Japan WT/TPR/S/76
Page 35
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. Since its previous Trade Policy Review, Japan has continued to liberalize its trade and
investment regimes, mainly as part of its regulatory  reforms.  Substantial progress has been made with
these reforms, improving the competitive environmen t, including in important service areas, such as
telecommunications;  however, potentially important distortions to competition are still evident insome sectors, particularly in agriculture and in certain service sectors, such as parts of domestic
transportation.  Recognizing the continued need to promote competition, the authorities attach high
priority to further regulatory reform and to sound competition policy.
2. The tariff is Japan's main trade policy instrument.  Most imports enter Japan duty free or are
subject to low tariff rates.  In fiscal year 2000
1, the simple average applied MFN tariff rate was 6.5%
and is expected to fall to 6.3% once the Uruguay Round tariff cuts are fully implemented, by 2009.
Nearly 99% of tariff lines are bound and most applied tariff rates coincide with bound rates, thereby
imparting a high degree of predictability to Japan's tariff schedule.  At the same time, non- ad valorem
duties are an important feature of the tariff, particularly in agriculture.  Such duties, which account for
6.9% of all lines, are indicated clearly in Japan's tariff schedule, but they can result in high ad valorem
equivalents (AVE).  In the interests of transpar ency, the Japanese authorities have provided the
Secretariat with AVE estimates for more than two thirds of these non- ad valorem  duties;  these
estimates show that 90 of the top 100 tariffs entailed non- ad valorem  duties whose AVEs ranged from
40.1% to 983.7%.  Non- ad valorem  duties are intended to provide consistent levels of protection to
domestic agricultural products in the face of international price fluctuations.  The allocation of tariff
quotas varies by product and can be complex.
3. Japan has few non-tariff border measures.  Those currently applied involve some import
prohibitions, import licensing and quantitative import restrictions, for example, on fish and silk.
Imports of certain goods are subject to licensing requirements in order to ensure national security,
safeguard consumer health and well-being, or to preserve domestic plant and animal life and the
environment.  Like tariff quotas, certain aspects of the import quota system can be intricate.
4. Japan has rarely used contingency measures, such as countervailing and anti-dumping duties
and emergency safeguards, although there has been resort to special safeguards in agriculture.
5. Japan maintains certain export controls on the grounds of national security and public safety
and to ensure adequate domestic supplies of certain agricultural and other primary products.
Indicating their absence, Japan has not notified any export subsidies to the WTO.  Export finance,
insurance, guarantees and duty drawback schemes are available.
6. Various forms of assistance are provided by central and local Governments, particularly in
agriculture.  An interesting anomaly involves assistance, in the form of tax breaks and low interest
loans;  such assistance is provided for certain types of imports (and investment).
7. No preferences are granted to domestic suppliers on government procurement covered by the
Agreement on Government Procurement.  The share of foreign suppliers in the total value ofgovernment procurement was 5.7% in 1998 (up from 4.6% in 1997);  there are indications that this
share is considerably lower in the case of public-works procurement, which has been a key feature of
recent fiscal stimulus packages.
                                                     
1 The fiscal year (FY) runs from April to March.WT/TPR/S/76 Trade Policy Review
Page 36
8. Japan continues to bring its standards into line wi th international standards;  it has also taken
further steps to ensure acceptance of foreign test data and conformity assessments.
9. Japan has continued to participate in multilateral and regional discussions for agreements to
promote international harmonization of regimes protecting intellectual property rights (IPRs).
10. The Three-Year Program for Promoting Deregulat ion (TYPPD), as revised in April 2000, is
aimed, inter alia,  at creating a "free and fair" Japanese economy fully open to the international
community.  Furthermore, with a view to increasing transparency of government policy and related
measures, the Government introduced in March 1999 a notice and comment (public comment) system
for use prior to introducing or revising regulations (Chapter II(2)(ii)).
11. The TYPPD also contains measures to increase competition.  These include the abolition of a
number of exemptions from the Anti-Monopoly Act (A MA);  the number of exemptions under the
AMA (and other laws) dropped from 89 in 1996 to 22 in 2000.  In addition the role of the Japan Fair
Trade Commission (JFTC) has been strengthened following a modest increase in its budget and staff.
Given the increased number of cases and actions taken, the JFTC also appears to have become
somewhat more aggressive in addressing private anti-competitive practices;  a majority of these cases
involve bid-rigging in connection with tenders for government procurement contracts.  The operationof the JFTC is perhaps hampered by its lack of resources and expertise in pursuing complex cases.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Customs valuation and clearance
12. Under Article 67 of Japan's Customs Law, importers must provide Customs with an import
declaration when goods are imported.  Japan uses the c. i.f. prices of imports (which is taken to be the
"transaction value" of the import) as the basis for customs valuation.  Japan does not employ
minimum import prices.
13. The average time between import declaration and import permission decreased between
March 1996 and March 1998 from 0.4 to 0.2 of a day for sea cargo and from 1.8 to 0.7 hours for air
cargo.  Likewise, during the same period the average time between cargo arrival and import
permission dropped from 4 to 3.6 days for sea cargo and from 46.3 to 31.5 hours for air cargo
(Table III.1 ).  The authorities recognize the importance of reduced customs clearance times both for
foreign suppliers and domestic importers.  Improvements related to customs clearance have focused
on increased computerization as well as planned improvements in facilities and procedures.
Accordingly, the TYPPD stated that the Government aims to simplify and speed up customs
procedures in a transparent manner (section (5)(vi)).2
14. No customs clearance fee is charged except for overtime services, which are charged at
¥8,300 per hour.
15. Changes in customs clearance since Japan's previous Review, in 1998, include an amendment
to the Customs and Tariff Law introducing, from March 2001, Simplified Declaration Procedures that
may enable an earlier release of goods by separating the release and duty payment declarations.3  The
authorities believe that this initiative will reduce the paperwork required for declarations, andbasically obviate the need for examinations or inspections for the purpose of customs duty payment.
                                                     
2 MCA (1999), p. 120.
3 Currently, Japan’s customs procedures require th e import declarations for cargo release and for
customs duty payment to be filed simultaneously.Japan WT/TPR/S/76
Page 37
Table III.1
Average time between import declaration and import permission in Japan, 1991-98
Sea cargo (days) Air cargo (hours)
February 1991 1.1 (7.0) 2.3 (52.6)
February 1992 0.8 (6.2) 1.6 (52.9)
March 1993 0.5 (4.8) 1.6 (43.7)
March 1996 0.4 (4.0) 1.8 (46.3)
March 1998 0.2 (3.6) 0.7 (31.5)
Note: Figures in parenthesis are the average times between cargo arrival and import permission.
Source: Information provided by the Japanese authorities.
16. Complaints about customs valuation and other customs measures must be filed with the
appropriate Director General of Customs within tw o months of the date of importation.  Appeals to
the Minister of Finance must be made within one month of the decision by the Director General.  If
unsatisfied, complainants may seek judicial review within three months of the Minister's decision.4
Complaints may also be filed with the Office  of Trade and Investment Ombudsman.  Since 1997, no
legislative changes regarding complaint and appeal procedures have taken place.
(ii) Rules of origin
17. Japan does not have preferential rules of origin, except those under the Generalized System of
Preferences (GSP).  The authorities state that the rules of origin under the GSP scheme are generally
more stringent than for MFN purposes.  The GSP rule s also have a list of exceptions for some goods;
the exceptions involve specific criteria such as processing rules and value added on a product-by-
product basis.  To apply MFN tariff rates, the country of origin for imported goods is defined as the
country in which the goods have last undergone substantial transformation that results in a new
essential characteristic being conferred on the goods.  The change of tariff classification at the
HS 4-digit level is generally used as a reference point for such transformation.  Detailed information
on Japan’s rules of origin is publicly available.5  Appeals against decisions by Directors-General of
Customs may be submitted to the Appeals Committee on Customs, as stipulated in the Customs Law.
(iii) Tariffs
(a) Main features
18. Japan's FY2000 tariff schedule consists of 9,029 tariff lines at the Harmonized System (HS)
9-digit level.6
19. The Japanese tariff schedule has three distinct sets of rates:  statutory rates (which include
both general and temporary rates), WTO bound rates, and preferential (GSP) rates.7  In the case of
statutory rates, the "temporary", but apparently open-ended, rate is normally used instead of the higher
                                                     
4 In the period 1997-99, complaints to the Director-General of Customs totalled 60 cases, appeals to the
Minister of Finance 14 cases, and judicial proceedings three cases (data from the Ministry of Finance).
5 For example, in the Customs-related Laws and Regulations, Director-General’s Directives, and APEC
Compendium on Rules of Origin.
6 The total number of tariff lines excluding the in-quota rates of tariff quotas is 8,851.
7 These are defined in the Customs Law, the Customs Tariff Law, the Temporary Tariff Measures Law
and the Schedule of Tariff Concession.WT/TPR/S/76 Trade Policy Review
Page 38
general rate8;  the lower of the statutory and bound rates are applied to WTO Members on an MFN
basis, except when the GSP rate is applied;  in instances where the temporary or general rate is above
the WTO bound rate, the latter rate applies.  The main features of the schedule concerning MFN
tariffs are captured by the summary indicators for 1998, 1999, 2000, which reflect the Information
Technology Agreement (ITA), and the full implem entation of the Uruguay Round (UR) reported in
Table III.2.9
Table III.2
Structure of applied MFN tariffs in Japan(Per cent)
Indicators FY1998aFY1999 FY2000bU.R.c
1. Bound tariff lines (per cent of all tariff lines) 98.9 98.9 98.9 98.9
2. Duty free tariff lines  (per cent of tariff lines) 37.7 37.1 37.1 41.2
3. Non- ad valorem  tariffs (per cent of all tariff lines) 6.8 7.0 6.9 6.3
Of which differential and sliding duties (per cent of all tariff lines) 0.3 0.6 0.4 0.0
4. Tariff quotas (per cent of all tariff lines) 2.0 2.0 2.0 2.0
5. Non- ad valorem  tariffs with no ad valorem  equivalent (per cent of all
tariff lines)6.8 2.0 2.0 1.9
Excluding "in-quota" rates 6.9 2.1 2.1 1.8
6. Simple average bound tariff rate 5.6 6.8 6.6 6.3
7. Simple average applied tariff rate 5.4 6.7 6.5 6.3
Agricultural products (HS 01-24)d11.8 17.5 17.0 17.4
Industrial products (HS 25-97) 3.9 4.1 3.9 3.6
8. Import-weighted average applied tariff rate .. .. .. ..
9. Production-weighted average applied tariff rate .. .. .. ..
10. Domestic tariff "spikes"e6.8 5.5 5.9 6.0
11. International tariff "spikes"f7.4 7.7 7.1 6.9
12. Overall standard deviation (SD) of tariff rates 7.4 24.9 24.8 25.0
13. Coefficient of variation (CV) of tariff rates 1.4 3.7 3.8 4.0
.. Not available.
a Not including AVEs, but taking into account the ad valorem  part of compound and alternate rates.
b Using 1999 AVEs, as available, provided by the Japanese authorities.
c Using 2000 nomenclature.d Under the definition used in the WTO Agreement on Agriculture the simple applied tariff average on agricultural imports is
18.2% in FY2000.
e Domestic tariff "spikes" are defined as those exceeding three times the overall simple average applied rate (indicator 7);  th us, in
2000, for example, a domestic tariff spike is defined as one that exceeds 19.5% (that is, three times the average applied rate of
6.5%).
f International tariff "spikes" are defined as those exceeding 15%.
Note: Indicators 1, 3 and 4 are calculated taking into account all tariff lines (i.e. in-quota and out-of-quota tariff lines).  Each of the
other ten indicators exclude in-quota lines.
Source: WTO Secretariat estimates, based on data provided by the Japanese authorities.
                                                     
8 Although temporary rates are, in principle, subject to a nnual review, most are rolled over from one
year to the next.  Under a tariff line, there may be multiple temporary rates (e.g. applied temporary rates may
differ between April-December and January-March) for a par ticular fiscal year;  the Secretariat used the lowest
rate in each line for the calculation of tariff averages for each fiscal year.
9 The ITA was fully implemented in 2000, while the Uruguay Round tariff cuts are to be fully
implemented in 2009.Japan WT/TPR/S/76
Page 39
20. Current applied MFN tariffs reflect Japan's scheduled reductions under the WTO Agreement;
they also reflect the tariffication in April 1999 of the previous quantitative restriction on imports of
rice as well as the results of the Information Technology Agreement and agreements on
pharmaceuticals.  With certain exceptions, Japan’s agricultural tariff reductions under the Uruguay
Round have been completed over six years (by April 2000) and industrial tariff reductions over five
years (by January 1999).10  The impact of the ITA has been minor, as nearly all of the items
concerned were already either duty free or subject to very low tariffs.
(b) MFN tariff bindings
21. Ninety-nine (1.1%) of Japan's HS 9-digit tariff lines are unbound.  These lines involve a
number of "sensitive" items, notably fisheries products (including seaweed), certain wood products,
and petroleum.  By and large, bound and applied rates coincide, thereby ensuring a high degree oftariff predicability.
11  Bound rates exceed applied rates only on certain agricultural items, food
products, alcohol beverages, tobacco, chemicals and petroleum.
(c) Duty-free items
22. In FY2000, about 37% of Japan's tariff lines (at the 9-digit HS level) bore a zero rate.  This
proportion is expected to rise to 41.2% once the Ur uguay Round is fully implemented.  By contrast, as
most of the products covered by the ITA were already subject to zero duty rates, full implementation
of the Agreement in FY2000 has had little effect on the proportion of tariff lines that are duty free.
(d) Non- ad valorem  duties
23. In FY2000, non- ad valorem  duties accounted for 6.9% (628 lines) of all Japan's tariff lines (at
the HS 9-digit level).  Non- ad valorem  duties consist of compound duties12, alternate duties13,
differential duties14, and sliding duties15, all of which include specific rates (Table AIII.1). Such duties
are generally intended to provide consistent levels of protection to domestic products facingfluctuations in import prices.
24. Japan's non- ad valorem  duties apply mainly to agricultural  products (Chart III.1).  According
to the authorities, the products subject to specific duties are selected on the basis of prevailing market
conditions and product characteristics, including fluctu ations and trends in prices owing to shifts in
supply and demand as well as differences in quality.  Non- ad valorem  duties are indicated clearly in
Japan's tariff schedule and the Japanese authorities have ensured the transparency of more than two-
                                                     
10 WTO (1998), p. 41.
11 In FY2000, some 95% of Japan's applied tariffs are identical to the bound rates.
12 A compound duty involves a combination of both  ad valorem  and specific rates.
13 An alternate duty involves either an ad valorem  or specific rate;  usually the higher of the two is
applied.
14 A differential duty involves a specific rate charged per kg. of imports with the rate varying directly
with the difference between the standard import price, set by the authorities, and the actual import price.  It
would appear that differential duties are designed to  protect domestic producers from surges in low-priced
imports.
15 Sliding duties are apparently intended to protect  domestic consumers of the product concerned from
a surge in import prices.  They involve a specific tariff rate for imports whose value is no more than a certainthreshold;  the rate declines as the value exceeds the threshold and becomes zero at certain point.  For example,
the applied rate on refined lead is ¥2.70/kg. when the value for customs duty does not exceed ¥172/kg., (¥180 –
the value for customs duty)/kg. when the value is more than ¥172/kg. but less than 
¥180/kg., and zero when the
value exceeds ¥180/kg.WT/TPR/S/76 Trade Policy Review
Page 40
thirds of these duties by providing estimates of their AVEs.16  These official estimates show that 90 of
the top 100 tariffs entailed non- ad valorem  duties whose AVEs ranged from 40.1% to 983.7%,
indicating that specific duties can result in high ad valorem  equivalents.  It should be noted that every
method of calculating AVEs is subject to bias and that AVEs can vary widely depending on the world
prices of the products involved.  Some thoughts on the use of non- ad valorem  duties are summarised
in Box III.1.
(0) (0) (0) (0) (0)(28)(74)
(60)(33)
(123)
(24)
(5)(6)
(0) (0) (0)(245)(28)
(628)
(0)(2)(0)
051015202530354045Chart III.1
Share of non-ad valorem duties, by HS section, FY2000
Per cent
Note:
Source :Each bar in the chart depicts the percentage of tariff lines out of the total within each HS section that 
are non-ad valorem duties.  The figure in parent heses above each bar shows the number of tariff 
lines in each HS section involving non-ad va lorem rates.  Excluding in-quota rates.  
WTO Secretariat estimates, based on da ta provided by Japanese authorities.
                                                     
