RESTRICTEDWORLD TRADE
ORGANIZATIONGPA/W/234
7 January 2003
(03-0018)
Committee on Government Procurement Original:  English
RESPONSES FROM JAPAN TO QUESTIONS FROM THE EUROPEAN
COMMUNITY RELATING TO ITS NOTIFICATION
(GPA/W/144-146)
Communication from Japan
Please find below Japan's responses to questions from the European Community
(GPA/W/205) regarding Japan's notification (GPA /W/144-146) relating to the East Japan Railway
Company, the Central Japan Railway Company, and the West Japan Railway Company.
1. How many companies have a licence to use the infrastructure of each of the three Honshu
companies?  What are the respective market shares of any such companies?
(a) In Japan, it is possible for a railway company that does not own its infrastructure to operate a
railway business by leasing infrastructure from other railway companies.  Such arrangements are
based on private leasing contracts, not on licensing from the Government.
(b) Railway companies using the infrastructure  of the respective Honshu Companies are as
follows:
- East Japan Railway Company: one lessee (Japan Freight Railway Company
(JR Freight))
- Central Japan Railway Company:  two lessees (JR Freight and Tokai Transport
Service Company)
- West Japan Railway Company:  four lessees (JR Freight;  Sagano Scenic
Railway Co., Ltd.;  Ihara Railway Co., Ltd.;  and Noto Railway Co., Ltd.)
(c) The market share of JR Freight is as follows.  The market share of each of the other four
passenger railway companies is less than 0.1 per cent in terms of passengers andpassenger-kilometres.
(Shares in total cargo (by volume))
JR Freight Other private railways Coastal vessels Airlines Motor vehicles
0.6% 0.3% 8.1% 0.0% 91.0%
(FY1999)
(Shares in total cargo (by ton-kilometres))
JR Freight Other private railways Coastal vessels Airlines Motor vehicles
4.0% 0.0% 40.9% 0.2% 54.8%
(FY1999)GPA/W/234
Page 2
2. For how long is it envisioned that the Guidelines will apply to the Honshu Companies?
The Guidelines will remain applicable to the three Honshu Companies "for the time being", as
stipulated in Article 2 of the Amendment to the Law Concerning Passenger Railway Companies andJapan Freight Railway Company (cf. GPA/W/152, p.2) and the last paragraph in Section I (Purposes)
of the Guidelines (GPA/W/179, p.3).  As less than  a year has passed since the Law and the Guidelines
became effective on 1 December 2001, Japan is not able to give a specific time, at this stage, when
these provisions will be reviewed, taking into acc ount further developments in the reform process of
Japan National Railway.
3. We understand that the Honshu companies and the remaining JR Companies will jointly
procure railway-related infrastructure, such as rails, and services.  Please explain what will be
procured jointly and how this will be organize d.  Please also detail the involvement of the
Government or Government bodies or o fficials in the procurement process.
(a) The JR Passenger Companies jointly procure rails only.  There are no plans for joint
procurement of goods and services, except for rails.
(b) Joint procurement of rails proceeds as follows:
One of the JR Companies, acting as representative of the JR Companies with respect to the
procurement, first inquires from each JR Company the volume of rails needed for the next
procurement.  Then, a purchase contract is concluded with a rail manufacturer that tenders for the
entire lot of rails with the lowest price.  The JR Company coordinating the procurement collects bills
from the other JR Companies and completes the payment.
(c) Joint procurement of rails by the JR Companies is conducted on a purely voluntary basis in
order to reduce the costs.  In this procurement process there is no involvement of the government,
government bodies, or officials.
(In this context, Japan wishes to note that the Government of Japan has never requested or
advised JR East to coordinate common procurement of rails.  Under the Amendment Law
(cf. GPA/W/152) the Government of Japan has no right to control or influence the procurementconducted by the three Honshu Companies.  Therefore, Japan sees no relevance of this issue to
government control or influence over the entity under Article XXIV:6(b).  With a view to expediting
the consultations, Japan requests the EC to state specific concerns as well as the reasons why this
issue is relevant under this Article if it wishes further clarification.)
4. What changes have there been to the individual market shares of each of the three Honshu
Companies since their privatization?
See Appendix 1 below.
5. Please detail any subsidies that each of the Honshu companies may receive, on what criteria
they are awarded and how they ar e allocated to the companies.
