RESTRICTED  
  
GPA/MOD/JPN/85  
 
27 July 2016  
(16-3993)  Page: 1/9  
Committee on Government Procurement  Original: English  
 
 PROPOSED MODIFICATIONS TO APPEND IX I OF JAPAN UNDER THE REVISED 
AGREEMENT ON GOVERNMENT PROCUREMENT 
COMMUNICATION FROM JAPAN 
Replies from Japan to the questions from the United States of America (GPA/MOD/JPN/83)   
to its proposed modifications circulated in GPA/MOD/JPN/82  
The following communication, dated 26 July 2016, is being circulated at the request of the 
Delegation of Japan. 
 
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RESPONSE FROM JAPAN TO QUESTIONS FROM THE UNITED STATES (GPA/MOD/JPN/83) 
TO ITS PROPOSED MODIFICATIONS CIRCULATED IN GPA/MOD/JPN/82 
Please find below Japan's response to questions from the United States of America 
(GPA/MOD/JPN/83) regarding the proposed modifica tion to Appendix I of Japan under the revised 
GPA (GPA/MOD/JPN/82) related to Kyushu Railway Company. 
 1. In paragraph 2, Japan notes that the proposed modification is based on the fact 
that the Amendment to the Law concerning  Passenger Railway Companies and Japan 
Freight Railway Company was promulgated on 10 June 2015 and entered into force on 1 April 2016. Can Japan share an Englis h version of the amendment to the Law 
concerning Passenger Railway Companie s and Japan Freight Railway Company? 
Please see the attachment. 
 2. In paragraph 2.f., Japan notes that the whol e shares of the Company are to be sold 
by the end of this fiscal year. Can Japan ex plain the legal obligations which requires the 
complete sale of shares in the comp any by the end of this fiscal year? 
The Japan Railway Construction, Transport and Technology Agency (JRTT) holds the whole share 
of the Kyushu Railway Company. The JRTT is obliged to consult the Council concerning the disposal 
of assets as provided in the Law concerning the disposal of Debts and Other Matters of the Japanese National Railways Settlement Corporation at the disposal of the share of Kyushu Railway Company. Accordingly, the Council deliberated the disposal of the share of Kyushu Railway 
Company and issued the recommendation to the JRTT that the share should be sold in a package 
in this fiscal year.  
3. There are several other railway companies covered in Annex 3 by Japan, such as 
the Hokkaido railway company and the Shikoku railway company. Why did the Amendment to the Law concerning Passenger Railway Companies and Japan Freight 
Railway Company privatize only the Kyushu Railway Company? 
The Government of Japan (GOJ) has basic policy to privatize Passenger Railway Companies and 
Japan Freight Railway Company as soon as possible once conditions are met such as establishment of the management base and the like in accordance with the relevant cabinet decisions since the 
reforms of the Japanese National Railway.  GPA/MOD/JPN/85 
 
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  Regarding Kyushu Railway Company, it was deemed that conditions were met for the listing on the 
stock market as a result of the deliberation of the GOJ on the following:  
 Kyushu Railway Company is expected to stabilize sound management after the 
privatization.  
 Kyushu Railway Company has established management base. 
4. Is Japan aware of other covered entities th at are in the process of being privatized? 
As of July 2016, the GOJ is not aware of entities th at officially plan to sell the share like Kyushu 
Railway Company.  5. What is the relationship between Kyushu Railway Company and the Japan Railway 
Construction Transport and Technology Agency  (an entity listed as 1.33 in Attachment B 
in GPA/MOD/JPN/82)? 
The JRTT holds the share of Kyushu Railway Comp any. In the process of the Japan National 
Railways reforms, the JRTT succeeded to assets like the estate and the share of the Passenger 
Railway Companies and Japan Freight Railway Company owned by Japan National Railways 
together with the annuity liabilities for employees of Japan National Railways. The Agency holds 
the share of Kyushu Railway Company as the source for payments for the annuity liabilities for 
former employees of the Japan National Railways.  The JRTT conducts business operation, the construction and advisory service of the railway 
infrastructure and surveys relating to railway proj ects and the like. These services are provided to 
any railway company and it is possible for the JR TT to contract with Kyushu Railway Company. 
 GPA/MOD/JPN/85 
 
