SECOND JOINT STATUS REPORT ON THE U.S.-JAPAN ENHANCED INITIATIVE ON DEREGULATION AND COMPETITION POLICY

(1) Reduction of Interconnection Rates

(2) Interconnection with NTT DoCoMo

(3) Streamlining Interconnection Agreements: The final report of "The Study Group on Streamlining Interconnection Agreements" was released in March, 1999. Carriers can streamline their interconnection agreements among more than two carriers referring to the measures presented in the report. MPT will not prevent the use of clearing houses which provide services on a non- discriminatory, cost-based basis.

(4) Access to Cable landing Stations: MPT confirms that it will arbitrate, in accordance with the Telecommunications Business Law, any dispute relating to access to international cable landing stations through interconnection arrangements, including those involving co-locations of equipment in their facilities.

(5) Number Portability: The final report of "The Study Group on Cost-Sharing of Number Portability" was announced in March 1999. Local number portability will be introduced, based on the report, as early as possible around FY 2000.

(6) Dialing Parity: The final report of "The Study Group on Dialing Parity" was released in November 1998. Based on the report, Dialing Parity will be introduced around FY 2000.

(1) MPT confirms that the Telecommunications Business Law provides Type 1 carriers three arrangements for building out part of their networks using transmission line facilities owned by other Type 1 carriers: consignment, IRU, and interconnection. MPT recognizes Type 1 carriers' needs for flexibility in choosing, consistent with the Telecommunications Business Law, which of such arrangements to utilize, based on the Type 1 carriers' evaluation of their practical and economic requirements, and the technical viability of such arrangements.

(2) MPT will make publicly available, by the end of CY 1999, materials that facilitate understanding of the possibilities for utilization of such arrangements. The materials include explanations of laws, orders and examination standards, and examples of arrangements already permitted. MPT will update these materials annually to reflect evolving business needs and technical developments.

(1) The Government of Japan surveyed the existing circumstance on the procedures to use available properties (such as land and facility) for laying of cables, and released the results of the study on December 25, 1998. In line with the results of the study, the government published the results of its research of the measures for improvement taken by the entities concerned on March 26, 1999.

(2) The Government of Japan will receive complaints with regard to laying of cables, look into the matters needed within the scope of available cooperation from related entities and then reply to the complaint of applicants in the form of appropriately compiled results. The cases will be regarded as references for the consideration of further improvement in the review during FY 1999.

(3) It is necessary to conduct further study in the future, considering how the proposed measures will work and listening to a broad range of views. In FY 1999, a review will be conducted with participation of the Ministries concerned.

(4) In FY 1999, the Government of Japan will continue to make efforts to facilitate laying of cables by telecommunications carriers and cable television operators. In this connection, the review group will closely monitor implementation of the measures for improvement, evaluate their effectiveness in improving access to rights-of-way, consider complaints, opinions and questions from domestic and foreign entities, and review the need for other means of improving access to rights-of-way.

(1) The Government of Japan amended the Building Standards Law (BSL) on June 5, 1998 to introduce performance-based codes, a uniform evaluation system for new building materials by June 2000 and upgraded and efficient building confirmation and inspection procedures, including an interim inspection system, as of May 1, 1999. The Law will be fully implemented by June 2000.

(2) Japan initiated a process to coordinate funding for the translation into English of the amended BSL and related documents, e.g., enforcement orders and notifications, and provided information on their implementation through a series of formal and informal meetings.

(3) Japan held, with the United States, a series of joint seminars, beginning on July 2, 1998, to introduce and promote procedures for approval of three-story, multi-family, wood housing and certain commercial and mixed-use wood buildings in quasi-fire protection districts, which was permitted beginning in August 1997.

(4) Testing methods and procedures for 2x4 construction were established and published in December 1998, based on international and North American practice.

