Japan's Highlights of IAP Revision

1. Japan's Basic Stance for its IAP Revision

(1) Japan presents in its IAP a comprehensive action plan in accordance with the Osaka Action Agenda, with the aim of achieving the goal of "free and open trade and investment" by 2010/2020, stipulated in the Bogor Declaration. Japan is of the view that revision of IAPs is the core of APEC's efforts for liberalization and facilitation and that IAPs should be revised continuously and progressively. In view of these, we believe that all member economies should strive to submit their revised IAPs to the Joint Ministerial Meeting in November this year.

(2) Japan, in the process of revising the IAP, welcomes other members' views and comments on it and consult on it with other members concerned.  Also, we will endeavor to reflect their requests from the private/business sector on our revision of the IAP as fully as possible. We will take seriously recommendations from ABAC, in particular, as a representing voice from the private/business sector and reflect them in our IAP wherever possible. Also, we deliver to other members comments and requests on their IAPs submitted by over 150 Japanese business associations.

(3) Japan will chiefly focus on trade facilitation in revising the IAP, taking into account the reform measures in the Economic and Social Reform Program being pursued by the Cabinet.

(4) The main source of Japan's IAP revision this year is the Three-Year Deregulation Program (hereinafter "the Three-Year Program"), decided by the Cabinet on March 31. Deregulation efforts are pursued as a key to the economic structural reform, one of the six major reform programs for the transformation of Japan's social and economic systems. The economic structural reform is aimed for a more efficient and revitalized Japanese economy, and the Three-Year Program aims to fundamentally reform Japan's socio-economic structure, to create free and fair socio-economic systems, based upon rules of responsibility and market principles. The Three-Year Program is a comprehensive one which goes beyond "Deregulation" as defined in Section Part One C of the Osaka Action Agenda. The Three Year Program contains liberalization and facilitation measures affecting a wide range of economic activities, such as services, investment, standards and conformance, customs procedures, competition policies, rules of origin and government procurement. The Three-Year Program consists of the following principles:

(i) In principle, economic regulations shall be lifted and social regulations minimized as regulations are abolished or otherwise relaxed.
(ii) Regulatory arrangements shall be further rationalized, such as by the transfer of inspection functions to the private sector.
(iii) Regulations shall be simplified and rendered more specific.
(iv) Regulations shall be modified to conform to international standards.
(v) Regulatory procedures shall be speeded up.
(vi) Transparency shall be increased in the procedures for establishing new regulations.

In particular, the review shall focus on lowering and abolishing entry barriers, and conforming to international standards. Emphasis shall be placed on the removal of entry barriers against foreign companies and their products coming into the Japanese market.

(5) Furthermore, as agreed in Joint Statement on the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy, Japan has taken further steps from the Three-Year Program in such areas as housing, telecommunications, medical devices and pharmaceuticals and competition policy. The benefits of those measures will be accorded to goods and services of other economies, consistent with international obligations.

(6) In the process of drawing up the Three-Year Program, Japan listened to the voices of a wide range of overseas as well as domestic sources.

(7) The Three-Year Program also includes deregulation measures in the financial sector. The financial system reform is based on the three principles of "Free" (liberal market under market principle), "Fair" (transparent and reliable market) and "Global" (international and advanced market). The financial system reform is a comprehensive and cross-sectoral one, aiming for establishing a free and fair financial market competitive with those of London and New York. A reformed market is expected to vitalize the economy through realizing better return on household wealth and providing efficient supply of funds for the next generation of key industries. The status of the yen as an international currency would also be strengthened through the reform.

(8) A strong recovery of the Japanese economy would be important for those Asian economies affected by the financial crises to vigorously restart their economic growths with their high economic potentials. It is in this regard that Japan will implement the Three-Year Deregulation Program. Also, the Obuchi Cabinet has designated itself as the "Cabinet for Economic Revival" and the Government is now devoting itself to implementing the largest ever economic stimulus measures and to undertaking the efforts for the revitalization of the financial sector. It is also determined to make every effort to develop a supplementary budget in the current fiscal year and to implement permanent tax cuts for the recovery of the Japanese economy.

