2009 JETRO WHITE PAPERON“INTERNATIONAL TRADE AND
FOREIGN DIRECT INVESTMENT”

Global Strategy for Japanese Companies: Environment as a New Growth Engine

Japan External Trade Organization（JETRO）
Overseas Research Department

2009 JETRO WHITE PAPER ON “INTERNATIONAL TRADE AND FOREIGNDIRECT INVESTMENT”

Published in November 2009

Written and published by:
INTERNATIONAL ECONOMIC RESEARCH DIVISIONOVERSEAS RESEARCH DEPARTMENT
JAPAN EXTERNAL TRADE ORGANIZATION (JETRO)ARK MORI BUILDING 6F, 12-32 AKASAKA 1-CHOME, MINATO-KU, TOKYO
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FAX: +81-3-3582-5309
E-mail: ORI@jetro.go.jp

Copyright © 2009 JETRO. All rights reserved.

Contents
I. The World Economy, Trade and Direct Investment
1. Current State of the World Economy and Issues to Be Solved·········································2(1) Toward Bottoming Out of Economy(2) Post-Financial-Crisis Changes in International Balance-of-Payments Structure and Impact
on Real Economy(3) Risks and Issues Faced by World Economy
2. World Trade ······················································································································· 11(1) 2008 World Trade Entered Downward Phase in October(2) Slowdown Centered on Machinery and Equipment Began in October(3) World Trade in 2009, under Conditions of Uncertainty about the Future(4) Global Trade in Services Rose by 11.3% in 2008
3. Global Direct Investment & Cross-Border M&As ··························································18(1) Global Direct Investment Falls by 25.0% in 2008
(2) Global M&A Activities Decrease for the First Time in Five Years
4. Japan’s Trade and Direct Investment ···············································································28(1) Trade in Japan(2) Japan’s Outward FDI Shows Considerable Growth[Column I-1] Overseas Income of Japanese Firms Supported by Asia and Oceania(3) Steadily Expanding Inward FDI[Column I-2] Trends in treatment of indirect investment in International Investment
Position statistics and revision of the Balance of Payments Manual
II. Post-Financial Crisis Trade Restrictive measures and the Need for Discipline inInternational Trade
1. The WTO and the Trade Restrictive measures of Major Countries ······························96(1) Doha Round Stalling due to the Situation of Global Political Economy(2) Introduction of trade restrictive measures in certain countries following the financial
crisis
2. The Arrival of the Era of full FTA utilization ································································108(1) FTAs now number 171 worldwide(2) Trends in Japan’s FTAs
(3) Trends in FTAs in the Asia Pacific Region(4) The wide-area FTA concept under consideration(5) FTA Trends in the U.S. and the EU
3. Needs for Discipline on Trade-related Regulations ······················································116(1) Discussions Concerning Trade and the Environment(2) Formation of International Environmental Standards driven by the EU(3) Ongoing Liberalization and Regulation of Investment and Services by means of FTAs andInvestment Agreements[Column II-1] U.S. measures to suspend NAFTA truck transport provision(4) How Can We Sell to the World’s Largest Market of the U.S. Government Procurement(5) Protection of Intellectual Property Rights – Discussions are Moving Ahead(6) Current Issues of Competition Law

4. Post-crisis Changes in the Business Environment Should be Carefully Watched ··138(1) The strengthening of the WTO and the conclusion of FTAs will be effective against thetrade restrictive measures being introduced throughout the world(2) Post-2010: Towards the era of the FTA(3) Expanding areas of trade
III. New Business Opportunities in the Environmental Market and Service Market
1. Global Environmental Market and Approaches of Japanese Companies···················157(1) Efforts for market expansion and future growth strategies of Japanese companies(2) The global environmental market driven by renewable energy and low carbon sectors(3) Sizes and characteristics of the world’s environmental markets(4) World’s environmental measures and business opportunities for Japanese companies[Column III-1] JETRO: Projects of Supporting Environment/Service Industries
2. Beyond the Financial Crisis: Strategies of Japanese Companies on Service Markets in
Asian Emerging Economies ····························································································184(1) Global consumer market with growing share of service expenditure(2) Global expansion of service market with high expectations for further growth(3) Entering emerging markets with low-cost and value-added services(4) Moves and characteristics of service markets of major emerging economies
IV. Global Strategy for Japanese Companies: Environment as a New Growth Engine(Conclusion) ····················································································································225
Statistical Appendix ··············································································································229

Explanatory Notes
1. Abbreviations of publications and publishing organizations(1) IFS: International Financial Statistics (IMF)(2) DOTS: Direction of Trade Statistics (IMF)(3) WEO (D): World Economic Outlook (Database) (IMF)(4)BOP: Balance of Payments Statistics (IMF)
2. Figures (As follows, unless otherwise indicated.)(1) In text, figures and tables, “year” indicates the period January-December, and “fiscalyear” indicates the period April-March.
(2) In tables, figures for “foreign currency reserves” and “outstanding outward debt” areyear-end figures. “Foreign currency reserves” exclude gold.
(3) Figures for “rate of growth” are year-on-year figures. In figures and tables, “-“ indicateslack of results, “0” indicates figures of less than a unit, and “n.a.” indicates that figures
are unclear or unavailable.
(5) Because figures are rounded, there may be discrepancies in total.
3. Country and region classifications (As follows, unless otherwise indicated.)(1) ASEAN (Association of Southeast Asian Nations): Indonesia, Singapore, Thailand,
Philippines, Malaysia, Brunei, Vietnam, Laos, Myanmar, Cambodia(2) ASEAN 4: Indonesia, Thailand, the Philippines, Malaysia(3) Hong Kong and Taiwan are treated as independent economies(4) EU27: EU15 (Austria, Belgium, Denmark, Germany, Greece, Finland, France, Ireland,
Italy, Luxembourg, Portugal, Spain, Sweden, Netherlands, UK), plus 12 new members(10 countries which acceded in 2004 (Cyprus, Czechoslovakia, Estonia, Hungary, Latvia,
Lithuania, Malta, Poland, Slovakia, Slovenia) and 2 countries which acceded in 2007
(Romania, Bulgaria))(5)EU member candidates: Croatia, Macedonia, Turkey(6)EFTA (European Free Trade Association): Liechtenstein, Norway, Switzerland, Iceland(7) NAFTA (North American Free Trade Agreement): US, Canada, Mexico(8) BRICs: Brazil, Russia, India, China
4. Base point in time
As a rule, the base point in time is at the end of June 2009 for the General Overview.
5. Trade statistics
World trade figures are based on the World Trade Atlas.

Preface
Triggered by the financial crisis that began in the United States, the world economy
slowed down rapidly beginning in the second half of 2008. After experiencing rapid growth
at a rate of roughly 5% from 2004 through 2007, the world economy entered a recessionary
phase said to be the worst since the Great Depression, with the world economic growth ratefalling to 3.2% in 2008 and expected to fall into negative in 2009. While the first half of2009 saw some signs of the world economy likely to hit bottom sooner or later, such as
improvements in some economic indicators, many observers still have a cautious outlook for
the world economy.
Real trade on a global basis grew by 3.8% yoy in 2008, a growth rate approximately onehalf that of the previous year. Pressure toward a slowdown in growth will be intensified in2009. In 2008, cross-border M&As totaled US$1.2 trillion, falling for the first time in five
years. In the first half of 2009, this figure dropped massively, and it is likely that a major
decrease on an annual basis will be unavoidable. At the same time, while a drop in Japan's
outward M&As by value will be unavoidable in 2009 following the record high recorded in
2008, development of foreign markets through outward M&As continues to become a very
important strategic option for Japanese firms.
With the world economy in a recessionary phase, some countries adopted a succession of
measures restricting trade. Such measures include increasing tariffs, introducing compulsory
standards, giving priority to use of domestic products in government purchasing, and so on.
While at present each member country is under World Trade Organization (WTO) rules withadvanced dispute-resolution mechanisms, the importance of reaching agreement on the Doha
Round of global trade negotiations is increasing for the purposes of further checking trade
restrictions and advancing trade liberalization. Also, at present progress is being made inliberalization and systematization of trade above and beyond that achieved under the WTO,
in areas such as investment and services, government purchasing, and intellectual property
rights, through frameworks such as those of free trade agreements (FTAs) and multilateralagreements. In addition, as awareness of environmental issues grows internationally, theimportance of discussions concerning trade and the environment is increasing.
Through the financial crisis, demand is growing for energy-saving technical products suchas hybrid vehicles and for low-priced apparel. In energy-related fields, interest is increasing
in clean energy sources (such as wind and solar power) as substitutes for depleting resources
such as petroleum. Environmental businesses will play key roles in leading the world
economy after the financial crisis, and the necessity of analysis of the size of this market andgrowth fields within it is increasing. In addition, consumer markets in emerging countries
shows growing need for low- and mid-priced products targeted at the middle class. The
situation is the same with service markets, and some experts insist that it is strategicallyimportant to provide Japanese-style (high-quality) services at low prices (local prices) in Asia.
In this White Paper, Chapter I deals with the “World Economy, Trade, and Direct
Investment,” Chapter II, with “Post-Financial Crisis Trade Restrictive Measures and the Needfor Discipline in International Trade,” and Chapter III, with the “New Business Opportunities
in the Environmental Market and Service Market.”
Trade and direct investment statistics of the world and Japan are updated on the JETRO
website (www.jetro.go.jp) as needed. Visiting the JETRO website for such data is highly
recommended (for details, see the last page).
Japan External Trade Organization (JETRO)

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I. The World Economy, Trade and Direct Investment
1. Current State of the World Economy and Issues to Be Solved(1) Toward Bottoming Out of Economy
 Financial crisis that started in the U.S. leads to a global recession
The world economy in 2008 suffered a massive slowdown as an effect of the global
financial crisis that was realized beginning in September. According to IMF estimates as ofApril 2009, the world’s real GDP growth rate (Purchasing Power Parity [PPP] basis) stood at
3.2%, its lowest level since 2005, and in 2009 was projected to see its first negative figure
since the end of World War II. (Table I - 1)== Table I-1 ==The subprime mortgage (housing loans for individuals with low credit scores in the UnitedStates) problem in the U.S., which had shaken the world’s financial markets substantiallywith the August 2007 freezing of assets of an investment fund in the major French banking
group BNP Paribas, developed into a global financial crisis with the September 2008 collapseof major U.S. securities firm Lehman Brothers.
The effects of these developments damaged not just financial markets but also the real
economy of each country and region around the world. First, in the U.S. amplification of
credit crunch and worsening of the fund-raising environment markedly decreased financial
institutions’ risk-taking capabilities. As a result, it became difficult for businesses andhouseholds to borrow or raise funds, leading to sluggish capital investment and expenditures
on household consumption. At the same time, massive losses recorded in residential andfinancial industries increased pressure toward labor adjustments. Worsening of labor andincome conditions, combined with the negative wealth effect due to falling prices of equities
and residential properties, dampened household consumption. Over the three straight quartersfrom the third quarter of 2008 through the first quarter of 2009, the U.S. recorded a negative
real GDP growth rate. On November 28, 2008, the National Bureau of Economic Research(NBER) stated that the period of economic growth that began in 2001 had ended in
December 2007, when a period of contraction began.
Due to factors including the fact that in comparison with the U.S. the developed nations ofEurope were expected to have lower degrees of exposure among financial institutions to
subprime-loan instruments and had lower rates of equity holdings among households, some
expected the impact on the real economy in these nations to be weaker than in the UnitedStates. However, nations including Iceland, Ireland, the United Kingdom, and Spain were
faced with adjustments following the collapse of residential and real-estate bubbles similar toor exceeding those in the U.S., as well as marked balance-sheet losses at financial institutions.
As a result, the economy in each nation slipped into recession. The 15 nations of the eurozone recorded negative GDP growth for the four consecutive quarters, from the second
quarter of 2008 through the first quarter of 2009.
Meanwhile, in Japan, since its financial institutions held fewer holdings of subprime-loan
instruments than those in Europe and the U.S., its corporate sector had relatively soundfinancial structures, its financial institutions’ nonperforming loan ratios had been on the
decline, and its households held relatively smaller shares of risk assets, the direct impact on
the real economy was minor through mid-2008. However, toward 2009, as cyclicaladjustment pressure increased, a rapid increase in the value of the yen led to a rapid drop inexports and a full-fledged worsening of business performance, and downward pressure on thereal economy intensified, Japan recorded three consecutive quarters of negative real GDP

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growth rates, from the third quarter of 2008 through the first quarter of 2009.
(2) Post-Financial-Crisis Changes in International Balance-of-Payments Structure andImpact on Real Economy
 Contractions in international monetary flows
In regions other than Europe and the U.S. and in developing nations, where links to theglobal economy and financial markets are not very strong, economic damage appeared to belimited with some exceptions. According to the IMF’s Global Financial Stability Report,
released in April 2009, while cumulative financial-institution losses resulting from thesubprime-mortgage problem (estimated for the period 2007 - 2010) will reach US$2.712
trillion (19.0% of GDP) in the U.S. and US$1.193 trillion (7.3% of GDP) in Europe, losses
will be relatively lower in regions such as Japan, Asia, Central and South America, and the
direct impact on regions other than Europe and the U.S. is relatively limited. (Figure I - 1)== Figure I-1 ==However, chaos in financial markets has intensified downward pressure on the real
economy through two channels: (1) contraction of credit in international financial markets,and (2) a decrease in real demand due to the slowdown of the U.S. economy.
From 2007 through 2008, the cross-border bank lending balance fell by approximately
US$5 trillion worldwide from a peak of approximately US$36 trillion (March 31, 2008) toapproximately US$31 trillion at the end of 2008. (Fig. I - 2)== Figure I-2 ==A look at this trend broken down by country and region shows an aggressive movement
toward growth in lending from the U.S. and the developed nations of Europe to developing
nations and regions and to offshore financial centers in 2007, while this trend reversed itself
in 2008 as the pull of funds from overseas accelerated in both the U.S. and the developed
nations of Europe. While the U.S. began collecting on loans from overseas in the first half of2008, the developed nations of Europe increased lending by approximately US$1.5 trillion in
the first half of the year and then decreased it by US$3.9 trillion in the second half (Figure I 3). Similarly, trends in securities investment between countries and regions show a clear
contracting trend, indicating that the fund-raising environment is worsening in international
financial markets (Figure I - 4).
== Figure I-3 ==== Figure I-4 ==The effects of credit contraction in international financial markets were felt at relatively
early stages in Central and Eastern Europe and in Russia and members of the Commonwealthof Independent States (CIS). Against a background of expectations that they would join theeuro zone and rising resource prices, these countries had realized high levels of economic
growth thanks to substantial increases in inward foreign direct investment. At the same timesome bubble-like conditions developed in their domestic economies, large-scalecurrent-account deficits also developed. Highly dependent on short-term funds from overseas,
they faced the risk that once short-term funds started to flow outward from their economies,3they would run short of foreign reserves in a short period of time. Not a few of these nations
employed systems of fixed exchange rates, leading to conditions similar to those of the Asiancurrency crisis of the late 1990s. While resource-exporting nations were faced with rapid
adjustments to commodities markets beginning in mid-2008, outflows of real national income
overseas due to worsening of trade conditions spurred a worsening of economic conditions.
As a result, some of these nations ran short of foreign currency due to a rapid worsening of
the international balance of payments, with decisions having been made by June 2009 for
IMF support for the following nations among those in Central and Eastern Europe and Russia
and the CIS: the Ukraine, Hungary, Latvia, Belarus, Serbia, and Romania, among others(Figure I - 5).
== Figure I-1 == Realization of the effects of decreased exports in Asia
The global financial crisis had an effect on the real economy as well through a decrease intrade resulting from the worsening of economic conditions in the U.S. and other developed
nations and regions. According to IMF estimates, while the global value of trade had
continued to grow at rates mostly in the 10-20% range since 2006, it fell in the fourth quarterof 2008 for the first time in about seven years. The value of trade between developed nations,in particular, showed a drop of 15.6% year on year. While trade between developing nations
remained steady, growing at a rate of 10.9%, this rate represented a substantial slowdown
from the first half of the year (Figure I - 6).
== Figure I-6 ==This global shrinkage in trade led to major damage to the economies of Japan and thecountries and regions of Asia, which are highly dependent on exports to developed nations,particularly the U.S., and whose export value of products with high income elasticity, such as
electrical and transport equipment, is large (Figure I - 7).
== Figure I-7 ==While the countries and regions of Asia, which had increased their balances of foreign
reserves in light of their experiences with the currency crisis of 1997-98, suffered only
limited effects of short-term capital outflows (Figure I - 5), the rapid decreases in exports thatbegan in the fourth quarter of 2008 intensified downward pressure on their economies (Fig. I- 8).
== Figure I-8 == Damage to low-income nations grows more severe
The impact on developing nations was even more extensive, with low-income nations inparticular suffering severe damage. This is because, in addition to originally weak economic
bases, inflows of funds from overseas, which had supported these nations’ economies, weresqueezed by factors such as decreases in direct investment and remittances from workers
overseas and contraction of development assistance due to the worsening of economic

4

conditions in developed nations. Forecasts from the World Bank project a fall of more than
30% in direct investment in developing nations, from US$583 billion in 2008 to US$385
billion in 2009. Remittances from workers overseas, which had reached US$305 billion in
2008, are projected to fall by 5-8% in 2009.
Together with the rapid adjustments in resource prices beginning in mid-2008, which havedealt another blow to monoculture economies that had been unable to overcome the weaknessof their foundations for growth, the moves of foreign workers returning to their homecountries, which surfaced in some developed nations and Russia, is resulting ultimately indeveloping countries forced to share the burden of the economic slump of developed
countries.1
 Commodities markets reach a turning point, and a recovering trend in the dollar
The trend toward contraction of credit in international financial markets also had aconsiderable impact on foreign-exchange and commodities markets. Through the first half of2008, in addition to brisk investment in commodities markets due to easy financial conditions
and poor performance of traditional financial instruments (equities and bonds), backed by
expectations of growth in emerging nations and regions, there were active moves toward
proactive investment in developing nations of Europe, including Central and Eastern Europe,
as well as Asia. In foreign-exchange markets as well, the dollar declined in value while
investors purchased currencies of emerging nations and regions. As tension in financial
markets reached a peak with the shock of the Lehman Brothers collapse in September 2008,
investors adopted a stronger stance toward selling risky assets and securing dollar holdings.
While the nominal effective rates of the dollar (broadly defined) against the currencies ofdeveloped nations and regions and emerging nations remained bearish mostly uniformly as
uncertainty about the prospects of the U.S. economy intensified beginning in early 2007, thedollar rebounded from mid-2008 through the end of the year. Since February 2009, thedollar’s recovering trend has eased somewhat, and the nominal effective exchange rates havebeen somewhat soft (Fig. I - 9).
== Figure I-9 ==The conditions in international commodities markets, which had shown a nearly uniform
increasing trend since 2002, entered a period of rapid adjustments after peaking in early July
2008. Investment funds that had avoided dollar-denominated financial assets, due to thedecrease in the dollar’s value, flowing into markets for commodities such as crude oil,precious metals, and cereals, combined with expectations of growing demand in emerging
nations, boosted commodities market through the first half of 2008. In the second half of theyear, in addition to a reaction to this rapid increase, the impact on the real economy of thefinancial crisis that started in the U.S. and resulting anticipation of falling demand caused themarkets to enter a rapid adjustment phase. While the Reuters/Jefferies CRB Index, an
indicator of trends in international commodities markets as a whole, had risen by mid-2008
by more than 50% from its level at the start of 2007, by mid-December 2008 it had fallen toless than one-half its peak level. From that point through July 2009, the index reboundedsomewhat as some aspects of the real economy appeared to have bottomed out and some
speculative funds flowed in to the markets for precious metals, cereals, and crude oil.
1

According to 2004 estimates by the International Labour Organization (ILO), the numberof migrant workers worldwide involved in economic activities (as of the year 2000) was 86.3
million (including 5.4 million refugees).
5 Responses of and coordination between authorities in each country and region andinternational institutions
1) Reponses of central banks and governments in each country and region
Beginning around mid-2007, when the subprime-mortgage problems materialized,
central banks implemented a variety of measures to prevent drying up of liquidity andcontraction of credit. Specific measures included a) provision of funds to short-term financial
markets through means such as open-market operations, b) extension of emergency credit to,
injection of public funds in, and nationalization of troubled financial institutions, and c)raising credit limits of financial institutions. In the area of financial policies, while many
central banks in each region maintained a tight policy stance through mid-2008 since they
were unable to eradicate concerns abut rising inflation, due partly to rising prices ininternational commodities markets, as downward pressure was felt on the real economy
following the collapse of Lehman Brothers major central banks successively shifted tolowering interest rates, with policy interest rates in the U.S. and the U.K. dropping tohistorically low levels.
Another characteristic of the responses to this financial crisis is the fact that coordinatedaction by major central banks (i.e., supplying liquidity to short-term financial markets andcoordinated interest-rate cuts) and measures such as conclusion of currency swap agreements
and raising credit lines were undertaken at a relatively early stage. Following coordinatedaction by major central banks in Europe and the U.S. at the end of 2007 to stabilize financial
markets (announced December 12 and implemented December 17, 2007), individual currency
swap agreements were concluded between the Federal Reserve Board and major central
banks on March 11, September 18, and September 29, 2008, credit lines were increased, andon October 8 coordinated interest-rate cuts were conducted by major central banks in Europe
and the U.S. (These were the first coordinated interest-rate cuts since September 17 - 18,
2001, immediately following the terror attacks of September 11. The Bank of Japan followed
suit by cutting interest rates on October 31.)
Within each region as well, movements have begun toward cooperation between central
banks. In Europe, under the framework of the Nordic Council, four Northern European
nations (Norway, Sweden, Finland, and Denmark) decided (November 20) jointly to provide
US$2.5 billion in additional lending to Iceland, in which the impact of the financial crisis wassevere. Also in Asia, at a summit of the leaders of Japan, China, and South Korea, an
agreement was reached on expanding the scale of the currency swap arrangements between
these three nations concluded under the framework of the Chiang Mai Initiative, and the scaleof currency swaps with South Korea was expended. (As a temporary measure throughOctober 2009, the limit on activity from Japan to South Korea has been increased from theequivalent of US$13 billion to the equivalent of US$30 billion.)
In step with the central banks, governments in each country and region also worked out
a series of countermeasures against the financial crisis. While the actors implementing thesemeasures vary since financial regulations and supervision systems differ in each country,
countermeasures implemented included a) depositor protection, b) government guarantee ofinterbank and other transactions, to aid cash flow at financial institutions, c) injection ofcapital into and nationalization of financial institutions, and d) purchase of nonperforming
loans and assets that no longer were liquid.
2) Responses of international conferences and international institutions
Immediately following the collapse of Lehman Brothers, the financial ministers andcentral bank presidents of the G7 nations conferred in a teleconference on September 22,
2008 and then met in Washington, D.C. on October 10, after which they announced that they6

would employ various means available to stabilize financial markets. In response, thegovernments of the U.S. and eurozone nations began a series of countermeasures against thefinancial crisis, including injection of public capital into financial institutions andguaranteeing bank obligations. At the same time, as it became more apparent that thisfinancial crisis was having a major impact on not just developed nations but emerging
countries as well, expectations grew for a response under the framework of the G20, which
includes large emerging countries such as Brazil, China, Russia, and India. In preparation for
the G20 conference to be held November 15 (the financial summit, the first meeting on
financial and global economic conditions), the governments of each country and region
formulated and announced policy guidance and action plans.
Under these circumstances, decisions were made to provide financial assistance to
Iceland and some emerging countries, which were faced with currency crises or saw foreign
reserves hit bottom. Since Iceland originally maintained high interest rates due to priceinflation and had earned high credit ratings, the nation saw inflows of nonresident deposits invery large amounts compared to the size of its economy. As a result of an outflow of thesefunds over a short period of time due to the current financial crisis, its foreign reserves weredepleted and it was forced to ask the IMF for assistance. Since October 2008, in addition to
the nations of Central and Eastern Europe mentioned above, decisions have been made toprovide assistance to developing nations such as Costa Rica, El Salvador, and Mongolia as
well, and the number of countries subject to aid under the Stand-by Arrangements has grownfrom two as of the end of September 2008 (with credit lines of 554.25 million special
drawing rights [SDRs], or roughly US$854.54 million) to 16 in June 2009 (with credit linesof 48,037.81 million SDRs, or roughly US$74,064.42 million).
Furthermore, in addition to existing frameworks, the IMF decided (October 29, 2008)
to adopt a Short-Term Liquidity Facility (SLF) intended to provide swift, large-scaleassistance. While the Stand-by Arrangements have primarily been used under existing
frameworks, under the SLF, countries participating in capital markets may borrow up to 500
percent of their cumulative quotas, with a three-month maturity. While conditions for using
the SLF include a good track record of sound economic policies and a sustainable debt
burden, other aspects of conditionality required for the Stand-by Arrangements, such aspolicy implementation and policy monitoring, do not apply the SLF, which makes swift
borrowing possible. In addition, in March 2009 the Flexible Credit Line (FCL) wasestablished to enable drawing funds for purposes of crisis prevention with no promise of
specific policy goals such as reduction of budget deficits or public debt. Through the end ofJune, arrangements had been decided on with three countries: Mexico, Colombia, and Poland.
In February 2009, Japan signed a lending arrangement with the IMF to provide financial
assistance of up to US$100 billion.
In step with the IMF, the World Bank too began providing emergency loans todeveloping nations faced with the plight of an outflow of investment funds. The International
Bank for Reconstruction and Development (IBRD), a core institution of the World Bank
group, announced that it was prepared to lend US$100 billion over three years. It increased
the amount of loans made during 2008 to US$35 billion from US$13.5 billion in the previous
year. In addition, it established a new emergency loan facility of US$2 billion as well as aframework for completing approval procedures over a short period of time through theInternational Development Association (IDA; total funds: US$42 billion). The World Bank
also has come out with measures such as the following, which are to be conducted through its
International Finance Corporation (IFC): a) expansion of the funding limit of the Global
Trade Finance Program, intended to facilitate trade transactions (from US$1.5 billion to
US$3 billion), b) establishment of a US$1 billion fund for capital injections to troubled banks
in developing countries, and c) investment of US$300 million and shifting US$15 billion
7

from
other
resource-allocation
categories
tofacilitate
fund-raisingforinfrastructure-development projects. Japan has announced a contribution of US$2 billion
toward establishment of the fund described under “b” above.
To enhance these initiatives, at the London Summit held April 2, 2009 (the second summit
on financial and global economic conditions), an agreement was reached on US$1.1 trillion
in programs, including enhancement of IMF funding and additional lending by international
development financial institutions.
 Economic measures by each country’s government
As the impact of the financial crisis on the real economy materializes, the focal point iscurrently shifting to government economic measures and their effects. Main economic
measures undertaken by the governments of each country and region are (1) household
financial assistance and employment measures (such as income-tax reductions, reductions of
tax on mortgages, and provision of benefits to support standards of living), (2) assistance tobusinesses (cash-flow assistance for small and medium-sized enterprises), (3) stimulation of
actual demand through growth in public-sector investment (such as development of airports,
ports, and expressways), and (4) assistance to financial institutions (such as injection of
public funds and raising limits on government capital participation). A unique point of thesemeasures is the fact that the measures under category 2, assistance to businesses, incorporate
many measures intended to encourage allocation of resources to the fields of energy security,environment protection, information technology and telecommunications due to theirpotential to drive the economy over the medium to long term, in addition to measures toassist specific industries such as the automotive and residential industries as well as
assistance to small and medium-sized enterprises.
Ordinarily, it is said that when adopting a floating exchange rate system, use of fiscal
policies causes the nation’s currency to increase in value through an increase in interest rates,in turn leading to a decrease in exports that cancels out the effects of fiscal expenditures on
effective demand, ultimately rendering such policies ineffective. For this reason, monetary
policy is considered more effective as a means of economic stimulus. However, since major
central banks had already carried out substantial interest-rate cuts, they were left with limited
room for further action. In addition, there was a need for emergency responses to present
conditions in light of the marked drop in demand in the real economy. Accordingly, bothdeveloped and developing nations successively came out with economic stimulus measuresthrough fiscal policies. The scale of these measures taken by the G20 appears to have risen to
the level of roughly 2% of the total GDP. However, most of these measures have not borne
enough fruit to offset the rapid drops in demand (Table I - 2).
== Table I-2 ==(3) Risks and Issues Faced by World Economy
 Despite signs of bottoming out, downside risks have not been eradicatedA look at the current economic indicators for major economies shows a number of signs
suggesting that the downturn has reached bottom. In major economies, stock prices and bothbusiness and consumer confidence are improving steadily, and production activity has also
begun to show signs of bottoming out (Figure I - 10). While the IMF’s World Economic
Outlook, updated in July, revised the forecast real economic growth rate for 2009 down 0.1
percentage point from the April forecast to 1.4%, it also revised the forecast for 2010 up 0.6
percentage points to 2.5%.

8

== Figure I-10 ==At the same time, worsening revenues and earnings in the business sector prolonged theslowdown in corporate capital investment and negatively impacted income and employment
conditions, leading to a delayed strengthening of downward pressure on personal
consumption. Protracted downturns in capital investment and personal consumption will
result in continuation of the vicious circle in which business performance worsens as a result,leading to further worsening of employment and income conditions. Under conditions inwhich there are limits to creation of demand through fiscal policies adopted by each country,
pressure on supply-side adjustments has not been eased, keeping down potential growth rates
over the long term.
In addition, in the area of international finance, the possibility cannot be denied that undereased financial conditions, excess funds may flow into commodities and foreign-exchange
markets, destabilizing international financial markets as a result. Viewed in terms of thesefactors, while at least the worst seems to have passed as of mid-2009, future downside risk
does not appear to have been eradicated yet.
From a regional point of view, there is a need to focus on the effects on other countries
and regions of a worsening of the currency and economic crises in Central and Eastern
Europe. According to BIS statistics on international banking, as of the end of December 2008
the balance of credit provided by overseas financial institutions to developing countries in
Europe totaled US$1,523.3 billion, of which more than 60% was denominated in foreign
currencies. A breakdown by creditor nation shows that Austria had the largest share at
US$267.1 billion (17.5%), followed by Germany at US$205.5 billion (13.5%), and Italy at
US$198.3 billion (13.0%). Next came France, the Netherlands, and Sweden. The U.S. share
was US$46.8 billion (3.1%), the U.K. share was US$35.2 billion (2.3%), and Japan’s was
US$25.4 billion (1.7%). The balance of credit provided to the three Baltic nations (Estonia,
Latvia, and Lithuania), where economic conditions are particularly severe, was US$118.4
billion, of which Sweden provided US$79.1 billion, or nearly 70% of the total. For thisreason, while it is highly likely that, even if the economic and currency crisis in this region
were to worsen, the direct impact would be limited to the European continent, unexpected
damage could be brought about to international financial markets as risk tolerance decreased
among financial institutions in each country.
While the IMF’s World Economic Outlook as of April projected positive growth in 2010
under the baseline scenario, it also suggested some risk scenarios in which negative growthwould continue through 2009 and 2010 (Fig. I - 11). The World Bank’s forecast as of Juneshows a more severe outlook than the IMF’s April forecast, projecting a real growth rate of-2.9% in the world’s economy in 2009 (-1.7% on a PPP basis with 2000 as the base year).
 Toward establishment of a foundation for mid- to long-range growth in JapanThe global economic slowdown has had a massive impact on trade, which supports theJapanese economy. Japan’s balance of trade in the quarter January - March 2009 was-US$9.7 billion, the third consecutive quarter since July - September 2008 in which thenation recorded a trade deficit. This is the first time the nation experienced three consecutive
quarters of trade deficit since the period from the first quarter of 1979 through the third
quarter of 1980 (seven consecutive quarters), when the value of imports increased rapidly asa result of the second oil crisis. In addition to decreased price competitiveness due to a rapid
increase in the value of the yen beginning in September 2008, Japanese exports havestructural problems that they depend heavily on equipment such as transport equipment,
chiefly automobiles, and electrical equipment, as well as that high-end products account for a9large proportion. These negative factors, in conjunction with the deteriorating income
environment, dampened demand for these products with high income elasticity. This rapid
decrease in exports and the resulting decrease in capital investment and slowdown in
consumption have been very trying on the Japanese economy.
Meanwhile, attention should be given to the fact that Japanese income from overseas issupported not just by exports but by balance on income as well. A look at balance of
payments statistics shows that balance on income, which consists mainly of factors such as
interest and dividends from overseas investments, has surpassed the balance-of-trade surplus
since 2005, and that the balance on income in 2008 totaled US$152.5 billion in the black,greatly exceeding the balance of trade (in goods and services) of US$17.8 billion. After
experiencing circumstances such as yen’s appreciation, Japanese businesses have invested
aggressively overseas since the 1980s. With domestic markets maturing in recent years, they
have more aggressively been developing local overseas markets. Such behavior by businesses
is reflected in the makeup of income from overseas, easing the damage from falling exports.
The significance of exploring overseas markets, particularly emerging markets, for Japan is
likely to increase even more in the future, as domestic markets mature and the domestic
population decreases. In line with this, the importance of capitalizing on the vitality ofemerging countries through not just exports but also investments is likely to increase as well.
Markets related to the environment and energy conservation in particular, which are being
focused on in the economic policies of each country and region and provide a number ofareas where Japanese firms have the competitive edge, are expected to have strong growthpotential over the mid- to long term.
The global financial crisis has greatly shaken not just the epicenter of the U.S. but
developing countries and regions in Europe, Asia, and elsewhere and has proved trying to theJapanese economy as well. However, the financial crisis and the recent increase in the valueof the yen also can be seen to be providing a good opportunity for Japanese companies toestablish their presence more firmly in overseas markets. Whether Japan will be able toovercome this crisis and secure a foundation for mid- to long-term growth depends onwhether it can use its experiences in past crises to resolve to turn this crisis into an
opportunity.

10

2. World Trade(1) 2008 World Trade Entered Downward Phase in OctoberWorld trade in 2008 (merchandise trade, nominal basis) showed an increase of 14.9%
yoy in exports to US$15.9 trillion and an increase of 15.2% yoy in imports to US$16.8
trillion (Table I-3). Both exports and imports showed double-digit growth for the sixth
consecutive year. On a real basis, excluding price changes and the impact of foreignexchange, the rate of growth in exports slowed from 5.6% in 2007 to 3.8% in 2008, while therate of growth in imports slowed from 7.0% in 2007 to 3.5% in 2008.
== Table I-3 ==The growth rate in world trade can be broken down into two parts, the price factor(import and export price indices) and the volume factor (import and export volume indices,
real imports and exports). In 2008, export prices grew by 11.1% and import prices grew by
11.7% (both dollar-based, IMF), and as in 2007 the price factor significantly outpaced thevolume factor. With significant impact on rising prices of commodities such as fuel andfood, primary product prices rose by 27.5% and energy prices, in particular, grew massively
by 40.1% (Table I-4). In addition, the weaker dollar in 2008 than in 2007 boosted thedollar-based value of worldwide trade. In this way, exchange-rate fluctuation factors also
contributed to growth in the value of trade in 2008.
== Table I-4 ==While both exports and imports grew on a yearly basis, they entered a downward phasein October. While both showed two-digit rates of yoy growth in each month from January
through September, a negative growth was recorded in both exports and imports in November(Figure I-12), for the first time in six years and eight months since the period from May 2001
through March 2002, when trade fell as a result of factors such as the collapse of the IT
bubble.
== Figure I-12 ==The rapid decrease in exports and imports was brought about by not just falling prices
due chiefly to adjustments in commodities markets but also by decreases in trade volume
resulting from falling demand in major developed economies. Commodities markets, which
had followed virtually an upward path since 2002, peaked in early July 2008 and then entereda downward phase. Although the Reuters/Jefferies CRB Index, an indicator of generaltrends in commodities markets, recorded an all-time high (473.52 points; based on closing
prices) in July, it then had fallen 55.9% from the high to 208.60 points in December.
Volume factors show a massive drop beginning in October, in response to decreasing
demand for transportation equipment and other products. Real imports (seasonally adjusted)in the U.S. and the U.K. shows that the real import index as of December 2008, with January
2007 as the base period, had fallen from January 2007 by 10.6% in the U.S. and by 9.3% in
the U.K. (Figure I - 13, Figure I - 14)== Figure I-13 ==== Figure I-14 ==11 The Slowdown in the Markets in Developed Economies Spreads to Emerging andDeveloping Economies
In 2008, exports (nominal basis) grew by 10.7% yoy to US$9,619.7 billion in developed
economies and those jumped by 21.9% yoy to US$6,271.1 billion in emerging anddeveloping economies (Table I-5). The fact that emerging and developing economies
provide an underpinning for world trade is a characteristic of recent years, and it was also
witnessed in 2008 with higher rates of growth in both exports and imports recorded inemerging and developing economies than those in developed economies. Exports fromemerging and developing economies to developed economies, however, had fallen
substantially since November, due to falling commodities prices and sluggish demand indeveloped economies. Although exports from emerging and developing economies showeddouble-digit yoy growth from January through October, negative growth was posted in
November (Table I-6).
== Table I-5 ==== Table I-6 ==The U.S. imports, which accounted for 14.9% of world imports on a value basis in 2007,
grew by 7.5% to US$2,337.4 billion in 2008. Monthly figures show that the growth rate fell
to below zero beginning in November, due to factors such as a rapid drop in crude-oil prices
and a sudden decrease in domestic consumption (Figure I-15). The other developed
economies such as Germany and France also shows that the value of imports posted
double-digit yoy growth from January through September, it fell yoy beginning in October asa result of factors such as a drop in imports of transport equipment dented by decreased
passenger-vehicle demand.
== Figure I-15 ==Meanwhile, exports from emerging and developing economies shows that full-year
exports from China grew by 17.3% to US$1,428.9 billion, reflecting a slowdown from the
25.7% growth in 2007. It was the first time in seven years that Chinese exports grew by ayoy rate of less than 20 percent since 2001 when exports were affected by the slowdown in
the U.S. economy and the September 11 terror attacks. The gap between the largest
exporter economy, Germany (whose exports grew by 10.8% to US$1,464.7 billion) andChina, however, shrunk from US$104.3 billion in 2007 to US$35.8 billion in 2008. Someexperts consider that China is poised to surpass Germany in terms of value of exports in2009.
While the monthly value of exports from China recorded double-digit yoy growth nearly
uniformly from January through October, it started to post a yoy decline in November (FigureI-16). The plummeting Chinese exports was attributed to a substantial decrease in exports
to the U.S. and Hong Kong, which accounted for 19.1% and 15.1%, respectively, of China’s
total exports in 2007. Taking it into consideration that the majority of China’s exports toHong Kong are re-exported to Europe and the U.S., the real reason behind the slump ofChinese exports is believed to be the stagnating European and the U.S. economies.
== Figure I-16 ==12With regard to exports from other emerging and developing economies, exports from
Brazil slowed down beginning in October hit by decreased overseas demand due to thefinancial crisis and falling resource prices. Exports from India recorded strong growth of
more than 20% over the year-earlier period from January through August, driven by thedepreciation of rupee. Later, the growth rate slowed due to factors such as a slowdown indeveloped economies’ markets resulting from the financial crisis. Falling by 12.4% in
October, India’s exports recorded a yoy decline for four consecutive months through January
2009.
 The Impact of Deepening U.S.-China Trade Ties on Asian Economies
In November, the value of Chinese imports fell yoy, affected by a drop in imports from
Taiwan, South Korea, and elsewhere. Due to factors such as falling prices of primary
products, for which china relies on import, and a slowdown in growth of industrial production,
imports of industrial goods and capital goods decreased. Possible main causes of thismassive drop in Chinese exports and imports over a short period of time are deepening traderelations between the U.S. and China and increasingly close ties within the Asia region.
Through now, trade relations between China and the U.S. have grown closer, with thetrade intensity index (export basis) between the two nations rising from 0.5 points in the
1980s to 1.0 points in the 1990s and 1.3 points in the 2000s (Table I-7)2. In addition, theratio of the value of exports to the U.S. in China’s GDP has also increased from 0.7% in the
1980s to 2.9% in the 1990s and 5.9% in the 2000s, meaning that the Chinese economy has
become increasingly exposed to the moves of the U.S. economy (Table I-8).
== Table I-7 ==== Table I-8 ==China is growing closer to the Asian economies through the expansion of production
networks aiming at the sharing of production processes between them. In South Korea, thetrade intensity index with China (export basis) has risen from 2.1 points in the 1990s to 3.5
points in the 2000s. Over the same period, this index rose from 1.0 to 1.4 points in
Singapore, from 1.0 to 1.2 points in Malaysia, and from 0.8 to 1.4 points in Thailand. In
addition, the ratio of the value of exports to China to each economy’s GDP rose from the
1990s to the 2000s as follows: from 1.6% to 5.7% in South Korea; from 3.3% to 12.2% in
Singapore; from 2.0% to 6.0% in Malaysia; and from 0.8% to 4.1% in Thailand. In this way,these economies’ dependency on China is increasing.
As a result, each Asian economy not only has been affected directly by the economic
downturn in the U.S. but also has suffered damage through the slowdown in the Chinese
economy. While the monthly value of exports from South Korea had grown at double-digit
yoy rates through September, it slumped beginning in October and recorded negative growth
beginning in November. South Korea’s exports by country and region shows that thelargest factor behind this slowdown was a decrease in exports to China. Most of South
Korea’s exports to China consist of intermediate goods, which, after being processed in
China, are exported to other countries as final goods. For this reason, the decrease inexports from China due to the global economic slump can be seen as a major cause of the2

Trade intensity index is an indicator of the degree to which trade relations between two
economies differ from standard worldwide trade volume. A trade intensity value greaterthan 1 indicates close trade relations between the two economies.
13

decrease in South Korea’s exports to China. Exports from the ASEAN member states ofSingapore, Malaysia, and Thailand fell yoy beginning in October, also due in part todecreased exports to China.
(2) Slowdown Centered on Machinery and Equipment Began in OctoberConsidering 2008 export trends by product, machinery and equipment accounted forroughly 40% of world trade, was weak, rising by 7.3% over the year-earlier, to US$6,024.8
billion. By contrast, exports in primary products for the most part showed double-digit
growth, with the figure for mineral fuels rising by 44.4% to US$2,562 billion and that for
grains rising by 40.7% to US$98.1 billion (Table I-9). Thanks to the contributions ofmineral fuels and other items, the monthly value of imports in the major 20 economies
recorded double-digit growth rates from January through September (Figure I-17). In
October, trade in items such as transport equipment and electrical equipment slowed. While
many products saw their trade fall yoy, due primarily to falling commodities prices andrestraint and decreases in consumption resulting from the financial crisis, the impacts on
pharmaceutical and medical supplies and on clothing were relatively limited.
== Table I-9 ==== Figure I-17 ==Automobile exports grew by 2.6% to US$781.6 billion, reflecting a substantial
slowdown from 2007 (when exports grew by 17.8% to US$761.5 billion). Monthly
automobile imports by country and region shows falling growth rate beginning in October,due to a slowdown in demand in developed economies, chiefly in Europe and the U.S.
(Figure I-18). Steel exports also, which grew massively over the course of the entire year by
21.7% to US$828.9 billion, entered a downward phase beginning in October. According to
the World Steel Association, worldwide production of crude steel fell yoy in 2008 for the firsttime since 1998, ten years earlier. The worsening of the real economy that started with thefinancial crisis put the brakes on steel production.
== Figure I-18 ==By contrast, while exports of pharmaceuticals and medical supplies showed negative
growth yoy in November, they returned to positive growth in December. This can be seen
as a reflection of the nature of such products as essentials not easily affected even by aneconomic slowdown. Imports of clothing also rebounded in December. At the same time,
clothing exports from China, the largest exporter of clothing, showed positive yoy growthsince October.
It appears that consumers’ low-price orientation strengthened asconsumption contracted in each market, which boosted demand for cost-competitive Chinese
goods. During 2008, the Chinese government twice (in August and November) increased therate of refund on value-added tax on textiles and apparel products.
Exports of information-technology products (finished IT products such as computers andvideo equipment and IT components such as semiconductors) totaled US$2,065.5 billion,
accounting for 13.0% of world exports (Table I-10). China has been the largest exporter
since 2004 (with its IT exports totaling US$422.1 billion in 2008), and its share of global IT
exports has risen from 19.1% in 2007 to 20.4% in 2008. On the other hand, the share of the
U.S., the second-largest exporter of IT products (US$189.7 billion), fell from 9.6% in 2007 to
9.2% in 2008, with the gap between the two countries broadening.
14

== Table I-10 == Primary Products Are in a Downward Trend as Well
While trade in primary products such as crude oil and grains grew for the year as a whole,
it began to fall in the second half of the year.
Exports of crude oil, which account for more than 50% of mineral-fuel exports, grew by
43.1% yoy to US$1,418.6 billion. Crude oil exports by country and region shows an increaseof 53.2% to US$229 billion in Saudi Arabia, followed by an increase of 36.2% to US$150
billion in Russia. Although Russia’s crude oil production volume fell due to factors such as
low drilling efficiency as the country faced a backlog in development of new oil fields, its
crude oil exports in terms of value grew for the year, benefiting from factors such as rapidly
increasing crude oil prices in the first half of 2008. In November, the value of exports
showed negative yoy growth, due to the impact of falling global prices in the second half of2008 (Figure I-20).
== Figure I-20 ==Crude oil prices fluctuated widely in 2008. Both Brent and Dubai crude oil prices saw arecord high on the New York Mercantile Exchange (NYMEX) in terms of crude oil futures(nearest futures, closing price) of US$145.29/barrel on July 33. Although the price laterremained in an adjustment phase for a while, the withdrawal of funds from crude oil futures
markets triggered by the financial crisis in September caused the price to tumble 76.7% fromthe high to US$33.87/barrel by mid-December.
While grains prices remained high through the first half of 2008 as well, they were in a
downward phase toward the end of the year. For example, wheat prices (nearest, closing
price) at the Chicago Board of Trade (CBOT) recorded a record high of US$12.80/bushel on
February 27, 2008, due primarily to the fact that the increase in U.S. winter wheat acreage
had been less than the market had expected. Later, prices fell due to factors such as
expectations of massive increases in global production volumes, withdrawal of funds from
commodities markets, and expectations of decreased demand for grains as a result of the
global economic slowdown. In early December, the price fell to US$4.58, or 64.2% lessthan the peak price.
The value of monthly exports of wheat, which account for more than 40% of grains
exports, slowed in the second half of the year (Figure I-21). Due to concerns about inflation,
China constrained exports through means such as imposition of export duties andimplemented measures to expand domestic supply. However, its measures to restrain foodexports were eased beginning December 1, as inflation pressures also eased. In addition toremoving export duties on corn and special export duties, China also decreased export duties
on wheat.

3

Crude oil forming the basis for the price of each type of crude oil is referred to as
benchmark crude oil. In the U.S., this is West Texas Intermediate (WTI) crude, in Europe it
is Brent crude, and in the Middle East it is Dubai crude. On a global basis, NYMEX's WTI
crude futures price virtually determines the WTI crude spot price and the Brent crude futures
price, traded in London, and these affect the formation of the Dubai crude futures and spot
prices in the Middle East.
15

== Figure I-21 ==(3) World Trade in 2009, under Conditions of Uncertainty about the Future
Global trade statistics for the 17 major economies, for which quarterly data through thefirst quarter of 2009 is available, shows that exports fell by 28.4% yoy to US$1,562.5 billion
in the first quarter of 2009, while imports fell by 26.9% to US$1,662.1 billion (Table I-11).
Monthly figures show that exports and imports in March 2009 fell by 27.3% and 28.9% yoy,
respectively, improvements from the drops of 30.0% and 30.5% yoy, respectively, inFebruary (Figure I-22, Figure I-23).
== Table I-11 ==== Figure I-22 ==== Figure I-23 ==Imports of machinery and equipment fell by 30.5% yoy in February but fell by 28.2%
yoy in March. Imports of automobiles, in particular, fell by 53.1% yoy in February but fellby 44.2% yoy in March. In this way, the pace of the declines is easing gradually. In fact,
trends in real imports in the U.S. and the U.K. have shown improvements since the start of2009. Overall U.K. imports show signs of having bottomed out in March. An index ofreal imports, with a value for the base period of January 2007 set as 100, shows a slightincrease from 84.5 points in March 2009 to 86.2 points in April (Figure I-14). Meanwhilein the U.S., although the corresponding indicator continued dropping, which stood at 77.5
points as of April, imports of automotive vehicles, which had been showing massive declines
until then, showed signs of bottoming out (Figure I-13).
Double-digit negative yoy growth in major economies’ trade, however, has continued
into 2009. In addition, since it is likely that rising commodities prices will encumber
consumption and production, it is difficult to predict a full-fledged recovery from the impactof the financial crisis4. Under these circumstances, the WTO predicted as of the end of
March 2009 a growth rate in global real exports for 2009 at -9.0% from the previous year.
(4) Global Trade in Services Rose by 11.3% in 2008
In 2008, trade in services (exports of commercial services, excluding government
services) rose by 11.3% yoy to US$3.73 trillion (Table I-12).
== Table I-12 ==Trade in services by category shows an increase of 14.7% to US$873 billion intransportation services, an increase of 10.0% to US$947 billion in travel services, and anincrease of 10.4% to US$1.91 trillion in other services (including financial, insurance, andcommunications services, as well as royalties and licence fees etc.).
In the area of transportation services, according to the International Air Transport
4

The Reuters/Jefferies CRB Index began rising after bottoming out in March, as
commodities prices began to surge. The Baltic Dry Index (BDI), and indicator of marinetransportation costs, has also been increasing rapidly, recovering to 3,742 pints by July 2 after
having dropped as low as 663 points in December 2008.
16

Association (IATA), growth in international passenger air travel (revenue passenger
kilometers basis) slowed from 7.4% growth in 2007 to 1.6% growth. International air cargotransportation (freight tonne kilometers basis) fell by 4.0%, after increasing by 4.3% in 2007.
While cargo transportation had already fallen yoy as of June, the pace of the decline
accelerated beginning in September, due to worsening economic conditions in developed
economies (Figure I-24). Growth in passenger transportation also has remained in thenegative range since September 2008. While both cargo and passenger transportation show
signs of having bottomed out in 2009, future moves must be observed carefully.
== Figure I-24 ==In the area of travel services, the United Nations World Tourism Organization(UNWTO) estimates international tourist arrivals in the world in 2008 to have risen by 1.7%
to 924 million. This figure reflects a slowing in the pace of growth, from 6.7% in 2007.
As a result of factors such as decreasing consumer and business confidence due to uncertain
global economic conditions, the yoy rate of growth went negative in the third quarter. Thisdecreasing trend appears to be continuing into 2009, in which the number of tourists in theworld is forecast to decrease 7.7% yoy.
Trade in services in 2008 by country and region shows that, in the U.S., the leader inboth exports and imports of services, exports rose by 10.4% yoy to US$522 billion, while
imports rose by 6.4% yoy to US$364 billion (Table I-13). According to the U.S.
Department of Commerce, visitors from overseas increased in the first half of 2008 due tofactors such as the low value of the dollar, and exports of travel services increased in 2008 asa whole. The growth rate in other services as a whole was weak for both exports andimports due to factors such as a slowdown in the growth rate for both exports and imports offinancial services in the second half of the year.
== Table I-13 ==In the EU, both exports and imports of services grew by 10.1%, to US$1.74 trillion and
US$1.52 trillion, respectively. The WTO states that exports decreased in the fourth quarterdue to factors such as the rising value of the dollar.
Trade in services in Asia showed an increase of 12.0% in exports to US$837 billion,
and an increase of 12.5% in imports to US$858 billion. As part of these figures, both
Japanese exports (up 13.4% to US$144 billion) and imports (up 11.4% to US$166 billion)
grew at rates higher than those for the world as a whole. Japan outpaced Spain to take theposition of the fifth-largest exporter of services.

17

3. Global Direct Investment & Cross-Border M&As
(1) Global Direct Investment Falls by 25.0% in 2008
Global inward foreign direct investment (FDI, JETRO estimates, net flows based onbalance of payments) fell by 25.0% yoy in 2008 to US$1,834.6 billion (Table I - 14). This
was the first drop in inward FDI in five years, after it had shown continued growth since 2004
and recorded a historical high of US$2,446.7 billion in 2007.
== Table I-14 ==Spurred by the worsening of the fund-raising environment beginning in the second halfof 2007, worldwide cross-border mergers and acquisitions (M&As), which account for alarge share of FDI, began to fall. Furthermore, the worldwide economic slowdown eroding
business revenues appears to have led to a decrease in funds allocated by businesses forinvestment. Revenues of foreign subsidiaries also worsened, causing reinvested earnings(undistributed profits internally reserved by foreign-affiliated subsidiaries within a region), a
component of FDI, to show a decreasing trend in developed nations.
Looking at figures for developed and developing nations separately shows that inward
FDI in developed nations (31 countries and regions based on IMF categories) fell by 35.3%
to US$1,183.7 billion. In Europe in particular, losses were substantial in financial markets
due to factors such as a succession of cases of bankruptcy or nationalization of financial
institutions, leading to drops of roughly 50% in both inward FDI and inward M&As. On theother hand, developing nations saw an increase of 5.4% to US$650.9 billion. In markets such
as East Asia and India, where domestic demand remained steady, and Central and SouthAmerica, which attracted investment in resources, figures were relatively strong. FDI indeveloping countries as a share of the worldwide total grew by 10.2 percentage points to35.5 % (Figure I - 25).
== Figure I-25 ==Worldwide, outward FDI decreased by 12.7% to US$2,176.6 billion. While theoreticallythe global figures for inward and outward FDI should match, in reality discrepancies occur on
account of differences in statistical methods between countries5. These statistical differences
between countries are thought to have been particularly large in 2008, due to quite a numberof capital transfer transactions between parent companies and their subsidiaries.
 Investment in the EU halved, while capital inflows to the U.S. increased
Inward FDI in the 27 EU nations (referred to collectively as “EU” hereinafter) was
US$731.1 billion, reflecting a drop of roughly one-half from the 2007 figure of US$1,350.7
billion. As a result of damage to the balance sheets of financial institutions due to a global
contraction of credit, the fund-raising environment worsened rapidly, and the trend towardindustrial reorganization within Europe, which had been marked over the past several years,
slowed somewhat. Damage in Europe was comparable to that in the U.S., as, for example,
major financial institutions such as the Royal Bank of Scotland in the U.K., Fortis in Belgium,
5

Definitions of FDI, evaluation methods, and the timing of recording statistics, such as
minimum amounts recorded, handling of reinvested earnings and subsidiaries of subsidiaries,
and handling of remittance of profits and transactions with offshore companies, differ fromcountry to country.
18

Dexia in France, and Hypo Real in Germany, received injections of taxpayer funds orunderwent temporary nationalization. A look at inward FDI in the leading EU nations (EU15)
by quarter also shows a decreasing trend in 2008 (Figure I - 26).
== Figure I-26 ==According to Eurostat, the Statistical Office of the European Commission, FDI fromoutside the EU region fell by 48.7% to US$252.9 billion, while FDI within the region fell by
41.9% to US$470.5 billion. FDI from outside the region was impacted strongly by the factthat FDI from the U.S. fell by 73.5%, to just US$65.4 billion. FDI from offshore financial
centers (defined by Eurostat to include 38 countries and regions) such as the Cayman Islands(a British overseas territory) fell by 42.5% to US$66.0 billion.
A look at figures by country shows a drop of roughly one-half from the previous year in
the United Kingdom. Net inflows of equity capital (such as acquisition of new shares ofstock) decreased by 48.2% to just US$90.9 billion, due to a decrease in large-scale M&As.
Reinvested earnings also decreased by 39.5 %. On the other hand, net inflows increased yoy
to US$53.1 billion in the first quarter of 2009, as loans to their U.K. subsidiaries by foreign
firms increased rapidly.
The drop in inward FDI was large in the Netherlands and Luxemburg as well. Since newinvestment in equity capital from outside both inside and outside Europe decreased, it appears
that transit investment through special-purpose enterprises (SPEs) located in both countries
has decreased. The fact that a large M&A in the financial field took place in 2007 in the
Netherlands was another reason behind the depressed inward FDI in that country.
Chaos in financial markets led to withdrawal of funds invested in EU nations, with Finlandand Ireland seeing net outflow of funds. Among new members of the EU, outflow of funds
progressed rapidly in Hungary and Latvia, which were designated to receive IMF aid
beginning in the second half of the year, resulting in a large decrease in net inward FDI.
The EU’s outward FDI decreased by 25.2% to US$1,188.4 billion, a smaller decrease thanthat sustained by inward FDI. A primary reason for this difference is the fact that FDI
directed toward the U.S., focused on manufacture of products such as food andpharmaceuticals, was robust. According to Eurostat, the EU’s FDI in the U.S. increased by
9.7% to US$218.6 billion. At the same time, outward FDI directed outside the EU zone as awhole decreased by 21.7% to US$519.1 billion, while outward FDI directed inside the EUzone decreased by 28.0% to US$636.0 billion.
While FDI in the EU decreased considerably, inward FDI in the U.S. saw an increase ininflows, rising by 15.9% to US$319.7 billion (Table I - 15). Moves toward acquisition of U.S.
firms, as investors sought bargains resulting from falling stock prices, were active.
Furthermore, fund-raising by U.S. financial institutions to enhance their capital was brisk. As
a result, FDI from Europe (rising by 19.8% to US$206.5 billion on a book-value basis) andfrom Japan (rising by 38.0% to US$35.7 billion on a book-value basis) was concentrated on
the U.S. On the other hand, in the second half of the year repatriation of funds fromforeign-owned subsidiaries in the U.S. to the nations of their parent companies frequently
took place, and lending of funds between parent companies and subsidiaries resulted in net
capital outflow.
In the first quarter of 2009, inward FDI in the U.S. decreased by 40.7% yoy to as low as
US$35.3 billion. Deterioration of the revenue situation of foreign-owned subsidiaries in the
U.S. caused US$8.3 billion net outflow of reinvested earnings．Inflows of equity capital was
also sluggish, falling by 47.5% to US$22.2 billion.
Meanwhile, outward FDI from the U.S. fell by 16.7% yoy to US$332.0 billon. In 2008,19

outward M&A activity in the U.S. halved, which slashed FDI in the form of equity capital by
48.4%. Many of these cases appear to have been carried out in forms such as capital increases
intended to enhance the capital of overseas subsidiaries whose business performance hadworsened. One example is Citi’s capital increase (approximately US$3.6 billion) in Nikko
Citigroup in the second half of the year. Also in the second half of the year, recovery by U.S.
parent companies of loans extended to their subsidiaries accelerated, and the balance of othercapital showed net inflow of US$29.5 billion. Looked at by country and region, US FDI in
China was active, which nearly trebled to US$15.7 billion (on a book-value basis).
Reinvested earnings account for the majority of U.S. outward FDI, and although they werein a decreasing trend beginning in the second half of 2008, they reached75.8% of the total, or
US$251.5 billion. Since 2006, internal reserves of overseas subsidiaries of U.S. firms
accumulated as FDI in the form of reinvested earnings. On this point, the new administrationin the U.S. is advancing efforts to eliminate deferred taxation on income earned by overseas
subsidiaries, claiming that the exiting method of taxes deferred until income is transferredback to the U.S. prevents return of income to the United States. There is a possibility that achange in the taxation system would encourage transfer of internal reservesto the U.S.,
statistically decreasing reinvested earnings in outward FDI.
 Asia remains strong, led by China and India
Inward FDI in East Asia increased slightly by 2.2% yoy to US$269.1 billion. In China,
investments such as those directed to its inland regions and those related to service industries
remained strong. China also saw a more than threefold increase in outward FDI. Total
outward FDI from East Asia was also robust, rising by 12.3% to US$168.5 billion.
Inward FDI targeted at China rose by 6.8% yoy to US$147.8 billion, making the nation thesecond-largest recipient of FDI in 2008, after the United States. According to the State
Administration of Foreign Exchange’s data on inward FDI broken down by country andregion, inflows from Hong Kong had an overwhelming share at US$70.1 billion (gross).
Results by region of China show an increase of 19% in 2008 in investment in western China,
including Sichuan Province and the city of Chongqing. By contrast, investment in eastern
China, including the city of Beijing, tumbled 14% yoy. New investment in coastal regions,which had continued to see rapid advancement, decelerated somewhat. Viewed by industry, ayoy increase of 88% in inflows in the financial sector to US$14.7 billion (gross) was recorded.
A look at inward FDI trends shows major growth in FDI directed to non-manufacturing andservices-related industries. For example, in 2008 investment in mining grew by 41% and thatin education grew by 46%. On the other hand, investment in manufacturing sectors fell by
8%. Even among non-manufacturing industries, real-estate and infrastructure-related
investment fell, with real-estate investment decreasing by 30% and investment inconstruction and in transportation and shipping falling by 10% each.
Outward FDI by China soared 214.6% yoy to US$53.5 billion. Outward M&A activity by
Chinese firms has become increasingly brisk, with the share of FDI in non-financial sectors
accounted for by M&As rising to 50% according to the State Administration of Foreign
Exchange. In China, the Banking Regulatory Commission lifted in December 2008 theprohibition of M&A financing by commercial banks for the first time in 12 years, and in May
2009 an FDI law went into effect to simplify application procedures and screening foroutward FDI by Chinese firms. These systemic changes are also likely to help accelerating
outward FDI from this point onward.
Among other economies in East Asia, inward FDI in Hong Kong increased by 15.9% to
US$63.0 billion. Corporate income-tax regulations that took effect in 2008 resulted in a 10%
tax on dividends paid by companies that have advanced into China to their home countries.
Since in principle this tax is 5% for dividends paid to Hong Kong, there appears to be an
20

active movement toward establishment of parent companies in Hong Kong by enterprises
conducting FDI in China. In addition, beginning in July 2009 prohibitions were lifted on
direct investment by Chinese firms in Taiwan, chiefly in manufacturing industries, a movelikely to lead to an increase in direct investment in that region.
FDI in the ASEAN5 economies decreased by 17.1% to US$50.7 billion, with FDI fallingin most nations. Only Indonesia saw inward FDI increase, rising by 20.4% to US$8.3 billion
as firms that had already advanced into the market expanded their investments, in response tobooming domestic demand.
On a new-approvals basis, inward FDI in Vietnam remained strong, rising by more than
threefold yoy to US$60.3 billion. Vietnam approved a succession of large-scale investments,
including investments in facilities such as steel mills and petrochemical plants. At the sametime, projects approved also included many resort developments, causing concerns that theinvestments might not take place under sluggish economic conditions. It is possible that therevisions to the reductions of and exemptions from corporate taxes in 2009, limiting these tohigh value-added fields such as high technology, could be a negative factor as well.
Inward FDI in India maintained high growth, jumping by 68.3% yoy to US$41.1 billion.
On an execution basis (according to the Ministry of Commerce and Industry), inward FDI
increased by 72.4% to US$33.0 billion. A look at these figures by industry shows high rates
of growth in the shares of inward FDI in the financial industry, rising by 195.9% to US$4.0
billion, and the telecommunications industry, rising by 140.8% to US$2.6 billion. In addition,
investment in the automotive industry was high as well, rising by 208.5% to US$1.1 billion.
Investment in the nation’s port infrastructure totaled US$1.4 billion, and it appears likely that
greater international procurement will take place in the future as well, under thegovernment’s ports development project. Growth slowed in FDI in computer-relatedindustries, which already had accumulated, as such investment fell by 24.4% to US$1.8
billion.
 The Central and South America regions demonstrate their presence
According to the UN Economic Commission for Latin America and the Caribbean(ECLAC), inward FDI in Central and South America and the Caribbean (not including
offshore financial centers such as the Cayman Islands) grew by 13.4% yoy to record an
all-time high of US$128.3 billion. Countries such as Brazil (up 30.3%), Chile (up 33.5%),
and Colombia (up 16.7%) saw double-digit growth as they did last year. While risingresource prices slowed in the second half of 2008, considerable resource-related investment
intended to secure interests in resources from a long-term perspective was apparent. At thesame time, investment decreased in countries highly dependent on the U.S. economy, such as
Mexico and Central American nations, as a result of the economic downturn in the U.S.
While the U.S. had the largest share of FDI in Central and South America at 24%, the sharesof Canada (8%) and Japan (6%) increased due to growth in resource projects.
Inward FDI in Russia remained on an increasing trend, rising by 27.7% to US$70.3 billion.
However, Russia experienced considerable effects of the financial crisis and rapid drops inresource prices, which led to the negative growth of -9.5% in real GDP in the first quarter of2009, with the nation’s inward FDI falling by 38.4% yoy in the fourth quarter of 2008. The
majority of equity capital flowed in from tax havens such as Cyprus and the Bermuda Islands(a British overseas territory), a sign of a not inconsiderable return of Russian capital for
purposes of tax reduction and asset preservation.
FDI targeted at Africa maintained a high level, rising by 34.7% yoy to US$72.0 billion(according to UNCTAD estimates). While inward M&A activity decreased worldwide, M&A
activity targeted at Africa, centered on resource- and infrastructure-related activity, rose
rapidly, climbing by 57.6% to US$29.0 billion.
21

 Decreases predicted to continue in 2009 as well
In 2009, each country is projected to see major decreases in economic growth rates, andcross-border M&A activity is predicted to continue to decrease. For these reasons, global FDI
is expected to continue to fall. Inward FDI in 31 developed countries and regions fell by
47.6% yoy in the first quarter of 2009. UNCTAD figures show worldwide decreases of 54%
in inward FDI and of 57% in outward FDI in the first quarter, and they indicate that if current
trends continue, FDI will be nearly halved in the full year of 2009. The OECD also forecasts
a drop of roughly one-half in inward FDI in the 30 member nations.
As to be described below, worldwide M&A activity in the first half of 2009 fell by morethan one-half yoy. Since it has been demonstrated by actual results that FDI and M&A
activity are closely related (Figure I - 27), global FDI is projected to see a massive drop in2009.
== Figure I-27 ==FDI targeted at developing countries, which increased slightly in 2008, is projected to also
decrease over the short term, as a decrease in investment from developed countries proves
unavoidable due to worsening business profits. In particular, an economic recovery indeveloped countries is essential to revitalize capital investment and investment in exportindustries.
UNCTAD reports that many multinationals are in the process of reducing costs andworkforces, and are cautious about new direct investment, whether in the form of M&A
activity or greenfield projects. Taking this into account, it projects a recovery beginningaround the middle of 2010 as a fundamental scenario for trends in global FDI.
(2) Global M&A Activities Decrease for the First Time in Five Years
The total amount of cross-border M&A activity worldwide in 2008 (deals completed in2008) fell by 25.0% yoy to US$1,213.1 billion6. As is the case with the total value of FDI, thevalue of global M&A activity, which had continued to grow since 2004 and recorded a record
high in 2007, fell for the first time in five years as M&A activity by European and U.S. firms
slowed due to the impact of the financial crisis (Figure I - 28). The number of M&As was
9,350, reflecting a yoy drop of 8.3%.
== Figure I-28 ==6

Source: Thomson Reuters data (as of July 6, 2009). While FDI statistics on an internationalbalance of payments basis represent the difference between outflows and inflows (net figures),
M&A figures are calculated by totaling values upon completion of individual M&As (grossfigures). M&A transactions in which the nationality of the ultimate parent company differsfrom that of the company invested in are defined as cross-border M&As. Under thisdefinition, some M&As between residents or between nonresidents, not recorded in FDI
statistics, are included in cross-border M&As. In addition, FDI statistics include only
investments of 10% share or more, and some cases, in which funds were raised in the country
where the acquisition took place, are not included. In cases such as these, definitions andcategories of FDI statistics and M&A data may differ. However, in terms of actual results,
M&As account for a large share of FDI, and the two moves more or less in the same way. In
all cases in this chapter, "M&A" refers to cross-border M&As.
22

Global M&A markets continue to be characterized by conditions in which fund-raising isdifficult, chiefly in Europe and the U.S. In particular, in 2008 the decrease in M&As fornon-business purposes, such as those by investment funds raising acquisition funding
primarily through loans, fell massively by 40.6% to US$215.5 billion. Large-scale M&As
also decreased beginning in the second half of the year, as the number of acquisitions valued
at more than US$10 billion fell by about one-half from 11 in the second half of 2007 to fivein the same period of 2008. Cancellation of large M&A plans due to fund-raising difficulties
and worsening economic conditions also stood out. In addition to cancellation of the purchaseof Rio Tinto of the U.K. (for US$188.2 billion) by BHP Billiton of Australia, the largest
resources firm in the world, other cases included a major Swiss resources firm, Xstrata,
giving up on its acquisition of a British platinum producer, Lonmin (estimated at US$10
billion), and South Korea’s Samsung Electronics abandoning its plans to purchase a U.S. IT
firm, SanDisk (estimated at US$5.9 billion). It can be said that the worsening of financial
conditions has put the brakes on the trend over the past few years of successive large-scaleacquisition funded by aggressive borrowing.
 Marked decreases in acquisitions by U.S. and U.K. buyers
A look at figures by country and region shows that M&A activity worldwide targetingfirms headquartered in the EU region decreased by 41.2%. At the same time, M&A activity
targeting U.S. firms maintained the high level recorded in 2007, rising by 1.0% to US$328.8
billion. Led by the acquisition of Anheuser-Busch of the U.S. (US$60.4 billion) by a leading
Belgian brewer, InBev (Table I - 16), an array of acquisitions of U.S. firms, whose shareprices appeared to be undervalued or who had weakened due to the economic slowdown,
took place. Other examples include the purchase of a pharmaceutical firm, Alcon (US$10.5
billion), by a major Swiss pharmaceutical firm, Novartis, the purchase of a power holding
company, Energy East (US$8.1 billion) by a major Spanish power firm, Iberdrola, and thepurchase of a data services firm, NAVTEQ (US$7.6 billion) by a leading Finnish IT firm,
Nokia. Acquisition of and capital increases in U.S. financial institutions, which sufferedlosses due to the financial crisis, also stood out. In addition to investment by Mitsubishi UFJ
Financial Group in Morgan Stanley of the U.S. (US$7.8 billion), other examples include thepurchase of a U.S. financial institution, Commercial Bancorp (US$8.6 billion), by Canada’s
Toronto Dominion Bank.
== Table I-16 ==Against a background of credit contraction on the part of European and U.S. financial
institutions, acquisitions by firms in developed nations have decreased massively. In
particular, the shares of the two leading nations in terms of acquisition values fell markedly,with U.S. M&As falling by 50.2% to US$149.3 billion and U.K. M&As dropping by 56.1%
to US$138.1 billion. Among developed countries, virtually Japanese firms alone increased
M&As, which rose by 59.8% to US$65.2 billion. Japan has a large number of firms withrelatively sound financial constitutions, and M&As targeting U.S. firms increased inparticular.
 China continues aggressive acquisitions, while SWFs adopt a cautious investment
postureAmid a decreasing trend worldwide, M&As in East Asia rose markedly, by 69.1% to
US$107.1 billion from the perspective of acquired firms and by 79.9% to US$137.1 billion

23

from the perspective of acquiring firms. Among these, acquisitions by Chinese firms grew bymore than fourfold, to US$77 billion. As shown by examples such as Chinalco’s investment
in Rio Tinto of the U.K. (US$14.3 billion), the Commercial Bank of China’s investment inStandard Bank of South Africa (US$5.6 billion), and China Huaneng Group’s acquisition of a
Singapore power company, Tuas Power (US$3.1 billion), Chinese firms taking part inaggressive overseas M&As stood out. In 2009 as well, Chinese firms are showing signs of
aggressive acquisition activity, in resources and manufacturing industries such as motor
vehicles.
Sovereign wealth funds (SWFs) and state-owned enterprises, such as national resource
firms, which had been increasing their presence in M&A markets over the past few years,
maintained aggressive investment stances through the first half of 2008. In fact, such firms
showed that they had the funding capacity to cover the substantial losses sustained by
European and U.S. financial institutions as a result of the subprime mortgage problem. For
example, the Government of Singapore Investment Corp. (GIC) invested US$9.8 billion in a
major Swiss financial institution, UBS, and the Abu Dhabi Investment Authority invested
US$7.5 billion in Citigroup of the U.S. (Table I - 17).
== Table I-17 ==However, beginning in the second half of the year, the financial crisis caused worldwide
falls in stock prices and Middle Eastern SWFs in particular, funded by oil money, saw
investment assets decrease, leading to restraint in new equity investment. Although somelarge-scale deals were completed since the fall, including the Qatar Investment Authority’s
acquisition of Cegelec of France (US$3.0 billion) and the establishment in 2009 of a joint
venture (US$3.6 billion) between the Advanced Technology Investment Company (ATIC) of
Abu Dhabi and a U.S. semiconductor firm, Advanced Micro Devices (AMD), overall
investment activity involving SWFs and state-owned enterprises was generally stagnant.
While in the first half of 2008, SWFs took part in US$54.2 billion worth of M&As, thisfigure fell to US$22.4 billion in the second half, and it was just US$8.3 billion in the first halfof 2009 (Figure I - 29). There were moves toward reorganization of assets among SWFs as
well, such as the sale of an energy company, PowerSeraya, owned by Temasek Holdings ofSingapore, to a subsidiary of a Malaysian power firm, YTL Power (US$2.4 billion).
== Figure I-29 ==According to the Council on Foreign Relations (CFR) in the U.S., as of December 2008
the SWFs of oil-producer nations (Middle East and Norway) recorded a yoy loss of 30-40%
of total assets. In particular, since the asset portfolio of the Abu Dhabi Investment Authority
had given heavy weight to equity investments, it suffered massive losses of US$183.0 billion.
The size of the assets of the Abu Dhabi Investment Authority is estimated to have shrunk to
US$328.0 billion. This means that it has conceded first place in the world in terms of SWF
size to the Saudi Arabian Monetary Agency (estimated at US$501.0 billion), which invests
primarily in bonds.
At present, the SWFs of oil-producer nations are showing a cautious approach toinvestment. However, it is conceivable that they could become more aggressive in large-scale
equity investments if crude-oil prices increase again in the future. The CFR identifies acrude-oil price of US$75/barrel or higher as the rough level at which the SWFs of
oil-producer nations would shift to more aggressive investment. In addition, non-oil-money
24

SWFs are showing signs of resumption of aggressive investment activity as global stock
prices have been in a recovering trend, as witnessed in a Chinese SWF, China Investment
Corporation (CIC), announcing in July 2009 of its plan to invest in a major Canadianresources firm, Teck Resources (US$1.5 billion).
In November 2008, the IMF announced the Santiago Principles, 24 codes of conduct for
SWFs. These principles cover matters such as advancing information disclosure by SWFs
and ensuring that their investments should be made for economic purposes and should not
exercise political influence. Prior to the announcement, the Abu Dhabi Investment Authority
announced its full support for these principles. It is surmised that while the value of theirinvestment assets itself has fallen substantially, SWFs with trillions of dollars in funding in
total will demonstrate their presence as part of the limited number of funding sources indeveloping nations in M&A markets. In addition, private-sector investment is slow inrecovering at present, there is a possibility that government-funded companies from countries
such as China and Russia could once again make outstanding moves as investors.
 The impact of industrial reorganization continues
Although it decreased in 2008, the world total value of M&As has exceeded US$1 trillion
for three consecutive years since 2006 (when it totaled US$1.013 trillion). Not just Japaneseand Chinese firms, whose activities have stood out, but also European and U.S. firms haveactively been implementing M&As between operating companies as initiatives to ensure
survival amid international competition.
A look at trends by industry shows a marked move toward reorganization in the food andtobacco industries. In addition to the deal between InBev and Anheuser-Busch, which had thelargest value in 2008, Imperial Tobacco of the U.K. purchased a major Spanish tobaccocompany, Altadis (US$21.5 billion), and a partnership of Dutch brewers, Heineken andCarlsberg, bought a major British brewer, Scottish & Newcastle (US$18.6 billion). In thisway, three of the top five deals in terms of value resulted from moves toward reorganizationin the food and tobacco industries. While the sale of Anheuser-Busch attracted considerable
attention regarding whether the deal would be approved, out of antitrust considerations, in theend it was approved conditionally by the U.S. Department of Justice.
Among major industries, in addition to food and tobacco, the only other industries inwhich the value of M&A activities surpassed its level of the previous year were mining andcomputers and software services.
In fields such as chemicals, electric power, and pharmaceuticals as well, while the value of
M&A activities was less than that in the previous year, large-scale acquisitions involving
industrial reorganization stood out. In the chemical industry, large firms made aggressive
acquisitions to enhance their overseas businesses. Examples included the purchase of aleading British chemical firm, Imperial Chemical Industries (ICI; US$18.3 billion) by a
Dutch firm, Akzo Nobel, and the purchase by a German cosmetics and chemicals giant,Henkel, of a U.S. subsidiary of Akzo Nobel (formerly ICI; US$5.5 billion).
In the electric power industry, European power markets were, in principle, liberalized inJuly 2007 under an EU Directive revised in 2003, and industrial reorganization within theregion intensified around that time. In addition to the acquisition by a leading German power
firm, E.ON of an Italian subsidiary of a leading Spanish power firm, Endesa (US$14.3
billion), Électricité de France (EDF) purchased British Energy of the U.K. (US$15.4 billion)
in 2009.
In pharmaceuticals, acquisitions targeting the U.S. pharmaceuticals market stood out in2008. These included Novartis’s purchase of Alcon of the U.S., the purchase by Teva of
Israel of Barr Pharmaceuticals of the U.S. (US$8.8 billion), and the purchase by Takeda
Pharmaceutical Co. of Millennium Pharmaceuticals of the U.S. (US$8.1 billion). This trend25has continued in 2009, with a Swiss pharmaceuticals giant, Roche, making a U.S. biotech
firm, Genentech, a wholly owned subsidiary (US$46.7 billion). As shown by this example, inthe pharmaceuticals industry where new drug development is costly, the number of firms
attempting to grow through the acquisition of U.S. biotech firms with excellent R&D
expertise, is increasing.
The global economic downturn and fluctuations in resource prices have given anotherimpact on industrial reorganization. In November 2008, BHP Billiton abandoned its effort topurchase Rio Tinto, claiming that prospects no longer were clear for the initially expected
benefits of a merger, in light of decreased world demand for iron ore and falling resource
prices. However, in June 2009, when resource prices had again begun to rise, the twocompanies announced a merger of their iron-ore businesses (US$58.0 billion). Moves among
companies in the same industry toward goals such as growth in scale and reduction in costs
are likely to continue from this point onward, not only in the resources industry but also inothers.
 China implements measures to prevent M&As under the Antimonopoly Law
Realization of large-scale cross-border M&As involving industrial reorganization, such as
BHP Billiton’s plans to purchase Rio Tinto and InBev’s acquisition of Anheuser-Busch,
could result in major changes in market shares in the respective industries. For M&As that
could negatively impact competition in the markets, antitrust authorities around the world areintervening by examining proposed deals regardless of the locations of companies involved,
and in some cases, issuing injunctions to resolve pertaining problems or prohibiting the
M&As from taking place. Since the approval of the relevant authorities is a necessary
precondition of any M&A for the companies involved, thorough preparations are essential.
In the U.S. and the EU, authorities have a wealth of experience and precedent to draw onin examining proposed M&As. From the perspective of companies proposing M&As, it istrue that business practices to be carried out for examinations by U.S. or European authorities,
such as submittal of applications, are a certain burden, but it has become predictable to someextent how to handle them. By contrast, caution is required concerning handling of M&A
examinations by authorities in China, where the Antimonopoly Law took effect just recently
in 2008.
On March 18, 2009, the Antimonopoly Bureau of the Chinese Ministry of Commerce
decided to block Coca-Cola’s planned acquisition of Huiyuan Fruit Juice. This was the firstcase in which the Antimonopoly Bureau had blocked an M&A under the Antimonopoly Law.
Advance examination of M&As is prescribed under Chapter 4 of the Chinese
Antimonopoly Law. Applications are covered under the State Council regulations on
application for tie-ups between companies. In January 2009, opinions were issued on
guidance for application for tie-ups between companies and for documentation of application
for tie-ups between companies. According to some experts, these opinions on guidance
require involving companies to submit information more broad-ranging and in greater detailin some ways than that required for examination in Europe and the U.S.
In April 2009, Mitsubishi Rayon’s acquisition of Lucite of the U.K. was awarded
conditional approval by the Chinese Antimonopoly Bureau. In addition to the separation of
50% of Lucite’s Chinese subsidiary’s production capacity and sale of this portion in whole toa third party, these strict conditions extended to limits on future business growth, such as
prohibition of acquisition of any other company in the same industry in China as well as of
opening new plants for five years after the acquisition. They incorporate strong elements ofindustrial policy, intended to protect Chinese firms. This was the second case of suchconditional approval, following on the case in which InBev’s ownership of Chinese brewerystock was restricted on the company’s acquisition of Anheuser-Busch.
26

In each of these cases — InBev, Coca-Cola, and Mitsubishi Rayon — sufficient grounds
for the decisions made are lacking, and at present the authorities’ examination methods
appear unpredictable from the perspective of applying businesses. Procedures are likely to beestablished through the implementation of each detailed rule and the accumulation ofprecedents from this point onward.
 Contracting trend continues in the first half of 2009
In 2009, the contracting trend in global M&A markets has accelerated. The value of M&A
activities worldwide in the first half of 2009 fell by 64.5% yoy to US$225.2 billion, thelowest level since the first half of 2004. The number of M&A transactions in the second
quarter (1,109 deals completed) was the lowest since the second quarter of 2003. Withfund-raising remaining difficult, the number of large-scale M&As in particular has decreased
dramatically. While the first half of 2008 saw 131 large-scale M&As valued at more than
US$1 billion, the first half of 2009 saw only 34 such cases. Large-scale deals in the first halfof the year included the acquisition by BNP Paribas of France of more than one-half of thestock of a financial institution, Fortis (US$12.8 billion), which had been nationalized
temporarily by the government of Belgium, in addition to Roche’s making Genentech its
subsidiary.
In 2009 too, it remains difficult to raise M&A funding. The number of leveraged buyouts(LBOs, buyouts in which the target company’s assets are used as security for raising funds), a
commonly used method of raising funds for large-scale M&As through 2007, decreased
rapidly beginning in 2008. Out of 304 large-scale deals valued at US$1 billion or more, 53
deals employed LBO schemes in 2007. Corresponding figures were 16 out of 241 in 2008and zero out of 34 so far in 2009. At the same time, stock-swap schemes (including those
involving partly cash payment), which accounted for a share of 47.0% of all M&As during
the M&A boom of 2000, fell to a 6.3% share in 2008 and a 7.7% share in the first half of2009. As such, it is difficult to say that such schemes are in wide use today.
Judging from current trends, it would appear certain that full-year figures for 2009 willshow a major decrease as well. However, while M&As are contracting over the short run, thetrend toward industrial reorganization continues as described above, and it is thought that
corporate expansion in connection with such reorganization will advance further over the
medium to long term.