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  ATTACHMENT1 
(Tentative Translation) 
  
1  THE AMENDMENT TO THE LAW CONCERNING PASSENGER RAILWAY COMPANIES AND 
JAPAN FREIGHT RAILWAY COMPANY (EXCERPT) 
[Law No. 26 of 28 December 2016] 
 
The Law concerning Passenger Railway Companies and Japan Freight Railway Company shall 
be partially amended as follows:  
- Delete "Kyushu Railway Company " from paragraph 1 of Article 1 and Article 2. 
  
Supplementary Provisions 
 
 
(Date of Enforcement) 
 Article 1  
This Law shall come into force on the date to be determined by a Cabinet Order not later 
than one year from the date of its promulgation, provided that the provision of Article 6, 7 and 12 
of the Supplementary Provisions shall come into effect on the date of the promulgation. 
 
(Publication of the Guidelines)  
Article 2 
 1. Taking into account the process of the reforms of the Japanese National Railways, which was 
implemented in accordance with the purpose set forth in Article 1 of the Japanese National Railway 
Reform Law (Law No. 87 of 1986), the Minister of Land, Infrastructure, Transport and Tourism 
shall determine and publish the guidelines regarding matters that the New Companies should consider for the time being in the conduct of their business (hereinafter referred to as the 
"Guidelines"), for the purpose of securing the convenience of the customers of the railway 
business operated by the entities listed below (hereinafter referred to as the "New Companies"), and maintaining appropriate conditions for their use, and securing the foundation for the sound 
development of the economy and communities of the region in which the New Companies conduct 
their business. 
(1) Kyushu Railway Company established under the Law Concerning Passenger Railway 
Companies and Japan Freight Railway Company before the amendment by this Law 
(hereinafter referred to as the "Former Law") (hereinafter referred to as the "Kyushu 
Railway Company"); and 
 
(2) entities which operate from or will operate after the enforcement date of this Law 
(hereinafter referred to as the "Enforcement Date"), as a result of sale, merger, division or inheritance, the whole or part of the railway business that was operated by 
Kyushu Railway Company on the preceding day of the Enforcement Date, and which 
are or will be designated by the Minister of Land, Infrastructure, Transport and Tourism in consideration of such factors as the contents, scale, shareholders and other circumstances of their railway business. 
 
                                               
1 In English only. GPA/MOD/JPN/85 
 
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  2. The Guidelines shall provide for the following matters: 
(1) matters related to the appropriate setting of passenger fares and rates and the 
smooth use of railway facilities between the Companies (meaning hereinafter in this subparagraph, between the entities listed in the subparagraphs of the preceding 
paragraph or between the entities listed in the subparagraphs of the preceding 
paragraph and the Companies under paragraph 3 of Article 1 of the Law Concerning the Passenger Railway Companies and Japan Freight Railway Company after the 
amendment by this Law or the New Companies under paragraph 1 of Article 2 of 
Supplementary Provisions of the Amendment to the Law Concerning the Passenger Railway Companies and Japan Freight Railway Company (Law No. 61 of 2001), and other matters related to securing of coordination and cooperation in the railway 
business between the Companies; 
 (2) matters related to the appropriate maintenance of the currently operated railway 
routes in light of the trend of demand for transportation and other changes in 
circumstances following the implementation of the reform of the Japanese National 
Railways, and matters related to securing the convenience of customers in the 
development of stations and other railway facilities; and 
 (3) matters related to consideration to be given to small and medium-sized enterprises 
engaged in business similar to that New Companies conduct in their business areas, 
by avoiding unfair interference with activities or unfair infringement of interests of 
such small and medium-sized enterprises. 
 