(5) American Lumber Standards Committee (ALSC) and Western Wood Products Association (WWPA) grademarks received recognition as 2x4 construction material for Machine Stress-Rated Lumber (MSR) in February 1998, and for Finger-Jointed Lumber (FJ) in June 1998.

(6) An engineer training program was concluded in 1998 required for recognition of the Underwriters Laboratories as a fire-testing laboratory for various fire preventive building materials.

(7) Japan concluded that the cordless nailer (IM350/90CTQ) did not fall within the definition of "firearms" in the Firearms and Swords Control Law in March 1998.

(8) Japan continued ongoing dialogue with the United States in the Housing Experts Group and the Building Experts Committee on recognition of U.S. nails and nailing systems.

(9) Japan continued ongoing dialogue with the United States in the Housing Experts Group and other fora on market access and standards-related issues in the housing sector.

(1) Upon its introduction by the GOJ on April 1, 1999, the Ministry of Construction (MOC) will apply the Public Comment Procedure in developing cabinet orders, ministerial ordinances, notifications and other relevant regulations that will be issued to implement revisions to the BSL.

(2) By May 1, 1999, MOC will develop and implement all measures necessary for the use of performance-based building standards for three-story, multi-family wood housing and certain commercial and mixed-use wood buildings in quasi-fire protection districts.

(3) Japan and the United States will expand the scope and frequency of joint eduucational programs to acquaint Japanese builders and consumers with newly made available, U.S.-style building materials and methods.

(4) By June 1999, MOC will issue and implement guidelines, which will include information on the content and timing of inspections, on new interim inspection systems for building code enforcement.

(5) Within six months of submission of all necessary data from the United States, MOC will authorize the use of U.S. power-driven nails and staples in Japan.

(6) MOC will accredit Underwriters Laboratory as a testing laboratory for fire- preventive building materials by recognizing certain necessary protocols after conducting an on-site examination.

(7) The Ministry of Agriculture, Forestry and Fisheries (MAFF) will revise Japanese Agricultural Standards (JAS) for structural plywood during an early stage of FY 1999, with increased emphasis on performance-based standards, including board strength.

(8) Within two months of the submission of requested data from the United States, which is anticipated by September 1, 1999, the MOC will re-evaluate the existing correction factors of Oriented Strand Board (OSB) with a view to applying the existing plywood correction factors to OSB, thereby achieving equivalency.

(9) By June 1, 1999, the MOC will publicly reiterate that it does not intend for its programs to discriminate against imported products.

(10) By June 2000, the Government of Japan will establish and implement a system of recognized/designated evaluation bodies for the nationwide acceptance and evaluation of test data for building methods and materials, and will facilitate implementation by providing opportunities for discussions with potential applicants prior to this date.

(11) A bill amending the JAS Law will be presented to the Diet during the present session with a view to bestowing on testing organizations overseas a function as JAS-registered grading organizations (RGO) and/or JAS-registered certification organizations (RCO).

(12) The MOC will provide the information requested by the United States concerning the approval process for aluminum fire-resistant windows in 1991.

Recognize the value of innovation of pharmaceuticals and medical devices, so as not to impede the introduction of innovative products which bring more effective and more cost-effective treatments to patients.

(1) When revising the National Health Insurance Pharmaceutical Pricing System, within the circumstances of the National Health Insurance System in Japan, the Government of Japan recognizes the value of innovation of pharmaceuticals so as not to impede or prevent the introduction of innovative pharmaceuticals which bring more effective and more cost-effective treatments to patients, and continues to study the pharmaceutical pricing system with related parties, including the U.S. industry, recognizing the role of the market.

(2) Streamlined and transparent procedures will be developed as soon as possible for the prompt creation of new by-function reimbursement categories for new medical devices within a specified period of time, taking into consideration the views of interested parties, subject to the approval of Chuikyo. The Government of Japan will work both to develop such procedures as well as to institute restructured categories and a by-function system for pacemakers, and will work to implement these measures simultaneously within FY 2000.

