Provisional Translation

Report on the Expert Group Meetingon Foreign Direct Investment in Japan

April 21, 2014

Report on the Expert Group Meeting on Foreign Direct
Investment in Japan (Summary)
April 2014

Positioning of the report Following the instructions of the prime minister at the meeting of theCouncil on Economic and Fiscal Policy in January of this year, theExpert Group, under the direction of the Minister of State for Economic
and Fiscal Policy, analyzed issues to promote foreign direct investment
in Japan while listening to the opinions of foreign companies.
 From February to April of this year, the Expert Group held five meetingsto hear the opinions of foreign companies and other parties concerned.
Officials from its secretariat visited foreign companies individually tocollect their opinions.
 This report analyzes the opinions of these companies and other parties
concerned and summarizes the results of analysis in an unvarnishedmanner.

Challenges to increase foreign direct investment in Japan(1)Low profitability: Challenges include systems and practices peculiar to
Japan, lack of human resources that play an active role in the global arena,and corporate governance.
(2)High costs: Cited as issues on the reverse side of low profitability arebusiness costs, tax burdens, high time and labor costs.

（ⅰ）

Specific policies proposed by foreign companies and other partiesd(1)Harmonization with the global systems(a)Tax system
Reduction of the corporate tax rate, carryover and carryback of retained
loss(b)Securing human resources, employment systems, etc.
Fostering globally competitive human resources, ensuring the flexibility of
employment agreements and termination rules, and so forth(c)Corporate governanceImprovement of the independent external director system, and so forth(d)Corporate merger system
Greater deferred tax charges for forward triangular mergers(e)International harmonization of regulations and administrative procedures
Provision by administrative agencies of one-stop services, making English
versions of laws and other instruments available, and so forth(2)Promotion of economic partnerships, social security treaties, etc.
(3)Improvement of living conditions
Promotion of labeling in English and alphabets along with Japanese,increasing the number of medical staff who can speak English, and so forth(4)Challenges related to individual business sectors(a)Health care and pharmaceuticals(b)Agriculture(c)Food items(d)Energy(e)Tourism and hotels(f)Retail sales(5)Support and preferential measures for foreign direct investment to Japan
Expansion of the project to promote the location of global corporations inJapan, JETRO’s stepped-up efforts to provide one-stop services, and so forth(6)Promotion of the appeal of Japan
Publicity by the prime minister and other ministers of state, cooperation
between the national and local governments in publicity, and so forth（ⅱ）

Report on the Expert Group Meeting on Foreign Direct Investment in Japan(Table of Contents)
1. Introduction

1

2. Challenges in Increasing Foreign Direct Investment in Japan2(1) Low Profitability 2
1) Systems and Practices Peculiar to Japan, etc. 22) Lack in Globally Competitive Human Resources 2
3) Corporate Governance 3(2) High Costs 3
1) Business Costs 3
2) Costs Related to the Taxation System
3) Costs Related to Time and Effort 4

4

3. Concrete Policy Recommendations

5(1) Harmonization with the Global System
51) Tax System
5i) Reduction of the Corporation Tax Rate
5ii) Carryover and Carryback of Retained Losses
5iii) Simplification of Tax Declaration Procedures
5iv) Reduction in Burden of Individual Income Tax5v) Treatment of the PE (Permanent Establishment) Taxation
6vi) Promotion of Long-term Investments
62) Securing Human Resources, Employment System, etc.6i) Fostering Globally Competitive Human Resources
6ii) Ensuring the Flexibility and Transparency in Employment Agreement
and Termination Rules
6iii) Easing of Regulations Regarding Dispatched Workers, etc.
6iv) Hosting Overseas Personnel
7v) Others
73) Corporate Governance74) Corporate Merger System
75) International Harmonization of Various Regulations
and Administrative Procedures
8(2) Promotion of Economic Partnerships, Social Security treaties, Tax Treaties, etc.
(3) Improvement of Living Conditions

8

（ⅲ）

8

(4) Challenges Related to Individual Business Sectors
1) Health-care and Pharmaceutical Sectors
92) Agricultural (Dairy) Sector
93) Food Items, etc.
104) Energy
105) Tourism and Hotels
106) Retail sales
109(5) Support and Preferential Measures for Foreign Direct Investment to Japan(6) Promoting the Appeal of Japan.