2. Contents of Japan's IAP Revision in 1998

The following measures, most of which are stated in the Three-Year Program, are included in Japan's revised IAP.

Deregulation and Further Rationalization Measures for Trade and Investment Facilitation

*Housing
--The Building Standards Law
Japan amended the Building Standards Law, incorporating performance-based building regulations in June 1998 with the view to full implementation within two years.

--Implementation of amended Building Standards Law
Japan will fully being into effect the system based on the recognized approval bodies and recognized evaluation bodies under the amended Building Standards Law by 2000, which will simplify the pre-market procedure for foreign materials.

--Steel Structures
Methods for testing the fire-resistance of steel structures and standards for fire-resistant paint will be brought in line with international standards as soon as the results of ISO studies become available

*Government Procurement
--The post-award publication of the scheduled ceiling tender prices for construction services procurement will be practiced in FY 1998.
--The results of the business evaluation on qualification for participating in competitive tendering will be published after the review of the business evaluation in 1998.
--The effective measurement to (reverse subcontracting) and (bulk-subcontracting) will be implemented.

*Telecommunications
--The Bill for the revision of the Telecommunications Business Law and the Radio Law was enacted to introduce the following measures (April 1998).

-Establishing systems which enable the acceptance of certifications and/or testing results conducted by the organizations in other economies.

-Establishing certification systems based on the types of telecommunications equipment.

--As for interconnection rates, the government of Japan intends to submit a bill necessary to amend the Telecommunications Business Law to the ordinary session of the Diet in the spring of 2000 in order to implement Long-run Incremental Cost Methodology (LRIC) as early as possible. Provided that all due procedures are completed expeditiously, LRIC will be implemented in 2000. Prior to the introduction of LRIC-based rates, the government of Japan will, within the scope of its existing authority, promote the reduction of interconnection rates as much as possible.

--The Bill for the abolition of the KDD Law, which would eliminate the limitation of foreign capital participation in KDD was enacted in April 1998, and was implemented in July 1998.

--The Bill for the revision of the Telecommunications Business Law, in which the requirement for authorization of each end user charge change would be abolished and replaced in principle with a notification system, and a price-cap regulation would be applied to end user charge for basic telecommunications services including subscribed telephone service in the regional telecommunications market was enacted in April 1998.

*Finance
--Expansion in Means of Asset Investment
Through amendments to Securities Investment Trust Law, Securities and Exchange Law, Banking Law, etc., The changes will make ways for:

-Enhancements to investment trusts by way of (a) launching new investment trust products (b) Liberalizing product design (c) Introducing over-the-counter sales of investment trust by banks and other institutions.
-Full liberalization of the securities derivatives
-Expansion of the definition of securities
These will cater for broader range of products available to the investors, such as securities derivatives, but also for over-the-counter sales of investment trust by banks and other institutions.

--Provision of Attractive Services through Active Intermediations It is designed to liberalize securities company services and fees, encourage new entries, and provide for reforms designed to make it easier for market participants to receive higher-quality services from financial institutions through:

-Liberalization of services in terms of (a) diversification of securities company services (b) diversification of asset investment businesses
-Price liberalization in the forms of (a) full liberalization of brokerage commissions (brokerage commission that applies to transaction value in excess of 50 million yen was liberalized in April 1998, and full liberalization will be completed by the end of 1999) (b) reform of the rating organization system (eliminating the obligation for member insurers of the rating organization to use premium rates calculated by the rating organization for fire, automobile, and other insurance products).
-Promotion of new entry to the market by way of (a) Shifting from licensing to registration system for securities companies (b) Promotion of cross-sectoral entry (c) Revision of the provision consequent upon the ratification of the WTO Protocol on Financial Services.