27

4. Japan’s Trade and Direct Investment(1) Trade in Japan Trade surplus contracts considerably in 2008
In 2008, Japan’s exports (customs-clearance basis) grew by 8.9% yoy to US$775.9 billion,
while imports grew 21.7% to US$756.1 billion (Table I - 18). Although the value of exports
on a full-year basis increased for the seventh consecutive year, it fell by 11.9% yoy in the
fourth quarter, reflecting the global economic slowdown. This was the first quarter ofnegative growth in exports since the first quarter of 2002. On a monthly basis, exports fell by
23.3% in December in particular. The pace of the decline accelerated further in 2009, with
first-quarter exports dropping 38.7% yoy to US$120.9 billion. In 2008, imports grew by morethan 20% for the first time in eight years, backed by high resource prices through the first halfof the year. This was the sixth consecutive year in which imports set a new record. However,in the first quarter of 2009, imports fell massively, dropping 26.9% to US$130.5 billion, as aresult of falling resource prices and worsening of domestic demand. Growth in the export
volume index (base year: 2005) was -1.6% in 2008, the first negative growth in seven years.
The import volume index fell too, dropping for the second consecutive year with a growthrate of -0.6 percent.
== Table I-18 ==Japan’s total trade value (total value of exports and imports) rose 14.9% yoy to US$1.532
trillion in 2008. The trade surplus fell by US$71.8 billion (78.4%) yoy to US$19.8 billion,
due primarily to a slowdown in exports and massive growth in imports. This was the greatest
drop in terms of value since Japan achieved a surplus in its balance of trade in 1981. On a
fiscal-year basis, the balance of trade for FY 2008 was negative (by US$8.5 billion) for the
first time in 28 years. While growth in exports gradually slowed through the third quarter of
2008, growth in imports continued to rise, shrinking the surplus as a result. In the fourth
quarter, although imports slowed rapidly, exports continued to fall at an even faster pace, andas a result, Japan recorded a trade deficit over three consecutive quarters through the firstquarter of 2009. This is the first time the nation experienced two or more consecutive quartersof trade deficit since the period from the first quarter of 1979 through the third quarter of
1980, when it experienced seven consecutive quarters of trade deficit as a result of the second
oil crisis. The pace of export declines is slowing after hitting bottom in March 2009, and as of
May 2009, exports were slightly in the black.
The surplus in the current account balance, which represents the state of all transactions
including trade in goods and services, dividends, and interest, contracted for the first time inthree years, due primarily to the decrease in the trade surplus. The current account surplus in2008 fell by US$53.3 billion (25.3%) yoy to US$157.2 billion, also falling as a percentage ofGDP, from 4.8% in 2007 to 3.2 % (Table I - 19). While the current account balance fell into a
deficit in January 2009 for the first time in 13 years, it was back into surplus in February andhas remained in the black since then.
== Table I-19 ==While the trade surplus decreased rapidly, the services account deficit narrowed by
US$400 million yoy to US$20.8 billion. Although the transportation account deficit increased
by US$100 million yoy to US$7.1 billion, the size of the increase was smaller than the
US$1.8 billion increase in 2007. The travel account deficit contracted from US$17.2 billion28

in 2007 to US$17.1 billion. According to the Japan National Tourism Organization (JNTO),
while the number of foreigners visiting Japan in 2008 remained virtually unchanged, growing
by only 0.1%, the number of Japanese travelling overseas decreased for the second
consecutive year, by 7.6%. This decrease was attributed to factors such as a perception thatoverseas travel was more expensive due to the low value of the yen through the first half ofthe year and increases in fuel surcharges. The other-services account showed a surplus for the
fourth consecutive year, rising by US$400 million yoy to US$3.4 billion. Included in thisfigure is an increase (by US$800 million yoy to US$7.4 billion) in royalties on patents etc.,
the sixth consecutive year of such an increase. While automotive royalties received decreased
in connection with declining overseas production, royalties paid in connection with electricalmachinery also decreased, resulting in a positive balance. At the same time, the insurance
deficit widened (by US$1.4 billion to US$4.2 billion), as payments of reinsurance premiums
to overseas insurers continued. The services account deficit has been contracting since thelate 1990s. Nevertheless, due to the structure of Japan’s international balance of payments,
Japan is somewhat destined to suffer services account deficit, and thus receipts of services
fees are desired to increase from this point onward.
The surplus in the balance on income (interest, dividends, etc. from overseas investment)
grew for the sixth consecutive year, reaching a record high of US$152.5 billion. On aninternational balance of payments basis, since the trade surplus fell by US$66.1 billion(63.1%) to US$38.6 billion, the surplus in the balance on income has surpassed the trade
surplus for four consecutive years.
 Diverging export trends between developed and emerging countries, butacross-the-board declines after the fourth quarter
Viewing the exports in 2008(on a customs-clearance basis) by country and region (Table I- 20) , while exports to Europe and the U.S., whose economies were in downturns, fell, thoseto emerging countries remained relatively strong through the third quarter. However, in the
fourth quarter, exports fell virtually on a global basis (Figure I - 30).
== Figure I-20 ==== Figure I-30 ==Exports to the U.S., the epicenter of the financial crisis, decreased uniformly beginning inAugust 2008, falling by 5.0% for the full year to US$136.2 billion, and have continued to fallin 2009, dropping by roughly one-half yoy. While exports to the U.S. were in a decreasing
trend for most products even in 2007, the pace of the decrease accelerated in 2008, centeringon transport equipment (down 9.3%).
Although exports to the 27 EU nations (referred to collectively as “EU” hereinafter)
maintained positive growth, the rate of growth slowed considerably due to the economic
slowdown from 11.8% in 2007 to 3.9%, totaling US$109.4 billion. Exports of transport
equipment, which account for one-fourth of exports to the EU, decreased for the first time inthree years. Meanwhile, exports of chemicals (up 6.7% to US$11.3 billion) and precision
instruments (up 12.8% to US$6.8 billion), among other products, remained strong.
While exports to Europe and the U.S. were not thriving, those to emerging countries wererelatively stable. Exports to China, which is becoming Japan’s largest export destination,
recorded double-digit growth for the third consecutive year, rising 13.7% to US$124.0 billion.
The presence of China as an export destination is growing, as exports to China surpassed
those to the U.S. for the first time from July through August 2008. This growth was driven bygeneral machinery (rising 15.4% to US$23.4 billion), which accounts for about 20% of total
29

exports to China, and steel (up 25.5% to US$11.1 billion), accounting for roughly 10%.
Nevertheless, the brisk exports to China were also affected by the collapse of Lehman
Brothers in September, and they fell yoy beginning in November. China imports components,
raw materials, etc. from Japan and exports finished products to Europe and the U.S. It
appears that decreasing consumption in the final markets of Europe and the U.S. has slowed
Chinese production, in turn decreasing Japanese exports to China. In fact, the rate of growthin Chinese exports to the U.S. slowed in 2008 to the single-digit range for the first time inseven years, and those to the EU grew by less than 20% for the first time in six years.
Furthermore, in connection with a slowdown in Chinese domestic demand, exports ofproducts such as automobiles and electrical equipment from Japan to China, which until thenhad been growing strongly by double digits, slowed rapidly in the fourth quarter.
Aside from China, exports to ASEAN markets increased by 18.2%, faster growth than in2007 (13.9% growth). Contributors to this growth were: general machinery (up 18.2% to
US$21.0 billion), transport equipment (up 28.3% to US$12.3 billion), and steel (up 40.7% to
US$12.8 billion). Exports to resource-rich countries and regions, such as the Middle East (up28.8% to US$33.7 billion), Russia (up 52.5% to US$16.4 billion), and Brazil (up 47.4% to
US$5.9 billion) were strong as well. However, following the decline in exports to Europe andthe U.S., exports to these countries and regions began to decrease in the fourth quarter.
 Value of imports pushed up by rising fuel prices
Imports trend by country and region shows that while imports from Europe and the U.S.
increased at roughly the same pace as in 2007, imports from resource-rich countries andregions increased rapidly due to the appreciation in fuel prices throughout the year. On theother hand, imports from many regions showed negative growth in volume terms.
Imports from China, Japan’s largest supplier, grew by double digits for the first time inthree years, rising by 11.5% to US$142.3 billion. The key product categories, such as
electrical equipment (up 14.7% to US$29.3 billion) and general machinery (up 13.6% to
US$24.1 billion), pushed up the value of imports. On the other hand, food imports from
China decreased as they did in 2007, by 11.9%, due to factors such as concerns about thesafety of Chinese food products and strengthening of inspections by Chinese quarantine
authorities. On a volume basis, imports from China fell by 1.1%, a first decline in 10 years.
Imports from the U.S. rose by 8.7% to US$77.0 billion. While the growth was faster thanin 2007 (4.1% growth), volume-based imports from the U.S. decreased for the first time infive years, falling by 5.6%. Imports from the EU also increased on a value basis, rising by
7.6% to US$69.9 billion and securing virtually the same growth pace recorded in 2007 (8.2%
growth). However, they decreased on a volume basis for the third consecutive year, droppingby 4.1 percent.
Growth was marked in imports from resource-producing countries and regions, with
imports from the Middle East in particular, which account for more than 20% of imports interms of value, growing by 45.4% to US$165.4 billion. The yoy rate of growth in theseimports reached as high as 81.8% in the third quarter. Imports from other resource-richcountries and regions also grew on a full-year basis, with those from Australia rising by
51.7% to US$47.3 billion, those from Russia rising by 25.8% to US$13.3 billion, and thosefrom Brazil rising by 51.6% to US$9.1 billion. However, beginning in the fourth quarter,
imports from most regions declined. Imports from the Middle East, which seemed to havebeen mostly affected by rising prices, decreased by 52.8% in the first quarter of 2009,
suffering a sharper drop than other regions.
 Sluggish growth in exports, centered on machinery
Most of the products showed sluggish growth in 2008(Table I - 21). Together with global
30

contraction of demand, the yen’s appreciation is considered to have kept down growth inexport volume. In 2008, the yen/dollar exchange rate rose by 13.9% yoy to 103.4 yen/dollar.
This was the fastest growth in the value of the yen since it rose by 14.9% in 1999.
== Table I-21 ==Exports of general machinery, which account for about 20% of total exports, increased by
8.8% to US$151.5 billion. Exports to the U.S., the largest market for exports, decreased forthe second consecutive year, falling by 1.5% to US$28.5 billion. Exports to the EU increased
only slightly, by 2.0% to US$28.0 billion. On the other hand, among main product categories,
exports of mining and construction machinery showed steady growth of 14.8% to US$13.1
billion, helped by strong exports to emerging countries such as ASEAN (up 47.6%), Russia(up 30.7%), and the United Arab Emirates (up 88.9%).
Exports of electrical equipment grew slightly by 2.7% to US$138.7 billion, with the rate of
growth in exports to China, the largest market for exports of these products, slowing
considerably from 19.8% in 2007 to 6.0%. Exports of integrated circuits (HS No. 8542),
which account for the largest share in value terms, decreased for the first time in three years,
falling by 0.7% to US$8.1 billion. Exports of electrical equipment to major regions weresluggish, as exemplified by the fourth consecutive year of decrease in exports to the U.S.
Growth in exports of transport equipment, a specialty of Japan, also slowed for the second
consecutive year (rising 14.2% in 2006, and 13.0% in 2007), growing by 9.4% to US$196.0
billion. Exports to the U.S., the largest market, fell by 9.3% to US$54.1 billion. The numberof motor vehicles exported also shows a marked decrease in exports to the U.S. (Table I - 22).
Exports to the EU also fell on a value basis, dropping for the first time in three years, by 0.8%
to US$27.4 billion. While exports to China (up 30.9%) and ASEAN (up 28.3%) showedstrong growth, backed by booming demand, they were not enough to offset the decline inshipments to Europe and the U.S., resulting in a sluggish performance for the sector overall.
Exports to Russia, the second-largest market, increased by 54.9% to US$12.8 billion.
However, the country raised vehicle taxes in January 2009, and this could impact future
exports of transport equipment to that country.
== Table I-22 ==In addition, growth in steel exports (up 25.7% to US$53.0 billion) to China (up 25.5%)
and ASEAN(up 40.7%) stands out. While exports of other products decreased in the fourth
quarter, steel exports maintained double-digit growth throughout 2008. According to theJapan Iron and Steel Federation, full-year 2008 steel export volume rose by 4.6% to a record
high of 38.54 million tons.
Imports of mineral fuels rose by 54.4% to US$265.7 billion, accounting for more than
30% of total (Table I - 23). In line with this, share of manufactured goods imports fell by 6.2
percentage points to 50.1% to the same level as 1992. Commodities such as crude oil (up48.3% to US$154.4 billion), liquefied natural gas (up 68.8% to US$45.2 billion), and coal (up97.9% to US$29.3 billion), whose market prices soared from the start of the year through thesummer, saw considerable increases.
== Table I-23 ==Trends in crude oil imports show that while there was no major change in imports in terms
31

of volume, prices rose by 46.8% over the course of the entire year, breaking through the
US$100/barrel barrier for the first time to rise to US$101.90/barrel. Import growth in 2008
was driven by rising fuel prices (Figure I - 31). However, after peaking at a high of
US$135.20/barrel in August, the imported price of crude oil fell rapidly in the fourth quarter.
In tandem with this decrease in prices, imports have continued to decrease in terms of value.
If import volume remains unchanged, the decline in import prices will naturally erode importvalue to the extent of the decline.
== Figure I-31 ==While imports of general machinery (up 6.2% to US$59.1 billion) and electricalequipment (up 5.5% to US$77.7 billion) saw relatively steady growth, automobile imports
decreased by 8.4% dented by sluggish sales. Steel imports rose by 26.1% to a record high of
US$17.6 billion, due to growth in imports from China (up 32.6% to US$5.9 billion) andSouth Korea (up 15.3% to US$3.8 billion).
 Exports of major IT products decrease
IT trade in 2008 was largely unchanged from the previous year, with exports leveling off
at US$143.0 billion and imports rising by 3.1% to US$90.3 billion (Table I - 24). The IT
trade surplus shrunk by US$2.7 billion from US$55.3 billion in 2007 to US$52.6 billion.
== Table I-24 ==The reasons behind the sluggish growth of IT exports were: electronic components such as
semiconductors, including integrated circuits, accounting for about 30% of total IT exports,
leveling off (at US$44.5 billion); and mainstream products, such as other electrical andelectronic components (down 0.8% to US$34.6 billion) and video equipment (up 2.5% to
US$16.2 billion), either decreasing slightly or remaining virtually flat. Volume-based
semiconductor sales worldwide have been stagnating since peaking in the fourth quarter of
2007, and growth in sales has slowed rapidly since the third quarter of 2008 (Figure I - 32).
The growth rate in Japanese exports also fell rapidly in the fourth quarter. Exports of
television receivers, such as LCD TVs, declined massively by 19.7 %. While price decreases
appear to be a major cause of this drop, the fact that the Beijing Olympics and year-end sales
campaign did not boost TV sales as much as expected is considered to be another cause.
== Figure I-32 ==IT exports by country and region shows that the U.S. market put significant downward
pressure on exports as a whole, with exports to that market dropping by 6.1% to US$22.1
billion. Exports to China (up 4.6% to US$27.9 billion), the largest export market, also
showed decreases for many products, centered on electronic components such as
semiconductors (down 0.9% to US$10.0 billion). At the same time, while their shares were
small, exports to Eastern European markets such as the Czech Republic (up 21.1% to US$1.3
billion) and Hungary (up 25.8% to US$1.1 billion) recorded high growth.
Regarding IT imports, imports of components increased by 0.7% to US$46.8 billion andthose of finished products rose 5.7% to US$43.6 billion. Imports were strong for complex
digital equipment, computers, such as laptop computers, and peripheral equipment (up 9.8%
to US$14.1 billion), and communications equipment (up 15.0% to US$10.8 billion).
32

IT imports from China, which account for roughly 40% of IT imports, grew at a rate
greatly exceeding that for IT imports as a whole, with imports of components rising by 9.4%
to US$13.4 billion and those of finished products rising by 15.9% to US$21.4 billion. While
many products entered a decreasing trend in the fourth quarter, for the year as a whole, allproducts other than computer components, digital cameras, and audio equipment recorded
double-digit growth. Imports from ASEAN, which account for the second largest share of IT
imports, rose just slightly, by 3.4% to US$16.1 billion, due to a 0.7% decrease in imports ofcomponents.
 Dependence on specific products was a factor behind worsening of trade balance
Japan’s most recent trade deficit was recorded in 1980, following the second oil shock(Figure I - 33). At that time, the rapidly rising value of imports due to rising crude-oil prices
was the main cause of the deficit. The prices later fell, and Japan has experienced continuing
trade surpluses in and after 1981. While at times the surplus shrunk temporarily, there had
been no drop in trade surplus as sharp as that posted in 2008.
== Figure I-33 ==The massive contraction in the surplus in 2008 was caused not just by a major increase inimports due to rising prices but also by sluggish exports. While Japanese imports are focusedon necessities such as mineral fuels and foods, a large share of its exports is made up of
durable consumer goods, for which demand tends to be affected easily by economic
conditions.
The structure of exports in 2008 shows that machinery accounts for approximately 70% ofJapan’s exports (with transport equipment alone accounting for a quarter of the total). In
Germany, the largest exporter of machinery, and China, the second-largest, machinery
account for only about one-half of their exports. Thus, in comparison with those of otherleading exporters, Japanese exports can be said to be particularly dependent on machinery.
(See Reference Materials/Supplement Statistics: Annotation 4 at the end of this White Paper
for a breakdown of exports from the countries and regions of the world by product category.)
From November 2008, exports of transport equipment, general machinery, and electricalequipment fell, massively pushing down exports as a whole (Fig. I - 34). Since the proportionof domestically procured components is particularly high in Japan7, a slowdown in demand
for finished products can easily and immediately affect the components sector. Against thisbackground, the export structure focused on specific products can be considered to have been
hit hard by the financial crisis, resulting in the drop in the trade balance to the level recorded
after the oil shock.
Statistics in 2009 show that monthly exports of transport equipment have continued
dropping by roughly one-half yoy, and were down by 46.7% in May, indicating that any
recovery is a slow one. Exports of steel, which were strong throughout 2008, also continued
to decline increasingly rapidly (falling by 40.7% in May), as demand for steel materials fromleading export markets such as South Korea dulled. As such, it appears to take some time
before steel exports begin picking up.
7

According to the 2009 Monozukuri White Paper (ie. White Paper on manufacturing
activities), the percentages of parts and materials procured domestically in Japan were 80.3%
in the electrical equipment field, 94.5% in the transport equipment field, and 92.4% in thegeneral machinery field, much higher than the rates of roughly 60% in each of these fields in
the U.S.
33

On the other hand, exports of electrical equipment and those of general machinery andprecision instruments appeared to have bottomed out in February and March, respectively.
While the increase pace slowed in May compared to April, due to less business days than inusual years, the recovery trend has virtually been maintained. Exports of electrical equipment
to China have particularly been robust, rising by roughly 10% month-on-month beginning in
February. In addition, exports of chemicals decreased by 26.1% in May, while total exports
dropped by 37.1%, indicating that this product is recovering relatively quickly. Within thiscategory, pharmaceuticals recovered to positive growth of 17.6% yoy in March and continued
double-digit growth in subsequent months, while exports of other products continued to show
negative growth.
(2) Japan’s Outward FDI Shows Considerable Growth
In 2008, Japan’s outward FDI (based on balance of payments; net flows) totaled
US$130.8 billion (up 78.0% yoy), significantly higher than the previous all-time high of
US$73.5 billion recorded in 2007. This is attributed to: (i) aggressive outward M&A activity
by Japanese companies, assisted by the high value of the yen and a global downward trend instock prices; (ii) increased investments related to capital increases at financial institutions;and, (iii) strong investment intended to secure interests in natural resources. Valued in yen,
the nation’s outward FDI grew by 52.8% yoy for 2008 as a whole, indicating that the impactof the weaker dollar pushed up the rate of growth in the outward flow of FDI by more than 20
percentage points.
A look at quarterly figures shows that outward FDI in the fourth quarter totaled
US$62.5 billion, accounting for 47.8% of the full-year total. In the fourth quarter, net
outflows to the U.S. totaled US$27.0 billion, a sign of high levels of investment in equity
capital in U.S. financial institutions suffering losses due to the financial crisis, and lending offunds from parent companies to their subsidiaries in the U.S.
A look at figures by type of FDI shows that outflows of equity capital (gross) totaled
US$112.3 billion due to an increase in M&A activity, surpassing the US$100 billion level forthe first time ever. Similarly, outward M&As by Japanese companies in 2008 set a newrecord high at US$65.2 billion, up 59.8% yoy, driving the growth in outward FDI. Reinvested
earnings also set a record high for the full year at US$24.1 billion, reflecting strong profits atoverseas subsidiaries through the previous fiscal year.
 FDI directed at the Americas increases considerably
A look at targets of FDI by leading country and region shows that FDI directed at North
America surged by 164.9% to US$46.0 billion and FDI directed at Central and SouthAmerica soared by 212.4% to US$29.6 billion, contributing greatly to the overall growth in
FDI (Figure I - 35).
== Figure I-35 ==Including a large number of large-scale M&As by Japanese firms, FDI targeted at the U.S.
rose rapidly by 185.1% to US$44.7 billion. In the U.S., the finance and insurance industries
accounted for a large share of such FDI, skyrocketing 7-fold yoy to US$20.3 billion. In
addition to the investment by Mitsubishi UFJ Financial Group in Morgan Stanley of the U.S.
(US$7.8 billion), whose capital adequacy ratio reduced hit by the financial crisis, large-scaleacquisitions of insurance companies took place. In the pharmaceuticals industry, FDI in the
category of chemicals and pharmaceuticals, which saw a succession of M&As, rose by
163.5% to US$5.1 billion. Examples of M&A in the category of electrical equipment and34

devices included Ricoh’s acquisition of IKON Office Solutions (US$2.4 billion)8.
In Central and South America, FDI targeted at Brazil rose rapidly by 331.7% to US$5.4
billion. The value of such FDI was pushed upward by the major investment (totaling US$3.1
billion) in Namisa, a resources company owning iron-ore deposits by a consortium of major
Japanese and South Korean steelmakers and trading companies. In addition, a large numberof capital transactions targeted chiefly at the Cayman Islands (a British overseas territory),
intended to strengthen the capital of financial institutions, took place. According to the Bankof Japan, these transactions include a large number of cases in which Japanese securities
firms and other companies underwrote preferred shares issued by special-purposes enterprises(SPEs) of Japanese financial institutions located in the Caymans Islands and elsewhere.
In Asia, FDI targeted at countries such as India, China, South Korea, and Vietnam
increased by 20.4% to US$23.3 billion. FDI directed at India significantly increased by
268.6% to a record high of US$5.6 billion. The acquisition by Daiichi Sankyo of the largest
Indian pharmaceuticals firm, Ranbaxy Laboratories (totaling US$5.0 billion) made a major
contribution to this rise. FDI in transport equipment and devices also increased by 31.9% to
US$600 million, thanks to automobile-related capital investment. FDI targeted at China
increased by 4.5% to US$6.5 billion, as capital investment in manufacturing sectors, such as
general machinery and devices and transport equipment and devices, as well as
solidreinvested earnings. FDI targeted at South Korea rose massively by 82.0% to US$2.4
billion. In addition to notable investment in the finance and insurance industries, investment
in manufacturing increased as well. A typical example of this was an increase in LCD
panel-related capital investment by Asahi Glass. FDI directed at Vietnam roughly doubled to
US$1.1 billion thanks to booming capital investment in machinery fields as well as growth innon-manufacturing fields, in which FDI had been small in the past, as witnessed in theinvestment of more than US$200 million by Sumitomo Mitsui Banking Corp. in Vietnam
Eximbank. In Asia, a trend in recent years has been toward growth in investment in
distribution fields, particularly the retail sector.
FDI in Western Europe increased by 9.6% to US$22.4 billion. The increases were marked
in countries such as Germany, France, and the U.K. FDI in Germany was particularly robust,rising by 343.9% to US$3.9 billion. This appears to have been impacted by investments suchas TDK’s making a German electronic components manufacturer, EPCOS, its subsidiary(US$600 million), as FDI in the electrical equipment and devices field grew rapidly to
US$1.4 billion. FDI targeted at France grew by 255.2% to US$1.7 billion, with the capital
participation by Otsuka Pharmaceutical in a major French beverage firm, Alma (US$1.2
billion), contributing. FDI targeted at the U.K. rose by 122.8% to US$6.7 billion, making the
U.K. the second largest recipient of FDI after the U.S. FDI in the finance and insurance
industries accounted for US$5.1 billion of this figure, as financial institutions appeared toenhance the capital of their U.K. subsidiaries in the fourth quarter in particular.
FDI in Oceania increased by 44.2% yoy to US$6.1 billion. Active investment in Australia
was conducted by companies such as trading companies and petroleum development firms tosecure interests in mining and fuel resources. A large amount of investment took place in the
food-products field as well.
FDI targeted at the Middle East grew by 18.8% to US$1.1 billion, maintaining the high8

In not a few cases, M&As are conducted through overseas subsidiaries. In many such cases,
funds are raised locally, for example by using the subsidiaries’ internal reserves and loans
from local financial institutions. For this reason, it must be noted that there are some M&A
deals that do not involve transfer of capital between residents and nonresidents, whichcorresponds to FDI on an international balance of payments basis.
35

level from the previous year. This included participation by trading companies inenergy-plant projects in Saudi Arabia.
 The fields of finance and insurance, chemicals and pharmaceuticals, and mining were
drivers of FDI
A look at FDI figures by industry shows that FDI in nonmanufacturing industries grewmassively by 151.8% to US$85.5 billion, accounting for two-thirds of the total. With asuccession of investments in U.S. financial institutions and insurers, finance andinsurance-related FDI alone recorded an increase of 168.5% to US$52.2 billion. In finance, in
addition to its investment in Morgan Stanley, Mitsubishi UFJ Financial Group also acquired
UnionBanCal of the U.S. (US$3.7 billion). In insurance, Tokio Marine Holdings acquired
U.S. nonlife insurer, Philadelphia Consolidated (US$4.7 billion).
FDI in mining also increased by 159.5% to US$10.5 billion. In addition to the capital
participation in Namisa of Brazil, other marked examples of investments by trading
companies and steelmakers to secure resource interests included investment by Mitsubishi
Corp. and others in an Australian coal-mining project (US$2.4 billion) and Marubeni’s
investment in a copper-mining firm in Chile (US$1.3 billion).
FDI in manufacturing industries grew by 14.6% to US$45.3 billion, maintaining the highlevel from the previous year. As a result of a succession of large-scale M&As in thepharmaceuticals industry, FDI in the chemicals and pharmaceuticals field grew massively by
211.0% to US$11.6 billion. In the pharmaceuticals industry, where domestic markets arefacing difficulties in achieving growth, major firms are aggressively expanding overseas sales
channels.
 Firm establishment of overseas strategies utilizing cross-border M&As
A look at outward M&As by country shows that those targeted at the U.S. had an
overwhelming share, accounting for 59.4% of the total at US$38.7 billion, followed by India(US$5.0 billion) and Australia (US$4.6 billion) (Figure I - 36). Cumulative totals since 2000
show that outward M&As targeted at the U.S. had the largest share, followed by thosetargeted at the U.K. and Australia, in that order.
== Figure I-36 ==A look at outward M&As by industry shows that pharmaceuticals had the largest share in
2008, at US$19.6 billion, followed by finance at US$11.9 billion. The largest by value was
Takeda Pharmaceutical’s acquisition of a pharmaceuticals development venture, Millennium
Pharmaceuticals (US$8.1 billion) (Table I - 25). In the pharmaceuticals industry, there was a
succession of aggressive expansion into overseas using M&As, including Eisai’s acquisition
of MGI Pharma of the U.S. (US$3.7 billion), Daiichi Sankyo’s acquisition of Ranbaxy
Laboratories, and Shionogi’s acquisition of ScielePharma of the U.S. (US$1.2 billion).
Recent trends show heavy use of M&As in the food-product and mining industries as well.
== Table I-25 ==While M&As by the major countries of Europe and the U.S. decreased uniformly in 2008,
the increase in Japan’s outward M&As stood out. Although 2009 figures show yoy decreases,
outward M&As in the first half surpassed US$10.0 billion. This probably should be seen as asign that outward M&As are being established firmly as corporate growth strategies, for36

purposes such as expanding overseas markets, securing new technologies, and entering new
fields (Table I - 26).
== Table I-26 ==Outward M&As frequently involve greater risk than those between domestic firms.
Acquisitions involve many legal, regulatory, and local taxation matters that should be given
attention, such as calculation of an acquisition price that includes an appropriate premium on
stock prices (a premium offered by an acquirer over the face value of the acquired company’s
stock), and M&A examinations by each country. In not a few cases, competition to acquire
target firms increases premiums, and accordingly, a success in acquisition could become aheavy burden for the acquirer. Furthermore, a drop in stock prices after acquisition could leadto losses at the acquirer as the market capitalization of the acquired company declines.
On this point, in large-scale outward M&As by Japanese firms since roughly the 1990s,
there are not a few cases in which large valuation losses or losses on sale were booked after
the acquisitions, such as the purchase by Matsushita Electric (now Panasonic) of MCA of the
U.S. (US$7.1 billion, later sold). In response, among large-scale outward M&As in recent
years, the number of cases is increasing in which acquisitions have been conducted with morecautious management decision-making. For example, JT’s acquisition of Gallagher of the
U.K. in 2007 (US$18.8 billion) and NSG’s acquisition of Pilkington of the U.K. in 2006
(US$4.0 billion) kept the acquisition premium low in the 20-30% range. A look at the
average acquisition premium (vs. stock prices four weeks prior to announcement of theacquisition, not including negative figures) in large-scale Japanese outward M&As (valued at
US$100 million or more) shows a decrease from 77.7% in the years 1990-2003 to 44.4%
from 2004 through the first half of 2009.
Meanwhile, M&As still involve risk, as witnessed in the fact that Daiichi Sankyo booked
351.3 billion yen in consolidated extraordinary losses in 2008 as a one-time write-off of
goodwill (the difference between the acquisition price recorded on the balance sheet and thecurrent value of the net assets of the acquired firm) as a result of a drop in the stock price of
its acquired subsidiary, Ranbaxy Laboratories.
Consolidation of management following M&As can be said to be another difficulty ofcross-border M&As. The success of an acquisition requires various considerations, such as
differences in business practices and culture, corporate governance, and compensation levels
and systems, as well as measures to keep superior human resources from leaving.
 While returns on FDI fell for the first time in five years, those in China were solid
Japan’s outward FDI stock (assets) in 2008 increased by 25.1% yoy to US$683.9 billion.
This balance has increased rapidly, roughly doubling the figure at the end of 2003. However,when valued in yen, the balance decreased in 2008 by 118.5 billion yen yoy, as a result of the
sharp appreciation of the yen.
The rate of return on outward FDI, i.e. profits received from FDI (dividends, reinvested
earnings, and interest receipts) as a percentage of the balance of outward FDI, was 8.1%, adrop of 1.1 percentage points from the previous year. Looked at by country and region,
returns fell in major countries and regions with large outward FDI balances: ASEAN markets,
down 1.4 percentage points to 12.3%; the U.S., down 0.4 percentage points to 7.0%; and theEU, down 1.6 percentage points to 5.2 % (Figure I - 37). This could be attributed to runningcosts due to the rapid rises in prices of crude oil and raw materials beginning in 2007, as wellas the worsening economic conditions in the second half of 2008.

37

== Figure I-37 ==Amid these conditions, returns from outward FDI targeted at China remained strong at
9.8 %. Profits of firms advancing into China maintained a high level in 2008 as well, and alarge amount of these appears to have been booked as reinvested earnings. The Chinese
economy is relatively strong, supported by aggressive government fiscal policies and brisk
domestic demand. The Chinese market has become an earnings pillar of Japanese firms’
overseas investments.
JETRO’s FY2008 Survey of Japanese Firms’ International Operations (March 2009, withvalid responses received from 928 firms, for a response rate of 28.3%) asked about plans forbusiness advancement in China over the coming period of roughly three years. The
percentage of respondents in the manufacturing, trading, wholesale, and retail sectors,
reporting that they were considering expansion of existing businesses or startup of new
businesses was 50.1%, a drop of 12.9 points from the previous year’s results. In contrast, thepercentage of those reporting plans to maintain the existing scale of business increased by
10.7 points to 33.1%, indicating an increasing number of firms shifting their strategies tomaintain current status. Meanwhile, the percentage of those reporting plans to curtail orwithdraw business in China remained small at 3.4%, albeit increasing by 1.5 percentage
points. These results show that adopting a cautious attitude under tough economic conditions,Japanese firms still maintain positive operating stance, with more than one-half of the
respondents planning to expand their businesses in China instead of contracting them.
 Reinvested earnings projected to decrease
One major cause of the increase in outward FDI through 2008 can be said to be thecontributions of profits earned by overseas subsidiaries of Japanese firms. Of income fromoverseas subsidiaries, internal reserves other than dividends, interest income, etc. are booked
as reinvested earnings in international balance of payments statistics, and have contributed to
growth in outward FDI. While monthly statistics show that reinvested earnings already began
to decrease in September 2008, there are a number of factors that cause us to expect thatreinvested earnings will continue to decrease in and after 2009.
The first factor is revisions to the taxation system. Under the previous Japanese taxation
system, worldwide corporate income should be subject to corporate taxation. In many cases,
companies saw an increase in their tax burden, if income from overseas subsidiaries was paid
to Japan as dividends. Some pointed out that this had boosted internal reserves overseas. For
this reason, the Ministry of Economy, Trade and Industry had considered revisions to thesystem to encourage return of investment funds to Japan.
As a result, under FY 2009 revisions to the taxation system, a system of exclusion of gains
from dividends from overseas subsidiaries was adopted in April 2009. Under this system,
95% of dividends from overseas subsidiaries (in principle, those in which a parent company
in Japan has a stake of 25% or more) are not subject to domestic corporate tax or local tax.
This revision is likely to affect dividend behavior on the part of overseas subsidiaries to somedegree, and lead to a decrease in reinvested earnings accounted for as outward FDI.
The second is the fact that overseas units of Japanese firms, which had maintained strong
performance, saw a marked worsening of profits in FY2008, as described in Column I - 1
below.
The third is the fact that, faced with cash-flow problems, many parent companies in Japan
made their overseas subsidiaries to transfer their internal reserves to them as dividend
payment, in preparation for settlement of accounts in March 2009. The value of receipts from
FDI in March reached a monthly record of 978.5 billon yen. This rapid temporary increase in38

dividends should also lead to a decrease in future reinvested earnings by decreasing internal
reserves.
Reinvested earnings start to be reflected in international balance of payments statistics
about six months after the end of the fiscal year. Since the fiscal year of most Japanese firms
ends in March, these factors will statically impact reinvested earnings in and after September
2009. On a full-year basis, it appears certain that reinvested earnings will fall in 2009 after
peaking in 2008.
 Despite the financial crisis, Japanese firms remain motivated to expand overseas
In 2009, Japan’s outward FDI is decreasing. The value of FDI from January through May
decreased by 26.7% yoy to US$28.8 billion. In the first half of the year, Japan’s outward
M&As fell 54.1% yoy to just US$10.5 billion. Major investments taking place since the startof 2009 include NTT DoCoMo’s investment in a major Indian telecommunications firm, Tata
Teleservices (US$2.6 billion), Mitsubishi Rayon’s acquisition of a U.K. chemical firm,
Lucite (US$1.6 billion), and Kirin Holdings’ investment in a Philippine beverage maker, San
Miguel (US$1.2 billion).In the light of the global deceasing trend, Japanese outward FDI andM&A activity cannot be said to be bearish, although it has somewhat lost steam compared tothe past two years, in both of which Japan’s outward FDI recorded an all-time high.
What is the direction of Japanese firms’ overseas businesses under these circumstances?
The survey mentioned above was conducted in November and December 2008, when theimpact of the financial crisis was spreading. When asked about policies for overseas businessdevelopment (new investment or expansion of existing operating bases) in the future (roughly
the next three years), 52.8% of respondents in the manufacturing, trading, wholesale, andretail sectors reported plans to expand the size of their businesses, a drop of 13.6 percentage
points from the previous year’s results. However, most of this drop consisted of firms shifting
to a policy of maintaining current status (up 12.4 percentage points), while the percentages of
respondents reporting policies of shrinking or withdrawing from overseas businesses or notinvesting overseas remaining largely unchanged. A breakdown of respondents planning to
expand their businesses shows that an overwhelming majority of 77.4% planned to expand
sales functions. Furthermore, when firms whose overseas units’ business performance was
impacted by the financial crisis that started in the U.S. were asked about theircountermeasures against the crisis, most responses indicated a positive approach, with 23.0%
citing expansion of existing overseas businesses and 22.8% starting new businesses overseas(Figure I - 38).
== Figure I-38 ==Although the number of firms taking a cautious approach has currently increased, it can besaid that many firms are advancing overseas, particularly through active expansion ofoverseas sales channels, even under harsh operating circumstances created by the financial
crisis.
==================================================================
Column I-1 Overseas Income of Japanese Firms Supported by Asia and Oceania
 Overseas operating income surpasses its domestic counterpart
According to the data on Japanese firms’ overseas income collected by JETRO frompreliminary financial statements of 890 listed firms whose fiscal year ends between
December 2008 and March 2009, overseas units of the Japanese firms accounted for 36.2% interms of sales (not including exports from Japan) and 52.5% in terms of operating income. It
39was the first time since collection of these figures began in FY1997 that operating income
from overseas exceeded domestic operating income (Column Table I-1).
== Column Table I-1 ==A look at figures for income (sales and operating income) of the overseas units of 841
firms, for which comparison with the previous fiscal year’s results is available, shows thatsales decreased by 14.2% and operating income decreased by 38.7%, the first decrease insales and operating income in 10 years since FY1998, a year the Asian currency crisis
occurred. However, in comparison with the decreases of 12.3% in domestic sales and 65.5%
in domestic operating income, damage to operating income of overseas units was limited(Column Table I-2).
== Column Table I-2 ==The Americas suffered the most serious impact on income (with a decrease of 18.8% in
sales and 89.8% in operating income). Either decreased profits or losses recorded in nearly allindustries. Conditions were particularly severe in the transport equipment field (73 firms),
where sales fell by 29.2% and operating income of US$1,209.7 billion posted in the previous
year turned to operating loss of US$388.0 billion, which eroded operating income for theAmericas by 68.1%. Meanwhile, sales and operating income in Europe fell by 16.0% and69.9%, respectively. The impact of the crisis was relatively limited in Asia and Oceania,
where sales fell by 11.1% and operating income by 20.0%, as performance in materials
industries, such as chemicals, remained firm, while machinery and non-manufacturingindustries were sluggish. As a result, the share of operating income accounted for by Asia andOceania (on an 890-company basis) increased greatly from 12.2% in the previous year to39.4%, providing an underpinning for the income of Japanese firms.
 Local market development is an issue in emerging markets
One major reason behind this firm performance in Asia and Oceania is the fact that the
impact of the financial crisis was limited and lagged in being felt in these regions incomparison with other regions and consequently, it has not fully been reflected in theJapanese firms’ earnings reports. At the same time, while sales of processing manufacturingindustries*1 such as electrical and transport equipment, in which the impact of the financial
crisis has been marked, account for 66.3% of total sales in the Americas, the counterpart
figure for Asia and Oceania was as low as 43.5%. Meanwhile, the comparative figure forbasic-materials manufacturing industries, on which the impact of the crisis has been
comparatively limited, was relatively high at 39.1% in Asia and Oceania. This industrial
structure can be pointed to as a possible buffer against the impact of the crisis in theseregions.
The fact that income from Asia has become a major element supporting Japanese firms’
business performance also highlights some issues for them. Comparison of the share ofinternal sales (internal sales and transfers/total sales*2) among major regions in FY2008
shows that it reached 19.4% in Asia and Oceania, compared to 4.7% in the Americas and6.3% in Europe. It is likely that the high share of internal sales in Asia is due to Japanesefirms establishing production facilities in Asia and using them as bases for exports to Japanor third-party countries. However, in order to benefit from rapid growth in emerging markets
in the future, it is expected to be necessary for Japanese firms to revise their traditional
strategies of positioning emerging countries and regions just as production bases to explore
40

markets in Europe and the U.S.
*1 Industry categories of the Tokyo Stock Exchange are basically used. The categories ofprocessing manufacturing industries and basic-materials manufacturing industries used here
are based on the Annual Survey of Corporate Behavior from the Cabinet Office of Japan.
*2 In segment information by location included in preliminary consolidated earnings report,
regional sales consist of sales to outside customers as well as internal sales and transfers.
==================================================================(3) Steadily Expanding Inward FDI
 While inward FDI set a new record high, it was unable to escape the effects of thefinancial crisis
In 2008, inward FDI towards Japan (balance of payments basis, net) totaled US$24.6
billion, rising by 10.7% yoy to post a new record high for the second consecutive year. The
value of capital inflow (gross) rose 8.1% yoy to US$73.2 billion. On the other hand, the valueof capital outflow rose by 6.8% yoy to just US$48.6 billion, resulting in an increase in thevalue of net inflow (Figure I - 39). The value of net inflow of equity capital more thandoubled from the previous year’s figure of US$10.5 billion to US$24.1 billion. In addition tomultiple large-scale M&A deals, chiefly in the first half of the year, injection of capital into
financial institutions boosted the inflow of equity capital (gross) by 18.2% to US$41.5 billion.
At the same time, the number of large-scale withdrawals from Japan was limited, and thevalue of capital outflows (withdrawal of capital from Japan) fell by 29.5% to US$17.3 billion.
Among other items, while reinvested earnings (undistributed income of companies investedin) decreased by 2.3% to a net inflow of US$3.8 billion, other capital (such as loans between
parent companies and subsidiaries) fell from a net inflow of US$7.8 billion in the previous
year to a net outflow of US$3.3 billion. However, the surplus of inflow was maintained forinward FDI as a whole.
== Figure I-39 ==According to Thomson Reuters data (on a completed-deal basis), inward M&As toward
Japan in 2008 totaled US$19,158.91 million, the second highest level after the peak of
US$26,474.09 million recorded in the previous year. The number of deals was 168, the sameas in the previous year. These included four large-scale deals each totaling more than US$1
billion in value, such as the January 2008 deal (US$4,466.32 million) that made the Nikko
Cordial Group a wholly owned subsidiary of Citigroup. However, all these large-scale deals
were concentrated in the first three quarters of the year, with only one large-scale deal, i.e. theinvestment in Benesse Corp. (US$576.4 million), conducted in and after October (Table I 27).
== Table I-38 ==Since it would be difficult to expect any large-scale M&As to take place in 2009, and thevalue of the yen has been in an increasing trend since September 2008, future prospects forinward FDI appear somewhat dark. In fact, with the value of net capital inflows from January
through May 2009 depressed to roughly one-third of the results of the same period of 2008, at
US$4.0 billion, and a large-scale capital outflow expected from Citigroup’s sale of the Nikko
Cordial Group, it is hard to expect the full-year figure to exceed the 2008 level.
41 Capital transfer increased in connection with industrial reorganization
A look at the values of capital inflows by region in 2008 shows that while inflows from
Asia and Central and South America saw double-digit growth, investment from thedeveloped nations of Europe was sluggish and net inflows from the largest investor nation,
the U.S., decreased (Figure I - 40).
== Figure I-40 ==Investment from Asia (net inflow value) rose by 110.7% yoy to US$3.4 billion. This wasdue to an increase of 111.9% to US$2.7 billion in investment from Singapore, as thegovernment investment fund, GIC, acquired the Westin Tokyo in a major deal (US$721.8
million). Investment from Asian NIEs were generally favorable: investment from South
Korea (up 26.5% to US$279.0 million), Hong Kong (up 445.9% to US$257.0 million), andTaiwan (up 80.9% to US$66.0 million) combined rose by 109.2% to US$3.3 billion. While
investment from China was not that large in terms of size, at US$37.0 million (up 155.4%),
this was the highest level since 1996, from when onward statistics are available. Movements
by Chinese investors include Chongqing Changan Automobile’s establishment of a wholly
owned subsidiary, the Changan Japan Design Center, in Kanagawa Prefecture in April and an
investment fund in the CITIC Group making a precision-component press manufacturer,
Shinwa Seiko, its subsidiary in November.
Investment from Central and South America as a whole increased by 42.0% to US$4.0
billion, due primarily to an increase of 142.7% (to US$3.6 billion) in the value of investment
from the Cayman Islands (a British overseas territory) in the finance and insurance industry.
This increase appears to have resulted primarily from capital increases in finance-related
firms, conducted through investment subsidiaries.
While the value of net inflow from Western Europe increased only slightly as a whole,rising 1.6% to US$4.9 billion, both inflows and outflows involving this region were active,
including injections and withdrawals of capital in the financial and insurance industries,
industrial reorganization chiefly in the chemicals and pharmaceuticals industries, and majorloans to Japanese subsidiaries in the transport equipment and devices industry.
Investment from the Netherlands increased from a net outflow of US$400.0 million in theprevious year to a net inflow of US$2.7 billion. Although capital of nearly US$1.0 billion
was withdrawn from the telecommunications industry, the purchase of additional shares in
Chugai Pharmaceutical by a Swiss pharmaceuticals giant, Roche, through its Dutch
subsidiary (US$919.51 million) and investments in the electrical equipment and devices andgeneral machinery and devices industries boosted overall investment from the country.
Investment from Germany increased from a net outflow of US$800.0 million in theprevious year to a net inflow of US$1.2 billion. In addition to a reaction to the contraction of
the Japanese operations by a major pharmaceuticals firm in the previous year, deals such as
Robert Bosch GmbH making Bosch Japan its wholly owned subsidiary (US$911.38 million)
contributed to the increase.
Investment from Switzerland increased by 61.2% to US$1.9 billion. In addition to capital
inflows in the chemicals and pharmaceuticals industry, developments such as UBS (bank)investing US$136.29 million in a theme-park operator, USJ were major contributors to theincrease.
In contrast, investment from the U.K. and Belgium fell from net inflows in the previous
year to net outflows of more than US$1.0 billion each. Investment from the U.K. dropped
from a net inflow of US$500.0 million in the previous year to a net outflow of US$1.3 billion

42because of large-scale withdrawals of capital from chemicals and pharmaceuticals andwholesale and retail industries. Investment from Belgium recorded a net outflow of US$2.0
billion due to capital outflows in the wholesale and retail and financial and insurance
industries.
Although the value of investment from the U.S. decreased by 11.1% from the peak of2007 to US$11.8 billion, it remained high. The value of inflows into the financial andinsurance industries increased substantially when Citigroup increased in the first quarter its
ownership of Nikko Cordial Securities (US$4,466.32 million) through a forward triangularmerger (a stock-swap M&A paying for the acquisition with parent-company stock) as part ofmaking the latter the formers’ subsidiary, and conducted in the fourth quarter a major
increase in capital (approximately US$3.6 billion) of a company in the same group. In
addition, Citigroup decided to transfer its shares in the Nikko Cordial Group to Sumitomo
Mitsui Banking Corp. in the fourth quarter of 2009 (774.5 billion yen, or roughly US$7.9
billion). Also, while large-scale deals such as the acquisition of the real estate of Shinsei
Bank’s head office by a special-purpose company in the Morgan Stanley Group(US$1,174.45 million) did take place, Ford Motor sold its shares in Mazda (US$528.0
million), resulting in a yoy decline in the value of net inflows.
A look at investment by industry type shows that, as was the case in the previous year, thevalue of net inflows in non-manufacturing industries, chiefly the financial and insurance
industries, accounted for more than 90% of the total at US$22.3 billion. Meanwhile, in
manufacturing industries, investment fell substantially in the materials industries of oil,rubber and leather, and glass, earth, and stone, as well as metals, which saw active investmentin the previous year. At the same time, investment increased in machinery-related industries
such as general machinery and devices and electrical machinery and devices. In these ways,
investment in manufacturing industries had a different investment trend than that in theprevious year. (See Reference Materials/Supplement Statistics: Annotation 13 at the end of
this White Paper.) Toward more active FDI in JapanThe balance of inward FDI has increased steadily since the Japanese government
announced a plan to double inward FDI in 2003, rising 2.8 times from the 2001 base level of
6.6321 trillion yen under the plan to 18.4562 trillion yen by the end of 2008. As a percentage
of GDP, this represents an increase from 1.3% to 3.6% (Figure I - 41). Nevertheless, Japan’sbalance of inward FDI remains low in comparison with those of other major nations9. Whilein some aspects international comparisons are difficult, since, for example, JapaneseInternational Investment Position statistics do not include indirect investment (see Column I 2), there is more room for Japanese inward FDI to grow than that for other major nations’
inward FDI.
== Figure I-41 ==Reasons for the virtually growing trend in Japan’s inward FDI since 2000 were: the steady
growth of the world and Japanese economies until the financial crisis; and the spread ofcorporate rehabilitation businesses in Japan in line with increased inward M&A activity,
backed by improvements in the legal systems governing corporate reorganization (such ascompany law) and bankruptcies (such as the Civil Rehabilitation Law and the Corporate
According to UNCTAD, the balance of inward FDI as a percentage of GDP globally
averaged 27.9% as of the end of 2007, while the average for developed countries was 27.2%.
943

Reorganization Law). Additional contributing factors that may be identified include
improvements in administrative procedures to increase predictability for foreign investors andimprovements in corporate governance. With regard to the latter, the Financial Instruments
and Exchange Law have made it mandatory for listed firms to report on their internal controls
beginning with the business year starting in after April 2008. This has made some
contribution to increasing reliability of financial reporting. Appointment of outside directors
is spreading as well. According to the Corporate Governance Study Group Report (June 17,2009) from the Ministry of Economy, Trade and Industry, more than 40% of firms listed on
the Tokyo Stock Exchange that have established board of auditors had appointed outside
directors, and the percentage is in an increasing trend. Although the report called for further
improvements and initiatives in governance systems, it did not go so far as to propose formal
institutionalization of appointment of outside auditors.
Under these circumstances, the Japanese government’s Expert Committee on FDI
Promotion released Five Recommendations Toward the Drastic Expansion of Foreign Direct
Investment in Japan10 on May 19, 2008, and in December it revised the Program for
Acceleration of Foreign Direct Investment in Japan compiled in June 2006. Key points thathave newly been added to the program included consideration of the ideal effective corporatetax, active promotion of bilateral investment agreements and execution of Economic
Partnership Agreements (EPAs) including sections on investment, consideration of ideal
foreign capitals regulations, and, continuation and rehabilitation of domestic firms’
operations through M&As. The Economic and Fiscal Reform 2009, released June 23, 2009,
also states clearly that “progress shall continue to be made in comprehensive study of foreign
capitals regulations, an exception to the principle of nondiscrimination between domestic andforeign investors, together with an effort to boost inward FDI in Japan, in accordance with
the Program for Acceleration of Foreign Direct Investment in Japan.”
Efforts toward promotion of inward FDI toward Japan in the areas of administrative
procedures and taxation systems are also being implemented. Beginning Aril 1, 2009, theexamination period for prior notification of FDI under the Foreign Exchange and Foreign
Trade Control Law has been reduced from the previous periods of 30 days in principle (twoweeks if no problems arise) to five business days at the shortest, and on June 23,
improvements were made including lengthening the periods over which notification of FDI
may be submitted, extending the deadline for follow-up reports, and simplification of thesubjects of reporting. In the area of taxation as well, gains on sale of stock by foreign
investors investing in Japanese firms through means such as venture and rehabilitation funds
and satisfying certain conditions have been made, in principle, nontaxable, and taxation
conditions have been eased on sale of stock by foreign investors investing in Japanese firms
through funds investing over the period of one year or longer. In addition, progress is being
made in improving the business environment, with an awareness of competition from Asia,
through steps such as the start of operations (June 2009) of the new Tokyo AIM stock market
for professionals, established as a joint venture between the TSE and the London Stock
Exchange.
In the future, in order to increase international competitiveness in terms of business costs,
continued study would be desirable concerning an ideal taxation system, particularly

The five recommendations are: (1) enhancement of a system toward the facilitation of
M&As, (2) comprehensive studies on foreign capitals regulations, (3) establishment ofpriority strategies by sector, (4) reduction of business costs and improvement of systemtransparency, and (5) regional revitalization through foreign capital, and strengthening
promotion activities to invite foreign capital.
10

44

concerning the effective corporate tax rates in Japan11, which are considered higher level inthe world (Figure I - 42). In addition, to raise the level of Japan’s investment environment toa more competitive level, there is likely to be a need for environmental improvements toenable foreign firms to do business smoothly in Japan, for example by increasing theefficiency of international movements of people and things through infrastructure
improvements, and facilitating international movements of capital by improving theinternational taxation system, such as reorganization of tax treaties, and concluding
investment agreements. Furthermore, since many foreign businesses operating in Japan point
to the difficulty of securing human resources such as those with proficient language skills andspecialists as impediments to doing business, enhancements in “soft” areas such as
human-resources development as needed for foreign capital to do business in Japan remains
an issue be addressed.
== Figure I-42 ====================================================================
Column I-2 Trends in treatment of indirect investment in International Investment
Position statistics and revision of the Balance of Payments Manual
International Investment Position statistics for each country and region are prepared inaccordance the fifth edition of the Balance of Payments Manual (BPM5) compiled by the
IMF. However, since in some areas, specific methods of totaling figures are left to thediscretion of each country and region, international comparisons are difficult.
Typical examples of such differences include (1) methods of valuation of assets andliabilities (book value or market value) and (2) whether to include indirect investments within
the scope of companies booked as direct investments.
While BPM5 recommends evaluation of assets and liabilities at market value, Japan
employs book value. However, since 2007, estimated market prices*1 have been released for
figures for 1999 and later, for reference purposes.
Regarding handling of indirect investments, BPM5 calls for including investments
satisfying certain criteria (e.g., the direct investor’s subsidiaries [greater than 50%
participation], the subsidiaries’ subsidiaries, branches and affiliates [10-50% participation],and the direct investor’s affiliates and their subsidiaries) as direct investments (fully
consolidated system, FCS). According to a 2001 survey by the IMF, 13 of the 56 countries
surveyed included FCS in their inward FDI balance statistics. However, out of concern for
calculation costs and reporting burden, not a few countries restricted their balances to direct
investments only, and Japan was one of them.
In December 2008, the IMF released the sixth edition of the BPM (BPM6)*2. While thisrevision to the manual effectively did not make any major changes to handling of indirect
investments, it has permitted alternative calculation methods: investments for which the
product of multiplication of participation through the direct investment by participation
through indirect investment is more than 10% (participation multiplication method, PMM)
are to be accounted for as direct investments; and the direct investor’s investments in its
subsidiaries and affiliates and their subsidiaries alone to be accounted for as direct
11

According to KPMG’s Corporate and Indirect Tax Rate Survey 2008 (KPMG
International, September 2008), as of April 2008, Japan’s effective corporate tax rate was
40.69%, exceeding the average of 26.7% for the 30 OECD member states and that of 25.9%
for all 106 countries surveyed.
45investments (direct influence/indirect control method [DIIC]). (See Column Figure I-1)== Column Figure I-1 ==Whichever method is employed, inclusion of indirect investments in balance statistics inJapan is highly likely to lead to an upward revision of the inward FDI balance*3.
*1 There are two methods of determining market value: (1) the market price method (using
the stock price for listed firms and assessing the value of non-listed firms in reference to thestock prices of listed firms [or indices]), and (2) the current value method (reassessing thecurrent value of the firm by assuming purchase of all tangible assets on the balance sheet). In
countries employing assessment by market value (e.g., France and Italy), primarily themarket price method is used, out of concern for preparation costs and international
comparisons. (The U.S. releases figures for both methods.)*2 Major changes include recognition of international investment position (IIP), which had
been an auxiliary statistic in previous balance of payments statistics, as a core statistic andaddition of new statistics to improve systemic consistency with system of national account(SNA) and grasp the status of new transactions. BPM5 was published in 1993, and Japan’s
IIP statistics shifted to a BPM5 basis beginning in 1996.
*3 For reference, the ratio of consolidated to nonconsolidated figures for 1,613 listedcompanies in Japan whose fiscal year ended March 2009 is 1.45 on a total asset basis, or 1.27
on a net worth basis (according to statistics from the Tokyo Stock Exchange). However, it
must be noted that the scope of direct investments under the FCS system and the scope of
consolidation under accounting standards differ on points such as the latter employees thestandard of effective control.
References:
Wada, Maiko (2004) “Cyokusetsu toshi ni okeru kansetsu shusshi saki no toriatsukai ni
tsuite” (“Treatment of Indirectly Owned Enterprises in Direct Investment.” September
2004 .September 2003(Bank of Japan)
Wada, Maiko and Koichiro Ohnishi (2003) “Kokusai shushi tokei, taigai shisan fusai
zandaka ni okeru chokusetsu toshi no tokeijo no atsukai ni tsuite” (“Differences inTreatment of Direct Investment in the Balance of Payments Statistics and the International
Investment Position”). August 2003 (Bank of Japan)“Japan’s Balance of Payments for 2008 (Preliminary).” March 2009 (Bank of Japan)
IMF, The Survey of the Implementation of Methodological Standards for Direct Investment(SIMSDI), 2003――, The Coordinated Direct Investment Survey Guide, March 2008==================================================================

46

Table I-1 GDP growth and contribution by country and region
2005
U.S.
EU 27
Japan
East Asia
China
South Korea
ASEAN 10
India
Central and South America
BrazilCentral and Eastern Europe
RussiaMiddle East
AfricaWorld
Reference
Developed Countries
Developing Countries
BRICs

2006

2007

2008

2009(Estimate)(%)
2010(Estimate)

Growth rate

Contribution

Growth rate

Contribution

Growth rate

Contribution

Growth rate

Contribution

Growth rate

Contribution

Growth rate

Contribution

2.9
2.2
1.9
8.1
10.4
4.0
5.9
9.2
4.7
3.2
6.0
6.4
5.8
5.8
4.5

0.7
0.5
0.1
1.3
0.9
0.1
0.2
0.4
0.4
0.1
0.2
0.2
0.2
0.2
4.5

2.8
3.4
2.0
9.1
11.6
5.2
6.2
9.8
5.7
4.0
6.6
7.7
5.7
6.1
5.1

0.6
0.8
0.1
1.5
1.1
0.1
0.2
0.4
0.5
0.1
0.2
0.2
0.2
0.2
5.1

2.0
3.1
2.4
10.1
13.0
5.1
6.6
9.3
5.7
5.7
5.4
8.1
6.3
6.2
5.2

0.4
0.7
0.2
1.8
1.3
0.1
0.3
0.4
0.5
0.2
0.2
0.3
0.2
0.2
5.2

1.1
1.1
-0.6
6.6
9.0
2.2
4.5
7.3
4.2
5.1
2.9
5.6
5.9
5.2
3.2

0.2
0.3
0.0
1.2
1.0
0.0
0.2
0.3
0.4
0.1
0.1
0.2
0.2
0.2
3.2

-2.8
-4.0
-6.2
2.9
6.5
-4.0
-0.7
4.5
-1.5
-1.3
-3.7
-6.0
2.5
2.0
-1.3

-0.6
-0.9
-0.4
0.5
0.7
-0.1
0.0
0.2
-0.1
0.0
-0.1
-0.2
0.1
0.1
-1.3

0.0
-0.3
0.5
5.3
7.5
1.5
2.2
5.6
1.6
2.2
0.8
0.5
3.5
3.9
1.9

0.0
-0.1
0.0
1.1
0.9
0.0
0.1
0.3
0.1
0.1
0.0
0.0
0.1
0.1
1.9

2.6
7.1
8.4

1.6
2.9
1.6

3.0
8.0
9.5

1.8
3.3
1.9

2.7
8.3
10.5

1.6
3.5
2.1

0.9
6.1
7.6

0.5
2.7
1.6

-3.8
1.6
3.3

-2.1
0.7
0.7

0.0
4.0
5.5

0.0
1.8
1.3

(Notes) (1) The world GDP growth rate is calculated with the IMF's weighted purchasing power parity (PPP).
(2) Contribution by each country and region is calculated with the weighted PPP for 2008.
(3) East Asia includes the 10 ASEAN countries, China, South Korea, Hong Kong and Taiwan.
(4) Figures may differ from other parts due to the revision of and difference in original statistics.
(5) The definition of the developing countries follows the World Economic Outlook (IMF).
(Source) Prepared based on the World Economic Outlook (IMF)

Figure I-1 Financial-Institution Losses In Connection With the Financial Crisis (2007 2010)
3,500（US$ billion）（％）

Losses

19.0

3,000

20
18

Loss rate (right scale)

16
Percentage of GDP (right scale, in bold)

2,500

14
12

2,000
10.2
5.9

7.3
1,000

1,193

U.S.

Europe

9.0

5.8
3.0
2.0

2,712

8.7
7.0

5.0

500
0

10

9.9

1,500

270
149

345
185

8
6.1

6

4.3

4

181

2
0

Japan

Developing
nations in Asia

Developing Eastern Europe Central andSouth America
nations in
Europe; Middle
East; Africa

Notes: (1) Bank losses as a percentage of GDP for each region have been calculated based on 2008 nominal GDP figures for each region.
(2) Loss rates represent ratios to financial institutions’ balances of loans and securities held.
Source: Based on World Economic Outlook (WEO) (IMF, April 2009) and Global Financial Stability Report (IMF, April 2009).

47

Figure I-2 Cross-border bank credit balances (by credit recipient)(US$ billion)$35.8 trillion(as of March 31,
2008)

40,000U.S.

35,000Developed European countries(excluding the U.K.)
U.K.

30,00025,000$30.9 trillion(as of December
31, 2008)

Japan
Other developed countries
Developing European countries

20,00015,000Asia and Oceania
Central and South America
Middle East and Africa

10,000Off-shore centers

5,000

77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
2005
2006
2007
2008

0

48

Figure I-3 Rise and fall of cross-border bank credit balances (consolidated,
ultimate-risk basis)(Solid lines indicate credit expansion; dotted lines indicate credit contraction)(US$ million)(2007)
10,706

3,997

6,216

Developing European countries

6,547

Russia, CIS

U.S.

106,002429,148

153,081
44,326

218,534

Developed European countries

58,27372,272Developing
Asian countries and regions

33,757

Japan

194,977
22,698118,415
6,791
322,039

46,775Central and SouthAmerica

134,912
8,226
Offshore banking centers

Middle East and Africa

37,386
8,907
148,255
189,809(2008)-6,860-1,093

1,017

Developing European countries-9,431

Russia, CIS

U.S.

2,535
45,275-98,532-41,067-4,28567,931-92,689

Developing Asian countries
and regions

506

Developed European countriesJapan-65,352-23,066-51,735
2,477-115,005

Central and SouthAmerica

843

16,647
4,229
Offshore banking centers

Middle East and Africa-7,235-7,689-50,500-548,569(Notes)(Source)(1) Positive values denote an expansion of credit; negative values represent a contraction (capital withdrawal).
(2) The ultimate-risk basis values were compiled in order to gain an understanding of the actual country risk, and were calculated in part byadding transnational money flows moving through banks (excluding their overseas subsidiaries and branches) into foreign banks located within each country(3) Classification of countries and regions follows the BIS system in principle, except that Russia and the CIS countries were excluded from the developing
Asian and European countries. Hong Kong and Singapore were included in the offshore banking centers.
Prepared based on BIS statistics.

49

Figure I-4 Trends In Cross-Border Securities Transactions(Solid lines represent increases in investment amounts, dotted lines represent repatriation of funds)(Units: US$ million)(2007)

93

1,162

Developing nations in
Europe1,015
Russia, CIS-753-3,0394,726

26,276
220,667

U.S.

-8,488
123,734

Developed
nations in
EuropeDeveloping
nations in Asia

26,547
5,660-6,189

7,153
Japan

47,366
172,860

5,394
9,319

8,993
104

-1,093553

98,612Central andSouth America

33,162
159,467

Middle East,
AfricaOffshore financial centers-1,157-2,84228,542

530,693(2008)-9,183519

Developing nations in
Europe-1,45863

Russia, CIS-2,893

2,809-37,140-27,143

U.S.

-4,8897,319

109,514Developed
nations in
EuropeDeveloping
nations in Asia

-18,707255
2,894

48,314
Japan

48,54349,516

7,381-29,273-19,739-23-58,409
2,594

5,664

Central andSouth America-246-26,020

Middle East,
AfricaOffshore financial centers

8,373-8,751
22,386

226,704
Notes:(1) Positive figures indicate a surplus of acquisition by residents of securities issued by nonresidents, while negative figures indicate a surplus of sale by residents of securities issued by nonresidents (repatriation of funds).

(2) While regional categories are based primarily on the text, for offshore financial centers figures have been totaled for countries and regions corresponding to BIS definitions. For transactions with Japan, developed countries in Europe
correspond to the category “Western Europe,” while for transactions with the U.S., they correspond to the 12 euro-zone nations plus Denmark, Norway, Sweden, Switzerland, and the United Kingdom. For transactions with Japan,
developing countries in Europe correspond to the category “Eastern Europe, Russia, etc.,” not including Russia, while for transactions with the U.S., they correspond to Europe as a whole minus countries and territories corresponding todeveloped countries in Europe and offshore financial centers. For transactions with Japan, figures for Russia and the CIS represent totals for Russia, while for transactions with the U.S., they represent totals for Russia, the Ukraine, andKazakhstan. For transactions with Japan, developing countries in Asia correspond to Asia as a whole, not including Singapore and Hong Kong. For transactions with the U.S., these figures represent totals for Bangladesh, China, India,
Indonesia, South Korea, Laos, Malaysia, Pakistan, the Philippines, Taiwan, and Thailand.
(3) Transactions with Japan have been converted to dollars using average IFS rates during the period.
(4) Japanese statistics have been employed for transactions between Japan and the United States.

Source:Based on Balance of Payments Statistics (Ministry of Finance, Bank of Japan) and Treasury International Capital System (U.S. Department of the Treasury).

50

Figure I-5 Trends In Borrowing From Overseas By Major Regions (Percentage of
Foreign Reserves) and Current Account Balance（％）

Central and Eastern Europe and the Baltic nations

200

（％）

LatviaShort-term borrowing from overseas(percentage of foreign reserves)

Russia, CIS

100

Short-term borrowing from overseas(percentage of foreign reserves)

Estonia

Croatia
Romania

Hungary100

Slovakia

Lithuania
Bulgaria

Czech Republic

Belarus

50
UkraineKazakhstan

Georgia

RussiaCurrent accountbalance (percentage of GDP, inverted scale)
Kyrgyzstan

Poland

0
0

-5
-10
-15
-20
Current account balance (percentage of GDP, inverted scale)

Armenia

0

-25
（％）

10

5

0

-5

-10

-15

-20

-25
（％）

（％）

Asia

150

Hong Kong

Singapore

Short-term borrowing from overseas(percentage of foreign reserves)

Short-term borrowing from overseas(percentage of foreign reserves)

Indonesia
South Korea
Thailand100

Malaysia

Philippines

India
China

0
20

Central and South America

（％）

200

Bangladesh

Taiwan10

Vietnam1000Current account balance (percentage of GDP, inverted scale)

Ecuador50
MexicoPeru

Argentina
BrazilCurrent account balance Colombia(percentage of GDP, inverted scale)

0
5

-10

Costa Rica

Chile

0

-5

-10

（％）

（％）

Figure I-6 World trade trends (developed and developing countries)
Between developed countries

50.0

Between developed and developing countries
Between developing countries

40.0

Total world trade

30.0
20.0
10.0
0.0
-10.0
-20.0
ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣ
2000

2001

2002

2003

2004

2005

2006

2007

2008

(Note) The classification for developed and developing countries follows the Direction of Trade Statistics(IMF). Taiwan is classified as a developed country.
(Source) Prepared based on DOT (IMF) and Taiwanese statistics.
51

(%)

80.0

Exports of machinery and equipment (percentage of total exports, 2007)

Figure I-7 Exports to the U.S. as a Percentage of Exports From Major Countries
and Regions, and Percentage Made Up of Machinery and Equipment(2007)

70.0

Hungary

60.0

Czech Republic

Japan
South Korea
Singapore

Slovakia

50.0

Germany

Luxemburg

SwedenAustria

MexicoFinland

Slovenia

40.0

Hong Kong
Taiwan
Malaysia
China
ThailandU.K.

FranceSpain

PolandRomania

30.0

Philippines

Switzerland

Italy
Netherlands

CanadaPortugal

IrelandTurkeyBelgium

Lithuania

20.0

BrazilSouth Africa
Argentina

Indonesia
India

Greece10.0

NorwayRussiaNew ZealandColombia

Australia

Venezuela
Chile

0.0
1.0

Vietnam

Peru

10.0
Percentage of exports to U.S. (exports to U.S./total exports, 2007, logarithmic scale)

52

100.0
(%)

Figure I-8 Net Export Dependency of Major Countries (2007) and Q1 2009 Real GDP
Growth Rate
7.0

(%)
China

5.0

Egypt

Real GDP growth rate Q1, 2009 (year on year)

PolandIndonesia

India

3.0

Argentina
Peru

Norway1.0

Australia Israel

GreecePhilippines

South Africa

-1.0
Chile

-3.0

CanadaUnited States
Spain
United Kingdom

Portugal

Iceland-5.0

BrazilBelgium

FranceItaly

Denmark

Republic of Korea

Malaysia

Slovakia

Slovenia-7.0

Switzerland

Austria
Czech RepublicNetherlands

Hungary

Germany
SwedenThailandHong Kong

MexicoJapan-9.0

Finland

RussiaSingapore

Taiwan

-11.0
-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

(%)
(Notes) (1)◆ denotes Asian countries and regions(2) The figures for some countries are year-on-year calculations using seasonally adjusted figures.
(Sources) Prepared based on data from "National Accounts Main Aggregates Database" (United Nations, August 2008), statistics ofindividual countries and data from Thomson Reuters.

53

Figure I-9 Commodity price indicator and nominal effective dollar exchange rates
60

350
Reuters/Jeffries CRB Index (right scale)

65

Dollar's nominal effective rate (broad)
Dollar's nominal effective rate (vs. currencies of major countries and regions)

Dollardepreciation

70

Dollar's nominal effective rate (vs. other currencies)

300
Risingcommodity prices

75

250

80
85

200

90
150

95
100

100

105

Fallingcommodity prices

110

50
02/01
02/03
02/06
02/09
02/12
03/02
03/05
03/08
03/11
04/01
04/04
04/07
04/10
04/12
05/03
05/06
05/09
05/12
06/02
06/05
06/08
06/11
07/01
07/04
07/07
07/10
07/12
08/03
08/06
08/09
08/11
09/02
09/05

Dollarappreciation

54(Year/Month)Table I-2 Gaps Between G-20 Public Expenditures (As a Percentage of GDP in 2007)
and GDP(Unit: %)Public expenditures to counter the f inancial crisis(discretionary spending) as a percentage of G DP

2009
(projected)

2010(projected)

2009(projected)

2010(projected)

0.0
1.2
0.0
0.0
0.4
0.0
0.0
0.6
0.0
0.0
0.3
1.1
0.0
0.0
2.4
2.3
1.9
0.0
0.2
1.1

1.5
2.5
0.6
1.9
3.1
0.7
1.6
0.6
1.4
0.2
2.4
3.7
1.5
4.1
3.3
3.0
2.3
0.8
1.5
2.0

2.1
0.5
1.7
2.7
0.8
2.0
0.6
0.6
0.1
1.8
1.2
1.3
3.5
2.1
0.0
0.3
0.0
1.8

-1.0
-4.3
-4.5
-5.8
-5.1
-8.0
-0.9
-5.5
-4.1

-1.6
-4.7
-5.2
-7.2
-5.7
-7.9
-2.0
-6.6
-5.5

0.6

2.0

1.5

-4.6

-5.7

2008

Argentina
Australia
BrazilCanadaChina
FranceGermany
India
Indonesia
Italy
Japan
South Korea
MexicoRussiaSaudi Arabia
South Africa
Spain
Turkey
U.K.
U.S.
Total
(PPP weighted-average basis)

GDP gap (projected)

Note: Total GDP gap shown is based on figures for developed nations (33 nations as defined by the IM F).
Source: Based on WEO (IM F, April 2009) and Fiscal Implications of the Global Economic and Financial Crisis (IM F,
June 2009).

55

Figure I-10 Trends in OECD countries' economic indicators(January 2007=100)
105
103
101
99
97
95
93
Manufacturing Business Survey Index

Consumer Confidence Index

Industrial Production Index

Leading economic indicators

91
89
87
85
1

2

3

4

5

6

7

8

9

10

11

12

1

2

2007

3

4

5

6

7

8

9

2008

10

11

12

1

2

3

4

5

2009 (Month)(Note) The leading economic indicators and Industrial Production Index figures include all OECD countries as well as India, Indonesia,
China, Brazil, Russia and South Africa.

(Source) Prepared based on Organization for Co-operation and Development (OECD) statistics.

56

Figure I-11 The IMF's global real economic growth rate scenario
6.0

(%)
5.1

5.2

5.0
4.4

4.0
3.2
3.0
2.0

1.9
1.0

0.3

0.0
90% confidence interval-1.0

70% confidence interval-1.3

50% confidence interval

-2.0

-1.3

Baseline scenario

-3.0

-3.4
-4.0
2006

2007

2008

(Source) Prepared based on WEO (IMF).

57

2009(estimate)（Year）
2010(estimate)Table I-3 World Trade Indices
Units
World merchandise trade (export basis)

2004

2005

2006

2007

2008

US$ billion

9,136

10,45012,124

13,821

15,891

Nominal growth rate

％

22.2

14.4

16.0

14.0

14.9

Real growth rate

％

13.5

9.7

11.5

5.6

3.8

Export price growth rate

％

8.8

4.7

4.5

8.4

11.1

US$ billion

9,372

10,67012,252

14,096

16,832

Nominal growth rate

％

22.2

13.8

14.8

15.1

15.2

Real growth rate

％

12.7

8.2

9.4

7.0

3.5

Import price growth rate

％

9.5

5.6

5.4

8.0

11.7

World trade in services (export basis)

US$ billion

2,220

2,480

2,810

3,350

3,730

Growth rate

％

21.3

11.7

13.3

19.2

11.3

World trade in services (import basis)

US$ billion

2,120

2,350

2,630

3,120

3,470

Growth rate

％

19.1

10.8

11.9

18.6

11.2

World real GDP growth rate

％

4.9

4.5

5.1

5.2

3.2

Growth in industrial production index (advanced economies)

％

2.9

2.0

3.2

2.6

-2.0

Crude oil prices (average)

US$/barrel

37.8

53.4

64.3

71.1

97.0

1 million bbl/day

81.8

83.1

83.8

84.9

84.5

％

-8.2

-1.5

-0.9

-5.4

-5.1

World merchandise trade (import basis)

Crude oil

Quantity demand for crude oil

Change in nominal effective exchange rate of U.S. dollar(Notes)(Sources)(1) 2008 trade value and growth rates are JETRO estimates.
(2) Real growth rate = nominal growth rate - export price growth rate(3) Real GDP growth rates based on purchasing power parity.
(4) The definition of advanced economies and emerging and developing economies follow IFS classification.
(5) A negative change in the nominal effective exchange rate stands for depreciation.
Prepared based on International Financial Statistics (IMF), World Economic Outlook (IMF), WTO, BP and statistics of individual
economies.

Table I-4 Trends in Growth Rate of Commodity Price Indices
2004
2005
23.7
24.3
All primary commodities
15.2
6.0
Non-fuel commodities
Food
14.0
-0.9
Beverages-0.9
18.1
Agricultural raw materials
4.1
0.5
Metals34.6
22.4
Energy31.1
38.1(Source) Prepared based on International Financial Statistics (IMF).

58

2006
20.7
23.2
10.5
8.4
8.8
56.2
19.2

2007
11.8
14.1
15.2
13.8
5.0
17.4
10.4

(Unit: %)
2008
27.5
7.5
23.3
23.3
-0.8
-8.0
40.1

Figure I-12 Monthly Change in World Export Growth Rate(% YoY)
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0

Volume contribution-30.0

Price contribution-40.0

Nominal growth rate

(Source) Same as Table I-4.

Figure I-13 Trends in Real Imports in US (January 2007-April 2009)(January 2007=100)
120.0

100.0

80.0
Total

Capital goods

Automotive vehicles

Consumer goods

60.0

40.0

(Source) Prepared based on Thomson Reuters.

59

Figure I-14 Trends in Real Imports in the UK (January 2007 - April 2009)(January 2007=100)
130.0
120.0
110.0
100.0
90.0
Total

Basic materials

Semi-manufactures

Finished manufactures

80.0
70.0

(Source) Same as Figure I-13.

Figure I-15 Trends in Imports of Major Advanced Economies(% YoY)
40.0
30.0
Germany

20.0

U.S.
France

10.0

U.K.

0.0
-10.0
-20.0
-30.0
Jan. Feb. Mar. Apr. May Jun. Jul. Aug.
(Sources) Prepared based on statistics from individual economies.

60

Sep.

Oct.

Nov.

Dec.

Figure I-16 Trends in BRICs Exports(% YoY)
80.0
60.0
China
Russia40.0

Brazil
India

20.0
0.0
-20.0
-40.0
Jan. Feb. Mar.
(Source) Same as Figure I-15.

Apr.

May

Jun.

61

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Table I-5 World Trade by Country and Region (2008)(US$ million，%)Exports
Value

NAFTA
US
CanadaMexicoEU27
EU15Germany
Netherlands
FranceItaly
UK
Belgium
Spain
SwedenJapan
East Asia
China
South Korea
Hong Kong
TaiwanASEAN
Singapore
Malaysia
ThailandIndonesia
VietnamPhilippines
RussiaSwitzerland
BrazilAustralia
India
NorwayTurkeySouth Africa
World trade value (estimate)
Advanced economies
Emerging and developing economies

BRICs

2,036,681
1,287,442
456,574
292,666
5,935,445
5,284,156
1,464,715
633,650
606,814539,591
483,567
476,978
268,982
183,979
775,918
3,429,242
1,428,869
422,007
370,654
243,233
964,478
338,143
199,759
177,846
137,020
62,68549,025367,573
200,336
197,942
186,560
178,034
164,146
131,934
80,20815,890,769
9,619,666
6,271,103
2,172,418

Growth rate

9.8
10.7
8.5
7.6
10.9
10.0
10.8
14.8
9.9
7.8
8.9
10.3
6.1
8.8
8.9
13.3
17.3
13.6
6.0
3.6
13.2
12.9
13.3
9.0
20.1
29.1
-2.5
31.4
16.4
23.2
32.0
20.6
20.3
22.9
14.8
14.9
10.7
21.9
20.3

Imports
Share

12.8
8.1
2.9
1.8
37.4
33.3
9.2
4.0
3.8
3.4
3.0
3.0
1.7
1.2
4.9
21.6
9.0
2.7
2.3
1.5
6.1
2.1
1.3
1.1
0.9
0.4
0.3
2.3
1.3
1.2
1.2
1.1
1.0
0.8
0.5
100.0
60.5
39.5
13.7

Contribution

Value

1.3
3,134,263
0.9
2,337,379
0.3
453,7190.1
343,165
4.2
6,213,390
3.5
5,422,378
1.0
1,204,290
0.6
573,6390.4
706,558
0.3
556,1900.3
669,4990.3
470,4460.1
402,9720.1
167,6590.5
756,086
2.9
3,123,827
1.5
1,131,469
0.4
435,275
0.2
393,443
0.1
239,666
0.8
923,974
0.3
319,7480.2
157,0860.1
180,5830.2
129,1970.1
80,714-0.0
56,646
0.6
255,5740.2
183,200
0.3
192,4410.3
212,080
0.2
292,848
0.2
87,691
0.2
201,706
0.1
101,176
14.9 16,832,338
6.7 10,774,759
8.2 6,057,580
2.6 1,872,331

Growth rate

7.7
7.5
7.4
9.5
12.1
11.0
14.0
16.3
13.9
8.6
5.3
13.7
3.4
9.7
21.7
17.6
18.3
22.0
6.1
9.6
22.5
21.5
6.8
19.0
73.5
28.8
2.4
34.8
13.6
43.6
20.9
34.6
9.2
18.4
13.9
15.2
11.5
22.2
25.0

Share

18.6
13.9
2.7
2.0
36.9
32.2
7.2
3.4
4.2
3.3
4.0
2.8
2.4
1.0
4.5
18.6
6.7
2.6
2.3
1.4
5.5
1.9
0.9
1.1
0.8
0.5
0.3
1.5
1.1
1.1
1.3
1.7
0.5
1.2
0.6
100.0
64.0
36.0
11.1

Contribution

1.5
1.1
0.2
0.2
4.6
3.7
1.0
0.5
0.6
0.3
0.2
0.4
0.1
0.1
0.9
3.2
1.2
0.5
0.2
0.1
1.2
0.4
0.1
0.2
0.4
0.1
0.0
0.5
0.1
0.4
0.3
0.5
0.1
0.2
0.1
15.2
7.6
7.5
2.6

(Notes)(1) Trade values for the world, EU27, advanced economies and emerging and developing economies are based on JETRO estimates.
(2) ASEAN includes the following six countries: Singapore, Thailand, Malaysia, Indonesia, the Philippines and Vietnam.
(3) East Asia referred to in this section stands for 10 economies: China, South Korea, Taiwan, Hong Kong and the six ASEAN countries.
(4) The definition of advanced economies and emerging and developing economies follow DOT (IMF).

(Source)

Same as Figure I-15.

62

Table I-6 Trends in Export Growth Rate by Economies (YoY Change, October December 2008)(Unit: %)OctoberNovember
Emerging
Emerging
Exported to
Advanced
Advanced
Advanced
and
and
World
World
economies
economies developing
economies developing
Exported from
economies
economies
-6.2
7.9
-1.9
-22.8
-8.4
-18.4
-18.1
Advanced economies
Emerging and developing economies
14.6
17.9
15.9
-5.8
7.6
-0.8
-7.0
World
0.8
11.7
4.3
-16.9
-2.2
-12.1
-14.0
(Note)The definition of advanced economies and emerging and developing economies is same as Table I-5.
(Source)
Prepared based on Direction of Trade Statistics (IMF).

December
Emerging
anddeveloping
economies
-6.1
7.6
-0.6

World
-14.2
-1.4
-9.4

Table I-7 Trends in Trade Intensity Indices with U.S. and China, for Selected Asian
Economies (Export Basis)(Unit: points)

China
South Korea
Singapore
Malaysia
ThailandJapan
Hong Kong(Notes)(1)(2)(Source)

1980s
0.5
2.2
1.2
1.0
1.1
2.1
1.9

U.S.
1990s
1.0
1.4
1.3
1.3
1.3
1.9
1.5

2000s
1.3
1.0
0.8
1.2
1.1
1.6
1.1

1980s
0.0
1.2
1.0
2.2
2.9
11.8

China
1990s
2.1
1.0
1.0
0.8
1.7
12.7

2000s
3.5
1.4
1.2
1.4
2.3
8.8

T rade Intensity Index (export basis) between Economy A and Economy B is calculated as:(value of exports from Economy A to Economy B/total value of Economy A’s
exports)/(total value of worldwide exports to Economy B/total value of worldwide exports).
Figures for the 2000s are based on averages through 2007.

Same as T able I-6.

Table I-8 Trends in Exports to the U.S. and China as a Percentage of GDP, for Selected
Asian Economies(Unit: %)
U.S.
China
1980s
1990s
2000s
1980s
1990s
2000s
China
0.7
2.9
5.9
South Korea
9.7
5.3
5.5
0.0
1.6
5.7
Singapore
26.8
26.4
21.0
2.5
3.3
12.2
Malaysia
7.8
15.6
18.9
0.7
2.0
6.0
Thailand
3.6
7.2
10.0
0.6
0.8
4.1
Japan
3.7
2.7
3.0
0.5
0.4
1.5
Hong Kong
24.2
25.3
25.8
15.9
35.1
61.6
Figures for the 2000s are based on averages through 2007.
(Note)(Sources) Prepared based on Direction of Trade Statistics and World Economic Outlook(both from the IMF).

63

Table I-9 World Trade (Exports) by Product in 2008
Total value
Machinery and equipment
General equipment
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automobile parts
Precision instruments
ChemicalsIndustrial chemicals
Pharmaceutical and medical supplies

Plastics and rubber
Foodstuffs
Seafood
Grains
Wheat
Corn
Rice
Processed food products
Oils, fats and other animal and vegetable products

Miscellaneous manufactured goods
Iron ore
Mineral fuels, etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum products(Source)

Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
CopperNickelAluminum
Lead
Same as Figure I-15.