1011

4. Future Promotion Schemes

12

（ⅳ）

1. Introduction
While the balance of foreign direct investment (FDI) to Japan increased in the 2000s, itpeaked out in 2009 and sagged to 3.4% of nominal GDP in 2012, which is an extremely low
level compared to the OECD average of approximately 30%.
In the Japan Revitalization Strategy (decided by the Cabinet in June 2013), the government
indicates that it “will develop an environment where all companies and human resources
enjoy the benefits of the global economy and facilitate full-fledged globalization in Japan inorder to attract outstanding overseas manpower and technologies to Japan and to create
employment and innovation” and states that it “will also aim to double inward FDI stocks to
35 trillion yen in 2020 (17.8 trillion yen at the end of 2012)”.
It is against this background that in January 2014, Prime Minister Abe ordered in the Council
on Economic and Fiscal Policy the establishment of an agenda targeting promotion of foreign
direct investment in Japan under the supervision of the Minister of State for Economic andFiscal Policy, considering the opinions of foreign companies. To this end the Expert Group
Meeting on Foreign Direct Investment in Japan (hereinafter, the “Expert Group Meeting”)
was organized. The Expert Group Meeting held five sessions during the period between
February and April 2014, and, in addition to presentations by members, organized hearings
from plural foreign companies, etc. Its secretariat also visited foreign companies individually
to hear their views.
In this report, such views are sorted and compiled in an unvarnished manner. Challenges andconcrete policy recommendations presented in this report reflect frank opinions of foreigncompanies which seek business opportunities in Japan.
The expansion of foreign direct investment into Japan is a very important issue which willlead to a reinforced growth dynamic of Japan’s economy, and if careful attention is not given
to the opinions of foreign companies, Japan would simply be removed from the choices ofinvestments with their investments directed to other countries. With these and other arguments
in mind, the government should give positive consideration to the opinions of foreigncompanies. It is strongly desired that the challenges and proposals analyzed in this report befurther discussed and that many of the outcomes of such discussions be realized in the near
future.

