RESTRICTED
WORLD TRADE S/FIN/W/12/Add.3/Rev.1
12December 1997
ORGANIZATION(97-5579)
Original: English Committee onTrade inFinancial Services
COMMUNICATION FROM JAPAN
Revised Offer onFinancial Services
Revision
Thefollowing communication iscirculated attherequest ofJapan toMembers oftheCommittee
onTrade inFinancial Services.
_______________
Further totheinitial offercontained inS/FIN/W/12/Add.3, dated 11July1997, Japan hereby
submits theattached revised draftoffer submitted totheCommittee onTrade inFinancial Services
on11July1997.
Thisrevised offerincludes theAdditional Commitments thatJapan isready toundertake. These
commitments are,however, conditional andcontingent uponthelevelofcommitments undertaken by
Japan'strading partners.
Japan reserves theright tomodify orwithdraw allorpartofitscommitments, andtolist
MFN exemptions, inaddition totherightofmaking technical modifications. Japan hopes thatother
Members alsoundertake meaningful commitments onanMFN basis.S/FIN/W/12/Add.3/Rev.1
Page2JAPAN
REVISED DRAFT OFFER -SPECIFIC COMMITMENTS
Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
7. FINANCIAL SERVICES
Inaddition toPartIIIofthisAgreement andtheAnnex onFinancial Services, Japan undertakes itsspecific commitments withrespect toFinancial Services
under thisAgreement inaccordance withtheUnderstanding onCommitments inFinancial Services (hereinafter referred toasthe"Understanding", attached to
thisschedule, which forms anintegral partofthisschedule). Thus, theobligations under theUnderstanding areincurred inthesectors ofFinancial Services
additionally tothose covered bytheprovisions ofPartIIIofthisAgreement andtheAnnex onFinancial Services.
Forprudential reasons within thecontext ofparagraph 2(a)oftheAnnex onFinancial Services, Japan shall notbeprevented from taking measures such as
non-discriminatory limitations onjuridical forms ofacommercial presence. Forthesame reasons, Japan shall notbeprevented from applying
non-discriminatory limitations concerning admission tothemarket ofnewfinancial services which shall beconsistent withregulatory framework aimed at
achieving such prudential objectives. Inthiscontext, securities firms areallowed todealinsecurities defined intherelevant Japanese law,andbanks arenot
allowed todealinthose securities unless allowed inaccordance withthesaidlaw.
With respect tospecific commitments inthesectors ofFinancial Services, services supplied intheterritory ofaMember other thanJapan totheservice
consumer inJapan without anyactive marketing from theservice supplier areconsidered asservices supplied under paragraph 2(b)ofArticle Iofthis
Agreement.
A. Insurance andInsurance -
Related ServicesSpecific commitments inthemarket access
column withrespect tothesupply ofaservice
asprescribed inparagraphs 2(a)and(b)of
Article IofthisAgreement areunbound except
forobligations under paragraphs 3and4ofthe
Understanding respectively which areincurred
inthissector additionally tothose covered by
theprovisions ofPartIIIofthisAgreement and
theAnnex onFinancial Services, subject to
conditions andqualifications setoutbelow.Japan undertakes the
additional commitments
attached hereto.S/FIN/W/12/Add.3/Rev.1
Page3Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
(1) Commercial presence isinprinciple
required forinsurance contracts onthe
following items andanyliability arising
therefrom:
(a)goods being transported within
Japan;
(b)ships ofJapanese registration which
arenotused forinternational
maritime transport.(1)None
60percentofamounts ofreinsurance on
thecompulsory automobile third party
liability insurance issubject tothe
compulsory coverage bytheGovernment.
Insurance services arenotallowed tobe
supplied through anintermediary in
Japan.