64

Value
Growth rate
15,890,769
14.9
6,024,840
7.3
1,977,994
8.6
1,922,179
6.0
1,647,130
6.3
781,551
2.6
632,596
1.8
22,73810.0
334,458
2.3
477,14510.4
2,008,634
12.9
1,376,563
15.3
401,345
16.2
632,0717.9
970,92617.0
72,053
4.5
98,101
40.7
43,15047.4
26,80732.2
16,682
41.2
424,21915.3
156,701
45.1
448,057
10.6
68,79363.4
2,682,668
44.3
2,562,004
44.4
96,55877.4
90,90856.0
2,166,633
43.4
1,418,581
43.1
640,902
3.5
73,743-1.1
360,873
4.6
1,343,078
11.5
828,90721.7
55,297-2.5
14,732-39.3
56,571
-0.9
5,339
-5.9

(US$ million, %)Contribution
Share
100.0
14.9
37.9
3.0
12.4
1.1
12.1
0.8
10.4
0.7
4.9
0.1
4.0
0.1
0.1
0.0
2.1
0.1
3.0
0.3
12.6
1.7
8.7
1.3
2.5
0.4
4.0
0.3
6.1
1.0
0.5
0.0
0.6
0.2
0.3
0.1
0.2
0.0
0.1
0.0
2.7
0.4
1.0
0.4
2.8
0.3
0.4
0.2
16.9
6.0
16.1
5.7
0.6
0.3
0.6
0.2
13.6
4.7
8.9
3.1
4.0
0.2
0.5
-0.0
2.3
0.1
8.5
1.0
5.2
1.1
0.3
-0.0
0.1
-0.1
0.4
-0.0
0.0
-0.0

Figure I-17 Import Trends for 20 Leading Economies (January-December 2008,
Dollar-Denominated Values' Contribution to Increase or Decrease)(% YoY)
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0

General equipment
Transport equipment
Chemicals
Mineral fuels, etc.
Base metals and base metal products
Total

-5.0
-10.0
-15.0
Jan.

Feb.

Mar.

Apr.

May

Electrical equipment
Precision instruments
Foodstuffs
Textile and textile products
Other
Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

(Notes)(1)The 20 leading economies are: Japan, Germany, China, the US, France, the UK, Canada, South Korea, Hong Kong,
Russia, Singapore, Mexico, Taiwan, Switzerland, Malaysia, Brazil, Australia, India, Thailand and Indonesia.
(2)These 20 economies account for 62.9% of world imports by value.
(Source) Same as Figure I-15.

Figure I-18 Trends in Automobile Imports(% YoY)
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0

11 advanced economies
BRICs
Five other emerging and developing
economies
Total growth rate in 20 major economies-40.0
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
(Notes) (1)The 20 leading economies are same as Figure I-17.
(2)The definition of advanced economies and emerging and developing economies is sameas Table I-5.
(Source) Same as Figure I-15.

65

Figure I-19 Trends in Clothing Exports(% YoY)
30.0

11 advanced economies

25.0

BRICs

20.0

Five other emerging and developing
economies

15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

(Notes) (1)The 20 leading economies are same as Figure I-17.
(2)The definition of advanced economies and emerging and developing economies is sameas Table I-5.
(Source) Same as Figure I-15.

Table I-10 World IT Trade (Export Basis, 2008)(Unit: US$ million, %)Share of Share of
Value
total
total IT
exports exports
Total IT equipment
2,065,531
13.0
100.0
IT parts
1,021,064
6.4
49.4
Finished IT products
1,044,468
6.6
50.6
Computers and peripherals (total)
456,999
2.9
22.1
Multifunctional digital equipment
18,4980.1
0.9
Computers and peripherals
287,073
1.8
13.9
Parts of computer and peripherals
151,428
1.0
7.3
Office equipment
5,087
0.0
0.2
Telecommunications equipment
337,903
2.1
16.4
Semiconductors and electronic components
454,4852.9
22.0Electronic tubes and semiconductors
95,1650.6
4.6
Integrated circuits
359,320
2.3
17.4
Other electronic components
408,389
2.6
19.8
Flat panel displays
61,7080.4
3.0Video equipment
193,695
1.2
9.4
Digital cameras
41,3310.3
2.0
Reception apparatus for television
79,3680.5
3.8
Audio equipment
6,821
0.0
0.3
Portable audio players
5,647
0.0
0.3
Measuring and testing equipment
170,2631.1
8.2
Machines and apparatus for the manufacture of semiconductor devices
31,8890.2
1.5(Note)
Time series comparisons with past data is difficult due to significant revisions of HS codes in 2007. For this reason, in
this White Paper the current value in 2008 and the share of total exports are listed.
(Sources)

Same as Figure I-15.

66

Figure I-20 Trends in Russia's Crude Oil Export (January - December 2008)(% YoY)
100.0(US$/barrel)

Average spot price (rightscale)
Growth rate on a pricebasis
Growth rate on a volume
basis

80.0
60.0
40.0

140.0
120.0
100.0
80.0

20.0
60.0

0.0

40.0

-20.0
-40.0

20.0

-60.0

0.0
Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

(Sources) Prepared based on International Financial Statistics (IMF) and Russia's trade statistics.

Figure I-21 Trends in Wheat Exports from Major Economies(US$/ton)(% YoY)
200.0

500.0
450.0

150.0

400.0
350.0

100.0

300.0
250.0

50.0

200.0
0.0

150.0
100.0

-50.0

50.0
-100.0
Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

U.S.

Aug.

Canada

Sep.

Oct.

Nov.

0.0
Dec.

France(Sources) Prepared based on International Financial Statistics (IMF) and statistics from individual economies.

67

68

(Sources)(Notes)

Total

72.4
69.5
77.5

Electrical equipment

Transport equipment

Precision instruments

56.5

52.9

56.8

2,182,391(19.5)
1,056,317(15.0)
336,653(14.9)
334,870(13.0)
293,540(15.6)
91,254(20.9)
204,481(20.9)
55,143(17.8)
106,660(25.6)
17,124(63.0)
7,861(35.8)
170,538(58.6)
57,612(58.2)
82,820(12.1)
41,679(12.0)
103,496(15.4)

I
2,406,299(22.0)
1,125,471(16.4)
354,986(17.8)
359,320(15.4)
313,319(14.6)
97,847(21.0)
220,849(25.3)
59,251(24.3)
117,604(29.4)
18,261(79.5)
11,997(75.7)
227,926(74.9)
78,322(66.9)
90,069(3.9)
42,578(- 1.6)
126,490(25.0)

II2008

2,440,767(19.0)
1,101,942(10.1)
350,924(11.7)
371,315(8.2)
284,046(9.9)
95,658(12.3)
219,818(22.2)
59,385(21.6)
121,199(22.7)
18,503(39.6)
16,459(118.2)
248,113(77.4)
84,556(66.0)
103,583(2.7)
58,446(1.2)
139,013(47.5)

III
2,034,034(- 7.8)981,246(- 11.0)
316,967(- 6.0)325,699(- 12.7)
253,569(- 15.0)
85,011(- 10.1)
177,635(- 5.7)53,420(3.1)
108,917(- 3.5)
14,507(- 12.1)
11,777(46.9)
162,646(- 0.4)54,397(- 10.0)87,444(- 2.9)48,107(2.9)
99,019(1.7)

IV1,562,480(- 28.4)
733,868(- 30.5)
239,747(- 28.8)
236,536(- 29.4)
188,698(- 35.7)
68,888(- 24.5)
161,560(- 21.0)
55,155(0.0)
90,424(- 15.2)
12,784(- 25.3)
10,114(28.7)
101,388(- 40.5)
28,381(- 50.7)
69,296(- 16.3)
37,847(- 9.2)
69,563(- 32.8)

I

2009

46.6

63.6

56.0

71.6

64.6

82.8

30.1

50.3

53.7

55.3

68.4

53.6

66.2

57.8

60.4

57.8

17 leading
economies'
share of world
total in 2008

2,361,446(21.1)
937,122(12.9)
291,066(12.4)
333,183(10.8)
228,663(14.2)
84,210(19.9)
199,207(17.2)
54,050(13.4)
123,970(18.4)
9,063(71.9)
20,010(74.0)
425,687(63.7)
262,634(70.1)
88,436(5.2)
56,407(4.6)
90,758(14.8)

I
2,576,245(23.2)
1,001,890(13.9)
312,178(13.8)
352,445(12.8)
247,063(13.8)
90,204(18.9)
214,736(21.1)
56,992(17.1)
135,762(22.3)
9,733(80.5)
23,405(90.4)
496,199(66.5)
309,134(73.4)
88,527(4.7)
52,836(5.0)
109,126(23.8)

II

2008
III
2,641,189(21.3)
982,405(7.8)
304,850(9.6)
371,382(7.3)
217,556(5.8)
88,618(9.2)
219,585(21.5)
58,271(16.7)
130,805(18.2)
8,297(46.3)
26,936(90.1)
547,987(70.8)
346,539(71.7)
101,986(2.9)
68,999(4.1)
116,960(39.6)

Imports

2,154,578(- 8.2)865,648(- 12.4)
273,262(- 7.1)
327,775(- 13.4)
184,394(- 18.7)
80,217(- 9.6)
183,294(- 3.5)54,074(2.1)
127,018
(1.1)
7,220
(9.6)
20,071(18.1)
357,255(- 4.8)205,762(- 12.2)
84,836(- 6.3)55,486(- 2.5)89,607(7.3)

IV1,662,141(- 29.6)
657,352(- 29.9)
216,139(- 25.7)
238,942(- 28.3)
139,868(- 38.8)
62,404(- 25.9)
159,256(- 20.1)
52,132(- 3.5)
109,374(- 11.8)
6,656(- 26.6)
15,352(- 23.3)
221,318(- 48.0)
114,126(- 56.5)
75,834(- 14.2)
51,501(- 8.7)63,422(- 30.1)

I2009(Unit: US$ million, %)Based on data available as of June 30, 2009.
(1)
The 17 leading economies are: Japan, Germany, China, the US, France, the UK, South Korea, Canada, Hong Kong, Singapore, Russia, Taiwan, Australia, Switzerland, Brazil, Thailand and the Philippines.
(2)
Figures in parentheses represent YoY growth rates.
(3)
Same as Figure I-15.

Steel

Clothing

Textiles and textile products

19.4

31.6

Mineral fuels

Crude oil

69.9

69.7

46.8

56.6

Iron ore

GrainsFoodstuffs

Pharmaceuticals and medical supplies

59.8

68.7

General equipment

Industrial chemicals

70.8

Machinery and equipment

57.0

17 leading
economies'
share of world
total in 2008

Exports

Table I-11 Quarterly Trends for 17 Leading Economies (by Major Product)Figure I-22 Export Trends for 17 Leading Economies （January 2008-March 2009,
Dollar-Denominated Values' Contribution to Increase or Decrease）(% YoY)
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0

General equipment
Electrical equipment
Transport equipment
Precision instruments
Chemicals
Foodstuffs
Mineral fuels, etc.
Textiles and textile products
Base metals and base metal products
Other
Total

08/01 08/02 08/03 08/04 08/05 08/06 08/07 08/08 08/09 08/10 08/11 08/12 09/01 09/02 09/03（Yr/Mo）(Note) The 17 leading economies are same as Table I-11.
(Source) Same as Figure I-15.

Figure I-23 Import Trends for 17 Leading Economies(% YoY)
40.0
30.0
20.0
10.0
0.0
‐10.0
‐20.0
‐30.0
‐40.0

General equipment
Electrical equipment
Transport equipment
Precision instruments
Chemicals
Foodstuffs
Mineral fuels etc.
Textiles and textile products
Base metals and base metal products
Other
Total
08/01 08/02 08/03 08/04 08/05 08/06 08/07 08/08 08/09 08/10 08/11 08/12 09/01 09/02 09/03(Yr/Mo)(Note) The 17 leading economies are same as Table I-11.
(Source) Same as Figure I-15.

69

Table I-12 Trends in Growth Rate of World Trade in Services (Export Basis)(Unit: %, US$ million)
2007
Total

2008

19.2
11.3
Transportation
19.7
14.7
Travel
14.8
10.0
Other services
21.8
10.4
(Source) Prepared based on WTO data.

Value
Contribution
3,730,000
11.3
873,000
3.3
947,000
2.6
1,910,000
5.4

Figure I-24 Trends in Air Transportation (January 2008 - May 2009)(% YoY)
15.0
10.0
Passengers

5.0

Cargo

0.0
-5.0
-10.0
-15.0
-20.0
-25.0

(Yr/Mo)(Source) Prepared based on International Air Transport Association (IATA) data.

70

Table I-13 Trade in Services by Country and Region (2008)(Unit: US$ million, %)Imports

Exports

World
NAFTA
US
EuropeEU27
UK
Germany
France
Spain
Italy
Asia
Japan
ASEAN10CIS
RussiaSouth and Central America
BrazilAfricaEgypt
Middle East
Israel(Source) Same as Table I-12.

GrowthValue
rate
3,730,000
11.3
603,000
9.2
522,000
10.4
1,920,000
10.3
1,740,000
10.1
283,000
1.8
235,000
11.4
153,000
5.5
143,000
11.7
123,000
11.8
837,000
12.0
144,000
13.4
168,000
6.3
82,60025.9
50,29928.6
109,000
16.6
28,81727.4
87,80013.1
24,67425.5
93,50016.7
23,763
12.7

71

Share
100.0
16.2
14.0
51.5
46.6
7.6
6.3
4.1
3.8
3.3
22.4
3.9
4.5
2.2
1.3
2.9
0.8
2.4
0.7
2.5
0.6

GrowthValuerate
3,470,000
11.2
473,000
6.3
364,000
6.4
1,630,000
10.1
1,520,000
10.1
199,000
1.0
285,000
10.9
137,000
6.2
108,000
9.7
132,000
11.9
858,000
12.5
166,000
11.4
198,000
10.6
114,000
25.1
74,81329.4
117,000
19.1
44,37327.9
121,000
14.2
16,32224.7
158,000
12.9
19,598
11.4

Share
100.0
13.6
10.5
47.0
43.8
5.7
8.2
3.9
3.1
3.8
24.7
4.8
5.7
3.3
2.2
3.4
1.3
3.5
0.5
4.6
0.6

Table I-14 FDI of major economies (net flow, based on balance of payments)(US$ million, %)Outward foreign direct investment

Inward foreign direct investment
Value

US
CanadaEU27
EU15
Luxembourg
FranceGermany
NetherlandsUK
12 new EU members
Japan
East Asia
China
ASEAN5
India
BrazilRussia31 developed economies
Developing economies
World

Growth rate319,737
44,712731,087
620,382
80,52997,17424,939117,933
96,939110,705
24,550269,074
147,791
50,65941,07745,05873,053
1,183,703
650,904
1,834,607

Value

15.9
-58.8
-45.9
-48.7
-56.8
-6.4
-55.8
-65.3
-50.6
-22.0
10.7
2.2
6.8
-17.1
68.3
30.3
32.6
-35.3
5.4
-25.0

Growth rate

332,012
77,667
1,188,385
1,133,745
104,133
200,350
156,463
227,436
134,019
54,640130,801
168,515
53,471
32,036
19,354
20,45752,6291,919,615
257,019
2,176,634

-16.7
30.2
-25.2
-24.8
-58.5
18.5
-12.9
25.1
-50.8
-32.0
78.0
12.3
214.6
-29.8
25.2
189.5
14.6
-15.1
10.5
-12.7

(Notes) (1) JETRO estimates for "World" and "Developing economies" figures. (2) For countries and regions in which
dollar-based data has not been released, conversion is made using IMF quarterly average exchange rates. (3) The figures for"East Asia" consist of the sum total of China, South Korea, Taiwan, Hong Kong and five ASEAN countries. (4) "Developed
economies" consists of 31 countries and regions based on classification by the IMF. "Developing economies" are definedas all other countries and regions.
(Sources) Prepared based on national and regional balance of payments, BOP (IMF) and the Economic Commission for Latin
America and the Caribbean (ECLAC).

Figure I-25 Global inward FDI and cross-border M&As
2,500

(US$ billion)

2,000

1,500

1,000

500

0
95

96

97

98

FDI in developed economies

99

2000

01

02

03

FDI in developing economies

72

04

05

06

07

Global cross-border M&A

08 (Yr)Figure I-26 Inward FDI value trends (quarterly)（US $ million）

800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0-100,000

2004:I

2005:I

2006:I

2007:I

Other developed economiesUS2008:I

2009:I

EU 15

Table I-15 Top 10 Countries and Regions In the World In Terms of FDI(Unit: US$ million, %)Inward FDI
Outward FDI
2007
2008
2007
2008
1 Netherlands
340,093 U.S.
319,737 U.S.
398,597 U.S.
332,012275,758 China
147,791 U.K.
272,384 Netherlands
227,436
2 U.S.
196,390 Netherlands
117,933 Luxemburg
250,818 France
200,350
3 U.K.
186,225 France
97,174 Netherlands
181,790 Germany
156,463
4 Luxemburg
138,413 U.K.
96,939 Germany
179,538 U.K.
134,019
5 China
110,774 Luxemburg
80,529 France
169,062 Japan
130,801
6 Belgium
108,414 Russia
73,053 Spain
138,497 Luxemburg
104,133
7 Canada
103,871 Spain
69,944 Belgium
93,901 Switzerland
86,295
8 France
71,861 Belgium
63,064 Italy
90,778 Spain
80,070
9 Hungary
68,829 Hong Kong
62,992 Japan
73,483 Canada
77,667
10 Spain
Source: Based on national and regional balance of payments statistics and BOP (IMF).

73

Figure I-27 Global Inward FDI and Cross-Border M&As (1995 - 2008)(Unit: US$ billion)

3,000

Total global inward FDI

2,500
2,000
1,500
1,000
500
0
0

500

1,000

1,500

2,000

Total global cross-border M&As
Note: The direct line represents an approximate curve.
Source: Based on national and regional balance of payments statistics, BOPS (IMF), and Thomson Reuters data.

Figure I-28 Global cross-border M&A trends by quarter (2004-2Q 2009)
600,000(Deals)(US$ million)

3,000

M&A Value

500,000

2,500

Deals (right scale)

400,000

2,000

300,000

1,500

200,000

1,000

100,000

500

0

0

(Yr)
(Source) Prepared based on Thomson Reuters.

74

75

U.K.

Reuters Group PLCIntelsat Ltd
ICI PLCOCI Cement Group
Endesa Italia

Information services
Finance (investment)
Chemical products
Kiln, ceramics and stone
Electric, gas and waterJapan

Mar. NTT DoCoMo Inc

Puget Energy Inc
Ciba Specialty Chemicals
Advanced Micro-Mnfg Facilities
Distrigaz SA
Daimler AG
Tata Teleservices Ltd

Finance (investment)
Electric, gas and water
Finance (investment)
Communications

Fortis Bank SA/NV

Finance
Chemical products

Endesa SA

Electric, gas and water
Finance (investment)

British Energy Group PLC

Electric, gas and waterElectric, gas and water

FinanceElectric, gas and waterElectric, gas and waterIndustry
Pharmaceuticals

Electric, gas and water

Kiln, ceramics and stone

Chemical products

Information technology

Information services

Beverage (beer)

Food (tobacco)

Food (tobacco)

India

Germany

Belgium

U.S.

Communications

Automobiles

Electric, gas and waterElectronic equipment

Switzerland Chemical products

U.S.

Belgium

Spain

U.K.

U.S.

Target company
Nationality

Italy

Egypt

U.K.

Bermuda

U.K.

U.K.

U.K.

Spain

Industry
U.S.
Beverage (beer)Hong Kong Communications

Target company
Nationality

2,655

2,664

3,174

3,600

4,549

6,717

12,765

13,47015,40046,695

Amount14,34215,01815,70816,00018,266

18,631

19,82721,48960,40832,012

Amount(Source) Prepared based on Thomson Reuters.

(US$ million)

26.0

9.1

100.0

65.8

95.9

100.0

54.6

92.1

99.6

100.0

Equity after
acquisition (%)

80.0

100.0

100.0

76.0

100.0

100.0

27.1

100.0

100.0
100.0

Equity after
acquisition (%)(4) The ranking is based on the value of a single transaction. (5) If the acquirer is a holding company with manufacturing industries as its major business category, the manufacturer's name is listed.

(Notes) (1) Months indicate the completion date of the transaction. (2) Nationality of the acquirer is that of its ultimate parent company. (3) The definition of M&A follows Thomson Reuters.

UAE

Mar. Aabar Investments PJSC

Apr. BASF SE
Italy

CanadaGermany

Feb. Macquarie Group, etc.

May ENI G&P Belgium SpAFranceMay BNP Paribas SA

UAE

Italy

Jun. Enel SpA

Mar. Advanced Technology Investment

FranceGenentech Inc

Scottish & Newcastle PLC

Beverage (beer)

Industry
Switzerland Pharmaceuticals

Acquiring company
Nationality

Jan. Electricite de France SA

Mar. Roche Holding AG

January-June 2009

FranceGermany

Jun. E ON AG

Netherland

U.S.

CanadaNetherland

Jan. Lafarge SA

Jan. Akzo Nobel NV

Feb. Serafina Holdings Ltd

Apr. Thomson Corp

Apr. Heineken NV, Carlsberg A/S

Altadis SA

Food (cigarettes)
British American Tobacco PLC

Anheuser-Busch Cos Inc
China Netcom Grp(HK)Corp Ltd

Beverage (beer)

Telecommunications

Industry

Switzerland Investment groupFeb. Imperial Tobacco Group PLC

Nov. Investors

China

Belgium

Acquiring company
Nationality

Nov. InBev NV
Oct. China Unicom Ltd

2008

Table I-16 10 largest cross-border M&As (January 2008-June 2009)Table I-17 10 Largest Cross-Border M&As by SWF Investment (2008)(Unit: US$ million, %)Acquiring company/fund

Acquired company

Nationality
March GIC

SingaporeJune

Abu Dhabi Investment
Authority

Jan.
Jan.
July
Feb.
Oct.
Feb.
Jan.

Industry

Switzerland Finance
U.S.

Equity afte r
acquisition
(%)

9,760

9.0

Finance

7,500

4.9

UAE

Citigroup

GIC

Singapore

Citigroup

U.S.

Finance

6,880

4.0

Temasek Holdings
Qatar Investment
Authority
Dubai International
Financial Centre
Qatar Investment
Authority
Korea Investment
Corporation
Kuwait Investment
Authority

Singapore

Merrill Lynch

U.S.

Securities

4,400

10.7

Qatar

Barclays

U.K.

Finance

3,483

7.7

UAE

OMX

SwedenSecurities

3,397

98.4

Qatar

Cegelec

FranceEngineering

2,964

100.0

U.S.

Securities

2,000

8.5

Securities

2,000

n.a.

Financial services

1,205

25.0

South Korea Merrill Lynch

Abu Dhabi Investment

May Authority
Notes:

Nationality
UBS

AmountKuwaitMerrill Lynch

U.S.

UAE

RHB Capital

Malaysia(1) Months shown represent months of completion of transactions.
(2) The definition of SWF above is based on Thomson Reuters’ definition.
(3) Acquisitions of less than 10% equity are considered investments in securities.

Source: Based on Thomson Reuters data.

Figure I-29 Trends in value of M&As involving sovereign wealth funds(US$ million)
Government or government-owned entity

250,000

Of that, SWF

200,000
150,000
100,000
50,000
0
96

97

98

99 2000 01

02

03

04

05

06

07

08

(Notes) (1) SWF and government entities as defined by Thomson Reuters.
(2) Deals involving direct or indirect investment in acquirer or target.
(Source) Prepared based on Thomson Reuters.

76

09
1st
Half
(Year)

Table I-18 Trends in Japanese Trade
2007

2008

2008

Ⅱ
Ⅲ
Ⅰ
712,735
775,918
197,147
201,800
204,395(Growth rate)
10.1
8.9
18.5
18.1
13.8
Total import value
621,084
756,086
178,497
193,120
205,662(Growth rate)
7.2
21.7
23.2
29.0
33.7
Trade balance
91,651
19,831
18,6498,679-1,266(Difference from previous year [quarter])
23,654-71,820-2,822-12,423-27,069
Export volume index
112.9
111.1
115.7
114.8
116.4
(Growth rate)
4.8
-1.6
9.1
4.0
2.3
Import volume index
103.6
103.0
103.2
103.7
103.5
(Growth rate)
-0.2
-0.6
1.4
2.2
1.2
69.4
101.9
93.1
109.8
129.4
Crude oil import price (US$/barrel)(Growth rate)
8.6
46.8
61.9
69.7
82.4
Ratio of crude oil imports
16.8
20.5
21.2
20.9
23.4
Ratio of manufactured imports
56.3
50.1
51.7
50.2
47.1
Quarterly average exchange rate (yen/dollar)
117.8
103.4
105.2
104.5
107.6
(Rate of increase)
-1.2
13.9
13.5
15.5
9.4
(Notes) (1) 2005 is the base year for volume indices.
(2) The exchange rate is the yearly average of the center value of the inter bank rate during the year.
(3) Quarterly growth rates are year-on-year comparisons.
Total export value(US$ million, %)2009
ⅣⅠ
172,575
120,861-11.9-38.7
178,806
130,535
3.6-26.9-6,231-9,673-29,506-28,322
97.4
66.6
-19.8
-42.5
101.6
83.7
-6.7
-18.9
76.3
43.6
-8.4
-53.1
16.0
11.7
52.0
56.0
96.1
93.6
17.6
12.4

(Sources) Prepared based on "Trade Statistics" (Ministry of Finance), "National Economic Accounting" (Cabinet Office) and "Foreign
Exchange Quotations" (Bank of Japan).

Table I-19 Trends In Japan’s Current AccountCurrent accountGoods and services accountTrade balance
Exports
Imports
Services accountIncome accountCurrent transfers
Current account/GDP

2007
210,481
83,479104,654
677,009572,355-21,175
138,555-11,553
4.8 %(Unit: US$ million, %)2008
Change157,157-53,324
17,780-65,699
38,593-66,061
740,61363,604702,020
129,665-20,813362
152,470
13,915-13,093-1,5403.2 %-(Note)Exchange rates are based on the rules in the ministerial ordinance concerning reports on foreignexchange transaction. Exchange rates for exports and imports are calculated by JET RO based on theforeign exchange rate provided by regulation on Ministry of Finance.
(Sources) Based on "Balance of Payments Statistics" (Ministry of Finance, Bank of Japan) and"National Economic Accounting" (Cabinet Office).

77

Table I-20 Trends in Japanese trade by country/region(US$ million, %)
2009
2007
2008
Ⅱ
Ⅲ
Ⅳ
Ⅰ
Ⅰ
Value
712,735
775,918
197,147 201,800
204,395
172,575
120,861
ExportGrowth rate
10.1
8.9
18.5
18.1
13.8
-11.9
-38.7
Value
621,084
756,086
178,497
193,120
205,662
178,806
130,535
World
ImportGrowth rate
7.2
21.7
23.2
29.0
33.8
3.6
-26.9
4.0
2.3
-19.8
4.8
-1.6
9.1
-42.5
Export volume growth
2.2
1.2
-6.7
-0.2
-0.6
1.4
-18.9
Import volume growthValue
143,383
136,200
36,67735,09433,64830,781
19,379
ExportGrowth rate
-1.6
-5.0
4.0
2.8
-5.8
-19.5
-47.2
Value
70,83677,01818,895
20,58919,41918,115
14,717
US
ImportGrowth rate
4.1
8.7
10.4
14.3
15.0
-3.8
-22.1
-7.3
-10.9
-1.6
-3.3
-12.1
-25.6
-51.3
Export volume growth
2.0
-5.6
-5.6
-2.2
1.4
-15.7
-23.3
Import volume growthValue
105,270
109,383
30,431
28,411
27,47323,067
16,552
ExportGrowth rate
11.8
3.9
19.5
11.7
6.9
-19.5
-45.6
Value
65,00969,915
17,772
18,062
17,506
16,575
14,690EU27
ImportGrowth rate
8.2
7.6
13.1
15.0
6.8
-3.6
-17.3
-3.0
-4.2
5.9
-1.8
-1.5
-18.8
-46.0
Export volume growth
-0.2
-4.1
0.7
-0.7
-5.5
-10.5
-23.4
Import volume growthValue327,726
363,134
88,951
96,39498,44579,34557,417
ExportGrowth rate
10.8
10.8
18.8
20.9
18.0
-11.5
-35.5
East Asia
Value
253,976
286,898
68,132
72,52874,36471,87453,690
ImportGrowth rate
6.0
13.0
13.0
16.4
18.8
4.5
-21.2
Value
109,060
124,035
29,03633,29433,79027,917
20,609
ExportGrowth rate
17.5
13.7
19.8
27.6
20.1
-8.7
-29.0
Value
127,644
142,337
32,76235,731
36,73037,11428,537
China
ImportGrowth rate
7.7
11.5
9.8
13.7
16.3
6.6
-12.9
9.0
7.6
24.3
16.1
9.7
-14.5
-33.5
Export volume growth
0.5
-1.1
0.6
0.2
0.8
-5.7
-18.6
Import volume growthValue
86,990102,799
24,713
26,597
27,73623,754
15,435
ExportGrowth rate
13.9
18.2
27.1
26.8
22.9
-1.1
-37.5
Value
86,898106,118
25,722
26,45628,06725,873
19,120ASEAN 10 Import
Growth rate
8.6
22.1
25.6
26.0
28.6
9.6
-25.7
11.1
8.4
21.5
12.8
12.3
-9.8
-42.5
Export volume growth
0.4
1.3
8.0
3.4
1.6
-7.0
-23.0
Import volume growthValue54,19958,985
15,164
15,553
16,192
12,076
10,098
ExportGrowth rate
7.7
8.8
15.3
17.1
24.5
-18.1
-33.4
Korea
Value
27,252
29,248
7,369
7,522
7,372
6,985
4,978
ImportGrowth rate
-0.3
7.3
13.5
10.7
15.8
-8.1
-32.5
Value
44,78045,70812,067
12,426
12,1899,026
6,713
ExportGrowth rate
1.4
2.1
18.6
10.6
5.4
-23.5
-44.4
TaiwanValue
19,80921,637
5,242
5,585
5,610
5,200
3,866
ImportGrowth rate
-2.6
9.2
2.6
18.2
16.2
1.1
-26.3
Value
38,81839,98810,011
10,73910,766
8,473
5,861
ExportGrowth rate
6.4
3.0
11.0
12.7
10.1
-19.2
-41.5
Hong Kong
Value
1,448
1,545
421
376
378
369
274
ImportGrowth rate
-4.8
6.7
10.3
20.4
12.0
-11.3
-35.0
Value
26,18433,722
7,886
7,497
9,101
9,239
5,400
ExportGrowth rate
36.4
28.8
31.8
29.8
42.9
14.7
-31.5
Middle EastValue
113,824
165,445
39,95642,032
51,11532,343
18,874
ImportGrowth rate
4.2
45.4
59.4
65.8
81.8
-8.4
-52.8
Value
35,06340,684
10,358
9,711
10,896
9,719
8,377
ExportGrowth rate
Central and
14.7
16.0
22.9
18.1
22.5
2.1
-19.1
South America
Value
24,11727,448
6,500
6,938
7,205
6,805
4,829
ImportGrowth rate
18.2
13.8
20.5
19.2
14.1
3.3
-25.7
(Note) East Asia here refers to the sum total of China, NIEs (South Korea, Taiwan, Hong Kong, Singapore), and ASEAN
4 (Thailand, Malaysia, Indonesia, the Philippines).
(Source) Prepared based on "Trade Statistics" (Ministry of Finance).
2008

78

Figure I-30 Japan's Quarterly Export Trends (Contributions by Country and Region)(YOY change, %)
30.0
20.0
10.0
0.0
-10.0
US
ASEAN4
China
Total export growth rate

-20.0
-30.0

EU
NIES
Other

-40.0
-50.0
Ⅰ

Ⅱ

Ⅲ

Ⅳ

Ⅰ

2007

Ⅱ

Ⅲ

2008

Ⅳ

Ⅰ

2009 (Year)

Table I-21 Japanese exports by product (2008)

Total value
Machinery and equipment
General equipment
M ining and construction equipment

Machine tools
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
ChemicalsBase metals and base metal products

Steel
Primary steel products
Steel products

World
Value Growth rate
775,918
8.9
521,4117.1
151,482
8.8
13,093
14.8
8,447
11.2
138,650
2.7
195,966
9.4
131,301
8.5
115,439
6.7
5,797
-7.7
33,176
4.2
35,313
5.3
88,224
6.6
71,51819.6
53,04925.7
39,262
30.4
13,787
14.1

US
Value Growth rate136,200-5.0
109,431-5.5
28,455
-1.5
1,650
-15.0
1,990
17.7
20,082-2.4
54,095-9.3
40,930-9.3
40,516
-8.6
1,974
-9.4
8,346
-9.8
6,800
1.3
10,749
5.0
4,933
7.5
3,335
12.8
1,215
18.3
2,120
9.8

EU27
Value Growth rate
109,383
3.9
83,1282.4
28,022
2.0
2,125
-15.1
1,874
3.3
20,845
4.2
27,428-0.8
17,920-3.2
17,137
-3.7
2,315
-13.5
5,657
4.9
6,833
12.8
11,310
6.7
3,388
14.6
1,948
18.3
834
20.1
1,115
17.0

China
Value Growth rate
124,035
13.7
69,62512.9
23,447
15.4
963
47.5
1,564
9.7
30,042
6.0
9,240
30.9
4,075
47.8
3,752
51.9
2
57.2
5,153
19.8
6,896
15.5
17,7403.5
16,67620.1
11,062
25.5
8,708
22.4
2,354
38.4

(Note) See Reference Materials/Supplement Statistics: Annotation 1 at the end of this White Paper for the definitions of products.
(Source) Prepared based on "Trade Statistics" (Ministry of Finance).

79(US$ million, %)ASEAN10
Value Growth rate
102,799
18.2
59,05813.4
20,972
18.2
1,641
47.6
983
21.1
22,367
2.2
12,290
28.3
4,443
25.7
2,429
29.3
139
15.7
4,912
25.8
3,429
20.4
10,80512.2
16,65032.1
12,784
40.7
9,692
50.5
3,092
16.7

Table I-22 Japan's Auto Export Trends (Volume basis)

Total exports(YOY growth rate)
US(YOY growth rate)
Europe(YOY growth rate)
Asia

2005
5,053,061
1.9
1,662,939
6.6
1,178,197-7.6
420,067-17.8

2006
5,966,672
18.1
2,261,552
36.0
1,305,861
10.8
381,561-9.2(No. of vehicles, %)
2007
2008
6,549,940 6,727,091
9.8
2.7
2,215,452 2,068,062
-2.0
-6.7
1,497,800 1,589,054
14.7
6.1
440,920
525,08115.6
19.1(YOY growth rate)
Reference: Vehicle production by
3,383,277 3,281,073 3,324,326
Japanese automakers in US(YOY growth rate)
7.6
-3.0
1.3
(Note) Only four-wheel vehicles included above.
(Source) Based on Japan Automobile Manufacturers Association data.

2,893,466-13.0

Table I-23 Japan's Imports By Product (2008)

Total value
Machinery and equipment
General equipment
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
Chemicals
Foodstuffs
Iron ore
Mineral fuels
Coal
LNG
Petroleum and petroleum products
Crude oilBase metals and base metal products
Steel
Primary steel products
Steel products

World
GrowthValue
rate
756,086
21.7
183,414
5.3
59,058
6.2
77,715
5.5
22,580
3.7
7,219
-8.4
6,820
-11.3
714
21.9
6,851
17.6
24,061
3.6
65,46920.3
60,45616.9
13,021
47.5
265,71054.4
29,30197.9
45,163
68.8
178,56346.9
154,44748.3
41,0148.4
17,591
26.1
11,344
37.1
6,247
10.0

U.S.
GrowthValue
rate
77,018
8.7
32,111-4.2
10,098
-7.1
8,325
-7.6
6,761
2.9
615
8.6
538
5.6
204
26.3
750
19.2
6,927
-2.0
11,615
12.1
17,519
29.2
0
n.a.
1,802
91.8
468 41984.8
292
5.0
1,021
59.0
0
n.a.
2,634
5.3
1,016
7.1
464
23.0
552
-3.4

EU27
GrowthValue
rate
69,915
7.6
27,963
2.7
9,484
5.6
4,707
9.4
8,478
-6.2
5,494
-10.6
5,333
-11.6
105
7.4
2,118
15.9
5,294
8.2
18,872
14.7
7,317
18.8
0 1619.8
668
79.1
0
395.7
0
n.a.
653
81.6
0
n.a.
2,799
10.7
865
2.3
392
-3.5
473
7.6

China
GrowthValue
rate
142,337
11.5
60,922
14.5
24,115
13.6
29,343
14.7
2,919
24.2
37
55.3
18
0.1
159
24.4
1,813
21.7
4,545
12.1
11,899
23.5
7,051
-11.9
0
60.2
4,104
59.2
2,151
78.0
0
n.a.
1,074
35.4
388
239.0
9,689
21.4
5,857
32.6
2,580
66.6
3,276
14.2

(Note) See Reference Materials/Supplement Statistics: Annotation 1 at the end of this White Paper for the definitions of products.
(Source) Based on "Trade Statistics" (Ministry of Finance).

80(Unit: US$ million, %)ASEAN10GrowthValue
rate
106,118
22.1
27,820
6.5
8,001
5.0
16,118
4.1
1,623
31.6
160
126.1
30
-52.5
46
215.0
1,290
22.9
2,078
15.9
9,000
27.7
7,442
23.9
453
-1.1
39,343
64.0
4,180
88.8
21,352
59.5
13,714
65.6
8,084
65.7
5,341
-9.3
931
14.3
246
13.1
685
14.8

Figure I-31 Import Factor Analysis and Trends in Crude and Raw Oil Import Prices(US$/barrel)(YOY change, %)

50.0
40.0

160.0

August: US $135.20/barrel
140.0

30.0

120.0

20.0

100.0

10.0
80.0
0.0
60.0

-10.0

Price factors (left scale)-20.0

Volume factors (left scale)

-30.0

40.0

Rate of growth in total import value (left scale)

20.0

Crude oil/raw oil import prices (right scale)

-40.0

0.0
(Year/month)

Table I-24 Japan’s Imports and Exports of IT-Related Products (2008)(Unit: US$ million, %)Imports

Exports
2007

Computers and peripheral equipment (total)
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunication equipment
Semiconductors and electronic components
Electron tubes and semiconductors
Integrated circuits
Other electronic components
Flat-panel displays
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment
Machines and apparatus for the manufacture of semiconductor devices
IT parts
Finished IT products
Total IT equipment

2008

Value

Value

9,015
1,166
4,173
3,676
114
8,441
44,526
11,15933,36734,881
8,939
15,771
11,779995
155
121
17,171
12,90985,01357,970142,983

7,768
980
3,601
3,187
114
8,660
44,524
11,68032,844
34,615
8,904
16,164
12,354799
144
115
17,266
13,742
84,721
58,275
142,997

Growth
rate
-13.8
-16.0
-13.7
-13.3
-0.7
2.6
0.0
4.7
-1.6
-0.8
-0.4
2.5
4.9
-19.7
-7.3
-4.6
0.6
6.5
-0.3
0.5
0.0

2007
Value
19,441
1,356
12,819
5,265
250
9,352
24,1302,781
21,34916,523
4,262
5,222
1,602
910
666
533
9,165
2,920
46,44941,22087,6692008
Value
20,3191,591
14,074
4,654
267
10,75623,803
3,150
20,653
17,686
4,582
5,752
1,638
1,150
432
323
8,833
2,498
46,777
43,571
90,348(Notes)See Reference Materials/Supplement Statistics: Annotation 1 at the end of this White Paper for the definitions of productcategories.
(Source) Based on "Trade Statistics" (Ministry of Finance).

81

Growth
rate
4.5
17.3
9.8
-11.6
6.7
15.0
-1.4
13.3
-3.3
7.0
7.5
10.1
2.2
26.3
-35.1
-39.3
-3.6
-14.4
0.7
5.7
3.1

Figure I-32 Trends In Japan’s Semiconductor Exports and Related Indices
(%)

(%)

120.0

50.0
40.0

100.0

30.0
80.0

20.0

60.0

10.0
0.0

40.0

-10.0

Rate of growth in Japan’s exports of semiconductors and other electronic components (left scale)

20.0

Rate of growth in world semiconductor sales (left scale)-20.0

Rate of growth in world semiconductor sales volume (left scale)Utilization rate of world semiconductor production capacity (right scale)

-30.0
I

II III IV

2003

I

II III IV

2004

I

II III IV

2005

I

II III IV

2006

0.0
I

II III IV

2007

I

II III IV

2008(Year)(Notes)(1) All growth rates above are YOY growth rates.
(2) Rates of growth in world semiconductor sales volume above are calculated as follows: rate of growth in sales - average rate of growth in prices.
(Sources) Based on "Trade Statistics" (Ministry of Finance), "World Semiconductor Trade Statistics", and "Semiconductor International Capacity Statistics".

82

Figure I-33 Long-Term Trends In Japan’s Balance of Trade(US $100 million)(US $100 million)

9,000

1,400

8,000

1,200

7,000

1,000

Balance (right scale)

6,000

Exports

800
Imports

5,000

600
4,000
400
3,000
200

2,000

0

1,000

-200

60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
2000
02
04
06
08

0

(Year)(Source) Based on "Trade Statistics" (Ministry of Finance).

Figure I-34 Japan's monthly exports(contribution by commodity)(%YoY)
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0

General equipment

Electric equipment

Transport equipment

Precision instruments

Chemicals

Steel

OthersTotal(growth rate)(Source) Prepared based on "Trade Statistics"(Ministry of Finance).

83

09/05

09/04

09/03

09/02

09/01

08/12

08/11

08/10

08/09

08/08

08/07

08/06

08/05

08/04

08/03

08/02

08/01

-50.0
(Year/Month)Figure I-35 Japan's outward FDI (net) by region(US$ million)
140,000

Other

120,000

Western Europe

100,000

South and Central America
North America

80,000Asia

60,00040,00020,0000

2009(Jan.-May)-20,000
96

98

2000

2002

2004

2006

2008 (Year)(Note) The yen-based published rate is converted to dollars each quarter by using the averagequarterly Bank of Japan inter bank rate and then the annual sum is calculated.
(Source) Prepared based on "Balance of Payments Statistics" (Ministry of Finance and Bank of

Figure I-36 Trends in number of Japanese M&As targeting foreign firms(Number of deals)(US$ million)

70,000300

60,000250

50,000200

40,000150
30,000100

20,00050

10,000
0

0
96

97

98

99 2000 2001 2002 2003 2004 2005 2006 20072009
2008(Jan.Jun.)(Year)U.S.

U.K.

Australia

Others84

Number of deals

85

Pharmaceuticals-

Tokio Marine Holdings, Inc.

Bank of Tokyo-Mitsubishi UFJ, Ltd.

Eisai Co., Ltd.

Daiichi Sankyo Co., Ltd.

Japanese-South Korean consortium (seeNotes)Marubeni, Kansai Electric Power, and others -NTT DoCoMo, Inc.

Mitsubishi Corp.

Dec. 2008

Nov. 2008

Jan. 2008

Oct. 2008

Dec. 2008

Sept. 2008

March 2009

Sept. 2008

New Hope-New Saraji Project

Tata Teleservices

Senoko Power

NamisaRanbaxy Laboratories

MGI Pharma

UnionBanCal

Philadelphia Consolidated

Morgan Stanley

Millennium Pharmaceuticals

Telecommunications
MiningAustralia

Pharmaceuticals

India

India

Pharmaceuticals

U.S.

Electric power service

FinanceU.S.

Singapore

Insurance

U.S.

MiningFinanceU.S.

BrazilPharmaceuticals

Industry

U.S.

Nationality

Acquired company

2,384

2,655

2,763

3,120

3,442

3,655

3,707

4,692

7,839

8,128

Amount(US$million)

100.0

26.0

100.0

40.0

63.2

100.0

100.0

100.0

21.9

100.0

Equity after
acquisition(%)

Notes: (1) Where the acquiring company is a holding company or a group of investors, major company names are shown.
(2) The ranking above is based on the value of each single transaction.
(3) The Japanese-South Korean consortium consists of Itochu Corp., JFE Steel, Nippon Steel, Sumitomo Metal Industries, Kobe Steel, Nisshin Steel,and South Korea’s POSCO.
Source: Based on Thomson Reuters data.

Trading company

Telecommunications

Pharmaceuticals

FinanceInsurance

Finance

Mitsubishi UFJ Financial Group, Inc.

Oct. 2008

Pharmaceuticals

Industry

Takeda Pharmaceutical Co. Ltd.

Acquiring company

May 2008

Monthcompleted

Table I-25 Japan’s 10 Largest Overseas M&As (2008 - June 2009)Table I-26 Active M&A industries and recent Japanese M&A deals
Industry

Company nameTakedaPharmaceutical Co

Pharmaceuticals

Daiichi Sankyo

Shionogi & Co

Summary
Acquired M illennium Pharmaceuticals (US) for $8.1 billion with an aim to leverage
M illennium's expertise in cancer R&D to strengthen its drug-development ability.
Purchased Ranbaxy Laboratories (India) for $5 billion in order to expand its sales
network and marketing activities in developing countries, and to diversify into thepromising field of generic drugs.
Acquired Sciele Pharma (US) for $1.2 billion in an attempt to beef up its sales
structure in the US market and augment its position in critical fields such as
cardiovascular health.

Kirin Holdings

Concentrated resources on M &As in Asia, including the purchase of $1.2 billion of
San M iguel (Philippines) stock in order to establish a foothold for production andsales in the Asia-Oceania market, and the takeover of Lion Nathan (Australia) as awholly-owned subsidiary (underway, approximately $2.3 billion).

Suntory

Bought Frucor Beverage (New Zealand) for $800 million in order to strengthen its
beverage operations in the Oceania market and expand its product lineup.

Food

Purchased over 20 percent of M organ Stanley's (US) voting shares for $7.8 billion
to pursue a strategic alliance in the investment banking sector. Turned Union
BanCal Corp (US) into a wholly-owned subsidiary for $3.7 billion in order toFinance andenhance its presence in the US financial market.
Insurance
Paid $4.7 billion for property and casualty insurance company Philadelphia
Tokio M arine
Consolidated (US) and $900 million for property insurer Kiln (UK) with an eye
Holdings, Inc
toward strengthening its revenue base.
Took a 50 percent stake in a metallurgical-coal project in Queensland (Australia) for
M itsubishi Corp
$2.4 billion.
Acquired a 30 percent stake in a copper mining project run by Antofagasta (Chile)
M arubeni
Resources
for $1.3 billion.
Japanese-Korean
Obtained a 40 percent stake in CSN's (Brazil) iron-ore manufacturing and sales
consortium (See note subsidiary, Namisa, through an international competitive bidding process, for $3.1
below)
billion.
(Note) Itochu, JFE Steel, Nippon Steel, Sumitomo M etals, Kobe Steel, Nisshin Steel and POSCO (South Korea)
M itsubishi UFJ
Financial Group(Sources) Prepared on the bases of companies' press releases and Thomson Reuters.

86

Figure I-37 Rates of Return on Japan’s outward FDI, By Major Country and Region
(%)

15.0
ASEAN
China

10.0

World
U.S.
EU

5.0

0.0

-5.0
2000

2001

2002

2003

2004

2005

2006

2007

2008

(Year)

Notes: The rate of return on outward FDI is calculated as follows: FDI earnings in the term/average of outward FDIbalances at the start and the end of the term
Source: Based on Balance of Payments Statistics (Ministry of Finance and Bank of Japan).

87

Figure I-38 Steps taken by Japanese companies to deal with the effect of the financial
crisis on their overseas operations
0.0

5.0

10.0

15.0

20.0

Expand existing overseas operations

25.0
(%)

Start new overseas operations
Suspend or delay new overseas operations
Lower export prices
Cut staff at overseas operations
Shrink overseas operations
Raise export prices
Cut export volume
Change site of overseas operations
Increase import volume
Increase export volume
Change overseas suppliers
Cut import volume(Multiple answers，N=690)

Buy overseas firms in the same industry
Change overseas customers
Other
Unclear(Source) "Survey on International Operations of Japanese Firms" by JETRO (2009).

88Column Table I-1 Overseas sales and profit among listed Japanese companies(%)
Fiscal year
(number ofcompanies)
1997

(582)

1998

(593)

1999

(643)

2000

(668)

2001

(715)

2002

(728)

2003

(738)

2004

(774)

2005

(804)

2006

(832)

2007

(866)

2008

(890)

Fiscal year
(Number ofcompanies)
1997

(582)

1998

(593)

1999

(643)

2000

(668)

2001

(715)

2002

(728)

2003

(738)

2004

(774)

2005

(804)

2006

(832)

2007

(866)

2008

(890)

Share of sales by region
Domestic Overseas
71.4
71.1
72.5
71.9
69.7
68.0
67.9
67.3
66.1
66.2
63.1
63.8

28.6
28.9
27.5
28.1
30.3
32.0
32.1
32.7
33.9
33.8
36.9
36.2

Americas

Europe

11.3
13.4
12.4
12.6
13.7
13.7
12.9
12.2
12.5
12.6
13.0
11.0

5.4
6.0
5.4
5.2
5.5
6.0
6.1
6.4
6.3
6.9
8.5
7.0

Asia and
Oceania
5.8
4.9
5.5
6.4
6.7
7.8
8.2
8.8
10.1
10.3
12.0
14.8

Other
6.1
4.6
4.2
3.9
4.4
4.6
4.9
5.3
5.0
4.1
3.5
3.4

Operating profit share by region (%)
Domestic Overseas
76.6
73.4
75.0
79.9
76.0
72.9
73.3
71.8
70.8
73.5
67.1
47.5

23.4
26.6
25.0
20.1
24.0
27.1
26.7
28.2
29.2
26.5
32.9
52.5

Americas
9.8
13.8
14.1
10.4
12.4
13.0
11.1
10.9
10.8
9.1
8.7
1.9

89

Europe
3.4
4.8
2.1
0.7
0.6
2.8
4.3
4.7
4.7
4.1
6.8
3.6

Asia and
Oceania
4.8
4.4
5.0
6.0
6.7
7.2
7.5
8.6
10.0
8.3
12.2
39.4

Other
5.3
3.6
3.7
3.0
4.2
4.1
3.7
4.0
3.7
5.1
5.2
7.6

Column Table I-2 Overseas sales and profit among listed Japanese companies
Year-on-year growth rate
Growth rate of sales (year-on-year, %)Fiscal year
(number ofcompanies)

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

(556)
(576)
(620)
(650)
(683)
(694)
(710)
(748)
(773)
(786)
(841)

World
Domestic Overseas

-7.0
-3.6
4.2
-2.7
2.4
-0.4
7.4
10.3
13.9
7.9
-13.0

-7.5
-2.9
3.0
-6.0
0.0
-0.9
6.1
7.8
14.3
6.4
-12.3

Americas Europe

-5.8
-5.3
7.5
5.8
7.7
0.9
10.0
15.4
13.0
10.5
-14.2

10.9
-7.9
7.4
7.6
2.3
-4.9
2.9
13.7
10.3
7.5
-18.8

3.0
-9.6
1.2
4.8
11.3
5.4
11.7
10.5
18.7
19.1
-16.0

Asia and
Oceania

Other

-21.6
11.5
22.2
1.2
16.8
3.6
17.1
28.0
16.7
15.0
-11.1

-29.3
-10.1
-3.8
9.1
6.4
7.5
15.1
4.2
3.9
-8.5
-7.4

Growth rate of operating profit share (year-on-year, %)Fiscal year
(number ofcompanies)

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

(556)
(576)
(620)
(650)
(683)
(694)
(710)
(748)
(773)
(786)
(841)

World
Domestic Overseas

-20.0
7.8
26.8
-31.3
40.2
15.5
15.4
14.6
28.2
11.3
-55.0

-23.7
9.7
34.8
-35.6
35.7
15.7
14.4
12.4
33.4
7.4
-65.5

Americas Europe

-8.0
2.7
2.9
-14.6
54.0
15.2
18.0
20.3
14.9
20.3
-38.7

12.9
13.1
-4.7
-13.2
40.8
-0.4
17.6
16.1
6.5
-10.0
-89.8

90

14.9
-50.6
-58.5
-33.0
389.8
86.3
6.7
18.2
38.2
55.0
-69.9

Asia and
Oceania

Other

-26.4
22.0
51.4
-22.1
49.0
24.4
21.1
33.7
2.9
41.2
-20.0

-45.7
10.9
2.1
-0.2
38.1
2.6
26.3
5.4
47.8
12.5
-10.8

Figure I-39 Breakdown of Japan's inward direct investment by type
(US$ million)
80,00060,000Share capital (inflow)

Share capital (outflow)

Other capital (inflow)

Other capital (outflow)

Reinvested earnings (inflow)

Net inflow value

Capital inflow value

Capital outflow value

40,00020,0000-20,000-40,000(Year)-60,000
96

97

98

99

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
(Jan.-May)(Note) The yen-based value is converted to dollars each quarter by using the average quarterly Bank of Japan inter bank rate and then the annual
sum is calculated.
(Source) Both this figure and Fig. 1-40 were prepared based on "Balance of Payments Statistics" (Ministry of Finance and Bank of Japan).

91

92

Acquired company

efu Investments Ltd.

Education services

Nov. 2008 Benesse Corp.

Source: Based on Thomson Reuters data.

GIC Real Estate Pte.
BCJ-2 (a special-purpose acquisition vehicle established by
Bain Capital Partners, L.L.C.)

Hotel
Electrical equipment

Feb. 2008 The Westin Tokyo
Sept. 2008 D&M Holdings

Proteus Invest (a special-purpose acquisition vehicle wholly
owned by Robert Bosch GmbH of Germany)

Auto parts

June 2008 Bosch Japan

Roche Pharmholding BV (a Dutch subsidiary of Roche of
Switzerland)

Fujisawa Holding (a special-purpose company intended toestablish real estate funds managed by an affiliate of Morgan
Stanley of the U.S.)Group of investors led by Saturn I Sub (Cayman) Exempt

Industrial Equity Investments

Citigroup Japan Holdings (a wholly owned subsidiary of
Citigroup Inc.)

Pharmaceuticals

Commercial property

Banking

Chemicals

Securities

Industry

June 2008 Chugai
Pharmaceutical

March 2008 Shinsei Bank (headoffice real estate)Jan. - March 2008 Shinsei Bank

March 2008 Arysta LifeScienceJan. 2008 Nikko Cordial
Corporation

Month/YearAcquiring company
Country/
regionFinanceFinanceU.S.
New Zealand

REIT

Auto parts

Pharmaceuticals

FinanceSecurities investment
advisory services

Finance

Holding company(financial holding
company)

Industry

Singapore

Germany

Switzerland

U.S.

Cayman Islands

U.K.

U.S.

Table I-27 10 Largest M&As By Overseas Companies In Japan (January 2008 - April 2009)

576

663

722

911

920

1,174

1,841

2,185

4,466

13.7

92.8

100.0

97.6

61.5

100.0

28.1

100.0

98.7

Equity after
Amountacquisition(US$ million)(%)

Figure I-40 Japan's inward direct investment by region (net)(US $ million)
30,000

OthersWestern Europe
Central and South America
North America
Asia
World

25,00020,00015,00010,0005,000

0-5,000-10,000
96

97

98

99

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
(Jan.-May)(Year)

93

Figure I-41 Japan's inward direct investment balance(trillion yen)20

4.0
Others18

3.6

Western Europe

3.5

Central and South America

16

2.9

North America

14

Inward direct investment balance/GDP (right scale)

12
1.9

10
8

2.0

2.4

2.5
2.5

2.0
2.0
1.5

1.3
1.1

6
4

3.0

Asia

0.9
0.7

0.7

1.0

0.6
0.5

2
0

0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Year)(Source) Prepared based on "Direct Investment Balance Statistics" (Ministry of Finance and Bank of Japan) and statistics from the Economic and Social Research Institute of the Cabinet Office.

94

Figure I-42 Factors making it difficult to do business in Japan (Multiple replies)
High business cost

69.3

Demanding consumers

61.2

Difficulties in securing human resources

56.9

Exclusivity and peculiarity

50.8

Strict regulations and authorization

34.3

Administrative procedures

29.1

Inadequate preferential treatment

21.2

Residential environment for foreigners

18.2

Difficulty of fund raising

14.5

Inadequacy of information and services

14

Infrastructure

10.8
0

10

(Ｎ=636)
(%)
20

30

40

50

60

70

80

(Notes) Sample size: 2,097 companies; valid responses: 636 companies （response rate: 30.3%); survey conducted Nov 28, 2008 to Jan 14, 2009.
(Source) Prepared based on "FY2008 Survey Report on Foreign-Affiliated Companies' Attitudes toward Foreign Direct Investment in Japan (METI).

Column Figure I-1 Scope of Direct Investment Firms Under the Balance of Payments
ManualDirect investors
60%

10%

30%

Company A

Company D

Company F

9%Company H

55% (33.0%)

60% (6.0%)

Company B

Company E (*1)

25% (7.5%)
Company G

100% (9.0%)
Company I

70%Company J
100% (70.0%)

Branch K

12% (4.0%)

Company C (*1 *2)
Notes:(1) Figures above represent participation ratios, with figures in parentheses representing the investment ratios
multiplied by investment ratios of cumulative investments from direct investors.

(2) Companies and branches shaded gray above represent the scope of direct investment under BM P5 and BM P6
principles.
(3) The asterisk (*1) represents an investment not subject to direct investment under the PM M .
(4) The asterisk (*2) represents an investment not subject to direct investment under the DIIC.
Source: Based on data from the IM F and the Bank of Japan.

95II. Post-Financial Crisis Trade Restrictive measures and the Need for Discipline inInternational Trade
1. The WTO and the Trade Restrictive measures of Major Countries(1) Doha Round Stalling due to the Situation of Global Political Economy
The leaders of the G8 nations and five newly emerging nations (Brazil, China, India,
Mexico, and South Africa) jointly announced a new resolution at the L’Aquila G8 Summit
held in July 2009, to seek “an ambitious and balanced conclusion to the Doha Development
Round (the “Doha Round” below) in 2010.”
However, to date the path to a conclusion of the Doha Round has been anything but
smooth. Since the commencement of the negotiations in November 2001, while efforts havebeen made towards defining approaches to the reduction of tariffs and subsidies (modalities),
the negotiations have faced numerous setbacks. Opinions appeared to be converging in
discussions held in the informal ministerial meeting convened in Geneva in July 2008 (the“July Meeting” below) to discuss the reduction of agricultural subsidies and tariffs on
products of the mining and manufacturing industries, part of the non-agricultural market
access (NAMA) negotiations, which were seen as the key to achieving success in the Doha
Round. However, conflict between the U.S. and India/China in discussions concerning
special safeguard mechanisms (SSM), emergency import restrictions for developing nations
able to be put into effect temporarily in the event of a rapid increase in imports of agricultural
products, and a NAMA’s sectoral initiative that would see complete elimination of or massive
reductions in tariffs in specific sectors including automobiles and related parts and chemical
products could not be resolved, and the talks collapsed after all. Another informal ministerial
meeting was scheduled for the following December, but was ultimately not held due to thelack of progress in negotiations at the working level.
Changes in the situation of the global political economy have acted as a heavy weight on
the negotiating positions of the participant countries in the Doha Round. The U.S. is the key
to agreement in the Doha Round. In the U.S., the Obama administration began in January
2001, ushered in Democrat-led senate, and the administration has expressed its commitment
to the Doha Round, as demonstrated by statements made by U.S. Trade Representative Ron
Kirk indicating that it was seeking a conclusion within 2010. However, the U.S. is presently
engaged in rebuilding its ailing domestic economy, and there is a strong possibility that trade
policy will be put on the back burner.
In India, which had clashed with the U.S. in the July meeting, the ruling Indian National
Congress Party declared victory in general elections held in May 2009. India is expected tomake continuing efforts to engage in the Doha Round, but circumstances are working against
this, with increasing calls from businesses suffering under the financial crisis for introducing
import restrictive measures such as trade remedies, import licensing systems, etc.
It is highly possible that the changed global economic and political situations will act as
impediments in areas in which political decisions are essential, such as the important
discussions regarding the reduction of agricultural tariffs and subsidies. Ministerial meeting isscheduled to be held in Geneva between November 30 and December 3, 2009. However, it is
not yet clear to what extent substantive negotiations will be pursued.
It should not be assumed, however, that negotiations are not moving at all. The nations andregions involved are pursuing negotiations at the working level, and technical points arebeing decided. Progress in working-level negotiations has resulted in revision of
Chairperson’s texts, in which the Chairperson of each negotiation records his or her personal
opinions regarding the status of the discussions. The negotiating teams use these
Chairperson’s texts as foundations for proceeding to the next step (Table II-1). Politicaldecisions are essential in the case of important discussions that will have a significant
96domestic impact, but these cannot be expected at present, and working-level negotiations canbe predicted to continue step-by-step.
== Table II-1 ==It is no exaggeration to indicate that world trade has developed with the WTO at the coreof the process. What are demanded now are the further liberalization of trade and theestablishment of trade rules through the conclusion of the Doha Round.
(2) Introduction of trade restrictive measures in certain countries following the financial
crisis■ Successive introduction of trade restrictiive measures and surveillance by the WTO
In the times of economic recession, a sense of alarm with regard to competing imported
products increases in line with the worsening status of business operations. The businessworld demands the introduction of trade restrictive measures by the government, and thegovernment and legislature respond to them. In this way, pressure for the imposition of trade
restrictive measures can easily increase.
If such measures are imposed, other countries and regions may follow suit, leading to fearthat the imposition of retaliatory measures may spread worldwide. The impact on othercountries and regions would be particularly strong if the U.S., the world’s largest economy
and the major proponent of free trade over the past quarter-century, were to impose trade
restriction measures.
Various trade restrictive measures have actually been imposed in certain countries andregions since the global financial crisis in October 2008 (Table II-2). In addition to offering
financial bailout packages to then-struggling General Motors (GM) and Chrysler, the U.S.
government instituted the Recovery and Reinvestment Act of 2009 in February 2009, which
included a “Buy American” clause that prioritized domestic products. Following the entry
into effect of this provision, “Buy Indonesian” and “Buy Victorian” campaigns went into
effect (the latter in the Australian state of Victoria), European nations including Germany,
France, and the UK have successively announced automotive industry bailout measures, andIndia, Indonesia, and Argentina have introduced import licensing systems. Russia, Ukraine,and Ecuador have raised import tariffs on a wide range of products, including automobiles,
electrical goods, iron and steel, and machinery.
== Table II-2 ==The WTO established a taskforce in October 2008 in response to a surge of trade
restrictive measures worldwide, and commenced monitoring them. The WTO reported theresults of this monitoring of policy trends to member nations and regions in January 2009,and its activities received the support of the majority of countries participating in an informal
meeting of the Trade Policy Review Body (TPRB) held in February of the same year.
Following this, member nations approved the issuing of a surveillance report on athree-monthly basis at a meeting of the TPRB held in April 2009.
The Japanese government is also cooperating in this WTO initiative. The Ministry of
Economy, Trade and Industry, in cooperation with the relevant ministries and agencies,
collects information regarding directions in policy measures, and reports this information to
the WTO. JETRO also monitors trade restrictive measures via its network of 71 overseas
offices, and provides reports to the Japanese government.
Below, this chapter looks at the major trade restrictive measures put into effect following
the financial crisis.
97

■ Tariff increases observed in certain emerging nations
Following the financial crisis, certain nations and regions implemented tariff increases.
Russia, Ukraine, and Ecuador increased their tariffs on a large number of products, while
India, Turkey, Vietnam, the EU, and Brazil, among other nations, increased tariffs in specificitems, including iron and steel products and agricultural products.
Russia has intermittently increased tariffs since November 2008. To date, tariffs have been
increased on vehicle bodies, automobiles, meat, combine harvesters, iron and steel products,
and televisions. The tariffs on vehicle bodies have been increased from 15% to15% or 5,000
Euros per body, whichever of the two is higher. The tariff on passenger cars (gasoline engine)less than 3 years old was raised from 25% or not less than 1.2-2.35 euros per cubic centimeterof cylinder volume (with some exceptions), to 30% or not less than 1.2-2.8 euros per cubic
centimeter of cylinder volume.; tariffs on passenger cars from three to five years old havebeen increased from 25% or not less than 0.45-1 Euro per cubic centimeter of cylinder
volume to 35% or not less than 1.2-2.8 Euros per cubic centimeter. Among iron and steel
products, tariffs have been increased on steel tubing, pipes, and other products. Tariffs onflat-screen televisions have also been rosed from 10% to 15%. These tariff measures havebeen put into effect for periods of nine months or one year.
In Ukraine, additional tariffs up to a maximum increase of 13% have been applied fromMarch 7, 2009 to a wide range of products, including foodstuffs, iron and steel products,
textiles, automobiles, and pumps. The Ukrainian government explains this as a measure tosafeguard the balance of payments, as specified in Article 18 of GATT. The government
announced to the WTO on May 18, 2009 that it had removed the additional tariffs from allimports, with the exception of refrigerators and automobiles. However, on a reported baseUkraine is not applying the extra tariffs to imports from some Eastern European and Middle
Eastern nations, and has been criticized for being discriminatory.
From January 2009, Ecuador increased tariffs on a wide range of products, effective for aperiod of one year. Like Ukraine, Ecuador states that this is a measure to safeguard thebalance of payments.
Considered by product, one distinctive feature of these tariff increases is the number ofcountries applying them to iron and steel products. In addition to the aforementioned Russia,
Ukraine, and Ecuador, India, Turkey, Vietnam, and Brazil are among other nations that haveincreased tariffs on iron and steel products. India increased the tariff rate on certain iron andsteel products from zero to 5% in November 2008. Turkey also increased its tariff rates on
selected iron and steel products (hot flat-rolled steel: from 5% to 13%; cold flat-rolled steel:from 6% to 14%; etc.) in January 2009. In April 2009, Vietnam increased its tariffs on
half-finished iron and steel goods, flat-rolled steel, steel bars, steel wire, and iron and steel
pipes by several percent in each case. Ecuador increased a tariff by 5% on products including
steel bars and iron and steel springs, while in June 2009, Brazil increased tariffs on seven ironand steel products, including hot-rolled steel sheets and cold-rolled steel sheets, from zero toa maximum of 14%.
Tariffs have also been increased on other products, e.g., soybean oil in India and paper in
Vietnam. From October 2008, the EU also reintroduced tariffs on cereal imports which had
been eliminated in January 2008.
The products on which tariffs have been increased include products on which tariffs had
previously been reduced as an anti-inflation measure to respond to the rapid increases in theprices of primary products, which continued until the first half of 2008.
Under GATT, by means of which the WTO applies discipline to tariffs, member nations
bind to an upper limit on tariff rates. The upper limit tariff rates to which member nationscommit themselves are called bound rates. The rates actually applied by member nations are98termed applied rates. Because member nations have voluntarily reduced their applied rates
since the establishment of the WTO in 1995, in the majority of nations there is a wide gulf
between the applied rates and the bound rates. Under the terms of GATT, increasing anapplied rate in excess of the bound rate is a violation of the agreement, however nations may
increase applied rates to match the relevant bound rates. In the case of Russia, because thenation has not acceded to the WTO, it has made no commitments to bound rates, and may
therefore increase tariffs as it sees fit. Given, however, that these measures have a negative
impact on global trade, they should fundamentally be avoided, and it would be desirable for
their use to be curbed, irrespective of whether or not they are consistent with WTO
procedure.
As the examples above indicate, nations around the world can be seen to have introduced
tariff increase measures against the background of the global recession. If the Doha Roundwas to be concluded and bound rates were thus reduced, the potential margin for further
increases would be limited, and this could be expected to increase the predictability of tariffs.
However, for countries that have concluded FTAs with countries that have increased tariff
rates, the tariff rates specified in the agreement apply, and these countries are thus able to
avoid the normal effects of tariff increases on MFN basis. As the Doha Round negotiations
drag on and a significant gap continues to exist between bound rates and applied rates, therole of the binding effects of FTAs can be seen as having increased in relative importance.
■ Introduction of compulsory standards centering on iron and steel products
The tightening of regulations regarding standards and certification is conspicuous among
trade restrictive measures that have been applied by certain developing nations since thefinancial crisis. In particular, there has been a succession of cases of imposition ofcompulsory standards, which are codes and standards to which adherence is compulsory.
Every country possesses its own unique standards, like the Japan Industry Standards (JIS);
they are termed compulsory standards when compliance is obligatory rather than voluntary.
India, Malaysia, Indonesia, Argentina, and Ecuador are among countries that haveintroduced compulsory standards in the wake of the financial crisis. Compulsory standards
for iron and steel products are conspicuous among those that have been introduced.
In September 2008, India introduced regulations requiring compulsory compliance with
Bureau of Indian Standards (BIS) standards for six iron and steel products, including steel
wire and steel bars. India announced compulsory standards for 11 further products, including
magnetic steel, tin plate, and certain types of steel sheet, in February 2009. However, facing
opposition from other nations and the domestic business community, the government
announced immediately before the standards were to go into effect that it would defer
implementation of the regulation for a period of one year, and would exclude three products
from the application of the regulation.
In November 2008, Malaysia abolished its import license system for 57 iron and steel
products including steel bars and stainless steel, but introduced compulsory standards. The
standards were formulated by the Construction Industry Development Board (CIDB) in thecase of iron and steel products used in construction, and the Standard and Industrial ResearchInstitute of Malaysia (SIRIM) in the case of other iron and steel products. It has been
indicated that the introduction of these compulsory standards has increased costs for Japanesecompanies that deal with the target products.
In January 2009, Indonesia also announced its intention to comply with Indonesiannational standards compulsory in the case of hot-rolled-steel sheets, steel strips, zinc, andaluminum alloy-coated steel sheets, among other products. In March 2009, the Indonesian
government specified product certification organizations and testing laboratories. In the samemonth, while waiving the application of the regulations in the case of certain products, the99government announced that batteries and shoes would now be the subjects of compulsory
standards. These measures have been successively introduced from May 2009.
From February 2009, Ecuador introduced compulsory standards for automobiles andautomotive parts including brake pads, plastic pipes, tires, and glass, among other products.
In addition to the above, there have also been cases of the introduction of importprohibition measures, with standards certification offered as the justification. In January 2009,
India announced that it would prohibit imports of Chinese-made toys (HS numbers 9501,
9502, and 9503) for a period of six months. This measure met with resistance from China,
and the Indian government softened its stance in March 2009, indicating that it would accept
imports of Chinese-made toys if they fulfilled conditions including meeting standards set by
ASTM International and the International Standards Organization (ISO).
In Thailand, the procedures for acquiring or renewing product certification from the Thai
Industrial Standards Institute (TISI) became stricter from May 2009. Procedures for obtaining
approval from the TISI became stricter in practice from the latter half of 2008, and there werecases in which more time than had previously been the case was required to obtaincertification. In South Korea, lithium secondary batteries became the target of compulsory
standards from July 1, 2009.
In addition, while not a measure announced following the financial crisis, China’s plans
for the introduction of a system of compulsory certification for IT security products ispresently a subject of concern. The Chinese government announced in January 2008 that 13
products, including certain software products and IC cards and systems would become
subject to China Compulsory Certification (CCC), administered by the Certification andAccreditation Administration of the People’s Republic of China (Certification andAccreditation Administration of the People’s Republic of China, Notice No. 7, dated January
28, 2008). Concerns that the introduction of the new measure will lead to violations ofintellectual property rights due to the disclosure of technological information and that newprocedures will increase operating costs have been voiced by foreign-owned companies andothers. Faced with these serious concerns on the part of other countries, the Chinese
government announced in April 2009 that it would limit the requirement for disclosure to thecase of procurement by the government, and that it would postpone the implementation of themeasure for one year, until May 2010 (Notice No. 33, dated April 27, 2009). The introductionof intellectual property-related regulations in a growing market like China is certain to havesignificant repercussions.
Of the various WTO agreements, order is maintained in measures relating to standards andcertification by the WTO Agreement on Technical Barriers to Trade (TBT). The TBT
prohibits the introduction of measures the purpose of which is to create unnecessary obstacles
to international trade. All nations introduce measures to ensure the safety of their citizens, andit can be difficult to clearly judge whether a given measure is necessary or unnecessary.
However, there are numerous cases in which measures related to standards certification havebeen introduced as de facto import restrictive measures, and it is therefore important to alsoenhance surveillance in relation to these measures.
■ Non-automatic import licensing may violate WTO rules
Since the financial crisis, such emerging nations as India, Indonesia, and Argentina haveintroduced import licensing systems for specified products. From November 2008, India
introduced the government license requirement for iron and steel products including
hot-rolled steel and unalloyed flat-rolled steel sheets, and automotive parts including
gearboxes and bumper bars. Indonesia has made a total of 505 products, including foodstuffs
and beverages, children’s toys, and electrical and electronic products, subject to the importer
registration requirement and pre-shipment testing for two years from January 2009. In100

addition, these products can only receive customs clearance at international airports and fivesea ports. Furthermore, a system of importer registration for iron and steel products has beenin place since April 2009. Non-automatic import licensing for products including iron andsteel products, metallurgical products, spun products, elevators, and tires has been in effect inArgentina since November 2008.
Generally speaking, import license system is introduced for a wide variety of purposes,
including import control, sanitary and quarantine, and the safety protection. Under WTO
rules, import licenses are divided into automatic and non-automatic. In the “automatic”
category, licenses are granted for all products that are subject to approval. Non-automatic
import licensing systems, on the other hand, may be partly aimed at import restriction.
If such a measure places quantitative restrictions on imports, then it may be in violation of
Article 11 of GATT (General Elimination of Quantitative Restrictions), which prohibits
quantitative restrictions in principle. Exceptions are found in the case of restrictions applied
to relieve critical shortages of foodstuffs (Article 11, Item 2(a)), restrictions necessary to theapplication of standards (Article 11, Item 2(b)), restrictions applied to safeguard the balanceof payments (Article 18, Section B), restrictions applied as safeguards (Article 19), andrestrictions applied to protect public morals, human and animal life, etc. (Article 20). For
example, Japan prohibits the importation of guns, chemical weapons, etc., under the Customs
Act, and requires registration of importers of mercury, nicotine, ammonia, and other toxic
substances under the Poisonous and Deleterious Substances Control Law.
Even assuming that quantitative restrictions are justified, the operation of an importlicensing system can still present problems. Under the terms of the WTO Import Licensing
Agreement, an import licensing system must guarantee transparency and impartiality, andmust not be operated in such a way as to restrict trade. In addition, in the case of a
non-automatic import licensing system, applications must be processed within 30 days if
treated on a first-come, first-served basis, or within 60 days if considered simultaneously.
With regard to this point, there is a possibility that the non-automatic import licensing
system for elevator products introduced by Argentina in November 2008 may violate the
WTO rules. The “2009 Report on Compliance by Major Trading Partners with Trade
Agreements-WTO, FTA/EPA, BIT-,” published by the Ministry of Economy, Trade andIndustry, reports on a case in which no import license was granted for elevator products
exported from Japan despite the fact that 30 days had elapsed from the date of application,and the products were unable to be unloaded at the port of import.
Japanese companies with bases in Indonesia have also indicated concerns regarding the
problems with the registration system introduced on April 1, 2009 for importers of 202 ironand steel products, including hot- and cold-rolled steel coils and sheets, plated steel sheets,
and welded pipes. This measure requires importers and manufacturers of the specified ironand steel products to register, to inspect the products prior to shipment at the port of loading,and to report on the status of importation of the products every three months. Points on which
Japanese companies have expressed their dissatisfaction in relation to this measure include
the facts that (1) the Japanese inspection companies able to be employed and the procedures
involved in the inspections prior to shipment have not been made clear (as of May 2009,
because no decision had been reached regarding the companies to be used for the
pre-shipment inspection, importers which had already completed the registration procedures
had been exempted from the requirement for inspection), and (2) it is unclear which products
are exempted from the measure based on bilateral agreements (in Japan’s case, theJapan-Indonesia FTA1).
1

In Japan, the term FTA generally refers to an agreement covering goods and services, whilean agreement encompassing a broader range of topics including investment and government
101

“Buy American” spreading over the world
The U.S. Recovery and Reinvestment Act of 2009 was enacted on February 17, 2009.
Coming as it does in the midst of what is considered the worst recession since the global
panic of the 1930s, the enactment of this bill is extremely welcome not only for the U.S., butalso for all other countries seeking to boost their exports with a recovery in U.S. consumption.
However, the Act also includes a “Buy American” clause, which stipulates that the use of
U.S.-made iron and steel products and manufactured goods should be used in public works
construction and repair projects. This is a response to strong lobbying by the U.S. iron andsteel industry, which has faced a severe business environment.
The major trading partners of the U.S., including the EU, Canada, and Japan, have all
expressed strong concerns since this clause was included in the bill put before the House ofRepresentatives and the Senate. In response, President Obama indicated that the U.S. had nodesire to ignite trade conflict in introducing the “Buy American” clause, and a provision
reading “This section shall be applied in a manner consistent with United States obligations
under international agreements” was added to the clause.
“International agreements” here refers to the WTO Government Procurement Agreement,
FTAs concluded by the U.S., and the Caribbean Basin Trade Initiative, among others. The
WTO Government Procurement Agreement differs from other WTO agreements which, inprinciple, apply to all member nations in that it is a “plurilateral” agreement, and participation
is voluntary. As of August 2009, 14 nations and regions participated in the agreement,
including Japan, the U.S., and the EU27. There are 16 countries with which the U.S. hasformulated FTAs in this case (the U.S.-Jordan FTA contains no commitment regarding
increasing access to the government procurement market). While the mandatory use of the
U.S.-made products is fundamental to government procurement in the U.S. based on theprovisions of the Federal Buy American Act of 1933 and some of state government
procurement laws, the WTO Government Procurement Agreement and the government
procurement chapters in FTAs guarantee national treatment, with conditions attached, forsignatory nations and regions. The U.S. will adhere to the terms of these existing agreements,
and the Buy American clause in the Recovery and Reinvestment Act of 2009 will not affectthe products of these nations and regions.
However, in both the WTO Government Procurement Agreement and the FTAs concludedby the U.S., the stipulations only apply to procurements of a value equivalent to or exceedingcertain thresholds. For example, in the case of the WTO Government Procurement
Agreement, the U.S. federal government specifies figures of (1) USD 194,000 or more forgoods and services, and (2) USD 7.443 million and above for construction services, to be
subject to the stipulations of the agreement (as of August 2009).
Nations which do not participate in the WTO Government Procurement Agreement, or
which have not had FTAs with the U.S., e.g., China, India, Brazil, and Russia (the BRICs)
will be affected by the Buy American clause of the Recovery and Reinvestment Act of 2009.
The BRICs have raised objections to the Buy American clause in succession, and Brazil’s
Foreign Minister Celso Amorim has not ruled out the possibility to bring the case to the
WTO.
However, as these nations have traditionally been discriminated against in U.S.
government procurement based on the Buy American Act of 1933 and some state government
procurement laws, it is not the case that the discrimination based on the 2009 Act is an■

procurement is termed an Economic Partnership Agreement, or EPA. In this paper, the term
FTA will be employed for both forms of agreement.