12. Challenges in Increasing Foreign Direct Investment in Japan
In the Expert Group Meeting, as factors which lead to a positive evaluation of Japan as an
attractive destination for foreign investment, such points were listed as 1) Japan’s large-scale
market; 2) excellent technologies of Japanese companies; (iii) skillful and experienced
manpower; (iv) its potential as a leading country for challenges such as the issue ofsuper-aging societies; (v) safety and convenient infrastructure; and (vi) its low capital cost.
On the other hand, problems pointed out by foreign companies, etc. are largely summarized
into two categories: (1) issues related to low profitability and (2) those related to high costs,
which are inextricably associated with the first category.
(1) Low Profitability
The level of return on equity (ROE) of Japanese companies is generally lower than that ofEuropean and US companies. The primary purpose for enterprises to make investments lies in
the pursuit of profits, and for business managers making investment decisions, the rate of
return that they can expect in the market is extremely important. It is thus necessary to
improve the environment so that companies can realize higher productivity and improve thereturn rate in Japan.
1) Systems and Practices Peculiar to Japan, etc.
As problems behind the low profitability in Japan, foreign companies, etc. pointed out thefollowing challenges related to the systems and practices peculiar to Japan, etc.
First, various regulations restrict corporate activities in Japan. These regulations sometimes
require foreign companies to meet Japan’s unique standards, and in addition, there are cases
in which the regulations introduced in the past have become out of date.
Second, Japan’s labor market has a low fluidity and M&A activities in the country aresluggish owing to a sense of caution against M&A. As a result of this limited fluidity of
production factors such as the labor force or capital, the Japanese market lacks dynamism,
resulting in excessive competition where a number of companies with small shares compete
against each other.
Third, the Japanese market is said to be closed against foreign companies as it has uniquetrade practices, and Japanese companies tend to feel uncomfortable at the prospect of
forming an alliance with, and becoming a subsidiary of, a foreign-owned corporation. As aresult, change or innovation is often impeded in the Japanese market.
Fourth, the wage system in Japan does not necessarily reflect the labor productivity and thehigh-risk-high-return contingency fee system is not common, either. As just described, theenvironment in which motivated and capable human resources can fully demonstrate theirability is not sufficiently developed in Japan.
2) Lack in Globally Competitive Human Resources
In order for foreign companies to achieve high earnings in Japan, it is essential to secure
qualified human resources locally. Some foreign enterprises stated that they would be able tosurvive in Japan despite the high wage level if they could secure excellent human resources
and realize high efficiency.
2However, many foreign companies feel that it is difficult for them to secure excellent humanresources as Japan lacks globally competitive human resources, particularly those with
sufficient English skills.
As the reasons for this, they pointed out the following:First, the country lacks fluidity in human resources. Since a system of allowing workers toenhance their career by changing jobs is not widely established in Japan, it is difficult forforeign companies newly entering the Japanese market to secure experienced workers.
Second, Japanese young people are becoming increasingly inward-looking. The number ofJapanese students studying at first-rate overseas universities is lower than that of theirChinese and South Korean counterparts. In addition, some foreign companies operating inJapan pointed out that even if they try to send young Japanese employees to the company’s
home country for a certain period of time so that they develop a cosmopolitan sensibility,
they tend to dislike going abroad.
Third, women’s participation in society is still limited. Some foreign companies mentionedthat they wanted to hire more Japanese women.
3) Corporate GovernanceIn order to improve the rate of return, it is important to appropriately pursue a shareholder
profit. It was pointed out that Japanese-style corporate governance, in which enterprises
comprehensively consider the positions of various stakeholders, such as employees andbusiness counterparts, lacks transparency compared to those in foreign companies, whichreflect the position of shareholders more directly. Such corporate governance contributes tothe lower return rates of enterprises.
(2) High Costs
Another challenge which is inextricably linked to low profitability is the issue of high costs.
In their site selections, global companies tend to select a low-cost country if other conditions
are equal. Some pointed out that to make investments in Japan, there must be somethingwhich cannot be achieved in countries other than Japan despite its high costs.
1) Business Costs
The following points were pointed out in terms of business costs.
Businesses in Japan take on high costs in various areas, including energy costs, distribution
costs arising from a complex distribution system, costs required to meet safety or quality
standards, and costs related to personnel and offices.
Foreign companies pointed out that even when products are manufactured in the same
production line for all other markets around the world, they are obliged to have a separate
production line for the Japanese market in order to meet the quality standards which are
unique to Japan. They also indicated that in particular, the wages that foreign companies
need to pay to hire human resources with English skills is extremely high in Japan comparedto other countries.

3In addition, in some markets, such as those for agricultural products, access to the market islimited, and prices are fixed. As a result, material prices are high, and it works as a factor
preventing relevant foreign companies from entering the market.
2) Costs Related to the Taxation System
In terms of costs related to the taxation system, the following points were raised.
The corporation tax rate in Japan remains high compared to other developed counties except
the United States. In particular, the Japanese rate is remarkably higher compared to Asian
countries which are geographically close to Japan. The country is thus unfavorable in termsof the taxation system in regard to site selections by global companies. As to the carry-oversystem of losses, while businesses are allowed to add up losses for nine years under thecurrent Japanese system, European and American countries allow businesses to carry overlosses for 20 years or for an indefinite period. Therefore, the relative shortness of theJapanese carry-over period was pointed out.
3) Costs Related to Time and Effort
In addition to monetary costs, which directly affect the amount paid in a transaction, thefollowing issues were pointed out in relation to hidden costs in terms of the time and effort
required for doing business in Japan.
First, the administrative procedure required for a business start-up is inefficient owing to thelarge volume of paperwork to be submitted and the absence of one-stop services. Likewise,companies are required to clear various requirements under regulations, etc. and screening
and other processes by the government take a long time. Some mentioned that they were
extremely welcomed initially when they contacted the government regarding the possibilityof making a new investment, but when they tried to proceed to discussions at a practicallevel, they could not advance the discussions easily owing to various restrictions or rules.
Such time and effort needed to do business in Japan is a huge burden for foreign companies
which are not familiar with such procedures.
Second, in terms of the tax payment procedure, it is not limited to the declaration of
corporate income tax but also involves various other paperwork, such as tax withholding or
year-end adjustments of income tax payment of employees. Research shows that the related
paperwork in Japan takes longer than in other countries because, for example, relevant
processes are not fully computerized/standardized in Japan.
Third, within a company, decision-making may take a long time owing to the complex
relationship among stakeholders, etc. Foreign companies also consider such practices ascosts when they consider going into business together with a Japanese company.
Fourth, apart from administrative procedures, the Japanese language barrier is considered asa hidden cost in various situations in business and daily life.