16 The lack of estimates for the remaining one third of specific duties is seemingly due in some
instances to the absence of imports, which may suggest that the specific rates in question may be prohibitive.The most recent estimates of AVEs available were for 1999.Japan WT/TPR/S/76
Page 41
Box III.1:  Non- ad valorem  duties
Specific duties are relatively simple to administer in instances where the value-for-duty cannot be easily
observed.  Moreover, as import prices fall, the ad valorem  equivalents of specific duties rise, and vice versa,
thereby contributing to domestic price stability in the face of "excessive" fluctuations in world prices;  whilethese duties provide protection against surges in imports, they do so only in so far as those surges are causedby lower import prices.  At the same time, specific duties impart a degree of predictability to the amount of
duty payable.  As the amounts of duty collected are unaffected by drops (or rises) in import prices, for
whatever reason, specific duties may also reduce pres sure to resort to anti-dumping or countervailing
(AD/CV) measures for protection.  And unlike with AD/CV duties, any increases in real tariff protectionassociated with specific duties are on an MFN basis.
On the other hand, the use of non- ad valorem  duties involving specific rates may be regarded as undesirable
for several reasons.  Such duties tend to be  less transparent and less predictable than ad valorem  tariffs in
that they can conceal high ad valorem  equivalents (AVEs) and can vary widely with changing world prices.
Specific rates of duty also tend to distort domestic production patterns more than ad valorem  tariffs because
they provide disparate levels of protection for somewhat different goods falling in the same tariff line (andsubject to the same specific rate), by taxing imports of cheaper products relatively more heavily, therebyencouraging domestic firms to produce less expensive goods for which the level of protection against
imports is proportionately greater.  At the same time, specific duties can encourage quality upgrading by
exporters, which may entail efficiency losses in addition to the conventional dead weight losses associatedwith tariffs.  Furthermore, as AVEs are inversely related to import prices, specific duties progressivelycushion domestic producers against competition from lower-priced imports, thereby counteracting cuts inspecific duty rates.  Consequently, they counteract the relative price effects of exchange rate changes oncountries' trade balances.  It follows that the applica tion of specific duties to imports of selected products
could lead to an increase in real tariff protection for producers of those products in so far as the appreciation
of the currency results in declining prices for such imports.  Likewise, to the extent that a depreciation of thecurrency results in increasing prices for imports of produ cts subject to specific duties, real tariff protection
for those products may fall.  To the extent that developing countries are exporters of relatively low-pricedproducts, specific duties also tend to have a greater im pact on their exports than on those of industrialized
countries.
Source:  WTO Secretariat.
25. As a result of the considerable decline in Japan's import prices during the period under review
(1998-2000), real protection for some of those products subject to specific duties may well have
increased, notwithstanding cuts in their applied rates.17  As information on AVEs was available for
1999, but not for 1998 (or 2000), the Secretariat was unable to ascertain whether or not there have
been any such instances during the review period.18
(e) Tariff quotas
26. In 1995, Japan introduced tariff quotas for 20 groups of agricultural products, as part of its
commitment under the WTO Agreement on Agriculture to "tariffy" quantitative import restrictions
(Table AIII.2).  In addition, Japan has long had a system of autonomous tariff quotas, primarily for the
                                                     
17 Japan's import prices fell by 5.4% in 1998, and, according to estimates by the OECD (1999b),
dropped by a further 12.6% in 1999;  commodity price falls were even larger in 1998.  These decreases in
import prices during the period under review were subsequent to a 20.9% increase during the period 1995-97,when the Yen depreciated against the U.S. dollar, from ¥96.3 to ¥122.6.
18 Some such instances have been found recently in the case of the United States, for example.
(WTO, 1999).WT/TPR/S/76 Trade Policy Review
Page 42
purpose of providing low-cost inputs for industrial purposes (Table AIII.3).  Recent revisions to
Japan’s tariff quota system include the "tariffication" of rice in April 1999 (Chapter IV(2)(ii)).19
27. In FY2000, tariff quotas covered 2.0% of all tariff lines (at the HS 9-digit level).  Less than
18% of the out-of-quota rates were ad valorem , compared with 100% of the in-quota rates.  The
simple average in-quota MFN tariff rate is estimated to be 18.9%;  the corresponding average out-of-
quota MFN tariff was 111.7% (including AVEs of non- ad valorem  duties).  Many of the tariff quotas
with end-use provisions were agriculture-related, while tariff quotas for leather were linked to
regional and social policies.
28. The quota allocation method tends to be intricate.  In the case of tanned leather, the in-quota
amount is divided into a "general quota" (95% of the annual quota amount) and "reserved quota"
(remaining 5%).  Those eligible for quota allocations must be a corporation or an individualundertaking the production, sale or import of the tanned leather or related goods.  The general quota is
allocated to applicants who were licensees in the previous year or two.  When the total requested
amount exceeds the quota, each applicant is allocated a pro rata  share of the quota.  The reserved
quota is allocated to those who did not apply for either the general or reserved quota in the previous
year.  Quotas not filled by any of the above applicants as well as those returned unused are reallocatedto applicants on an "equal basis".  In the case of agricultural products, quota allocation is based upon
historical imports and current and future plans for imports.  Some qualification requirements for
applicants are stipulated taking into account the characteristics of the product and the market, with a
view to ensuring that the licensed goods are supplied to end users.
(f) MFN tariff averages
29. In FY2000, the overall simple applied MFN tariff average was 6.5%, down from 6.7% in
1999.
20  HS categories of products with the highest simple tariff averages were footwear and headgear
agricultural products and prepared food (Chart III.2).
(g) MFN tariff dispersion
30. In addition to the 37% of tariff lines that are duty free, 28.4% lines are subject to applied tariff
rates of 5% or less (Chart III.3).  Tariff spikes, that is rates exceeding three times the simple applied
MFN average, affect 5.9% of all tariff lines in FY 2000, a slightly higher percentage than in FY1999.
(h) Tariff escalation
31. Tariff escalation is evident in a number of sectors, most notably processed food, textiles, other
chemicals, and leather products (Table AIII.4).
                                                     
19 Tariffication refers to a conversion of all import restrictions to tariff measures.
20 WTO Secretariat calculation, based on data prov ided by the Japanese authorities.  The averages
include FY1999 AVEs of non- ad valorem  duties, insofar as they are available, and ad valorem  components of
compound and alternate duties, where AVEs are not available;  it excludes in-quota rates of tariff quotas, and anaverage of a seasonal ad valorem  duty (i.e. different rates applicable during "high" and "low" seasons) is
included as a single line.Japan WT/TPR/S/76
Page 43
05101520253035Chart III.2
Simple average applied MFN tariff rates, by HS section
Per cent
Excluding in-quota rates.  For FY2000 and the Uruguay Round rates, FY1999 ad valorem equivalents 
(AVEs) provided by the Japanese authorities are used, as available.   The ad valorem part of compound and alternate rates are taken into account where AVEs are not available.  Uruguay Round rates are based on 2000 nomenclature.  WTO Secretariat estimates, based on data  provided by the Japanese authorities.Note:
Source :FY1998 (excl. AVEs)
Uruguay Round FY2000 
(i) Tariff concessions and exemptions
32. Details of Japan's system of tariff concessions and exemptions are found in Table AIII.5.
Customs duty reductions and exemptions  for FY1997 amounted to  about ¥186 billion.21  Many end-
use tariff concessions are agriculture-related (Table AIII.6).  In FY2000, the system of reduction orexemption for raw materials for manufacture was, in  effect, abolished with the elimination of tariffs
on sugar, the only remaining raw material covered by the system.  Japan's GSP-related measures are
described in Chapter II(4)(iv).
(j) Tariff adjustments
33. Annual procedures for tariff revisions begin in July, when the Ministry of Finance (MOF)
requests other ministries concerned to initiate studies of desired changes;  this is followed by
individual negotiations between the MOF and each ministry.  Proposed changes are reviewed by the
Customs Tariff Council, after which the MOF prepares legislation for Diet approval.
                                                     
21 MOF (1999).WT/TPR/S/76 Trade Policy Review
Page 44
0510152025303540
Duty-
free0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 >50Chart III.3
Applied MFN tariff distribution, FY2000
Per cent
Including AVEs of non-ad valorem duties, as available.  In case of missing AVEs, specific rates 
have been excluded from the tariff analysis and averages for compound a nd alternate rates have 
been calculated on the basis of th e ad valorem component of such ra tes.   Excluding in-quota rates.
WTO Secretariat estimates, based on da ta provided by the Japanese authorities.Note:
Source :
34. Tariff changes implemented by Japan in FY1998 included the reduction or elimination of
tariff rates on metal watch straps and raw sugar, together with a simplification of the customs
clearance procedure in Hozei  (bonded) areas.22  The FY1999 tariff changes included:  the elimination
of the tariff on niobium titanium alloys;  a tariff rate reduction for yarn spun from silk waste;  and anextension of the periods for the reduction or exemption and repayment systems.  The FY2000 tariff
changes included tariff revisions for crude oil, and th e elimination of the tariff on raw sugar and rare-
earth metals.
(iv) Other charges affecting imports
35. Indirect taxes, including the consumption (v alue-added) tax and the excise taxes applied
mainly to liquor, tobacco, gasoline, and automobiles, are levied at the same rates on imports and on
domestically produced goods and services (section (5)(i)).  In the case of imports, the consumption tax
is levied on import prices plus customs duties and excise taxes.
36. Following WTO dispute settlement concerning liquor taxation, Japan substantially reduced
tax rates on whisky and brandy, while raising rates on shochu and other products.
23
                                                     
22 MOF (1999).
23 WTO document WT/DS8/2, 12 January 1998.Japan WT/TPR/S/76
Page 45
(v) Non-tariff border measures
37. The non-tariff border measures (NTMs) currently applied by Japan involve import
prohibitions, import licensing, and quantitative restrictions.  The importation of certain goods may be
prohibited or subject to licensing in order to ensure national security, safeguard consumer health and
well-being, or to preserve domestic plant and animal life and the environment.  Some commodities,
including fish and silk yarn and certain silk fabrics, are subject to import quotas or restraints underbilateral trade agreements and arrangements with, for example, China and the Republic of Korea.  In
addition, import surveillance is employed for certain products to confirm place-of-origin and
documentation requirements.
(a) Import prohibitions and sanctions
38. Prohibited imports are classified in the Customs Tariff Law under five categories:  narcotics;
revolvers and pistols;  imitation currencies;  books and other articles considered contrary to public
security or morality;  and articles infringing patents or other intellectual property rights.
24  Import
prohibitions pertaining to items listed in Annex I to the Convention on International Trade in
Endangered Species of Wild Fauna and Flora (CITES) are specified in the Import Control Order.
Directors-General of Customs may confiscate prohibited import items at the border or order theirreshipment.  There has been no change in the list of prohibited imports since 1998.
(b) Licensing and approval requirements
39. Import licensing procedures in Japan are governed by the Foreign Exchange and Foreign
Trade Law, as amended in 1998.  Such licensing is primarily for the purpose of enforcing health,
public security or environmental measures;  it is also used to implement border protection schemes for
agriculture and other policy measures (for example, to ensure compliance with bilateral agreements
on silk yarn and silk fabrics).
25  Under the Law, the Minister of International Trade and Industry may,
in the interest of promoting the sound development of foreign trade and the national economy, require
prior ministerial approval for the import of certain goods (Article 52).
40. Approval from the Minister of International Trade and Industry is required to import goods
subject to Japan's international arrangements;  such  arrangements relate to commodities covered by its
membership of international commodity and bilate ral agreements.  Since January 1998, changes in the
list of items requiring import approval other than those subject to import quotas have included the
addition of diamonds shipped from Angola, and the elimination of silk yarn from 155 countries and
territories.26  Imports requiring approval are listed in Table AIII.7.
(c) Import quotas
41. Japan maintains import quotas on various items, including fishery products, certain organic
chemicals, pharmaceuticals, explosives, rubber adhesives, military equipment and firearms
(Table III.3).
                                                     