(1) The Ministry of Health and Welfare (MHW) directive issued in August 1998, based on the International Conference on Harmonization (ICH) guidelines, expanded the acceptance of foreign clinical test data for the approval of new pharmaceuticals.

(2) To further promote deregulation in this sector, the Government of Japan will:

(1) As soon as possible, but no later than April 1, 2000, the Government of Japan will ensure that decisions made by review personnel in the approval processes for medical devices and pharmaceuticals be treated as binding commitments by reviewing institutions and are binding on other reviewers throughout the process by, for example, requiring that evaluation standards, requests for information, questions and all other types of inquiries be set out in writing.

(2) The consistency and speed of the approval process for medical devices will be improved. Effective review by the Pharmaceutical and Medical Devices Evaluation Center and the Japan Association for the Advancement for Medical Equipment in the approval process will be promoted, for example, by clarifying the criteria of partial change, and criteria to distinguish "me-too medical devices" from "new devices" which require clinical test data, and allowing for continual direct communication between reviewing bodies and the applicant. Necessary measures have begun and continuous progress will take place with the first goal of completing such measures for pacemakers and orthopedic implants (bones and joints) by April 1, 2000. The progress of other items will continue to be discussed in the MOSS.

(3) MHW will make efforts for the proper management of the Highly Advanced Medical Technologies System, such as prompt and transparent procedures, with an eye to ensuring factors, including access to new technologies, subject to the approval of Chuikyo.

(4) To ensure a smooth transition to the new Japanese GCP, recognition of new drug approval applications and other required documentation such as all clinical data compiled under the old Japanese GCP, or equivalent standards, in clinical trials begun before April 1, 1997 will be accepted without the need to conduct new clinical trials.

(5) The approval processing period for new drug applications will be shortened to 12 months by April 2000, with steady and continuous improvement between now and then, and to further speed the introduction of innovative new pharmaceuticals, the approval period will be significantly shortened, particularly for priority drugs. The criteria and the selection review process for approval of applications for priority review treatment have been outlined by MHW notification. To ensure smooth and expeditious NDA (New Drug Application) approvals, the Government of Japan will:

(6) From April 1, 1999, a soft contact lenses grouping system has been introduced regarding the testing comparability between chemical disinfectant solutions and soft contact lenses, which will enable a manufacturer to obtain MHW approvals for use of all brands of contact lenses in a group by testing one representative in the group.

(1) With a view to ensuring transparency in the consideration of health care policies, foreign pharmaceutical and medical device manufacturers have been provided, upon request, with meaningful opportunities to state their opinions in the relevant Councils and relevant study groups on an equal basis with Japanese manufacturers, and to exchange views with MHW officials at all levels. MHW will continue to provide such meaningful opportunities.

(2) MHW will use the Public Comment Procedure for cabinet orders, ministerial ordinances, guidelines, notifications and any other administrative measures, which are subject to the Procedure as adopted by the Government of Japan on March 23.

1. Enhanced disclosure by financial institutions to market participants, such as adoption of disclosure standards for non-performing loans similar to those of the U.S. Securities and Exchange Commission (phased in from the business year beginning on and after April 1, 1997);

2. Abolition of the obligation for member insurers to use premium rates calculated by the rating organizations (July 1, 1998);

3. Promoting transaction of assets through establishing a system for securitization of assets via special purpose companies (SPC's) (September 1, 1998);

4. Introduction of new investment trust products (i.e., company-type investment trusts and privately-placed investment trusts) (December 1, 1998);

5. Full liberalization of securities derivatives (December 1, 1998);

6. Elimination of restrictions on the scope of business activities for securities companies (December 1, 1998);

7. Switch from a licensing system to a registration system for securities companies (December 1, 1998);

8. Introduction of proprietary trading systems (December 1, 1998);

9. Improvement of fair trading rules in the Securities and Exchange Law (December 1, 1998);

10. Expansion of the scope of the business activities for banks (lifting the ban on sales of investment trusts, etc.) (December 1, 1998);

