WT/TPR/S/76 Trade Policy Review
Page 80
IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Since Japan's previous Trade Policy Review , the Government has continued to pursue
structural reforms to create a "free and fair" economy open to the international community, thereby
fostering competition.  These reforms pertain especially to the services sector.
2. In agriculture, Japan is moving away from price to income support.  However, the sector
remains relatively protected from foreign competition.  The average tariff on agricultural imports
remains high, tariff quotas can be intricate and domestic support applies to a number of products.  As
a consequence, the overall level of government assistance for agriculture (as measured by producer
and consumer support estimates, for example) is we ll above the OECD average, and may have risen
since 1997.  The average annual amount of transfers to agriculture during the 1990s exceededagriculture's contribution to GDP, which averaged roughly 1.5%.  Despite this assistance, productivity
in Japanese agriculture, although growing, remains low by national standards.
3. Japanese manufacturing has, by and large, traditionally been much more exposed to
international competition than agriculture and certain services (except in the cases of prepared food
products, tobacco, alcoholic beverages, textiles, footwear and headgear, and leather and leatherproducts).  Tariffs on manufactured goods are usually low;  moreover, non-tariff barriers are few and
the sector receives relatively little financial or other support from the Government.  Nonetheless,
manufacturing has been the driving force behind Japan's rapid development during the past 50 years.
This is especially true for automobiles, robotics, video recorders, cameras and video games, where the
Government has played a very small role other th an to participate actively in multilateral trade
liberalization.  As in most other industrialized countries, however, manufacturing's contribution to
Japan's GDP has been declining steadily; it currently accounts for 23.5% of GDP compared with24.4% in 1997.
4. On the other hand, the share of services in Japan's GDP has been growing steadily;  it
accounted for roughly 65% in 1998.  Japanese suppliers of services have by and large been
considerably protected from foreign competition.  Such protection has been provided not so much
through border measures, but more through internal regulations (including licensing and restrictionson foreign investment), state-ownership of what we re perceived to be "natural monopolies", and the
Government's tolerance of anti-competitive private practices.  In recognition of the growing
importance of services, not just to consumers, but to all kinds of businesses for which services are
essential inputs and therefore a significant determinant of their international competitiveness, and the
fact that during the 1990s total factor productivity growth in the services sector lagged behind that inmanufacturing, the Government's attention has focused increasingly on deregulation combined with
the strengthening of competition laws and their enforcement.  The high cost of services and other
inputs can be a factor encouraging Japanese businesses to relocate abroad.
5. Deregulation and the promotion of competition have thus been two key elements of structural
reform.  Since it was first announced in March 1998, the Three-Year Program for PromotingDeregulation has been revised twice.  Progress in this regard has been most notable in
telecommunications and financial services.  In the case of financial services, deregulation has gone
hand in hand with the restructuring of Japan's financial institutions (Chapter I(3)(ii)).  In addition,
greater emphasis is being placed on ensuring the transparency of regulations, based on well-defined
rules, and evaluating the costs and benefits.  As discussed in Chapter III, however, concerns have
been raised about the adequacy and effectiveness of competition policy in various service sectors as
deregulation proceeds, notwithstanding the recent strengthening of competition laws and theirJapan WT/TPR/S/76
Page 81
enforcement;  certain activities in several sectors, notably, maritime and air transport, are exempt from
Japan's principal competitions law, the Anti-Monopoly Act (AMA).
(2) AGRICULTURE
(i) Overview
6. Agriculture accounts for a small and declining share of GDP, about 1.3% in FY1998.  In
absolute terms, Japan's agricultural market is quite large, with imports of US$59.8 billion in 1999;  bycontrast, agricultural exports amounted to a mere US$4.2 billion.  Labour productivity in the sector
increased by 2.3% in 1997.  Land scale per farmer in Japan has remained roughly the same during
1997-99, at around 1.6 hectares.
1  OECD estimates indicate that the total transfers to agriculture were
higher than the sector's value-added during the period 1990-98 (Table IV.1).  The high cost of
agricultural inputs may have been an important factor in encouraging Japan's food processingindustries to relocate offshore.
2
7. The authorities indicate that the average retail prices of food in Tokyo in 1998 were higher
than in other major cities in the world, by about 20% to 30%;  they attribute such price discrepancies
to high transportation and distribution costs, partly reflecting differences in consumer buying
behaviour, which, for example, favours a “more-frequent, less quantity” delivery system.
Table IV.1
Major indicators for Japanese agriculture, FY1990-98(¥ trillion and per cent)
1990 1991 1992 1993 1994 1995 1996 1997 1998
Agricultural production (percentage of total)
Rice 27.8 25.4 30.1 27.1 33.8 30.5 29.6 28.0 25.6
Vegetables 22.5 24.4 21.9 25.4 22.2 22.9 22.3 23.3 26.3
Fruit 9.1 9.6 8.5 7.7 8.5 8.7 9.0 8.1 9.0
Flowers 3.3 3.6 3.8 4.1 3.8 4.2 4.3 4.6 4.7
Livestock 26.8 26.9 25.2 25.4 22.5 24.0 25.0 26.0 24.4
Dairy cattle, milk and other dairy products 7.9 7.8 7.7 8.0 7.0 7.6 7.8 8.0 7.9
Beef cattle 5.2 5.1 4.9 4.7 4.2 4.3 4.2 4.6 4.4
Pigs 5.5 5.6 5.6 5.4 4.7 4.8 5.3 5.3 4.9
Eggs and poultry 7.5 7.7 6.4 6.6 6.1 6.7 7.3 7.5 6.6
Total agricultural GDPa (¥ trillion) 7.7 7.6 7.4 7.0 7.5 6.8 6.5 6.1 6.3
Percentage of total GDP 1.8 1.6 1.6 1.5 1.6 1.4 1.3 1.2 1.3
Total agricultural transfers  (¥ trillion) 8.3 8.4 9.4 9.0 9.8 8.7 8.8 8.0 8.7
Percentage of total GDP 1.9 1.8 2.0 1.9 2.0 1.8 1.7 1.6 1.8
Table IV.1 (cont'd)
                                                     
1 Farm ownership is restricted to certain corporations, including agricultural cooperatives, unlimited
partnerships, limited partnerships, or limited responsibility companies;  a majority of members of a corporationmust be farmers, and over three quarters of the total capital of the corporation and the majority of directors
should be farmers.  To legally own farmland, the activities of the corporations must be limited to agriculture andrelated activities.
2Trewin and Bosworth (2000).  According to the auth orities, wages in Japan as well as the appreciation
of the yen are among the other factors contributing to the food-processing industry's relocation offshore.WT/TPR/S/76 Trade Policy Review
Page 82
1990 1991 1992 1993 1994 1995 1996 1997 1998
Self-sufficiency ratio by products
Rice 100 100 101 75 120 103 102 99 95
W h e a t 1 51 21 21 0 9 7 7 9 9
S o y b e a n s 544222333
Vegetables 91 90 90 88 86 85 86 86 84
F r u i t 6 35 95 95 34 74 94 75 34 9
Milk and dairy products 78 77 81 80 72 72 72 71 71
Beef 51 52 49 44 42 39 39 36 35
Pork 74 70 68 69 65 62 59 62 61
Chicken eggs 98 97 97 96 96 96 96 96 96
Self-sufficiency ratio on a calorie basis 47 46 46 37 46 43 41 41 40
a Provisional;  data for 1999 are not available.
Source: Data provided by the Japanese authorities;  OECD (2000).
8. The Basic Law on Food, Agriculture and Rural Areas, which replaced the 1961 Agricultural
Basic Law, outlines the future direction of Japan's agriculture policies3;  the new law was enacted on
16 July 1999.  The purpose of the new law is to cope with major changes in Japan's economic and
social situation concerning, inter alia, agriculture, food supply, and rural areas.  The Law has
established four basic principles:  a stable food supply;  fulfilling agriculture's multifunctional roles;
sustainable agricultural development;  and the development of rural areas.  With a view to
implementing the policy direction stipulated in the new Law, the Basic Plan for Food, Agriculture and
Rural Areas was decided by the Cabinet in March 2000.  The Plan, which covers policy directions for
the coming ten-year period, includes various measures that correspond to the four principlesembodied in the law.  Some of the measures have already been implemented;  these include the
reform of price policy for wheat and the introduction of direct payment to farmers in hilly and
mountain regions.  The Government has indicated that a guideline under the Plan is the achievement
of a food self-sufficiency ratio of 45% (on a calorie basis) by 2010.  This compares with a ratio of
40% in 1998, which was six percentage points less than in 1994.  The main factors behind thisdecline, which is a part of a longer-term falling trend in self-sufficiency, include:  an increase in the
domestic consumption of livestock products and fats
4;  a decrease in the domestic consumption of
rice, in which Japan has been largely self-sufficient;  and an overall decrease in agricultural
production.  According to the authorities, the improvement of the food self-sufficiency ratio requires
efforts, inter alia , by farmers, the food industry and consumers;  to encourage their efforts, the
Government plans to take, inter alia , the following measures:
- expanding the scale of production and improving agricultural infrastructure to raise
the productivity of the sector;
- developing and disseminating technology to improve the quality of products;
                                                     
3 "Article 30 – 1.  The State shall take necessary measures for allowing the prices of farm products to
form appropriately reflecting the real supply/demand situation and quality evaluation, in order to promoteagricultural production responsive to consumer demands.  2.  The State shall take necessary measures formitigating the adverse effects of significant price changes of farm products on farm management supposed to beencouraged."
4 Production of these items requires feed grains and oil seeds, whose domestic production is deemed
limited owing to Japan's farming scale.Japan WT/TPR/S/76
Page 83
- promotion of agricultural products reflecting the needs of consumers and food
industries;  and
- developing a nationwide campaign for a dietary guideline that encourages consumers
to review dietary patterns in order that, for example, their nutritional balance may be
improved and the amount of food wasted is reduced.
(ii) Border measures
9. The average applied MFN tariff for agriculture (WTO definition) was 18.2%5 in FY2000
compared with an overall average of 6.5% (Chapter III(2)(iii));  some 16% of duties applied to
agricultural goods were non- ad valorem .  Many agricultural subsectors, (particularly dairy products,
vegetables, products of the milling industry, sugar and sugar products) benefit from relatively high
levels of MFN tariff protection (Table IV.2);  several of these subsectors are also subject to a numberof tariff peaks (defined here as tariff rates exceeding three times the simple applied MFN average).
Some of the average tariffs for the subsectors ma y be underestimated, owing to the lack of estimates
of AVEs for some specific duties.  In particular, the average applied MFN tariff for cereals (e.g. rice
and wheat) was estimated to be 3.9%; this average does not include ad valorem  equivalents (AVEs)
for 12 specific duty lines because estimates of these were not available.  In the case of rice, theamount of duty payable is one of the highest rates of  duty in Japan's customs tariff.  According to the
authorities, AVEs could not be calculated because none of the 12 items were imported;  this suggests
that the tariff rates were prohibitive.
Table IV.2
Protection in agriculture, FY2000
(Per cent)
HS Chapter/Description AVE-tariffMax.
tariffTariff peaksa
(% of lines)Non-
ad valorem
tariff
(% of lines)
01 Live animals 4.5 40.1 7.4 22.2
02 Meat and edible meat offal 12.1 80.2 17.8 20.6
03 Fish and crustaceans, molluscs and other aquatic invertebrates 5.5 15.0 0.0 0.0
04 Dairy produce;  birds' eggs;  natural honey;  edible products of
animal origin, not elsewhere specified or included 68.1 490.7 90.8 60.5
05 Products of animal origin, not elsewhere specified or included 0.3 3.5 0.0 0.0
06 Live trees and other plants;  bulbs, roots and the like;  cut
flowers and ornamental foliage 0.5 3.0 0.0 0.0
07 Edible vegetables and certain roots and tubers 32.1 983.7 6.5 8.3
08 Edible fruit and nuts;  peel of citrus fruit;  melons 7.9 24.0 6.5 0.0
09 Coffee, tea, maté and spices 3.5 17.0 0.0 0.0
10 Cereals 3.9 69.7 4.9 31.7
11 Products of the milling industry;  malt;  starches;  inulin;  wheat
gluten 33.0 386.5 46.9 39.5
12 Oil seeds and oleaginous fruits;  miscellaneous grains, seeds and
fruit;  industrial or medicinal plants;  straw and fodder 26.4 690.3 7.0 5.6
13 Lac;  gums, resins and other vegetable saps and extracts 3.0 17.0 0.0 8.7
14 Vegetable plaiting materials;  vegetable products not elsewhere
specified or included 2.6 8.5 0.0 0.0
Table IV.2 (cont'd)
                                                     
