RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/JPN/21
25 January 1999
(99-0250)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the EUROPEAN COMMUNITY Regarding
the New and Full Notification of JAPAN1
The following communication, dated 15 January 1999, has been received from the Permanent
Delegation of the European Commission.
_______________
Japan submitted on 17 August 1998 and 23 September 1998 its new and full notification of
subsidy programmes to the WTO pursuant to Article XVI:1 GATT 1994 and Article 25 of the WTO
Subsidies Agreement.  In this respect, the European Communities would like to obtain clarification ona number of issues on the notified schemes as described below.  The Community also requests further
clarification on a number of programmes which appear to be specific and were not included in the
notification.
I. NOTIFIED SUBSIDY PROGRAMMES
A. S
UBSIDIES NOTIFIED BY G /SCM/N/38/ JPN OF 17 AUGUST 1998
The questions on the specific programmes refer to the number of the programme in the
notification.
1. Could Japan provide a description of a "knowledge-intensive type enterprise"?
11. (SMEs – textile)  In the FY 1998 budget, is this programme under the ¥357 million budget for
"Subsidy for measures to promote the textile industry (senisangyo-shinkotaisaku-hi-hojokin)" in the
General Account?
12. (New Silk Products)  In the FY 1998 budget, is this under the ¥94 million budget for "Subsidy
for promotion of textile industry production region (senisangyo-sanchi-shinkoujigyou-hi-hojokin)"?
13. (Advanced Promotion Facility of the Textile Industry)  Subsidy for 1992-1997 was zero.
What is the budget for FY 1998?  Has this been reclassified to another budget line?
14. and 15. (Textile and Apparel Industry)  Is this also under the ¥357 million budget line
mentioned above in No. 11?
                                                     
1 G/SCM/N/38/JPN and Suppl.1G/SCM/Q2/JPN/21
Page 2
16. (Leather and leather goods)  Is this the subsidy of ¥267 million from the General Account, to
which ¥85 million is added from other financial sources to make it ¥352 million in total for FY 1998?
The budget is under "Subsidy for measures to promote leather industry (hikakusangyo-
shinkotaisakujigyo-hi-hojokin)".  Since this was a new budget line since FY 1998, the notified budget
of ¥322 million came from another/old budget line.  What was the old budget line?
17. (Bekko and ivory industry)  The budget for FY 1998 under "subsidy for bekko industry etc.
relief measures (bekko-sangyo-toh-kyuzaitaisaku-jigyo-hi)" is ¥317 million including ¥5 million from
other financial sources.  Was FY 1998 budget reduced from the notified budget of ¥340 million for
FY 1997?
18. (Traditional craft products)  Is the budget for FY 1998 also zero as was the case during
FY 1995-1997?
21. (ISTF)  The total budget for these projects under NEDO is ¥28.6 billion for FY 1998.  Why is
the notified subsidy ¥31.6 billion?
22. (The New Sunshine Programme)  Under which budget lines does this fall?
23. What sectors are included in "key technology"?
24. (Deep Seafloor Mineral Resources)  Is this subsidy (notified as ¥31 million for FY 1997)
under the ¥796 million budget for "Commission to exploration of deep seafloor mining resources
(shinkaitei-kobutsushigen-tansatou-itakuhi") for FY 1998?
25. (Offshore oil field development)  This subsid y is provided to the Japan Ocean Industries
Association (¥639 million for FY 1997).  Is it differ ent from the budget for "subsidy for research and
development for offshore oil production support system (kaitei-sekiyu-seisanshien-system-
kenkyuukaihatsuhi-hojokin)", which is provided to NEDO (¥1,983 million for FY 1998 budget)?
30. (Radioactive waste disposal)  The Special Acc ount budget for "Contracts for  experimental
and research expenses of survey on criteria of radioactive waste disposal etc. (Hoshasei-haikibutsu-
shorikijun-chosatoh-itakuhi)" was ¥2,651 million for FY 1997 and ¥2,936 million for FY 1998.  The
notified settlement of accounts was ¥1,924 million for FY 1997.  Does the budget include some other
expenses?
