JOINT STATEMENT
47th U.S.-Japan Business Conference
U.S.-Japan/Japan-U.S. Business Councils
October 8, 2010
Tokyo, Japan
Business leaders from the United States and Japan meet each year at the U.S.-Japan
Business Conference to identify common business interests, promote bilateral
cooperation, foster mutual understanding, and enhance business relationships. This
year, the U.S.-Japan Business Council and Japan-U.S. Business Council (“theCouncils”) focused on opportunities in the Asia-Pacific region and on the importanceof innovation to both economies. The Councils hereby agree and declare as follows.
1. U.S. Economy
The fundamentals show the U.S. economy still has not fully recovered its strength
after the financial crisis of 2008. The employment situation remains severe, as
reflected by the high unemployment rate. As the largest economy in the world,
activation of U.S. demand is very important for world growth, but demand in othereconomies is also critical for growth that is balanced and sustainable, as called for by
the G-20. While recovery measures taken by the U.S. Government have mitigated
the situation, continued efforts to achieve more sustained growth are required,
particularly the enactment of tax, regulatory and trade policies that boost private
investment, production and trade.
2. Japanese Economy
The Japanese economy is not yet on a self-sustaining recovery path, and a difficult
situation remains with the unemployment rate still at a high level. The growth of theeconomy largely depends on exports, thus raising the risks that an appreciating Yen
will depress growth and add to deflationary pressures. The Councils welcome the
New Growth Strategy announced by the Japanese Government. It is meaningful that
the Government laid out measurable targets with concrete timeframes. While theprivate sector continues to endeavor for growth upon private initiative and activity,
the Councils count on the Japanese Government to promptly put into place thestrategies as planned. It should also be noted that the comprehensive tax, fiscal andsocial security system reform is essential to implement this strategy.
3. U.S.-Japan Economic Cooperation in the Asia-Pacific
The Councils recognize that as two of the largest economies in the dynamic AsiaPacific, Japan and the U.S. can play leading roles in helping shape the future growthand economic architecture of the region. The successive chairmanship of APEC by
Japan in 2010 and the U.S. in 2011 presents a tremendous opportunity to set a paththat will accelerate and achieve substantial regional economic integration andpromote more open trade and investment, regulatory and standards harmonizationand technical cooperation in key industries such as life sciences, ICT, energy andenvironment, finance and transportation. Such a path would revitalize Japanese andU.S. businesses and boost economic growth in the APEC economies.
To those ends, the Councils welcome the commitments by both Governments toactively pursue the realization of a high-standard, WTO-compatible Free Trade Areaof the Asia Pacific (FTAAP). In particular, the commitment by the Government ofJapan in its June 2010 New Growth Strategy to create an FTAAP by 2020 was apositive development. The Councils urge Japan and the U.S. to lead the discussion
on the scope of an FTAAP so that it can be as comprehensive as possible inpg. 1/6