24 Article 21 of the Customs and Tariff Law.
25 Japan notified its import licensing procedures, as well as the products concerned, in WTO documents
G/LIC/N/3/JPN/1 and Corr.1, 20 November 1996 and 9 April 1998.
26 The measure was introduced in May 1999;  prio r confirmation, instead, became a requirement.WT/TPR/S/76 Trade Policy Review
Page 46
Table III.3
Allocation of import quota by item, FY1999
Ratio of allocated quota to the total quota amount (%)
Trading
companiesDesignated
corporationsFishery
industriesFirst-come-
first-served
basisOtherTotal quota
amountUnit
Fish and shellfish (HS 0301.99.2;
03.02; 03.03; 03.04; 03.05; 03.07)6.8 11.6 74.1 4.9 2.7 180.0 US$ million
Fish and shellfish imported from the
Republic of Korea97.5 n.a. n.a. 2.5 n.a. 40.0 US$ million
Horse mackerela34.0 48.2 2.8 15.0 n.a. 108.0 TMT
Mackerela30.6 49.7 4.8 15.0 n.a. 210.0 TMT
Sardine 2.7 47.3 35.0 15.0 n.a. 22.0 TMT
Scallops n.a. 80.2 4.8 15.0 n.a. 5.0 TMT
Herring (except Clupea pallasi ) 16.6 57.1 n.a. 26.3 n.a. 55.0 TMT
Herring ( Clupea pallasi ) 4.2 46.5 2.8 46.5 n.a. 71.0 TMT
Pollack productsa9.8 6.1 15.6 0.3 68.2 1,027.0 TMT
Squid and cuttlefish 41.9 36.8 16.1 2.4 2.9 56.5 TMT
Dried squid & cuttlefish 57.8 31.1 n.a. 11.1 n.a. 4.5 TMT
Cod and pollack roes 23.1 29.4 29.5 17.8 0.2 78.0 TMT
Dried laver 15.8 63.3 n.a. 20.8 n.a. 120.0 million sheets
Dried seaweed (Enteromorpha and
Monostroma species)n.a. 100.0 n.a. n.a. n.a. 0.1 TMT
Preparation of Kombu ( Kjellemaniella
spp. and Laminaria  spp.)96.0 n.a. n.a. 4.0 n.a. 0.5 TMT
Other edible seaweed (HS 1212.20-1-(3))      n.a. 100.0 n.a. n.a. n.a. 2.9 TMT
CFC n.a. n.a. n.a. n.a. n.a. 34.0 ODP kg.
HCFC n.a. 61.1 n.a. 38.9 n.a. 505,741.0 ODP kg.
Methyl bromide n.a. n.a. n.a. n.a. n.a. 506,054.0 kg.
Machinery and pipes of zirconium for
nuclear power generationn.a. n.a. n.a. n.a. n.a. n.a. n.a.
Arms n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Nuclear materials n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Gunpowder n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Certain chemicals n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Certain pharmaceuticals n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Species registered in the Washington
treatyn.a. n.a. n.a. n.a. n.a. n.a. n.a.
Products made of species registered to
the Washington Treatyn.a. n.a. n.a. n.a. n.a. n.a. n.a.
Textiles and clothing of Chinese origin n.a. n.a. n.a. n.a. n.a. 630 m2n.a.
n.a. Not applicable.
a Allocation for trading companies is divided into two categories:  (A) performance basis;  and (B) newcomers-oriented
performance basis.  The latter system is only for companies who were newly allocated in the last year's allocation on first-com e-
first-served basis.  Allocation on first-come-first-served basis is also divided into two categories:  (A) interim allocation s ystem;
and (B) conventional system.  The former is only for bidders who have been ever allocated less than 30 ton per an allocation, t he
latter for others.
Note: TMT = thousand tonnes;  ODP = ozone depleting potential.
Source: JETRO International Trade Bulletin, various issues.Japan WT/TPR/S/76
Page 47
42. Since 1998, certain vaccines and chemicals have been added or removed from the list of
import quotas.  Rice and prepared rice products were removed from the list in April 1999.  As regards
fish products, separate quotas were established during the period 1997-99 for horse mackerel,
mackerel, sardine, scallop, and herring, which were previously included in the fish and shellfish quota
(Table III.4).
Table III.4
Import quotas on fisheries products,  FY1995-99
Commodity Unit 1995 1996 1997 1998 1999
Fish and shellfish (actual imports) US$ million 362 (302) 362 (318) 342 (279) 213 (..) 220 (..)
Horse mackerel (actual imports) TMT .. .. 78 (58) 95 (..) 108 (..)
Mackerel (actual imports) TMT .. .. 198 (155) 204 (..) 210 (..)
Sardine (actual imports) TMT .. .. .. 20 (..) 22 (..)
Scallop (actual imports) TMT .. .. .. .. 5 (..)
Herring (actual imports) TMT 118 (79) 118 (71) 118 (63) 119 (..) 126 (..)
Pollack products (actual imports) TMT 1,027 (514) 1,027 (621) 1,027 (564) 1,027 (..) 1,027 (..)
Squid and cuttlefish (actual imports) TMT 55.1 (49) 55.1 (44) 55.6 (45) 55.6 (..) 56.5 (..)
Dried squid & cuttlefish (actual imports) TMT 4.5 (2.8) 4.5 (2.4) 4.5 (2.8) 4.5 (..) 4.5 (..)
Cod and pollack roes (actual imports) TMT 48.6 (47) 55.4 (53) 66.7 (45) 73.1 (..) 78 (..)
Dried laver (actual imports) million sheets 250 (12) 250 (10) 250 (32) 69 (..) 120 (..)
Edible seaweed (actual imports) TMT 2.9 (2.1) 2.9 (2.5) 2.9 (2.1) 2.9 (..) 3.5  (..)
.. Not available.
Note: TMT = thousand tonnes.
Horse mackerel and mackerel quotas have been separated from fish and shellfish quota and managed by metric ton since 1997.Sardine quota has been separated from fish and shellfish quota and managed by metric ton since 1998.  Scallop quota has been
separated from fish and shellfish quota and managed by metric ton since 1999.  Figures in parenthesis are actual imports based
on reports of import quota holders, as of November 1999.
Source: Data provided by the Japanese authorities.
43. The import quota system is administered by MITI, which issues eligible importers with a
certificate of import quota allocation.  Import quotas on fish and fish products often have originrequirements.  Quotas on scallops, fish and shellfish, horse mackerel, mackerel, sardine, dried squid
and cuttlefish, and squid and cuttlefish are accorded only to countries not listed in the Import Notice;
quotas on dried laver and certain edible seaweed apply only to imports from the Republic of Korea.
27
In addition, import quotas apply to silk fabrics and certain specialized silk fabrics shipped from China.
44. According to the authorities, the reasons fo r limiting countries eligible for quotas are
historical.  Originally, quotas on fish and fish products were accorded solely to imports from the
Republic of Korea.  The origin criteria mentioned above have been modified according to requests
from various exporting countries.  Although no importation is allowed from countries listed in the
Import Notice, the authorities state that the list ma y be further modified according to requests from
countries wishing to export items under quota to Japan.  According to the authorities, no such requestshave been denied to date.
45. The amount of quotas to be allocated is decided annually or on a six-monthly basis.  The size
of fish-related quotas are determined by MITI, with the consent of the Ministry of Agriculture,
Forestry and Fisheries (MAFF), according to domestic supply and demand, e.g. the amount of
imports, domestic production, consumption, and prices in the previous year as well as projections for
                                                     
27 In addition, about 18% of FY1999 quotas on fish and shellfish was allocated solely to imports from
the Republic of Korea.WT/TPR/S/76 Trade Policy Review
Page 48
the coming year.28  Information concerning the quota application procedures and requirements for
individual items subject to import quota is published.29  Quotas are allocated to applicants who meet
various criteria and, for some items, on a first-come first-served basis30;  when the amount applied for
exceeds remaining unallocated quota, the latter quotas are allocated by lottery.
46. Unused quota entitlements may (or may not) be carried over to the next period, seemingly at
the authorities' discretion.31  Unused quotas are not transferable and the Government does not
reallocate unused quotas.  A certificate of import quota allocation, normally with a validity of four
months, is issued by the Minister of International Trade and Industry to eligible importers.
(d) Import surveillance
47. The intent of the system of prior confirmation is to collect data concerning imports, monitor
and confirm that imports are for specific uses, and verify documentation and origin requirements.32
Prior confirmation is required from the Minister of International Trade and Industry, or other relevant
ministers, for some imports such as silk fabrics, tuna, marlin, whales, certain species listed in
Appendices II and III of CITES, microbial vaccines, and uranium catalysts. Prior confirmation is
used, inter alia , in cases where fraudulent declarations have been found in the past or are deemed
more likely.33  In regard to the bilateral consultations between Japan and the Republic of Korea on silk
products, a ten-year phase-out programme has been notified to the WTO Textiles Monitoring Body
pursuant to Article 3 of the Agreement on Textiles and Clothing.34
48. Changes in Japan's import surveillance system include the elimination in January 2000 of the
import confirmation requirement for wakame  seaweed.
(e) Administrative guidance
49. The Government employs administrative guidance to implement its trade policy.  For
example, the Director-General of Fisheries Agencies, under MAFF, issued a letter to importers,transporters, and equipment manufacturers, requesting that tuna captured by the flag-of-convenience
                                                     
28 The quota amount for silk products from China is decided in bilateral negotiations annually held with
China;  an understanding was reached on the following import levels for 1999:  silk yarn, etc. 16,755 bales;  andsilk fabrics, 7,365 thousand square meters.  Quotas on CFC and HCFC are decided in the light of the MontrealProtocol.
29 The information is published in the Government ( Official Gazette),  MITI Official Bulletin , and the
JETRO  International Trade Bulletin .
30 An applicant must generally be:  an importer who in the past has obtained certificates of import quota
and actually imported the item;  an importer who is delegated by a government-approved industrial associationto obtain materials for food processing;  or an importer who plans to import items subject to the import quota(JETRO International Trade Bulletin , various issues.)
31 There are no hard and fast rules in this regard;  the situation varies between commodities.  When
determining allocations, continued under-usage of past import entitlements by an importer may result in areduction in quota allocations.
32 For example, animals and plants covered by CITES require an export permit issued by a
management authority of the exporting country.
33 Import surveillance is also operated through the customs confirmation system, which requires
lodging of specified documents with customs authorities, such as visa documents for silk fabrics covered by the
bilateral agreement with the Republic of Korea.
34 WTO documents G/TMB/N/82, 28 April 199, G/TMB/N/82/Add.1, 15 February 1996, and
G/TMB/N/175, 13 June 1996. Products with origin markings found to be fraudulent under the confirmationprocedures are not permitted to enter into Japan.Japan WT/TPR/S/76
Page 49
vessels that do not abide by an international treaty for the conservation of the fish not be imported.35
According to the authorities, the request is intend ed to induce voluntary action by importers;  it is up
to importers whether to abide by the request.
(f) Import cartels
50. No authorized import cartels remain in Japan.
(vi) Anti-dumping, countervailing and safeguard measures
51. Japan's current use of anti-dumping, countervailing and safeguard measures is based on the
Customs Tariff Law and the relevant Cabinet Orders.  Since the previous Trade Policy Review, there
have been no changes in these measures or their implementation procedures.
(a) Anti-dumping and countervailing duty actions
52. An anti-dumping duty on Chinese ferro-silico-manganese, imposed by Japan in 1993, ended
in January 1998.36  Japan levied definitive duties on Pakistani cotton yarn of 20-21 count in
August 1995;  several reviews of duty rates for new suppliers were conducted in March 1996,
May 1996, and February 1998, and new dumping margins have been notified to the WTO.37
53. To date, Japan has never taken any countervailing actions.
54. Japan has often expressed the view that some of its trading partners abuse anti-dumping
measures, perhaps making them the source of "hidden protectionism".38
(b) Safeguard measures
55. Japan has never applied a safeguard measure based on the WTO Agreement on Safeguards.
(vii) Government procurement
56. Procurement by the Government, notably public works projects, accounted for a large share
of the spending contained in various fiscal stimul us measures employed since Japan's previous Trade
Policy Review (Chapter I(2)(ii)).  According to the authorities, the aim of the procurement system ofthe Central Government is to secure efficiency and equal opportunity regardless of the origin of
products or services, in accordance with the principle of price competition.
57. Japan is a signatory to the WTO Agreement on Government Procurement (GPA).  Its GPA
coverage encompasses all central government enti ties, all 47 prefectures, all "designated cities"
39, and
certain public corporations.40  Coverage of services includes most public works, telecommunications,
air transport, computer and vehicle repair.  As a consequence of the 1999 restructuring of the Nippon
                                                     
35 A letter concerning the dealing of catch pursuant to the ICCAT (International Commission for the
Conservation of Atlantic Tunas) resolution, which calle d for "further action against illegal, unreported and
unregulated fishing activities by large-scale long-line vessels", was issued on 15 December 1999.
36 WTO document G/ADP/N/41/JPN, 15 September 1998.
37 WTO documents G/ADP/N/22/JPN and 53/JPN, 19 February 1997 and 15 September 1999.
38 See, for example, statements by the Minister of International Trade and Industry, 7 December 1999,
[Online].  Available at:  http://www.miti.go.jp/topic-j/ e500001j.html;  and Industrial Structure Council (2000).
39 Twelve cities with populations over 500,000 designated by a relevant Cabinet Order.
40 Exceptions to GPA coverage include the Nationa l Space Development Agency and, at the central
government level, contracts awarded to cooperatives or associations.WT/TPR/S/76 Trade Policy Review
Page 50
Telegraph and Telephone (NTT) Company, which had been under Japan's GPA coverage, Japan
notified the Committee on Government Procurement in 1999 of the addition of NTT East Company,
and NTT West Company to the "List of Entities" and to the "List of Entities which procure the
services specified in Annex 4" in the Annexes of  GPA;  it did not include NTT Communications in
the lists.41
58. The Accounts Law and relevant ordinances specify the procurement procedures of the central
government entities, while the Local Autonomy Law stipulates procurement procedures of local
governments.  The authorities state that government procurement is conducted without any
restrictions on suppliers’ nationality or on the origin of products or services, based on the principle of
non-discrimination, and that all relevant entities have thoroughly implemented the GPA;  no price or
other kinds of preferences are granted to domestic suppliers in a tender covered by the GPA.
59. Government procurement practice in Japan is highly de-centralized.  There is no agency
coordinating government procurement;  each procurement entity maintains its own list of registered
suppliers.  Nevertheless, the Ministry of Foreign Affairs seeks to assure the consistency of
procurement policies and practices with the GPA.
60. Japan's unilateral actions concerning government procurement include the 1994 Action
Program on Government Procurement Procedures, as amended, and the 1994 Action Plan on Reform
of Bidding and Contracting Procedures for Public Works.42  The former, together with its
supplementary understandings and guidelines, is intended to improve market access and encompass
the procurement of goods and services covered by the GPA above a threshold level of SDR 100,000,
except public works.  The latter is aimed at promoting greater fairness, transparency and competition
in the procurement of construction services;  it includes measures to promote "open tendering" and
thereby addresses the previously pervasive practice of selective tendering.43  The Plan applies to
central government projects with a contract va lue over SDR 4.5 million and quasi-governmental
projects exceeding SDR 15 million, the same as the current GPA levels;  it includes a commitment on
the part of most central government and government-related entities to publish their annual planned
procurement above the threshold levels at the beginning of each fiscal year
61. According to the Japanese authorities, the voluntary measures, which are aimed, inter alia , at
providing transparent, open, and non-discriminatory competitive procedures on government
procurement in the field of computers, supercomputers, satellites, medical technology,
telecommunications, and construction, reflect the results of bilateral consultations between Japan and
the United States.44  The authorities state that these measures are applied on an MFN basis.  The
                                                     
41 For details, see WTO document GPA/W/91, 6 September 1999.  Other changes in Japan's GPA
coverage since the previous Review can be found in WTO documents GPA/W/74, 78, 79, 88, 93, 94, and 98.The Japanese authorities indicated that these changes are of "a purely formal nature" or "a purely formal orminor nature", mainly due to the restructuring of government ministries, or the consolidation of government-related entities.
42 Since the previous Trade Policy Review, there ha ve been no changes in the contents of these
programmes.
43 Bidding for individual projects is open to firms that have previously completed registration
procedures with the specific entity concerned.  According to the authorities, no foreign suppliers have ever beendenied listing.  In 1997, 2,016 foreign suppliers – only 0.6% of the total number – were listed  (Prime Minister'sOffice, 1999, p. 29).
44 Since its previous Review, the framework of Japan’s voluntary measures based on Japan – U.S.
bilateral dialogues have remained unchanged.   Progress since 1998 in the Japan – U.S. dialogue on government
procurement (construction, architecture and engineering, medical technology, satellites, supercomputers,telecommunications), is detailed in the Prime Minister's Office online information.  Available at:http://www.sorifu.go.jp/english/whitepaper/procurement/99/index.html.Japan WT/TPR/S/76
Page 51
Government carries out annual reviews of such voluntary measures;  in 1999, it invited opinions from
domestic and foreign suppliers concerning the measures' implementation.  Reflecting opinions
submitted, a 3 December 1999 review of voluntary measures resulted in the Government Initiative on
Future Management of Government Procurement.
62. Whereas threshold levels, set by Japan under the GPA for the procurement of goods and
services other than construction, are generally equivalent or below those of other signatories, the levelfor the procurement of construction services by local governments and public corporations, as well as
their procurement of architectural, engineering, and other technical services covered by GPA is, in
most cases, considerably higher.
45
63. Data provided by the Japanese Fair Trade Commission (JFTC) show that many cases of
known infringement of Japan's Anti-Monopoly Act (AMA) continue to involve bid rigging
(section (5)(vii)).  In order to prevent bid-rigging, the Bidding Instruction for procurement by the
Ministry of Construction, for example, was revised in June 1999 to require a declaration by
participants in bidding that the bid price had been decided solely on the basis of a decision by the
bidder;  the bidders are not allowed to intentionally disclose their bid prices before the tendering is
finished.46  According to the authorities, infringement of the requirements results in disqualification
from the particular bid, but does not automatically disqualify the bidder from selective tendering
procedures in general, and no other penalty may necessarily be entailed unless legal measures under
the AMA are taken by the JFTC.
64. For procurement above the threshold level of SDR 100,000 specified under the 1994 Action
Program, the level of open contracting in 1997 was slightly less than 70% of the total procurement
value of ¥964 billion, down by 6 percentage points from 1995, with procurement of overseas goods
and services accounting for 13.2% (16.1% for goods only) of the total (Table III.5).  The share ofselective tendering fell to 3.6%, while that of single  tendering rose to 26.7%, compared with 4.2% and
19.7%, respectively, in 1995.
47  Procurement from foreign suppliers increased in 1998 but remained
low;  the ratio of foreign suppliers in Japan's government procurement was 5.6% in terms of value and
2.1% in terms of contracts, compared with 4.7% and 1.8%, respectively, in 1997.  The shares of
foreign suppliers in contracts resulting from open, selective, and single tenders were 1.8%, 0.4%, and3.7%,  respectively, in 1998;  the ratios decreased from those in 1996 by 0.4, 0.4 and 1.2 percentage
points, respectively.
48  In the case of procurement involving public works, data provided by the
authorities show that the share of foreign suppliers was at least 0.04% in FY1997.
                                                     
