RESTRICTED
WORLD TRADE S/FIN/W/12/Add.3
11July1997
ORGANIZATION(97-2975)
Original: English Committee onTrade inFinancial Services
COMMUNICATION FROM JAPAN
Initial Offer onFinancial Services
Addendum
Thefollowing communication iscirculated attherequest ofJapan toMembers oftheCommittee
onTrade inFinancial Services.
_______________
InaccordancewiththescheduleestablishedatthemeetingoftheCommitteeonTradeinFinancial
Services on10April 1997, Japan hereby submits itsinitial offerofspecific commitments onfinancial
services.
Theattached initial offer, fullyreflecting therecent amendments totheForeign Exchange and
Foreign Trade Control Law, themostrelevant aspect ofJapan'sFinancial System Reform fortrade
liberalization infinancial services, andbased upon theenactment oftherevised Insurance Business
Law, suggests toeliminate anumber ofimportant restrictions. With suchcomprehensive reflection
ofliberalization achievements andplans, thisofferprovides essentially fullmarket access, byfurther
improving thehighlevelliberalization commitments thatJapan hasalready made. Other WTO Members
areencouraged tofollow thisexample andsubmit theiroffers withmeaningful improvements.
This offer isconditional upon other Members 'commitments totheMFN principle and
presentation ofmeaningful improvements oftheirschedules. Itisunderstood that,pursuant tothe
adopted Decisions, Japan reserves therighttomodify orwithdraw allorpartofitsspecific commitments
onfinancial services andtolistMFN exemptions, inaddition totheright ofmaking technical
modifications.S/FIN/W/12/Add.3
Page2JAPAN
SPECIFIC COMMITMENTS -INITIAL OFFER
Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
7. FINANCIAL SERVICES
Inaddition toPartIIIofthisAgreement andtheAnnex onFinancial Services, Japan undertakes itsspecific commitments withrespect toFinancial Services
under thisAgreement inaccordance withtheUnderstanding onCommitments inFinancial Services (hereinafter referred toasthe"Understanding", attached to
thisschedule, which forms anintegral partofthisschedule). Thus, theobligations under theUnderstanding areincurred inthesectors ofFinancial Services
additionally tothose covered bytheprovisions ofPartIIIofthisAgreement andtheAnnex onFinancial Services.
Forprudential reasons within thecontext ofparagraph 2(a)oftheAnnex onFinancial Services, Japan shall notbeprevented from taking measures such as
non-discriminatory limitations onjuridical forms ofacommercial presence. Forthesame reasons, Japan shall notbeprevented from applying non-
discriminatory limitations concerning admission tothemarket ofnewfinancial services which shall beconsistent withregulatory framework aimed at
achieving such prudential objectives. Inthiscontext, securities firms areallowed todealinsecurities defined intherelevant Japanese law,andbanks arenot
allowed todealinthose securities unless allowed inaccordance withthesaidlaw.
With respect tospecific commitments inthesectors ofFinancial Services, services supplied intheterritory ofaMember other thanJapan totheservice
consumer inJapan without anyactive marketing from theservice supplier areconsidered asservices supplied under paragraph 2(b)ofArticle Iofthis
Agreement.S/FIN/W/12/Add.3
Page3Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
A. Insurance andInsurance -
Related ServicesSpecific commitments inthemarket access
column withrespect tothesupply ofaservice
asprescribed inparagraphs 2(a)and(b)of
Article IofthisAgreement areunbound except
forobligations under paragraphs 3and4ofthe
Understanding respectively which areincurred
inthissector additionally tothose covered by
theprovisions ofPartIIIofthisAgreement and
theAnnex onFinancial Services, subject to
conditions andqualifications setoutbelow.
(1) Commercial presence isinprinciple
required forinsurance contracts onthe
following items andanyliability arising
therefrom:
(a) goods being transported within
Japan;
(b)ships andaircraft ofJapanese
registration which arenotused for
international maritime transport.
Thecross-border insurance transactions
forships ofJapanese registration which
areused forinternational maritime
transport andaircraft ofJapanese
registration willbeliberalized bytheend
ofJune 1996.(1)NoneS/FIN/W/12/Add.3
Page4Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
60percentofamounts ofreinsurance on
thecompulsory automobile third party
liability insurance issubject tothe
compulsory coverage bytheGovernment.
Insurance services arenotallowed tobe
supplied through anintermediary in
Japan.
