AND ADDITIONAL
COMMENTS 28
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 43WT/TPR/M/76
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The fifth Trade Policy Review of Japan was held on 14 and 16 November 2000.  The
Chairperson welcomed the delegation of Japan, led by Mr. Yoshiyuki Motomura, and the discussant,
Ambassador Walter Lewalter (Germany).  As usual, the discussant would speak in his personal
capacity and not as representative of his country.  In accordance with the established procedures, the
discussant had made available, in advance, outlines of the main issues he intended to raise.
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The report by the Government of Japan was contained in document
WT/TPR/G/76 and that of the WTO Secretariat in document WT/TPR/S/76;  the main issues to be
raised by the discussant were contained in document WT/TPR/D/55.  Copies of advance questions,
submitted by Argentina;  Chile;  Hong Kong, China;  Canada;  New Zealand;  Korea;  Malaysia;
Peru;  EU;  Switzerland;  Australia;  Colombia;  Uruguay;  India;  Brazil,  Norway;  Mauritius;Thailand;  and the United States (WT/TPR/M/76/Add.1, Annex I) were transmitted to the delegation
of Japan.WT/TPR/M/76
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF JAPAN
3. The representative of Japan, Mr. Yoshiyuki Motomura stated that the TPRM process greatly
contributed to enhancing the transparency of the trading systems of member countries, which was
essential for promoting the multilateral trading system.  He hoped that through the discussions in the
fifth Trade Policy Review of Japan, WTO Members would have a better and clearer understanding of
Japan’s trade policy in the international community.  In this context, he touched upon some of the
salient points of the recent actions taken by Japan in trade and investment.
4. Since the early 1990s, the Japanese economy had been in a severe situation, one of the most
concerned elements in the world economy.  Thus, it had been the highest priority of Japan's economic
policy to overcome the recession.  The recession that Japan had experienced was not an ordinary
cyclical economic recession, but rather was characterized by economic stagnation caused by structural
problems.  Three major problems the Japanese economy faced were non-performing loans, excessivecapital stock, and excessive labour.  These were closely interrelated.  Corporations and households
suffered from the collapse of the bubble economy, which brought down the value of  assets, including
stocks and properties.  Domestic demand shrank, triggering a further fall in asset prices and creating a
vicious cycle of asset decline and economic slowdown.  Consequently, the corporate sector had
maintained excessive capital stock, labour, and loans.  Many companies tried to reduce these bycutting employment cost and investment.  Restru cturing in the corporate sector resulted in
significantly weaker levels of household confidence and consumption.
5. He briefly explained the major points of various macroeconomic measures and structural
reform implemented by the Japanese Government:
(a) considerable tax reduction had been undertaken to stimulate demand, while public
spending, including public works, was aimed at stimulating private investment to
create lasting demand;
(b) to respond to the reluctance of financial institutions to supply funds, the Government
undertook financial reforms as well as creating systems that would facilitate the
provision of funds for entrepreneurs to stimulate private investment;
(c) programmes to provide training for entrepreneurs and workers were being improved.
Providing skills and education would create more jobs and employment, and thusincrease income, which would lead to increased consumption and effective demand;
(d) responding to the sense of insecurity, the Government was aiming to create a society
where all people, including the aged, women, and people seeking jobs as a result of
restructuring of firms, were able to work;  and
(e) the Government continued to make efforts to revitalize private industries.  Various
deregulation measures were taken.  These would reduce barriers to market entry and
revitalize the economy.  The deregulation would also reduce prices and thus increase
consumption and effective demand.  The Government also attached importance to
promoting promising industries, including those related to the protection of the
environment, medical care, bio-technologies, building of urban infrastructure, solarand other alternative energies, and housing.
6. In addition, the Government developed an economic plan and introduced a number of policy
packages.  As detailed in the Government Report, in July 1999 the Government developed a new plan
entitled “Ideal Socio-economy and Policies for Economic Rebirth”, which set forth a fundamentalWT/TPR/M/76
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reform of the socio-economic system in order to respond to four major socio-economic trends:  i.e.
transition to a knowledge-based society, low birth-rate and aging of the population, globalization, andincreasing environmental restrictions.  Under the direction of the Prime Minister, in October 2000 the
Government adopted "A Policy Package for New Economic Development toward the Rebirth of
Japan", which was the fourth policy package since the previous TPR.  The package aimed to place the
economy on a self-sustained recovery path and to provide the basis for launching a society fitting for
the era of diverse knowledge, focused on rapid promotion of the IT revolution, responding toenvironmental issues, the aging of society, and upgrading the urban infrastructure as well as measures
for life-related infrastructure, disaster prevention, financial measures for small and medium-sized
enterprises, and housing.
7. The economic situation began to show signs of recovery.  After posting negative GDP growth
in 1998, economic growth reached 1.4% in FY1999.  The economic prospect of real growth in
FY2000 was 1.2 %, as announced by the Government on 19 October 2000.  The Government intended
to continue to undertake a broad range of reform measures and hoped that such efforts would support
an upward trend in Japan’s economy.
8. The trade balance indicated that Japan's exports and imports, particularly exports, decreased
in 1999, and as a result, the trade surplus decreased to ¥14.02 trillion.  However, in the first half of2000, imports largely increased, reflecting a recovery of the Japanese economy as well as high oil
prices, and the trade surplus declined by 5.1% compared with the first half of 1999.  According to
recent monthly statistics, both exports and imports increased for ten consecutive months up to
August 2000.  Japan’s outward foreign direct investment (FDI) amounted to ¥7,439 billion in
FY1999, an increase of 42.6 % over FY1998.  FDI flows into Japan almost doubled for two
consecutive years to ¥2,399.3 billion in FY1999 from ¥1,340.4 billion in FY1998.  The figure
indicated a positive influence, by the Government’s structural adjustment measures, on Japan'sinvestment environment.
9. The representative mentioned some improvements made so far in several areas:
(a) in parallel with deregulation, systems for exemption from the application of the
Antimonopoly Act (AMA) had been reviewed step by step since 1995.  A Bill to
eliminate the exemption systems under the AMA was submitted to the Diet andenacted in 1999.  A Bill submitted to the Diet in March 2000 and enacted on
12 May 2000 permitted private parties to seek and obtain injunction orders from the
courts against parties engaged in activities that violated the unfair trade practices set
forth by the AMA.  This would improve the damage compensation system against
AMA violations.
(b) during 1998-2000, the Government continued to implement a financial system reform
plan formulated in June 1997, known as the Big Bang, while taking measures to
restore the stability of the financial system.  In 1998, two laws vital for restoring the
stability of the financial system were enacted.  One was the Financial Revitalization
Law, which improved the financial resolution schemes for the protection ofdepositors and borrowers in good faith.  The other was the Financial Function Early
Strengthening Law, which established a new system for capital injection into
financial institutions using public funds.  Both laws had been effective in dealing with
problems leading to under-capitalization and the failure of large banks and other
deposit-taking institutions.
Monetary policy fell under the jurisdiction of the Bank of Japan, and its independence
was respected.  While tax reduction to stimulate demand might be conducted in theWT/TPR/M/76
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context of overall fiscal and other economic policies, as suggested in the Secretariat
Report paragraph 12, due respect was needed for the basic tax principles (i.e. fairness,neutrality and simplicity) when examining tax reductions.
(c) Until July 1999, Japan's agricultural policy had been based on the 1961 Agricultural
Basic Law.  Some of the objectives of the Basic Law had been achieved.  However,
certain problems had arisen, such as a substantial decline in the food self-sufficiency
ratio.  At the same time, there had been an increasing recognition that the agriculturalsector had its multifunctional roles such as food security and conservation of land.  In
order to meet the changing environment, the new Agricultural Basic Law was enacted
in July 1999.  The new Law established four basic principles, i.e. securing a stable
food supply, fulfilling the multifunctionality of agriculture, promoting sustainable
agricultural development, and developing rural areas.
Based on the new Law, policy reform had been conducted through various measures,
including substantial changes of price policies for rice, wheat and other products, and
the introduction of an area-based direct payment scheme for farmers in hilly and
mountainous areas.
(d) A series of bills were passed by the Diet, based on the Law on Central Government
Reform enacted in June 1998.  In April 1999, the Plans to Expedite the
Administrative Reform of the Central Government were adopted to set directions on
matters including the streamlining of administrative organizations.  The legislative
framework was further consolidated in 2000 by enacting necessary cabinet orders and
ordinances.
Furthermore, the Government was trying to promote the reform process in other
areas, which would contribute to revitalizing the Japanese economy.
10. Japan was committed to the multilateral trading system, and had steadily promoted domestic
liberalization since its accession to GATT in 1955.  Japan's basic trade policy had been, and would be,
to maintain and strengthen a free and non-discriminatory trade policy for the sustainable development
of the global economy.
11. Japan had made significant contributions to strengthening the multilateral trading system.
Since the establishment of the WTO, Japan had implemented fully and faithfully all the Uruguay
Round Agreements.  As a result, Japan's tariff level continued to be the lowest among developed
countries, with an average tariff on industrial  goods of 1.5%.  Furthermore, Japan had been
implementing the ITA and moving forward with chem ical harmonization.  Since its previous Review,
tariff reductions had been implemented in accordance with the schedule in the areas of agriculture,forestry and fishery products.  Japan had tarrified rice in accordance with the Agriculture Agreement.
Before the Seattle Ministerial Conference, Japan submitted various proposals aimed at further
promoting the multilateral trading system.  Japan had been contributing constructively to the activities
of the WTO in order to ensure the proper functioning of the system.  Japan’s strong commitment to
the multilateral trading system would not change in the 21
st century.
12. The priority for Japan's economic policy was the revitalization of its economy and society, not
only for its own sake, but also for the development of the world in the age of globalization.  To that
end, Japan had been making utmost efforts to create a framework in which people, goods, services,
and capital could flow more freely.  While the Government placed the highest priority on maintaining
and strengthening the multilateral trading system, bilateral and regional economic cooperation had thepotential to bring about great success as long as it was developed in a manner that complemented andWT/TPR/M/76
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strengthened the multilateral trading system and contributed to the development of the world
economy.  From that point of view, Japan had developed cooperative economic relationships withmajor countries and regions:
(a) Japan had conducted a series of bilateral consultations and dialogue with the
United States and the European Union regarding issues such as deregulation,
competition policies and regulatory reform.  Measures taken as a result of these
consultations had been applied on an MFN basis, and were expected to facilitate tradeand investment with all economic partners.
(b) Japan was also involved in regional economic cooperation in both the Asia-Pacific
Economic Cooperation (APEC) and the Asia -Europe Meeting (ASEM) fora.  Trade
liberalization in the APEC process benefited members and non-members alike as it
had been implemented on an MFN basis. The members of the ASEM had adopted theTrade Facilitation Action Plan (TFAP) a nd the Investment Promotion Action Plan
(IPAP).  The promotion of cooperative economic relationships among the APEC and
ASEM members would invigorate world trade and promote the development of the
world economy.
(c) Japan decided to launch negotiations from January 2001 to achieve a wide-ranging
economic partnership between Japan and Si ngapore.  The Japan-Singapore Economic
Agreement for a New Age Partnership would not be a traditional free-trade
agreement, but rather a new type of economic agreement that could strengthen the
broad range of economic ties between the two countries.  It would include new
economic fields such as capital flows, the harmonization of electronic commerce
regulations, cooperation on paperless trade, financial services, media and
broadcasting, the movement of professionals, and the development of humanresources.  The future agreement between Japan and Singapore would further
promote trade and investment liberalization and institutionalize regulatory and other
policy reforms in both countries.  It woul d also facilitate smooth transborder flow of
management resources, create a larger market, provide greater opportunities and
larger economies of scale, and contribute to the prosperity of the world economy.The partnership agreement would enhance the creativity of both nations as well as
encourage technological innovation, especially in information and communication
technologies.  When deciding to launch the negotiations, both countries reaffirmed
the primacy of the multilateral trading system and shared the view that regional trade
agreements had to be consistent with WTO rules and complementary to themultilateral trading system.  Both countries recognized the catalytic role that regional
trade agreements should play in accelerating liberalization and rule-making in the
framework of the multilateral trading system.  Japan aimed to achieve an economic
agreement that would serve as a model framework for other countries.
13. Japan was committed to the multilateral trading system and had played a leading role in
strengthening it.  All Members of the WTO had to cont inue to work hard toward the early launch of a
broad-based round to enable the WTO to continue to contribute to global economic development and
increase standards of living, through the promotion of the multilateral trading system.
14. The next round of WTO negotiations should cover a balanced and inclusive agenda to enable
the WTO to properly address broad issues in the age of globalization and of new technologies, totackle the growing gap between countries, face up to environmental constraints, and to respond
positively to the various challenges in a well-balanced manner.WT/TPR/M/76
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15. The Government was determined to enhance the multilateral trading system in collaboration
with other Members.  In the 21st century, Japan wished to play a pivotal role in a joint endeavour to
cope with these challenges.WT/TPR/M/76
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III. STATEMENT BY THE DISCUSSANT
16. The discussant (Ambassador Walter Lewalter) stated that, as the second largest economy of
the world and one of the world’s biggest trading nations, Japan's economic performance was of key
importance to the recovery of the Asian region and to the development of world trade as a whole.
17. Having gone through a number of difficult years, Japan's economy might have reached the
path of growth again.  In 1999, real GDP rose by 0.2%;  there were differing opinions about the
growth rate in 2000, however it was the unanimous  view that the Japanese economy was growing.
The Japanese Economic Planning Agency forecast a real growth of 1.5%.  In its forecast of
31 October 2000, the Bank of Japan expected the growth figure to attain 1.9% to 2.3% in FY2000.
Some analysts even expected a solid growth between 2.0% and 2.7% of GDP.
18. By the end of October 2000, the Economic Planning Agency had revised its GDP calculation
method according to the commonly agreed UN standard of 1993.  That had significant consequences;for 1997 the new calculation resulted in a change in GDP to +0.2% instead of -0.1% and for 1998 to
-0.7% instead of -1.9%.  The negative growth reco rd of two consecutive years no longer seemed to
represent a correct picture.
19. These figures were encouraging, but it would be premature to assume that the economic
situation was fully satisfying again.  Significant challenges remained, as became apparent to thepublic by recent breakdowns of insurance and distribution companies.  The breakdowns might well
have been influenced by the recent structural changes.  The discussant asked the Japanese delegation
to elaborate on latest projections for future economic growth, taking into consideration the
aforementioned phenomena.
