Note: Advance written questions by WTO Members and replies provided by the Government of
Japan are reproduced in document WT/TPR/M/107/Add.1 and will be available online
at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/107
4 February 2003
(03-0709)
Trade Policy Review Body
6 & 8 November 2002
TRADE POLICY REVIEW
JAPAN
Minutes of Meeting
Chairperson:  H.E. Mr. Milan Hovorka (Czech Republic)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF JAPAN 4III. STATEMENT BY THE DISCUSSANT 7
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 11
V. REPLIES BY THE REPRESENTATIVE OF JAPAN AND ADDITIONAL COMMENTS 19VI. CONCLUDING REMARKS BY THE CHAIRPERSON 27WT/TPR/M/107
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The sixth Trade Policy Review of Japan was held on 6 and 8 November 2002.  The
Chairperson welcomed the delegation of Japan, led by Mr. Yoichi Suzuki, and the discussant,
Ambassador Dr. Toufiq Ali (Bangladesh).  As usua l, the discussant would speak in his personal
capacity and not as representative of his country.  In accordance with the established procedures, thediscussant had made available, in advance, outlines of the main issues he intended to raise (document
WT/TPR/D/86).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The report by the Government of Japan was contained in document
WT/TPR/G/107 and that of the WTO Secretariat in document WT/TPR/S/107.  Copies of advanced
questions, submitted by Switzerland;  Chile;  New Zealand;  Canada;  Korea;  Australia;  China;
Colombia;  Hong Kong, China;  Chinese Taipei;  Argentina;  the European Union;  Malaysia;  theUnited States;  Indonesia;  Uruguay;  Norway;  Mexico;  India;  and Brazil had been transmitted to the
delegation of Japan.
3. The Chairperson was encouraged by tentative signs of moderate recovery in the Japanese
economy.  This recovery was due in part to the Government's own efforts involving macroeconomic
policy measures and structural reforms.  WTO Members had also played an important role in thisrecovery by keeping their markets open to Japan's exports, which had been the main source of growth
during the period under review.  He was struck by the Government's apparent recognition that further
structural reforms might be necessary and that they needed to be actively promoted.  He encouraged
the Government to pursue, and perhaps even streng then, its agenda in this regard;  such reforms
would pave the way for the sustained growth of the Japanese economy in the future.  On Japan's trade
policy regime, while it remained committed to the multilateral trading system and had supported
strongly the launch of the Doha Development Agenda, it had placed more emphasis than before on
regional and bilateral trade initiatives.  In this regard, he noted from the Government Report that these
initiatives were intended to complement the multilateral trading system, and he was certain that
Members would be interested in learning more about how the Government of Japan hoped toaccomplish this goal.WT/TPR/M/107
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF JAPAN
4. The representative of Japan, Mr. Yoichi Suzuki, stated that, after the mild-paced recovery in
FY1999 and 2000 and a negative growth in FY2001, a m oderate incipient recovery (since the first
quarter of 2002) had been observed in some areas of the Japanese economy.  However, the
unemployment rate was still high and the economic environment remained uncertain owing toconcerns over the future of global economic development and stock price volatility both in domestic
and overseas markets.  After more than a decade of stagnated economic conditions, changes in the
social and economic environment, and conscious of  the large government debt, the Government of
Japan had strengthened its efforts to promote structural reforms with a view to restoring vitality to the
economy, and had been pursuing "structural reforms without sanctuary".
5. The Council on Economic and Fiscal Policy, established in January 2001, had proposed a
series of policy measures to promote structural reform and to overcome the deflationary pressure.The Government had taken a wide range of measures to advance structural reforms according to the
proposals, and succeeded in putting a hold on a downward trend in economic and fiscal condition in
the first half of 2002.  On this base, the Cabinet had decided the Basic Policies for Macroeconomic
Management and the Structural Reform 2002 in June 2002;  the policies indicated the agenda of the
second stage of reform.
6. However, a growing sense of economic uncertainty had been felt recently.  In response, the
Government had decided to reinforce its policy measures to realize greater stability to the financial
system, by working for the rapid recovery of financial intermediary functions, in order to facilitate the
smooth reallocation of resources to new growth fields and to realize a rapid recovery of Japan's
finance and industry.  On 30 October 2002, these measures were announced as ComprehensiveMeasures to Accelerate Reforms, with which the Government would accelerate structural reforms
through four main pillars:  financial system reform, tax reform, regulatory reform, and reform of the
government expenditure structure.  The Government would promote policies to realize a self-
sustaining growth, driven by private-sector demand while overcoming deflation, and would make
every possible effort to reinforce safety nets for employment and small and medium-sized enterprises,making best use of policies of local governments to minimize harmful effects of accelerating the
disposal of non-performing loans.  On 30 October 2002, the Bank of Japan also decided on additional
easing measures to maintain the smooth functioning and stability of financial markets, thereby
strengthening support for economic recovery.
7. The Government would resolve the problems of non-performing loans by the end of FY2004,
by reducing the ratio of major banks' non-performing loans to approximately half the current level.
The Program for Financial Revival, which was part of the Comprehensive Measures to AccelerateReforms, comprehensively strengthened government policies to provide a strong boost for the
disposal of non-performing loans by developing a fi nancial system that people could rely on without
anxiety, creating a new framework for corporate revival, and creating a framework of the New
Financial Administration.  The Program also provid ed that the Government and the Bank of Japan
together would take every necessary measure to avoid systemic risk and further plummeting of theeconomy.
8. Industrial and financial policy measures would be implemented in an integrated manner, such
as establishing a new institution for revival of enterprises and substantially revising the Industrial
Revitalization Law, which aimed for the support of the reallocation of management resources and
prompt industrial reorganization.
9. Considering that market risk pertaining to financial institutions' shareholdings had become a
significant destabilizing factor, the Bank of Ja pan decided in September 2002 to explore possible
policy measures to enhance the efforts of financial institutions to reduce their shareholdings, and
announced, on October 2002, basic guidelines on the purchase of stocks held by banks.WT/TPR/M/107
Page 5
10. The Government would also conduct tax reforms with a view to establishing a "desirable tax
system", which would bring about a sustainable revitalization of the economy and society.  A tax
reduction, exceeding ¥1 trillion under the framework of a multiple-year, revenue-neutral framework
would also be introduced.  The Government was considering various items including enhancing
corporation tax incentives for R&D and investments, and reform of inheritance and gift taxes topromote the transfer of assets to younger generations.
11. The Government would promote an early introduction of Special Zones for Structural
Reform, which would enhance the contents of regulatory reform programmes, and deregulation in
areas where public sector had strong influence, such as welfare and education services.  On
5 November 2002, a bill to introduce Special Zones for Structural Reform was decided upon by the
Cabinet, and was presented to the Diet.
12. The Government had a medium-term vision on its economic and fiscal reform. By
overcoming deflation through structural reform, the Japanese economy would begin to recover, and
would achieve some positive growth in FY2003 a nd onwards.  Growth driven by private sector
demand should be realized at a steady pace of at least 1.5% in real terms on an annual basis.  The ratio
of the primary balance deficit of the central and local governments to GDP was expected to decline
from 4.3% in FY2000 to approximately half of that by around FY2006. A primary balance surplus
was expected to be posted in the early 2010s.
13. Japan strongly believed that the multilateral trading system was beneficial to all Members for
their future growth, and had actively participated in the preceding round of negotiations with a view  to
strengthening the  multilateral trading system through the framework of GATT and the WTO.  Japan
had been a large beneficiary  of multilateral trade liberalization and felt that the system had contributed
greatly to its  economic growth in the past.   Maintaining and strengthening the multilateral trading
system had been the main pillar of Japan's external economic policy, and the importance it attached to
the pillar would not change.    
14. At the same time, Japan had increasingly become aware of the role of FTAs or RTAs in its
economic relations, and had come to attach greater importance to regional and bilateral trade policies.These include possible elements of FTAs in Japan's response to changes in its trade environment, for
example, the increasing weight  of Asian economies in its trade and economic structure, as well as in
its efforts to meet needs and expectations of its own businesses.  The potential cost of staying out of
the global web of bilateral and regional agreements had also led Japan to review its trade policy.
Japan's first such agreement, signed with Singa pore (the Japan-Singapore Economic Agreement for a
New Age Partnership) in January 2002, went through the ratification process on the 31 October 2002,
and would soon be notified to the WTO.  On 27 October 2002, it was decided and announced by theleaders of Japan and Mexico, that the two countries would start negotiations to conclude a bilateral
agreement, including the elements of a free-trade agreement, to strengthen their bilateral economic
partnership.
15. Following a joint statement issued in January 2002 by a business forum advising that Japan
and Korea should conclude a bilateral agreement as a comprehensive economic partnership agreementas early as possible, the leaders of the two countries agreed to set up an industry-government-
academia joint study group on a Japan-Korea FTA.