37. (Overseas coal)  The Special Account budget for Subsidies for overseas coal development
feasibility survey was ¥103 million annually for FY 1997 and 1998 (for FY 1998, ¥165 million in
total which includes ¥61 million from other financial sources).  The notified settlement of accountswas ¥22.0 million for FY 1997.  Does the budget include some other expenses?
41. and 44. (Geothermal power plant)  Notified su bsidy budget under No. 41 for 1996-1998 was
zero and the duration of the subsidy is FY 1992-1997.  Was this item reclassified to No. 44(ii) from
FY 1998?
43. (Coal Fired Power Generation)  The total notified budget for FY 1998 is ¥2.6 billion, whereas
the budget under "Contract for verification tests for the coal fired power generation (sekitan-
karyokuhatsuden-jisshoshikento-itakuhi)" is ¥3.1 billion.  What does ¥3.1 billion include other than
the notified subsidy amount?  Also, the notification No. 11 of the List B (of 23 September) is exactlythe same as this notification.  Are they not duplicated?
47. and 48. (Fuel cell power generation)  Budget for FY 1998 is notified to be zero but there
exists a NEDO appropriate project budget of ¥350 million.  Should this amount not be notified?G/SCM/Q2/JPN/21
Page 3
57. (Increased Expenses of Research)  The tax credit is 20 per cent rather than 10 per cent.
Which figure is correct?
61. (Technopolis)  Is special initial depreciation applicable for 16 years after approval at the
following rates, rather than for the notified 14 years?
Machinery Building etc.14 y – 15 y 10% 5%15 y – 16 y 9% 5%
67. (Fishing boat)  The additional depreciation rate is 20 per cent rather than 16 per cent.  Which
figure is correct?
74. (New mineral beds)  The maximum amount of the reserve shall be whichever is lower:
(1) 12 per cent of the sales amount of the minerals;  or (2) 50 per cent of the mining income of the
above.  Is it correct?
B. 
SUBSIDIES NOTIFIED BY G /SCM/38/ JPN/SUPPL .1 OF 23 SEPTEMBER 1998
2. (House Technology)  The total general account budget and special account budget for "House
Technology Creating Life Value Project" for FY 1998 is ¥1,500 million.  Why was the settlement
account for FY 1997 ¥150 million?
11. See No. 43 in List A above.
16. (Petroleum product)  The Special Account budget for "Subsidy for structural improvement of
the petroleum product sales industry (sekiyu-seihin-hanbaigyo-kozoukaizen-taisaku-jigyohi hojokin)"
was ¥21,073 million for FY 1997 and ¥15,388 million for FY 1998 (¥25,095 million in total for FY
1998 includes ¥9,706 million from other financial sources).  Does this budget line include expenses
other than the notified settlement account (¥1,709 million for FY 1996)?
17. (Petroleum product quality)  The Special Accoun t budget for "Subsidy for ensuring petroleum
products quality (sekiyu-seihin-hinshitsukakuho-jigyohi-hojokin)" was ¥4,012 million for FY 1997
and ¥3,557 million for FY 1998 (¥3,583 million includes ¥26 million from other financial sources.
Does the budget include expenses other than the notified ¥2,299 million for FY 1997?
II. PROGRAMMES NOT NOTIFIED TO THE WTO
The Community considers that Japan has not notified a number of programmes – on the
national as well as on the regional level – which appear to be notifiable under Article 25.  The
Community finds that the schemes described below provide a financial contribution which confers
benefits to the local industry.  In addition the schemes are clearly specific (as pertaining to a specific
sector or contingent upon exports).  In addition to the specific questions asked, the Community would
like clarification why these programmes were not notified to WTO and requests that, if appropriate,
Japan supplies a notification under Article 25, using the standard format.G/SCM/Q2/JPN/21
Page 4
A. NATIONAL PROGRAMMES
Note:  The budget is for FY 1998 unless specified.
