Japan WT/TPR/S/243 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) INTRODUCTION  
1. Since Japan's previous Trade Policy Review in  2009, changes in the government ministries 
and agencies responsible for the formulation, implem entation, and evaluation of its trade policies have 
included the establishment of the Consumer Affa irs Agency (CAA) on 1 September 2009 and of the 
Government Revitalization Unit (GRU) on 18 September 2009.   
2. Japan's overall trade policy objective, unchanged si nce 2009, is to ensure long-term prosperity 
and growth by promoting business activities in Japan and at an international level.  In Japan's view, its 
regional and bilateral trade agreements compleme nt the multilateral system, while it acknowledges 
that the level of complication increases as entry in to force of the free-trade agreements (FTAs) 
progress.1  FTAs (EPAs) that Japan has adopted also involve, inter alia,  trade facilitation, investment, 
movement of natural persons, competition policy, and improvement of the business environment.  
During the period under review, two bilateral FTAs entered into force (with Switzerland and with 
Viet Nam);  several others are being negotiated.  The agreements with countries that are significant 
exporters of agricultural products tend to exclude ma ny of these products.  They also exclude certain 
industrial goods, such as leather products and footw ear, which the authorities consider to be highly 
sensitive.  Most of Japan's imports are subject to  applied MFN tariffs;  trade data suggest that 
preferential duties are applied to about 20% of Japan 's imports, and the MFN rates to about 80%.  The 
effects of FTAs on Japan's trade are not clear, pa rtly because few relevant quantitative evaluations 
have been published by the authorities. 
3. Japan has been a major participan t in WTO activities. It has been a party to four disputes, one 
as a respondent and three as a complainant. 
4. With a view to enhancing the Government's ac countability to the public, Japan has continued 
to adopt measures to increase the transparency of its trade and trade-related policies, practices, and 
measures.  Since March 2007, administrative organs have been required to conduct ex-ante evaluation 
of regulations, and a procedure for ex-ante regul atory impact analysis has been introduced.  
Nonetheless, cost-benefit analyses are not frequently used when introducing, revising, or abolishing 
measures;  such analyses are rarely used to evalua te existing measures, such as the costs and benefits 
of tariff and non-tariff protection on agriculture, or to evaluate the economic effects of regional trade 
agreements. 
5. Japan grants preferential treatment to products  from certain developing and least developed 
countries under its Generalized System of Preferen ce (GSP) scheme.  The current GSP scheme, which 
is valid until March 2011, extends to 140 countries and 14 territories.  The main beneficiaries are 
China, the Philippines, Viet Nam,  Indonesia, and India.  The scheme excludes many agricultural 
products and some industrial products.   
6. Inward FDI in Japan remains substantially lo wer than outward FDI, and is relatively low 
compared with that in other large OECD economies.   Since its previous Review, Japan has adopted 
measures to facilitate the approval of FDI;  there ha s been no particular change to Japan's investment 
promotion measures. 
                                                      
1 Japan prefers to call these pref erential agreements economic partne rship agreements (EPAs) rather 
than FTAs. WT/TPR/S/243 Trade Policy Review 
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(2) TRADE POLICY OBJECTIVES  
7. Japan's overall trade policy objective has remain ed largely unchanged since 2009;  it is to 
ensure long-term prosperity and growth by promoting business activities in Japan and at an 
international level.  Japan grants at least MFN treatment to all countries and economies except 
Andorra, Republic of Equatorial Guinea, Eritrea, Lebanon, North Korea, a nd Timor-Leste (the same 
as in 2009).  Judging from trade data, it would appear th at the MFN rate is applied to more than 80% 
of Japan's imports2, although data are not collected on the total value of imports subject to preferential 
duties. 
8. Japan considers that its regional and bilatera l trade agreements complement the multilateral 
system3;  at the same time, it acknowledges that the leve l of complication increases with the entry into 
force of the free-trade agreements (FTAs), since rules applied for specific goods are different among 
FTAs.4  This is in contrast with Japan's trade polic y objectives before 2002, when its first FTA with 
Singapore entered into force:  Japan had been scep tical of preferential trade agreements (PTAs) on 
grounds that they might lead to exclusive, discriminatory trading blocs, and that, if the WTO consistency of the regional agreements is not clear ly assured, they might weaken credibility in the 
rules and procedures of a liberal, non-discriminatory, multilateral trading system under the WTO.
5  
Japan now has ten bilateral trade agreements and one regional (with ASEAN).  Japan is currently 
negotiating bilateral FTAs (EPAs) with the Gu lf Cooperation Council (B ahrain, Kuwait, Oman, 
Qatar, Saudi Arabia, and the United Arab Emirates ), India, Australia, and Peru.  Since June 2008, 
Japan has been holding working-level consultations to "consider and create a favourable environment 
for the resumption of negotiations" with the Republic of Korea.  Japan also participates in the Asia-
Pacific Economic Cooperation (APEC) fo rum and participates in other regional trade fora, such as the 
Asia-Europe meeting (ASEM), the ASE AN+3, and the East Asian Summit.  
9. While Japan officially welcomes foreign dir ect investment (FDI) and seeks increased inward 
FDI into Japan has remained very low in recent years (Chapter I). 
(3) TRADE POLICY FORMULATION AND EVALUATION  
(i) Trade policy formulation and implementation 
10. There has been no major change in Japan's trade-related legal framework since its previous 
Review (Table II.1).  On 1 September 2009, the Consumer Affairs Agency  (CAA) was established, 
based on relevant laws adopted in May 200 9. The CAA is responsible for overseeing inter alia :  the 
Travel Agency Act, and the JAS Law (on quality co ntrol) and the Food Sanitation Act (on labelling).  
Trade-related issues remain the responsibility of a number of ministries and agencies, in particular, 
Foreign Affairs (MOFA), and Economy, Trade, a nd Industry (METI), as stipulated by laws 
establishing relevant ministries and agencies.  Other ministries and agencies with responsibility for sectoral issues involved in trade policy formula tion and implementation include the Ministries of 
Agriculture, Forestry and Fisheries;  Educati on, Culture, Sports, Science and Technology;  
Environment;  Finance;  Health, Labour and Welfare;   Justice;  Land, Infrastructure and Transport;  
and Internal Affairs and Communications;  as well as  the Cabinet Office.  The overall coordination of 
                                                     
