COVER STORY • 2

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Roundtable with Prof. Fukunari Kimura, Prof. Junko Shimizu & Kayo Matsumoto

oundtable Discussion on the White Paper on
International Economy & Trade 2021: Trade
Policy at an Historical Turning Point

By Japan SPOTLIGHT
A Roundtable on METI’s White Paper on International Economy & Trade 2021 was organized on Aug. 4,
2021. Kayo Matsumoto, the representative author and director of the Policy Planning and Research Officeat the Trade Policy Bureau of the Ministry of Economy, Trade and Industry (METI) at the time of its drafting,showcased the highlights of the White Paper and moderated the discussion following it. She is currently
working as counsellor to the Cabinet Secretariat in charge of infrastructure issues related to economic
cooperation.
Prof. Fukunari Kimura of Keio University and Prof. Junko Shimizu of Gakushuin University joined thediscussion. Prof. Kimura is a distinguished trade policy economist, a dedicated advocate for a multilateral
trading system based on free trade. With his expertise and interest in the Asian economy, he is also
working as chief economist for the Economic Research Institute for ASEAN and East Asia (ERIA), a
Jakarta-based Asian think tank.
Prof. Shimizu is also a distinguished economist with expertise in international finance and currency
systems, as she had more than 10 years’ working experience as an exchange dealer at international banks
before becoming an academic. Her interest is a common currency in Asia, such as an Asian Monetary Unit
(AMU). Both academics are very keen on policy-oriented issues and have been active in publishing theirviews.
(Online Roundtable on Aug. 4, 2021)
ParticipantsProf. Fukunari Kimura

Prof. Junko Shimizu

Introduction of the Highlights of METI’s
White Paper on International Economy &Trade in 2021
Matsumoto: In drafting this White Paper, we had in mind that wewere now at a time of big changes that require us to reconsider ourtrade policy. Early in 2020 when the White Paper for 2020 was being
drafted, METI officials at the Trade Policy Bureau began discussing
what the economy in a post-pandemic would look like and what
https://www.jef.or.jp/journal/

Kayo Matsumoto

policies would be needed in responding to the disruption of global
supply chains due to the pandemic. You can see the analysis of thepandemic’s economic impact on both the demand and supply side inlast year’s METI’s White Paper reflecting those discussions. This
analysis led to a policy of lowering the concentration of supply chainsin certain places or nations to reduce risk. Providing subsidies fordiversifying supply chains was one of the policies, including subsidies
to transfer production bases from China to other nations. The same
discussion continued in the second half of 2020. Regarding wider
Japan SPOTLIGHT • September / October 202111

trade policy, before the US presidential election last November, it was
hard for us to get a clear prospect of the future economy and policies
in the United States. But as we see from international leaders’meetings and their statements after President Joe Biden’s
administration was formed, we have begun to get a clearer idea of thepolicy environment.
The first thing to be noted as a key policy that affects trade is “theenhanced interest in common values in international economic
activities”. Increased interest in the global environment is the leading
issue. In Europe, for example, they have been engaged in what we callsustainable finance along with a large-scale action program topromote a green economy since around 2018. In my view, theirpolicies for reorienting financial flows towards sustainable economic
activities as defined by themselves could change the competitiveenvironment in their favor, with the alleged objective of achieving
green growth in a sustainable environment.
This growing interest in common values is not limited to Europe. In
the US as well, Securities and Exchange Commission (SEC)
consultations for potential new disclosure requirements related toclimate change were held recently. This is a further step after thereport of the Task Force on Climate-related Financial Disclosures,
established in 2015. The Biden administration is also strengthening
efforts to encourage businesses to respect human rights, anotherimportant issue of common values.
Another key change in the policy environment is the expanded roleof the government. The expansionary fiscal policy adopted during the
pandemic to compensate for the economic damage it has caused has
not been a mere remedy for suffering industries or people but afurther active policy to encourage green and digital growth.
The urgent need to strengthen efforts to protect economic security
is also crucial today as a key change in the policy environment.
Though it has been observed for several years, and in 2019 inparticular, it was argued as a sensitive issue mostly in the context of
the US-China conflict, but today it is considered to be a key issue inpromoting alliances, such as between the US and Europe or the US
and Japan, in order to protect national security.
These changes in the policy environment will affect businesses,with regard to both global common values and global supply chains.
We confirmed in this White Paper that Japanese business supply
chains in Asia, which have long been far too dependent upon China,
gradually started becoming more diversified around 2011 or 2012,
though little by little, with a slightly lower share in China in terms ofForeign Direct Investment (FDI) or the number of production sites aswell as imports of principal parts and components among Japan’s
12 Japan SPOTLIGHT • September / October 2021

