Deregulation

The Government of Japan has abolished or relaxed regulations following the principle that economic regulations should, in principle, be lifted and that social regulations should be minimized, in promoting the Three-Year Deregulation Program. The Three-Year Regulatory Reform Program (tentative translation) that was created in March 2001, not only includes short-term reform plans but also includes mid-term and long-term reform agenda and shows the fundamental direction of the overall reform. The program stipulates that the Government of Japan will also work to implement steadily all the measures specified in the past programs. Furthermore, the General Regulatory Reform Council (tentative translation), established in the Cabinet Office based on "The Administrative Reform Outline," will monitor the implementation of the new program and will promote broad regulatory reform taking in the perspective of promoting socio-economic structural reform.

It is true that the Governments of Japan and the United States have engaged in dialogues on those agenda listed in the NTE report, under the Enhanced Initiative on Deregulation and Competition Policy. However, measures in the Joint Status Reports of the Enhanced Initiative that are discussed in the NTE report are measures that the Government of Japan decided to take voluntarily. The Joint Status Reports of the Enhanced Initiative merely contain these voluntary measures of the Government of Japan. The Government of Japan is not going to implement these measures because of the "agreements" with the United States. The Joint Status Reports of the Enhanced Initiative also describe measures that the U.S. Government will take, as well as measures that the Government of Japan will take.

(1) Sectoral Deregulation

i. Telecommunication

The Government of Japan has been steadily promoting regulatory reform and competition in the telecommunications sector, which have led to significant increase of new entry into the market. This has led to substantial results such as rate reductions and diversified and advanced services. Unlike the United States, Japan has already abolished the restriction on foreign direct investment for the license of radio stations for telecommunications business; has no market entry regulations based upon criteria irrelevant to telecommunications policy, such as "foreign policy" and "trade concerns" under the name of "public interests"; and does not impose unnecessary burden on telecom companies due to differences of application and reporting forms among states. Furthermore, as is clearly stated in the Three-Year Regulatory Reform Program and in the e-Japan Priority Policy Program, it has already been decided that efforts will be made to further promote fair competition in the telecommunications market by introducing such measures as further improvement of asymmetrical regulations and the establishment of "Telecommunications Business Dispute Settlement Commission" for the prompt and efficient settlement of disputes among telecom companies, and to facilitate the establishment of information and telecommunications network infrastructures through smooth laying of cables. An amendment to the Telecommunications Business Law incorporating these measures has been submitted to the current Diet session. Needless to say, the Government of Japan has been faithfully implementing its WTO commitments.

The U.S. Government has also inappropriately included in the report unfounded and one-sided views with regard to such areas as interconnection and price regulation policy, although the Government of Japan has repeatedly given full explanation to the United States. The U.S. Government should refrain from easily making individual company issues into a government-to-government level issue, without having the relevant companies to exhaust transparent procedures such as arbitration and submission of opinions under the Telecommunications Business Law.

ii. Information Technology

Japan has enacted most of the amendments to relevant laws that will enable Japan to meet the obligations under the WIPO Performances and Phonograms Treaty (WPPT). Furthermore, Japan is seeking the possibility of ratifying WPPT, fully taking into consideration the issue of how to protect audiovisual performances, and the consistency between the treaty and relevant domestic legislation.
With regard to the rule for the liability of Internet service providers (ISPs), the Government of Japan is currently working on a bill that intends to clarify the ISP liability for information distribution through the Internet so that ISPs can take quick and appropriate measures against liability issues. The bill will have general provisions that will apply to all areas including copyright infringements, defamation and invasions of privacy. In this framework, the basic policy of the bill is to balance the respective rights among the senders of the information, the person who claims that his/her rights have been violated, and ISPs that connect them. The Government of Japan is hearing the views from various relevant organizations and individuals on this issue. For example, a public comment procedure has been taken on the report issued by the Study Group for Securing Adequate Information Distribution through Internet, which was compiled last December. The Government of Japan is working on the bill taking into account these various views.
Regarding "temporary copies" pointed out in the 2001 NTE report, the Article 21 of Japan's Copyright Law gives authors exclusive rights of permission to reproduce their works, which is consistent with WIPO Copyright Treaty, fulfilling Japan's obligations under the Treaty.

iii. Medical Devices and Pharmaceuticals

In April 2000, the Ministry of Health, Labour and Welfare (MHLW) re-classified categories for medical device application in order to improve the review process. This does not mean narrowing the scope of "me-too" medical devices.

Japan considers it necessary to impose individual unit verification of imported blood pressure gauges and thermometers according to the Measurement Law due to the fact that some of them actually have failed in the verification.