5 The average applied MFN tariff for agriculture (HS 1-24) was 17.0% in FY2000.WT/TPR/S/76 Trade Policy Review
Page 84
HS Chapter/Description AVE-tariffMax.
tariffTariff peaksa
(% of lines)Non-
ad valorem
tariff
(% of lines)
15 Animal or vegetable fats and oils and their cleavage products;
prepared edible fats;  animal or vegetable waxes 4.8 29.8 2.4 40.2
16 Preparations of meat, of fish or of crustaceans, molluscs or other
aquatic invertebrates 13.7 53.7 30.7 3.0
17 Sugars and sugar confectionery 30.6 121.6 70.2 55.3
18 Cocoa and cocoa preparations 19.3 29.8 64.3 7.1
19 Preparations of cereals, flour, starch or milk;  pastry cooks'
products 22.8 301.6 50.8 26.6
20 Preparations of vegetables, fruit, nuts or other parts of plants 16.3 46.8 30.3 4.8
21 Miscellaneous edible preparations 27.8 465.2 47.8 16.3
22 Beverages, spirits and vinegar 19.2 68.0 38.8 57.1
23 Residues and waste from the food industries;  prepared animal
fodder 0.8 12.8 0.0 9.5
24 Tobacco and manufactured tobacco substitutes 5.1 29.8 9.1 0.0
1-24 Agriculture 17.0 983.7 23.7 16.0
a Three times the simple average of applied MFN rates.
Note: All indicators were calculated excluding in-quota tariff lines.
Source: WTO Secretariat, based on data provided by the Japanese authorities.
10. Tariff quotas apply mainly to agricultural products, including dairy products, rice, wheat and
barley, silk-worm cocoons and raw silk, prepared edible fat, and starches (Chapter III(2)(iii));  such
measures cover 2.0% of all tariff lines.  Wh ereas over 82% of out-of-quota tariffs are non- ad valorem
duties, all in-quota tariffs are ad valorem .  The authorities maintain that the applicable quotas for
products tariffied in the Uruguay Round are set each year in accordance with Japan's WTO
commitment.  The degree to which tariff quotas are filled varies by product.  Tariff quotas forproducts such as maize intended for use in the manufacture of corn starch, malt, and certain dairy
products were filled by more than 90% for FY1998;  while tariff quotas for some other products such
as skimmed milk powder and whey have been little  utilized (Table AIII.3) .  Quota allocations for
many products are based on previous business records and plans of applicants.  In-quota imports of
rice, wheat, barley, certain milk products, and raw silk are handled mainly by state-trading entities;certain amounts of rice, wheat, and barley may be imported by private entities (e.g. the simultaneous
buy-sell system for rice (see below)).
6
11. Special safeguards (SSGs) were triggered during the period FY1997-99 for a number of
products, including starches, condensed milk and milk powders, and inulin (Table IV.3).  Both price-
based and volume-based SSGs, which are applicable only to above-quota imports, have beenimposed.  Japan invoked separate emergency tariff measures on pork products, from 1 April 1997 to
30 June 1997.  Under the measure, the standard import price for access was increased from
¥440.06/kg. to ¥545.49/kg. (i.e. the WTO bound rate).
                                                     
6 Rice, wheat, and barley are imported by the Food Agency attached to the Ministry of Agriculture,
Forestry and Fisheries;  milk products and raw silk by the Agriculture and Livestock Industries Corporation;
leaf tobacco by the Japan Tobacco Inc.;  and salt for common use by the Salt Industry Centre of Japan (WTO
document G/STR/N/JPN, 24 March 1999).Japan WT/TPR/S/76
Page 85
Table IV.3
Special safeguard (SSG) actions in agriculture by Japan, FY1997-99
Description Type of action Date or period of application
FY1997
Inulin Volume-based 1 October 1997 to 31 March 1998
Milk and cream, not concentrated nor containing added
sugar or other sweetening matterVolume-based 1 December 1997 to 31 March 1998
Condensed milk Volume-based 1 December 1997 to 31 March 1998
FY1998
Condensed milk Volume-based 1 June 1998 to 31 March 1999
Inulin Volume-based 1 November 1998 to 31 March 1999
Food preparations containing by weight not less than 30%
natural milk constituents on the dry matterPrice-based 16 March 1999
Wheat flour Price-based 18 March 1999
FY1999
Condensed milk Volume-based 1 June 1999 to 31 March 2000
Inulin Volume-based 1 November 1999 to 31 March 2000
Wheat starch Price-based 26 May 1999
Other starch (excluding sago starches) Price-based 19 July 1999
Milk powder, not containing added sugar or other
sweetening matterPrice-based 13 August 1999
Peas (Pisum sativum) Price-based 6 January 2000
25 February 2000
Food preparations by weight not less than 30% natural
milk constituents on the dry matterPrice-based 7 March 2000
Wheat flour Price-based 16 March 2000
Other starch (excluding sago starches) Price-based 16 March 2000
Source: WTO notifications.
12. Quantitative import restrictions on rice have been replaced by tariff quotas since
1 April 1999.7  The applied out-of-quota duty on rice in FY1999 was set at ¥351.17 per kg.;  the duty
is a sum of a specific duty of ¥59.17 per kg., and a levy, collected by Japan's Food Agency, of ¥292
per kg. of imports.8  The applied out-of-quota duty was reduced to ¥341/kg. in FY2000.  According to
the authorities, an increase in rice imports is unlikely.9
13. Japan's minimum access commitments for rice imports, under the WTO Agreement on
Agriculture, continue to be implemented.  With the tariffication, importation under the minimum
access commitments is to be increased by 0.4% per annum, which would have been about half of
Japan's import requirement (i.e. 0.8% per annum) if Japan's special treatment of rice under the WTO
Agreement on Agriculture had continued.  The Food Agency continues to import rice as a state-
trading entity;  of some 0.6 million tonnes of rice imported in 1998 under the minimum accesscommitments,  0.13 million tonnes were to be used for economic assistance to developing countries.
According to the authorities, this arrangement was introduced so that the unsold rise would not affect
                                                     
7 Japan's rice imports had been given a special treatment under the WTO Agreement on Agriculture.
As at 1 August 2000, the reservation made by Uruguay on the amendment of Japan's modifications andrectifications to its Schedule concerning the tariffication of rice has not been withdrawn.
8 The Food Agency is an affiliate of MAFF.
9 MAFF online information.  Available at:  http://mf003u.maff.go.jp/wto/wto07-ex1.html.  The
authorities note that the duty was calculated in accordance with the WTO Agreement on Agriculture.WT/TPR/S/76 Trade Policy Review
Page 86
domestic markets.10  Actual rice imports in the context of Japan's minimum access commitments
totalled 530,600 tonnes in FY1997 and 606,400 tonnes in FY1998.
14. As part of Japan's minimum access commitments, a certain amount of rice can be purchased
and marketed directly under the simultaneous buy-sell (SBS) system.11  In FY1997, a total of
55,100 tonnes were imported under SBS, and 120,000 tonnes for FY1998 and FY1999.  Data on
actual bids received were not available to the Secretariat
(iii) Domestic measures and support programmes
15. The support received by farmers in Japan and the costs to consumers of agricultural products
remain above the OECD average and have increased since 1997.  Japan's net producer and consumer
support estimates (PSE and CSE) for 1999 have been provisionally estimated at 65% and 53%,
against an OECD average of 40% and 31%, respectively.12  In the same year, the producer nominal
assistance coefficient (NAC) of 2.8 indicates that gross farm receipts (including support) were almost
three times as high as they would have been wi thout support.  Likewise, the consumer NAC of 2.15,
indicates that consumers were implicitly taxed, and paid on average more than twice as much as they
would have paid in the absence of market price support to producers and consumer subsidies.13  These
producer and consumer NACs were, on average, 1.7 and 1.4 times as much as the respective OECDaverages.
14  Judging by the above indicators, assistance to agriculture may have risen; for example,
the PSE and CSE for all commodities rose by 14% and 15%, respectively, between 1997 and 1999.15
Data provided by the authorities show that the total Aggregate Measure of Support level in FY1997
was ¥3,171 billion, a 4.8% decrease from FY1996.
16. Total budgetary expenditure for agricultural price support increased slightly in FY1997 (the
most recent year for which data are available).16  Budgetary expenditures in FY1999 under the six-
year, ¥6 trillion programme to aid Japanese farmers, to alleviate the domestic effects of the UruguayRound, were ¥0.7 trillion, compared with about ¥1.0 trillion in FY1998.
17. Current price support schemes and their magnitudes are tabulated in Table IV.4.  Official
purchase prices of major agricultural products have declined every year since FY1997.  The
authorities indicate that data for annual budgetary expenditures involving direct payments to farmers
in FY1998 and subsequent years, have not been finalized.
                                                     
10 MAFF (1999), p. 27.
11 Under the SBS system, pairs of importers and domestic users jointly participate in the tender
conducted by the Food Agency.  The rice actually imported under the system is sold to the Food Agency, and isimmediately delivered to domestic users.  The SBS system has been established to collect information ondomestic demand for imported rice and to meet specific needs for small quantities of rice (i.e. 17 tonnes per
bid).  The authorities confirm that the MFN principle is applied to the SBS system.  The announcement of the
tender is made about three weeks in advance.
12 OECD (2000).
13 According to the author ities, in 1997 retail prices of food items in Tokyo were about 10% to 20%
higher than prices in other major cities in the world.
14 As noted in the 1998 Secretariat Report, caution is  necessary in interpreting PSEs, CSEs, and NACs
as changes in exchange rate may produce significant fluctuations in the three indicators, and border prices maybe artificially reduced owing to the presence of export subsidies in international agricultural trade (WTO, 1998).
15 Although domestic producer prices fell in 1999, the appreciation of the yen (against the U.S. dollar)
made imports even cheaper (OECD, 2000, p. 87).
16 The total budget for agricultural price suppor t amounted to ¥320. 4 billion in FY1997, compared with
¥313.1 billion in FY1996.  Of the total budget, support for rice, and wheat and barley had the largest shares
(about 55% and 57%) in FY1997 and FY1996.Japan WT/TPR/S/76
Page 87
Table IV.4
Procurement prices for all major crops subject to pricing and/or marketing arrangements/price controls
(¥ and per cent)
1997 1998 1999
¥ % ¥ % ¥ %
Rice, official purchase price (unpolished rice, 60 kg.) 16,217 -1.1 15,805 -2.5 15,528 -1.75
Wheat, official purchase price (60 kg.) 9,023 -1.0 8,958 -0.7 8,893 -0.7
Soybeans, standard price (60 kg.) 14,160 -0.4 14,082 -0.6 14,011 -0.5
Sweet potatoes, trading guideline price (1 ton) 31,740 -0.4 31,620 -0.4 31,520 -0.3
White potatoes, raw material standard price (1 ton) 14,270 -1.0 14,150 -0.8 14,050 -0.7
Sugar beets, lowest producer price (1 ton) 17,330 -1.0 17.070 -1.5 16,960 -0.6
Sugar cane, lowest producer price (1 ton) 20,510 -0.1 20,510 0.0 20,490 -0.1
Milk for processing, guaranteed price (1 kg.) 74.27 -2.0 73.86 -0.6 73.36 -0.7
Calves for beef, guaranteed standard price (black cattle) (per head) 304,000 .. 304,000 .. 304,000 ..
Beef, stable standard price (1 kg.) 810 -1.2 805 -0.6 795 -1.2
Pork, stable standard price (1 kg.) 385 -1.3 380 -1.3 370 -2.6
Raw silk, stable standard price (1 kg.) 5,775 .. .. .. .. ..
.. Not available.
Source: Information provided by the Japanese authorities.
18. The authorities have introduced various internal measures to promote domestic competition in
the sector, including a direct income support scheme in place of price support schemes.  For example,
wheat and barley, which have been distributed solely by a government corporation, can now be
distributed by the private sector.  The Government also established the Wheat and Barley Farming
Income Stabilization Fund for income support.  Management stabilization measures, to mitigate theadverse effects of price fluctuations on farming operations, were introduced for the soybeans
produced in 2000.  Producers of about 90% of voluntarily marketed rice (in volume) benefited for two
consecutive years (1998 and 1999) from the Rice Farming Income Stabilization Program, in which the
Government provides financial assistance to privately established loss-compensation programmes,
which provide a fund to compensate for the price declines of the voluntarily marketed rice.
(3) E
NERGY AND UTILITIES
(i) Overview
19. A stable energy supply has been one of main objectives of Japan's energy policy, reflecting
the fact that about 80% of its primary fuels (e.g. oil, coal, natural gas, nuclear, hydro and geothermal
energy) were imported in 1999.17  In recent years, more emphasis has been placed on economic
efficiency in Japan's energy policy, as observed in various deregulation measures implemented since
its previous Trade Policy Review.
20. Japan's deregulation measures since its previous Trade Policy Review affect in particular
electric and gas utilities, which used to be full regional monopolies regulated by the Ministry of
                                                     