--Create Diverse and Distinctive Market Systems
We will provide investors and fund-raisers with a variety of markets and fund-raising channels rather than only the traditional exchange markets through:

-Abolishment of requirement of consolidation of order-flow for listed securities
-Reviewing the operations of exchange markets
-Reinforcement of registered over-the-counter market functions
-Introduction of proprietary trading systems (PTSs)

--Build a Framework that Enables Users to Make Transactions with Confidence While adhering to the principle of self-responsibility, we will also enhance disclosure requirements and formulate fair trading rules so as to ensure that markets are fair and reliable. In addition, under the transparent rule-based framework, we will ensure the soundness of financial intermediaries, and will also prepare for frameworks for protecting investors and policy-holders in the event of failure. These will be achieved through:

-Enhancing disclosure requirements and frameworks for fair trading by (a) providing for consolidated disclosure covering both parent and subsidiary companies. (b) Formulating and enhancing fair trading rules to prevent unfair trading activities
-Ensuring the soundness and fairness of intermediaries and enhance investor protection through (a) enhancing rules governing actions taken by securities companies etc. and (b) reviewing the disclosure systems on financial institutions (c) preparing for subsidiary rules (d) reviewing capital adequacy rations for securities companies (e) creating new securities investor protection fund. (f) creation of Policy-Holders Protection Corporation

*Investment
--As recent expanding, in FY 1997, the requirement of the foreign capital ratio in the foreign-affiliated firms eligible for loans was relaxed, from 50% or over to over one-third, and the loan program for facilitating international cooperation between enterprises in case of business transfer was added to the program. Thereafter, since January 1998, special low-interest has been applied for all sectors which make the first full-scale investment in Japan. The Japan Development Bank (JDB) will continue to promote foreign direct investment in Japan by these measures.

*Medical Devices/Pharmaceuticals
--The approval processing on applications of new drugs will be shortened to 12 months by April 2000, while improving the processing steadily and continuously. The approval processing for priority drugs which are innovative pharmaceuticals will be more shortened in order to speed up their introduction.

--The range of acceptable foreign clinical test data for pharmaceuticals was expanded through the adoption of the International Conference on Harmonization Guidelines in August 1998. Process for the acceptance was more transparent, while inappropriate delays will be avoided.

--In order to ensure transparency in the consideration of the health care policies, allow foreign pharmaceutical and medical device manufacturers meaningful opportunities to state their opinions in the relevant Councils on an equal basis with Japanese manufacturers, and provide them on their request, with opportunities to exchange views with MHW officials at all levels.

*Competition Policy
--Regarding the exemption cartels under the Antimonopoly Act, depression cartels and rationalization cartels will be repealed. Regarding the exemption systems under the Exemption Act, the exemption concerning cooperatives will be allowed under Section 24 of the Antimonopoly Act and other exemptions will be in principle abolished. The Exemption Act itself will also be abolished, A bill for this purpose will be submitted to the next ordinary session of the Diet.

--Regarding the resale price maintenance (RPM) system for copy-righted works (books, magazines, newspapers, records, music tapes, music CDs), based on the principle that reasonable and particular reasons are necessary to keep the system which is in principle prohibited by the AMA, necessary measures will be taken. In the interest of consumer protection, for the time being, prompt and appropriate actions will be taken in order to correct the bad effect in distribution and business transaction existing under the current RPM system.

--A conclusion will be reached after conducting a study on appropriate private remedy system which facilitates the victims of conducts impeding the formation of fair and open market to seek relief on their own initiative.

--Necessary measures will be taken to enforce the Convention on Combating Bribery of Foreign Public Officials in International Business Transaction (the amendment of the Unfair Competition Prevention Law has been passed by the Diet session.).

-- Regarding the kind of holding companies prohibited and the restrictions on the total value of stockholdings by a large-scale non-financial company, necessary review will be implemented.

*Legal Services
--The revised Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers has been passed. This law, which came into force in August 1998, includes such measures as relaxing the regulations on gaikokuho-jimu-bengoshi (a foreign lawyer qualified by Japanese law) (i.e. relaxation of practicing experience requirement, lifting a ban on performing the legal business concerning so-called third country law, relaxation of restrictions on the objectives of joint enterprise).

*Standards and Certification Systems
--The Road Vehicles Act was revised and promulgated in May 1998. The revision enables accession to the revised UN-ECE 1958 Agreement and introduction of the mutual recognition system for component type designation certification with foreign government. These measures will be implemented within six months of promulgation, i.e. by November 1998.