102entirely new phenomenon.
Nevertheless, there are concerns that the U.S. has sent a clear protectionist message to theworld via the Buy American clause. As the situation faced by industries in countries
throughout the world has become increasingly severe with the rapid economic downturn,calls for the protection of domestic industries through methods including the use of subsidies
or the restriction of imports have increased in strength. Against this background, it is fearedthat the introduction of protectionist measures by the very nation that has driven the free trade
movement over the past quarter-century may prompt other nations and regions to follow suit,or to retaliate, by introducing trade restrictive measures.
Measures resembling “Buy American” have in fact begun to appear in other countries
around the world. Regulations stipulating the preferential treatment of locally made goods
and local companies at all levels of the government were issued by Indonesia’s Minister of
Public Works in May 2009. If a predetermined local procurement rate for goods and services
is met, the relevant company will receive a price advantage when being evaluated for a bid.
For construction services as part of public works projects, in the case of a local company, aprice advantage of 7.5% will be obtained under fixed conditions; in the case of a consortium,
if the representative company is Indonesian, that company will receive 50% or more of thevalue of the tender, and if other conditions are fulfilled, a price advantage of 5% will beobtained. The government of the Australian state of Victoria announced measures in March2009 under which a level of 40% local content would be sought, with local businesses
receiving a 10% price advantage when bidding for public works projects of “strategic
projects” valued at AUD 250 million dollars or more. Movements to prioritize domestic andlocal goods for procurement can also be observed in other areas, including the states of New
South Wales in Australia and Ontario in Canada.
The scale of the global government procurement market cannot be ignored. In major
nations, the value of government procurement represents approximately 9% of GDP. In
addition, major nations and regions including Japan, the U.S., and the EU are increasing
government expenditure as an economic stimulus packages to counter the recession, andbusiness opportunities for foreign companies are consequently expanding. Against thisbackground, if more nations implement preferential measures for domestic products like Buy
American, it will represent a significant loss of opportunities for companies with their sights
set on the overseas government procurement market.
■ Application of special safeguards against Chinese-made products likely to increasein addition to AD and CVD
The trend towards protecting domestic industries from imported products is increasing instrength, with the implementation of trade remedies such as anti-dumping (AD) measures.
The WTO has indicated that 120 AD investigations were commenced in the latter half of2008, an increase of 35 over the first half of the same year.
In recent years, Chinese-made products have been the major target of AD measures
implemented around the world. The WTO has indicated that 413 AD investigations werecommenced against Chinese products from 2002 to 2008, representing 27% of the total, andmeasures were applied against Chinese goods in 297 cases, again 27% of the total. India has
implemented the most AD measures, and has been actively putting measures in place against
Chinese-made goods since the financial crisis, in particular iron and steel and chemical
products. From July to December 2008, India initiated 21 AD investigations against Chinese
products, an increase of 12 investigations from the first half of 2008, and a figure
representing half of the nation’s total of 42 AD investigations for the same period.
The AD and countervailing duties (CVD) are measures put into place to prevent harm todomestic industry by increasing tariffs on unfair imports. AD measures can be implemented
103

against products exported at dumping prices, while CVD measures target products that havebeen rendered competitive by means of subsidies from the government of the exporting
nation. Safeguard (SG) measures are another form of trade remedy measures, but unlike AD
and CVD, they are not implemented to protect domestic industries from unfair imports from a
trading partner, but are put into effect when a rapid increase in imports causes serious harmon domestic industries, or when threat to cause serious harm exists. AD, CVD, and SG are alllegitimate measures under the WTO rules, and their application should be unproblematic as
far as investigation as well as measures implemented are in accordance with the terms of theagreement. However, if such measures are applied excessively, they become an impediment
to trade. In addition, there is ambiguity in the WTO rules in this area, and as in the case of theuse of zeroing by the U.S., AD measures continue to be applied in contravention of the WTO
rules.
The U.S. refrained from applying CVD measures to Chinese products for an extended
period, but finally in November 2006 started a CVD investigation in relation to
Chinese-made coated paper. Following this, up to August 2008, the U.S. conducted 13 CVD
investigations against Chinese products, and applied the measures against a variety of
products including welded steel pipes, square steel pipes, laminated bags, and sodium nitrite.
The application of CVD measures by the U.S. against Chinese-made products is predicted toincrease in future. As part of the nation’s policy of promoting Chinese brands, China isproviding export subsidies for electrical and other goods. The U.S. and China are presently
contesting this issue before the WTO’s Dispute Settlement Body, but it is possible that the
U.S. will make these products, which have been increased in competitiveness by subsidies,
the targets of future CVD measures.
AD and CVD are not the only causes of concern for China. At the conclusion of thenegotiations for China’s accession to the WTO, the existing member nations won two
safeguards against China: China-Specific Textile and Apparel Safeguard; and Transitional
Product-Specific Safeguard. Normal SG measures can be used to restrict imports from any
WTO member nation or region, but these two measures apply exclusively to Chinese
products. While the application of the China-Specific Textile and Apparel Safeguard waslimited to Chinese-made textiles and textile products, the product-specific safeguard can beapplied to any Chinese-made product. The Textile and Apparel Safeguard became ineffective
as of the end of 2008, but the Product-Specific Safeguard can be applied until the end of 2013.
Up to the end of 2008, no nations had invoked the measure, but since February 2009, India
has applied it to Chinese-made aluminum wheels, soda acid, nylon tire cords, tires, and otherproducts. In the U.S., the United Steelworkers of America petitioned the U.S. International
Trade Commission (ITC) in April 2009 for the application of the safeguard (Section 421)
against Chinese tire imports.
In April 2009, India provisionally applied AD measures to stainless steel flat-rolled
products imported from not only China but also Japan. In June, India again provisionallyapplied SG measures to hot-rolled steel sheets and other products, and many believe that theirapplication will have a significant impact on Japanese companies.
The abuse of measures such as AD and CVD is a species of protectionism, and it will beessential to continue surveillance to ensure that they are not put to unscrupulous uses on thepretext of safeguarding domestic industries.
■ Subsidies for discriminating consumers
As part of their economic stimulus measures, some countries have introduced subsidy
systems to encourage consumers to buy specific products – for example, a certain amount of
the purchase price might be refunded. Subsidy systems targeting consumers can be effectivein stimulating demand and promoting trade. However, when there is discrimination with104

regard to the products that are subject to the subsidy payments, as for example whensubsidies are paid on condition that a product manufactured by a domestic company ispurchased, the conditions of competition for imported products are distorted, and this may
violate the principle of national treatment.
Malaysia is one of the countries considering the introduction of a discriminatory subsidy
for consumers. In a speech given in March 2009 concerning the nation’s second economic
stimulus package, Finance Minister and then Deputy Prime Minister Najib Razak announced
the nation’s intention to introduce a scheme offering a subsidy for consumers to replace theirpresent car with a domestically made vehicle. Under the scheme, the government would offer
a subsidy of 5,000 ringgits (approximately 13,000 yen) to consumers who purchase a car
manufactured by the domestic automakers Proton or Perodua to replace a vehicle that is 10 ormore years old. Given its restriction to domestically manufactured vehicles, this measure canbe indicated as discriminatory.
■ The U.S. and European Countries Bailing out Struggling Companies
Following the financial crisis, a wave of support measures for industries was announced,
chiefly in the developed nations (Table II-3). GM and Chrysler, previously ensconced at the
pinnacle of the global automotive industry, invoked Chapter 11 of the Federal Bankruptcy
Law in June and April 2009, respectively. Prior to the bankruptcies of the companies, the U.S.
government provided GM with USD 13.4 billion dollars and Chrysler with USD 4 billion
dollars in emergency loans.
== Table II-3 ==When the U.S. announced the introduction of support measures for GM and Chrysler in
December 2008, the move was internationally denounced as protectionist. However, thenumber of nations and regions offering loans and financial support to domestic industries has
now increased, and the list includes the EU, Australia, and Canada, among others.
In the EU, French President Nicolas Sarkozy announced the provision of 6 billion Euros inloans to Peugeot-Citroen and Renault in February 2009. The loans were offered on condition
that the companies maintain operation of their plants in France, which drew a strong response
from other EU member nations, in particular the Czech Republic, where a Peugeot plant islocated. Following this, France indicated that it would remove conditions that would
discriminate against other EU member nations. Other than France, the major EU nations tohave announced support packages for their automotive industries are the UK, Spain, Italy,
Germany, and Sweden.
Subsidy measures for companies and industries are regulated by Article 16 of GATT(“Subsidies”) and the WTO Agreement on Subsidies and Countervailing Measures (SCM
Agreement). Under the terms of the SCM Agreement, a subsidy is deemed to exist if agovernment or public body makes a financial contribution (by providing a grant or loan, notcollecting revenue which is due, purchasing goods, entrusting or directing a private body tocarry out these functions, etc.) and this action provides a benefit to a company (Article 1.1). A
subsidy that is “specific to an enterprise or industry or group of enterprises or industries”(Article 1.2) is potentially subject to countervailing measures. If measures falling under thiscategory have a negative impact on the domestic industries of member nations or regions,they have recourse to request for consultation within the WTO Dispute Settlement Body.
When an export product that has been increased in competitiveness through the provision of a
subsidy causes harm on the domestic industries of an importing country, the importing
country is able to apply CVD measures to countervail the effect of the subsidy. Given that the
U.S. and European loan measures discussed above involve the provision of government funds
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to specific companies (GM, Renault, etc.), they can be considered to be measures with a highdegree of specificity.
Subsidies provided on the basis of export performance and subsidies contingent upon thepreferential use of domestic products over imported products are prohibited under the termsof the SCM Agreement. If either of these types of subsidies is put into effect, member nations
have the right to demand their immediate withdrawal before the WTO Dispute Settlement
Body.
In the past, Europe and the U.S. have adopted tough positions with regard to government
assistance to ailing companies. The CVD measures launched by Japan, the U.S., and the EU
against DRAM manufactured by Hynix, a company which received support from the South
Korean government after it almost collapsed as a result of the 1998 Asian financial crisis, is aleading example. In addition, the U.S. has proposed in the Doha Round rule negotiations thata further group of subsidy types should be prohibited in addition to the abovementioned
subsidies based on export performance and subsidies contingent upon preferential use ofdomestic products, including the transfer of funds to compensate for operating losses. The
measures targeted here are similar to the measure implemented by South Korea in the case of
DRAM.
Despite having previously maintained this stance, the U.S. and the EU have now provided
financial assistance to domestic industries. These moves have the potential to impact
significantly on a wide range of discussions, including negotiations concerning theappropriate form and rules for subsidy systems and considerations of CVD measures.
■ The role of the WTO as a bulwark against protectionism
Following the financial crisis, there was apprehension that trade restrictive measuresdesigned among other purposes to protect domestic industries, i.e., protectionist measures,
would gain ground. It was agreed at the G20 Leaders Summit and the APEC Economic
Leaders’ Meeting held in November 2008 that restraint should be exercised in the area ofprotectionist measures. The declaration of the G20 Leaders Summit on Finance and the World
Economy held in Washington on November 14-15, 2008 stated that “…within the next 12months, we will refrain from raising new barriers to investment or to trade in goods andservices, imposing new export restrictions, or implementing World Trade Organization(WTO) inconsistent measures to stimulate exports.” Similar statements were made regarding
protectionist measures in the declaration of the APEC Economic Leaders’ Meeting held in
Lima on November 22, 2008. The declaration made at the G20 Summit held in London in
April 2009 reaffirmed the sentiments of the November 15, 2008 declaration, and added thatthe pledge with regard to protectionist measures would be extended to the end of 2010.
However, despite this commitment, trade restrictive measures are being put into placearound the world, as we have seen in a variety of fields.
One point which can be affirmed in relation to the recent trend towards the introduction of
trade restrictive measures is that all the measures that have been introduced conform to theframework established by WTO rules – the WTO is functioning as a bulwark against
protectionism. The existence of the WTO, with its sophisticated dispute settlement system,functions to ensure that the trade policies implemented by member nations and regions
remain within the bounds of the rules. The adoption of protectionist measures in the 1930s,
before the WTO came into existence, of which the U.S. Smoot-Hawley Tariff Act isrepresentative, resulted in a rapid contraction in world trade, increasing the severity of therecession in the world economy.
However, the existing WTO agreements are the products of the Uruguay Round(1986-1994), and were thus established fifteen years ago. As exemplified by the gap between
bound tariff rates and applied tariff rates, cases in which measures are allowable under the106terms of the present WTO agreements despite their negative impacts on world trade can beobserved in a wide range of areas. Given this, the successful conclusion of the present Doha
Round becomes even more significant in terms of controlling the rise of protectionism andrealizing an expansion of world trade. The WTO Secretariat estimates that the access tomarkets in products of the mining and manufacturing industries and agricultural products thatwould result from successful Doha Round negotiations would contribute USD 150 billion ormore to global economic stimulus.
The importance of the binding and trade liberalization effects of FTAs can also be seen to
be increasing. Against the background of stalled WTO negotiations, FTAs are making an
increasing contribution to the liberalization of trade in goods and services. In addition,
another role played by FTAs is to provide a foundation for the creation of new rules in areas
not covered by the Doha Round, such as investment and intellectual property. The
formulation of FTAs consistent with WTO frameworks is an agenda of similar importance tothe enhancement of the WTO rules themselves.

107

2. The Arrival of the Era of full FTA utilization(1) FTAs now number 171 worldwide
As of August 2009, 171 FTAs were in effect globally. (This figure, based on WTO reports,
includes customs unions. For a list of global FTAs, see “Table of World FTAs” in thestatistical materials at the end of this report). Sixteen FTAs were in existence at the end of
1989, a figure that increased by 50 in the decade between 1990 and 1999, and by a further
105 in the period of approximately nine and a half years from 2000 to June 2009. (Figure
II-1)== Figure II-1 ==Despite fears that FTA negotiations would be affected as governments began to focus ondomestic policy against the background of the global recession, the number of FTAs going
into effect increased steadily from October 2008. However, the negotiations for almost all of
the FTAs that have most recently gone into effect were concluded prior to October 2008,
when the financial crisis struck. It is possible that the effects of the recession may extend thenegotiating period for FTAs presently under negotiation.
(2) Trends in Japan’s FTAs
■ Japan has 9 FTAs in effect, has signed 2, and is presently negotiating 5
Japan has concluded successive FTAs since the latter half of 2000. Since the nation
concluded its first FTA with Singapore in 2002, its FTA network has rapidly expanded, with
the nation concluding agreements with Mexico in 2005, Malaysia in 2006, Chile andThailand in 2007, and Indonesia, Brunei, the Philippines, and ASEAN in 2008.
The Japan-Philippines FTA was signed in September 2006, but some time was required for
its ratification by the Congress of the Philippines, and the agreement did not go into effectuntil December 2008. The ASEAN-Japan FTA is Japan’s first FTA using a multilateralframework. The agreements with specific nations go into effect as each nation completes its
ratification procedures. As of June 2009, the FTA was effective between Japan and sevennations, comprising Singapore, Laos, Vietnam, Myanmar, Brunei, Malaysia, and Thailand.
The agreement is not yet effective between Japan and Indonesia, the Philippines, andCambodia.
The entry into effect of the ASEAN-Japan FTA gives Japan effective FTAs with Vietnam,with which the nation had previously signed a bilateral FTA that had not yet gone into effect,
and with Cambodia, Laos, and Myanmar, with which Japan had not previously conductedbilateral negotiations (noting, however, that the agreement with Cambodia has not yet gone
into effect). In addition, one aspect of the ASEAN-Japan FTA which underlines its
significance is the application of a cumulative rule of origin, a provision under which
products imported from other signatory nations and used in the manufacture of a finishedproduct are considered to be products of the nation in which the finished product ismanufactured. This means that intermediate products procured from either Japan or ASEAN
can be treated as products of the nation by which they are imported.
In February 2009, Japan signed an FTA with Switzerland, representing Japan’s first FTA
with a European nation. Distinctive features of this FTA include, for the first time in a
Japanese FTA, the introduction of an approved exporter certification system for certificationof origin, high-level disciplines concerning intellectual property and electronic transactions,and WTO-plus liberalization of services. Under an approved exporter certification system,
exporters that have received certification from the government are able to self-certify theorigin of a product, while other exporters must use third-party certification, in which athird-party organization judges the origin of a product. All of Japan’s previous FTAs have108

employed third-party certification systems; the approved exporter certification system has
been newly introduced in the nation’s FTA with Switzerland. Another distinctive feature ofthis FTA is the fact that nationality requirements for the board members of Japanesesubsidiaries in Switzerland have been waived.
Japan is currently negotiating FTAs with the Gulf Cooperation Council (GCC), India,
Australia, and Peru. It was hoped that the Japan-India FTA would be concluded by the end of
2008, but negotiations are continuing.
The leaders of Japan and Peru agreed to commence FTA negotiations at a meeting in April
2009, and the first negotiation meeting was held in May 2009. The Japan-Peru Economic
Partnership Agreement Research Group (Chairperson: Professor Shujiro Urata, Graduate
School of Asia Pacific Studies, Waseda University; Secretariat: JETRO), convened in Japanto study the potential for a Japan-Peru FTA, formulated and published a report recommending
the commencement of negotiations in March 2009. This report provided some of the
momentum for the commencement of the negotiations. Peru has been very active inconcluding FTAs, and has already concluded FTAs with a wide variety of countries including
the U.S., Canada, Singapore, Mexico, Chile, and China, and is involved in negotiations with
South Korea, the European Free Trade Association (EFTA), and the EU (within theframework of the Andean Community (CAN)). Peru has also announced its intention toparticipate in the negotiations for the Trans-Pacific Strategic Economic Partnership
Agreement (TPP), a move that can be seen as significant in terms of the conclusion of FTAs
with the participants in the TPP. Negotiations have been suspended in the case of theJapan-Korea FTA (at present, working-level talks are proceeding towards therecommencement of the negotiations).
Table II-4 provides an overview of the Japanese FTAs that are effective, have been signed,or are under negotiation, and the scale of Japan’s trade with the relevant nations and regions(for 2008). Japan’s nine effective FTAs represent 14.8% of its exports, 15.6% of its imports,
and 15.2% of its two-way trade. Factoring in the two FTAs that have been signed and the fivepresently under negotiation (including the FTA with South Korea, for which negotiations
have been suspended), these figures increase to 29.9% in the case of exports, 46.6% in thecase of imports, and 38.2% in the case of two-way trade. This demonstrates the increasing
importance in corporate activities of business development that takes FTAs into
consideration.
== Table II-4 ==Delays in Japan’s FTA negotiations while other countries are actively pursuingnegotiations, including South Korea, would put the nation’s companies at a competitive
disadvantage, making attempts to accelerate negotiations a matter of tremendous importance.
One major talking point with respect to potential future Japanese FTAs is a Japan-EU FTA.
FTA negotiations presently being conducted between the EU and South Korea are nearing aconclusion. South Korea’s trade structure is similar to Japan’s, and if the nation concludes an
FTA with the EU, it will receive more preferential tariff treatment than Japan for exports ofautomobiles, electrical goods, and other products. This is therefore an area of considerable
interest for Japan’s business community. In January 2007, taskforces were established inJapan and the EU (with JETRO acting as the Secretariat on the Japanese side) to study thepotential for an Economic Integration Agreement (EIA) between the EU and Japan. The
taskforces compiled a joint report in July 2008.
From January 2009, with JETRO again acting as the Secretariat, the EIA ResearchCommittee began conducting research with the cooperation of members of Japan’s business
community. The EU has not previously been active in undertaking FTA negotiations with109

advanced nations, but following on from the negotiations with South Korea, it agreed in May
2009 to commence FTA negotiations with Canada.
(3) Trends in FTAs in the Asia Pacific Region■ The ASEAN+1 FTA network is almost complete in the Asia Pacific Region
Since 2000, a large number of FTAs have been concluded in the Asia Pacific region. One
significant aspect of this trend is the fact that a network of FTAs between ASEAN andsurrounding nations (i.e., “ASEAN+1” FTAs) has virtually been completed. ASEAN has
established FTAs with China (effective from 2004), South Korea (effective from 2007), Japan(effective from 2008), Australia and New Zealand (signed in 2009), and India (signed in2009). In the case of the ASEAN-Korea FTA, certain aspects of negotiations had previously
not been concluded between Thailand and South Korea, and this part of the FTA wastherefore not effective, but the two nations signed the agreement in February 2009.
ASEAN and Australia and New Zealand signed an FTA in February 2009. The agreement
was initially intended to have been signed at the East Asia Summit scheduled to be held in
Thailand in December 2008, but the summit was postponed as a result of political instability
in Thailand, and the signing was delayed by two months. Thailand and Singapore alreadyhave bilateral FTAs with Australia and New Zealand, but when an FTA goes into effectbetween ASEAN as a whole and the two nations, the benefits of these FTAs will be sharedwith other ASEAN nations, and will be increased through the introduction of a cumulative
rule of origin.
In the case of the ASEAN-India FTA, negotiations were prolonged despite the fact that theparties had been expected to sign the agreement. A broad agreement was reached regarding
the ASEAN-India FTA at the Sixth AEM-India Meetings in August 2008, and the agreement
was scheduled to be signed at the East Asia Summit in December 2008, but this was delayed
due to the postponement of the summit. The agreement was eventually signed in August
2009.
India held its first general elections in five years for the lower house between April andMay 2009, with the ruling coalition, led by the Indian National Congress, emerging
victorious and retaining power. The Indian National Congress had previously promoted
negotiations for India’s FTA with ASEAN, and the retention of power by the Congresscoalition was seen as boding well for the signing of the agreement. The FTA is expected to go
into effect in 2010. Japanese companies have a significant presence in the ASEAN nations,and the coming into effect of the FTA will mean that they will be able to export products ateliminated or reduced tariffs from ASEAN nations to India, a consumer market of increasing
importance. Japanese companies therefore have a considerable interest in this matter.
China already has an FTA in effect with Hong Kong, and announced its intention in May
2009 to establish an Economic Cooperation Framework Agreement with Taiwan. Taiwan is amajor trading partner of Japan, and it will therefore be necessary to monitor trends in FTAs
with the nation.
■ Increasing utilization of FTAs between third countries in the Asia Pacific region
This section will consider the actual status of utilization of FTAs in the Asia Pacificregion that are of particular concern for Japanese companies.
Table II-5 shows the results of a survey of the status of utilization of FTAs of Japanesecompanies operating in 13 nations (the ASEAN7 nations (Thailand, Malaysia, Indonesia, thePhilippines, Singapore, Vietnam, and Myanmar), India, Pakistan, Sri Lanka, Bangladesh,
Australia, and New Zealand) with an investment ratio of at least 10% (Survey ofJapanese-Affiliated Firms in Asia and Oceania, conducted in FY2008). The companies wereasked which of the third country FTAs effective in the Asia Pacific and Southwest Asia
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regions they actually made use of (excluding FTAs formulated by Japan in the Asian region).
The results of the survey showed that the FTA most frequently used by Japanese companies
in the Asia Pacific and Southwest Asia regions is the ASEAN Free Trade Area (AFTA).
AFTA is eliminating tariffs in stages, and more than 80% of products are now tariff-free in
the ASEAN6 nations (Thailand, Malaysia, Indonesia, the Philippines, Singapore, and Brunei).
The next most frequently used FTA is the ASEAN-China FTA. Frequent utilization is also
made of the Thailand-India FTA and of the Thailand-Australia FTA. This suggests that thehigh concentration of Japanese companies in Thailand is using these FTAs in conducting
exports to India and Australia.
== Table II-5 ==Thailand and Malaysia publish figures for the value of trade using FTAs, providing
fundamental statistical data for an understanding of the status of utilization of FTAs in effectin the Asia Pacific region.
Table II-6 shows the status of utilization of FTAs in Thailand and Malaysia. Looking firstat the status of AFTA, the core FTA in the Asia Pacific region, we find that the combined total
value of exports conducted using AFTA for Thailand and Malaysia was USD 15.6 billion
dollars, representing 28.6% of the total value of the nations’ exports to ASEAN nations(excluding Singapore, which has only ever applied tariffs to certain types of alcohol, the totalexport value used in the denominator included products which are tariff-free in the importing
country on an MFN basis). The rate of utilization of AFTA is increasing annually, with thepercentage of total export value of exports conducted using the agreement climbing 23.0
percentage points from 5.6% in 1998. Considered by country, figures are comparatively highfor the utilization of the FTA to conduct exports to Indonesia and Vietnam (Table II-7). Six ofthe signatory nations (the ASEAN6: Singapore, Thailand, Indonesia, Malaysia, thePhilippines, and Brunei) reduced tariffs on most products to 5% or less in 2003, and in 2008
more than 80% of products were made tariff-free in these nations. This suggests that the rateof utilization of the FTA has increased as the agreed tariff rates have been reduced. Thesesame six nations intend to remove tariffs on almost all trade items in 2010, and this can be
expected to promote even greater utilization of AFTA.
== Table II-6 ==== Table II-7 ==In addition, in August 2008, AFTA introduced a new standard for certification of origin. In
addition to the value-added content criterion (a product to which value is added in a signatory
nation to an amount equivalent to or greater than a predetermined figure is considered a
product of that nation), a standard based on change in tariff classification criterion (when thetariff classification number of a finished product manufactured in a signatory nation differsfrom the tariff classification number of a material not originating in that country that wasused in the manufacture of the product, the product is considered a product of that nation) has
been introduced. Exporters are now able to choose between these criterions. The introductionof the new criterion for certification of origin is particularly significant in the case of liquid
crystal televisions, an area of great interest to Japanese companies. Liquid crystal panels, likeliquid crystal televisions, are high-value-added products, and are only manufactured in theregion by Japan and South Korea etc. Given that they are not manufactured in ASEAN, it wasdifficult for these products to satisfy rules of origin requirements when only thevalue-added
content criterion was used. The introduction of a criterion based on change in tariffclassification criterion will enable these products to satisfy AFTA criterion for certification of111

origin, and this can be expected to promote further utilization of the FTA by Japanesecompanies in future.
As large numbers of FTAs successively go into effect in the Asia Pacific region, thenecessity for harmonization of rules of origin has begun to be discussed. In terms of standards
for certification of origin, while some FTAs offer exporters a choice of standard, others
require only the value-added content criterion, only the change in tariff classification criterion,
or both criterions to be satisfied. Companies using Asia Pacific FTAs are demanding to beoffered a choice of criteria, and it will be essential in future to intensify discussion concerning
the appropriate direction for rules of origin, taking into consideration the further
internationalization of company activities as the FTAs begin to cover a broader geographic
area. In addition, it will also be necessary to give further consideration to methods ofcertification of origin, such as discussing the introduction of exporter certification systems.
Turning to the status of use of the ASEAN-China FTA in Thailand and Malaysia, the valueof exports using the FTA from both countries in 2008 was USD 3.6 billion, representing
10.1% of the total value of their combined exports to China. The utilization of the FTA for
exports of fruit is conspicuous when considered by product. The rate of utilization of theASEAN-China FTA has remained unchanged, but is expected to increase from 2010, whentariffs are abolished on the majority of products. The utilization of systems outside the scopeof the FTA, such as a system for the waiving of tariffs on intermediate goods for the
production of goods for export, can be indicated as a reason for the lower rate of utilization of
the ASEAN-China FTA at present.
Thailand has effective bilateral FTAs with both Australia and India. The value ofThailand’s exports conducted using the Thailand-India FTA is USD 400 million, or 12.3% of
the total value of the nation’s exports to India. Thailand and India have implemented an early
harvest scheme (fast-track tariff reductions) covering 82 products in their FTA. If the totalexport value of the products covered by this scheme is used as the denominator, a figure of
83.4% is obtained for the percentage of total export value, and the FTA is used for exports ofthe majority of the target products. The value of Thailand’s exports conducted using theThailand-Australia FTA is USD 4.9 billion, representing 61.9% of the total value of its
exports to Australia. Among Thailand’s exports to India, the FTA is used most frequently forexports of electrical goods including televisions and air conditioners, while in the case of thenation’s exports to Australia, its utilization is most prominent for exports of automobiles.
(4) The wide-area FTA concept under consideration
With the network of ASEAN+1 FTAs largely complete, attention appears to be shifting to
the formation of wide-area ASEAN+3 and ASEAN+6 FTAs in the Asia Pacific region.
ASEAN+3 encompasses Japan, China, and South Korea in addition to the ASEAN nations,while ASEAN+6 adds Australia, New Zealand, and India to the ASEAN+3 framework.
Research is presently being conducted on the viability of FTAs for both frameworks. Japanstrongly backs the establishment of an ASEAN+6 FTA.
With the ASEAN+3 and ASEAN+6 wide-area FTAs under review, the concept of an
APEC-wide FTA presents a vision of an FTA covering an even broader area.
This APEC-wide FTA, proposed by the U.S., is termed the Free Trade Area of the Asia
Pacific (FTAAP). The FTAAP was put on the agenda for research as a long-term project atthe 2006 APEC Leaders Summit. APEC is made up of 21 nations located in and around theAsia Pacific region. 12 members of ASEAN+6 are APEC members (India, Cambodia, Laos,and Myanmar are not APEC members). APEC is operating on the basis of non-binding
commitments,, and has not previously discussed the formulation of agreements with binding
power, such as FTAs. The commencement of FTA negotiations would therefore represent asignificant shift in direction for APEC.
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Among APEC members, the U.S. has active FTAs with a number of North and SouthAmerican nations, including Canada, Mexico, Chile, and Peru, but its only FTAs withmember nations in the Asian region are with Singapore and Australia. An FTA has beensigned with South Korea, but has not yet gone into force. With FTA negotiations excluding
the U.S. proceeding in the Asia Pacific region, the nation’s interest in establishing an FTA
that takes in the region is increasing.
The Trans-Pacific Partnership Agreement (TPP) is an FTA related to the FTAAP in which
the U.S. does participate. The TPP, also known as the P4, was originally an agreement
formulated between Singapore, Brunei, New Zealand, and Chile in 2006. In March 2008, the
TPP commenced negotiations concerning investment and financial services, which had
previously been set aside. In February 2008, the Bush administration announced the intentionof the U.S. to participate in these negotiations, and in September 2008, the nation further
announced its desire to participate in all aspects of the TPP negotiations. Australia and Peru
are also scheduled to join the negotiations, and Vietnam has expressed interest. These nations
are all APEC members, and the TPP therefore forms a core for multilateral negotiations
involving the U.S. towards an APEC-wide FTA.
However, the Obama administration’s stance towards the TPP negotiations is unclear. The
first round of intergovernmental negotiations was scheduled to be held in Singapore in March
2009, but was postponed due to uncertainty in U.S. trade policy in the wake of the change ofadministration, among other issues.
Table II-8 shows the percentages of world population, GDP, and trade encompassed by thevarious wide-area FTAs discussed above. ASEAN+3 and ASEAN+6 respectively encompass
31.4% and 49.6% of the world’s population, 19.4% and 23.3% of world GDP, and 22.7% and25.2% of world trade. With the U.S. and Japan as members, an APEC-wide FTA would
encompass more than half of the global economy, representing 40.6% of the world’s
population, 53.3% of world GDP, and 43.7% of world trade.
== Table II-8 ==■ Intraregional trade rate of 44% in Asia Pacific region
In part due to the conclusion of successive FTAs, the intraregional trade rate of the Asia
Pacific region is displaying an increasing tendency. Table II-9 shows the intraregional traderates of major regional groupings and the various regional groupings projected in potential
wide-area FTAs in the Asia-Pacific region, of the EU, and of the North American Free Trade
Area (NAFTA). The intraregional trade rate of ASEAN+6 (two-way trade and adjusted forre-export) was 44.2% in 2008, a figure exceeding the rate for NAFTA. The 2008 intraregional
trade rate for APEC (adjusted for re-export) was 64.1%.
== Table II-9 ==A variety of factors, including the promotion of direct investment and the reduction of
distribution costs, appear to be contributing to increases in intraregional trade rates, but fromthe systemic perspective, the reduction of tariffs by means of FTAs can also be seen to bepromoting intraregional trade.
It is predicted that tariffs will be abolished in the major FTAs in the Asia Pacific region
from 2010. In AFTA, the ASEAN6 have removed tariffs on almost all products for
intra-ASEAN trade, and the majority of goods have been made tariff-free in the
ASEAN-China and ASEAN-Korea FTAs. The phased elimination of tariffs in the
ASEAN-Japan FTA has also progressed further. We have entered the era of the full FTA
utilization, and the agreements are propelling further increases in intraregional trade in the113world’s major regions.
(5) FTA Trends in the U.S. and the EU
The Bush administration consistently promoted a free trade agenda, and expanded U.S.
market access by means of FTAs against the background of the stalled Doha Round. Prior to
the Bush administration, the U.S. had four FTA partners. The Bush administration actively
pursued FTA negotiations with nations in Central and South America, the Middle East, andAsia, concluding FTAs with 16 new countries.
However, with the advent of Democratic majorities in the house and the senate in October
2006, clashes with the Bush administration in congress increased in intensity. With the
exception of an FTA with Peru, those concluded by the Bush administration from that point
onwards (with Peru, Panama, Colombia, and South Korea), remain unratified. Following the
global financial crisis in September 2008, it became clear that the world was entering arecession, and the Obama administration that entered power in January 2009 made rebuilding
the domestic economy its priority. Given this, it is highly likely that trade policy will beplaced on the back burner, and that progress in U.S. FTA formation will be slow.
At the same time as it is working to deepen its level of regional integration, the EU is
expanding eastward, has entered into a process of stabilization and association with theBalkan nations, and is deepening its economic relations with the Mediterranean nations. It
has also concluded FTAs with Mexico and Chile, and is involved in negotiations towards
FTAs with various Central and South American nations, including Mercosur (the SouthernCommon Market), which includes Brazil and Argentina, and the Andean Community (CAN),
which numbers Colombia and Peru among its members. The EU began FTA negotiations
with the GCC in 1990, but the process has stalled, and the negotiations have now entered
their nineteenth year.
In addition, since the expiry of the fourth Lome Convention, a preferential tariff agreementwith the African, Caribbean and Pacific Group of States (ACP) in December 2008, the EU
has moved forward with negotiations towards the conclusion of FTAs with these nations.
Among the ACP nations, the EU already has FTAs in effect with the CARIFORUM nations,with the exception of Haiti.
In October 2006, the EU announced a new trade strategy under the banner “Global
Europe,” making clear its intention to pursue FTAs with the rapidly growing emerging
nations of Asia. The EU has pushed ahead with negotiations with South Korea, ASEAN, andIndia as the partners of top priority.
The FTA between the EU and an Asian nation that should receive the closest attention is
the EU-South Korea FTA. Negotiations began in May 2007, and appear to have beenconcluded, in major issues, in July 2009. The parties are aiming to sign the agreement within2009. The major stumbling block in the negotiations was a provision that would keep South
Korea’s duty drawback system, under which tariffs paid for the importation of parts or raw
materials used in specified products for export are refunded. With this system in operation,
third countries would be able to enjoy merits from the FTA in relation to exports to the EU,
and the EU therefore demanded the inclusion of a clause prohibiting the utilization of thesystem. The South Korean side insisted that it was unable to accept the prohibition of thesystem, on the grounds that it was an existing system with no relation to the FTA, and that thenation sourced a high ratio of its parts and raw materials from outside the region. Finally, it
was agreed that a special provision would be included to go into effect if South Korean
companies increased their level of procurement of parts from third countries in the future, andan upper limit was set for the duty drawback system.
In comparison to the negotiations with South Korea, the negotiations between the EU, andIndia and ASEAN, respectively, have proceeded at a slow pace. Negotiations between the EU114

and India began in June 2007. Six rounds of negotiations have been completed to date, andthe parties are pushing ahead with the process with a view towards reaching a conclusion by
the end of 2009. However, the negotiations are reported to have encountered difficulties inrelation to a broad range of areas, such as tariffs, services and investment, and government
procurement. ASEAN and the EU began their negotiations in May 2007, but thesenegotiations also encountered difficulties, and the parties agreed to temporarily suspend themat the ASEAN Economic Ministers Meeting in May 2009. The EU wishes to pursue FTA
negotiations separately with ASEAN member nations, but ASEAN side has opposed this, andas yet, it is uncertain when the negotiations will resume.

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3. Needs for Discipline on Trade-related Regulations
Today, corporate activities are becoming increasingly globalized, and their needs arediversifying. The range of areas that are becoming subject to liberalization and regulation
formulated by GATT and the WTO are increasing. With the establishment of the WTO in
1995, liberalization and regulation was promised in a broad range of fields in addition totariff and non-tariff barriers, including investment and services, government procurement,
and intellectual property rights.
Following the establishment of the WTO, there were increasing calls for liberalization andthe establishment of regulations in areas newly agreed upon in the Uruguay Round and thecoordination of competition. In addition to the area of services, the Doha Round pursued
negotiations in the areas of investment, government procurement, and competition, theso-called “Singapore issues.” However, in the face of strong oppositions from developing
nations, among others, the Singapore issues were eventually taken off the agenda. In addition,
the Doha Round has not given sufficient consideration to trade measures related to theenvironment.
We also cannot ignore the fact that 15 years have passed since the conclusion of the
Uruguay Round. A rapid conclusion to the Doha Round is essential from the perspective ofmatching trade rules to the realities of fast-changing economic activity, while the necessity ofrule-making in FTAs, multilateral agreements, bilateral frameworks, etc., has also increased
as an adjunct to the multilateral rule-setting associated with the WTO.
(1) Discussions Concerning Trade and the Environment■ Increasing environmental awareness worldwide
An increase in environmental awareness can be observed throughout the world. The
Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC),
published in 2007 indicated that the global warming “unequivocal.” The issue has beenbrought home to people throughout the world by disturbing images of crumbling glaciers in
the Arctic and the Antarctic, animals and plants on the verge of extinction, and torrential
downpours and droughts, and we have become aware that the situation is no longer potential,
but actual. Work is being done to combat global warming in a large number of international
forums and in countries and regions throughout the world, and considerable effort is being
directed towards attempts to reduce emissions of carbon dioxide, one of the factors causing
global warming.
The United Nations Conference on Environment and Development (also known as the
Earth Summit), held in Rio de Janeiro in June 1992, represented a major turning point inthinking regarding the environment. 182 countries participated in the summit, with 102
sending their leaders. Participants voted to adopt the UN’s Agenda 21, an action plan forsustainable development for the 21st century, and signed two important agreements, theFramework Convention on Climate Change and the Convention on Biological Diversity.
Another important summit was held in Johannesburg in September 2002, 10 years after the
Earth Summit. 104 leaders representing 191 countries participated in The World Summit on
Sustainable Development, also known as the Johannesburg Summit. The summit reviewed
Agenda 21, and produced the Johannesburg Declaration in addition to establishing animplementation plan providing guidelines for action. This summit increased internationalawareness of the fact that environmental issues demand rapid solutions.
At the same time, discussions began to focus on the relationship between free trade –essential for economic development – and the preservation of the environment. In 1991, a
dispute was brought before a GATT panel regarding import restrictions imposed on Mexican
tuna by the U.S., because of the use of fishing methods resulting in a high rate of capture ofdolphins in the tuna nets. The panel found that the restrictions were not justified under the116terms of GATT, leading to a fierce reaction from environmental groups. Free trade rules wereseen as taking precedence over environmental protection measures. However, since that
period, discussions of these issues have continued globally, and awareness that the two cancoexist has increased. The relationship between free trade and environmental protection was
taken up as an issue at the Earth Summit and the Johannesburg Summit, and it was concluded
that such a relationship could be mutually supportive. In the Doha Round, “trade and theenvironment” forms part of the negotiation agenda, aiming at reducing as well as cutting
tariffs on environment-related products, and harmonizing between trade rules and the various
environmental agreements, concerning the management of poisonous substances, waste
products, and chemical substances.
In the EU, new types of environmental regulations dealing with the waste produced by the
manufacturing industry are being successively introduced based on the 6th Environmental
Action Programme announced by the European Commission in July 2002. Based on theconcept the polluter-pays and precautionary principles, and taking into consideration the
lifecycle of the product (to be discussed below), these regulations demand that member
nations and their industries reduce the environmental burden at every stage of a product’s life,
from design to scrapping. The regulations are therefore having a significant impact on
business activities. The EU’s environmental regulations are also spreading to other major
nations, including the U.S., Japan, China, and South Korea.
Below, this report will consider what actions are being taken by the international
community and individual nations, based on the recognition that protection of theenvironment and a free trade system can coexist. In particular, focus will center on thediscussions taking place in the Doha Round concerning the reduction or elimination of tariffs
on environment-related products and the relationship between WTO rules and environmental
agreements, in addition to looking at the effect of the EU’s environmental regulations on
business activities.
■ The coordination of trade liberalization and environmental protection in the WTO
With the increasing global efforts to protect the environment, such as the implementationof measures to combat climate change, the WTO has also been required to harmonize therelationship between trade liberalization and the environmental protection measures that are
sometimes inimical to it. Because GATT does not contain clear stipulations regarding
environmental protection, in the majority of cases the WTO-consistency of domestic
environmental measures is decided by the WTO Dispute Settlement Body based oninterpretation of Article 20 of GATT, covering general exceptions to trade rules (Figure II-2).
== Figure II-2 ==In 2001, the Appellate Body of the WTO ruled that a French domestic measure banning
imports of products containing asbestos fibers was necessary for the protection of human lifeand health, and that the criteria for application of the measure were justifiable under WTO
rules. This case demonstrated that the WTO Dispute Settlement Body would to a certain
extent consider domestic measures implemented for the purpose of environmental protection
as exceptions to the demands of trade liberalization. However, there are limits to theregulation of these issues that can be achieved through a reliance on the judicial
interpretations of the WTO, and the necessity for an agreement between member nations is
recognized.
Paragraphs 31-33 of the Doha Ministerial Declaration stipulate negotiation topics related
to trade and environment. The main points of discussion are (1) the reduction or abolition of
trade and non-trade barriers to products (termed “environmental goods” below) and services
117that are useful from the perspective of environmental protection or have a minimal
environmental impact, and (2) clarification of the relationship between WTO rules andspecific trade obligations established in multilateral environmental agreements. A number ofother points for negotiation are also set out, including the labeling of environmentallyconscious products.
■ Abolition of tariffs on environmental goods
The point to which the most discussion time has been given in the Doha negotiations on
trade and the environment is the method of abolishing tariffs on environmental goods.
Nine advanced nations and regions including Japan, the U.S., and the EU have proposedthat tariffs should be abolished on 153 products in 12 classifications (6-digit HS code level).
The proposal reflects differences in the detailed classifications used by different countries,
and contains provisions for more detailed definitions, the designation of excluded products,
withholding of specific products by different countries, etc.
In addition, the U.S. and the EU have proposed a two-stage approach, in which
negotiations are divided into those concerning goods on which all WTO member nations
should abolish tariffs, and concerning goods on which only the major member nations should
abolish tariffs. The approach of limiting the countries participating in the negotiations issimilar to that adopted for the Information Technology Agreement (ITA), by means of whicharound 70 members have abolished tariffs on IT-related goods, and have liberalized
approximately 97% of trade in the goods covered by the agreement.
In January 2009, the Japanese government announced its intention to propose its own listof goods, focusing in particular on energy-saving products.
In response to this approach of formulating lists of products to be subject to the abolitionof tariffs, as suggested chiefly by the developed nations, developing nations have raised thecriticism that the goods proposed by the developed nations are not necessarily utilized as partof environmental measures; i.e., they are imported and exported for purposes other than use
in environmental protection-related contexts (this is the issue of “dual use”). The developing
nations have also indicated that the formulation of detailed lists in itself is advantageous forthe exports of developed nations, which possess greater technological capacity, and areasserting that agricultural products in which the developing nations have a competitive
advantage, such as raw materials for bioethanol, should also be subjects of the negotiations. A
new proposal made by Brazil in November 2007 for a bilateral “request-offer” process to be
employed in negotiations regarding services, can be taken as a representative example of the
proposals coming from developing nations (Table II-10).
== Table II-10 ==The negotiations were discontinued with the list approach and the request-offer approach
recorded as Chairperson’s proposals, and the negotiation method itself therefore remains
undetermined. The trade and environment negotiations are closely related to the
non-agricultural market access (NAMA) negotiations, and their progress will be affected by
the course of these latter negotiations.
■ The relationship between multilateral environmental agreements and WTO rules
The second major point of contention in the trade and environment negotiations has been
the coordination of the stipulations of multilateral environmental agreements that impose
trade restrictions (prohibition of the importation of regulated items, etc.) and WTO rules. Of
more than 250 multilateral environmental agreements in existence, approximately 20 containprovisions, such as import and export prohibitions, which clearly do not conform to WTO
118

trade liberalization rules. While none of these provisions has yet become an issue for the
WTO, as environmental agreements proliferate and increase in complexity, it is easy to
predict that cases of conflict with WTO rules will arise in future.
For example, the Cartagena Protocol on Biosafety, an agreement concerning biologicaldiversity, stipulates a higher level of environmental protection than the “precautionary
principle” based on the WTO Agreement on the Application of Sanitary and Phytosanitary
Measures (SPS). Specifically, even if an importing nation does not possess sufficient relevantscientific information or knowledge, it is able to prohibit the importation of a living modified
organism if it judges that the importation will have a negative impact on the protection of
biological diversity, etc. (Cartagena Protocol on Biosafety, Article 10, Item 6). This is afurther step onwards from Article 5, Item 7 of the SPS agreement, which provides for theprovisional application of sanitary or phytosanitary measures on the basis of available
information. Given this, it is possible that conflicts between prohibitions on imports ofgenetically modified substances applied by signatories to the Cartagena Protocol and the SPS
agreement will represent a problem in the future.
Other environmental agreements forming the subject of negotiations include theStockholm Agreement on Persisting Organic Pollutants, the Rotterdam Convention on the
Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides inInternational Trade, the Basel Convention on the Control of Transboundary Movements ofHazardous Wastes and their Disposal, and the Montreal Protocol on Substances that Deplete
the Ozone Layer.
In the Doha Round, judgments have been demanded regarding which obligations in
specific environmental agreements are allowable, based on WTO environment-related
standards, and in particular Article 20 of GATT. Japan takes the position that, whereenvironmental agreements clearly stipulate provisions for specific trade obligations, theseprovisions should be recognized as being in accord with the WTO agreements.
If environmental agreements between WTO member nations are recognized as being
consistent with WTO rules, the ability of companies to predict trade risks such as prohibitions
on imports and exports will increase to a certain extent, and future progress in thenegotiations is therefore eagerly awaited.
There are some cases where consistency with environmental agreements has been
established at the FTA level. Article 104 of NAFTA gives priority to the obligations ofspecific environmental agreements (the Montreal Protocol, the Washington Convention, andthe Basel Convention) over NAFTA obligations, provided that the method of complying withthe obligations that is chosen is the least inconsistent with other NAFTA obligations.
At present, most attention is being focused on the consistency of countermeasures against
climate change being introduced around the globe with WTO rules. The Kyoto Protocol,
which makes provision for an emissions trading scheme, contains no provisions for trade
restrictive measures that are clearly inconsistent with WTO rules. The Protocol rather enjoinsparties to strive to minimize the negative impact of any measures adopted on international
trade, seeking to establish harmony between trade and the Kyoto mechanisms.
However, there is a possibility that the details of the measures being considered for
introduction around the world in order to meet Kyoto targets, or the mode of operation ofthese measures, may be inconsistent with WTO rules, and it will be necessary to monitor thesituation. For example, the U.S. and the EU are considering the introduction of a border tax
adjustment measure (the imposition of an import levy on the products of nations and regions
which have not satisfied their commitments for the reduction of greenhouse gases). In June
2009, the House of Representatives passed the American Clean Energy and Security Act,
which paves the way for the introduction of border tax adjustment. The same Act enables the
President, in the event that no international agreement with binding power regarding the119reduction of greenhouse gas emissions has been reached by January 1, 2018, to recommend
to Congress the establishment of a system requiring the purchase of international reserve
allowances, corresponding to border tax adjustments, in the case of imports from countries
whose levels of energy consumption and greenhouse gas emissions per shipment of specificproducts exceeds the standards established by the U.S. for the same industry.
In relation to this point, the WTO indicated in a report on trade and climate change jointly
issued with the United Nations Environment Programme (UNEP) in June 2009 that bordermeasures put into effect by any nation must be consistent with WTO rules, in particular
Article 20 of GATT.
■ Conflict over eco-labeling carries over from the GATT era
The provision of information regarding products that consider the environment is allowedby the WTO, provided that it is done in a non-discriminatory manner. However, the WTO
does not allow the use of labeling requirements as disguised trade restrictions, or theirarbitrary application resulting in actual discrimination against import products. The
relationship between eco-labeling and the WTO Agreement on Technical Barriers to Trade(TBT) represents a particular point of argument.
In a recent development, Mexico brought a case to the WTO in October 2008 claimingthat a U.S. labeling system indicating that tuna had been caught using “dolphin-safe”
methods was discriminatory. This issue had previously been brought before a GATT panel
before the WTO came into existence. At that time, the panel report had stated that the labels
could be retained provided that they did not hinder free sale of the product. However, thepanel report was not adopted. In April 2009, the WTO established a dispute settlement panel
to deal with the issue, and attention is being drawn to the case as presenting a new aspect ofenvironment-related conflict in the WTO.
(2) Formation of International Environmental Standards driven by the EU■ The EU introduces pioneering environmental regulations successively
A significant change in thinking about regulations concerning the waste products of the
manufacturing industry has taken place. In the past, the central focus was the formulation ofregulations to control the discharge of harmful gases and waste products from factories.
However, there has been an increasing awareness of the necessity to limit the burden on theenvironment at every stage of manufacturing process in order to regulate waste products in an
efficient manner.
It is the EU that is leading the way in the new push towards this type of environmental
regulation. Since the July 2002 publication of the Sixth Environment Action Programme,
which provides guidelines for regulations, the EU has been introducing a series ofenvironmental regulations. To date, it has introduced the End of Life Vehicles (ELV)
Directive (July 2003), the Waste Electrical and Electronic Equipment (WEEE) Directive(August 2005), the Directive on the Restriction of the Use of Certain Hazardous Substancesin Electrical and Electronic Equipment (RoHS) (July 2006), the Regulation on Registration,
Evaluation, Authorization and Restriction of Chemicals (REACH) (June 2007), and theEnergy-Using Products Directive (EuP) (framework directive: August 2005; Implementation:
Successively from December 2008) (Table II-11).
== Table II-11 ==The life-cycle thinking (LCT) introduced in the Integrated Product Policy (IPP) announced
by the European Commission in February 2001 brought about a significant change in theorientation and design of environmental regulations. LCT seeks to reduce the burden on the120

environment at every stage of a product’s lifecycle, from raw materials to manufacture,transportation and scrapping. Regulations designed on the basis of this way of thinking will
have an effect throughout company supply chains. This means that the manufacturer of afinished product, upstream companies that supply parts to that manufacturer, and their
upstream companies will all be affected by the regulations as long as the EU is the destination
for their finished products.
The basic principles of the new environmental regulations have also had a significant
influence on the orientation and design of the regulations. There are four basic principles: 1)
the “polluter-pays” principle; 2) the precautionary principle; 3) the preventive principle; and4) the principle of rectification at source. Of these, the polluter-pays principle places the
responsibility of assessing the risk of chemical substances, treatment of waste products, etc.,
on companies, and has a direct effect on management methods and other practices. For
example, the WEEE Directive obliges manufacturers to collect and dispose of waste products,
based on this principle.
If these new types of regulations are able to contribute sufficiently to the protection of theenvironment, then they should be welcomed from the perspective of sustainable development.
However, if the regulations place excessive restrictions on company activities, businesses will
suffer. Environmental regulations are tending to become increasingly stringent. For
companies, in addition to pushing ahead with modification of product design andmanufacturing methods in order to ensure that they do not lose profitability, it will beessential to actively participate in the formulation of rules by the EU to prevent regulations
from becoming an impediment.
■ WEEE and RoHS expected to be revised extensively
The WEEE Directive seeks to reduce the amount of waste electrical and electronicequipment through reuse, recycling, and energy recovery. To this end, EU member nations
and companies are requested to establish collection and recycling systems for WEEE
products. The RoHS Directive prohibits in principle the use of six substances (lead, mercury,cadmium, hexavalent chromium, polybrominated biphenyls (PBBs), and polybrominateddiphenyl ethers (PBDEs)), and requires substitutes to be employed.
The WEEE and RoHS Directives went into effect in August 2005 and July 2006,
respectively, and numerous problems have surfaced since then. Issues relating to theeffectiveness of the regulations have been pointed out. For example, the rate of collection of
WEEE under the regulations is only one-third the total amount of the corresponding
equipment sold. In addition, it is observed that EU member nations differ in the volume ofcollection of waste equipment. According to European Commission documents, in 2006 14.4
kg of waste equipment was collected per person in Sweden and 11.1 kg was collected in
Denmark, nations which have been traditionally known for their high level of environmental
awareness. By contrast, only 0.3 kg and 0.4 kg were collected per person in France andPortugal, respectively. In Rumania, a nation at a lower technological level, the figure was 0.1
kg per person.
In the case of the RoHS Directive, problems are stemming from ambiguous definition of
the products subject to the regulations. For companies, uncertainty as to whether theirproducts are subject to the regulations is a major issue, and calls to clarify the definition havebeen frequently heard. In addition, problems in the enforcement of the regulations have been
indicated, with numerous products that do not conform to the RoHS regulations.
The WEEE and RoHS Directives will be reviewed every four years. The European
Commission prepared draft revisions in December 2008 mainly in order to rectify the
problems discussed above, and has submitted them to the European Parliament and theEuropean Council. The revision of the WEEE Directive scraps the collection target of 4 kg of121waste equipment per person, replacing it with a collection target of 65% of the averaged
weight of all electrical and electronic equipment sold in the preceding two years. This can beseen as a measure to respond to the differences between member nations in terms of thevolume of waste equipment collected per person. This target figure will become mandatoryfrom 2016. In addition, target figures have been increased by 5% each in the case of theenergy recovery rate (originally 80%), reuse rate (originally 75%), and recycling rate(originally 75%) stipulated for the products subject to the regulations. In addition, the RoHS
Directive, based on Article 95 of the EC Treaty (concerning harmonization within theEuropean Community) has been used as a reference in an attempt to eliminate the differences
between the lists of products subject to the WEEE regulations formulated by EU member
nations. These differences originated from the fact that the regulations had previously been
based on Article 175 of the EC Treaty (dealing with environmental protection), enabling
member nations to freely add products to their lists.
The revision of the RoHS Directive contains a list of products that defines the scope of theregulations. In addition to the eight product groups that were originally subject to theregulations, the revision adds WEEE Category 8 (medical devices) and Category 9(monitoring and control instruments), which were previously not subject to the RoHS
regulations. Moreover, in the initial stages of formulation of the revision, the introduction offour new prohibited substances (hexabromocyclododecane (HBCDD), di(2-ethylhexyl)
phthalate (DEHP), butyl benzyl phthalate (BBP), and di‐n‐butyl phthalate (DBP)) in
addition to the six already prohibited by the regulations was considered, but this was set aside
as a matter for future study. In other revisions, monitoring of products after they have reachedthe market has been enhanced, and products must now display a CE Mark (a label indicatingcompliance with harmonized standards based on EU directives and regulations) issued by aconformity organization.
In future, the draft WEEE and RoHS revisions will go through the co-decision procedures(the EU procedures for the enactment of laws) and will officially go into effect. Corrections
may be made to the revisions in the course of the co-decision procedures. Sweden, a nation
with an impressive record in environmental protection, will take the Presidency of the EU
Council from July 2009. The possibility that the ultimate revisions may apply very stringent
conditions to companies therefore cannot be ignored.
■ REACH registration, the critical stage for business
REACH is a set of regulations that ultimately controls the production and sale of chemical
substances, requiring companies to register chemical substances and perform safety
evaluations. Companies which produce and sell one tonne or more of chemical substances or
which import the same quantity of chemical substances from outside the EU, are required toregister those substances. The regulations went into effect in June 2007, and pre-registrationof chemical substances was conducted between June and December 2008. Full registration
will be required to be conducted in the future by deadlines stipulated on the basis of theannual volume of production of the substance concerned.
REACH contains a set of rules that are entirely new to business, and many companies are
confused as to how to respond. REACH differs from existing chemical substances regulations
in a number of points, as follows: 1) The regulations do not simply cover chemical substances,
but also products in which those substances are employed, such as electrical and electronic
products; 2) existing chemical products are subject to the regulations in addition to new
chemical substances; 3) registration is not by substance but by use; and 4) the regulations
include a supply chain obligation. This latter point requires upstream companies (chemical
manufacturers) to provide information on chemical substances to downstream companies(companies that produce compounds of two or more chemical substances), and in the122

opposite direction, product manufacturers to provide information on the use of chemicals in
products to the manufacturers of compounds and chemicals. As company supply chainsbecome increasingly international, it will be no easy task to create information-sharing
systems on a global scale.
REACH is also a new experiment for the European Commission, and it is fumbling its
way forwards in putting the regulations into effect. For this reason, there are still numerous
vague areas in the regulations and frequent changes, making it difficult for companies to
respond.
In addition, companies outside the EU are unable to directly register chemical substances,and must request the EU-based importer (in many cases a subsidiary of the non-EU company),a consulting company or other company able to act as an “Only Representative” (OR) to
conduct the registration procedures as a proxy. Problems could easily arise here when
non-EU producers of chemical compounds purchase chemicals from chemical manufacturers
in their own countries and export compounds to the EU. In this case, unless the chemical
manufacturer or the chemical compound manufacturer has an EU importer or an OR act as aproxy in registering the chemical compounds, the chemical compound manufacturer will be
unable to export its product to the EU. If it seeks to continue exporting, the chemicalcompound manufacturer has the choice of requesting the chemical manufacturers from which
it obtains products to register the substances it produces, to register the substances itself, or topurchase chemicals from a chemical manufacturer that has already registered the substances
it produces (irrespective of whether the company is based in the same nation or not). As partof their marketing strategies, some Japanese chemical manufacturers have pre-registered evensubstances that they do not directly export to the EU, taking their relationship with thechemical compound manufacturers that form their clients into consideration.
For full registration, companies that manufacture the same substances are required tocreate Substance Information Exchange Forums (SIEF), and to submit the required
documents, including evaluations of the harmfulness or safety of chemical substances.
According to the European Chemicals Agency (ECHA), with which chemical substances
must be registered, more than 50,000 Pre-SIEF have been formed to coordinate the formationof the SIEF, and there are more than 100 Pre-SIEF with more than 1,000 participatingcompanies. It is therefore predicted that the operation of the system will not be an easy
matter.
Against this background, some European companies have already hired toxicologists andconducted tests on the harmfulness of chemical substances, preparing to sell the data to othercompanies. By contrast, Japanese companies are expected to have a difficult time with the
SIEF. SIEF are formed by competing companies, and while it is necessary for companies
outside the EU to participate in SIEF by means of importers (local subsidiaries) or OR, it will
not be clear to these companies to what extent their opinions are reflected in the SIEF, andthey will find it difficult to proceed with negotiations on issues such as appropriate
distribution of testing costs.
It is possible that REACH will cause companies to reevaluate their business plans. If thecost of complying with the regulations is too high, some companies may cease exporting to
the EU. There is also the possibility that EU-based companies that had previously purchased
their chemical supplies from companies outside the region may begin to source theirrequirements from companies within the EU if non-EU companies are too slow in responding
to the regulations.
■ Eco-design regulations: A new EU initiative
The EuP Directive seeks to contribute to sustainable development and the stable supply ofenergy by promoting consideration of the environment at the design stage of energy-using123

products (eco-design) and the achievement of increased energy efficiency. “Energy-using
products” are products that are dependent on energy resources, or products that produce,transfer, or measure energy. A wide range of electrical and electronic equipment is subject tothe regulations, taking in boilers, PCs, photocopy machines, televisions, office lighting, airconditioners, and refrigerators. Japanese companies have developed sophisticatedenergy-saving technologies as a result of the “top runner” system, and skillful use of the EuP
regulations, one of the purposes of which is to promote energy-saving products, could enable
them to boost their competitiveness.
The EuP Directive went into force in August 2005. This was the framework directive,
which established general principles such as conditions and standards. Since then, concrete
implementing measures for each product group have been defined in sequence. When theimplementing measures have been formulated, the process of establishing harmonizedregulations based on the “New Approach” concept (the formulation of regulations by EU
standardization bodies) will begin. Companies will ensure that their products comply withthese regulations, and will market products displaying the CE Mark as proof compliance.
The European Commission has to date conducted product surveys to enable theformulation of implementing measures, and consultative forums have been held involving
various stakeholders, including the European Commission and companies. Eco-design
requirements for the standby and off modes of electrical and electronic household and officeequipment were announced by the Commission in December 2008; for computer set-top
boxes in February 2009; for household and office lighting, street lighting, and factory lighting
in March 2009; and for external power supplies in April 2009.
The successive introductions of the implementing measures for the EuP Directive havetherefore taken place, and at present numerous products and functions are under review. The
demands of companies will be taken into consideration through consultation forums until theannouncement of each implementing measure. Japanese companies, which have experienced
difficulties in responding to the RoHS regulations, are actively lobbying the European
Commission and other bodies through the Japan Business Council in Europe (JBCE) in order
to influence the development of the rules. The JBCE has formulated joint guidelines andpresented petitions to the European Commission in collaboration with DIGITALEUROPE(until March 2009 known as the European Information & Communications Industry
Association (EICTA)) and other U.S. and EU organizations. For example, the regulations
state that power consumption in standby mode must be 0.5 watts or less, but this is not arealistic demand for companies. This regulation was initially intended to go into effect three
years following the announcement of the implementing measures, but the JBCE lobbied tohave the regulations go into effect within a period of three years dated from one year after theend of the period of grace, and this amendment was ultimately included in the implementing
measures.
This period is one of continuing agitation for Japanese companies. The Action Plan for
Sustainable Consumption, Production and Industry announced by the European Commissionin July 2008 proposed that the scope of the EuP regulations be expanded from energy-using
products to all energy-related products (ErP). Products which do not themselves use energy
but indirectly affect energy consumption would become subject to the regulations. This
would include, for example, products and materials used in building, such as windows andinsulating materials, and products related to water use, including faucets and shower heads. In
addition, the European Parliament is moving towards making all products subject to theregulations. It will be essential for Japanese companies to participate in the formulation of therules by making their opinions heard through the JBCE and other business organizations.
■ How should EU product environmental regulations be dealt with?
124

Companies are beginning to develop a greater understanding of EU’s environmental
regulations. Environmental specialists at BUSINESSEUROPE, one of the EU’s major
business associations, have indicated a change in the environmental awareness among EU
companies. Companies vigorously resisted the implementation of environmental regulationsin the past, but today they are largely accepted.
However, situations in which companies are burdened due to flaws in the laws themselves
or in their administration can still be observed. Ambiguity has been indicated as one of thespecific problems of EU laws. There are cases in which the ambiguity in texts makes it
difficult for companies to judge whether they comply with the regulations appropriately ornot. It is not only Japanese companies that have experienced difficulties as a result of this
aspect of EU law. BUSINESSEUROPE’s environmental specialists claim that EU companies
also view the ambiguity of regulations as a problematic issue.
Communication between companies and the European Commission will be essential todealing with issues of ambiguity and laws that do not coincide with business realities.
Officials of the European Commission’s Environment Directorate-General have stated that
opinions and requests from companies are vital to the formulation of draft laws, and thatcompanies should actively involve themselves in the process. They also encourage Japanesecompanies to indicate their expectations through the Japanese government and industry
organizations.
The JBCE is requesting Japanese companies to respond as quickly as possible to the EU
regulations. The EU policy-making process involves two procedures, co-decision andcomitology (Figure II-3). European Commission proposals regarding common market-related
EU directives or regulations are ratified by the European Council and the European
Parliament after going through the co-decision procedure.
Decisions made by the European Commission go through the comitology procedure inwhich the details of laws established by the co-decision procedure are determined. In EuP, forexample, the decision on the framework directive was made via the co-decision procedure,
but the concrete implementing procedures for each product will be decided through thecomitology procedure. Some Japanese companies have started gathering information fromthe stage of the comitology procedure, and are studying guidelines for response and potential
business changes when the regulations are implemented in each EU member nation. Thismode of response is too slow. What is required is for companies to start gathering informationfrom the stage of publication of the green papers indicating the orientation of the European
Commission, and to present petitions, etc., at the stage of formulation of policy proposals by
the European Commission (during preparatory surveys, etc.) prior to the co-decision
procedure; i.e., to work in tandem with the policy-making process. Only by making active
efforts of this type can Japanese companies begin on the same footing as EU companies.
In addition, rapid and flexible business decisions are essential to doing businesssuccessfully in the EU. In the SIEF convened in connection with the REACH regulations,companies must express their requirements, and ensure that their opinions are incorporated in
the final output. Flexible decision-making responsive to the direction of the SIEF will be
demanded. The JBCE Secretariat therefore advises Japanese companies operating in the EU
to place reliable staff members in their European operations to enable this type of rapid
judgment and decision-making. It is essential for Japanese companies to assign resident
personnel to the EU to collect and make available information and to conduct lobbying
activities. There are significant differences between the ways in which business is conductedin the EU and in Japan, where the government decides the details of regulations early in theirprocess of establishment. It is necessary for Japanese companies to understand this, and tobuild systems enabling them to put rapid responses into effect. At the least, Japanesecompanies must enhance their capacity to respond to EU regulations.
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■ EU product environmental regulations spreading all over the world
EU environmental regulations are spreading globally. The U.S., Japan, China, South Korea,
Thailand, Vietnam, and Turkey have all introduced regulations resembling the RoHS, WEEE,
and/or REACH regulations (Figure II-4). At least three potential mechanisms can explain
partly this tendency. The first mechanism is the diffusion of regulations through theconclusion of international conventions. The Action Plan emerging from the World Summit
on Sustainable Development (the 2002 Johannesburg Summit) included a provision regarding
the sound management of chemical substances and toxic wastes, with consideration of
product lifecycles. This resonates with the concepts behind the EU’s supply chain regulations
based on LCT. Later, the revision of Japan’s Act on the Evaluation of Chemical Substances
and Regulation of their Manufacture, etc., was influenced by this provision of theJohannesburg Summit Action Plan.
== Figure II-4 ==The second mechanism is via actual trade. The EU boasts the world’s largest market, andcan therefore influence countries outside the region through trade. Non-EU companies
exporting to the EU manufacture their products to satisfy stringent EU standards. At the sametime, they also apply these EU standards to products they manufacture for the domestic
market or for markets other than EU countries, because costs would increase if they were touse different manufacturing methods for products aimed at different markets. In some cases,
this will mean that the products manufactured to EU standards will be less price-competitive
than equivalent products manufactured by other companies in accordance with the morerelaxed domestic standards. If this is the case, the national government and companies in the
country will have an incentive to introduce regulations at the same level as the EU
regulations. This incentive will be greater the stronger the trade relationship of the country
with the EU. This way, EU Environmental regulations can spread into foreign countries.
Diplomatic efforts conducted by the EU are the third way in which standards can be
diffused. An official of the European Council’s Environment Directorate-General haveindicated that it will be important to establish a level playing field on a global scale.
BUSINESSEUROPE specialists also stress the need to promote global diffusion ofenvironmental regulations. Working directly with countries outside the region, for example
engaging in bilateral cooperation programs in particular with developing nations, will be
important to achieving this goal.
California is more environmentally aware than any other states in the U.S., and under theleadership of Governor Arnold Schwarzenegger, the state government has implemented awide range of environmental policies. The Electronic Waste Recycling Act (SB20), dealing
with the recycling of electrical and electronic products, enacted in September 2003.
Following this, the Act was partially revised to incorporate elements of the EU’s RoHS
regulations, and SB20/SB50 went into effect in January 2007. The revised Act prohibits thesale of products such as notebook computers if they contain more than a specified quantity of
the chemical substances that are subject to the regulations.
The introduction of the EU environmental regulations is not limited to California. Whileregulations concerning the recycling of electrical and electronic products are presently
limited at the federal level, their introduction is proceeding at the state and municipal levels(Figure II-5). In almost all of these states and municipalities, there has been a partial
introduction of the polluter-pays principle, and laws have been established placing the burdenof recycling televisions and computers on the manufacturers of the products.

126

== Figure II-5 ==However, the introduction of different regulations in each state will increase the burden on
manufacturers. Intel, for instance, views increases in costs for the formulation of documents,
testing, etc., if different standards are put in place among states as a problematic issue. For
this reason, the electronics industry is lobbying the Senate for the introduction of unified
federal regulations.
California itself has not rested with the SB20/SB50, but has also introduced a Green
Chemistry Initiative (GCI) modeled on EU’s REACH regulations. The purpose of the GCI is
to impose regulations that will reduce the effect of toxic substances, not merely when aproduct is scrapped, but at every stage of its lifecycle, including production and use. These
regulations would therefore have an effect on the total supply chain. In a major step towards
the realization of the GCI, the bills AB1879 and SB509 were signed into law in September
2008. By January 2011, the California Department of Toxic Substances Control (DTSC) must
establish a system for the identification of chemical substances and chemical components in
products, and for the evaluation of substances of concern to enable the potential for exposureand the level of danger to the public to be reduced. The use of substances of concern will be
restricted or prohibited. The DTSC will therefore collect information regarding chemical
substances from all over the U.S. and the rest of the world, and will publish this informationin an Internet database to make it available to consumers. Other U.S. states are watching
trends in the GCI carefully, and there is a possibility that the initiative might in the future
spread throughout the country, as in the case of recycling regulations.
EU environmental regulations are also seen in Japan. The first to be considered here is theJapanese version of the RoHS regulations. The Law for Promotion of Effective Use of
Resources (1991) was revised in July 2006 to incorporate a requirement for “marking forpresence of the specific chemical substances for electrical and electronic equipment”(J-MOSS). The six chemical substances subject to the regulations (lead, cadmium, etc.) are
identical to those subject to the RoHS regulations. However, the Japanese regulations do not
restrict the use of the specified substances as in the case of RoHS, but require a mark to be
applied to products in which the substances exceed a predetermined level, instead. The
Japanese regulations are also less strict than RoHS, being limited to seven products(including personal computers and refrigerators) rather than almost all electrical andelectronic products as in the case of RoHS.
A Japanese version of the REACH regulations has also appeared. A draft revision of the
Act on the Evaluation of Chemical Substances and Regulation of their Manufacture, etc.,(1973) was approved by the Diet in May 2009, and is scheduled to go into effect within one
year. The statement of the purpose of the revision references the agreements made atenvironmental summits such as the Johannesburg Summit to minimize the effects of chemical
substances on human beings and the environment, and in this the influence of international
trends can be seen.
All chemical substances are subject to the revised Act on the Evaluation of Chemical
Substances and Regulation of their Manufacture, etc., and companies which manufacture or
import a specific amount or more of chemical substances (the figure of one ton is planned)
will be required to notify the government. Harmful substances among those reported will be
subject to a safety evaluation, and as necessary the company will be asked to submit data
regarding their level of toxicity. If any concerns exist regarding the potential effect of thesubstances on living things based on the results of the safety evaluation, the substances will
be nominated as designated substances, and permission will be required for their manufacture
or importation.
The revised Act, like the REACH regulations, is a mechanism that will promote the127development of systems for information exchange throughout company supply chains.
Although to date downstream companies (product manufacturers) have been able to makequeries to upstream companies (chemical manufacturers), there has previously been no
regular provision of information by upstream companies to downstream companies in Japan.
The revised Act will effectively require the exchange of information in both directions. The
establishment of systems for the exchange of information throughout supply chains is now
being demanded from a variety of directions, such as the promotion of information exchangesystems by the Joint Article Management Promotion-consortium (JAMP).
With China’s rapid industrialization having a steadily worsening effect on its rivers and air
in the recent years, the environment has come to occupy a more important position in termsof national policy. At the same time, interest in EU environmental regulations is increasing in
the nation.
China promulgated the Measures for Administration of the Pollution Control of Electronic
Information Products in February 2006, and the law went into effect in March 2007. This law
is similar to EU’s RoHS, and is also called the “Chinese RoHS.” While the subjects of theregulations are the same six substances targeted by the RoHS regulations, the Chinese
measures have two distinct aspects. First, companies are required to display information
concerning the regulated chemical substances on products when they exceed specificthreshold values. Second, products listed on a “Catalogue for Priority Controls” must receive
China Compulsory Certification (CCC).
In addition, China is currently formulating a law concerning the collection and disposal ofelectronic waste. The objectives of this law are to increase the rate of collection of electronic
waste, to operate recycling plants using funds provided by manufacturers and regional
governments, and to improve recycling technology through the construction of model plants
and other measures.
A trend such as this one in Japan’s largest trading partner will have a more direct effect on
Japanese companies than that in the EU. As the establishment of supply chains between
companies in both nations picks up pace, cooperation between these companies is likely to
become increasingly important.
The regulations that have recently been introduced or are scheduled to be introduced
around the world have in the major part been regulations concerning recycling or chemical
substances. The characteristics of the individual regulations may vary, but they have all
undoubtedly been significantly influenced by EU’s environmental regulations.
It is possible that in future the EuP regulations might also diffuse around the world, giventhat the EU is promoting a policy of international standardization of EU regulations. The
harmonized standards that will form the foundation of the EuP’s implementing measures arebeing formulated on the basis of the new approach by standards bodies such as the European
Committee for Electrotechnical Standardization (CENELEC). The standards formulated inthis process will be diffused around the world by a variety of media, including 1)
international standards organizations (for example the IEC and the ISO), 2) de facto basethrough actual trade, 3) mutual recognition agreements (MRA), and 4) technological aid todeveloping nations.
The various laws and their associated procedures that have been implemented around theworld, influenced by the EU environmental regulations all differ from one another and it is
not the case that a company which complies with the EU regulations will therefore find it
easy to comply with these other regulations. However, in many cases, the threshold values
and the substances and products that are subject to the regulations are the same, or standards
are not as stringent as found in the EU regulations. The information exchange systems
developed to respond to the RoHS and REACH regulations will also be of practical value in
responding to other regulations. For Japanese companies, it will be essential to prepare for128international standardization by sufficiently adopting their products to the EU regulations.
(3) Ongoing Liberalization and Regulation of Investment and Services by means of
FTAs and Investment Agreements
The liberalization and establishment of regulation in the fields of investment and services
is proceeding through the medium of FTAs and bilateral agreements. A variety of WTO
agreements regulate investment and services, including the General Agreement on Trade inServices (GATS) and the Agreement on Trade-Related Investment Measures (TRIM).
However while GATS provides for national treatment, most-favored nation treatment, andmarket access in the area of services, there are numerous exceptions, and it does not cover
manufacturing. TRIM is also limited to certain prohibitions on performance requirements,
such as local content requirements and import-export equilibrium requirements. The scope of
WTO regulation in the areas of investment and services is therefore limited.
Against this background, countries with a high degree of concern in the area of investment(countries in which a large amount of investment is conducted, countries in which investment
is concentrated in resources, etc.) are concluding investment agreements or are including
chapters dealing with investment and services in their FTAs. With the Doha Round stalled,
and investment not forming part of the negotiations in the Round, liberalization andregulation in the area of investment and services is proceeding through the framework ofinvestment agreements and FTAs.
Investment agreements may incorporate either investment protection or investment
liberalization, or may contain both elements. In addition to national treatment andmost-favored nation treatment following the approval of the investment, investment
protection normally provides for compensation for expropriation, fair and equitable treatment,
and the resolution of conflicts between the nation and the investor in the event of
nationalization. Investment liberalization incorporates national treatment, most-favorednation treatment, and the prohibition of performance requirements prior to the approval of theinvestment, among other elements. National treatment, most-favored nation treatment, andthe prohibition of performance requirements are also covered in GATS and TRIM, butinvestment agreements extend these elements to the manufacturing sector, and make thembinding at a higher level. The WTO does not provide for the resolution of conflicts between
the investor and the nation, or for fair and equitable treatment. Investment agreements thus
incorporate wide-ranging WTO-plus content.
According to the United Nations Conference on Trade and Development (UNCTAD),
2,608 bilateral investment agreements had been concluded worldwide as of 2007. European
countries have been the most prolific in terms of concluding investment agreements, withGermany having signed 135 agreements, Switzerland 114, France 99, and Holland 95.
Despite previously having concluded comparatively few such agreements, Japan has
recently rapidly increased its volume of investment agreements. Japan has concluded a totalof 24 investment agreements, comprising 15 bilateral investment agreements (of which 13 arein effect) and nine investment chapters in FTAs (of which eight are in effect). In 2008,
investment agreements were signed or went into effect between Japan and Laos (effective
August 2008), Uzbekistan (signed August 2008), and Peru (signed November 2008).
Comprehensive negotiations are necessary to conclude agreements like FTAs, which cover abroad range of fields, but the negotiations for investment agreements, which cover only
services and investments, can be concluded more quickly. The Japanese government therefore
flexibly uses FTAs and investment agreements as convenient. The government has indicatedthat it intends to actively formulate investment agreements with resource-producing nations,and with nations and regions in which Japanese companies have established bases. The nationis therefore expected to conclude investment agreements at an accelerated pace in future.
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Column II-1 U.S. measures to suspend NAFTA truck transport provision
The provision in the North American Free Trade Agreement (NAFTA) concerning mutual
truck transport privileges between the U.S. and Mexico is a case in which liberalization istreated in the investment and services chapters of FTAs.
Under the terms of NAFTA, trucks transporting goods from Mexico are able to travel
throughout the U.S. from 2000. However, this provision generated opposition in the U.S., andits implementation was postponed. The governments of both nations agreed to commence a
trial program granting mutual truck transport privileges from 2007, and planned to formallyestablish mutual truck transport following the conclusion of the test period at the end of
August 2010. However, the Obama administration cut the budget for the trial program in thenational budget published in March 2009. This made the trial program impossible to continue,and put the establishment of formal rights on hold. There is opposition to the scheme fromenvironmental organizations and trucking unions on the U.S. side.
The Mexican side declared that the U.S. measures are in contravention of the terms of
NAFTA, and introduced countermeasures in March 2009, eliminating preferential tariffs on
89 U.S. agricultural and industrial products.
==================================================================(4) How Can We Sell to the World’s Largest Market of the U.S. Government
Procurement
The WTO Agreement on Government Procurement (GPA), which went into effect in 1996,
provides for the liberalization and regulation of government procurement in international
trade. Signatory nations must provide national treatment, fair and transparent transactions,and complaint notification procedures, and must eliminate local content requirement.
However, the GPA has its limit compared to other WTO agreements. Only 14 nations andregions are signatories to the agreement2, and they are free to apply their own terms otherthan within the specified scope of the agreement and in relation to the organizations subject
to the agreement. Against this background, there is considerable resistance to theliberalization and regulation of government procurement. For security reasons, or fromconsiderations of the protection and fostering of domestic industry, systems related togovernment procurement generally display a low level of transparency, and give preferential
treatment to bids involving domestic or local products. For this, government procurement wasfor an extended period treated as an exception to the principle of national treatment in GATTera.
The U.S. is no exception to this general trend. The nation still applies the provisions of the
Buy American Act of 1933, which stipulates the use of U.S.-made goods and materials andthe addition of an extra 6-12% to the cost of overseas products when bids are evaluated. In
addition, laws concerning the budgets of federal government organizations (the Departmentof Defense Appropriations Act, 2007, the Homeland Security Appropriations Act, theAmerican Recovery and Reinvestment Act of 2009, etc.); laws concerning the purchase ofheavy transport equipment, including the Safe, Accountable, Flexible, and Efficient2

The signatories to the WTO Agreement on Government Procurement are Japan, the U.S.,
the EU27, Canada, Hong Kong, South Korea, Israel, Liechtenstein, Norway, Aruba,
Singapore, Switzerland, Iceland, and Taiwan. China is among other nations presently
involved in negotiations to become a signatory to the agreement. China presented an initialoffer in December 2007, but the U.S. was critical because government services were notincluded in the scope of liberalization, the majority of state-owned companies were excluded,a transitional period of 15 years was set, and regional governments were not included.
130

Transportation Equity Act and the Rail Passenger Service Act; and other laws at the regional
level all have provisions for the preferential treatment of nationally as well as
locally-produced goods.
The U.S. government procurement market is enormous, representing approximately 11%of the nation’s GDP at more than USD 1.3 trillion (averaged for FY2004-FY2006). This
figure is almost equivalent to the GDP of Brazil. In addition, the American Recovery andReinvestment Act enacted in February 2009 adds approximately USD 7.07 billion inenvironment-related projects, a significant opportunity for non-U.S. companies against thebackground of this prolonged recession. However, this enormous market is protected by thelaws mentioned above. Some nations and regions have secured access to the market throughthe WTO GPA or FTAs with the U.S., but the basic stance of the U.S. remains “BuyAmerican.” For example, a report to the Senate by the Department of Defense states that of
the Department’s total procurement expenditure for FY2008 (approximately USD 396
billion), foreign goods and services represented only 6% (approximately USD 23.7 billion, of
which approximately USD 504 million, used for the procurement of Japanese products). The
ratio of non-domestically sourced goods and services procured by the Department ofCommerce was similarly low in FY2008, representing only 7.2% (approximately USD 1.2
million) of a total expenditure of approximately USD 16 million.
Nations and regions throughout the world seek to complement the inadequate WTO GPA
by demanding the opening of the partner country’s government procurement market throughFTAs. For example, when the U.S. negotiates an FTA with a nation which is not a signatory
to the GPA, it requests almost identical level of liberalization and regulation of thegovernment procurement market as specified in the GPA. If the partner country is a signatory
to the GPA, the U.S. requests a higher level of liberalization than provided for in theagreement. Considered from the perspective of countries which are discriminated against in
the U.S. market because they are not signatories to the GPA, the establishment of an FTA
with the U.S. represents an opportunity to gain access to that nation’s enormous government
procurement market. Australia is not a signatory to the GPA, for example. Thus, theAustralian companies had been suffering their competitive disadvantages in the U.S. market.
When the U.S.-Australia FTA went into effect in January 2005, Australian companies andproducts became exempt from the terms of the Buy American Act. As a result, Australiancompanies receive national treatment when making a bid of a specific value or higher in the
U.S. government procurement market.
The waiving of the application of the Buy American Act to Australian companies by thefederal and some U.S. state governments has increased opportunities for those companies toparticipate in the U.S. government procurement market. According to the report to the Senate
by the Department of Defense, the Department’s procurements within the framework of the
U.S.-Australia FTA totaled approximately USD 16 million in FY 2005, approximately USD
52 million in FY 2006, and approximately USD 4 million in FY 2007.
Supplementing the limited WTO GPA and eliminating discrimination against
non-signatory nations by means of FTAs expands opportunities for companies to participate
in the government procurement market of the partner country, leading to the expansion of
trade.
(5) Protection of Intellectual Property Rights – Discussions are Moving Ahead■ TRIPS agreement established an international standard for the protection
Intellectual property rights (such as patents and copyrights) are today a vital aspect of theinfrastructure enabling trade and foreign direct investment. Adequate protection of
intellectual property rights enhances the urge to create, and thus propels invention andtechnological development. Insufficient protection of intellectual property rights, by contrast,131

can lead to the proliferation of cheap, counterfeit goods and services. To what degree
intellectual property rights are protected is an important factor in determining the course ofbusiness evolution.
International frameworks for intellectual property rights were formulated from the 19th
century, mainly in European countries, with the intention of harmonizing the intellectual
property laws of different nations. The Paris Convention for the Protection of Industrial
Property and the Berne Convention for the Protection of Literary and Artistic Works are
representative examples. Intellectual property issue was taken up for the first time as a part ofnegotiation agenda in the Uruguay Round, at the urging of the United States. The outcome
was the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), an
agreement specifying comprehensive regulations concerning intellectual property rights. The
agreement went into effect in 1995 and became enforceable following a year transition period
for developed countries, and a five-year transition period for the developing countries.
The TRIPS has been applauded for its role in establishing a minimum standard forprotection shared by all members and in setting up an effective procedure for settling disputes.
TRIPS agreement obliges members to observe existing international laws such as the Paris
Convention and the Berne Convention, and to establish further protections and procedures forthe exercise of rights at a higher level than specified in existing laws. In addition to this,single undertaking enables the use of unified conflict resolution procedures, making TRIPS agroundbreaking document in comparison to other agreements related to intellectual property.
To date, 28 TRIPS-related cases have been brought before the WTO. The majority of theseoccurred prior to 2000, and represented complaints by developed countries against
developing countries focusing on the national treatment and most-favored nation treatment,
and those between developed countries, for which the performance obligation applied soonafter TRIPS came into effect. However, there have been few conflicts more recently
regarding the violations of the agreement, mainly due to the framework agreement-like natureof TRIPS.
■ Using FTAs to achieve TRIPS-plus
FTAs are used as a method of supplementing the WTO also in the area of intellectual
property. Developing countries were originally unenthusiastic about discussing on intellectual
property rights in the WTO, and they have been dissatisfied since the TRIPS agreement cameinto effect, seeing the intellectual property institution as imposing a burden. For example,
the EU and other countries have pushed for discussion of enforcement in the WTO since2005, but developing countries have continued to oppose the idea. The developed countries,
on the other hand, feel that the establishment of related laws has been proceeding in the
majority of countries as a result of TRIPS, but view the flooding of infringed and pirated
products as a problematic issue. As coordinating members’ interests has become more
complicated within the multilateral negotiations at the WTO, there has been a trend toward
using FTAs which are more flexibly negotiated, to secure intellectual property protection.
Clauses concerning intellectual property are incorporated in almost all of the FTAs concluded
by developed nations and regions such as Japan, the U.S., and the EU.
The U.S. has been particularly active in having original intellectual property-relatedclauses included in FTAs, and has worked to create international norms through bilateralnegotiations. The fact that the U.S. has filed the most intellectual property-related complaints
to the WTO, suggests how seriously the nation takes the issue.
The intellectual property provisions of FTAs are highly diverse, but clauses that specify ahigher level of protection than TRIPS are generally termed TRIPS-plus. The U.S. is putting inplace a broad range of TRIPS-plus conditions via the conclusion of FTAs (Table II-12). The
most conspicuous feature of the intellectual property-related clauses incorporated by the U.S.
132

is enhanced protection of copyright and test data concerning medical devices. In the case of
copyright, the U.S. has stipulated extension of the period for copyright protection,prohibitions on the avoidance of technical methods of protection 3 , and the signing of
copyright-related agreements, among other measures. In the case of test data, measures
include the specification of protection periods for unpublished test data and demands for thepatentability of animals and plants (excluding microorganisms), which are not subject topatents under the terms of TRIPS. Other TRIPS-plus items apply a restricted interpretation toclauses in TRIPS which has some degree of flexibility4. Behind these measures is pressure
from the film, music, and pharmaceutical industries, for which the protection of intellectual
property is a serious issue.
== Table II-12 ==However, this increased level of protection of intellectual property rights in U.S. FTAs has
also been criticized as a potential impediment to future international harmonization in thearea. For example, there are cases in which details that have not yet been decided on amultilateral level have been codified in FTAs, such as the principle of exhaustion of rights5,
which was set aside in discussions leading up to the formulation of TRIPS. The
U.S.-Singapore FTA allows restriction of parallel imports (non-acceptance of the principle ofinternational exhaustion of rights) if specific conditions are satisfied.
The enhancement of the protection of intellectual property through the formulation of
FTAs with third countries like the U.S. may influence Japan’s intellectual property strategies
in future. Unlike tariffs and services, for which discriminatory treatment is allowed, theintellectual property agreements specified in FTAs should in principle apply with the same
conditions to other member nations, within the scope of Article 4 of TRIPS (concerning
most-favored nation treatment). This means that when other nations specify intellectual
property-related rights and privileges in an FTA, Japan will also receive those rights andprivileges. On the other hand, the possibility also exists that the U.S. or a nation which has
concluded an FTA with the U.S. may, in future FTA negotiations with Japan, demand similar
high-level protection of intellectual property. Given this, it will be essential to monitor trends
in TRIPS-plus conditions in the U.S.
Excluding the nation’s FTA with Mexico, all of Japan’s FTAs include a chapter dealing
with intellectual property. However, in almost all cases, the treatment of issues such as thefacilitation of procedures and the bolstering of cooperation and enforcement represents anenhancement or clarification of items in TRIPS. Japan’s FTAs do not incorporate new rules
not specified by TRIPS or demand large-scale changes to existing systems, as in the case of
the provisions of U.S. FTAs. However, Japan’s FTA with Switzerland, signed in February
3

Technological methods for the prevention of copyright violation, such as copy control toprevent digital copying and access control that restricts viewing, etc., through the use of
encryption.
4
For example, Article 31 of TRIPS provides for compulsory licensing of pharmaceuticalpatents (under specific conditions, rights for the use of the subject matter of a patent can be
granted to third parties without the authorization of the holder of the right), but the scope forauthorization of compulsory licensing is narrower in the U.S.-Singapore FTA than in TRIPS.
5
The doctrine of exhaustion of rights states that the holder of an intellectual property right oran individual or entity which has been granted a license loses certain rights after the subject
matter of the right or license is first sold in a market. The international acceptance or
non-acceptance of the doctrine of exhaustion of rights was a point of contention in the
Uruguay Round, and TRIPS ultimately did not incorporate either position (Article 6).
1332009, does incorporate a high-level regulation pertaining to the intellectual property field,
including limitation of the responsibility of internet service providers. The agreement istherefore a pioneering document in relation to ACTA (to be discussed below), and is expected
to serve as a model for the intellectual property chapters of future FTAs.
■ Progress on plurilateral rule creation
As discussed above, nations around the world are seeking to guarantee the protection of
intellectual property through FTAs, with TRIPS as the foundation. Against this background,
there were opinions that TRIPS specifies only the most basic standards, and lacks
effectiveness in terms of the actual implementation of rights6. In addition, considering not
merely the proliferation of counterfeit and pirated goods but also the increasing complexity of
the routes of diffusion of these goods, the systematization of their suppliers, and the threat tosafety that they represent, a situation is developing in which TRIPS and FTAs alone will not
be sufficient to prevent negative impacts on a global scale.
Given this, negotiations are currently proceeding on the Anti-Counterfeiting Trade
Agreement (ACTA) as a more effective multilateral framework. Formal negotiationscommenced on the initiative of Japan in June 2008, and the process aims for a conclusion by
2010. At present, 11 nations and regions with a high level of interest in the protection of
intellectual property rights participate in the negotiations7. The objective is first to formulate
a text between countries sharing common goals. This text will be extended by stages to otherparticipating nations, and will ultimately form the basis for future multilateral regulation of
intellectual property rights.
According to a summary of elements under discussion in ACTA negotiations published in
April 2009, the agreement will not seek to replace TRIPS, but to establish more concrete androbust regulations. The agreement is expected to incorporate effective measures to promoteinternational cooperation in areas such as the exchange of statistical data and best practices
and capacity-building in developing nations, and to support the exercise of rights, including
border measures, civil enforcement measures, criminal enforcement measures, and measures
for the protection of intellectual property in the digital environment.
(6) Current Issues of Competition Law
The effect of anti-competitive activities such as the formation of international cartels andcorporate mergers on the competitive environment in specific nations and regions cannot beignored, and competition authorities have recently intensified their oversight and surveillancethroughout the world. Cases in which the business activities of Japanese companies havebeen identified by the U.S. or the EU as “anti-competitive,” entailing significant costs in finesand penalties, have not infrequently occurred. As will be discussed below, some cases wereobserved in 2008 in which Japan extended the application of its competition law to foreigncompanies. The application of competition law without consideration of the location of thecompany (the principle of territoriality), i.e., extraterritorial application of competition law, isalready practiced by the U.S. and the EU, and Japan is also moving in the direction of
6

The U.S. had been concerned about the lax standards in China with regard to criminal
prosecution in cases of pirating, etc. The WTO panel report published in January 2009
concerning piracy complaints brought by the U.S. against China, did not accept the U.S.
assertion that conditions of prosecution in China were in contravention of the agreement.
7
The U.S., Australia, Canada, the EU, Japan, Mexico, Morocco, New Zealand, Singapore,
South Korea, and Switzerland. In June 2009, the Office of the U.S. Trade Representative
established a special page on its website to publish information as it becomes available. The
sixth round of ACTA negotiations was held in South Korea in November 2009.
134

actively applying its anti-monopoly law to the actions of foreign companies which have aneffect on the competitive environment in the nation.
■ The increasing importance of monitoring M&A between foreign companies
The attempted acquisition of the UK’s Rio Tinto by Australia’s BHP Billiton (terminatedin November 2008) functioned to increase the attentiveness of competition authorities to themonitoring of M&A.
In response to requests from the Japan Iron and Steel Foundation and other organizations,
the Japan Fair Trade Commission conducted an investigation of the purchase attempt fromthe perspective of a potential infringement of Japan’s Act on the Prohibition of Private
Monopolization and Maintenance of Fair Trade from July 2008. It was suspected that theacquisition would violate Article 10 of the Act, concerning restrictions on corporate stock
holdings, and that it would limit competition in Japan’s iron ore and raw coking coal markets.
This represented the first time that Japan had investigated an M&A between foreigncompanies under the official investigation procedure in relation to domestic anti-monopoly
law. The investigation was discontinued with the termination of the acquisition attempt, but
the Japan Fair Trade Commission has indicated that in the future it will actively investigate
cases in which large-scale M&A will have an impact on competition in the Japanese market,
even if the M&A involves foreign companies.
In recent years, numerous cases like the BHP Billiton-Rio Tinto merger plan have arisen
which could have a significant impact on world trade and the activities of Japanesecompanies, in particular in the field of resources. The rapid convergence of discussion onthese issues is desirable.
The European Commission conducted a secondary (detailed) investigation in the case of
the BHP Billiton-Rio Tinto merger, and presented a Statement of Objections to BHP Billiton.
The European Commission’s intention appears to have been not to prevent the merger, but torecommend corporate divestitures in the iron ore sector following the merger, on condition
that remedy measures (measures adopted by the parties to an M&A in order to correct theeffects of the M&A on the competitive environment) were put into place.
Since issuing the new EC Merger Regulation in 2004, the EU has clarified its standards inmerger investigations, and there have been fewer cases in which mergers have been
disallowed as a result of investigations. Under the previous EC Merger Regulation 1989, 18
mergers were disallowed between 1990 and 2003, but only two cases were recorded in the
period from the promulgation of the regulation in 2004 to 2007, and there were no cases in2008. However, in 2008 there were 24 cases in which mergers were approved on condition
that remedy measures were put in place after either primary or secondary investigations, thehighest figure since the new regulations were effected.
In addition to the EU procedures, it will be important for Japanese companies considering
M&A to conform to the requirements of China’s merger investigation process. China passed
an Anti-Monopoly Law in August 2008, and has established an Anti-Monopoly Commission
in the Ministry of Commerce to investigate corporate mergers. In the case of the BHP Billiton
merger proposal, the Anti-Monopoly Commission only requested the company to submit
information, but since then has become noticeably more active in conducting investigations.
In April 2009, the Commission conditionally approved the acquisition of UK Lucite by
Mitsubishi Rayon Corp. The conditions were severe: for a period of five years, the company
would be prohibited from conducting M&As in China, and would be unable to build new
production plants in the country for the same period. The details of the investigation processused to reach the decision are unclear. These new trends in China are having a significant
impact on Japanese companies.