16. The leaders of Japan and ASEAN, at their summit meeting on 5 November 2002, endorsed
the approach that, while considering a framework for the realization of a Comprehensive Economic
Partnership between Japan and AS EAN, any ASEAN member country and Japan could initiate work
to build a bilateral economic partnership, and that the implementation of measures for the realization
of the partnership, including elements of a possible free-trade area, should be completed as soon as
possible within ten years.  To this end, they decided to establish of a committee to consider and draftWT/TPR/M/107
Page 6
such a framework and report to the Leaders’ Meeting in 2003.  In addition, Japan had launched
working groups with Thailand and the Philippines.  
17. Maintaining and strengthening the multilateral trading system under WTO had been the main
pillar of Japan’s external economic policy.  Japan was determined to contribute to the realization of
the Doha Development Agenda.  Three general objectives Japan wished to achieve in the DDA were:keeping relevancy with today's business environment, the unique role and functions of the WTO vis-
à-vis FTAs, and a comprehensive new round.  Japan considered that priority should be given, in
particular, to:  developing rules on investment, which would facilitate investment activities by
providing greater stability and predictability;  developing and improving rules on trade remedies,
which would enhance market opening efforts instead of undermining them;  and developing rules that
would allow suitable economic development through better protection of environment and consumer
safety.
18. The representative emphasized the particular importance of the DDA when the web of RTAs
was rapidly spreading.  An RTA consistent with WTO rules could represent an effective building
block for a greater global trade liberalization, while an RTA had its own limitations and various
implications on the multilateral trading system.  Different legal frameworks contained in different
RTAs might not always be coherent and compatible, with each other or with the multilateral system,and could cast a negative effect on the development of unified world trade rules.  The world-wide
trade creation and expansion, which the MFN princi ple had long promoted, was unique to the WTO.
Taking these points into consideration, the WTO should continue to serve as a good common base
upon which bilateral or regional efforts for additional liberalization could be built.  WTO should keep
pace with the evolution of RTAs, and a timely a nd meaningful success in DDA both in terms of
market access and rule-making was needed.
19. Japan had committed itself to making DDA a comprehensive round.  Since Japan had vital
interests in achieving fair and free trade, it placed strategic importance to making progress in certain
areas of negotiation.  One such area was the single-undertaking on four Singapore issues, namely
investment, competition, trade facilitation, and transparency in government procurement, another wasto improve disciplines on anti-dumping.  A comprehensive round covering these areas would make
the results of the negotiation more balanced.
20. On market access in various sectors, Japan was of the view that an overall compromise would
be possible only when meaningful balance was maintained in each negotiation and also through the
whole negotiations in a cross-cutting manner.  The conclusion of negotiations only in a limited
number of areas would not be tenable to all.  The only way to secure positive commitment to DDA by
all Members was to achieve a comprehensive result under the single-undertaking as had been agreedby the Ministers at Doha.WT/TPR/M/107
Page 7
III. STATEMENT BY THE DISCUSSANT
21. The discussant (Ambassador Dr. Toufiq Ali) st ated that, when Japan’s real GDP rose by 0.7%
in 1999, and by 2.4% in 2000, there were signs for optimism.  In 2000, gross fixed investment rose by
4.6%, the exports of goods and services by 12.4%, and imports by 9.6%.  In 2001, all the positive
indications from 2000 had soured;  real GDP had fallen by 0.6% and exports of goods and services by6.6%, the Government debt had steadily increased, and there were indications that the policies of the
Government were not having the desired impact.
22. The Secretariat Report indicated that sustained recovery would appear to hinge on structural
reforms.  Many countries involved in restructuring in  one form or another realized this was easier said
than done.  A key element in Japan’s structural reform was regulatory reform, particularly to reduce
economic intervention.  The structural reform most  highlighted in the media notably involved the
reform of the banking sector, corporate restructuring, and attention to non-performing loans.  Therewere many reasons for the attention to the banking sector.  The impact of these reforms on the
United States was perhaps of concern;  it was reported that Japan, as a nation, was estimated to hold
more than US$3 trillion in dollar-denominated asse ts.  Should the reform package affected these
holdings, the impact on the U.S. dollar could be considerable.
23. The reform programme was announced on 30 October 2002, immediately after the
Government had unveiled a tax cut worth US$8 billion.  It was reported that an agency would be
created to aid Japanese companies that might face difficulties as banks scaled back lending to reduce
bad loans.  In the past, the Government had bailed out companies that were unprofitable, without the
need for such an agency.  However, the bailing out of companies would inevitably mean that good
companies were being penalized while bad ones supported.  The banking sector and other corporatereforms did not find place in the media reports and it was not known to what extent those reforms
featured in the package.  The discussant asked Japan for more information on the reforms that had
been announced, their implications, and the impact they were likely to have on the banking sector and
the economy.
24. The Bank of Japan (BOJ) seemed to have considered initiatives and taken some measures.  It
recently held out the possibility of an inflation target;  later, this seemed to have been discarded.
Critics have said that if the BOJ was serious about restoring prices, it should offer to fund an
increased budget deficit needed to compensate the huge contraction of corporate investment.  The
BOJ had announced that it hoped to buy ¥2,000 billion of shares from more than ten banks over the
next year. The discussant wondered if this was likely to have much of an impact, considering that, for
example, estimates by the Nomura Research Institute indicated that ¥30,000 billion might be required,
and that the State had injected ¥8,000 billion into banks in 1999 but analysts did not notice anyimprovement in corporate governance.  He asked the Japanese delegation to discuss the implications
of these proposals and indicate their current forecast for private corporate investment.
25. Drastic improvement of the banks’ corporate governance was required to recover bad loans,
which were estimated at about ¥43,000 billion, or 8% of GDP.  Risk assessment was seen as key.  The
close relationship between banks and their corporate customers, propping up indebted borrowers inwhich they often owned equity stakes, was seen as the main reason to continue lending at cheap rates.
The issue of capital adequacy ratio, as required by BIS, was also a matter of concern.
26. The Government had decided on a tax break to increase consumer spending and encourage
private investment.  These policies would undoubtedly  complement those of the Bank of Japan.  In
the Government Report, there was a desire expressed to achieve a surplus in the primary balance inthe early 2010s.  The discussant asked the Japanese delegation to elaborate on the likely impact of the
tax break that had been announced by the Government.WT/TPR/M/107
Page 8
27. The discussant noted that the aims and objectives of Japan’s trade policy regime had
remained unchanged since its last Trade Policy Review;  its commitment to the WTO and the
multilateral trading system remained strong.  Japan granted MFN treatment to all WTO members.
During the period under review, Japan had used the dispute settlement mechanism twice as a
complainant and once as a defendant.
28. A significant development in recent times had been the signing of a bilateral free-trade
agreement with Singapore, in January 2002.  Both the Government and the Secretariat Reports
reported that more bilateral agreements were under consideration.  The discussant asked whether
these regional or bilateral initiatives undermined  Japan’s commitment to the multilateral trading
system.
29. The tariff remained Japan’s main trade policy instrument, and non- ad valorem  duties, which
accounted for 7% of all lines, were an important feature of the trade policy, particularly in agriculture.Even the LDCs were not exempted from the non- ad valorem  duties.  The Japanese authorities had
provided the Secretariat with ad valorem  equivalent (AVE) estimates for the non- ad valorem  duties,
which showed that 95% of the top 100 tariffs entailed non- ad valorem  duties ranging from 47.2% to
1,739 % in terms of AVEs.
30. Tariff quotas and technical regulations continued to restrain market access, particularly in
agriculture, fisheries, and pharmaceuticals.  The allocations of tariff quotas varied by product, and
could be quite complex;  the distribution of quotas among State and private trading agencies,
particularly in selected products, could be an opaque process to outsiders.  The presence of tariff
peaks and escalation had also been reported.  There had been simplification of import procedures
since March 2001, but their impact across the board was yet to be fully felt.  The discussant askedJapan to clarify when it planned to remove quantitative restrictions and non- ad valorem duty
structures.
31. Japan had not notified any export subsidies to the WTO, thereby indicating their absence.
However, questions had been raised as to whether they continued to have schemes for insurance
guarantee, drawback schemes, or other forms of assistance that might be considered as indirectsubsidy.
32. The outflow of FDI in 2001 fell to just under ¥4,000 billion, a fall to almost half that the 1999
figure.  FDI inflow seemed to be ¥2,177 billion in 2001, which was fairly close to the 1999 figure but
lower than that of 2000.  Many countries in Asia were interested in the outflow of FDI from Japan.
Any fall in outward FDI flows w ould affect the growth prospects of the customary destination
countries, while the inflow of FDI was proportionally small for a developed country.  Greater
measures were needed to create an environment in Japan to encourage FDI inflow and outflow.
