RESTRICTED  
  
GPA/MOD/JPN/93  
 
15 August 2016  
(16-4393) Page: 1/3 
Committee on Government Procurement  Original: English  
 
 PROPOSED MODIFICATIO NS TO APPENDIX I OF JAPAN UNDER THE REVI SED 
AGREEMENT ON GOVERNM ENT PROCUREMENT  
COMMUNICATION FROM J APAN  
Replies from Japan to q uestions from the European Union  (GPA/MOD/JPN/8 8) to its proposed 
modifications circulated in GPA/MOD/JPN/82  
The following communication, dated 1 5 August  2016, is being circulated at the request of the 
Delegation of Japan.  
 
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RESPONSE FROM JAPAN TO QUESTIONS FROM TH E EUROPEAN UNION  
(GPA/MOD/JPN/8 8) TO ITS PROPOSED MO DIFICATIONS  
CIRCULATED IN GPA/ MOD/JPN/82  
 
 
Please find below Japan 's response to questions from the European Union  (GPA/MOD/JPN/8 8) 
regarding the proposed modification to Appendix I of Japan under the revised GPA 
(GPA/MOD/JPN/82) related to Kyushu Railway Company.  
 
1. JR Kyushu has been r eceiving various forms of subsidies (special tax measures, 
interest free loans, interest payment), in addition to being allowed to use the 
¥387.7  billion Management Stabilization Fund for other purposes than repaying 
this amount to the government. What typ e and amount of subsidies, including 
supporting measures for capital investment, will JR Kyushu continue to receive 
from the Japanese government or from JRTT?  
The Management Stabilization Fund is not a subsidy.  
At the time of the division and privatizatio n of Japan National Railways (JNR), the Management 
Stabilization Fund was established in Kyushu Railway Company, Hokkaido Railway Company and 
Shikoku Railway Company respectively in order to stabilize their business with the investment 
profit of the Fund. The liability arising from the establishment of the Fund was borne by JNR which 
was a separate legal entity from the Government of Japan  (GOJ) and subsidy or governmental 
funds were not provided to the Fund.  
In addition, the liabilities of JNR including th e liabilities of the Management Stabilization Fund are 
not reimbursed by the GOJ. They were succeeded to the JNR Settlement Corporation, whose legal 
personality was also apart from the GOJ with the asset of JNR. The succeeded liabilities were 
supposed to b e reimbursed by the disposal of the asset such as succeeded real estate or the share 
of JR companies.  
Kyushu Railway Company has been granted subsidies of ¥590 million in the fiscal year 2015 of 
which the purposes are the installation of railway crossing safety equipment, the installation of 
barrier -free equipment and facilities and the seismic strengthening of railway facilities. All railway 
companies in Japan are granted these subsidies and total amount of the subsidies are less than 
0.3% of the total re venue of Kyushu Railway Company.  GPA/MOD/JPN/93  
 
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  The special tax measure granted to Kyushu Railway Company applies to local tax only in order to 
assure the transportation network in the area in accordance with the demand for transportation 
under the severe business enviro nment. The measure is not an aid directly granted from the 
central government. It does not enable the central and local governments to control or influence 
the procurement of Kyushu Railway Company either.  
The interest free loan from JRTT, accounting ¥85.7 billion in total between the fiscal years 1998 
and 2015 was reimbursed on 31 March 2016 and JRTT has not and will not provide the loan to 
Kyushu Railway Company thereafter. In addition , the fund of this loan is not an expenditure from 
the national treasu ry but the selling profit of the asset succeeded to JRTT such as the real estate 
and the share of JR companies.  
The interest payment from JRTT is not a subsidy but the consideration of the loan from Kyushu 
Railway Company to JRTT. In addition , JRTT is sup posed to complete the reimbursement of the 
principal balance on 31 March 2017 and the interest will not be generated thereafter.  
2. On what criteria are these subsidies awarded and how are they allocated to the 
companies?  
Subsidies for the installation of rai lway crossing safety equipment, the installation of barrier free 
equipment and the seismic strengthening of railway facilities are granted to all railway operators 
including Kyushu railway Company, Hokkaido Railway Company and Shikoku Railway Company 
within the government budget to the extent requirements for granting the subsidies are satisfied 
and the amount may not exceed the government budget.  
3. When will these forms of subsidies, including pre ferential tax treatment, for 
JR Kyushu be ended?  
Subsidies for  the installation of railway crossing safety equipment, the installation of barrier -free 
equipment and facilities and the seismic strengthening of railway facilities are not planned to end 
at present and they will be granted to Kyushu Railway Company based  on its request to the extent 
that the requirements for granting the subsidies are satisfied.  
The special local tax measures applying to Kyushu Railway Company, referred to in the reply to 
the question 1 above, seem to reduce gradually and be abolished by the fiscal year 2018, as 
Kyushu Railway Company is no longer subject to the Law Concerning Passenger Railway 
Companies and Japan Freight Railway Company and the whole share s of Kyushu Railway Company 
are supposed to be sold in a package in this fiscal year . 
4. From Japan 's notification we understand that the whole shares of JR Kyushu are to 
be sold by the end of the fiscal year (March 2017). How is this going to be carried 
out? What percentage of JR Kyushu (which business segment) will be subject to 
the IPO?  
The whole shares of the Kyushu Railway Company are supposed to be sold in a package.  
5. Who will receive the revenues of the IPO - JRTT or the Japanese Government?  
JRTT will receive the revenue as the fund for the pension payment to the former employees of 
JNR. 
6. Will this IPO be carried out gradually, and if so, what is the timing of the steps?  
As responded above to the question 4.  
7. Will JRTT or any other public entity keep  some degree of ownership 
(e.g.  shareholding) of JR Kyushu initially, and for how long?  
The JRTT owns the whole shares of the Kyushu Rail Company which are supposed to be sold  in a 
package within fiscal year 2016 . GPA/MOD/JPN/93  
 
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  8. Is there any board member or executive at JR Kyushu who has been a former 
official of MLIT or other part of the Japanese government,  or JRTT?  
Only one executive director is a former official of MLIT. Considering the fact that the board of 
directors of Kyushu Railway Company consists of 19 directors (as of August 2016), the ratio of 
former government official is extremely low. Given th e fact that there are four executive directors 
on the board and their rank is under chairman, president, two senior executive directors, the said 
former MLIT official acting as executive director is not a position to exert a decisive influence on 
decision s of the board.  
There are no executives who were former officers of JRTT.  
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