135

■ Detection of international cartels advancing in the EU
The European Commission’s Directorate General for Competition has noticeably
enhanced its detection of international cartels. The publication of new guidelines for thesetting of fines in antitrust cases in 2006 increased the ability to predict the level of fines thatwould be applied, but the amount of the fines also increased considerably (the upper limit is
10% of total sales in the fiscal year on a consolidated basis) (Table II-13).
== Table II-13 ==In November 2008, a fine of 1.38 billion Euros, the highest figure to date in the EU, was
imposed on four companies involved in an automotive glass cartel. The largest fine yet
imposed on a single company was 896 million Euros, applied to French company Saint
Gobain in the same case.
In June 2008, the European Commission introduced settlement procedures for EU cartel
cases. Under this system, if a company admits to the existence of the cartel and its own
involvement in it, and reaches agreement with the European Commission regarding theamount of the fine, fixed procedures can be employed to enable the company to obtain a 10%
reduction in the fine. In the U.S., the Antitrust Division of the Department of Justice uses aplea-bargaining procedure in negotiations with companies it seeks to prosecute, in which theamount of the fine is determined on the basis of an agreement with the company if a guilty
plea is entered. At first glance, the EU settlement procedures seem similar to this system.
However, the U.S. system involves monetary negotiations, while the EU system is limited to
the granting of a 10% reduction in the penalty and a speedy resolution if a company
approaches the European Commission during the course of a cartel investigation. The
introduction of the settlement procedures by the European Commission, which has increased
the number of cases it mounts against cartels since the introduction in 1996 of its Leniency
Program (that Program became the present system in 2006), seems to have been a measure tosimplify procedures in order to deal with cases more quickly.
As a reward to a company for approaching the competition authorities and admitting theexistence of a cartel and its own involvement in it, the Leniency Program may, depending on
the importance of the confession and the degree of cooperation offered by the company,
waive or reduce fines and offer immunity from criminal prosecution, among other incentives.
For example, in the case of the automotive glass cartel discussed above, a Japanese company
made an application for leniency and received a 50% reduction in its fine.
The U.S. was the first to introduce a leniency program, in 1978, and made the transition to
its present system in 1993. In Japan, the revision of the Act on Prohibition of Private
Monopolization and Maintenance of Fair Trade in 2005 introduced a system for the reduction
or waiving of penalties, and it has been used effectively in the discovery of domestic cartels.
However, the Japanese law has limitations with regard to the regulation of foreigncompanies: the fines levied are calculated on the basis of sales in Japan. Because of this, bycontrast with the EU and the U.S., which are able to apply significant fines and penalties
calculated on the basis of a company’s share in the world market even if it has not made sales
in the EU or the U.S., the Japan Fair Trade Commission has no basis for calculating fines andapplying penalties if a company has not made sales domestically.
■ Status of international competition law initiatives
Concerns exist that the presence of international cartels and the abuse of the market
dominance of multinational corporations may have negative impacts on world trade. For thisreason, it was initially intended that the Doha Round would incorporate trade and competition
as an agenda for negotiations, in order among other measures to seek the harmonization of136

competition policy in WTO member nations. However, trade and competition was ultimately
not included as a negotiation agenda, due to factors including opposition from the developing
nations, which were concerned about a potential increase in WTO obligations, and thepassivity of the U.S. with regard to the issue.
However, antitrust agreements are being forged bilaterally and multilaterally, and systems
of cooperation are being created between competition authorities in the areas of enforcement
and the implementation of procedures. The 2007 marine hose case (involving hoses used forthe transport of oil on the ocean) provides an example of effective cooperation bycompetition authorities against an international cartel. In this case, eight U.S. and EU
companies formed a cartel in order to share the world market between themselves. During
their investigations of the matter, Japanese, U.S., and EU competition authorities utilized asystem of cooperation to contact each other in May 2007, and came together to conduct a
joint investigation that led to the discovery of the cartel. In February 2008, the Japan Fair
Trade Commission issued a cease and desist order requesting the cessation of activities inviolation of Japan’s antitrust law and the prevention of any reoccurrence against four EU
companies in addition to two Japanese companies. This was the first time that the Japan Fair
Trade Commission had applied administrative sanctions concerning cartels to foreigncompanies. However, only the Japanese companies were fined. This cartel divided the world
market between its members, and the foreign companies had not made any sales in Japan.
This case highlights the limitations of the Japan Fair Trade Commission’s overseas
enforcement rights, as compared to the systems in operation in the U.S. and the EU.
There are also many examples of provisions on competition regulations being incorporated
in FTAs. The most advanced provisions are found in the systems of the EU and the European
Free Trade Association (EFTA). The EU’s competition law extends to the entire European
Economic Area (EEA), which incorporates EFTA (excluding Switzerland).
Almost all of Japan’s FTAs also incorporate provisions regarding competition. The maincontent of these provisions is the establishment of a basic cooperative relationship between
competition authorities in terms of notification and consultation. Japan’s antitrust agreements
incorporate provisions for higher-level cooperation between competition authorities including
positive comity enabling the competition authorities in the partner country to commence
appropriate enforcement procedures, and coordinated enforcement enabling both countries to
conduct simultaneous raids in order to prevent destruction of evidence, when there is asignificant potential for anti-competitive activities in the partner country’s territory to have anegative impact on the other country. The Japan-Switzerland FTA signed in February 2009
incorporates almost identical provisions for high-level cooperation as Japan’s antitrust
agreements, and thus achieves progress in the establishment of systems of cooperation
between antitrust laws via FTAs (Table II-14).
== Table II-14 ==Factors such as the appearance of huge corporate entities in the resources field throughM&As and active responses by national competition authorities will have a significant effecton the international activities of Japanese companies. With trade and competition having been
excluded from the Doha Round as a negotiation agenda, the International Competition
Network (ICN), in which competition authorities exchange information, is one of the only
venues for discussion of competition-limiting activities that have a profound effect on trade
and the relationship between the measures affected by competition authorities and trade rules.
It would be desirable for points of discussion in this area to be organized and discussions to
be commenced at an early date bilaterally, plurilaterally, and multilaterally withinorganizations such as the OECD.
137

4. Post-crisis Changes in the Business Environment Should be Carefully Watched(1) The strengthening of the WTO and the conclusion of FTAs will be effective against
the trade restrictive measures being introduced throughout the world
The worsening global situation since the financial crisis in September 2008 has often been
compared to the Great Depression of the 1930s. The trade-limiting measures put in place by
the U.S. at that time drew protectionist reactions from Europe, intensifying the depression.
Since the financial crisis, a succession of measures have been introduced around the globe
to protect national industries, including the introduction of the Buy American clause in the
U.S. and a series of tariff hikes in emerging nations. This situation has raised concerns that
trade conflict of the type that occurred in the Great Depression may be looming. However,the decisive difference between the trade environment of the past and that of today is theexistence of WTO rules. Almost all of the trade-limiting measures introduced since thefinancial crisis appear to remain within the scope allowed by the various WTO agreements. If
WTO rules are violated, requests from other members for rectifying the measures will be
issued via the WTO judicial process, which has attained a high level of advancement. The
WTO functions as a bulwark against the global trend towards protectionist measures.
However, in the recession, it is expected that demands for protectionist measures willcontinue. The loss of markets and the negative impact on supply chains generated bytrade-restricting measures would hit Japan hard, which seeks footholds in overseas markets.
In addition to exhorting member nations to respect WTO rules, Japan must actively
participate in the enhancement of the system for surveillance of protectionist measures being
pushed forward by the WTO.
In addition, the major nations must continue to send the message of free trade. The
conclusion of the Doha Round would mean the liberalization of trade throughout the world,
and would send a powerful message regarding adherence to the free trade system. The
reduction of all bound tariff rates and the consequent narrowing of the margin for tariffincreases by the WTO member nations would increase the foreseeability of trade.
The conclusion of FTAs, despite the fact that their merit is limited to the signatory
countries, also sends a message regarding adherence to free trade. FTAs entail liberalization
through the reduction of tariffs and other measures, and also have a powerful effect incontrolling tariff increases and the introduction of non-tariff barriers. The importance of theirrole as supplements to the WTO is increasing.
(2) Post-2010: Towards the era of the FTA
From 2010, it is expected that tariffs will be eliminated in the major FTAs in effect in the
Asia Pacific region, in which Japanese companies are conducting a wide range of businessactivities. In AFTA, the ASEAN6 will eliminate tariffs on almost all products for the ASEAN
market. In addition, tariffs will be eliminated on the majority of goods in the ASEAN-China
FTA and the ASEAN-South Korea FTA. The phased tariff reductions scheduled in Japan’s
FTAs with the ASEAN nations will also progress further, and the ASEAN-Australia-New
Zealand FTA is expected to go into force and the ASEAN-India FTA to be signed within 2010.
The era of the FTA is arriving, and it is clear that they will have an effect in further boosting
intraregional trade in the world’s major regions.
From the perspective of using FTAs, it will be essential to promote understanding of thenature and operation of individual FTAs to companies, and to make efforts towards steady
improvement if a problem exists, including renegotiating points. The meaning of FTAs is notin their conclusion, but in their use by companies.
JETRO is working to maximize the benefits of FTAs, spreading information, offering
consultation, and providing guidance concerning FTAs through its head office and its
overseas offices, and participating in the Business Environment Promotion Council
138

established in cooperation with the Japanese government.
Japan’s trade coverage by FTAs is currently only 15%. In future, it will be essential for
Japan to accelerate its FTA negotiations and improve the conditions of competition forJapanese companies.
(3) Expanding areas of trade
The areas of discussion covered by global trade talks are expanding to include trade andthe environment, investment and services, government procurement, intellectual property
rights, and competition, etc. As international business diversifies, the type of tradeliberalization and the rules demanded by companies are exceeding the previous WTO
framework. Against this background, it is regrettable that the scope of the Doha Roundnegotiations has been rather limited.
“WTO-plus” liberalization and regulation shows progress through the medium of FTAs
and plurilateral agreements in areas already covered by the WTO, including investment andservices, government procurement, and intellectual property rights. At the same time, a trend
towards increased cooperation in the area of competition, not covered by the WTO
framework, can also be observed. In addition to achieving an early conclusion to the Doha
Round, it will be necessary for the WTO to make preparations to engage immediately withthese new agendas post-Doha.
In the area of trade and the environment, given the increasing importance to theinternational community of grappling with environmental problems such as climate change
and the effects of hazardous chemicals, it will be necessary to ensure smooth trade inenvironment-related products, but at the same time the relationship between environmental
agreements and international trade rules must be clarified. In addition, the EU has introduced
a succession of environmental regulations, and these regulations have diffused around theworld as de facto international standards. A situation is developing in which companies will
be unable to conduct business successfully unless they internalize the cost of complying withenvironmental rules as an investment.
Via measures such as tariff hikes and the import licenses introduced anywhere in the world,
the today’s focus tend to be on conventional tariffs and non-tariff barriers; at the same time,
however, the rules of international business in such areas as the environment, intellectual
property, and competition, are steadily changing. It is possible that these changes in thebusiness environment will increase in pace when the world emerges from the financial crisis.
Close attention should be paid to this trend when engaging in business activities.
It is becoming increasingly important to drive discussion and rule-making in relation tothese new trade agendas through FTAs and multilateral agreements in order to create thegroundwork for future multilateral trade rules. Japan must be an active participant in thisprocess.

139

140

(Notes) *1 A formula for the reduction of general tariffs. The lower the coefficient, the lower the final tariff level becomes. Members are obliged to reduce tariffs on all general goods to the level of the coefficient or below.
*2 Products which are treated as exempt from tariff reductions on general goods. Goods designated as special products are subject to tariff quotas.
*3 Japan and Canada have expressed opposition to this proposal. Japan seeks a figure of 8%.
*4 The total of "amber box" subsidies (subsidies which have a trade distorting effect), "blue box" subsidies (subsidies which have less of a trade distorting effect than "amber box" subsidies), and de minimis subsidies (minimal "amber box" subsidies).
*5 In monetary terms, this represents upper limits of approximately USD 34.6 billion in the case of the EU and of approximately USD 14.46 billion in the case of the U.S.
(Source) WTO Secretariat documents, WTO Reporter （BNA）, World Trade Online （Inside Washington Publishers）, and other materials.

○A reduction 80% for the EU, 75% for Japan, and 70% for the U.S. against the average value of OTDS for the period 1995-2000. Reductions of 55% for other developed nations.*5 Japan, the U.S. and the EU will
implement reductions of 1/3, and other developed nations will implement reductions of 25%, when the Doha Round results go into force. Following this, the target level for reductions will be achieved by means offive equal reductions.
○The level of reductions for developing nations will be 2/3 the level for developed nations. Developing nations will implement a reduction of 20% when the Doha Round results go into force, following which thetarget level for reduction will be achieved by means of eight equal reductions.

Overall trade-distorting support （OTDS）*4○In addition to sensitive products, developing nations can designate up to 12% of their total products as special products. An average tariff reduction of 11% must be applied to all sensitive products. Up to 5% of
special products can be exempted from tariff reductions.

Special products （SP）

Domestic
support(reduction ofsubsidies)○Developed nations can designate up to 4% of their agricultural products as sensitive products. However, if 30% or more of the products are in the highest tariff tier, up to 6% can be designated as sensitive
products. *3○Developing nations can designate the above 4% or 6% plus one-third of their agricultural products as sensitive products.

Sensitive products*2○The SSM can only be used by developing nations.
○SSM can be applied as follows: If import volumes increase by 110-115% over average volumes for the most-recent three-year period, applied tariff rates can be increased by up to 25% or 25 percentage points,
whichever is higher, above the current bound rates. If import volumes increase by 115-135% over average volumes for the most recent three-year period, applied tariff rates can be increased by 40% or 40 percentage
points, whichever is higher, over the current bound rates. If import volumes increase by more than 135% over average volumes for the most-recent three-year period, applied tariff rates can be increased by 50% or 50
percentage points, whichever is higher, above current bound rates. However, the SSM cannot be applied if the level of the imports is negligible in relation to domestic production and consumption.
○The SSM can be applied if a developing nation's currency is acknowledged to have declined in value by 10% against international currencies in the previous one-year period, in the event of a decline in averagemonthly import prices (c.i.f.) in the most-recent three-year period to 85% or less of the price of M FN imports (85% is the trigger price). The upper limit for tariff increases is 85% of the difference between the actual
import price and the trigger price.

○The developed nations will divide their current bound rates into four tiers. Tariffs in the highest tier (75% or more) will be subject to 70% cuts, and 54% cuts will be made across all tiers. The tariff cuts will be
implemented in six equal reductions.
○The developing nations will divide their current bound rates into four tiers. Tariffs at the highest level (130% or more) will be subject to cuts of 2/3 of the equivalent tier for developed nations. Cuts of 36% will bemade across all tiers. The tariff cuts will be implemented in 11 equal reductions.

General tariff cuts: Four-tier tariff reductions

Market access(tariff
reductions)

Special Safeguard Mechanism （SSM）○Elimination or large-scale reductions of tariffs in the following sectors are sought: ①Automotive and related parts; ②Industrial machinery;③ Chemicals; ④Fish and fish products; ⑤Forestry products; ⑥Gems
and jewellery products; ⑦Toys; ⑧Electronic/Electrical products; ⑨Healthcare, pharmaceutical and medical devices; ⑩Bicycles and related parts; ⑪Hand tools; ⑫Sporting goods; ⑬Textiles, clothing and footwear;⑭Raw materials○Participation is non-mandatory.

Sectoral tariff elimination/harmonization (Sectoral)

Points of discussion○Coefficient of 8 for developed nations. No exempted goods. Reductions to be achieved in five-year instruments from January of the year following the entry into force of the DDA by means of equal annual
reductions.
○Choice of coefficients of 20, 22, or 25 for developing nations. Selecting a coefficient of 20 would allow up to 14% of all products of the mining and manufacturing industries to be exempted. The rate of tariff
reductions on exempted goods would be half or more of the rate for general goods. However, this is conditional upon these goods not exceeding 16% of the total value of the country's imports of mining andmanufacturing products. Alternatively, the country may choose to exempt 6.5% of its total mining and manufacturing goods from tariff reductions, provided that these goods do not exceed 7.5% of the total value ofthe country's imports of mining and manufacturing goods. The choice of a coefficient of 22 would enable up to 10% of all products of the mining and manufacturing industries to be exempted. The rate of tariff
reductions on exempted goods would be half or more of the rate for general goods. Alternatively, the country may choose to exempt 5% of its total mining and manufacturing goods from reductions. There would be no
exemptions in the case of a coefficient of 25. The period for implementation of the reductions would be ten years from January 1 of the year following the entry into force of the Doha Round.

General tariff cuts: Swiss formula coefficient*1

Area of negotiation

Table II-1 Major Areas of Negotiation and Points of Discussion in the Doha Round(Texts of NAMA Negotiations Chairperson Wasescha and Agriculture Negotiations Chairperson Falconer, Published December 2008)

Non-agricultural market access（NAMA ）

AgricultureTable II-2 Main trade-limiting measures taken by countries in the wake of thefinancial crisis
Main corresponding
MeasureCountry/Region
WTO agreement
General tariff GATT (General
Russiahike
Agreement on Tradeand Tariffs)○Raised basic tariff rate on some steel products from 0% to 5% and raised basic tariff rate on soybean oil from 0% to 20%.

2009/1/1○Raised import taxes on some steel products, including hot flat-rolled steel (from 5% to 13%) and cold flat-rolled steel (from 6% to 14%).
○Periodic hikes in customs duties on newsprint paper, writing utensils, dairy products, meat, semifinished steel products, flat-rolled products, bar steel and iron February 16, 2009
wire, refined copper and copper alloy, alloy steel bar and others.
March 9, 2009
March 20, 2009
April 1, 2009
April 8, 2009
April 15, 2009

Ukraine○The Ukrainian government imposed a temporary surcharge, beginning on March 7, 2009, of up to 13% on items designated non-critical.
○On May 18, 2009 the Ukrainian government notified the WTO that it was withdrawing the temporary surcharge, with the exception of refrigerators (HS8418)
and passenger cars（HS87031).

EcuadorSuccessive enforcement○Introduced an import-quota system and raised import taxes for a one-year period, citing a deteriorating balance of payments.
from January 23, 2009
○Applied to imports from the Andean Community (CAN).
○Covered a wide array of products, including agricultural products; foodstuffs; soap; leather; paper and pulp; textiles and apparels; ceramic wares; glass; iron,copper and aluminum products; base-metal products; machinery, electronic appliances; sunglasses and other eyeglass products; cameras; movie projectors;
watches; percussion instruments; furniture and others.

Foreign Trade and Investment Council of Ecuador Resolution No. 458,
November 26, 2008; Foreign Trade and Investment Council of Ecuador
Resolution No. 466, January 1, 2009; Foreign Trade and Investment
Council of Ecuador Resolution No. 468, January 30, 2009; Foreign
Trade and Investment Council of Ecuador Resolution No. 469,
February 12, 2009; Foreign Trade and Investment Council of Ecuador
Resolution No. 470, February 19, 2009; Foreign Trade and Investment
Council of Ecuador Resolution No. 477, March 6, 2009; Foreign Tradeand Investment Council of Ecuador Resolution No. 478, March 6, 2009;
Foreign Trade and Investment Council of Ecuador Resolution No. 480,
March 18, 2009; Foreign Trade and Investment Council of Ecuador
Resolution No. 481, April 1, 2009; Foreign Trade and Investment
Council of Ecuador Resolution No. 482, April 7, 2009; Foreign Tradeand Investment Council of Ecuador Resolution No. 484, April 30, 2009.

EU○Reintroduced customs duties on cereals that had been temporarily removed.
○Duties were set at 12 euros/ton for common wheat, 16 euros/ton for barley, 7 euros/ton for mullet and 8 euros/ton for barley used in malt.

2008/10/26○Increased tariffs from tariff-free to a maximum of 14% on seven steel items, including hot-rolled steel sheets and cold-rolled coils.
○Introduction of compulsory standards for 57 steel items including bar steel and stainless steel.

2009/6/5
2008/11/15

European Commission Regulation No. 1039/2008 of October 22, 2008
(published in the Official Journal of the European Union, Issue L280,
October 23, 2008).
Chamber of Foreign Trade Decision No. 28, June 5, 20092008 Customs (Prohibition of Imports) Order Rev. 5; 2008 Customs(Prohibition of Imports) Order Rev. 5 guideline(WTO) Permanent Delegation of Malaysia to the WTO
Gazette of India, September 9, 2008; Gazette of India, February 10, 2009

Indonesia

Ecuador

ImportLicensing
System○Mandated compliance (compulsory standard) for cement, diesel oil, matches, tires, clothing, glass, steel products, aluminum, refrigerators, electronic
appliances, tractors, automobiles and automobile parts and requires the submission of certification at the time of importation.
○From March 15, 2009, an interim measure allows companies with ISO9001 certification to make a self-declaration of conformity.

2009/2/2○Toughened procedures for acquiring and renewing product specifications by the Thai Industrial Standards Institute (TISI).

2009/5/1○Designated lithium rechargeable batteries as "industrial products subject to voluntary safety confirmation" under the "Quality Management and Safety
Control of Industrial Products Act." Products must be certified as meeting safety standards by a testing organization before shipment or customs clearance.

2009/7/1

Country/Region

US

Indonesia

Australia

Australia

GATT (General
Agreement on Tradeand Tariffs)○Mandated compliance (compulsory standard) with Bureau of Indian Standards (BIS) for six steel products including iron wire and bar steel from September 12, 6 items: Sept 12, 20082008.
8 items: February 12○Compulsory standards were scheduled to be introduced for 11 items, including galvanized steel sheet, tinplate and certain steel sheet on February 12, 2009, but enforcement postponed for
it was announced on February 10, 2009 that implementation would postponed for one year and that three items would be exempted.
one
Jan 23, 2009 enforcement;○Imports of toy products made in China were banned for a six-month period (HS No. 9501, 9502, 9503).
March 2, 2009 revision○This was relaxed on March 2, 2009, to allowing imports of toys made in China on the condition that, among other things, they meet the standards of theAmerican Society for Testing and Materials (ASTM) and International Organization for Standardization (ISO).
May 6, 2009
○Mandated compliance (compulsory standard) with the Indonesian National Standard (SNI) for hot-rolled sheet steel, zinc and aluminum alloy-plated sheet
steel.
July 6, 2009
September 27, 2009scheduled enforcement

Thailand

Argentina

Consumer
Subsidies

2009/3/7

South Korea

Agreement on Import India
LicensingProcedures
Indonesia

Government Agreement on
procurement Government
Procurement

2008/11/18

Basis
Russian Federal Government Act of October 10, 2008 No. 745; RussianFederal Government Act of December 5, 2008 No. 903; Russian Federal
Government Act of December 8, 2008 No. 918; Russian Federal
Government Act of January 9, 2009 No. 9; Russian Federal
Government Act of January 9, 2009 No. 12; Russian Federal
Government Act of February 26, 2009 No 174; Russian Federal
Government Act of March 31, 2008 No. 273.
Ministry of Finance, Notification No. 122, November 18, 2008

TurkeyVietnamIndia

Main corresponding
WTO agreement

Date of Introduction

India

BrazilStandards
Agreement on
Malaysia
andTechnical Barriers to
Certification Trade (TBT)
India

MeasureDescription○The government of Russia has periodically increased tariff rates. Tariff hikes have been applied to automobiles, automobile bodies, meat, combines, steel
November 14, 2008
products and televisions in the past.
January 1, 2009
○The tariff hike lasts for a period of 9 months or one year.
January 12, 2009
○The tariff on passenger cars (gasoline engine) less than 3 years old was raised from 25% or not less than 1.2-2.35 euros per cubic centimeter of cylinder volume February 14, 2009
(with some exceptions), to 30% or not less than 1.2-2.8 euros per cubic centimeter of cylinder volume. The tariff on flat-screen televisions rose from 10% to 15%. April 4, 2009
May 7, 2009

Malaysia

Description

Date of Introduction

Official Gazette No. 27097, December 31, 2008
Ministry of Finance Circular No. 28/2009/QD-BTC, February 10, 2009;
Ministry of Finance Circular No. 39/2009/TT-BTC, March 3, 2009;
Ministry of Finance Circular No. 52/2009/TT-BTC, March 17, 2009;
Ministry of Finance Circular No. 58/2009/TT-BTC, March 25, 2009;
Ministry of Finance Circular No. 67/2009/TT-BTC, April 3, 2009;
Ministry of Finance Circular No. 75/2009/TT-BTC, April 13, 2009
Ukraine Law No. 924-VI, February 4, 2009

Ministry of Commerce and Industry Notification No. 82, January 23,
2009; Ministry of Commerce and Industry Notification No. 91, March 2,
2009.
Minister of Industry Decree No. 01/M-IND/PER/1/2009, January 6,
2009; Minister of Industry Decree No. 02/M-IND/PER/1/2009, January
6, 2009; Minister of Industry Decree No. 32/M-IND/PER/3/2009, March
16, 2009; Minister of Industry Decree No. 36/M-IND/PER/3/2009,
March 27, 2009; Minister of Industry Decree No. 37/MIND/PER/3/2009, March 27, 2009; Minister of Industry Decree No.
38/M-IND/PER/3/2009, March 27, 2009; Minister of Industry Decree
No. 39/M-IND/PER/3/2009, March 27, 2009.
Ministry of Industries and Competitiveness National Quality Council
Directive No. 001-2008, No. 002-2008, December 1, 2008;
Ministry of Industries and Competitiveness National Quality Council
Directive No. 003-2008, December 18, 2008; Ministry of Industries andCompetitiveness National Quality Council Directive No. 007-2008,
February 2, 2009.
Thai Industrial Standards Institute Proclamation TISI-R-PC-01, March
4, 2009.
Korean Agency for Technology and Standards Notification No 20081019
Basis○Transferred the imports of steel products and automobile parts (gearboxes, bumpers, etc) from the "free" to "restricted" category. Accordingly, the import of Effective from November 21 Ministry of Commerce and Industry Notification No. 63 (RE-2008)/2004these products will require obtaining a license from the government.
and November 24, 2008.
2009; Ministry of Commerce and Industry Notification No. 64 (RE2008)/2004-2009.
○Introduced the registration system for importers of steel products, which requires: (1) importer registration, (2) regular reports on import performance, and (3) Effective from February 18, Regulation of the Minister of Trade No. 08; Regulation of the Director
pre-loading inspections at ports, for 202 steel products including flat-rolled and shaped steel. The period of enforcement is from February 18, 2009 to December 2008 (Registration system General of Metal, Machinery, Textile and Miscellaneous Industries No.
31, 2010.
for importers of steel
04 (Registration System for Importers of Steel Products); Regulation of
the Minister of Trade No. 44 and No. 56; Regulation of the Director○Introduced the registration system for importers that requires importers of electric items, ready-made goods, children's toys, foodstuffs, beverages and other products).
items to register and submit periodic reports on their import figures. Effective from December 15, 2008 to December 31, 2010. Further, imports are restricted to
Effective from December 15, General of Foreign Trade, Ministry of Trade No. 14 (Importer
five ports and all international airports.
2008 (Registration system Registration System); and Ministry of Industry and Trade Notice No.
for importers).
63 and Notice No. 64.
○Introduced non-automatic import licensing system covering products like joints for steel pipes, elevators, forging machines and other machinery, fabrics and Effective from November 30, Ministry of Economy and Production Administrative Resolution
textiles, automobile tires and knives, combines, disks, tractors, furniture and fasteners (MEP Administrative Decision 61/2009 issued on March 4, 2009).
2009 （588・589/2008）.
588/2008 and 589/2008;
Effective from January 21,
Ministry of Economy and Production Administrative Resolution
2009 （26/2009）.
26/2009 and 61/2009
Effective from March 26,
2009（61/2009）.
Signed February 17, 2009
○Included the "Buy American" Clause (Title 16 General Provisions) in the "American Recovery and Reinvestment Act of 2009," which requires use of
American-made products in government procurement. But also includes the language that stipulates that it "be applied in a manner consistent with the UnitedStates' obligations under international law." The Buy American requirement can be waived when: (1) use of American products would be inconsistent with the
public interest, (2) sufficient and reasonable quantity, and of a satisfactory quality is produced domestically, and (3) use of domestic product would increase thecost of the overall project by more than 25%.
Enacted May 12, 2009
○Enacted preferential treatment for domestic goods and services by government agencies in procurement on May 12, 2009; scheduled entry into force is in
August, three months later. Provides preferential pricing in bid tendering for products and services whose local content is above a certain threshold.
○Also provides preferential treatment for domestic firms when construction work on government public-works projects is contracted out.

American Recovery and Reinvestment Act Title XVI, General
Provisions, "Buy American"

Applies to bids after July 1,○Strengthened, on the basis of the results of a 2008 evaluation, the state of Victoria's "Victoria Industry Participation Policy" (VIPP) (originally took effect in2009.
April 2001) which gives preferential treatment to local SMEs in government procurement. The policy applies to projects of over AU$3 million in the city of
Melbourne and over AU$1 million elsewhere.
○Projects of over AU$250 million are designated as "strategic projects" mandating extra preferential treatment to local SMEs than the normal local-content
requirements.
○The state of New South Wales announced, in June 2009, a revision of its guidelines covering state-government procurement to provide preferential treatment Announced June 2009.
to Australian and New Zealand companies. This includes: participation in tenders of over AU$4 million requires the submission of an "industry participation
plan" (IPP), and evaluation of a bid requires at least a 6% weighted score be given to the IPP, among other things.

State of Victoria Department of Innovation, Industry and Regional
Development website○The government pays 5,000 ringgit to the owner of a car that is at least ten years old to trade it in for a Proton or a Perodua.

(Sources) Prepared based on materials from the governments of several countries, the WTO, World Bank and "2009 Report on Unfair Trade" (METI).

141

Regulation of the Minister of Industry No.49/M-IND/PER/5/2009 on
use of Domestic Products in Procurement of Government Goods andServices.

New South Wales Government Procurement: Local Jobs First plan,
June 6, 2009.

Announced March 10, 2009. Supplementary Budget Plan, March 10, 2009

142

Agreement on
Subsidies andCountervailing
Measures

Major relevant WTO
agreements○On December 20, the prime minister of Canada announced that emergency support of up to $4 billion (Canadian) would be provided to Chrysler. The federal government andthe provincial government of Ontario would extend loans of C$3 billion to GM Canada, and C$1 billion to Chrysler Canada.
○The Canadian government announced on April 7, 2009 that it would increase the capitalization of the Export Development Canada (EDC) by C$700 million to finance an
Accounts Receivable Insurance Program for automobile parts suppliers.

○President Sarkozy of France announced the extension of a 6 billion euro loan to aid Peugeot-Citroen and Renault in February 2009, on the condition that the manufacturers
keep their factories within the country. After a protest from the Czech Republic, France promised that the substance would changed in order to avoid any discriminatory effects
on other member states.
○The UK, Spain, Italy, Germany and Sweden have also announced aid packages to companies, mainly in the automobile sector.

○On March 12, 2009, the European Investment Bank announced that its Board of Directors had approved the extension of 3 billion euros in financing to the European
automobile manufacturing sector. The majority of the money was earmarked to fund the economic package that had been approved at the EU Summit in March, 2008, which
included programs for the development of clean technologies to help drive up energy efficiency and reduce carbon dioxide emissions.
○Announced its further loans of 866 million euros on April 7 and 750 million euros on May 12, for an anticipated total of more than 7 billion euros in loans to the automobile
industry, including parts suppliers, in 2009.

CanadaEuropeEuropeDescription○Announced on December 19, 2008 that GM and Chrysler would receive up to $17.4 billion ($13.4 billion for GM and $4 billion for Chrysler) in financial support as part of theEmergency Economic Stabilization Act enacted on October 3, 2008. Of that, GM and Chrysler received $4 billion each on December 31 and January 2, 2009 respectively. In April
2009, an extra $2 billion was provided to GM.
○In March 2009, the Treasury Department announced that it would provide up to $5 billion to auto-parts suppliers as part of the Emergency Economic Stabilization Act passedin October 2008. The government would provide guarantee to banks that purchased suppliers' accounts receivables.

Country/Region

US(Source) Prepared based on material from various governments.

Financial
Assistanceto industry

MeasureTable II-3 Post-Financial Crisis Industrial Assistance by Country/Region
Period of Introduction

Basis

Approved by Board of
Directors on March 12, 2009.

Applied from December 17,
2008.

Announced Dec 20, 2008
Announced April 7, 2009

European Investment Bank press release, March 12, 2009.
European Investment Bank press release, April 7, 2009.
European Investment Bank press release, May 12, 2009.

European Commission Communication "Temporary Community
Framework for State Aid Measures to Support Access to Financein the Current Financial and Economic Crisis" (Official Journal of
the EU C16, January 22, 2009).

Government of Canada press release, December 20, 2008.
Government of Canada press release, April 9, 2009.

Enacted October 3, 2008.
H.R.1424 Emergency Economic Stabilization Act of 2008
Announcement of assistance Department of Treasury Press Release TG-64, March 19, 2008.
to automobile manufacturers:
December 19, 2008.
Announced March 19, 2009.

Figure II-1 Number of FTAs Worldwide by Year

(Year)
1955-1959
1
1960-19642
1965-1969 0
1970-1974
4
1975-19793
1980-19843
1985-19893
1990-1994
1995-1999
2000-2004
20050

171 Agreements in Total （as of June 1, 2009）

18
32
50
55
10

20

30

40
50
60
(Number of agreements)(Note) The year is based on the date of the agreement becoming effective. The South
Korea-ASEAN and India-Thailand FTAs are added, before notification.
(Source) Compiled from list on WTO website(http://www.wto.org/english/tratop_e/region_e/region_e.htm)

143

144

Singapore
MexicoMalaysia
Chile
ThailandIndonesia
Brunei
Philippines
ASEAN
Subtotal
Vietnam
Switzerland

Export
3.4
1.3
2.1
0.4
3.8
1.6
0.02
1.3
10.3
14.8
1.0
0.6
3.5
1.0
2.2
0.1
7.6
29.9

Import
1.0
0.5
3.0
1.0
2.7
4.3
0.6
1.2
8.6
15.6
1.2
0.8
19.2
0.7
6.2
0.3
3.9
46.6

Trading partnercountry/region

2.2
100
0.9
98.4
2.6
99.3
0.7
99.8
3.3
97.4
2.9
89.7
0.3
99.9
1.2
96.6
9.5 approximately 91
15.2
1.1
87.7
0.7
99.7
11.2
0.8
4.2
0.2
5.8
38.2
-

Two-way

(%)

94.7
86.8
94.1
90.5
91.6
93.2
99.99
91.6
93.2
94.9
99.3
-

Japan

Share of tariff-free items (trade amount basis)(Notes) (1) The figure for ASEAN's share of trade with Japan only includes trade with the ASEAN members that have an FTA in effect (Singapore, Laos, Vietnam,
Myanmar, Brunei, Malaysia and Thailand).
(2) The share of tariff-free items refers to the share of total value of trade categories for which tariffs have been immediately eliminated and items for which tariffs will beeliminated in stages within 10 years to the total value of trade. The share of tariff-free items represents the share of 2005 for trade with Singapore, the share of 2002 fortrade with Mexico, the share of 2004 for Japan and the share of 2003 for Malaysia; for trade with Malaysia, the share of 2005 for trade with Chile, the share of 2004 forJapan and the share of 2003 for Thailand; for trade with Thailand, the share of 2003 for trade with the Philippines, the share of 2005 for trade with Brunei, the share fromMay 2004 to April 2005 for trade with Indonesia; for trade with ASEAN, the share of 2006 for Japan, the share of 2005 or 2006 for ASEAN, the share of 2006 forVietnam and the share of 2006 for Switzerland.
(Sources) Trade Statistics of Japan, Ministry of Foreign Affairs, "2009 Report on Compliance by Major Trading Partners with Trade Agreements - WTO, FTA/EPA, and
BIT" (METI).

GCC (Gulf Cooperation Council）
Being
negotiated India
Australia
Peru
South Korea
Total

SignedIn effect

FTA

Share of Japanese Trade (2008)

Table II-4 Japan's FTAs: In effect, signed, being negotiated, and their share of Japanese trade (2008)

Table II-5 Status of Use of Major effective FTAs in the Asia Pacific and Southwest
Asia Regions by Third Countries

AFTA

86

(Units: Number, %)% share56.2

ASEAN-China

18

11.8

Thailand-India9

5.9

Thailand-Australia

9

5.9

ASEAN-Korea

7

4.6

Australia-New Zealand5

3.3

Thailand-New Zealand5

3.3

Australia-Singapore

42.6South Asian Free Trade Area (SAFTA)

3

2.0

Singapore-India

2

1.3

India-Sri Lanka

2

1.3

Singapore-New Zealand2

1.3

Malaysia-Pakistan

1

0.7

153

100.0

FTA

NumberTotal number of times FTAs have been used

(Notes) ① The survey was conducted between September 25 and October 31, 2008. The survey subjects were Japanesecompanies operating enterprises with a ratio of capital contribution of 10% or more in any of 13 nations (ASEAN7 [Thailand,
Malaysia, Indonesia, the Philippines, Singapore, Vietnam, Myanmar], India, Pakistan, Sri Lanka, Bangladesh, Australia, and
New Zealand). The number of valid responses was 1,852, and the valid response rate was 36.8%.
② The number of FTA utilization was determined by responses to a question as to whether the companies had used an
FTA in conducting exports from one signatory nation to another signatory nation.
(Source) Survey of Japanese-Affiliated Firms in Asia and Oceania(FY2008) (JETRO)

145

Table II-6 Utilization of FTAs in Thailand and Malaysia (Exports)(US$ million, %)Total value of exports utilizing FTA

Trading Partner
Country/Region
Thailand

Malaysia

2005

2007

2008

2005

2006

2007

2008

AFTA

5,146

5,509

7,865

10,735

21.5

20.2

22.6

26.8

AFTA(excluding Singapore)

4,942

5,299

7,609

10,343

30.0

28.2

30.9

34.4

ASEAN-China

614

1,450

1,769

1,691

6.7

12.3

11.1

10.4

Thailand-India

267

328

399

418

17.6

18.1

14.0

12.3

(82 items of the Early Harvest Scheme)

267

328

399

418

79.0

89.1

98.3

83.4

Thailand-Australia

2,122

2,746

4,067

4,944

67.3

62.6

66.3

61.9

AFTA

2,921

3,071

3,924

4,815

7.9

7.3

8.7

9.3

AFTA(excluding Singapore)

2,731

2,898

3,736

4,561

18.5

16.9

19.1

20.6

274

1,043

1,629

1,889

2.9

8.9

10.5

9.9

AFTA

8,066

8,580

11,78915,550

13.3

12.4

14.7

17.0

AFTA(excluding Singapore)

7,673

8,197

11,345

14,904

24.6

22.8

25.7

28.6

888

2,493

3,398

3,579

4.8

10.6

10.8

10.1

ASEAN-China
Total

2006

Share to the total exports

ASEAN-China(Notes) (1) The share to the total exports is: the value of exports utilizing FTA divided by the total value of exports. Total value of exports includes
items for which tariffs have been eliminated on a MFN basis by the trading partner.
(2) Malaysia's trade figures with South Korea are based on June to December 2007 results.
(Sources) Prepared based on Thailand Ministry of Commerce, Malaysia Ministry of International Trade and Industry, and trade statistics of various
countries.

Table II-7 Utilization of AFTA in Thailand and Malaysia (Exports)(US$ million, %)Trading Partner
Country/Region
Total forThailand andMalaysia

Total value of exports using AFTA
1998

2003

2006

2007

Share to the total exports

2008

1998

2003

2006

2007

2008

Indonesia

99

913

2,231

3,530

5,128

5.0

20.6

30.1

34.4

40.8

Vietnam

7

632

1,763

2,772

3,329

0.8

30.3

36.3

43.2

44.6

Malaysia

212

801

1,363

1,850

2,465

11.9

20.7

20.5

22.1

24.9

Philippines

179

748

1,529

1,928

2,411

9.3

24.9

32.0

34.1

37.4

Thailand

91

594

1,270

1,206

1,414

3.9

13.0

14.9

13.8

14.8

Singapore

17

247

382

445

646

0.1

1.1

1.2

1.2

1.6

Myanmar

0

2

4

13

74

0.0

0.4

0.4

1.0

4.5

Laos

0

4

23

30

46

0.0

0.9

2.3

2.1

2.6

Brunei

0

2

14

15

23

0.1

0.7

3.3

3.0

4.0

Cambodia

0

0

1

1

14

0.0

0.0

0.1

0.1

0.6

Total
606 3,942 8,580 11,789 15,550
2.2
9.3
12.4
14.7
17.0
Total (excluding
589 3,696 8,198 11,345 14,904
5.6
18.4
22.8
25.7
28.6
Singapore)
ThailandTotal
391 2,561 5,509 7,865 10,735
4.0
15.5
20.2
22.6
26.8
Total (excluding
383 2,454 5,299 7,609 10,343
7.4
23.0
28.2
30.9
34.4
Singapore)
MalaysiaTotal
214 1,382 3,071 3,924
4,815
1.2
5.3
7.3
8.7
9.3
Total (excluding
206 1,242 2,898 3,736
4,561
3.8
13.2
16.9
19.1
20.6
Singapore)(Notes) (1) The value for exports utilizing AFTA employs values under the Common Effective Preferential Tariff (CEPT), the AFTA
tariff-lowering scheme.
(2) The share to the total exports is the value of exports utilizing AFTA/total value of exports. Total value of exports includes
items for which tariffs have been eliminated on a MFN basis by the trading partner.
(Sources) Prepared based on Malaysia Ministry of International Trade and Industry, Thailand Ministry of Commerce and trade statistics
for various countries.

146

Table II-8 region-wide FTA concepts Involving the Asia-Pacific Region and theirPosition in the World Economy (2008)
Share to world population

Share to world GDP

Share to world trade

6,653.43 million

60.6898 US$ trillion

15.8908 US$ trillion

ASEAN+3

31.4%

19.4%

22.7%

ASEAN+6

49.6%

23.3%

25.2%

FTAAP (APEC)

40.6%

53.3%

43.7%

TPP

5.7%

26.0%

12.3%

World

(Notes) (1) Member nations making up region-wide FTA concepts are as follows:
ASEAN+3：ASEAN10, Japan, China, South Korea.
ASEAN+6：ASEAN10, Japan, China, South Korea, Australia, New Zealand, India.
APEC(FTAAP）: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia,
Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, US and
Vietnam.
TPP: US, Singapore, Brunei, New Zealand, Chile, Australia, Peru.
(2) World population is the total of 180 countries.
(3) World GDP is nominal GDP (dollar basis, converted at market exchange rate).
(Sources) Prepared based on WEO(IMF) and trade statistics for various countries.

147

Table II-9 Intra-regional trade within major regions of the world (two-way trade)
Table II-9 Intra-regional trade within major regions of the world (two-way trade)
(%)
1980
Asia

ASEAN+6（adjusted for reexports）

1990

1995

2000

2005

2006

2007

2008

-

-

-

41.9

44.1

43.2

43.1

44.2

ASEAN+6

33.2

33.0

40.3

40.6

43.1

42.4

42.3

43.5

ASEAN+3

28.9

28.6

36.9

37.4

39.1

38.2

37.8

38.5

ASEAN

15.9

17.0

21.0

22.7

24.9

24.9

25.0

26.7

ASEAN+China

14.9

15.8

19.1

20.1

20.7

20.7

20.6

21.7

ASEAN+India

15.1

16.5

20.7

22.3

23.9

23.9

23.9

25.4

ASEAN+Japan

23.4

21.7

27.4

26.4

26.0

25.4

25.6

27.2

ASEAN+6+Taiwan

35.1

36.2

43.7

44.9

47.7

46.9

46.6

47.3

ASEAN+3+Taiwan

30.9

32.0

40.4

41.9

44.1

43.1

42.5

42.5

ASEAN+Taiwan

15.8

17.3

21.7

23.8

25.0

25.1

25.2

26.6

Americas NAFTA

33.2

37.2

42.0

46.8

43.0

42.0

41.1

39.9

Europe

57.3

65.4

65.1

64.6

64.2

64.6

65.1

63.9

-

-

-

71.4

68.2

67.1

65.8

64.1

APEC

57.5

67.5

71.6

72.3

69.3

68.3

67.0

65.2

TPP

7.6

8.5

8.9

7.2

6.9

7.1

7.0

7.1

EU27

APEC (adjusted for re-exports)(Notes) (1) ASEAN+6 is composed of the ASEAN countries plus Japan, China, South Korea, Australia, New Zealand and India.
(2) ASEAN+3 is comprised of the ASEAN countries plus Japan, China and South Korea.
(3) APEC is comprised of Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New
Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the US and Vietnam.
(4) TPP is comprised of the US, Singapore, Brunei, New Zealand, Chile, Australia and Peru.
(5) The share of intra-regional trade was calculated by (Value of intra-regional exports + Value of intra-regional imports) / (Value of exports to the world + Value ofimports from the world) x 100.
(6) In terms of ASEAN+6 (adjusted for re-exports), adjustments to the estimations of intra-regional exports were made by excluding re-exports as duplicate
postings, using the estimation method below.
<Adjustments to Singapore, one of the ASEAN+6 countries>(a) For the value of Singapore's exports, the value of exports of Singapore origin to the world was used.
(b) For the value of Singapore's exports to ASEAN+6, the value of exports of Singapore origin to ASEAN+6 was used.
(c) Imports of Singapore from the World = Total value of imports from the world - Value of re-imports from the World.
(d) Imports of Singapore from ASEAN+6 (estimate) = Value of imports from ASEAN+6 x ((Value of imports from the World - Value of re-exports from theWorld) / Value of imports from the World).
<Adjustments to Hong Kong, one of the non-ASEAN +6 countries>
In addition to the amount of intra-regional exports of the ASEAN+6, calculated using the above procedures, the following adjustments were made:(a) Value of re-exports from ASEAN+6 to ASEAN+6 via Hong Kong is added.
(b) Of the above re-exports, those that have been re-exported from China to China via Hong Kong have been excluded (since they are considered to be
domestic Chinese trade.)(7) As a member of APEC, Hong Kong's figures were adjusted according to the same method used for ASEAN+6 member state Singapore.
(Sources) Prepared based on DOT(IMF) and trade statistics of Taiwan, Hong Kong and Singapore.

148

Figure II-2 Environmental-Protection Standards under GATT and dispute settlement
mechanism of WTO<Principle>
NO
Does a domestic regulation such as
M easure does not
most-favored-nation treatment, national
conflict withtreatment or elimination of quantitative
WTO rules
restrictions violate WTO rules?
YES<General Exception （ GAT T Article 20 ） > <Applicability Criteria （GATT Article 20 chapeau）>
YES
YES
・M easure necessary to protect human,
Constitutes a
・Is not applied in a manner which would
animal or plant life or health (b), or
trade restriction
constitute a means of arbitrary or
・M easure relates to the conservation ofthat is justifiableunjustifiable discrimination andexhaustible natural resources （g） (noteunder WTO rules
・Is not a disguised trade restriction
2)
NO

NO
Violation of WTO rules(Note) (1) Besides GATT Article 20, WTO documents relating to environmental protection include: the preamble in
the Agreement Establishing the WTO, the General Agreement on Trade in Services (GATS) Article 14 (b), The
Agreement on the Application of Sanitary and Phytosanitary M easures (SPS) Article 2 and others, Agreement on
Technical Barriers to Trade (TBT) Article 2 and others, etc.
(2) Only if such measures are made effective in conjunction with restrictions on domestic production or
consumption.
(Source) Prepared based on WTO Agreement.

Table II-10 Main proposals on tariff-elimination formulas for environmental goods
Proposing Country/Region(Date of Proposal)

Description

Japan, US, EU, Canada, South
List encompassing 153 items (HS code 6-digits) and 12 categories: (1) Air pollution control (2)Korea, New Zealand, Norway,
M anagement of Solid and Hazardous Water and Recycling System (3) Cleanup or remediation
Taiwan, Switzerland (April 2007) of soil and water (4) Renewable-energy plants (5) Heat and energy management (6) Waste
water management and potable water treatment (7) Environmentally preferable products,
based on end use or disposal characteristics (8) Cleaner or more resource efficient technologies
and products (9) Natural risk management (10) Natural (marine) resources protection (11)Noise and vibration abatement (12) Environmental monitoring, analysis and assessment
equipment

US, EU（November 2007）

Two-step process for negotiating elimination of tariffs on 153 items starting with (1) 43 goods
directly linked to environmental protection, according to a World Bank report, on which tariffs
should be eliminated by all 153 WTO member states, and (2) limited to developed andemerging member states and excluding least-developed countries. The proposal was a response
to developing countries' criticism of an across-the-board elimination.

India, Argentina (June 2007)

Project-based formula that eliminates tariff and service barriers only for trade related toactivities that are certified as projects that contribute to the environment. Each country would
submit a list of private-sector companies and public entities engaged in activities benefitting
the environment, and certification of projects on each country's list would be decided throughmultilateral negotiations.

Brazil（November 2007）"Request & offer" formula adopted during the Doha Round negotiations on services. Eachcountry would submit a list (request) of environmental goods whose tariffs it wished to haveeliminated, and each country receiving the list would answer (offer) items on which it could
take action. An item liberalized as a result of a country's offer would be accorded M FN status
by all WTO members. Brazil's proposal would not limit environmental goods to industrial
goods, but would include agricultural products such as bioethanol in the negotiations as well.

(Source) Prepared based on WTO Secretariat materials.

149

150

(Source): EU documents, etc.

2005/8/11

Energy-using Products (EuP) Directive

2006/7/1

Restriction of Hazardous Substances (RoHS) Directive

2007/6/1

2005/8/13

Waste Electrical and Electronic Equipment (WEEE) Directive

Registration, Evaluation, Authorization, and Restriction of Chemicals

2003/7/1

Date of promulgation

End of life Vehicles (ELV) Directive

Regulation
Content

Target products・ In force.

Status(August 2009)

Large and small domestic electronic ・In force.
・Obliges establishment of systems for the collection and separation ofwaste electrical and electronic equipment, pick-up services, and treatment appliances, ITC devices, white・Proposed revisions are currently under review in the co-decision procedure.
goods, lighting products, electricalfacilities.
and electronic tools, toys, leisure・Sets collection target of 4 kg per person per year.
goods and sporting goods, medical
・Requires the manufacturer to bear the cost of collection, treatment,
devices, monitors, vending
machines, ATMs, etc.
recycling, and scrapping.

Automobiles, automotive parts
・Obliges establishment of integrated systems for the transportation ofvehicles to treatment facilities, the issuing of certificates of scrap, and deregistration of vehicles.
・Prohibits the use of lead, mercury, cadmium, and hexavalent chromium.
Certain exemptions are provided.
・Requires the manufacturer to bear the entire cost or the majority of thecost for treatment of the vehicle.
・Increases the recycling rate for scrapped vehicles to 85% or more (until
January 2006). Increases the rate to 95% by January 2015.

OutlineTo improve environmental performancethroughout product lifecycles through design thatconsiders the environment (ecodesign). Includes
elements of energy-saving regulations.

・In force.
・Pre-registration was completed in December 2008.
・Full registration is presently being conducted.

All energy-using products.
・General requirements: Requires environmental evaluation and・Implementing measures by product are presently being introduced.
Products for which implementing
formulation of an ecological profile (materials, waste products, etc.) for・An Action Plan has been announced, and is presently under review in the comeasures have been formulated or
every stage of a product lifecycle.
decision procedure.
are under review include boilers,
・Specific requirements: Sets specific limits for standby power, etc., when water heaters, PCs, batteries,
a product is used.
lighting, street lighting, air
・Stipulates the formulation of harmonized standards by EU standardization conditioners, set-top boxes, vacuum
cleaners, refrigerators, etc.
organizations (CEN, CENELEC, ETSI) based on the New Approach.
・Products named in implementing directives will be sold bearing the CE
Mark after a declaration of conformity has been made.

Chemical substances, preparation,
To enhance the protection of human health and ・Registration: Companies manufacturing or importing 1 tone or more of
products using chemicals.
chemical substances are required to submit the necessary documents,
the environment while promoting technologicalinnovation and maintaining the competitiveness of including technological documents and Chemical Safety Reports (CSR), tothe European Chemicals Agency (ECHA).
the chemicals industry.
・Evaluation: Evaluation of the CSR, etc., by the ECHA.
・Authorization: Authorization is required from ECHA for the use of
substances of very high concern (SVHC).
・Restriction: Based on the results of the risk evaluation by the ECHA,
production, use, etc., of substances can be restricted when necessary to
reduce risk.

To minimize the destruction of the environment ・Prohibits the manufacture and sale of electrical and electronic equipment Large and small domestic electronic ・In force.
appliances, ITC devices, whiteand health risks by restricting the use of specified containing more than a specified quantity of six hazardous substances
・Proposed revisions are currently under review in the co-decision procedure.
goods, lighting products, electricalhazardous substances in electrical and electronic (lead, mercury, hexavalent chromium, cadmium, polybrominated biphenyls
and electronic tools, toys, leisureequipment.
(PBB), and polybrominated diphenyl ethers (PBDE).
goods and sporting goods, medical
・Depending on the use of the equipment, use of the substances might be devices, monitors, vending
machines, ATMs, etc.
approved. The regulations also do not apply if no substitute substanceexists.
・Compliant products are sold bearing the CE Mark.

To prevent and reduce waste by increasing thecollection and recycling of waste electrical andelectronic equipment.

To reduce waste through the collection, reuse,
and recycling of scrapped vehicles.

PurposeTable II-11 Major EU Environmental Regulations

Figure II-3 Illustrated Examples of Response by Companies to the Co-decision andComitology Procedures
Responding following
enactment of law

EU legislative process

Issuing of Green Paper

Consultation with stakeholders

Recognizing, collecting
information

Starting examining how
to respond(Source)

Recognizing, collecting
information

Submitting opinions
Starting examining
how to respond

Presentation of proposal
by European Commission

inputtinginformation

Submission of proposal→European Parliament,
European Council (co‐decision procedure)

Narrowing down ofpoints of focus,
lobbying

Enactment, commencement ofcomitology procedures (whennecessary)

Checking
information

Implementation inmember nations

Examining guidelines, etc.

Examining modificationsin production design,business strategy, etc.
(Note)

Responding Early

Examining
modifications in
production design,

Verifying
responses
Establishingsystem, etc.

Respond

The co-decision procedure is employed in the establishment of all EU laws and regulations; the comitology
procedure is used in the case of the establishment of detailed regulations (implementing measures, etc.) by theEuropean Commission.
Formulated from Japan Business Council in Europe documents.

151

152

Figure II-5 The Spread of Laws Regarding Wasted Electric and Electronic Equipment
throughout the U.S.
（As of August, 2009）
Yea r Introduced

Sta te, Ci ty

2003
2004

California
Maine

2005
2006

MarylandWashington

2007

Connecticut
Minnesota
Oregon
Texas
North Carolina

2008

New Jersey
New York City
Oklahoma
Virginia
West Virginia
Missouri
Hawaii
Rhode Island
Illinois

2009

MichiganIndiana(Source) JETRO Daily, National Electronics Recycling Infrastructure Clearinghouse.

153

154

Singapore, Chile, Australia, CAFTA-DR, South Korea

Extends patent protection period to compensate for delay in granting patent

Singapore, Australia

Limits scope of compulsory licensing

Moves up deadline for interim measures in TRIPS Agreement for obligations pertaining to FTAs concluded with
Singapore
the US and for some treaties in which membership is required by an FTA with the US

NAFTA, Jordan, Singapore, Chile

FTAA，Singapore, Australia, Morocco

Contains stipulation on patent exhaustion issue, not yet being subject to discussion in the WTO

Denies exceptions to patentability allowed in TRIPS Article 27 (3)Singapore, Chile, Australia, South Korea

Limits ISP (Internet service provider) responsibility

Strengthens protection against technological development, such as prohibiting the circumvention of technological Free Trade Area of the Americas (FTAA), NAFTA, Singapore,protection measures
Chile

Singapore, Chile, Australia, CAFTA-DR, South Korea

Singapore, Chile, Australia, CAFTA-DR, South Korea

Protects trademarks on sounds and scents

Strengthens protection of test data on pharmaceuticals

All except for Jordan

Extends the copyright protection period (from 50 years after author's death to 70 years)
Singapore, Chile, Morocco, South Korea

Singapore, Australia, CAFTA-DR, South Korea

Enhances protection for well-known marks

All FTAs

Requires membership in International Union for the Protection of New Varieties of Plants (UPOV)Examples of Relevant FTA

Requires membership in WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty

Specific Example(Note) "Examples of Relevant FTAs" includes those not yet in effect. FTAA is the third iteration.
(Sources) Prepared based on the Office of the US Trade Representative, the International Association for the Protection of Intellectual Property (AIPPI) of Japan and others.

Limits range of discretion
allowed by TRIPS

Rules and regulations onareas not addressed by
TRIPS

Level of protection
surpassing TRIPS

Requirement to join IP
related treaties

TRIPS-Plus Type

Table II-12 TRIPS-Plus Clauses in US FTAs

Table II-13 European Commission Fines Levied Against Japanese Companies for Cartel
Behavior (2003-June, 2009)(1,000 euro)
Company Name

Target Product

Pilkington
YKK
Pilkington
Mitsubishi Electric
Asahi Glass
ToshibaAsahi Glass
Bridgestone
HitachiSony
Denka
Daicel Chemical Industries
Hitachi Maxell
Fuji Film
Ueno Fine Chemicals

Automobile glass
Fasteners
Flat glass for construction
Gas insulated switchgear
Automobile glass
Gas insulated switchgear
Flat glass for construction
Marine hoseGas insulated switchgear
Professional videotape
Chloroprene rubber
Sorbates
Professional videotape
Professional videotape
Sorbates
Nippon Synthetic Chemical Industry Sorbates
Zeon Corporation
Nitrile butadiene rubber
Tosoh
Chloroprene rubber
Fuji Electric
Gas insulated switchgear
Fujisawa Pharmaceutical Co
Sodium gluconate
Japan AE Power Systems
Gas insulated switchgear

Year

Value

2008
2007
2007
2007
2008
2007
2007
2009
2007
2007
2007
2003
2007
2007
2003
2003
2008
2007
2007
2004
2007

(Notes) (1) Pilkington was acquired by NSG Group in 2006.
(2) Japan AE Power Systems is a joint venture company of Hitachi, Fuji Electric and M eidensha.
(3) Fujisawa Pharmaceutical is now Astellas Pharma.
(Source) Prepared based on European Commission material.

155

370,000
150,250140,000
118,575
113,500
90,90065,00058,50051,75047,19047,00016,60014,40013,20012,30010,500
5,360
4,800
3,750
3,600
1,350

156

○

Consultation

○

○
○

○

○

○

○

○

○

○

○

○

○

○

○

○

2005

Me xico

○

○

○

○

2006

Malaysia

△

2007

Chile

○

○

○

○

○

△

△

○

2007

Thailand

○

○

○

○

○

△

△

○

2008

Indonesia

2008

○

○

○

○

2008

2008

○

○

○

○

○

○

○

○

Signe dSwitzerland

○

△

△

△

△

Signe dVie tnam(Year represents entry into effect)
Brune i Philippine s ASEAN

Free Trade Agreement(3) As of the end of 2008, Malaysia and the Philippines had no antitrust law.

(2) Vietnam and Chile include only general content in the agreement language, no detailed stipulations.
FT As with Brunei and ASEAN do not include any competition stipulation.
Other EPAs include provisions in the agreement wording, stipulating detailed procedures in implementing agreements.

(Notes) (1) For Singapore, "notification" and "enforcement cooperation" only pertain to telecommunications, energy and gas sectors. Elsewhere △ denotes the existence of general provisions only,with no specific implementation stipulation.

○○

Confidentiality of information○○

Review○

Conflict avoidance(negative comity)○○△Note 1○○

Positive comity○○△Note 1

T ransparency○

Enforcement coordination

○

○

2002

Singapore△○

Enforcement assistance

○

2005

CanadaT echnical cooperation

○

2003

1999

Notification

EU

US

Antitrust Agreement

Table II-14 Japan's Antitrust Agreement and FTA Competition Provisions

III. New Business Opportunities in the Environmental Market and Service Market
1. Global Environmental Market and Approaches of Japanese Companies(1) Efforts for market expansion and future growth strategies of Japanese companies
Responding to the global economic crisis triggered by the “Lehman Brothers Shock,”individual countries have taken proactive economic measures to create demand and promoteindustry. In particular, the environmental sector is drawing much attention as a potential
source of growth, in which many countries intensively inject their resources and budgets. Of
the ¥15.4 trillion economic stimulus package prepared by the Japanese government in April
2009, ¥1.6 trillion has been allocated to environmental measures. On the international scene,
President Barak Obama of the United States announced a $150 billion ten-year renewableenergy initiative to create five million new jobs, fulfilling a campaign policy. In China, 5.3%of its 4 trillion yuan (¥57 trillion) economic stimulus package has been secured for theenvironment-related budget (approx. ¥3 trillion). European countries have taken measures tosupport switching to low-emission vehicles.
Progress in discussions at the meeting for formulation of a post-Kyoto Protocol framework
to be held in Copenhagen in December 2009 will indicate the efforts of individual countries
in environmental control and environmental protection as well as the direction in which thecontrol and protection will be enhanced.
Environmental business will grow on a global scale, including in Japan, and create hugebusiness opportunities for Japan, which has excellent technologies and products in this sector,
through continuous corporate efforts. With respect to the service industry, in which Japan issaid to have weak international competitiveness, delicate and high quality services in Japan
have been widely accepted particularly in emerging economies, including Asia.
This chapter examines the current status and future prospects of the environmental market
and service market in individual countries, which may offer substantial business opportunities
to Japanese companies.
Overseas production ratio for the environmental business sector is 5.5%.
According to a questionnaire survey on Japanese firms with respect to theenvironment-related business (Survey period: April-May 2009; Effective responses: 813;
Effective response rate: 24%), 88.7% of companies answered that environmental industries
will continue to grow in the future. Only 2.1% responded that they would not launch into an
environmental market since the prospect of the market is uncertain.
Of those companies that responded that growth was expected, 39.8% have been or plan to
be engaged in domestic production/sale of eco-goods and services and 29.9% have been
exporting or plan to export such products and services. However, only 11.8% of them haveactually been engaged or plan to be engaged in production/sale by establishing a
production/sales center of eco-goods and services in foreign countries.
The percentage of companies that have actually been exporting eco-goods and services
was 17.6%, while 12.3% are planning to export. Since Japan’s export-to-GDP ratio is about
16%, it is fair to conclude that incentives for export/sale in the environmental industry areslightly higher than average. However, according to the Ministry of Economy, Trade andIndustry, the overseas production ratio of all Japanese companies was 19.1% in 2007. The
fact that the percentage of overseas production/plan for production of eco-goods and services
is limited to a little more than 10% (specifically, the percentage of companies
producing/selling such products is 5.5% and those considering the production/sale is 6.3%)
means that there is plenty of room for business expansion overseas.
The proportion of companies that responded that they cannot afford to tap into theenvironmental industry for the time being, although the growth is expected to be strong, was157

37.6%. This suggests the possibility that these waiting groups for environmental industry may
dash into the green market in a domino effect, as the global environmental industry expands
and as Japan’s industry goes green.
== Figure III-1 ==In response to a question about which sector of environment-related products a company
sells domestically and exports, the frequently cited answers for both domestic sale and export
were water treatment devices (domestic sale 10.7%, export 4.7%), waste/raw garbage
treatment devices (domestic sale 10.2%, export 3.0%), eco-paints/adhesives (8.5%, 4.7%),
photovoltaic (PV) cells (7.2%, 4.1%), renewable energy (excluding PV cells) (6.9%, 5.0%),
vehicles (electric, hybrid, fuel cell vehicles) (6.3%, 4.4%) and wastewater treatment (6.3%,
3.6%). The environmental industries in which a number of companies are engaged in exports
are believed to be those in which Japan has a competitive advantage. The questionnaire did
not include such sectors as energy-saving home appliances, biofuels, carbon capture andstorage, eco-materials such as bioplastics, and nuclear power generation, but Japanesecompanies are said to have a competitive advantage in these sectors.
== Figure III-2 ==== Figure III-3 ==As for challenges in the development of environmental business, the most frequent answer
was “environmental markets in emerging economies are immature” at 26.2%. This isfollowed by “the cost of eco-goods and services is high compared with conventional
products” at 22.9%, “lack of information on environmental markets in other countries” at
20.7%, “the size of environmental markets in other countries is still small” at 19.3%,“consumers’ interest is low” at 16.5%, “profitability of environmental business is low” at
14.3%, and “incentives are insufficient” at 13.2%.
== Figure III-4 ==In short, the fact that an “immature market,” “small market size,” “high cost,” and“insufficient incentives” are ranked high on the list of challenges in the environmental market
indicates that the market as a whole is not mature enough to generate sufficient profits
exceeding the production and development cost and that the sector is going to expand anddevelop in the future. Therefore, in order for the environmental market to mature, the role andcontribution of the government are increasingly necessary, which include regulations andincentive measures.
The contributing factors to an increase in income of emerging economies, such as BRICs,
before the financial crisis are: (i) increase in the price of energy resources, (ii) economic
expansion led by exports (iii) increase in remittance from abroad and (iv) increase ininvestment from abroad. When this is applied to Japan, technological development and sales
promotion in an alternative energy sector, such as renewable energy, are required to achieve
success in the energy resource sector. As an economic stimulus package to address thefinancial crisis, the United States prepared a budget of more than $70 billion forenvironmental measures (including tax reduction), China more than $30 billion, and Korea$30 billion in four years. In order to strengthen Japan’s competitiveness, we need to integrate
environmental measures by the both public and private sectors.
With respect to the second factor of economic expansion led by exports, Japan should takeexport-promotion measures highlighting environmental industries (low emission vehicles,158

wind and PV power generation, etc.) which are expected to grow strongly despite thefinancial crisis. As for the third sector of remittance from abroad, since increase of
employment of Japanese citizens in foreign countries cannot be expected, this can bealternatively worked out by increasing income from abroad through promotion of expansionof foreign investment and overseas M&A. In order to expand foreign investment inenvironmental business, it is essential to spur demand in emerging markets, particularly in
Asia, by effectively utilizing economic assistance/aid for environmental business in theseregions.
The result of the questionnaire suggests that helping environmental industries expand theinternational markets is necessary since the overseas production ratio in the environmental
industry is lower than the industrial average. Also, bringing profits generated overseas backto Japan can help to revitalize the national economy, resulting in an expansion of investment
from abroad, which is the fourth factor.
In order to take careful policy measures for a diversified environmental industry sector,
accurate understanding of market trends is necessary. To do so, statistical data must be
developed to allow accurate understanding of the environmental market as a whole. Such data
will enable the companies and government to advance into the environmental market, tocomprehensively evaluate the sector-wise competitiveness of Japanese companies and to
identify which environmental industries should be enhanced and supported by thegovernment.
Furthermore, measures, such as holding of and participation in symposiums and tradeshows for Japan’s environmental business, and support for exports and global expansion are
also necessary. It is desirable to provide information and consultancy for environmental
markets of emerging economies, let alone of developed countries.
== Table III-1 ==(2) The global environmental market driven by renewable energy and low carbon
sectors
 Expanding global environmental market
Public awareness of global warming is growing. It has been pointed out that a massive
increase in the volume of greenhouse gases, such as CO², attributes to an increase in thetemperature. Thus, a reduction in CO² has been listed as a major goal of environmental
measures. The traditional environmental measures had targeted such areas as prevention of
air and maritime pollution, purification of soil and water quality, waste and wastewater
treatment and resource and water recycling. However, in the future, sectors related to CO²
reduction need to be considered as potential environmental business.
One of the sectors in CO² reduction is renewable energy. Major business areas in the
renewable energy include PV power generation, which is drawing much attention these days,hydro, wind, geothermal, tidal and wave power generation and biomass. In the renewableenergy sector, energies are generated by utilizing phenomena that occur repeatedly in nature,such as the sun and wind, instead of exhaustible resources such as oil. Unlike exhaustible
resources, renewable resources are CO² free and could supply energy virtually for an infinite
period of time.
Biomass energy is produced from such resources as paper, raw garbage and thinned wood.
Since they are originally photovoltaic energy captured by plants, they are classified as an areaof renewable energy. Biomass energy is produced by burning carbons captured by plants andthus is carbon neutral without an increase in CO².
A number of low carbon-related sectors with reduced CO² emissions are emerging as newenvironmental businesses, represented by alternative fuels such as bioethanol/hydrogen for
159

automobiles, batteries, and nuclear power generation, hybrid and electric vehicles, which arerecently drawing increasing attention, energy-conserving technologies, such as inverter
air-conditioners, eco-materials, such as bio-plastics, eco-houses fitted with insulation, carbon
capture and storage devices and carbon finance.
Therefore, when considering the global environmental business, it is essential to take threebusiness categories into consideration: namely, the renewable energy sector and low carbon
sector, in addition to the traditional environmental sector. The traditional method of
calculating the size of the environmental market simply incorporated the traditional
environmental sector, but today, the renewable energy sector has been added, demonstrating
the progress in understanding the environmental market to capture the actual conditions asmuch as possible, but it is more desirable to incorporate the low carbon sector, where Japan isstrong. It is necessary to incorporate the environmental businesses that are being graduallypenetrated into a variety of industries by expanding the coverage as much as possible.
With this as a backdrop, the Department for Business Enterprise & Regulatory Reform(BERR) of the United Kingdom released a report entitled “Low Carbon and Environmental
Goods and Services: an industry analysis” in March 2009. The report defines the global
environmental market as being composed of traditional environmental activities, renewableenergy technologies and low carbon activities1.
BERR estimates the global market value to be £3.046 trillion in FY2007/08 (which isequal to ¥605 trillion with a conversion rate of ¥198.75 to a pound as of the end of March
2008: British fiscal year is from April 2007 to March 2008). Since the definition includes awide range of sectors, giving consideration to the supply chain, such as procurement ofmaterials and parts, BERR’s estimates on the global market are considerably larger than otherestimates. BERR estimates the global market value to be £4.417 trillion in FY2014/15, anincrease by 45% in seven years. BERR’s method of estimation indicates a direction tounderstand the global markets. However, it still seems necessary to develop even moreaccurate and reliable data by refining the definition of the environmental business and themethod of estimation.
The global environmental market value of ¥605 trillion in 2007/08 is slightly above
Japan’s GDP (approx. ¥550 trillion). The world’s GDP in 2007 was $54 trillion (¥6,359
trillion), and the ratio of estimated global environmental market by BERR to the world’s GDP
is 9.5%. Roughly speaking, the market accounts for about 10% of the world GDP, which isalready quite sizable.
== Table III-2 ==The market value of the traditional environmental sector in 2007/08 was £657.3 billion(¥131 trillion), accounting for 21.6% of the market share, renewable energy sector £939.8
billion (¥187 trillion) with 30.9% and low carbon sector £1.4487 trillion (¥288 trillion) with
47.6%. In short, according to the estimate of BERR based on a major classification, the shareof the low carbon sector is the largest, followed by the renewable energy sector and then the
traditional environmental industry.
== Figure III-5 ==The reason for the high share of the low carbon sector can be explained by the ratio of the1

The report is available on the following BERR website (URL). The definition of theenvironmental business market is listed in Appendix 1, p101-103(http://www.berr.gove.uk/files/file50253.pdf).
160

composition based on sub-major classification. For example, the largest by market value inthe sub-major classification is alternative fuels (18.5%), part of the low carbon sector,
eco-building technologies is ranked second (12.8%) and alternative fuels for vehicle forth
position (11.1%). In the renewable energy sector, wind power generation devices/services areranked third place (11.5%), geothermal generation devices/services are fifth (9.1%), PV
power generation eighth (4.7%) and biomass tenth (4.6%). In the traditional environmental
sector, water/waste water treatment is in the sixth spot (7.8%), recovery & recycling theseventh spot (6.1%) and waste management the ninth (4.6%). Energy-saving products are
11th with 2.4% and carbon finance is 13th with 1.0%, both of which belong to the low carbon
sector.
== Figure III-6 ==Thus, the characteristic of the environmental market as a whole is that the share ofalternative fuels, such as biofuels, batteries and nuclear energy, is high. The eco-building
market has grown to be the second largest market. PV power generation has attracted muchattention in the renewable energy sector, which is 2.5 times the size of the wind power
generation and is expected to grow even more in the future. Geothermal power generation isnearly twice the market size of PV generation. In the traditional environmental sector, themarket sizes of water/wastewater treatment, recovery & recycling and waste management arelarge. During FY2007/08, it was estimated that the market sizes of water/wastewater
treatment, capture & recycling and waste management were larger than that of PV generation.
Japan is strong in the energy-saving product sector but its market size in the U.K. is not aslarge as the top 10 sectors. Thus, Japan needs to develop strategies toward sales expansion.
The method of calculation of the environmental market by BERR uses “bottom-up” data
related to the sales activities of industries and companies and classifies the data into the 2490
minimum classification sectors based on the statistics of international organizations,
universities and research institutes, which are then bottomed up into minor, sub-major andmajor classifications. This method of bottom-up calculation requires accurate counting to
avoid double counting.
The environmental market by BERR includes a supply-chain market which provides
materials and parts to companies specializing in environmental business. For the calculationof the environmental market, BERR separates the specialist and supply chain; and the market
share of the specialist in the overall environmental business is 52%. The market share of thespecialist is 48% for the traditional environmental industry, 58% for the renewable energy
sector and 49% for the low carbon sector. The ratio of specialist for the renewable energy
sector is relatively high at around 60% and the remaining two sectors are around 50%. BERR
estimates the proportion of manufacturing activities to be 32% of the global environmental
market.
== Figure III-7 ==An overview of the BERR’s global market by region shows that Asia and the Far East
have the largest share with 35.8%, followed by North and Central/South America with 30.1%,
Europe with 27.2%, Africa with 3.8%, the Middle East with 1.9%, and Oceania with 1.2%.
== Figure III-8 ==The figures by country shows that the United States has the largest share with £629.1
billion (¥125 trillion) accounting for 20.6%, followed by China with £411.4 billion (¥82161

trillion) at 13.5%, Japan £191.3 billion (¥38 trillion) at 6.3%, India £190.8 billion (¥38
trillion) at 6.3%, and Germany £127.6 billion (¥25 trillion) at 4.2%. The top four countries (toIndia) account for 47% of the global market value and the top 11 countries (to Russia) 68%
and top 17 countries (to Australia) 77%.
The characteristics of top countries are that the United States has the largest environmental
business market, that three Asian countries (Japan, China and India) are included in the top 5
list and that European countries (U.K., France, Spain and Italy) occupy the sixth throughninth spots.
== Figure III-9 ==BERR identifies wind power generation, PV generation, carbon finance, alternative fuels
including automobiles, geothermal generation, biomass and eco-building technologies assectors with high growth potential. Japan, the United States and European countries have an
equal level of environmental technologies and are considering the expansion of theseprospective sectors in China and India. However, China has been expanding the business inwind power generation and PV generation aiming for the global market, and the competition
with Japan, the United States and Europe is expected to become fierce.
It is clear that the growth rates of the renewable energy sector and low carbon sector willcontinue to be higher than that of the traditional environment sector. Bio-fuel technology,
such as bio-ethanol, has become the main stream in some developing countries. Since theenvironmental business is the most promising sector for the future, the role of the governmentis crucial. Therefore, accurate understanding of measures and policies of other countries is the
key to having Japan equipped to lead the business expansion in the global environmental
market.
High expectation on political instruments in the environmental market
The German Federal Environment Agency issued a report entitled “Innovative
Environmental Growth Markets from a Company Perspective” in November 2007. The report
estimates the global environmental market in 2005 to be around €1 trillion (equivalent to¥137 trillion at a rate of ¥136.89 to €1 (an average of 2005)). The report also predicts that the
global market will continue to grow over the coming years and that, by 2020, the total market
value will reach €2.2 trillion (an average growth rate of 5.4%). The global market size by theGerman Federal Environmental Agency is smaller than that by the aforementioned BERR.
The global market size of ¥137 trillion estimated by the German Federal Environmental
Agency indicates that the market size will reach around ¥152 trillion in 2007, assuming thatthe market expands by 5.4% per year. Since the estimated value of BERR, on a fiscal year
basis, is ¥605 trillion, the estimate by the German Federal Environmental Agency is only one
quarter of the BERR’s. The gap in the market size seems attributed to the difference in thecapture rate of the supply chain and in the coverage of the low carbon sector, such asalternative fuels.
== Figure III-10 ==The global market value of ¥137 trillion estimated by the German Federal Environmental
Agency is classified into six categories. The largest sector is energy efficiency with €450
billion (¥62 trillion) in 2005, which is expected to be doubled to €900 billion by 2020. This
sector comprises several sub-markets such as energy-saving home appliances, solar coolingsystems, heat insulation materials, measuring instruments, etc. The second largest market issustainable water management, which reached €190 billion in 2005 and is expected to reach162€480 billion by 2020. This is composed of water supply, wastewater treatment and water
control. The growth potential of this sector is high since an investment in water-related
infrastructure in developed countries is expected to grow strongly.
The third largest market is sustainable mobility which is expected to grow to €350 billion
from €180 billion. The main markets of this sector are bio-diesel and related equipment,
hybrid vehicles, and an advanced traffic management system. Sales of hybrid vehicles areprojected to grow to eight million units in 2020. The fourth largest sector is power generationand storage, which is forecasted to increase to €280 billion from €100 billion. This sector
includes renewable energy.
The fifth largest market is material efficiency with an estimated size of €50 billion as of2005. The bioplastics market was merely €600 million in 2005 but is expected to expand
rapidly to €11.3 billion in 2020. The sixth largest is waste management and recycling whichis expected to grow from €30 billion to €46 billion. The installation of automatic separationof materials is not making progress on a global scale, and the market is expected to growfrom about €200 million in 2005 to €1.4 billion by 2020.
== Figure III-11 ==As described above, the report from the German Federal Environmental Agency lists the
product and service sectors with the highest growth potential: namely, water management, PV
power devices, hybrid vehicles, solar cooling systems, automatic separation of materials,
carbon capture and storage technology, effective storage of electrical energy using
compressed air and hydrogen, bioplastics and biopolymers, membrane technology, andbiofuels.
== Figure III-12 ==The report organized the views of the private sector concerning measures that would link
the environmental business with growth, based on interviews with German corporations.
They all expressed high expectations of the government. The report cites some successfactors of environmental business. For example, governments should set environmental
targets supporting the development of innovative technology. Governments also should
stimulate demand in environmental markets through active support for public procurement
and commercial launch programs.
Incentives for buying hybrid vehicles and information campaigns by governments are also
effective. The report also emphasizes the importance of making the level of innovationachieved by the best-performing companies the new standard for the industry; and it lists thecase of Japan’s Top Runner Program as its example. In addition, the report calls for training
for a skilled workforce, R&D support for small- and medium-size enterprises and expansionof access to financial resources. Furthermore, the report stresses the importance of long-term
subsidy programs lasting 10 or 20 years to support considerable investments in technologies
associated with PV power generation, wind power generation, alternative fuels andcompressed air storage.
The needs of the German corporations seem to be directly linked with the measures forenvironmental business in Japan. For that matter, Japan’s local governments will play aconsiderable role for the future of environmental business. It is thus necessary to draw up
measures that would contribute to local revitalization in the renewable energy sector, such as
PV/wind power generation, in pursuit of the method for waste treatment/recovery, waterreuse and resource reuse, while making full use of the characteristics of local communities.
As political instruments, it is necessary to develop statistics on the environmental market.
163Currently, the environmental market is measured based on the individual definitions by
individual countries, which makes it difficult to accurately grasp the current status of the
global market, which is broadening its horizon. The coverage of definitions adopted by theUnited States and Germany does not reflect the actual state of environmental business, andunderestimates the market. In reality, individual countries cannot grasp the accurate
environmental market, which impedes the effective formulation and execution of political
instruments. Thus, now is the best opportunity for Japan to lead the world since Japan’senvironmental industry has competitive strengths, and to exert leadership in developing
environmental statistics as the world’s standard.
Concurrently with the development of environmental statistics, it is also important to
identify and analyze Japan’s strengths and weaknesses in various areas of environmental
energy technology and product development, and disclose the results. This would greatly
contribute to R&D strategies of Japanese companies for environmental business and topromotional measures of the government.


