WT/REG277/5/Rev.1  
 
19 April 2024 
(24-3245) Page: 1/3 
Committee on Regional Trade Agreements  Original: English  
 
 
FREE TRADE AGREEMENT BETWEEN JAPAN AND THE MEMBER STATES OF THE 
ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN), SERVICES   
QUESTIONS AND REPLIES  
Revision  
The following communication, dated 9 April 2024, is being circulated at the request of the delegations 
of the ASEAN Member States and Japan . 
 
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Question s from Canada  
 
1.1.  With regards to Chapters 6 and 7 of the agreement:  
a. What is the rationale for including two prudential carve out provisions in the 
agreement (i.e. in Chapter 6 – Trade in Services – Financial Services Annex - A.4 
Domestic Regulation and Chapter 7 – Investment - 51.20 Prudential Measures)?  
Response from Japan  
 
 In the financial services sector, if there is a need to take measures for prudential reasons, the 
measures might be inconsistent with various provisions of those  Chapters in some cases. Thus, 
Article A.4 and Article 51.20 was designed to allow a Party to take prudential measures.  
 
[Reference]  
Article A.4 Domestic Regulation  
 
1. Notwithstanding any other provisions of Chapter 6, including Annexes A and B to Chapter 6 and 
Annexes 6 through 8, a Party shall not be prevented from taking measures for prudential reasons, 
including for the protection  of investors, depositors, policy holders or persons to whom a fiduciary 
duty is owed by a financial service supplier, or to ensure the integrity and stability of the Party 's 
financial system. Where such measures do not conform with the provisions of Chapt er 6, they shall 
not be used as a means of avoiding the commitments or obligations of the Party under that Chapter.  
 
2. Nothing in Chapter 6, including Annexes A and B to Chapter 6 and Annexes 6 through 8, shall be 
construed to require a Party to disclose  information relating to the affairs and accounts of individual 
customers or any confidential or proprietary information in the possession of public entities.  
 
Article 51.20 Prudential Measures  
 
1. Notwithstanding any other provisions in this Chapter, a P arty shall not be prevented from taking 
measures relating to financial services for prudential reasons, including measures for the protection 
of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by an entity 
supplying financ ial services, or to ensure the integrity and stability of its financial system.  
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  2. Where the measures taken by a Party pursuant to paragraph 1 do not conform with this Chapter, 
they shall not be used as a means of avoiding the commitments or obligations of the Party under 
this Chapter.  
 
3. Nothing in this Chapter shall be construed to require a Party to disclose information relating to 
the affairs and accounts of individual customers or any confidential or proprietary information in the 
possession of pub lic entities.  
 
Response from the ASEAN Members  
 
 The rationale for having separate prudential carve -out provisions in Chapter 6 (Trade in  
Services - Financial Services Annex) and Chapter 7 (Investment) is as follows:  
 
• Prudential carve -out is common on ASE AN+ FTA/CEPA. Reflecting from the previous financial 
crisis and understanding the spillover effect of financial services towards  other sectors, 
ASEAN Member States always carve out financial services as long as  for the purpose of 
prudential reason, to ensu re the integrity and stability of the  financial system. This process 
covers the market access stage, when financial  service suppliers are entering the market of 
the other party, to post -establishment  period.  
 
• While in Chapter 7, prudential carve -out is for all services sectors in general, and  applies to 
covered investment, covering the process/period of post -establishment.  
 
b. Do the parties take on any MFN commitments in relation to Financial Services?  
Response from Japan  
 
 As described in 3. 3.2 National and MFN treatment (paragraph 3.10) of the Secretariat 's report, 
Japan takes on MFN commitments in relation to Financial Services (In the list of Japan of Annex 7 
(Lists of Most -Favored  Nation Treatment Exemptions), measures related to Financial Services are 
not listed), while all the ASEAN Member States are exempted from MFN provisions (according to 
Annex 8) in accordance with paragraph 3 of Article 50.3.  
 
[Reference ] 
Article 50.3 Most -Favoured -Nation Treatment  
 
1. Each Party shall accord to services and service suppliers of another Party treatment no less 
favourable than that it accords to like services and service suppliers of any other Party or a non -
Party.  
 
2. Paragraph 1 shall not  apply to any measure by a Party with respect to sectors, subsectors or 
activities, as set out in Annex 7.  
 
3. Notwithstanding paragraphs 1 and 2, the Parties listed in Annex 8 shall be exempted from 
paragraphs 1 and 2 and shall endeavour to consider acco rding to services and service suppliers of 
another Party treatment no less favourable than that they accord to like services and service 
suppliers of any other Party or a non -Party. Any decision of a Party with regard to this paragraph 
shall not be subject  to dispute settlement procedures provided for in Chapter 9 . 
 
Annex 8 List of the Parties in relation to paragraph 3 of Article 50.3  
 
1. Brunei Darussalam  
2. Kingdom of Cambodia  
3. Republic of Indonesia  
4. Lao People 's Democratic Republic  
5. Malaysia  
6. Republic of the Union of Myanmar  
7. Republic of the Philippines  
8. Republic of Singapore  
9. Kingdom of Thailand  
10. Socialist Republic of Viet Nam  
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  Response from the ASEAN Members  
 
 While AJCEP Agreement amendment contains article relating to MFN (Chapter 6 – Trade in 
Services, Article 50.3 Most -Favoured -Nation Treatment), only Japan commits MFN for financial 
services sector (Annex 7) while all ASEAN parties are listed in Annex 8 for exemption of MFN 
obligations for all sectors including financial services  
 
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