RESTRICTED  
  
GPA/MOD/JPN/90  
 
5 August 2016  
(16-4195) Page: 1/9 
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 the follow -up questions from the United S tates of America 
(GPA/MOD/JPN/87 ) to its proposed modifications cir culated in GPA/MOD/JPN/8 2 
The following communication, dated 4 August  2016, is being circulated at the request of the 
Delegation of Japan.  
 
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RESPONSE  FROM JAPAN TO THE FOLLOW -UP QUESTIONS FROM THE U NITED STATES 
(GPA/MOD/JPN/87) TO ITS PROPOS ED MODIFICATIONS CIR CULATED IN 
GPA/MOD/JPN/82  
Please find below Japan’s response to  the follow up questions from the United States of America 
(GPA/MOD/JPN/87 ) regarding the proposed modification to Appendix I of Japan under the revised 
GPA (GPA/MOD/JPN/82)  and Japan ’s response to questions from the United States of America  
(GPA/MOD/J PN/85) related to Kyushu Railway Company.  
 
1. In response to question 1, Japan provided an attachment with an English version 
of the amendment to the Law concerning Passenger Ra ilway Companies and Japan 
Freight Railway Company, particularly how such amendments will affect the Kyushu 
Railway Company. Japan has noted that the legislation was promulgated on 10 June 
2015 and entered into force on 1 April 2016. However, the attachment  identifies the 
amendment as "[Law No. 26 of 28 December 2016]."  
 
a. Could Japan please identify, in the form of a timeline, when the amendment 
was made to legislation and when the privatization of the Kyushu Railway 
Company will be complete?  
 
As stated in  the proposed modification to Appendix 1 of Japan under the revised GPA  
(GPA/MOD/JPN/82), 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 20 16. The privatization of Kyushu Railway Company will be completed when the share of 
Kyushu Railway Company is on the list of stock market and the share of the company which 
Japan Railway Construction, Transport and Technology Agency holds is sold in a pack age in this 
fiscal year.  
 
The date referred to in the attachment ([Law No. 26 of 28 December 2016])  was a typographical 
error, which is to be corrected as  ([Law No. 36 of 10 June 2015]). Please see the revised 
attachment.  
 
b. What is the significance in th is process  of the 28 December 2016 date?  
 
As in the reply to the question 1.a.  above, the date was a typographical error.  
 GPA/MOD/JPN/90  
 
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  2. In regards to the attachment, specifically Article 4 of the section titled 
"Supplementary Provisions", it appears that the Ministr y of Land, Infrastructure, 
Transport and Tourism would have the authority to order the Kyushu Railway Company 
(or other New Companies) to take certain actions related to matters related to the 
appropriate setting of passenger fares and rates and the smooth  use of railway facilities 
between the Companies, to matters related to the appropriate maintenance of the 
currently operated railway routes, to matters related to securing the convenience of 
customers in the development of stations and other railway facil ities, and to 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. The Ministry 
may only order actions if the Kyushu Railway Company (or other New Companies) fails 
to follow recommendations.  
 
a. Are there other areas or matters, in this or any other legislation, where the 
Ministry would have the authority to issue orders to the Kyushu Railway 
Company or other New Companies?  
The Ministry of Land, In frastructure, Transport and Tourism (MLIT) could give guidance to 
Kyushu Railway Company based on the guideline s stipulated in the Supplementary Provisions to 
the Amendment Law. Other than that, the MLIT has authority to order to improve business 
operation  to take such measures as to secure safety transportation of passengers in accordance 
with the Law for Railway Business Enterprise, which equally applies to other railway companies.  
 
The guidelines above are similar to the guidelines applied to the three JR Honshu Companies 
that were already withdrawn from the Appendix 1 of Japan. The contents of these guidelines are 
not substantially different and they do not provide special control or influence of government 
over Kyushu Railway Company.  
 
b. Are there any ci rcumstances that might be related to this law and to these 
specific matters where the Ministry would be able to order a certain 
government procurement decision?  
The M LIT has no authority to make  requests regarding the procurement to Kyushu Railway 
Company.  GPA/MOD/JPN/90  
 
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  ATTACHMENT1 
 
 (Tentative Translation)  
 
 
1  THE AMENDMENT TO THE  LAW CONCERNING PASSE NGER RAILWAY COMPANI ES AND 
JAPAN FREIGHT RAILWA Y COMPANY (EXCERPT)  
[Law No. 36 of 10 June 2015  26 of 28 December 2016 ] 
 
The Law concerning Passenger Railway Companies and Ja pan 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 Gui delines)  
 
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 Ministe r 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 s ound 
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 amendm ent 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 th is Law 
(hereinafter referred to as the "Enforcemen t 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.  
 
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 
                                               
1 In English only.  GPA/MOD/JPN/90  
 
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  paragraph or between the entities listed in the subparagraphs  of the preceding 
paragraph and the C ompan ies 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 Art icle 2 of 
Supplementary Provision s 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 Japa nese 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 busines s 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 necess ary 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 Com panies 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 ma y 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 unde r 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 reaso ns, even after the fact that they did not follow the recommendation was published 
under the provision of the preceding paragraph, and if it is deemed that the assurance of the 
convenience of the customers of the railway business operated by the said New Co mpanies, 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 Lan d, 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/90  
 
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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 P ASSENGER RAILWAY COM PANIES AND JAPAN FRE IGHT 
RAILWAY COMPANY (EXC ERPT)  
[Law No. 88 of 4 December 1986]  
 
[Amendment: Amended by Law Nos. 50 and 6 5 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 compani es 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 Minister of Land, Infrastructure and Transport. In 
this case the Minister of Land, Infrastructure and Transport shall giv e 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 i s 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/90  
 
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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 corpora te 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 
liabiliti es. 
(Resolution on appointment of the 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 L and, 
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, Trans port 
and Tourism and obtain the approval of it from the 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 th e 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 witho ut 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 wh ere it operates, take at most care not to unreasonably hamper 
the business operations of small and medium -sized enterprises engaged in the same field of 
business in the region or to unreasonably impair their business profit.  
 
(Financial statements)  
 
Articl e 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/90  
 
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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 Stabi lization 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 it s capital stock, 
reserves and Fund, and the approval of the Minister 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 th ereafter 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 provided by ordinances of the Minist ry 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, I nfrastructure 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, Infrastru cture, 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 branche s, offices and others, and inspect the books, documents, and other articles.  
2. The officials who perform the inspection by entering the premises of the Company concerned 
in accordance with the provision of the preceding paragraph shall carry their identity c ards and 
present the same to the persons concerned.  
3. The right of inspection by entering the premises of any Company under the provision of 
paragraph 1 shall not be construed as admission for the purpose of criminal investigation.  GPA/MOD/JPN/90  
 
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  (Consultation with the Min ister 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, d emanded 
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 unfair action or has not taken reasonable action as 
a result, he/she shall be liable to penal servit ude of not exceeding five years.  
2. In the case of the preceding paragraph, any 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 conf iscated.  
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 provision 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 s hall 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 violat ion 
of the provision in Article 8;  
 GPA/MOD/JPN/90  
 
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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 Fu nd 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 adminis trative fine not 
exceeding ¥50,000.  
 
 
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