 
2 Calculation by the WTO Secretariat based on the value of imports into Japan from its trading partners 
that have concluded bilateral/regional FTAs and the data on imports subject to Japan's GSP scheme.   
3 See "Foreign Policy Speech by Minister for Foreign Affairs Katsuya Okada to the 174th Session of 
the Diet".  MOFA online informati on.  Viewed at:  http://www.mofa.go .jp/announce/fm/oka da/speech1001.html 
[19.07.2010]. 
4 See, for example, WTO document WT/TPR/M/211/Add.1, 22 May 2009, p. 155. 
5 WTO (2001). Japan WT/TPR/S/243 
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trade policies, including ensuring policy cohere nce and consistency with  the WTO Agreements, 
remains the final responsibility of the Cabinet. 
Table II.1 
Major trade-related laws a nd regulations, October 2010  
 Most recent amendment 
Foreign trade and exchange restrictions  
Foreign Exchange and Foreign Trade Act (1949 Law No. 228)  2009 
Export and Import Transaction Act (1952 Law No. 299)  2008 
Foreign Exchange Order (1980 Order No. 260)  2009 
Export Trade Control Order (1949 Order No. 378)  2009 
Import Trade Control Order (1949 Order No. 414)  2009 
Customs- and tariff-related regulations  
Customs Law (1954 Law No. 61)  2010 
Customs Tariff Law (1910 Law No. 54)  2009 
Temporary Tariff Measures Law (1960 Law No. 36)  2010 
Cabinet Order Relating to Counterva iling Duties (1994 Order No. 415)  2009 
Cabinet Order Relating to Anti-Dump ing Duties (1994 Order No. 416)  2009 
Cabinet Order Relating to Emerge ncy Duties (1994 Order No. 417)  2009 
Cabinet Order Relating to Retaliato ry Duties (1994 Order No. 418)  2000 
Cabinet Order on Tariff Quotas (1961 Order No. 153)  2010 
Trade promotion  
Trade and Investment Insurance Act (1950 Law No. 67)  2008 
Services and energy   
Construction Business Law (1949 Law No. 100) 2007 
Banking Law (1981 Law No. 59)  2009 
Insurance Business Law (1995 Law No. 105)  2010 
Financial Instruments and Exchange Law (1948 Law No. 25)  2010 
Telecommunications Business Law (1984 Law No. 86)  2007 
Law Concerning the Measures by Large-Scale Reta il Stores for Preservation of Living Environment 
(1998 Law No. 91)   
Employee's Pension Insurance Law (1954 Law No. 115) 2009 
Civil Aeronautics Act (1952 Law No. 231)  2009 
Marine Transportation Law (1949 Law No. 187)  2008 
Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers (1986 
Law No. 66)  2003 
Certified Public Accountants Act (1948 Law No. 103)  2007 
Certified Tax Accountant Law (1951 Law No. 237)  2007 
Law for Improvement of International Tourist Hotels (1949 Law No. 279)  2008 
Travel Agency Law (1952 Law No. 239)  2009 
Electricity Utilities Industry Act (1964 Law No. 170)  2006 
Gas Utility Industry Law (1954 Law No. 51)  2006 
Petroleum Stockpiling Act (1975 Law No. 96) 2007 
Act on the Quality Control of Gasoline and Other Fuels (1976 Law No. 88)  2008 
Standards and technical regulations  
Industrial Standardization Act (1949 Law No. 185)  2005 
Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (JAS Law) 
(1950 Law No. 175)  2009 
Pharmaceutical Affairs Law (1960 Law No. 145)  2006 
Food Sanitation Law (1947 Law No. 233)  2009 
Quarantine Law (1951 Law No. 201)  2008 
Plant Protection Law (1950 Law No. 151)  2005 
Domestic Animal Infectious Diseases Control Law (1951 Law No. 166)  2005 
Building Standard Law (1950 Law No. 201)  2007 
Electrical Appliance and Material Safety Law (1961 Law No. 234)  2007 
Consumer Product Safety Law (1973 Law No. 31)  2009 
Table II.1 (cont'd) WT/TPR/S/243 Trade Policy Review 
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 Most recent amendment 
High Pressure Gas Safety Act (1951 Law No. 204)  2006 
Road Vehicle Law (1951 Law No. 185)  2009 
Act concerning the Rational Use of Energy (1979 Law No. 49)  2008 
Fire Service Law (1948 Law No.186) 2009 
Intellectual property rights  
Patent Act (1959 Law No. 121)  2008 
Customs Law (1954 Law No. 61)  2010 
Act Against Unjustifiable Premiums and Misleading Representations (1962 Law No. 134)  2005 
Unfair Competition Prevention Act (1993 Law No. 47)  2009 
Utility Model Act (1959 Law No. 123) 2007 
Design Act (1959 Law No. 125)  2008 
Trademark Act (1959 Law No. 127)  2008 
Copyright Law (1970 Law No. 48)  2009 
Civil Code (1896 Law No. 89)  2006 
Penal Code (1907 Law No. 45)  2010 
Agriculture  
Basic Law on Food, Agriculture and Rural Areas (1999 Law No. 106)  
Temporary Law for Compensation Price of Milk for Manufacturing Use (1965 Law No. 112)  2002 
Others  
Administrative Procedure Law (1993 Law No. 88)  2006 
Act Concerning Prohibition of Private Monopolizati on and Maintenance of Fa ir Trade (Anti-Monopoly 
Act) (1947 Law No. 54) 2009 
Source:  Information provided by the Japanese authorities. 
11. The Government Revitalization Unit (GRU) w as established on 18 September 2009 under the 
new Government, and has been responsible for regulatory reform.6  While the Three-Year Program 
for the Promotion of Regulatory Reform, announced by the Committee for the Promotion of Regulatory Reform (CPRR) on 22 J une 2007 is still in effect, on 18 J une 2010, the Cabinet authorized 
a regulatory reform programme issued by the GRU.
7  Under this programme, the authorities are to 
review and improve about 60 regulations concerning, inter alia,  environment and energy, medical and 
elderly care services, and agriculture.  The GRU is to  monitor the implementation of the programme.   
12. Trade and trade-related policy issues may also be debated in various Committees, including 
standing committees in the Diet.8  The authorities state that each mi nistry and agency receives inputs 
from the private sector concerning matters related to trade policies through, inter alia,   exchanging 
opinions with private entities and receiving petiti ons from them.  In addition, the Cabinet Office 
invites comments and opinions concerning regulations  (including matters related to trade policies) 
from the general public. 
(ii) Transparency and policy evaluation 
13. Promoting transparency is one of the Government's policy priorities.  All laws and  
regulations are published in the Government Gazette .  The Government makes available all laws, 
Cabinet orders, and ministerial ordinances on the In ternet;  however, various Cabinet decisions and 
"understandings" are not automatically and fully available online.  The authorities maintain that most, 
                                                      
6 The GRU, as a part of its responsibilities, has take n over the role of the previous Council for the 
Promotion of Regulatory Reform (CPRR). 
7 The GRU online information (in Japanese). Vi ewed at: http://www.cao.go.jp/sasshin/kisei-
seido/publication/220618/item 100618_03.pdf [2 0.07.2010]. 
8 These include standing committees on:  Foreign Affairs, Economy, Trade and Industry;  Financial 
Affairs;  Forestry and Fisheries;  and Fundamental National Policies.  Each committee consists of 10 to 
50 members. Japan WT/TPR/S/243 
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if not all, of these decisions are published in various publications including the Government Gazette .  
Each ministry decides whether to put relevant cabin et decisions on its own website and/or to publish 
the decisions (including in the Government Gazette ) when it considers it necessary.  As a part of the 
Government's efforts to increase transparency, ma ny laws and regulations "of great interest" have 
been translated into English.9  Information in English websites tend  to be less frequently updated and 
contain less detailed information compared with the original Japanese versions.   
14. Cost-benefit analyses of policies, particularly of existing policies, are seldom undertaken.  
The lack of such evaluations makes it difficult fo r consumers to assess the effectiveness of policies, 
and effectively undermines the Government 's intention to promote transparency.10 
15. Under the Government Policy Evaluations Act (GPEA) and the Basic Guidelines for 
Implementing Policy Evaluation, adopted by the Cabinet in December 2001, the Cabinet Office and ministries are required to evaluate their own polic ies before and after impl ementation and to publish 
the results of their evaluations.  For selected cases,  ministries and agencies are required to conduct ex-
ante regulatory impact analyses, to be presente d when soliciting "public comments" before the 
Cabinet makes a decision to introduce, abolish or change regulations.  Fr om 1 October 2007, draft 
laws or draft cabinet orders to enact, revise or a bolish regulations must be evaluated by ex ante 
regulatory impact analyses (RIAs);  the results of ex ante RIAs must be published, in accordance with 
a Implementation Guidelines for ex-ante Evaluati on of Regulations, which provide:  standard 
guidance on the type of analysis that should be cond ucted;  what procedures are necessary;  and other 
matters relevant to the ex-ante evaluation of regulations.
11  According to the Guidelines, ex-ante 
evaluations should report:  the purpose, contents a nd necessity of regulations;  analysis of their costs 
versus  benefits;  comparison with alternatives;  vi ews of experts, and other related matters; and time 
and/or condition for reviews.  An evaluation report concerning a regulation is to be made public no 
later than the Cabinet's approval of the draft law to enact, revise or abolish the regulation.12  
Nonetheless, not all bills are subject to ex ante RI As.  For example, an ex ante RIA was not conducted 
on the draft bill for the reform of the Japan Post Office, which was submitted to the Diet on 
30 April 2010.  The authorities maintain that dr afting of the bills for postal reform was the 
responsibility of the Cabinet Secretariat, which is not subject to the GPEA, and thus was not obliged 
to conduct ex-ante RIAs.  On the rescue of Japan Airlines (Chapt er IV), there was no relevant 
enactment, revision, or abolition of regulations by a la w or a cabinet order, and therefore, according to 
the authorities, no ex ante evaluation was conducted.  Existing regulations and measures that are not 
subject to amendment or abolition are not subject to these evaluations.  Thus, the cost and benefits of 
protection from various tariffs and or other trade policy measures are not evaluated by the Government.  
16. In addition to these self-evaluations, the GPEA obliges the Ministry of Internal Affairs and 
Communications (MIC) to undertake independent assess ments of the policies implemented by other 
ministries, and the Ministry of Finance conducts its own policy evaluation of selected expenditure 
programmes.  The authorities state that the results of the self-evaluations and the evaluations by the 
                                                     
 
9 See Ministry of Justice online information.  Vi ewed at:  http://www.japan eselawtranslation.go.jp 
[25.06.2010]. 
10 Japan ranked 19th among 48 countries in the 2009 Opacity index, which measures the degree to 
which countries lack clear, accurate, easily discer nible, and widely accepted practices governing the 
relationships among governments, businesses, and investors.  See Milk en Institute (2009). 
11 The Ministry of Internal Affairs and Communication online information (in Japanese). Viewed at: 
http://www.soumu.go.jp/menu_news/s-news/2007/070824_1.html [29.06.2010]. 
12 If the regulation to be evaluated is enacted, revised or abolished by a cabinet order, or ordinance 
equivalent or inferior to a cabinet order, an evaluation report is to be made public no later than the commencement of public hearing procedures. WT/TPR/S/243 Trade Policy Review 
Page 16 
 