43. Concrete Policy Recommendations by Foreign Companies, etc.
As concrete policy recommendations to promote foreign direct investment to Japan, foreigncompanies, etc. presented the following feedback. The government needs to give moreconsideration to these points, closely examining the details, etc. of the current system.
(1) Harmonization with the Global System
With regards to differences between the Japanese system and the global system, many
comments were received from foreign companies, etc. regarding the need for harmonization.
Among such comments, cross-sectoral points are as follows. (Comments related to individual
sectors are listed in (4)).
1) Tax System
Concerning the tax system, many pointed out that the corporation tax rate is an extremely
important consideration in investment decisions by foreign companies, and that it isimportant to reduce tax burdens, particularly the effective tax rate which remains at a higher
level compared to other countries.
i) Reduction of the Corporation Tax Rate, etc.
 Japan should reduce the effective tax rate for corporate income tax (currently at about35%). With regards to its level, while it is difficult to clearly determine the level which
would be deemed sufficient, it is important to introduce a level which is in not inferior
to other major countries, including neighboring Asian nations (about 25% in China
and South Korea and 17% in Singapore).
 In case Japan chooses not to reduce the tax rate, it should allow the inclusion ofdividends in deductible expenses as a measure which brings about a substantive
reduction effect of the corporate income tax.
ii) Carryover and Carryback of Retained Losses
 Regarding the carry-over period of retained losses of the corporate income tax, which
is currently set to 9 years, Japan should extend it to an indefinite period orapproximately 20 years as in other major countries.
 It should also allow the carryback of retained losses (It is a system which allows
businesses which fell into the red in that business year to receive a refund of its
corporate income tax paid for the previous year, summing up with the profits in theprevious year).
iii) Simplification of Tax Declaration Procedures
 With regards to the declaration procedure for corporate income tax that companies
need to go through and the income tax of employees withheld at source, etc., Japan
should simplify declaration procedures, which are said to take a longer time comparedto other major countries, by making e-file services more convenient or other means.
iv) Reduction of Burden of Individual Income Tax
 The maximum tax rate for individual income (currently at 50%, including the local tax
rate) in Japan, which remains higher compared to other Asian countries with which
Japan competes, should be reduced. (It is 20% in Singapore, for example.) As foreign citizens are required to declare their overseas incomes in Japan if theirresidency in Japan exceeds five years, many of them return to their home country
within five years. The country should also amend such restrictions.
5v) Treatment of the PE (Permanent Establishment) Taxation
 Non-resident investors who invest in investment funds established as an investment
partnership in Japan may be taxed in Japan when they are considered as being engaged
in a joint business with the general partner in Japan and having a permanentestablishment (PE) in Japan. While a reform measure was taken to avoid this problem
in revision of the tax system in fiscal 2009, it has remained under-utilized mostly
because the requirements for its application were unclear in many respects, and the
problem remains unsolved. Japan should thus reform the system morecomprehensively to make it clear that non-residents shall not be subject to the taxation.
vi) Promotion of Long-term Investments
 In order to promote long-term investments, including inward direct investments, Japan
should take measures such as increasing the rate of tax on short-term investments
while reducing the tax related to long-term investments in the capital gain taxation.
2) Securing Human Resources, Employment System, etc.
Foreign companies and related entities provided considerable feedback regarding problems
related to the difficulty in securing human resources in Japan, the employment system andlabor market. The following are concrete suggestions regarding these points.
i) Fostering Globally Competitive Human Resources, etc.
 It is necessary to foster Japanese human resources who are capable of responding to
the needs of global businesses, and for that purpose, Japan needs to focus on education
fostering human resources with English skills, analytical abilities and communication
skills. As a part of such efforts, the country should expand subsidy programs, etc. tosupport corporate executives or youth who wish to study or participate in internshipprograms abroad.
 So that students who studied abroad can obtain jobs appropriate for their abilities, it
should be made possible for companies to recruit year around students who graduatedfrom universities.
 In order to receive an educational corporation license, foreign universities wishing toprovide education in Japan from a global perspective are required to meet strict criteria
regarding their capital or assets and the predictability of the time needed for therecognition procedure is low. The country should resolve these issues and make iteasier to establish foreign national schools.
ii) Ensuring the Flexibility and Transparency in Employment Agreement andTermination Rules
 Japan should clarify the requirements for cases in which employers (business owners)
lay off employees for unavoidable reasons.
 For the cases of dismissal without sufficiently legitimate reasons, it should introduce amonetary compensation system which replaces the current system, which allows
dismissed employees to return to the job.
iii) Easing of Regulations Regarding Dispatched Workers, etc.
 Japan should relax regulations regarding dispatched workers, such as by exempting
small-and-medium-sized businesses employing dispatched workers from theregulation regarding the dispatching period, etc.
 It should also establish a tax incentive for host companies which directly employ thedispatched workers.