33. There had been some significant changes in the regulatory framework and business practices,
providing a greater role for external auditors and revision of Japan’s accountancy practices to allow
greater transparency.  The three-year programme for promoting regulatory reform adopted in
March 2001, and revised in early 2002, might help to create a fair system open to the international
community.  Nevertheless, it remained unclear whether the existing reform measures, particularlythose involving the Japan Fair Trade Commission (JFTC) were sufficient to constitute an effective
deterrent to violation of Japan’s competition law (A MA).  By increasing the JFTC’s budget and staff
the government was clearly signalling a desire to make it effective.
34. Sectoral policies had changed in only a few areas since Japan's last Review.  Manufacturing,
in relative terms, had continued to be open.  Central and local governments provided various forms ofassistance to agriculture, including special safeguard measures:  the total value of assistance to
agriculture exceeded the sector’s contribution to GDP;  most of the assistance seemed to consist of
measures that distorted production and trade.  It was reported that the average retail prices of food inWT/TPR/M/107
Page 9
Tokyo in 2000 were 25% to 100% higher than in other major cities in the world, although food prices
in Tokyo decreased in 2001.  It was also reported that the target of self-sufficiency in food, by calorie
count, had been raised by the Japanese authorities.  It was questionable how that might be achieved,
without further distortion of production and trade.
35. The Secretariat reported that greater openness had been observed in the services sector,
particularly in insurance, postal services, and telecommunications.   He asked Japan to outline its
plans for further opening up of services in the next few years.
36. It was clear that the Government of Japan attached a great deal of importance to the Doha
Development Agenda, as indicated by the attention devoted to it in the Government Report.  Some
would question the emphasis on the multi-functionality of agriculture;  the attention to non-trade
concerns in agriculture seemed to be considerable.
37. The discussant expressed appreciation for Japan’s contribution to the Trust Fund for
Technical Assistance for 2002, and hoped that increased contributions in future would reflect Japan’s
growing interest in this area.  Japan had always been pro-active in assisting the LDCs.  For most
LDCs, Japan was a most important bilateral development partner, which took a great deal of interest
in supporting their economic development plans.  In  matters of FDI inflow into LDCs, the Japanese
Government had taken a leading role in encouraging companies to invest in LDCs.
38. Japan did not feature very prominently in bilateral trade relations with LDCs.  In 2000,
Japan's total imports from LDCs amounted to US$1,237 million, which was barely 4% of total LDC
exports.  The question that emerged was whether this was due to trade barriers or the inability of the
LDCs to export.  The LDCs had supply side problems, which they were trying to address.  However,
it was significant for WTO Members to examine the market access provided by Japan.
39. Based on data supplied by the Japanese authorities to the IDB of the WTO, the discussant
noted that in 2000, of the total imports from LDCs of US$1,237 million, US$321 million entered
Japan under non- ad valorem  duties.  As the duties were non- ad valorem , the IDB figures did not
explain their nature.  It was clear, however, that more than a quarter of the products, in value terms,
entered Japan on a non- ad valorem  basis, and this pointed to market access barriers that were not
transparent in the database.
40. Using the LDC preferential tariff offered by Japan, the imports into Japan in 2000 amounted
to US$665.6 million.  If the MFN tariff rates had been applied, the duty-free imports would have been
to about US$362.5 million, indicating that LDCs had had an added benefit of US$303 million by the
preferential rates.   In 2000, the LDCs were able to export close 53% of their exports to Japan under
the preferential tariffs.  The rest, however, was subject to duty at varying rates.
41. Japan notified some additional GSP measures to the Committee on Trade and Development in
2001.  The data of imports under this scheme had not yet been incorporated into the IDB database.
However, out of the 7,106 tariff lines on which Japan offered LDCs preferential tariffs, imports
actually took place on only 644 tariff lines and in those lines the imposition of non- ad valorem  duties
was high along with quantitative restrictions.
42. These statistics revealed the opportunity for Japan to further open up its market to LDC
products.  Many countries were offering duty-free and quota-free market access for products from
LDCs;  the discussant hoped that Japan would do the same in the not-too-distant future, with realistic
rules of origin that conformed to LDCs' needs.
43. Japan was a strong supporter of the multilateral trading system, and had a good track record
of positive achievements in its trade policy.  Japan participated actively in the deliberations of theWTO, and contributed significantly to its decision-making processes.  The discussant hoped that theWT/TPR/M/107
Page 10
Government would carry out structural reforms and implement policies that would enable the country
to emerge from the current economic downturn.  This recovery was important, not only for Japan but
also for other countries in Asia and beyond.WT/TPR/M/107
Page 11
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
44. Members thanked the Japanese Government and Secretariat for their Reports.  They looked
forward to receiving any outstanding repl ies to their advanced written question.
45. Many noted that their bilateral trade and investment ties with Japan had been strengthened
over the recent period.  Noting that the Government of Japan had placed more emphasis on structuralreform, Members hoped that reform measures would actually lead to a  recovery of the economy.
46. Members appreciated Japan's active role at the WTO, including its strong support for the
Doha Development Agenda, and commended the authorities for their active engagement in properly
reflecting the interests of developing countries in the ongoing negotiations and work. However, some
Members expressed concerns about the nature of Japan's proposal in agriculture. Members noted
Japan's increased involvement with regional and bi lateral trade agreements; in this regard, they
encouraged WTO-compatibility, notably on product and sectoral coverage.
47. Members commented in particular on Japan's complex tariff structure, including tariff quotas,
significant tariff peaks, and tariff escalation for some products, and the fact that non- ad valorem
tariffs tended to involve relatively high applied rates.  Many Members appreciated that Japan had
shown restraint in the application of anti-dumping and countervailing measures.
48. Members noted that the level of domestic support for agriculture seemingly exceeded the
sector's contribution to GDP.  Although generally acknowledging the importance of non-trade
concerns in agriculture, some Members urged Japan to address these concerns in a manner that would
not unduly distort production or trade.
49. The representative of Switzerland stated that his country and Japan often shared similar views
on a broad range of areas that were under discussion within the multilateral framework;  for example,
their belief that agricultural policy should reflect the multifunctional nature of the sector and their
support for the “Singapore Issues” in the Round.  He  asked for Japan's views on the strategic decision
process with regard to its selection of potential bilateral or regional free-trade partners, and its
priorities in that field.
50. While Switzerland welcomed Japan's introduction of legislation to prevent improper actions
in government procurement, he was concerned w ith the low level of transparency in tendering
procedures, in particular for government procurement not covered by the GPA.  He requested
information on measures taken, since Japan's previous Review, to increase fairness and transparency
in procurement not covered by the GPA.
51. He sought the reasons for Japan not recognizing Swiss quality certificates for medical
devices.  The Swiss Certification Bodies were authorized to issue quality certificates fully valid in
Switzerland and within the European Community, owin g to the entering into force of a MRA between
the European Community and Switzerland.
52. He also asked for Japan's views about the time needed for structural reforms in Japan to lay
the groundwork for an economic recovery, and overcome the recession.
53. The representative of Chile stated that his country and Japan shared the desire to prevent
protectionist abuse of anti-dumping measures, while they differed on agriculture significantly. While
welcoming Japan's reforms to agriculture, he believed that they were still insufficient, and the reforms
had not materialized in Japan's commitment in the agricultural negotiations.  On fishing subsidies,
Chile wished to cooperate with Japan in designing disciplines that would resolve a problem that had
been recognized in the recent Johannesburg summit on sustainable development.WT/TPR/M/107
Page 12
54. The representative of New Zealand encouraged Japan to engage fully in all aspects of the
negotiations under the Doha Development Agenda, for example, by tabling a detailed proposal on
agriculture to develop a draft modalities document for negotiations on agriculture.  No meaningful
commitments in agriculture were made in Japan’s bilateral free-trade agreement with Singapore, and
he hoped that Japan would, in the future, pursue key trade objectives such as comprehensiveness tostrengthen the multilateral trading system.
55. While appreciating Japan’s progress in deregulation and international harmonization of its
standards and technical regulations and the adoption of mutual recognition agreements, he noted with
concern the low acceptance rate of overseas test reports and certification in Japan.
56. Agricultural exports to Japan were severely impeded by its tariff peaks, and there was a
discrepancy between tariff costs for industrial and agricultural goods.   In providing future support to
the agriculture sector, Japan should pursue measures that were decoupled, transparent, targeted anddid not distort production or trade.  A stable food supply could be guaranteed more effectively
through open and effective markets, rather than heavy subsidization of domestic producers.
Government support for agriculture had been at a high cost to Japanese consumers and domestic food
producers, and there had been spillover effects on others, particularly developing countries.
57. Japan had not implemented the International Plant Protection Convention definition of
"official control" and it applied quarantine systems and procedures that New Zealand regarded as
inconsistent with its obligations under the WTO SPS Agreement.  The resulting fumigation rates on
most imported fresh produce led to unscientifically justified trade restrictions due to the consequent
increased costs and reduced shelf-life of the product.