 
MOF are taken into consideration in the annua l budget formulation.  In September 2009, the 
Government set up a new policy evaluation body within the GRU, aiming at cutting the expenditure of a number of government projects.  The author ities indicate that the Government has eliminated 
projects worth ¥96.9 billion in the process of formulating the FY2010 budget, based on the 
recommendations of the GRU.   
17. The authorities state that 207 of the 762 ex -post evaluations undertaken during FY2009 
resulted in improvement and review of polici es (including abolition).  Some of these policy 
evaluations involve analysis of cost-effectiveness.
13 
18. Ministries and agencies must publish draft regulations, including draft cabinet orders or 
ministerial orders, and receive comments from the public ;  they must allow, in principle, at least 
30 days to receive comments, from the date of publication of the draft.14  Ministries and agencies are 
required to consider the comments submitted by th e public and publish the comments, as well as the 
results of their consideration, and the reason for th e results.  The Ministry of Internal Affairs and 
Communications (MIC) conducts and publish es a comprehensive annual survey on the 
implementation of the public comment procedure un der the Administrative Procedure Act.  A report 
published in December 2009 states that comments subm itted have been reflected in 122 (25.2%) out 
of 485 cases.  While the Office for the Postal Reform  held a number of public hearings on the postal 
reform and conducted the public comment procedure before submitting the bills for postal reform to 
the Diet on 30 April 2010, the Government did not conduct an ex-ante evaluation.15   
19. In addition to these programmes, the new "I mproving Transparency of Special Taxation 
Measures Law" entered into force on 1 April 2010.  The law obliges persons and companies that have 
been granted tax exemptions under the special ta x measures to submit the annual amount of granted 
exemption to the Japanese authorities;  it is not intended to review "cost and benefit".16  
20. The GRU has also introduced screening (jigyo-shiwake ) of government projects.  The 
screening is conducted by meetings of selected re presentative from politicians, academics, and private 
sectors;  it does not involve quantitative cost-benefit analysis. To date, 25% of 449 projects reviewed 
have been abolished or their funding by budget pos tponed indefinitely.  Such projects related to 
human capital development for industrial sectors in  developing countries, and research projects for 
agricultural investment in foreign countries.17   
                                                      
13 For policy evaluations by ministries and agencies (in Japanese), see MIC online information.  
Viewed at:  http://www.soumu.go.jp/main_sosiki/hyouk a/seisaku_n/seisaku_fusyou.html [25.06.2010].   
14 If the authorities decide that comments are required within less than 30 days of publication, they 
must publish the reason for this decision.  The authorities  state that draft laws are not subject to the public 
comment requirements, as they are scrutinized in the Diet. 
15 The bill was re-submitted to the 176th session of the Diet on 13 October 2010. 
16 Ministry of Finance online information (in Japanese).  Viewed at:  http://www.mof.go.jp/houan/174/ 
houan.htm [10.06.10]. 
17 The authorities indicate that the budget for human resource development programmes decreased by  
¥1.2 billion in the FY2010 budget, and that for the research on agricultural investment decreased by  
¥1.4 billion.  The GRU online information (in Japanese ).  Viewed at:  http://www.cao.go.jp/sasshin/kaigi/ 
honkaigi/d5/shidai.html [25.06.2010]. Japan WT/TPR/S/243 
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(4) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) WTO 
(a) Participation in the WTO 
21. Japan participates actively in the WTO;  the au thorities state that Japan remains committed to 
the DDA and will continue to make every effort towa rd reaching agreement in the negotiations.  Japan 
has submitted comprehensive notifications under WT O Agreements (Table AII.1).  Japan is an 
original Member of the WTO.  It undertook commitments as a result of the post-Uruguay Round negotiations on telecommunications and financial services.  Japan is a party to the Agreement on 
Government Procurement and the Agreement on Trad e in Civil Aircraft, and a participant in the 
Information Technology Agreement.  
22. In the WTO, Japan has recently sought to curtail unilateral export restrictions by its trading 
partners, especially those concerning ch emical fertilizers and natural resources.
18 
(b) Disputes 
23. Since 2009, Japan has been involved in one  dispute as a respondent and three cases as a 
complainant (Table AII.2).  In addition, Japan participated as a third party in six dispute cases.19   
(ii) Regional trade agreements 
(a) Bilateral/regional free-trade agreements adopted by Japan 
24. Whereas Japan had no preferential trade agreemen t before 2002, it now h as ten bilateral FTAs 
(EPAs) in force (with Singapore, Mexico, Mala ysia, Chile, Thailand, Indonesia, Brunei, the 
Philippines, Switzerland, and Viet Nam) and one regional FTA with the ASEAN (Table AII.3).  
These FTAs include the application of prefer ential rates of duty but also involve,  inter alia,  trade 
facilitation, investment, movement of natural pe rsons, competition policy, and improvement of the 
business environment.   
25. Although not a member of the ASEAN, Japan, al ong with China and the Republic of Korea, 
holds regular meetings with ASEAN under the AS EAN+3 framework of co operation.  High level 
meetings are held annually;  the twelfth ASEAN+ 3 summit was held in October 2009.  Japan also 
participates in the East Asian Summit framework of cooperation, which involves Australia, China, 
India, Japan, Korea, and New Zealand.  The four th East Asian Summit meeting was also held in 
October 2009.   
26. Over the past two years, the Agreemen t on ASEAN-Japan Comprehensive Economic 
Partnership (AJCEP) entered into force between Japan and most ASEAN countries.20  C e r t a i n  
                                                      
18 WTO documents G/MA/W/96, 22 September 2009.  Japan also reserves its third-party rights in 
disputes involving China's measures related to the exportation of various raw materials (WTO documents 
WT/DS394/8, WT/DS395/8, and WT/DS398/7). 
19 Cases in which requests for consultations were made and panels were established between 
January 2009 and June 2010.  WTO documents  DS 391, DS394, DS395, DS397, DS398, and DS399. 
20 The agreement entered into force on:  1 Decem ber 2008 between Japan, Lao PDR, Myanmar, 
Singapore, and Viet Nam;  1 January 2009 between Japan and Brunei;  1 February 2009 between Japan and 
Malaysia;  1 June 2009 between Japan and Thailand ;  1 December 2009 between Japan and Cambodia, and 
1 July 2010 between Japan and the Philippines.  As of September 2010, the agreement had not yet entered into force between Indonesia and other contracting parties. WT/TPR/S/243 Trade Policy Review 
Page 18 
 
 
agricultural and industrial products, such as alc oholic beverages, tobacco, and steel products are 
excluded from the agreement.   
27. The AJCEP is legally independent from the i ndividual FTAs concluded bilaterally between 
Japan and ASEAN member countries;  it ne ither nullifies nor integrates these FTAs.21  The Japanese 
Customs applies a preferential tariff based on a b ilateral FTA or the AJC EP, depending upon the 
certificate of origin of the item concerned, thus a dding to the complexity of Japan's rules of origin.22  
The authorities indicate that the AJCEP eliminates ta riffs on about 93% of the total value of Japan's 
imports from ASEAN countries, based on 2006 data. 
28. Two FTAs entered into force during the pe riod under review (with Switzerland on 
1 September 2009, and with Viet Nam on 1 Octobe r 2009).  While the authorities indicate that the 
FTAs Japan has concluded to date eliminate tariff s on some 91% to 99.9% of the total value of 
bilateral trade, all the FTAs exclude similar produc ts, including certain items of agriculture; fish and 
fish products; petroleum oils (other than crude o il);  leather, leather products, and footwear;  and 
laminated wood.  In FY2010, the overall simple av erage applied preferential tariff under Japan's FTAs 
range from 2.9% to 3.4%, compared with Japan's average applied MFN tariff of 5.8% 
(Chapter III(2)(ii)).  Under these FTAs, the percentage of total tariff lines that are either zero or lower 
than the corresponding applied MFN rates ranges be tween 86.3% and 90.3%, and the percentage of 
duty-free tariff lines in total lines ranges from 81.2% to 82.3%. 
29. Under Japan's FTAs, preferential rules of origin involve criteria including the change in tariff 
classification at the HS 4-digit level (Chapter III(2)(iii)).  Some tariff lines, including certain meat, 
fruit juice, leather, and leather products, are subj ect to tariff-rate quotas created especially under the 
FTA between Japan and Mexico (JUMSEPA) (Chapt er III(2)(ii)).  Safeguard measures (involving 
emergency tariff increases) may be imposed on items subject to tariff concessions in accordance with 
each agreement, as long as the resulting tariff rate does not exceed the lesser of:  the applied MFN rate 
in effect at the time the measure is taken, or th e applied MFN rate in effect on the day immediately 
preceding the date of entry into force of each agreement. 
30. As the authorities have not, in most instances,  conducted quantitative analysis on the effects 
of FTAs on Japan's trade before or after the entr y into force of these agreements, their economic 
benefits are unclear.23  According to the UN Comtrade datab ase, in 2009, exports from Japan to its 
FTA partners generally fell, just as its total exports  fell by 25.7%, due to the latest global recession;  
the decrease ranged from 9.9% (exports to Brunei) to 51.3% (exports to Chile).  The only exception 
was Japan's exports to Switzerland, which increased by 44.9%.  Japan's imports from the FTA 
partners in 2009 also decreased, along with its tota l imports, which fell by 27.1%;  the decrease 
ranged from 2.3% (imports from Switzerland) to  33.0% (imports from Chile and Indonesia). 
31. In the Committee on Regional Trade Agreements , some Members raised concerns about  
Japan's FTAs.  These included disproportionate  liberalization between agricultural and non-
                                                      