17 According to data collected by the Internationa l Energy Agency.  The major objective of Japan's
energy policy is to attain simultaneously energy security, economic growth and environmental protection (so
called "3-Es").WT/TPR/S/76 Trade Policy Review
Page 88
International Trade and Industry (MITI), as well as petroleum18;  the measures introduced concerned,
inter alia , partial liberalization of the retail business of electric and gas utilities.
(ii) Electricity
21. Based on a traditional view that electric utilities were thought to constitute "natural
monopolies", Japan has allowed the existence of regional monopolies by vertically integrated firms
(i.e. companies conducting generation, transmission, and retailing), and, at the same time, regulatedprices, quantities, and quality of services to prevent negative impacts arising from the monopoly
arrangement.
19
22. Reflecting such factors as recent technological change, Japan has promoted deregulation as a
means of enhancing competition.  In doing so, it aims to realize internationally comparable cost levels
by 2001.  In this context, wholesale power generation has been liberalized since 1995.20
23. Partial liberalization of electricity supply at the retail level was introduced in March 2000 as a
result of a 1999 amendment to the Electric Utility Industry Law.  The amendment enabled customers
consuming over 2,000 kW and taking power at 20,000V to buy from sources other than incumbent
regional electric utility companies.  Price regulation was also relaxed under the amendment;   the
lowering of electricity rates now requires prior notification, while the raising of rates continues torequire authorization.  The Government also introduced a set of rules regarding the use by new
entrants of existing transmission lines ("wheeling rule").
21  The wheeling rule consists of a rule
requiring prior notification of the wheeling contract, a rule concerning the setting of rates, and a rule
ordering the use of existing transmission lines.
(iii) Gas
24. Japan aims to realize internationally comparable cost levels in the gas sector by the year 2001,
and to that end, the Gas Industry Law was amended in May 1999.  Before 1995, the supply of "citygas" had been under regional monopolies.
22  The 1999 law provided for various reform measures,
notably:  an approval requirement for the change in user charges was replaced by a notification
requirement, in the case of reduction in rates23;  "large scale supply" of piped-gas, which has been
liberalized since 1995, is expanded to annual contracts exceeding 1 million cubic metres or more.  A
rule concerning the use of existing transmission pipes by new suppliers was also established andpublished.
24
                                                     
18 Regulatory reform in petroleum and petroleum products notably concerns the retail of gasoline.  In
January 1998, Japan abolished a requirement that new serv ice stations must submit to  the authorities a certificate
indicating its supplier of gasoline (i.e. the refining companies).  A ban on unmanned self-service gasoline
stations was lifted on 1 April 1998, following the amendment of Ordinances Concerning the Regulation ofDangerous Articles.
19 MITI is mainly responsible for the general framework regulating electricity.  Domestic or foreign
entities wishing to invest in electric utilities must notify their intention to the competent authorities, including
MITI;  permission for investment is not denied, except on grounds of national security.
20 See WTO (1998), p. 105.
21 Electricity transmission is allowed only for the incumbent regional electric companies.
22 Gas supplies for large volume customers (i.e. over 2 million cubic metres of gas per year) was
liberalized in 1995.  At the end of March 1998, there were eight new gas suppliers other than incumbentregional gas suppliers that supplied for large volume customers.
23 Changes involving an increase in user rates still require approval.
24 The rule is specified in Article 22-2 of the Gas Industry Law.Japan WT/TPR/S/76
Page 89
(4) MANUFACTURING
(i) Overview
25. Manufacturing accounted for about 24% of Japan's GDP and some 21% of employment in
1998 (Table I.2).  Against a background of recession, manufacturing output was down slightly in the
period 1995 to 1998;  over the same period, nominal value added declined by some 3%.  In 1998,
electrical machinery was the largest industry in terms of gross output and value added, followed bytransport equipment and non-electrical machinery (Table IV.5). With a decline in the number of
employees in manufacturing, value added per employee remained almost unchanged between 1995
and 1998;  wages per employee increased slightly over the same period (Table IV.6).  The highest
level of value added per employee is in the petroleum and coal sector.  In individual industries, the
number of employees slightly increased in printing, but decreased in other industries includingelectrical machinery and transport equipment.
Table IV.5
Manufacturing output and value added in Japan, 1992-98
(Per cent and ¥ trillion)
JSIC Description Gross output Value added
1992 1995 1998 1992 1995 1998
Total (¥ trillion) 329.5 309.4 309.3 121.1 119.3 115.3
12 Food manufacturing 7.5 7.9 8.0 7.5 7.9 8.1
13 Beverages and tobacco 3.3 3.5 3.6 2.4 2.6 2.9
14 Textiles 2.3 1.4 1.2 2.6 1.6 1.4
15 Clothing 1.5 1.7 1.5 1.9 2.2 1.9
16 Wood product 1.4 1.4 1.2 1.3 1.3 1.1
17 Furniture 1.2 1.2 1.1 1.4 1.4 1.3
18 Pulp and paper 2.7 2.8 2.7 2.6 2.7 2.7
19 Printing 4.0 4.3 4.5 5.5 5.8 6.2
20 Chemicals 7.3 7.6 7.5 9.8 10.1 9.8
21 Petroleum & coal products 2.6 2.5 2.7 1.1 1.1 0.8
22 Plastic products 3.4 3.4 3.4 3.6 3.6 3.7
23 Rubber products 1.1 1.1 1.1 1.4 1.3 1.3
24 Leather products 0.4 0.3 0.3 0.4 0.3 0.3
25 Pottery, china, glass 3.3 3.3 3.1 4.3 4.2 4.0
26 Iron and steel 5.0 4.6 4.2 4.8 4.2 3.8
27 Non-ferrous metals 2.1 2.1 2.1 1.6 1.7 1.6
28 Fabricated metals 6.0 5.9 5.6 7.3 6.9 6.8
29 Non-electric machinery 10.1 9.9 10.3 11.0 10.6 11.1
30 Electric machinery 16.6 17.8 18.2 16.4 16.5 16.1
31 Transport equipment 15.0 14.3 14.7 10.2 10.5 11.4
32 Prof. & scientific equipment 1.5 1.3 1.5 1.6 1.4 1.6
33 Arms and weapons 0.2 0.1 0.0 0.2 0.2 0.0
34 Other 1.7 1.7 1.7 2.0 1.9 1.9
Source: MITI, Industrial Statistics , various issues.
26. In 1999, manufactured products accounted for about 94% of Japan's total merchandise exports
and some 57% of its total merchandise imports.  Office machinery and telecommunications
equipment, and automotive products are the main export industries;  machinery and transport
equipment account for about half of manufactured imports.WT/TPR/S/76 Trade Policy Review
Page 90
Table IV.6
Employment in manufacturing, value added per employee and wages per employee in Japan, 1992-98
Number of employees
('000)Value added per employee
(million yen)Wages per employee
(million yen)JSIC and description
1992 1995 1998 1992 1995 1998 1992 1995 1998
Total 11,157 10,880 10,399 10.9 11.0 11.1 4.1 4.2 4.4
12.  Food manufacturing 1,117 1,178 1,197 8.1 8.0 7.8 2.9 2.9 2.9
13.  Beverages and tobacco 127 129 126 22.9 24.2 26.2 4.4 4.5 4.7
14.  Textiles 496 327 272 6.2 5.9 6.0 3.0 3.0 3.1
15.  Clothing 567 644 544 4.1 4.0 4.1 2.2 2.1 2.2
16.  Wood product 237 232 202 6.9 6.9 6.6 3.3 3.2 3.3
17.  Furniture 221 247 229 7.8 6.9 6.4 3.5 3.2 3.4
18.  Pulp and paper 281 279 270 11.0 11.7 11.4 4.2 4.3 4.4
19.  Printing 566 583 586 11.8 11.9 12.2 5.0 5.0 5.1
20.  Chemicals 415 393 384 28.5 30.5 29.5 5.6 5.9 6.1
21.  Petroleum & coal products 34 34 32 39.6 39.7 28.2 6.6 7.0 7.4
22.  Plastic products 447 467 457 9.7 9.2 9.3 3.8 3.9 3.9
23.  Rubber products 171 157 145 10.0 9.9 10.5 4.2 4.3 4.5
24.  Leather products 77 74 65 6.3 5.6 5.3 3.0 2.6 2.6
25.  Pottery, china, glass 454 450 417 11.7 11.2 10.9 4.2 4.2 4.4
26.  Iron and steel 331 301 265 17.7 16.6 16.6 5.8 6.1 6.2
27.  Non-ferrous metals 170 165 153 11.4 12.0 12.3 5.0 5.1 5.3
28.  Fabricated metals 850 980 846 10.3 9.3 9.2 4.7 4.1 4.2
29.  Non-electric machinery 1,197 1,156 1,156 11.1 10.9 11.1 4.9 4.9 5.1
30.  Electric machinery 1,927 1,769 1,686 10.3 11.1 11.0 4.0 4.4 4.7
31.  Transport equipment 974 928 908 12.7 13.5 14.5 5.2 5.3 5.7
32.  Prof. & scientific equipment 236 206 200 8.2 8.3 9.5 4.2 4.2 4.4
33.  Arms and weapons 10 7 7 18.0 25.7 26.5 5.5 6.6 5.9
34.  Other 251 269 258 9.5 8.4 8.7 3.6 3.3 3.5
Source: MITI, Industrial Statistics, various issues.
27. Japan's manufacturing has traditionally been much more exposed to international competition
than agriculture.  The simple average applied MFN tariff for imported industrial products (HS 25-97)
was 3.9% in FY2000, compared with 17% for agricultural imports.  Simple average tariffs are
considerably higher for footwear and headgear and for prepared food than for other manufactured
goods (Chart III.2).
28. In a few instances, non-tariff border measures are applied to imports and exports of certain
manufactured products to ensure national security, safeguard consumer health and well-being, or to
preserve the environment (Chapter III(2)(v)).
29. Japan has been making efforts to align its industrial standards to international norms
(Chapter III(2)(ix)), and to accept foreign test  results, notably in the approval process for
pharmaceuticals.Japan WT/TPR/S/76
Page 91
(ii) Sectoral developments
(a) Motor vehicles
30. Japan's motor vehicle industry is the third largest, after the United States and the European
Union, accounting for 19.3% of world production by volume in 1998.25  Domestic production of
motor vehicles (cars, trucks and buses) amounted to 10 million units, down 8.4% from 1997, the first
decline in three years, and 25% less than the peak level of production achieved in 1990.  Japan'sexports of four-wheel motor vehicles in 1999 experienced a decline of 2.6% from 1998, and were
one-third below the peak in 1985 (6.7 million units).  Imports, which amounted to 261,000 units, also
declined in 1999, by 3.6%.
31. Production abroad by Japanese automakers has expanded since the previous Trade Policy
Review.  In 1998, Japanese automakers' production in U.S. plants increased by 2.3%, to 2.4 millionunits.  The increase reflected a 14% increase in the production of trucks (0.49 million units in 1998),
while the production of cars decreased by 0.2%.  In Europe, Japanese automakers produced
0.91 million units in 1998, up 7.0% from the previous year.
26
32. Japan's motor vehicles industries have gone through various moves to form alliances.
Various Japanese companies have made alliances in terms of equity holding with foreign automaker:for example, as of March 1999, about 37% of Nissan's shares are held by Renault;  34% of Mitsubishi
Motors' shares are held by Daimler-Chrysler (since March 2000)
27;  and General Motors (GM) has
long held substantial shares of Isuzu, Suzuki, and Subaru (49%, 10% and 20%, respectively, as of
April 2000).28
33. Japan's voluntary export restrictions on passenger cars to the European Union were
terminated by the end of 1999.  Measures introduced as a result of the 1995 Japan-U.S. Autos and
Auto Parts Consultation are to terminate by the end of 2000.29
(b) Semiconductors
34. Imports of semiconductors and integrated circuits amounted to ¥1.4 trillion in 1999, an
increase of 13.2% over 1998;  exports amounted to ¥2.7 trillion, some 2% more than in 1998.  In
June 1999, Japan agreed to establish an international framework concerning semiconductors;  the
framework includes a new World Semiconductor Council, comprising private sector representativesfrom Japan, Chinese Taipei, the European Union, the Republic of Korea, and the United States, as
well as meetings to be held involving governments and the private sector.  The first such meeting was
held in the Republic of Korea in June 2000.
                                                     
25 Japan Automobile Manufacturers Association, Inc. (1999), p. 4.
26 Japanese automakers had affiliated plants in Hungary, the Netherlands, Portugal, Spain and the
United Kingdom, at the end of 1998.
27 Volvo (trucks) has held 5% of Mitsubishi's shares since October 1999.
28 Toyota and GM now have an agreement for a fuel-cell technology development, and Honda and GM
cooperate in engine supply and technology development.
29 Among the measures resulting from the consultations, Japan committed to:  provide information,
exhibition space, and import promoting finance to fore ign vehicle manufacturers;  support Japanese vehicle
manufacturers' efforts to expand research and developm ent in foreign countries;  increase suppliers' sales
opportunities without adverse discrimination based on capital affiliation;  continue open design-in andprocurement processes to foreign parts suppliers in Japan and to suppliers in other countries;  initiate
deregulation of the auto-parts after-sales market in Japan;  and review regulations upon request by foreign
vehicle manufactures and auto-parts suppliers, to improve market access.WT/TPR/S/76 Trade Policy Review
Page 92
(c) Pharmaceuticals
35. The production of pharmaceuticals in Japan amounted to ¥5.8 trillion in 1998, down 5% from
the previous year.  Exports in 1998 were ¥42 billion, down 9.5% from the previous year, and imports
were ¥566 billion, down 8.7%.30  Pharmaceutical imports are duty free.  Ministerial licence is required
to manufacture or import pharmaceuticals31;  an examination is conducted by the authorities before
approval is granted.  Prohibited drug imports include rhinoceros horn, musk, and tiger bones, inaccordance with CITES (Convention on International Trade in Endangered Species);  the importation
of stimulants (amphetamine and metamphetamine) is also prohibited.
36. The acceptance of foreign clinical test data has often been a subject of concern by Japan's
trading partners.  The authorities indicate that the scope of acceptance of foreign test data was
expanded in August 1998 by MHW notifications.
32  In particular, foreign test data are accepted
provided foreign test procedures meet corresponding domestic testing standards;  in some cases, the
testing results must be supplemented by other data in order for authorities to verify a drug's
effectiveness and safety for the Japanese users.  As described in the second revision of the Three-Year
Program for Promoting Deregulation, the Government recognizes that licensing procedures are
lengthy compared with those in the United Stat es.  According to the authorities, the standard
processing period for the approval of prescription drugs has been shortened to 12 months since
April 2000.
37. Certain vitamins, herbs, and minerals have been allowed to be sold as food since March 1999;
on 5 April 2000, MHW relaxed regulations concerning dosage of these products provided that they
are clearly labelled as food.  A large number of pr escription drugs used in medical services are under
the Public Health Insurance Reimbursement System33, where an official Drug Tariff (reimbursement
price) is set.  The Drug Tariff has been revised seven times since 1990.  Pricing decisions on the DrugTariff is not subject to the public comment procedur es;  the authorities indicate that these decisions
are not regarded as regulations, and discussions in "Chuikyo" (a policy deliberation  committee
regarding drugs and medical service), whose members include parties concerned, is sufficient to
assure transparency.   Some of Japan's trading partners claim that the fixed (reimbursement) prices
listed in the Drug Tariff are insufficient to meet the costs of developing and marketing innovativepharmaceutical products.  Furthermore, as medical doctors are reimbursed for drugs prescribed to
patients on the basis of the fixed price listed in the Drug Tariff rather than the actual price, there may
                                                     