addressing not only the border issues such as tariffs, export/import restrictions,immigration procedures, etc. but also “behind the border” issues such as regulato ry
reform; liberalization of foreign investment; harmonization of technical standards;
protection of intellectual property rights under a harmonized, predictable andbalanced system; and establishment of rules on network-based ICT services.
The Councils urge the Japanese and U.S. Governments to build support for an
FTAAP by focusing on achieving interim steps, or pathways. The most meaningful
pathways should include the Trans-Pacific Partnership (TPP) encompassing the U.S.
and Japan and a high-standard Japan-U.S. EPA by no later than 2015. The Councils
recommend that Japan join the TPP negotiations on the same terms as other countries
as soon as possible and that a building block approach be put in place for thenegotiation of a high-standard Japan-U.S. EPA. In either case, work would have tostart now in order to meet the deadline.
The proliferation of unique or non-uniform regulations and standards in the various
APEC economies raises the costs to businesses by requiring them to manufacture
products to comply with or conform to multiple regulations and standards. Here, too,Japan and the U.S. can lead by addressing regulatory and standards harmonization
issues in the bilateral context first through an updated economic dialogue (including arenewed U.S.-Japan Regulatory Reform Initiative), and the Councils strongly urge
both Governments to commence immediately on this. Greater harmonization ofregulations and standards would provide significant benefits to Japanese and U.S.
companies in the short term by lowering production and compliance costs while
representing a significant step toward greater economic integration of the Japaneseand U.S. economies. This in turn would provide a critical platform and model for
regulatory and standards harmonization among like-minded countries in APEC, thus
serving as another critical pathway to FTAAP.
4. Entrepreneurship, Innovation and U.S.-Japan Collaboration
The Councils approve the perception of the U.S. Government underlying its paper “AStrategy for American Innovation: Driving Towards Sustainable Growth and Quality
Jobs”; that innovation was what made the U.S. lead the world’s economies in the pastand that innovation will be even more of importance for the U.S. to make progress inthe future. The Councils believe that entrepreneurship and innovation is equallyimportant to Japan. In this regard, the Councils welcome the opening of the dialogue
between METI and the U.S. State Department to promote innovation,
entrepreneurship and job creation. The Councils wish to watch keenly on theoutcome of this dialogue and look forward to any creation of new methods of support
from both Governments in the private sector ’s entrepreneurial ventures andinnovation challenges.
The Councils regard information communication technology (ICT) as a key toaccelerate entrepreneurship and innovation that enhances economic growth andcompetitiveness. The Councils call for the U.S. and Japanese Governments’ active
involvement in the effective utilization of ICT. For example, recent development ofcloud computing has potential to generate new services through the active use ofenormous data in every field, so the Governments’ support in the security anddependability of advanced utilization of ICT, such as cloud computing, is expected.
International harmonization of standards is also vital.
5. Energy and Environment
The Councils support the progress made in recent years by the Governments of Japanand the U.S. in their adoption of sound public policies for the development of clean
and efficient energy technologies, and their commitments to improving the global
environment. We regard clean and efficient production and use of energy as the key
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to sustainable growth, and believe that business has a central role to play indeveloping technologies for a low carbon society. The Councils approve theJapanese Government’s highlighting of Green Innovation in its New Growth Strategy
as well as the U.S. Government’s emphasis on clean energy in its Strategy for
American Innovation. The two Governments are uniquely positioned this year andnext, during their APEC years, to chart a new course leading to a 21 st Century energy
and environment policy, and the Councils urge action on priorities highlighted below,
and spelled out in greater detail in the Supplement.
The Councils regard that the diffusion of advanced technologies is vital for the global
reduction of CO2, and encourage both Governments to support the development ofgreen technology by funding collaborative programs which leverage the strengths ofthe two countries’ private sectors. Moreover, both Governments are urged to promote
policies that support the use of technologies which will reduce costs and GHG
emissions, and encourage more efficient generation, transmission, distribution anduse of electricity.
When it comes to green house gases’ emission regulations, the Councils alert theGovernments that regulatory levels should be based on international fairness. Shoulda country enforce excessive standards whereas others go without any substantial
obligations, the private sector of the former would be deprived of its global
competitiveness and consequently lose its vitality needed for the innovation. The
Councils therefore call on the U.S. and Japan to cooperate and play leadership rolesin the continuing climate change negotiations for a fair and effective post-Kyoto
international framework in which all major economies participate.
The Councils recommend that both countries continue to collaborate to promote thepeaceful use of nuclear energy as a baseload power with virtually no GHG emissions,and to lead together in bringing safe, proven nuclear technology to emerging markets.
The Councils fundamentally support the adoption of new rules that promote trade inenvironmental goods and services based on the Doha Round through the elimination
and/or reduction of both tariff and non-tariff measures. Robust intellectual property
protection is also a necessary component to facilitating trade in this area.
All these efforts will cast a wide net of benefits to all industries that have increasingenergy demands, as well as create local jobs for large energy product manufacturers
and small businesses for the delivery of a wide range of energy services.
6. Financial Services
The Councils are encouraged by steps taken in the U.S. and Japan to restore
confidence in the financial system. As the two countries continue working toward afull recovery, the Councils welcome financial sector measures designed to protect
consumers and investors, promote market discipline, support competition andinnovation, and avoid protectionism.
A global effort to strengthen financial system oversight is being led at the G-20 and
Financial Stability Board, with an eye toward reaching a consensus at the G-20 Seoul
Summit. The Councils support this effort and hope that the U.S. and Japan willcontinue to exert strong leadership in this area. At the same time, the Councils areconcerned that some proposals for substantial new regulatory capital requirements forfinancial institutions could inhibit sustainable economic recovery, including in theirimpact on small and medium enterprises. The Councils continue to believe that,
where appropriate, financial regulation should also respect country differences.
The Councils welcome the U.S. commitment to improving financial regulation. As
implementation of the Dodd-Frank Act moves forward, the Councils hope thatpg. 3/6