20. The Japanese Government sought to support economic recovery by expansionary
macroeconomic policies.  It recently announced another fiscal package, amounting to ¥11 trillion.  On
the other hand, the Bank of Japan ended its long-practiced "zero interest-rate" policy in August 2000by introducing an interest rate of 0.25%.  Although this was a very moderate rise, it was under
intensive discussion in Japan because it seemed to point in the opposite direction.
21. Over the years, public expenditure had increased steadily.  Government debt amounted to
about 130% of GDP.  As early as 1997 Japan had tried to terminate the issuance of central
government deficit-financing bonds by FY2003.  However, due to prevailing adversities, the JapaneseParliament first postponed the target to 2005 and then suspended the law in December 1998.  For the
first time in four years, however, deficit-spending bonds were not used in the supplementary budget
approved by the Cabinet in the week previous to the current TPR.  The discussant expressed interest
in hearing from the Japanese delegation about the future Japanese policy in a time of economic
stabilization and renewed growth.
22. Private consumption was still sluggish.  There had been endeavours by the Japanese
Government to provide incentives for more private expenditure.  Thus far, results did not seem to be
that positive, but this had to be seen against the background of a level of unemployment
unprecedented in Japan in recent years.  The unemployment rate was declining;  it fell from 4.9% in
March 2000 to 4.5% in August.  Some analysts, how ever, expected a new increase, to roughly 5% in
2001, due to restructuring measures taken by companies.  A further reason for limited private
expenditure was uncertainties over the future of the Japanese pension system in the context of an
aging society.
23. Japan accounted for a large proportion of world-wide foreign direct investment.  However,
there had been only a relatively small foreign direct investment inflow into Japan.  According toWT/TPR/M/76
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OECD statistics, Japan ranked only 19th in this resp ect.  A good deal of the reluctance to invest in
Japan might be explained by insufficient recognition of the opening up of the Japanese economy inthe past.  Lately, however, it appeared that a number of companies had been investing.  In 1998 and
1999 FDI inflow increased considerably, by 97% and 79%.  Some reforms undertaken to attract FDI
might have contributed considerably to the development:  Japan introduced ex post  notification for
mining investment, the elimination of limits on foreign capital participation in certain types of
telecommunication carriers, and the abolition of regulations on foreign investment and employment ofnon-Japanese executives in the cable television industry.  The discussant asked the Japanese
delegation to share its views on possible further developments in this respect.
24. The domestic Japanese market was still regulated in many areas.  Small-scale companies were
producing only for the internal market with a low level of productivity.  Especially in the services
sector, there was a lot of potential for deregulation.  Recently, a study by the McKinsey GlobalInstitute concluded that by further deregulation Japan could achieve an annual growth rate of 4%.
25. Japanese exports decreased for two years from 1998, mainly due to the economic crisis in the
Asian countries.  Imports had also decreased since 1998 because of the low performance of the
Japanese economy and the appreciation of the yen.  However, export and import figures recovered in
the first half 2000.  International competition would increase further once China acceded to the WTO.The answer to those challenges would not be a pol icy of restraint against imports, but to encourage
companies to improve their competitiveness.  Japan had a policy of keeping its market open.  Since
1998, Japan had notified only few anti-dumping measures.  It had not taken any countervailing action;
nor had it introduced measures under the agreement on safeguards, although Japan had taken special
safeguard measures in agriculture.
26. Deregulation policy in Japan had to be viewed from two complementary angles.  One was the
strengthening of internal demand, the other was providing better opportunities for foreign trade.Given the limited growth of GDP, and even negative growth in 1998, the Japanese Government had
tried to provide additional impetus to economic development.  It promoted a policy of deregulation
and abolition of trade barriers.  A revised version of the Three-year Program for Promoting
Deregulation (1998–2000) was adopted in March 2000.  A new three-year programme for the years to
follow was planned to be set up in March 2001.  The Japanese Government had discussed potentialareas of further deregulation with various States.  Substantial input was provided, inter alia , through
consultations with the United States and the European Union.  The Japanese Government should
continue actively to engage in that process.  De regulation was not primarily a short-term means for
improving economic growth, but mainly a strategy with medium- and long-term benefits.  All WTO
Members would benefit from deregulation, because Japan was strictly committed to implementationon an MFN basis.
27. The discussant was interested in hearing more details on plans for further deregulation in the
services sector.  Whereas Japan’s performance in the manufacturing sector had always been
impressive, productivity data concerning services indicated that there was further potential.  This
comprised many issues such as banking, insurance, telecommunication, and transport.  To give anexample, telecommunications interconnection rates had been adjusted to improve competition among
different carriers.
28. Efficient enforcement of competition legislation, including the Anti-Monopoly Act, was part
of the deregulation policy.  Although Japan stressed its commitment to an active competition policy,
more could be done.  The new Bill permitting private parties to seek and obtain injunction orders fromthe courts would perhaps further improve competition enforcement.  In December 1999 and
March 2000 the Japanese Fair Trade Commission issued guidelines for an appropriate trade in
electricity and gas.WT/TPR/M/76
Page 11
29. On technical norms and standardization, Japan was working towards greater international
harmonization of regulations.  The discussant was encouraged that Japan was trying to increase theuse of bilateral agreements on mutual recognition of the equivalence of certification in order to
facilitate trade.
30. Strengthening of public procurement procedures seemed to be a useful tool for increasing
competition and public welfare.  Many foreign companies had not yet found a place in the
government procurement sector of Japan.  In 1998, the share of foreign suppliers in the total value ofgovernment procurement amounted to 5.7%.
31. Japan was an active supporter of the multilateral trading system.  However, regional trade
agreements seemed to be of greater interest to Japan.  At the end of October 2000, the Singaporean
Prime Minister visited Japan to initiate consultations on a bilateral economic partnership agreement.
The Prime Ministers reaffirmed the primacy of the multilateral trading system.  The partnershipagreement was an attempt to attain closer cooperation, including on many issues as yet not covered by
the WTO, such as investment protection and transborder flow of management resources.
32. Reforms had also been undertaken in agriculture.  Japan had introduced a new Basic Law for
Food, Agriculture and Rural Areas, which was a major reform since the 1960s.  Some measures had
already been taken, such as direct payments to farmers in hilly and mountainous regions.  Wheat wasnow distributed through the private sector.  Price policies for soybean, sugar, and dairy products were
also reformed.
33. The WTO had been dealing with the challenges of electronic commerce for quite some time.
At the WTO General Council meeting on 10 October 2000, all Members stressed the importance of
electronic commerce for economic development.  The enhancement of information technology was
one of the focal areas of the new Japanese plan, “Ideal Socio-economy and Policies for Economic
Rebirth”, of 1999.  The Japanese Government began discussion about a whole set of measures
including electronic signatures, intellectual property right law, illicit competition prevention law, and
laws referring to consumer protection.  Additionally, the information infrastructure would be
improved.  The new draft supplementary budget allocated ¥643 billion to IT-related projects.  The
discussant asked the Japanese delegation for further details of the measures Japan would take to
promote information technology.
34. The discussant highlighted the continuous efforts of the Japanese delegation to strengthen the
WTO dispute settlement system.
35. The discussant’s general impression was that Japan had a remarkable record of positive
achievements in its trade policy.  However, there was not as much certainty as might be anticipated
regarding the self-sustaining nature of the economic recovery.WT/TPR/M/76
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IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
36. Members thanked the Japanese Government and the Secretariat for their Reports.  They
looked forward to receiving any outstanding replies to their advance written questions.
37. Many Members noted that their bilateral trade and investment ties with Japan had been
strengthened over the recent period.
38. Members were encouraged by the signs of Japan's economic recovery, with official
government forecasts of 1.5% growth for FY2000.  They attributed this nascent recovery largely to
macroeconomic policies and structural reforms Japan had implemented.  Some Members noted that,
while the Government's fiscal stimulus packages appeared to have helped economic growth, there was
limited scope for further fiscal stimulus due to Japan's high level of government debt.
39. Members recognized that the openness of the multilateral trading system had positively
contributed to the improved economic outlook for Japan, by keeping foreign markets open to itsexports.  They appreciated Japan' commitment to the multilateral trading system, and its contribution
to the sustained growth of the world ec onomy through implementing its Uruguay Round
commitments.  They urged Japan's strong leadership in the strengthening of the multilateral trading
system, including the launch of a new round of trade negotiations.
40. Many Members noticed that Japan, historically not an active participant in bilateral and
regional free-trade agreements, was exploring bilateral agreements, and hoped that such agreements
would cover substantially all sectors, and be WTO consistent.  They hoped that Japan would not
exclude politically difficult sectors such as agriculture.
41. Members appreciated the progress made since Japan's previous Review in deregulation and
structural reform, including in financial services and telecommunications, and the implementation of
the Three-year Program for Promoting Deregulation.  Some Members were concerned that, despite
the progress in structural reform and deregulation, some signs of "reform fatigue" were appearing.Members strongly urged Japan to continue its reform process and improve access to its markets for
goods and services;  in this context, some Members welcomed Japan's decision to extend its
programme of promoting deregulation for another three years.
42. Members appreciated that most imports (of industrial products) to Japan were either duty free
or subject to low tariff rates.  Nevertheless, some distortions remained, such as Japan's complex tariff
and tariff quota structure, particularly in agriculture;  despite the low productivity of the agricultural
sector, Japan continued to provide high protection, such as the high average tariff rates, very high
non-ad valorem  duties on many agricultural products, and intricate tariff quota administration, as well
as high tariff peaks, which, on an ad valorem  equivalent basis, could range up to nearly 1,000%.
43. Many Members appreciated Japan's initiative to further open its foreign direct investment
regime.  However, they pointed out the low level of inward FDI into Japan, which ranked, only 19
th
amongst OECD members regarding inward FDI, as the Secretariat Report noted.
44. Some Members raised concern about the complexity and seeming lack of transparency of
government procurement practices.  Many Members were concerned about the complexity of Japan's
sanitary and phytosanitary regulations, including quarantine procedures.  They also hoped that Japanwould further bring its standards into line with international standards.
45. Members noted that the overall level of domestic support for agriculture was higher than for
other sectors and had increased since 1997;  it was well above the OECD average.  According to theWT/TPR/M/76
Page 13
OECD, total transfers to agriculture were higher than the sector's value added during 1990–98.
Average retail prices of food in Tokyo were between 20% and 30% more expensive than other citiesin the world.  Many Members noted, and supported, Japan's introduction of a new Basic Law on
Food, Agriculture and Rural Areas since July 1999, under which Japan was moving away from price
to income support.  They urged Japan to engage actively and constructively in the mandated
negotiations on agriculture.  Referring to the multifunctionality of agriculture, they generally
recognized that non-trade concerns did arise in agriculture.  Some Members urged Japan to addressthese concerns in a manner that would not unduly distort trade.
46. The representative of Norway stated that despite the considerable cultural and geographic
differences with Japan, Norway was benefiting from a close cooperation between the two nations in a
number of fields, including agriculture, anti-dumping, maritime transport.
47. The representative expressed interest in following future developments in the liberalization of
the foreign direct investment regime and deregulation in telecommunications.  As a whole, the
representative believed that market access was considered to be fairly satisfactory by Norwegian
companies who did business in Japan.
48. As an active member of EFTA, Norway was interested in receiving more information about
the regional and bilateral free-trade agreements Japan was considering.
49. Japan was the second largest market for Norwegian exports of seafood.  Japan had liberalized
the system of import quotas for some seafood products, which the representative regarded as positive,
and hoped that Japan would consider further liberalization in this area.
50. Japan and Norway shared an interest within the WTO in increasing the level of commitments
regarding international shipping.  Both countries had liberal regimes reflecting the importance they
attached to this sector for world trade.  Nevertheless, Norwegian shipping companies had met
problems of restrictive working practices in Japanese ports, which limited competition and raised thecost of doing business.  According to Norwegia n shipping companies, the newly adopted Harbor
Transport Business Act did not appear to improve the situation.
51. Like Norway, Japan promoted the multifunctional role of agriculture.  The representative
noted that the new Agricultural Basic Law in Japan was based on this approach.  Norway fully agreed
that such concerns needed to be taken into account when designing agricultural policy.
52. The representative of Chile stated that bilateral trade between Chile and Japan amounted to
about US$3 billion.  Japan was the second main destination of Chilean exports and first in Asia.  In
contrast, the level of Japanese investments in Chile was low, representing about 4% of the stock of
foreign investments.
53. Chile, like Japan, was interested in broad comprehensive trade negotiations, which should
include competition policy, trade facilitation, foreign investment, and electronic trade.  The two
countries had also been working closely to fight against the abusive use of anti-dumping duties.
54. There had been a study between Japan and Chile to explore the possibility of free-trade
agreements.
55. The representative was concerned that Japan’s agricultural policy was not oriented towards
greater opening or to achieving trade in agriculture products under market rules.  The sector
represented only 2% of GDP and, according to the OECD, had government support distorting the
market, together with tariff protection three times higher than the general average of  around 16%.  HeWT/TPR/M/76
Page 14
hoped there would be a proposal by Japan to liberalize agriculture trade to eliminate distortions.
Other areas of interest to Chile included restrictions in fisheries and forestry.
56. The representative of Hong Kong, China note d that Hong Kong was Japan's sixth largest
trading partner, and Japan was Hong Kong's third largest.  Two-way trade in 1999 amounted to about
US$30 billion.  The level of trade was on a downwar d trend in the late 1990s owing to the Asian
financial crisis, but rebounded no less than 23.1% in the first half of 2000.  The balance of trade had
consistently been in Japan's favour, around US $11.6 billion in 1999.  He was not unduly concerned
about any particular bilateral trade deficit.
57. Japan, as the second largest economy in the world, was a major destination for Hong Kong’s
exports and investment.  Japan was Hong Kong’s seve nth largest source of inward direct investment,
and Hong Kong, China took almost 10% of Japan's total investment in the region.  While Hong Kong
businessmen had invested in Japan, with a total stock of about US$1 billion, the figure was not ashigh as one might expect, pointed to continuing difficulties in penetrating the Japanese market, both
in terms of exports and investment.
58. He was pleased to see Japan's support for "broad-ranged negotiations" for a new round, but
these negotiations had to be manageable to succeed.  He welcomed Japan's commitment to addressing
fully implementation issues, so that the benefits of negotiations were shared equally amongdeveloping and developed countries.