30 Data according to a survey by the Ministry of Health and Welfare, based on reports from enterprises.
The data do not include exports or imports through trading companies.
31 Ministerial licence is not required for individuals to import or bring medication into Japan for
personal use;  this is subject to certain quantitative limitations as follows:  drug or "quasi-drug" (a product that
has restricted purpose or use, and has a mild reaction on the human body, e.g. hair tonics and bath preparations)- up to 2 months' supply;  prescription drug - up to 1 month's supply;  vitamins - up to 4 months' supply;  drug orquasi-drug for external use (excluding prescription dr ug), e.g. ointments and eye drops - up to 24 pieces;
cosmetics - up to 24 pieces per item;  and medical de vices for home use – one set.  Medication imported or
brought into Japan for personal use must not be sold or given to others.
32 The two notifications are "The Handling of Clinical Data on Pharmaceuticals Generated in Foreign
Countries" (Notification No. 739 of the Director-General of the Pharmaceutical and Medical Safety Bureau),dated 11 August 1998, and "Ethnic Factors in the Accepta bility of Foreign Clinical Data" (Notification No. 672
of the Director-General of the Pharmaceutical and Medical Safety Bureau), dated 11 August 1998.
33 Under the Public Health Insurance Reimbursement System, patients pay medical doctors or
pharmacies a certain fraction of fees;  the remainder is reimbursed directly to doctors or pharmacies by the
System.Japan WT/TPR/S/76
Page 93
be an incentive for them to prescribe a cheaper, albe it similar, product in the same tariff classification,
that may be less effective.34
(5) SERVICES
(i) Overview
38. The services sector is the largest contributor to output and employment in the Japanese
economy, and the sector's importance has continued to grow recently.  In 1998, services sectoraccounted for 67.9% of Japan's GDP, and for 69.5% of employment (67.2% and 67.9%, respectively,
in 1995).
39. In view of the importance of services as business inputs in various sectors of the economy and
that during the 1990s total factor productivity growth in the services sector has lagged behind that in
manufacturing, the authorities recognize the need to foster more competition in the supply of services.
40. As regards financial services, various measures outlined in the "Big Bang" initiative since
1997 have been steadily implemented.  Japan has made efforts to improve the transparency of
regulation in the financial services sector, under the jurisdiction of the Financial System Planning
Bureau of the Ministry of Finance, the Fi nancial Reconstruction Commission (FRC), and the
Financial Supervisory Agency, until June 2000, and under the jurisdiction of the FRC and the newFinancial Services Agency from July 2000.
41. Deregulation of telecommunications has progressed since Japan's previous Trade Policy
Review, including, inter alia , elimination of foreign ownership restrictions for certain services.
Foreign ownership restrictions remain, however, in the Nippon Telegraph and Telephone Corporation,
a facility-based de facto  monopoly in Japan.
42. Transportation services remain somewhat insu lated from international competition especially
as regards domestic activities.  As in many other countries, cabotage policies restrict the provision ofdomestic services both in maritime and air transport to national carriers.
43. Little foreign participation is observed in other services, including legal and education
services.  Reform in education services, which was one of six main items of the Government's 1997
reform programme, has not concerned market access by foreign entities.
44. Japan's Schedule of Specific Commitments under the General Agreement on Trade in
Services (GATS) covers 121 of the 160-odd sectors;   Japan has not taken any MFN exemptions.
Japan has ratified the Fourth and Fifth Protocols of GATS, involving telecommunications and
financial services;  it has been actively participating in the services trade negotiations, which began in
2000 as part of the "built in agenda".
(ii) Financial services
(a) Overview
45. The financial services sector in Japan has been undergoing significant change.  Technology
and deregulation have increasingly blurred the traditional distinction between financial products.
                                                     
34 In Japan, medical doctors may provide prescribed drugs to patients, and are reimbursed by the Public
Health Insurance Reimbursement System.WT/TPR/S/76 Trade Policy Review
Page 94
Globalization is another force driving the growth of Japan's financial services sector.  These forces
have encouraged mergers and acquisitions across different types of financial services firms with a
view to realizing economies of scale.
46. Trade in financial services (except for insurance) increased in 1999, after two consecutive
years of decline.35  The number of financial institutions by category are indicated in (Table IV.7).
Table IV.7
Financial institutions in Japan, December 1999
1.   Banks Number of
banksTotal funds
(¥ trillion)Related laws
City bank 9 254 Banking Law
Long-term credit bank 3 42.1 Long-Term Credit Bank Law
Trust bank 33 157.5 Banking Law, Trust Business Law
Regional bank 64 174.6 Banking Law
Second regional bank 60 61.1 Banking Law
Foreign owned bank 84 6.8 Banking Law
2.   Cooperative financial institutions Number of
organizationsTotal funds
(¥ trillion)Related laws
Zenshinren Bank .. 16.2 Shinkin Bank Law
Shinkin Bank 392 103.5 Shinkin Bank Law
Shinkumi Federation Bank .. 3.0 Law on Financial Business by Cooperatives
Mutual Federation of Labor Credit Association .. 2.9 Labour Credit Association Law
Labour Credit Associations 41 11.6 Labourer's Cooperative Law
Shoko-Chukin Bank .. 12.8 Shoko-Chukin Bank Law
Norinchukin Bank .. 38.6 Norinchukin Bank Law
Credit Federation of Agricultural Cooperatives 47 48.2 Agricultural Cooperative Law
Agricultural Cooperatives 1,558 71.0 Agricultural Cooperative Law
Credit Federation of Fishery Cooperatives 35 2.4 Fishery Cooperative Law
Fishery Cooperatives (including Processed
Marine Products Cooperatives893 1.4 Fishery Cooperative Law
Credit Guaranty Association .. .. Credit Guaranty Association Law
3.   Insurance companies Number of
companiesTotal assets
(¥ trillion)Related laws
Life insurance: Domestic 41 185 Insurance Business Law
Foreign 3 2.8
Non-life insurance: Domestic 36 24 Insurance Business Law
Foreign 27 0.2
Mutual fire insurance cooperative associations 43 0.05 Law for Cooperatives of Small Business
Ship owner's mutual insurance associations 2 0.03 Ship Owners' Mutual Insurance Association
Law
Table IV.7 (cont'd)
                                                     
35 In 1999, Japanese banking and securities firms generated cross-border ex ports of ¥23 2 billion, up
from ¥224 billion in 1997;  imports in banking and securities amounted to ¥309 billion in 1999 (¥324 billion
in 1997).Japan WT/TPR/S/76
Page 95
4.   Non-banks and other Number of
registered
companiesNumber of
reported
companiesRelated laws
Loan companies 31,668 .. Regulatory Law for Loan Business
Housing Loan Companies .. 1 Old Investment Law
Money Market Brokers .. 14 Old Investment Law
Mortgage companies 125 .. Act concerning Regulation of Mortgage
Backed Securities Business
Prepaid voucher issuers 2,055 363 Law on Regulation of Prepaid Voucher
Commodity investment brokers 111 .. Law on Regulation of Commodity
Investment Business
Number of
registered
companiesNumber of
reported
companiesRelated laws
Special credit brokers 45 .. The Business Asset Securitization Law
Denominated credit brokers 21 ..
Real-estate syndications 21 .. Real Estate Syndication Act
Financial futures brokers 199 .. Law on Financial Futures Trade
5.   Government's financial institutions Aggregated balance of loans
(¥ trillion)Related laws
Japan Development Bank 15.5 Japan Development Bank Law
Export-Import Bank of Japan 9.1 Export-import Bank of Japan Law
People's Finance Institution 8.9 People's Finance Institution Law
Housing Loan Corporation 70.1 Housing Loan Corporation Law
Agriculture, Forestry and Fisheries Finance
Corporation4.5 Law on Agriculture, Forestry and Fisheries
Finance Corporation
Japan Finance Corporation for Small Business 7.2 Small Business Finance Corporation Law
Small Business Credit Insurance Corporation .. Japan Finance Corporation for Small
Business Law
Hokkaido Tohoku Development Corporation 1.4 Hokkaido Tohoku Development Corporation
Law
Japan Finance Corporation for Municipal
Enterprise18.9 Japan Finance Corporation for Municipal
Enterprise Law
Environmental Sanitation Business Financial
Corporation1.0 Environmental Sanitation Business Financial
Corporation Law
Okinawa Development Finance Corporation 1.6 Okinawa Development Finance Corporation
Law
6.   Other financial institutions Related laws
Bank of Japan Total assets of ¥61.9 trillion Bank of Japan Law (as of December 1996)
Deposit Insurance Corporation .. Deposit Insurance Law
.. Not available.
Source: Information provided by the Japanese authorities.
47. The "Big Bang" reform programme of Japan's financial services sector, announced in
November 1996, started effectively in April 1998 with the enactment of the Foreign Exchange and
Foreign Trade Law as an initial legislative step.36  The Big Bang, a package of measures promoting
                                                     
36 The law largely abolished the prior authorization or notification system for capital transactions and
liberalized international securities and foreign exchange  transactions, which have been limited to AuthorizedWT/TPR/S/76 Trade Policy Review
Page 96
regulatory reform in the sector, is aimed at making the Japanese financial market an international
market comparable to those in New York and London by the year 2001.37  As a part of the Big Bang,
the Financial System Reform Law entered into force in December 1998, introducing measures in
banking, insurance and securities.38  Bank holding companies have been allowed since 1998.  Banks'
entry in insurance business, through subsidiaries, will be allowed from October 2000.
48. Japan ratified the Fifth Protocol of the GATS in June 1998;  the protocol entered into force on
1 March 1999.  Japan's GATS Schedule of Specific Commitments includes some limitations on
market access and national treatment;  for example, the deposit insurance system does not cover
deposits taken by branches of foreign banks, and commercial presence, as a juridical person
established in Japan, is required for investment trust management services.
(b) Regulatory framework
49. Since its previous Trade Policy Review, Japan's regulatory framework for financial services
has changed substantially (Chart IV.1).  Currently, the Financial Reconstruction Commission (FRC)
and Financial Services Agency (FSA), under FRC, are mainly responsible for regulatory control,
inspection and supervision.  By contrast, the responsibility of MOF, which used to be the main
regulator for the sector, is restricted to financial failure resolution, financial crisis management andinternational finance, including exchange rate policies and foreign investment.
39  The FRC is also
responsible for the resolution of failed banks, in accordance with the Financial Reconstruction Law,
and capital injections for financial institution, in accordance with the Financial Functions Early
Strengthening Law.40  The Bank of Japan has responsibility for the smooth settlement of funds
between banks and other financial institutions with a view to contributing to the maintenance of "an
orderly financial system".
Banking50. The centrepiece of legislation governing the operation of banks is the Banking Law;  the Law
stipulates that a licence by the FRC is required to operate a bank in Japan.  Licensing criteria include a
sound financial basis, appropriate business conduct in terms of management staff, and a "financial
order" clause for prudential reasons.
                                                                                                                                                                    