providing protection for consumers and investors, fostering innovation, and enabling
adaptation to changes in the financial markets will be emphasized, while avoiding
measures that could inhibit economic growth. In addition, efforts are needed tofurther modernize U.S. state-based insurance regulation and ensure that reinsurance
regulation is consistent with global best practices. In Japan, the Councils welcome
the FSA’s continued commitment to improving the quality of financial regulation byenhancing dialogue with financial institutions, dissemination of information, andresearch functions to promptly grasp both domestic and international market
developments, and improving the transparency and predictability of its regulatory
actions.
With regard to the Japanese postal financial entities, the Councils continue to believethat ensuring equivalent conditions of competition is essential in determining whether
the postal financial entities broaden their range of products.
7. Healthcare Innovation
Improving the regulatory environment to foster innovation and speed up evaluationof new drugs is important to the welfare of the human being. In this regard, theCouncils acclaim the reform of the Japanese Pharmaceutical Pricing System in April
2010 that provide for price stability over the life of a patent or an exclusivity period.
The Councils encourage the Japanese Government to adopt these measurespermanently in 2012. Furthermore, the Councils urge the Japanese Government toreview other rules in the Pricing System that hinder innovation. The Councils also
continue to support the U.S. and Japanese Governments’ programs for drug
development process improvement and measures to enhance intellectual property
rights protection by extending data exclusivity terms.
Innovation in medical devices can boost the quality of medical care, contribute toeconomic growth, and improve the global standard of well-being. Yet, in Japan, there
exists a device-lag and device-gap problem as well as a risk of unstable device supply.
To solve these problems and to achieve innovation, the Councils call for an
innovation rewarding reimbursement process, clarification of rules for clinicalresearch promotion, facilitation of review processes, cooperation between U.S. andJapan administrations, and the increased use of information communication
technology.
Prevention and early detection are also essential parts of medical treatment. The
Councils believe it is important to promote faster product reviews to support the useof innovative imaging and in vitro diagnostic testing as well as promotion of vaccines.
8. Other important Measures to improve the U.S. and Japanese Business
Environments and Global CompetitivenessTaxation: The Councils urge both Governments to implement tax measures toenhance the competitiveness of U.S. and Japanese companies in the global economy
while increasing the attractiveness of Japan and the U.S. as investment locations.


Reduce Corporate Tax: At 40%, corporate tax rates in the U.S. and Japan aremuch higher than the 2009 average of 25% in Asia and 26% in OECD countries.
Lowering the corporate tax rate in both countries will help level the playing fieldwith players outside the country, thus encouraging more investment andincreasing the competitiveness of both economies. However, bringing down thecorporate tax rate upon the condition of raising other corporate costs such associal welfare contributions will not have the right effect if the impact of thelatter outweighs the former.