59. On regional trade agreements, the representative fully agreed with the statement in
paragraph 10 of the Government Report that regional trading arrangements must be complementary to
the multilateral system.  He welcomed Japan's initiative to review its regulatory measures, and looked
forward to further opening of services, the largest and growing sector in the Japanese economy, which
would bring new momentum to its economic development.
60. The representative of New Zealand applauded Japan's ongoing commitment to assisting
developing and least developed countries, as well as economies in transition, to achieve sustained
development and enjoy the benefits of integration into the multilateral trading system.
61. The representative urged Japan to maintain the momentum of reform in financial services and
telecommunications, and to extend the reform process to other areas that remained largely insulated
from international competition and foreign participa tion, such as transport, legal, and education
services.
62. FTAs had been a useful means of advancing domestic reform and raising the competitiveness
of key industries for New Zealand.
63. The representative was pleased to note from the Secretariat Report (page xi, para. 17) that
Japan was continuing to bring its standards into line with international standards, and had taken stepsto ensure acceptance of foreign test data and conformity assessments.  He welcomed the new Japanese
Housing Quality Assurance Law and its non-discriminatory standards, which gave competitive access
to the Japanese wood housing market for rapidly expanding use of structural engineered radiata pine
products from New Zealand.
64. The tariff structure effectively discriminated against forestry products from some coniferous
species (including New Zealand pinus radiata ) while products from other coniferous species enjoyed
duty-free entry to Japan.   He saw no reasonable justification for this discrimination, and emphasized
that the tariff could not be in place as protection for Japan's domestic industry, because significantWT/TPR/M/76
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quantities of wood from other species that competed directly with Japanese timbers were imported
duty free.
65. Japans tariff quota allocation methods, which tended to be "intricate", was a major factor in
the persistent quota under-fill in, for example, dairy products.  He encouraged Japan to make its tariff
quota administration systems, particularly for dairy products and fish and fish products, more
transparent and to enable end-users to obtain the quantity and specification of imported products they
required.
66. The representative was concerned about the pest categorization and enforcement system
employed by the Japanese plant quarantine authorities;  many pests present in Japan but not under an
effective, mandatory official control programme became "quarantine pests", resulting in unreasonably
high fumigation rates and consequent increased costs and reduced shelf-life for most imported fresh
produce, particularly for New Zealand kiwi fruit.
67. He noted that a stable food supply could be guaranteed more effectively through a policy mix
that placed open and effective markets at its core rather than through an emphasis on self-sufficiency
involving heavy subsidization of domestic producers.  Regarding the new Basic Law's emphasis on
the multifunctional role of agriculture, he believed that Japan should introduce only measures that
were decoupled, transparent, targeted, and did not distort production or trade.  Government supportfor agriculture increased the costs faced by Japanese consumers and domestic food processors and had
spillover effects on other countries, particularly developing countries, reducing the benefits of
international trade liberalization for all.
68. More needed to be done in sectors that were still heavily protected, such as agriculture, to
demonstrate Japan's ongoing commitment to implementing comprehensive reforms.  He encouraged
Japan to continue to seek ways in which to make its economy even more competitive across the
board, including through improving market access for foreign goods and services.
69. The representative of Uruguay noted that during 1997-99, Uruguay exported to Japan a total
of US$74 million while it imported from Japan US$259 million, a surplus for Japan of over
US$185 million over the period.
70. Uruguay's position on agriculture was opposite to Japan's.  The representative fully shared
Chile's statement on agriculture, and was concerned that Japan had merely listened during thepreparations for the Seattle Ministerial, as well as in the Agriculture Committee.  Its interventions
were limited to highlighting the "multifunctional" elevator of agriculture and insistence that nothing
could be achieved outside the framework of a ne w round.  In Uruguay's view, the only objective
behind this position was to maintain inefficient agri cultural policies, which would transfer the cost of
these measures to efficient agri-economic countries, in particular, to developing countries.
71. The representative was interested to hear Japan's comments on the Secretariat Report
statement, that Japan's average MFN tariff was 18.2 %, against an overall average of 6.5%, and as a
result, 16% of duties applicable to agricultural products were non- ad valorem .  He also requested
Japan's comments on paragraphs 2 and 35 of the Secretariat Report, which stated that 90 of the top
100 tariffs entailed non- ad valorem  duties, whose AVEs ranged from 40 to 983%.  He was interested
in hearing further from Japan regarding a Japanese press article stating that the Japanese Government
might be considering reducing its commitments under the Uruguay Round regarding rice, in order to
strengthen the protection of local rice producers.
72. The representative of Malaysia stated that Japan was Malaysia's second largest trading partner
in 1999, accounting for 15.6% of its total trade.  Japan was Malaysia's third largest export destinationWT/TPR/M/76
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as well as its largest source of imports.  Malaysia's trade with Japan comprised mainly manufactured
goods, particularly electrical and electronic products, as well as natural resource products.
73. Japan was also a major source of FDI for Malaysia;  from 1995 to June 2000, Japan was the
second largest investor in Malaysia.  The well-being of the Japanese economy was an issue of
importance to Malaysia given these strong trade and investment links.  The representative appreciated
the efforts of the Japanese Government in implementing accommodative macroeconomic polices and
an expansionary fiscal policy to stimulate growth in the economy, as strong growth in the Japanese
economy could only augur well for Malaysia and the other Asian economies engaged in difficult
recovery efforts.
74. Considering the projection of 1% growth in FY2000 to be still low, he urged the Japanese
Government to intensify its efforts to further enhance growth, which was crucial in assisting Asian
economies in their economic recovery and to prevent any repeat of the Asian crisis.  In this context heurged Japan to redouble its efforts for appropriate economic and fiscal management measures to
facilitate a speedier economic recovery.  He welcomed Japan's new Plan for the Rebirth of Japan.
75. One of the measures that Japan should take was to increase its off-take of goods and services
from the affected Asian economies.  In this context, Malaysia requested improved access for goods
and services into Japan's market, and an indication of the measures it intended to take to ensurecontinued strong domestic market access.  While recognizing that Japan's average applied MFN rate
was low, at 6.7% in 1999, it represented an increase over the average applied rate of 5.4% in 1998.
He hoped the increase in tariffs was not in sectors of export interest to Malaysia and other developing
countries.
76. The representative urged Japan to review its policy of tariff discrimination against processed
products, particularly goods of export interest to developing countries, such as textiles, rubber, and
wood products.  Malaysian products, such as processed timber products, attracted higher duties of10-15% compared with duty-free access for timber and logs, while duty on cocoa-based products
ranged from 7.5% to 31.5%, compared with duty-free entry for cocoa beans.
77. Japan still maintained a large number of specific duties in several sectors, such as textiles,
processed food, and vegetable products.  Malaysia would welcome any move by Japan to convert
these rates to ad valorem, as these products  were of export interest to developing countries.
78. Only four tropical fruit items, namely green bananas, durians, coconuts, and pineapples were
allowed entry into Japan as fresh agricultural products for which fumigation was not required.  New
varieties had to undergo extensive and costly testin g.  Export of cut-flowers into the Japanese market
also faced stringent quarantine requirements while ai rport facilities were inadequate to cope with the
imports.  In addition, expensive costs involved in ap plication of health certificates, testing fees and
other related costs were not conducive for trade.
79. The representative of the United States stated that as the second-largest economy in the world,
Japan's sustained economic recovery was good not only for Japan, but also for the strength of the
world economy.
80. Japan's global current account surplus represented nearly 2.5% of GDP, considerably above
the levels of most industrialized countries.  Its trade surplus with the United States topped at
US$73 billion in 1999, an all-time record.  Annualized expected figures for 2000 showed a further
rise to over US$80 billion.  The surplus Japan enjoyed with its Asian neighbours was showing a
similar trend, registering a rise of over 30% during the first half of 2000.  Meanwhile, Japan continuedWT/TPR/M/76
Page 17
to maintain significant barriers to imports.  Ja pan had to open its markets to foreign goods and
services and end its reliance on exports to boost domestic growth.
81. Japan's recovery was slow and subject to co nsiderable downside risk.  The representative
strongly supported the Secretariat's statement that a sustained economic recovery could be achieved
only through more aggressive structural reform that enhanced competition.  Thus, the United States
had made deregulation and structural reform the primary focus of its bilateral trade agenda since
1997.
82. The United States had read the Secretariat Report with great interest;  one theme that emerged
was the continued opaque and barrier-ridden nature of the Japanese economy, which had hindered
recovery, and raised questions about Japan's commitment to WTO rules.  The Report also noted that,
while the Japanese Government had taken some steps to promote deregulation in the
telecommunications sector, Japan's rate for telephone and internet services were still well abovedeveloped-country standards.  Japan's willingness to  protect the largest carrier, rather than promote
competition in this sector was hampering growth in information technology for Japan and for the rest
of the world.  The United States continued to urge Japan to establish a strong independent regulator,
whose mandate was to spur competition in the market.
83. In various sectors, such as telecommunications, energy, and flat glass, foreign suppliers were
faced with many examples of barriers to the Japanese market caused by the lack of effective
enforcement of competition laws.  She called for more criminal prosecution, higher penalties for
violations, and increased resources at the Japan Fair Trade Commission (JFTC), as mentioned in the
Secretariat Report, and urged the JFTC to become more proactive in encouraging the establishment
and maintenance of competitive market structure in addition to the enforcement of the Anti-Monopoly
Act.
84. Under the reorganization of the Japanese Government, scheduled for January 2001, the JFTC
would be folded under the new Ministry of General Affairs, linking its operations with the current
Ministry of Posts and Telecommunications and the Management and Coordination Agency.  She
strongly urged the Japanese Government to take formal steps to safeguard the JFTC's independence
and bolster its role in the Japanese economy following this administrative reform.
85. The WTO Agreement on Agriculture helped establish the necessary conditions for long-term
agricultural reform, but it was important to accelerate the process of reducing trade distortions.  The
WTO negotiations on agriculture offered an opportunity to lower tariffs and bind them, and
substantially reduce trade-distorting domestic supports in the process.  The representative urged the
Japanese Government to support proposals in the agri cultural talks to reduce substantially or eliminate
disparities in tariff levels among countries and reduce substantially the disproportionate levels ofsupport used by Members.
86. The persistently low levels of FDI revealed the complex web of structural and regulatory
obstacles that presented large barriers to foreign firms wishing to gain access to Japan's economy.
Lack of rules on investment was not the problem.  Though the FDI into Japan rose significantly in
FY1999, by 79%, Japan's stock of inward FDI relative to the size of its overall economy appearedsmall in comparison to that of other industrialized nations.
87. Opaque government procurement practices continued to impede access to the Japanese
market and raised questions about Japan's commitment to the Government Procurement Agreement.
Since Japan's previous Review, the number of reports involving questionable government
procurement deals had increased.  The U.S. suppliers continued to face barriers, including a lack oftransparency, questionable standards and technical specifications in favour of domestic firms, andWT/TPR/M/76
Page 18
excessive use of single tendering.  Public work s procurement was of particular concern.  From
July 1998 to July 1999, foreign design and construction firms won only US$50 million of Japan'sUS$250 billion public works market.  A more competitive tendering system might have reduced the
costs of these projects.
88. Japanese suppliers of services were considerably protected from foreign competition through
internal regulations, state-ownership, and the Government's tolerance of anti-competitive private
practices.  The various barriers that inhibited foreign penetration into the sector carried a heavy cost,particularly given the increasing importance of the sector as a contributor to output and employment
in the Japanese and the world economy.
89. Japan's inefficient distribution system drove up the prices for consumer goods, and could be a
factor leading Japanese businesses to relocate abroad.  She urged the Japanese Government to support
proposals in the WTO services talks to reduce current restrictions, and to support proposals toimprove regulatory practices across industries to ensure that domestic regulations did not undermine
efforts to increase market access.
90. She welcomed the measures undertaken to increase the transparency of Japan's regulatory
regime.
91. According to a study by Japan's Economic Planning Agency in 2000, deregulation steps
implemented since 1989 had resulted in savings of roughly US$82 billion in real terms for Japanese
consumers.  The study also found that in 1998 alone, an average Japanese family of four saved
approximately US$450 in domestic telecommunica tion and electricity charges as a result of
regulatory reform measures.  She urged Japan to renew its commitment to reform to show that the
Government was resolved to getting the Japanese economy back on track.
92. The United States was heartened by recent news that Prime Minister Mori's administration
was placing a priority on fostering an "IT revolution" in Japan within five years.  She agreed with thestatement in the Government Report that IT would be one of the most potent forces in shaping the
21
st Century.  There was no better way for Japan to demonstrate its determination to become a major
IT player than by working constructively, bilaterally and multilaterally, including through our WTO
e-commerce work.
93. Another new action that would have far-reaching implications for foreign firms operating in
Japan was the Japanese Government's announcement of a major initiative to reform its Commercial
Code, the first such revision in over half a century.  She believed the revisions should help Japan
further integrate into the international economy and looked forward to providing input into this
process.  The comprehensive review would strengthen Japanese firms and improve the business
environment for foreign firms.
94. As a very strong participant in a number of FTAs, the United States fully recognized the value
of the free-trade agreements Japan was considering.  The United States would be closely monitoring
Japan's participation in these arrangements, particularly in light of the sensitivities of one particular
sector in Japan.
95. The representative of Australia stated that Japan had been Australia's largest export market for
many years.  In the past year, around 20% of Australia's total merchandise exports went to Japan.
Despite a sluggish Japanese economy in recent years, bilateral trade had continued to grow at a
modest pace.WT/TPR/M/76
Page 19
96. Japan's growth prospects appeared to be critically dependent on further structural reform
aimed at creating more open and transparent markets.  Japan's largely unregulated and unprotectedmanufacturing industries remained highly competitive by world standards and, on the whole,
continued to deliver profitable results at a time of relative weakness in the Japanese economy.
97. Australia welcomed the Japanese Prime Minister's initiative to make Japan a world leader in
information technology and communications within five years.  Comprehensively implemented, this
initiative could be a catalyst for essential reforms in a range of sectors of the Japanese economy,increase efficiency and productivity, and improve Japan's international competitiveness.  As an
essential part of these reforms, he urged Japan to address concerns raised by Members in relation to
the telecommunications sector.