(Guidance and advice) 
 Article 3 
 
If it is deemed to be necessary to ensure that New Companies follow the Guidelines in the 
conduct of their business, the Minister of Land, Infrastructure, Transport and Tourism may give to New Companies necessary guidance and advice on the conduct of their business. 
 
(Recommendation and order)  
Article 4 
 1. If it is deemed that, in light of the Guidelines, New Companies fail to conduct their business 
with no justifiable reasons in such a manner as to secure the convenience of the customers of the 
railway business operated by the New Companies and maintain appropriate conditions for their use and secure foundation for the sound development of the economy and communities of the region 
where New Companies conduct their business, the Minister of Land, Infrastructure, Transport and 
Tourism may issue to New Companies a recommendation that they take necessary measures 
regarding the conduct of their business. 
2. The Minister of Land, Infrastructure, Transport and Tourism may publish the fact if the New 
Companies that received the recommendation under the preceding paragraph fail to follow the 
recommendation. 
3. In the case that the New Companies which received the recommendation under paragraph 1 
of this Article have failed to take measures in accordance with the recommendation with no 
justifiable reasons, even after the fact that th ey did not follow the recommendation was published 
under the provision of the preceding paragraph, an d if it is deemed that the assurance of the 
convenience of the customers of the railway busi ness operated by the said New Companies, the 
maintenance of appropriate conditions for their use, or the assurance for the sound development 
of the economy and communities of the region  where the said New Companies conduct their 
business has been severely jeopardized, the Minister of Land, Infrastructure, Transport and 
Tourism may issue an order to the said New Companies that they take measures to follow the 
recommendation. 
4. The Minister of Land, Infrastructure, Transport and Tourism shall consult with the Transport 
Council when issuing an order under the provision of the preceding paragraph. GPA/MOD/JPN/85 
 
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  (Penal provision) 
 Article 5  
If an order issued under paragraph 3 of the preceding Article has been disobeyed, the 
directors of the New Companies which have disobeyed the order shall be liable to an administrative fine not exceeding one million yen. 
 
(Transitional measures)  Article 7 
 
Kyushu Railway Company will draw all the amount of the fund defined under paragraph 1 of 
Article 12 of the Former Law in order to appropriate it to the cost required for its business 
operations on the preceding day (Note: 31 May 2016) of the Enforcement Date. 
 2  THE LAW CONCERNING PASSENGER RA ILWAY COMPANIES AND JAPAN FREIGHT 
RAILWAY COMPANY (EXCERPT) 
[Law No. 88 of 4 December 1986] 
 [Amendment: Amended by Law Nos. 50 and 65 of 1990, No. 63 of 1993 and No. 61 of 2001] 
 
(Purposes and businesses of the Companies)  
Article 1 
 1. Hokkaido Railway Company, Shikoku Railway Company and Kyushu Railway  Company 
(hereinafter referred to as the "Passenger Companies") shall be stock companies whose purpose 
shall be to engage in the passenger railway business and other businesses incidental thereto. 
2. Japan Freight Railway Company (hereinafter referred to as the "Freight Company") shall be 
a stock company whose purpose shall be to engage in the freight railway business and other 
businesses incidental thereto. 
3. The Passenger Companies and the Freight Company (hereinafter referred to as "Company" 
or "Companies") shall respectively engage in the businesses referred to in paragraph 1 or the 
preceding paragraph and may additionally engage in the motor vehicle transportation business or 
other businesses subject to the approval of the Mini ster of Land, Infrastructure and Transport. In 
this case the Minister of Land, Infrastructure and Transport shall give the approval unless the 
appropriate and sound management of the businesses referred to in paragraph 1 or the preceding 
paragraph is considered to be jeopardized thereby. 
(Restriction on use of trade names) 
 
