RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/JPN/29
24 June 1999
(99-2608)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Follow-up Questions from the EUROPEAN COMMUNITY1 and
the UNITED STATES2 Regarding the New and Full Notification of JAPAN3
The following communication, dated 18 June 1999, has been received from the Permanent
Mission of Japan.
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QUESTIONS FROM THE EUROPEAN COMMUNITY
I-A-11/12
Subsidy for measures to promote the textile industry
Q. Is it the case that "Subsidy for measures to promote the textile industry" was introduced
in 1998.  Is this the reason why it was not notifi ed in the 1998 new and full notification?  (The
same question is valid for Programme I-B-2).
Reply
Several sub-programmes of "Subsidy for measures  to promote the textile industry" ("Subsidy
for the technical assistance to small sized enterpri ses", "Subsidy for the project to develop new silk
products" and "Subsidy for promotion of the textile and apparel industry") have been notified until 1998.
From the 1999 notification, we  will notify "Subsidy for measures to promote the
textile industry" as a single programme which includes the programmes mentioned above and sub-
programmes which have not been notified because they have been under examination.
I-A-No. 41
Subsidy for the drilling cost of an exploratory well for a geothermal power plantQ. The notified subsidy budget for FY 1998 was zero and the duration of the subsidy is given
as 1992-97.  Is it therefore correct that this subsidy was terminated at the end of FY 1997?
                                                     
1 G/SCM/Q2/JPN/28
2 G/SCM/Q2/JPN/27
3 G/SCM/N/38/JPN & Suppl.1G/SCM/Q2/JPN/29
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Reply
Yes.  This subsidy was terminated at the end of FY 1997.
I-A-Nos. 47 and 48
Subsidy for promotion of facilities for the rationalization of the energy useQ. When will Japan notify the "Subsidy for promotion of facilities for the rationalization of
the energy use"?
Reply
We will notify "Subsidy for promotion of facilitie s for the rationalization of the energy use" in
the 1999 notification.
I-B-2
House technology creating life valuesQ. Is it the case that "House technology creating  life values" was introduced in 1998.  Is this
the reason why it was not notified in the 1998 new and full notification?
Reply
"House Technology Creating Life Value Project"  consists of "Subsidy for Research and
Development of House Technology Creating Life Values" which has been notified inG/SCM/N/38/JPN/Suppl .1 and the other non-notified subsidies which have been under examination.
We will notify "House Technology Creating Life Value Project" as a single programme from the 1999
notification.
II-A-Nos. 12 and 33
Subsidy of modernization of facilities for medium and small sized businesses
Subsidy to the special measures  concerning credit insurance
Q. The definition of a SME differs according to its sector of activity.  In the absence of a
consistent definition, is this subsidy not specific?   (The same question is valid for Programme 33).
Reply
1. The definition of SMEs in Japan is in principle stipulated in "Small and Medium Enterprise
Basic Law" as below.  The definition of SMEs is classified under three types of sectors, Manufacturing
and Mining and Other Industries, Whol esale Industries and Retail and Service.
Category of business sectors Number of employees and amount of capital
Manufacturing, mining and other industries 300 or less employees, or ¥ 100 million or less
Wholesale 100 or less employees, or ¥ 30 million or less
Retail and service 50 or less employees, or ¥10 million or less
2. The classification of type of SME business is defined to differentiate clearly in consideration of
the following elements:G/SCM/Q2/JPN/29
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- Commerce and services sector (wholesale, retail and service) is characterized by generally less
investment in plant and equipment than is n ecessary, and smaller capital is enough to operate
business, etc. as compared to manuf acturing, mining and other industries.
- Difference of the definition between wholesale and retail comes from the difference of
industrial attributes (width of market area, capital per enterprise, number of employees per
enterprise, etc.) between them.
3. The definition thus established by different types of business sectors comes mainly from SME
policies of the Japanese Government depending on th e industrial attributes which are associated with
Japanese industrial policies to meticulously conduct considering attributes of a type of business.  Eachdefinition is based on objective criteria or condition.  Therefore, we do not consider the mere fact that
there are different definitions of SMEs according to th e type of sectors determines specificity within the
meaning of Article 2.
4. Furthermore, different definitions of SMEs by  business sectors prevail on other countries and is
not peculiar to Japan.