major trading partners in Asia.
I believe that businesses are now increasingly taking account ofcommon values like the global environment or due diligence onhuman rights in their management, with pressure from capital
markets as well; and it is also noteworthy that digital technology will
be useful for businesses to meet these new requests and challenges
regarding the environment and human rights.
“Trustworthy global supply chains” could be constructed byrelevant trade policies that reflect these new values. We highlighted awide range of rule-making venues and accords where such trade
policies could be discussed and achieved, such as the WTO, a varietyof Economic Partnership Agreements (EPAs) such as the EU-JapanFTA or the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP), the OECD and APEC. Among these, theOECD is utilized as a venue for discussions on frontier policies among
like-minded countries, while APEC can be a venue for more practical
discussions. In addition, the Supply Chain Resilience Initiative (SCRI)
launched by the Australia-India-Japan Economic Ministers’ Meeting in
April 2021 to create a virtuous cycle of enhancing supply chain
resilience and the Dialogue for Innovative and Sustainable Growth
initiated by the ASEAN-Japan Economic Ministers in August 2020 are
also relevant venues for discussing new issues. Our trade policy has
been these several years to utilize plural venues for discussions toestablish rules to achieve trade policy goals. We will continue using
these venues to achieve rule-making that reflects the new values intrade policy. I think even the rules among private businesses rather
than an official treaty would affect business behavior or capital flows
and eventually the business competition environment. If so, could
Japanese businesses create their own values by such rules that would
be accepted by the rest of Asia? This is a difficult question. We cannot
make it clear exactly what would be a unique value created by aJapanese business as a tangible concept, though the White Paper
introduced some specific examples of Japanese firms’ efforts tocreate values for local communities and for themselves as private
corporations.
I would like to end my introduction here and move on to thediscussion session. On the issue of supply chains, I would like to ask
Prof. Kimura for his views on supply chain resilience or connectivity
with regard to ASEAN, and in particular could he please give histhoughts on what the notion of “service link” means in this context?

To Achieve Resilient Supply Chains
Kimura: How excessively Japanese businesses depend upon Chineseindustries in their supply chains certainly needs to be examined, but it
is also true that China is still important for Japanese businesses. So I
believe that it is not necessary to even ask Japanese companies toleave China. Meanwhile, however, it is important for Japanesebusinesses to diversify their overseas production sites. In diversifying
them, they will find a clear distinction between nations where they
could possibly have an elaborate production network based on robust
connectivity and others where they could not. I believe that whatmatters most is to expand the working environment to enablebusinesses to develop elaborate production networks in as many
countries or regions as possible. Asian nations like Cambodia, Laos,
Myanmar or India do not yet have working environments toaccommodate such production networks. This is certainly due tothose nations’ investment environment but also to the lack of robust
connectivity from hardware to software. For example, in operations totransport parts and components in a supply chain, what matters is
not only the pecuniary cost but also time efficiency and reliability oflogistics. Unless those are guaranteed, production networks cannot
be expanded to such nations. Assuming that the manufacturingindustry is still a key to growth among these nations, there will be somany things that need to be improved in them.
In thinking about Japan’s economic cooperation on infrastructure
which could improve the environment of production networks, its
strength has been well noted. From the project in Laem Chabang Portand the Eastern Seaboard in Thailand to the infrastructure building
around Hanoi in Vietnam, Japan has carried out systematiccooperation on infrastructure. The strength of this approach is seen in
economic infrastructures such as electricity supply. Whether or not
China provides a wide range of economic support to ASEAN nations,Japan has its own strengths in infrastructure building, not least in avariety of urban amenity-related infrastructures such as water andsewage plants, which Asian countries also need.
Apart from manufacturing production networks, how it would bepossible to take advantage of disruptive innovation is also importantfor ASEAN countries. In order to achieve this, there will be a need forhighly qualified experts or for people returning from studying abroad
to start a variety of innovative businesses. Urban amenities are a key
area for such innovation and ASEAN cities are competing for such
experts. They are competing with each other in urban amenities, justas in the US where cities compete in an attempt to achieve a virtuous
cycle of qualified experts and more innovation leading to improved
amenities.
ASEAN nations are currently facing difficulty in proceeding withinternational division of labor beyond the manufacturing industry,