1. Name of scheme
Amount:
Ministry:
Administered by:
Remarks:Special grant for grace of interest on loans for building of ocean
ships (Gaiko Senpaku KenzoYushi Rishi Yuyo TokubetsuKofukin) Page 400
¥84,330,000
Ministry of Transport
Japan Development Bank
Stipulated under the Temporary measures law for the provision of
assistance on interest on loans for building ocean ships
2. Name of scheme:
Amount:
Ministry:
Recipient:Remarks:Subsidy to R&D cost for advance vessel technology (Kodo
Senpaku Gijyutsu Kenkyu Kaihatsu-hi Hojyokin) Page 314
¥332,000,000
Ministry of Transport
Association for shipbuilding infrastructure improvementStipulated by the Law concerning the association for shipbuilding
infrastructure improvement activities
3. Name of scheme:
Amount:
Ministry:
Recipient:Commission fees concerning the project for launching a
geostational meteorological satellite (Seishi Kisho Eisei Uchiage-To Itaku-hi) Page 461
¥11,150,000
Ministry of Transport
NASDA (National Space Development Agency of Japan)
4. Name of scheme:
Amount:
Ministry:
Recipient:Remarks:Commission fees concerning surveys related to the shipbuilding
agreement (Zosen Kyotei Taisaku Chosa-To Itaku-hi) Page 461
¥27,484,000
Ministry of Transport
Association for shipbuilding infras tructure improvement activities
To investigate dumping by foreign shipbuilders or to collect
information necessary for the implementation of "the Agreement
on normal conditions for competition in the commercial
shipbuilding industry" for the purpose of securing its objective to
securing fair competition.
5. Name of scheme:
Amount:
Ministry:
Recipient:Subsidy to the cost for development/improvement projects of
coastal fishing grounds (Engan Gyojyo Seibi Kaihatsu Jigyou-hi
Hojyo) Page 280
¥20,606,000,000
Ministry of Agriculture, Fishery and Forestry
Prefectures
6. Name of scheme:
Amount:
Ministry:
Remarks:Subsidy to the survey cost for development/improvement of
coastal fishing grounds (Engan Gyojyo Seibi Kaihatsu Chosa-hi
Hojyo) Page 280
¥118,000,000Ministry of Agriculture, Fishery and Forestry
Subsidy to overall project designingG/SCM/Q2/JPN/21
Page 5
7. Name of scheme:
Amount:
Ministry:
Recipient:Subsidy to the development cost of oceanic fishery resources
(Kaiyo Suisan Shigen Kaihatsu-hi-Hojyo-kin) Page 262
¥5,015,545,000
Ministry of Agriculture, Fishery and Forestry
Marine Fishery Resource Development Centre
8. Name of scheme:
Amount:
Ministry:Grant to the activities for diffusing enhanced technology of fishery
operation (Suisan-gyo Kairyo Fukyu Jigyo Kofu-kin) Page 398
¥761,213,000
Ministry of Agriculture, Fishery and Forestry
9. Name of scheme:
Amount:
Ministry:Subsidy to the cost of projects implemented by the regional
governments for promoting the development of the fishery industry
(Suisan-gyo Shinko Chiho Kokyo Dantai Jigyo-hi Hojyo-kin)
Page 264
¥5,711,111,000
Ministry of Agriculture, Fishery and Forestry
10. Name of scheme:
Amount:
Ministry:Subsidy to the cost of activities implemented by private
organizations for promoting the development of the fishery
industry (Suisan-gyo Shinko Minkan Dantai Jigyo-hi Hojyo-kin)
Page 266¥2,401,594,000
Ministry of Agriculture, Fishery and Forestry
11. Name of scheme:
Amount:
Ministry:Subsidy to the cost for establishing uranium enrichment
technology (Uran Noshyuku Gijyutsu Kakuritsu-hi To Hojyo-kin)Page 508
¥3,320,145,000
MITI
12. Name of scheme;
Amount:
Ministry:Subsidy to the special measures concerning credit insurance for
machinery (Kikairui Shinyo Tokurei Hoken Hokyu-kin) Page 410
¥50,500,000
MITI
13. Name of scheme:
Amount:
Ministry:Subsidy to the cost of measures for stockpiling rare metals (Kisho
Kinzoku Bichiku Taisaku-hi Hojyokin) Page 296
¥1,523,861,000MITI
14. Name of scheme:
Amount:
Ministry:Subsidy to the cost for promoting improvement of R&D facility