21 Some chapters of the bilateral FTAs (e.g. chapte rs concerning intellectual property, competition, and 
government procurement) are not included in the AJCEP. 
22 Thus, the rules of origin applied to imports into Japan depend on which agreement an exporter cites 
when exporting from one of Japan's FTA partners.  The authorities maintain that this broadens the choice of 
preferential tariffs from which exporters can choose. 
23 In the context of inter alia  Japan's possible participation in the Trans-Pacific Partnership (TPP) 
initiative, various governmental bodies have recently estimated the cost (and benefit) of its participation in 
FTAs (EPAs).  METI online information (in Japanese).  Viewed at:  http://www.me ti.go.jp/topic/downloadfiles/ 
101027strategy02_00_00.pdf  [30.11.2010]. Japan WT/TPR/S/243 
 Page 19 
 
 
agricultural products, and Japan's longer implementa tion periods compared with some developing 
country FTA partners (such as Brunei and the Philippines). 
32. The FTAs Japan has concluded do not have chapters on environment or labour.  The 
authorities consider that most FTAs address the issu e of sustainable development and labour standards 
through the reaffirmation of the rights and obliga tions under other existing international agreements 
and the various economic cooperation activities desc ribed in chapters on cooperation.  Some FTAs 
stipulate the inappropriateness of encouraging in vestment through a relaxation of  environmental 
measures or by weakening or reducing protec tion afforded in domestic labour laws.24   
33. In its FTAs (EPAs), Japan has made services-related commitments that are not listed on its 
GATS schedules.  For example, it has made commitments  to further relax foreign equity participation 
in telecommunications and liberalize the distributio n of salt, petroleum, and petroleum products.  
Japan considers that, besides additional commitm ents in specific servic es sectors, these EPAs 
enhanced transparency by the adoption of a ne gative-list approach.  For example, the Japan-
Switzerland EPA includes a negative-list approach for market access.  With respect to investment, 
Japan has made commitments that are beyond the scope of its obligations under the TRIMS 
Agreement. For example, in the Japan-Singapore EPA, the prohibition of performance requirements 
applies to goods and to services, and prohibitions are included in "technology transfer requirements" 
and "research and development requirements".25 
34. Under Japan's FTAs, a party may request, in writi ng, consultations with the other party on the 
interpretation or application of the agreement.  In the event that the request or the consultation does 
not produce any result, the complainant may call for th e establishment of an arbitration tribunal.  This 
is possible only if the complainant considers that any benefit accruing to it, directly or indirectly, 
under the agreement is being nullified or impaired as a result of the failure of the complained to carry 
out its obligations under the agreement.  Each party may appoint one arbitrator who may be a 
national, and propose up to three candidates to serve  as the third arbitrator, who becomes the chair of 
the arbitral tribunal.  The third arbitrator must not be a national of either party, have his or her usual 
place of residence in either party, or be employed by  either party.  The judgement of the tribunal binds 
each party and there is no specific provision for an appellate court.26 
(b) Bilateral/regional free-trade agreements currently being negotiated (or studied)  
35. The fourth "intermediate" negotiation for a free-trade agreement between Japan and the 
member states of the Gulf Cooperation Council (GCC:   Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, 
and the United Arab Emirates) was held in March 2009.27   
36. The first round of negotiations for a comprehe nsive FTA between Japan and the Republic of 
Korea was held in December 2003, and five further rounds were held in 2004;  there have been no 
negotiations since the end of the sixth round, in No vember 2004.  Since June 2008, four working-level 
consultations have been held between Japan and Korea to "consider and create a favourable 
environment" for the resumption of negotiations.   
37. In December 2006, the leaders of Japan and I ndia agreed to launch FTA negotiations;  the 
14th round of negotiations was held in September 2010, and agreement was reached between the two 
                                                      
24 WTO document WT/TPR/M/211/Add.1, 22 May 2009. 
25 See Article 75 of the Japan-Singapore FTA for details. 
26 METI online information (in Japanese).  Viewed  at:  http://www.meti.go. jp/report/downloadfiles/ 
g90527c3-8j.pdf [06.08.2010]. 
27 The first round of the negotiations was held in September 2006. WT/TPR/S/243 Trade Policy Review 
Page 20 
 
 
parties on major elements of a prospective FTA.  On 12 December 2006, the leaders of Japan and 
Australia agreed to launch FTA negotiations;  the 11th round of negotiations was held in April 2010.  
On 14 April 2009, the leaders of Japan and Peru de cided to launch negotiations  on a bilateral FTA.  
The sixth round of negotiations was held in August 2010.    
38. As part of Japan's trilateral cooperation with Ch ina and the Republic of Korea, joint research 
on a possible FTA has been conducted since 2001 by priv ate institutions of the three countries.  Some 
of these studies contain quantitative analysis on the economic effects on the three parties of a possible 
FTA.28  Pursuant to a joint statement during the trila teral Economic and Trade Ministers' Meeting  in 
October 2009, a joint study committee composed  of government officials, business and academic 
experts was established in May 2010;  the second meeting of the committee was held in 
September 2010.  The JSC is to issue its final report by 2012, as agreed by the leaders at their latest 
summit meeting in May 2010.  In addition, within the trilateral framework, the three countries are to 
promote 13 concrete programmes for trilateral co operation, including drafting the "action plan", 
setting up the "cyber secretariat", initiating the tr ilateral policy meeting on Africa, and promoting 
negotiation on a trilateral investment agreement.       
39. The authorities indicate that Japan has a strong in terest in the progress of the Trans-Pacific 
Partnership (TPP) initiative.  It is  seriously considering ways to be involved in it but has not yet 
decided whether to participate in the TPP.29 
(iii) Generalized System of Preferences and other preferential arrangements adopted 
 unilaterally by Japan   
40. Under the Generalized System of Preferences (GSP) scheme, Japan grants preferential tariff 
treatment unilaterally to certain developing countries.30  The Government has the authority to 
unilaterally designate, withdraw, suspend, and lim it the beneficiaries or products that receive 
preferential treatment under the GSP scheme.  A beneficiary country is removed from the scheme 
(graduates) when it has been classi fied in the World Bank statistics as a high-income country during 
the three preceding years.  In 2009, Japan consid ered that Saudi Arabia had graduated from the 
scheme and removed it from its GSP list.  There has been no other change in the scheme since Japan's 
previous Review.  The current GSP sch eme is valid until 31 March 2011.  
41. Ceilings on import value or volume for the granti ng of GSP preferential tariffs are determined 
in accordance with the Temporary Tariff Measures Law, as follows:  the ceiling (in value or volume) 
for FY2001 was established as 103% of the imports (i n value or volume) of a product in FY1999;  and 
since 2002, the ceilings have been increased each year by 3% of the previous year's ceiling.  Data on 
the actual use of ceiling are made available online.31 
42. The simple average GSP tariff rate is 4.6%, slightly lower than the overall applied MFN 
average tariff of 5.8% in FY2010.  Japan grants preferential tariff treatment under its GSP scheme to 
140 developing countries and 14 territories for 341 agricultural and fishery products, and 
                                                      
28 NIRA online information.  Viewed at:  h ttp://www.nira.or.jp/outgoing/report/entry/n081213 
_284.html [20.10.2010]. 
29 MOFA online information.  Viewed at:  http://www.mofa.go.jp/policy/economy/fta/policy 
20101106.html [22.11.2010]. 
30 For details of the GSP scheme see MOFA online information.  Viewed at: http://www.mofa.go.jp/ 
policy/economy/gsp/explain.html#6 [21.08.2010].   
31 Customs online information (in Japanese).  Viewed at:  http://www.customs.go.jp/tokkei/index.htm 
[21.08.2010]. Japan WT/TPR/S/243 
 Page 21 
 