Environmental technologies in which Japan has strengths, such as PV cells andhybrid vehicles
The Japan Patent Office has released a press release entitled “Survey on Technological
Trends of Patent Applications: Japan’s Technological Competitiveness Seen from Patents,
Part 1: Environment/Energy, etc.” in April 2009. The report compares the ratio of patentapplications filed by individual countries in Japan, the United States, Europe, China andSouth Korea, and examines Japan’s competitiveness in six areas, including PV cells andelectrically propelled vehicles (electric/hybrid vehicles).
Of the 7970 applications for PV cells from 2000 to 2006, Japan accounts for 68%, farahead of Europe, which is in second place (15%), with the United States in third place (11%),
South Korea in fourth (3%) and China fifth (1%).
Particularly, Japan has an overwhelming number of patent applications for silicon PV cells,
which account for 90% of the total PV production, with the percentage exceeding 70%.
However, the share of patent applications of Japanese companies for the next-generation
organic semiconductor PV cells is lower than the sum of applications of the United States andEurope, and Japan’s advantage wears off. Also, the number of papers on organic
semiconductors is significantly fewer than that of Europe. Therefore, it is necessary to focus
on the development of materials to improve the energy transformation efficiency of the next
generation organic semiconductors.
Of the number of patent applications in Japan, the United States, Europe, China and South
Korea for electrically propelled vehicles from 1995 to 2006, Japan ranks first at 72%. Europe
took second place with 14% and the United States third with 8%. Japan has a particularlyhigh number of patent applications for hybrid vehicles. As for the share of the number ofpatent applications for electrically propelled vehicle technologies during the period between
2001 and 2006, U.S. companies have 10%, China 3%, and South Korea 4%. The more recent
it is, the higher the shares of the United States/China/South Korea become. Japanesecompanies are required to establish an intellectual property portfolio, making effective use ofan overwhelming number of intellectual property rights.
== Figure III-13 ==Besides PV cells and electric/hybrid vehicles, there seem to be many environmental
sectors in which Japanese technologies have strengths. Typical examples of such technology
are turbines and parts for wind power generation and energy-saving technologies forhousehold appliances, etc. Also promising is a smart grid for electricity storage and accurate
164

control of supply and demand of electricity, as well as water treatment devices, waste
treatment devices, environmental assessment devices, recycling of wastes, including
household appliances, eco-materials such as bioplastics, eco-building technologies andnuclear power generation.
It is necessary to develop a system to comprehensively evaluate technological capacity,
product development capacity, product appeal, engineering capacity and service provision
capacity throughout the entire environmental industry in Japan. At the same time, it seems
crucial to implement political instruments, such as support measures and export promotion.
Germany has already launched comprehensive support projects and export promotion forenvironmental industries in 2003. The German government takes active measures to promote
global business opportunities for German corporations by holding symposiums, participatingin trade shows and conducting business matching with foreign companies.
(3) Sizes and characteristics of the world’s environmental markets
 Accelerating growth of the renewable energy market in the United States
The United States does not have official data on the latest environmental market tocomprehensively cover the actual state of low carbon sector, such as alternative fuels,
hybrid/electric vehicles, and Carbon Capture and Storage (CCS). In fact, many countries do
not release data on the environmental market with reference to the renewable energy sector
and low carbon sector. The fact that this is happing in Europe and the United States, where
standardization is a matter of daily practice, demonstrates how much the environment market
has been preoccupied with the image of a traditional sector, such as water management, waste
treatment and air pollution.
Renewable energy and low carbon sectors have attracted much attention since the breakout of the financial crisis, and their market size has already exceeded that of traditional
environmental activities. However, there is a lot of data of individual countries, including
those of the United States, to show the contrary. It is necessary to establish common statistics
that reflect the actual status of the environmental market, in this respect, too.
A U.S. magazine, Environmental Business Journal (EBJ), classifies the environmental
market into three categories (i) pollution control services, (ii) pollution control devices and(iii) effective utilization of resources. The first two categories are derived from the traditional
pollution control sector. In the last one, the renewable energy sector is added to a traditional
sector of water/resources reuse. In short, the definition of an environmental market by the
EBJ does not consider business associated with alternative fuels, such as biofuels,
hybrid/electric vehicles and carbon finance.
EBJ estimates the U.S. environmental market value in 2007 to be $302.3 billion(equivalent to ¥35.6 trillion, ¥117.75 = $1) and forecasts it will reach $349.3 by 2010. The
pollution control services and devices account for nearly 70%. The sector of effective
resources utilization, including renewable energy in the spotlight, is limited to 32.2%. The
pollution control service accounts for nearly half or 46.6%, almost twice as high as thepollution control devices (21.1%). In particular, the United States’ characteristic is that it has
strengths in the service industry, with a high ratio of waste treatment service and wastewater
treatment service, and high share of consultancy/ engineering at 8.5%.
The market of pollution control service grew by 1.5 times during the period between 1970
and 2000, which is much higher than the United States’ eight-fold GDP growth. On thecontrary, growth of the market for pollution control devices was rather dull. In recent years,
environment-related venture capital (VC) has injected 75% of its investment into therenewable energy sector. To confirm the data, the renewable energy market has shown a steep
growth since 2000 and is projected to grow twice the size in 2010. The pollution control
service is estimated to grow by 52% and pollution control devices by 30% during the same165

period. Considering the impact of measures in an economic stimulus package since thefinancial crisis, the United States’ renewable energy market after 2010 is forecasted toconstantly grow with a steeper slope. Needless to say, the low carbon market is expected to
grow dramatically, too, being positively affected by the renewable energy market.
The effective use of resources, which is the third element in the U.S. environmental
business market, is expected to grow rapidly, and in 2007 it registered an increase of 13.8%
over the previous year. Of the effective use of resources, the proportion of water reuse was
39%, resources reuse 32% and renewable energy 29%. Water reuse is an attempt to reuse thewater generated through the production processes, etc. and resources reuse refers to capture
and recycling of non-toxic chemical and industrial/corporate waste materials. Thesebusinesses have gained momentum along with an increased awareness of consumers.
== Table III-3 ==The growth rate of consumption of renewable energy from 2004 to 2007 was 11.1%. The
growing sectors include wind power generation (177%), biomass as a whole (28.3%) (ofwhich biofuels increased by 146%) and PV power generation (25%).
Among all energy production in the United States in 2008, fossil fuels accounted for
78.6%, of which coal and natural gas was high; together they accounted for more than 60%.
Nuclear generation was 11.5%, accounting for 9.9% of all renewable energy production.
The proportion of wind power generation of all renewable energy production was 33.5%,
wind power 7.0%, PV 1.2%, geothermal 4.9% and biomass 53.3%. The proportion ofrenewable energy (excluding wind power generation) was high in the state of Maine in 2007at 26%, followed by the state of California at 12%. The proportion was relatively high in thestates of Vermont at 8%, Minnesota 7.2%, and Hawaii 6.5%. Wind and biomass havetraditionally been active in Maine. Nonetheless, when the scale is taken into account,
California is absolutely outstanding in the use of renewable energy.
== Figure III-14 ==According to the National Renewable Energy Laboratory (NREL) of the U.S. Departmentof Energy, the United States has 27% of the world’s new wind power plants constructed in
2007, leading the rest of the world. China was ranked in second place, followed by Spain,
India, Germany and France. According to Renewable Energy Network 21, Germany, Spainand Japan were the top three countries as of the end of 2008 in terms of the cumulative
installed PV capacity. As for new installation in 2008, Spain was ranked in first place, and theUnited States stood at third, following Germany. Japan surrendered the top spot to Germany
in 2004, and ranked fourth in 2008.
According to the U.S. Energy Information Administration (EIA), the United States has theworld’s largest volume of geothermal generation in 2008, accounting for 30% of the world’s
share. The second largest is the Philippines, third India and Japan was fourth. All are volcanic
countries. Geothermal generation plants in the United States are located in the western states,
such as California and Nevada, as well as Hawaii and Alaska. Thirty-three geothermal power
plants in California produce 86% of its geothermal power domestically. In the Philippines,
geothermal power generation accounts for 20% of total domestic power production. U.S.
geothermal resources are estimated at 750,000 years of total primary energy supply for theentire nation, which demonstrates its abundant energy potential. It is a clean energy source,
being independent of climate change with low CO² emissions. Retail price of electricity fromgeothermal power is $0.05/kilowatt, considerably cheaper than that of PV power at $0.25 andalmost the same level as wind power at $0.04. The cost of geothermal power generation has
166declined by 25% in the last 20 years due to technology innovation and an increase in demand
for geothermal power.
The estimates of EBJ indicate that the most promising sector in the U.S. environmental
market is renewable energy with an estimated growth of 66% between 2008 and 2012. This isfollowed by production technology for pollution prevention with 30% growth and waste
treatment services with 23%. These sectors would lead to business opportunities of Japanesecompanies. On the other hand, air pollution control devices will decline by 9% and toxic
material treatment services by 2%, and the growth speed is rather slow.
== Figure III-15 ==Therefore, VC funds should mainly be injected in the promising renewable energy sector.
In 2008, 73.3% of renewable energy funds were injected into the PV sector, followed by
21.8% into biofuels. On the other hand, the percentage of wind power declined drastically to
2.2% and geothermal and hydropower were less than 1%.
Environmental market in Canada with growing wind power and biomass
The environmental market value in Canada, according to BERR, was £54.2 billion (¥11
trillion) in FY2007/08, accounting for 1.8% of the world’s share, which was ranked 13th after
Mexico, followed by South Korea at 14th place.
“Environment Account and Statistics Division 2004” of the Canada’s statistics department
states that Canada’s environmental market value was $18.4 billion (¥2 trillion) in 2004 andaccounted for 2.5% of the world’s market. There are about 8500 environment-relatedcompanies, of which 96% are composed of small- and medium enterprises with less than 100
employees. Much of the environmental market in Canada is composed of Ontario (share43%), Quebec (19%), Alberta (15%) and British Columbia (BC, 13%), and these four
provinces account for 90% of the entire market.
The following four sectors have large market sizes and competitive strengths:(1) Water management (ultraviolet irradiation, membrane systems for water treatment,
seawater desalination, etc.)(2) Clean technology (fuel cells, small-scale hydropower generation, wind power,
biomass and photovoltaic power generation)(3) Geo-information system (measurement, monitoring, analysis device, marine
acoustics)(4) Environment management (software, system)
Besides these sectors, Canada exports mainly to the United States in sectors such as waste
treatment, air pollution prevention and R&D/consultancy/education services.
As in the case of the United States, investment by VC in environmental business has been
active in Canada. The investment had been stable at around CAD 100 million until 2005; it
rapidly increased in 2006 and onwards and maintained its high level in 2007 and 2008 at
nearly CAD 200 million. In particular, an investment in the new energy sector (renewableenergy) is characteristically rapidly increasing. Biomass fuels are drawing much attention in
Canada.
Canada holds the world’s second-largest oil reserves (including oil sands), after Saudi
Arabia, and has the fourth largest uranium reserves and is the largest producer. Canada had
long supplied cheap electricity mainly from hydropower, but this might have, in return,
hindered the development of renewable energy. Canada produces the second largest amountof hydroelectricity (2007), after China, but P power generation is at an initial stage comparedto Germany, Japan or China. It is undeniable that geothermal, tidal and wave power
generations also lack thrust.
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Under such circumstances, wind power generation and biomass are rapidly gaining
momentum. The wind power generation has grown quickly, mainly in Quebec and Ontario,
and the market is expected to grow by 15 times from 2003 to 2010. Biomass is also
developing steadily, supported by abundant raw materials and scrap wood.
China: the second largest environmental market
According to the BERR’s report, China’s environmental market value in FY2007/08 was£411.2 billion (¥82 trillion), accounting for 13.5% of the world’s share, which places Chinaas the second largest after the United States, while Japan’s environmental market value was£191.3 billion (¥38 trillion) with a share of 6.3%, third after China. There is a huge gap
between Japan and China, with the size of Japan’s environmental market being less than halfof China’s.
The estimates by the National Development and Reform Commission (NDRC) of China
indicate that the gross product of China’s environmental industry will reach 880 billion yuan(¥12 trillion, ¥14 = 1 yuan). The details show that production from use of resources is 660
billion yuan, accounting for 75%. The production volume of environmental facilities is 120
billion yuan (13.6%) and the production volume of environmental services 100 billion yuan
(11.4%). Priority investment areas include water utilization/management, air pollution control,
solid waste treatment, ecological environment, nuclear waste treatment and establishment ofenvironmental capacity.
Can a Green New Deal boost the South Korean economy?
The environmental market in South Korea, according to BERR, reached £49.8 billion(¥9.9 trillion) in 2007/08 with 1.6% of the world’s share. The government of South Korea
calculated the South Korean environmental market in 2007 to be 34.1117 trillion won (about¥4 trillion).
By sector, the proportion of pollution management-related production was 16.8%, resource
management-related production 20.2%, pollution management-related construction industry
15.6%, resource management-related distribution 25.7% and pollution management-related
services 21.8%. The environmental market delivered a 16.9% year-to-year increase in 2007,
driven by pollution management-related production (an increase of 28.8%) and pollution
management-related construction (an increase of 37.0%).
Looking into which sectors have high growth rates on a lower sub-major classificationbasis, the growth was notable in the production of a wastewater management device (anincrease of 55.5%), production of improvement and purification devices for soil, surface
water and ground water (an increase of 146.5%), construction of air pollution control-related
facilities (an increase of 57.9%), air pollution control services (an increase of 103.7%) andsoil, surface water, underground water improvement and purification (an increase of 89.3%).
These sectors are so-called traditional environmental activities.
== Table III-4 ==The government of South Korea formulated an “Act Concerning the Development,
Utilization and Promotion of New Energy and Renewable Energy” in 2004, and designatedthe year 2004 as the first year of expanding the renewable energy industries. Prompted by thisact, the budget allocation to these sectors has increased. For instance, while the R&D
investment in the renewable energy sector in 2004 was 90.5 billion won, it increased to 192.7
billion won in 2006. In FY2009, in addition to R&D investment in technology/humanresources development, the budget was increased for the program to build one million green
homes, for subsidy/loan for renewable energy and for Feed-in Tariff.
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The One Million Green Homes project aims to build one million renewable energy-based
homes by 2020 and provide part of the cost (50–60%) for free when installing PV, solar
thermal, geothermal, or wind power generation facilities. A Feed-in Tariff is an incentive
structure to encourage the adoption of renewable energy through a program in which thegovernment subsidizes the difference in prices when the renewable energy price, such as theunit price of electricity from photovoltaic systems, exceeds the conventional electricity price.
The government of South Korea positions the Green New Deal as its center of economic
stimulus package to address the financial crisis, and the overall environmental market is
expected to grow in the future. Thus, business opportunities for Japanese companies are
believed to be expanding from the traditional environmental sector to renewable energy andlow carbon sectors.


The EU’s rapidly growing renewable energy-related markets
In a report by the European Environmental Bureau released in September 2006 titled“Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU,”the size of the environmental market of the European Union 25 was €226.7 billion (¥30.6045
trillion), of which €144.9 billion was for pollution management activities (64% of the total)and €81.8 million for resource management activities (36% of the total). Major areas ofpollution management activities are solid waste management/recycling, wastewater treatment,
and air pollution control. Resource management is composed of water supply, recycledmaterials, renewable energy, eco-building technologies, etc.
The definition of the environmental market by the European Commission includes
renewable energy and low carbon sectors, but its coverage seems narrower than that of the
U.K.’s BERR. The weight of the traditional environmental sector, such as waste materials,
wastewater, and water supply, is large, and these three areas account for 66% of the total. The
EU’s environmental market in 2004 was reported to have increased by 17% compared with
1999.
The data from 2006 is assumed to be the latest estimate of the environmental market by
the European Commission and is listed in the report, the “Links between the environment,
economy and jobs” released in November 2007. According to the report, the size ofenvironmental market of EU27 in 2006 was €270 billion (¥36.45 trillion), employing 2.3
million people. When indirect elements were added, it was €750 billion (¥101.25 trillion),
employing 4.6 million people
The EU has set out to increase the ratio of renewable energy in total energy consumption
to 20% by 2020 from 8.5% of 2005. Renewable energy-related markets are expected to growimmensely, backed up by policies of the EU and its member countries. EU member countries
have adopted a program in which electricity utilities buy electricity generated by renewableenergy, such as wind or solar power, at a fixed price.
According to a report of the European Commission “PROGRESS,” the electricity volume
generated from renewable energy sources in EU27 in 2006 accounted for 13.7% of the total
volume of electricity consumption. It is projected that the volume of electricity generated byrenewable energy will double in 2015 and will grow by 2.4 times in 2020. Then, theproportion of renewable energy is expected to jump to 28% in 2015 and 34% in 2020.
In 2020, hydropower, solid biomass, wind power, biogas, and bio-waste will account for
95% of renewable energy power generation, which means hydro and wind power will makeup the majority. Wind will account for 36.4% and hydro 32.4% (though remaining
unchanged). Solid biomass will be 16.8% and solar light/solar thermal will be merely 2.9%.
Tidal/wave power is just 1.2% and geo-thermal 0.7%. Nonetheless, as for the growth area of
power generation by renewable energy, the average growth rate in the period between 2005
and 2020 for solar thermal is estimated to be 32.0%, offshore wind power 29.9%, tidal/wave
169

power 28.4%, solar light 23.0%, biogas 12.0% and solid biomass 10.8%.
Data on Europe’s wind power generation indicate that cumulative wind power installedcapacity at the end of 2008 increased by 14.8% over the previous year-end, accounting for
54% of the world. Germany stood at second place after the United States and is followed by
Spain, China, India and Italy (seven European countries in the top 10). While the UnitedStates and China show rapid growth, Europe is also growing steadily. The overwhelming
majority of wind power had been produced by land-based wind farms, but offshore is
expected to grow in the future because offshore farms are less affected by geographicalfeatures and have less visual impact. In particular, the North Sea coast and the Atlantic coastin the U.K., Norway, Germany and Netherlands are suitable for offshore wind power
generation due to powerful winds in those areas.
== Table III-6 ==== Table III-7 ==Photovoltaic (PV) production remains small, but its market is rapidly growing in Europe.
Cumulative photovoltaic installed capacity of EU27 countries at the end of 2008 increased by
93.0% over the previous year-end. Germany has the largest share of cumulative capacity at
56.1%, followed by Spain 35.7%, Italy 3.3% and France 1.0%. Spain’s share exceeded
Germany’s in 2008 alone due to a surge in demand, following a reduction in fixed price.
Italy’s share also grew by 2.6 times from the previous year.
== Table III-8 ==Production of PV cells (PV device) is also rapidly expanding. Production of Germany’s
Q-Cells was in the first position in the 2008 world ranking for the second year in a row withan increase of 48% over the previous year. The second position went to the United States’First Solar, moving up from fifth place in the previous year with a 2.4 times increase. Suntec
of China secured third place. Both Sharp and Kyocera slipped to fourth place and sixth placefrom second and fourth in the previous year, respectively.
The market of renewable energy devices and services expands according to the size ofelectricity volume in the renewable energy sector in Europe. In the case of wind power, theprospect of the market for wind power turbines is bright and the market for related equipment
and parts will similarly expand. Also promising are hydropower turbines and dams andrelated facilities, biomass boilers and related devices, and the service market, such as
education/technical consultancy.
As for the biofuel market in EU 27 countries, biofuels for transportation increased by 37%
over the previous year. The share of biodiesel was 75%, bioethanol 15%, and other fuels(vegetable oil, etc.) 10%. The market of hybrid vehicles is smaller than that of the UnitedStates or Japan. In Western Europe, an estimated 70,000 hybrid vehicles have been sold
(JETRO estimate), accounting for merely 0.5% of 13.55 million registered vehicles. This
figure is much smaller than the 32,000 vehicles (2008) sold in the United States and 110,271
vehicles (FY2008) in Japan. However, the market is expected to grow in the future and theshare of hybrid car sales should reach 5% (about 700,000 vehicles) of all vehicles sold in
Europe by 2012.


Environmental market in Germany, achieving the double digit growth rate/year
Germany’s Federal Ministry of the Environment, Nature Conservation and Nuclear Safety(BMU) developed the Environmental Industry Report, 2009 and independently calculated thesize of the environmental market. The report estimated the size of Germany’s environmental
170

market to be €69.5 billion (¥9.5 trillion). This is an increase by 25% from 2005 and about a
50% increase from the 2002 level.
Germany’s environment market has expanded by more than 10% in 2006 and 2007 each.
This is believed to be attributable to an increased awareness of the global warming and aboom in the renewable energy industry. Air pollution control devices, such as filters andcatalysts, occupy a large portion in the German eco-business sector, which accounted for 29%
in 2007. The share of measuring technology (26%) is also large.
This report attempted to collect data on the supply chain, although it is difficult to collectsuch data because the environmental industry encompasses a wide range of sectors comparedto other traditional industries.
The size of Germany’s eco-business estimated by BMU indicates that the proportion of
traditional environmental activities, such as waste treatment, wastewater management, air
pollution control and measuring technology, was large in 2007, accounting for 80%. In
addition to this sector, the market includes an energy/environmental sector that comprises
efficient energy use products, efficient energy conversion products and renewable energy
source use products, and this sector accounts for 20%.
== Table III-9 ==Thus, according to the BMU’s estimates, the characteristic of the German market is thatthe combined share of the low carbon sector and renewable energy sector is only one quarterof the traditional environmental sector. The share of the renewable energy products was as
low as 7%. This exhibits a significant contrast to the estimate by BERR for the global shareof the renewable energy sector, which was 31%.
BERR of the United Kingdom estimates that Germany’s market value of theenvironmental sector was ¥25 trillion in FY2007/08, accounting for 4.2% of the world.
BERR adopts a broad definition for Germany’s environmental industry, which includes
alternative fuels, and covers a wide range of supply chains, such as parts and materials;
consequently the estimated size was 2.7 times the BMU’s estimate.
The report of BMU classified the German environmental market into six sectors andanalyzed the share of the German market in the world market. In the energy efficiency sector,
such as heat insulation materials and solar cooling systems, Germany accounted for 10% of
the world market in 2005. In particular, the share of the insulation market was 10%, energy
saving home appliances 15%, and measuring instruments 11%. Next, the German share ofsustainable water management, comprising water supply and wastewater treatment, wasabout 5% in 2005. This sector is characterized by a high proportion of wastewater treatment(12%) and water management (40%).
The share of German corporations in the sustainable mobility sector, such as biodiesel andrelated devices, hybrid vehicles and advanced transportation system, was about 20% in 2005.
The share of Germany in the renewable energy sector, electricity generation and storage, wasapproximately 30%, making it one of the top countries in the world. The share of biogas
generation was high, with 65%, followed by PV power generation 41%, hydropower 33%,
wind power 24% and solar thermal 17%.
The share of German companies in the market of waste management and recycling devices
was 24% in 2005. German companies hold two-thirds of the share for automatic waste
separation and management devices. Household waste recycling, use of renewable resources,
nano-technology and weight-reducing technologies are the areas in which German companies
are strongest in the sector of material efficiency.


U.K. market driven by wind power and photovoltaic power (PV) generation
171

The aforementioned report by BERR analyzes the details of the environmental industry in
the United Kingdom. The U.K’s environmental market was £107 billion in FY2007/08,
accounting for 3.5% of the global market share. The U.K. has the sixth largest eco-market,
after Germany.
Specifically, the traditional environmental sector accounts for 21%, renewable energy for
29% and low carbon sector for 50%. This is approximately the same composition as theglobal environmental market. In the traditional environmental sector, the proportions of water
purification/wastewater treatment (7% of the total), recovery & recycling (6%) and waste
management (5%) were high. In the renewable energy sector, the proportions of wind power
generation (11%), geothermal power generation (9%), biomass power generation (5%) andsolar photovoltaic power generation (4%) were high, but hydropower generation was merely
0.5%. In the low carbon sector, the shares of alternative fuels (17%), such as biofuels andnuclear, eco-building technologies (12%), alternative fuels for vehicles (12%) and carbon
finance (5%) were high.
== Table III-10 ==Industries such as water purification/wastewater treatment, geothermal generation,
alternative fuels for vehicles and building technologies have a large supply chain contribution
with more than 60% additional market value uplift due to the supply chain.
The sectors are ranked in order of percentage increase in the forecast growth rates between
2007/08 and 2014/15 to identify the sectors with high growth potential. Wind energy shows
the highest forecast growth rate (up 79% in seven years). PV energy is in second place (up66%), noise & vibration control third place (up 65%), carbon finance fourth (up 62%), wave
& tidal fifth place (up 57%), geothermal sixth place (up 52%), biomass seventh place (up50%), alternative fuels eighth place (up 46%), eco-building technologies ninth place (up45%) and alternative fuels for vehicles tenth place (up 39%). These sectors (except noise &vibration control in the third place and wave & tidal in the fifth place) are all ranked high in
the U.K.’s size of environmental market. Therefore, it is fair to say that in the U.K., the larger
the size of the environmental market, the faster its growth.
== Figure III-16 ==Spanish environmental market nearly tripled in seven years
According to BERR, the market value of Spain’s environmental industry was £83.3 billion(¥16.6 trillion) in 2007/08, and its share was ranked eighth (2.7%) in the world market. Spainis positioned between France (seventh) and Italy (ninth). Meanwhile, the market value ofFrance was £92.9 billion (¥18 trillion) and that of Italy was £82 billion (¥16 trillion), with theshare of 3% and 2.7%, respectively.
Data from Spain’s Ministry of Environment show that the market value of Spain’s
environmental business in 2007 was €19.1 billion (¥3 trillion) and it rapidly grew almost
three-fold during the period between 2000 and 2007. The ratio to GDP reached 1.8% in 2007
from 1.1% of 2000. This growth was driven by the EU’s subsidy program (€14 billion) andSpain’s environmental measures, focusing on renewable energy.
Data from Spain’s Ministry of Environment also show that 86% of Spain’s environmental
market is occupied by environmental pollution control and a rapidly growing renewableenergy sector holds only 12% of the share. As for the fast growing industries, demand forwater purification devices is increasing due to increased construction projects for desalination
plants (quadrupled in seven years). Also, the growth of the recycling sector and renewableenergy sector (quadrupled) is notable, led by wind and PV power generation.
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== Table III-11 ==(4) World’s environmental measures and business opportunities for Japanese companies
 Expansion of U.S. green market and business opportunities for Japanese companies
The financial crisis has drastically transformed the world’s economic landscape, withindividual countries taking various stimulus measures to overcome it. The main pillar of sucheconomic measures is to expand government spending in the environment and energy sectors
in order to boost the economy and create employment.
In the United States, a considerable amount of the budget has been allocated to theenvironment and energy sectors in the form of government spending and tax breaks under theAmerican Recovery and Reinvestment Act of 2009. The Green New Deal is designed to
combine economic growth and job creation, and at the same time, possibly activate
environmental industries and become a new source of the United States’ competitiveness. For
Japan, it means the emergence of a new environmental market that provides business
opportunities to expand the sales in this sector.
The understanding of how much money is allocated to the environment/energy sector
among the government spending of $500 billion under the American Recovery andReinvestment Act of 2009 varies depending on what the definition of the environment/energy
sector covers. Any items directly related to environment and energy can be counted as theyare. However, a decision of which investment/loan items for the development of
infrastructure, such as electric cables, and improvements in transmission technologies to be
counted as expenditures for environment depends on how far the definition is extended.
Moreover, the amount of the environment/energy budget as a whole varies depending on thedecision of whether public transportation items, such as expenditure concerning an urban
high-speed rail project or support for public transportation corporations, should be added toenvironment-related spending on the basis that such projects could lead to a reduction inenvironmental load.
If the expenditure for renewable energy includes the infrastructure development of electric
cables and technology development, the total amount reaches $25.2 billion. Specifically, thebudget contains $11 billion for an electric Smart Grid (infrastructure to promote purchase of
surplus household electricity), $6 billion for improvement of renewable energy/transmission
line technologies, $4.5 billion for modernization of electric cables, $3.3 billion for electricity
distribution systems for the Western Area Power Administration, and $0.4 billion fordevelopment of geothermal technology. Furthermore, as a tax break for corporations, abudget for tax reduction for renewable energy facilities reaches $13 billion by 2014.
Next, $14.3 billion were prepared to improve energy efficiency in federal and state
government facilities and low-income housing, of which $4.5 billion was for energy
efficiency in federal and state government facilities, $4.5 billion for improving energy
efficiency of the General Services Administration, $5 billion for anti-weather protection
systems for low-income housing, and $0.3 billion for improving energy efficiency of
low-income housing. As a tax break for individual eco-housing, the government adopted
measures to refund 30% (up to $1,500) of the cost of installing energy-efficient windows,
doors and ventilators to households in 2009 and 2010, which would come to $4.3 billion.
Electric and hybrid vehicles are becoming increasingly popular and the government
provides $3.3 billion for procurement of vehicles and development of a fuel cell system forvehicles. The government will spend $0.3 billion for procurement of electric vehicles forofficial cars, $0.3 billion for procurement of plug-in hybrid electric vehicles for official cars,$0.3 billion for procurement of energy-efficient vehicles by state governments, $0.4 billion
for development electric vehicle technology, and $2 billion for development of advanced fuel173

cell vehicle systems /parts.
The total government spending for three major sectors is $42.8 billion. The sum of tax
reductions or refunds in these three sectors is $17.3 billion. When green-related spending
other than these sectors, which have been covered by the American Recovery andReinvestment Act of 2009, are included, the overall environment- and energy-related
spending is believed to be close to 10% of the total budget. Looking into the overall
environment-related tax break, there are no items applicable to other sectors except for thesethree sectors, so the total amount remains the same.
Business opportunities for Japanese companies in U.S. environmental markets can befound in the Green New Deal initiative. The first item that attracts our attention is the size of
spending for infrastructure development and related equipment of electric cables. Eleven
million dollars have been allocated to electric cables and Smart Grid-related equipment,
which will provide Japanese companies with business opportunities to enter markets related
to electrics cable and electric power controls.
The renewable energy market in the United States is expected to rapidly grow in the nextten years. Photovoltaic power generation encompasses a wide range of areas from fuel cell
devices and related parts/materials to production machinery/parts or related technologies andservices. Thus, opportunities are open not only to large corporations but also to small- andmedium-enterprises. Business opportunities in wind power or the geothermal power
generation industry are also available for Japanese companies that have strengths in turbines,
power generation devices and related parts.
Japanese automakers have strengths in dealing with plug-in hybrid vehicle and electricvehicle markets. They are expected to expand the environment-friendly vehicle markets, forexample, of hybrid vehicles in such as way as to contribute to federal and state policies.
Needless to say, dissemination of hybrid or electric vehicles requires the improvement in fuelcell technologies and the development of infrastructure for electricity supply. Not only large
corporations but also small- and medium enterprises play a crucial role in such peripheralindustries, which are the areas in which Japanese companies are able to exert theircompetitiveness.
Furthermore, the American Recovery and Reinvestment Act of 2009 includes spending forgovernment-affiliated eco-housing. This sector also forms a large market and Japanesecompanies are capable of providing intricate services. Although it is not easy for Japanesecompanies to earn a large share in the government procurement market, sales strategies arenecessary to incorporate the growth of the market, taking advantage of the budgetary
allocation to official plug-in hybrid vehicles and government-affiliated eco-housing.
Business opportunities found in Smart Grid, CCS, bioplastics in Canada
One of the characteristics of the environmental market in Canada is that provincial
governments, such as those in Ontario or British Columbia, take more active measures than
the federal government. The province of Ontario has a 43% share of Canada’s environmental
industries and is actively involved in reducing greenhouse gas emissions. Ontario set a target
to reduce greenhouse gas levels to 6% below 1990 levels by 2014, by 15% below those levels
2020 and 80% below 1990 levels by 2050. This is by far higher than that of the reduction
target of the federal government.
To that end, Ontario has announced that it will put an end to coal-fired power plants,
which supply 19% of the electricity in the province, by 2014 and promote renewable energy,
such as wind and PV power generation. In May 2009, the provincial government passed andenacted the Green Energy Act, which includes a Feed-in Tariff (FIT) system adopting theworld’s most effective rates (a long-term contract: 20 years). Due to the shift to an innovative
policy in renewable energy, they ought to develop and expand infrastructure for electric174cables and supply facilities as soon as possible. It is therefore urgent to extend the electric
network connections using information technology (IT), as well as Smart Grid technology,
which controls the electric transmission systems, for effective energy supply. Thus, thebusiness opportunities in this sector are steadily expanding.
== Figure III-17 ==The province of Alberta is home to vast reserves of oil sands and the production is
expanding; however, a considerable volume of greenhouse gas is emitted as a byproduct.
What is now drawing attention to solve this issue is the Carbon Capture and Storage (CCS)
technology. Alberta’s government announced that it would invest CAD 3 billion in CCS
technology and has a plan to achieve 70% of the targeted greenhouse emission reduction by
2050 through CCS. A large volume of wastewater containing heavy metals is generated in theprocess of bitumen extraction (can be upgraded to a synthetic crude oil). Eighty-five percent
is reused during the process of wastewater treatment, but the rest is stored at exclusive ponds,
since it cannot be dumped into the rivers. It has been reported that these storage ponds caused
the deaths of wild birds, and the government made wastewater treatment mandatory.
Bioethanol, known as an alternative fuel for vehicles, is normally produced from corn andwheat. However, Canada has developed a syngas production technology to produce
bioethanol using urban wastes. Currently, the world’s first commercial plant is being built in
Edmonton, Alberta.
In Ontario, to replace oil-derived plastics, a technology is being developed to produce
vegetable oil- or cornstarch-derived bioplastics, which are to be decomposed into water andCO² by microorganisms. Bioplastics are carbon neutral since they are derived from plants.
There are a number of car manufacturers established in Ontario, with more than 900
auto-parts companies that are the end users of bioplastics. One vehicle contains 150kg ofplastics. If 2 million vehicles are produced in the province, it would generate 300,000 tons ofpotential demand for bioplastics.
Thus, in Canada’s environmental market, business opportunities can be found in the
sectors of wind or PV power generation and Smart Grid, as well as CCS, wastewater
treatment devices, biofuels, bioplastics and bio oils. It is also possible to pursue global
markets of biofuels and bio oils, in partnership with Canadian corporations.


Expanding demand in Mexico, in addition to a production center for power
generator for exports to the United States
Environmental awareness of the general public in Mexico is not as high as that ofdeveloped countries. Nonetheless, the government is rather actively involved in reducing
greenhouse gas emissions. The greenhouse gas emissions reduction plan, which is currently
being prepared, is to set a target of reducing the emissions by 2% by 2020 on year 2000 baselevels, 11.2% by 2030 and 50% by 2050.
Since no incentives were provided for renewable energy generation, Mexico’s Federal
Electricity Commission (CFE) purchased the electricity produced by photovoltaic systems at
the same price as the electricity generated by natural gas. But the rules of operations of the
Act on Alternative Energy Promotion and Financial Support for Conversions to New Energy
will enter into effect before the end of 2009, offering incentives for renewable energy.
Also the Act on Sustainable Use of Energy was also enacted to promote energy
conservation and a program has started in February 2009 to subsidize low-income households
to replace energy-consuming refrigerators and air-conditioners with energy-saving ones. In
local governments and private corporations, incandescent lamps are being replaced withfluorescent lamps. At the same time, led by large corporations, energy conservation efforts
175

are being made even in small factories; for example, lights have been changed, inverters havebeen introduced and transmitters have been renewed, and an increasing number of companies
are considering energy conservation measures, such as reuse of exhaust heat.
Japanese companies in Mexico had previously focused on the production center ofrenewable energy generation devices destined to the U.S. market. The current function as anexport center for the United States is expected to further increase its importance under U.S.
President Obama’s policy, highlighting renewable energy. There is also a possibility thatexports to other Central and South American countries will expand. On the other hand, it isincreasingly necessary to pay more attention to the growing Mexican market for PV and wind
power devices and parts.
With respect to energy conservation, Japanese companies had supplied Mexican
companies with energy conservation machinery for factories, exhaust heat reuse and vapor
trapping devices (to save vapor). Demand for vapor saving/production devices has increased
not only from the petroleum industry, but also from the food industry and chemical industry
for sterilization and cleaning purposes. It seems necessary for Japanese companies to supply
these devices to various types of industries, and to seek marketability in other energy
conservation
sectors,
includingenergy-saving
homeappliances(inverter
air-conditioner/refrigerator) and Light Emitting Diode (LED).


China: Business opportunities for environmental protection/development together
with photovoltaic/wind power generation
China is said to have invested 1.4 trillion yuan in the environmental sector since 2006,
under its 11th Five-Year Plan, and this amount accounts for about 1.4% of the GDP of thesame period. Specifically, about 650 billion yuan are invested in infrastructure developmentin urban areas (46% share), about 250 billion yuan in measures against factory pollution(18%), about 400 billion yuan (29%) in construction of environmental-friendly facilities, 60
billion yuan (4%) in conservation of ecology and 40 billion yuan (3%) in construction of
production capacity.
In the traditional environmental sector, much demand is still expected to grow in China forenvironmental conservation and development, unlike developed countries. In the case ofdeveloped countries, demand in the traditional environmental sector shows signs of levelingoff and business interests are shifting to renewable energy and low carbon sectors withpotential growth capacity. Similarly, China is also paying attention to renewable energy andlow carbon technologies, such as hybrid and electric vehicles, as part of an economic
stimulus to address the financial crisis.
Incidentally, China needs to make further investment in traditional environmental sectors,
such as air pollution control and waste treatment, due to rapid industrialization andurbanization. In China, it is necessary to promote water management business due
particularly to a paucity of water resource per capita and a delay in development of treatment
capacity of wastewater/polluted water in urban areas and industrial facilities.
Moreover, one of the characteristics of China is an advancement of coal-based air
pollution. Therefore, electric industry must invest in desulfurization and dust removal. For
example, demand for technology to capture and store CO² that is generated from coal-fired
power plants is assumed to be large. It is clear that China lacks wastewater treatment capacity
for the future, with a 7% annual rate of increase in industrial solid waste and 4% annual rateof increase in urban living waste.
The projection of the environmental conservation machinery industry in China predicts
that gross products of the industry as a whole will reach 100 billion to 120 billion yuan by
2010, with an average annual growth rate of 13–17% in five years until 2010. Thus, business
opportunities for Japanese companies seem promising in such areas as air pollution facilities,
176

Carbon Capture and Storage (CCS), water/wastewater treatment devices, environmental
monitoring devices and noise/vibration control devices.
Looking into the amount of investment in renewable energy in 2007, investment insmall-scale hydropower generation and wind power generation was highest, followed byinvestment in PV power generation and biomass. Renewable energy is a clean energy andwill simultaneously solve the problems that China is facing: energy shortage andenvironmental issue.
Thus, the Chinese government has taken on a full-fledged promotion of the renewableenergy sector in view of economic stimulus and employment creation. China’s PV power
installed capacity is lower than major countries in the world and an expansion of electric
consumption of PV poses a challenge for the future. Nonetheless, the production of PV cells
made remarkable progress, and currently, China is the world’s largest producer. Chinesecompanies are now among the world’s major PV cell manufacturers, and many are listed instock exchanges in New York and London. In the past, these companies have broadened theirhorizon in the overseas markets, but are now shifting gears to the domestic market, affectedby the financial crisis.
At the third International Photovoltaic Power Generation Conference & Exhibition held in
Shanghai in May 2009, it was revealed that the government of China was trying to raise the2020 target to at least five times higher than the original target, which is to achieve thegeneration capacity of 1.8 million kilowatt/year. China’s PV cell industry has rapidly grownthrough market expansion in Europe, but its sales have plunged due to a decline in export
price. In 2004, the percentage of sales to Germany of a major PV cell manufacture was 72%
in 2004, to other European countries it was 17% and to other regions 3%, and that ofdomestic sales was merely 8%. By the aforementioned revision of the target, the Chinese
government intends to expand domestic demand and further promote PV cell industry. If
China achieves this target smoothly, its share will increase in the PV power generation
installation market.
It is likely that China also has a plan to assist electric companies and manufacturers ofrelated equipment in order to increase the wind power generation capacity eight-fold by 2020.
The total investment value is projected to amount to ¥10 trillion. Since China has anadvanced wind power generation technology and its cost is lower than that of PV power
generation, wind power generation has a high potential for future development. An increasing
number of wind power generation facilities are domestically produced, with the latest shareachieving nearly 50%. If the 2020 target is achieved, China may well surpass the UnitedStates, the largest wind power generator in the world.
== Table III-12 ==Environmentally conscious markets in the EU and business opportunities
The environmental policy of the European Union reflects an aim to improve the quality oflife for EU citizens and a view that environmental measures lead to economic prosperity.
Herein lies the basic principle that innovation brought about by environmental policy andcreation of new markets strengthen the EU’s competitiveness. Various environmental
measures have been put forward in the EU and a number of action plans have been developedsince 2003 for hydrogen fuel cell technology, water supply/sewage treatment, PV power
generation technology, biofuel and wind power generation.
In terms of finance, there is a program called “eco-innovation” and nearly €200
million was made available to fund this program between 2008 and 2013. In 2008, 40
projects out of 134 applications were adopted, of which recycling projects accounted forabout 60%, followed by green business (17%) and eco-building technologies (13%).
177Seventy-four percent of participating companies are small and medium enterprises, and many
are from Spain (28 companies), Italy (27) and Germany (26). The total amount of R&D
subsidiary reaches about €50 billion during the period from 2007 and 2013.
The EU’s public green procurement, which prioritizes the purchase of environmentallyfriendly products and services, has made progress as well. The total annual amount of publicgreen procurement by the EU’s public organizations has reached €1.5 trillion, accounting for
16% of the GDP. In July 2008, the European Commission (EC) proposed to raise the rate of
public green procurement of the entire EU to 50% or higher by 2010.
The eco-label system (also adopted in Japan) is a voluntary system to affix a special
label to products and services that have been verified as environmentally friendly. The system
was introduced in the EU in 1992, and as of November 2008, 3,500 products and services ofabout 700 companies have obtained the label. The annual sales of these products and services
amount to €1.5 billion, which is expected to raise the incentives of environmentally conscious
consumers and upgrade the eco-market.
The EU intends to stimulate the potential of innovation and business throughutilization of regulations. At the same time, the EU expects the synergy effects on thedevelopment of the eco-market by combining environmental measures. Since theestablishment of the EU, various environmental measures have been taken. After the financial
crisis, each EU member state has also been implementing environmental measures as part ofan economic stimulus.
The member states have introduced subsidies for buying new cars in return for
consumers scrapping their old ones (€1000–2500). Furthermore, subsidies for energy
conservation in housing and other buildings and technology development of electric or fuelcell vehicles have also been adopted.
As in Japan, the EU mainly and intensively provides support for the renewable energy
sector and promising industries such as electric vehicles and fuel cells. The weight of PV
power generation is expected to grow in the future since its weight is still small in renewableenergy output. It is certain that if technological innovation is achieved, not only the electricalenergy sector but also related markets will drastically expand. Technological application canbe used for eco-housing, in addition to devices such as cells for PV generation. In addition tohouses and buildings, technology may also be applied to vehicles and electric appliances, andthus, related markets will be explored.
Let us now examine the case of the biomass market in the EU. A Belgium company
supplies wood pellets that can be used to heat homes. Like the kerosene delivery service inJapan, the wood pellets are delivered to homes via trucks. Pellets are delivered through a hosefrom a supply truck to a storage installed at the building, just as oil is refilled through the oiltank.
Although the price of pellets fluctuates depending on the price of oil, the prices ofpellets and oil are currently the same. The number of users is steadily increasing, motivatedby the government subsidy. It cannot be denied that the dissemination and expansion of
eco-business markets, such as use of pellets for heating, as well as PV power generation,require support and subsidy from the government. This means the government’s role isclearly reflected in the market and therefore, the eco-market is the perfect sector for thegovernment to implement economic measures to respond to financial crisis and develop
industry in a mid- and long-term perspective.
== Table III-13 ==Germany’ global expansion and business opportunities for Japanese companies
One sector that has been drawing a great deal of attention in Germany in recent years is178renewable energy, represented by wind or PV power. The market expansion was triggered bya feed-in policy that required utilities to purchase energy from all renewable energy providers.
In 2000, Germany enforced the Act on Granting Priority to Renewable Energy Sources (EEB)(hereinafter referred to as the “Renewable Energy Sources Act”) which provides that thepurchase can be changed at a price based on a fixed percentage of the retail price to a fixedprice system. The act succeeded in reducing risks involved in investment and business. At thesame time, the purchase price of electricity generated by PV power was drastically raised,setting up detailed price ranges by energy sources. The Renewable Energy Sources Act wasrevised in 2004 and 2009. While the price of electricity generated by PV power was slightly
reduced, the price system was set to encourage renewal of old turbines and promoting theestablishment of offshore wind farms. This was to create a new market that would replace thestagnant land-based wind power generation.
The Renewable Energy Export Initiative is a policy implemented in 2003 by the Federal
Ministry of Economics and Technology and is designed to promote exports of technologies
and devices related to renewable energy. In particular, it aims to help the small and medium
enterprises enter foreign markets. Major projects include a program to promote overseas
business negotiations by the German Chamber of Commerce, a business matching program
between small and medium enterprises, provision of information by the Federal Bureau of
Foreign Trade Information, holding of symposiums, a program to invite overseas
corporations, support by the Ministry of Economics and Technology for participation in trade
fairs, and support for projects in developing countries by projects of the German Organization
for Technical Cooperation (GTZ) (renewable energy power generation in rural areas).
One company rose to become the world’s best in PV power generation, backed by the
support system of the government: the German company Q-cells. Since its establishment in
1999, it grew rapidly and became the largest manufacturer of solar cells, making it perhaps
the most successful German corporation in recent years. It overtook Sharp for the top spot in2007 and maintained its position in 2008 far ahead of the second position, First Solar of theUnited States. The production volume in 2008 reached 60 times that of 2002, when actual
production started.
Q-Cells’ sales in 2008 were €1.251 billion, up 46% over the previous year. The
characteristics of Q-Cells are low-cost strategy and active overseas business activities.
Initially the cost of the PV generation device was high but Q-Cells started with multi-crystal
silicon, whose material cost is low but has excellent mass productivity, and made efforts to
cut labor cost by setting up production sites in the former East Germany. With respect tooverseas activities, Q-Cells focused on markets in Europe such as Spain and Italy, which
adopted the feed-in policy, as did Germany. The company’s next target is Asia (China andIndia) and the American continents. It launched construction of a factory in Malaysia in 2008
as an overseas production center, aiming to start shipment to Asian markets by the end of
2009.
The key point of Q-Cells’ success is that the company was able to foresee the rapid
expansion of the PV generation market due to the introduction of fixed price (feed-in tariff)arrangements by Germany and EU countries, and the company began to supply a large
volume of low cost products. Regarding next-generation organic semiconductor devices,
Q-Cells adopts a strategy to acquire excellent companies and to introduce technologies fromother corporations.
Business opportunities for Japanese companies in the German market can also be found in
the fast growing renewable energy sector. The cumulative installed capacity of solar PV in2008 accounts of 56% of EU 27 countries and registered an increase of 39% over theprevious year. Business opportunities are large particularly in the next-generation market.
Opportunities are expanding not only in the cell maker market, but also in cell production
179devices and material markets. PV generation devices have elements that are similar tosemiconductor technologies and may provide market opportunities for semiconductor
producers.
Furthermore, Germany is shifting its promotion policy from land-based wind generation to
offshore wind generation and the revised Renewable Energy Sources Act raised the purchaseprice of electricity produced by offshore wind farms to 60% higher than that of land-based
counterparts. Although offshore wind power generation devices are expected to growdrastically, competition with German companies is severe. Still, there are business
opportunities for Japanese companies that excel in light and strong blade materials, windmill
poles, power electronics parts, etc.
Additional promising areas are thermal insulation materials, which compete with German
corporations, as well as energy-saving household electric appliances, measuring devices,biodiesel, and automatic waste material separation devices.


Promising offshore wind power generation in the U.K. market
Measures for eco-business in the United Kingdom are well developed. The British
government created a new Department of Energy and Climate Change in October 2008,
which integrated the climate change policies and energy policies, to take over the climatechange portfolio from the Department for the Environment, Food and Rural Affairs and theenergy brief from the Department for Business, Enterprise and Regulator Reform (BERR).
The government also enacted the Climate Change Act which puts into statute the U.K.’s
targets to reduce greenhouse gas emissions by at least 26% by 2020 and by 80% by 2050.
Also in the renewable energy sector, the U.K. government adopted a feed-in tariff system andcreated the Environmental Transformation Fund (ETF) with an aim to promote developmentof low carbon technology and energy conservation technology.
Business opportunities can be made obtainable by prospecting the future market outlookwith focus on the sectors and technologies provided for in the British laws and regulations.
The U.K. has lowered the barriers against foreign capital and the business opportunities ineco-markets are wide open to Japanese companies. The U.K. is rather active aboutincorporating foreign investment, technologies and know-how and has welcomed
participation by foreign capital. Although this tendency has somewhat abated due to thefinancial crisis, it can be addressed by promoting business in partnership with local
companies.
The British government, as part of an economic stimulus package after the financial crisis,
has reinforced its support for environmental business. In this respect, too, the entry ofJapanese companies into the British eco-market would lead to business opportunities. At the
local level, a Regional Development Agency (RDA) develops its unique environmental
policies.
One promising specific area is offshore wind power generation. Market expansion of therenewable energy sector is definite, of which offshore wind power is at the top of the list.
Wind power generation is ranked first in the forecast of the market expansion rate during theperiod between FY2007/08 and FY2014/15. Japanese companies have strengths in wind
generation turbines and related parts.
PV power generation and carbon finance also have growth potential. As in the case of theUnited States, the Smart Grid market with electricity transmission control function will
expand. When considering the strengths of Japan, energy-conservation technology(eco-appliances) and measuring devices seem also promising.
Spain’s wind/PV power generation are among the largest in the world
Like the progress of the EU’s environmental policies and dissemination/expansion of180international environmental standards, environmental spending is increasing every year. The
Spanish government’s spending on the environment in 2004 was 0.31% of the GDP andincreased by 0.13 percentage point compared with five years earlier. The private sector
spending was also increased by 0.09 point, at 0.15% of the GDP. As for the number of ISO
Environmental Management System (ISO14001) acquisitions by Spain, 13,852 cases wererecorded in 2007, an increase by 4.3 times the previous five years and ranked third after
Japan and China.
Spain formulated the 2005-2010 Renewable Energy Plan, which raised the targets to 12%
or higher of primary energy from primary energy sources by 2010 and to 29.4% of grosselectricity consumption generation by renewable energies. The target of biofuels consumption
was raised to 5.75% of total transportation fuels. In reality, the share of electricity generated
by renewal energy of gross electricity products reached 20% in 2007, two years later, up by
2.2%. In particular, the progress in wind power, PV power, hydropower and biogas sectors
was notable.
== Table III-14 ==The driving force to achieving the plan is a feed-in tariff policy for renewable power
energy. This system, adopted in 1998, requires utilities to buy electricity, and the guarantee
period was extended to 25 years in 2004. This drastically affected the wind power sector,
which grew by an annual average of 25.7% from 2002 to 2007, and the cumulative installedcapacity as of the end of 2008 brought the country to third place after the United States andGermany. In the field of PV power generation, the purchase price of electricity for alarge-scale plant was doubled due to the policy revision in 2007, and the world’s top plants
were built one after another.
In September 2008, the government announced the reduction of the purchase price, out offear of an overheating boom. This in return caused a rush-in demand, spurring the plant
construction. New installation of PV generation in Spain in 2008 was ranked first in theworld and the cumulative installed capacity was ranked second, after Germany.
For PV generation, the purchase price was reduced by 27% and the total volume control
for annual new construction was adopted. Since there are large plants in Spain, two-thirds of
new construction have been allocated to a integrated roof-and-building system to be installedin houses and offices. For Spain, with its abundant sunlight, the PV generation industry leads
to effective use of resources. For Japanese companies, expansion of the wind and PV power
sector would offer big business opportunities. Some major Japanese corporations havealready been involved in the development of wind/PV power plants.
Facing a chronic shortage of water, dissemination of water treatment devices is an urgent
issue in Spain. Spain’s government is resolved to double the supply capacity of desalination
plants by 2011, and plans to double the reuse of water, too. Due partly to such active
promotion measures by the government, technologies from Japanese companies have alreadybeen introduced, gradually entering the market.
The government introduced mandatory blending of biofuels to be mixed with gasoline fortransport, which established that 3.4% of gasoline should come from biofuels in 2009 and5.8% in 2010. Thus, there are more business opportunities in this sector. The government
decided it would support the development of the next-generation electric/hybrid vehicles.
This project is to disseminate 2000 electric vehicles in urban areas by 2010 and develop
electricity supply stand networks.


The Middle East is expanding water treatment, wind/PV/solar thermal power
generation
181

Public awareness of environmental issues and effective use of resources is rather weak indeveloping countries, including in the Middle East. This means that there are no strong
incentives to buy hybrid/electric vehicles and energy-saving appliances, such as inverter air
conditioners, compared with developed countries.
With regard to the reduction of greenhouse gas emissions, Turkey’s signing of the Kyoto
Protocol, which obliges signatory countries to reduce their greenhouse emissions by 5% by
2010, does not require any responsibilities to achieve this goal. Nonetheless, the governmentof Turkey is steadily developing environment-related laws. Turkey has already signed 41
international agreements and 30 protocols, including the Kyoto Protocol. The government haschosen environmental industry as one of the tools to improve the competitiveness of Turkish
industry to fulfill EU standards and aims to become a hub in Europe, the Middle East and theCommonwealth of Independent States (CIS).
The situation in the United Arab Emirates (UAE) is similar. Since the UAE does not haveenvironmental clusters within the country, it seeks to create a general sense of business
opportunities by investing in environmental markets and incorporating foreign
environment-related companies.
As part of such efforts, the Abu Dhabi government announced the Masdar Initiative in2006, which is a future energy initiative to build the world’s center for renewable energy andenergy conserving technologies in the UAE. Under this initiative, the UAE is building zeroCO² emission city “Masdar”, implementing CO² reduction projects, and investing inenvironment-related companies. A PV power plant was constructed and began operations in
May 2009. A pilot project for wind power generation has also been launched. Furthermore,
the UAE successfully won the bid to host the headquarters of the International Renewable
Energy Agency (IRENA), which was founded in January 2009 and in which 75 countries
participated.
These approaches of Middle Eastern countries to the environmental market are largely
ascribed to domestic issues, such as increasing population and advancing urbanization, in
addition to the motivation of developing environmental industries. In other words, it isincreasingly essential to take measures to rapidly increase energy or electricity demand, waste
treatment, such as household garbage, and the old and new issue of watersupply/management. Middle Eastern countries are oil-producing countries and are supposed
to be able to supply low cost electricity; however, they must expand the supply of electricity
generated by wind, PV or solar thermal power due to depletion of resources. Moreover, theMiddle East is endowed with intense and abundant sunshine, though water resources arelimited. In short, the Middle East has plenty of photovoltaic resources and solar thermal
resources.
Therefore, demand for waste treatment, wastewater treatment/reuse, water management,
recycling, photovoltaic and solar thermal power generation, all of which come with the urban
development programs, will lead to business opportunities in the UAE and Saudi Arabia.
Capture-and-storage technologies for CO² emitted from power plants, oil refineries, andfactories also have good commercial potential. The Middle East depends on other countries
for these technologies and the environmental business in this region is attractive for foreigncompanies. The UAE and Saudi Arabia have high expectations for Japanese technologies andproducts, so the presence is not low but competition with the United States and Europe isgetting fierce. Competition with South Korea and China is also intensifying. In one case, aChinese company managed to win a bid for PV panel installation due to its lower bid price.
Turkey is not blessed with rich oil resources, despite its Middle East location, andtherefore, it needs to foster/develop environment-related industries as much as possible.
Current promising sectors are recycling, soil/water purification devices, water treatment
devices, air pollution control devices, waste treatment, and renewable energy. Turkey’s
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exports recorded an annual average growth rate of 30% between 2002 and 2007, accounting
for $2.6 billion in 2007. The details indicate that the percentage of emission systems forvehicles (prevention of noise/vibration) was high at 52%. The shares of air pollution control
devices, waste treatment devices and energy conservation products were also high.
Turkey is a country rich in renewable energy resources. Photovoltaic (PV), wind, biofuels,hydro, and geothermal resources are available. PV, wind and biodiesels are attracting
particular attention. Biodiesels are exported to the Netherlands, Romania, Saudi Arabia, theUAE, Bulgaria and Iran. The government is considering revision of a fixed price feed-in tariff
system for renewable energy. However, the business sector is calling for further incentives
because renewable energy business takes more time to turn profitable. When these incentives
work more correctly, business opportunities in the renewable sector in Turkey will increase
even more.
Aiming for the development of environmental business and the service market in Asia,
JETRO is determined to help Japanese companies grasp business opportunities bystrengthening its activities, such as information provision, support for various
fairs/exhibitions, business matching events, while seeking cooperation with the Ministry of
Economy, Trade and Industry (METI) and the Japanese Business Alliance for Smart Energy
Worldwide (JASE-World). (See Column III-1 for JETRO’s support programs.)==================================================================
Column III-1 JETRO: Projects of Supporting Environment/Service Industries
JETRO implements a number of projects to help the global expansion of Japan’senvironmental industries and service industries. The projects consist of four pillars: “businessmatching,” “development assistance,” “study/research and information/communication,” and“trade/investment consulting.”
JETRO hosts business matching meetings between Japanese and overseas companies withexhibitions and trade shows (see the Figure below) to create business opportunities forenvironment-related products. In the service sector, export support programs for video
contents are in place. In the development assistance program, JETRO dispatches experts andpromotes the transfer of environmental protection/energy-conserving technologies andknow-how to developing countries. For “study/ research and information/communication,”
JETRO performs analyses on environmental business and service-related consumption, andcommunicates information and messages through publications, various mail magazines andseminars, using JETRO’s global and national networks. Please refer to the “Support &Service” section on JETRO’s website (URL:http://www.jetro.go.jp/support_services/) for
details and contact the responsible department.
Trade and investment consultation centers in Tokyo and Osaka, trade information centers
across Japan, and overseas offices serve as points of contact for inquiries concerning tradeand investment, including environmental/service sectors.
== Column Table III-1 ==== Column Figure III-1 ====================================================================

183

2. Beyond the Financial Crisis: Strategies of Japanese Companies on Service Markets in
Asian Emerging Economies
Japan’s service sector has been in chronic deficit in balance of payments and is therefore
said to be weak in competitiveness. Therefore, we have a critical task to improve theproductivity of the service sector. Global activities of Japan’s service industry are not only
lagging behind the manufacturing sector, but also the service sectors of other developed
countries. According to the data on FY2008 (December 2008 – March 2009) prepared by
JETRO based on the consolidated financial statements of listed companies, the overseas sales
ratio (sales outside Japan/net sales; excluding exports from Japan) for the non-manufacturingindustry was 18.7%, whereas that for the manufacturing industry was 39.7%. The
non-manufacturing industry makes up 50.9% of Japan’s direct investment abroad, muchsmaller in size compared with 74.8% of the United States (excluding holding companies). On
the other hand, service-related companies with strong competitiveness have sought business
opportunities particularly in Asian emerging economies and have been successful there. Thissection examines the prospect of business expansion of Japan’s service industry in emerging
economies, mainly in Asia.
(1) Global consumer market with growing share of service expenditure Expansion of the share of emerging countries in world consumption
The world’s consumption expenditures in 2008 were $35.4726 trillion (nominal), an
increase of 9.4% over the previous year, showing a steady annual growth supported by thestrong first half performance. The growth of emerging economies is particularly notable. The
Asia-Pacific region (excluding Japan) registered a year-on-year increase of 14.9%, Eastern
Europe 26.7%, and Central and South America 13.4%. BRICs recorded a growth of 23.9%
and JFIC16 15.5%2. The consumption trend in China is drawing much attention; it increased
by 25.2% in 2008 from 2007 and served as a driving force behind Asia’s consumption growth.
Vietnam also showed a strong growth with 27.5%. Developed countries had relatively low
growth rates, with 3.6% for the United States and 7.6% for Europe. Since the impacts of thefinancial crisis will appear in 2009, a decline in the world’s consumption expenditures isinevitable.
The world’s consumption expenditures increased by 55% during the five years from 2003
to 2008. The Asia-Pacific regions recoded an increase of 91%, while Europe increased by
56%. Although the United States remained low at 31%, Eastern Europe and Central andSouth America increase rapidly with 190% and 105%, respectively. The growth rates for
BRICs and JFIC16 were 152% and 95%, respectively.
The share of emerging economies in the world’s consumption expenditures is steadily
expanding from 22.9% in 2003 to 30.9% in 2008. The share of JFIC16 in 2003 was 6.1% butgrew to 8.0% in 2008, tying with Japan, and the share of Central and South America was
7.5%, rapidly catching up with Japan. There are many sectors in emerging economies withhigh expansion potential, such as the dissemination rate of consumer durables, and therefore,
it is certain that the importance of business in this region will be increased even more in thedays of global economic recession caused by the financial crisis.

2

JFIC 16: JETRO-FILE Increasing-Interest Countries. Based on access data by country of
the JETRO File FY2007, JETRO compiled a list of the following 16 newly emerging
countries for which interest of Japanese companies is increasing: Vietnam, Thailand, Turkey,
United Arab Emirates, Pakistan, Mexico, Republic of South Africa, Venezuela, Saudi Arabia,
Peru, Poland, Argentina, Romania, Hungary, Nigeria and Egypt. For details, see the 2008
JETRO White Paper on International Trade and Foreign Direct Investment.
184

== Table III-15 ==Consumer markets in emerging economies driven by the service sector
With respect to the ratio of consumption expenditures to GDP in developed countries, it
exceeds 70% for the United States, and in general, it is nearly 60%, like Japan and Germany.
The ratio is rather low in emerging economies although Central and South America reached60%. The ratio was less than 40% for China, 51% for the Asia-Pacific region and 47% for the
Middle East/Africa. This leads to a conclusion that the ratio of consumption to GDP inemerging economies is lower than developed countries. This is partly attributed to the factthat as the economy becomes more service- and soft-oriented, as in the case of developed
countries, the larger service expenditure becomes, resulting in an increase in the consumption
expenditures as a whole.
Consumption is roughly divided into expenditure on goods and expenditure on services.
The changes in expenditures on goods and expenditure on services of the world during theperiod from 2001 to 2008 (Figure III-18) show that the growth rate of the expenditure on
services exceeded that of the expenditure on goods in both developed countries, such as
Japan, the United States, and Germany, and emerging countries, such as BRICs and ASEAN
5.
== Figure III-18 ==This might be ascribed to the expansion in a service-oriented economy not only indeveloped countries but also in developing countries. Furthermore, it might also be
attributable to the decline in the price of goods due to the technology innovation and theadvancement of the optimal production system in the manufacturing sector. For instance,
while the price of goods in Japan in 2008 declined by 3.7% compared to that of 1994, theservice price increased by 6%. As is widely known, the decline in price of household
appliances in Japan is remarkable. The price of refrigerators went down by 82% during thisperiod and washing machines by 76%. This was due to successful transfer of production
centers to China and other countries. It must be also noted that the prices of semiconductor
chips and liquid crystal panels are declining dramatically in recent years.
During 2001 and 2008, the increaes of expenditures on both goods and services was higher
in BRICs and ASEAN5 than in Japan/the United States/Germany (see Figure III-18).
Whereas the rate of increase in expenditures on goods and services in BRICs and ASEAN
was around 130%–200% in seven years, the rate of increase did not reach 100% in Japan, theUnited States or Germany. Among Japan, the United States, and Germany, the rate of increase
for Japan was markedly low, with less than 30% in both goods and services expenditures.
This suggests that Japan’s global sales strategies in emerging markets must consider theservice sector, in addition to the goods sector.
In developed countries such as Japan, the United States and Germany, the ratio ofexpenditures on services to the total consumption expenditures was more than 50% in 2008(see Figure III-19). This reflects the fact that the proportion of expenditures on services in
consumption is high, affected by the advancement of the service-oriented economy indeveloped countries. On the other hand, the ratio of expenditures on services in consumption
expenditures in BRICS and ASEAN 5 was around 40%, signaling further growth potential ofservice expenditures in the future, compared with developed countries. Thus, global salestrategies of Japanese companies must be drawn to Asian service markets, when considering
the high growth rate of service industry and its large growth potential in Asia.
== Figure III-19 ==185

In fact, according to the result of a questionnaire on JETRO members, eight countries
among the top 10 priority countries for service trade of Japanese companies in the coming
three years were Asian countries/regions, such as Thailand and Vietnam, lead by China (first).
Only two other non-Asian countries made it the top 10: the United States (second) and Russia(10th) (see Figure III-26).
The sectors with higher growth rates than the average of the total service expenditures in
China’s expenditures by services during the period from 2001 to 2008 were transportation
service, communications service, medical service and postal service (see Figure III-20). The
growth rates of financial service, social security service and health and beauty service werelower than the average. It is believed that the expenditures for transportation, medicine andcommunications increase as income rises. In this sense, distribution, such as retail trade, canbe expected to grow in the future. One of the reasons why the growth rate of China’s financial
service is lower than the average may be that most bank loans are for corporations and the
proportion of personal loans is small, besides the fact that many financial products have yet tobe launched in the country.
== Figure III-20 ==In the past several years, Japanese financial institutions have expanded their businesses in
China. This seems to be attributed to the fact that China allowed establishment of 100%
foreign-capital banks to develop business in China in December 2006. In response, Mizuho
Corporate Bank and the Bank of Tokyo Mitsubishi UFJ set up a local subsidiary in 2007 andSumitomo Mitsui Banking Corporation did so in 2009. Although the growth rate of financial
service expenditures in China had been lower than average, these moves can be seen to be
based on future growth prospects.
India’s service expenditures exhibit a opposite tendency to those of China. The growth
rates of expenditures on financial services, social security services and postal services, which
are lower than the average in China, are higher than the average in India, while those ontransportation services, medical service and entertainment and cultural services are lower
than the average. It is believed that the increase in financial service expenditures in India canbe greatly attributed to business expansion of financial institutions of the U.S and Europe inrecent years as part of their global customer service strategies (call center, etc.). The
liberalization of foreign capital inflows into the life insurance sector in 2000 can beconsidered one of the contributing factors, too. In the meantime, the government does notallow, in principle, foreign retailers selling multiple brands to set up shops in the country.
Only single-brand retailers, such as Nike or cash-and-carry type wholesalers , can enter the
Indian retail market. t== Figure III-21 ==Data show that service expenditures of ASEAN, unlike those of China or India, have beenon the rise as a whole. The growth rates exceed the average in every sector of finance,
education, communications, post, and transportation. Even in sectors with lower than the
average growth, such as entertainment and culture, health and beauty and insurance services,
the growth rates exceed 100%. This may be ascribed to the fact that the average income levelin ASEAN countries is higher than that of China and India, giving ASEAN countries moreroom to spend on services at large. Therefore, it can be concluded that Japanese companies
are able to develop their service trade in ASEAN countries in broader areas compared toChina and India.
186

== Figure III-22 ==(2) Global expansion of service market with high expectations for further growth Service companies, which have yet to go global, are keen to enter the global market
A “Questionnaire Survey on Global Consumption Market” (concurrently conducted with
the questionnaire on “Environmental Business” mentioned in Chapter III-1) was performed
on JETRO member companies to ask about the current status of overseas business and future
prospects of Japanese companies (effective responses were received from 813 companies).
The percentage of companies that responded that “they currently sell overseas and there
are plans/potential to expand the business” was 69.9% of all respondents. While 81.5% ofmanufacturing companies had selected this response, 53.6% of service companies did so,
showing a higher percentage of manufacturing companies is in this category. Therefore,among companies currently engaged in overseas sales, manufacturing companies have ahigher motivation for future global expansion than service companies do.
The percentage of companies that responded that “there are plans/potential for future sales,
although [they are] not currently engaged in it” was 12.9% of all respondents. While 11.3%
of manufacturing companies selected this response, 14.9% of service companies did so. This
indicates that, among companies that are not engaged in overseas sales, the services sector
has higher motivation for future global sales (see Figure III-23).
== Figure III-23 ==This is believed to be attributed to growing expectations for overseas markets affected bysluggish domestic demand.
Among the service areas that have not been engaged in overseas sales, motivation foroverseas expansion is high in “information & telecommunications (contents production),”“professional service (legal services, accounting, and consultancy),” “construction,” “retail,”and “transportation,” in descending order. In view of the economic recovery following thefinancial crisis, the percentage of companies in the manufacturing sector seeking access tooverseas markets remains high, and Japan’s service sector shows signs of increasing
motivation for overseas expansion, led by the companies that have not yet been engaged inoverseas business.
Some specialty retailers, such as clothing, jewelry, household products and miscellaneous
goods, responded that they are considering global business expansion. Some companies in thetransportation sector responded that they are considering global expansion in foodtransportation targeting mainly the middle-income market. This indicates a growth ofJapanese food business in Asia.
Among 673 companies that responded that “they are engaged in or have plans for overseas
expansion,” the highest proportion of them chose the response “high growth potential of
emerging markets” as the reason for their active business development: 56.6% (381companies). This is followed by “matured or saturated domestic market”: 54.2% (365). This
gives the impression that traditional domestic demand businesses are seeking new growth
opportunities in emerging markets.
== Figure III-24 ==Sales Priorities placed on emerging economies in Asia, including service sector
When asked “On which country will your company place the highest business priority inthe next three years?” 64.9% of companies cited China, followed by the United States at187

42.1%. Seven Asian countries/regions are listed in the top 10, and emerging countries, suchas Thailand, India and Vietnam, entered the top 10. This response corresponds exactly withthe global sales strategies of Japanese companies and shows on which countries they arefocused. China has been identified as the top priority country, followed by the United States,in a number of business areas. In terms of retail in the service sector, it is clear that many
Japanese companies place a great deal of weight on Asia, led by China, followed by other
Asian countries/regions such as Thailand, Taiwan and Vietnam.
== Figure III-25 ==High priority countries and regions for Japanese companies in the next three years in termsof service sales are listed in Figure III-26. Focusing on the services sector in Asia, the highpriority countries and regions in the next three years are China, Thailand, Taiwan, Hong
Kong, and Vietnam, in descending order. India and South Korea are ranked fourth and sixth
in the overall ranking for business priority. However, focusing on the service sector, South
Korea is in seventh spot after Vietnam and Singapore. India came in eighth.
== Figure III-26 ==Over 90% of companies identify China as the top priority country in the area of
information and communications (entertainment and culture-related contents and software),and motivation is high in the areas of finance/insurance and real estate/leasing. For
entertainment contents whose growth has leveled off in the domestic market, Chinese
markets for popular Japanese animation and music cannot be overlooked along with the U.S.
markets.
China has the largest market in the world in terms of the number of mobile phone
subscribers and individual accessing internet services. Thus, a growing number of companies
are seeking business opportunities in such areas as mobile phone games, entertainment
contents, and website production. Not only entertainment-related companies, but also
culture-related companies, such as e-learning, broadcasting production and publishing, areconsidering business expansion in China.
Financial institutions show much interest in Indian markets, in view of the life insurance
market with its low subscription rate and rising financial demand. There are Japanesefinancial institutions seeking to enter the loan market, which caters to the middle class inpurchasing expensive items, such as automobiles and household appliances. Russia’s
consumption, including expensive products, plummeted due to the financial crisis. Still,
Russia is placed eighth on the sales priority list by country/region, after Vietnam; and among
service entities, financial and insurance companies are highly interested in Russia.
== Figure III-27 ==Looking into the interest of service sectors in Asia by country/region, information andcommunications sectors are interested in South Korea, Taiwan and Thailand, reflecting the
popularity of Japanese animation and music in these countries. Construction-relatedcompanies show interest in Vietnam, Indonesia, the Philippines and Malaysia, in view ofdemand for ODA-related infrastructure and urban development, while financial/insurancecompanies have a clear business motivation in Thailand.
== Figure III-28 ==188

When comparing the current sales destination and the business priority in the next three
years, China’s position in three years’ time goes slightly down in the manufacturing sector,
but many service companies place more priority on China in three years’ time than now. Thistendency is particularly prominent in construction, information and communications, andprofessional services. The percentage of companies placing more priority in three years’ timeis also high for Vietnam, with high expectations in such businesses as retail, information andcommunications and professional services.
(3) Entering emerging markets with low-cost and value-added services
In order to cut into the markets in Asian emerging economies, Japanese companies should
first focus on rapidly growing service areas in each country: for example, providing contents
to fast growing online services, learning services, restaurants, etc. in China, business service
outsourcing and life insurance, etc., in India.
Secondly, although not prominent in Europe or the United States, Japanese companies canmake active approaches to service markets in emerging countries with the provision of highquality services.
The percentage of service companies engaged in overseas sales is smaller than the
manufacturing industry in Japan and it has been pointed out that the service industry lacks
competitiveness in global market. It has also been pointed out that Japan’s unique,personalized, warm and high quality services are costly and would not be advantage tobusiness performance abroad. However, these unique, value-added and high-quality services
are everywhere in Japan. Some examples are the polite customer service at luxury department
stores, delicate Japanese-style service at restaurants, sales strategy that combines a productand abundant product knowledge at consumer electronics retailers , the hospitable customer
relations and safety and security service offered by taxi drivers, and very attentive service
offered by automobile dealers.
These high-quality services have been accepted by the upper middle class abroad but havebeen too expensive for the middle class. Moreover, for cultural reasons these services may beviewed as excessive.
However, some Japanese companies have recently been accelerating their businessexpansion in overseas markets, successfully exploring new markets mainly in Asia andutilizing Japanese-style services as their strategic initiatives. These cases can be seen ingeneral supermarkets, cram schools, education service for small children, Japanese restaurant
chains for teishoku (set menu), and door-to-door sales of Yakult, etc.
In recent years, Japanese retailers have accelerated their business expansion in China. The
expansion is quite robust not only in urban areas, such as Beijing or Shanghai, but also inin-land areas. Ito-Yokado opened its first store in Chongqing (inland China) in 1997. As ofthe beginning of 2009, there is a plan to open a fifth store in Chongqing. The success inChongqing suggests that Japanese-style services have been welcomed. This success isbelieved to be made possible by orderly product display, high-quality customer service bysales clerks and provision of safe and secure products.
== Table III-16 ==As described above, people in Asia may have a propensity to accept high-quality
Japanese-style service. In other words, in Asia, people have accepted services that are
different from low-cost mass sales or manual operations provided by western companies.
However, if one intends to expand such high-quality services in Asian emerging
economies, the high-cost structure becomes an obstacle. Even if the service is accepted bywealthy people, the price is too high for middle-class groups, which constitute the189overwhelming volume of the markets.
To break this obstacle, there is no other way but to reduce prices while maintaining
Japanese-style, value-added and high-quality services as much as possible. To do so, it isessential to localize the business, use local people, provide education and training, andestablish a system to provide the same quality of service as in Japan at a low cost. It is thus
necessary to promote localization to make low-cost services available while resorting tovarious kinds of operation strategies, such as forming partnerships with local companies,
M&As, etc.
With respect to sales by Japanese companies in emerging economies, a “double sided
strategy” is in progress, in which low-priced general use products are sold to the middle classin addition to value-added high-end products. The JETRO 2007 White Paper on International
Trade and Foreign Direct Investment proposed the double side strategy for sales in goods inemerging economies. Having experienced the financial crisis and as a low-price orientation
become stronger, it may be necessary to apply this global business strategy for sales in goods
to the service sector as well. It is desirable to adopt this strategy particularly for service saels
in Asia.
Provision of value-added/high-quality, but low cost service to middle-class Asia is feasible
in the following wide range of areas: educational services, consumer electronic retailer, retail(supermarkets and convenience stores), restaurants, contents (animation, Manga, gamesoftware, movies, and music) Software, construction service (public works, installation of
exhibitions, store interior), security, transportation (distribution services, movers, parcel
delivery service, and taxis), finance (retail banking, auto loans, and life insurance),
hair/beauty, bridal services, personnel placement services, and health/welfare services.
== Table III-17 ==There may be many challenges to overcome to expand the service business in Asia, suchas human resources development, understanding of Japanese-style services, and local
regulations on business expansion and activities. However, compared to the penetration rateof Japanese goods in Asia, service is a sector for the future. Now is the time to establish a
new business model for service providers that fully reflects the characteristics of theJapanese-style service.
(4) Moves and characteristics of service markets of major emerging economies
 China pursuing economic revitalization through investment in services
China’s growing economy, a growth fueled by export-oriented foreign investment, isaccelerating its speed of expansion led by a domestic-based service industry. Of the $92.4
billion of inward direct investment (based on actual investment) in 2008, the share of thenon-manufacturing sector (44%) was catching up with that of the manufacturing sector (54%).
In particular, investment in the service sector is increasing in coastal areas.
In 2003, the government of China shifted its policy to an domestic dependent growthmodel (domestic demand and consumption) by transforming the industrial policies. In 2006,
the government promoted the investment in domestic market oriented industries, such as
high-tech and service industries, to depart from the traditional labor-intensive models. The
government designated call centers, IT services and distribution as specific promotional
businesses in 2007, which attracted investment mainly from European and U.S. companies.
In April 2008, the State Council of China laid out an economic policy after the second quarterto actively expand service-related consumption, such as culture, travel and information. The
motivation of new enrty by foreign service related companies have been on the rise sincedomestic businesses have been strong, despite the decline in exports due to the global
190

recession. According to the aforementioned questionnaire conducted by JETRO, all theservice companies (except for transportation) listed China as the top priority country in thenext three years in all service areas.
One of the recent characteristics of the service sector in China is the growth of the online
shopping market. According to i-Research, a major IT consulting company, sales from online
shopping have grown by 2.3 times over the previous year, reaching 1.2% of total retail sales
in Chinese market. The market size is forecasted to increase six times from 2008 to 2012,
signaling a rapid increase in the entry of suppliers. The online shopping that allows cost
reduction and the provision of reasonably priced products is commonly expanding in the
consumption market throughout the world after the financial crisis. China is not an exception,and the growth rate is outstanding; thus, online shopping is a consumption market that is
drawing much attention.
India boasting a huge potential service market
India, with a population of 1.15 billion people as of 2008, is expected to reach a
population of more than 1.53 billion in 2035, surpassing the population of China, currently
the most populous country in the world (United Nations). Thus, India, together with China, isexpected to offer huge market opportunities.
The weight of the service sector in the Indian economy is large and the GDP composition
by sector for services is 65%. In particular, external trade, hotels andtransportation/communications account for 28.6%, and finance/insurance, real estate andbusiness services for 14.8%. It has been pointed out that India has high entry barriers;
nonetheless, a number of foreign companies are rushing into the huge market. As for
activities of Japanese companies, Kumon has entered the education market to offer
mathematics and English instructions for children and students in 2007 in the form offranchising. In 2009, Nagase Brothers Inc., which operates Toshin High School, announced
that it will establish a base center in Singapore to expand the business in the form of licensing
to local corporations in India and China. In 2009, the Dai-ichi Mutual Life Insurance
Company established a joint venture with the local banks and started sales of insurance
products at bank counters.
The JETRO questionnaire shows that trading firms and wholesalers companies list India
as one of the priority countries in the next three years, after China and the United States.
Finance and insurance sector lists India as one of the priority countries, after China andRussia.