Foreign Exchange Banks.  Money changing business was also liberalized.  An ex-post  notification system was
introduced regarding capital transactions in order to collect data for balance-of-payments statistics.
37 For details of measures under the "Big Bang" programme, see FSA [Online].  Available at:
http://www.fsa.go.jp/p_mof/english/big-bang/big-bang.htm.
38 The Financial System Reform Law stipulated revisions of other laws including the Banking Law, the
Securities and Exchange Law, and the Insurance Business Law.
39 Responsibility was transferred from MOF to the Financial Supervisory Agency, established on
22 June 1998, as a result of a reform of MOF;  MOF's Banking and Securities Bureaux were abolished, and  theFinancial System Planning Bureau was established to be solely responsible for planning and formulation of thefinancial system.  FRC was established on 15 December 1998.  On 1 July 2000, the Financial SupervisoryAgency was replaced by the Financial Services Agency, and the Financial System Planning Bureau wasabolished.
40 In January 2001, FRC is to be abolished and its ro le is to be succeeded by FSA, which is to be a
subsidiary of the new Cabinet Office.WT/TPR/S/76 Trade Policy Review
Page 98
51. Foreign banks may enter the Japanese market by establishing branches, agencies, or
subsidiaries;  a licence from the FRC is required in each case.41  Under the Banking Law, foreign
banks with Japanese branches or agencies are subject to regulations no less favourable than those
applied to domestic banks.  While the Law includes "reciprocity" provisions with regard to
licensing42,  the authorities maintain that these do not apply to WTO Members, given Japan's WTO
commitments.43  The authorities consider that prudential requirements are no more onerous for
nationally licenced subsidiaries of foreign banks than for domestic banks.44  Under the Foreign
Exchange and Foreign Trade Law, cross-border capital transactions are not regulated, and free entry
and exit is guaranteed for foreign exchange businesses.
52. As well as commercial banks, there are two non-commercial banks45, six finance
corporations, and one corporation defined as Government Financial Institutions (GFIs), which havebeen established with a view to ensuring appropriate implementation of policy-based finance.
46  For
the past two years, this policy-based finance has, inter alia , targeted small and medium-sized
enterprises in order to supplement financing by private-sector financial institutions, which had fallen
in the wake of the burst "bubble" in the early 1990s.
53. As of 31 March 1999, the Postal Savings System, operated by MPT, had ¥252 trillion in
deposits, or about 19% of total individual financial assets in Japan.47  Deposits in the Postal Savings
System must all be re-deposited in the Trust Fund Bureau of MOF;  these deposits then become part
of the fund for the Fiscal Investment and Loan Program (FILP) (Chapter I(2)(ii)).  As a part of the
restructuring envisaged for January 2001, the planni ng and management body of Postal Businesses,
including the Postal Savings System, is to be separated from the operational body, which is to become
a new state-run public corporation in 2003.  In April 2001, the mandatory re-depositing of savings
with the FILP is to be terminated;  the Postal Savings System will instead be granted full discretion infund management.
54. Since 1 October 1999, banks have been allowed to issue bonds other than "financial bonds",
which can be issued by three long-term credit banks and Tokyo-Mitsubishi Bank.  In order to deal in
securities, banks must establish specialized subsidiaries;  these have been allowed to engage in all
securities businesses since 1 October 1999.
                                                     
41 Each branch or agency requires a separate licence.
42 On licensing a bank that is completely or partly owned by a foreign bank, FRC must examine
whether Japanese banks in the foreign bank's home country receive treatment substantially equal to domesticbanks.  (Banking Law Article 4-3)
43 Japan has made no MFN exemptions in its GATS Schedule of Commitments.
44 Prudential requirements have generally remained the same since the previous Review;  the
requirements include capital adequacy ratios, liquid-asset and real estate ratios, and disclosure requirements.
Capital requirements based on the Bank of Internatio nal Settlements rules on capital adequacy are applied to
Japanese financial institutions with overseas branches and/or subsidiaries, but not to branches or agencies offoreign banks in Japan.  Current disclosure requirements in the financial services sector are contained in
Articles 20 and 21 of the Banking Law.
45 The Development Bank of Japan and th e Japan Bank for International Cooperation.
46 Policy-based finance involves various incentives to induce private-sector activities;  the main
incentive involves the provision of long-term loans, at fixed and low interest rates, directed to, for example,
areas characterized by low profitability, high-risk, and long periods for recovery of investment.
47 The authorities maintain that the Postal Savings System fulfils roles that are not met by the market or
by private financial institutions;  it aims to provide financial services throughout Japan, including in unprofitable
remote areas.  Postal savings are subject to a ¥10 million deposit-ceiling per person.Japan WT/TPR/S/76
Page 99
Insurance
55. Japan's insurance market consists of three subsectors:  non-life, life, and the "third" sector;
the third sector includes insurance for personal accidents, liability, sickness, nursing care and
hospitalization.  Forty-seven life insurance companies and 50 non-life companies provide the third
sector services, as of 1 August 2000.  There are no state-owned insurance companies in Japan other
than the Trade Insurance, operated by MITI, and the Postal Life Insurance, operated by the MPT.48
56. A licence from the FRC is required to conduct insurance business in Japan.49  Insurance
policies, both for new products and modifications to existing ones, as well as premium rates, require
approval.50  Life and non-life insurance companies may enter each other's markets only by means of
subsidiaries.  Commercial presence, licensed by FRC, is required in order to offer insurance services
in Japan, except for such cross-border insurance contracts as reinsurance, commercial aviationinsurance, and international marine hull insuran ce.  The criteria for granting licences and the
requirement of solvency margins are the same for Japanese and foreign insurance providers.
57. One of the main reform initiatives in Japan's insurance sector since its previous Trade Policy
Review involves the elimination of the requir ement that non-life insurance companies use rates
approved by rating organizations (July 1998).
51  A package of measures introduced under the
Financial Reconstruction Law, in December 1 998, include:  allowing over-the-counter sale of
investment trust by insurance companies;  introducing a requirement for insurance companies to
prepare and disclose consolidated financial statements;  and allowing entry of insurance companies
into banking and securities business by way of establishing subsidiaries.
58. Japan reached a bilateral agreement on insurance with the United States in December 1996.52
Under the agreement, Japan undertook to deregulate primary life and non-life insurance, where
Japanese insurers had the dominant market share.  Japan also agreed to avoid "radical change" in the"third" sector for two-and-a-half years following Japan's full implementation of specific primary
sector deregulation measures, as well as to shield the incumbent non-Japanese insurers in the third
sector from full competition until January 2001.  The Japanese authorities confirm that the measures
under the agreement have been steadily implemented.
Securities59. The FSA is the main authority regulating th e securities sector, in accordance with the
Securities and Exchange Law.  Only joint-stock corporations registered with the FRC may engage in
securities business.  There is no foreign ownership rest riction in the securities sector;  subsidiaries and
branches of foreign securities firms are registered in the same manner as domestic securities firms.
                                                     
48 One of the largest insurance schemes in the world, the Postal Life Insurance had total funds of
¥111.7 trillion at the end of March 1999, about half of which were transferred to the Fiscal Investment and Loan
Program (FILP) managed by MOF.
49 The basic organization of a company, the minimum assets required to begin business, the existence
of favourable anticipated income and expenditure, basic human resources and social credibility are included inthe criteria for the review of licence applications.
50 The criteria for permitting new insurance products include secure protection of policyholders.
51 WTO document S/C/N/84, 18 November 1998.
52 The agreement was later incorporated into the additional commitments of Japan's Schedule of
Specific Commitments as a result of the WTO financial services negotiations.WT/TPR/S/76 Trade Policy Review
Page 100
60. Under the Law on Foreign Securities Firms, the main office in Japan of a foreign securities
firm requires registration with the FRC to operate securities business in Japan.53  Registration is not
accepted unless a firm has engaged in the same type of business for no less than three years.
61. On 1 October 1999, the setting of brokerage commissions was fully liberalized, in accordance
with the Financial System Reform Law.  Segmentation of business structure has been reformed;  the
Financial System Reform Law eliminated "compa rtmentalization" of securities business (i.e.
underwriting, brokerage, etc.), which had existed in the Securities and Exchange Law and the Law on
Foreign Securities firms.  The Tokyo Stock Exchange and Osaka Stock Exchange introduced options
on individual stocks in July 1997, and over-the-counter securities derivatives were legally allowed as
of 1 December 1998.  Reform measures concerni ng asset investment businesses include the
elimination of restrictions on investments trusts to invest in unlisted and unregistered equities on1 September 1997.
(iii) Telecommunications
(a) Overview
62. Since its previous Trade Policy Review, Japan has introduced various measures to promote
further deregulation in the telecommunications sector, based on the Government's DeregulationAction Program and the Three-Year Program for Promoting Deregulation.  The measures include:
elimination of foreign ownership restrictions for Type-I telecommunications services and for cable
TV service providers
54;  the elimination of the authorization requirement for end-user charges;  the
introduction of a price-cap regulation for certain end-user charges55;  and an amendment in May 2000
to the Telecommunications Business Law setting up a framework to introduce a long-run incremental
costing (LRIC) system.
63. The JFTC has indicated that the Japanese market for telecommunications services remains
monopolistic (Chapter III(5)(vii)).  Prices of some services remain high by developed-country
standards (section (b) below).  Against such a background, requests for further reform to enhance
competition (including the establishment of dominant-carrier regulation) have been made by, inter
alia, domestic businesses, for which telecommunications services constitute important inputs, and
Japan's trading partners.
64. In July 1997, Japan ratified the Fourth Protocol of the GATS concerning
telecommunications.56  Its GATS Schedule of Commitments includes all telecommunications services
subsectors except telegraph services.57  Limitations on market access and on national treatment remain
                                                     
53 Since 1 December 1998, licensing requirements for securities companies have been eliminated and
replaced by registration requirements.  Investment trust companies require authorization of the FRC.
54 Except for the NTT Corporation, whose foreign ownership is restricted to less than one fifth of
voting rights.  Restrictions on foreign equity and the nationality of board members and auditors that had been
applied to Kokusai Denshin Denwa (KDD), the largest international communication carrier in Japan, wereabolished as a result of the company's complete priva tization on 30 July 1998 in accordance with the repeal of
the KDD Law.
55 The rule is applied to end-user charges for subscriber telephone, "Integrated Services Digital
Network" (ISDN), and leased circuit services in the regional telecommunications market.
56 The ratification was promulgated on 4 February 1998.
57 WTO document GATS/SC/46/Suppl.2, 11 April 1997.Japan WT/TPR/S/76
Page 101
in Mode 3 (commercial presence) with regard to the Nippon Telegraph and Telephone (NTT)
Corporation.58
(b) Market structure
65. Telecommunications services accounted for 2.0% of Japan's GDP in 1998, compared with
1.6% in 1990.  Nominal growth of output in the telecommunication sector averaged 4.5% per annum
during 1980-9759.  Employment in public telecommunications operation was about 238,000 in 1997,
down 23.4% from 1985;  these figures include employment in mobile telecommunications, however,
which has steadily increased from some 10,000 in 1985 to 18,000 in 1997.
66. International telecommunications have also grown considerably;  total hours of calls abroad
originating in Japan, for example, increased by  2.5%  in FY1998.  At the same time, however,
cross-border trade in telecommunication services in 1999 declined, in value terms;  exports decreasedfrom ¥165 billion  to ¥87 billion and imports from ¥208 billion to ¥160 billion during the period
1997-99.
60
67. In 1998, the market share of "new common car riers" (NCCs, i.e. those other than NTT
(domestic) and KDD (international)) in the national long-distance (that is, inter-prefectural) market
reached 48.8% in terms of number of calls;  the market share of NCCs in the international marketreached 41.0% in terms of connection time in 1997.  With regard to revenues, NTT retained a
dominant market share in FY1999, at 87.5% in domes tic telephone market;  and on international
telephony, KDD had a share of 67.5% in terms of revenue.
61
68. Since the initial privatization of the NTT in 1985, and against the background of market entry
by other carriers, communications charges have declined for long-distance and international
communications;  for example, the charge for a three minute call between Tokyo and Osaka (weekday
daytime) was around ¥63-90 in 1998, compared with ¥400 in 1985.  Communications chargesbetween Japan and the United States were around ¥150-240 in 1998 compared with ¥1,530 in 1985.
NTT's high profitability indicates that there might be considerable scope for lowering
communications charges, some of which ar e high by developed-country standards.
62  For example,
Japan's internet access charges for 40 off-peak hours in March 2000 were higher than most other
OECD member countries.  (In terms of purchasing power parity, Japan's access charges for 40 off-peak hours were roughly the same as the OECD av erage, but substantially higher than the access
charges of the United States, or the United Kingdom.)
63
(c) Regulatory framework
69. The Ministry of Posts and Telecommunications (MPT) formulates policy to promote the
development of the sector, and regulates domestic and international telecommunications services aswell as broadcasting services.  It is also responsible for administering various laws concerning
telecommunications and broadcasting;  these in clude the Telecommunications Business Law (TBL),
                                                     