II-A-No. 13
Q. From a general point of view, a financial contribution to a public body can confer a
benefit as defined by Article 1.1( b) of the Subsidies Agreement.  If this were not the case, state-
owned companies would be treated more favourably than private-sector co mpanies.  In the light
of this, could Japan explain why, in this particul ar case, there is no subsidy?  (The same question
is valid for Programmes Nos. 14, 18, 24, 30, 31, 41, 42, 43, 44 and 47).
Reply
In Japan, when the government implements necessary activities in order to accomplish
special public purposes if the government itself cannot manage the activity in an effective manner, an
independent organization which is called the Special Administrative Corporation is established by the
Government Special Law.  The S.A.C. is established by its nature to achieve a government policy,
therefore it falls into a "public body" within the meaning of Artic le 1.1(a)(1).  All MMAJ, JNOC,
NEDO and JSBC, "public bodies" within the meaning of Article 1.1(a)(1).
As to some programmes mentioned by the EC, fi nancial transfer basically remains within public
sectors, from MITI to each Special Administra tive Corporation (MMAJ, NEDO, etc.) as Special
Administrative Corporation's personal and management expenses, expenses for activities to gatherinformation, research and development, and publicity .  Under another programme, financial transfer to
Special Administrative Cor porations goes to private sectors whic h conduct research by a contract with
the S.A.C.  The result of research belongs solely to  the S.A.C. and a benefit is not conferred to any
specific enterprise.  Therefore, it provides no benefit within the meaning of Artic le 1.1(b).  (See also the
answer to II-A-No. 15.)
(Each Special Administrative details:)1. Metal Mining Agency of Japan (MMAJ):
Legislation under which it is granted
Metal Mining Agency of Japan Law.G/SCM/Q2/JPN/29
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Purpose of activity
Stable supply of nonferrous metal resources, development of metal mining.
2. Japan National Oil Corporation (JNOC):
Legislation under which it is granted
Japan National Oil Corporation of Japan Law.
Purpose of activity
Promoting the development of oil and inflammable natural gas resources.
3. New Energy and Industrial Technolo gy Development Organization (NEDO)
Legislation under which it is granted
Law concerning promotion of the development and introduction of alternative energy etc.
Purpose of activity
Development and introduction/promotion of new energy and energy conservation technology
and research and development activities related to industrial technology.
4. Japan Small Business Corporation (JSBC)
Legislation under which it is granted
Japan Small Business Corporation Law.
Purpose of Activity
Development structure of SMEs, rationalization of management and development of
technology and stabilization of SMEs.
II-A-No. 15
Q. Could Japan explain why there is no financial contribution from the Government in the
case of such contract research?  How is the budget for the programme spent and who are the
recipients of the funding?  To what extent are th e results of the research made available to the
public, and to what extent does industry benefit'  (The same question is valid for Programmes
Nos. 20, 22, 27, 34, 41 and 42).
Reply
Contract research of the Japanese Government is essentially a Government task in spite of it
being implemented by a private body.  A benefit is not conferred within the meaning of Article 1.1(b).
The contract which the EC pointed out is to implement a research activity etc.  All the
outcomes of the research belong to the Government and not to the private body which implemented
the activity, therefore the contract provides no benefit to the industry.G/SCM/Q2/JPN/29
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II-A-No. 21
Q. If this programme is only available for the creation of new industries, firms in existing
industries are presumably not eligible.  Therefore, how can this programme be non-specific?
Reply
The aim of this programme is to support research which involves a large risk implemented by
a private enterprise.  The eligibility of this programm e is to all industries whose activity is to meet the
policy objective in the existing industries.
In fact, it is available to all the sectors and the actual result of 1998 is in the sectors of textiles,
chemicals and electronics which are existing industries.
II-A-No. 40
Interest subsidy to the fund for special facility for energy-use rationalizationQ. Is it not the case that many firms will simply never be in a position to introduce such
energy equipment?  In view of this, how a re the criteria and the subsidy non-specific?
Reply
This programme provides a supply of interest from the Government to the enterprises which
can save certain amounts of energy to give loan advantage for the investment.
The financial transfer under this programme is made for purchasing energy-saving equipment
in a factory based on the approved plan under "th e law on temporary measures to promote business
activities for the rational use of energy and the utilization of recycled resources" and there exists an
objective criteria governing the eligibility for a subsidy.
This programme is available for all the indust rial sectors to introduce such equipment and
whoever can use this subsidy if the enterprises meet the objective criteria.  In addition, on a de facto
basis, a very wide range of industries including textiles, electronics, steel, oil-chemical, cement, andpulp industries have benefitted under this programme.