(Kenkyu Kaihatsu Shisetsu Seibi Sokushin-hi Hojyo-kin) Page 296
¥1,600,000 for FY 1997 and zero for FY 1998MITI
15. Name of scheme:
Amount:
Ministry:
Remarks:Commission fees for R&D works – alcohol (Kenkyu Kaihatsu
Chousa Itaku-hi – alcohol) Page 636
¥700,000,000MITI
For commissioning R&D work designed to increase productivityG/SCM/Q2/JPN/21
Page 6
16. Name of scheme:
Amount:
Ministry:
Remarks:Subsidy to the cost of projects for improving/strengthening
underground structure (Konai Kokkaku Kozo Setsubi Kakujyu
Jigyo-hi Hojyo-kin) Page 510
¥2,294,587,000MITI
For enhancing safety in the coal mining industry
17. Name of scheme:
Amount:
Ministry:Commission fees concerning research for development of mineral
resources searching technology (Kobutsu Shigen Tansa Gijyutsu
Kaihatsu To Chosa Itaku-hi) Page 458
¥960,675,000MITI
18. Name of scheme:
Amount:
Ministry:Interest subsidy for local bonds for financing projects to promote
development of coal mining areas (Santan Chiiki Shinko Jigyosai
Choseibun Rishi Hokyu-kin) Page 624¥1,165,929,000
MITI
19. Name of scheme:
Amount:
Ministry:Subsidy to the cost of projects for improving refining technology
of oil producing countries and for related purposes (SanyukokuSekiyu Seisei Gijyutsu To Taisaku-hi Hojyokin) Page 514
¥5,351,846,000
MITI
20. Name of scheme:
Amount:
Ministry:Commission fees concerning development of information
processing technology (Jyoho Shori System Kaihatsu To Itaku-hi)
Page 456
¥430,063,000
MITI
21. Name of scheme:
Amount:
Ministry:Subsidy to the technological development cost for the creation of
new industries (Shinki Sangyo Sozo Gijyutsu Kaihatsu-hi Hojyo-kin) Page 294
¥1,690,000,000
MITI
22. Name of scheme:
Amount:
Ministry:Commission fees concerning R&D for new fuel oil (Shin Nenryo-
yu Kenkyu Kaihatsu Chosa Itaku-hi) Page 631
¥719,829,000
MITI
23. Name of scheme:
Amount:
Ministry:Grant for the assistance to the stabilization of the coal mining
industry (Sekitan Kogyo Antei Hokyu Kofu-kin) Page 604
¥1,784,476,000
MITI
24. Name of scheme:
Amount:
Ministry:Grant for National Oil Corporation (Sekiyu Kodan Kofu-kin)
Page 606
¥261,763,594,000
MITIG/SCM/Q2/JPN/21
Page 7
25. Name of scheme:
Amount:Subsidy to technological development cost for oil mining (Sekiyu
shigen Saikutsu To Gijyutsu Kaihatsu-hi Hojyo-kin) Page 514
¥4,836,082,000
26. Name of scheme:
Amount:
Ministry:Subsidy to the cost of projects for the rationalization of oil refining
(Sekiyu Seisei Gorika Taisaku Jigyohi To Hojyo-kin) Page 514
¥6,665,383,000
MITI
27. Name of scheme:
Amount:
Ministry:Commission fees concerning research for the revitalization of the
textile industry (Senisangyo, Kasseka, Taisaku Chosa Itaku-hi)
Page 456¥47,409,000
MITI
28. Name of scheme:
Amount:
Ministry:Interest subsidy to loans related to oil storage facility (Sekiyu
Chozo Shisetsu Yushi Rishi Hokyo-kin) Page 624¥40,959,000
MITI
29. Name of scheme:
Amount:
Ministry:Subsidy to technological development cost for solar energy and
other systems (Taiyo energy To Gijyutsu Kaihatsu-hi Hojyo-kin)Page 504
¥36,965,547,000
MITI
30 Name of scheme:
Amount:
Ministry:Subsidy to the cost of projects for the activation of a regional
industrial capacity (Chiiki Sangyo Shuseki Kasseika Taisaku
Jigyo-hi Hojyo-kin) Page 286
¥521,515,000
MITI
31. Name of scheme:
Amount:
Ministry:Subsidy to the facility cost for the activation of regional industrial
capacity (Chiiki Sangyo Shuseki Kasseka Taisaku Shisetsu-hi
Hojyo-kin) Page 288
¥2,835,000,000
MITI
32. Name of scheme:
Amount:
Ministry:
Remarks:Subsidy to the cost of projects for promoting the development of
regional leather industries (Chiho Hikaku Sangyo Shinko Taisaku
Jigyo-hi Hojyo-kin) Page 290
¥59,195,000
MITI
For technical training concerning leather production.