6iv) Hosting Overseas Personnel
 Some projects such as plant constructions may require hundreds of workers. As it will
be impossible to secure such a large number of workers in Japan, the country should
introduce a system which offers greater flexibility in receiving overseas personal sothat companies can employ overseas workers for a fixed time, on the premise that such
workers leave Japan upon completion of relevant projects.
 When personnel with expertise are dispatched from a home country to Japan, it islikely that their spouse also has a profession. In that case, if the spouse is not able towork in Japan, he or she may decide not to take the position in Japan as the spousemay not find a suitable job in Japan, preventing the couple from coming to Japan
together. In order to prevent such a problem, along with the residence status for
intra-company transferees, Japan should allow their spouses to easily obtain aresidence status that permits employment.
v) Others The Japanese labor law system does not correspond fully to various working styles
such as telecommuting or working flexible hours. It should promote diversity inworking styles in order to increase the fluidity of those with potential capacity.
 In terms of the issue of shortfalls in human resources and facilities for childcare or
nursing care, Japan should improve flexibility regarding the employment of humanresources for household labor or nursing care support to increase the employment ratioof women.
3) Corporate GovernanceWith regards to the corporate governance, concrete recommendations from foreigncompanies and others are as follows. It has been pointed out that if such changes are brought
about, corporate governance in Japan will be equivalent to that in major countries’ economy
and the trust from investors vis-à-vis the Japanese market will improve.
 At least one third of directors should be independent outside board members. And also, itshould be clarified which board members are such independent outside board members.
 The Companies Act should define “independent outside board member” so that Japan’s
independent outside board member system follows the global best practices.
 The corporate policy regarding the training of board members should be disclosed.
4) Corporate Merger System
With regard to the system for corporate mergers, it has been improved through a reform in
2007, which allowed forward triangular mergers. However, it has been pointed out that thesystem will be all the easier to utilize if further improvements are made on the following
points.
 In a forward triangular merger, when shareholders of the resolving company receive
shares of the parent corporation of the continuing company, if the continuing company
has not been engaged in business in Japan, capital gains arisen from such shares will betaxed. Deferred tax charges should be allowed for such taxation.
5) International Harmonization of Various Regulations and Administrative
Procedures
Many of the regulations in Japan are stricter than those in foreign countries. In addition,
administrative procedures are complicated. There were comments that Japan should7harmonize these regulations and procedures with international standards. In addition to thepoints listed below, concrete suggestions include those listed in (4) Challenges Related to
Individual Business Sectors.
 The processes for approvals and licenses, etc. take an extremely long time. It takes acertain amount of time to clear the examination by an administrative section and takes
time again when proceeding to the next stage. Various sections are involved in a process
and a final conclusion cannot be made unless a consensus is reached among these
sections. Japan should thus enhance interdepartmental functions in the administration andcreate systems allowing speedy assessments, by establishing one-stop services and giving
them certain authority for decision-making.
 While promoting the translation of laws and various documents, Japan should let
administrative offices receive applications in English. Likewise, in terms of inspections
or certifications of products, the number of inspection or testing agencies accepting
e-mail communications or issuing test reports in English is very limited. Japan is behindeven China in this regard and it should promote such services in English.
 With regard to the interpretation of laws, Japan should create a system to respond toinquiries in writing (in English), so that foreign companies do not need to repeat
discussions every time the person-in-charge changes.
 The country should relax the criteria for residency of corporate representatives in Japan at
the time of incorporation.
(2) Promotion of Economic Partnership Agreements, Social Security Treaties, TaxTreaties, etc.
From the perspective that economic partnerships pursued by governments, etc. are importantfor investment decisions by companies, the following opinions were raised.
 Japan should promptly conclude major economic partnership agreement negotiations
such as the TPP, EPA with the EU, and RCEP.
 The country should promote conclusion of bilateral social security agreements, so that
foreigners working in Japan do not need to bear the double burden of social security
premiums (such as pension premiums).
 Know-how in some manufacturing technologies is classified as confidential informationfrom a security perspective, and such information is often untransferable to foreigncompanies. As it poses an obstacle for joint developments with foreign companies, Japan
should promote conclusions of intergovernmental agreements which enable suchinformation transfer.
(3) Improvement of Living Conditions
With regards to the improvement of living conditions for foreigners entering the country inconnection with foreign direct investments to Japan, the following opinions were received.
 Japan should promote labeling in English and alphabets along with Japanese for domestic
products.
 The country should increase the number of medical staff who can speak English.
 Japan should provide more opportunities of education and a better educational
environment for the children of foreign citizens posted to Japan.