such as in services, without urban amenity-related infrastructures. So
Japan could increase its contribution to the development of ASEAN
nations by providing high-quality urban amenity-related
infrastructures.
I found the chapter on the resilience of supply chains in this White
Paper very useful and enlightening. I believe supply chain
management itself may as well be left to private businesses and what
the government needs to do first is to increase the alternatives forprivate businesses to enhance their resilience. I think it is very
important for the government to improve the investment environment
and the connectivity of supply chains among ASEAN nations andSouth Asian nations.
Matsumoto: A smart city, another urban amenity-related
infrastructure, is one of the focused infrastructures in the
Infrastructure System Export Strategy and is said to be difficult tomonetize from an exporting side’s perspective. I regarded it asproviding sustainability values. But as you said, we would need totake into account the needs of the host nation in terms of attracting
talented people.
I would like to ask Prof. Shimizu about selection of the currency for
procurements of parts and components in supply chains. In ourWhite Paper, we referred to a survey on diversification of supply
sources in supply chains conducted by the Japan Bank forInternational Cooperation and the Development Bank of Japan. The
results were that a large percentage of the companies surveyed
responded affirmatively to diversification of supply sources
immediately after the pandemic. This was probably, as we had
expected in advance, because it would be much easier to change
supply sources rather than changing production sites. Apart from theelectric and electronic appliances industry where nearly all
settlements are done in dollars, in the case of diversifying supply
sources, when Japanese firms procure similar parts and components
from among plural nations, what would be the implications for theselection of currencies used for settlements by businesses?

Selection of Currencies in Diversifying
Supply Sources
Shimizu: Even before the pandemic, with intensified US-China trade
friction as well as natural disasters, Japanese manufacturing
companies with production bases in Asia were thinking about further
diversification of production sites in terms of their business continuity
plans. The pandemic accelerated this trend. They are now seriously
Japan SPOTLIGHT • September / October 202113