98. While Japan's trade policy regime was among the most open in overall terms, its agriculture
sector was among the most highly protected and sup ported.  Australia sought fair, open, and equitable
access to markets for all commodities, substantial reductions in trade-distorting domestic support, and
the elimination of export subsidies.  This was no more than what Japan sought from other countries
for its exports of manufactured goods and services.
99. Australia encouraged the Japanese Government and agricultural lobby groups to look for new
solutions to old problems, and to consider new possibilities and alternatives.  To the extent that Japanhad legitimate non-trade concerns in agriculture, it needed to work with others in the negotiations to
find non-production and non-trade distorting means by which to pursue these objectives.  While
recognizing Japan's various policy objectives, the representative regarded the use of protectionist
policy instruments that shifted the cost of these polic ies on to other countries both as inequitable and
ultimately unsustainable.
100. The representative encouraged Japan to engage fully in the ongoing services negotiations.
Removal of unnecessary and remaining barriers, particularly in legal and financial services, wouldfoster greater dynamism in these services and bolster economic growth within Japan.
101. Australia acknowledged the potential role of the free-trade agreements Japan was considering
in supporting multilateral trade liberalization, but had concerns about the potential for distortion of
trade and investment flows to the detriment of other countries.  He urged Japan to ensure that third
parties were not disadvantaged as a result of the formation of any agreement.
102. Australia believed that commitment to a new round of multilateral trade negotiations should
be made at the earliest opportunity.  This message was reinforced by APEC Ministers meeting in
Brunei.  In particular, the representative urged Japan to join other Members in their efforts to
accelerate work on industrial tariffs in preparation for launching a new round as soon as possible.  For
a major industrial power like Japan not to be actively engaged in this work raised questions aboutJapan's commitment to a new round and weakened an area of work that should be part of the WTO's
core business.
103. The representative of the European Union stated that the political links between the EU and
Japan remained extremely important for the EU and were set to evolve even further.  Crucially, EU
and Japan were united in the drive for a new round of comprehensive trade negotiations.
104. To reflect the increasing depth and breadth of the overall political relations between the two
economies, at the 9th EU-Japan Summit held in Tokyo in Ju ly 2000, the EU and Japan decided to take
forward their cooperation significantly.  The EU and Japan were revising the 1991 Political
Declaration and developing an Action Plan for reinforced cooperation over the next ten years.WT/TPR/M/76
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105. The EU and Japan together accounted for ar ound two-fifths of the combined world economy.
Bilateral trading relations were just under €100 bil lion a year.  With growth in the U.S. expected to
slow down in the short term, prospects for the world economy and for world trade would depend
crucially on whether the EU and Japan could together maintain a stable expansion in economic
activity.  The EU and Japan also represented an important destination for each other's investments
with the EU providing an estimated 59% of total FDI in Japan in 1999.
106. Despite the sharp rise of EU investment flows into Japan in 1999, the continuation of this
trend was not assured.  The EU was concerned about  the possibility of a widening investment gap
between the EU and Japan.  High costs and over-reg ulation continued to be major disincentives for
European firms wanting to invest in Japan, depriving EU firms of business opportunities and Japanese
consumers and economic operators of access to competitive European goods and services.  In this
context, overall foreign investment in Japan tended to be greatest in sectors that had benefited, orwere in the process of benefiting, from significant deregulation.  Financial services, which had seen a
considerable inflow of foreign capital in the light of  the "Big Bang", was an instructive example.  The
successful pursuit of deregulation was the key element in Japan's efforts to improve its environment
for foreign investment.  The measures the EU proposed would benefit domestic operators as well.
Japan's business startup ratio, at 4.6%, was the lowest amongst leading industrialized countries(compared for instance with 13% in the UK and 11% in Germany).
107. Attempts to increase the level of competition in the Japanese economy constituted a major
element in the regulatory reform process.  Progress had been made in a number of areas but additional
efforts would be needed to make enforcement more proactive and sanctions more deterrent.  Within
the framework of international cooperation agreements between the JFTC and the competition
authorities in the EU, as well as in the U.S., th e EU hoped that the JFTC would use the full potential
of the legal powers at its disposal and that the Government of Japan would ensure more vigorous andproactive implementation of competition policy.
108. The telecommunications sector was another example where the determined pursuit of reform
would provide benefits for domestic and foreign operators.  The forthcoming reductions in
interconnection rates were welcome, but they constituted only a first step.  Measures to allow the free
play of competitive forces in the telecommunications sector were now necessary, which meantredrawing the designated carrier regulation to reflect effectively the market dominance of the NTT
Group and NTT DoCoMo.  As recommended in the GATS/WTO Agreement, the establishment of an
independent and impartial telecommunications regulator would be essential.
109. Partnerships between Japanese and foreign la wyers and employment of Japanese lawyers by
foreign lawyers were prohibited.  In practice, this prevented the creation in Japan of integratedinternational law firms able to provide the advice clients required on deals with multi-jurisdictional
aspects, such as initial public offerings and mergers and acquisitions.  It also had negative effects on
investment in Japan and on the economy as a whole.  Abolishing restrictions on partnership and
employment between Japanese lawyers and foreign lawyers licensed in Japan would be a
recommendable step.
110. Japan maintained limited volumes of tariff quo tas for leather, and the complexity of the
management of the quota system created a wall of protection, effectively restricted market access, and
shielded the domestic leather industry from more competitive imports from the EU.  The EU urged
Japan to proceed to a meaningful change of the existing quota system and to commit itself to
eliminating progressively these import restrictions.
111. As key actors in international trade, the EU and Japan reached the same conclusions on how
to harness globalization for the benefit of both developing and developed countries.  These includedWT/TPR/M/76
Page 21
trade liberalization, adapting WTO rules to current economic realities, the full integration of
developing countries in the global economy, and addressing the expectations of civil society aroundthe globe.
112. The representative of the Republic of Korea stated that two-way trade between Korea and
Japan amounted to US$40 billion in 1999 and would increase in 2000.  He hoped that bilateral trade
would keep expanding and that both countries would continue to explore ways to deepen their mid-
and long-term economic cooperation.
113. The Republic of Korea had a trade deficit with Japan since the 1960s.  To redress this
situation, the representative hoped that the Japane se Government would improve market access for
Korean products through the reduction of tariffs and non-tariff measures on items of Korean interest.
114. The Republic of Korea joined Japan in its support of an early launch of a round of multilateral
trade negotiations that would have a sufficiently broad-based agenda and allowed various Members'interests to be reflected.  Korea agreed with Japan that disciplines on anti-dumping rules and
multilateral rules on investment and electronic commerce should be included in the new round.
115. The Republic of Korea shared Japan's philosophy underpinning its agricultural policies,
which emphasized four basic principles, namely, a stable food supply, agriculture's multifunctional
role, sustainable agricultural development, and the development of rural areas.  It supported Japan'sguidelines for food self-sufficiency ratio indicated in its Basic Plan;  each country should be allowed
to pursue its optimal combination of domestic production and trade for food security purposes.  Korea
also shared Japan's view that agriculture had unique characteristics and roles in each society and that
international trade disciplines should be flexible enough to allow the coexistence of various types of
agriculture.
116. Japan's low average applied MFN tariff rate was a sign of its sustained efforts to lower overall
tariff rates.  However, Japan still maintained high tariff rates for some products of particular interestto Korea.  The representative was interested to k now whether Japan had any plans to lower the tariff
rates for these products.  He asked why the percentage of foreign suppliers in Japan's government
procurement remained as low as 5.6% in 1997 (Secretariat Report, p. 51).  He also wished to know
more about the measures taken by Japan to encourage foreign participation in Japan's government
procurement.
117. Japan would implement a recycling system for home electronic appliances in May 2001,
under which foreign manufacturers bore higher costs than domestic producers, given that they had to
entrust their recycling responsibilities to local recycling businesses, which imposed higher fees on
foreign manufactured goods.  The representative asked Japan to address this difficulty faced by
foreign manufactures.
118. The representative of Argentina noted that certain problems would persist, such as a high
unemployment rate as well as high fiscal deficit and government debt, if there was not more
aggressive structural reform that enhanced competition.
119. Tariff levels on agriculture were underestimated due to the lack of ad valorem  equivalents in
the case of certain duties;  ad valorem  equivalents for some products could not be calculated because
there was no importation, which would suggest that the rates might be prohibitive.
120. The high cost of agricultural inputs contributed to food processing industries' moving abroad.
Consumers, in general, bore part of the high negative impact of aid to farmers.  These practices deeply
affected and distorted international trade in the agriculture sector.  Gross agricultural incomeWT/TPR/M/76
Page 22
including subsidies was three times higher than it w ould have been without subsidies.  Budget outlays
had increased alongside the price support for agricult ural products, in order to alleviate the effects of
the Uruguay Round in the national economy.
121. Argentina was interested in finalizing as quickly as possible extensive negotiations to allow
the access of fresh fruit, particularly citrus fruit into the Japanese market.
122. The representative of Canada stated that, as Canada's experience had shown, regional and
bilateral free-trade agreements could complement mu ltilateral trade liberalization.  He was confident
that Japan's commitment to the WTO would not diminish as it took steps to establish a more
multi-layered trade policy.
123. Canada looked forward to receiving details of the new regulatory reform action plan
anticipated in the spring of 2001, and was particularly pleased with Japan's move towards
performance-based standards for building products, and the recently revised Japan AgriculturalStandards Law allowing foreign organizations to obt ain Registered Certification Organization status.
Canada was working with Japan to ensure that Canadian organizations could obtain this designation
as soon as possible, and looked forward to the introduction of further performance-based standards in
fire codes, the removal of unnecessary size restrictions on wood-frame housing, and fire prevention
and fighting techniques.
124. In Canada's telecommunications experience, a liberalized interconnection regime and a
healthy, competitive market for the provision of leased lines encouraged growth of domestic Internet,
e-commerce, and information technology industries.  Canada was encouraged that Japan was
addressing high interconnection costs, and looked forward to further progress on the resulting work of
the Ministry of Post and Telecommunications Study Group.
125. The Financial Services Agency (FSA) could make more progress in improving transparency,
despite a positive direction of deregulation in financial services.  By communicating more explicitlyits plans and individual regulatory actions, both to th e public and to the institutions that it supervised,
the FSA could increase the efficiency and stability of financial services and further encourage
internationalization in this increasingly integrated market.
126. Concerning Japan's environment for investment, Canadian firms had expressed increasing
frustration with the current legal services market.  Canada urged Japan to carefully consider itsproposals for lifting restrictions on foreign lawyers.  In addition, as the Secretariat Report mentioned
Japan's negotiation of social security agreements with some of its trading partners, Canada hoped to
commence negotiations with Japan in this area as soon as possible.
127. Canada reiterated its call for the reduction of tariff duties, especially those applied to
vegetable oils (particularly canola), processed foods, forest products, red meats, fish, non-ferrousmetals, and leather footwear.  An outstanding example was that of Spruce-Pine-Fir lumber imports,
which were mentioned in more detail in the remarks of the representative of New Zealand.
128. The representative of Peru stated that Japan was one of Peru's most important trading
partners, and its primary partner in Asia.  There was also important capital investment in production
and service activities in Peru.
129. The representative requested clarification on whether the structural reform had yielded
beneficial results.  He asked whether the Japanese Government intended to continue this reform in
more depth in the medium term.WT/TPR/M/76
Page 23
130. On tariff structure, the representative enquired about Japan's plans to reduce tariff escalation.
He also wished to know whether trade unions  and consumer associations were consulted or
participated in any adjustment process regarding tariff rates.
131. Japan's support to agriculture, which was higher than the OECD average, undermined the
purchasing power and the well-being of consumers.   He wished to know if Japan had considered
substituting the price support system by direct support to producers and consumers in order to correct
any distortions and increase competition.
132. The representative asked about the access conditions for the official training programme for
foreign lawyers, and whether there were any exemp tions based on reciprocity within the framework of
bilateral agreements for any services that foreign lawyers could render in the Japanese market.
133. The representative of Switzerland stated that the Japanese market ranked first among Asian
destinations for Swiss industrial exports, taking a total of Sw F 3.8 billion.  Switzerland imported
industrial products from Japan worth almost the same amount in 1999.  He highlighted the two
countries' strong common belief that the agricultural policy of a country should reflect the intrinsic
multifunctional nature of the sector.
134. Switzerland was interested in knowing more about the continuation of the deregulation and
regulatory reforms.  Despite the considerable number of reform measures taken over the past threeyears, Keidanren had noted that no measures were taken on almost 62% of their requests, which
would leave room for additional measures to be ta ken.  Switzerland was interested in receiving more
information on the new Three-year Program for the Advancement of Regulatory Reform, which was
to be formulated, particularly on the procedure for presenting requests for deregulation and on how
they would  be treated.
135. Regarding parallel imports of patented products into Japan, the Secretariat Report (para. 123)
mentioned that there was "no legislation prohibiting parallel imports into Japan of products subject tointellectual property protection.  In addition, a Japanese Supreme Court decision of 1 July 1997 did
not prohibit the import of patented products except for cases where individual sales contracts
prohibited it."  Switzerland asked the Japanese authorities to clarify the effect of the Supreme Court's
argument in the cited decision on the patentholder's rights in Japan.
136. Switzerland had taken note of the section in the Secretariat's Report on government
procurement, which stated that the procurement of overseas goods and services accounted for only
13.2 % and that open contracting was about 70% in 1997.  He asked when more recent data could be
expected, and whether Japan expected an increase in the procurement of overseas goods and services
since 1997.
137. The representative also sought clarification about the procedures applicable to goods or
agencies that were not subject to the provisions of the Agreement on Government Procurement
(GPA). He asked if the rules and procedures regarding the submission, receipt, and opening of
tenders, and the awarding of contracts were similar to those applicable to goods or agencies subject to
the GPA, and if there were procedures simila r to those in the GPA for providing additional
information to unsuccessful tenderers and for compla ints,  or if different, the extent to which they
differed.
138. The representative of Colombia stated that its bilateral trade with Japan was US$637 million
in 1999, although in 1995 it was over US$1,400 million.  Colombian exports to Japan decreased in
1998, and this trend continued until August of 2000;  the rate of decrease had been diminishing in the
first eight months of 2000.WT/TPR/M/76
Page 24
139. The main reasons for the negative performance of Colombian exports was the low prices of
coffee on the international market and the drop in the sales of emeralds, which jointly accounted formore than 80% of Colombian exports to Japan.  Imports from Japan had dropped from
US$1,045 million in 1995 to US$392 million in 1999;  this was partly explained by a fall in imports
of Japanese car industry products.