8(4) Challenges Related to Individual Business Sectors
Among concrete policy recommendations, those provided as opinions regarding individual
business sectors are as follows.
1) Health-care and Pharmaceutical Sectors
 Japan should work on regulatory reforms concerning home and remote medical care, andin addition, proper reflection of services in medical treatment fees should be made.
 With regards to large quantities of medical data, the usability of data will be limited if
personal information is overly protected. Japan should clarify the rules for personal
information protection so that such big data can be fully utilized while protecting theprivacy of patients.
 In order to realize open innovations in drug development, Japan should promote PPPs
(public-private partnerships) and improve systems for cooperation between government,
industry and academia, including universities, hospitals and small-scale biotech
companies.
 Doctors are allowed to prescribe new drugs only for two weeks per prescription during
one year from their release and it poses a significant burden on patients and doctors. Thus,
this regulation should be relaxed.
 While the period required for the approval of new drugs already used in other countries(“drug lag”) has been significantly reduced, from around 2 to 3 years to around 12
months, it should be shortened further.
 In EPA negotiations, Japan should agree to introduce mutual authentications of drugs andvaccines, as well as standardized guidelines so that companies do not need to conduct thesame tests redundantly.
 For the approval of quasi-drugs in Japan, companies are required to submit data which is
not required in other countries. In this regard, Japan should promote the harmonization ofsystems with major countries.
2) Agricultural (Dairy) Sector
 Japan should enhance the degree of freedom for producers (farmers, etc.) selling products,
by allowing dairy farmers, in real terms, to freely select an agricultural cooperative or
business operator and to determine a price through individual negotiations.
 The country should advance the improvement of systems for the export of dairy products
from Japan. Specifically, the following measures are suggested.
- Relaxation of conditions for the market access by foreign companies throughapplication of Special Zone systems.
- Support for the establishment of joint ventures or consortiums including foreigncompanies.
- Development of infrastructure with a view to establishing factories for export.
- Further simplification of export processes.
 Japan should promote a sustainable development of future business successors, forexample, by facilitating corporatization of the dairy sector.
 The country should seek to improve production efficiency and reduce costs, for example,
by promoting technological exchanges with developed countries in the dairy sector.
 Despite land limitations, the country should shift to a dairy husbandry centering on
low-cost grazing to the greatest extent possible.
 The fluidization of land should be increased so that large tracts of land can be purchased.
3) Food Items, etc.
 Best-before dates for foods are determined by industry organizations, but the periods set
are shorter than those in other countries, even for the same products of the same quality,9