(2) Commercial presence isinprinciple
required forinsurance contracts onthe
following items andanyliability arising
therefrom:
(a)goods being transported within
Japan;
(b)ships ofJapanese registration which
arenotused forinternational
maritime transport.(2) NoneS/FIN/W/12/Add.3/Rev.1
Page4Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
60percentofamounts ofreinsurance on
thecompulsory automobile third party
liability insurance issubject tothe
compulsory coverage bytheGovernment.
Insurance services arenotallowed tobe
supplied through anintermediary in
Japan.
(3) 60percentofamounts ofreinsurance on
thecompulsory automobile third party
liability insurance issubject tothe
compulsory coverage bytheGovernment.
Insurance intermediation services arenot
allowed tobesupplied forinsurance
contracts made byaninsurance service
supplier whoisnotlicensed inJapan.(3) None except asindicated inhorizontal
commitments
(4) Unbound except asindicated inhorizontal
commitments(4) Unbound except asindicated inhorizontal
commitments
Banking andOther Financial
Services (excluding Insurance
andInsurance-Related Services)Specific commitments inthemarket access
column withrespect tothesupply ofaservice
asprescribed inparagraphs 2(a)and(b)of
Article IofthisAgreement areunbound except
forobligations under paragraphs 3and4ofthe
Understanding respectively which areincurred
inthissector additionally tothose covered by
theprovisions ofPartIIIofthisAgreement and
theAnnex onFinancial Services subject to
conditions andqualifications setoutbelow.Japan undertakes the
additional commitments
attached hereto.S/FIN/W/12/Add.3/Rev.1
Page5Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
(1) Commercial presence isrequired for
discretionary investment management
services.
(2) “None ”after April 1998.
Before April 1998, supply ofservices is
subject toallthefollowing limitations:
Overseas deposits andtrustcontracts
denominated inforeign currencies, the
sumofwhich areover 200million yen
value, andthose denominated inyenare
subject toapproval. Business
corporations which satisfy thestandards
ofin-house systems relating tolegal
affairs, riskmanagement andfinancial
management setoutbytheMinistry of
Finance maybegiven anapproval
effective foranindefinite period oftime
withrespect tooverseas deposits
denominated inforeign currencies over
200million yenvalue forthepurpose of
portfolio investment subject onlyto
expostreporting.(1) None
(2) NoneS/FIN/W/12/Add.3/Rev.1
Page6Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
Thefollowing capital transaction services
maybesupplied through authorized
foreign exchange banks inJapan, or
otherwise areinprinciple subject to
approval:
(a) Trade in:
(i)payment instruments such as
cheques andbills;
(ii)foreign exchange; and
(iii)derivative products which
involve outright foreign
exchange transactions such as
currency spotoptions.
Business corporations areexempted
from obtaining approval andmay
invest inallsecurities derivative
products listed onoverseas exchanges
fortheir ownaccount subject onlyto
expostreporting.
Business corporations which satisfy
thestandards ofin-house systems
relating tolegal affairs, risk
management andfinancial
management setoutbytheMinistry
ofFinance areexempted from
obtaining approval andmayinvest in
financial futures andoptions listed on
overseas exchanges fortheir own
account subject onlytoexpost
reporting.S/FIN/W/12/Add.3/Rev.1
Page7Modes ofsupply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orSub-sector Limitations onMarket Access Limitations onNational Treatment Additional
Commitments
(b)Special methods ofsettlement such as
offsetting andanymethod whereby a
resident either makes payment forthe
non-resident concerned toanother
resident orreceives payment made
byanother resident forthenon-
resident concerned.
(c)Swaps
(3) Commercial presence forinvestment trust
management services must bejuridical
person established inJapan.
(4) Unbound except asindicated inhorizontal
commitments(3) Thedeposit insurance system does not
cover deposits taken bybranches of
foreign banks.
Asindicated inhorizontal commitments
(4) Unbound except asindicated inhorizontal
commitments(3) With respect tothe
assets of
Employees ’Pension
Funds qualified by
theMinister of
Health andWelfare
tobemanaged by
discretionary
investment
management service
suppliers, Japan no
longer employs the
classification of
New Money*and
assets other than
New Money.
