RESTRICTED  
  
GPA/MOD/JPN/86  
 
27 July 2016  
(16-3988)  Page: 1/2  
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 Canada (GPA/MOD/JPN/84)   
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 CANADA (GPA/MOD/JPN/84) TO ITS 
PROPOSED MODIFICATIONS CIRCULATED IN GPA/MOD/JPN/82 
Please find below Japan's response to questions from Canada (GPA/MOD/JPN/84) regarding the 
proposed modification to Appendix I of Japan under the revised GPA (GPA/MOD/JPN/82) related to 
Kyushu Railway Company. 
 1. In paragraph 2 e. of its communication, Japan mentions that JR Kyushu is now 
financially independent. However, Canada notes that JR Kyushu has been granted a 
management stabilization fund of 3,877 billion yen from the national government, which 
will continue to subsidize the company beyond  1 April 2016. Furthe rmore, and contrary 
to what was done for the East, Central and West Japan Railway Companies, JR Kyushu is 
not required to reimburse the management stabilization fund to the Government of 
Japan. How does this fund affect the classification of JR Kyushu as a "financially independent" entity? Can the Government of Japan ask for reimbursement of the 
management stabilization fund in the future? 
At the time of the division and privatization of Japan National Railways, 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 th e establishment of the Fund was borne by Japan 
National Railways in accordance with the Japanese National Railways Reform Act and former Law Concerning Passenger Railway Companies and Japan Freight Railway Company. In this sense, 
subsidy or governmental funds were not provided to the Fund, thus, it is not a kind of fund to be 
reimbursed to the Government of Japan (GOJ).  
The Fund was drawn on 31 March 2016 and therefore the GOJ has no influence over the Fund at 
the present as well as in the future.  
From the above facts, it is evident that Canada's comment that the GOJ subsidizes Kyushu Railway 
Company before as well as beyond 1 April 2016 is not correct.   In addition, the amount of the Management Stabilization Fund owned by Kyushu Railway Company 
was not 3,877 billion yen but 387.7 billion yen. 
 GPA/MOD/JPN/86 
 
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  2. In paragraph 2 f., Japan notes that "The whole shares of the Company are to be 
sold by the end of this fiscal year." Canada understands that the current Japanese fiscal 
year will end on 31 March 2017. Why is Japa n seeking to withdraw JR Kyushu from its 
Appendix I before the complete  privatization of the entity? 
As stated in the proposed modification to Append ix I of Japan, Japan notified the modification 
based on the following:  
 the Amendment to the Law concerning Passenger Railway Companies and Japan Freight 
Railway Company entered into force in April 2016 and Kyushu Railway Company is no longer subject to the law. 
 government control or influence over the Company was effectively eliminated. 
 the share of Kyushu Railway Company is supposed to be on the list of stock market and 
the share of the company which Japan Railway Construction, Transport and Technology Agency holds is supposed to sell in a package in this fiscal year. 
3. We understand that the Minister of Land, Infrastructure and Tr ansport will retain 
the authority to require JR Kyushu to mainta in services on lines that may not otherwise 
be commercially viable. Is this accurate and,  if so, will the Minister have the ability to 
direct how JR Kyushu maintains these serv ices (i.e. could the Minister impose 
requirements in relation with  procurement by JR Kyushu)? 
There is no law or regulation that grants authority to the Ministry of Land, Infrastructure, 
Transport and Tourism (MLIT) to require Kyushu Railway Company to maintain the money-losing 
routes. Kyushu Railway Company can discontinue such routes based on its management decision 
through the procedures in accordance with the Railway Business Law. Likewise the MLIT has no authority to impose any requests regarding the procurement to Kyushu Railway Company. 
 
On the discontinuance of routes, there is a guideline that applies to Kyushu Railway Company, similar to that of the three JR Honshu companies (East Japan Railway Company, Central Japan 
Railway Company and West Japan Honshu Railway Company). However, the guideline stipulates 
procedures similar to those applied to railway companies in general including other railway companies in accordance with the Railway Business Law, and they have no special control or influence over Kyushu Railway Company. 
 
4. Canada notes that three other Japane se Railway companies are listed under 
Japan's Annex 3: JR Shikoku, JR Hokkaido an d JR Freight. Does Japan plan to withdraw 
these entities from its GPA coverage in the foreseeable future? 
The 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 management 
base, in accordance with the relevant cabinet decisions since the reforms of the Japanese National 
Railway. However at present, there are no concrete plans for privatization of Hokkaido Railway Company, Shikoku Railway Company and Japan Freight Railway Company.  
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