WORLD  TRADE  
ORGANIZATION  WT/TPR/S/243/Rev.1 
2 May 2011  
 
(11-2226) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
JAPAN 
 
Revision 
 
 
 
 
This report, prepared for the tenth Tr ade Policy Review of Japan, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Ja pan on its trade policies and practices. 
 
Any technical questions arising from this report may be addressed to Michael 
Daly (022 739 5077), Masahiro Hayafuji  (022 739 5873), and Usman Ali Khilji 
(022 739 6936). 
 
Document WT/TPR/G/243 contains the policy statement submitted by Japan. 
 
 
 
 
   
 Japan WT/TPR/S/243/Rev.1 
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CONTENTS 
 
    Page 
SUMMARY   vii 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AIN ECONOMIC DEVELOPMENTS  1 
 (2) M ACROECONOMIC POLICIES  2 
 (3) S TRUCTURAL POLICIES  3 
 (i) Services sector 3 
 (ii) Labour market 5  (iii) Tax reform 5 
 (4) D
EVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT  6 
 (i) Composition of merchandise trade 7  (ii) Direction of merchandise trade 7 
 (iii) Foreign direct investment 10 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 11 
 (1) I
NTRODUCTION  11 
 (2) T RADE POLICY OBJECTIVES  12 
 (3) T RADE POLICY FORMULATION AND EVALUATION  12 
 (i) Trade policy formulation and implementation 12 
 (ii) Transparency and policy evaluation 14 
 (4) T RADE AGREEMENTS AND ARRANGEMENTS  17 
 (i) WTO 17 
 (ii) Regional trade agreements 17  (iii) Generalized System of Preferen ces and other preferential arrangements 
adopted unilaterally by Japan 20 
 (iv) Other bilateral/regional arrangements 22 
 (5) A
ID FOR TRADE  24 
 (6) F OREIGN INVESTMENT REGIME  27 
 (i) Regulatory regime 28  (ii) Investment promotion measures 30 
III. TRADE POLICIES AND PRACTICES BY MEASURE 31 
 (1) I
NTRODUCTION  31 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  32 
 (i) Customs clearance procedures and valuation 32 
 (ii) Tariffs 34  (iii) Rules of origin 40 
 (iv) Non-tariff border measures 40 
 (v) Contingency measures 42 
 (vi) Government procurement 43 
 (vii) State trading 47  (viii) Standards, technical regulations, an d sanitary and phytosanitary measures 48 
 (ix) Import promotion measures 56 WT/TPR/S/243/Rev.1 Trade Policy Review 
Page iv 
 
 
    Page 
 (3) M EASURES DIRECTLY AFFECTING EXPORTS  56 
 (i) Procedures 56 
 (ii) Export taxes, charges, and levies 56  (iii) Border adjustment in respect of internal taxes and import duties 57 
   (relating to exports) 
 (iv) Export prohibitions, restrictions, and licensing 58  (v) Export cartels 58  (vi) Export promotion schemes 59 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  59 
 (i) Taxation and tax-related assistance 59 
 (ii) Subsidies and other financial assistance 62 
 (iii) State-owned enterprises, co rporatization, and privatization 62 
 (iv) Intellectual property rights 64 
 (v) Regulatory reform 67 
 (vi) Competition policy 68  (vii) Corporate governance 73 
IV. TRADE POLICIES BY SECTOR 75 
 (1) I
NTRODUCTION  75 
 (2) A GRICULTURE  75 
 (i) Structure 75 
 (ii) Border measures 77  (iii) Domestic measures 81 
 (3) M
ANUFACTURING  82 
 (4) E NERGY AND UTILITIES  83 
 (5) S ERVICES  84 
 (i) Financial services 84 
 (ii) Telecommunications 89  (iii) Transport 90 
 (iv) Medical services 92 
REFERENCES   95 
APPENDIX TABLES  97 
  
 
 
 Japan WT/TPR/S/243/Rev.1 
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CHARTS 
 
  Page 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Composition of merchandise trade, 2007 and 2009 8 I.2 Direction of merchandise trade, 2007 and 2009 9 
 
III. TRADE POLICIES AND PRACTICES BY MEASURES  
III.1 Share of non- ad valorem  duties, by HS section, FY2010 37 
III.2 Simple average applied MFN tariff rates, by HS section, FY2008 and 2010 38 III.3 Import control system, 2010 41 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Selected macroeconomi c indicators, 2005-09 1 
I.2 Shares of GDP and employment by sector, 2006-08 4 I.3 Balance of payments, 2006-09 6 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
II.1 Major trade-related laws and regulations, October 2010 13 
II.2 Ten largest GSP beneficiaries, FY2008 21 II.3 Japan's aid-for-trade commitments, 2002-08 25 
 
III. TRADE POLICIES AND PRACTICES BY MEASURES  
III.1 Structure of the MFN tariff, 2006-10 35 
III.2 Preferential tariff rates, FY2010 39 III.3 Procurement by product and by origin, 2007 and 2008 46 
III.4 Main standards and technical regulations in Japan, 2009 50 
III.5 National government tax revenue, FY2009 and FY2010 60 III.6 Suspension of imports likely to infringe intellectual property rights, 2007-09 67 
III.7 Exemptions from the Anti-monopoly Act, June 2010 70 
III.8 Enforcement of competition policy, 2005-09 72 
 