45 Japan's thresholds for GPA coverage have remained unchanged since its previous Trade Policy
Review.  Japan has notified its thresholds expressed in national currency for 2000-02 (WTO documentGPA/W/101/Add.2, 2 March 2000).
46 The measure was introduced in view of the Second Joint Status Report on the U.S. – Japan Enhanced
Initiative on Deregulation and Competition Policy, 3 May 1999.
47 The shares of selective tendering and single tendering were 4.2% and 19.7%, respectively, in 1995.
48 Domestic and foreign suppliers are required to apply for qualification to each procuring entity and be
included in the list of qualified suppliers, in order to participate in open or selective tendering procedures.  In1998, the share of foreign suppliers in the total number of qualified suppliers was 0.6%.WT/TPR/S/76 Trade Policy Review
Page 52
Table III.5
Procurement composition by product and by origin, 1997
(¥ 100 million, per cent)
Share
No. ProductsTotal
valueDomestic Foreign
1. Products from agriculture, and from agricultural and food processing industries 1.9 84.5 15.5
2. Mineral products 199.1 12.0 88.0
3. Products of the chemical and allied industries 33.7 62.4 37.6
4. Medicinal and pharmaceutical products 261.1 73.5 26.5
5. Artificial resins and plastic materials, cellulose esters and ethers, and articles thereof;
rubber, synthetic rubber, factice, and articles thereof;  raw hides and skins, leather, furskins
and articles thereof, other than articles of apparel and clothing accessories of leather,
saddlery and harness, articles of animal gut40.2 99.2 0.8
6. Wood and articles of wood;  wood charcoal;  cork and articles of cork;  paper making
material;  paper and paperboard and articles thereof;  manufactures of straw of esparto and
of other planting materials, basketwork and wickerwork407.1 99.9 0.1
7. Textiles and textile articles, footwear, headgear, umbrellas;  sunshades;  walking sticks,
whips, riding crops and parts thereof;  travel goods;  hand-bags and similar containers;
articles of apparel and clothing accessories, of leather or composition leather106.8 98.8 1.2
8. Articles of stone, plaster, asbestos, mica and similar materials;  ceramic products, other
than sanitary fixtures;  glass and glassware, other than illuminating and signalling
glassware and optical elements of glass, not optically worked nor of optical glass14.6 100.0 0.0
9. Iron and steel and articles thereof,  other than boilers and radiators for central heating, air
heaters and hot air distributors not electronically heated167.1 99.2 0.8
10. Non-ferrous metals and articles, other than lamp and lighting fittings 124.9 93.2 6.8
11. Power generating machinery and equipment 52.4 91.5 8.5
12. Machinery specialized for particular industries 89.8 93.3 6.7
13. General industrial machinery and equipment, and machine parts 196.3 99.3 0.7
14. Office machines and automatic data processing equipment 2,613.8 90.0 10.0
15. Telecommunications and sound recording and reproducing apparatus and equipment 968.3 98.2 1.8
16. Electrical machinery, apparatus and appliances, and electrical parts thereof 160.6 95.1 4.9
17. Road vehicles 379.3 97.7 2.3
18. Railway vehicles and associated equipment 56.8 56.8 43.2
19. Aircraft and associated equipment 104.1 6.7 93.3
20. Ships, boats and floating structures 23.7 100.0 0.0
21. Sanitary, plumbing, heating and veterinary equipment 1.2 100.0 0.0
22. Medical, dental, surgical and veterinary equipment 509.1 56.5 43.5
23. Furniture and parts thereof 79.0 99.4 0.6
24. Professional, scientific and controlling instruments and apparatus 887.0 68.3 31.7
25. Photographic apparatus, equipment and optional goods;  watches and clocks 82.0 81.8 18.2
26. Miscellaneous articles 136.4 82.3 17.7
Total 7,696.3 83.9 16.1
Source: Information provided by the Japanese authorities.
65. The Office of Government Procurement Revi ew (OGPR), headed by the Chief Cabinet
Secretary, began processing complaints concerning procurement procedures by the Central
Government and public corporations, in January 1996.  The Government Procurement Review Board,
an independent examining body, considers complaints;  the Board issues a written report of findingsJapan WT/TPR/S/76
Page 53
within 90 days of the filing of a complaint, and, if necessary, the Board's written recommendations
concerning appropriate remedies accompany the report.49
66. Japan's complaint review procedures were amended on 11 January 1999 to allow the Review
Board to judge whether a complaint should be dismissed under Article 23 (exceptions to the
agreement).50  The amendment also introduced detailed procedural rules including methods of
counting days, methods of withdrawal, and mandates of agents and assistants;  a complainant mayalso choose to remain anonymous to the public.
67. The procuring entity is expected to follow the recommendations voluntarily.  Since the
establishment of the OGPR and the Board, two complaints, including one concerning
telecommunications system (in 1996) have been filed.  The status of receipt and review of complaints
has been issued every quarter.  The authorities stated that the Board encourages consultation betweena complainant and a procuring entity before a complain t is filed;  the Board also acts as intermediary
and  many complaints have been resolved through consultation.  Complaint procedures in the bilateral
agreements take precedence to the OGPR procedures.  For local governments under the GPA
coverage, complaints may be addressed to the contact points set up in each local government.
68. According to the authorities, the procuring entities of public works are required to decide
proper and clear criteria for, inter alia , the selection of construction works undertaken by joint
ventures and the organization of joint ventures by contractors;  the requirement was established to
prevent the participation of inadequate contractors and to secure smooth joint-operations.  For
example, the criteria stipulate that construction works executed by joint ventures must be large-scale
involving technical difficulty.
(viii) State trading
69. State trading in Japan involves leaf tobacco
51, salt for common use, opium, alcohol, rice,
wheat and barley, milk products, and raw silk.52  The stated aims of such trading include: stabilizing
supplies to consumers;  controlling imports to assist domestic producers;  and protection of
consumers' interests.   State-trading activities are generally underpinned by legislated import rights
and, in some cases, by specific monopoly rights ov er domestic production and distribution.  Examples
are the monopolies regarding production of manufactured tobacco by the Japan Tobacco Inc.;  therights of the Salt Industry Centre for Japan to control the distribution of imported salt for common
use;  the Ministry of Health and Welfare's monopoly of opium imports and exports;  and MITI's
monopoly on production and distribution of certain industrial alcohol
53.  Under the Alcohol Business
Law of March 2000, MITI's monopoly on the production and distribution of certain industrial alcohol
is to be abolished by 1 April 2001.
                                                     
49 The secretariats for the Office for Government Procurement Challenge System and for the
Government Procurement Review Board are both in the Office for Market Access Improvement, Coordination
Bureau, the Economic Planning Agency.
50 WTO document GPA/W/90, 11 August 1999.  Before revision, the Review Board did not accept
complaints when the procuring entity insisted that the procurement at issue fell under an exception to the
coverage of the GPA.
51 The domestic manufacture of tobacco is monopolized by the Japan Tobacco Inc. (JTI), and the
importation of leaf tobacco for tobacco manufacturing in Japan, though liberalized on 1 April 1985, effectively
depends upon purchases by the JTI.
52 WTO document G/STR/N/4/JPN, 24 March 1999.
53 MITI holds a monopoly for the production, sale and import of alcohol of an alcoholic strength by
volume of 90% or higher (WTO document G/STR/N/4/JPN, 24 March 1999).WT/TPR/S/76 Trade Policy Review
Page 54
(ix) Standards, sanitary and phytosanitary measures
(a) Standards, testing and conformity assessment
70. Japan has moved toward increased international harmonization of its standards and technical
regulations and the adoption of mutual recognition arrangements, as outlined in the Three-Year
Program for Promoting Deregulation (TYPPD ).  The TYPPD, as amended for FY2000,
re-emphasized that the responsible ministries and agencies should endeavour to achieve greaterinternational harmonization of standards, accept foreign data, adopt mutual recognition arrangements,
and eliminate redundant inspections.  Japan's voluntary standards, mandatory technical regulations,
and sanitary and phytosanitary (SPS) regulati ons are summarized in Tables III.6 and AIII.8.
Table III.6
Major standards and technical regulations in Japan, March 2000
Number of
standards or
regulationsPercentage
corresponding
to international
standardsaPercentage
equivalent to
international
standardsPercentage
acceptance
of overseas
certificationbPercentage
acceptance
of overseas
test datab
A. Mandatory technical regulations
Pharmaceuticals Affairs Law 2,557 .. .. .. ..
Food Sanitation Law 377 .. .. .. ..
Electrical Appliance and Materials Control
Law498 100 .. .. 100
Consumer Product Safety Law 6 0 0 0 100
High Pressure Gas Control Law 2 50 .. .. 100
Building Standard Lawc.. .. .. .. ..
Safety Regulations for Road Vehicles 274 11 0 14 11
Law concerning the Safety Assurance and
Quality Improvement of Feed151 n.a. n.a. n.a. 100
Law concerning Screening of Chemical
Substances and Regulation of their
Manufacture.. .. .. .. ..
Telecommunications Business Law .. .. .. .. ..
Radio Lawd.. .. .. .. ..
Fertilizer Control Law 138 n.a. n.a. n.a. 100
B. Voluntary standards
Japan Industrial Standards (JIS)e8,364 43 51 .. ..
Japan Agricultural Standards (JAS) 353 .. .. n.a. n.a.
Total .. .. .. .. ..
.. Not available.
n.a. Not applicable.
a Defined as "primary aspects sharing a common scope".
b Where applicable.
c Bulding Act Code.
d According to the authorities, the number of mandatory technical regulations is not available because the scope and definition of
mandatory technical regulations is ambiguous;  the technical conditions of radio stations in Japan generally comply with ITU-R
Recommendations and Radio Regulations, and international harmonization is given consideration.  Regarding the system for the
certification of radio equipment, the Radio Law was amended to establish the system for accepting foreign test results andforeign certification (promulgated in 1998 and went into effect in 1999).
e As of March 1998.
Source: Information provided by the Japanese authorities.Japan WT/TPR/S/76
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Voluntary standards
71. Voluntary standards in Japan comprise the Japan Industrial Standards (JIS) and the Japan
Agricultural Standards (JAS), with about 8,300 and 350 standards, respectively.
72. Japan is continuing to bring its standards into line with international counterparts.  According
to MITI, about half of JIS were equivalent to in ternational standards in FY1997 compared with 25%
in FY1996;  in FY1998, 880 new standards were introduced, of which 58% were aligned tointernational standards, and out of 747 standards developed in FY1999, 62% were aligned.  The
authorities state that some international industrial standards are not appropriate to be adopted as JIS
because of technical progress and regional characteristics.  With regard to JAS, in July 1998 Japan
revised standards for fruit drinks in line with Codex international standards;  the 1950 Law
Concerning Standardization and Proper Labelling of Agriculture and Forestry Products (JAS Law)
was revised to make JAS standards subject to mandatory review every five years.
54  Japan also
established standards, in January 2000, for organic plant products and processed foods made from
organic plant products, in accordance with Codex guidelines.55  The authorities have taken into
account international standard in the establishment, revision, and elimination of standards in
accordance with the Government's commitment in TYPPD.
73. As of April 1999, about 15,000 domestic and 350 foreign factories had received approval to
affix JIS marks.  The JIS marking system covers about 700 products.  With an amendment to the
Industrial Standardization Law in 1997, an accreditation system of private certification bodies,
domestic or foreign, was introduced in the JIS marking system, based on the related ISO/IEC Guides.
At the end of January 2000, six Japanese organizations were accredited as JIS mark certification
bodies.  No  foreign organization has yet been accredited as a JIS mark certification body (as of
1 August 2000).   For the JAS system, certification of products manufactured by foreign plants may be
carried out based on test data prepared by foreign testing organizations (FTOs) designated by the
Minister of Agriculture, Forestry and Fisheries;  Japan has designated four such FTOs since 1997.56
In June 2000, a new grading system for foreign products was introduced in accordance with the 1999
amendment to the JAS Law.  Only products graded under the JAS system may affix JAS symbols.
Mandatory technical regulations74. Approximately 7% of all JIS were quoted in 1996 as mandatory technical regulations.
57
Changes in technical regulations since 1997 include amendments in 1999 to 11 laws related to
mandatory technical regulations.  The amendments involved, for example, termination of the
government certification system, the introduction of a self-confirmation system by private enterprises
and a third-party certification system, which may involve a mandatory conformity assessment by astate-accredited third-party institution.  There have been no other significant changes to mandatory
technical regulations since 1997.
                                                     
54 The amendment also introduced a grading system by private companies as well as a self-grading
system by manufacturers or production process managers.
55 Other changes in JAS since the previous Trade Policy Review of Japan include the 1999 revision in
JAS for  dried fish and powdered dried fish, kezuribushi  (shaved dried fish), structural plywood, ordinary
plywood, concrete from plywood, and structural laminated veneer lumber;  the establishment of standards for
raw silk (1998) and for jidoriniku  (native fowl) (1999);  and the elimination of standards for candied cherry and
vegetable protein foodstuffs (corned beef style) in 1999.
56 Since 1987, 14 FTOs have been designated in seven countries.
57 Based on the most recent data available, as provided by the authorities.WT/TPR/S/76 Trade Policy Review
Page 56
75. Currently, 50 inspection bodies, none foreign, are designated by MITI for testing based on
standards and certification systems under the jurisdiction of MITI.  For telecommunications
equipment, the amendments to the Telecommuni cations Business Law and the Radio Law in 1998
established a system for accepting foreign test results and foreign certification, which went into effect
in 1999.  In 1998, guidelines regarding the acceptance of foreign clinical data, in the form of two
notifications, were issued by a bureau in the Ministry of Health and Welfare.  (No information wasavailable on the current number of inspection bodies or on foreign inspection bodies designated by
each ministry and agency concerning certification systems.)
Bilateral, regional, and multilateral arrangements
76. With regard to bilateral mutual recognition agreements (MRAs) of standards, no
comprehensive measures are currently in place.  Japan has been exchanging views on suchagreements with the European Union, and has been holding consultations with the United States in
regard to medical devices, pharmaceutical products, and building standards.
77. Japan has participated in regional and multilateral voluntary frameworks regarding the
acceptance of foreign certification and test results.  For example, the following laboratory
accreditation schemes in Japan have participated in the Asia-Pacific Laboratory AccreditationCooperation Multilateral Mutual Recognition Arrangement (APLAC–MRA):  Japan National
Laboratory Accreditation System (since October 1998), Japan Calibration Service System (since
December 1999), and Japan Accreditation Board for Conformity Assessment (since October 1998).
In the area of quality management, the Japan Accreditation Board for Conformity Assessment has
been a member of the Pacific Accreditation Cooperation Multilateral Mutual Recognition
Arrangement (PAC–MLA) since January 1998, and of the International Accreditation Forum (IAF)–
MLA since October 1997.
78. The Japanese Industrial Standards Committee (JISC) represents Japan at the International
Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC).
58
Japan unilaterally provides technical cooperation to developing countries, including trainingprogrammes for officials and the dispatching of Japanese experts on-site.
(b) Sanitary and phytosanitary measures
79. Since 1998, no change has been made to the Food Sanitation Law, which is the main
legislation for sanitary and phytosanitary regu lations in Japan.  Japan's SPS notifications are
summarized in Table AIII.9.  Recent changes in pl ant and animal quarantine arrangements are listed
in Table AIII.10.
80. On 19 March 1999, the WTO Dispute Settlement  Body (DSB) adopte d Panel and Appellate
Body findings regarding the dispute "Japan - Measures Affecting Agricultural Products".
59  O n
31 December 1999, Japan announced the immediate abolition of the varietal testing requirement that
was in force for eight products, in accordance with the rulings and recommendations adopted by the
DSB;  Japan has been conducting consultations with the United States regarding a new quarantine
                                                     