Article 2 
 
No person other than the Companies is allowed to use the words of Hokkaido Railway 
Company, Shikoku Railway Company and Kyushu Railway Company or Japan Freight Railway 
Company in his/her trade name.  
Article 3 Deleted (Law No. 63 of June 1995) 
 (General mortgage)  
Article 4 
 1. The bondholders of each Company are entitled to receive compensation for their credit, in 
preference to other creditors, out of the property of the Company concerned. 
2. The order of the lien under the preceding paragraph shall be immediately following the 
general line under the provisions of the Civil Code (Law No. 89 of 1896). GPA/MOD/JPN/85 
 
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  (New stocks, corporate bonds and borrowings) 
 Article 5  
1. Each Company shall obtain the approval of the Minister of Land, Infrastructure and 
Transport when it intends to issue new stocks, raise corporate bonds, or borrow funds with a repayment period of more than one year. 
2. The provision of the preceding paragraph is not applicable to the case where a Company 
issues replacement bonds in accordance with the applicable Cabinet Order and bears new liabilities. 
(Resolution on appointment of th e representative director, etc.) 
 
Article 6  
A resolution of appointment or dismissal of the representative director and corporate 
auditors of each Company shall not become effective without approval of the Minister of Land, Infrastructure and Transport. 
 
(Annual business plan)  Article 7 
 
Each Company shall, before the start of each business year, establish its annual business 
plan in accordance with the applicable ordinance of the Ministry of Land, Infrastructure, Transport 
and Tourism and obtain the approval of it from th e Minister of Land, Infrastructure and Transport. 
The approval shall be also required when a Company intends to modify the same.  
(Transfer of important assets) 
 Article 8  
Each Company shall obtain the approval of the Minister of Land, Infrastructure and 
Transport if it intends to transfer important assets set forth in the applicable ordinance of the Ministry of Land, Infrastructure, Transport and Tourism or to submit them as collateral. 
 
(Changes to the articles of incorporation)  
Article 9 
 
Resolutions on changes to the articles of incorporation, appropriation of the retained 
earnings or disposition of losses, mergers, corporate split-ups or liquidations of each Company 
shall not become effective without approval of the Minister of Land, Infrastructure and Transport. 
 (Consideration for small and medium-sized enterprises) 
 
Article 10  
Each Company shall, in consideration of the impact of its business operation on the 
economic activities in the region where it operates, take at most care not to unreasonably hamper the business operations of small and medium-siz ed enterprises engaged in the same field of 
business in the region or to unreasonably impair their business profit. 
 
(Financial statements)  
Article 11 
 
Each Company shall submit its balance sheets, income statements and business report for 
each business year to the Minister of Land, Infrastructure and Transport within three months after 
the end of each business year.  GPA/MOD/JPN/85 
 
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  (Management Stabilization Fund for Railway Companies) 
 Article 12  
1. Railway Companies shall manage their fund equal to the amount of credit that they acquired 
respectively in accordance with the provision in  paragraph 1 of Article 7 in the Supplementary 
Provisions as the Management Stabilization Fund (hereinafter referred to as the "Fund") and 
appropriate the profit from investing their Fund to  the cost required for their business operations. 
2. Railway Companies shall keep a separate account for their Fund from other accounts in 
accordance with the applicable ordinance of the Ministry of Land, Infrastructure, Transport and Tourism. 
3. The Fund shall not be reduced. However, the Fund may be reduced where the value of the 
net assets of a company concerned has diminished to less than the sum of its capital stock, reserves and Fund, and the approval of the Mini ster of Land, Infrastructure and Transport has 
been obtained in advance. 
4. If the Fund of the company concerned has been reduced in accordance with the proviso of 
the preceding paragraph, and thereafter the value of the net assets of the company has exceeded 
the sum of its capital stock, reserves and the Fund, the amount equal to the portion exceeding 
that sum shall be added to the Fund until the amount of the Fund reaches the amount referred to in paragraph 1. 
5. Railway Companies shall invest their Fund in a safe and profitable manner. 
6. Except the matters stipulated in each of the preceding paragraphs, the matters necessary 
for the management of the Fund shall be provid ed by ordinances of the Ministry of Land, 
Infrastructure, Transport and Tourism. 
(Supervision) 
 Article 13 
 