IV. TRADE POLICIES BY SECTOR  
IV.1 Applied MFN tariff protection in agriculture, FY2010 78 
IV.2 Special safeguards in agriculture, FY2008 to 2010 79 IV.3 Financial institutions, 2009 86 
 WT/TPR/S/243/Rev.1 Trade Policy Review 
Page vi 
 
 
APPENDIX TABLES 
 
   Page 
 I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports by group of products, 2005-09 99 
AI.2 Merchandise imports by group of products, 2005-09 100 AI.3 Merchandise exports by destination, 2005-09 101 
AI.4 Merchandise imports by origin, 2005-09 102 
 II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
AII.1 Status of selected notifications to the WTO, August 2010 103 
AII.2 Disputes to which Japan has been a party, 2009 to August 2010 105 AII.3 Overview of Japan's free-tr ade agreements, October 2010 107 
AII.4 Industries requiring prior not ification for inward FDI, 2010 110 
 III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
AIII.1 Applied tariff escalation and tariff ranges, FY2008 and FY2010 112 
AIII.2 Legislation on intellectual property rights, October 2010 115 
 IV. TRADE POLICIES BY SECTOR 
 
AIV.1 Tariff quota quantity and in-quota imports, FY2005-08 116 
 
 Japan WT/TPR/S/243/Rev.1 
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SUMMARY 
1. Since its previous Trade Policy 
Review in 2009, Japan has refrained from introducing new trade barriers, 
notwithstanding the onset of the global 
financial crisis; on the other hand, it has introduced few measures aimed at further liberalizing its trade and trade-related regime.    
2. Mainly as a result of the crisis, the 
Japanese economy contracted during the 
period under review owing to the sharp fall (by 25% in 2009) in exports, which have traditionally been the main engine of Japan's economic growth.  Against this background, Japan's current account surplus narrowed to 
3.3% of GDP in 2009 (from 4.8% in 2007).  
However, a subsequent rebound in exports has boosted growth, with real GDP projected to grow by 2.8% in 2010. 
3. To mitigate the adverse impact of the 
initial drop in exports on growth, the 
Government has instituted a series of stimulus packages (totalling 4.7% of GDP) since August 2008 in order to stimulate domestic demand.  The stimulus packages have focused largely on increased spending.  Consequently, 
the fiscal deficit rose to 10% of GDP in 2009 
and public debt reached roughly 220% of GDP.  The fiscal stimulus packages were complemented by accommodative monetary policy, with near-zero interest rates, adopted 
under the persistent deflationary environment 
in Japan.  In addition, however, the yen appreciated against all major currencies.  If sustained, this would tend to reduce the international competitiveness of Japan's 
exporters, thus jeopardiz ing export-led growth, 
unless their productivity can be substantially improved.     
4. While looser macroeconomic policies 
have helped Japan's economy to recover from the global financial crisis, they do not address 
its long-standing structural problems 
(including the rapid aging of its population) that are reflected in sluggish growth during the past decade or so in both real GDP and total factor productivity (TFP), a key determinant of Japanese firms' international competitiveness.  
These problems can be addressed more effectively by far-reaching structural reforms, of which trade liberalization (and the resulting 
stimulus to competition) is an integral part.  
However, structural reforms have, if anything, slowed since 2009. 
5. The authorities do recognize the need 
for structural reform, particularly to improve 
productivity in the services sector (which is 
much lower than in manufacturing).  In June 2010, it introduced a New Growth Strategy, focusing on seven priority areas (i.e. environment and energy, medical and health care, economic integration with other Asian 
countries, tourism and revitalization of 
regional economies, science and technology, human resources, and financial services).  In addition, as regards tax reform, considering Japan's relatively low share of taxes in GDP, 
the authorities recognize the need to render the 
income tax system more neutral with respect to investment and other economic decisions by broadening the tax base and cutting relatively high corporate tax rates.  Hence, the Government plans to reduce tax incentives and 
cut the statutory corporate tax rate from 40% 
to 35% from the next fiscal year.  To the extent that the present high corporate tax rate discourages inward foreign direct investment (FDI), the lower rate could also stimulate such 
FDI, which is a much smaller percentage of 
GDP than in other large OECD economies.  Since its previous Review, Japan has adopted measures to facilitate the approval of FDI. 
6. While administrative organs are 
required to conduct ex-ante evaluation of 
regulations, and a procedure for ex-ante regulatory impact analysis has been introduced, cost-benefit analysis is not frequently used when formulating, revising, or abolishing policies and measures;  such 
analysis is rarely used to evaluate existing 
measures, such tariff and non-tariff protection of agriculture, or to evaluate the economic effects of preferential trade agreements (PTAs).  The recent publication of quantitative 
analysis regarding the possible economic 
effects of Japan's participating in the Trans WT/TPR/S/243/Rev.1 Trade Policy Review 
Page viii 
 