58. The representative of Canada appreciated Japan's recent proposal on non-agricultural market
access, and encouraged Japan to put forward specific ideas to implement the phasing out of export
subsidies, substantially reducing trade-distorting domestic support, and improving market access for
agricultural products.
59. On regional and bilateral initiatives, he was inte rested to know how Japan would approach the
issue of inclusion of the agriculture sector in future agreements.
60. He encouraged Japan in its continued commitment to domestic administrative and economic
reform.  Canada's experience with economic restructuring in the 1990s had shown that, although
painful over a short-term, such measures greatly accelerated economic growth and produced
substantial long-term economic benefit.
61. He applauded Japan's regulatory reform implemented to date, such as the revision of the
Commercial Code with respect to corporate capital structure and corporate governance, the allocation
of increased funding to the Japan Fair Trade Commission, the decision to implement special structuralreform zone, the introduction of increased competition into the telecommunications sector, and the
introduction of revised regulations related to e-commerce and intellectual property.
62. The representative of Korea stated that the Korea-Japan Bilateral Investment Treaty, signed in
March 2002, was expected to come into effect in December 2002.  A joint study group for a Korea-
Japan FTA had also been established;  it comprised experts from both countries' industry,government, and academia.
63. He appreciated recent policy changes of the Japanese government, which placed greater
emphasis on structural reforms than on expansionary fiscal measures.  Early recovery of the Japanese
economy by continuing economic reform was essentia l for a healthy international trade environment.WT/TPR/M/107
Page 13
64. The representative hoped that Japan's recent affirmative determination of dumping on Korean
polyester staple fibre would be terminated immediately.
65. Some of Japan's SPS measures taken in response to the outbreak of BSE were causing an
unnecessary burden on international trade.  He hoped that Japan would ensure that any SPS
regulations did not function as disguised trade barriers.
66. He wished to hear the Japanese Government's plan to reform tariff peaks on products, such as
footwear and some textile and food products.
67. The representative of China noted with concern Japan's increasingly frequent application of
TBT and SPS measures.  Although it was the right of the Japanese Government to apply these
measures to the extent necessary to protect human health and safety of animals and plants, in many
cases they had been applied in a way far beyond the extent necessary.  Exports of Chinese agricultural
products were most affected;  statistics showed that export volume of major agricultural exportproducts from China to Japan dropped between January and July 2002.
68. He also noted with regret the use of the first safeguard measure by Japan in 2001, which was
targeted at Chinese products;  investigation of another safeguard case was extended three times and
continuing. The repeated extension of the investigation without good reasons would result in
misunderstanding or confusion, which was harmful to the healthy development of bilateral trade. Herequested that trade remedy measures be taken in strict conformity with WTO agreements.
69. He sought clarification on Japan's state trading regime, particularly concerning imports of
rice.
70. The representative of Australia appreciated Japan's efforts to deregulate and reform its
economy since 2000, and encouraged further reform.
71. Australia looked to Japan to improve substantially market access and to reduce significantly
its level of trade and production-distorting domestic support.  He hoped that the Japanese
Government's Action Plan for Revitalizing Japanese Food and Agriculture promoted further reform in
the agriculture sector in Japan, especially in terms of promoting a departure from non-efficient
farming practices.
72. He was concerned over the regulation of the telecommunications industry in Japan and
believed this should be undertaken by a wholly independent authority separate from the policy-
making arm.  In the area of tariffs, Australia was interested in agricultural tariffs as well as quota
allocation for footwear, particularly unused quotas.
73. Australia would share its disappointment with other suppliers if a safeguard mechanism was
introduced on beef imports to Japan in the wake of the discovery of BSE in Japan.
74. The representative of Colombia stated that Ja pan's participation in the Colombian market had
increased in recent years, while Colombian exports to Japan had plummeted.  Colombia and Japan
were working towards the improvement and clarification of anti-dumping disciplines, and had shared
concern in the area of dispute settlement.  Although Colombia supported the issue of anti-dumping
and was flexible on the Singapore issues, such issues were not part of the negotiating mandate.  Any
change made to the Doha mandate would require the incorporation of themes and issues that were ofspecific interest to developing countries, such as  agriculture, special and differential treatment, and
implementation.WT/TPR/M/107
Page 14
75. The representative of Hong Kong, China stated  that Japan’s sustained recovery would hinge
on its structural reforms, and was interested to hear further from the Japanese delegation about the
prospects of the regulatory and other structural reforms.
76. While WTO-consistent RTAs could be building blocks for multilateral trade liberalization,
the proliferation of RTAs could have possible downside effects if the WTO failed to advance inparallel as the unique forum for global trade liberalization and rule-making.
77. He commended Japan’s efforts in reducing applied tariffs in the past years, however, some
tariff lines still entailed high non- ad valorem  duties;  he encouraged Japan to remove tariff peaks and
reduce high tariffs, particular in sectors of interest to developing Members, in the current market
access negotiations.
78. Hong Kong, China and Japan both attached great importance to the removal of MFN
exemptions, elimination of horizontal restrictions, and further liberalization in various services sectorssuch as maritime transports services.  They both believed that the existing AD rules should be
clarified and improved so as to prevent the excessive use and abuse of AD measures for protectionist
purposes.
79. The representative of the Separate Customs of Territory of Taiwan, Penghu, Kinmen and
Matsu (Chinese Taipei) asked how Japan's trade poli cy dealt with the differences between the legally
binding bilateral MRAs of the type the Japan had recently signed, and its non-legally-binding
multilateral arrangements, such as those under APEC, especially in the area of conformity assessment
procedures.
80. Although Japan had made some changes since its previous Trade Policy Review, it still
appeared to be maintaining export controls on some products, such as eel fry.
81. The representative of Argentina stated that the level of government support for agriculture
was  considerable;  he hoped that the Government of Japan would undertake in the current
negotiations to further reform the sector, and work to overcome certain pending sanitary issues, which
impeded entry of some products to the Japanese market.
82. The representative of the European Union stated that there was still great potential for growth
in bilateral trade:  market entry costs in Japan were high, reflecting a range of problems such as weak
competition-policy enforcement and over-regulation.  Japan seemed to be hesitating to offer new
perspectives for investment so as to support restructuring of the Japanese economy.  He hoped that the
regulatory reform dialogue between the European Union and Japan would help to achieve some
results in areas such as competition, insurance industry regulation, and transparency in public
administration procedures.  The dialogue needed to be sustained and focused on achieving tangible
progress not only through the evolution of legi slation but also through real implementation.
83. He encouraged Japan to move towards prom oting FDI inflows and enforcing a stronger
competition policy in order to create a more favourable business environment.
84. He requested some detailed information from Japan regarding the utilization rates and the
tariffs applied within tariff quotas for leather and leather products compared with the normal MFN
tariffs for the same products.  He was also interested to know the share of these quotas in relation tototal imports of the same products, and their consumption in Japan, about the distribution of quotas
among exporting countries, and the criteria for this distribution.
85. Although the Government seemed to have established a unified list of qualified suppliers for
all central government entities, since January 2001, it appeared that, in practice, in order to participate
in open or selective tendering procedures in public works, domestic and foreign suppliers wereWT/TPR/M/107
Page 15
required to apply for qualification to each procuring entity.  He requested Japan's comments on this
issue.
86. The EU had several concerns on Japan's application of sanitary and phytosanitary measures;
these included food additives, regionalization and non-quarantine organisms, as well as concerns
regarding transparency, accountability, predictability and independence of the regulatory process inJapan.  He encouraged the Japanese authorities to ensure the effective implementation of instruments
and procedures to promote transparency and account ability, such as the "public comments" and "no
action letter" system.
87. The EU was interested in learning more about the opening of the Japanese pension funds
market to investment advisory companies, in pa rticular regarding the management of such funds
under the Postal Service Public Corporation.  He also asked whether Japan could consider revising
legislation in the securities and exchange field providing for the prohibition of integrated managementof those businesses.
88. The representative of Indonesia on behalf of ASEAN stated that ASEAN continued to view
Japan as an important destination for its exports, and looked forward to Japan addressing tariff peaks
and escalation in sectors of ASEAN export interest, particularly processed goods such as textiles,
footwear, leather, food, and rubber products.  It also looked towards Japan for improved marketaccess for tropical fruits and cut flowers.
89. ASEAN commended Japan for restraint in using contingency measures, however, it hoped
that distortions to competition, which were still ev ident in some sectors, especially in agriculture,
would be further reviewed and reduced in the future.