58 The JISC, a deliberation committee established under the Agency of Industrial Science and
Technology attached to MITI, has been the ISO member since 1952.  The JISC discusses and makes
recommendations regarding the estab lishment and maintenance of JIS, the administration of accreditation and
certification, participation in international standardization activities, and the development of measurementstandards and technical infrastructure for standardization, as stipulated by the 1949 Industrial StandardizationLaw, as amended in 1997.
59 See WTO document series WT/DS76.Japan WT/TPR/S/76
Page 57
methodology for the eight products, which are currently subject to import prohibition on the grounds
that they are hosts of codling moths.
81. Since its previous Review, Japan has extended operating hours for plant and animal
quarantine procedures.60
(c) Labelling and packaging requirements
82. As a result of the 1999 amendment to the JAS Law, labelling has become mandatory for any
food and beverage sold in Japan;  in particular, the amendment introduced mandatory labelling of
place of origin for any perishable food.61  Inspection certification and a labelling system for organic
food was newly introduced under the amendment62;  to label food as "organic" it is now necessary to
obtain accreditation from an authorized accreditation body that the food meets certain JAS
requirements.  Only accredited food may carry an Organic-JAS Mark label.
83. Mandatory labelling regarding genetically modified organisms (GMOs) is to be applied as of
April 2001 to soybeans, corn, potatoes, rapeseeds, cotton seeds, and some processed foods mainly
made of soybeans or corn according to the Genetically Modified Food Labelling Standard, which has
been enforced since June 2000.  The Ministry of Health and Welfare does not permit the importation
of GMOs that do not meet its safety requirements.   The authorities maintain that the labelling
requirement is to provide consumers with information necessary to make an informed choice.
(x) Other measures
Countertrade
84. Since its previous Trade Policy Review, Japan has not been involved in any countertrade
arrangements.
(3) IMPORT AND INWARD INVESTMENT PROMOTION MEASURES
(i) Overview
85. Japan's import and inward investment promotion programmes have mainly been conducted
under the Law on Extraordinary Measures for the Promotion of Imports and the Facilitation of
Foreign Direct Investment in Japan, which was renewed in 1996 for ten years.  These programmes
appear to be concerned more with enhancing existing procedures than with removing major
impediments to imports and inward FDI;  the removal of such impediments is instead being addressedby the Government in its deregulation programmes.  The matter of whether the considerable
restrictions imposed on the sectors and products eligible for incentives sharply limit the potential
benefits for the Japanese economy as a whole remains a concern, as pointed out in the 1995 and 1998
Secretariat Reports.
                                                     
60 For example, the Animal Quarantine Service at Se ndai International Airport has extended its opening
hours until 21:00 (from 19:30).
61 Before the amendment took effect, 64 food and beverage items required labelling and nine perishable
food items required place of origin labelling.
62 Livestock products are excluded from this system.WT/TPR/S/76 Trade Policy Review
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(ii) Import promotion
86. The Import Board plays an important role in the formulation of Japan’s import promotion
policy.63  The current import promotion measures, first announced in October 1993 and renewed for
FY2000, include tax incentives, a financing programme, import promotion activities by the Japan
External Trade Organization (JETRO) 64, improvements in infrastructure, and the Trade Promotion
Cooperation Program between MITI and U.S. Depa rtment of Commerce (Table III.7).  Budgetary
costs and cost estimates in terms of forgone tax revenue in during FY1997-2000 are summarized in
(Table III.8).
Table III.7
Overview of Japan's import promotion policy, 2000
I. System of tax incentives for manufactured imports
a. Tax Credits for Manufacturers (Special depreciation was eliminated in 1999)
II. Policy financing measures for the promotion of imports
a. Financing Program for Import Facilities Enhancement (Development Bank of Japan)
b. Financing Program for Manufactured Imports (Japan Bank for International Cooperation)
c. Import Promotion Credit Line (Japan Bank for International Corporation)
d. Loans to Facilitate Imports (Small Business Finance Corporation, National Life Finance Corporation)
e. Prepayment Import Insurance
III. JETRO's import promotion activities
a. Senior Trade Advisor
b. Import Product Specialist
c. Inviting Business People to Japan
d. Program to Provide Local Training to Foreign Business People
e. Business Support Center
f. Local (Integrated) Import Promotion Center
g. Support Program for Export-to-Japan Campaigns
h. Regional Import Promotion Activities
i. Program to Promote Housing Imports
j. Program to Promote Imports of Automobiles and Automotive Parts
k. Survey on the Actual Conditions Regarding Access to Japan
IV. Establishment of foreign access zones (FAZs)
V. Import Board
a. Vision of Improvements in Accessing the Japanese Market
VI. Office of Trade and Investment Ombudsman (OTO)
a. Market Access Ombudsman Council
VII. Trade Promotion Cooperation Program (TPCP)
VIII. Measures to stimulate consumer demand
a. Designation of "Import Promotion Month"
b. MIPRO's support to consumers' imports
IX. Government procurement of foreign products
a. Acton Programme for Government Procurement
Source: Information provided by the Japanese authorities.
                                                     
63 The MITI acts as secretariat to the Import Board.
64 Measures include import fairs and market research.Japan WT/TPR/S/76
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Table III.8
Total budget for Japan's import promotion programmes and forgone tax revenues, FY1997-2000
(¥ billion)
FY1997 FY1998 FY1999 FY2000
1. Total budget for import promotion programmes 7.0 7.2 6.8 6.6
FAZ related budget 0.67 0.68 0.60 0.51
JETRO import promotion related budget 6.3 6.5 6.2 6.0
2. Forgone tax revenues (Special Incentives Measure for the Promotion
of Manufactured Product Imports):  total amount of tax breaka19.0 25.0 14.0 ..
.. Not available.
a MOF's estimated value, not based on accumulated data on tax breaks.
Source: Information provided by the Japanese authorities.
87. The main objectives of Japan's import promotion measures are to encourage domestic
producers and distributors to switch to imported products, by subsidizing transition costs, and to
encourage foreign exporters and investors to increa se their presence in Japan by subsidizing entry
costs.65  Tax incentives offered under Japan's import promotion programmes are applied only to
manufactured products already entering Japan on a duty free basis.66  By promoting the importation of
duty free products, the programme exacerbates the difference in the treatment of these productscompared with others that encounter tariff and non-tariff barriers.  By contrast, there is the somewhat
anomalous situation where tax breaks can be used to promote manufactured imports that do not enter
duty free.
88. Although MITI believes that these programmes ha ve been effective, no rigorous cost-benefit
analysis has been undertaken.  Data from MITI, however, do indicate that imports of manufacturedgoods eligible for tax incentives increased more th an 5% faster than Japan's total imports in FY1990
and FY1991 (the latest available data provided by the authorities).
89. In FY1998, the tax incentive for manufactures, comprising a tax credit and special
depreciation, was initially extended for two years;  the special depreciation was abolished in FY1999
owing to insufficient use;  in FY2000, the tax credit  system was extended for another two years, with
a reduction in the amount of tax credits.  The provision of low interest loans under the Financing
Program for Import Facilities Enhancement, the Fi nancing Program for Manufactured Imports, and
Loans to Facilitate Imports was extended until the end of FY2000.
(iii) Investment regulation and promotion measures
90. In FY1997, foreign-affiliated firms accounted for 1.4% of total sales in Japan, 0.6% of
employment in all incorporated companies and 14.2% of total imports.
67  The value of inward direct
investment in Japan increased by 79% in FY1998, amounting to ¥2.4 trillion, which is about one third
of the level of Japan's foreign direct investment (F DI) abroad.  The size of the stock of inward FDI in
1996 was 0.7% of GDP.68
                                                     
65 MITI (2000a).
66 Products listed in SITC, Sections 5 to 8.
67 Based on MITI's 32nd Survey of Trends in Business Activities of Foreign Affiliates (the latest
available data).
68 According to MITI (2000b), p. 38, the ratios of the stock of inward FDI to GDP in 1996, based on
IMF data, were 16.0% in the United States, 3.8% in Germany, and 21.6% in the United Kingdom.WT/TPR/S/76 Trade Policy Review
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(a) Regulatory regime
91. Inward and outward FDI is governed mainly by the Foreign Exchange and Foreign Trade
Law, as amended in 1998, together with relevant cabinet and ministerial ordinances.69  I nward FDI
generally requires ex post facto  reporting to the Minister of Finance and the Minister in charge of the
industry involved within 15 days of executing a foreign investment in Japan.70  Prior notification is, in
principle, required for inward FDI in industries recognized in the OECD Code of Liberalization of
Capital Movements, such as agriculture, forestry and fisheries, petroleum, leather and leather
products, investment trust management71, air and maritime transport.  In addition, some other sectors
require prior notification on the grounds of public order and national security.72
92. Besides the notification requirements, various other laws stipulate specific restrictions on
inward FDI in sectors such as real estate, fisheries, financial services, telecommunications, andtransport.  For example, the 1926 Alien Land Law outlines reciprocity restrictions with respect to
acquisition of land properties in Japan;  the 1967 Law for Regulation of Fishing Operation by Foreign
Nationals prohibits foreign nationals and foreign-controlled enterprises from engaging in fishing, and
restricts the extent to which foreign-controlled vessels may engage in fishing-related activities in
Japan
73;  reciprocity requirements exist in banking and other financial services under the Banking
Law74;  cabotage in maritime transport is generally prohibited75;  and in the air transport sector,
foreign participation in equity and management is restricted.76
93. Although a notified inward FDI project may be rejected by the Government, the authorities
state that this has never happened.77  The reasons for rejection (implicit in relevant articles of
regulations applied) of each FDI proposals are made public.
                                                     
69 The Law was previously named Foreign Exchange and Foreign Trade Control Law.  Among the
most important orders are the Foreign Exchange Order (Cabinet Order No. 260 of 11 October 1980, asamended) and the Order on Inward Foreign Direct Investment (Cabinet Order No. 261 of 11 October 1980, asamended).
70 Detailed regulations regarding inward FDI are stipulated mainly in Articles 27 and 55-5 of the
Foreign Exchange and Foreign Trade Law.
71 Investment trust management by locally establishe d corporations in Japan does not appear to require
prior notification.
72 These include aircraft, arms, explosives, nuclear power, space, electric utilities, gas utilities, water,
heat generation, rail transport, passenger transport, v accine, security guard services, Type-I telecommunications,
radio, television and cable television, and broadcasting sectors.
73 Fishing activities in the Exclusive Economic Zones and the continental shelf of Japan by foreign
nationals or foreign-controlled enterprises are also regulated under the 1996 Law concerning the Exercise ofSovereign Rights concerning Fisheries in Exclusive Ec onomic Zones.  Various international agreements on
fisheries confer rights on fisheries, including licensing of fishermen, fishing vessels, and equipment.
74 For a bank wholly or partly owned by a foreign bank, the Banking Law stipulates that Japanese
banks in the foreign bank's home country should receive treatment substantially equal to domestic banks.
According to the authorities, given Japan's WTO commitments, the reciprocity provisions do not apply to WTOMembers.  See Chapter IV(5)(ii) for FDI restrictions in other financial services sectors, such as insurance andsecurities.
75 Under the Ship Law, only national flag vessels may engage in cabotage;  permission may
exceptionally be granted by the Minister of Transpor t.  Bilateral treaties may allow reciprocal cabotage
(Chapter IV(5)(iv)).
76 One third of voting rights or of board members is the threshold under the Civil Aeronautics Law and
the Freight Forwarding Business Law.
77 For example, FDI notified by a national of a country that does not extend comparable access to
Japanese investors may be rejected (Article 27-3 of the Foreign Exchange and Foreign Trade Law).Japan WT/TPR/S/76
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94. Major changes since the previous Review in the regulatory framework related to FDI into
Japan include:  the introduction of ex post facto  reporting for mining (instead of prior notification) and
the elimination of reporting requirements when foreig n corporations change their business to  sectors
that do not require prior notification78;  the elimination of the limits on foreign capital participation in
all Type-I (facility-based) telecommunications carriers, except for the Nippon Telegraph and
Telephone Corporation (NTT)79;  the abolition in June 1999 of the regulations on foreign investment
and employment of non-Japanese officers in the cable television industry (Chapter IV(5)(iii));  and the
1998 relaxation of restrictions on the operation of foreign lawyers in Japan (Chapter IV (5)(v)).
(b) Investment promotion measures
95. The framework of Japan's promotion measures for inward FDI has remained generally the
same since its  previous Trade Policy Review.  The 1992 Law on Extraordinary Measures for thePromotion of Imports and Facilitation of Foreign Direct Investment in Japan, valid until 2006, its
related ordinances, and other relevant legislati on outline measures for investment promotion that
mainly comprise tax incentives
80, financial support such as low interest loans and loan guarantees, and
technical support (Table III.9).  No estimates of  the total budgetary cost of Japan’s investment
promotion programmes, including forgone tax revenues were available to the Secretariat.  One of thevarious eligibility criteria for most incentives requires participants be certified as "Designated Inward
Investor".
81  A total of 151 economic sectors are open to approval as sectors for Designated Inward
Investors82;  many sectors are excluded, however, includ ing agriculture, leather, footwear, and many
other low-productivity sectors.
Table III.9
Measures for promoting imports and foreign direct investment into Japan, FY2000
I. Tax incentives – extension of loss carry-over period
Designated Inward Investors can carry forward their operating losses for up to seven years in those accounting years ending no
later than five years after the enterprise's founding.  (Operating losses occurring from FY1994 to FY1999 can be carried over f or
up to 10 years.)
II. Loan guarantees through the Industrial Structural Improvement Fund (ISIF)
Designated inward investors are entitled to obtain loan guarantees from the Industrial Structure Improvement fund when theyobtain financing loans from private institutions.  (Credit screening by the Industrial Structure Improvement Fund is required.)
III. Provision of low-interest financing from the Development Bank of Japan, etc.
(a) Expanding eligible projects
Former limitation that required establishment in one of six industrial high-tech fields was eliminated in 1996.  Those projects
establishing facilities (including land) for lease used by foreign companies and foreign affiliates with one third foreign owne rship
or more, or any company establishing office buildings in which the main tenants are non-Japanese businesses are eligible.
Table III.9 (cont'd)
                                                     