II-A-Nos. 49 and 50
Subsidy to the cost of measures for promoting development/use of regional energiesQ. In practice, which type of companies take  advantage of these programmes?  Is there a
predominant use by any sector or sectors?
Reply
In practice, these programmes are widely enjoyed by every sector such as local government,
the third sector, the private company, for exam ple the business company, communication, the retail
industry, the manufacturing industry, the general public and so on.
Third sector:  In Japan, it is established in joint capital by government or local government
(first sector), and private sector (second sector).G/SCM/Q2/JPN/29
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B. Sub-National Programmes
II-B-1Q. With regard to the cited subsidy programmes of Iwate, Tottori and Fukui, would Japan
agree that these programmes are specific within th e territory of the granting authority, even if
they are not export contingent?
Reply
With regard to the Wood Industry Stable Management Fund in Iwate and the Fund for the Glass
Industry in Fukui, Japan will notify these measures in the 1999 notification in order to achieve themaximum transparency under the Agreement on Subs idies and Countervailing Measures.  In accordance
with Article 25.7 of the Agreement, the notificati on of these measures does not prejudge their legal
status, effects or nature under GATT 1994 and the Agr eement.  The cited programme of Tottori is under
examination.
QUESTIONS FROM THE UNITED STATES
Q1. We did not receive a response to our original question 1.
Reply
Japan has already submitted an answer to the referred question.
2. Subsidy to promote and foster new enterprises of the research and development type or
knowledge intensive type.
Q. In response to original question (b), you stated that under "Subsidy to promote and foster
new enterprises of the research and development type or knowledge-intensive type" the Venture
Enterprises Centre conducts "debt guarantee servi ces for companies with plans to develop new
products or services".  Please explain what kinds of companies (i.e. sectors or industries) receive
debt guarantee services.
Reply
Any company with a viable plan to develop new products or services can apply for the debt
guarantee under this programme.  There is no restricti on on sectors or industries.  For example, the debt
guarantee was actually given to companies in vari ous sectors, including t hose of telecommunication,
medical and welfare and environment.
3. Support for business innovation
Q. Please refer to your response to our original question 3(b).  Regarding "Support for
business innovation", please ex plain what manufacturing sect ors have been designated by
ministerial order to receive subsidies under this programme?
Reply
The Ministerial Order to provide designated industries of 1998 is as follows:G/SCM/Q2/JPN/29
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1. Cotton spinning
2. Chemical fibre spinning
3. Wool spinning
4. Silk spinning
5. Flax and ramle spinning6. Cotton and staple fabrics
7. Natural and artificial silk fabrics
8. Wool fabrics
9. Bastfibre fabrics
10. Machine finishing of cotton, staple bastfibre and hemp fabrics
11. Machine finishing of natural and artificial silk fabrics
12. Machine finishing of wool fabrics13. Cotton string and yarn finishing
14. Knitted and lace finishing
15. Men and boys' clothing manufacturing
16. Women and girls' clothing manufacturing
17. Knitted outer shirts manufacturing18. Sweater manufacturing
19. Towel manufacturing
20. Wooden furniture manufacturing (excluding lacquered wooden furniture manufacturing)
21. Metal furniture manufacturing
22. Pulp production23. Ammonia production
24. Phosphoric acid fertilizer production and compound fertilizer production
25. Urea production
26. Soda production
27. Inorganic pigment production (excluding carbon black production)28. Oxygen production
29. Wet-process phosphoric acid production
30. Petrochemicals (limited to the production of certain major petrochemical products created as
a result of dissolving naphtha)
31. Synthetic dye manufacturing
32. Polyvinyl chloride production
33. Chemical fibre manufacturing34. Explosives manufacturing (excluding the manufacturing of explosives for use in weapons)
35. Rubber and plastic footwear and components manufacturing
36. Rubber belt manufacturing
37. Tanned leather manufacturing
38. Leather footwear manufacturing, and leather footwear materials and components
manufacturing
39. Flat glass manufacturing
40. Optical glass base manufacturing
41. Glass container manufacturing
42. Glass tableware and glass kitchenware manufacturing43. Ceramic tableware and kitchenware manufacturing
44. Ceramic ornament manufacturing
45. Ceramic tile manufacturing
46. Refractory brick manufacturing and prepared unshaped refractories manufacturing
47. Iron industries with blast furnaces48. Ferrous alloys
49. Steel manufacturing with electric furnaces and with rolling facilities
50. Hot-rolled steel (excluding copper pipe manufacturing and steel rolling)
51. Cold-rolled steel (excluding copper pipe manufacturing and steel rolling)G/SCM/Q2/JPN/29
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52. Wire drawing
53. Grey and ductile iron castings manufacturing (excluding cast iron pipes and malleable)
54. Malleable iron casting manufacturing
55. Steel casting manufacturing
56. Primary nickel refining and processing57. Secondary lead refining and processing (including lead alloy manufacturing)