11. Expansion of the scope of bank's subsidiaries to all financial related services (December 1, 1998);

12. Creation of the Securities Investor Protection Funds and the Policy Holder Protection Corporations (December 1, 1998);

13. Allowing investment trust management companies and investment advisory companies to grant discretionary authority to other fund management companies (December 1, 1998);

14. Strict separation of customer and proprietary accounts of securities companies (April 1, 1999);

15. Implementation of Public Comment Procedure for making, amending or repealing regulations related to financial services (April 1, 1999);

16. Enhancement of the disclosure such as shift to the framework of the disclosure primarily based on consolidated accounting (phased in from the business year beginning on and after April 1, 1998); and

17. Modification of the provisions to allow fund sponsors to directly transfer the securities when shifting business from trust bank to trust bank for Employee Pension Funds (kosei nenkin kikin) and National Pension Funds (kokumin nenkin kikin), and from any asset manager to another for Tax-Qualified Plans (tekikaku taishoku nenkin) (April 1, 1999).

18. Elimination of restrictions on financial company (nonbank) use of proceeds from bond and Commercial paper issuance (expected to be implemented in May 1999);

19. Elimination of restrictions on the scope of business activities for securities operating subsidiaries of banks and trust banks and trust bank operating subsidiaries of banks and securities companies (scheduled to be implemented on October 1, 1999);

20. Full liberalization of brokerage commissions (scheduled to be implemented on October 1, 1999);

21. Entry of the insurance companies into the banking business (scheduled to be implemented on October 1, 1999), and entry of banks into the insurance business as the completion of mutual entry between the insurance business and other financial business areas (scheduled to be implemented by March 2001);

22. Modification of the provisions concerning Employee Pension Funds (kosei nenkin kikin) and National Pension Funds (kokumin nenkin kikin) to allow the fund sponsors to directly transfer the securities when shifting business from any asset manager, including investment advisory companies to another (subject to approval by the Diet of the Pension Bills which are being considered for submission to the current session of the Diet); and

23. Modifications of the provisions concerning management of the successor fund for Nempuku to allow the fund sponsors to directly transfer the securities when shifting business from any asset manager, including investment advisory companies to another, and introduction of a new trust scheme (tokutei shintaku) as an alternative to the limited partnership scheme for the management of the successor fund for Nempuku, on condition that the successor fund for Nempuku establishes a sufficient risk management system. (Subject to approval by the Diet of pension asset management legislation, and legislation creating a successor institution to Nempuku.)

(1) The Government of Japan, for compressors and other equipment covered by the High Pressure Gas Safety Law, will accept the American Society of Mechanical Engineers (ASME) standard Section VIII, Division I, UG-101(n) (1998), equivalent of the stress measurement test in lieu of the casing pressure test at four times design pressure.

(2) Under the High Pressure Gas Safety Law, Japan simplified the application requirements in March 1998, eliminating requirements to append strength calculation sheets to the application when test certifications and other related certifications are provided. The Government of Japan will help U.S. and other foreign companies, as needed, to answer questions regarding implementation of the streamlined application process for the export of compressors and other equipment to Japan that is covered by the High Pressure Gas Safety Law.

(1) Adopt performance-based standards for welding for power facilities covered by the Electric Utility Industry Law; and

(2) Adopt self-inspection for standards conformity and require those who install the electrical equipment at power facilities, except nuclear power plants, rather than the manufacturer, to conduct the inspection.

(1) Will conclude its study of the differences between ISO 8528 and Japan's Fire Prevention Ordinance and, with due consideration to safety concerns, harmonize the Japanese standard with the ISO standard to the extent possible by the end of FY 2000; and

(2) Welcomes the decision in August 1998 by the Nippon Electric Generating Association, consistent with the concerns outlined in the 1998 Japan Fair Trade Commission report, to revise and streamline its certification procedures for standby generator sets.