 
2,641 industrial products at HS 9-digit level.32  The scheme excludes many agricultural products and 
some industrial products (e.g. rice and rice products, meat and meat products, fish and fish products, 
dairy products, pineapples, cereal products, textiles and clothing, leather and leather products, and 
footwear), many of which are export items in  which developing countries have comparative 
advantage;  MFN tariffs apply to these products im ported from developing countries.  The authorities 
have not made quantitative cost and benefit analysis  on the effect of the exclusion, such as how the 
exclusion has protected relevant sect ors or industries;  nonetheless, they are of the view that Japan's 
tariff rate is appropriately set by taking into c onsideration the results of  multilateral negotiations, 
international requirements, the need to protect dom estic industries, and pri ce gaps between domestic 
and overseas markets.  Under the GSP, applied tariff rates for 75.2% of total tariff lines are either zero 
or lower than the corresponding applied MFN rat es;  duty-free tariff lines account for 61.2% of all 
lines.  China remains the main beneficiary of G SP treatment (Table II.2).  In FY2008, the main 
products imported under the GSP scheme were coke  and semi-coke (HS2704.00), articles for the 
conveyance or packing of goods (HS3923.21), an d bananas (HS0803.00);  in FY2009, they were 
made-up textile articles (HS6307.90) and articl es for the conveyance or packing of goods 
(HS3923.21).  
Table II.2 
Ten largest GSP beneficiaries, FY2008  
(¥ million) 
Beneficiaries Import value of preferential treatment Share (%) 
China 1,618,208 77.9 
The Philippines 120,686 5.8 
Viet Nam 51,858 2.5 
Indonesia 49,184 2.4 
India 49,158 2.4 
Myanmar 26,952 1.3 
Brazil 26,458 1.3 
South Africa 25,627 1.2 
Bangladesh 12,775 0.6 
Thailand 10,666 0.5 
World 2,077,592 100.0 
Source:  Information provided by the Japanese authorities. 
43. Japan's duty-free and quota-free treatment for 49 LDCs has remained unchanged since its 
previous Review.  The current coverage is about 98% defined at the HS nine-digit level;  and the 
simple average applied rate for LDCs in FY2010 is 0.5%, the same as in FY2009.  For 170 tariff lines 
(1.9% of the total)33, the applied rates on imports from LDCs are the same as the applied MFN rates.  
Data provided by the authorities indicate that the value of imports from LDCs under the duty-free and 
quota-free treatment amounted to ¥65,566 milli on in FY2008 (up from ¥62,904 million in FY2006).  
                                                      
32 These figures take into account only tariff lines where the preferential rate is lower than the 
corresponding MFN applied rate. 
33 These cover, for example, fish and fish products, products of the milling industry, sugar, and articles 
of leather and footwear. WT/TPR/S/243 Trade Policy Review 
Page 22 
 
 
(iv) Other bilateral/regio nal arrangements 
(a) Japan–U.S. bilateral relationship 
44. In 2009, Japan and the United States conti nued their dialogue under the U.S.–Japan 
Regulatory Reform and Competition Policy Initiative,  established within th e framework of the  
Japan–U.S. Economic Partnership for Growth.  Issues dealt with in the dialogue include information 
technology, telecommunications, medical device s and pharmaceuticals, distribution, customs 
procedures, consular affairs, a nd government procurement. The latest report describing the measures 
taken in response to each party's recommendations for regulatory reform was issued on 6 July 2009.34  
The report describes reform measures adopted by the two parties in key sectors and areas including 
government procurement, privatization, intellectua l property, competition policy, medical devices and 
pharmaceuticals, telecommunications, and distribution.   
(b) Japan–EU bilateral relationship 
45. Since its previous Review, Japan has conti nued to pursue bilatera l cooperation with the 
European Union through, inter alia,  annual summit meetings and the Japan-EU Regulatory Reform 
Dialogue.  In the latest bilateral summit meeting, in April 2010, Japan and the EU agreed to start a 
"joint examination" of issues of interest to the two parties;  these include tariffs and non-tariff 
measures, services, investment in services and non-service sectors, government procurement, and 
intellectual property rights.35  They also cooperate on customs issues, under the Agreement between 
the Government of Japan and the European Union on Cooperation and Mutual Administrative Assistance in Customs Matters, which en tered into force on 1 February 2008. 
(c) APEC (Asia-Pacific Economic Cooperation) 
46. In 2009, 66.5% of Japan's merc handise imports were from APEC members, and 74.8% of its 
merchandise exports were to APEC.
36  In keeping with its policy of supporting multilateral trade and 
investment liberalization, Japan is a strong supporte r of APEC's "open regiona lism" goals.  Like other 
members, Japan submits an annual Individual Acti on Plan (IAP), which provides a roadmap of its 
intended actions in various policy areas with a vi ew to realizing APEC's liberalization goals.37  At the 
Seventeenth APEC Economic Leaders' Meeting, held in Singapore in November 2009, APEC 
Members, inter alia,  agreed to take all necessary economic and financial measures to resolve the 
current financial crisis;  they also stated th eir support for a prompt, ambitious, and balanced 
conclusion to the DDA.  In addition, they agreed to  continue to explore ways of setting up a possible 
Free Trade Area of the Asia-Pacific (FTAAP).  Furthe rmore, they agreed to review their efforts to 
achieve APEC's goals, known as Bogor Goals, unde r which industrialized economies among APEC 
members aim to achieve free and open trade and i nvestment no later than 2010, and other members 
by 2020.  At the Eighteenth APEC Economic Leaders' Meeting, held in Yokohama, Japan, 
in November 2010, APEC members reviewed th e implementation of Bogor Goals by five 
                                                      
34 Eighth report to the leaders on the U.S.-Japan Regulatory Reform and Competition Policy Initiative.  
Viewed at:  http://www.mofa.go.jp/region/n-a merica/us/economy/report0907.pdf [23.06.2010]. 
35 19th Japan-EU Summit, Tokyo, 28 April 2010, Joint Press Statement.  MOFA online information.  
Viewed at:  http://www.mofa.go.jp/region/europe/eu/summit/joint1004.html [19.07.2010]. 
36 UN Comtrade database. 
37 The latest available IAP for Japan was issued in 2009 (APEC online information.  Viewed at:  
http://www.apec-iap.org/document/J PN_2009_IAP.htm [23.06.2010]). Japan WT/TPR/S/243 
 Page 23 
 
 
industrialized economies and eight developing economies.38  They concluded, inter alia , that "while 
more work remains to be done, these 13 economies have made significant progress toward achieving 
the Bogor Goals".  APEC members also reaffirmed their commitment to bring the DDA to a prompt 
and successful conclusion.  In addition, they agreed to take concrete steps toward realization of a 
FTAAP.39 
47. The Investment Facilitation Action Plan (IFAP) for 2008-10, endorsed at the 2008 ministerial 
meeting, is intended to identify a menu of specific actions that an economy can choose to implement. 
48. In June 2008, Japan proposed to set up a one-stop online service providing information on 
patent search and patent examination, in res ponse to the APEC Cooperation Initiative on Patent 
Acquisition Procedures, which were endorsed at th e 2007 ministerial meeting.  This proposal was 
endorsed by APEC members at th e IPEG (Intellectual Property Rights Experts Group) meeting 
in March 2010.  The initiative aimed to enha nce patent examinati on cooperation, promote 
computerization of procedures, and impr ove patent examination capability.   
(d) ASEM (Asia-Europe Meeting) 
49. At the seventh ASEM Summit (ASEM7), held  in Beijing in October 2008, the leaders 
stressed the importance of multilateral cooperation to  tackle the ongoing financial crisis.  They also 
reiterated "the importance of an open, fair, rule-based and stable  multilateral trading system" under 
the WTO.40   
50. Under the ASEM's Trade Facilitation Action Pl an (TFAP), adopted in 1998 to reduce non-
tariff barriers and to promote trade opportunities betw een Asia and Europe, four priority areas (i.e. 
customs procedures, standards and conformity assessment, intellectual property rights, and e-
commerce) were set for the period 2006-08.  A re vised TFAP, for 2010-2012, was adopted at the 
eighth ASEM Customs DG-Commissioner Meeting.  In  the context of the revised TFAP, Japan has 
participated in various meetings including th e third meeting of the ASEM Working Group on 
Customs Matters, held in Budapest in April 2009. 
(e) Other bilateral/regional arrangements 
51. Japan participates in the Asia Pacific Metrology Programme and the Asia Pacific Legal 
Metrology Forum, as well as the Asia Pacific La boratory Accreditation Cooperation (APLAC), which 
aims to facilitate cooperation in the harmoni zation of laboratory accreditation practices.  
52. A protocol amending the bilateral tax treaty with  the Philippines, and new bilateral tax treaties 
between Japan and Australia entered into force in 2008;  and tax treaties between Japan and Brunei, 
and Japan and Kazakhstan entered into force in 2009 .  Japan signed new bilateral tax treaties with 
Kuwait and Bermuda in February 2010;  the treaty with Bermuda entered into force in August 2010.41  
                                                      