thinking about moving some of their production or procurement sites
from China to Southeast Asia, although maintaining business in
China.
On the question of selection of currencies for settlements, thanks
to the internationalization of the Chinese yuan, transactions of Asiancurrencies including the yuan are much more easily done and thecosts are much lower. Thus we have seen the percentage of yuanbased transactions in Japan-China trade increasing recently. The local
subsidiaries in China and Thailand are freed from foreign exchangerisks by being able to use their local currencies for their cross-bordertransactions. On the other hand, businesses have to move to lessdeveloped nations such as Vietnam, Indonesia or Cambodia and there
they have no choice but to use the US dollar for international trade.
However, these countries have regulations to enforce all domestictransactions to use the local currency. In this case, Japanesesubsidiaries have to manage transactions between the dollar and the
local currency, and therefore diversification of production bases toless-developed nations would make it more difficult to manage
currency transaction risks.
Another issue is trade finance. In less-developed countries
businesses would often have to use a more expensive method, suchas a Letter of Credit (L/C), and costs would be high. We would need asolution to this.
I am very impressed that this White Paper mentions this issue, inparticular the “Trade Waltz”, a trade-related information connecting
platform using blockchain technology. This platform would play a keyrole in Japanese companies’ attempts to diversify supply networks in
Asia and prepare to replace a production site in any country exposed
to a certain risk with another site somewhere else, because theywould need to be supported comprehensively in terms of currency,
customs clearance systems and trade finance. Recent innovations ofdigital technology will support further diversification of Japanesecompanies. This is as important as the question of urban amenities
that Prof. Kimura mentioned.
On possible future development in this regard, the Nippon
Automated Cargo and Port Consolidated System (NACCS), a
Japanese online customs clearance system for imported and exported
cargo now introduced in Vietnam and Myanmar, would be expanded
to other countries and certificates of origin would be issued moreeasily than ever by taking advantage of NACCS. Eventually, theAuthorized Economic Operator, a system adopted by the World
Customs Organization allowing businesses with the capacity forsecurity management of cargo and law observance to modify andsimplify customs clearance, may also be expanded. Thus, with the
14 Japan SPOTLIGHT • September / October 2021

“Trade Waltz” service, we would be able to achieve digitalized
customs clearance. In the White Paper, I think this would have been
more convincing with a clear explanation of why the “Trade Waltz”
and NACCS will be needed in the expansion of supply chains. It isclear that there will be enormous differences in cost and the timeneeded for procedures between a case where trade finance is done
simply through an account by an online network like the Society for
Worldwide Interbank Financial Telecommunication (SWIFT) and acase where the finance has to be done with an L/C because thebusiness partner is not to be fully trusted. This is a vital issue inbuilding up supply chains in the new less-developed trading partners.

Future Outlook for the Global Economy
Matsumoto: I would like to further discuss a little beyond the scopeof the White Paper.
Firstly, could you both please tell me your views on the future
outlook for the global economy?
International cooperation is now under progress to reduce theeconomic gaps between the developed nations where more people
have been vaccinated against Covid-19 and the developing nations
where fewer people have, as vaccination is at this moment the onlymeans of stopping the spread of the Delta variant and economic
recovery thus depends upon the progress of vaccination. What do
you think will be the key issues in reviving the global economy while
US or European monetary policy gradually returns to normal?
The second question is about the possibility of introducing private
finance for economic cooperation on infrastructure projects. As forfinancing for infrastructure in general, 90% is from private financeand 10% from public finance. Do you think there is more room for
private financing to be introduced in infrastructure projects under
economic cooperation?
Kimura: It is truly amazing to see that national governments, inparticular those in developed nations but also emerging economies
and developing ones as well, have been taking unprecedentedly largescale macroeconomic mitigation policies. In the first half of last year,
we worried about a possible global depression and extremely strong
negative shock on the demand side of the global economy with adamaged financial sector and the collapse of asset markets. But thenegative shock was truly small.
Looking at trade data, though we see a negative demand shock on
the whole economy continuing, all nations’ GDP growth bottomed out
in May or June in 2020 and is now coming back to normal. This is a