33. Name of scheme:
Amount:
Ministry:Subsidy for facility modernization of SMEs (Chusho Kigyo
Setsubi Kindaika Hojyokin) Page 304
¥973,500,000
MITIG/SCM/Q2/JPN/21
Page 8
34. Name of scheme:
Amount:
Ministry:Commission fees concerning projects to improve intellectual
infrastructure of SMEs (Chusho Kigyo Chiteki Kiban Seibi Jigyo
To Itaku-hi) Page 457
¥125,924,000MITI
35. Name of scheme:
Amount:
Ministry:Commission fees concerning research works for the promotion of
the leather industry (Hikaku Sangyo Shinko Taisaku Chosa To
Itakuhi) Page 454
¥22,413,000
MITI
36. Name of scheme:
Amount:
Ministry:Subsidy to the training cost fo r the tortoiseshell industry (Bekko
Sangyo Shido Jigyo-hi Hojyo-kin) Page 290
¥4,929,000 for FY 1997 and zero for FY 1998MITI
37. Name of scheme:
Amount:
Ministry:Subsidy to R&D cost for rationalization of energy use and for
other purposes (Energy Shiyo Go rika Gijyutsu Kaihatsu Hi To
Hojyo-kin) Page 522¥51,422,643
MITI
38. Name of scheme:
Amount:
Ministry:Commission fees for development/study, etc. of energy use
rationalization system  (Energy Shiyo Gori ika System KaihatsuChosa To Itakuhi) Page 632
¥7,533,366,000
MITI
39. Name of scheme:
Amount:
Ministry:Subsidy to the cost of measures for promoting introduction of
energy use rationalization facility, etc.  (Energy Shiyo Gorika
Setsubi To Donyu Sokushin Taisaku-hi Hojyo-kin) Page 520
¥27,178,251,000
MITI
40. Name of scheme:
Amount:
Ministry:Interest subsidy to the fund for special facility for energy-use
rationalization (Energy Shiyo Gorika Tokutei Setsubi To ShikinRishi Hokyukin) Page 625
¥355,649,000
MITI
41. Name of scheme:
Amount:
Ministry:Grant to NEDO – for enhancing supply-demand structure (NEDO
Kofukin – Jyukyu Kozo Kodoka) Page 606
¥2,319,441,000
MITI
42. Name of scheme:
Amount:
Ministry:Grant to NEDO – for diversification of electric sources (NEDO
Kofukin – Dengen Tayoka) Page 604
¥2,326,382,000
MITIG/SCM/Q2/JPN/21
Page 9
43. Name of scheme:
Amount:
Ministry:Grant on administrative expenses of NEDO (Nedo Jimu-hi To
Kofu-kin) Page 606
¥8,902,015,000
MITI
44. Name of scheme:
Amount:
Ministry:Subsidy to NEDO (NEDO Hojyo-kin) Page 296
¥2,460,723,000
MITI
45. Name of scheme:
Amount:
MinistryInterest subsidy to NEDO loans for financing supply-demand
stabilization (NEDO Jyukyu Anteika Yushi Rishi Hojyo-kin)
Page 624¥302,121,000 for FY 1997 and zero for FY 1998
MITI
46. Name of scheme:
Amount:
MinistrySubsidy to R&D cost for altern ative energy for petroleum (Seikyu
Daitai Energy Gijyutsu Kaihatsu Hi Hojyo-kin) Page 518¥25,620,934,000
MITI
47. Name of scheme:
Amount:
MinistrySubsidy to technological improvement expenses related to
alternative energy for petroleum (Sekiyu Daitai Energy ToGijyutsu Kaizen-hi Hojyo-kin) Page 520
¥1,900,612,000
MITI
48. Name of scheme:
Amount:
MinistryInterest subsidy on loans for financing special facility related to
alternative energy for petroleum (Sekiyu Daitai Energy Tokutei
Setsubi To Shikin Rishi Hokyu-kin) Page 625
¥682,766,000
MITI
49. Name of scheme:
Amount:
MinistrySubsidy to the cost of measures for promoting development/use of
regional energy (Chiiki Energy Kaihatsu Riyo To Sokushin
Taisaku-hi Hojyo-kin) Page 518
¥3,616,603,000
MITI
50. Name of scheme:
Amount:
MinistrySubsidy to the cost of measures for promoting projects related to
development, use and power generation of regional energy (Chiiki
Energy Kaihatsu Riyo Hatsuden Jigyo To Sokushin Taisaku-hi
Hojyo-kin) Page 506
¥27,996,037,000
MITI
51. Name of scheme:
Amount:
Ministry:Financial incentives for companies located in foreign access zones