38 The five industrialized economies are:  Australia;  Canada;  Japan;  New Zealand;  and the United 
States.  The eight developing economies are:  Chile;  Hong  Kong, China;  Korea;  Malaysia;  Mexico;  Peru;  
Singapore;  and Chinese Taipei. 
39 MOFA online information.  Viewed at:  http ://www.mofa.go.jp/policy/economy/apec/2010japan/sm/ 
index.html [30.11.2010]. 
40 MOFA online information.  Viewed at:  http ://www.mofa.go.jp/policy/economy/asem/asem7/chair 
_state.pdf [06.08.2010]. 
41 As of September 2010, Japan has 48 tax treaties a pplied to 59 countries and regions (i.e. Armenia, 
Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bermuda, Brazil, Brunei, Bulgaria, Canada, 
China, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Georgia, Germany, Hungary, India, Indonesia, Ireland, Israel, Italy, Republic of Korea, Kyrgyz Republic, Luxembourg, Malaysia, Mexico, Moldova, the WT/TPR/S/243 Trade Policy Review 
Page 24 
 
 
Japan signed protocols amending the current bila teral tax treaties with Belgium, Luxembourg, 
Malaysia, Singapore, and Switzerland in 2010.  Tax- sparing provisions in the treaty with Pakistan 
were removed in the new treaty, whic h entered into force in November 2008.42  None of the tax 
treaties Japan has signed contains MFN provisions.  
53. Since its previous Review, Japan has promoted  cooperation agreements on competition in the 
form of competition chapters in its FTAs.  Nine FT As with chapters on competition have entered into 
force (with Singapore, Mexico, Malaysia, Chile, Th ailand, Indonesia, the Philippines, Switzerland, 
and Viet Nam) (Chapter III(4)(vi)).  Japan's FTA with Brunei does not contain chapters on competition.  The economic cooperation chapter of Japan's FTA with ASEAN cites competition.   
54. Japan currently has bilateral investment trea ties with 15 trading partners (section (6)(i) 
below).  
55. In 2002, Japan and China agreed to estab lish the Japan–China Economic Partnership 
Consultation scheme, with a view to identifying  possible economic disputes at an early stage, 
preventing disputes between the two countries, an d further strengthening complementary economic 
relations.  In these consultations, the two count ries exchanged opinions on issues including IPR, 
China's commitment under the WTO rules, agriculture and quarantine, and othe r trade-related issues, 
as well as Japan-China cooperation within the intern ational economy.  There have been seven such 
consultations at deputy director-general le vel, the most recent in October 2008.  
(5) A
ID FOR TRADE  
56. In 2008, Japan was the largest bilateral aid-for-trade donor, providing US$8.7 billion 
(Table II.3).  This was an increase of US $3.9 billion over Japan's commitments in 2007 
(US$4.8 billion) and resulted in an increase in th e share of aid for trade in Japan's sector-allocable 
official development assistance (ODA) from 49% in 2007  to 69% in 2008 (latest year for which data 
are available).43 
Table II.3 
Japan's aid-for-trade commitments, 2002-08 
(2008 constant US$ million) 
Sectors 2002 2003 2004 2005 2006 2007 2008 
Transport & storage, total 2,273.78 866.1 2,087.32 2,963.11 2,284.1 1,501.09 4,510.5 
Communications, total 59.37 260.06 234.42 106.37 127.36 142.72 37.95 
Energy, total 1,513.59 2,394.92 1,738.13 1,095.23 1,371.66 1,665.37 1,553.97 
Banking & financial services, tota l 47.07 14.49 13.79 16.17 15.05 10.44 71.58 
Business & other services, total .. 19.24 24.72 18.1 21.91 144.4 341.83 
Agriculture, total 546.35 320.83 332.05 613.38 360.35 663.51 648.06 
Table II.3 (cont'd) 
                                                                                                                                                                     
Netherlands, New Zealand, Norway, Pakistan, the Philippines, Poland, Republic of Kazakhstan, Romania, 
Russia, Singapore, Slovak Republic, South Africa, Spain,  Sri Lanka, Sweden, Switzer land, Tajikistan, Thailand, 
Turkey, Turkmenistan, Ukrain e, the United Kingdom, the United States, Uzbekistan, Viet Nam, and Zambia). 
42 "Tax sparing" is a means by which the tax system  of a capital-exporting country can be made to 
accommodate the tax incentives of developing countries.  More specifically, in this case, Japan "spares" the tax 
it would normally impose on the untaxed (or low-taxed) income earned by Japanese investors in Pakistan by granting them foreign tax credits equal to  the tax they would have paid in Pakistan (in the absence of the 
incentives).  Japan's bilateral tax treaties with Sri La nka, Zambia, Brazil, the Philippines, China, Thailand, 
Bangladesh, and Viet Nam have tax-sparing provisions. 
43 WTO document WT/COMTD/AFT/W/21, 13 July 2010. Japan WT/TPR/S/243 
 Page 25 
 
 
Sectors 2002 2003 2004 2005 2006 2007 2008 
Forestry, total 82.84 434.61 111.08 334.17 236.75 427.86 243.4 
Fishing, total 83.39 78.75 99.19 97.33 64.85 99.37 151.28 
Industry, total 5.03 122.62 228.46 172.45 138.65 160.34 613.86 
Mineral resources & mining, total .. 29.26 23.76 20.26 18.35 17.8 497.05 
Trade policies & regulations, total .. 53.31 110.76 46.95 55.81 50.64 60.67 
Tourism, total .. 5.89 9.68 98.59 363.82 10.42 8.26 
Total 4611.42 4,600.08 5,013.36 5,582.11 5,058.66 4,893.96 8,738.41 
.. Not available. 
Source: OECD Query Wizard for International Development Statistics. 
57. The majority of the additional aid-for-trade fl ows were allocated to infrastructure in the 
transport and storage, communications, and energy supply and generation sectors. There was also an 
increase in support for industry and mineral resour ces/mining.  In 2008, US$6.1 billion (69.8% of the 
total aid for trade) was allocated to infrastructur e, and US$2.6 billion (29.5%) to building productive 
capacity.44  In 2008, grants, technical cooperation, a nd concessional loans accounted for 6%, 5%, and 
89%, respectively, of Japan's aid-for-trade assistance. 
58. The major recipients of Japan's aid for trade are Asia, the Middle East, and Africa.  In 2008, 
US$5.5 billion (62.3% of the total) was allocated to Asia, US$1.9 billion (22.0%) to Middle East, and 
US$1.0 billion (11.7%) to Africa.  Japan also had th e largest levels of disbursements in 2008 with 
US$5.3 billion, an increase of 21% over 2007. 
59. At the Second Global Review on Aid for Trade in July 2009, Japan announced a renewal of 
its aid-for-trade strategy, the Development Initiative for Trade (DIT).45  Under this initiative, Japan 
pledged to provide US$12 billion th rough bilateral assistance for tr ade-related projects from 2009 to 
2011, as well as technical assistance for 40,000 people in the field of trade-related activities.  This 
US$12 billion pledge superseded and increased Japan's funding by 20% compared with its 
commitment at the Hong Kong Ministerial Conf erence in 2005 to provide US$10 billion over the 
period 2006-08.  Among OECD countries, Japanese e xpenditure on aid for trade remains one of the 
highest, when measured as a share of its overall aid budget (69% in 2008).   
60. In its response to the 2009 OECD/WTO self-asse ssment questionnaire for the Second Global 
Review, Japan profiled the Global One-Village One-Product (OVOP) Campaign.  The OVOP emphasizes the importance of providing assistance to all three stages of the trade cycle:  production, 
selling, and buying, in line with Japan's concep tualization of aid for trade as a "comprehensive 
package of extensive development assistance".
46  Japan also provides aid-for-trade support for 
addressing regional challenges, specifically enhanci ng the development efforts of low income and 
least developed countries and supporting regional inte gration in the Asia-Pacific.  Japan collaborates 
with ASEAN through the JICA-ASEAN Regional Cooperation Meeting (JARCOM)47, to support and 
                                                      