58. Secondary aluminium refining and processi ng (including aluminium alloy manufacturing)
59. Wrought copper and copper alloys
60. Aluminium and aluminium alloy rolling industry
61. Electric wire and cable production (excluding optical fibre production)
62. Knives for industry production
63. Saw-blades production64. Steel pipe fitting manufacturing (excluding malleable cast iron fittings manufacturing)
65. Anodic oxide casting
66. Bolts, nuts, rivets, machine screws, wood screws, etc. production
67. Agricultural sprayer and duster machine manufacturing
68. Construction and mining machines and mining machinery manufacturing
69. Tractor manufacturing
70. Metal-cutting machine tools manufacturing
71. Metal-forming machines manufacturing (excluding metal-tooling machines manufacturing)
72. Metal-forming machine components and parts manufacturing
73. Tools for machines production (excluding powder and metal-working)74. Chemical fibre machine and yarn spinning machine manufacturing
75. Textile processing machine and weaving machine manufacturing
76. Bleaching, dyeing printing and finishing machine manufacturing
77. Textile machine parts, accessories and attachments manufacturing
78. Sewing machine manufacturing79. Wood processing machine manufacturing
80. Pulp making machine and paper-making machine manufacturing
81. Printing, binding and paper processing machine manufacturing
82. Plastic processing machine and accessories manufacturing
83. Business machine and equipment manufacturing
84. Hand-knitting machine manufacturing
85. Refrigeration and air conditioning equipment86. Molds and dies, parts and accessories thereof manufacturing
87. Trajectory operated robot manufacturing
88. Generator, motor and other electrical rotational machine manufacturing
89. Wiring device and wiring accessory production
90. Electric welding machine manufacturing91. Auxiliary equipment for internal combustion engines manufacturing
92. Radio receiver, television production, electrical acoustic device production and video
production
93. Storage battery production
94. Automobile accessory manufacturing95. Forklift truck manufacturing
96. Universal measures manufacturing
97. Balance and scales manufacturing
98. Microscopes and telescopes manufacturing
99. Camera and accessories manufacturing100. Motion picture equipment and accessory manufacturing
101. Optical machine lens and prism production
102. Watches and clocks, and component manufacturing (excluding watches and clock-cases)
103. Watches and clock-casesG/SCM/Q2/JPN/29
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104. Musical instrument manufacturing
105. Coal mining (excluding coal separating)
106. Fibre materials wholesaling (excluding wholesale of raw silk cocoons)
107. Yarn wholesaling
108. Textile wholesaling109. Men's clothing wholesaling
110. Women's and children's clothing wholesaling
111. Iron and steel wholesaling
112. Metal-forming machines wholesaling
113. Automobile parts and accessories wholesaling
114. Kimonos and cloths for kimono retailing
115. Men's clothing retailing116. Women's and children's clothes retailing
117. Automobile parts and accessories retailing
118. Cardboard manufacturing
119. Machine-made Japanese paper manufacturing
120. Corrugated cardboard manufacturing121. Carbon black industry
122. Plastic sheet and rod manufacturing
123. Artificial leather manufacturing
124. Industrial plastic products manufacturing
125. Bicycle tyre tube manufacturing126. Flat glass processing
127. Processed glass material manufacturing (excluding optical glass base manufacturing)
128. Cement manufacturing
129. Concrete pile manufacturing and hume pipe manufacturing (including the concrete product
manufacturing industry)
130. Aerated concrete products manufacturing
131. Magnesia clinker manufacturing
132. Galvanized steel sheet manufacturing
133. Primary copper smelting and refining
134. Primary zinc smelting and refining
135. Crafted cutting knives and hand tools manufacturing
136. Aluminium construction materials manufacturing (limited to manufacturing of construction
materials used in medium- and high-rise buildings)
137. Metallic springs manufacturing
138. Foundry machinery manufacturing (including diecasting machine manufacturing)
139. X-ray equipment manufacturing
140. Electronic applied medical equipment manufacturing141. Bicycle and bicycle parts manufacturing
142. Gas meter manufacturing
143. Medical machinery and apparatus manufacturing and medical supplies manufacturing
144. Recreational goods and toys manufacturing (excluding electronic applied toys manufacturing)
145. Sporting goods manufacturing146. Abrasive products manufacturing
147. Lime manufacturing industry
148. Non-ferrous alloy casting manufacturing (excluding die casting)
149. Metal flatware manufacturing
150. Aircraft manufacturing151. Canned fish processing industry
152. Canned vegetable and canned fruit processing industry
153. General sawing and planing industryG/SCM/Q2/JPN/29
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154. Normal plywood industry
155. Ship machinery industries
4. The Real World Computing  (RWC) Programme
Q. Please refer to your response to our origin al question 4(a).  Regarding "The Real World
Computing (RWC) Programme" you state that "anyone can join the RWC Programme through
the decision at the general meeting of the partne rship".  Please explain who participates in the
general meeting.  How are new applicants to the RWC Programme elected?