*New Money isanasset mainly consisting ofaccumulation ofpremiums collected byEmployees ’Pension Funds after thedaywhen such Funds arequalified by
theMinister ofHealth andWelfare asappropriate forexpanding their means ofasset management toinclude discretionary investment management services.S/FIN/W/12/Add.3/Rev.1
Page8
JAPAN: ADDITIONAL COMMITMENTS
A. Insurance andInsurance-Related Services
Whenever specific commitments intheadditional commitments column statethatappropriate
authorities willapprove anapplication orwillnotreject anotification, theapplication ornotification
mustmeettheapplicable legalcriteria. Theappropriate authorities willapply thelegalcriteria ina
fairandtransparent manner, andwillinterpret them withaview toward allowing insurance service
suppliers todifferentiate, onthebasisoftheriskinsured, therates, forms anddistribution ofproducts.
1. Appropriate authorities willapprove applications foradirect response system forautomobile
insurance,andwillapprovepaymentofpremiumsthroughtheuseofcreditcardswiththepolicyeffective
from thedatewhen theinsurance service supplier accepts credit cardpayment.
Adirectresponsesystem("Tsushin-Hanbai")forautomobileinsuranceisdefinedasadistribution
methodwherebyinsuranceservicesuppliersoffertheirproductstoconsumersthroughadvertisingmedia,
suchasnewspapers andmagazines, andthrough direct mailortelephone calls; accept applications of
consumers delivered viamailortelephone calls; andenter intocontracts withconsumers through an
exchange viamailortelephone calls, without meeting theconsumers.
2. Effective 1April 1998, appropriate authorities willexpand thescope oftheadvisory ratesystem
forloading ratesofcommercial fireinsurance, bylowering theminimum amount percontract toseven
billion yen.
3. Appropriate authorities include thefollowing sixteen products onthelistofproducts towhich
thenotification system applies withrespect totheratesandriders forsuchproducts andwillallow,
withinthestandardperiodofninetydays,marketingoftheproductsnotifiedtotheappropriateauthorities
(i.e., willnotreject thenotifications): medical malpractice liability insurance ("Ishi Baisho Sekinin
Hoken"), advanced lossofmachinery profit insurance ("Sogyo Kaishi Chien Hoken"), delayed start
ofconstructioninsurance("KaigyoChienHoken"),civilengineeringcompletedrisksinsurance("Doboku
Kozobutsu Hoken"), nuclear energy insurance (Genshiryoku Hoken"), umbrella liability insurance
("KigyoHokatsuBaishoSekininHoken"),environmentliabilityinsurance("KankyoOsenBaishoSekinin
Hoken"), erection insurance ("Kumitate Hoken"), moveable comprehensive insurance ("Dosan Sogo
Hoken"), computer comprehensive insurance ("Kompyuta SogoHoken"), boiler andturbo-set insurance
(Boiler Turbo-set Hoken"), transit insurance ("Unsoh Hoken"), credit cardtheftinsurance ("Credit
CardTonanHoken"),generalliabilityinsurance("BaishoSekininHoken"),constructionall-riskinsurance
("Kensetsu KojiHoken"), andsurety bonds ("Hosho Shoken").
4. (a) Bynolaterthan1July1998, appropriate authorities willeliminate obligations for
members ofarating organization touserates calculated bytherating organization forthe
provision ofinsurance services while allowing members ofarating organization touse,for
thepurpose ofcalculating rates, thestatistical datacollected bytherating organization.
(b) When thenecessary legislative changes aremade andtheiraccompanying administrative
measures come intoeffect toimplement subparagraph(a) above, theappropriate authorities
willapprove, within thestandard processing period ofninety daysaftersubmission, applications
allowing allinsurance service suppliers todifferentiate, onthebasis oftheriskinsured, the
rates, forms anddistribution ofproducts, without regard towhether suchapplications use
statistical ratescalculated bytherating organization.