58 Foreign capital participation must be less than one fifth, and board members and auditors must be of
Japanese nationality.
59 MPT (1999).
60 Bank of Japan, Monthly Statistics, various issues.
61  MPT (2000).
62 See NTT [Online].  Available at:  http://www.ntt.co.jp/ir/finance.html for annual balance sheets of
the NTT.
63 OECD [Online].  Available at:  http://www.oecd.org/dsti/sti/it/cm/stats/isp-4ohrs.htm.WT/TPR/S/76 Trade Policy Review
Page 102
the Radio Law, the Wire Communications Law, the NTT Law, the Broadcast Law, the Cable
Television Broadcast Law, and the Cable Broadcasting Telephone Law.  The TBL stipulates rights of
way concerning the use by Type-I carriers of privately owned land, these carriers can obtain, inter
alia, the approval of the MPT Minister before engaging in negotiations with the parties concerned to
seek rights of way.  Other rights of way including the use of roads, rivers, lakes, and ocean are under
the jurisdiction of the Ministry of Construction and lo cal governments, as are building standards.  (No
details of Japan's rights-of-way regulations, other than those under TBL, were provided by the
authorities.)  Notwithstanding complaints by domestic and foreign operators, the authorities state that
rights-of-way regulations are implemented on a non-discriminatory manner to any new applicants,
domestic or foreign, seeking such rights.
70. Along with other ministries and agencies, in cluding the Japan Fair Trade Commission, The
MPT is to become a part of the Ministry of General Affairs (MGA), which is to be established as part
of a comprehensive administrative reform scheduled to take place on 1 January 2001.  The
independence of the JFTC is legally guaranteed.
Entry regulations
71. The Telecommunication Business Law classifies telecommunications services into Type-I
and Type-II services;  Type-II services are further classified into "Special" and "General"
subcategories.64  Ministerial permission is required for entry into and exit from Type-I businesses.65
Prior notification is required for General Type-II businesses.  Special Type-II businesses requireregistration upon entry;  registration may be denied, inter alia , if the MPT Minister determines that
the applicant does not possess enough financial and technical ability to conduct the business properly.
72. Ministerial authorization is required in order for Type-I and Special Type-II carriers to
conclude, modify or abolish contracts between foreign governments, foreign citizens or foreigncorporations.  There is no foreign ownership or management restriction in the telecommunications
services sector, except in the case of the NTT Corporation
66;  as stipulated in the NTT Law, no more
than one fifth of NTT's voting rights may be foreign owned and its board members and auditors must
be of Japanese nationality.
73. In July 1999, NTT was reorganized into the East and West NTT companies and the NTT
Communications Corporation, a long-distance communications provider;  all three companies are
under the NTT Corporation, a holding company.67  The Government currently holds 58.9% of the
holding company's total stock.  The NTT Corporation must, at all times, hold all stocks issued by the
                                                     
64 Type-I carriers install and operate their own telecommunications circuit facilities, and Type-II
carriers provide services with the use of leased circuit facilities equipment from Type-I carriers.  Special Type-II
are defined as carriers offering services to many unspecified users through the interconnection at both ends of
leased circuits with public switched networks, or with those that provide facilities for internationalcommunications.  All other Type-II carriers ar e classified as General Type-II carriers.
65 The criteria for approving entry include sound and proper financial and technical capability,
predictable and rational business plans, and that the commencing of the business is deemed proper for the sound
development of the telecommunications sector.
66 A 1997 amendment to the TBL, and the 1998 abolition of the KDD Law removed limitations on
foreign equity participation in Type-I carriers, except for NTT.
67 The MPT authorized the Implementation Plan Concerning the Transfer of the Business Activities and
the Succession of the Rights and Obligations of the Nippon Telegraph and Telephone Corporation(Implementation Plan) on 21 May 1999, based on Article 3 of the Supplementary Provisions of the Law to
Amend Part of the Nippon Telegraph and Telephone Corporation Law (Law No. 98 of 1997 ("Law to
Amend")).Japan WT/TPR/S/76
Page 103
East and West NTT regional companies.68  The two local NTT companies have a de facto  monopoly
of the local communications market.69  According to a report by a study group of the JFTC, the
enhanced competition expected from the reorganization of NTT has not yet materialized.  In order to
foster competition, the study group recommended, inter alia , that the NTT Corporation reduce its
share-holding in NTT Docomo, a mobile phone provider;  the Government is currently considering
the issue.70  The authorities state that the MPT will continue to monitor the situation of NTT
companies in accordance with relevant laws.71
74. In accordance with the NTT Law, the NTT Corporation is required to provide universal
service.72  No other carriers have such an obligation.  There is no compensating fund for the provision
of universal service.
75. Although there is no explicit mention, in the TBL or other telecommunications-related
regulations, of the promotion of competition in Japan's telecommunications sector, the authorities
confirm that competition is promoted under the current legislative framework.73  Telecommunications
business is not exempt from the application of the Anti-Monopoly Act (Chapter III(5)(vii)).
Regulations on charges
76. For Type-I carriers, charges and their modification must be notified to MPT at least a week in
advance.74  MPT may order carriers to revise their charges in order to assure fair and reasonable end-
user charges.75
77. Since November 1998, a price-cap regulation has been applied to end-user charges for basic
telecommunications services, including subscribed telephone services, ISDN, and leased circuit
services in the regional telecommunications market, all of which are provided within prefectural
boundaries where "competition is not necessarily sufficient", that is, when Type-I carriers that have
fixed transmission-line facilities account for more than half of the number of subscriber lines in aprefecture.
                                                     
68 NTT Law Article 5.  The issuance of stocks by the regional companies requires ministerial
authorization.
69 According to the OECD (1999c), p. 96, before the reorganization, NTT had 99.5% market share in
the local fixed telephony service by the percentage of access lines.
70 JFTC (2000).
71 MPT online information.  Available at:  http://www.mpt.go.jp/pressrelease/english/telecomm/
news990621_1.html.
72 Article 3 of the NTT Law.
73 The TBL stipulates that Type-I carriers installing "designated telecommunications facilities" must
maintain the accounts of costs associated to interconnection with such facilities, and establish a "model
agreement" that must be authorized by the MPT Minister. Designated telecommunication facilities are definedunder TBL  Article 38-2 (and its relevant ordinances) as transmission facilities, held by a carrier, that exceedhalf of existing relevant facilities in a prefecture.  The TBL also stipulates a price-cap regulation over carriersthat possess more than a certain fraction of the number of subscriber lines in a region (paragraph 77).
74 The notification requirement concerns new charge plans, the date of implementation, reasons for
changes in the charge, and applied areas and period.  Exceptions to such requirement include charges that
"minimally" affect users, transaction charges, and exempl ary charges, as stipulated by a ministerial ordinance
concerning the Telecommunication Business Law.
75 Such action may be taken where:  the calculation methods for charges are deemed neither appropriate
nor clear;  the charges may unfairly discriminate against any person;  or charges might cause anti-competitive
behaviour between telecommunications carriers or impair the interests of users because the charges are
inappropriate in current socio-economic circumstances (TBL Article 31-2).WT/TPR/S/76 Trade Policy Review
Page 104
Interconnection
78. The MPT established a "Basic Rules of Interconnection", which outlines the obligation for
Type-I carriers to interconnect with Type-II operators, and transparency requirements for
interconnection rates and accounting.  Under the TBL, as amended, ministerial authorization is
required for contracts establishing interconnection charges.  The criteria for authorization include,
inter alia , that the calculation of interconnection charges must be based solely on costs of recovering
management and operation expenses for local communications networks.  Interconnection charges by
NTT concerning designated telecommunication facilities were initially authorized on 20 March 1998;
current interconnection contracts involving NTT East and West companies were both authorized on
1 July 1999.  As a result of recent consultations between Japan and the United States on NTT's
interconnection charges, Japan is to voluntarily introduce measures including a reduction ofinterconnection charges collected by both NTT East and NTT West.
79. The Government is in the process of determinin g the details of a long-run incremental costing
(LRIC) system, which it intends to introduce in accordance with an amendment to the TBL authorized
by the Diet in May 2000.  The interconnection of both ends of international leased circuits with public
switched networks has been comp letely liberalized since December 1997.  International internet
telephony services have been liberalized since August 1997, and call back companies are, in principle,
allowed to operate.
76  Number portability is not permitted.
Mobile telephony
80. Mobile telephony has continued to show significant development since Japan's previous
Trade Policy Review;  subscribers to cellular telephony expanded from 25.3 million in August 1997
to 52.8 million by the end of May 2000.77  All mobile service providers have been classified as Type-I
carriers.
Cable TV
81. Cable TV service providers have recently been offering, through their cable networks, local
telephony services, which had previously been the monopoly of NTT.  The Cable Television
Broadcast Law requires ministerial permission and the Wire Telecommunications Law requires
ministerial notification for entry into the market.  Criteria for the granting of permission includeappropriateness of the plan to install broadcasting facilities, meeting technical standards prescribed in
an MPT ordinance, sound financial basis and technical capability, and necessity and appropriateness
of the installation of the facilities in the light of natural, social, and cultural conditions in the local
area.  The regulations on foreign equity participation and non-Japanese officers for cable TV were
abolished in June 1999.
78
                                                     
76 Call-back services using a polling or answer suppre ssion technique have been prohibited in line with
the October 1996 decision of the World Telecommunications Standards Council in the InternationalTelecommunication Union (ITU).
77 In addition to the cellular telephony subscribers, there were 5.8 million subscribers to the Personal
Handy-phone System (PHS) at the end of May 2000.  MPT, Press release [Online]  Available at:
http://www.mpt.go.jp/policyreports/english/stats/Handy-phone-imm-e.html.
78 APEC (1999).Japan WT/TPR/S/76
Page 105
Appeals
82. Users and carriers may file complaints and petitions with MPT about telecommunications
service charges, other conditions and terms of services, and their manner of operation. MPT
investigates the case by, inter alia , hearing from the carriers concerned and examining information
provided by the carriers to justify their charges.  Petitioners and the public are advised of the results of
the investigation and the underlying reasoning behind MPT's decision.
Other issues (electronic commerce)
83. With a view to fostering electronic commerce, the Diet approved the Law Concerning
Electronic Signatures and Certification Service on 24 May 2000.  The Law stipulates that electronic
records containing electronic signatures are presumed to be authentic;  it introduces a voluntary
accreditation scheme, by the Government, for private certification, without discriminating betweendomestic and foreign businesses.  The authorities indicate that they are in the process of establishing a
ministerial ordinance accrediting certification services, according to provisions in the Law.  The Law
also introduces a system that enables mutual recognition of certification services between Japanese
and foreign accreditation systems, where a mutual recognition agreement exists between the two
countries.
84. With the advancement of technology and blurring  of the distinction between broadcasting and
telecommunications services, requests for the establishment of comprehensive rules and regulations
for these services have been received from various domestic and foreign sources
79;  while no concrete
measures have yet been announced by the Government on the introduction of such measures, the
MPT held a forum in June 2000 and has been exploring policy issues in this regard.
(iv) Transportation services
(a) Maritime transport
85. Almost all of Japan's internationally traded goods are shipped by maritime transport.  In
addition, coastal shipping accounted for 8.1% of domestic goods transported in 1998.  In 1998, the
share of Japanese-flag carriers in Japan's ocean-borne international trade was 43.4% for exports, a
decrease of 3.4 percentage points since 1990, and 71.8% for imports, an increase of 4.6 percentage
points.  Port services were provided by some  1,000 firms at the end of March 1998, employing around
60,000 persons.
86. The Maritime Transport Bureau and the Maritime Technology and Safety Bureau of the
Ministry of Transport are the main authorities regulating Japan's maritime transport sector.  There are
cabotage restrictions;  only Japanese-flag carriers are permitted to carry cargo and passengers between
Japanese ports.
87. The authorities state that there are no monopolies in the maritime services sector;  moreover,
there are no quotas for suppliers or arrangements for cargo allocation.  Agreements between operators
on freight rates or other conditions of transportation, e.g.  routes, are exempt from the Anti-Monopoly
Act (AMA).
88. Japan's GATS Schedule of Commitments covers a range of maritime transport services,
including maritime auxiliary transport services and internal waterways transport services, but
                                                     
79 See, for example, Keidanren (2000a).WT/TPR/S/76 Trade Policy Review
Page 106
excludes cabotage.  International maritime transport services, concerning both passenger and freight,
are unbound.  Japan participated actively in the WTO negotiations on maritime transport services,
which were suspended in 1996.
Domestic water-borne trade
89. Like many maritime nations, Japan's domestic maritime transportation services market is
shielded from foreign competition by cabotage legislation.80  For national security reasons, cabotage
is prohibited, except where non-Japanese vessels obtain permission from the Minister of Transport.
90. With respect to coastal maritime passenger services, scheduled domestic services must be
approved by the Minister of Transport.81  Prior notification is required regarding fares, fees and other
conditions for the services.  An economic needs test requirement is contained in the Coastal Shipping
Law.
91. A Japanese flag-carrier must be manned by a certain number of officers holding Japanese
certificates under the Law for Ship Officers.  A foreigner who has a certificate issued by foreign
authorities may take Japanese certificate examinations with the approval of the Minister of
Transport.82
92. Under the Marine Transportation Law, agreemen ts between operators in domestic maritime
transport for joint ship operations to  maintain vital lifeline services or to improve user convenience
are exempt from the AMA, provided approval is obtained from the MOT;  the latter must consult with
the Fair Trade Commission before giving such approval.  The national government and local
governments also provide subsidies to coastal passenger shipping businesses in order to maintain vital
lifeline routes to isolated islands;  these businesses must continuously improve their performance, in
terms of revenue-cost rates, in order to remain eligible for the subsidies.
International water-borne trade93. The authorities maintain that there are no discriminatory measures affecting foreign
participation in international maritime services.
94. Japan's bilateral agreements on passenger or cargo shipping apparently provide national
treatment to partners on a reciprocal basis.
83  Bilateral discussions on maritime transportation have
been held with the United States as well as with the European Union since 1998.  Reciprocityprovisions can be invoked under the terms of the Law on Special Measures against Unfavourable
Treatment to Japanese Ocean-going Ship Operators by Foreign Governments and Others.
                                                     