production method and test results. (For example, the best-before date for yogurt inEurope is 39th day after production, but that in Japan is 27th.) Japan should correct thissituation while gaining the understanding of consumers and improve the efficiency of thefood supply chain.
 Foods containing additives whose safety has been recognized by the World HealthOrganization (WHO) or the Food and Agriculture Organization of the United Nations(FAO) may not be approved under the Japanese standards. Such regulations should beharmonized with international standards.
4) Energy
 Japan should determine numerical targets and time frames related to the nation’s energy
mix in the Basic Energy Plan at an early date. In doing so, the country should set
transparent and sustainable numerical values which help investment decisions.
 The environmental impact assessment for wind-power generation projects currently takes
3 to 4 years in Japan. It should be reduced to approximately 18 months as in othercountries.
5) Tourism and Hotels
 Japan should develop foreign-tourist-friendly infrastructures, through multilingual traffic
signals or multilingual labeling of various devices and systems, etc.
 The country should increase the number of Wi-Fi access points and allow internationalroaming of overseas cellphones.
 In Okinawa, which is expected to be designated as a National Strategic Special Zone,
Japan should loosen regulations to enhance entertainment facilities and attractions,
including casinos, and to promote the development and improvement of tourism
resources where tourists can also enjoy entertainment during the night.
6) Retail sales
 In selling products in Japan, foreign companies are sometimes required to label themaccording to Japan’s unique standards. There are also regulations unique to Japan withrespect to safety and other product attributes. These labeling and safety standards should
be harmonized with those of other countries. Since certification-related processes arecomplicated and time-consuming, they should be simplified mainly by promoting mutualcertification with other countries.
 If newcomers attempt to purchase land for large retail stores, there are restrictions onchanges of land use categories, and in addition, even if they can purchase land, it takes along time before they obtain approval for such purchase. Japan should relax regulations
in order to facilitate land acquisitions and improve the way regulations are applied.
(5) Support and Preferential Measures for Foreign Direct Investment to Japan
With regards to support and preferential measures for foreign direct investments to Japan
provided by the government, JETRO or local governments, the following comments weremade.
 Japan should not limit the targets of preferential measures under The Subsidy Programfor Projects Promoting Foreign Direct Investment, Site Location and Regional
Development in Japan (Project of site location for global companies), to regional
supervision bases and R&D facilities, but should expand it to include companies
launching an office or facility in Japan for the first time.