(a) Since the division and privatization of the Japan National Railway in 1987, there have been
no subsidies exclusively granted to the three Honshu Companies.  The Honshu Companies have
benefited from two subsidy programmes for which all railway companies in Japan are eligible to
apply.  These are subsidies for the installation of ra ilway crossing safety equipment, and subsidies for
the installation of barrier-free equipment and facilities.GPA/W/234
Page 3
(b) The purpose of the subsidy programme for the installation of railway crossing safety
equipment is to prevent railway-crossing accidents.  Eligible for this subsidy programme are all
railway business operators that meet certain criteria (e.g. the operation profit does not exceed
7 per cent of the total value of a company's fixed assets employed in its railway business).  Under this
programme, within the budgetary constraints, the ce ntral government may support up to half of the
necessary construction costs per operator, and local governments may support up to one-third of the
necessary construction costs per operator.
(c) The purpose of the subsidy programme for the installation of barrier-free equipment and
facilities is to ensure better access to transportation systems for the aged and physically handicapped.
Eligible for this programme are all railway business operators, with the exception of the Teito Rapid
Transit Authority and local governments running underground railways.  Central and localgovernments may provide subsidies under this programme within the budgetary constraints.  No
specific ceiling is set for the subsidy amount to be granted per operator by local governments.  The
amount of subsidy to be granted an operator by the central government may not exceed:
(i) the total amount of subsidies that the operator receives from local governments; and(ii) one-third of the necessary construction costs for such equipment and facilities to be
installed by the operator.
(d) See Appendix 2 for the allocation of the two subsidies to railway companies including the
three Honshu companies.
*
6. Please give details of the leasing agr eement between JRCPC and the Honshu Companies
relating to the construction and subsequent running of the Shinkansen lines.  Please explain the
process by which the Honshu Companies will gain ownership of the Shinkansen infrastructure and
whether this opportunity will be open to any other companies.  During the te rm of the lease, who is
responsible for the maintenance of the lines an d how will the necessary resulting procurement be
conducted?
(a) As of September 2002, five Shinkansen systems are in operation in Japan.  Four are owned
and operated by one of the three Honshu Companies as follows:
- Tokaido Shinkansen (by JR Central), Sanyo Shinkansen (by JR West), Tohoku
Shinkansen (by JR East), and Joetsu Shinkansen (by JR East).
- Hokuriku Shinkansen (117.4 kilometres between Takasaki and Nagano operated by
JR East) is the only one of which infrastructure is leased from Japan RailwayConstruction Public Corporation (JRCPC).  The leased portion is only 6 per cent of
the total length of the five Shinkansen systems currently in operation.
(b) Details of the Hokuriku Shinkansen leasing agreement are as follows:
[i] Duration of lease:  30 years from 1 October 1997 (Disposal of the facilities at the end
of the term of the lease agreement is to be determined through consultation between
JRCPC and JR East.)
                                                     
* Since the three Honshu Companies operate their railway businesses in a vast area, the number of
stations for whose construction, maintenance or management they are responsible is much larger than that ofother railway companies.  As a result, the total amount of subsidies granted to each Honshu Company isrelatively large, but the share of the income from the subsidies in the total income of each Honshu Company is
less than 0.1 per cent.GPA/W/234
Page 4
[ii] Leasing charge:  ¥17.5 billion per year plus management costs (including fixed assets
tax).
(For example, the average annual leasing charge actually paid from FY 1998 through
FY 2002 is approximately ¥20.2 billion.)
[iii] Maintenance and repair clause:
- JR East is responsible for undertaking ordinary maintenance and repair work 
necessary for ensuring both stable operations and passenger safety and 
convenience.
- JRCPC is responsible for and defrays the costs beyond the scope of ordinary
maintenance and repair.
(c) JRCPC may, with the approval of the Minister of Land, Infrastructure and Transport, transfer
the ownership of a Shinkansen system to a railway business operator.  The transfer of the ownership is
not limited to the three Honshu Companies.  Therefore, non-JR railway companies (including those
owned by a foreign company) may purchase a Shinkansen system from JRCPC.