(2) Commercial presence isinprinciple
required forinsurance contracts onthe
following items andanyliability arising
therefrom:
(a)goods being transported within
Japan;
(b)ships andaircraft ofJapanese
registration which arenotused for
international maritime transport.
Thecross-border insurance transactions
forships ofJapanese registration which
areused forinternational maritime
transport andaircraft ofJapanese
registration willbeliberalized bytheend
ofJune 1996.S/FIN/W/12/Add.3
Page5Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
60percentofamounts ofreinsurance on
thecompulsory automobile third party
liability insurance issubject tothe
compulsory coverage bytheGovernment.
Insurance services arenotallowed tobe
supplied through anintermediary in
Japan.
(3) Establishment ofcommercial presence as
insurance brokers isnotallowed until the
endofJune 1996.
60percentofamounts ofreinsurance on
thecompulsory automobile third party
liability insurance issubject tothe
compulsory coverage bytheGovernment.
Insurance intermediation services arenot
allowed tobesupplied forinsurance
contracts made byaninsurance service
supplier whoisnotlicensed inJapan.
(4) Unbound except asindicated in
HORIZONTAL COMMITMENTS(3) Foreign lifeinsurance companies are
required toretain inyencurrency an
amount corresponding totheir technical
andclaim reserves foryen-denominated
insurance policies inJapan until theend
ofJune 1996.
AsNone except asindicated in
HORIZONTAL COMMITMENTS
(4) Unbound except asindicated in
HORIZONTAL COMMITMENTSS/FIN/W/12/Add.3
Page6Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
Banking andOther Financial
Services (excluding Insurance
andInsurance-Related Services)Specific commitments inthemarket access
column withrespect tothesupply ofaservice
asprescribed inparagraphs 2(a)and(b)of
Article IofthisAgreement areunbound except
forobligations under paragraphs 3and4ofthe
Understanding respectively which areincurred
inthissector additionally tothose covered by
theprovisions ofPartIIIofthisAgreement and
theAnnex onFinancial Services subject to
conditions andqualifications setoutbelow.
(1) Commercial presence isrequired for
discretionary investment management
services.
(2) “None ”after April 1998.
Before April 1998, supply ofservices is
subject toallthefollowing limitations:
Overseas deposits andtrustcontracts
denominated inforeign currencies, the
sumofwhich areover 100200million
yenvalue, andthose denominated inyen
aresubject toapproval. Business
corporations which satisfy thestandards
ofin-house systems relating tolegal
affairs, riskmanagement andfinancial(1) None
(2) NoneS/FIN/W/12/Add.3
Page7Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
management setoutbytheMinistry of
Finance maybegiven anapproval
effective foranindefinite period oftime
withrespect tooverseas deposits
denominated inforeign currencies over
100200million yenvalue forthepurpose
ofportfolio investment subject onlytoex
postreporting.
Thefollowing capital transaction services
maybesupplied through authorized
foreign exchange banks inJapan, or
otherwise areinprinciple subject to
approval:
(a) Trade in:
(i)payment instruments such as
cheques andbills;
(ii)foreign exchange; and
(iii)derivative products which
involve outright foreign
exchange transactions such as
currency spotoptions.S/FIN/W/12/Add.3
Page8Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
Business corporations areexempted
from obtaining approval andmay
invest inallsecurities derivative
products listed onoverseas exchanges
fortheir ownaccount subject onlyto
expostreporting.
Business corporations which satisfy
thestandards ofin-house systems
relating tolegal affairs, risk
management andfinancial
management setoutbytheMinistry
ofFinance areexempted from
obtaining approval andmayinvest in
financial futures andoptions listed on
overseas exchanges fortheir own
account subject onlytoexpost
reporting.
(b)Special methods ofsettlement such as
offsetting andanymethod whereby a
resident either makes payment forthe
non-resident concerned toanother
resident orreceives payment made
byanother resident forthenon-
resident concerned.
(c)SwapsS/FIN/W/12/Add.3
Page9Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
(3) Commercial presence forinvestment trust
management services must bejuridical
person established inJapan.
(4) Unbound except asindicated in
HORIZONTAL COMMITMENTS(3) Thedeposit insurance system does not
cover deposits taken bybranches of
foreign banks.
Asindicated inHORIZONTAL
COMMITMENTS
(4) Unbound except asindicated in
HORIZONTAL COMMITMENTS(3) With respect tothe
assets of
Employees ’Pension
Funds qualified by
theMinister of
Health andWelfare
tobemanaged by
discretionary
investment
management service
suppliers, Japan no
longer employs the
classification of
New Money*and
assets other than
New Money.