78 As a result of the amendment of the Foreign Exchange and Trade Law in 1998.
79 As a result of the abolition of the Kokusai Denshin Denwa (KDD) Law in April 1998 and 1998
amendments to the Telecommunications Business Law and the Radio Law.
80 Including an extension of the carry-forward period of losses, offered to foreign companies certified
by the law (Designated Inward Investors), from the usual five years to seven years.
81 Parties desiring eligibility for preferential treatment must be certified as a Designated Inward
Investor, with certification valid for up to one year.  To be certified, an applicant must be a Japanese branch or
office of a foreign enterprise or a Japanese corporatio n whose foreign capital ratio exceeds one third of the total
capital;  and have operated less than eight years in Japan.  The standard processing time is one month or less.
82 The sectors remain unchanged since the previous Trade Policy Review (WTO, 1998, p. 205).WT/TPR/S/76 Trade Policy Review
Page 62
(b) Creating new loan programmes
- Loan programme for promoting market entry of foreign-affiliated firms:  in addition to the capital investment
finance, the new programme will finance related operating capital needs (e.g. rent for facilities, property tax,
insurance premium).
- Loan programme for facilitating international cooperation between enterprises:  if the foreign share in the company
exceeds one third of total equity as a result of M&A, the company can obtain DBJ loans for capital investment
afterward.  Corporate alliances involving transfer of operations are also eligible for this loan programme.
IV. Import promotion measures
(a) Tax reductions, applied to national and local taxes, for import-related businesses.  Businesses undertaking activities to
promote distribution of imported cargo (wholesalers, manufacturers, transporters or retailers dealing with imported
goods) within specified zones for congregation in FAZ areas designated by the local governments of approved FAZ
areas can make use of following tax reduction measures:
- Reduction of national taxes (Tax Incentives for the Promotion of Business Congregation within the FAZ Areas):
businesses conducting activities to promote distribution of imported cargo are allowed a special depreciation with
regard to certain machinery, facilities, buildings, etc. which have been acquired for their business use.  (Special
depreciation rate:  22% for machinery and facilities;  10% for buildings.)
- Reduction of local taxes:  Businesses conducting activities to promote distribution of imported cargo are exempted
from special landholding tax on the land for the facilities.
(b) Loan guarantees and exceptional measures provided by the Small Business Credit Insurance for import-related
businesses:  businesses undertaking activities to promote distribution of imported cargo (wholesalers, manufacturers,
transporters or retailers dealing with imported goods) within specified zones for congregation in FAZ areas designatedby the local governments of approved FAZ areas can make use of following loan guarantees and exceptional measures
related to credit insurance:
- Loan guarantees through the (ISIF):  loan guarantees are provided by the Industrial Structure Improvement Fund to
businesses conducting activities to promote distribution of imported cargo to aid in borrowing necessary funds,
including operation funds.
- Exceptional measures provided by Small Business Credit Insurance:  exceptional measures are provided by the
Small Business Credit Insurance to small and medium-sized companies conducting activities to promote distribution
of imported cargo.
(c) Special financing measures for FAZ-related businesses:  with regard to the DBJ financing programme for import
facilities enhancement and the low-interest loans provided by the Japan Finance Corporation for Small Business to
facilitate import sales, import-related businesses within the FAZ areas are able to receive loans with special conditions:
- DBJ (Financing Programme for Import Facilities Enhancement).  Companies are eligible for this programme if the
share of imported goods among their handling is 30% or more.
- Japan Finance Corporation for Small Business (Loans to Facilitate Import):  wholesalers, retailers or manufacturers
selling imported goods or using imported intermediate goods through their own offices in the FAZ facil ities or
contacts with businesses in the FAZ facilities are eligible for this programme up to ¥400 million.
V. Measures for small and medium-sized enterprises
Training for administrative managers of foreign-affiliated firms:  Institute of the Japan Small Business Corporation offers tra ining
programmes on personnel management and business practices in Japan, etc. for administrative managers etc,  of small and
medium-sized foreign-affiliated firms.  The participants are subsidized on two thirds of the training fee.
VI. Venture support measures
(a) Loan guarantees for loans using collateral of intellectual property rights for venture enterprises:  the ISIF provides loan
guarantees for up to 80% (usually 70%) of business funds, and does not require a guarantee backer of a capitalized
enterprise if the collateral of the loan is intellectual property rights.
(b) Investment for venture enterprises:  in addition to a company that has been operating or has submitted an application for
a patent less than five years earlier (currently three years), a company that establishes know-how in five years is able to
take investments from the New Business Investment Company Limited.
(c) Introducing a stock option system:  the Government of Japan expands the term of exercise for the company's executives
or employees to accept new stock shares of the company at lower price than others, based on the resolution of a general
meeting of stockholders, from six months to within ten years.
Source: Information provided by the Japanese authorities.Japan WT/TPR/S/76
Page 63
96. The Development Bank of Japan (DBJ) has programmes providing low-interest loans to
foreign companies and foreign affiliates.83  A total of  ¥13.4 billion was loaned (involving 15 cases) in
FY1998, and ¥10.8 billion (17 cases) in FY1999.
97. Changes in investment promotion measures since Japan's previous Trade Policy Review
include the introduction in January 1998 of special low-interest loans by DBJ for all sectors that make
green-field investment in Japan, and the lowering in April 1997 of foreign capital ratio requirementsfor foreign affiliated companies to qualify for low-in terest loans provided by DBJ.  In April 2000, the
carry-forward period of losses for Designated Inward Investors was reduced from ten years to seven
years.
98. The Expert Committee of the Japan Investment Council (JIC), a ministerial level council
established in July 1994, accepts requests and opinions concerning the investment environment inJapan.  The budget of JIC for FY2000 is ¥24.1 million.  On 27 April 1999, JIC issued a statement
titled "Toward an Age of Diversified Ideas through Foreign Direct Investment in Japan".  The
statement highlighted the Government's efforts to improve the investment climate in Japan, pointing
out lowered investment costs, notably land prices, and an increasing trend in FDI into Japan;  a report
by the JIC Expert Committee, which the JIC statement took into account, summarized the significanceof FDI in Japan and provided background to the recent increase in inward FDI.
84
99. The provisions of bilateral investment treaties (BITs) also regulate investment policy.  Since
the previous Trade Policy Review, Japan has concluded two additional BITs, with Bangladesh (in
1999) and Russia (in 2000), bringing the total to seven.85
(iv) Foreign access zones (FAZs)
100. By January 1999, Japan had approved a total of 22 foreign access zones (FAZs)
(Table AIII.11).  Since 1997, no additional FAZs have  been approved, while nine FAZ facilities have
started operations.  The zones are a major component of Japan's import and investment promotion
schemes, and are intended to serve as centralized locations for import-related operations and facilities,
as well as to streamline the internal distribution of imported cargos.  FAZs are organized by "third-
sector" companies set up with public and private funds to provide facilities for distribution,
processing, wholesale, business support, exhibitions and conventions.  FAZs must include a seaport orairport.  FAZs are also intended to facilitate customs clearance of imports by, for example, applying
simplified bonded warehouse procedures.  Companies located in FAZs may benefit from incentives
including tax breaks and low-interest loans.  In 1997, Japan's imports and exports through FAZs
accounted for 33% and 40% of its total imports and exports.
                                                     
83 The Japan Development Bank and the North East Finance of Japan merged on 1 October 1999 to
become the Development Bank of Japan.
84 The report argues that FDI in Japan would:  create new management and technological systems as
well as new employment opportunities;  increase benefits to consumers;  and establish multi-facetedinternational economic relations.  According to the report, Japan always had a great potential for inwardinvestment, as it is a large and affluent market with high educational standards, diligent workforce, sophisticated
infrastructure, stable political and economic environment, and geographical proximity to Asian markets.  A
gradual manifestation of the stated potential, together wi th the lowered investment costs such as land and stock
prices as well as interest rates, large-scale reor ganization initiatives in various sectors, the progress in
deregulation and investment promotion measures, is belie ved to lie behind the recent increase in inward FDIs.
85 WTO document WT/WGTI/W/34, 8 April 1998.WT/TPR/S/76 Trade Policy Review
Page 64
(4) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Export taxes and other charges
101. Japan has no export taxes or levies.  Exports are normally exempt from consumption tax.
(ii) Export restrictions, licensing, and cartels
102. Export controls implemented in Japan are defined in the Foreign Exchange and Foreign Trade
Law and the Export Control Order.  Goods requiring  permission from the Minister of International
Trade and Industry for exportation include certain seeds, endangered animals and plants specified in
international treaties;  narcotics;  designated art works;  false currencies;  and other products involving
criminal offences in Japan.  Export controls are maintained to ensure national security and public
safety and to ensure adequate domestic supplies of certain agricultural and other primary products.86
Changes in Japan's export controls since its previous Review concern the elimination of the export
approval system of cocoon, silkworm eggs and silk  waste in 1998, and that of rice in 1999.  Exports
of crude oil, volatile oil, paraffin oil (including jet fuel oil), gasoline, heavy oil, and liquid petroleum
gas are restricted under the provisions of the Foreign Exchange and Foreign Trade Law.
(a) Voluntary export restraints
103. The authorities indicate that by the end of 1999 Japan had eliminated its only remaining
voluntary export restraint (VER), on its car exports to the European Union.
(b) Export cartels
104. The authorized cartels for the export of pearls was abolished on 1 January 1999, as a
consequence there are no longer any authorized export cartels in Japan.
(iii) Export promotion schemes
(a) Subsidies and tax concessions
105. The authorities indicate that Japan has no subsidy or tax concession schemes to promote its
exports.87
(b) Export finance, insurance and guarantees
106. Long-term official export credits for exports of plant and technology to developing countries
are handled by the Japan Bank for International Cooperation (JBIC).88  In FY1998, JBIC made
59 export loans of ¥379.8 billion in total.  The main sectors assisted by the loans included power andtelecommunications.  Export credits provided by the JBIC meet the terms and conditions of the
                                                     
86 According to Article 48 of the Foreign Exchange an d Foreign Trade Law.  The Article also stipulates
that the Minister of International Trade and Industry may impose on exporters the obligation to obtain exportapproval for the purpose of maintaining the balance of payments as well as to ensure sound development ofexternal trade and the national economy.
  Article 51 of the Law also empowers the Minister of International
Trade and Industry to stop shipments, within a limit of one month, for particular goods or destinations.
87 WTO documents G/SCM/N/38/JPN and /JPN/Suppl.1, 17 August 1998 and 23 September 1998,
contain Japan's latest notification concerning subsidies and countervailing measures.
88 JBIC was established on 1 October 1999 as a result of a merger between the Export-Import Bank of
Japan and the Overseas Economic Cooperation Fund of Japan.Japan WT/TPR/S/76
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OECD Arrangement on Exports Credits.  Standard  forms of export credit extended by the JBIC
include supplier credits, buyer credits, and bank-to-bank loans.
107. MITI, through its Trade Insurance Division, operates insurance schemes to protect exporters
against risks not covered by existing private insurance institutions.
(c) Export promotion schemes
108. The Government has provided little funding for export promotion and marketing assistance,
which used to be handled by the Japan External Trade Organization (JETRO) until the mid 1980s.
JETRO now focuses mainly on import and inward-investment promotion schemes.
(5) MEASURES AFFECTING PRODUCTION AND TRADE
(i) Taxation and tax-related assistance
(a) Indirect taxes
109. A consumption tax (value-added tax) of 5% is levied on goods and services transactions in
Japan.89  Revenues from this and other indirect taxes, including excise taxes applied mainly to liquor,
tobacco, gasoline, and automobiles, accounted for 37.3% of total central government  revenue in
FY1998;  the consumption tax accounted for more than half of the indirect tax revenue (Table III.10).
(b) Direct taxes
110. Revenue from personal income tax and corporate income tax in FY1998 accounted for 33.2%
and 22.3% of the total tax revenue of central government, respectively.  The reduction of marginal
rates of corporate and individual income tax took place in FY1998 and FY1999.  As a result, the
effective rate of corporate tax, including local taxes, was lowered from 49.98% in FY1997 to 40.87%
in FY1999, and the highest marginal rate of personal income tax from 65% to 50%.
111. The tax reform in FY2000, which was adopted in March of that year, did not include further
reduction of corporate or individual income taxes compared to the FY1999 regime.
(c) Tax incentives
112. In order to achieve various policy objectives, including investment in certain equipment to
address environmental concerns and stimulate demand, Japan has a complex system of tax breaks,
which are described in the Special Taxation Measures Law;  this has been amended annually.
Estimates of the amounts of tax revenues forgone as a result of these and other tax measures do notappear to be publicly available;  clearly, publication of such estimates along the lines of practices in
many other OECD countries would enha nce fiscal transparency in Japan.
90  The FY2000 amendment
included special taxation measures, concerning public welfare, the energy sector, and housing.
                                                     
89 The 5% consists of the national consumption tax (4%) and a local consumption tax (1%).  Exempted
transactions include the sale and lending of land, rent fo r residential buildings, the sale of securities, fees paid
for public services, interest received, foreign exchange businesses, medical care, welfare and certain educational
services, and school textbooks.
90 Such estimates are published in the form of tax expenditure accounts in 14 other OECD countries
(OECD, 1996).WT/TPR/S/76 Trade Policy Review
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Table III.10
National government tax revenue, FY1998
(¥ billion)
FY1998
Tax Item
Amount Per cent of total
Direct taxes 30,339 59.3
Income tax 16,996 33.2
Corporate tax 11,423 22.3
Inheritance tax 1,916 3.7
Land value tax 4 0.0
Indirect taxes 19,093 37.3
Consumption tax 10,074 19.7
Liquor tax 1,898 3.7
Tobacco tax 1,046 2.0
Gasoline tax 1,998 3.9
Liquefied petroleum gas tax 14 0.0
Aviation fuel tax 90 0.2
Petroleum tax 477 0.9
Motor vehicle tax 817 1.6
Custom duty 869 1.7
Tonnage duty 9 0.0
Other 193 0.4
Stamp tax 1,608 3.1
Special taxes 1,766 3.4
Local road taxa, b285 0.6
Liquified petroleum gas taxa, b15 0.0
Aviation fuel taxa, b17 0.0
Motor vehicle tonnage taxa, b272 0.5
Special tonnage tax 11 0.0
Customs duty on oila52 0.1
Promotion of power resources development taxa357 0.7
Gasoline taxa665 1.3
Special tobacco tax 93 0.2
Total 51,198 100.0
a Taxes whose revenues are distributed to special accounts.
b Taxes whose revenues are distributed to local governments.
Source: Information provided by the Japanese authorities.
(d) Bilateral tax treaties
113. As of 31 March 2000, Japan maintains tax treaties with Armenia91, Australia, Austria,
Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic92, Denmark, Egypt,
                                                     
91 The Tax Convention between Japan and the Soviet Union, signed on 18 January 1986, is applied to
Armenia, Belraus, Kyrgyz, Georgia, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.
92 The Tax Convention between Japan and Czechoslovakia, signed on 11 October 1977, is applied to
the Czech Republic and Slovak Republic.Japan WT/TPR/S/76
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Fiji93, Finland, France, Georgia, Germany, Hungary, India, Indonesia, Ireland, Israel, Italy, Republic
of Korea, Kyrgyz, Luxemburg, Malaysia, Mexic o, Moldova, the Netherlands, New Zealand, Norway,
Pakistan, the Philippines, Poland, Romania, Russia , Singapore, Slovak Republic, South Africa, Spain,
Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Turkey, Turkmenistan, Ukraine, the United
Kingdom, the United States, Uzbe kistan, Viet Nam, and Zambia.
(ii) Subsidies and other financial assistance
114. Energy and mining, agriculture, and small and medium-sized enterprise (SME) have
accounted for the majority of the subsidies notified by Japan since 1998 (Table AIII.12).94
(iii) State-owned companies and privatization
115. There are several sectors where the state retains stakes in major companies through which it
can directly affect production and trade (Table AIII.13).
(iv) Trade-related investment measures
116. Japan has not notified any measures under the WTO Agreement on Trade-Related Investment
Measures (TRIMs);  the authorities state that Japan has no TRIMs inconsistent with the Agreement.95
(v) Trade-related intellectual property rights
117. Japan is a founding member of the World In tellectual Property Organization (WIPO), and a
signatory to most major treaties regarding intellectual property rights (IPRs).  Japan's major
IPR-related laws and regulations have been notified to the WTO (Table III.11).96  The authorities
consider that Japan's IPR-related laws and regulations fully comply with the Agreement on Trade-
Related Aspects of Intellectual Property Rights.
(a) Scope of IPRs and examination procedures
118. Recent changes in Japan regarding IPRs include a 1998 amendment to three IPR-related
laws, i.e. the Patent Law, the Design Law, and the Trademark Law, effective in January 1999, withthe aim of further strengthening the protection of IPRs in Japan.  The amendment included additional
measures against patent infringements.
97  A 1999 amendment to the IPR-related laws, which entered
into force in January 2000, includes shortening of the period for requesting patent examination from
seven years to three years, improvement of the registration system for patent term extension as well as
reduced patent fees.98  The Copyright Law was amended in June 1999 with a view to, inter alia ,
                                                     