(d) As long as JR East and JRCPC are listed in Annex 3 of Japan's Appendix I, these entities
conduct procurement related to the maintenance and repair work for Shinkansen systems inaccordance with the Agreement on Government Procurement.GPA/W/234
Page 5
APPENDIX 1
MARKET SHARES OF THE THREE HONSHU JR COMPANIES
<Passengers> Fiscal Year
Railways 1987 1990 1995 1999
JR East 25.2% 26.1% 26.7% 27.0%
JR Central 2.0% 2.2% 2.3% 2.3%
JR West 7.4% 7.7% 8.3% 8.4%Three Honshu
JR Companies
Subtotal 34.6% 35.9% 37.3% 37.7%
JR Hokkaido 0.5% 0.5% 0.6% 0.6%
JR Shikoku 0.3% 0.3% 0.3% 0.3%
JR Kyushu 1.2% 1.3% 1.4% 1.4%Other JR
companies
Subtotal 2.0% 2.0% 2.3% 2.2%
Other private
railwaysSubtotal 63.4% 62.1% 60.4% 60.1%GPA/W/234
Page 6
<Passenger-Kilometres> Fiscal Year
Railways 1987 1990 1995 1999
JR East 30.3% 30.9% 32.1% 32.7%
JR Central 11.9% 13.2% 12.4% 12.4%
JR West 13.3% 13.5% 13.9% 13.7%Three Honshu
JR Companies
Subtotal 55.5% 57.5% 58.4% 58.8%
JR Hokkaido 1.1% 1.2% 1.2% 1.2%
JR Shikoku 0.5% 0.5% 0.5% 0.5%
JR Kyushu 2.2% 2.1% 2.2% 2.1%Other JR
companies
Subtotal 3.8% 3.8% 3.9% 3.7%
Other private
railwaysSubtotal 40.6% 38.7% 37.8% 37.5%GPA/W/234
Page 7APPENDIX 2
ALLOCATION OF SUBSIDIES
SUBSIDY FOR INSTALLATION OF RAILWAY CROSSING SAFETY EQUIPMENT (Unit: million yen)
FY1996 FY1997 FY1998 FY1999 FY2000 FY2001
J R  E a s t 0000 1 37
J R  C e n t r a l 0000 1 2 0 1 3
J R  W e s t 000000Three
Honshu JR
Companies
S u b t o t a l 0000 1 3 3 2 0
J R  H o k k a i d o 0 1 2840 2 6
J R  S h i k o k u 2 32 53 55 72 22 3
JR Kyushu 58 92 35 28 51 32
J R  F r e i g h t 000000Other JR
companies
Subtotal 81 130 78 89 73 81JR
JR total 81 130 78 89 206 101
30 35 28 15 11 13
27 23 15 10 8 8
23 21 15 10 7 7
1 4 1 4 1 4776[1]*
[2]
[3]
[4]
[5] 1 18 1 3666
Total for others 22 34 64 30 23 10Other
private
railways
Total for private railways 127 134 149 78 62 50
Grand total 208 264 228 166 268 151
* Numbers indicate order of annual subsidy amount received;  actual company ranking varies from year to year.  For example, [1] could indicate
Company A for FY1996, but Company B for FY1997.GPA/W/234
Page 8 SUBSIDY FOR INSTALLATION OF BARRIER-FREE EQUIPMENT AND FACILITIES (Unit: million yen)
FY1996 FY1997 FY1998 FY1999 FY2000 FY2001
JR East 24 11 34 864 772 386
JR Central 0 0 1 749 241 261
JR West 8 3 16 203 554 862Three
Honshu JR
Companies
Subtotal 31 14 50 1,815 1,568 1,510
JR Hokkaido 0 1 16 353 71 23
J R  S h i k o k u 000 2 800
JR Kyushu 6 8 0 240 123 18
J R  F r e i g h t 000000Other JR
companies
Subtotal 6 9 16 621 194 41JR
JR total 37 23 66 2,436 1,761 1,550
14 35 18 331 249 441
10 16 14 330 248 369
9 11 14 245 190 365
8 8 12 167 167 302[1]*
[2]
[3][4]
[5] 7 6 9 158 131 296
Total for others 25 8 17 698 302 1,087Other
private
railways
Total for private railways 72 83 86 1,929 1,286 2,860
Grand total 109 107 151 4,365 3,048 4,410
* Numbers indicate order of annual subsidy amount received;  actual company ranking varies from year to year.  For example, [1] could indicate
Company A for FY1996, but Company B for FY1997.
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