Thai and Indonesian service markets expanding in the middle class
As BRICs countries, Thailand is drawing much attention in terms of expanding its middle
class. The 2008 GDP per capita was more than $4,000 in Thailand and $9,000 in Bangkok.
The middle class has grown in urban areas generating prospective markets for foods,
restaurants and IT-related services, in addition to manufactured goods.
Japanese food is quite popular in Thailand, and, as in the 1980’s and around the year 2000,
the Japanese food boom has returned to Thailand, hailed as healthy foods. As of April 2009,
there are about 1,020 Japanese restaurants in Thailand (about 730 in Bangkok alone), with awide variety ranging from upscal;e restaurants, such as fine Kappo cuisine, to low-key
restaurants such as teishoku (set menu) chains, ramen, and curry restaurants. The majority ofcustomers are upper and middle class Thai people. Thais have a custom of eating out at foodstands, and Japanese fast food seems to fit right in. Along with heightened health awareness,
Yakult has been penetrated in Thai society through two sales channels: door-to-door sales by“Yakult Ladies” and store sales at supermarkets.
Besides food and beverages, after-school educational programs, such as Kumon and191

Yamaha Music class, have been expanding businesses, targeting Thai consumers, along withan increasing interest in Japan in Thailand.
Medical tours for foreigners can also be a business with growth potential. Thailand earned
an income equivalent to ¥182.2 billion in 2008 from medical tours from abroad, about ¥52.1
billion of which came from medical expenses at hospitals, with the remaining ¥130.1 billion
coming from tourism, such as shopping and trips by family members of patients. Affected by
the economic slowdown, U.S. companies are having difficulty paying medical costs for theiremployees within the United States, where medical costs tend to be expensive, and U.S.
insurance companies are investigating the feasibility of medical tours to countries where costs
are less expensive. Foreign physicians and medical institutions, which are owned more than
50% by foreign capital, are not permitted to practice medical treatment in Thailand under thecurrent laws. Still, there may be business opportunities for Japanese companies. An aging
population is no longer a problem unique to Japan and Thailand’s population is projected to
decline after hitting its peak in 2040, according to U.N. data. Both manufacturing and service
sectors have business opportunities to meet increasing medical demands in the general public
due to an aging society (personal services, medical devices and pharmaceuticals).
In Indonesia, the service market is growing along with the expansion of the middle class.
The economy is steadily growing with a real GDP growth rate of 6.1% over the previous year
in 2008 and it registered a 4.4% growth in the first quarter of fiscal 2009 over the same
period of the previous year. While many areas of the manufacturing sector recorded a decline,
private consumption of the same quarter grew by 5.8% and the strong areas in the services
sector are retail and food & beverages. An underlying factor for strong retail sector is amassive expansion of large-scale retailers.
Details of a survey carried out by a research company, Nielsen (a survey on growth rates
of retail sales carried out in six major cities from January to March 2009), show that while thetotal retail sales of daily consumer goods (50 items) of the retailers as a whole grew by 8.1%
over the previous year, that of large-scale retailers increased by 12.7%. While the total retailsales of grocery products of retailers as a whole grew by 7.5%, that of large-scale retailers
increased by 11.1%. While the total retail sales of household goods of the former grew by
8.2%, that of the latter increased by 16.4%. All these figures indicate that the growth oflarge-scale retailers is much higher than that of retailers as a whole. In particular, the recent
retail scene has experienced a plethora of foreign supermarkets, such as Carrefour from
France and Ace (a home center) from the United States. Carrefour has been expanding its
business by acquiring local retailers, in addition to establishing new stores.
South Korea’s Lotte has also successfully acquired local retailers, indicating an activatedentry of foreign capital into retail markets. In view of protecting micro, small and medium
enterprises, the government of Indonesia does not, in principle, approve the entry of foreign
capital into retail markets. The foreign capital entering Indonesia either has met the criterionof the sales floor area as an exception to the foreign investment restrictions or has franchised
the system.
Japanese retailers have also entered the market. For example, department stores such as
SOGO and SEIBU and the consumer electronics retailer Best Denki are opening up in large
shopping malls, targeting the middle class or higher. Following these moves, the convenience
store 7-Eleven, and the clothing and general merchandise store MUJI are planning to open
their first stores in the capital of Jakarta before the end of 2009. This market, with a total
population of 230 million people, is large, and offers huge opportunities for foreign retailers.


Expanding service market in Brazil through acquisition of local businesses
Among emerging countries, Brazil is notable for its low entry barriers for foreign capital
into various industries. In the service sector, 100% foreign capital investment is possible in192principle, except for some industries, such as aerospace, health/ medical care, mass media,etc.
A high presence of foreign companies is found in communications, retail and education;
most of them have entered the market through acquisition of local companies.
The top three companies in the communications sector are foreign. The top ranked
Telefonica of Spain has secured the market by acquiring State of Sao Paolo-run Telesp, which
had boasted its high market share. Currently, fixed telephones are mostly monopolized by
Telefonica. In the area of mobile phones, it maintains the largest share through a jointcompany with a Portuguese company.
Foreign capitals lead the retail sector as well. French supermarket Carrefour, having thelargest share in France, chose Brazil to mark its first footprint on the American Continent andexpanded the store network throughout the country by acquiring the local supermarket chain
Atacadão in April 2007. The second-ranked Pan de Azúcar is owned by a French Casinogroup. The third-ranked Walmart of the United States is also expanding its share by acquiring
a local retail chain, etc. These three companies comprise more than 70% of the sales of thesupermarket chains in Brazil.
Since consumers’ tastes depend greatly on locality, foreign capital supermarkets willcontinue to expand the share by acquiring good local companies.
Low-income households have not been the target of the marketing strategy in Brazil.
However, business has recently been expanding to the low-income households backed by an
improvement in purchasing power. Such move is represented by Walmart, which has been
focusing on business development in the North East, the home of many low-income people.
A major example of Japanese companies extending the business opportunities in theservice sector in Brazil is the case in which Millea Holdings (current: Tokio Marine Holding,Inc) strengthened its business in Brazil by acquiring 100% of Real Seguros, an insurancecompany owned by ABN AMRO (acquired by Santander in 2007), in 2005. As in the case ofAsia, Kumon is firmly established in Brazil. Because of the presence of 1.5 million JapaneseBrazilians and the Japanese food boom, such as sushi and sashimi, Japanese food chains,such as gyudon, seem to have high potential for penetration.

193

Figure III-1 Japanese Companies' Approach to the Eco-Business Market

0%

20%

40%

17.6%

Export12.3%

Considering exports
Manufacture and sell abroad

5.5%

Considering establishment of a production/sales
location abroad

6.3%

Growth can be
expected

22.3%

Manufacture and sales done domestically.

17.5%

Will consider domestic manufacture and sales.

37.6%

Promising, but unable to enterNot a promising field; no plans to enter

2.1%(Multiple answers，N=710)

No growth canbe expected

9.2%

No response

No answer
9.2%
No growth can be
expected

2.1%

Growth can be
expected

88.7%(Note) Survey period: April-May 2009; effective responses: 831 companies (24%)(Source) "Survey Report on World Consumer Markets and Environmental-Business
Markets" (JETRO, 2009.)

194Figure III-2 Domestic sales
0%

2%

4%

1.9%
4.4%

7.2%

Photovoltaic (PV) cell

1.1%

10.2%

Waste/household waste treatment

2.8%

6.9%

Renewable energy (excluding PV cell)

0.8%

8.5%

Environment‐friendly paint/adhesive

1.7%

6.3%

Vehicle (electric, hybrid, fuel cell vehicles)

3.0%

4.4%

0.6%

6.3%

Wastewater treatment
Sound/vibration‐proof materials

0.6%

5.5%

Emission treatment device

4.7%

0.3%

Recycling of waste materials (vehicles, household
appliances, etc.)

4.4%

0.6%

Waste treatment

4.1%

0.8%

Production of recycled materials

4.1%

0.8%

Eco‐housing (household solar system, insulation)

3.6%

1.1%

Environmental measurement (noise/vibration)/Analysis
device3.6%

0.6%

Used product sale

3.6%

0.6%

Carbon emission trade‐related business

3.9%

0.0%

Resources recovery

3.9%

0.0%

3.0%

0.8%

〔Source〕Same as Figure Ⅲ‐１

Engaged in domestic
sales
Considering domestic
sales

1.1% 3.0%

Sewage development project

Soil and water purification device

8% 10% 12% 14%

10.7%

Water treatment device

Fuel cell

6%(Multiple responses accepted, N=363)

195

Figure III-3 Exports
0%5%

Water treatment device

4.7%

Renewable energy (excluding
PV cell)

5.0%

10%
5.5%
2.8%

Photovoltaic (PV) cell

4.1%

Wastewater treatment

3.6%

3.3%

4.4%

1.9%

Vehicle (electric, hybrid, fuelcell vehicles)
Waste/household waste
treatment
Environment‐friendly
paint/adhesive
Emission treatment device

15%

3.6%

2.5%

3.0%

0.8%

4.7%
2.2%

1.9%

Production of recycled
0.6%
2.8%
materials
Environmental measurement
1.4%
1.7%
(noise/vibration）/Analysis…
Eco‐housing (household solar
1.1% 1.9%
system, insulation)
Sound/vibration‐proof
1.1%
1.7%
materials
Waste treatment

1.7%

1.1%

Used product sale

1.4%

1.4%

Heat pump

2.8%

Sewage development project 0.8%

1.9%

Air pollution control

1.4%

1.1%

Resources recovery

1.4%

1.1%

Fuel cell 0.8%

1.7%

Soil and water purification
0.3%
deviceEngaged in exports

0.0%

Considering export(Multiple responses accepted, N=363)

1.4%〔Source〕Same as Figure Ⅲ‐１

196

Figure III-4 Obstacles in Engaging in Eco-Business
0%

10%

20%

Underdeveloped market in emerging countries

30%
26.2%

Cost more than traditional products

22.9%

Lack of information on the market overseas

20.7%

Market overseas is still small

19.3%

Low level of consumer interest

16.5%

Profitability is low

14.3%

Insufficient incentive

13.2%

Tougher competition

11.0%

Difficult to clearing regulatory and licensing hurdles overseas

9.6%High tariff

9.6%

Difficult to secure human resources

9.1%

Domestic market is small

5.8%

Protectionism overseas favors domestic products

5.5%

Support by foreign governments

3.9%

Difficult to secure financing 3.3%
No answer(Source) Same as Figure III-1

197

26.2%

Table III-1 A Global-Competition Strategy Leveraging Eco-Business for JapaneseCompanies【 Mid- and Long-Term Outlook for the Global Economy】
Development of multipolar world economy, characterized by the G20.
⇒Though the emerging countries' economic growth are moderate, their expanding consumption is driving the world
economy.
The IT industry, investment funds and natural-resource/energy sectors drove trade and investment in the1990s andearly 2000s⇒Promising fields now include renewable (clean) energy, low-carbon products and other green-business sectors.

【 Environmental-Business Growth Strategy for Japan】
Competitive Strategy for Japanese Products⇒(1) High-value-added products with enhanced functionality, (2) Growth products targeting middle-income consumers
in emerging countries, (3) Green products incorporating environmentally-friendly technology.
Japan's global strategy hinges on incorporating the growth in the emerging countries.
⇒Effective economic aid and support should be provided to environmental-business sectors in emerging countries,
especially in Asia, to drive export growth and more direct investment abroad
Agriculture, forestry, food-processing industry, construction/real estate, petrochemicals, materials/steel, automobiles,
general machinery, electric machines, precision medical equipment⇒Greener, more energy-saving, less resource-intensive ⇒Aim for enhanced competitiveness and pursue global
expansion in renewable energy (solar, wind, geothermal, biomass) and low-carbon sectors (electric cars, alternative
fuel, green housing, carbon capture and storage, trading in emission rights) which are positioned to deliver higher
growth than "traditional environmental industries" such as air pollution, water/waste management and recycling.
Create universal, standardized environmental-business statistics⇒Establish mechanism for comprehensive evaluation of the technical sophistication of Japan's environmental-businessproducts and services, product-development ability and service-provision aptitude; feed the results into policymaking.
Proactively support global expansion of global environmental-business market⇒Collect information on developed and emerging countries' environmental businesses; host symposia; support
participation in exhibitions, exports, expansion overseas and business matching.
Revitalize rural areas by supporting environmental business (waste management, wastewater treatment, recycling ofwaste, wind power, solar energy, geothermal energy, etc.
(Source) Compiled by JETRO

198

Table III-2 Global Environmental-Business Market Size
Organization
UK Department for Business,
Enterprise and Regulatory Reform(BERR），announced March 2009

German Federal Ministry for theEnvironment, November 2007

European Commission

Environmental-Business Market Size
FY2007-08 environmental-business market
size of £3.5 trillion (¥605 trillion at £1=¥198[March 2008 exchange rate]). 45% growthto £4.4 trillion in FY 2014-15.
2005 global environmental-business market
size of 1 trillion euros (¥137 trillion at 2005
average conversion rate of 1 euro=¥
136.89). Average annual growth rate of
5.4% to 2.2 trillion euros in 2020.
Environmental-business market size of 270
billion euros (¥36.5 trillion) in 2006,
employing 2.3 million people.

Environmental Business International(US)

According to the "2008 White Paper on theEnvironment," the EBI's estimate of the
global environmental-business market size
was $692 billion in 2006 (¥80.5 trillion at2006 average exchange rate of $1=¥
116.31). According to "Report 2020,"
published by EBI, the size of the market
would expand 22.3 % in six years from$628.6 billion in 2004 to $768.7 billion in2010.

Japan Ministry of the Environment("2008 White Paper on theEnvironment")

Japan's environmental-business market
expanded from ¥30 trillion in 2000 to ¥45
trillion in 2006.

(Source) Compiled from various sources.

199

Figure III-5 World Environmental-Business Market Size (£3.46 trillion [approx. ¥605
trillion] in FY2007-08)
A) Traditional
environment
sectors22%C) Low-carbon
sectors47%B) Renewableenergy31%(Source) Prepared based on material from the UK Department of
Business, Enterprise and Regulatory and Reform (BERR).

Figure III-6 Global Environmental-Business Market Size, by Sector (FY 2007-08)(£1 billion)
600A) Traditional environmental sectors

500B) Renewable energy

400C) Low-carbon sectors

300

200

100

0

(Source) Prepared based on material from the UK Department of Business, Enterprise and Regulatory and Reform (BERR).

200

Figure III-7 Specialist Environmental-Business Market Size (2007/2008)（£1 billion）

1,800

(%)

60

1,600

58

1,400

56

1,200

54

1,000

52

800

50

600

48

400

46

200

44

0

42

Market size of
specialists (LHS)
Share of specialists(RHS)(Source) Prepared based on material from the UK Department of Business, Enterprise andRegulatory and Reform (BERR).

Figure III-8 Environmental-Market Share by Region (FY2007-08)

Africa4%

Middle East2%

Oceania1%
Far East Asia
36%

Europe27%

Americas30%(Source) Prepared based on material from the UK Department of Business, Enterprise and Regulatory and
Reform (BERR).

201

Figure III-9 Environmental-Business Market Share by Country (FY 2007-08)
(%)
25
20
15
10
5
0

(Source) Prepared based on material from the UK Department of Business, Enterprise and Regulatory and Reform (BERR).

Figure III-10 Global Environmental-Business Market （2005, 1 trillion euros/¥137
trillion）（1 billion euros）
2,500
2,000

2.2 trillion euros

2,200

1 trillion euros (¥137 trillion)
1,300

1,500

1,000

1,000
500
0
2005

2010

2020

(Source) Prepared based on material from the German Federal Ministry for the Environment202

Figure III-11 Global environmental market by sector（ € million)

10,000
8,000
6,000
4,000
2,000
0
2020

(Source) Compiled based on Innovative environment growth markets from a company
perspective, The German Federal Environment Agency

Figure III-12 Environmental-Business Sectors Forecast to Grow Worldwide(100 million euro)
350
300
250
200
150
100
50
0

2005
2020

(Source) Prepared based on material from the German Federal Ministry for the Environment203

Figure III-13 Number of Patents Granted by Country
（%）
80
70
60
50
40
30
20
10
0
Japan
EuropeUS(Source) Prepared based on "Japan's Technological Competitiveness from the Patent Viewpoint 2008" (Japan Patent
Office)Table Ⅲ-3 Sales, number of corporations and number of employees of environmental
market in the U.S.
2007

2007

2005

Market size

S hareS hare（ $1 billion )a. Pollution management service

2007

2007

Number of Number ofcorporations employees（ people ）141.02

46.6%

47.9%

43,790852,100

Analysis

1.89

0.6%

0.7%

1,080

20,500Wastewater treatment

39.06

12.9%

13.4%

26,200152,600

Waste treatment service

53.2

17.6%

18.1%

10,050280,700

Harmful waste treatment

9.08

3.0%

3.2%

630

45,600

Disposal of contaminated substances

12.18

4.0%

4.1%

2,220

104,100

Consulting/engineering

25.61

8.5%

8.4%

3,610

248,600

b. Pollution control device

63.89

21.1%

22.6%

6,080

430,200

27.29

9.0%

9.4%

2,080

164,400

M easurement/information system equipm

5.49

1.8%

1.8%

840

39,200Air pollution control equipment

18.31

6.1%

7.0%

1,900

118,900

Waste treatment equipment

11

3.6%

3.8%

920

76,700Pollution control production technology

1.8

0.6%

0.6%

340

31,000

97.42

32.2%

29.5%

68,480485,000

Water reuse

37.89

12.5%

13.3%

61,800153,700

Resource reuse

31.23

10.3%

7.9%

5,050

213,900

Water treatment equipment/agentsc. Efficient use of resources

Renewable energy
Total

28.3

9.3%

8.4%

1,630

117,400

302.3

100.0%

100.0%

118,350

1,767,300〔Source〕 Compiled based on “The U.S. Environmental Industry Overview 2009,” Environmental Business Journal

204

Figure III-14 Renewable Energy's Share of Total US Energy Production (2008)
80%
70%
60%
50%
40%
30%
20%
10%
0%

(Source) Prepared based on material from the US Office of Environmental
Information.

Figure III-15 Change in US Environmental-Business Sales by Sector (2008-2012)(US$ 100 million)
800
2008

700

2012

600
500
400
300
200
100
0

(Source) Environmental Business Journal, “The US Environmental Industry Overview 2009"205

Table III-4 Sales of environmental business in South Korea by sector（Unit: 1 million won, ％）2007

Environment-related industry

AmountTotal

34,111,652
5,729,441
2,174,687
2,604,883
253,609
222,586
283,208
190,468
6,877,591
4,434,919
2,442,672
5,319,406
1,587,203
3,166,142
454,189
111,872
8,758,753
8,758,753
7,426,461
780
1,485,000
4,717,708
117,141
163,926
662,687
279,219

Pollution management-related production
Air pollution control device
Wastewater management device and product
Solid waste management device
Soil, surface water, underground water improvement and purification equipment
Noise and vibration reduction equipment
Environmental monitoring, analysis and measurement device
Resource management-related production
Power generation, water works and energy storage
Recycled materials and recycled products
Pollution management-related construction
Air pollution control-related facility
Wastewater management-related facility
Solid waste management-related facility
Noise and vibration reduction facility
Resource management-related distribution
Distribution of recycled products
Pollution management-related services
Air pollution control
Wastewater management
Solid waste management
Soil, surface water, underground water improvement and purification
Environmental R&D
Environment-related contract and engineering
Analysis, information collection and assessment〔Source〕Statistical Report on Environmental Industry (May 2008)

Table III-5 Details of EU's environmental market by sector (EU25, 2004)
SectorMarket size (€100 million) Share（％）

Pollution control
Solid waste treatment and recycling

1,449
524

63.9
23.1

Wastewater treatment

522

23.0

Air pollution control

159

7.0

Environmental management by government

115

5.1

Environmental management by company

58

2.6

Soil/underground water purification

52

2.3

Noise/vibration control

2

0.1

R&D on environment

0.1

0.0

Environmental measurement/equipment

NA

NA

818

36.1

Water supply

457

20.2

Recycled materials

243

10.7

Renewable energy

61

2.7

Nature protection

57

2.5

Efficient use of resources

Eco-housing construction
Total
p
〔
〕
Commission report

p

206

NA

NA

2,267

100.0

Growth rate

16.9
28.8
9.7
55.5
ᇞ 8.6
146.5
1.7
32.4
ᇞ 5.5
3.6
ᇞ 18.5
37.0
57.9
29.5
32.6
22.4
19.3
19.3
19.1
103.7
11.8
18.0
89.3
18.9
15.5
106.6

Share

100.0
16.8
6.4
7.6
0.7
0.7
0.8
0.6
20.2
13.0
7.2
15.6
4.7
9.3
1.3
0.3
25.7
25.7
21.8
0.0
4.4
13.8
0.3
0.5
1.9
0.8

Table III-6 Wind Power Markets in Major European Countries
Aggregate
Newly
Rate ofRate of
Installed
EnergyConstructed
GrowthGrowthCapacity
Production
Capacity
(%)
(%)
(MW)
2008
(MW)
versusversus
December
(GWh)
2008
2007
2007
2008
Germany

1,665

23,903

7.4

41,923

Spain

1,609

Italy

1,010

FranceUK

6.1

16,74010.5

34,207

26.5

3,737

37.1

5,957

47.7

949

3,404

38.7

5,654

39.5

869

3,288

35.9

6,591

25.0

Denmark

78

3,180

1.8

7,300

1.8

Portugal

712

2,862

33.1

5,700

41.1

Netherland

499

2,225

27.4

4,200

22.2

Sweden

190

1,021

22.9

2,021

41.3

Ireland

208

1,003

26.2

2,298

22.6

Austria

14

995

1.3

2,040

1.0

Greece

114

985

13.1

2,159

16.9

Poland

153

451

51.3

723

53.2

Belgium

104

384

33.8

653

25.6

Others

273

803

50.9

1,261

67.4

EU27 Total

8,447

64,981

14.8

122,687

18.6(Source) “Wind Energy Barometer (February 2009)”,
EurObserv’ER。

Table III-7 Projected Growth in EU Offshore Wind Power Capacity (as of January
2009)
(MW)

CountryIn
operation
Under
2015
Share (%)
Planned(as ofconstruction
Projection
January
2009)

2015
Share
(%)

Germany

12

0.8

733

10,183

10,928

29.2

UK

591

40.2

1,392

6,773

8,756

23.4

Sweden

133

9.0

30

3,149

3,312

8.8

Netherlands

247

16.8

0

2,587

2,834

7.6

Spain

0

0

0

1,976

1,976

5.3

Denmark

409

27.8

449

418

1,276

3.4

Other EU

79

5.4

0

8,281

8,360

22.3

EU Total

1,471

100.0

2,604

33,36737,442100.0(Source) European Wind Energy Association

207

Table III-8 European Solar Power Market
Newly
Constructed
Capacity
(MWp)
2008

Aggregate
Installed
Capacity(MWp)
December
2008

EuropeanShare (%)

Capacity
GrowthRate overpreviousyear (%)

Germany

1,505

5,351

56.1

39.1

Spain

2,671

3,405

35.7

364.0

Italy

197

318

3.3

164.0

France

44

91

1.0

95.3

Belgium

50

71

0.7

231.0

EU27
Total

4,592

9,533

100.0

92.9

Country(Source) “ Photovoltaic Barometer (March 2009)”, EurObserv’ER。

Table Ⅲ -9 Potential production volume of environmental protection products inGermany (by objective)（Unit ：€1 billion)
2002

2003

2004

2005

2006

2007

Waste treatment

2.9

2.8

3.1

3.5

4.1

4.7

Wastewater treatment

9.7

9.9

10.7

11.4

12.6

14.3

Air pollution control

14.1

14.6

15.5

15.8

17.8

19.7

13

13.4

14.5

15.3

16.8

18.3

9

9.4

10

10

12.3

14.1

6

6.4

6.3

6.4

7.2

7.9

1.2

1

0.9

1

1.3

1.4

M easurement technology
Energy/environment1

Of which：
Energy-efficient productEfficient energy conversion productProduct using renewable energy
Total

2

Percentage of industrial output

1.7

2.1

2.8

2.6

3.8

4.8

47.4

48.5

52.6

54.6

62.1

69.5

4.7

4.8

4.9

4.8

5.1

5.3

〔Note〕 (1) Excluding heat pump(2) Including noise control. Computed considering overlaps. Some data are estimates.
〔Source〕Compiled based on “Umweltwirtschaftsbericht 2009,” the Federal Environment Agency

208

Table III-10 FY2007-08 UK Environmental-Business Market Size

Traditional
Environmental
Sectors

RenewableEnergy
Categories

Low-Carbon
Sectors

Category
Air pollution
Environmental consultancy
Environmental monitoring
Marine pollution control
Noise/vibration control
Contaminated land
Waste management
Water and wastewater treatment
Recovery/recycling
Hydro
Wave & tidal
BiomassWind
Geothermal
Renewable consulting
Photovoltaic
Alternative fuels for vehicles
Alternative fuels
Additional energy sources
Carbon capture and storage
Carbon finance
Energy management
Building technologies
Total

Market size
1.0
0.7
0.2
0.1
0.2
0.9
4.8
7.9
6.5
0.5
0.1
5.0
11.3
9.2
0.5
4.4
12.6
18.5
1.2
0.5
5.2
2.5
12.9
106.5

(£1 billion, %)
Share
0.9
0.7
0.1
0.1
0.2
0.9
4.5
7.4
6.1
0.5
0.1
4.6
10.6
8.7
0.5
4.2
11.8
17.3
1.1
0.4
4.9
2.4
12.1
100.0

(Note) "Alternative fuels" includes nuclear and biomass energy and biofuels (excluding
biofuels for vehicles). "Alternative fuels for vehicles" includes LPG, biodiesel and bioethanol.
"Building technologies" are those designed to improve energy usage.
(Source) BERR report.

209

Figure III-16 Projected 7-Year Growth Rate in the UK Environmental-Business Market(Top 10 Categories)
(%)

90
80
70
60
50
40
30
20
10
0

(Source) BERR report.

Table III-11 Market size of environmental business in Spain
Unit：€1 million, ％
2000
5,876
2,691
2,158
533
n.a.
3,095
1,154
888
182
871
90
n.a.
1,349
415
105
210
619
7,225

A．Pollution control
Water

Sub-total
Water supply
Water purification
Of which, desalination
Waste mateSub-total
Urban solid waste
Road cleaning
Industrial waste
Recycling
Air
B．Environmental load reduction technology an
C．Effective use of resources
Sustainable forestry
Sustainable agriculture
Eco-tourism
Renewable energy
Total

2007
16,360
5,600
3,472
2,128
168
10,760
3,785
1,010
965
5,000
n.a.
n.a.
2,739
n.a.
400
n.a.
2,339
19,0992007/2000
2007
Growth Rate Share
178.4
108.1
60.9
299.2
247.7
228.0
13.8
429.9
473.7

85.7
29.3
18.2
11.1
0.9
56.3
19.8
5.3
5.1
26.2

103.1

14.3

282.5

2.1

277.8
164.3

12.2
100.0

〔Source 〕Compiled from news releases: Data on 2000 (Ministry of Environment) and Data on 2007 (DBK(Market research company), Ministry of Environment and the association of recycling businesses)

210

Figure Ⅲ-17 Power generation from renewable energy under planning in Ontario,
Canada (Total power generation capacity 15,128MW) As of December
2008PV（1,213MW） 8%

Bioenergy（159MW） 1%

Hydro（374MW） 3%

Wind（13,382MW） 88%〔Source 〕 Compiled based on data of the Ontario Power Authority

211

212

Solar power equipment

Biodiesel, bioplastics, smart grid, carbon capture & storage (CCS)Power-transmission/power-control equipment ("smart grid"), hybrid cars
(plug-in), electric cars, electric-car recharging facilities, building
technologies

Biodiesel, bioplastics/biopolymers, carbon capture & storage (CCS), hybridcars, hydrogen/compressed-air storage equipment, solar cooling systems

Biodiesel, bioethanol, biogas, next-generation electric/hybrid cars,recharging stations for electric cars

Nuclear power production equipment，carbon capture and storage (CCS)

carbon capture and storage (CCS)
Biodiesel and bioethanol

Hydropower-generation and wind/solar power generation equipment

Miniature hydropower-generation equipment, biomass power generationequipment, wind power generation equipment, solar power generationequipment, solar thermal utilization
Equipment for wind/geothermal/solar/solar-thermal power generation andparts/materials
Solar/solar-thermal power generation equipment
Wind/solar energy power generation equipment and parts

Urban solid waste-disposal equipment water treatment equipment,
wastewater treatment equipment, recovery/recycling

Air pollution-preventing equipment, environmental-monitoring machinery,
noise/vibration control equipment, waste-treatment equipment,water/wastewater management equipment

Air pollution-preventing machinery, noise/vibration-abating equipment,
soil/surface water/groundwater decontamination machinery,recovery/recycling-product manufacture

Waste management equipment, wastewater treatment/reuse equipment,water management, recycling

Air pollution-preventing equipment, soil/water-purification equipment,
waste management equipment, water-treatment equipment,
recovery/recycling

South Korea

UAE, Saudi Arabia

Turkey(Sources) Prepared by JETRO based on material from BERR (UK), German Federal Ministry for the Environment and others.

China

Spain

Energy management products, building technologies

Alternative fuels, carbon finance, smart grid, energy management products，building technologies

Wave & tidal energy power generation equipment, wind power (including
offshore) generation equipment, power-generating turbine equipment andrelated equipment, geothermal energy generation equipment, solar power
generation equipment

Biodiesel, insulation, energy management products, energy management(green household appliances)

Measuring instruments, noise/vibration control

UK

Germany

wind power (including offshore) generation equipment, solar power
generation equipment, photovoltaic cell-manufacturing equipment

Measuring instruments, waste management equipment, water supply/sewage Hydroelectric power-generation equipment (including turbines and related Biofuels, fuel cells, hydrogen-fuel cells, energy-saving-technology
treatment equipment, recovery/recycling, afforestation businessequipment), wind-power generating equipment (turbines and parts), biomass products/services, electric cars, building technologies
equipment/services, solar power generating equipment

Exhaust-heat reuse, steam-trapping equipment

Wind and solar power equipment

Wastewater treatment equipment

Low-Carbon Sectors
Alternative fuel for vehicles, carbon finance, building technologies

Renewable energy including wind power generation equipment, solar power
generation equipment (the Mexican government put into effect the detailed Electricity-saving machinery (from incandescent to fluorescent lighting,regulations of the 2009 Law for Renewable Energy)
adoption of inverters and converters), energy-saving household appliances(inverter air conditioning and refrigerators), light-emitting diodes (LED)Wind power generation/geothermal power generation (turbines and relatedparts) solar energy power generation (cell equipment and relatedparts/materials)

Contamination-preventing production engineering, waste management
services

Promising Fields for Japanese Corporations in Various Country

Automatic waste-sorting and disposal equipment, water management,
membrane technology

Renewable Energy
Biomass power equipment, wind power equipment, geothermal power
equipment, solar power equipment

Measuring instruments, automatic waste-sorting management equipment

EuropeMexicoCanadaUS

German Federal
Ministry for theEnvironment

BERR (UK)

Traditional Environmental Sectors

Main Growth Areas Worldwide

Table III-12 Promising Environmental Business Sectors Worldwide and Business Opportunities for Japanese Companies in Various
Countries

Table III-13 Anti-global warming measures included in the economic stimulus packageof major EU states（As of January 2009）
Country

Details
Additional spending of €3 billion for renovation and refurbishment to improve efficiency

Germany

Offer a €2500 incentive to consumers who buy a new car that fits the minimum Euro 4 emissions standards and at
the same time scrap a vehicle that is more than nine years old.
Provide small and medium enterprises with €900 million for R&D in environment/energy sector for two years
Subsidy or loan of €500 million for two years for innovative vehicle technology, such as fuel cell and hydrogentechnology
Front loading of public investment plan in the areas of transportation and energy
Shore up the automobile and housing markets

FranceExpand the target of Scrap Incentive to vehicles that are at least ten years old and raise the incentive to €1000
Establish a half-public, half-private auto industry fund (total €300 million) for development investment for electriccars to improve competitivenessIntroduction of preferential tax system to install highly efficient boiler and double glazed windows in January 2005
Injection of £535 million for improvement of energy efficiency and railway transportation
Postponement for financial support for the introduction of large-scale renewable energy (electricity) to 2037
Introduction of a fixed price feed-in tariff to support introduction of small-scale renewable energy

U.K.
Implementation of insulation measures through household energy-saving program
Promotion of introduction of environmentally conscious vehicles by revising the automobile excise tax
Support of technological innovation at every stage of environmental research, development, verification anddissemination
Italy

Extension of income tax deduction for 55% of building costs for energy-saving on housing, etc. in 2009
Interest-free or low-interest loan guarantee for replacement of a car that is owned for more than ten years with an
eco-car.
Exemption of the vehicle registration tax for the vehicles with CO² emissions of below 120g/km

Spain

Subsidy for purchase of household appliances with high energy efficiency (implemented in 2008)
Subsidy for making buildings energy-efficient (implemented 2008)
Subsidy for the construction of energy-efficient new buildings〔Source〕JETRO overseas offices

213

Table III-14 Current installation of renewable power generation facilities in Spain

New installation target by2010（Cumulative Target）
Hydro (new installation of less than small- and medi
Biomass (including Combined Combustion)
Urban solid waste
Wind
PV
BiogasSolar thermal
Total(Source) Ministry of Industry, Tourism and Commerce

810（18,977）
1,695(2,039)0（189）
12,000（20,155）
363（400）
94（235）500（500）
15,462（42495）

214

Unit：MW
Newly installed facilities
by the end of 2007
Installation rate
（Cumutative Results）
205（18,372）
52（396）0（189）
6,935（15,090）
601（638）
25（166）
11（11）
7829（34,862）

25.3%
3.1%
100.0%
57.8%
165.6%
26.6%
2.2%
50.6%

215

TEL： 03-3582-5541
Industry and Technology Department: Support for exhibition at national and international trade fairs
TEL： 03-3582-5313
Overseas Market Development Department: Support for exploration of global sales channels of small and medium enterprises
Overseas Business Support and Intellectual Property Department: Support for industrial incubation in developing countries and for the promotion of economic TEL： 03-3582-5543
partnership between Japan and developing countries
TEL： 03-3582-5544
Overseas Research Department: Research/analysis of international economic information and information provision through various media
TEL： 043-299-9500
Institute of Developing Economies: Research on economies, society, politics, international cooperation/assistance in developing countries
Trade and Investment Consultation Center: Consultations, information provisions on trade and investment
TEL： 03-3582-5171

TEL： 03-3582-7571

Industry and Technology Department: Support for international exchange in new industrial sector, Support for global expansion of high-tech ventures, etc.

Project outline and contact point ofeach department

Overseas Research
Department
Institute of Developing
E
i Investment
Trade andIntroduction of the global environmental business and service markets in JETRO White Paper on International Trade and Foreign Direct Investment, Tsusho Koho
(Daily global business news) and Monthly magazine "JETRO Sensor"
Publication of various studies and research papers

Study, research, information
dissemination

Conduct person-to-person consultation by trade and investment advisors with practical experiences in various specialties and regions by setting up consultation desks
Consultation Center (Tokyo,
on trade and investment
Osaka), 36 domestic offices
In North America, conduct support for consultation, entrepreneurship and partnering for environmental business support, and deliver a mail magazine called "Letter on
and 71 overseas offices ofEnvironment/Energy in North America"
the Trade Information Center
In China, establish "Japan-China Energy Conservation/Environment Cooperation Desks" in five offices (Beijing, Shanghai, Dalian, Qingdao, and Guangzhou) tosupport matching between Japan and China

Overseas Business Supportand Intellectual Property
Department

By dispatching experts in environmental business to developing countries for the transfer of Japanese energy-saving technologies and know-how, and humanresources development for advancement of distribution services of private sector in ASEAN countries

Assistance for developing countries

Trade and investment consultancy

Overseas Market
D lD

Trade Fair Department

Industry and Technology
Department

Competent department(s)Support including services support for development of video contents in China

Support for business matching at trade fairs, support for exchanges among local governments/organizations in Japan and overseas, export support for small andmedium enterprises by exports, matching support and information collection/provision by experts dispatched abroadBusiness matching (including
Supportfor business matching by supporting exhibitions at trade fairs
export/investment support programs)

Major projects in environment and service sectors

Column Table III-1 JETRO's projects for environmental business and service-related assistance, and list of contact points

216

Abu Dhabi, UAE
20 10.1.18‐21

World Future
Energy Summit 2010

Singapore
20 09.11.18‐20

Clean Energy
Expo Asia 2009

Paris, France
2 009.12.1-4

Pollutec Horizons
2 009
Osaka, Japan
2 009.9.3-5

N-expo KANSAI2009

Sao Paulo, B razil
20 09.11.4‐6

FIMAI

New Deli, India
2 009.12.11-14

Energy Tech
Expo 2009

Shanghai, China
2 009.11.3-7

China International
Industry Fair

Yokohama, Japan
2 009.10.28-30

Green Device 2009

Vancouver, Canada
20 10.3.24-26

GLOBE 2010

Washington D.C.
2 010.2.3―5

RETECH

Washington D.C.
20 09.11.4-5

World Energy
Engineering
Congress 2009

Column Figure III-1 Environmental Business related Exhibitions and Trade Shows with JETRO’s participation

Table III-15 Global share of consumption expenditure of major regions(Unit ％）

2003
22.9
10.0
2.9
5.7
4.4
77.1
10.6
35.9
29.0
1.6
7.3
3.0
1.6
1.0
1.5
6.1

Emerging economies
Asia (excluding Japan)
East Europe
Central/South America
Middle East/Africa
Developed countries
Japan
North America
West Europe
Australia/NZ(Reference）BRICs
China
India
RussiaBrazilJFIC 16

2008
30.9
12.1
5.4
7.5
5.8
69.1
8.0
30.7
28.6
1.7
11.4
7.0
2.9
3.6
4.2
8.0

〔 Note〕 Nominal value, based on dollar〔 Source 〕 Compiled from the International Financial Statistics

Figure III-18 Growth in Goods/Services Expenditures by Country/Region
(%)
250
206
200
170

169
150

134

100

50

76

90

45

39

29
11

0
Goods Services

Goods Services

Goods Services

Goods Services

Goods Services

US

Germany

Japan

BRICｓ

ASEAN5(Note) Nominal values; dollar-conversion basis(Source) Prepared based on OECD statistics.

217

Figure III-19 Spending on Services as a Share of Consumption by Country (2001 and
2008)
(%)

70
57 58

60

49 51

50

55

58

38

40

41
36

39
2001

30

2008

20
10
0
US

Germany

Japan

BRICｓ

ASEAN5(Note) Nominal values; dollar-conversion basis

Figure Ⅲ-20 Growth of service areas by expenditure in China (2008/2001）
（％）

600

549

500
400
305
300
200

198

301

293
215
88

100
0

〔Source〕 Same as Figure Ⅲ―20

218

68

66

Figure III-21 Growth of service areas by expenditure in India （2008/2001）
（％）

450
400
350
300
250
200
150
100
50
0

411
340

292

240

149

140

173
82

45

〔Source〕 Same as Figure Ⅲ―20

Figure Ⅲ-22 Growth of service areas by expenditure in ASEAN （2008/2001）
（％）

300
250
200
150
100
50
0

269

254

222

178

213

179
135

〔Note〕ASEAN 10。
〔Source〕 Same as Figure Ⅲ―20

219

131

124

Figure III-23 Breakdown of possible/planned sectors for future overseas sales
(%)
45.0
40.0

(N=103)

35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0

Figure Ⅲ-24 Reasons for active overseas expansion
0.0

10.0 20.0 30.0 40.0 50.0 60.0

Growth potential of emerging markets
Domestic market is matured/saturated
Market exploration of developed countries
Increased trade inquiries from abroad
Requests from foreign business partners
Intensified domestic competition
Parent company/clients are globally present
FY2009 survey(N=673)

Expansion of overall production capacity
Cheap labor cost

FY2008 survey(N=824)

Domestic profit margin is small
Overseas profit margin is large
Removal/reduction of tariff/non‐tariff barriers…
Prospect of further appreciation of the yen
Other（Multiple responses
accepted）

No response〔Source〕Same as Figure Ⅲ‐23

220

Figure III-25 Priority countries for the next three years
0.0%

20.0%

40.0%

60.0%

China

80.0%
64.9%

U.S.

42.1%

Thailand

31.0%

India

30.6%

Taiwan26.2%

South Korea

26.2%

Vietnam

24.6%

Russia23.7%

Germany

23.4%

Hong Kong

21.0%

Indonesia

19.4%

Singapore

19.0%

France

18.5%

U.K.

17.7%

Malaysia

16.3%

Brazil

16.3%

Italy

16.1%

Australia

14.6%

UAE

14.2%

Spain

13.2%

（Multiple responses accepted，
Ｎ =710）〔Source〕Same as Figure Ⅲ‐ 23

Figure III-26 Critical Markets for Sale of Services by Japanese Firms Over the Next 3
Years
(%)

70
60

(N=250)

50
40
30
20
10
0

(Source) See Fig. 3-27.

221

Figure III-27 Business expansion of Japanese companies in BRICs for the next three
years; by service area
Professional services
Information andcommunications
Real estate/Leasing

RussiaFinance/Insurance
Transportation
India
RetailTrading company/Wholesale
Construction

China

Agriculture/Forestry/Fishery

0.0

20.0

40.0

60.0

80.0

100.0

(%)

〔Source〕Same as Figure Ⅲ‐23

Figure Ⅲ-28 Business expansion of Japanese companies in Asia for the next three
years; by service area

South Korea

Professional services

TaiwanInformation andcommunications
Real estate/Leasing
Finance/Insurance

Philippines

Transportation
RetailMalaysia

Trading company/Wholesale
Construction

Indonesia

Agriculture, Forestry, Fishery

VietnamThailand

0.0

10.0

20.0

30.0

40.0

〔Source〕Same as Figure Ⅲ‐23

222

50.0

60.0

(%)

223

China

Ample employee training to ensure gracious customer interaction. Quality fresh produce with a safe, reliable image. Chengdu (China)
outlet typifies management by locally hired personnel and positive impression on the local community.

Broad range of services, including repair, to achieve differentiation with local outlets. Knowledgeable employees provide service in line with Hong Kong, Taiwan, Malaysia, Singapore, Indonesia
customer wishes.
Japanese-style store management; aims to enhance brand image by stocking private brands in the future.
China

Ito Yokado (general supermarkets)

Best Denki (household appliances)

Shiseido (cosmetics manufacture andsales)

Rigorous training for local hires to master selling techniques that appeal to customers; aims to establish an overwhelming presence in Asia.

Broad product selection--marked by high quality, varied designs, colors and sizes--driving market expansion that appeals to a range of
UNIQLO (clothing manufacture andages and incomes too.
sales)
Ryohin Keikaku (dry goods manufacture High quality and good design enhancing the value of US and European brands and introducing them to the Asian market.
and sales)

South Korea, Taiwan, China, Singapore, Malaysia,
Indonesia, Philippines
China, Hong Kong, Taiwan, etc.

China, India, Thailand, etc.
Taiwan, South Korea, China, Thailand, Malaysia,
Indonesia, Singapore, Vietnam
China, Taiwan, South Korea, Hong Kong, Thailand,
Philippines, Singapore, Indonesia, Malaysia, Vietnam, India
China, Taiwan, Korea, etc.
South Korea, Thailand
Singapore, Taiwan, Hong Kong, South Korea, Thailand,
Indonesia, Philippines, Malaysia, Vietnam
Singapore, Malaysia

Distributes contents such as anime, manga, game software, produced in Japan.

Constructs factories and offices in emerging countries for mainly Japanese customers whose level of demand is high. Also engages intransportation infrastructure projects for governments in those regions.
Leverages IT to provide online crime- and disaster-prevention systems throughout Asia.
Integrated distribution system for shipping and storage of domestic and international items, providing logistical support for retail businessoverseas.
Consulting for local governments in the area of environment friendly city development.
Quick and sensitive service for rapid delivery of products matched to customers' desires.
Developing franchise network through local companies. Differentiation through broad product selection and low, uniform pricing.
Quick and easy haircuts. Rapidity and store cleanliness are the cornerstone of its differentiation strategy.

Construction and civil engineering
company

Secom (security)

Nippon Express (distribution)

Consulting company

ABC Mart (shoe sales)(Sources) Prepared based on JETRO overseas office reports, company websites and media reports.

QB Net (low-priced hair salon chain)

Middle-Income Segment, Local Pricing Daiso (uniform-price shop)

Contents (anime, manga, game software)
production and sales company

Pepper Food Service (steak chain)

Fast-food steak restaurant. Customers grill their own food, a novel method of preparation for this market.

Taiwan, Hong Kong, Singapore, Thailand, Indonesia

Thailand, Taiwan, Hong Kong, Indonesia

China, Hong Kong, South Korea, Taiwan, Thailand,
Singapore
China, Taiwan, Hong Kong, Thailand, Philippines,
Singapore, Indonesia, Malaysia, Vietnam, India

South Korea, Hong Kong, China, Thailand, Singapore

China, Hong Kong, South Korea, Singapore

Hong Kong, South Korea, China

Education for infants and children. Correspondence courses including language, arithmetic, discipline and manners.

Benesse (infant and child education)

Seven-Eleven Japan (convenience stores)

China, India, Indonesia, Malaysia, Philippines, Singapore,
Thailand, Vietnam

Main Market Penetration

Learning centers focusing on reading, writing and arithmetic. Instruction based on individual degree of advancement. Targets lower-andmiddle-income earners in some countries.

Company Features

Kumon (learning centers)

Market Entrant

Door-to-door sales by "Yakult ladies." Sales driven by salespeople's' knowledge of the products and health proposition.
Yakult (beverage manufacture and sales)
High-Income and Upper-Middle
Provides Japanese food with a common touch. Attentive Japanese-style service. Safety and freshness are points of pride. Introduces
Segments, Relatively High Price Points Ootoya (Japanese-food chain)everyday Japanese food to new markets.
Well-established reputation for safety and for providing menu items, such as rice burgers, not found in American competitors' lineups.
MOS Food Services (hamburger chain)

Target Income Group and Price

Table III-16 Examples and Features of Entry into Asian Markets by Japanese Companies

224

Transcend mere sales of reasonably-priced products by providing explanations of the features and method of use,
backed up by sophisticated knowledge of the products. The Chinese appliance retailer Suning has already entered intoa business and capital alliance to acquire these types of insights.

Retail (electronics merchandise)

Medical and welfare services

Human dispatch services

Hair salons, beauty parlors, bridal
services

Introduce appropriate human resources to client company and provide measure for interviews to applicants. Businessknow how accumulated in Japan will be applied in Asia.
In light of aging society, medical, nursing services for senior persons, which Japan has advantage, are expected toenter into Asian market.

Advanced hairstyling and beauty techniques based on a sophisticated fashion sense, and attentive service in a clean,well-maintained space combine to provide the customer a relaxing experience in a comfortable environment. "Onestop shopping" for the set-up of the bridal hall, execution and procession of the ceremony and arrangement of theentertainment.

Win retail-customer trust through accurate transaction settlement , and detailed explanations of the high risk products
at the point of sale. Polite service to win customer confidence is another sales point.

Finance (retail banking, auto loan,
life insurance)(Source) Compiled by JETRO.

Areas expected to expand

Relocation: careful wrapping and flexible rate structure to allow customer options. Parcel service: leverage IT toprovide specific timeframes for package pick-up and delivery. Taxi: polite customer interaction, maintenance of a cleaninterior and use of GPS navigation system to delineate the optimal route.

Transport (relocation, parcel
delivery, taxi)

Support customer business by proposing optimal logistical services utilizing IT and know how.

Provide an attentive Japanese-style approach to security services using IT controlled efficient security system in multifamily developments such as apartments.

Security

Transport (logistics)

High-level technical expertise and skilled construction management combined with design and proposal work that issensitive to customer wishes and meets customer needs.

Elaborate and sophisticated anime, manga and game soft with realistic story line are popular among upper middle
Asian. High overseas demand for high quality software catering to customer needs.

Selling points include not only a clean, hygienic, secure and pleasant environment, but also the type of hospitality andcustomer service.

Construction services (civilengineering, installment )High-Income and UpperRestaurant
Middle Segments (Alreadyentered)Contents (anime, manga, gamesoftware, movie, music), Software

Careful explanations of the specifics of products and services, based on sophisticated familiarity with them.
Retail (supermarkets, convenience
Leveraging IT allows for proper inventory management and placement of hot-selling items.
stores)Use Japanese-style service expertise to providing effective learning programs and individual instruction to boost
scientific knowledge and mathematical ability.

Service Features

Study services

Industry

Table III-17 Potential Growth Sectors for Japanese Firms to Provide High-Value-Added/High-Quality Services to Middle-Class
Customers in Asia

IV. Global Strategy for Japanese Companies: Environment as a New Growth Engine(Conclusion)
Trends of the Global Economy, Trade, Direct Investment
 Dragging full-fledged recovery of the global economy
It is now clear that the world economy is heading for a negative growth in 2009 for the
first time since the World War II, reversing the year-on-year growth of 3.2% in 2008. The
global economy, battered by the Lehman Brothers’ collapse in the latter half of 2008, showedsigns of recovery in the second quarter of 2009 after hitting the bottom in the first quarter.
However, the economy will be on a slow upward path driven by emerging economies, insteadof a rapid v-shaped recovery.
World’s total export volume reversed to a large negative growth
The world trade in value (export base) recorded a double-digit growth of 14.9% in 2008
from the previous year. However, trade in volume grew by only 3.8%, signaling a further
slowdown in growth rate, which had been halved (up 5.6%) in 2007. The growth of trade involume in 2009 is expected to be negative, which is sure to surpass by far the decline of theworld economy. Plummeting global trade is largely a result of a significant drop in the tradeof motor vehicles, steel and electric appliances. Soon after the Lehman Shock, this tendency
was marked in developed countries, but in 2009 the growth in the export volume in emerging
economies started to slow down with a time lag. The world’s cross-border M&As havedrastically declined since the latter half of 2008, resulting in a full-year decline of 25%. The
slowdown accelerated in the first half of 2009, with a decline of 65% over the previous year.
Japanese economy further deepening the dependency on profits from abroad
The total amount of Japan’s overseas M&As recorded an all-time high in 2008 with about
a 60% increase from the previous year, showing active developments while the world’s
M&As have been sluggish. Although a slowdown was inevitable in the first half of 2009,
global strategies of Japanese companies using cross-border M&As are being penetrated. The
percentage of overseas market revenue to operating profits of Japanese companies in FY2008
increased drastically to 53% from the previous year of 33%, of which the percentage from theAsia-Pacific region increased to 39% from the previous year of 12%. It had been said that
one-third of operating profits of Japanese companies come from abroad, of which one-third isfrom Asia. This has changed in 2008, with 50% coming from abroad, of which 80% comefrom Asia-Pacific. According to the questionnaire survey on JETRO members, the companies
identifying “expansion of overseas basis” or “new global expansion” as efforts against
financial crisis account for 20%, demonstrating the enthusiasm of Japanese companies for
global expansion even under a recession.

Outlook of WTO/FTA and Environmental Regulations
 WTO’s restraining effect on protectionism and FTA’s supplementary effect to bereviewed
Due partly to the downturn of the global economy in the aftermath of financial crisis,some countries have adopted measures to restrict trade. Not only have the Buy American
provisions of the United States increased tariffs on some products and introduced such
schemes as technical regulations/import licensing, but emerging countries, such as Russia,
Ukraine, India and Brazil have followed suit. The presence of the WTO should put the brakes
on such movement of protectionism and the conclusion of the Doha Round is significant.
Since raising tariffs up to bound rates does not constitute a violation under the WTO
agreements, many emerging nations resorted to raising tariffs. On the other hand, the FTA
225

obliges signatories to reduce tariffs in a phased manner over a certain period of time toachieve zero tariffs in the end. In this sense, the significance of an FTA that supplements the
WTO mechanisms is relatively increasing.
Entering the age of full-fledged FTA utilization with an establishment of ASEAN+1
in 2010In the Asia-Pacific region, the FTA network of ASEAN+1 is nearly complete, such as
ASEAN-China and ASEAN-Japan. Japanese companies residing in ASEAN countries areable to conduct virtually tax-free trade in almost all goods with Japan, China, South Korea,
India, Australia and New Zealand. In reality, a tax-free zone will be making progress in major
FTAs in the Asia-Pacific region since 2010. The importance of this region for Japanesecompanies is increasingly shifted from production/export centers to sales centers. The
utilization of an FTA is expected to further increase when a Japanese company sells productsin the ASEAN region. The Asia-Pacific region is now entering the age of full-fledge
utilization of FTAs.


Response to environmental regulations necessary for sustainable growth ofcompanies and tariff reduction on environmentally friendly products
Environmental awareness is increasing on a global scale. The European Union, the leaderof environmental product regulation regime, is creating new rules one after another. In
addition to the Directive on Waste Electrical and Electronic Equipment (WEEE/2005) and the
Directive on Restriction of the use of certain Hazardous Substances in electrical andelectronic equipment (RoHS/2006), the EU began a full-scale process for the registration ofchemical substances with the establishment of Registration, Evaluation, Authorization andRestriction of Chemicals (REACH/2007); and the EuP (Energy-using Products/2005)
Directive implements measures by product and function, such as standby/off mode or lighting,etc. Japanese companies had difficulties in dealing with EU regulations in the past. The
companies need to ensure and expand the market under the EuP framework by using energy
conservation technologies in which Japan has an advantage. Since EU rules are increasingly
adopted as international standards, it is important for Japanese companies to prepare for
global expansion of environmental product regulations by sufficiently responding to thoserules. Negotiations are underway at the Doha Round towards reduction/elimination of tariffs.
It is desirable to conclude the Doha Round at the earliest possible time, which would lead tothe expansion of the global environmental market.
Sales Strategy for Global Environmental Markets and Asian Service Markets
 Renewable energy sector and low-carbon sector with high growth potential
The global environmental market, according to BERR, is £3.46 trillion (¥605 trillion) in
FY2007/2008, corresponding to about 10% of the world’s GDP. Looking into the detail,while the traditional environmental sector, such as air pollution control, accounts for merely
20%, the renewable energy sector, such as photovoltaic (PV) power generation, accounts for
30%, and the low-carbon sector, such as electric vehicles, for 50%. The environmental
sectors with high growth potential are renewable energy and low carbon. Wind power
generation (particularly, offshore wind firms), PV generation and biomass generation are
identified as good prospective markets for renewable energy, and biofuels, electric/hybrid
vehicles, eco-housing, carbon capture and storage and energy-saving products are promisingmarkets for the low-carbon sector. Further active investment and support are desirable in the
future.


Necessary development of statistics on environmental industries and support for226

global expansion
According to the questionnaire survey conducted by JETRO, 40% of surveyed companies
are engaged in or planning for sales of environmentally friendly products/services and 30%
are engaged in or planning for exports. This has proved that Japanese companies areproactive about exporting environmentally friendly products. However, the percentage ofcompanies engaged in or planning for production/sales by setting up production/sales centersabroad is limited to a little more than 10%. The overseas production ratio of Japanesecompanies as a whole is 19%, showing that overseas production/sales are not well developed
despite the fact that Japan has authority in environmental business. This seems to be
attributable to the fact that the business cost is high because the environmental market has yet
to be developed and that the market includes immature industries. It may also be because
companies tend to produce domestically and export products in which they havetechnological superiority (product cycle theory) since there are many technology- andcapital-intensive industries in the renewable energy sector and low-carbon sector. However,in the wake of the financial crisis, many countries are making efforts to improve theircompetitiveness in the environmental industry. In order to expand the share in the overseas
environmental market where competition will be intense, Japanese corporations need tocontrive a global business strategy that includes overseas production, in addition to focusing
on exports.
It is necessary to accurately grasp the environmental market trends of each country of theworld in order to support global expansion in the environmental business. In other words, it isessential to develop environmental business statistics to allow us to understand, at a glance,
which country and which sector are growing (standardization by Japan). It is then necessary
to establish an evaluation mechanism for Japan’s environmental technologies, production
development capacity and service provision capacity by sector and to reflect the evaluation
results in policies. Furthermore, active efforts are needed in the collection/provision of
information pertaining to environment markets in each country, holding of symposiums,
participation in trade fairs, support for exports, support for global expansion, and support forbusiness matching. In the environmental sectors, such as PV generation, wind generation,
biofuels, electric vehicles, eco-housing, waste treatment and wastewater treatment, measuresof the central/local governments are directly and sensitively connected with the success ofbusiness.
Expanding value-added Japanese services at a low cost in Asia
The growth rate of the amount of services sold in emerging countries is higher than that ofproducts sold in recent years. The growth rate of service expenditures in BRICs and ASEAN
5 during the period between 2001 and 2008 reached 150%–200%, growing two to three times
faster than the United States and Germany. Japanese companies also pay a great deal ofattention to the growth of the service sector in emerging economies. According to thequestionnaire, service companies without a history of overseas sales in the past have shown
enthusiasm about active overseas sales much more than manufacturing industries have. Asian
countries are identified as the priority countries for sales designations, led by China, followedby Thailand, Taiwan, Hong Kong and Vietnam. Among the service industries, many
companies have shown enthusiasm about sales for information/communications, construction,and finance/insurance (Thailand, India and Russia). Amidst this tendency, demand isincreasing for Japan’s high quality/value-added services. More people in other countries haveaccepted the sales strategy of Japanese electronics retail stores, which combine a product andproduct knowledge, and provision of fine Japanese-style services offered by restaurants,
supermarkets, and convenience stores. In order to disseminate such value-added/high quality
services of Japan into low-price-oriented Asian markets affected by financial crisis, a227business model for low-cost service provision is required.
In other words, just like household appliances, in order to be accepted by the middle class,which is expanding in Asian emerging economies, a system needs to be created to provide
Japanese-style services at a low cost (bi-polar strategy of valued-added services and services
for the middle class). To that end, sufficient education/training for and utilization of local
staff seem essential.

228

Statistical Appendix

229

Annotation I: Product Category Definitions
1 Products
Product name
Total
Machinery and equipment
General equipment
Air conditioners
Mining and construction equipment
Machine tools
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
ChemicalsIndustrial chemicals
Pharmaceuticals and medical supplies
Plastics and rubber
Foodstuffs
Seafood
Grains
Wheat
Corn
Rice
Processed food products
Oils, fats, and other animal and vegetable products
Miscellaneous manufactured goods
Other raw materials and products
Iron ore
Mineral fuels etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum products
Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
Primary steel products
Steel products
CopperNickelAluminumLeadHS
00 - 99
84 - 91
84
8415
8429 - 8430，8431.42 - 8431.43，8474，8479.10
8456 - 8461
85
86 - 89
8702 - 8705
8703
8711
8707 - 8708，8407.31 - 8407.34
90 - 91
28 - 40
28 - 3830
39 - 40
1 - 11，16 - 24
03
10
1001
1005
1006
16 - 24
12 - 1564 - 67，92 - 97
25 - 27，41 - 63，68 - 832601
272701 - 2705，2708 - 2713，2715
2701
2711.112708 - 2710，2712 - 2713，2715
2709
50 - 63
54 - 55
61 - 62
72 - 83
72 - 73
72
73
7403
7502
7601
7801

2 IT Products
Product name(1) Computers and peripherals (total)
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals(2) Office equipment(3) Telecommunications equipment(4) Semiconductors and electronic components
Electronic tubes and semiconductors
Integrated circuits(5) Other electronic components
Flat-panel displays(6) Video equipment
Digital cameras
Reception apparatus for television(7) Audio equipment
Portable audio players(8) Measuring and testing equipment(9) Machines and apparatus for the manufacture of semiconductor
devices
IT parts
Finished IT products
Total IT equipment

HS8443.31，8471，8473
8443.318471
8473
8469，8470，9009
8517，8525.10，8525.20，8526
8540 - 8542
8540 - 8541
8542
8504，8518，8522，8523，8529，8532 - 8536
8529.90
8521，8525.30，8525.40，8525.80，8528，9006
8525.808528.71，8528.72
8519 - 8520
8519.818543，9014 - 9015，9024 - 9027，9030 - 9032
8486
8473，8486.90，(4)，(5)8443.31，8471，8486.10，8486.20，8486.30，8486.40，(2)，(3)，(6)，(7)，(8)IT parts + Finished IT products

230

Annotation II: Estimates of world trade value in 2008
The value of world trade in 2008 was estimated based on 53 economies’ trade statistics
available as of June 2009 and then by obtaining a grand total of the following three categories.
The trade value by products is the aggregation of (1) and (2).
(1) The total export (import) value of the 53 economies.
(2) For economies, for which statistics were not available (mainly emerging and developing
economies, approximately 120 in number), the value of imports from those economies
was extracted from the statistics (CIF basis) of the 53 economies and converted to FOB
basis figures (for imports by those areas, the export values [FOB basis] were converted to
CIF basis figures).
(3) For trade among economies, for which statistics were not available, data was extracted
from Direction of Trade Statistics (June 2009, IMF).
The 53 economies:
Japan, US, Canada, Mexico, Costa Rica, Panama, Venezuela, Colombia, Peru, Chile,
Argentina, Brazil, China, Hong Kong, Taiwan, South Korea, Singapore, Thailand, Malaysia,
Indonesia, Philippines, Vietnam, India, Australia, New Zealand, UK, Germany, France, Italy,
Spain, Netherlands, Belgium, Denmark, Sweden, Finland, Switzerland, Austria, Poland,
Czech Republic, Hungary, Romania, Greece, Ireland, Lithuania, Luxemburg, Norway,
Portugal, Slovakia, Slovenia, Russia, Ukraine, Turkey, and South Africa.
Annotation III: Estimates of global direct investment value in 2008
Global inward direct investment in 2008 was estimated as described below.
(1) Figures were collected for the following 93 countries and regions for which 2008 data
were available.
i) For the following 51 countries and regions, each country or region’s internationalbalance of payments statistics were used: the United States, Canada, Australia,
New Zealand, the United Kingdom, Austria, Belgium, Finland, France, Germany,
Greece, Ireland, Italy, Portugal, Luxemburg, the Netherlands, Spain, Denmark,Sweden, Cyprus, the Czech Republic, Estonia, Slovakia, Slovenia, Hungary, Latvia,
Lithuania, Malta, Poland, Bulgaria, Norway, Switzerland, China, Taiwan, Hong
Kong, South Korea (ROK), Malaysia, the Philippines, Singapore, Thailand, India,
Brazil, Chile, Colombia, Mexico, Venezuela, Russia, Israel, Turkey, Iceland, andEgypt. For countries that released two types of statistical values, i.e., one includingtransactions via special purpose enterprises (SPEs) and the other not including suchtransactions, the former was used. Data valued in local currencies were converted
to US dollars using the IMF’s annual average rate.
ii) For Japan, the balance of payments statistics released by the Bank of Japan wereconverted to US dollars at the average Bank of Japan interbank rate during theterm.
iii) For the following 16 countries, data from the IMF’s Balance of Payments Statistics(BOPS, June 2009) were used: Azerbaijan, Belize, Bosnia and Herzegovina,
Croatia, Georgia, Indonesia, Kazakhstan, Moldova, Panama, South Africa, Uganda,
Ukraine, Belarus, Mozambique, Romania, and Argentina.
iv) For the following 25 countries and regions, data from the Economic Commission
231for Latin America and the Caribbean (ECLAC) were used: Anguilla (a British
overseas territory), Antigua and Barbuda, Uruguay, Peru, El Salvador, Trinidad
and Tobago, Honduras, the Bahamas, Guatemala, Nicaragua, Ecuador, Bolivia,
Costa Rica, the Dominican Republic, Guyana, Grenada, Jamaica, Suriname, Saint
Kitts and Nevis, Saint Vincent and the Grenadines, Saint Lucia, Dominica, Haiti,
Paraguay, and Montserrat (a British overseas territory).
(2) For 59 developing countries and regions, for which data for 2008 were not available, but
those for 2007 were listed in the BOPS (June 2009), 2007 data from the BOPS were usedas data for estimation purposes.
(3) As a result of the above steps, 2008 data on inward direct investment values wereavailable for the following countries and regions: 31 developed countries and regions(corresponding to the IMF’s classification of Advanced Economies: the United States,
Canada, Australia, Japan, New Zealand, EU15, Iceland, Norway, Switzerland, Cyprus,
Malta, Slovenia, Israel, South Korea, Singapore, Hong Kong, and Taiwan; for an
aggregate sum of US$1.1837 trillion), and 62 developing countries and regions (countries
other than the 31 developed countries and regions; for an aggregate sum of US$594.3
billion). The aggregate sum for the 62 countries and regions in 2007 accounted for 91.3%
of the aggregate sum for 121 developing countries, for which data for 2007 wereavailable.
(4) The aggregate sum for the 31 developed countries and regions was used as the inward
direct investment value for developed countries in 2008, and that for the 62 developing
countries and regions was divided by the percentage of 91.3% for 2007 to obtain an
estimated 100% value, which was used as the direct investment value for developing
countries in 2008. The aggregate sum for developed and developing countries was used as
the total global inward direct investment value.
Incidentally, the same method was used for the outward FDI value: From the 31 developed
countries and regions, for which 2008 data were available (a sum of US$1.9196 trillion) and38 developing countries, for which 2008 data were also available (US$242.2 billion, with the2007 aggregate sum for the 38 countries accounting for 91.0% of the aggregate sum for the
81 countries and regions, for which the data for 2007 were available), the sum was estimatedfor developed countries, developing countries, and the world total, respectively.

232

Table 1 GDP growth rate and contribution rate by country and region(Unit: %)
2005
2006
2007
2008
Growth rate Contribution Growth rate Contribution Growth rate Contribution Growth rate Contribution
2.9
0.7
2.8
0.6
2.0
0.4
1.1
0.2
2.2
0.5
3.4
0.8
3.1
0.7
1.1
0.3
1.9
0.1
2.0
0.1
2.4
0.2
-0.6
0.0
8.1
1.3
9.1
1.5
10.1
1.8
6.6
1.2
10.4
0.9
11.6
1.1
13.0
1.3
9.0
1.0
4.0
0.1
5.2
0.1
5.1
0.1
2.2
0.0
5.9
0.2
6.2
0.2
6.6
0.3
4.5
0.2
4.6
0.0
5.2
0.0
4.9
0.0
2.6
0.0
7.3
0.0
8.4
0.0
7.8
0.0
1.1
0.0
5.3
0.0
5.8
0.0
6.3
0.0
4.6
0.0
8.4
0.0
8.2
0.0
8.5
0.0
6.2
0.0
9.2
0.4
9.8
0.4
9.3
0.4
7.3
0.3
2.8
0.0
2.8
0.0
4.0
0.0
2.1
0.0
2.8
0.0
1.9
0.0
3.2
0.0
0.3
0.0
4.7
0.4
5.7
0.5
5.7
0.5
4.2
0.4
3.2
0.1
4.0
0.1
5.7
0.2
5.1
0.1
6.0
0.2
6.6
0.2
5.4
0.2
2.9
0.1
6.4
0.2
7.7
0.2
8.1
0.3
5.6
0.2
5.8
0.2
5.7
0.2
6.3
0.2
5.9
0.2
5.8
0.2
6.1
0.2
6.2
0.2
5.2
0.2
4.5
4.5
5.1
5.1
5.2
5.2
3.2
3.2

US
EU27
Japan
East Asia
China
South Korea
ASEAN10
ThailandSingapore
Malaysia
Vietnam
India
Australia
New ZealandCentral and South
BrazilCentral and Eastern
RussiaMiddle East
AfricaWorld
For reference:
2.6
1.6
3.0
1.8
2.7
1.6
0.9
Developed countries
7.1
2.9
8.0
3.3
8.3
3.5
6.1
Developing countries
Asia Pacific
6.5
1.8
7.3
2.0
8.1
2.3
5.2
ASEAN +3
6.3
1.4
7.1
1.6
8.1
1.8
5.0
BRICs including
8.3
1.6
9.4
1.9
10.3
2.2
7.5
South Africa
BRICs not including
8.4
1.6
9.5
1.9
10.5
2.1
7.6
South Africa(Notes) (1) The world growth rate was calculated by the IMF using purchasing power parity weighting.
(2) Each country or region's contribution rate was calculated using 2008 prices and purchasing power parity weighting.
(3) East Asia includes the ASEAN10, China, the ROK (South Korea), Hong Kong, and Taiwan. Asia Pacific includes ASEAN+6.
(4) Figures may differ from those found elsewhere due to revisions, differences in source data, and other factors.
(5) Developed and developing countries are as defined in the WEO (IMF).
(Source) Based on WEO (IMF) data.

0.5
2.7
1.5
1.2
1.7
1.6

Table 2 World Export Matrix (2008)(Unit: US$ million)
World
NAFTA

EU27

Japan

East Asia

ASEAN+6

US
World(Notes)

16,490,225
2,052,963
1,323,884
5,930,873
825,005
3,608,665
4,236,032
3,822,258
1,512,361
1,055,582
7,276,859

2,730,572
988,439
412,453438,303
159,754575,999
700,461
656,563
313,300
124,030
1,774,718

2,055,361
553,758
367,340
139,022499,906
606,108568,238
273,129
110,793
1,232,541

APEC
ASEAN+3

6,165,445
328,026
275,290
3,972,403
110,460
545,522647,183
583,971
302,286
118,641
1,282,836

709,192
80,47866,57962,398286,009
303,863
255,304
120,546
107,964
430,828

3,195,488
247,000
219,742
284,093370,287
1,461,543
1,600,775
1,470,653
420,904
496,877
2,215,467

3,652,474
328,842
284,688385,462
315,860
1,537,769
1,664,022
1,477,037
370,706
594,6432,404,463

3,222,909
278,005
240,994
297,704
288,136
1,370,905
1,459,729
1,301,192
311,418
519,698
2,121,714

NAFTA
US
EU27
Japan
East Asia
ASEAN + 6
ASEAN + 3
China
ASEAN
APEC
(1) Exports from each economy to Taiwan were converted to FOB figures by multiplying 0.9 by Taiwan's CIF imports.
(2) East Asia consists of China, South Korea, Hong Kong, Taiwan, and ASEAN.
(3) ASEAN + 6 includes ASEAN, Japan, China, South Korea, India, Australia, and New Zealand.
(4) ASEAN + 3 includes ASEAN, Japan, China, and South Korea.

China
1,160,963
84,49671,457
115,573
125,039
466,984
391,474
341,839
110,176
741,238

ASEAN
953,616
73,857
68,151
81,838103,656
489,072
570,611531,264
115,660
263,426
691,475

7,211,203
1,377,401
751,301
991,442569,8422,461,673
2,793,814
2,549,573
920,190
771,425
4,685,304(5) APEC includes Japan, Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea,
Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, US, and Vietnam (21 economies in total).
(Sources) Prepared based on Direction of Trade Statistics (IMF) and Taiwan's trade statistics.

233

Table 3 World Trade by Country and Region(Unit: US$ million, %)Exports
2006
2007
2008
2006
Value
Growth rate
Value
Growth rate
Value
Growth rate
Value
Growth rate
North America
1,424,932
12.5
1,583,125
11.1
1,744,016
10.2
2,448,828
10.9
US
1,036,635
14.4
1,162,479
12.1
1,287,442
10.7
2,059,932
10.8
Canada388,2977.6
420,6468.3
456,5748.5
388,896
11.2
Europe5,196,553
13.6
6,069,587
16.8
6,848,693
12.8
5,204,648
15.2
EU154,164,918
11.9
4,801,884
15.3
5,284,156
10.0
4,206,767
13.2
Germany
1,109,183
14.4
1,322,465
19.2
1,464,715
10.8
907,678
17.0
Netherlands
464,000
14.3
551,78918.9
633,65014.8
417,213
14.9
France495,875
7.1
552,306
11.4
606,8149.9
541,964
7.6
Italy
417,32912.0
500,35419.9
539,5917.8
442,71915.1
UK447,16313.5
444,205-0.7
483,5678.9
566,086
12.7
Belgium
367,0399.8
432,36417.8
476,978
10.3
352,017
10.5
Spain
213,765
11.0
253,44418.6
268,982
6.1
328,906
14.0
Sweden147,91113.6
169,079
14.3
183,979
8.8
127,724
14.7
Austria
136,9029.5
163,840
19.7
181,385
10.7
137,356
8.0
Ireland108,800-0.7
121,527
11.7
124,046
2.1
73,163
6.8
Denmark
92,636
9.0
102,82111.0
116,928
13.7
85,580
13.4
Finland77,30817.2
90,11016.6
96,817
7.4
69,467
17.9
Portugal
43,365
13.7
51,53218.8
56,0688.8
66,703
9.1
Luxemburg
22,86022.1
22,435-1.9
25,37413.1
26,554
21.7
Greece20,78321.0
23,613
13.6
25,262
7.0
63,638
17.7
Poland110,92524.3
140,44626.6
168,72820.1
127,240
25.5
Czech Republic
95,053
21.9
122,77729.2
146,733
19.5
93,352
22.3
Hungary
75,39020.0
95,59326.8
107,993
13.0
78,386
18.0
Slovakia
41,96831.4
58,33639.0
71,02821.8
44,94927.4
Romania
32,48717.5
40,56824.9
49,55022.1
51,341
27.3
Slovenia
23,25921.1
30,144
29.6
34,211
13.5
24,186
19.2
Lithuania
14,15720.4
17,173
21.3
23,72538.2
19,418
25.4
Switzerland
147,884
13.1
172,12216.4
200,336
16.4
141,468
11.9
Norway122,123
17.7
136,468
11.7
164,146
20.3
64,27815.9
Asia
3,400,432
17.0
3,940,057
15.9
4,444,780
12.8
3,121,325
15.8
Japan
647,290
8.2
712,735
10.1
775,918
8.9
579,294
11.7
East Asia
2,581,499
19.1
3,025,784
17.2
3,429,242
13.3
2,295,232
16.2
China
969,324
27.2
1,218,155
25.7
1,428,869
17.3
791,794
19.9
South Korea
325,465
14.4
371,489
14.1
422,00713.6
309,383
18.4
Hong Kong
322,664
10.4
349,6638.4
370,654
6.0
335,753
11.7
Taiwan213,004
12.7
234,71010.2
243,233
3.6
202,038
11.2
ASEAN
751,04317.4
851,766
13.4
964,47813.2
656,264
14.9
Singapore
271,91618.4
299,404
10.1
338,14312.9
238,900
19.4
M alaysia
160,845
14.1
176,311
9.6
199,759
13.3
131,223
14.5
Thailand
130,62118.9
163,11924.9
177,846
9.0
128,652
8.9
Indonesia
100,799
17.7
114,101
13.2
137,02020.1
61,065
5.8
Vietnam
39,82622.7
48,561
21.9
62,68529.1
44,891
22.1
Philippines
47,03714.7
50,2706.9
49,025-2.5
51,53317.0
India
121,259
21.7
147,56421.7
178,034
20.6
172,87624.9
153,885
14.3
178,460
16.0
227,60227.5
188,791
9.6
Oceania
123,47816.6
141,379
14.5
186,560
32.0
147,532
11.9
Australia
22,4493.3
26,95820.1
30,571
13.4
27,543
1.0
New Zealand
674,74518.2
757,41212.3
883,56516.7
661,617
19.3
South and Central America
249,99716.7
271,958
8.8
292,666
7.6
284,589
15.5
M exico137,470
16.2
160,649
16.9
197,94223.2
101,551
24.3
Brazil
46,546
15.3
55,78019.8
70,132
25.7
34,154
19.1
Argentina
55,88444.8
65,788
17.7
69,5805.8
34,75016.7
Chile23,73012.5
29,07622.5
37,131
27.7
25,468
20.5
Colombia
23,431
37.8
27,58817.7
31,20813.1
15,327
22.6
Peru
Costa Rica
8,453
18.2
9,569
13.2
9,745
1.8
12,74038.9
Panama
985
3.1
1,079
9.6
1,125
4.3
4,657
13.3
Russia, CIS
317,33723.4
395,97024.8
533,48334.7
230,362
35.4
Russia226,524
22.5
279,724
23.5
367,573
31.4
128,151
40.1
38,36811.9
49,24828.4
67,00336.1
45,035
24.6
Ukraine569,49425.4
642,90212.9
901,93840.3
471,740
15.6
M iddle East
85,602
16.6
107,38925.5
131,93422.9
139,779
19.9
Turkey323,477
22.5
374,30715.7
488,60230.5
285,106
16.8
Africa57,898
11.6
69,86820.7
80,20814.8
75,73023.9
South Africa(Notes) (1) Estimated for regions other than North America. See statistical appendix for the estimating method.
(2) ASEAN includes the following six countries: Singapore, Thailand, M alaysia, Indonesia, the Philippines, and Vietnam.
(3) East Asia includes the following 10 economies: China, South Korea, Hong Kong, Taiwan, and the six ASEAN countries.
(Sources) Prepared based on statistics from individual economies.