(1) Conclude review by the end of FY 1999 of the requirements for hazardous area classification for gasoline pumps and, with due consideration to the safety level, revise the requirements in accordance with internationally-accepted standards, as necessary, to facilitate the introduction of self-service gasoline pumps equipped with electronic point-of-sale devices (such as credit card processing systems);

(2) Accept Underwriters Laboratories (UL) certification to the extent that it conforms with IEC standards for electrical components used in the manufacture of gasoline pumps after UL is approved as a foreign inspection institute designated by the Minister of Labour; and

(3) Initiate a study of the duplications between the certification process required to obtain designated manufacturer status and those required to obtain ISO 9001/9002 certification, with a view toward their possible omission, and will conclude this study by no later than the end of CY 2000.

(1) The Government of Japan established a prior classification information system using e-mail in 1998.

(2) The Government of Japan will institute Electronic Data Interchange (EDI) filing for import-export permits and approvals under the provisions of the Foreign Exchange and Foreign Trade Law by the end of FY 1999.

(3) Measures to be taken in FY 1999: The Government of Japan will:

(4) The Government of Japan has re-confirmed the decision by the Cabinet in March 1995 concerning "The Deregulation Action Program" that bonded warehouses in the vicinity of Narita Airport can be permitted if there is no problem from the viewpoint of control by Customs and promptness of Customs Clearance.

(1) Fundamental Changes of Policy Concerning Large-Scale Retail Stores: The Government of Japan introduced the Daiten-Ricchi-Ho (Law Concerning the Measures by Large-Scale Retail Stores for Preservation of Living Environment) from the viewpoint of abolishing supply/demand adjustment concerning the opening and operating of large-scale retail stores and preserving the living environment surrounding such stores. A legislative measure was taken to implement the new law from June 1, 2000 and abolish the current Large-Scale Retail Store Law on the same day;

(2) In implementing the Daiten-Ricchi-Ho (the Law), the Government of Japan, in order to facilitate the consistent, transparent and predictable application of the Law, will take the following measures:

(3) The 1998 revision of the City Planning Law abolished the classifications of Special Land Use Districts. In designating Special Land Use Districts, local governments will provide for public review of the proposed designation, hold public hearings on the proposed designation, allow interested parties to comment on the proposed designation, and require the City Planning Council (Toshi Keikaku Chihou Shingikai) to conduct an objective and transparent review of the comments. Based on the public comments, local governments will issue transparent and neutral decisions.

(4) Liquor: With regard to liquor retail licenses, the restriction on the number of licenses issued per a definite population has been steadily phased out beginning September 1998, to be abolished as of September 1, 2003. The restriction on proximity to existing premises will be abolished on September 1, 2000

(1) Trucking Business

(2) Warehousing: The entry system of warehouse business in the direction of minimizing governmental regulations, as well as fee notification system in the direction of achieving a more liberalized system, will be studied. Each study will be concluded as early as possible.

(3) Freight Forwarding Business: With regard to the notification system for fees and charges in the freight forwarding business for motor vehicles (i.e., trucks, vans and other freight-carrying motor vehicles), based on the system for trucking business, for which the submission of cost account statements are not required, was extended to within the range of 20 percent of the difference of standard fees in FY 1998.

(4) Port Transportation Business: Based upon the final report submitted by the Administrative Reform Committee in December 1997, which recommended replacement of the port transportation business licensing system with a permit system, replacement of the current fee approval system with a notification system, and the examination and implementation of various measures for ensuring stability of port transportation, the Port Transport Subcommittee of the Maritime Transport Committee of the Transportation Policy Council conducted a study beginning in May 1998 and issued its interim report in December 1998. Public comment procedures are being applied to the interim report.

(1) The Japan Fair Trade Commission (JFTC) conducted a survey on the Antimonopoly Act (AMA) Compliance Programs of the top 2,372 firms in Japan and publicized its survey report in June 1998.