93 The Tax Convention between Japan and the United Kingdom, signed on 4 September 1962, is
applied to Fiji.
94 WTO document G/SCM/N/38/JPN/Suppl.1, 23 September 1998.
95 APEC (1999).
96 Japan's major IPR-related laws and regulations have been notified to the WTO.  See, for example,
WTO document IP/N/1/JPN/1, 1 March 1996.
97 The measures included provisions concerning orders  issued by the courts to the defendant to submit
required documentations in order to reduce the plaintiff's requirements in patent infringements actions;  theintroduction of an "expert witness system" in patent damage assessment;  and an expansion of the legal scope of
patent damages in order to cover not only facts proved convincingly, but also facts that are sufficiently probable,
such as an unavoidable price reduction by the right owner;  and heavier penalties on patent infringement bycorporations.
98 These amended provisions on the Patent Law are to be applied mutatis mutandis  to the Trademark
Law and the Design Law.WT/TPR/S/76 Trade Policy Review
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complying with the 1996 World Intellectual Property Organization (WIPO) treaties;  the amendment
includes the regulation of the circumvention of tech nological measures such as copy protection, the
regulation of alteration of rights management information, the establishment of the rights of
distribution, the extension of the right of presentation, and the elimination of a transitory provision
with regard to the exception to th e right of public performance by the use of sound recordings.  The
amendment entered into force on 1 January 2000.  On the protection of trade secrets, a new CivilProceedings Act entered into force in 1998;  the new Act allows only parties of the litigation to access
trade secrets involved.
99
Table III.11
Legislation regarding Intellectual Property Rights protection in Japan
Specific intellectual property rights Relevant legislationAgencies responsible for the
administration of law
Copyright and related rights Copyright Law Agency for Cultural Affairs, MOE
Trade marks Trademark Law Japanese Patent Office, MITI
Patents Patent Law – Utility Model Law Japanese Patent Office, MITI
Plant variety rights Seeds & Seedling Law Ministry of Agriculture, Forestry
& Fisheries
Patent Law Japanese Patent Office, MITI
Designs Design Law Japanese Patent Office, MITI
Geographical indications (Wines and spirits)
The Special Measures Law concerning the Stability
of Sake Brewing and Related IndustriesNational Tax Administration
Layout designs of integrated circuits Law concerning the Circuit Layout of
Semiconductor Integrated CircuitsJapanese Patent Office, MITI
Protection of undisclosed information Unfair Competition Prevention Law MITI
Control of anti-competitive practices Anti-Monopoly Act Fair Trade Commission
Unfair Competition Prevention Law MITI
Civil and administrative enforcement
remediesCode of Civil Procedure – Law of Civil Execution Ministry of Justice
Patent Law – Utility Model Law Japanese Patent Office
Design Law Japanese Patent Office
Trademark Law Japanese Patent Office
Law concerning the Circuit Layout of
Semiconductor Integrated CircuitsMITI
Anti-Monopoly Act Fair Trade Commission
Border measures Customs Tariff Law Ministry of Finance
Export & Import Trading Law MITI
Source : Information provided by the Japanese authorities.
119. Recent trends in patent, design and trade mark applications are presented in Table III.12.
According to the authorities, JPO has made effo rts to speed up the examination of IPR-related
applications by promoting mechanization, entrusting research to outside agencies, and by increasingthe number of examiners (Table AIII.14).  The average "first action" period for patents was reduced to
                                                     
99 Article 2-4 of the Unfair Competition Prevention Law.  The Government regards it difficult to limit
the rule of public trials to protect corporate secrets or technical information, or to amend existing laws, in thelight of Article 82 of the Japanese Constitution, which  stipulates, for example, that a trial may be privatelyconducted only where a court unanimously determines publicity to be dangerous to public order or morals.Japan WT/TPR/S/76
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19 months in 1998, from 21 months in 1997;  similarl y, average "first action" periods for trade marks
and designs were reduced to 17 months and 18 m onths in 1998, from 21 months and 19 months in
1997, respectively.100  The JPO has taken measures to reduce the pending period of design
examination and wishes to reduce the average first action period for design applications to 12 months
by the end of 2000.
Table III.12
Patent, utility model, design and trade mark applications filed and registered, 1995-98
Patent Utility model Design Trade mark Total
Applications filed
1995 369,215 15,662 40,067 179,689 604,633
(34,603) (1,357) (1,810) (22,899) (60,669)
1996 376,615 14,082 40,192 188,160 619,049
(36,514) (1,254) (1,736) (24,642) (64,146)
1997 391,572 12,048 39,865 133,116 576,601
(40,765) (1,331) (2,099) (18,727) (62,922)
1998 401,932 10,917 39,352 112,469 594,670
(42,551) (1,248) (2,012) (15,624) (61,435)
Registrations
1995 109,100 77,732 34,887 144,911 366,630
(14,296) (2,494) (1,325) (8,028) (26,143)
1996 215,100 95,481 35,495 178,251 524,327
(37,419) (2,072) (1,494) (12,707) (43,692)
1997 147,686 50,108 37,418 253,272 488,484
(17,749) (1,717) (1,574) (31,442) (52,482)
1998 141,448 35,513 36,264 132,066 345,291
(15,744) (1,510) (1,382) (17,171) (35,807)
Note: Figures in parenthesis indicate the number of applications filed by and registrations granted to foreigners.
Source: Information provided by the Japanese authorities.
(b) International harmonization and cooperation
120. Progress on international harmonization of application and examination procedures related to
IPRs, has been made concerning, inter alia , patents and trade mark and industrial designs.  In
particular, Japan has participated in the discussions in the Standing Committee on the Law of Patents,regarding the Patent Law Treaty, which aim to harmonize patent application procedures.  Moreover,
Japan amended the Trademark Law in 1999 to accede to the Protocol Relating to the Madrid
Agreement Concerning the International Registration of Marks, to facilitate and expedite the process
for enterprises to acquire trade marks;  the amendment entered into force on 14 March 2000.  Japan
has also been studying the possibility of acceding to the Geneva Act (New Act) of the HagueAgreement Concerning the International Deposit of Industrial Designs, and has taken part in the
Professional Committee Responsible for the Development of the Hague Agreement as well as the
Diplomatic Conference for the A doption of a New Act of the Hague Agreement, held in June 1999.
121. The JPO authorities maintain cooperative bilateral relations with U.S. and European patent
authorities to solve common problems.  Major programmes in this regard include:  a comparativestudy of patent examination practices in the field of  advanced technologies;  examiner exchanges;  the
assessment of search and examination results of each authority;  the development of the Trilateral
                                                     
100 Based on data provided by the Japanese authorities.WT/TPR/S/76 Trade Policy Review
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Network for data exchange concerning administrative and technical patent data;  and the
establishment of a trilateral website.
(c) Enforcement
122. Statistics detailing Japan’s efforts since 1990 to combat violations of intellectual property
rights at the border are provided in Table III.13.101  Infringement of IPRs, such as patents, exclusive
licences, or trade marks or the use of false marking may result in either imprisonment or a fine.102
Table III.13
Suspension of imports likely to infringe intellectual property rights, 1990-99
Category Main items 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
(A)  Products concerned (1,000 units)
Shoes Sports shoes (tennis
shoes, sneakers)21 17 22 13 5 0.2 12 7 0.5 49
Bags Handbags, purses 29 38 58 304 245 309 161 148 37 54
Clothing T-shirts, sweatshirts,
raincoats, scarfs140 110 91 211 445 290 359 861 476 658
Sports equipment Golf equipment, ski
equipment6 2 120 2 2804 0 . 90
Watches Wristwatches, pocket
watches62 7 10 1 5 44 3 76 226 32
S m o k i n g  e q u i p m e n t L i g h t e r s 2 8 1 03 0 . 0 5 0 . 38650 3 2
Toys Stuffed animals, mini-
cars366 175 108 48 80 122 10 0.5 11 40
Others Household goods, key
holders, cosmetics652 400 147 110 389 372 366 492 255 129
Total 1,305 779 441 687 1,191 1,153 917 1,594 1,006 994
(No. of cases) (6,114) (1,274) (767) (676) (826) (1,550) (3,996) (2,136) (1,689) (1,972)
(B)  Types of violation (Number of cases)
P a t e n t  r i g h t s 1214994100
U t i l i t y  r i g h t s 972 1 8 5 2 2 9 2 2531
Design rights 47 35 77 117 196 194 107 104 58 32
Trade mark rights 5,957 1,154 618 390 445 1,114 3,240 1,675 1,437 1,719
Copyright 100 76 64 123 125 73 113 63 22 65
Total 6,114 1,274 762 652 827 1,419 3,486 1,848 1,520 1,807
.. Not available.
Note: Cases involving hand baggage and unaccompanied baggage are excluded.
Each violation is counted for cases violating more than one intellectual property right.
Source: Information provided by the Japanese authorities.
                                                     
101 Details of Japan's judicial measures regarding IPR enforcement are provided in WTO document
IP/N/P/JPN/1, 18 February 1997.
102 The penalty for infringement of patent, exclusive licensing, or trade mark rights is either
imprisonment not exceeding five years or fines not exceeding ¥5 million;  infringement by corporations of these
rights results in fines not exceeding ¥150 million.  False marking is penalized either by imprisonment notexceeding three years or fines not exceeding ¥3 million;  penalties against false marking by corporations resultin fines not exceeding ¥100 million.Japan WT/TPR/S/76
Page 71
(d) Parallel imports
123. The authorities indicate that there is no legislation prohibiting parallel imports into Japan of
products subject to intellectual 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;  this particular prohibition is enforced at the border by the Customs service,
which examines relevant individual contracts and products.
(vi) Deregulation and regulatory reform
124. Since its previous Trade Policy Review, Japan has continued to pursue its deregulation
initiatives, mainly through the new Three-Year Program for Promoting Deregulation (TYPPD), first
adopted on 31 March 1998, and effectively replacing the Deregulation Action Program (DAP), which
was first formulated in March 1995.  The TYPPD initially listed 624 measures, including 327 newlyadded measures, such as the elimination of the foreign equity restriction in cable television business,
deregulation in port transport business, and deregulation in the sales of certain medicines.  TYPPD
was revised twice, in March 1999 and March 2000.  The 1999 revision included 248 new measures,
such as a review of the electricity supply system, and the 2000 revision included 351 new measures.
The revisions were conducted in the light of opinions and requests from domestic and foreign entities,as well as opinions from the Regulatory Reform Committee.
125. The direction of reform contained in the TYPPD is largely the same as that of the DAP.  In
particular, it envisages the creation of a free and fair socio-economic system fully open to the
international community, and a general shift from ex ante  regulatory-type administration to ex post
facto  monitoring of compliance.  The TYPPD also prompted a "horizontal" review of deregulation
across sectors;  these reviews encompass entry regulations ( inter alia , with a view to removing
barriers affecting the entry of foreign companies a nd products into the Japanese market), approval and
notification requirements, certified qualification systems, standards and certifications, examination
procedures and criteria regarding licensing and approval, the enforcement of the Administrative
Procedures Law (Chapter II(2)(i)), "public comme nt" procedures, and the examination of regulations
to be introduced.   The TYPPD also calls for active development and enforcement of competition
policy.
126. The main sectors covered in the TYPPD include housing, land and public works, information
and telecommunications, distribution, transportati on, financial services, energy, explosives and
combustibles, education, medical care and welfare, and legal affairs;  the TYPPD also contains
measures related to standards and certification, employment and labour, environment, disaster
prevention, and safety.
127. Other programmes for deregulation and regulatory reform include the Action Program for
Economic Structural Reform, announced in May 1997, which contains individual action programmes
related to the Program for Economic Structural Reform, announced in December 1996.
128. Proposals for deregulation are formulated by the ministries and agencies in charge of the
applicable regulation;  the Management and Coordination Agency compiles the whole TYPPD,generally in line with the items submitted by the ministries and agencies.  The proposals and items
listed in TYPPD range from concrete measures, including amendments to laws and ordinances aimed
at eliminating market entry regulations for foreign investors (e.g. in cable television services), to
statements simply proposing to launch reviews of certain regulations in the future.
129. The authorities appear to favour intensifying the process of deregulation to achieve a steady
economic recovery;  this view is supported by, for example, Keidanren, a major association ofWT/TPR/S/76 Trade Policy Review
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corporations in Japan.  According to data published by Keidanren, 12.2% of the requests it had made
to the Government for the March 2000 revision of the TYPPD were fully included and 25.9%
partially included, while no relevant measures were included concerning 61.9% of the requests.
(vii) Competition policy and regulatory issues
(a) Recent developments
130. As noted in the previous Trade Policy Review of Japan, several aspects of Japan's competition
policy – most notably enforcement issues – continue  to be of major concern for trading partners.103
The Government acknowledges this concern and, in accordance with the Government's commitments
in the TYPPD, the Japanese Fair Trade Commission (JFTC) has introduced various measures to
strengthen competition policy.  These include the publication of guidelines concerning patent and
know-how licensing agreements under the Anti-M onopoly Act (AMA), and mergers and acquisitions.
It has also increased its efforts to enforce the AMA since the previous Trade Policy Review.
131. In international fora, Japan is an active participant in the WTO Working Group on the
Interaction between Trade and Competition Policy, and in OECD committees and working groups
established to increase cooperation in competition policy.104  Japan has also included various
competition-related measures in its APEC Individual Action Plan.  In 1999, an Agreement Betweenthe Government of Japan and the Government of the United States of America Concerning
Cooperation on Anticompetitive Activity, Japan's first bilateral anti-trust agreement, was signed.
132. As part of a comprehensive administrative reform, scheduled to take place on 1 January 2001,
the JFTC is to become a part of the Ministry of General Affairs, which also includes regulators of
telecommunications services.
(b) Exemptions from the AMA prohibition of cartels
133. The AMA contains a provision exempting natural monopolies from its general prohibition of
cartels.  It also contains provisions exempting the enforcement of intellectual property rights,
activities of cooperatives, and resale price maintenance of copyrighted work.  In addition, provisions
authorizing certain cartels are incorporated into other laws, including the Insurance Business Law and
the Export-import Trading Law (Table III.14).  In recent years, the Government has steadily reduced
the number of authorized cartels, most of which are found in services sectors.  In July 1997,35 exemption systems under 20 individual laws were abolished or reduced in scope by the enactment
of the Omnibus Act to Repeal and Reform Cartels and other Systems Exempted from the Application
of the Anti-Monopoly Act under Various Laws.   An Act entered into force in July 1999 eliminating
exemption systems (i.e. depression cartels and rationalization cartels), abolishing the AMA
Exemption Act, and amending other laws  With the enactment of the above-mentioned laws andamendments, the number of exemption system is to be decreased from 89 systems under 30 laws at
the end of FY1996 to 22 systems under 16 laws at the end of FY2000.  In May 2000, the AMA was
amended to eliminate Section 21, which had exempted natural monopolies in public utilities;  this
                                                     