truly phenomenal and revolutionary performance achieved bymacroeconomic policy.
Vaccination is a key to the restoration of the economy and there will
be a big time lag in the recovery between nations making good
progress in vaccinations and nations failing to do so, as the directionof economic recovery will depend upon the virus variants. It should
also be noted that the fiscal situation among Southeast Asian nations
including Indonesia is not damaged yet. But we will need to watch
carefully the macro balance of emerging economies and developing
economies as developed nations start raising interest rates inaccordance with their own economic recovery.
Over the mid-term, there will be a divide in the economic recovery
among sectors in ASEAN. Some are steadily recovering but some arenot. In general, the sector of goods trade is steadily getting better, inparticular goods that had a positive demand shock from the pandemic
such as those linked with remote working, as ASEAN nations’ exports
are very competitive and their exports of goods to Europe and the US
have returned to normal very quickly. But there are some sectors
which cannot recover well, such as transportation, tourism and faceto-face services, and they will still have much difficulty recovering.
Such sectoral division will be seen as a key characteristic of the future
recovery process. Whether a sector or business can adjust well to thedigital economy or not could make a clear difference in its
performance as well.
According to an Internet questionnaire survey by ERIA, more than
2,000 companies in ASEAN responded by Internet, and thosecompanies with high IT literacy have a record of good businessperformance, as shown in that more than half of them saw a positive
increase in sales even last year. This means that companies using theInternet are exploring for business opportunities everywhere and thus
show a good performance. Nonetheless, there is still uncertainty
about their recovery due to political instability. We are not sure yet if
we can truly draw a rosy picture of recovery for these nations.
On the question of private finance for economic cooperation in
infrastructure, ASEAN nations have tried to introduce it these last 10
years, in particular under the scheme of Public-Private Partnerships.
But their optimism about it has now gone after seeing its failures, likethe one by India which was very positive about it and announced it
was introducing private finance for two-thirds of infrastructure
investment. Because of this, they have been proceeding little by little
with caution in introducing private finance.
It is certain that the easiness of private finance introduction differs
by sector. For example, in large-scale power plants, private financeintroduction is now confirmed, but it would be difficult to introduce itin sectors like transportation, urban infrastructure or public services.
We need to think about how to finance projects that do not pay welland make up for their low profitability. We cannot recommend theintroduction of private finance without consolidated governance on
private and public finance in projects in developing and emerging
economies. It is too risky to promote such projects by collaboration
between the public and private sector without fixed rules in thosenations. We will need to promote it as carefully as possible, step by
step.
Shimizu: Japan seems to have failed to secure imports of vaccines or
Personal Protective Equipment (PPE) and other essential goods at the
beginning of the pandemic. I think the government should have taken
greater initiative in this rather than leaving it all to private business.
We should examine policy measures in this regard. Though Japanconcludes bilateral or regional and multilateral EPAs, all nations
naturally take actions in favor of their own country in emergencies likethis pandemic. I do not think there is any rule on cooperating in suchactions in any of the EPAs. We should also examine how helpful EPAs
could be in responding to such unexpected emergencies.
On the question of the global macroeconomy affected by the
pandemic, the damage was much less than we had thought, as Prof.
Kimura mentioned. Though there is a significant divide in damage
among sectors, the economy as a whole is coming back to a normal
track. We will need policies to support the seriously damaged sectors
and businesses after finding out how best to help them from now on.
On the question of the introduction of private finance into economic
cooperation projects in infrastructure, I think we need to have ascheme in which Japanese overseas subsidiaries with excess liquidity
could invest in those projects. Urban amenity-related infrastructures
will be very important in ASEAN countries. In Thailand or Indonesia,
which have heavy traffic jams and high temperatures, frozen storageof vaccines is difficult and thus vaccinations are not progressing very
well in those countries. Economic cooperation in building up urban
infrastructures for those nations would have benefits not only for
those nations but also for the Japanese working for the subsidiaries
in the local economy. It is often said that some Japanese production
subsidiaries have excess liquidity after remittance of patent royalties
or dividends to their headquarters and it does seem to be difficult forthem to find a good and safe destination for investment. With ascheme for those subsidiaries to invest their money in economic
cooperation projects in urban infrastructures, there would be a very
positive benefit in the long run for those companies as well.