(c) Intheinterim before thenecessary legislative changes aremade andtheiraccompanying
administrative measures come intoeffect, theappropriate authorities willapprove within theS/FIN/W/12/Add.3/Rev.1
Page9
standard processing period ofninety daysaftersubmission, applications forproducts inmajor
productcategoriesinthelifeandnon-lifesectorswhichprovidefortheflexibilitytodifferentiate,
onthebasis oftheriskinsured, therates, forms anddistribution ofproducts.
(d) Appropriate authorities willapprove applications forvoluntary automobile insurance
withtheflexibility todifferentiate, onthebasis oftheriskinsured, therates, forms and
distribution ofproducts, including adirect response system forautomobile insurance with
differentiated rates (collectively referred toas"differentiated autoinsurance") effective
1September 1997. Differentiation onthebasisofriskinsured includes differentiation ofrates
outside thebanded ratesbased onthefollowing riskfactors: age,sex,driving history, usage
(e.g., commercial, personal) andpattern ofuse(e.g., mileage peryear), geography (byregion,
i.e.Hokkaido, Shikoku, Kyushu, andHonshu, which willbedivided intoTohoku,
Kanto-Koshinetsu, Hokuriku-Tokai, andKinki-Chugoku), vehicle type,vehicle safety features,
andmulti-car ownership.
5. (a) Appropriate authorities willnotpermit non-life insurance subsidiaries oflifeinsurance
service suppliers tosellthefollowing personal accident insurance:
(i) personalaccidentinsurancebasedonasinglepolicywrittenforand/orendorsed1
bynon-profit inter-industry associations orfoundations formanagers of
corporations2;
(ii) domestic andoverseas travel accident insurance through travel agents;
(iii) personal accident insurance forstudents marketed through orendorsed by
schools (including alllevels ofschools, andincluding public andprivate
schools), orscholastic, student orparent organizations orassociations (i.e.,
"Gakusei-Dantai", "Dosokai" andPTA);
(iv) personal accident insurance through direct response methods ("Tsushin-
Hanbai");
(v) group personal accident insurance except when theinsurance subsidiaries are
acting asleadmanagers among co-insurers orsolounderwriter, andwhen the
insurance issoldtoagroup thathasnotheldinthepreceding sixmonths a
policy forthesameorasubstitutable group personal accident insurance product
bysmall tomedium and/or foreign insurance service suppliers; and
(vi) maturity refund personal accident insurance.
(b) Appropriate authorities willnotpermit lifeinsurance subsidiaries ofnon-life insurance
service suppliers tosellstand-alone cancer insurance andstand-alone medical insurance, and
theappropriate authorities willmaintain thelimitregarding theratioofriderbenefits tobase
policy benefits thathadexisted before thenewInsurance Business Lawcame intoforce on
1April 1996.
1"Endorse" means torecommend ("suisho") and/or back-up ("koen").
2"Non-profit inter-industry associations orfoundations formanagers ofcorporations" means the
"Zenkoku Hojinkai Sorengo", "Kyokuren Hojinkai", "Kenhojinkai Rengokai", "Tan-i Hojinkai",
"Nozeikyokai Rengokai", "Burokku-kai" and"Nozeikyokai".S/FIN/W/12/Add.3/Rev.1
Page10
(c) Appropriate authorities willterminate themeasures3toavoid radical change inthethird
sector asdescribed insubparagraphs (a)and(b)twoandone-half years afterthedatewhen
thenecessary legislative changes aremade andtheiraccompanying administrative measures
come intoeffect asdescribed inparagraph 4,oncondition thatallthefollowing measures will
havebeenimplemented bythatdate. Isolated instances ofminor divergence withrespect to
thestandard processing period ofthemeasures setoutinsubparagraphs (i),(iii)(B), or(v)
below donotconstitute afailure toimplement thefollowing measures forthepurpose ofthis
paragraph.