Reply
The members belonging to RWCP attend the general meeting.  A participation qualification
to RWCP is a corporation which has the capacity of executing an examination in RWCP.  The
participation of a new member is approved when more than 2/3 of those present in the general
meeting give their consent to it in the meeting where more than half of the members attend.
5. Capital Investment and Loan for R& D Projects concerning Key Technology
Q. Please refer to your response to our original question 9(a).  Regarding "Capital
Investment and Loan for R&D Projects concerning Key Technology", please explain how
granting a patent to the beneficiary of the subsidy results in the public release of researchresults?
Reply
Under the Japanese patents system, the results of their research are made known publicly
through the application of the patent after a certain period.  Anyone can obtain this information.
6. Capital Investment and Loan for R& D Projects concerning Key Technology
Q. Please refer to your response to our original question 9(c).  Regarding "Capital
Investment and Loan for R&D Projects concerning Key Technology", please explain what
interest rate is charged on the loan.  How is that interest rate determined?
Reply
The programme applies the interest of the Japanese Government's Trust Fund Bureau
(Ministry of Finance) (the recent rate of interest (May 1999) is 1.7 per cent), which is decided by theGovernment according to the long-term interest in the market.
7. Q. It appears we did not receive answers to our original questions 12 through 17 .
Reply
Japan has already submitted answers to the referred questions.
8. Business Reform Law
Q. Please refer to your response to our original question 18.  It appears we did not receive a
full notification regarding the programme Business Reform Law (or Law on Special Measures
to Facilitate Business Reform by Specially Designated Businesses/Law).G/SCM/Q2/JPN/29
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Reply
As for the measures related to the Business Reform Law (BRL), we have already informed, in
document G/SCM/N/38/JPN of 1998 notification No. 2.
In this notification, we informed the special depreciation on machinery for business
innovation and the special tax credit for the increased expense for R&D.
The additional question from the United States seems to indicate that the tax measures related
to the BRL include the special treatment for replacement of land for a long time.
First, this measure is different from the special depreciation on equipment acquired for
production.
Second, since the special tax treatment is provided generally for replacement of land for all
corporations, this tax treatment provides no advantageous benefit to any specific enterprises.
Lastly, we would like to add that we are ready to notify the measure if the US insists on its
notification regardless of its legal status, effects or nature.
9. Ultra Super-Advanced Electronics Technology Development Programme
Q. Please refer to your response to our original question 18.  Regarding "Ultra Super-
Advanced Electronics Technology Development Programme" please explain whether the
recipient of the subsidy (the Association of Super-Advanced Electronics Technologies (ASET))
provides assistance to producer or exporters.  Pl ease provide a list of ASET's members, or an
indication of the technology sectors represented.
Reply
The objective of this programme is to conduct research and development for establishing
super-advanced technology of the "next-after- the-next" generation.  The Ultra Super-Advanced
Electronics Technology Development Programme does not provide assistance to producer and
exporters.  The ASET's member list is as follows:
Advantest Corporation
Fujitsu Limited
Hitachi Ltd.
Matsushita Electric Industrial Co. Ltd.Mitsuishi Electric Corporation
NEC Corporation
Nikon Corporation
NTT Advanced Technology Corporation
Oki Electric Industry Co. Ltd.Sanyo Electronics Corporation
Sharp Corporation
Sony Corporation
Texas Instruments Tsukuba
Research & Development Centre Ltd.Toshiba Corporation
Toshiba Machine Co. Ltd.
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