140. Japan had expressed the benefits of regional agreements and closer ties with Singapore and
Korea.  Colombia hoped that Latin America might be seen as a potential trading partner in theframework of a free-trade agreement.
141. On agriculture, Colombia believed that Japan's non-commercial concerns were legitimate but
should be dealt with from a perspective of not creating distortions in the production and trade of
agricultural products.
142. The representative of India stated that Japan was India's fifth largest trading partner.  A
bilateral trade agreement, signed in 1958, guided  commercial exchanges be tween the two countries.
Bilateral trade in 1999 amounted to US$4.0 billion;  the share of exports from India was
US$1.7 billion.  There was great scope for further increasing and diversifying bilateral trade, which
had been hampered by various factors, including quarantine formalities in respect of agricultural
products, less-than-transparent procedures, a withholding tax of 20% on Indian software services, etc.
143. India and Japan had been holding bilateral talks regularly, covering not only bilateral and
global trade issues, but also investment and other issues of economic importance to both countries.  In
early 2000, the Prime Minister of Japan visited India, when the talks covered economic and
commercial issues.  The 14th Round of Trade Talks was held in Tokyo in February 1999.  The first
dialogue between the Indian Ministry of Industry and the Japanese Ministry of International Trade
and Industry was held in New Delhi in August 1999, which established a forum to facilitate exchange
of ideas between the two sides with the participation of the private sector.  It was also decided to setup working groups on information technology, food processing and infrastructure.
144. Despite a seeming recovery of the Japanese economy, the Secretariat had noted the fragility
of the financial system, which it saw as a threat to sustained economic recovery, and so-called "reform
fatigue", which could endanger economic recovery.  The representative was interested in the views of
the Japanese delegation on these observations.
145. The representative hoped that Japan's seeming interest in regional free-trade arrangements
would not mean a lesser commitment to the multilateral system.
146. India was interested to know if Japan intended to autonomously liberalize its agriculture
sector as part of its reform process under its Basic Law, without waiting for the conclusion of the
on-going mandated negotiations on agriculture.  The presence of non- ad valorem  duties, accounting
for nearly 6.9% of all tariff lines, concealed high ad valorem  equivalent rates.  The Secretariat Report
noted the complex nature of tariff quota allocation of about 200 agricultural items and the import
quota system.  India requested the Japanese authorities to review the situation with a view to
simplifying the present systems so that these measures did not result in restricting its external trade.
147. India urged Japan to extend MFN and national treatment for the auctioning of flowers from
India, and requested Japan to arrange for preshipment inspection of flowers in India, so as to avoid
delays at the time of entry into Japan.
148. The Japanese authorities had imposed a ban on Indian mangoes and grapes due to the alleged
presence of insects.  In the case of mangoes, treatment as suggested by Japan was carried out, and theWT/TPR/M/76
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results had been submitted to the Japanese authorities, who had reportedly expressed satisfaction.
However, they wanted the results to be verified by a technical team of experts.  Even three years aftersubmission of the results and extension of an invitation for a technical team to visit India, the
Japanese authorities were yet to respond.  He requested the Japanese authorities to look urgently into
this matter, which was being seen as a disguised barrier to trade.
149. The representative of Brazil stated that its bilateral trade with Japan in 1999 amounted to
US$5 billion, with some deficit for Brazil.
150. Although the reforms taken by Japan had moved in the direction of more liberal trade
policies, the agricultural sector continued to be extremely protected by high tariff levels and other
border measures, particularly in the sanitary and phytosanitary areas, as well as internal support
measures.
151. The level of tariff peaks for agricultural products was particularly high on processed products.
These peaks had a direct impact on the access of Brazilian exports of sugar, orange juice, and mango.
Brazil urged Japan to improve market access for agriculture, not only through the reduction or
elimination of the many types of barriers but also through the adoption of a more simplified and
transparent tariff regime, based on ad valorem  terms.
152. The representative of Mauritius noted that Japan’s economic recovery was largely attributable
to domestic measures adopted by the Japanese Government as well as regional Asian economic
recovery.  The latter element and the greater access to the Japanese market of goods from Asia were
clear signs of increasing regional interaction and integration.
153. Mauritius applauded the Japanese Government for its seeming willingness to pursue reform
measures despite recent signs of "reform fatigue".  It was gratifying to see that side by side with the
objectives of promoting the information technology revolution and the development of a
recycle-based socio-economy, the Japanese Government was also keen to ensure the creation of avital and less anxious society under an aging population.  She also commend the adoption of specific
economic and fiscal management measures to address the fragility of the financial system, and general
structural reform with a view to ensuring sustained economic recovery.
154. Mauritius appreciated Japan's view that developing and least developed countries as well as
economies in transition should share the benefits of the results of multilateral negotiations.  Suchequitable distribution could be achieved only through the acknowledgement of the diverse economic
realities of the WTO Members and a common will to address the varying concerns of all Members.
155. Mauritius fully supported the four basic principles enunciated by Japan for the elaboration of
its agricultural policy;  these were important goals to be achieved also in the broader context of
negotiations.
156. The representative of Hungary commended Japan for the liberalization and deregulation that
had been taken, and awaited with interest, in particular, the liberalization of wine distribution, which
seemed to have been pushed back by more than a year.
157. According to data by the Hungarian veterinary and phytosanitary authorities, Japan had lifted
the import ban on Hungarian fresh meat in 1999;  he expected similar steps for fresh fruit andvegetables in the near future.
158. Hungary welcomed the marked change in Japan's approach to RTAs and expected that on this
basis Japan's support for Hungary's EU accession would become even more articulate.WT/TPR/M/76
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159. Japan was an important economic partner for Hungary, ranking ninth among its trading
partners.  In 1999, two-way trade exceeded US$1.2 billion, with an overwhelming Japanese surplus.Japan was also an important source of FDI for Hung ary.  He hoped that the  investment ties between
Japan and Hungary would grow stronger while bilateral trade flows became somewhat more balanced.
160. The representative of Brunei Darussalam, on behalf of ASEAN noted that the continued
robustness of the Japanese economy remained an issue of importance to ASEAN, whose trade with
Japan was high.  ASEAN relied on strong Japanese imports to assist in its recovery process.  In thisrespect, she urged Japan to continue its strong commitment to strengthening economic growth, hence
ensuring a sustained economic recovery.  She appreciated Japan's continued involvement in assistance
in the region notwithstanding its own domestic difficulties.
161. She was encouraged that the total value of imports from ASEAN had shown an increasing
trend, and hoped this trend would continue.  She was pleased that Japan was embarking on a strategyto ensure benefits of globalization and information technology.  ASEAN was confident that Japan
would continue to liberalize its import regime , which would enhance trade between ASEAN and
Japan.  In this context, she highlighted the strengthening of relations between Japan and ASEAN in
the "ASEAN plus three" arrangement.
162. The representative of Thailand stated that further to the views reflected in the statement by
ASEAN, Japan was Thailand's major trading partner, with bilateral trade for the first eight  months of
2000 totaling more than US$15.6 billion, marking a 24% increase over the same period of 1999.
Japan enjoyed a trade surplus with Thailand of over US$2 billion, accounting for over 3% of Japan's
total trade surplus with the rest of the world.  He  thanked the Government of Japan for the leadership
and instrumental role Japan played in helping to revitalize Thailand's economy through fiscal stimulus
packages following the crisis.
163. Thailand wished to be assured that Japan's multifunctional policies would not be used in any
way that could distort trade in agriculture.
164. Although Japan had changed to a tariff scheme for rice imports since 1999, Thailand found
the out-of-quota import duty on rice to be prohibitively high.  In addition, both the administration of
tariff quota and the Simultaneous Buy-Sell systems were complex and lacked transparency.
165. Many of the standards and procedures required under Japan's Food Sanitation Law were more
stringent than those prescribed by Codex, especially in the case of pesticide residue in fresh
vegetables.  Thailand hoped that Japan's constructive participation in the ongoing negotiations on
agriculture would result in greater market access opening for developing countries.
166. The representative of the Czech Republic was of the view that a comprehensive round was
essential to address many challenges facing the multilateral trading system in a bold and
well-balanced manner.
167. Agriculture’s importance for the domestic econo my was much more important than it might
appear when looking at its share in Japan's GDP.  In this area, he welcomed the authorities'
determination to pursue agricultural policy reforms as reflected in the new Basic Law for Food,
Agriculture and Rural Areas enacted in July 1999.  Though the principles embodied in the law had nospecific reference to market-oriented agriculture, it seemed, from the measures already taken under
the new Law, that this policy orientation was also present.  He believed that more could and should be
done to improve access to Japan’s agriculture market, while addressing legitimate non-trade concerns.WT/TPR/M/76
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168. A system of investment incentives was applied by the Japanese authorities to encourage
foreign investors.  The Secretariat qualified the as sistance, in the form of tax breaks and low interest
loans provided for certain types of imports and investment, as an interesting anomaly.  He asked if the
delegation of Japan could comment on this aspect and put into broader perspective its systemic
interest in attracting foreign investors.
169. The representative of Slovak Republic noted that Slovak Republic and Japan shared the view
that a new round should cover an advanced and ambitious agenda to enable WTO Members to address
broader issues, and bring benefit to all of them.
170. The representative of Turkey believed that the trade protection provisions, in relevant
legislation, on certain agricultural products, such as cut flowers, should be removed, and the Food
Sanitation Law should be reviewed in accordance with international standards and should be adapted
to the SPS and TBT Agreements of the WTO.  He also urged Japan to eliminate the complex structureof and barriers in the construction services market, as well as the favourable treatment extended to
domestic companies in Japanese government procurement.
171. He asked whether Japan had any intention of reducing the high customs tariff rates on textile
and footwear products, an important export item of Turkey.
172. The representative of Japan stated that the Government had been taking drastic reform
procedures, which were still going on.  Despite the Secretariat’s mention of possible "reform fatigue",
he emphasized that Japan's commitment to the regulatory reform and deregulation remained
unchanged.  Japan was one of the largest importers of agricultural products;  Japan's food
self-sufficiency ration was about 40%.  On the di screpancy between inward and outward FDI, Japan
was one of the most open markets for FDI and there were many successful foreign companies that had
made much profit in the Japanese market.  They had made efforts to penetrate the market despite
language and cultural difficulties;  the same efforts were required of those wishing to invest in Japan.The Japan-Singapore economic agreement for a new age partnership would be WTO consistent.
However, no similar concerns had been expressed by Members, when other regional agreements were
examined in one of the committees in the WTO.WT/TPR/M/76
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V. REPLIES BY THE REPRESENTATIVE OF JAPAN AND ADDITIONAL
COMMENTS
173. The representative of Japan stated that he would concentrate on the substantial points of
Japan's written replies, focussing in particular on the comments expressed by the member countries on
the first day of the meeting.
174. A number of delegations had commented that the real GDP growth forecast was 1.5% for
FY2000;  and it was somewhat gratifying to note that Japan’s economy was showing some signs ofrecovery.  Japan should further promote structural reform and the deregulation process, which had
been implemented so far, and should further strengthen competition in the Japanese market.  He
reiterated that the commitment by the Japanese Government to promote supportive macroeconomic
policy, structural reforms, deregulation, and economic rebirth, remained solid.
175. Economic activities in Japan continued to improve moderately and there seemed to be a
gradual movement, mainly in the corporate sector, toward a self-sustained recovery.  In 1999, there
was a 0.2% growth, and there had been two quarter s marked by consecutive positive growth, mainly
due to domestic demand, while the contribution of external demand had not been so large recently.
However, he did not wish to be too optimistic about the current economic situation.  The labour
market conditions remained severe, and personal consumption had remained more or less inactive.Self-sustained recovery had yet to be achieved;  economic recovery was still fragile.
176. Furthermore, there existed some downside risks to the future economic prospects.  These
could include a slowdown in the U.S. economy, a hike in crude oil prices, and the effect of
restructuring the corporate sector with regard to the economy.  There were uncertainties in the
over-spill of recovery trends in the corporate sector into the household sector, and the spread of
IT-related demands in other sectors.
177. In terms of economic management, based on the current judgement, the Japanese Government
would continue to focus on economic recovery.  At the same time, it was necessary to undertake some
swift and bold action to change its economic structure into one suited for the 21
st century.  Therefore,
a new economic package, "A Policy Package for a New Economic Development toward the Rebirth
of Japan", was formulated on 19 October 2000.
178. This package featured, not only the traditional expansionary fiscal stimulus, but also
comprehensive policy measures for promoting a forwar d-looking structural reform, such as regulatory
reform.  The Government fully acknowledged the im portance of structural reform for the benefit of
the Japanese economy.
179. Regarding public projects, Japan had set down priorities, which had been assigned to four
major areas in view of preparing the foundations for the 21st century.  These priority areas were:  a
rapid promotion of the IT revolution, a response to environmental issues, and to the aging society, and
improvement in the urban infrastructure.  The overall scale of the work to be promptly implemented
under this basic policy direction would be in the order of ¥11 trillion.
180. To implement this package, the Government had decided to create a supplementary budget.
The scale of this budget would be about ¥3.9 trillion, of which approximately ¥2.5 trillion would go tosocial infrastructure development.  The effect of the package on the economy was expected to be an
increase of around 1.2% in real GDP within one year.
181. Bearing in mind the effect of the new fiscal package, the Economic Planning Agency made
public a revised forecast of the real economic grow th in FY2000, of 1.5%.  The forecast for FY2001WT/TPR/M/76
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was not yet available, but would be announced during the course of budget preparations in
December 2000.  The forecast for real economic growth for FY2001 and thereafter would be based onthe new system of calculating GDP, which was know n as the 93 System of National Account (SNA).
182. The revised figures of Japan’s real GDP growth rates had resulted from the adoption of the
new calculation method mentioned above, which had already been adopted by a number of countries.
The new figures for Japan based on the 93 SNA would be +0.2% instead of -0.1% for FY1997, and
-0.7% instead of -1.9% for FY1998;  figures for FY1999 had not yet been calculated.
183. In the area of monetary policy, it was expected that the monetary authority would maintain
mainly relaxed monetary conditions, by conducting monetary policy in an appropriate and flexible
manner to support economic recovery consistent with price stability.