44 Based on information provided by the authorities;   aid given to infrastructure-related projects 
increased substantially because of the large loan projects in  the transport and storage s ector committed in 2008.   
45 MOFA online information.  Viewed at:  http://www.mofa.go.jp/policy/economy/wto/min05/ 
initiative.html [21.08.2010].   
46 Responses to the self-assessment questionnaire.  Viewed at: http://www.oecd.org/dataoecd/46/3/ 
39639093.pdf [30.08.2010]. 
47 JICA-ASEAN Regional Cooperation Meeting online in formation.  Viewed at: http://www.jarcom.net 
[30.08.2010]. WT/TPR/S/243 Trade Policy Review 
Page 26 
 
 
promote greater South-South cooperation amongs t ASEAN members and to expedite regional 
integration through JICA tec hnical cooperation activities. 
61. Japan's aid-for-trade priorities for Africa fo cus on:  providing assistance for developing 
policies to promote industrial development; pr oduct development with a focus on quality and 
competitiveness;  empowerment of SMEs as a m eans to generate income and employment;  and 
promoting the role of the private sector in growth .  The Tokyo International Conference on African 
Development (TICAD) is the platform used by Japan  and its African partners to support the bridging 
of the demand and supply of Japan's ODA and aid for trade to Africa.  The Yokohama Action Plan 
under which Japan pledged to double its ODA to Afri ca by 2012 was agreed at the Fourth Tokyo 
International Conference on African Developmen t (TICAD IV) in May 2008.  The Second TICAD 
Ministerial Follow up Meeting to review progress in  the implementation of the Plan was held in 
May 2010, and an additional focus agreed on effort s to enhance private-sector collaboration with 
Africa on market access for African exports to Japan, investment, and tourism.  Between end-August 
and early September 2010, Japan dispatched a public and private sector joint mission to Angola, Namibia, and South Africa with a view to promoting trade and investment to Africa.    
62. Japan's aid policy is coordinated mainly by th e Ministry of Foreign Affairs, and its aid 
programme is implemented mainly by the Ministry  of Foreign Affairs and the Japan International 
Corporation Agency (JICA).  JICA has conducted vari ous types of evaluation on its aid for trade and 
Aid projects at the pre-implementation, implementa tion, and post-implementation stages.  The JICA 
Advisory Committee on Evaluation aims to improve ev aluation techniques and its systems, as well as 
the quality of evaluation, placing a greater focus on outcomes, especially given the need for aid 
effectiveness in the light of the strain on public budgets, and fo r accountability.  JICA also conducts 
joint-evaluations with recipient countries, a nd its 2009 Evaluation Report reflected evaluations 
undertaken in a number of countries across various regions.
48   Evaluations are conducted on technical 
assistance, grant support, and ODA loans.  JICA A nnual Evaluation Report 2008 indicates that 51 out 
of 83 projects evaluated in FY2008 were counted as aid for trade.  Of the 51 projects, 41 were rated as 
"highly satisfactory" and "satisfactory".  Evaluati ons focusing on aid for trade included an impact 
assessment of a transport infrastructure project in northern Viet Nam, and an empirical study on growth and poverty reduction in Indonesian farms.
49 
63. Japan continues to support the Aid-for-Trade  Initiative in Asia-Pacific through its co-
chairmanship of the Regional Technical Group (RTG).50  The RTG is a forum for discussion of aid for 
trade issues and proposals, and the formulation of a regional integrated approach to operationalizing 
aid for trade.  The Third Meeting of the RTG was held in May 2009 and a publication on aid for trade in the Asia-Pacific region is under preparation. 
64. Private public partnerships (PPPs) are a central feature of Japan's aid and aid-for-trade 
programmes. In April 2008, Japan announced the "P ublic-Private Partnership for Boosting Growth in 
Developing Countries", which includes:  examin ing and adopting projects of public-private 
collaboration proposed by the private sector;  periodi cally implementing public-private discussions in 
recipient countries and Tokyo;  and convening me etings of the "Expanded Country-based ODA Task 
Force", whose members include Japanese compani es in recipient countries.  Japan has PPP 
                                                     
 
48 JICA Annual Evaluation Report 2009.  Viewed  at:  http://www.jica.go .jp/english/operations/ 
evaluation/reports/2009 [12.10.2010]. 
49 JICA online information.  Viewed at: http://www .jica.or.id/english/operations/evaluation/oda_loan 
/post/2003/pdf/1-03_smry.pdf;  and http://jica-ri.jica. go.jp/research/growth-poverty /infrastructure-building-in-
asia/index.html [12.10.2010]. 
50 Regional Technical Group online information.  Viewed at:  http://www.aric.adb.org/aid-for-trade-
asia/overview.php. Japan WT/TPR/S/243 
 Page 27 
 
 
arrangements with Africa through the Africa-A sia Business Forum (AABF) and the TICAD 
conferences, and with India and Viet Nam th rough the Japan-OECD-Vietnam PPP Forum.  Japan 
recognizes the contribution that private corporations in donor countries can provide to private sectors 
in developing countries through foreign direct investment (FDI), technology transfers, and 
"bottom/base of the pyramid (BOP)" businesses.51  Discussions have been held between the 
Government, governmental agencies (including JI CA and the Japan External Trade Organization 
(JETRO)), and the Japan Business Federation on exporti ng this model to developing countries.  Japan 
has held opinion-exchange meetings with bus iness communities, such as  the Japan Business 
Federation, on a regular basis to abso rb their awareness concerning ODA.   
(6) FOREIGN INVESTMENT REGIME  
65. Inward FDI in Japan remains substantially lo wer than outward FDI, and is relatively low 
compared with that in other large OECD economies (Chapter I(4)(iv)).  The continued low level of 
FDI into Japan may be attributed to macroeconomic factors such as the exchange rate (when the yen 
is appreciating), high costs of business, and regulatory barriers.52  The Five Recommendations 
Toward the Drastic Expansion of Foreign Direct I nvestment in Japan, issued by the Expert Committee 
on FDI Promotion on 20 May 2008, consider that th e Government should prom ote:  enhancement of 
the system to facilitate M&A;  comprehensive st udies on FDI regulations;  establishment of priority 
strategies by sector;  reduction of business costs and improvement of transparency;  and regional revitalization by FDI.
53  Against this background, Japan has c ontinued to take measures to make itself 
an attractive investment destination for foreign firm s.  Nonetheless, inward FDI has been lower than 
the authorities expected;  net FDI inflow in 2009 de clined more than 50%, due mainly to the global 
recession.  On the other hand, the Japanese authoriti es consider that the main reasons for the recent 
decline include the difficulty of hiring qua lified employees;  high business costs in Japan54;  and high 
customer expectations.55  On the other hand, Japan's trading part ners indicated in the past that the low 
level of inward FDI in Japan could be attributed, inter alia,  to impediments to mergers and 
acquisitions;  insufficient regulatory reform and fina ncial transparency and fl exibility;  and lack of 
flexibility in the labour market.  Japan ranks 18th in the World Bank's Doing Business 2011  index56, 
and 19th in the Heritage Foundation's 2010 index of economic freedom.57 
66. The Government's current Program for Accele ration of FDI into Japan was last revised 
in December 200858;  Japan's FY2009 budget associated with the programme included ¥750 million 
allocated to projects to, inter alia,  provide business opportunities in Japan.  In addition, the 
Government adopted a New Growth Strategy in June 2010, under which the promotion of FDI was 
considered as one of the most important elements to secure growth.   
                                                      
51 BOP is a "sustainable business model targeting the poor which is sustained through the development 
of a value chain approach that incorpor ates those at the base of the market , including consumers and producers".  
In this context, the One Village, One product' approach is being pursued.  TICAD online information.  Viewed 
at:  http://www.ticad.net/documents/Follow-up-to-TICADIV.pdf [30.08.2010]. 
52 WTO (2001), p. 14. 
53 Cabinet Office online information (in Japanese).  Viewed at:  http://www.invest-japan.go.jp/ 
committee.html [30.11.2010]. 
54 The recent appreciation of the yen has perhaps helped increase the net outflow of FDI in Japan. 
55 METI online information (in Japanese).  Vi ewed at:  http://www.meti.go.jp/press/20090416001/ 
20090416001.html [20.07.2010]. 
56 World Bank online information.  Viewed at:  http://www.doingbusiness.org/economyrankings. 
[25.08.2010] 
57 Heritage Foundation online information.  Viewed  at:  http://www.heritage.org/index/Ranking.aspx. 
[25.08.2010]. 
58 Cabinet Office online information (in Japa nese).  Viewed at:  http://www.invest-
japan.go.jp/jp/fdip/files/program.pdf [30.11.2011]. WT/TPR/S/243 Trade Policy Review 
Page 28 
 