90. The representative of the United States was concerned with Japan's use of non-science-based
import restrictive measures, affecting the importation of a broad range of agricultural products, and
expected Japan to fulfil its obligations under the WTO SPS Agreement and employ only the least
trade-restrictive sanitary and phytosanitary measures.  She was also concerned with indications that
Japan might impose emergency tariff measures on beef imports;  such measures would be
inappropriate if they were taken in response to a recovery in the beef market following the previous
year's BSE crisis in Japan and were not due to an import surge above historic levels.
91. She applauded Japan's efforts to improve transparency and competition in government
procurement, but noted that problems such as bid-rigging remained in the construction sector.  She
urged Japan to continue to implement competition-enhancing measures.
92. She welcomed the ongoing reforms in Japan's financial services and telecommunications.
She commended Japan on the steps taken in 2001 that eased the process by which foreign banks could
establish a commercial presence and operate in Japan, and welcomed Japan's continuing commitmentto address problems in its banking sector.
93. It was essential that interested parties be given opportunities to participate in a decision-
making process on a major funding decision for the Life Insurance Policyholder Protection
Corporation.
94. On telecommunications, the United States was concerned that Japan might raise its
interconnection rates, despite the global trend of reducing such rates, and urged Japan to continue to
take steps that would spur growth and benefit consumers.
95. The representative of Uruguay stated that the extent of Japan's direct subsidies on agricultural
products, such as rice, was detrimental to the producers of agricultural products in, inter alia ,
developing countries.  The agricultural mandate agreed in Doha was ambitious and commensurateWT/TPR/M/107
Page 16
with the requirements, and he hoped that it would be achieved, thereby reducing the unfair
discrimination this sector had suffered since the creation of GATT.
96. The representative of Norway welcomed the recent liberalization of the import quota system
for some seafood products and looked forward to further liberalization in this field.
97. Japan had expanded  the scope of  unilateral preferential market access granted to products
from certain developing and least developed countries under its GSP scheme;  he looked forward to
further efforts from Japan in facilitating an increas ed participation of developing countries in world
trade.
98. Norway welcomed Japan’s continued efforts to implement reforms in services,  in particular
financial and telecommunications services.  He stressed the importance of further liberalization of
maritime services, including access for foreign vessels to domestic cabotage and the possibility for
foreign shipping companies to register ships in the Japanese ship register directly or by establishing aJapanese subsidiary.
99. Japan and Norway shared the view that non-trade concerns had to be taken into account in the
WTO negotiations.  He believed that these concerns could not be adequately addressed unless there
was a domestic agricultural production.  Norway fully recognized Japan’s need to have recourse to an
appropriate combination of policy measures in order to safeguard its non-trade concerns inagriculture.
100. He looked forward to further information a nd analysis in relation to how the Japanese
authorities intended to ensure economic recovery.
101. The representative of Mexico stated that this Trade Policy Review of Japan was of particular
interest as talks were under way with a view to setting up a free-trade treaty between the two
countries.  Mexico believed that the most objective, transparent and functional way to identify the
consistency of Members' trade policy was the Trade Policy Review Mechanism.
102. The representative of India noted that Japan's agriculture sector was highly protected;
regarding the reduction of subsidies, India looked forward to the ongoing reform process under the
Japanese Basic Law on Food, Agriculture and Rural Areas.
103. Indian exports to Japan had been affected by the use of stringent sanitary and technical
standards enforced by the Japanese authorities.  Since the previous Trade Policy of Japan, there had
been little progress in this regard.  He urged the Japanese delegation to look into these concerns and
take satisfactory remedial measures.
104. Japanese business practices were sometimes at variance with international norms.  For
example, contracts did not have the same sanctity in Japan as in other international markets.  In the
software industry, clients often changed specifications after the contract was signed and refused to payextra for the changes.  In addition, products exported from Japan were on a cash-down payment basis,
while imports were paid for after a credit cycle of 90 to 120 days.  He requested the Government of
Japan to look into these practices of its companies.
105. The representative of Brazil commended the Japanese Government's efforts to counter the
recessive macroeconomic trend and encouraged it to continue on the path of regulatory reform by
further reducing its intervention in the economy and introducing more competition in the domestic
market.
106. Further deregulation was needed in a number of areas, particularly agriculture;  the sector
continued to be protected by high tariffs and other border measures and internal support measures.  HeWT/TPR/M/107
Page 17
urged Japan to improve market access for agriculture not only through the reduction or elimination of
the many types of barriers, but also through the adoption of a more simplified and transparent tariff
regime, based on ad valorem  terms.
107. The representative of Czech Republic stated that the Czech Republic had special interest in
further development and continued intensification of the bilateral ties and hoped to be able to benefit
more from the promising opportunities offered by the Japanese market.  Despite the progress in
improving the competitive environment, the repres entative was concerned with important distortions
to competition in agriculture and with non-tariff obstacles to trade, especially to access for heat-
processed foodstuffs (canned meat) into the Japane se market.  For example, following an official
application, it had taken almost 18 months for Japan's Ministry of Agriculture, Forestry and Fisheries
to exempt the Czech Republic from the list of countries at risk of occurrence of infectious diseases of
farming animals (Group 2) and include it on the list of countries without of such a risk (Group 1) in
the accordance with the Domestic Animal Infectious Disease Control Law.  The long delay by the
Japanese administration in issuing a positive decision prevented Czech exporters from exporting fresh
meat or heat-processed meat products (ham, salami, etc.) to Japan.  He requested details of the exact
criteria applied by the Japanese administration in evaluating countries' risk associated with infectious
diseases of farm animals.  The Czech authorities were of the opinion that the Czech Republic hadachieved fully reliable standards in this respect.
108. The representative of Mauritius noted Japan's very active participation in regional
organizations such as the APEC, ASEAN+3, and the ASEM and its very laudable initiatives such as
the Japan-Singapore Economic Agreement for a New-Age Partnership and the initiative for Japan-
ASEAN Comprehensive Economic Partnership.  The Japan-ASEAN Comprehensive EconomicPartnership had broad provisions for assistance in science and technology, human resource
development, and tourism;  she asked Japan whether similar initiatives would be made available to
small economies in the future.
109. Mauritius appreciated Japan's support to developing and least developed countries, and to
economies in transition in the WTO.
110. She was pleased with the outcome of the International Conferences on Non-Trade Concerns
in Agriculture, of which Japan and Mauritius had been among the co-organisers;  the latest conference
had been held at Ministerial level in Rome in June 2002.  Mauritius believed that it was necessary to
translate the non-trade concerns into concrete modalities to be included in future agreements on
agriculture.
111. The representative of Slovak Republic appreciated Japan's recent liberalization efforts,
although in some sectors there were potential distortions in regard to competition, especially in
agriculture.  He encouraged Japan to further expand FDI to the Slovak Republic, and sought some
information on Japan's investment strategy, especially its outward investment policy regime.
112. The representative of Poland recognized the recently increased activity of Japanese investors
in Poland, and the overall inflow of Japanese investments.  Poland's accession to the European Union
should intensify the trade relationship between Japan and Poland.  He observed with interest recentinitiatives such as the Action Plan for EU-Japan Cooperation.
113. The representative of Thailand expressed support for the initiative for an ASEAN-Japan
Comprehensive Economic Partnership, and welcomed the accord on a free-trade area that had just
been signed between Japan and Southeast Asian nations.  The agreed framework would provide a
basis for gradually achieving a free-trade area within ten years.WT/TPR/M/107
Page 18
114. The representative of Hungary stated that Japan's high non- ad valorem  duties on agricultural
products not only impeded exports but distorted comparative advantages and placed competitive
products at an unreasonable and unfair disadvantage.
115. In 1998 Hungary proposed a dialogue with the Japanese SPS authorities with the objective of
clearing the way for Hungarian fruit and vegetables to the Japanese market. The necessarydocumentation had been submitted to the Japanese authorities for evaluation about two years ago;
this appeared to be still in progress, and he hoped that the review would be expedited and come to a
positive conclusion within a short period of time.WT/TPR/M/107
Page 19
V. REPLIES BY THE REPRESENTATIVE OF JAPAN AND ADDITIONAL
COMMENTS
116. The representative of Japan stated that, with the series of measures the Government had taken
on the basis of the proposals by the Council on Economic and Fiscal Policy with a view to revitalizing
the economy, Japan had succeeded in halting the downward trend of economic and fiscal conditionsin the first half of the year 2002.  However, severe economic conditions still persisted and uncertainty
was growing over the future growth of the Japane se economy.  It was under such circumstances that
the Comprehensive Measures to Accelerate Reforms were announced on 30 October 2002.  The new
steps under the programme reinforced the policy measures to bring greater stability to the financial
system by working toward a rapid recovery of financial intermediary function, which should facilitate
the smooth reallocation of resources to growth fields  such as information technology, and to realize a
rapid recovery of Japan’s financial and industrial sectors.