184. In terms of fiscal deficit and gross government debt, Japan’s situation was probably the worst
among all major industrialized countries.  Under these circumstances, fiscal consolidation was aserious challenge that had to be overcome.  However, the Government's priority was to put the
economy back on the track of self-sustained recovery;  it would then proceed to reform the fiscal
structure, taking into account broad issues such as tax structure and social security systems, as well as
the relations between central and local governments.  Therefore, the efforts should be of a
comprehensive undertaking.
185. The importance of structural reform and deregulation was stressed by the discussant and
several Members:  some quoted the term "reform fatigue", which could endanger Japan's economic
recovery.  However, the Government's commitment to further promote structural reform remained
unchanged. The Government had been faithfull y implementing the Three-Year Program for
Promoting Deregulation since March 1997, which covered a broad range of sectors including IT,
medical care and welfare, employment and educati on. Moreover, the Government planned to adopt a
new Three-Year Program for Advancement of Regulatory Reform in March 2001 and intended tocontinue making the utmost efforts toward revitalizing the domestic economy through its structural
reform.
186. In recent years, the Government of Japan had implemented a number of measures aimed at
regulatory reform and the deregulation of sectors that had been subject to governmental intervention.
As a result, the flow of foreign direct investment had increased dramatically.
187. The deregulation of the distribution sector was currently in the headlines.  The Large-Scale
Retail Store Law, which had been in force since 1973, was abolished in 2000, and a prior economic
needs test (the so-called “supply and demand adjustme nt”) was no longer required in this sector.  A
number of foreign investors had already entered the distribution business in Japan, in anticipation of
this move towards deregulation.
188. This trend was clearly demonstrated in the current statistics:  inward investment amounted to
US$21.5 billion for FY1999, nearly double the figure for the previous year.  For FY2000, the figure
seemed to be even more promising:  during five months, from April to August, the figure already
stood at US$16.8 dollars, far exceeding the FY1999 level.
189. Regarding the discrepancy pointed out by many delegations, as well as the discussant, the
current ratio between outward and inward investment  was roughly four to one;  compared with the
ratio of ten to one in 1997, it could be regarded as a significant achievement.
190. Vigorous implementation of competition policy had been required, in combination with the
promotion of deregulation.  The role of competition policy was becoming ever more important fromWT/TPR/M/76
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the viewpoint of promoting free and fair competition among Japanese and foreign businesses, and
protecting the benefits of consumers.  Japan' s Fair Trade Commission (JFTC) had been actively
implementing competition policy, besides making re forms to the competition law, as mentioned in
Japan's opening statement.
191. The JFTC has cracked down on price cartel s, bid-rigging, and other Anti-Monopoly Act
(AMA) violations, by taking legal action, including filing a prosecution.  With regard to criminal
enforcement, in 1990 the JFTC announced a policy to bring active criminal accusations againstserious violations of the AMA, which were likely to have a widespread influence on consumers.  In
1999, 14 firms and 19 persons were prosecuted in two cases.  The JFTC would work closely with
public prosecuting authorities by exchanging information and opinions.  When the JFTC considered
that concrete facts made prosecution suitable, it would bring the criminal accusation to the public
prosecuting authorities.
192. In order to promote deregulation, the JFTC had been engaged in various activities, including
conducting surveys and making public the results of the examination by the study group that it had
established.  As mentioned in Japan's Report, the study group had released an indication of the
reforms for some public utilities.  Furthermore, th e guidelines on appropriate trade in the electricity
and gas subsector was another of the JFTC’s accomplishments to establish rules on fair competition inpublic utility sectors.
193. With regard to some Members’ concerns about the JFTC’s status, the AMA clearly secured
the independence of the Chairman and the Commissioners in enforcement or policy decisions, and
further guaranteed their status.  The AMA also stipulated that the Chairman and the Commissioners
were appointed by the Prime Minister with the consent of the Diet, as had always been the case.
Thus, the JFTC's independence and neutrality as an independent administrative commission would
continue to be guaranteed by the AMA in the future, even after its integration into the Ministry ofGeneral Affairs.  In addition, though the Gove rnment had conducted administrative and fiscal
reforms, the JFTC had been allowed to staff espe cially the investigation sector.  The JFTC would
continuously be expected to play a more active and crucial role in enforcing competition law and
policy.
194. Japan concurred that the economic agreement for a new age partnership between Japan and
Singapore had to be consistent with the WTO rules and should cover "substantially all trade".
195. The discussant stated that, although the Japanese economy was recovering, doubts remained
as to whether the recovery process was self-sustained.  The areas of uncertainty were especially in
fragile private consumption and high government debt and public expenditure.  He welcomed the
strong commitment expressed by the Japanese representative to deregulation policy, and wasreassured to hear that there was no reform fatigue and that the Government was committed to further
action.  On competition policy, whether the JFTC  would remain independent might need further
discussion.  On FDI, the discussant took note of the Japanese statement that there were promising
developments taking place and much depended on the individual entrepreneur to ensure success.  On
systemic interest in attracting FDI, the regulatory environment could be simplified. On regional tradeagreements, he welcomed comments by Japan that recent moves on bilateral agreements would not
undermine WTO commitments.
196. The representative of Canada noted that the experience Japan cited in the retail subsector, in
terms of attracting FDI, underlined the importance of deregulation and regulatory reform.  He asked
for comments by Japan on the suggestion that regulatory reform could take a more cross-cuttingapproach as opposed to sector-by-sector approach.WT/TPR/M/76
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197. The representative of the European Union emphasized that a key issue was the translation and
management of regulatory reform, new regulations, and their implementation, into actual changes on
the market-place, in order to affect the overall economic effectiveness of competition and of reform.
198. The representative of the United States stated that the use of administrative guidance made
the operation of significant parts of Japan's trade policy non-transparent.  The introduction of public
comment procedures prior to the adoption of some regulations had improved the transparency of some
policy-making, but the system was still limited both in  applicability and effectiveness.  He askedJapan to outline the plans for expanding the public comment procedures, making them more effective,
and enacting such procedures into statute.
199. He was pleased to hear Japan reaffirm that no major commodities would be left out of the
regional trade agreements, and requested further details of the sectoral coverage of the agreements.
200. The representative of Japan stated that, on the question of a cross-cutting rather than sectoral
approach in regulatory reform, the Structural Reform Council was set up at the Cabinet Office and
under its leadership various ministries collaborated.  Each ministry had its own expertise and
knowledge, thus, a sectoral approach was taken, and no cross-cutting approach had been introduced.
201. The Administrative Procedures Law stated that administrative guidance had to be made
public, and the Information Disclosure Act would be in effect from April 2001.  It was important forthe Japanese Government to increase transparency in  the field of administrative guidance;  at the same
time, when certain policies needed to be changed, a public comment system was introduced.
202. Negotiation of the free-trade agreement, had not started yet;  it would begin some time in
January 2001.  Japan envisaged an agreement that would be WTO consistent and would cover
substantially all trade.  Japan did not define this agreement as a traditional free-trade agreement,
wishing to cover many new sectors, such as coll aboration between the two capital markets, the free
movement of professionals between the two countries, and mutual acceptance of educational units incertain universities in Japan and Singapore.
203. Japan’s trade policies had been further liberalized, especially in recent years, and many
foreign manufacturers and service providers had taken advantage of opportunities resulting from such
liberalization.  At the same time, Japan was trying to promote the liberalization process and to make
its measures more transparent to all trade partners for easier access to the Japanese market.
204. Japan had been fully and faithfully implementing the UR Agreements, including tariff
reductions and, as a result, Japan’s tariff level continued to be the lowest among the WTO Members,
with an average tariff rate on industrial goods at 1.5%.
205. The Customs Tariff Council, which reviewed the proposed changes, consisted of various
parties, including producers, intermediaries, and consumers.  The relevant ministries also consultedwith interested parties before requestin g changes to the Ministry of Finance.
206. The increase in the simple average applied tariff rate in FY1999 compared with FY1998 was
mainly because the applied MFN tariff rate in FY1998 did not include the ad valorem  equivalents
(AVEs) of non- ad valorem  duties, whereas those of FY1999 did (see footnote (a) of Table III.2, and
para. 24 of the Secretariat Report).
207. Japan had made significant efforts to reduce tariff escalation.  For some products, however, it
was very difficult to further reduce the tariff rates.WT/TPR/M/76
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208. The Government of Japan applied non- ad valorem  duties, taking into account the specific
situation of each product, which could be subject to market fluctuations.  Moreover, the respectivetariff rates were set, regardless of the types of  duties, taking into consideration the domestic and
overseas price differential, situation of domestic industries, and whether or not non- ad valorem  duties
are applied.
209. Japan did not believe that the overall tariff level of agricultural products and of other products
should be the same.  Agriculture has its own specificity  in that it was directly related to the survival
and health of human beings and its production was significantly affected by natural conditions.  Given
this specificity, it was difficult for Japan to understand the claim that the tariff level of industrial
products should automatically be considered the norm for agricultural tariffs.
210. The current tariff level was the result of a series of trade negotiations based on such factors as
domestic geographical and natural conditions, as well as on situations regarding the respectiveproducts.  As a result of the UR Agreement, tariffs were the only legitimate border measures for
adjusting the differences in the natural and economic conditions among countries.  In this respect, due
consideration should be given to the production conditions of each product, as well as to the necessity
to maintain a certain level of domestic production and to fulfil the multifunctionality of agriculture.
211. The overall level of agricultural tariffs in Japan was not high compared with that of a number
of other developed members.  According to the OECD, the average agricultural tariff for Japan was
12% while that for some countries was 50%, 100%, etc.
212. The administration of tariff quotas was conducted in consistency with Japan’s commitment
under the WTO rules.  The administration methods of allocation were selected taking into account the
characteristics and market conditions of each product.  These were then made public by the related
ministries;  this was adequate as regards transparency.  In this context, what Members had committed
in their own schedules was the opportunity to access,  and not the actual volume of imports.  The fill
rates might vary according to the situation of the products concerned.
213. Japan was open to discussion on this issue, as well as on other related issues in the ongoing
negotiations on agriculture.
214. On customs administration, for the purpose of supporting capacity-building on the facilitation
of international trade and the prevention of the smuggling of social contraband, the Japanese customsauthority had been providing technical assistance to customs administrations in developing countries.
215. The central and local government entities, as well as public institutions, had been faithfully
implementing government procurement through fair, open, and transparent procedures in compliance
with the Government Procurement Agreement.
216. The Government had been taking a series of action programmes to improve access to
government procurement markets since 1985.  Thes e measures were genuinely voluntary, and
designed to increase access opportunities for foreign suppliers to the Japanese market.  Owing to such
efforts, the rate of procurement from foreign suppliers had been increasing over recent years, although
Japan had yet to see real vigorous efforts by many foreign suppliers towards penetrating the Japanese
market.  The representative wondered if any other Member published similar figures, as he was notaware of such availability;  he asked for the penetration ratio of foreign suppliers in other Members'
government procurement.WT/TPR/M/76
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217. The most recent data on Japan’s government procurement of foreign goods and services, was
for 1998 and was scheduled to be published in Japan at the end of November 2000;  it would beavailable in English by March 2001.
218. Regarding procurement for which the exception clause of Article 23 of the Agreement was
deemed to apply, the procuring entity concerned was not prevented from taking any action, nor from
disclosing any information for national security reasons, etc.  If a complaint was lodged by an
interested supplier involved in the procur ement case concerned, the independent Government
Procurement Board would judge whether the complaint was to be dismissed as falling under the
exception clause.
219. Japan’s SPS measures were applied only to the extent necessary for the protection of human,
animal or plant life or health, in full consistency with the SPS Agreement based on scientific
principles.  Under the Japanese plant protection system, quarantine pests were defined as those liableto cause damage to economic plants if they were to spread, and which met either of following
conditions:  those which were not confirmed as existing in Japan, or those which were already present
in some part of Japan, but for which official controls were undertaken.  This definition was based on
the standards provided by the International Plant Protection Convention.
220. Under the Plant Protection Law, the importation of plants that served as hosts for pests, such
as the Mediterranean fruit fly and Tobacco blue mold were prohibited.  Such a quarantine measure
was based on scientific evidence and was consis tent with the WTO/SPS Agreement.  At the same
time, Japan approved the importation of these prohibited plants on the condition that the exporting
country had developed an effective method to prevent the invasion of such pests.  If a country had a
specific request for lifting an import ban, Japan was ready to discuss it from a technical viewpoint.
221. For the sake of transparency, Japan translated into English the requirements and procedures
for lifting the import ban and this was distributed to the various countries’ embassies in Tokyo.  Japanalso provided information on import-prohibited pest s and diseases.  Furthermore, Japan was prepared
to explain at length the details of such requirements, upon request.
222. With regard to plant quarantine, the number of requests for lifting the import ban was
increasing. The Standard Examination Procedures regarding Request for the Lifting of the Import Ban
on Plant Quarantine were determined by the Agriculture Minister in September 1999 and werepublished in the Tsusho Koho , as well as on the MAFF website.  The current status of the examination
of such requests had also been published in the Tsusho Koho .  As to animal quarantine, the
information on the status of requests had been provided to foreign authorities.
223. On international technical cooperation concerning plant and animal quarantine, Japan
dispatched approximately 80 experts abroad every year and invited around 200 experts from
developing countries every year for both training and capacity building.  Japan also conducted group
training programmes for plant quarantine techniques, e.g. for fruit flies, in Okinawa.  Sixty-six
trainees from 25 countries participated in this programme between 1988 and 2000.
224. A detailed answer had been given regarding a question on parallel imports.  As noted in the
Secretariat Report, in a decision in July 1997 involving certain German-patented products, theSupreme Court held that a patent-holder might not ask for an injunction against parallel imports, nor
claim damages for the infringement of his rights under certain circumstances.  However, it was
premature to discuss in general the effect of this decision on a patent-holder’s right in Japan, because
the Court also held that patent rights were not always immediately exhausted if a patent-holder
distributed patented products outside its territory.  The issue of international exhaustion was asensitive one, yet without a consensus view, as reflected in Article 6 of the TRIPS Agreement.WT/TPR/M/76
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225. The discussant asked whether Japan intended to facilitate customs procedures, which was
pointed out by many delegations to be lengthy, in volving a lot of paperwork.  Although average tariff
levels were low, a number of delegations expressed concerns on the many non- ad valorem  duties and
tariff peaks.  He invited the Japanese delegation to elaborate in more detail on these issues.  He asked
if Japan would further address this issue in the context of ongoing negotiations on agriculture or be in
a position to reduce or abolish such tariffs autonomously.