(i) theappropriate authorities approve, within thestandard processing period of
ninety days, applications fordifferentiated autoinsurance asdescribed in
paragraph 4(d);
(ii) theappropriate authorities havelowered theminimum insured amount per
contract required forapplication oftheadvisory ratesystem forcommercial
fireinsurance asdescribed inparagraph 2;
(iii) withrespect tothenotification system, theappropriate authorities;
(A) haveputintoeffect thenotification system withrespect tothelastsix
products setoutinparagraph 3;and
(B) allow, within thestandard period ofninety days, marketing ofthe
sixteen products setoutinparagraph 3notified totheappropriate
authorities (i.e., willnotreject thenotifications);
(iv) thenecessary legislative changes aremade andtheir accompanying
administrative measures come intoeffect toeliminate obligations formembers
ofarating organization touseratescalculated bytherating organization as
described inparagraph 4;and
(v) withrespect toapplications fordifferentiated products orrates, theappropriate
authorities approve, within thestandard period ofninety days, applications
submitted.
Intheevent thatnoapplications ornotifications havebeensubmitted byninety daysbefore
theabove-mentioned date, themeasures insubparagraphs (iii)(B) and(v)willbeconsidered tohave
beenimplemented.
6. Ifaninsurance service supplier hassubmitted documents toappropriate authorities related to
insurance products orrates, which theinsurance service supplier considers tobeanapplication, the
insurance service supplier maymake arequest totheappropriate authorities todetermine itsstatus.
Theappropriate authorities willrespond without undue delay tosucharequest andindicate whether
theyconsider thedocuments toconstitute aformal application.
3The"measures" donotapply togroup long-term disability insurance ("Dantai Choki Shogai Shotoku
Hosho Hoken") andincome indemnity insurance ("Shotoku Hosho Hoken"), including individual longterm
disability insurance ("Choki Shogai Tokuyaku").S/FIN/W/12/Add.3/Rev.1
Page11
B. Banking andOther Financial Services
(excluding Insurance andInsurance-Related Services)
1. With respect totheassets ofEmployees 'Pension Funds (hereinafter referred toas"Funds")
qualified byappropriate authorities tobemanaged bydiscretionary investment management service
suppliers, theeight-year qualification requirement withrespect totherequired duration oftheFunds
following theirestablishment isreduced tothree years.
2. There isaceiling of1/2oftotalassets withrespect totheassets ofFunds which canbemanaged
bydiscretionary investment management service suppliers. Theceiling willbeeliminated byMarch
1999.
3. Noassetallocationguidelinesareappliedtoindividualpensionfundmanagementservicesuppliers
withrespect tothemanagement offundassets ofthePension Welfare Service Public Corporation
(excluding thecommingled fundmanagement ofinsurance companies) oroftheassets ofFunds
(excluding thecommingled fundmanagement ofinsurance companies) which canbemanaged by
discretionary investment management service suppliers.
4. Investment trustmanagement services anddiscretionary investment management services may
besupplied byoneentity ifthatentity satisfies therelevant prudential provisions ofJapanese Laws
andtheprudential standards setoutbyappropriate authorities.
5. Appropriate authorities permit thePension Welfare Service Public Corporation toallow
investment advisory companies toparticipate inthemanagement ofitsfundassets through avariation
onthe"Shiteitan" framework. Atthetimeofthenextcomprehensive review oftheJapanese pension
system in1999, thisscheme would bereviewed.
"Shiteitan" isadesignated money trustforseparate investment management provided bytrust
banks. Under "Shiteitan", beneficial owners donotspecify individual objects ofstocks, bonds orother
financial instruments tobepurchased. Trust banks arepermitted toguarantee principal of"Shiteitan"
under domestic lawsandregulations.
6. Appropriate authorities willfullyutilize theexisting mechanisms available tothemtorespond
expeditiously toaccommodate innovations insecurities products, while ensuring themostappropriate
supervision ofmarkets from prudential viewpoints.