under the Law on Extraordinary Measures for the Promotion of
Imports and the Facilitation of Foreign Direct Investment
MITIG/SCM/Q2/JPN/21
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B. SUB-NATIONAL PROGRAMMES
1. Previous notifications
Further to the above, on Pages 5-7 of its questions on the previous new and full notification of
Japan (Doc. G/SCM/Q2/JPN/4 of 19 September 1996), the Community identified a number of state-
level programmes which had not been notified, but which appeared to be specific and thus subject tonotification under Article 25.2.  Furthermore, the Community identified additional programmes in
Doc G/SCM/Q2/JPN/14 operated by regional authorities in Japan.
The Community notes that many of these programmes have still not been included in the
present new and full notification of Japan, and once again requests Japan to explain why their
notification has not been considered appropriate.  If a notification is appropriate, Japan is requested to
provide it, using the standard format.
In particular, the Community notes that certain states appear to provide subsidies which are
contingent upon export performance and therefore specific in accordance with Article 2.3 of the
Subsidies Agreement.  Examples are:
- Iwate: Wood industry stable management fund
- Tottori: Subsidies for the establishment in Takeuchi Industrial Park- Ishikawa: Subsidy for encouraging investment in Core Noto- Fukuoka: Grants for specified areas- Fukui: Fund for the glass industry
- Saga: Regional Development programme
2. Additional programmes
In addition to the schemes referred to above, the following sub-national programmes have
also not been notified.
1. Name of scheme:
Name of prefecture:
Recipient:Subsidy to operational costs for strengthening the subcontracting
industry in the region
Akita
SMEs engaged in subcontract works (moulding, etc.)
2. Name of scheme:
Name of prefecture:
Recipient:Project for assisting SMEs technological development and market
exploration (Changed in fiscal 1997 from Subsidy to operational
costs for fostering entry into new business fields)
Yamagata
SMEs (individually or as a group)
3. Name of scheme:
Name of prefecture:
Recipient:Integration promotion project (subsidy to creation of new
businesses by multiple companies in different businesses)
Tokyo
Associations or groups consisting of two or more SMEs which
have been in operation for more than one year consecutively,holding the main offices inside Tokyo.G/SCM/Q2/JPN/21
Page 11
4. Name of scheme:
Name of prefecture:
RecipientProject for assisting new business creation (subsidy to new
businesses to be carried out by those who are planning to start
businesses or by those companies created less than one year ago)
TokyoThose who are planning to establish SMEs or have started SMEs
less than one year before inside Tokyo.
5. Name of scheme:
Name of prefecture:
RecipientProject for supporting tie-ups between industry, academia and
public sector (subsidy to development of new technologies jointly
by the research institutes belonging to private companies,
universities and public entities)Tokyo
SMEs or groups of SMEs, which are in business for more than one
year consecutively, holding the main offices inside Tokyo.
6. Name of scheme:
Name of prefecture:
RecipientSubsidy to the projects for promoting development of advance
technology
Shiga
SMEs or their organizations
7. Name of scheme:
Name of prefecture:
RecipientSubsidy to development cost of advance technology
Kagawa
Companies with their main offices inside the prefecture.
__________