226. On SPS and TBT-related issues, the discussant appreciated Japan's willingness to comply
with relevant international standards, maintaining that  in the interest of consumer health and safety the
precautionary principle required very high standards.  He noted that further discussion would possibly
show whether there was room for improvement.
227. On government procurement, many delegations expressed concerns that the Japanese market
was not open due to specific procurement practices of Japanese authorities, especially at thesub-central level.  The discussant appreciated detailed answers by Japan on this topic, but believed
that this query was also a question of culture;  it might need a continued and proactive effort by the
Japanese Government, which would not be entirely limited to regulation but would need additional
follow-up in the future.  He wondered whether there were further questions on this point.
228. The representative of India looked forward to the resolution of the specific problems raised by
India, especially with regard to the barriers affe cting exports of flowers and fruit from his country.
229. The representative of Uruguay wished to hear from Japan on tariff peaks and non- ad valorem
rates.  He was also interested to know what Japan would feel if the specificity of agriculture were
applied by other countries in connection with other sectors such as the industrial sector, automobile
sector or the services sector.
230. The representative of Malaysia, referring to the comments made by the discussant, hoped that
Japan could provide detailed replies on customs procedures, tariff peaks and some specific duties, and
SPS and TBT issues.
231. The representative of the United States noted Japan's point that efforts were required for
anyone to succeed in a market, and was interested in knowing why the trend in foreign procurement
continued to fall.  There were some areas in the Japanese market where businesses showed a fair
degree of success in selling in a private market but they had not had the same level of success in thecorresponding sector in the government market.  He wondered if Japan could provide more details to
their observations on what might lie behind this trend.  He stressed he was not referring to compliance
with agreements but trying to understand the underlying economic dynamics.
232. Regarding Japan's apparent failure to provide protection against unauthorized temporary
copying of works of sound recordings, the TRIPS agreement incorporated Article 9 of the BernConvention, which stated that right-holders shou ld have the exclusive right of authorizing
reproduction of works in sound recordings in any manner or form.  This appeared to include
temporary reproduction.  He asked Japan to conf irm whether it provided protection against such
reproduction, if it was not authorized.
233. The representative of the European Union noted that the implementation of procurement by
sub-entities, the managing of tenders, etc. tended to diminish the likelihood of success and to prohibit
the normal course of business.
234. On standards and certification, he regretted that the Japan's explanation had not addressed the
general attitude of the Japanese Government, notably those reasons that would explain the deviationWT/TPR/M/76
Page 35
from international standards that existed.  He asked why Japan, having adhered to the 1995 UNECE
agreement on cars, had signed only a few of the relevant conventions.  On recognition of foreignconformity assessment bodies, he asked if there was a general drive to help cooperation, such as
easier data sharing on conformity assessment.
235. The representative of Canada was interested in hearing how Japan would address non-trade
concerns, noting the heavy reliance on trade policy solutions;  there might be other ways to address
these concerns.  He was also interested in hearing why there were some sharp differences in tariffrates within the wood sector, as pointed out by the representative of New Zealand.
236. On the questions raised by the EU with regard to standards, he supported the approach that
standards should be based on scientific results, and hoped that Japan would consider explicit
performance-based standards within its Building Standards Law to recognize new building designs,
and fire prevention and fighting techniques that were based on scientific evidence.
237. The representative of Japan stated  that Article 21 of Japan's copyright law granted authors
exclusive right to reproduce the works in a manner consistent with Article 9 of the Bern Convention.
Japan therefore fully complied with the obligations under the TRIPS Agreement.
238. On the question of customs procedures, the fumigation of cut flowers usually took half an
hour to two hours, and any delay was related to cargo handing.  On fruit, for instance mangoes,technical discussion had already been held between India and Japan, and in October 2000 a
specialist's conference discussed scientific data for fruit fly suggested by India.
239. Japan had an open system of government procurement and wondered why the ratio of foreign
penetration was low in Japan.
240. On specific duties, it might be one-sided to infer that ad valorem  duties were good while
specific duties were bad:  specific duties would not be so affected by price fluctuations, and could be
more appropriate for agricultural products.
241. Japan believed that agriculture was more affected by natural conditions, and that in the
manufacturing sector it would be difficult to cover certain elements of the multifunctionality of
agriculture, such as preservation of natural environment or landscape.  The high tariffs on certain
agricultural products were the result of the UR Agreement.  The Japanese Government was prepared
to discuss market access and other questions in the ongoing agricultural negotiations.
242. There was a Hozei (bonded) area system in which certain cargo was kept;  under this system
cargo management operations were entrusted primarily to the private sector.  There were no lengthy
customs procedures:  the average clearance time for marine cargo was about 0.2 days in 1998.
243. As explained in both of the Reports prepared for this Review, the main feature of agriculture
since the last TPR, was the enactment of the new Basic Law on Food, Agriculture and Rural Areas in
1999, which described the broad direction of agricultural policy reform.
244. Japan had been implementing faithfully its agricultural policy reform based on its UR
commitments and the Agreement on Agriculture.  Among recent developments was the decline inofficial purchase prices of major agricultural products every year since 1997;  substantial changes had
been made on the price policies of a number of agricultural products, such as rice, wheat, and
soybeans with a view to establishing an agriculture sector that could properly respond to consumer
demand.WT/TPR/M/76
Page 36
245. Many comments from delegations referred to the target of the food self-sufficiency ratio
announced as a part of the Basic Plan published in March 2000.  The representative emphasized thatall measures that Japan might take would be consistent with its commitments under the WTO
Agreements.  Whatever the Government action, the self-sufficiency ratio would not rise, unless
consumers favoured the quality and price of domestic agricultural products, and chose them, in
preference, at the market.  Over the past years, in line with a long-term change in the food
consumption pattern, imports of a number of agricultural products had increased substantially;  thishad led to a decline in the food sufficiency ratio to around 40%, which was the lowest among
developed countries.  On the other hand, Japan was the largest net food importer in the world, which
was why the main objective of the Government was to establish domestic agriculture that could
properly respond to consumer need.  Changes in the price policy on a number of major agricultural
products had also been made as part of the agricultural policy reform, in order to allow prices toproperly reflect the supply/demand situation and quality evaluation.  In this regard, the target of the
food self-sufficiency ratio was a guidance in various stakeholders' efforts toward making domestic
agriculture more attractive to consumers.
246. Another main gist of Japan's agricultural policy reform was consideration for the
multifunctionality of agriculture.  Several countries had commented that, whatever the purpose of thepolicy, it must not distort trade.  He reiterated that any policy measure that Japan took was consistent
with the WTO rules.  However, at the same time, he pointed out, as the multifunctionality of
agriculture had a good public aspect, a certain level of policy intervention was required for its
fulfilment, and as the multifunctionality of ag riculture was closely related to, and could not be
separated from, agricultural production, discussion on policy measures should duly reflect this point.
247. Referring to a comment by Uruguay on the ongoi ng agricultural negotiations, Japan had been
actively participating in the discussions on agriculture.  In the process of the General Council in thelead-up to Seattle, Japan had made a proposal for the framework of agricultural negotiations.
Furthermore, there was an extremely lively discussion on 15 November 2000, based on the paper
submitted by Japan together with 25 other countries, at the Special Session of the Committee on
Agriculture.  The basic philosophy of Japan regarding the negotiations on agriculture was that the
agricultural trade rule of the 21
st century should allow the co-existence of various types of agriculture.
Currently, Japan was preparing a negotiating proposal to submit to the Committee on Agriculture by
the end of 2000.  The Government had been conducting a number of consultations with various
stakeholders, including farmers, consumers, th e food industry, and policy makers.  It had also
collected a wide range of opinions from the general public through the website of the MAFF.  Japan
was willing to explain and discuss its proposal with other Members at the Committee on Agriculture,once it had been finalized.
248. In the textiles sector, the import volume had risen steadily, particularly in the area of apparel,
while demand in the domestic market had remained stagnant throughout the 1990s.  Consequently,
domestic production had shown a downward trend, and the import penetration ratio stood at 60.6% in
1999, compared with 34.4% in 1990.  As a result, the textile industry had been facing manydifficulties and there was mounting pressure to introduce import relief measures through the use of
transitional safeguards (TSG).  Despite this, the Government of Japan had firmly abided by the
Agreement on Textiles and Clothing (ATC), and was implementing an integration programme under
the ATC in good faith.
249. Furthermore, based on the Uruguay Round Agreement, Japan had implemented the phased
reduction of tariff levels, resulting in a significant reduction of high tariffs and tariff escalation.  Large
portions of Japan's textiles industry were small and medium-sized firms, which had been severely
affected by the stagnant consumption, as well as the increased imports.  It was therefore very difficult
to engage in any further reductions of the tariff levels.WT/TPR/M/76
Page 37
250. Application of specific duties in the textiles sector was limited to a selected number of
products, where market prices were volatile.  In Japan's view, the use of specific duties alongsidead valorem  duties, in limited areas of textiles products, was perfectly WTO-consistent, and Japan had
no plans to change the system.  However, Japan had no intention of excluding these goods from the
scope of the negotiation of a comprehensive coverage as long as the industrial tariff negotiation was
launched as a part of a new round with a balanced and sufficiently broad-based agenda.
251. Leather manufacturers in Japan were located in regions facing difficult challenges due to their
historic and social backgrounds.  Most were small or medium-sized companies with little
competitiveness in the international arena;  this was why the current tariff rate quota system had been
introduced.
252. In allocating tariff rate quotas for leather products, the Government of Japan had set out
detailed procedural rules for quota allocation, which had been published in the MITI Bulletin.  Theholders of quota licences had, in principle, also been published therein.  Thus, the operation of the
tariff rate quota system had been carried out in an equitable and transparent manner, fully consistent
with Japan's obligations under the WTO.
253. As was the case for textiles, Japan had no intention of excluding these products from the
scope of the negotiation as long as the comprehensive industrial tariff negotiation was launched as apart of a new round with a balanced and sufficiently broad-based agenda.
254. Japan had made every effort to liberalize and deregulate the financial services sector, and had
put a maximum effort into stabilizing the financial system since its previous Trade Policy Review in
January 1998.  Japan appreciated the fact that many delegates had acknowledged how much it had
done in this sector.
255. The fragility of the financial system was no longer a worry.  In the banking subsector,
non-performing loans had been steadily disposed of.  In insurance, statistics were showing positivesigns, and Japan had developed a system to deal promptly with insurers undergoing difficulties in
continuing their businesses.
256. Since the establishment of the Financial Supervisory Agency in June 1998, all regulatory
requirements had been made public in the form of Cabinet Orders, Ministerial Ordinances, or
guidelines.  These would undergo public comment procedures when changes were to be made.
257. Japan had already realized most of the measures originally planned for the "Big-Bang".
Japan's efforts had indeed been fruitful, as seen, for example, by the entry into the Japanese market of
many foreign entities;  11 foreign bank branches, 21 foreign securities companies, and 11 foreign
insurance companies had entered Japan since March 1997.  Japan intended to continue its efforts to
further promote deregulation based on the backbone of the "Big-bang".
258. Japan had been promoting deregulation in the field of telecommunications.  The deregulation
issue had brought about many effective changes:  rates had been lowered sharply, and various
advanced services had emerged.  Furthermore, more than 8,000 new entrants were in the market.
259. Regarding interconnection rates, a steady reduction had been made so far.  In addition, the
Telecommunications Business Law was amended in May 2000 and, as a result, interconnection rates
based on the Long-Run Incremental Cost Methodology had already been introduced.  Therefore, a
further reduction of the rates was expected in the future.WT/TPR/M/76
Page 38
260. Regarding the promotion of diverse network access, Japan recognized the importance of
promoting competition in the regional telecommunicat ions market.  Japan was actively promoting the
creation of a competitive environment through the positive use of new technologies and through the
development of diverse network access, such as DSL, FWA, and CATV.  For example, new rules
were adopted in September 2000 regarding the unbundling of local loops, where NTT competitors
were provided with convenient means to connect th eir networks directly to the NTT subscriber lines
in order to offer DSL services.
261. Regarding the regulation of dominant carriers, Type-I telecommunications carriers that owned
local bottleneck facilities, namely NTT East and NTT West, were obliged to formulate and disclose
articles of the interconnection agreement.  A price-cap regulation on the particular type of
telecommunication services was applied to these carriers.  These regulations were special obligations
imposed on dominant carriers and were not applied to any other telecommunications carriers.  Thedesirable pro-competitive policy in the telecommunications field was being discussed in the
Telecommunications Council, and a strengthened regulation of the dominant carriers was one of the
main issues.
262. With regard to the issue of an independent regu lator, Japan abided by the stipulation of the
Reference Paper, which stated that "the regulatory body is separate from, and not accountable to, anysupplier of basic telecommunications services.  The decisions of and the procedure used by regulators
shall be impartial with respect to all market par ticipants."  Japan was prepared to study various
measures in order to maintain the fair competitiv e environment and to promote further competition in
telecommunications.
263. The amended Port Transportation Business Law was approved by the Diet in May 1999 and
entered into force on 1 November 2000.  In nine major ports, where 95% of container cargo in Japan
was handled, the amended law substantially liberalized port transport business and provided theenvironment for actual competition.  Through this amendment, the economic needs test was lifted
from the requirement when approving new entrants into the port transport business, and the fee
approval system was also replaced by a filing sy stem.  Japan believed that this new system would
provide users with a more flexible service.
264. The prior consultation system was based on an agreement among associations related to the
port transport businesses, including shipping lines, labour unions, and port transport companies.  The
system was used when changes in a shipping line's business plans might affect the employment and
working conditions of port workers.  The prior consultation system had been vastly improved, based
on the agreement made among these associations in October 1997, and the number of consultations,
which had been seen as problematic, had decreased by more than 80%.
265. Japan was energetically trying to define the basic architecture of a new economy, based on
information technology, by gathering the knowledge and experience of the most qualified people in
this area.  For this purpose, the IT Strategic Headquarters was set up in the Cabinet.  It was assisted by
the IT Strategic Council, consisting of top executives from leading companies as well as other experts.