80 Cabotage was not part of the WTO negotiations on maritime transport services.
81 Article 3 of the Marine Transportation Law.
82 Article 14.2 of the Law for Ship Officers.
83 Japan has bilateral agreements related to maritime  transport with the following countries:  Argentina,
Bulgaria, China, Cuba, Denmark, El Salvador, Finland, France, Germany, Greece, Haiti, Hungary, Italy, India,
Malaysia, the Netherlands, Norway, the Philippines, Po land, Portugal, Romania, Russian Federation, Spain,
Sri Lanka, Sweden, Thailand, Turkey, the United Kingdom, and the United States.Japan WT/TPR/S/76
Page 107
95. According to the authorities, no exclusive rights or subsidies are given to Japanese-flag
carriers.84  Nonetheless, in order to cope with a decrease in numbers, the Government has introduced
support measures for Japanese-flag carriers (the so-called "International Ship Regime").  Under the
regime, certain Japanese-flag ships are entitled to preferential tax treatment, and to employ foreign
officers (other than the captain and chief engineer).85  According to the authorities, the International
Ship Regime has no distortionary effects on trade in maritime transport services;  it aims to placeJapanese vessels on an equal footing for with those of other countries that provide  preferential tax
treatment for their ships registered.
96. Under the Marine Transportation Law, a Japanese national intending to operate scheduled
international passenger services must notify the MOT at least 30 days prior to the commencement of
service
86;  publication and prior notification are also required regarding terms and other conditions for
international passenger liner services.  Rates and fees for such services are required to be published
before their commencement.  A Japanese national intending to operate scheduled international cargo
liner services must notify the MOT at least ten days  prior to the commencement of service.  Rates and
fees must be made public before such commencement.  For international tramp services, a prospective
supplier of cargo services must notify the MOT within 30 days of commencement;  for passengerservices, a supplier must notify the Minister at least 30 days before commencement.
87  Fares must be
made public before such commencement.  Foreign persons, firms or organizations are exempted from
these requirements.
97. Conferences and other agreements among shipping lines are exempted from the AMA.  The
MOT may issue an order of prohibition or alteration of an individual agreement if it judges that the
agreement unduly restricts competition or unduly discriminates against others.
Auxiliary services98. According to the authorities, there are no discriminatory measures affecting foreign
participation in auxiliary services.  The Port Tran sportation Business Law is the regulatory basis for
port services in 94 major ports in Japan.  Ports in Japan are generally planned, constructed and
managed by port management bodies under local govern ments;  private-sector bodies, such as oil or
steel industries, sometime construct and own wharves.
99. Both entry into and exit from the port-service sector requires a ministerial licence.
88  A n
economic needs test (demand-supply adjustment clause) is an element of the approval criteria.  The
authorities indicate that an average of about 20 new licences have been issued per year since Japan's
previous Trade Policy Review.  Pilotage services are mandatory in some ports.89  I t  i s  c o m m o n
practice in Japan's port sector for carriers to notify the Japan Harbour Transport Association (JHTA)in advance of a request for, or change in, steve dore works (prior consultations).  According to the
authorities, the number of consultations has decreased by more than 80% since 1997.  Stevedore
charges require ministerial approval.  Unified charges are applied in the major container terminals.
                                                     
84 To qualify for a national flag, the vessel must be owned by the Government, a Japanese public office,
a Japanese national, or a judicial person that is established in accordance with Japanese laws, and it must be
registered with the Minister of Transport, in accordance with the Ship Law.
85 These include tax breaks in ship-registration tax and local property tax.
86 Articles 19-4, 19-5 of the Marine Transportation Law.
87 Article 20 of the Marine Transportation Law. A supplier for domestic tramp passenger services in a
routine route requires prior approval of the Minister (Article 21 of the Maritime Transportation Law).
88 Articles 4 and 20 of the Port Transportation Business Law.
89 A person supplying pilot services must be of Japanese nationality and obtain a ministerial licence.WT/TPR/S/76 Trade Policy Review
Page 108
100. The authorities indicate that the number of container ships using Japanese ports has been
decreasing recently on the main routes connecting East Asia and western countries;  this is partly
because the existing port transportation services are costly and do not meet the needs of users.90
101. The Port Transport Business Law was amended in May 2000, to replace a licensing
requirement (involving an economics needs test91) with permission as regards entry into port transport
business in nine major ports92;  the amendment also replaced the fee approval system concerning
certain port services with a registration system involving prior notification.  At the same time,
regulations concerning fees and employment standards were strengthened.
(b) Air transport
102. Japan has 22 national scheduled passenger airlines, while a total of 84 scheduled passenger
airlines, domestic and foreign, operate in the country.
103. Japan's international air transportation market is mainly regulated by Japan's Civil
Aeronautics Law (CAL) and numerous bilateral agreements.  The Civil Aviation Bureau of the
Ministry of Transportation (MOT) administers the entry, pricing, and routes of airlines, as well as
safety regulations.
Domestic air transport services104. Under the CAL, any person intending to prov ide domestic airline services must obtain
permission from the Minister of Transport.
93  The appropriateness of the company's business plan is
among the approval criteria for such permission. Aircraft must be registered with the Minister of
Transport to carry the Japanese flag.94
105. As in most other countries, the provision of Japanese domestic air services is restricted to
Japanese carriers (cabotage restrictions).  An ownership restriction prohibits foreign investors from
holding more than one third of voting rights of domestic airlines.
106. While maintaining cabotage restrictions, the Government has promoted deregulation in
domestic air services to a certain extent.  The ec onomic needs test (demand-supply adjustment clause)
concerning the licence system of domestic scheduled services was abolished in the February 2000
amendment to the CAL.  Japanese air carriers mu st notify their fares and fees to the authorities.95
They must generally notify the MOT of domestic flight schedules;  permission by MOT is required
for use of certain congested airports that are specified in a ministerial order.
107. Agreements on cooperative management necessary to maintain domestic essential routes are
exempted from the Anti-Monopoly Act.  Tax incentives, consisting of reduction in the aircraft fuel tax
                                                     
90 MOT online information  Available at:  http://www.motnet.go.jp/ns/kanwa_e/port.htm.
91 Whereas under the licence system, entries into the business have been limited by an economic needs
test  (or demand-supply adjustment), there is no such test under the permission system; instead any company
that satisfies certain conditions will be allowed to enter the market.  The abolition of the economic needs test isexpected to stimulate competition among operators.
92 The nine major ports are: Keihin Ports (Tokyo, Yokohama and Kawasaki Ports), Chiba Port, Shimizu
Port, Nagoya Port, Yokkaichi Port, Osaka Port , Kobe Port, Kanmon Port, and Hakata Port.
93 Article 100.
94 Article 3-2.
95 Article 105.1.Japan WT/TPR/S/76
Page 109
and the municipal property tax on aircraft, are provided in order to maintain necessary airline routes to
remote areas, such as solitary islands.
International air transport services
108. In FY1998, Japanese airlines accounted for 36% of Japan's scheduled international passenger
market and 40% of Japan's international freight market, in terms of the number of passengers and
tonnes of freight, respectively.  Imports of air transport services in 1999 were ¥0.9 trillion (13.0% oftotal service imports), 1.8% lower than in 1998.  Exports in the same year were ¥1.3 trillion (9.6% of
total services exports), 11.3% higher than in 1998.
109. International air services are governed by a series of bilateral agreements that traditionally
grant each country's flag carriers specific traffic rights, covering such matters as the routes to be
flown, the number of airlines that fly the route, and the number of flights that can be operated.  SinceMarch 1997, Japan has concluded bilateral air service agreements with eight economies (Ethiopia,
Papua New Guiana, Bahrain, Oman, Qatar, the United  Arab Emirates, Israel, and Hong Kong, China);
the number of air service agreements amounted to 55 as of March 2000.  In addition, following
discussions on the expansion of air services with the United States, Japan concluded a new
Memorandum of Understanding (MOU) with the United States;  according to the Japanese authorities,traffic rights for both countries' airlines on capacity  and routes were equalized as a result of the MOU.
Japan has not accepted "open skies" air services agreements;  the authorities believe that such
arrangements may entail oligopoly and other adverse effects on competition in Japan's international
air services market.
110. In addition to traffic rights, Japan has concluded bilateral arrangements on code sharing with
many countries;  such arrangements are subject to approval under the CAL.  These and other
agreements between airline companies for improvin g user convenience on international routes from/to
Japan are exempted from the Anti-Monopoly Act (AMA ), provided such agreements do not involve
unfair transactions or adversely affect competition.  According to the authorities, while private
agreements such as the IATA air fare agreement and code-sharing agreements have the potential to
restrict competition, they are indispensable to the maintenance of a stable and broad international air
transport network for the benefit of users.
111. Traffic rights, together with services directly related to the exercise of traffic rights, are
outside the scope of the GATS.
96  In its GATS Schedule of Commitments, Japan has listed aircraft
repair and maintenance services, the selling and marketing of air transportation services, and the
operation and regulation of computer reservation systems (CRS) services.  The  number of licences
for the establishment (mode 3) of aircraft repair and maintenance services is subject to limits, with aview, according to the authorities, to ensuring high  quality of services.  Japan made full commitments
for the selling and marketing of air transport services and CRS services in mode 1 and mode 2;
mode 4 and limitations on national treatment in mode 3 are bound by the horizontal provisions of its
GATS Schedule.
112. Airplanes cannot be registered in Japan if the owner is any one of the following:  a foreign
national;  a foreign government or public entity;  a judicial entity established under foreign laws;  a
judicial entity whose representatives are foreign nationals or whose board is composed of one third or
more of foreign nationals, or one third or more of whose voting interest are owned by such an entity.
                                                     
96 The Annex on Air Transport Services further specifies that the GATS shall not reduce or affect a
Member's obligations under bilateral or multilateral agreemen ts that are in effect on the date of entry into force
of the WTO Agreement.WT/TPR/S/76 Trade Policy Review
Page 110
113. In Japan, the setting and changing of fares and fees for international airline services require
ministerial approval.  Licences or certificates are required for the operation of aircraft;  a foreigner
who holds a certificate issued by a foreign govern ment may be exempted from taking the whole or
parts of the certificate examinations, subject to mini sterial approval.  With regard to foreign aircraft
flown between Japan and a foreign country, or betw een points within Japan, licences or certificates
issued by a foreign government are regarded as licences issued by Japan in accordance with the CAL.
114. Japan grants no exclusive rights, such as an obligation on government officials to use specific
carriers for official duties.  According to authorit ies, the Government does not provide any subsidies
or government guarantees for Japanese airlines.
Other related services
115. The two major international airports, New Tokyo (Narita) and Kansai, are mainly
government owned.  Narita airport is a government corporation, Kansai airport has a majority
government shareholding, and other major airports are operated through Special Accounts for Airport
Developments.  Landing fees are significantly higher than at major airports in other developed
countries.97
116. It is often pointed out that airport capacity constraints, especially at Narita, are a severe
barrier to the expansion of Japan's international civil aviation sector.98  B o t h  N a r i t a  a n d  K a n s a i
airports have only one runway.  Acco rding to the authorities, Japan's airport slot allocation system for
international civil aviation services is based upon guidelines issued by the IATA.99  Japan Airlines is
the coordinator (as stipulated in the IATA Worldwid e Scheduling Guidelines).  The allocation of slots
takes place twice yearly.
117. Aerodrome operators must enact the administrative regulations regarding the conditions for
the utilization of public aerodromes and other items for operation of services, in accordance with theCAL.
100  The Airport Regulations, an MOT ministerial ordinance, stipulate matters relating to the
management of facilities and operational services of airports, and other related matters deemed
necessary to ensure the efficient operation and maintenance of the airport.  Any person who intends to
provide auxiliary services, such as ground handling services, in airports operated by the Government,
must submit an application for approval by the Director of the Regional Civil Aviation Bureau.  As of1 August 2000, 16 companies provide ground handling services in the New Tokyo Airport and 12 in
Kansai Airport.
(v) Other services
(a) Legal services
118. The Ministry of Justice (MOJ) is the regula tory authority for legal services in Japan;
self-regulation by the Japan Federation of Bar Associations also governs the sector, as prescribed in
                                                     