Japan SPOTLIGHT • September / October 2021

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Matsumoto: Though we mentioned the advanced aspects ofdigitalization in Asia in the White Paper, such as Grab or Gojek, taxi
dispatch applications in Singapore and Indonesia, I find now that we
did not think well enough about the sectors of the Asian economy that
do not enjoy the benefits of digital technology. There must still be agreat need for economic cooperation or private business to help in
those sectors.
Kimura: There seems to still be a gap in capacity for using basic IT in
Southeast Asia. For example, there are some who can take advantageof e-commerce and some who cannot. There are also some who caneasily do work connected with the Internet and some who cannot. So
there remain many gaps in capacity for using simple technology inSoutheast Asia. What matters is not to slow down the introduction oftechnology creating gaps in the economy but to encourage it in awide range of businesses.
Meanwhile, there are also many areas with more progress inutilization of digital technology than in Japan, such as the introductionof digital ID for promoting the availability of a variety of public
services. In this light, it would be possible for their digital economies
to make great leaps after deployment of basic IT in these nations.
Matsumoto: How can the government and private sector in thesenations reduce such gaps in the capacity for using digital technology?
Kimura: We will need to wait and see how governments could get
involved in it. In the case of developed nations, with government
regulations, any digital infrastructure such as the Internet or
broadband would be accommodated with private funding. But inemerging or developing economies, how quickly it could be achieved
needs to be examined. Anyway, a tremendous amount of government
expenditure on highway or port construction would not be necessary.
So it is important for the governments not to hesitate to spend moneyon digital infrastructure building.
On the question that Prof. Shimizu mentioned about whether EPAs
should be equipped with rules on a cooperation framework forproviding essential goods less restrictively among the member
nations or not, there were certainly many countries that restricted
exports of PPE, medical goods, food or other essential goods at the
beginning of the pandemic. This was a big issue. Temporary export
restrictions could be GATT-consistent. This issue, however, wasfortunately fixed at a rather early stage, within several months after
the pandemic started. On the other hand, I think India’s policy to start
imposing tariffs, contrary to trade liberalization, is clearly violating
16 Japan SPOTLIGHT • September / October 2021

GATT articles and should be properly addressed. EPAs would play arole in stopping such an abusive industrial policy.
Matsumoto: We would need to use a dialogue venue and internationalrules as in the SCRI or EPAs to address issues like the “Make inIndia” initiative. With a bigger role by government in trade policies, I
guess there may be an increasing number of policies combiningsome that promote national interests which are not protectionist withsome that are protectionist. We had a warning against it in the White
Paper.
On the issue of large retained earnings by Japanese overseas
subsidiaries that Prof. Shimizu mentioned, I thought they were aiming
at good investment targets with those earnings in overseas markets
that are growing more rapidly than the Japanese market, wherefinding financing would be easier. Would there not be many
investment opportunities for them?
Shimizu: There are certainly some companies holding a good amountof retained earnings in Singapore and such subsidiaries are
increasing. They would be ready to buy bonds with government
guarantees for big infrastructure projects, if this investment would beto their benefit and raise Asian growth. In recent years, Japanese
insurance companies have also expanded overseas business into
Asia. For them, the expansion of the local currency bond market isessential.
In addition, firms’ risk management covers not only foreignexchange risk but also risks of natural disasters or accidents or law
suits, and they aim to be insured for those risks at minimum cost. For
this, they recently started to establish their own insurance companies
covering all the risks faced by their affiliated companies instead of
paying fees to external insurance companies to save costs. It is
so-called “Captive Insurance”, and this has been the trend in Japan
since 2019. This is another way to encourage them to use theirretained earnings and an important business strategy for aheadquarters to protect its local subsidiaries. It may not work if
anything serious worldwide happens, but one small subsidiarycompany’s risk can be covered by the company’s headquarters.
Furthermore, in such cases, they set up a captive independent agent
from a headquarters in charge of covering all the subsidiaries’
business risks. This captive agent can get all the insurance fees fromthe affiliates and thus this is much more cost saving, rather thanasking external insurance companies to insure against those risks.
How Japanese overseas subsidiaries use their retained earnings could
be an interesting issue to be examined in next year’s White Paper.