*New Money isanasset mainly consisting ofaccumulation ofpremiums collected byEmployees ’Pension Funds after thedaywhen such Funds arequalified by
theMinister ofHealth andWelfare asappropriate forexpanding their means ofasset management toinclude discretionary investment management services.S/FIN/W/12/Add.3
Page10
UNDERSTANDING ONCOMMITMENTS INFINANCIAL SERVICES
Participants intheUruguay Round havebeenenabled totakeonspecific commitments with
respect tofinancial services under theGeneral Agreement onTrade inServices (hereinafter referred
toasthe"Agreement") onthebasis ofanalternative approach tothatcovered bytheprovisions of
PartIIIoftheAgreement. Itwasagreed thatthisapproach could beapplied subject tothefollowing
understanding:
(i) itdoesnotconflict withtheprovisions oftheAgreement;
(ii) itdoesnotprejudice theright ofanyMember toschedule itsspecific commitments in
accordance withtheapproach under PartIIIoftheAgreement;
(iii) resulting specific commitments shallapply onamost-favoured-nation basis;
(iv) nopresumption hasbeencreated astothedegree ofliberalization towhich aMember is
committing itself under theAgreement.
Interested Members, onthebasisofnegotiations, andsubject toconditions andqualifications where
specified, haveinscribed intheirschedule specific commitments conforming totheapproach setout
below.
A.Standstill
Anyconditions, limitations andqualifications tothecommitments noted below shallbelimited
toexisting non-conforming measures.
B.Market access
Monopoly rights
1.Inaddition toArticle VIIIoftheAgreement, thefollowing shallapply:
Each Member shalllistinitsschedule pertaining tofinancial services existing monopoly rights
andshallendeavour toeliminate themorreduce theirscope. Notwithstanding subparagraph 1(b)
oftheAnnex onFinancial Services, thisparagraph applies totheactivities referred toin
subparagraph 1(b)(iii) oftheAnnex.
Financial services purchased bypublic entities
2.Notwithstanding Article XIIIoftheAgreement, eachMember shallensure thatfinancial service
suppliers ofanyother Member established initsterritory areaccorded most-favoured-nation treatment
andnational treatment asregards thepurchase oracquisition offinancial services bypublic entities
oftheMember initsterritory.
Cross-border trade
3.Each Member shallpermit non-resident suppliers offinancial services tosupply, asaprincipal,
through anintermediary orasanintermediary, andunder terms andconditions thataccord national
treatment, thefollowing services:S/FIN/W/12/Add.3
Page11
(a) insurance ofrisksrelating to:
(i) maritimeshippingandcommercialaviationandspacelaunchingandfreight(including
satellites), withsuchinsurance tocover anyorallofthefollowing: thegoods being
transported, thevehicle transporting thegoods andanyliability arising therefrom;
and
(ii) goods ininternational transit;
(b) reinsurance andretrocession andtheservices auxiliary toinsurance asreferred toin
subparagraph 5(a)(iv) oftheAnnex;
(c) provision andtransfer offinancial information andfinancial dataprocessing asreferred
toinsubparagraph5(a)(xv)oftheAnnexandadvisoryandotherauxiliaryservices,excluding
intermediation,relatingtobankingandotherfinancialservicesasreferredtoinsubparagraph
5(a)(xvi) oftheAnnex.
4.EachMembershallpermititsresidentstopurchaseintheterritoryofanyotherMemberthefinancial
services indicated in:
(a) subparagraph 3(a);
(b) subparagraph 3(b); and
(c) subparagraphs 5(a)(v) to(xvi)oftheAnnex.
Commercial presence
5.Each Member shallgrant financial service suppliers ofanyother Member therighttoestablish
orexpand within itsterritory, including through theacquisition ofexisting enterprises, acommercial
presence.
6.AMember mayimpose terms, conditions andprocedures forauthorization oftheestablishment
andexpansion ofacommercial presence insofarastheydonotcircumvent theMember 'sobligation
under paragraph 5andtheyareconsistent withtheother obligations ofthisAgreement.
Newfinancial services
7.AMember shallpermit financial service suppliers ofanyother Member established initsterritory
tooffer initsterritory anynewfinancial service.