10 For the application for the subsidy program, a sufficient application period should beassured.
 As further efforts by JETRO, the following measures should be reinforced.
- Development of one-stop services in a real sense, which are not limited to centralized
counseling/supporting functions related to administrative procedures, but where
people can deal with all administrative procedures in a centralized place.
- Promotion of provision of detailed information related to legal regulations.
- Promotion of the access of foreign investors to Japanese companies (particularly
small-to-medium-sized companies) in need of new capital or a new market.
- Fund-raising support by Japanese banks.
(6) Promoting the Appeal of Japan.
Appealing aspects of Japan are not sufficiently understood in other countries. It has been
pointed out that Japan should actively publicize its appeal through measures as listed below.
 The excellent business environment in Japan should be more actively publicized by
top-level personnel, such as the prime minister and other ministers. The government
should clearly state that Japan cordially welcomes foreign direct investment in the
country.
 Local governments such as prefectures and municipalities are individually conducting
public relations (PR) activities through their overseas offices, etc. However, in order toachieve further results, the government should lead PR activities abroad using its
network.
 From a perspective of stepping up PR activities in Japan and abroad, statistics on inward
foreign direct investments (sales by foreign companies, import and export figures, andR&D expenditures, etc.) should be enhanced as basic information.

11

4. Future Promotion Schemes
It is desired that policy challenges presented in this report be positively discussed in relevant
ministries and meetings of the government. Under the ministerial-level Council for Promotionof Foreign Direct Investment to Japan (hereinafter, the “Council”), which will be convened
under the leadership of the Minister of State for Economic and Fiscal Policy, the government
should gather information on the status of discussions at relevant ministries and meetings ofthe government, and promote efforts as the whole government.
Likewise, it is important to actively promote projects of foreign direct investment to Japanaround the world through diplomatic missions abroad and JETRO while working withenthusiastic local governments, and to improve the system in which the Japanese government
consults foreign companies’ managers on a regular basis. The Council is expected to function
as the headquarters for the promotion of projects while receiving periodical activity reports
from diplomatic missions abroad and JETRO and allow relevant ministers themselves tolisten to the opinions of foreign companies directly.
Through such efforts, it is expected that the environment to host foreign companies will besteadily improved and foreign direct investment to Japan will be expanded.

12

List of members of the Expert Group Meeting on Foreign Direct Investment in
Japan[Members]
Sakie Akiyama

CEO and Founder of Saki Corporation(Member of the Industrial Competitiveness Council)

Hiroyuki Ishige

Chairman and CEO of the Japan External Trade
Organization(Chairman)

Shujiro Urata

Professor, Graduate School of Asia-Pacific Studies,
Waseda University

Sadakazu Osaki

Head of Research, Center for Strategic Management andInnovation, Nomura Research Institute, Ltd.
(Member of the Council for Regulatory Reform)

Masayuki Oku

Chairman of the Board, Sumitomo Mitsui Financial Group

Norio Sasaki

Vice chairman of the Board, Toshiba Corporation(Member of the Council on Economic and Fiscal Policy)

Fumiko Hayashi

Mayor of Yokohama

Jay Ponazecki

President of the American Chamber of Commerce in Japan

Danny Risberg

Chairman of the European Business Council in Japan[Observers](The meeting consists of nine members as listed above)(Titles are omitted; official positions are as of February 19, 2014)13

Record of meetings of the Expert Group on Foreign Direct Investment in JapanFirst meeting (February 27)• Present condition of foreign direct investment in Japan and initiatives for its
promotion(briefing by the Cabinet Office)• Initiatives by JETRO and the City of Yokohama• Presentation by the American Chamber of Commerce in Japan (ACCJ)• Presentation by the European Business Council (EBC) in Japan• Hearing with a guest speaker (Mr. V. Sriram, Head of Japan Business, Infosys Ltd.)
Second meeting (March 5)• Hearings with guest speakers:(a) Dr.-Ing Heinrich Hiesinger, CEO, ThyssenKrupp AG(b) Mr. Shigeru Shiina, CEO, PricewaterhouseCoopers Co., Ltd.
(c) Mr. George Zarifi, Representative Director & President, Danone Japan Co., Ltd.
Third meeting (March 17)• Hearings with guest speakers:(a) Mr. John G. Rice, Vice Chairman, General Electric Company(b) Mr. Jez Moulding, Representative Director & President, Sanofi K.K. and Chairmanof the European Federation of Pharmaceutical Industries and Associations, Japan(c) Mr. Yasuhiro Saito, Representative Director & President, Fonterra Japan Co., Ltd.
(d) Mr. Arthur Ozeki, Representative, MacQuarie Capital Securities (Japan) Ltd.
Fourth meeting (April 3)• Hearings with the following guest speakers:(a) Mr. Scott Callon, Partner and CEO, Ichigo Asset Management, Ltd.
(b) Mr. Peter List, Representative Director & President, IKEA Japan K.K.
(c) Mr. Ryuichi Terada, Director, Okinawa Kin Resort Ltd.
• Hearings with the secretariat• The Interim Summary
Fifth meeting (April 15)• Draft report14