What Is Expected from METI’s White Paper
in 2022?
Matsumoto: In addition to Prof. Shimizu’s comment on what is
expected from our White Paper in 2022, is there anything else to be
expected to be picked up as topics for next year’s White Paper?
Kimura: In the light of trade policy, the biggest issue in this White
Paper was how to conciliate trade liberalization with economic
security or environmental and human rights issues. I think the logicof this conciliation between the two different groups of policy values
could be further developed in the next White Paper. Upgrading thefree trade system is mentioned in this White Paper and the question
how it is to be done must be explored, but it would be a tremendous
task. In my view, as the logic of international trade policy is alreadyestablished as one that authorizes a rules-based trade regime basedon the concept of economic efficiency or legal stability, it should not
be mixed up with any other value judgement. In other words, it
should not be assumed that trade policy will assess economic
security or due diligence on human rights. This is beyond the scopeof trade policy thinking. We trade policy people should reconcile thevalues of economic efficiency with non-economic values. The thought
behind GATT Article 20 and 21 is that trade policy is not in a position
to judge whether a specific security standard or environmental
standard is appropriate or not. Instead, a trade policy must be taken
to minimize the negative impact on trade of those policies that pursue
the goal of a green environment or human rights or economic
security. I think this perspective is very important. The mixing-up of
two different values like economic security and economic efficiency
would lead to the collapse of trade rules, as any trade policy could
reflect security concerns. We need to make a clear distinction
between the responsible domain for trade policy and others, and trade
policy should pursue rules of trade and investment within a limited
scope of responsibility. Without it, it will be difficult to point out evendisguised protectionism. As a result, uncertainty surrounding trade
regimes will rise and all kinds of unexpected policy risks could
emerge, which would be the worst for private businesses.
I know we will need to listen to whatever any superpower is saying.
But I believe that trade policies need to observe their own logic.
Economic security or environment policies or human rights policies
have values to be respected by other policies than trade policies.
Trade policy people need to present their views on this as clearly as
possible, considering how non-trade policy values differ from trade
policy values. For example, if any superpower says we need to restrictproduction of automobiles for security reasons, trade policy people
will need to oppose it based on their logic. I think it is still important
for trade policy people to say what economics says, such as free
trade almost always achieves the optimal resource allocation and thehighest economic efficiency.
Shimizu: I would like METI’s White Paper next year to pick up theissue of international taxation such as transfer pricing taxation, one of
the challenges for manufacturing businesses operating overseas. In
particular, after the global financial crisis in 2008, the decline in someJapanese companies’ headquarters business was compensated for by
their overseas subsidiaries with more earnings, and thus the taxation
system would be very important for a variety of production bases inAsia.
In addition to international comparisons of capital regulations by
host countries in the context of emphasizing the need to facilitate abusiness environment in favor of Japanese local subsidiaries’
operations shown in this White Paper, it would be better in next year’s
White Paper to at least mention the importance of each host country’s
financial regulations for the Japanese subsidiaries’ operations.
Lastly, on the question of “what would be the values that Japanesebusinesses can claim as specific to themselves” that Ms. Matsumoto
mentioned, I have a couple of things to be noted. One is the highquality of goods and services, and the other is “continuous aftercare”. For example, having helped set up the stock market in
Myanmar, Japan had been taking care of the market until companies
got listed and market transactions started.
When bidding for large-scale infrastructure investment projects,
Japanese firms could often lose out in terms of price, but with a highquality of the infrastructure and continuous after-care andmanagement support, which are the main sales points of Japanesebusiness, they would be highly appreciated by host nations as aresult. So, in such a case, the government should support it by somekind of subsidies in order to win the project first. And thesesuccessful experiences will further enhance the credibility of Japan’s
infrastructure investment.

Written by Naoyuki Haraoka, editor-in-chief of Japan SPOTLIGHT, with theassistance of TapeRewrite Corporation.

Japan SPOTLIGHT • September / October 2021

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