103 WTO (1998), p. 70.  A similar view is expressed in an OECD report on Japan's regulatory reform,
which "will not succeed without effective competition policies, but competition enforcement is not yet strongenough" (OECD, 1999c).
104 The OECD revised in July 1995 the Recommendation of the Council of the Organization for
Economic Co-operation and Development concerning Cooperation Between Member Countries onAnticompetitive Practices Affecting International Trade, and adopted in March 1998 the Recommendation ofthe Council of the Organization for Economic Co-operation and Development Concerning Effective ActionAgainst Hard Core Cartels.Japan WT/TPR/S/76
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amendment reflected the recent liberalization of the electricity and gas sectors (Chapter IV(3)(ii)
and (iii)).
Table III.14
Exemptions from the Anti-Monopoly Act, FY2000
Relevant ministries and agencies Legislation System
1.   Exemptions under the AMA (3 systems)
Japan Fair Trade Commission Section 23 Enforcement of intellectual property
rights
Section 24 Activities of cooperatives
Section 24-2 Resale price maintenance contracts
2.   Exemptions under various individual laws (19 systems under 15 laws)
Ministry of Justice Cooperation Reorganization Law Acquisition of shares of companies
under reorganization
Ministry of Finance Insurance Business Law Insurance cartels
Law Concerning Non-Life Insurance RatingOrganizationsRating of standard ratio concerning
compulsory automobile insurance andearthquake insurance
Law Concerning Liquor Business Associationsand Measures for Securing Revenue from LiquorTaxRationalization cartels
Ministry of Education Copyright Law Cartels on fees for secondary use of
commercial phonograph
Ministry of Health and Welfare Law on Concerning Coordination and
Improvement of Hygienically Regulated
BusinessCartels to prevent excessive competition
Ministry of Agriculture, Forestry and
FisheriesAgriculture Cooperative Association Law Central Associations of Agriculture
Cooperatives
Corporation of Farmers' cooperativeorganization
Ministry of International Trade andIndustryExport-import Trading Law Cartels on exports by exporters and
exporters' trade associations
Law Relating to Organization of Small andMedium-Sized Business AssociationsEconomic business by cooperatives
The Cooperative Societies of Minor Enterprises
ActCentral Associations of Small and
Medium Business Groups
Law on Investment Companies for the
Development of Small and Medium-sized
CompaniesUnderwriting and possession of shares
of small and medium-sized companies
Ministry of Transport Marine Transportation Law Maritime transportation cartels (coastal
shipping)
Maritime transportation cartels (ocean
shipping)
Road Transportation Law Transportation cartels
Civil Aeronautics Law Aviation cartels (domestic)
Aviation cartels (international)
Coastal Shipping Association Law Coastal shipping cartels
Joint shipping cartels
Source: Information provided by the Japanese authorities.
(c) Private remedies
134. Though only the JFTC may currently enforce injunctions against violation of the AMA, a
May 2000 amendment to the AMA introduced a private remedy system, which will be in force
in 2001;  a private party who has suffered or is likely to suffer serious damage due to "unfair tradepractices" that seemingly violate the AMA will be able to bring a case to court for injunction against
alleged violators.WT/TPR/S/76 Trade Policy Review
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(d) Resale price maintenance system
135. Since the previous Trade Policy Review, Japan has not changed the AMA exemption for the
resale price maintenance (RPM) system, although the Government has adopted various Cabinet
Decisions to review the system, currently applie d to books and magazines, newspapers, music CDs,
music cassettes and records.  On the basis of these decisions, the JFTC has held meetings of a study
group on government regulations and competition pol icy to review RPM issues since February 1997;
the group submitted its report on 13 January 1998.  In response to the report, the JFTC made public
the following conclusions on 31 March 1998:
- in the light of competition policy, the RPM exemption for copyrighted works must be
reviewed with a view to repealing the ex emption.  However, the RPM exemption for
copyrighted works has a function of disseminating copyrighted materials and promotingculture, and further study and review of the scheme is needed to ascertain the effects of its
repeal;  and
- the goods subject to the RPM scheme must be limited to six items:  books and magazines,
newspapers, music CDs, music cassettes and records.
136. On 2 December 1998, and 28 December 1999, the JFTC released reports on relevant
industries' efforts to address the problems under the current RPM scheme.  The authorities indicate
that the JFTC is to reach a conclusion on whether to repeal the exemption for RPM system on
copyrighted works by spring 2001.
(e) Holding companies, and mergers and acquisitions (M&As)
137. The establishment of holding companies had not been allowed until recent amendments to the
AMA.  Article 9 of the AMA was amended in June 1997, and made effective in December 1997, to
allow the establishment  or transformation of an ex isting company into a holding company that is not
deemed to constitute an "excessive concentration of economic power".
105
138. Against the background of a recent decline in the number of M&As and the need for
corporate restructuring, the Government hopes to facilitate M&As (Tables III.15, AIII.15,
and AIII.16).  In May 1998, the AMA was amended to reduce the scope of notification and reporting
requirements concerning stockholding and mergers.106  The amended AMA also enables the JFTC to
investigate M&As conducted outside Japan and modifies notification requirement concerning M&As
in Japan involving foreign companies.107  The Commercial Code was amended in August 1999 to
introduce a system that allowed shar es swaps between existing companies108;  the system apparently
reduced procedures for establishing a holding company by consolidating existing companies through
                                                     
105 A holding company whose value of assets, together with that of its subsidiaries, is greater than
¥300 billion must submit a report for the business of th e holding company and the subsidiaries to the JFTC
within three months from the end of each business year;  the authorities indicate that two reports have been
submitted since FY1998.  On 8 December 1997, the JFTC issued its interpretations of holding companies that
are deemed to constitute an excessive  concentration of economic power (JFTC online information.  Available at:
http://www.jftc.admix.go.jp/guidline/9guide.html).
106 The amendment took effect on 1 January 1999.
107 For example, any foreign company that wishes to become a party to a merger must file a report with
the JFTC in advance, in cases where domestic sales of one company exceed ¥10 billion and domestic sales of
one of the other companies exceeds ¥1 billion.
108 The amendment took effect in October 1999.  The exchange or transfer now requires the approval of
shareholders at a shareholder meeting;  by a majority decision, opposition by minority shareholders is overruled
and minority shares must be exchanged or sold.Japan WT/TPR/S/76
Page 75
share swaps.  Such share swaps would enable one company to acquire another without incurring
transfer taxes.  The authorities did not indicate whether foreign as well as Japanese companies could
take advantage of this arrangement.
Table III.15
Merger and acquisition notifications, 1995-99
1995 1996 1997 1998 1999
Mergers 2,520 2,271 2,174 1,514 151
Acquisitions of business, etc. (No. including foreign affiliates) 1,467 1,476 1,546 1,176 179
Total 3,987 3,747 3,720 2,690 330
Note: As the amended Anti-Monopoly Act was effective from 1 January 1999, the scope of notification requirements concerning
merger and acquisitions was reduced.
Source : Information provided by the Japanese authorities.
139. To ensure transparency concerning the enforcement of the Act, the JFTC published guidelines
in December 1998 concerning situations where M&As may be considered to substantially restrain
competition.109  On the basis of these guidelines, the JFTC accepts prior enquiries and consultations
from companies as to whether planned M&As might contravene the AMA.  With a view, in part, to
further facilitating M&As, the Government is curr ently discussing how tax consolidation might be
introduced in Japan.
(f) Bilateral arrangement
140. On 7 October 1999, Japan and the United States signed a bilateral anti-trust agreement;  the
agreement took effect on the same day.110  The agreement includes a requirement for the competition
authority of each party to notify enforcement activit ies that may affect the important interests of the
other party.  The agreement also provides for cooperation and coordination with regard toenforcement activities of both parties, and positive comity.
111
(g) Enforcement
141. In order to ensure transparency and enhance deterrence, the JFTC makes public all formal
actions, including recommendations and surcharge payment orders.  The Government made efforts to
strengthen staffing and the budget of the JFTC;  budgetary allocations have been increased by about2% per annum since FY1997,  and the number of investigation-department personnel has risen from
248 in FY1997 to 263 in FY2000.  The JFTC appears to have no mandate to take action against
anti-competitive administrative measures initiated by other ministries and agencies.  The 1999
Industrial Revitalization Law prescribes that, if a "business restructuring plan" includes merger, joint
development and production of new goods by, inter alia , two or more firms, JFTC can provide
opinions to the relevant minister on whether there is a problem under the AMA in implementing such
a plan, in response to the relevant minister's inquiry.
                                                     
109 The guidelines outline the cases of M&As requiring examination under the AMA, for example,
when the shares owned by the acquiring company, which is a sole leading shareholder, exceed 25% of the total
outstanding stocks of the acquired company;  criteria us ed to define a particular field of trade concerning
M&As;  and criteria used to define M&As that may substantially restrict competition.
110 JFTC online information.  Available at:  http://www.jftc.admix.go.jp/e-page/agree/usagree.htm.
111 Under the principle of positive comity, a party that believes itself to be affected by anti-competitive
behaviour occurring in the territory of another party may request that party to take appropriate action.WT/TPR/S/76 Trade Policy Review
Page 76
142. Data involving investigations by JFTC of alleged AMA violations and legal measures taken
are summarized in Table III.16.  Of the 93 complete cases investigated in FY1999, 27 cases resulted
in legal measures.  Of these 27 cases, 18 were concerned with bid-rigging in public procurement of
goods and services, including garbage incinerators, petroleum products, and bridge-painting;  the
other nine cases involved private monopolization, price cartels, unfair trade practices and private
sector regulation ( min-min kisei ).
Table III.16
Enforcement statistics related to competition policy, 1995-99
Fiscal Year
Details1995 1996 1997 1998 1999a
(A)   Cases in which legal measures were taken against acts prohibited by the Anti-Monopoly Act
Number of legal measures 31 21 31 27 27
Private monopoly 0 1 3 1 1
C a r t e l s 2 41 51 91 9 2 0
Price cartels 4 10 3 1 1
Collusive tendering 20 5 16 17 18
Other types of cartelsb0001 1
Unfair trading practices 4 2 9 6 3
O t h e r s 3301 3
(B)   Surcharge payment orders (¥ billion)
Payment order
N u m b e r  o f  c a s e s 2 41 41 61 6 1 6
Number of enterprise operators 741 368 369 576 315
Surcharge amount 6.45 7.49 2.83 3.15 5.96
Decision to initiate hearings 0 2 1 2 1
(C)   Recently proce ssed investigation cases
Cases investigated
Carry-over from the previous fiscal year 70 68 70 45 50
New cases begun during the current fiscal year 128 112 155 125 82
Total 198 180 225 170 132
Processed Cases
Legal measures
Recommendation 26 19 30 27 26
(Decision to commence hearing)c(2) (3) (4) (3) (6)
Surcharge Payment Orderd5210 1
(Decision to initiate hearing)c
Sub-total 31 21 31 27 27
Others
Warnings 13 17 19 17 20
Cautions 60 61 123 62 36
Discontinuede26 11 7 14 10
Sub-total 99 89 149 93 66
Total 130 110 180 120 93
Carry-over to the next fiscal year 68 70 45 50 39
Criminal accusations 0 (1) 1 0 1 (1) 1 (1)
.. Not available.
a Data for FY99 are from April to December 1999.
b Other types of cartels include restrictions on sales volume and restrictions on business clients.
c Figures in () are cases in which the decision to commence hearing procedures has been made.d Cases in which surcharge payment orders were given without a recommendation.
e Cases that have been discontinued due to lack of evidence of wrong-doing.
Source: Information provided by the Japanese authorities.Japan WT/TPR/S/76
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143. Under Section 8-4 of the AMA concerning measures against a monopolistic situation, the
JFTC monitors highly oligopolistic markets, and may order measures to restore competition in the
event of "undesirable market performance".112  Under Article 2-7, a monopolistic situation is defined
as a situation where the market share of a single enterprise is no less than 50%, (or 75% for two
enterprises combined in a particular field of business), and where the annual total output of the
business is no less than ¥100 billion;  new entry into the market is conspicuously difficult and for aconsiderable period of time, (a)  the price structure in the market is rigid or inflexible, and (b)  profit
or expenditure (e.g. on advertizing and marketing) is far in excess of standard levels in the industry.
"Undesirable market performance" includes such factors as barriers to entry, extraordinary price
increases or extremely high profit rates.
113  In 1999, a total of 24 industries were being monitored by
the JFTC in respect to the presence of a monopolistic situation (Table III.17).
Table III.17
Industries monitored by the JFTC with respect to a "monopolistic situation", 1995-99
1995 1997 1999
Chewing gum X X
Beer XXX
Whisky XXX
Brandy XXX
Cigarettes XXX
Household synthetic detergent X
Photographic color film X X X
Photographic paper X X
Polished sheet glass X X X
Glass bulbs for cathode-ray tubes X X X
Tiles X
Fluorescent lamp X
Plasterboard XX
Tin cans (including aluminium cans) X X X
Shutters XXX
Cranes for construction X
Closed electric power distribution panels X
Charging generators X
Ventilators XXX
Incandescent light features for automobiles X X X
Fluorescent lamp fixture XX
Touch-tone telephones X X
Numerical controllers X
Medical X-ray equipment X
Transfer equipment X
Motorcycles XXX
Gasoline engines for motor vehicles X X X
Radiators XXX
Air-conditioners for transportation machines X X X
Table III.17 (cont'd)
                                                     
112 The JFTC has published "Guidelines Concerning Particular Fields of Business Among the
Provisions of the Definition of Monopo listic Situations" in order to implemen t the regulation.  According to the
authorities, the JFTC has not issued an order to rest ore competition, under Section 8-4 of the AMA, since 1997.
113 WTO (1998), p. 76.WT/TPR/S/76 Trade Policy Review
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1995 1997 1999
TV game devices for family use X
Scheduled domestic passenger flights X X X
Domestic basic telecommunications X X X
International basic telecommunications X X X
Dust control XXX
Source: Information provided by the Japanese authorities.
(h) Keiretsu
144. The JFTC regularly conducts surveys of the six major corporate groupings, namely Mitsui,
Mitsubishi, Sumitomo, Fuyo, Sanwa, and Dai-ichi Kangyo Bank;  the most recent report published
was in October 1998.  The most recent (1998) survey found that the member companies of these
groups continued to maintain a certain degree of cross-share holding, financing, dispatching ofexecutives within the member companies and close business transactions.  On the other hand, ties
among group members through capital, personnel and financing were loosening and the volume of
business transactions within a group was decreasing.  Nonetheless, the authorities believe it is
necessary to continue to monitor the ties within those corporate groups in regard to personnel and
capital, business transactions within the group, and the degree of concentration, as the groups include
many leading companies in various industries.
(i) Distribution measures
145. Since its previous Trade Policy Review, there has been a shift in Japan's legal framework
pertaining to the distribution sector, particularly concerning the opening and expansion of large-scale
retail stores.  Unlike the previous legislation, whic h aimed to preserve business opportunities for small
shop-owners, the new law, rather than regulating large shops, notably their floor space and opening
hours, seeks instead to regulate their impact on the local environment.  The Large-Scale Retail Store
Law was thus abolished, and replaced on 1 June 2000 by the Law Concerning the Measures by Large-
Scale Retail Stores for Preservation of Living Environment.  Under the new law, businesses that wish
to establish or expand store-structures with total retail space exceeding 1,000 square meters must
notify local governments of their establishment or expansion plan
114, and the plan must go through
public hearing and examination under the law before any recommendation by local government isissued and made public.  Responsibility for adjusting facilities to ensure a sound environment for
local residents, e.g. parking space and opening hours, is assigned (by law) to local governments with a
view to maintaining living standards and enviro nment.  The Central Government has no formal
enforcement mechanism against the decisions of local governments however, it provides, inter alia ,
technical assistance or recommendations.  There is no appeals mechanism regarding the decisionsassociated with the new Large-Scale Retail Store La w;  the authorities believe that such mechanism
does not fit into the framework of the law, under which firms are only recommended to abide
voluntarily by the decisions of local governments.   According to the authorities, the new law does not
include an economic needs test ("demand-supply adjustments") for retailers.
146. On 30 June 1999, MITI issued guidelines for entities wishing to open or expand a large-scale
store;  among the issues that entities are urged to consider are factors that may have an impact on the
local environment (such as parking space, reduction of noise and waste).
                                                     
114 The threshold of 1,000 square meters was stipulated by an ordinance to the law on 6 October 1999.Japan WT/TPR/S/76
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147. On 23 May 2000, MITI established official contact points within its headquarters in Tokyo
and at eight regional bureaux in order to receive questions and complaints from and give advice to any
interested party regarding the law.  MITI explained the purpose and content of the new law by holding
meetings with prefectures and 12 major cities, and provided technical training to local governments;
it has undertaken to provide necessary information regarding the implementation of the law.
148. The JFTC published a survey in July 1999 concerning transactions between large-scale
retailers and suppliers.  The survey found that from the competition policy perspective, these
transactions had improved.  However, remaining problems include return of unsold goods, request for
cooperative payments, and lack of opportunities (from suppliers' viewpoint) to negotiate the prices of
supplies.