117. It was the firm intention of the Government to resolve the problems of non-performing loans
by the end of FY2004, by reducing the ratio of major banks’ non-performing loans to approximately
half the current level.  The Government would also set up a mechanism tentatively called an
Institution for Industrial Revival in order to assist revitalization of companies carrying excessive
loans.
118. The Bank of Japan also decided on 30 October 2002 to take additional easing measures to
maintain the smooth functioning and stability of fi nancial markets, thereby strengthening support for
economic recovery from the monetary side.   
119. The Government would conduct thorough tax reforms and would introduce tax reduction
exceeding ¥1 trillion by as much as possible under a multiple-year, revenue-neutral framework.  TheGovernment was currently considering possible items for the tax reduction, including enhancement of
corporate tax incentives for research and developm ent and investments, which should help companies
to allocate their resources in growth areas.
120. One concrete example of the Government's efforts for regulatory reform was the
establishment of the Special Zones for Structural Reform.  This was to revitalize the economy throughmaximizing private-sector vitality and expanding the private sector activities. The relevant bill,
submitted to the Diet, would open the way for privat e companies to enter, for example, into the
business of special nursing homes for the elderly, and into the agriculture sector through preferential
regulatory measures in the Special Zone.
121. The Government’s medium-term vision was th at overcoming deflation by promoting
structural reforms would help the recovery of the Japanese economy and some positive growth would
be seen from FY2003.  In addition, the growth driven by demand in the private sector should berealized at a steady pace of at least 1.5% in real terms on an annual basis.
122. Although some delegations asked Japan to be more forthcoming in the agricultural
negotiation by submitting specific proposals, and some mentioned agriculture as being an exception to
Japan’s positive attitude in the new Round, these comments were unfounded.  Japan was fully
committed to engaging actively in the agriculture negotiations on the basis of the Doha mandate,which recalled the long-term objective of the Agreement on Agriculture to establish a fair and market-
oriented trading system through a programme of fundamental reform.
123. The Doha mandate talked about substantial improvement in market access, a reduction with a
view to phasing out all forms of export subsidies, and a substantial reduction in trade-distorting
domestic support, but it also stated that non-trade concerns would be taken into account in thenegotiations.  Non-trade concerns were an integral part of any fundamental reform and negotiation.WT/TPR/M/107
Page 20
124. The negotiations on agriculture had been conducted smoothly in accordance with the Work
Programme that Members agreed on in March 2002.  However, there was still considerable
divergence of positions among Members on certain critical issues.  If Members were to overcome the
difficulties and move forward, it was indispensable for all to be realistic.  Any unrealistic formula, or
too ambitious proposals that did not take into account the political realities, would not help Membersfind a solid basis for further negotiations.  Japan was fully conscious of the vital importance
agriculture negotiations represented in successfully conducting the current round of negotiations.
Japan would work with its negotiating partners to find the modalities that would allow Members to be
ambitious in line with the Doha mandate and give th em the necessary flexibility to meet its needs and
sensitivities.  The modalities should reflect basic rules that all Members could adhere to.  It would be
premature to discuss the specific figures before Members had agreed on the basic rules concerning the
reduction of tariffs, AMS or special safeguard measures.  Therefore, the criticism that Japan haddelayed or stagnated agricultural negotiations by not presenting specific figures was misdirected.  In
fact, Japan had put forward a series of specific and realistic proposals with particular emphasis on the
rule elements.  Members were not yet overly concerned at not meeting the deadlines for the
modalities.  Japan was committed to meeting the deadlines and urged all Members to engage in the
negotiations in a realistic manner in order to converge diverse opinions.   
125. Japan had contributed CHF1.5 million to the WTO Trust Fund to promote trade-related
technical assistance to the developing countries, and in terms of bilateral assistance, had announced
that it would provide 4,500 persons from developing countries with trade-related capacity-building
training within a five-year period from FY2000.   
126. As for market access for products from LDCs, as a result of the expansion of the product
coverage in April 2001, almost all industrial products from LDCs were offered duty-free and
quota-free access to the Japanese market.  Japan was determined to continue to work towards the
objective of duty-free and quota-free market access for all LDCs products.
127. In this connection, in June 2002, Prime Minister Koizumi announced a decision to examine
the possibility of expanding coverage of duty-free and quota-free treatment for LDC products by therevision of tariff-related laws for FY2003.
128. The discussant believed that, it was clear from the Japan' statement that Japan recognized its
role in the world economy and the importance of undertaking its structural reforms as quickly and as
efficiently as possible.
129. Many Members had outlined the importance of their bilateral relations with Japan as well as
Japan's importance in the world economy as a whole, particularly in trade.  Hence, it was of critical
importance to all Members that Japan regained its due place in multilateral trade and economicrelations.
130. It was very important that Members recognized the efforts Japan was making, particularly
with regard to structural reforms in the ba nking sector, non-performing loans, and corporate
governance.  Certain timeframes indicated for reforms were critical and needed to be observed.
131. He welcomed Japan's attention and commitment to the current round of trade negotiations,
and looked forward to its continuing effective part icipation in the trade negotiations, particularly in
agriculture.
132. He welcomed Japan's initiative to examine the possibility of additional concessions for least
developed countries from the next fiscal year.  Many countries offered least developed countries duty-
free and tariff-free access for industrial products, but LDCs produced very few industrial products;  itwas the full range of products that was important for LDCs.WT/TPR/M/107
Page 21
133. The representative of Japan stated that he was grateful for delegates' support for Japan's basic
macroeconomic policy and structural reform.  The Government was conscious of the urgency of
putting policies in place as soon as possible in order to achieve robust recovery of the Japanese
economy.  The Prime Minister's announcement that Japan would dispose of non-performing loans
held by private banks by FY2004 was a good indication that this was one of the main sources ofdifficulties in the current economic situation in Japan.
134. Market access for industrial products of least developing countries was virtually duty-free and
quota-free.  Japan was working hard for the remaining products, including agriculture, fishery and
forestry products;  the Government was determined  to expand the list as much as possible and
improve market access for LDC products by the next fiscal year.
135. Japan viewed efforts to strengthen economic partnership through bilateral and regional
economic arrangements, including FTAs, as a complement to the multilateral trading system under theWTO and not as its substitute.  In selecting potential bilateral or regional economic partners, Japan
carefully considered economic, strategic, and domestic factors, including requests from domestic
businesses.
136. On this basis, Japan had signed its first agreement with Singapore, and was now advancing
economic partnerships with other countries in East Asia.  Japan had decided to start negotiations withMexico taking into consideration requests from the relevant domestic industries.
137. In pursuing such partnerships, Japan aimed to conclude a wide-ranging agreement, which
would include, for instance, provisions on trade in services, investment, movement of natural persons,
and economic cooperation, such as financial services and information and communications
technology.  It was Japan’s intention not to exclude any specific sectors.
138. There had been increasing requests from Japanese consumers to ensure food safety, and to
prevent the introduction of pests and infectious diseases from overseas.  It was the Government's
responsibility to respond to these concerns.  Japan’s sanitary and phytosanitary measures had been
pursued for the purpose of properly responding to such critical needs raised by the society, and had
been established on a scientific basis.  Japan constantly ensured that these measures remained at anappropriate level for the protection of human, animal or plant life or health, in conformity with the
SPS Agreement.  Considering these factors, it was not appropriate to criticize Japan’s SPS measures
as unjustifiable or excessively restrictive.
139. Several Members had raised out the issue of contingency measures, such as anti-dumping, in
which Japan felt that it was an affected Member rather than an invoking Member.  The discussant had
noted that a considerable number of Members commended Japan’s efforts, under the WTO rules
negotiations, to clarify and improve discipline under the current anti-dumping rules so as to pursue thefundamental objective of avoiding any misuse of these instruments.  Japan was also encouraged that
they shared the view that the Anti-Dumping Agr eement should better reflect the reality of today’s
world trade.
140. The representative stressed Japan's efforts to ensure non-discriminatory, transparent, and
competitive opportunities for foreign suppliers to participate in tendering procedures in compliancewith the Government Procurement Agreement.  Th e Government had enforced the Act for Promoting
Proper Tendering and Contracting for Public Works, which entered into effect in 2001.  The Act
obliged all entities commissioning public works to announce prospects for orders of public works in
each fiscal year and the process and content of tenders and contracts of their public works.  The Act
requested commissioning entities of central and local governments and other governmental bodies tosubmit a report on the measures taken as of the end of the previous fiscal year.  According to the Act,
the relevant Ministers urged heads and supervisors of procuring entities to take measures necessary to
comply with the Guiding Principle of the Act.WT/TPR/M/107
Page 22
141. The Ministry of Land, Infrastructure and Transport (MLIT) began online bidding in
October 2001 and planned to shift all of its construction projects to this online bidding system from
the beginning of FY2003.  The Government would introduce online bidding for non-public works by
the end of FY2003.