97 According to the Ministry of Transport, the landing fee levied on international air transport for a
B747-400 aircraft, for example, is ¥950,000 for Narita, ¥910,000 for Kansai, ¥290,000 for Charles de Gaule(Paris) and ¥310,000 for JFK (New York) airports.
98 American Chamber of Commerce in Japan (2000), p. 229.
99 The IATA guidelines include, inter alia , general criteria to allocate slots, such as the use of historical
precedence where appropriate, allocation of slots to in cumbent and new airlines, and reallocation of unused
slots.
100 Article 54-(2).Japan WT/TPR/S/76
Page 111
the Practising Attorney Law (PAL).  Foreign participation in the sector is regulated by the PAL and
the Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers.
Practising attorneys ( Bengoshi ) in Japan must have completed the official programme for a legal
apprentice.  Passing the Japanese bar examination is required for entry into apprenticeship, both for
Japanese and foreign nationals.
119. Foreign lawyers, with the approval of the MOJ and the necessary registration, are allowed to
set up a law firm and handle certain matters of foreign law as Gaikokuho-jimu-bengoshi (GJB,
attorney in charge of foreign legal affairs) in Japan, without any further qualification exams.
However, it is forbidden for GJBs to employ Bengoshi .  Among the criteria for approval of a GJB
licence is at least three years of practice as a lawyer.  No reciprocity is required concerning approval
for GJBs from countries and economies that are WTO Members.  GJBs must stay in Japan for not lessthan 180 days per year.
120. Recent regulatory changes in the sector include an amendment to the Special Measures Law
Concerning the Handling of Legal Business by Foreign Lawyers, which came into force in
August 1998.  The amendment relaxed restrictions on the objectives of a joint enterprise involving a
GJB and a Bengoshi , lifted a ban on a GJB undertaking legal business concerning the third country
law, and relaxed experience requirements for GJB qualification.
121. Since 1998, no change has been made to the eligibility criteria for patent attorney licences,
which can be obtained by passing the patent attorney examination.  The qualification to be eligible for
becoming a patent attorney includes reciprocity requirements for foreign nationals, unless overruled
by Japan's international obligations or by the Minister of International Trade and Industry.  Since
1 January 1998, there have been no instances of these requirements being overruled by the Minister.
The reciprocity requirement will be abolished on 6 January 2001, when the revised Patent AttorneyLaw is to enter into force.
(b) Education services
122. Recent progress in the globalization of business activities and increase in foreign direct
investment into Japan calls for education that suits individuals with diverse background and needs.
101
A recent survey by MITI shows a shortage of about 200,000 IT engineers;  this shortage is due in
large part to the failure of an inflexible academic system to nurture skilled IT professionals.102  I n
addition, positive feedback through cooperation between academics and business sector would benefit
the development of technology and innovation.
123. Recognizing the demand for diversity in education, in 1997 Japan announced a reform in
education services, which was one of six main items of the Government's reform programme in thatyear.  The Government is currently implementing the Program for Educational Reform, which aims to
clarify specific problems and schedules for educational reform.  In the Three-Year Program for
Promoting Deregulation, a few measures regarding education were included.
103  These reform
measures have not concerned market access by foreign entities.
                                                     
101 Regulatory Reform Committee (1998).
102 Financial Times , 10 August 2000, "Japan finds the powerhouse empty of skilled IT workers," p. 12.
103 These concerned, for example, accelerating approval  procedures for new university curriculum, and
allowing universities to recognize credits earned by a student elsewhere.WT/TPR/S/76 Trade Policy Review
Page 112
124. Japan's GATS Schedule of Specific Commitments includes education services supplied by
"formal education institutions" in Japan, and foreign language tuition service. 104  Services supplied by
formal education institutions require commercial pr esence, and must be provided by school judicial
persons.105  Both cross-border supply (mode 1) and consumption aboard (mode 2) are unbound due to
the alleged lack of technical feasibility.  No market access or national treatment restrictions exist for
foreign language tuition services, except for horizontal restrictions applied to the movement of naturalpersons (mode 4).
Education services provided by universities
125. Japan's education system consists of six years of primary education, three years each of lower
and higher secondary education, four years of unive rsity-level education (including two-year junior
colleges), and post-graduate education.
106  The first nine years, from the first grade in the elementary
level up to the final year in the lower secondar y level, is obligatory for Japanese citizens.107  The share
of private schools in the total number of students enro lled in formal education institutions is large;  for
example, as of 1 May 2000, 74% of university students were enrolled in private universities.108
126. The Ministry of Education (MOE) is responsible for formulating policy and implementing
measures concerning formal education in Japan.  Major legislation includes the Fundamental Law ofEducation, the School Education Law, and the Private School Law.  The establishment or abolition of
private universities, together with changes in the number of personnel in faculties in private
universities, inter alia, must be authorized by the MOE in accordance with the University
Establishment Standard and other standards;  the standards include regulations on curriculum.
109  The
Minister of Education consults with the University  Establishment and School Judicial Person Council
before authorizing the establishment or abolition of a university.
127. Authorization to establish a new university depends on fulfilment of various requirements,
such as organization of faculty, facilities and equipment, and funds needed for establishment.
128. Formal educational institutions must be non-profit organizations, and their commercial
activities are legally limited110;  the MOE has the discretion to define the scope of commercial
activities.  Formal educational institutions are eligib le for government subsidies to the extent that they
do not generate profits.  All expenses in the first year of establishment must be secured in cash.  TheMOE does not authorize the establishment of a new university if the potential entrant plans to finance
expenses by loans.
                                                     
104 Formal education institutions consist of elementary schools, lower and upper secondary schools,
universities, technical colleges, schools for the blind, deaf and handicapped, and kindergartens.
105 Formal education institutions must be established by school judicial persons.  A school judicial
person is a non-profit judicial person established for the purpose of supplying educational services under
Japanese Law.
106 In FY1995 the percentage of students entering four-year university education reached 45.8% of the
Japanese citizens of appropriate cohort.  During the period 1975–85, the number of graduate students increasedfrom 48,464 to 69,688.
107 In addition, the nursery system and kindergarten education are optional as pre-schools.  The nursery
system, which is not aimed at providing education but mainly to promote public welfare, e.g. reducing parents'burden through day care services is regulated by the Ministry of Health and Welfare.
108 MOE online information  Available at:  http://www.monbu.go.jp/aramashi/1999eng/e04/e04-2.htm.
109 Up to the secondary level of formal educa tion, the Establishment Standards apply.  The
Enforcement Regulation of the School Education Law further requires elementary and secondary schools and
kindergartens to observe the National Curriculum Standards, a ministerial ordinance.
110 The Fundamental Law of Education and the Private School Law.Japan WT/TPR/S/76
Page 113
129. The Private School Law and its relevant ordinances require in principle that a university
possess its own school buildings and stipulated minimum area of land.  In addition, laws restricting
the establishment of factories and other facilities in some designated large urban district, such as
Tokyo and Osaka, also prohibit the establishment and enlargement of school premises in urban areas,
except when authorized by a head of the local government concerned. 111  In the past three years, two
universities have been established by new entrants in the Tokyo metropolitan area.112
130. New entry entails compliance with complex requirements stipulated in the standards such as
organization of facility, facilities and equipment, and funds needed for establishment.113  Amendments
to the standards must go though public comment procedures.  The authorities indicate that the time
required for the authorization procedure is to be reduced to eight months in 2002, as a result of a
change in the rules (March 2000).  A standard processing period for approval is not published;according to Keidanren, authorization procedures require at least eight months for courses, and fifteen
months for the establishment of faculties.
114
131. No legislation restricting foreign participation in formal education services appears to exist.115
Nevertheless, under the Fundamental Law of Education, only central and local governments and
"school judicial persons"116 established in Japan are allowed to establish a formal de jure  school in
Japan, which must be approved by MOE in accordance with Establishing Guidelines or National
Curriculum Standards.  During the past decade, there has been no entry into Japan by foreign
institutes, such as universities, as a formal de jure  school;  according to the authorities, there has been
no application by foreign institutes for the establishment of school judicial persons.  On the other
hand, various foreign-affiliated universities in Japan have been  established as "other schools ( kakushu
gakko )".  Diplomas and certificates issued by these schools may not be regarded as equivalent to those
issued by formal de jure  schools;  for example, foreign university graduates may need additional pre-
qualification requirements to obtain professional licences, such as lawyers and medical doctors.117
132. The 1992 Law on Extraordinary Measures on Employment of Foreign Teachers in National or
Public Universities permits national or public universities to employ foreigners (except as executive
members).118
133. The Law for Promoting Technology Transfer form University to Industry was enacted in
May 1998 in order to accelerate the transfer of technology from universities to business sectors.  The
                                                     
111 For example, the 1959 Law on Restriction of Factor ies and Other Facilities in the Urban District in
the Tokyo Metropolitan Areas and the 1964 Law on Restriction of Factories and Other Facilities in the UrbanDistrict in the Osaka Metropolitan Areas.
112 The two universities include the Tokyo Metropolitan University of Health Sciences, authorized
in 1998;  the university (four years) replaced an existing junior college (two years).
113 Keidanren (2000b).
114 The standard period of authorization to establ ish new faculties by private two-year colleges was
reportedly reduced as stipulated in the Three-Year Program for Promoting Deregulation.
115 Educational services are not included in Japan's reservation to national treatment instruments in
regard to investment by established foreign-controlled enterprises in either the OECD Code of Liberalization of
Capital Movements or the OECD Code of Liberalization of Current Invisible Operations.
116 The establishment of school judicial persons requires ministerial approval.
117 According to the Law for Medical Doctors, foreign-university graduates must be approved by the
Minister of Health and Welfare to be eligible to take Japan's National Medical Examination;  a successful resultin the examination is a requirement to practice medicine in Japan.  The preliminary examination of the NationalBase Examination is exempted for graduates of four-year Japanese universities.  Graduates of foreign
universities may be exempted from the preliminary exam ination, provided that official approval is given.
118 Article 3.1 allows foreigners to be employed as advisers.WT/TPR/S/76 Trade Policy Review
Page 114
Law promotes the establishment of Technology Licen sing Organizations, which engage in obtaining
patents, marketing, and licensing on behalf of university researchers.  There are no foreign entry
restrictions under the law, except that eligible foreign entities must reside in Japan.119
                                                     
119 The Guideline of implementation of business activities on specific technology transfer from
universities issued in August 1998.Japan WT/TPR/S/76
Page 115
REFERENCES
American Chamber of Commerce in Japan (2000), Making Trade Talks Work 2000 , Tokyo.
APEC (1999), Japan Individual Action Plan  [Online]. Available at: http://www.apecsec.org.sg/iap/99.
Bank of Japan (2000), Chosa Geppo , various issues, (Monthly statistics – in Japanese), Tokyo.
EPA (2000a), Economic Outlook and Basic Policy Stance on Economic Management for 2000 ,
Economic Planning Agency, Tokyo.
EPA (2000b), Economic Survey of Japan 1999-2000 .
GATT (1995), Trade Policy Review – Japan , Geneva.
IMF (2000), International Financial Statistics , various issues, Washington D.C.
Industrial Structure Council (2000 ), 2000 Report on the WTO Consistency of Trade Policies by Major
Trading Partners , Tokyo.
Japan Automobile Manufacturers Association, Inc. (1999), 1999 The Motor Industry of Japan , Tokyo.
Japan Productivity Center for Socio-economic Development (1999), Rodo Seisansei no Kokusai
Hikaku (International comparison of labour productivity – in Japanese), Tokyo.
Japan Tariff Association (1999), Kanzei Nenpo Heisei 11-nen ban , Tokyo.
JFTC (2000), Competition policy issues in the telecommunications sector , Japan Fair Trade
Commission, Tokyo.
Keidanren (2000a), Preliminary Recommendations on the Restructuring of the Legal System
Governing Telecommunications to Propel the IT Revolution , Tokyo.
Keidanren (2000b), 1999-nendo Kisei Kaikaku Yobo, Vol. III,  Tokyo.
MAFF (1999), Nogyo Hakusho – FY1998  (FY 1998 Annual Report on Agriculture – in Japanese),
Ministry of Agriculture, Forestry and Fisheries, Tokyo.
MCA (1999), Kisei Kanwa Hakusho  (White paper on deregulation – in Japanese), Management and
Coordination Agency, Tokyo.
MOF (1998), Ministry of Finance Statistics Monthly , October, Ministry of Finance, Tokyo.
MOF (1999), Customs Administration in Japan 1999,  Tokyo.
MITI (2000a), Overview of Japan's Import Policy , Ministry of International Trade and Industry,
Tokyo.
MITI (2000b), Tusho Hakusho  (White paper on international trade – in Japanese), Tokyo.WT/TPR/S/76 Trade Policy Review
Page 116
MPT (1999), Tsushin Hakusho  (White paper on telecommunications – in Japanese), Ministry of Posts
and Telecommunications, Tokyo.
MPT (2000), Outline of the Telecommunications Business in Japan, Tokyo.
OECD (1996), Tax Expenditures:  Recent Experiences , Organization for Economic Cooperation and
Development, Paris.
OECD (1999a), OECD Economic Surveys – Japan, Paris.
OECD (1999b), Economic Outlook , December, Paris.
OECD (1999c), Regulatory Reform in Japan, Paris.
OECD (1999d), Recent Trends in Foreign Direct Investment, Financial Market Trends, June, Paris.
OECD (2000), Agricultural Policies in OECD Countries – Monitoring and Evaluation 2000,  Paris.
Prime Minister's Office (1999), Japan's Government Procurement:  Policy and Achievements –
annual Report (FY 1998) , Tokyo.
Regulatory Reform Committee (1998), The First Opinion regarding Deregulation , Tokyo.
Shiratsuka (1999), "Measurement errors in Japanese Consumer Price Index", Federal Reserve Bank of
Chicago, Working Paper No.2 .
Takayama et. al. (1998), "Generational Accounting in  Japan", in Alan J. Auerbach et al. (eds.),
Generational Accounting Around the World , University of Chicago Press.
Trewin, R. and M. Bosworth (2000), Moving Japanese Agriculture Forward – Issues, Options and
Strategies , Australia-Japan Research Centre, Canberra.
WTO (1998), Trade Policy Review – Japan , Geneva.
WTO (1999), Trade Policy Review – United States, Geneva.