1. Each Company shall be subject to supervision of the Minister of Land, Infrastructure, 
Transport and Tourism in accordance with the provisions of this Law. 
2. The Minister of Land, Infrastructure and Transport may, when it is considered especially 
necessary for the enforcement of this Law, give a supervisory order to any Company concerning its 
business operations. 
(Reporting and inspection) 
 
Article 14  
1. The Minister of Land, Infrastructure, Transport and Tourism may, if it is considered 
especially necessary for the enforcement of this Law, request any Company to submit a report on its business, or have government officials enter the business establishment of any Company such as branches, offices and others, and inspect the books, documents, and other articles. 
2. The officials who perform the inspection by en tering the premises of the Company concerned 
in accordance with the provision of the preceding paragraph shall carry their identity cards and present the same to the persons concerned. 
3. The right of inspection by entering the prem ises of any Company under the provision of 
paragraph 1 shall not be construed as admission for the purpose of criminal investigation. GPA/MOD/JPN/85 
 
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  (Consultation with the Minister of Finance) 
 Article 15  
The Minister of Land, Infrastructure, Transport and Tourism shall consult with the Minister of 
Finance, when giving an approval under paragraph 1 of Article 5 (except the matters related to issuance of new stocks), Article 7, 8 or 9 (except resolutions on changes to the articles of 
incorporation), or giving an approval under the proviso in paragraph 3 of Article 12. 
 (Penal provisions)  
Article 16 
 1. Any director, statutory auditor or employee of each Company who has received, demanded 
or promised a bribe in connection with his/her office  capacity shall be liable to penal servitude of 
not exceeding three years. If he/she has taken unfai r action or has not taken reasonable action as 
a result, he/she shall be liable to penal servitude of not exceeding five years. 
2. In the case of the preceding paragraph, an y bribe received by the criminal shall be 
confiscated. If the whole or part of it cannot be  confiscated, the amount of money corresponding 
to the value of such portion shall be confiscated. 
Article 17 
 
1. Any person who has given, offered or promised to give a bribe referred to in paragraph 1 of 
the preceding Article shall be liable to penal servitude of not exceeding three years or a fine not 
exceeding one million yen. 
2. If a person who has committed the crime referred to in the preceding paragraph surrenders 
himself/herself to the authorities, his/her penalty may be reduced or exempted. 
Article 18 
 
The crimes under paragraph 1 of Article 16 shall follow the cases falling under Article 4 of 
the Criminal Law (Law No. 45 of 1907). 
 
Article 19  
Any director, statutory auditor or employee of each Company that refuses to submit a report 
under the provision in paragraph 1 of Article 14, or  that has submitted a false report, or refused, 
hampered or avoided the inspection under the prov ision in the same paragraph shall be liable to a 
fine not exceeding ¥200,000. 
 Article 20  
 
If a Company committed a violation falling under one of the following items, directors or 
statutory auditors of the Company shall be liable to an administrative fine not exceeding ¥1,000,000: 
 
(1) if a Company has conducted business in violation of the provision in paragraph 3 of 
Article 1; 
 
(2) if a Company has issued new shares, raised corporate bonds or borrowed funds in 
violation of the provision in paragraph 1 of Article 5; 
 
(3) if a Company has not obtained the approval for its business plan in violation of the 
provision in Article 7; 
 
(4) if a Company has transferred its properties or submitted them as collateral in violation 
of the provision in Article 8; 
 GPA/MOD/JPN/85 
 
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  (5) if a Company has not submitted its balance sheets, income statements or business 
report, or submitted the same with false descriptions in violation of the provision in Article 11; 
 
(6) if a Company has reduced the Fund in violation of the provision in paragraph 3 of 
Article 12; 
 
(7) if a Company has not followed an order given under the provision in paragraph 2 of 
Article 13. 
 Article 21 
 
Any person who violated the provision in Article 2 shall be liable to an administrative fine not 
exceeding ¥50,000. 
 
 
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