142. Japan had been promoting procurement through procedures based on the principle of non-
discrimination and transparency as well as on fairness and openness.  Japan invited foreign suppliers
to take advantage of the opportunities and to participate more readily in tendering procedures in
Japan.
143. The discussant noted that bilateral agreements had a certain legal status and thus needed to
complement the multilateral system.  With regard to measures affecting imports, he hoped that the
Japanese delegation might give some indication of when non- ad valorem  duties and other quantitative
trade restrictions would be phased out.
144. He believed that Japan had valid concerns regarding protective measures taken under the SPS
Agreement.  The key issue was that these measures must be fair and reasonable under the Agreement;
no one disputed Japan's right to use the Agreement or how to use it.  However, the issue of fairness
and maintaining a balance between the needs of the country and the interests of outsiders who wished
to export to Japan was critical.
145. With regard to contingency measures, Japan had not been among the main countries using
these agreements;  therefore, he did not believe that this was a major issue.
146. The representative of the United States was encouraged that Japan did not intend to exclude
any specific sector and fully intended to include agriculture in FTAs.  On SPS, he understood Japan's
right to ensure food security, but remained concerned with its use of non-science-basedimport-restrictive measures.
147. The representative of the Republic of Korea requested further clarification regarding two of
his delegation's written questions.  With respect to  question 6, although certain standards certification
requirements were voluntary they were, in practice, necessary for market access and were very
burdensome.  Regarding question 14, Korea was concerned about the requirement for an existingdomestic sales network before an import licence could be granted for alcoholic beverages;  this
requirement appeared to protect already established domestic producers.
148. The representative of China stated that he saw the SPS measures as a major difficulty for
bilateral trade with Japan.
149. No Members had a problem with the legitimate right of the Japanese Government to take SPS
measures as in accordance with the SPS Agreement.  However, the problem was whether these
measures were unnecessarily restrictive and whether they were scientifically based.
150. He also wished to know the nature of Japan's state trading system and how it operated in
detail.
151. The representative of the European Union added his voice to the concerns already raised on
the application by Japan of the sanitary and phytosanitary measures.  With regard to Japan's answer to
EU's question 9 regard to scientific data on the treatment of oranges against flies.  He had taken notethat Japan had initiated a re-examination of  this scientific data, and wished to know when Japan was
planning to do that.
152. The representative of Australia remained concerned with Japan's approach in the agriculture
negotiations and some of the comments suggesting that others were being ambitious or unrealistic inWT/TPR/M/107
Page 23
the negotiations.  He was also concerned with the suggestion in Japan's statement about the need to be
balanced within each specific negotiation.
153. The mandate on agriculture to which Members were committed was ambitious and it referred
to fundamental reform of the sector;  it committed Members to substantial improvements in market
access, phasing out all forms of domestic support, and substantial reductions in trade-distortingdomestic support.  He was of the view that the proposals put forth by the Cairn's group and others
were in the spirit of the mandate.  Japan's vision on agriculture negotiations appeared to encompass
two basic objectives that might be characterized as a small, incremental change to Uruguay Round
commitments on agriculture, while at the same time being prepared to be far more ambitious in other
areas.
154. The representative of Japan stated that he was in full agreement with the discussant's
statement about balance.  There should be balance between the protecting consumers as well as
human, animal, and plant health, and finding a reasonable and appropriate level of protection.
155. Japan was on many fronts a disease/pest-free country, and the introduction of infectious
disease or pest, through insufficient quarantine measures, would severely damage the Japanese
industry.  Once this damage was done it was difficult to recover, and as recovery to the previous level
of safety was slow.  Furthermore, the Government was faced with growing public awareness about thesafety of the food and the recovery of consumer confidence was even more difficult than the recovery
of the material damage to the industry.
156. SPS issues were highly technical in nature and differed from one product to another, or one
pest to another.  A full, satisfactory response to some of the concerns expressed on SPS-related issues
could only be provided through consultations at expert level, including the question of the scientificbasis upon which Japan's experts were acting.  Japan was prepared to enter into any bilateral
consultations at expert level.
157. On certain technical questions raised by Korea, Japan would respond to these bilaterally.  On
the question of the liquor sales licensing, he believed that there was no such restriction as mentioned
in Korea's questions, but he would clarify their specific concern and respond bilaterally.
158. Members had an ambitious mandate under the Doha Development Agenda.  This mandate
was fully shared by Japan, who was working for a fundamental reform in the agriculture sector.  Japan
was not using the non-trade concerns as an excuse not to move in the direction of fundamental reform.
159. The Government was undertaking fundamental reform in agriculture for its own interest.
Japan was making its agriculture more market oriented.  Japan had severe budgetary constraints, and
was not in a position to accord ample subsidizes to its farmers;  it had to respond more to signals from
the market.
160. On the question of a balance within a particular sector, this was not an excuse to offer less
than what was required by the mandate.  There had to be a balance within a sector in the sense that
there had to be a balance between the obligations of exporters and importers. Japan was very
dependant on agricultural imports;  its self-sufficiency rate was 40% in calorie terms, indicating that
Japan was very dependent on imported food.  Being the world's largest net-food importer and being sodependant on imports of agricultural products, there was no way that Japan could strike a balance
within the agriculture sector alone.
161. On FTAs, the Government of Japan was firmly of the view that any regional agreement or
bilateral agreement Japan signed should be fully consistent with the WTO Agreement.WT/TPR/M/107
Page 24
162. Several Members had referred to the OECD report stating that Japan’s total transfers to
agriculture amounted to 1.4% of GDP, while agricu lture’s GDP share was 1.1%.  These two figures
had been calculated on a different basis and thus it was misleading to draw a simplified conclusion.
GDP was on a value-added basis and did not include production costs.  On the other hand, total
transfers to agriculture, or TSE (total support estimate), which was an index estimated by the OECD,was on a gross basis and did include production costs.  The Secretariat Report explicitly admitted this
fact.
163. The Secretariat Report stated that "According to  the OECD, more than 95% of total support to
producers has consisted of measures that potentially distort production”.  Japan was of the view that
this was also misleading because, to be accurate, more than 95% of the so-called Production Support
Estimate (PSE) calculated by a certain OECD formula, fell into the categories of support that the
OECD considered to be potentially production-distor ting, i.e. market price support, payments based
on output, and input subsidies, and the average shar e of this support among OECD countries PSE was
78%.  In other words, Japan was not the only OECD  Members with a relatively high percentage of
such support.
164. There were more relevant figures in the WTO context.  According to Japan's 1999 notification
to the WTO, the shares of Amber, Blue a nd Green Box measures were 21%, 3% and 76%,
respectively, which showed that the share of Green Box measures, i.e. non- or minimally
trade-distorting support was overwhelmingly high in  the case of Japan.  Moreover, as a result of the
policy reform moving from price support measures to safety-net mechanisms, the total amount of
domestic support provided to agricultural producers, according to Japan's notification of the total
AMS in 1999 to the WTO, was reduced to less than 20% of the final commitment level of 2000.These figures demonstrated the effects of Japan’s policy reform of shifting away from trade-distorting
measures.
165. Current tariff levels for agricultural products were determined in a series of negotiating
rounds, especially tariffication on the basis of the tariff equivalence in the Uruguay Round, and
accepted by all Members of WTO.  Determinations of appropriate tariff levels needed to take intoaccount the need for smooth implementation of a continuous reform process, as well as non-trade
concerns and other priorities of each Member, reflecting diverse situations of individual products in
different Members.  The tariff levels should in any event be negotiated in the current round of
negotiations on agriculture.  Japan was of a strong view that there was no room for the “one-size-fits-
all” approach, and flexibility among products needed to be retained.
166. Specific tariffs and ad valorem  tariffs had their own strengths and weakness, so that the
choice depended on policy objects and product characteristics.  Specific tariffs were transparent andpredictable in the sense that tariff amounts were easily determined regardless of market price
fluctuations.  Furthermore, there was no uniform and agreed method to convert the specific tariffs to
ad valorem  tariffs. For these reasons, mandatory transformation to ad valorem  tariffs was not
appropriate and would be unrealistic considering such methodological difficulties.
167. With regard to the rice policy reform, the distribution system for rice was drastically reformed
with the half-century-old practice of government control on all distributed rice being replaced with an
unrestricted private-sector distribution system;  the new system was based on market mechanisms and
had no government intervention in the formation of prices.  As the government obligation to purchase
all distributed rice was abolished, the Government’s role and function became limited;  it now
purchased only a limited amount of rice, indispensabl e for the management of reserve stocks, at the
market price level.