234

Imports
2007
Value
Growth rate
2,597,051
6.1
2,174,402
5.6
422,649
8.7
6,167,280
18.5
4,883,816
16.1
1,056,059
16.3
493,40218.3
620,27814.5
511,976
15.6
636,059
12.4
413,666
17.5
389,74818.5
152,81219.6
163,282
18.9
83,922
14.7
98,666
15.3
81,774
17.7
78,34517.5
27,553
3.8
76,272
19.9
166,17630.6
118,481
26.9
95,73522.1
60,42434.4
70,56837.4
31,63230.8
24,461
26.0
161,28814.0
80,33625.0
3,584,078
14.8
621,0847.2
2,656,976
15.8
956,26120.8
356,84615.3
370,733
10.4
218,648
8.2
754,48815.0
263,24710.2
147,06512.1
151,703
17.9
74,47322.0
62,682
39.6
55,3177.3
217,54325.8
225,737
19.6
175,47418.9
32,31417.3
781,40818.1
313,379
10.1
134,02332.0
44,70730.9
42,71422.9
32,58728.0
20,46433.5
14,095
10.6
6,729
44.5
328,14042.4
189,61948.0
60,67034.7
587,96524.6
170,39921.9
357,750
25.5
88,804
17.3

2008
Value
Growth rate
2,791,097
7.5
2,337,379
7.5
453,719
7.4
6,997,510
13.5
5,422,378
11.0
1,204,290
14.0
573,63916.3
706,558
13.9
556,190
8.6
669,499
5.3
470,44613.7
402,972
3.4
167,659
9.7
183,663
12.5
83,383-0.6
110,918
12.4
92,08912.6
90,21415.1
31,60914.7
79,2493.9
204,95323.3
141,671
19.6
108,21713.0
73,42521.5
82,971
17.6
37,06017.2
31,08627.1
183,200
13.6
87,691
9.2
4,274,278
19.3
756,086
21.7
3,123,827
17.6
1,131,469
18.3
435,275
22.0
393,443
6.1
239,666
9.6
923,97422.5
319,74821.5
157,086
6.8
180,58319.0
129,19773.5
80,71428.8
56,646
2.4
292,84834.6
271,800
20.4
212,080
20.9
35,916
11.1
947,841
21.3
343,165
9.5
192,441
43.6
57,41328.4
56,475
32.2
39,11820.0
29,98246.5
15,289
8.5
8,896
32.2
446,805
36.2
255,57434.8
85,53541.0
727,32623.7
201,706
18.4
451,07026.1
101,176
13.9

Table 4 World Exports by Product (2008)(Unit: US$ million, %)Total
Machinery and equipment
General equipment
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
ChemicalsIndustrial chemicals
Pharmaceuticals and medical
supplies
Plastics and rubber
Foodstuffs
Seafood
Grains
Wheat
Corn
Rice
Processed food products
Oils, fats, and other animal and vegetable products
Miscellaneous manufactured goods
Iron ore
Mineral fuels etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum
Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
CopperNickelAluminum
Lead

World
Value
Growth rate
15,890,769
14.9
6,024,840
7.3
1,977,994
8.6
1,922,179
6.0
1,647,130
6.3
781,551
2.6
632,596
1.8
22,73810.0
334,458
2.3
477,14510.4
2,008,634
12.9
1,376,563
15.3

US
Value
Growth rate
1,287,442
10.7
615,076
1.9
212,8487.0
153,210
3.1
177,669-6.1
66,504
9.6
50,694
13.0
1,630
16.0
37,239-8.2
71,3486.3
205,272
11.9
142,387
14.2

EU15
Value
Growth rate
5,284,156
10.0
2,182,969
6.2
822,5127.3
466,5545.0
728,025
4.9
361,210-0.5
294,741
-2.7
7,833
10.6
142,425
1.6
165,878
9.4
985,66410.6
715,200
12.2

Japan
Value
Growth rate
775,918
8.9
521,4117.1
151,482
8.8
138,650
2.7
195,966
9.4
131,301
8.5
115,439
6.7
5,797
-7.7
33,176
4.2
35,313
5.3
88,224
6.6
52,650
4.7

China
Value
Growth rate
1,428,869
17.3
727,791
16.7
268,740
17.5
342,082
13.9
70,841
28.6
9,408
26.7
2,993
6.4
4,810
25.8
16,05919.8
46,12817.0
110,058
25.5
68,90634.8

ASEAN4Value
Growth rate563,65111.9
209,003
2.2
75,136
0.5
96,986-1.3
27,68420.1
12,503
25.9
6,816
30.7
782
60.6
8,350
16.5
9,197
8.6
66,017
13.5
23,39214.0

Asia NIEs
Value
Growth rate
1,374,037
9.5
807,883
5.7
176,4375.5
442,169
2.0
111,91118.8
37,368-4.5
33,480
-7.7
813
-2.7
18,631
10.7
77,366
11.9
142,651
5.9
72,8544.7

401,345

16.2

34,21217.0

271,663

13.6

2,981

21.0

2,881

40.1

649

7.1

6,511

-9.3

632,071
970,926
72,053
98,101
43,15026,807
16,682424,219
156,701
448,057
68,7932,682,668
2,562,004
96,55890,9082,166,633
1,418,581
640,90273,743360,873
1,343,078
828,907
55,297
14,732
56,571
5,339

7.9
17.0
4.5
40.7
47.4
32.2
41.2
15.3
45.1
10.6
63.4
44.3
44.4
77.4
56.0
43.4
43.1
3.5
-1.1
4.6
11.5
21.7
-2.5
-39.3
-0.9
-5.9

62,886
92,2093,803
28,906
11,301
13,862
2,206
28,42723,86031,544
1,245
76,94073,444
7,966
322
58,711
2,296
22,575
3,852
3,681
74,81441,553
416
266
1,070
123

7.1
23.6
-1.7
37.0
35.6
37.1
58.8
16.7
48.0
8.4
73.1
82.1
85.3
91.9
143.0
91.8
106.0
2.2
2.9
1.7
17.8
29.7
-0.1
9.7
-1.7
48.3

270,464
433,221
18,68919,80910,831
3,273
1,785
214,799
35,196
154,207
4,520
381,260
318,646
5,004
1,028
281,378
59,642
174,052
21,161
94,882505,668
322,635
7,319
2,785
11,883
1,378

6.4
14.3
4.2
44.2
62.5
41.5
38.4
12.8
35.5
8.0
47.3
40.2
37.9
46.4
421.2
36.3
28.2
4.6
-4.1
9.8
7.7
12.9
5.4
-37.8
-0.5
1.6

35,574
3,967
1,150
20
0
0
20
2,323
294
8,168
0
18,707
17,8012
0
17,344
0
8,767
3,910
416
71,51853,049
3,266
60
61
85

9.5
10.1
-0.9
97.1
422.8
19.9
97.2
13.8
13.7
5.0
-22.9
101.2
107.0
62.6
-29.5
111.0
2,148.4
3.9
3.1
13.8
19.6
25.7
-1.1
40.8
-18.7
10.7

41,15335,703
5,187
673
31
73
482
18,2183,148
120,4302
31,40230,1075,238
018,041
2,749
179,292
15,647113,021
143,808
101,838
805
149
2,135
124

12.6
7.4
8.9
-65.6
-93.7
-91.5
0.1
10.5
42.2
19.3
-77.4
57.7
61.1
58.9
-91.2
53.1
66.1
8.1
10.5
4.0
24.4
32.8
-15.5
-72.2
59.5
-79.6

42,62439,504
5,552
6,477
19
249
6,190
20,867
34,135
12,640226
88,95288,354
10,57825,11550,45827,62622,021
5,362
12,32030,86814,404
2,620
0
697
54

13.3
23.6
6.0
66.1
13.8
90.8
65.8
21.6
50.7
3.3
21.9
41.4
42.8
57.0
44.4
41.9
35.5
0.2
-3.8
1.4
8.2
16.4
-18.3
-85.4
4.1
47.7

69,797
17,075
3,194
60
0
0
58
9,599
1,461
35,661
1
120,309
119,0386
0
118,14153
65,286
11,51730,52191,60058,720
1,434
957
1,204
427

7.2
20.1
18.1
66.9
-68.7
4.8
69.3
17.2
33.5
6.9
-43.1
49.7
50.4
376.2
150.0
50.8
-15.3
-4.6
-7.4
-4.0
9.3
18.2
-22.6
-3.8
-11.9
-1.1

IT products(Unit: US$ million, %)Total IT equipment
IT parts
Finished IT products
Computers and peripherals (total)
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunications equipment
Semiconductors and electronic components
Electronic tubes and semiconductors
Integrated circuits
Other electric and electronic components
Flat-panel displays
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment
Machines and apparatus for the manufacture ofsemiconductor devices

World
Value
Percentage
2,065,531
13.0
1,021,064
6.4
1,044,468
6.6
456,999
2.9
18,4980.1
287,0731.8
151,428
1.0
5,087
0.0
337,903
2.1
454,485
2.9
95,165
0.6
359,320
2.3
408,389
2.6
61,7080.4
193,695
1.2
41,331
0.3
79,368
0.5
6,821
0.0
5,647
0.0
170,263
1.1
31,889

0.2

US
Value
Percentage
189,716
14.7
98,3097.6
91,407
7.1
39,4003.1
464
0.0
23,787
1.8
15,1501.2
597
0.0
23,4601.8
50,658
3.9
8,892
0.7
41,766
3.2
30,421
2.4
3,166
0.2
6,083
0.5
1,558
0.1
1,696
0.1
666
0.1
512
0.0
30,977
2.4
7,454

0.6

EU15
Value
Percentage
458,862
8.7
197,3543.7
261,508
4.9
105,398
2.0
5,944
0.1
70,5201.3
28,9340.5
922
0.0
77,113
1.5
60,976
1.2
18,5920.4
42,3840.8
106,082
2.0
8,326
0.2
31,262
0.6
7,462
0.1
11,808
0.2
2,073
0.0
1,730
0.0
67,615
1.3
7,421

0.1

Japan
Value
Percentage
142,997
18.4
84,721
10.9
58,275
7.5
7,768
1.0
980
0.1
3,601
0.5
3,187
0.4
114
0.0
8,660
1.1
44,524
5.7
11,6801.5
32,844
4.2
34,615
4.5
8,904
1.1
16,1642.1
12,354
1.6
799
0.1
144
0.0
115
0.0
17,266
2.2
13,742

1.8

China
Value
Percentage
422,08229.5
145,51410.2
276,569
19.4
145,522
10.2
7,910
0.6
105,6217.4
31,991
2.2
1,446
0.1
91,993
6.4
42,8443.0
18,113
1.3
24,731
1.7
70,481
4.9
10,8200.8
56,923
4.0
10,8180.8
14,141
1.0
1,423
0.1
1,266
0.1
10,8840.8
567(1) See statistical appendix for the definition of products.
(2) Value of world exports based on JETRO estimates.
(3) Asia NIEs include South Korea, Hong Kong, Singapore, and Taiwan.
(4) For IT products, since comparison of time series data with the past is difficult due to major revisions to HS Codes in 2007, 2008 levels and percentages of total export (import) value are shown.
(Sources) Same as Table 3.
(Notes)235

0.0

ASEAN4
Value
Percentage
131,934
23.4
78,01313.8
53,921
9.6
49,0928.7
444
0.1
32,015
5.7
16,632
3.0
505
0.1
6,894
1.2
42,770
7.6
8,298
1.5
34,471
6.1
18,597
3.3
3,319
0.6
8,857
1.6
1,629
0.3
2,299
0.4
362
0.1
117
0.0
4,789
0.8
68

0.0

Asia NIEs
Value
Percentage
480,29635.0
337,04224.5
143,254
10.4
73,749
5.4
1,333
0.1
25,073
1.8
47,3443.4
938
0.1
79,617
5.8
193,690
14.1
23,854
1.7
169,836
12.4
95,475
6.9
20,448
1.5
19,899
1.4
5,349
0.4
2,698
0.2
1,663
0.1
1,506
0.1
13,252
1.0
2,013

0.1

Table 5 World Imports by Product (2008)(Unit: US$ million, %)Total
Machinery and equipment
General equipment
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
ChemicalsIndustrial chemicals
Pharmaceuticals and medical
supplies
Plastics and rubber
Foodstuffs
Seafood
Grains
Wheat
Corn
Rice
Processed food products
Oils, fats, and other animal and vegetable products
Miscellaneous manufactured goods
Iron ore
Mineral fuels etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum
Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
CopperNickelAluminum
Lead

World
Value
Growth rate
16,832,338
15.2
6,274,623
7.3
2,043,804
9.1
2,093,021
6.0
1,636,505
6.2
815,793
2.4
653,933
1.6
22,753
7.9
345,2312.1
501,766
9.6
2,139,600
13.5
1,475,975
15.3

US
Value
Growth rate
2,337,379
7.5
869,205-1.8
276,780-0.3
279,541
1.1
244,435-8.2
154,555-10.4
139,995
-6.2
3,469
-1.1
52,800-10.7
68,4495.7
239,41111.9
177,039
14.3

EU15
Value
Growth rate
5,422,378
11.0
1,907,763
4.2
653,155
5.3
492,291
4.5
619,335
1.6
304,831-4.0
253,679
-5.5
9,934
4.1
136,264-1.4
142,9829.3
825,593
9.6
589,372
11.0

Japan
Value
Growth rate
756,086
21.7
183,414
5.3
59,058
6.2
77,715
5.5
22,580
3.7
7,219
-8.4
-11.3
6,820
714
21.9
6,851
17.6
24,061
3.6
65,46920.3
47,920
19.9

China
Value
Growth rate
1,131,469
18.3
524,737
7.5
138,70711.5
266,639
3.5
39,83313.7
15,13438.9
14,03642.8
610.9
12,414
4.8
79,557
12.3
137,707
11.6
76,961
12.3

ASEAN4Value
Growth rate523,51222.2
207,330
14.9
67,67916.7
100,746
7.8
27,913
39.3
7,456
51.9
4,117
38.5
429
-4.5
8,232
42.2
10,992
21.7
63,98726.6
42,33029.4

Asia NIEs
Value
Growth rate
1,388,132
14.8
601,761
4.3
162,183
7.2
348,619
2.3
39,672
15.4
9,827
11.6
8,306
8.5
358
-6.4
6,834
5.4
51,2871.1
121,145
7.5
82,402
8.9

415,620

14.1

58,1586.9

210,791

13.6

9,988

20.2

4,886

41.3

2,967

11.9

7,753

12.2

663,625
1,029,273
82,309114,00250,15031,722
18,777444,584
171,087
501,722
109,195
2,963,278
2,829,274
125,710
108,132
2,341,917
1,569,973
649,435
75,392
367,347
1,398,385
872,483
55,49016,97958,846
5,822

9.5
17.5
6.0
44.6
52.6
31.9
47.4
15.8
49.3
7.3
63.7
43.5
43.8
73.2
53.8
42.1
42.9
5.4
0.6
6.8
11.6
22.4
-2.2
-36.8
-11.2
-2.9

62,372
96,68812,015
3,086
1,200
389
605
47,5009,095
120,016
1,026
546,622
540,8022,270
4,090
491,458
392,819
106,556
4,273
81,222
138,146
77,641
5,910
2,969
9,155
740

5.6
6.7
1.4
69.3
115.4
35.9
41.5
7.1
45.4
-2.6
72.7
34.8
35.1
18.6
-34.2
37.7
43.8
-3.3
-4.3
-3.2
7.2
21.9
-10.0
-32.3
-0.6
15.7

236,221433,379
32,71022,885
9,084
6,384
2,807
193,40952,490184,617
16,043860,891
780,353
33,655
17,628609,978
411,927
223,20918,513
151,773493,828
298,791
18,6886,595
22,768
1,958

6.2
13.0
1.8
27.7
27.1
10.6
58.5
15.2
42.4
7.3
48.1
40.7
41.2
57.5
52.2
38.2
38.8
4.9
-4.0
7.8
4.0
11.1
-5.4
-40.2
-11.2
-10.2

17,54960,456
11,604
10,319
3,262
5,602
408
20,941
7,850
20,854
13,021
266,405
265,71029,30145,163
178,563
154,447
31,755
1,278
24,28741,014
17,591
733
1,043
8,389
69

21.5
16.9
13.5
55.5
99.8
45.8
12.7
6.7
40.8
5.1
47.5
54.0
54.4
97.9
68.8
46.9
48.3
8.2
15.1
7.5
8.4
26.1
-2.7
-46.3
4.9
-19.5

60,747
16,246
3,657
699
7
12
184
6,089
34,1805,024
59,291
168,643
167,350
3,544
931
160,720
128,960
24,944
6,175
2,075
79,63135,076
10,249
2,748
564
118

10.6
23.3
6.2
35.7
-64.5
84.9
-15.6
34.0
70.8
11.2
75.4
61.1
62.5
46.3
55.0
65.0
61.8
-1.7
-6.0
14.6
2.6
13.0
-4.4
-28.9
-10.4
33.9

21,65730,669
2,995
6,991
3,401
814
2,744
12,641
5,007
3,836
1,015
97,71996,5272,979
688,09354,793
11,464
2,919
1,071
61,47642,177
3,995
91
2,595
452

21.4
26.9
21.1
57.4
53.9
-1.7
98.7
23.9
56.3
27.0
97.9
34.5
34.5
88.1
111.5
32.5
30.0
40.3
35.6
24.3
33.4
48.2
11.4
-32.4
6.1
-6.3

38,74347,220
5,861
6,823
1,869
4,119
740
17,8296,206
33,991
6,697
306,434
302,915
20,922
26,620247,869
155,242
44,895
4,853
24,772
117,51174,261
8,083
1,745
5,340
611

4.4
20.6
4.6
47.2
52.1
47.9
35.3
18.0
39.7
7.9
59.2
50.1
51.2
85.5
57.1
48.3
44.5
-4.6
-7.8
-3.3
18.6
39.0
-4.3
-43.4
-2.5
-20.5

IT products(Unit: US$ million, %)Total IT equipment
IT parts
Finished IT products
Computers and peripherals
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunications equipment
Semiconductors and electronic components
Electronic tubes and semiconductors
Integrated circuits
Other electric and electronic components
Flat-panel displays
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment
Machines and apparatus for the manufacture ofsemiconductor devices(Notes and Sources) Same as Table 4.

World
Value
Percentage
2,236,452
13.3
1,136,616
6.8
1,099,829
6.5
476,715
2.8
20,2320.1
300,355
1.8
156,128
0.9
6,055
0.0
364,577
2.2
535,027
3.2
93,2060.6
441,8222.6
439,391
2.6
76,8380.5
197,063
1.2
45,0630.3
82,419
0.5
9,381
0.1
7,595
0.0
181,105
1.1
27,138

0.2

US
Value
Percentage
320,328
13.7
91,5833.9
228,7459.8
89,010
3.8
5,261
0.2
62,736
2.7
21,012
0.9
1,220
0.1
71,872
3.1
28,451
1.2
6,624
0.3
21,8260.9
40,801
1.7
2,796
0.1
57,9792.5
10,2160.4
30,452
1.3
1,525
0.1
1,323
0.1
25,329
1.1
4,142

0.2

EU15
Value
Percentage
535,4879.9
207,368
3.8
328,112
6.1
153,160
2.8
7,903
0.1
105,397
1.9
39,859
0.7
1,480
0.0
95,063
1.8
67,134
1.2
29,9360.6
37,1980.7
98,4301.8
12,0950.2
62,546
1.2
13,3970.2
27,435
0.5
3,642
0.1
2,977
0.1
50,435
0.9
3,596

236

0.1

Japan
Value
Percentage
90,348
11.9
46,777
6.2
43,571
5.8
20,319
2.7
1,591
0.2
14,074
1.9
4,654
0.6
267
0.0
10,756
1.4
23,803
3.1
3,150
0.4
20,653
2.7
17,686
2.3
4,582
0.6
5,752
0.8
1,638
0.2
1,150
0.2
432
0.1
323
0.0
8,833
1.2
2,498

0.3

China
Value
Percentage
293,28025.9
221,625
19.6
71,655
6.3
38,9753.4
496
0.0
22,8702.0
15,6081.4
190
0.0
19,452
1.7
147,94413.1
17,3591.5
130,585
11.5
57,564
5.1
8,160
0.7
5,299
0.5
3,184
0.3
115
0.0
77
0.0
47
0.0
17,610
1.6
6,170

0.5

ASEAN4
Value
Percentage
110,872
21.2
86,60516.5
24,267
4.6
21,808
4.2
162
0.0
6,676
1.3
14,970
2.9
348
0.1
8,084
1.5
48,454
9.3
4,730
0.9
43,7248.4
23,149
4.4
3,958
0.8
1,954
0.4
510
0.1
173
0.0
133
0.0
52
0.0
6,781
1.3
161

0.0

Asia NIEs
Value
Percentage
391,69428.2
279,865
20.2
111,829
8.1
57,545
4.1
1,013
0.1
22,3701.6
34,1622.5
744
0.1
42,575
3.1
173,379
12.5
20,164
1.5
153,215
11.0
71,145
5.1
11,8720.9
15,106
1.1
6,283
0.5
1,707
0.1
1,547
0.1
1,330
0.1
20,906
1.5
8,747

0.6

Table 6 FDI of major economies (net flows; balance-of-payments basis)(Unit: US$ million, %)Inward FDI
USCanadaEU27
EU15

Belgium
Luxemburg
Austria
Denmark
FinlandFranceGermany
GreeceIreland
Italy
Netherlands
Portugal
Spain
SwedenUK
12 new EU members
Czech RepublicHungary
PolandSlovakia
Slovenia
Estonia
LatviaLithuania
CyprusMalta
Bulgaria
Romania
NorwaySwitzerland
Australia
New ZealandJapan
East Asia
China
South Korea
TaiwanHong Kong
ASEAN5Thailand
Malaysia
Indonesia
Philippines
Singapore
India
Argentina
BrazilChile
Colombia
MexicoVenezuela
RussiaIsraelSouth Africa
TurkeyDeveloped economies(31 countries andregions)
Developing economies
World

2007
275,758
108,4141,350,741
1,208,859
110,774
186,225
30,126
11,83012,351
103,871
56,404
1,918
24,70740,202340,093
3,063
68,82922,077
196,390
141,882
10,596
71,861
22,959
3,265
1,457
2,737
2,247
2,017
2,173
930
11,716
9,924
4,433
49,24544,3302,871
22,181
263,195
138,413
1,579
7,769
54,341
61,093
11,238
8,460
6,928
2,916
31,55024,403
6,473
34,585
12,577
9,049
27,167646
55,0739,961
5,737
22,046

2008
319,737
44,712731,087
620,382
63,06480,52913,926
10,926-4,19997,17424,9395,093-20,030
17,026
117,933
3,532
69,944
43,58796,939110,705
10,87147,772
16,533
3,414
1,734
1,969
1,426
1,815
1,849
901
9,205
13,218-95
17,415
46,774
2,229
24,550269,074
147,791
2,200
5,432
62,99250,65910,090
7,984
8,340
1,520
22,72541,077
7,979
45,058
16,787
10,564
18,5891,716
73,053
10,544
9,632
18,198

1,829,324
617,4092,446,733

1,183,703
650,904
1,834,607

Outward FDI

15.9
-58.8
-45.9
-48.7
-43.1
-56.8
-53.8
-7.6
n.a.
-6.4
-55.8
165.6
n.a.
-57.6
-65.3
15.3
1.6
97.4
-50.6
-22.0
2.6
-33.5
-28.0
4.6
19.0
-28.1
-36.6
-10.0
-14.9
-3.1
-21.4
33.2
n.a.
-64.6
5.5
-22.4
10.7
2.2
6.8
39.4
-30.1
15.9
-17.1
-10.2
-5.6
20.4
-47.9
-28.0
68.3
23.3
30.3
33.5
16.7
-31.6
165.6
32.6
5.9
67.9
-17.5

17.4
2.4
39.8
33.8
3.4
4.4
0.8
0.6
n.a.
5.3
1.4
0.3
n.a.
0.9
6.4
0.2
3.8
2.4
5.3
6.0
0.6
2.6
0.9
0.2
0.1
0.1
0.1
0.1
0.1
0.0
0.5
0.7
n.a.
0.9
2.5
0.1
1.3
14.7
8.1
0.1
0.3
3.4
2.8
0.6
0.4
0.5
0.1
1.2
2.2
0.4
2.5
0.9
0.6
1.0
0.1
4.0
0.6
0.5
1.0

Contribution
1.8
-2.6
-25.3
-24.1
-1.9
-4.3
-0.7
0.0
-0.7
-0.3
-1.3
0.1
-1.8
-0.9
-9.1
0.0
0.0
0.9
-4.1
-1.3
0.0
-1.0
-0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
0.1
-0.2
-1.3
0.1
0.0
0.1
0.2
0.4
0.0
-0.1
0.4
-0.4
0.0
0.0
0.1
-0.1
-0.4
0.7
0.1
0.4
0.2
0.1
-0.4
0.0
0.7
0.0
0.2
-0.2

2007
398,597
59,637
1,588,907
1,508,504
93,901
250,818
33,79520,501
7,655
169,062
179,538
5,338
21,146
90,778
181,790
5,493
138,497
37,807272,384
80,403
1,641
67,121
4,983
384
1,810
1,737
334
608
1,201
31
274
279
15,58049,661
16,8062,811
73,483150,104
16,995
15,276
11,10761,08145,646
1,857
11,1194,675
3,536
24,45815,461
1,504
7,067
3,009
913
8,256
2,237
45,916
6,782
2,982
2,106

2008
332,012
77,667
1,188,385
1,133,745
74,179104,133
28,867
27,206
1,629
200,350
156,4632,651
13,501
43,839227,436
2,106
80,07037,295134,019
54,6401,899
43,715
3,582
258
1,453
1,089
231
356
1,361
274
733
-311.028,11386,29535,938357
130,801
168,515
53,471
12,794
10,29359,921
32,036
2,835
14,174
5,861
237
8,928
19,354
1,504
20,457
6,891
2,158
438
2,757
52,6297,719-2,305
2,585

-35.3
5.4
-25.0

64.5
35.5
100.0

-26.4
1.4
-25.0

2,260,042
232,6362,492,678

1,919,615
257,019
2,176,634

Growth rate

Share

-16.7
30.2
-25.2
-24.8
-21.0
-58.5
-14.6
32.7
-78.7
18.5
-12.9
-50.3
-36.2
-51.7
25.1
-61.7
-42.2
-1.4
-50.8
-32.0
15.7
-34.9
-28.1
-32.8
-19.7
-37.3
-30.9
-41.5
13.3
789.5
167.7
n.a.
80.4
73.8
113.8
-87.3
78.0
12.3
214.6
-16.2
-7.3
-1.9
-29.8
52.7
27.5
25.4
-93.3
-63.5
25.2
0.0
189.5
129.0
136.4
-94.7
23.2
14.6
13.8
n.a.
22.7

15.3
3.6
54.6
52.1
3.4
4.8
1.3
1.2
0.1
9.2
7.2
0.1
0.6
2.0
10.4
0.1
3.7
1.7
6.2
2.5
0.1
2.0
0.2
0.0
0.1
0.1
0.0
0.0
0.1
0.0
0.0
n.a.
1.3
4.0
1.7
0.0
6.0
7.7
2.5
0.6
0.5
2.8
1.5
0.1
0.7
0.3
0.0
0.4
0.9
0.1
0.9
0.3
0.1
0.0
0.1
2.4
0.4
n.a.
0.1

Contribution
-2.7
0.7
-16.1
-15.0
-0.8
-5.9
-0.2
0.3
-0.2
1.3
-0.9
-0.1
-0.3
-1.9
1.8
-0.1
-2.3
0.0
-5.6
-1.0
0.0
-0.9
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.5
1.5
0.8
-0.1
2.3
0.7
1.5
-0.1
0.0
0.0
-0.5
0.0
0.1
0.0
-0.1
-0.6
0.2
0.0
0.5
0.2
0.0
-0.3
0.0
0.3
0.0
-0.2
0.0

-15.1
10.5
-12.7

88.2
11.8
100.0

-13.7
1.0
-12.7

Growth rate

Share

(Notes)(1) JETRO estimates used for "World" and "Developing Economies" figures (see Reference Materials: Supplement Statistics, Annotation 3 for methods of estimation). Sum totals used for "Developed Economies."(2) For countries and regions which do not release dollar-based data, figures are converted to dollar values using IMF average exchange rates for corresponding years.
(3) "Developed Economies" refers to 31 countries and regions classified based on BOP (IMF) categories. "Developing Economies" is defined to include all other countries and regions.
(4) Figures for "East Asia" represent the sum total of figures for China, South Korea, Taiwan, Hong Kong, and five ASEAN nations.
(Sources) Based on national and regional balance of payments statistics, BOP (IMF), and UN Economic Commission for Latin America and the Caribbean (ECLAC) data.

237

Table 7 World cross-border M&As (by target and acquirer country and region)(Unit: US$ million, %, cases)

2005

2006

2008

2007

Acquirer country or region

Target country or region

Value
Value
Value
Value
Growth rate
848,279
1,012,952
1,617,053
1,213,086
-25.0
World
US
108,258
188,991
325,507328,826
1.0
Canada29,374
74,153
122,815
44,456-63.8
522,215504,089
791,679
465,686-41.2
EU27
496,837
481,383
772,934
446,818
-42.2
EU15
UK
206,618
211,572
229,579
176,536-23.1
France35,86247,511
67,41425,997-61.4
Germany
65,34663,316
91,95055,365-39.8
Netherlands
33,54736,264
187,309
30,114-83.9
Italy
51,80434,71734,012
33,207-2.4
Spain
26,36814,56964,992
42,681-34.3
25,37822,706
18,745
18,8680.7
12 new EU members
Czech Republic
11,187
1,775
1,445
5,822
302.9
Hungary
3,227
3,444
6,285
2,866
-54.4
Poland
2,652
4,933
3,357
3,910
16.5
Switzerland
10,682
14,024
26,902
21,591-19.7
Norway8,395
6,388
10,53519,01380.5
Australia
11,95017,51566,347
43,163
-34.9
Japan
3,596
4,356
26,474
19,159-27.6
53,38861,51963,336
107,074
69.1
East Asia
China
14,592
18,024
11,21918,986
69.2
South Korea
8,889
3,657
2,803
4,891
74.5
Taiwan
3,173
6,569
6,828
2,832
-58.5
Hong Kong
10,856
15,911
11,07547,816331.8
15,877
17,35831,41132,5493.6
ASEAN6Singapore
5,753
7,817
10,546
17,637
67.2
Thailand
443
5,121
3,126
398
-87.3
Malaysia
1,632
2,695
8,086
3,207
-60.3
Indonesia
7,491
886
4,280
6,216
45.2
Philippines
552
619
4,754
4,042
-15.0
Vietnam
7
220
620
1,050
69.4
India
5,925
8,483
21,945
14,820-32.5
Mexico5,470
2,489
11,554
5,824-49.6
Brazil9,951
10,91019,52019,5460.1
United Arab Emirates
213
80
1,739
4,279
146.0
South Africa
6,693
7,043
9,404
8,048
-14.4
Russia9,100
9,151
26,801
17,846-33.4
US157,464
218,980
299,649
149,259-50.2
Canada23,89339,46067,53353,802-20.3
486,634
438,766
837,930
571,230-31.8
EU27484,136
430,335
832,977
566,357
-32.0
EU15
UK
120,618
92,872
314,487
138,080-56.1
France94,68567,225
113,327
86,439-23.7
Germany
39,236
54,115
115,865
82,226-29.0
Netherlands
94,361
25,02734,50562,17880.2
Italy
30,831
15,662
71,78935,004-51.2
Spain
31,398101,089
61,162
34,156
-44.2
2,498
8,431
4,953
4,872
-1.6
12 new EU members
Switzerland
18,33948,847
27,85761,703
121.5
Norway10,428
10,348
10,3297,391-28.4
Australia
37,02553,46554,737
27,592-49.6
Japan
11,254
21,21540,781
65,16859.8
37,83950,372
76,205
137,124
79.9
East Asia
China
8,770
14,88318,44677,013317.5
South Korea
329
2,589
9,429
6,584
-30.2
Taiwan
593
427
1,773
1,237
-30.2
Hong Kong
11,837
12,102
11,468
8,440-26.4
16,311
20,37035,08943,85125.0
ASEAN6Singapore
10,634
15,05828,727
27,733-3.5
Thailand
220
102
267
1,452
444.4
Malaysia
2,856
4,603
5,066
13,414
164.8
Indonesia
620
363
906
924
2.0
Philippines
1,981
236
123
303
147.2
India
2,166
7,311
31,522
14,763-53.2
Mexico
3,144
3,757
19,985621-96.9
Brazil2,452
19,861
10,898
5,534-49.2
Saudi Arabia
6,688
5,689
16,257
4,526-72.2
United Arab Emirates
8,753
25,72426,89026,076-3.0South Africa
2,491
11,558
5,005
5,419
8.3
Russia6,816
4,257
21,967
20,585-6.3(Notes)(1) Data as of July 6, 2009.
(2) ASEAN 6 consists of Singapore, Thailand, Malaysia, Indonesia, the Philippines, and Vietnam.
(3) East Asia figures represent totals for China, South Korea, Taiwan, Hong Kong, and ASEAN6.
(Source) Based on Thomson Reuters data.

238

First half 2009Share
No. of cases
100.0
9,350
27.1
1,361
3.7
478
38.4
3,643
36.8
3,160
14.6
872
2.1
327
4.6
487
2.5
200
2.7
230
3.5
275
1.6
483
0.5
107
0.2
43
0.3
83
1.8
142
1.6
121
3.6
439
1.6
168
8.8
1,084
1.6
375
0.4
63
0.2
47
3.9
156
2.7
443
1.5
130
0.0
43
0.3
94
0.5
92
0.3
36
0.1
48
1.2
250
0.5
84
1.6
219
0.4
44
0.7
69
1.5
234
12.3
1,841
4.4
468
47.1
4,015
46.7
3,818
11.4
1,010
7.1
558
6.8
512
5.1
341
2.9
190
2.8
172
0.4
197
5.1
285
0.6
124
2.3
265
5.4
275
11.3
859
6.3
125
0.5
73
0.1
41
0.7
194
3.6
426
2.3
196
0.1
21
1.1
178
0.1
14
0.0
16
1.2
200
0.1
35
0.5
63
0.4
23
2.1
101
0.4
55
1.7
143

Value
225,189
73,6232,228
80,61875,707
20,572
1,582
4,981
2,651
2,689
17,664
4,911
2,168
1,852
331
9,049
1,162
12,911655
15,817
4,986
1,405
326
642
8,459
4,208
458
83
2,375
1,225
110
4,993
166
3,367
104
1,917
1,378
18,801
10,197
94,25692,726
11,81638,513
10,0301,854
17,9704,213
1,530
49,356275
1,189
10,494
14,117
3,520
1,221
90
3,231
6,055
1,933
825
3,101
175
21
690
3,128
2,498
17
10,052386
3,579

Growth rate
-64.5
-49.8
-89.4
-70.7
-71.2
-80.9
-90.2
-83.4
-85.1
-86.9
-46.0
-61.7
-60.6
-34.0
-84.8
-46.6
-73.9
-19.1
-95.5
-47.7
0.4
-4.0
-71.1
-86.5
-52.9
-55.7
363.9
-96.8
-18.6
-40.9
-85.6
-18.9
-87.4
-62.3
-86.3
-71.7
-87.7
-77.0
-76.0
-68.1
-68.3
-86.7
4.7
-81.7
-96.4
-14.2
-54.5
-51.1
166.1
-81.8
-93.3
-54.1
-78.6
-87.1
-61.5
-90.7
2.4
-80.7
-92.5
-13.6
-24.6
-53.5
-90.5
-92.6
477.7
-20.4
-98.5
-59.0
-87.3
-74.7

Share
No. of cases
100.0
2,879
32.7
373
1.0
168
35.8
1,036
33.6
939
9.1
201
0.7
108
2.2
149
1.2
49
1.2
68
7.8
115
2.2
97
1.0
14
0.8
6
0.1
26
4.0
59
0.5
43
5.7
171
0.3
48
7.0
302
2.2
91
0.6
16
0.1
9
0.3
47
3.8
139
1.9
43
0.2
20
0.0
19
1.1
28
0.5
5
0.0
24
2.2
65
0.1
31
1.5
49
0.0
7
0.9
18
0.6
109
8.3
572
4.5
177
41.9
1,190
41.2
1,064
5.2
249
17.1
164
4.5
173
0.8
102
8.0
42
1.9
55
0.7
126
21.9
104
0.1
31
0.5
59
4.7
101
6.3
287
1.6
41
0.5
35
0.0
18
1.4
56
2.7
137
0.9
50
0.4
15
1.4
63
0.1
4
0.0
4
0.3
40
1.4
15
1.1
14
0.0
2
4.5
31
0.2
28
1.6
38

Table 8 World cross-border M&As (by industry)
All industries
Primary industries
Oil and Gas: Petroleum Refining
Agriculture, Forestry, and Fishing
MiningManufacturing
Food, Tobacco
Food and Kindred Products
Tobacco Products
Textile and Apparel Products
Wood and Paper Products
Wood Products, Furniture, andFixtures
Paper and Allied Products
Stone, Clay, Glass, and Concrete Products
Chemicals
Chemicals and Allied Products
Drugs
Metal and Metal Products
Machinery and Equipment
Machinery
Electronic and Electrical Equipment
Computer and Office Equipment
Communications Equipment
Transportation Equipment
Aerospace and Aircraft
Measuring, Medical, Photo
Equipment; Clocks
Printing, Publishing, and Allied Services
Miscellaneous Manufacturing
ServiceElectric, Gas, and Water Distribution
Transportation
Transportation and Shipping (except
air)
Air Transportation and Shipping
Telecommunications
Construction Firms
Commerce
Wholesale Trade
Retail Trade, Eating and Drinking
PlacesReal Estate; Mortgage Bankers and Brokers
Finance, insurance
Commercial Banks, Bank Holding
Companies
Investment & Commodity Firms,
Dealers, Exchanges
Insurance
Hotels and Casinos
Other service
Advertising Services
Broadcasting Services (radio, television)
Leisure related Services
Film related Services
Business Services (such as computer-related
services)

Prepackaged Software
Others2008
Growth rate
Share
No. of cases
-25.0
100.0
9,350
9.2
11.2
903
-8.3
6.1
323
-44.0
0.3
94
53.8
4.8
486
-16.6
35.0
2,913
118.9
12.9
347
118.1
8.9
337
120.9
4.0
10
-77.3
0.2
95
-44.0
0.6
131

(Unit: US$ million, %, cases)
First half 2009
Growth rate
Share
No. of cases
-64.5
100.0
2,879
-61.0
11.1
357
-55.5
5.1
95
-66.1
0.3
39
-64.6
5.7
223
-59.2
39.5
865
-78.9
4.8
117
-64.0
4.5
113
-97.2
0.3
4
-94.4
0.1
19
-73.7
0.6
35

2005
Value
848,279
134,934
119,114
1,965
13,854
242,895
56,11150,545
5,567
3,532
8,261

2006
Value
1,012,952
104,671
39,3142,454
62,902
251,207
27,63325,724
1,910
3,608
6,600

2007
Value
1,617,053
124,281
80,6295,499
38,153509,178
71,68949,54522,144
13,21913,868Value
1,213,086
135,71173,968
3,082
58,661
424,647
156,951
108,038
48,913
3,002
7,767

4,005
4,256
15,38763,43030,91327,82531,24948,721
4,950
12,755
3,190
1,921
8,042
3,114

4,614
1,986
11,94370,221
30,11830,49918,752
86,692
19,41819,3192,047
19,521
7,307
9,673

5,093
8,774
49,000138,800
26,58999,150112,531
89,42825,47621,124
4,524
4,091
9,141
11,828

1,908
5,859
31,49796,87934,01250,41829,347
91,767
16,796
21,318444
1,963
13,679
3,680

-62.5
-33.2
-35.7
-30.2
27.9
-49.1
-73.9
2.6
-34.1
0.9
-90.2
-52.0
49.7
-68.9

0.2
0.5
2.6
8.0
2.8
4.2
2.4
7.6
1.4
1.8
0.0
0.2
1.1
0.3

54
77
124
601
215
246
321
1,145
346
317
44
47
149
22

402
867
962
59,1196,518
52,094
1,455
14,805
921
5,359
839
645
5,048
265

-66.5
-76.1
-96.4
-1.4
-78.2
123.2
-92.5
-69.3
-88.8
-57.3
281.2
-35.9
-55.0
-39.7

0.2
0.4
0.4
26.3
2.9
23.1
0.6
6.6
0.4
2.4
0.4
0.3
2.2
0.1

16
19
22
189
66
79
79
355
83
89
16
25
58
10

14,748
11,462
4,742
470,450
65,34137,0309,407
23,6652,093
657,074
52,67467,04913,24318,994
1,651
983,593
151,837
49,64433,8875,396
2,040
652,714
99,56737,089

155.9
-71.6
23.5
-33.6
-34.4
-25.3

2.8
0.4
0.2
53.8
8.2
3.1

220
101
48
5,532
288
356

1,729
349
15
111,259
45,620
3,898

-88.1
-91.8
-98.4
-68.4
-4.5
-72.9

0.8
0.2
0.0
49.4
20.3
1.7

74
38
11
1,657
110
103

30,127
6,903
72,221
7,907
33,335
8,607

29,91337,137
116,678
18,11729,604
8,423

43,586
6,058
66,357
16,39878,29920,76828,3898,700
75,205
3,626
40,32522,447

-34.9
43.6
13.3
-77.9
-48.5
8.1

2.3
0.7
6.2
0.3
3.3
1.9

296
60
158
156
797
512

2,878
1,021
11,111
2,449
5,700
1,352

-73.5
-71.3
-64.7
12.4
-76.6
-88.0

1.3
0.5
4.9
1.1
2.5
0.6

91
12
64
49
234
130

24,72861,070104,817

21,181
77,172
165,223

57,531
104,358
360,608

17,87747,075
227,703

-68.9
-54.9
-36.9

1.5
3.9
18.8

285
356
995

4,348
7,864
27,323

-66.8
-72.3
-78.8

1.9
3.5
12.1

104
85
313

Value
225,189
24,966
11,523620
12,82388,964
10,848
10,203
645
141
1,269

60,494

76,799182,478

121,116

-33.6

10.0

199

14,992

-75.7

6.7

46

22,534
15,1498,969
79,7601,595

39,86037,732
25,181
105,376
2,087

128,380
44,512
19,605
136,4872,871

61,552
38,1996,598
115,527
465

-52.1
-14.2
-66.3
-15.4
-83.8

5.1
3.1
0.5
9.5
0.0

482
215
95
2,331
45

3,852
4,770
764
6,530
21

-91.6
-73.8
-86.1
-90.6
-95.1

1.7
2.1
0.3
2.9
0.0

156
65
16
683
13

18,9803,756
883

17,3407,345
1,132

34,467
5,293
2,707

8,896
1,706
314

-74.2
-67.8
-88.4

0.7
0.1
0.0

93
72
43

395
114
138

-92.3
-89.4
-36.6

0.2
0.1
0.1

24
16
17

25,42728,582

48,52860,573

24.8

5.0

1,304

3,353

-91.2

18,386-

20,465-

16,186-34,168
15

111.1
n.a.

2.8
0.0

450
2

1,460
-

-92.6
n.a.

1.5
0.6
n.a.

1,548

20,384-70.9

9.1

IT (for reference)
132,067
203,311
159,561
154,688-3.1
12.8(Notes)(1) Data as of July 6, 2009.
(2) Based on industries of acquired firms.
(3) IT includes hardware such as computers and peripherals, telecommunications equipment, software services, and telecommunications services.
(Sources) Same as Table 7.

239

399
135
476

Table 9 Japanese trade by country and region(Unit: US$ million, %)Exports
2007

2006

Value

Growth rate

Value

2008

Growth rate

307,779
6.3
343,113
Asia
92,852
15.6
109,060
China
50,321
7.3
54,199South Korea
44,152
0.6
44,780
TaiwanHong Kong
36,4690.938,81876,3490.4
86,990ASEAN1022,924
1.4
25,553Thailand
13,223
4.9
15,027
Malaysia
7,378
-20.6
9,047
Indonesia
9,015
-1.1
9,458
Philippines
19,360
4.4
21,784Singapore
4,142
14.7
5,673
Vietnam
4,457
25.9
6,152
India
15,502-0.7
17,891
Oceania
12,5090.1
14,199Australia
2,096
-14.6
2,489
New Zealand
155,614
8.2
153,903
North America
145,651
8.0
143,383
US
9,963
12.3
10,520
Canada30,57421.8
35,063Central and South America
9,283
34.1
10,221
Mexico
8,096
9.0
8,594
Panama
3,049
11.8
3,989
Brazil
1,088
14.9
1,581
Chile
100,835
7.3
112,492
Europe94,1396.7
105,270EU27
20,433
8.9
22,581
Germany
7,628
-2.4
8,365
France15,2380.4
16,268
UK
6,428
11.3
6,709
Italy
886
1.5
766
Denmark
1,638
-15.8
1,599
Ireland
14,74011.6
18,513
Netherlands
7,155
-0.3
7,895
Belgium
202
-11.0
193
Luxemburg
5,633
10.2
5,574
Spain
768
2.7
819
Portugal
1,420
60.4
1,300
Greece
1,194
10.6
1,292
Austria
1,848
-6.3
1,962
Sweden
2,407
27.1
2,519
Finland
2,420
11.4
3,019
Switzerland
5,638
16.1
7,661
Central and Eastern Europe
1,057
4.6
1,637
Poland
1,943
34.7
2,618
Czech Republic
487
109.3
437
Slovakia
1,758
-4.0
2,380
Hungary
82
150.1
134
Bulgaria
188
4.7
256
Romania
8,315
60.2
12,482
Russia, CIS
Russia7,065
57.5
10,73819,19415.8
26,184
Middle East
1,174
-12.8
1,329
Iran
4,641
10.7
6,711
Saudi Arabia
1,190
0.4
1,665
Kuwait
6,050
24.3
8,053
United Arab Emirates
1,731
24.3
2,524
Oman
1,460
46.8
1,842
Qatar
1,206
-1.6
1,896
Israel9,459
14.6
11,602Africa
1,140
43.9
1,287
Egypt
565
8.1
732
Nigeria
873
-21.5
1,190
LiberiaSouth Africa
4,062
23.6
4,599
647,290
8.2
712,735World
488,067
7.4
527,354
APEC
166,556
9.2
165,942
NAFTA
3,831
13.5
4,984
Mercosur 4(Note) Exchange rates are converted to US$ based on applicable customs rates.
(Source) Based on "Trade Statistics"(Ministry of Finance).

11.5
17.5
7.7
1.4
6.4
13.9
11.5
13.6
22.6
4.9
12.5
37.0
38.0
15.4
13.5
18.7
-1.1
-1.6
5.6
14.7
10.1
6.1
30.8
45.3
11.6
11.8
10.5
9.7
6.8
4.4
-13.6
-2.4
25.6
10.4
-4.8
-1.1
6.7
-8.5
8.2
6.2
4.7
24.8
35.9
54.8
34.7
-10.3
35.4
63.5
35.9
50.1
52.0
36.4
13.2
44.6
40.0
33.1
45.8
26.2
57.3
22.7
12.9
29.6
36.2
13.2
10.1
8.1
-0.4
30.1

Value

2006

Growth rate

382,658
124,035
58,98545,70839,988102,799
29,253
16,32912,508
9,902
26,4257,767
7,850
21,06917,162
2,501
146,891
136,200
10,691
40,6849,880
10,851
5,878
2,727
118,411
109,383
23,796
8,922
16,309
6,754
727
1,268
20,923
8,415
176
4,363
759
1,211
1,239
2,183
2,325
4,313
8,823
1,962
2,992
460
2,599
139
445
19,13916,37433,722
1,889
7,824
2,088
10,793
3,912
2,010
2,166
13,344
1,859
923
1,203
4,598
775,918
567,769
158,368
7,085

240

Imports
2007

11.5
13.7
8.8
2.1
3.0
18.2
14.5
8.7
38.3
4.7
21.3
36.9
27.6
17.8
20.9
0.5
-4.6
-5.0
1.6
16.0
-3.3
26.3
47.4
72.5
5.3
3.9
5.4
6.7
0.3
0.7
-5.1
-20.7
13.0
6.6
-8.9
-21.7
-7.3
-6.9
-4.1
11.3
-7.7
42.9
15.2
19.9
14.3
5.2
9.2
3.9
74.1
53.3
52.5
28.8
42.1
16.6
25.4
34.0
55.0
9.1
14.2
15.0
44.5
26.2
1.2
0.0
8.9
7.7
-4.6
42.2

Value
252,506
118,516
27,345
20,345
1,521
79,99016,896
15,48824,149
7,963
7,485
5,295
4,058
31,76527,9472,534
77,757
68,071
9,623
20,411
2,823
35
5,089
7,256
67,00160,064
18,463
8,972
6,718
7,037
2,037
3,494
2,176
1,848
33
1,926
188
77
1,543
2,215
1,355
5,106
1,711
263
424
168
579
50
184
7,369
6,658
109,190
11,11337,2159,105
31,5902,673
14,814834
13,266
397
811
8
6,635
579,294374,233
81,8775,715

Growth rate
9.6
8.6
11.4
11.9
-3.7
9.5
7.8
4.8
15.3
2.5
11.0
16.1
26.2
12.7
13.6
0.2
5.7
5.5
7.2
26.7
10.7
-20.8
14.8
40.6
1.6
1.4
2.8
4.8
-0.5
1.6
-15.0
-7.9
1.5
-13.5
-23.7
10.3
-4.7
-35.2
15.7
1.5
9.1
0.8
10.8
14.8
7.7
55.0
1.8
28.7
17.7
8.0
7.3
24.6
7.3
29.5
18.8
24.7
-2.5
38.6
-1.0
33.6
235.8
-18.8
3084.1
19.7
11.7
9.5
5.8
17.6

Value
267,926
127,644
27,25219,8091,448
86,89818,275
17,36826,445
8,704
7,031
6,125
4,153
35,52931,161
2,686
80,857
70,836
9,957
24,117
3,153
13
5,981
8,133
72,51065,00919,38810,015
7,520
7,234
2,020
4,090
2,799
1,926
46
1,971
169
56
1,597
2,235
1,680
5,210
2,009
379
479
204
620
53
223
11,514
10,554
113,824
12,67835,3509,928
32,298
3,578
16,942899
14,770
839
674
0
7,709
621,084
402,149
85,3166,910

2008

Growth rate
6.1
7.7
-0.3
-2.6
-4.8
8.6
8.2
12.1
9.5
9.3
-6.1
15.7
2.4
11.9
11.5
6.0
4.0
4.1
3.5
18.2
11.7
-62.3
17.5
12.1
8.2
8.2
5.0
11.6
11.9
2.8
-0.8
17.1
28.6
4.2
40.0
2.4
-10.2
-26.8
3.5
0.9
24.0
2.1
17.4
44.3
13.2
21.3
7.1
7.2
21.5
56.2
58.5
4.2
14.1
-5.0
9.0
2.2
33.9
14.4
7.9
11.3
111.2
-16.9
-98.3
16.2
7.2
7.5
4.2
20.9

Value
307,169
142,337
29,24821,637
1,545
106,118
20,62723,02732,293
8,355
7,829
9,027
5,215
51,65847,2802,892
89,78077,018
12,68027,448
3,783
18
9,068
7,852
79,053
69,91520,702
10,561
7,410
7,897
2,428
4,133
3,790
2,047
43
2,487
219
101
1,544
2,072
1,891
6,393
2,253
477
523
215
717
56
216
14,743
13,281
165,445
18,09550,47015,121
46,415
5,519
26,233916
20,768
1,576
1,749
46
8,920
756,086
468,213
94,7659,977

Growth rate
14.7
11.5
7.3
9.2
6.7
22.1
12.9
32.6
22.1
-4.0
11.3
47.4
25.6
45.4
51.7
7.7
11.0
8.7
27.4
13.8
20.0
35.4
51.6
-3.5
9.0
7.6
6.8
5.5
-1.5
9.2
20.2
1.0
35.4
6.3
-6.3
26.2
29.6
79.8
-3.3
-7.3
12.6
22.7
12.1
25.7
9.0
5.4
15.7
5.2
-3.3
28.0
25.8
45.4
42.7
42.8
52.3
43.7
54.2
54.8
1.8
40.6
87.9
159.4
33134.7
15.7
21.7
16.4
11.1
44.4

Table 10 Japan's exports by products (2008)(Unit: US$ million, %)

World

Value

Growth rate

US

Value

EU27

Growth rate

Total value
775,918
8.9
136,200
Machinery and equipment
521,4117.1
109,431
General equipment
151,482
8.8
28,455Air conditioners
1,638
3.3
181
Mining and construction equipment
13,09314.8
1,650
Machine tools
8,447
11.2
1,990
Electrical equipment
138,650
2.7
20,082
Transport equipment
195,966
9.4
54,095
Automobiles
131,301
8.5
40,930
Passenger vehicles
115,439
6.7
40,516
Motorcycles
5,797
-7.7
1,974
Automotive parts
33,176
4.2
8,346
Precision instruments
35,313
5.3
6,800
Chemicals
88,224
6.6
10,749Industrial chemicals
52,6504.7
6,827
Pharmaceuticals and medical supplies
2,981
21.0
1,121
Plastics and rubber
35,574
9.5
3,922
Foodstuffs
3,967
10.1
640
Seafood
1,150
-0.9
181
Grains20
97.1
1Processed food products
2,323
13.8
413
Oils, fats, and other animal and vegetable products
294
13.7
65
Miscellaneous manufactured goods
8,168
5.0
1,881
Other raw materials and products
123,195
26.9
8,188
Mineral fuels etc.
18,707
101.2
695
Mineral fuels
17,801
107.0
669
Petroleum and petroleum products
17,344111.0
470
Textiles and textile products
8,767
3.9
655
Synthetic fibers and textiles
3,910
3.1
249
Clothing
416
13.8
36
Base metals and base metal products
71,518
19.6
4,933
Steel
53,04925.7
3,335
Primary steel products
39,26230.4
1,215
Steel products
13,78714.1
2,120
Copper
3,266
-1.1
49
Nickel60
40.8
3Aluminum
61
-18.7
4
Lead
85
10.7
0
IT products
Computers and peripherals
7,768
-13.8
2,749
Multifunctional digital equipment
980
-16.0
560
Computers and peripherals
3,601
-13.7
1,439
Parts of computer and peripherals
3,187
-13.3
750
Office equipment
114
-0.7
61
Telecommunications equipment
8,660
2.6
1,644
Semiconductors and electronic components
44,5240.0
3,214Electron tubes and semiconductors
11,6804.7
1,176
Integrated circuits
32,844-1.6
2,039
Other electric and electronic components
34,615-0.8
4,792
Flat-panel displays
8,904
-0.4
1,131
Video equipment
16,1642.5
4,276
Digital cameras
12,354
4.9
3,263
Reception apparatus for television
799
-19.7
23
Audio equipment
144
-7.3
44
Portable audio players
115
-4.6
31
Measuring and testing equipment
17,2660.6
3,477
Machines and apparatus for the manufacture ofsemiconductor devices
13,7426.5
1,826
IT parts
84,721-0.3
9,385
Finished IT products
58,2750.5
12,698
Total IT equipment
142,9970.0
22,083(Notes) (1) See Reference Materials: Supplement Statistics, Annotation 1 for product-category definitions.
(2) Singapore figures are included under both ASEAN10 and Asia NIEs statistics.
(Source) Same as Table 9.

Value

China

Growth rate

Value

ASEAN10Growth rate

Value

Asia NIEs

Growth rate

Value

Growth rate

-5.0
-5.5
-1.5
40.9
-15.0
17.7
-2.4
-9.3
-9.3
-8.6
-9.4
-9.8
1.3
5.0
6.4
13.0
2.7
11.7
15.9
-19.7
12.1
20.4
-5.6
-7.5
-59.4
-60.7
-70.4
-4.3
1.1
-36.3
7.5
12.8
18.3
9.8
-19.5
135.5
2.6
n.a.

109,383
83,12828,022
701
2,125
1,874
20,84527,42817,92017,137
2,315
5,657
6,833
11,310
6,999
852
4,311
168
27
0
113
55
2,032
8,551
1,153
1,153
1,092
869
492
50
3,388
1,948
834
1,115
22
17
3
1

3.9
2.4
2.0
-8.5
-15.1
3.3
4.2
-0.8
-3.2
-3.7
-13.5
4.9
12.8
6.7
6.8
23.3
6.5
18.1
-16.2
17.6
25.3
12.6
4.3
27.8
59.2
59.2
55.9
7.9
6.1
14.7
14.6
18.3
20.1
17.0
-10.4
234.9
62.4
1069.8124,035
69,62523,447
187
963
1,564
30,042
9,240
4,075
3,752
2
5,153
6,896
17,74010,551
183
7,189
349
193
1
120
33
1,260
28,627
4,704
4,536
4,535
3,362
1,358
61
16,676
11,062
8,708
2,354
1,559
14
11
15

13.7
12.9
15.4
9.5
47.5
9.7
6.0
30.9
47.8
51.9
57.2
19.8
15.5
3.5
0.1
33.4
8.8
-16.0
-24.1
42.8
0.4
27.4
27.3
29.5
150.4
163.1
163.2
-0.6
-5.3
29.3
20.1
25.5
22.4
38.4
7.5
96.9
7.7
131.2

102,799
59,05820,972
168
1,641
983
22,367
12,290
4,443
2,429
139
4,912
3,429
10,805
6,014
101
4,791
569
261
1
225
29
650
27,352
4,778
4,742
4,733
1,313
539
28
16,65012,784
9,692
3,092
483
4
25
37

18.2
13.4
18.2
23.4
47.6
21.1
2.2
28.3
25.7
29.3
15.7
25.8
20.4
12.2
9.6
38.6
15.6
36.3
32.2
-56.7
36.6
13.6
15.8
41.0
162.5
163.6
163.7
14.8
16.9
47.9
32.1
40.7
50.5
16.7
11.8
-35.0
-2.4
-0.2

171,106
87,45629,757
148
1,433
1,028
39,693
9,276
3,147
2,542
154
1,746
8,730
29,54519,086381
10,459
1,937
340
4
1,307
79
1,536
40,136
6,687
5,982
5,832
1,565
500
231
22,503
17,34915,374
1,975
1,142
13
5
31

7.2
3.4
5.3
-3.7
17.9
-0.1
1.7
19.5
7.6
5.9
-25.0
-4.4
-8.3
4.6
3.0
15.8
7.6
7.5
-11.7
42.2
10.2
2.5
-11.7
26.4
118.7
135.3
142.2
0.7
-1.4
20.3
16.8
24.2
25.7
13.1
-14.1
-24.4
-15.3
-2.7

-11.7
-16.2
-15.2
0.3
18.6
-14.6
0.7
11.1
-4.5
-4.3
10.6
-6.3
-4.3
-67.3
-21.7
-26.7
-3.0

1,608
278
854
476
21
1,343
4,289
2,543
1,746
5,485
2,316
4,849
3,749
127
76
68
3,177

-15.3
-11.3
-12.8
-21.2
-36.8
15.0
11.1
30.9
-8.9
-1.6
3.1
-2.0
-1.8
-15.0
7.6
18.8
11.3

849
16
396
437
1
1,792
10,031
1,963
8,068
8,107
2,345
1,808
1,603
8
2
2
3,410

-20.0
-21.8
-13.0
-25.4
-9.9
-3.2
-0.9
-1.5
-0.7
9.5
32.1
25.6
22.6
-32.5
184.1
185.2
-2.1

838
14
155
669
11
811
10,298
2,155
8,143
5,427
802
999
729
62
4
4
1,958

-6.9
-29.6
24.4
-11.5
42.2
8.6
-3.0
-8.1
-1.5
0.0
-17.1
14.0
17.8
-19.2
-26.8
-26.7
13.8

1,465
50
580
835
10
2,293
18,717
3,801
14,915
8,929
1,147
2,405
1,807
228
11
8
4,130

-20.6
-30.6
-25.4
-16.1
13.7
21.4
-1.1
-2.7
-0.7
-2.7
13.4
9.0
15.6
-6.5
-29.7
-42.5
-11.1

-9.4
0.2
-10.2
-6.1

360
10,416
10,793
21,209

-26.7
2.1
0.9
1.5

1,874
18,7539,121
27,874

45.2
2.7
8.7
4.6

1,075
16,595
4,825
21,420

11.4
-2.3
12.7
0.8

8,836
29,744
17,053
46,797

4.3
-1.4
0.3
-0.8

241

Table 11 Japan's imports by products (2008)(Unit: US$ million, %)

World

Value
Total value
Machinery and equipment
General equipment
Air conditioners
Mining and construction equipment
Machine tools
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
ChemicalsIndustrial chemicals
Pharmaceuticals and medical supplies
Plastics and rubber
Foodstuffs
Seafood
Grains
Wheat
Corn
Processed food products
Oils, fats, and other animal and vegetable products
Miscellaneous manufactured goods
Other raw materials and products
Iron ore
Mineral fuels etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum products
Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
Primary steel products
Steel products
CopperNickelAluminum
IT products
Computers and peripherals
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunications equipment
Semiconductors and electronic components
Electron tubes and semiconductors
Integrated circuits
Other electric and electronic components
Flat-panel displays
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment
Machines and apparatus for the manufacture ofsemiconductor devices
IT parts
Finished IT products
Total IT equipment(Notes and Source) Same as Table 10.

USGrowth rate

Value

EU27

Growth rate

Value

China

Growth rate

Value

ASEAN10Growth rate

Value

Asia NIEs

Growth rate

Value

Growth rate

756,086
183,41459,058
1,826
296
579
77,715
22,580
7,219
6,820
714
6,851
24,061
65,46947,9209,988
17,54960,456
11,604
10,3193,262
5,602
20,941
7,850
20,854
411,500
13,021
266,405
265,71029,30145,163
178,563
154,447
31,755
1,278
24,28741,014
17,591
11,344
6,247
733
1,043
8,389

21.7
5.3
6.2
25.5
2.3
-6.2
5.5
3.7
-8.4
-11.3
21.9
17.6
3.6
20.3
19.9
20.2
21.5
16.9
13.5
55.5
99.8
45.8
6.7
40.8
5.1
34.5
47.5
54.0
54.4
97.9
68.8
46.9
48.3
8.2
15.1
7.5
8.4
26.1
37.1
10.0
-2.7
-46.3
4.9

77,01832,111
10,098
23
43
56
8,325
6,761
615
538
204
750
6,927
11,615
9,303
1,796
2,312
17,519
1,446
8,122
1,979
5,528
4,390
2,522
1,215
10,988
0
2,010
1,802
468
292
1,021
0
532
100
153
2,634
1,016
464
552
0
2
75

8.7
-4.2
-7.1
3.1
-1.5
-32.5
-7.6
2.9
8.6
5.6
26.3
19.2
-2.0
12.1
12.5
31.5
10.8
29.2
29.0
60.4
108.1
54.0
-3.2
27.6
46.3
17.8
n.a.
92.8
91.8
41984.8
5.0
59.0
n.a.
0.9
19.8
-8.9
5.3
7.1
23.0
-3.4
-68.4
33.7
-14.6

69,91527,963
9,484
34
110
179
4,707
8,478
5,494
5,333
105
2,118
5,294
18,872
16,986
6,023
1,886
7,317
624
13
3
6
4,596
421
2,114
12,868
0
670
668
0
0
653
0
2,137
185
1,389
2,799
865
392
473
1
131
53

7.6
2.7
5.6
23.4
1.6
-6.4
9.4
-6.2
-10.6
-11.6
7.4
15.9
8.2
14.7
15.4
20.2
8.4
18.8
46.2
-66.8
62.6
16.9
22.0
8.5
5.4
5.4
1619.8
78.6
79.1
395.7
n.a.
81.6
n.a.
-1.4
4.3
-2.6
10.7
2.3
-3.5
7.6
-53.0
-20.9
20.8

142,337
60,922
24,1151,423
73
88
29,343
2,919
37
18
159
1,813
4,545
11,899
7,600
199
4,299
7,051
1,153
102
2
1
4,168
516
13,59547,930
0
4,343
4,104
2,151
0
1,074
388
24,408285
20,459
9,689
5,857
2,580
3,276
0
0
823

11.5
14.5
13.6
27.6
12.4
-2.3
14.7
24.2
55.3
0.1
24.4
21.7
12.1
23.5
27.1
-12.3
17.8
-11.9
-1.3
-62.6
-54.0
-99.4
-13.8
22.3
1.8
14.8
60.2
54.8
59.2
78.0
n.a.
35.4
239.0
8.5
16.4
7.8
21.4
32.6
66.6
14.2
-75.8
-100.029.1

106,118
27,820
8,001
319
19
88
16,118
1,623
160
30
46
1,290
2,078
9,000
3,225
138
5,775
7,442
2,030
125
0
5
3,699
978
2,424
55,869453
39,45939,343
4,180
21,352
13,714
8,084
2,531
342
1,511
5,341
931
246
685
55
4
441

22.1
6.5
5.0
19.8
-2.7
-7.6
4.1
31.6
126.1
-52.5
215.0
22.9
15.9
27.7
26.3
63.1
28.5
23.9
7.1
55.5
n.a.
66.4
33.2
51.3
11.4
34.5
-1.1
61.6
64.0
88.8
59.5
65.6
65.7
17.6
15.0
18.4
-9.3
14.3
13.1
14.8
-67.6
2264.5-2.8

60,25929,478
6,822
27
38
122
19,214
1,141
35
31
197
615
2,302
7,131
3,977
211
3,154
2,845
1,197
0
0
0
1,218
140
829
15,773
8
5,231
5,027
1
0
4,937
0
973
314
250
6,763
4,886
3,731
1,155
28
6
382

8.5
-0.3
4.9
19.9
2.8
24.4
-1.0
16.8
-7.2
1.2
8.1
13.7
-13.8
34.9
35.9
40.2
33.7
19.5
16.7
-96.3
n.a.
n.a.
24.9
21.9
-7.2
16.5
9.3
25.7
35.9
148.8
n.a.
35.0
n.a.
3.0
12.7
-12.5
11.9
13.3
16.5
4.0
-70.2
403.5
50.4

20,3191,591
14,074
4,654
267
10,75623,803
3,150
20,653
17,686
4,582
5,752
1,638
1,150
432
323
8,833

4.5
17.3
9.8
-11.6
6.7
15.0
-1.4
13.3
-3.3
7.0
7.5
10.1
2.2
26.3
-35.1
-39.3
-3.6

1,195
1
903
291
10
1,139
4,009
347
3,661
1,446
284
120
49
14
5
4
3,271

-16.0
-86.3
-11.0
-27.8
196.6
8.6
-4.2
24.1
-6.2
-22.8
-51.9
3.7
-24.1
-6.9
-12.4
-4.3
-12.3

975
1
826
148
2
424
1,138
147
990
847
58
125
61
4
4
3
2,026

4.4
18.8
9.8
-18.1
-3.8
4.4
19.7
55.2
15.8
-1.2
-5.0
8.4
12.6
-6.8
-7.3
6.9
-2.3

12,469
953
9,112
2,405
201
5,169
2,500
789
1,711
8,478
2,082
4,055
853
776
339
266
1,506

10.6
21.8
15.6
-7.8
7.6
27.2
14.2
19.4
12.0
13.8
26.1
12.5
-4.5
37.8
-32.3
-39.6
7.1

3,761
599
2,497
665
17
1,903
4,717
1,235
3,482
3,644
1,070
975
586
165
72
41
859

1.9
15.4
3.8
-13.2
21.2
15.1
-7.0
5.7
-10.8
12.2
12.0
20.5
16.8
25.9
-45.9
-41.8
4.1

2,522
38
1,265
1,220
41
1,775
12,284659
11,626
3,105
1,079
427
63
187
11
7
731

-10.6
-21.7
-4.5
-15.9
-11.9
-6.3
-1.8
11.5
-2.5
2.4
3.2
-17.9
0.0
-4.1
-49.4
-41.6
19.9

2,498
46,777
43,571
90,348

-14.4
0.7
5.7
3.1

1,267
6,099
6,363
12,462

-36.0
-9.9
-16.2
-13.2

845
2,211
4,176
6,386

29.1
7.5
5.9
6.4

83
13,43821,36234,800

61.9
9.4
15.9
13.3

132
9,072
7,008
16,080

17.1
-0.7
9.2
3.4

244
16,727
4,413
21,140

30.1
-2.0
-3.5
-2.3

242

Table 12 Japan's outward/inward foreign direct investment by country and region (netflows; balance-of-payments basis)(Unit: US$ million, %)Outward FDI

Inward FDI

2006

2007

2008

17,167
6,169
1,509
491

19,388
6,218
1,131
1,373

23,348
6,496
1,301
1,082

17.8
5.0
1.0
0.8

1,517
6,923
1,984
744
2,941
369
375

1,302
7,790
2,608
1,030
325
1,045
2,233

2,369
6,309
2,016
731
591
705
1,089

1.8
4.8
1.5
0.6
0.5
0.5
0.8

467
512

475
1,506

1,098
5,551

0.8
4.2

Singapore
131.0
India
268.6 Oceania

723
466
125
98
20

4,204
4,140
-22
41
19

6,060
5,232
635
5
72

4.6
4.0
0.5
0.0
0.1

44.2
Australia
26.4
New Zealandn.a. North America
-87.7
US
287.5
Canada10,1889,297

17,385
15,672

46,04644,67435.2
34.2

Central and South America
M exicoBrazilCayman Islands (GB)

892
2,547
-2,603
1,423
2,814

1,713
9,482
501
1,244
5,838

1,372
29,623315
5,371
22,550PanamaBermuda (GB)British Virgin Islands

558
-305
255

791
-428
1,120

64
11
18,029

2006

2007

2008

-852
12
-2,136
110

1,605
15
47
36

3,381
37
257
66

13.8
0.2
1.0
0.3

Growth
rate
110.7
155.4
445.9
80.9

108
1,063
1
3
1
-1
1,062

221
1,283
1
2
-1
1
1,282

279
2,740
6
0
13
3
2,716

1.1
11.2
0.0
0.0
0.1
0.0
11.1

26.5
113.6
894.9
-69.1
n.a.
297.3
111.9

-1
36

3
215

1
258

0.0
1.1

-74.6
20.2

35
0
-2,666105-2,771207
712,70913,270-561

53
204
12,005
11,792
213

0.2
0.8
48.9
48.0
0.9

-74.4
2685.6
-5.5
-11.1
n.a.

164.9 Central and South America
185.1
M exico

566
0

2,831
-

4,020
-

16.4
n.a.

42.0
n.a.

1.0
22.6
0.2
4.1
17.2

-19.9
212.4
-37.1
331.7
286.3

-82
9
428
181

1,480
3
309
883

3,592
7
189
137

n.a.
14.6
0.0
0.8
0.6

n.a.
142.7
130.6
-39.0
-84.5

807
185
138

0.6
0.1
0.1

2.0 Western Europe
n.a.
EU
-87.7
Germany-3,938-4,274

4,785
642

4,861
2,943

19.8
12.0

1.6
358.4

50
82
20,45632
101
22,418

0.0
0.1
17.1

-36.5
23.9
9.6

-542
1,807
274
-7,583

-813
540
504
-390

1,185
-1,289
177
2,692

4.8
n.a.
0.7
11.0

n.a.
n.a.
-64.8
n.a.

17,925
1,128
7,271
842
8,497

19,934
880
3,026
479
12,44022,939
3,905
6,744
1,703
6,514

17.5
3.0
5.2
1.3
5.0

15.1
343.9
122.8
255.2
-47.6

48
884
-12
669
40

62
148
484
368
-44

33
-2,040
477
92
66

0.1
n.a.
1.9
0.4
0.3

-46.5
n.a.
-1.5
-75.0
n.a.

51
133
-478

45
796
2,291

177
2,196
527

0.1
1.7
0.4

Sweden
Spain

416
136

254
10

570
210

0.4
0.2

128
40
317
-4
-

-211
-8
1,162
1
-

1,524
42
1,873
5
1

6.2
0.2
7.6
0.0
0.0

n.a.
n.a.
61.2
562.2
n.a.

Denmark
Ireland
Austria
CyprusM altaSwitzerland
Norway

6
-229
41
-11
-1
183

-2
-600
3
16
-2
61

23
-158
27
12
165

0.0
n.a.
0.0
0.0
n.a.
0.1

-1
0
-1
63
-

3
1
4
33
0

-2
0
0
21
-

n.a.
n.a.
n.a.
0.0
0.1
n.a.

n.a.
n.a.
n.a.
-97.6
-36.6
n.a.

17
7

-91
-26

37
25

0.0
0.0

63
-6,78932
22,181

24,550

n.a.
100.0

n.a.
10.7

367
160

509
99

650
306

0.5
0.2

27.6
208.1

234
-102
-18
242
254
-56
21

206
27
87
958
746
60
55

53
106
98
1,138
892
194
63

0.0
0.1
0.1
0.9
0.7
0.1
0.0

-74.3
289.1
13.0
18.8
19.6
225.6
13.5

Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN10
ThailandIndonesia
M alaysia
Philippines
Singapore
Vietnam
India
Oceania
Australia
New ZealandGuam
M arshall Islands
North America
US
CanadaPeru
Argentina
Western Europe
EU
Germany
UK
FranceNetherlands
Italy
Belgium
Luxemburg

TurkeyEastern Europe, Russia, etc.
RussiaPolandHungary
Czech Republic
M iddle East
Saudi Arabia
United Arab Emirates
Egypt

S hareGrowthrate
20.4 Asia
4.5
China
15.0
Hong Kong-21.2
Taiwan
82.0
-19.0
-22.7
-29.0
81.8
-32.5
-51.2

South Korea
ASEAN10
ThailandIndonesia
M alaysia
Philippines

BrazilCayman Islands (GB)PanamaBermuda (GB)British Virgin Islands

UK
FranceNetherlands
Italy
Belgium
Luxemburg

SwedenSpain
291.7
Ireland175.9
Austria
Switzerland-77.0
124.4 Eastern Europe, Russia, etc.
Russia1920.0n.a. M iddle East
Saudi Arabia
n.a.
793.8
United Arab Emirates-25.4
Israeln.a. Africa
169.7
South African.a.
M auritius
n.a. WorldS hare

899
1,101
1,518
1.2
37.8
Africa
466
82
648
0.5
690.5
South Africa
-99
-70
-4
n.a.
n.a.
Liberia
M auritius
533
1,026
772
0.6
-24.8
World
50,16573,483130,801100.0
78.0(Notes) (1) Figures released in yen were converted to the US dollar at the average quarterly Bank of Japan interbank rate.
(2) Negative figures indicate withdrawal.
(3) "0"indicates an amount of less than one million US dollars; "-" indicates no investment recorded during the corresponding period.
(4) Growth rates are yoy.
(5) EU includes the 25 member states in 2006, and the 27 states, with Bulgaria and Romania added, in and after 2007.
(6) "World" includes countries that are not classified into individual regions. Therefore, "World" figures are not necessarily equal to the sums of regional components.
(Sources) M inistry of Finance Balance of Payments Statistics and Bank of Japan foreign exchange rates.

243

Table 13 Japan's outward/inward foreign direct investment by industry (net flows;balance-of-payments basis)(Unit: US$ million, %)Outward FDI
2006
M anufacturing (total)

2007

2008

Inward FDI

S hareGrowth
rate

2006

2007

2008

S hareGrowthrate

34,51339,51545,268

34.6

14.6

254

1,381

2,261

9.2

Food

1,025

12,776

3,601

2.8

-71.8

-717

365

-86

n.a.

63.8
n.a.

Textile

180

371

716

0.5

92.7

58

109

-3

n.a.

n.a.

Wood and pulp

420

745

734

0.6

-1.4

-23

3

-5

n.a.

n.a.

Chemicals andpharmaceuticals

4,413

3,744

11,647

8.9

211.0

1,538

-1,010

245

1.0

n.a.

Petroleum

2,921

-280

652

0.5

n.a.

37

935

300

1.2

-67.9

Rubber and leather

1,107

835

771

0.6

-7.6

35

35

4

0.0

-89.6

Glass and ceramics

2,759

837

1,417

1.1

69.3

193

663

212

0.9

-68.0

Iron, non-ferrous andmetals

1,795

2,202

3,152

2.4

43.1

60

230

124

0.5

-46.1

General machinery

1,663

2,642

3,726

2.8

41.0

-24

-22

721

2.9

n.a.

Electrical equipment

7,041

4,691

5,675

4.3

21.0

32

-391

642

2.6

n.a.

Transport equipment

8,597

8,671

10,9248.4

26.0-1,408

331

-55

n.a.

n.a.

Precision instruments

1,420

1,293

953

0.7

-26.3

598

20

113

0.5

454.4

Non-manufacturing (total)

15,65233,96885,533

65.4

151.8

-7,04320,80022,28990.8

7.2

Agriculture and forestry

42

93

59

0.0

-36.8

11

41

1

0.0

-96.4

Fishery and marine
products

28

64

119

0.1

86.3

-39

-33

-2

n.a.

n.a.

M ining

1,577

4,053

10,518

8.0

159.5

1

-

-

n.a.

n.a.

Construction

-64

490

389

0.3

-20.5

37

19

-60

n.a.

n.a.

Transportation

1,507

2,133

2,283

1.7

7.1

28

-288

43

0.2

n.a.

Communications-3,368

-331

1,675

1.3

n.a.

-9,715-633-1,028n.a.

n.a.

Wholesale and retail

5,483

4,792

13,319

10.2

178.0

-387

1,660

1,160

4.7

-30.1

Finance and insurance

5,562

19,45852,243

39.9

168.5

2,265

17,661

19,823

80.7

12.2

Real estate

-811

162

162

0.1

-0.3

72

1,413

581

2.4

-58.9

Services
Total

188

1,406

2,721

2.1

93.5

122

295

473

1.9

60.2

50,16573,483130,801

100.0

78.0

-6,78922,181

24,550

100.0

10.7

(Notes) (1) Figures released in yen were converted to the US dollar at the average quarterly Bank of Japan interbank rate.
(2) Negative figures indicate withdrawal.
(3) "0"indicates an amount of less than one million US dollars; "-" indicates no investment recorded during the corresponding period.
(4) Growth rates are yoy.
(Sources) Same as Table 12.

244

Table 14 Japan's outward/inward foreign direct investment balance by country andregion(Unit: US$ million, %)Outward FDI balance (assets)

2007-end
2006-end
Share
107,653
132,986
159,570
23.3
8,247
9,390
30,316
37,79749,002
7.2
100
125
7,776
9,129
11,716
1.7
1,928
2,301
6,328
7,742
8,830
1.3
1,475
1,534
10,66912,103
12,1801.8
423
694
49,83761,43567,654
9.9
4,310
4,721
14,83919,776
20,529
3.0
42
44
7,457
8,315
8,528
1.2
8
9
7,763
8,184
7,743
1.1
13
1
4,253
5,780
7,800
1.1
43
46
14,27017,586
19,511
2.9
4,205
4,620
n.a.
1,711
3,307
0.5
n.a.
0
2,315
4,218
9,440
1.4
9
13
13,794
19,617
21,624
3.2
492
779
12,181
17,94019,107
2.8
485
764
994
951
1,440
0.2
3
11
North America
163,230
183,776
234,957
34.4
44,27345,947
US
156,411
174,199
226,61133.1
41,98944,795
Canada
6,818
9,577
8,346
1.2
2,284
1,152
Central and South America
39,291
54,74990,79413.3
12,123
15,227
M exico
1,773
1,469
2,097
0.3
4
5
Brazil7,829
11,02816,492
2.4
30
32
Cayman Islands (GB)21,44032,03861,5319.0
8,400
10,469Western Europe
118,657
145,884
161,649
23.6
42,36762,341
EU
118,852
145,280
161,783
23.7
39,625
55,117
Germany
7,415
9,524
11,992
1.8
4,582
3,811
UK
31,61332,021
32,576
4.8
4,983
5,962
France13,064
12,415
14,9202.2
11,54912,776
Netherlands
45,41963,941
72,172
10.6
12,17526,025
Italy
807
837
882
0.1
495
509
Belgium
9,630
12,071
14,009
2.0
1,901
1,947
Luxemburg
1,128
3,537
4,332
0.6
1,635
2,267
Sweden
2,199
2,956
3,054
0.4
742
709
Spain
1,348
1,736
1,276
0.2
195
102
Switzerland
985
1,118
1,332
0.2
2,640
3,942
Eastern Europe, Russia, etc.
2,315
2,864
3,786
0.6
47
46
Russia
258
373
668
0.1
46
48
M iddle East
2,038
3,066
4,164
0.6
14
20
Saudi Arabia
1,753
2,585
3,481
0.5
2
3
United Arab Emirates
183
254
303
0.0
1
1
Iran
4
5
6
0.0
0
Africa
2,701
3,895
7,325
1.1
63
99
South Africa
1,125
852
1,673
0.2
0
OECD nations
309,275
363,214433,482
63.4
87,463
106,484
Total
449,680
546,839
683,872
100.0
107,663
133,888(Notes) (1) Figures first released in Japanese yen were converted to US dollars using Bank of Japan year-end interbank rates.
(2) For inward FDI, negative figures indicate net outflow.
2006-end

2007-end

Inward FDI balance (liabilities)

2008-end

Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN10
ThailandIndonesia
M alaysia
Philippines
Singapore
Vietnam
India
Oceania
Australia
New Zealand

2008-end
16,769
225
3,203
1,892
1,235
10,19361
12
7
61
10,047
0
18
1,075
838
231
75,68074,344
1,336
23,5766
40
17,36386,91575,6006,592
6,750
16,23336,510
719
1,362
4,000
901
175
7,150
63
61
29
4
1
-2
275
0
160,743
204,433(3) "0"indicates an amount of less than one million US dollars; "-" indicates no investment recorded during the corresponding period.

(4) OECD member countries include the EU15, Australia, Canada, Iceland, New Zealand, Norway, Switzerland, Turkey, US, Mexico,
Czech Republic, Hungary, South Korea, Poland, and Slovakia (29 countries in total). However, Slovakia was added from the end of 2007.
(5) EU figures are based on the EU25 nations for the end of 2006 and on the EU27 nations for the end of 2007 and 2008.
(Sources) Based on Japan's Balance of External Assets & Liabilities statistics by Ministry of Finance and Bank of Japan, andBank of Japan foreign exchange rates.

245

Share
8.2
0.1
1.6
0.9
0.6
5.0
0.0
0.0
0.0
0.0
4.9
0.0
0.0
0.5
0.4
0.1
37.0
36.4
0.7
11.5
0.0
0.0
8.5
42.5
37.0
3.2
3.3
7.9
17.9
0.4
0.7
2.0
0.4
0.1
3.5
0.0
0.0
0.0
0.0
0.0
n.a.
0.1
0.0
78.6
100.0

Table 15 Worldwide FTA list
Effective date

Area

Name

Effective date

Turkey - Georgia

2008/11/1

1960/5/3
1973/1/1
1977/7/1
1991/7/1
1992/2/17
1992/4/2

EU - Cote d'Ivoire
Central American Common Market (CACM)
Caribbean Community (CARICOM)
Latin American Integration Association (ALADI)
Andean Community (CAN)
Common Market of the S outh (Mercosur)North American Free Trade Agreement(NAFTA)
Costa Rica - Mexico
Canada - Chile
Mexico - Nicaragua

2009/1/1
1961/10/12
1973/8/1
1981/3/18
1988/5/25
1991/11/29

EFTA - Israel

1993/1/1

Armenia - Russia
Kyrgyzstan - Russia
Faroe Islands - Norway
Economic Community of West African S tates(ECOWAS )European Economic Area (EEA)
Ukraine - Russia
Georgia - Russia
Common Market for Eastern and S outhern
Africa (COMES A)
Commonwealth of Independent S tates (CIS )economic union
Faroe Islands - S witzerland
Kyrgyzstan - Armenia
Ukraine - Turkmenistan
Kyrgyzstan - Kazakhstan
Armenia - Republic of Moldova
EU - Turkey
Ukraine - Uzbekistan
Georgia - Ukraine

1993/3/25
1993/4/24
1993/7/1

Americas

1958/1/1

1994/1/1
1995/1/1
1997/7/5
1998/7/1

1993/7/24

Chile - Mexico

1999/8/1

1994/1/1
1994/2/21
1994/5/10

Mexico - El S alvador
Guatemala - Mexico
Honduras - Mexico

2001/3/15
2001/3/15
2001/6/1
2002/2/15

1994/12/8

Chile - Costa Rica

1994/12/30

Chile - El S alvador

2002/6/1

1995/3/1
1995/10/27
1995/11/4
1995/11/11
1995/12/21
1996/1/1
1996/1/1
1996/6/4

Canada - Costa Rica
Panama - El S alvador
US - Chile
CAFTA-DR
Chile - Panama
Panama - Costa Rica
US - Peru
Asia-Pacific Trade Agreement (APTA)
Papua New Guinea-Australia Trade andCommercial Relations Agreement (PATCRA)
South Pacific Regional Trade and Economic
Cooperation Agreement (S PARTECA)
Australia/New Zealand Closer Economic
Relations Trade Agreement (ANZCERTA)
Laos - Thailand
AS EAN Free Trade Area (AFTA)
Melanesian S pearhead Group (MS G)
New Zealand - Singapore
India - Sri Lanka
Japan - Singapore
Pacific Island Countries Trade Agreement(PICTA)AS EAN - China (Framework Agreement)
Singapore - Australia
China - Macao
China - Hong Kong
Thailand - India

2002/11/1
2003/4/11
2004/1/1
2006/3/1
2008/3/7
2008/3/7
2009/2/1
1976/6/17

Armenia - Turkmenistan

1996/7/7

Georgia - Azerbaijan

1996/7/10

Ukraine - Azerbaijan

1996/9/2

Kyrgyzstan - Republic of Moldova
Armenia - Ukraine
EU - Faroe Islands
Turkey - Israel
EU - Palestinian Territories
Eurasian Economic Community (EAEC)

1996/11/21
1996/12/18
1997/1/1
1997/5/1
1997/7/1
1997/10/8

Pan-Arab Free Trade Area

1998/1/1

Kyrgyzstan - Ukraine
EU - Tunisia
Kyrgyzstan - Uzbekistan
Ukraine - Kazakhstan
Georgia - Armenia
Economic and Monetary Community of Central
Africa (CEMAC)EFTA - Palestinian Territories
Georgia - Kazakhstan
EFTA - Morocco
EU - S outh Africa
Georgia - Turkmenistan
Western African Economic and Monetary Union(WAEMU/UEMOA)
EU - Morocco
EU - Israel
East African Community (EAC)
Turkey - Macedonia
S outhern African Development Community(S ADC)EFTA - Macedonia
EU - Macedonia
Ukraine - Macedonia
Armenia - Kazakhstan
EFTA - Jordan

1998/1/19
1998/3/1
1998/3/20
1998/10/19
1998/11/11

EFTA - Croatia

2002/1/1

EU - Croatia

2002/3/1

Asia-Pacific

Name
European Union (EU; formerly European
Community [EC] under Treaties of Rome)European Free Trade Association (EFTA)
EU - S witzerland
EU - S yria
EU - Andorra
Economic Cooperation Organization (ECO)
EFTA - Turkey

1977/2/1
1981/1/1
1983/1/1
1991/6/20
1992/1/28
1994/1/1
2001/1/1
2001/12/15
2002/11/30
2003/11/30
2003/7/1
2003/7/28
2004/1/1
2004/1/1
2004/9/1

1999/6/24

Thailand - Australia

2005/1/1

1999/7/1
1999/7/16
1999/12/1
2000/1/1
2000/1/1

Pakistan - S ri Lanka
Thailand - New Zealand
India - Singapore
South Asian Free Trade Area (S AFTA)
South Korea - S ingapore

2005/6/12
2005/7/1
2005/8/1
2006/1/1
2006/3/2

2000/1/1

Japan - Malaysia

2006/7/13

2000/3/1
2000/6/1
2000/7/7
2000/9/1

India - Bhutan
S outh Korea - AS EAN
China - Pakistan
Japan - Thailand

2006/7/29
2007/6/1
2007/7/1
2007/11/1

2000/9/1

Pakistan - Malaysia

2008/1/1

2001/1/1
2001/6/1
2001/7/5
2001/12/25
2002/1/1

Japan - Indonesia
Japan - Brunei
China - New Zealand
Japan - Philippines
China - Singapore
EU - Overseas Countries and Territories(OCTs)
Protocol Relating to Trade Negotiations Among
Developing Countries (PTN)
US - Israel
Global S ystem of Trade Preferences Among
Developing Countries (GS TP)
Canada - Israel
Israel - Mexico
EU - Mexico
EFTA - Mexico
US - Jordan
EFTA - S ingapore
EU - Chile
US - S ingapore
South Korea - Chile
EFTA - Chile
US - Australia
Japan - Mexico
Jordan - S ingapore
US - Morocco
Trans-Pacific S trategic Economic Partnership
Agreement (P4)
Panama - S ingapore
US - Bahrain
EFTA - S outh Korea
China - Chile

2008/7/1
2008/7/31
2008/10/1
2008/12/11
2009/1/1

EU - Jordan

2002/5/1

Ukraine - Tajikistan

2002/7/11

Gulf Cooperation Council (GCC)
EU - Lebanon
Turkey - Bosnia And Herzegovina
Turkey - Croatia
S ingle Economic S pace
EU - Egypt
S outhern African Customs Union (S ACU)
Ukraine - Moldova
EFTA - Tunisia
Turkey - Palestinian Territories
Turkey - Tunisia
EU-Algeria
Turkey - Morocco
Faroe Islands - Iceland

2003/1/1
2003/3/1
2003/7/1
2003/7/1
2004/5/20
2004/6/1
2004/7/15
2005/5/19
2005/6/1
2005/6/1
2005/7/1
2005/9/1
2006/1/1
2006/11/1

Ukraine - Belarus

2006/11/1

Cross-Regional

Europe, Russia and the CIS, Middle East, Africa

Area

1997/1/1
1973/2/11
1985/8/19
1989/4/19
1997/1/1
2000/7/1
2000/7/1
2001/7/1
2001/12/17
2003/1/1
2003/2/1
2004/1/1
2004/4/1
2004/12/1
2005/1/1
2005/4/1
2005/8/22
2006/1/1
2006/5/28

2006/12/1
2006/7/24
EU - Albania
2007/1/1
2006/8/1
Turkey - S yria
2007/1/1
2006/9/1
EFTA - Lebanon
2007/3/1
2006/10/1
Turkey - Egypt
Central European Free Trade Agreement
2007/5/1
2007/8/17
India - Chile(CEFTA)
2007/8/1
2007/9/3
EFTA - Egypt
Japan - Chile
2008/1/1
2008/11/1
EU - Montenegro
EU - CARIFORUM
2008/5/1
2009/1/1
Turkey - Albania
US - Oman
2008/5/1
2009/3/7
EFTA - S ACU
Australia - Chile
2008/7/1
EU - Bosnia and Herzegovina(Notes) Although the EEA has been reported to the WTO only under Article 5 (Services) of the GATS Agreement, the agreement contains elementsof liberalization of trade in goods.
With the exceptions of South Korea - ASEAN and Thailand - India FTA, all of the above information is based on WTO reports.
(Sources) Based on list on WTO website (http://rtais.wto.org/UI/PublicAllRTAList.aspx) as of June 1, 2009.

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