 
Pacific Partnership initiative is one of the few 
notable exceptions. Publication of such quantitative analysis by the Government can help it adopt trade and related policies and 
measures that are more cost-effective.     
7. In the period under review, Japan has 
been a party to four disputes, one as a respondent and three as a complainant.   
8. During the period under review, two 
bilateral trade agreements, or Economic 
Partnership Agreements (EPAs), entered into force (with Switzerland and with Viet Nam);  several others are being negotiated.  Japan considers that its regi onal and bilateral trade 
agreements complement the multilateral 
system, while it acknowledges that the level of 
complication increases as entry into force of such agreements progresses.  The PTAs that Japan has adopted also involve, inter alia,  
trade facilitation, investment, movement of 
natural persons and competition policy.  
However, the agreements  with countries that 
are significant exporters of agricultural products tend to exclude many of these products.  They also exclude certain industrial goods, such as leather products and footwear, 
which the authorities consider to be highly 
sensitive.  These products are also largely excluded from the Generalized System of Preference (GSP) scheme, under which Japan grants preferential treatment to products from 
certain developing and least developed 
countries.   
9. The tariff continues to be Japan's main 
border instrument.  In fiscal year (FY) 2010, the simple average applied MFN tariff rate 
was 5.8%, down from 6.1% in FY2008, 
reflecting a decrease in the average ad valorem  
equivalents (AVEs) of non- ad valorem  duties.  
Non- ad valorem  duties, which account for 
6.6% of Japan's tariff lines, tend to involve high AVEs, and are an important feature of 
Japan's tariff, particularly for agricultural 
products.  Whereas the simple average tariff rate under the GSP is 4.6% (down from 4.9% in FY2008), that for LDCs is 0.5% (the same as in FY2008).  Japan's simple average tariff rates under bilateral PTAs range from 2.9% to 
3.4%.   
10. Japan's non-tariff border measures 
include some import prohibitions and 
quantitative import restrictions (for example, 
import quotas on some fish).  State trading involves leaf tobacco, opium, rice, wheat and barley, and milk products.   
11. Japan makes little use of contingency 
measures.  It has continued to apply two anti-
dumping measures during the review period, but eliminated one countervailing measure;  it has not imposed any safeguard measures since 2001. 
12. Japan maintains certain export 
controls on national security and public safety 
grounds and to preserve natural resources in accordance with international agreements (such as CITES).  Export finance, insurance, and guarantees are available.  Duty drawback 
schemes are available on selected inputs for 
certain manufacturing, but they do not necessarily refund 100% of duties paid.  The Government has recently begun promoting agricultural exports, mainly by providing information to consumers overseas. 
13. About 46% of Japanese Industrial 
Standards (JIS) were a ligned to international 
standards in 2009 (unchanged since 2008).  Although Japan maintains that its SPS measures are based on scientific assessment of 
risks, it has apparently not conducted cost-
benefit analysis in this connection. 
14. Various laws on intellectual property 
rights (IPRs) have been amended since Japan's previous Review with a view to, inter alia,  
strengthening the role of Customs in 
enforcement and expanding the scope of application of criminal penalties for infringement of trade secrets.  Japan remains an active participant in multinational and regional discussions on agreements to promote 
international harmoni zation of regimes 
protecting IPRs. Japan WT/TPR/S/243/Rev.1 
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15. The authorities intend to continue to 
strengthen competition policy.  In this regard, the Anti-monopoly Act was amended in June 2009 to, inter alia , introduce a surcharge (fine) 
in respect of practices involving exclusionary 
types of private monopolization, and a 50% increase in the surcharge on businesses that have played a leading role in cartels and bid-rigging.   
16. With regard to agriculture, whose 
labour productivity remains much lower than in the rest of the economy, the Government has continued to move away from price support toward income support.  However the sector continues to receive substantial 
government support, which involves, inter 
alia, a relatively higher average applied MFN 
tariff rate compared with other sectors, tariff quotas, income support, and, in some sub-sectors, production controls.  
17. Manufacturing, whose labour 
productivity is higher than in the rest of the economy, remains open and subject to competition. However, it would appear that during the period under review, government support to the sector increased through the 
Enterprise Turnaround Initiative Corporation 
(ETIC). Certain services continue to be subject to, inter 
alia, licensing and restrictions on foreign 
investment;  as in many other sectors, they are also faced with the generally high cost of 
doing business in Japan, which has been 
considered as one of the main deterrents to inward FDI in services and thus competition in the services sector.  Furthermore, it appears that trade-related reforms initiated in the 
services sector have slowed, with the notable 
exception of liberalization of air traffic through the pursuit of "open sky" agreements, which has increased competition in the sector.  At the same time, however, partially as a result of intensified competition, the Government 
authorised the rescue of Japan Air Lines by the 
ETIC and the Development Bank of Japan. The privatization of Japan Post, a reform that was regarded as a "landmark" when it was initiated in 2007, has been under review since 
2009 with a view, inter alia,  to maintaining 
the postal network.  Despite some volatility in domestic capital markets affected by the global financial crisis, Japanese banks emerged, by and large, relatively unscathed.  Nonetheless, the Government put in place a 
number of measures for both banks and 
securities firms to mitigate the impact of the crisis.