168. Food was the most basic substance for humans and, therefore, it was the fundamental
responsibility of the Government to ensure a stable supply of safe food.  To this end, it was prescribed
in the Basic Law on Food, Agriculture and Rural Areas that a stable food supply should be securedWT/TPR/M/107
Page 25
primarily through promotion of domestic agricult ural production, together with an appropriate
combination with imports and stockpiles.  More specifically, Japan determined the target self-
sufficiency ratio as 45% in the Basic Plan.  Japan's idea was that the food self-sufficiency ratio would
rise only if more consumers and the food industry  chose domestic products.  Japan would therefore
make efforts to meet this target by accelerating structural adjustment, developing and disseminatingnew technologies and undertaking measures for supplying products that met consumers’ needs, such
as food safety and quality, while ensuring conformity with the international disciplines on agricultural
trade.  Accordingly, Japan did not think its efforts in this context might lead to trade distortions.
169. Japan believed that it was ungrounded to single out fisheries subsidies as a cause of trade
distortion or over-exploitation of fishery resources.  A special rule for subsidies in the fishery sector
was unnecessary, since there was no specific peculiarity regarding the trade effects of fisheries
subsidies to be addressed by the WTO Agreement on Subsidies and Countervailing Measures.  Inaddition, it would lead to the fragmentation of the Agreement.  Government expenditure for research,
resource management and enforcement was very important to achieve sustainable use of fishery
resources. Japan attached great importance to this policy objective and was prepared to discuss a
comprehensive approach to the issue.
170. In the telecommunications sector, Japan had implemented further regulatory reforms with a
view to enhancing competition, and many consumer benefits had improved due to increased
competition.  Even in the local market, asymmetric regulation had been introduced, thereby
decreasing user charges.
171. Concerning independence from service suppliers, which was required in the Reference Paper
of the GATS, the regulator had already been independent from the suppliers in Japan.  In terms of therelation between policy-making and regulation-supervision functions, Japan considered that a regime
that enabled a mutually cooperative exercise betw een these functions was necessary and appropriate
to ensure swift, flexible, strategic, and comprehensive pursuance of functions, because technical
innovation in this sector occurred at a rapid pace in Japan. Thus, administrative organizations should
be established based on the types of organizations that were deemed to be effective and best suited tothe conduct of administrative affairs in the political system of each Member.
172. Interconnection charges had been steadily falling due to the introduction of a long-run
incremental cost (LRIC) model.  The LRIC model was being revised by the Ministry of Public
Management, Home Affairs, Post and Telecommunicat ions.  Japan was prepared to consider various
measures in order to maintain a fair and competitive environment and to promote further competition
in the telecommunications sector.
173. The representative of the United States reiterated his concern about the indication that Japan
might impose emergency tariff measures on beef imports and that such measures would be
inappropriate if taken in response to a recovery in the beef market following the previous year's BSE
crisis and not due to an import surge above historical levels.  He requested Japan's comments on this.
174. On Japan's decision regarding the Life Insurance Policyholder Protection Corporation, he
stressed that discussions should be held in a very transparent, open, and in an inclusive manner withall interested parties.
175. The representative of Japan stated that, on the emergency tariff on imports of beef, the
measure had been introduced as a result of the negotiation conducted under the Uruguay Round and
had been agreed by all parties concerned.  Members had agreed to reduce the tariff rate on beef from
the agreed bound rate, but this had been coupled with the introduction of emergency tariff measureswhen there was a surge in imports to protect domestic producers.  The considerable reduction that
Japan had accorded was a package that comprised this element of emergency tariff.  This was not a
discretionary measure;  the emergency tariff was triggered automatically when certain statisticalWT/TPR/M/107
Page 26
conditions were fulfilled and because of its automatic nature there was practically no room for
discretion on the part of the Government.
176. On life-insurance, he believed that the system was in the interest of Japan's general public, but
he was prepared to discuss with the U.S. authorities where there was particular interest.
177. The discussant suggested that the Secretariat should try to clarify the question of agricultural
support and the confusion about the statistics.
178. Regarding the explanation provided by the delegation of Japan concerning conversion of non-
ad valorem  tariffs, he believed that these issues would surely arise in the negotiations on agriculture.
179. Regarding Japan's food self-sufficiency target of 45%, he was grateful for the clarification
that this was not something that the Government was tr ying to achieve, but rather that it would be left
to producers and consumers to try and achieve the target without specific Government intervention.
180. The representative of Japan stated that there was a policy target for self-sufficiency set by the
Government, and the Government was trying to undertake structural reform so that Japan's producers
could be competitive in the market and be able to respond to consumer needs.  There was a
combination of efforts by the Government to help producers respond more positively to the demands
of consumers, while efforts were also requested on the part of the consumers to respond to any
positive move on the part of the producers.  There was nothing that would distort artificially themarket-orientated nature of Japan's basic policy thrust.  This was a combination of government-
producer-consumer effort to render Japan's producers more competitive in the market.WT/TPR/M/107
Page 27
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
181. This Meeting has involved a very informative ex change of views, stimulated by the full and
open engagement of the Japanese delegation, highly analytical and insightful comments by the
discussant, and Members' active involvement in the discussion.  This exchange has contributed to a
much better understanding by Members, and thus their collective evaluation, of Japan's trade andtrade-related policies.  The outcome, I believe, has been a highly successful 6
th Review of Japan's
trade policies, practices and measures.
182. Members were encouraged by signs of moderate economic recovery in Japan, whose
economic health is important for the prosperity of the world economy and the expansion of trade.
Members recognized that the multilateral trading system by keeping foreign markets open to Japan's
exports, had contributed to the improved economic outlook for Japan.  While commending Japan's
recent efforts to implement and accelerate structur al reforms, including the removal of barriers to
foreign businesses in various sectors, Members encouraged Japan to press ahead with reforms,
through inter alia  further financial and corporate restructuring, improved market access (particularly
in agriculture), and stronger competition policy, particularly implementation.
183. Members congratulated Japan on its active role at the WTO, including its strong support for
the Doha Development Agenda and commended the authorities for their active engagement inproperly reflecting the interests of developing countries in the ongoing negotiations and work.
However, some Members expressed concerns about the nature of Japan's proposal in agriculture.
Members also noted Japan's increased involvement with regional and bilateral trade agreements; in
this regard, they encouraged the WTO compatibility of these agreements, notably on product and
sectoral coverage.  While expressing their appreciation of preferential market provided by Japan todeveloping and least-developed countries, some Members encouraged Japan to liberalize further its
market in respect of LDCs' products.
184. On trade and trade-related policies, Members remarked in particular on Japan's complex tariff
structure, including tariff quotas, significant tariff peaks and tariff escalation for some products, and
the fact that non- ad valorem  tariffs tended to involve relatively high applied rates.  Some Members
voiced concern over the complexity and seeming lack of transparency of government procurement
practices.  Furthermore, while recognising Japan's right to pursue legitimate policy objectives with
regard to the protection of human, animal and plant life or health, many Members expressed concern
over the complexity of Japan’s standards, technical regulations, and sanitary and phytosanitary
measures, including quarantine procedures (and long delays therein), and encouraged Japan to employ
these measures in the least trade-restrictive manner.  In addition, pointing to the low level of inflows
of foreign direct investment (FDI) into Japan, Members welcomed Japan's efforts to open further itsFDI regime.
185. On sectoral issues, Members noted that the level of domestic support for agriculture
seemingly exceeds the sector's contribution to GDP.  Although generally acknowledging the
importance of non-trade concerns in agriculture, some Members urged Japan to address these
concerns in a manner that would not unduly distort production or trade.  Members recognised thatsubstantial reforms had been undertaken in the financial services and telecommunications, but
expressed their belief that reform should continue with a view to enhancing competition in these and
other services, such as transportation, education, legal and medical services.
186. Members also sought clarification on several specific issues including:
- transparency of regulatory procedures;
- contingency measures, including emergency safeguards;
- state trading;
- export-related measures;WT/TPR/M/107
Page 28
- special economic zones;
- business practices;
- regulations and business costs in telecommunications market; and
- maritime transport restrictions.
187. Members expressed their appreciation of the oral and written responses and explanations
provided by the Japanese delegation; they looked forward to receiving written answers on outstanding
questions.
188. This brings us to the conclusion of our 6th Trade Policy Review of Japan.  The large number
of advance questions, numerous interventions and th e high level of attendance indicate the importance
Members attach to Japan's leadership at the WTO.  In this context, I would encourage Japan to
continue its strong support for the multilateral trading system.  I also hope that Japan will take to heart
the concerns expressed by Members, particularly with regard to its policies on agriculture, sanitaryand phytosanitary measures, government procurement and competition.
* * * * * * * * * *
189. At the end of the meeting, following the Chairperson's concluding remarks, the representative
of Japan pointed out that there had been some confusion with respect to agriculture's share of
domestic support exceeding its share of GDP.  The two figures in question were calculated on adifferent basis.  He stated that Japan was actively participating in the agricultural negotiations by
submitting a comprehensive proposal, therefore comments by some Members that Japan was not
positive to the agricultural negotiations were unfounded.
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