266. As a result of such initiatives, the Diet passed the Electronic Signature Law in May 2000,
which recognized the validity of electronic signatures in legal documents as the equivalent of
hand-written signatures or signature seals.  At the current session of the Diet, a bill was being
considered which recognized the validity of electronic procedures in 50 laws in which the provision of
a written legal instrument was required to conclude a transaction between private parties.
Furthermore, an amendment to the Contract Law was also under preparation, taking into account thespecific characteristics of information technology.WT/TPR/M/76
Page 39
267. Japan attached great importance to the role of the WTO in promoting electronic commerce.
To this end, Japan was encouraging support for the idea of establishing a horizontal task force toassist the e-commerce work programme from comprehensive and future perspectives.
268. The discussant, referring to Japan's remarks on its self-sufficiency ratio, stated that the ratio of
a country with the geographic configuration of Japa n could not be compared with that of a large
surface country, which had other constraints in terms of servicing its own people and in terms of
gardening the country.  The common denominator should not be the self-sufficiency rate but ratherthe trade-incidence of any measures taken, and their compatibility with obligations under the WTO
Agreements.  He noted that the special session of the Committee on Agriculture had been convened at
the same time as the TPR of Japan, and asked about the future intentions of the Japanese Government.
269. On information technology and telecommunications, an open market-oriented approach was a
key issue.  He looked forward to a proactive attitude of the Japanese Government to improve controlof the behaviour of dominant telecommunication carriers.  Concerning the future role of the Ministry
of Post and Telecommunications, which had to level the playing field for competitors, he believed that
there should be an independent regulator to ensure equal opportunities for all service providers.  In
addition, the recently planned substantial infrastructure investments in telecommunications should be
made in accordance with WTO obligations.  Regulations on telecommunications services should beless cumbersome.
270. Japan's financial services sector had potential for further deregulation.  An example could be a
possible simplification of licensing requirements for banking and insurance.  Transparency could be
further improved.
271. There had been some deregulation and market opening in maritime transport, however, a
number of delegations pointed out there was potential for improvement.  Further deregulation in legal
services was requested by some delegations, especially regarding restriction of partnership and theemployment of Japanese lawyers by foreign lawyers licensed in Japan.
272. The representative of the United States stated that Japan has made much of the benefits of the
multifunctional character of agriculture.  To the extent that it employed trade distorting measures, he
wondered whether any thought had been given to the impact that these measures might have on the
ability of other countries to enjoy these multifunctional benefits.
273. Japan had established income stabilization measures for wheat, barley, rice, and soybeans, but
these measures appeared to continue to insulate domestic producers from market signals.  He
wondered how Japan would attempt to increase the pr oductivity of its farming sector when its policies
continued to isolate producers from economic factors that yielded increases in efficiency and
productivity.  He was also interested in what new agricultural policy measures Japan envisioned in thecoming year, whether the thrust of these measures would be to reform price policies for other
agricultural commodities, thereby lowering the existing burden on Japanese consumers, and whether
new income support programmes to farmers might be envisaged.
274. There was still widespread concern, for both Japanese and foreign industries, that the new
Large-scale Retail Store Law left local authorities with too much power and too much latitude indealing with new store openers;  he wondered how MITI planned to monitor local implementation of
the law, particularly if implementation was being frustrated locally by unwritten administrative
guidance, and the imposition of voluntary guidelines.WT/TPR/M/76
Page 40
275. With respect to Japan's response regarding the postal system and public corporation, he
sought further details, particularly as to what specific steps Japan planned to take to ensure that plansfor the transition were devised and implemented in as open and transparent a manner as possible.
276. He had concerns that NTT was not yet feeling the full impact of market forces.  When a
government owned a substantial stake as an operator there was a clear incentive not to take action that
could affect the business interest of that operator, which in this case included the maintenance of its
market position.  Thus, the United States was interested in hearing about any plans to move from thecurrent situation where the law required 33% ownership.  He wondered whether there were not other
means of achieving laudable objectives, for example universal service and avoidance of management
abuse, without maintaining a level of control that might interfere with the full integration of NTT into
the play of market forces.  NTT had been, and continued to be a large player in the Japanese
economy, and insulated from market forces;  he was therefore interested in further details on howJapan would dealt with the issue.
277. The representative of the European Union regretted that negotiations on leather had been left
for a future round.  He did not agree with Japan's interpretation that management of tariff quotas for
leather was in full compliance with the rules.  He hoped that further consultations with Japan would
yield some progress.
278. He noted that some points did not appear to be answered in Japan's written responses:  a
question on the positive-list system of quarantine pests, which most OECD governments were using
but was not used by Japan;  and a question regarding varietal testing, which the WTO appellate body
found inconsistent with the requirements of the SPS, 19 March 1999.  He looked forward to receiving
answers on these points.
279. He was interested in hearing why Japan still had not brought its legislation regulating engine
output for fishing vessels in line with the relevant international standards, ISO 3046.
280. He requested figures on market share by foreign financial institutions in key sectors, to
illustrate the development in recent years;  and asked for more concrete details of what measures were
actually being planned by the FSA to improve or to liberalize the notification system for insurance
products.
281. In regard to asset management, he had raised a specific question regarding investment
advisory companies, which was relevant to competition in the pension sector.  This did not appear to
be covered in Japan's written answers.
282. The representative of Hong Kong, China was pleased to hear Japan reaffirm the primacy of
the multilateral trading system, and the importance of WTO consistency of the regional trade
agreement, which was to be initiated.  He was still concerned, however, about coverage of all sectors,and hoped that Japan would fully take into account systematic implications of the position it took.
283. The representative of Brazil referred to Japan's quarantine requirements against
Mediterranean fruit flies and tobacco mold.  Brazil adopted measures and methods to control these
specific diseases, which were rigid and detailed and were accepted by other importing countries, but
not by Japan.  He asked for further clarification on the reasons for this quarantine measure.
284. Regarding trade barriers in certain products, for example soybean oil, prepared coffee,
cigarettes, and footwear, Japan had specified in its answer that the temporary tariff rate on cigarettes
was zero, and indicated that would not, therefore, be correct to say that cigarettes were facing barriers.WT/TPR/M/76
Page 41
However, according to the Brazilian industry, Japan imposed specific duty on the importation of
cigarettes;  this was also indicated in the Secretariat Report (Table AIII.4, p. 141).
285. The representative of Australia noted that some questions raised by Australia on agriculture
and telecommunications had not been answered and looked forward to receiving responses.  While
comprehensive answers had been provided in the area of legal services, Australia was disappointed
with these responses.
286. The representative of Uruguay noted that with respect to the multifunctionality of agriculture,
for developing countries, the industrial and services sectors were also sensitive, and had their own
specificities.  If Japan's concept were to be applied then these sectors should also be considered as
being multifunctional.
287. On Japan's participation in the current negotiations on agriculture, Uruguay was concerned
that Japan's position seemed to be that these negotiations concerned trading concerns, which shouldalso take account of market access.  It appeared that Article 20 established quite the contrary, in other
words, agricultural negotiations were intended to help take greater account of market access and also
should take account of non-trade concerns.  Uruguay wished to emphasize this point because it was
important for Uruguay to be clear from the outset.
288. The representative of Japan stated that, on the question of SPS, Japan had no intention to
avoid importation without scientific reasons.  The question of quarantine was very technical, and for
certain specific questions, one solution was to hold bilateral consultations between Japan and the
countries concerned so that issues could be solved in an amicable manner.  The Ministry of
Agriculture had made efforts to hold bilateral consultations with a number of countries on fumigation
and certain other issues, and certain measures had already been taken.
289. Japan had been accelerating efforts to align its standards and technical regulations to
international standards.  According to the TBT Ag reement, a certain amount of flexibility could be
taken into account, and Japan had taken into account fundamental climatic and geographic factors.
Nevertheless, Japan would do its utmost so that its standards could be aligned with international
standards as far as possible.
290. According to Article 30 of Japan's Agricultural Law, on price formation of farm products and
stabilization of farm management, the State "shall take necessary measures for allowing the prices offarm products to form appropriately reflecting the real supply-demand situation and quality evaluation
in order to promote agricultural production responsive to consumer demands".
291. On the market share of foreign companies in financial services, there were no official data,
however, about 10% of the insurance market had been taken by foreign companies.  A fuller response
would require further investigation.
292. The question of NTT, had been discussed in the Telecommunication Council, and 33% of
NTT's shares had been held by the Government in order to pursue universal service, etc.  The
representative was not in the position to provid e a specific answer on how the telecommunications
regulations would evolve.  At the same time, the Japanese Government had been abiding by the
GATS.  The Ministry of Posts and Telecommunications was one entity and the NTT was another.The regulatory body was separate from and not accountable to any supplier of basic
telecommunications services and the decision and the procedures used by the regulator should be
impartial with respect to all market participants.WT/TPR/M/76
Page 42
293. With regard to the point raised by the EU delegation regarding panel recommendations on the
SPS matter, Japan was of the view that measures subject to the panel recommendation and appellatebody report had been abolished as of 31 December 1999, and the Japanese Government was in
discussion with the U.S. Government about measures replacing this abolished measure.  Unlike
French apples, Spanish oranges had not been subject to the measure in question.  An explanation was
clearly provided in Japan's written answers.  The same applied to the points raised by the EU with
regard to the TBT matter on fishery engines and on Japan's rationale for not adopting the "positivelist" method for SPS.
294. With respect to the argument that Japan's claim for multifunctionality was hurting the
multifunctionality of other countries, especially developing countries, as the largest net-importer in
the world, Japan was the best customer of many ag riculture exporters.  The discussion or claim of
multifunctionality was not necessarily what was hurting the interest of some developing countries,especially some agriculture exporting developing countries.  Developing countries had stated that the
UR negotiations had not led to an upsurge of their ag ricultural exports to overseas markets, but rather
an increase of agriculture exports from a limited number of countries.
295. It has been mentioned that it was not appropriate for Japan to compare its low self-sufficiency
ratio with that of large agricultural countries.  However, compared with major agriculture exporters aswell as with other developed nations such as Germany, the United Kingdom and Switzerland, Japan's
food self-sufficiency rate was extremely low.  As far as the self-sufficiency rate of grains was
concerned, Japan's ratio was 29%, whereas figures for the United Kingdom, Germany and
Switzerland were 130%, 118%, and 70%, respectively, and the figure for France was 198%.
296. Under the Law concerning the Measures for Large-scale Retail Stores for the Preservation of
Living Environment, MITI established a detailed guideline providing national standards for regulating
entities intending to establish a large-scale re tail store with regard to preserving the living
environment, such as traffic and noise.  MITI was closely monitoring local governments'
implementation of the law to ensure that the aim of the new law was not impeded.  The MITI would
take appropriate measures in accordance with the Local Autonomy Law, including the provision of
technical advice and recommendations to the local go vernments, with regard to the implementation of
the law.  MITI would also publish the necessary information for the implementation of the law.
297. On the question of fishing vessel engines, the Japanese Government was trying to make
Japanese standards consistent with international standards.  He was not aware of how much this
request had been studied within the Japanese Government and would return to this mater later.WT/TPR/M/76
Page 43
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
298. We have had an open and informative discussion of Japan's trade policies.  Members were
encouraged by signs of economic recovery in Japa n, whose economic prosperity is important for the
continued recovery of the region, for the health of the world economy and the expansion of trade.
Members attributed this nascent recovery largely to Japan's macroeconomic policies and structural
reforms.  At the same time, Members recognized that the multilateral trading system had contributed
to the improved economic outlook for Japan, by keeping foreign markets open to Japan's exports.  Incommending Japan's recent efforts to implement deregulation and other structural measures, including
the removal of barriers to foreign businesses, Members strongly urged Japan to continue its reform
process and improve access to its markets for goods and services.
299. Members expressed their appreciation of Japan's active participation in the work of the WTO.
Many Members underlined that their bilateral trade and investment ties with Japan had beenstrengthened over the recent period.  Noting Japan's increased willingness to explore bilateral trade
agreements, they sought (and received) assurance that such agreements would be WTO-consistent.
300. On trade and trade-related policies, Members remarked in particular on Japan's complex tariff
(and tariff quota) structure and the fact that the use of non- ad valorem  tariffs appeared to conceal high
applied rates.  Some Members also voiced concern about the complexity and seeming lack oftransparency of government procurement practices.  Furthermore, many Members were concerned
about the complexity of Japan’s sanitary and phytosanitary regulations, including quarantine
procedures.  In addition, pointing to the low level of inflows of foreign direct investment (FDI) into
Japan, Members welcomed Japan's efforts to open further its FDI regime.
301. On sectoral policies, Members noted that the level of domestic support for agriculture was
disproportionate to its share in GDP.  While Members generally recognized that non-trade concerns
did arise in agriculture, some urged Japan (among the world’s largest importers of agriculturalproducts) to address these concerns in a manner that would not unduly distort trade.  While
recognizing that substantial reforms had been undertaken in the financial services and
telecommunications sectors, Members expressed their belief that reform should continue with a view
to enhancing competition in these sectors.  They also urged Japan to extend reforms to other sectors,
such as agriculture, transport, legal services and education services.
302. Members also sought further clarification in a number of areas, including:
- matters concerning tariff classification and high tariff rates for certain goods;
- the opacity and complexity of tariff quotas and quantitative restrictions;
- alignment of national standards with international standards;
- reform of standards and environment-related regulations;
- competition policy;
- the new agricultural policy embodied in the Basic Law on Food, Agriculture and Rural Areas;
- impediments to market access for certain items, such as rice, leather, and forestry products;
- Japan’s initiative to promote information technology;
- restrictive business practices in Japanese ports;  and- independence of regulatory authorities in some areas, such as telecommunications, electricity.
303. Members expressed their appreciation to the Japanese delegation for their oral and written
responses to the large number of questions posed by them, and for the Japanese delegation's
undertaking to provide written responses as soon as possible to any outstanding queries.WT/TPR/M/76
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304. In conclusion, it is my view that this Review has provided Members with a much better
understanding of Japan's trade and trade-related policies, particularly regulatory and other structuralreforms.  Members were pleased to see signs of Japan's economic recovery;  they strongly urged
Japan to maintain the momentum of structural reform so as to ensure that the recovery is sustained.  It
is my sense that Members were reassured by Japan's commitment to multilateralism;  nonetheless,
they urged Japan to ensure that bilateral and regional arrangements were WTO-consistent.  Members
also looked to Japan for strong leadership in purs uing future multilateral trade liberalization, including
in any new round of negotiations at the WTO.
__________