 
67. Tax incentives for investment apply equally to domestic or foreign enterprises operating in 
Japan.  The Government is currently considering lowering its relatively high statutory corporate tax 
rate, which can be a deterrent to FDI, and broadening the tax base (Chapter III(3)(i)).  
(i) Regulatory regime 
68. Since its previous Review, Japan has adopt ed measures to facilitate FDI approval. 
69. In addition to the GATS, under which Japan h as made commitments regarding the supply of 
services through commercial presence, Japan is a party to the OECD Code of Liberalization of Capital 
Movements, and the OECD National Treatment Inst rument, neither of which is legally binding. 
70. Japan's regulatory regime on inward and outwa rd FDI is governed mainly by the Foreign 
Exchange and Foreign Trade Act, together with rele vant cabinet and ministerial ordinances, such as 
the Foreign Exchange Order and the Order of Inward Foreign Direct Investment.59  Inward FDI 
generally requires ex post facto  reporting to the Minister of Finance and the Minister in charge of the 
sector involved, by the 15th day of the month following the investment.  The reporting period was 
extended on 23 June 2009.60  The authorities' approval in response to investors' "prior notification" is 
required for inward FDI in industries recognized in  the OECD Code of Liberalization of Capital 
Movements, such as agriculture, forestry and fisherie s, crude oil, leather and leather products, and air 
and maritime transport.  The authorities maintain that these requirements applied only to sectors 
where there is "significant adverse effect on the smooth management of the national economy", with a 
view to safeguarding the national economy.  In additi on, approval is required in some other sectors on 
the grounds of "public order, public safety, and nationa l security", in accordance  with Article 3 of the 
OECD Code (Table AII.4).61 
71. The authorities state that only one re quest for approval has been denied.62  Besides the 
approval (prior notification) requirements under the Foreign Exchange and Foreign Trade Act, various 
other laws stipulate specific restrictions on inward FDI in certain sectors, including the acquisition of 
land, mining, oil industry, telecommunications, and transport.  As developing mineral resources in 
Japan is deemed to serve the national interest, mini ng rights (including those for the oil industry) are 
granted only to Japanese citizens or juridical pers ons, in accordance with Article 17 of the Mining 
Act.  In telecommunications, on th e grounds of national security, fore ign capital participation in NTT 
Corporation, which holds all the shares of NTT East Corporation is restricted to less than one third;  
under the Radio Act, foreign ownership in radio stations  is limited, in principle, to less than one third 
of voting rights.63  Ships not flying the Japanese flag are pr ohibited from entering Japanese ports that 
are not open to foreign commerce and from carrying cargoes or passengers between Japanese ports, 
unless otherwise specified in Japan's laws and regulati ons, or international agreements to which it is a 
party.  Permission to conduct air transport business as  a Japanese air carrier is not granted to a legal 
                                                      
59 For an English translation for the Foreign Exchange and Foreign Trade Act, see The Cabinet 
Secretariat online information.  Viewed at: http ://www.cas.go.jp/jp/seisaku/hourei/data/FTA_2.pdf. 
[30.08.2010]. 
60 Before the extension, investors had to report to the relevant authorities within 15 days of executing 
foreign investment in Japan. 
61 These include aircraft, arms, explosives, nuclear power, electric utilities, gas utilities, water, heat 
generation, rail transport, passenger transport, tel ecommunications (accompanying certain network facilities), 
television and cable television, and broadcasting sectors.  See details in a notice of the Ministry of Finance (in Japanese).  Viewed at:  http://www.mof.go.jp/h ourei/kokuji/KO-20070907-0001-15.pdf. [19.08.2010]. 
62 This concerned a particular FDI proposal in el ectric utilities in 2008 (See WTO (2009), p. 30). 
63 Exceptions to this provision include radio stati ons established for the purpose of telecommunications 
services. Japan WT/TPR/S/243 
 Page 29 
 
 
person of which more than one third of the memb ers of the board of directors comprise natural 
persons or entities that do not have Japanese nationality  or to a legal person of which more than one 
third of the voting rights are held by the foreign pe rsons or entities.  In addition, the ratio of shares 
that can be owned by foreign entities to total shares in certain companies are restricted:  less than 20% 
for TV stations, less than one third for the Nippo n Telegraph and Telephone Corporation, and less 
than one third for companies approved by the Go vernment to conduct aviation and transportation 
services.  Selected products that are deemed conver tible to military equipment are included in the list 
of products subject to approval, as stipulated in the Appendix to the Export Trade Control Order, for 
reasons of national security. 
72. Since April 2009, the examination period require d for approval of a foreign investment has 
been reduced to about five business days from about two weeks.  Since June 2009, in addition to the 
aforementioned extension of the reporting period, in vestment advisors have been allowed to make 
prior notifications without attaching clients' indivi dual information, and investors are now allowed to 
file "prior notifications" within 6 months (previ ously within 3 months) before the date of the 
investment.  The authorities consider that these chan ges have reduced the burden on foreign investors, 
as the examination period for more than 85% of approval has required no more than five business 
days since April 2009.  Prior notifications  increased from 138 in 2005 to 641 in 2008. 
73. Cross-border mergers and acquisitions are subject to the Anti-Monopoly Act.  Since 2009, no 
merger or acquisition has been rejected by the Japan Fair Trade Commissi on in accordance with the 
Act.   
74. Japan signed bilateral investment  treaties (BITs) with Uzbekist an and Peru in 2008;  these 
entered into force in September 2009 and December 2009, respectively.  Japan also has BITs with 
Bangladesh;  Cambodia;  China;  Egypt;  Hong Kong,  China;  the Republic of Korea;  Lao PDR;  
Russia;  Sri Lanka;  Turkey;  Mongolia;  Pakistan;  and Viet Nam.64  Japan is currently negotiating 
BITs with:  Angola;  Colombia;  Kazakhstan;  Kuwait;  Papua New Guinea;  and Saudi Arabia.   
75. At their latest trilateral summit held in May 201 0, China, Japan, and Korea shared a view to 
make utmost efforts to reach a "substantive agreemen t" of the trilateral investment treaty "in a few 
months time for the earliest conclusion of the Agreement".   The eleventh round of negotiations for a 
trilateral investment agreement among China, Jap an, and the Republic of Korea was held in 
June-July 2010.65 
76. Japan's bilateral FTAs with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, 
ASEAN, the Philippines, and Switzerland include pr ovisions on investment;  articles on national 
treatment, MFN treatment, access to the courts of justice, and prohi bition of performance 
requirements are generally included in the agreements.66  The FTAs accord preferential treatment to 
investment from the FTA parties over other foreig n investors.  The provisions are similar to the 
provisions of Japan's BITs.  These articles are applie d to investors and investments as defined in the 
agreements, with exceptions specified in the annexe s.  Japan's FTA with Viet Nam does not contain 
provisions on investment. 
                                                      
64 These BITs stipulate investment protection and liberalization by, for example:  providing, in 
principle, national treatment and MFN treatment with respect to the "pre-establishment phase of investments";  
obliging the contracting parties to abide by their contra cts with investors;  and prohibiting, in principle, 
performance requirements that might hinder investment. 
65 MOFA online information (in Japanese).  Vi ewed at:  http://www.mofa.go.jp/mofaj/gaiko/ 
investment/jck/index.html [20.07.2010]. 
66 JSEPA includes a national treatment provision (Article 73) but does not include an MFN provision;  
it includes a provision on access to the courts of justice (Article 92).   WT/TPR/S/243 Trade Policy Review 
Page 30 
 
 
(ii) Investment promotion measures 
77. Japan's investment promotion measures remain s ubstantially the same as in 2009.  However, 
it would appear that the Government is consideri ng an introduction of a new preferential tax scheme 
for inward FDI.67  
78. Japan's current measures to remove obstacles to  FDI appear to be associated largely with 
institutional reforms, such as those of regulations on cross-border mergers and acquisitions (including 
tax measures) as well as improvement in infrastruct ure related to logistics and R&D, and seminars 
and sales campaigns by ministers and local government  leaders to invite FDI into Japan.  The Expert 
Committee on FDI Promotion, established in 2008, gath ers information to improve Japan's investment 
environment for foreign capital and examine the Government's policies on FDI promotion.68  I n  
May 2008, it published;  recommendations including th e establishment of priority strategies by sector, 
notably medical devices.69  In December 2008, the Expert Committee revised the Program for 
Acceleration of Foreign Direct Investment in  Japan, which incorporated the recommendations.70  The 
most recent meeting of the Expert Committee was held in December 2008. 
79. The Government supports investment promo tion activities by selected regional governments 
through its Project to Promote Foreign Direct Inve stment in Selected Areas;  these activities include 
planning strategies to attract FDI, public relations, inviting potential investors, and helping the start-
up process of selected companies.  By FY2007, 17  regions had been selected for such support 
measures.  In FY2008, the Government started a proj ect consisting of:  a programme to help inviting 
potential investors to regional exhibitions, with a view to creating further business opportunities in 
Japan (business matching programme)71;  support for potential investors to conduct a feasibility study 
(regional invitation programme);  and support for re gional initiatives to promote their publicity abroad 
(area sales support programme). 
                                                      
67 Financial Times online information.  Viewed at:  http://www.f t.com/cms/s/0/3eaccebe-0942-11e0-
ada6-00144feabdc0,s01=1.html#axzz18MyfUSzJ [17.12.2010]. 
68 The Committee comprises academics, Japanese and non -Japanese businesspersons, and others.  It is 
an advisory body to the Minister of St ate for Economics and Fiscal Policy.   
69 The five recommendations include:  the facilitation of M&As;  conducting comprehensive studies on 
FDI regulations;  the establishment of priority strategies by sector;  reduction of business costs and improvement 
of transparency;  and promoting efforts of local governments to attract foreign capital.  See Office of Invest 
Japan online information.  "Five Recommendations Toward the Drastic Expansion of Foreign Direct Investment in Japan".  Viewed at:  http://www.invest-japan.go.jp/fdip/files/en_recommendations_ 20080519.pdf 
[20.08.2010]. 
70 See WTO document TPR/M/211/Add.1, 22 May 2009, p. 131, for the details of the Program. 
71 Five exhibitions were selected in FY2010.