--Efforts will be made to contribute to international standardization by proposing JIS as international standards, in cases where relevant international standards do not exist or existing international standards seem to be inappropriate, and where JIS seem to be acceptable as international standards, in addition to proposing, as necessary, to withdraw inappropriate international standards.

--Japan will work to facilitate the conformance of JAS with international standards, and actively abolish unnecessary standards and revise standards in order to meet public needs, taking into account situation of production, distribution and consumption. In order to properly understand trend in international standardization of foods and to reflect situation of Japan to international standards, Japan will promote its internationalization in the area of standards through the submission of proposals to conferences for international standardizations (Committees of Codex Alimentarius Commission and TCs of ISO).

--The list of pests which are not subject to the plant quarantine continues to be under review based on outcomes of PRA (Pest Risk Analysis).

--As for the post-race quarantine for race horses, Japan shortened the quarantine holding period in April 1998.

*Energy
--The Japanese Government abolished the certification system of gasoline supplier in January 1998, under which certificate had been required for registration of new service stations prior to this abolishment.

--In accordance with the views of the Administrative Reform Committee made on December 12, 1997 and after the conclusion of the Council for Electric Power Business, efforts have been made to create a new system in which the demands for higher efficiency, energy security, universal services, stable supply and reduced environmental burden can be met. As a means to achieve greater efficiency, introduction of competition and liberalization in the retail sector of electric power supply is examined.

--The Government reviewed the effects of deregulation measures by the amendment of the Gas Utility Industry Law (enacted in March 1995), concerning gas sales to large-volume consumers. The Government also reviewed existing regulations on large-volume supplies, including its conditions and areas of supplies, taking into account the terms of competition among gas suppliers with a view to facilitating new entry into the market.

--In view of further promoting competitions in the power generating business, the Government will introduce a new tender system, which is to be implemented from the year 1999 unless special circumstances arise. This system includes post award investigations by a third-party to ensure a fair competition among all participants in a tendering for new thermal power sources, except for the authorized or permitted power sources (planned to be in operation from 2007). It also contains the introduction of accounting separation on newly-bid thermal power sources.

*Computerization of Customs Procedure
--Japan will enable certain containerized sea cargoes to obtain import permission immediately after Customs confirms the cargoes are brought into a (Hozei) area, through the up-graded computerized customs clearance systems or NACCS (Nippon Automated Cargo Clearance System) together with the pre-arrival cargo examination system in FY 1999.

--The current Sea-NACCS shall be improved, and institutionalization of EDI (Electronic Data Interchange) filing for customs procedures between the each business' system and Sea-NACCS shall be enhanced during FY 1999.

*Food
--Japan will accept health certificates for meat and meat products which are issued and electrically transmitted by authorities for exporting countries to the Japanese Government, Since March 1998 a network for electrical transmission of health certificate between Australia and Japan has been installed. The United States of America and New Zealand will join to the network.

*Mobility of business people
--The government abolished in January 1998 the restriction on the maximum period of stay for status of residence of (Intra-company Transferee), a decision based on the analyses of the five-year survey on enforcement practices after the coming into force of the revisions to the Immigration Control and Refugee Recognition Act in June 1990.

*Transportation
--Extension of the period of validity of completion inspection certificates to nine months from six months (May 1998).

*Others
--The national inspection system of pearls for export will be abolished in January 1999.

Actions towards achieving the goal of Free and Open Trade and Investment

--Japan firmly commits itself to the multilateral trading system. As Japan expressed in the WTO Ministerial Conference in May 1998, it will support the launch from 2000 of comprehensive multilateral trade negotiations including those on industrial goods and rule-making of investment. Japan will take the initiative on the modalities of the coming negotiations in close consultations with other WTO members.

--Japan fully Implements the Uruguay Round agreements, thereby bringing tariff rates down to the following levels (simple average for agricultural products and trade-weighted average for other products)

*Industrial products (6,700items*) : 1.5%
*Fisheries products (290items*) : 4.1%
*Forestry products (170items*) : 1.0%
*Agricultural products (1500items*) : 9.3% (*approximate figures)

--Japan is continuously implementing the ITA and actively participating in the discussions on ITA II.

--The Government has finished the ratifying process of the Fifth Protocol of General Agreement on Trade in Services (GATS).


Back to Index