(2) The JFTC conducted three surveys and actively addressed violations of the AMA with regard to min-min kisei or "private regulations."

(3) The Government of Japan will provide for the following:

(1) The Ministry of International Trade and Industry's (MITI) study group on private party injunctions issued its final report in June 1998. The report concluded that it is necessary to permit private parties to bring injunctions against unfair business practices.

(2) The JFTC's study group on private remedies issued its interim report on private party injunctions in December 1998. The report concluded that private party injunctions against AMA violations may be "appropriate," subject to further review on specific points, within the framework of the AMA.

(3) The Government of Japan:

(1) The Government of Japan:

(2) The Government of the United States notes that in February 1999, the JFTC filed a criminal accusation with the Public Prosecutor General against three manufacturers of ductile iron pipe for colluding to fix the market share for each firm. In March 1999, the JFTC filed an additional criminal accusation against ten of the sales staff from the manufacturers.

(3) The Government of the United States notes that in FY 1998, the JFTC took formal legal actions in 27 cases of AMA violations, 19 of which were unreasonable restraints of trade such as cartel arrangements and bid-rigging.

(4) In furtherance of the OECD Recommendation (March 25, 1998) concerning Effective Action Against Hard Core Cartels, the Government of Japan will provide for the following:

(1) The JFTC:

(2) The JFTC will:

(1) The Cabinet on February 16, 1999 submitted a bill to the 145th Diet Session to abolish the Depression and Rationalization Cartels and other AMA exemptions.

(2) The JFTC will further consider reviewing the AMA exemption systems from the viewpoint that continuous review is required to limit the exemption systems as much as possible to the necessary minimum, taking into consideration the changes in future circumstances.

(1) The Government of the United States notes that in December 1998, the JFTC announced the finalized guidelines on stockholdings and mergers.

(2) The Government of Japan will, through the JFTC:

(1) The Government of Japan proposed to the Diet a FY 1998 budget that increased the JFTC's budget by 1.1% and its staff by 10 persons; and the FY 1998 budget was approved by the Diet in April 1998.

(2) The Government of Japan submitted a FY 1999 budget to the Diet that proposed to increase the JFTC's staff by 9 persons, to be assigned mainly to the Investigation Bureau, and its budget by 2.8%; and the FY 1999 budget was approved by the Diet in March 1999.

(3) The Government of Japan will take all necessary measures to maintain the JFTC's independence, especially regarding personnel matters and policymaking matters, when the JFTC becomes part of the Ministry of General Affairs in 2001.

(1) The Management and Coordination Agency (MCA) drafted and announced "Public Comment Procedure for Formulating, Amending or Repealing a Regulation" to invite comments and information from the public and entrepreneurs from November 5, 1998 to December 10, 1998 on the proposed Procedure. After studying various comments and information submitted, the Cabinet adopted the Procedure by issuing a Cabinet Decision on March 23, 1999. The Procedure was implemented at the beginning of the new fiscal year (April 1, 1999).

(2) In implementing the new Procedure, the Government of Japan will make maximum efforts so that central government entities will apply the Procedure as broadly as possible.

(3) In order to ensure that the Procedure is properly implemented, the MCA will follow-up its implementation and publish its findings.

(4) Pending the adoption and implementation of government-wide Public Comment Procedure, several government entities, including advisory councils, have used, on their own initiative, public comment procedures before issuing significant regulations or reports.

(1) Streamlining and Expediting the Application Process: The MCA conducted a review with an aim of reducing the standard processing period for the issuance of licenses, permits and approvals and announced the results in September 1998. The standard processing period for 1380 application processes, out of 3,602 application processes, were shortened, of which the standard processing periods for 580 items were reduced by half.

(2) Examination Standards: The Government of Japan is reviewing examination standards for the issuance of licenses, permits and approvals with the aim of clarifying, specifying, and quantifying the examination standards while minimizing discretionary factors, in accordance with the Three-Year Deregulation Program (decided by the Cabinet on March 31, 1998).