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

Extend Japan’s carry-forward period for Net Operating Losses (NOLs): Extending
Japan’s carry-forward period for NOLs to OECD standards – at least 20 years, asin the U.S., if not on an unlimited basis – would encourage further investment inJapan by domestic and foreign corporations, but also SMEs who typically show
losses in their early stages. In aligning with most developed economies in thisway, Japan should also ensure that eligible losses include those incurred over the
past several years to provide a strong stimulative impact for companies
attempting to manage through their current loss positions.

Export Controls: The Councils urge both Governments to undertake fundamental
reform of export control regimes with the objective of creating an improved export
control system that enables limited resources to be focused on truly sensitive items
and technologies, levels the playing field, and keeps both countries competitive,
while safeguarding national security. A reformed and robust export control system
will enhance national security, strengthen the industrial base and foster
competitiveness of U.S. and Japanese companies. To achieve this, the Councils callfor the following significant reforms in both countries: overhauling the existing list ofcontrolled items and technologies based on a systematic review focusing on foreign
availability; streamlining and harmonizing control standards and the licensing
process, such as through the introduction of a license free zone for exports to andfrom key allies and a license exception for intra-company transfers; and increasing
global outreach to the countries outside the regimes, among other measures.
With regard to the U.S., we applaud the Obama Administration’s leadership inlaunching the Export Control Reform Initiative and believe it is critical for the
Administration to remain focused on transforming the current system. As the
Administration continues to work on the phased reform process, we encourage strong
outreach to and input from industry on the proposed reforms outlined by Secretary
Gates in April 2010. The abolishment of re-export controls needs to be a part ofthese reforms in order to minimize the burden on industry as well as to avoid “designout” of U.S.-made components. Additionally, we believe reforming the Technology
Release process within the Department of Defense will be critical in ensuring the fulllifecycle of defense exports are accounted for in the reform process.
In Japan, the so-called “Three Principles on Arms Exports, etc.” policy should bealso amended to allow for more international joint research and development.
Further reforms needed include: applying a more consistent application of existing
policy; defining a clearer treatment of “dual use” materials and technology; andestablishing a process for cooperation on programs that are in the pre-requirement
stage (e.g, a defense program that is not yet an official MoD requirement).
Labor Policy: The Councils continue to urge both Governments to take acomprehensive approach and work with U.S. and Japanese companies and labororganizations to develop smart and competitive labor policies and rules that balance
worker protection and social needs with employer flexibility and productivity needs.
The Councils urge both Governments to start formulation of such labor policies
immediately since it is requisite for sustainable economic growth. It is important thatboth Governments consider carefully the real impact of policies aimed at supporting
employment as there can be counterproductive effects unless the measures areconstructed carefully. For example, while the Japanese Government’s recent policy
discussion based on the need for more rigid rules of dispatched worker ’s regulation,
definite term employments and minimum wage policies are intended to help workers
and boost incomes, such policies would instead further discourage investment andbusiness expansion in Japan – the critical engines of sustainable job creation –because they would make it more costly to hire Japanese workers.

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Competition Law: The Councils urge the Government of Japan to revise the AntiMonopoly Act to better comply with global fair standards of “due process” in theinvestigative and appeals processes of the Japan Fair Trade Commission. The
Councils welcome that a new act to abolish the current appeals process was proposedto the ordinary Diet of 2010 and continue to support it in hopes it will pass the Dietand come into effect very soon. The Councils welcome the Japanese Government’s
commitment to review the merger control regulations of Anti-Monopoly Act within
FY2010 to encourage businesses to reorganize and enhance its competitiveness in the
global market.
Aviation: The Councils applaud the significant progress made by the U.S. andJapanese Governments toward an Open Skies Agreement and encourage theGovernments to take the final steps to conclude this Agreement. Aviation
liberalization under Open Skies will facilitate enhanced air services, and in turnsupport trade, investment and economic growth for both Japan and the U.S., further
enhancing the relationship between the two countries and Japan’s position in the
Asia-Pacific region.

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