Transfers ofinformation andprocessing ofinformation
8.NoMember shalltakemeasures thatprevent transfers ofinformation ortheprocessing offinancial
information, including transfers ofdatabyelectronic means, orthat,subject toimportation rules
consistent withinternational agreements, prevent transfers ofequipment, where suchtransfers of
information, processing offinancial information ortransfers ofequipment arenecessary fortheconduct
oftheordinary business ofafinancial service supplier. Nothing inthisparagraph restricts theright
ofaMember toprotect personal data, personal privacy andtheconfidentiality ofindividual records
andaccounts solongassuchrightisnotusedtocircumvent theprovisions oftheAgreement.S/FIN/W/12/Add.3
Page12
Temporary entry ofpersonnel
9. (a) Each Member shallpermit temporary entry intoitsterritory ofthefollowing personnel
ofafinancial service supplier ofanyother Member thatisestablishing orhasestablished
acommercial presence intheterritory oftheMember:
(i) senior managerial personnel possessing proprietary information essential tothe
establishment, control andoperation oftheservices ofthefinancial service supplier;
and
(ii) specialists intheoperation ofthefinancial service supplier.
(b) EachMember shallpermit, subject totheavailability ofqualified personnel initsterritory,
temporary entry intoitsterritory ofthefollowing personnel associated withacommercial
presence ofafinancial service supplier ofanyother Member:
(i) specialists incomputer services, telecommunication services andaccounts ofthe
financial service supplier; and
(ii) actuarial andlegalspecialists.
Non-discriminatory measures
10.Each Member shallendeavour toremove ortolimitanysignificant adverse effects onfinancial
service suppliers ofanyother Member of:
(a) non-discriminatory measures thatprevent financial service suppliers fromoffering inthe
Member 'sterritory, intheform determined bytheMember, allthefinancial services
permitted bytheMember;
(b) non-discriminatory measures thatlimittheexpansion oftheactivities offinancial service
suppliers intotheentire territory oftheMember;
(c) measures ofaMember, when suchaMember applies thesame measures tothesupply of
bothbanking andsecurities services, andafinancial service supplier ofanyother Member
concentrates itsactivities intheprovision ofsecurities services; and
(d) other measures that,although respecting theprovisions ofthisAgreement, affect adversely
theability offinancial service suppliers ofanyother Member tooperate, compete orenter
theMember 'smarket;
providedthatanyactiontakenunderthisparagraphwouldnotunfairlydiscriminateagainstfinancial
service suppliers oftheMember taking suchaction.
11.With respect tothenon-discriminatory measures referred toinsubparagraphs 10(a) and(b),a
Membershallendeavournottolimitorrestrictthepresentdegreeofmarketopportunitiesnorthebenefits
already enjoyed byfinancial service suppliers ofallother Members asaclassintheterritory ofthe
Member, provided thatthiscommitment doesnotresult inunfair discrimination against financial service
suppliers oftheMember applying suchmeasures.S/FIN/W/12/Add.3
Page13
C.National treatment
1.Under terms andconditions thataccord national treatment, eachMember shallgrant tofinancial
service suppliers ofanyotherMember established initsterritory access topayment andclearing systems
operated bypublic entities, andtoofficial funding andrefinancing facilities available inthenormal
course ofordinary business. Thisparagraph isnotintended toconfer access totheMember 'slender
oflastresort facilities.
2.When membership orparticipation in,oraccess to,anyself-regulatory body, securities orfutures
exchange ormarket, clearing agency, oranyother organization orassociation, isrequired byaMember
inorder forfinancial service suppliers ofanyother Member tosupply financial services onanequal
basiswithfinancial service suppliers oftheMember, orwhen theMember provides directly orindirectly
suchentities, privileges oradvantages insupplying financial services, theMember shallensure that
suchentities accord national treatment tofinancial service supplies ofanyother Member resident in
theterritory oftheMember.
D.Definitions
Forthepurpose ofthisapproach:
1.Anon-resident supplier offinancial services isafinancial service supplier ofaMember which
supplies afinancial service intotheterritory ofanother Member fromanestablishment located inthe
territory ofanother Member, regardless ofwhether suchafinancial service supplier hasorhasnot
acommercial presence intheterritory oftheMember inwhich thefinancial service issupplied.
2."Commercial presence" means anenterprise within aMember 'sterritory forthesupply offinancial
services andincludes wholly- orpartly-owned subsidiaries, joint ventures, partnerships, sole
proprietorships,franchisingoperations,branches,agencies,representativeofficesorotherorganizations.
3.Anewfinancial service isaservice ofafinancial nature, including services related toexisting
andnewproducts orthemanner inwhich aproduct isdelivered, thatisnotsupplied byanyfinancial
service supplier intheterritory ofaparticular Member butwhich issupplied intheterritory ofanother
Member.