MHLW does not regard pre-application consultations with applicants on medical devices and pharmaceuticals approval review as "binding" although MHLW ensures the consistency of, and adherence to the approval review.

It is Japan's view that interpretation on the E5 guideline agreed at the International Conference on Harmonization (ICH) should be discussed scientifically at ICH.

As for revising the medical device pricing system, MHLW clarified the time-clock of the reimbursement process and set the provisional pricing for the category C1 in October 2000. Therefore, the intention of the statement "Under the current system, the introduction of such products can be delayed for years" is unclear.

As for revising the pharmaceutical pricing system, MHLW is now classifying drugs to select comparitor products based on the principles clarified in March 2000. Therefore, the statement "Japan is revising the system by which drugs used as price comparitors are selected" is not correct if it refers to revision of such principles.

iv. Housing

The Government of Japan does not consider that building standards and regulations in Japan, such as "performance-based standards for special building," "ISO testing method," "fire-related prescriptive height" impede the use of U.S. building products and building systems in Japan. The Government of Japan has explained these issues in the Housing Expert-Level Group in November 2000.

v. Financial Services

Regarding measures for financial system reform decided in 1996, the implementation timetable up to 2001 was announced in 1996, reflecting the intent to accelerate the process as much as possible. Until now, the reform has been implemented as planned and almost all the measures have already been implemented.

vi. Energy

In Japan's electricity and gas market, there has been competition in prices among the existing power companies and the new entrants after the partial liberalization for large-scale users. The Government of Japan has made efforts to set up non-discriminatory and transparent market through various measures including the establishment of a guideline for proper transaction in the electricity and gas market, making clear the Minister ordinance and notice concerning how to calculate the transmission charges, and making relevant information public. The Government of Japan will measure progress towards liberalization in a timely fashion in accordance with the developments of the market.

(2) Structural Deregulation

i. Antimonopoly Act and Competition Policy

JFTC is making efforts to strengthen the enforcement of the Antimonopoly Act, including efforts to enhance its investigative functions, and is taking strict and vigorous measures against price cartels, bid rigging and other types of violations of the Antimonopoly Act. The actions that JFTC will take against such violations will include criminal prosecutions. If the U.S. Government has any information based on facts concerning alleged violation of the Antimonopoly Act, the U.S. Government should provide such information to JFTC. JFTC, for promoting deregulation from the viewpoint of its competition policy, had actively conducted surveys and made proposals in business sectors where entry had been restricted by supply and demand balancing regulations and, with regard to the sectors where entry restrictions have been relaxed, is conducting surveys and making necessary proposals regarding post deregulation conditions of these sectors and supporting businesses' voluntary efforts to comply with the Antimonopoly Act for promoting competition policy. JFTC will continue to make these efforts even after the government reorganization of ministries and agencies in January 2001.

ii. Distribution

Ministry of Economy, Trade and Industry (METI) has explained to relevant local governments the purpose and content of the Daiten-Ricchi Ho (the Law) and will continue to provide necessary information. METI is making efforts to ensure fair application of the Law through such measures as taking questions and giving advice at official contact points (Daiten-Ricchi Ho Contact Points) established within METI headquarters in Tokyo and regional bureaus. Thus, these measures should dispel any concerns that the U.S. may have about the Law.

iii. Transparency and Other Government Practices

The Government of Japan has introduced a government wide policy evaluation system at the same time as the reorganization of the central government in January 2001 to improve the transparency of the government, to strengthen the government's accountability to the public and to improve the quality of public administration. The Government of Japan has submitted the Government Policy Evaluations Bill in March 2001 to ensure effective implementation of the system and to make the system more reliable to the public. Regarding the Public Comment Procedure, the Government of Japan has conducted a follow-up survey of the implementation of the Procedure and published its findings in July 2000. As for administrative procedures and practices, the Government of Japan will continue to promote compliance with the Administrative Procedure Law, and to enhance transparency and clarity in administrative procedures and administrative guidance pertaining to application processes.

iv. Commercial Law

The Commercial Law Group of the Legal System Council is considering the revision of the existing Commercial Law to meet the demands of the advanced information society and internationalization, taking into account the requests from the business community in Japan. The present process for the revision has four main points: a) corporate governance, b) meeting the demands of the advanced information society including utilization of the Internet, c) improvement of measures to obtain capital by corporations, d) meeting needs of corporate activities that have become more internationalized. The bill for the revision will be submitted to the ordinary session of the diet next year. The assertion in the 2001 NTE report that the current Commercial Law constitutes structural impediments for investment into Japan is not accurate since recent revisions of the Commercial Law have already made it easier to reorganize corporations.

v. Judicial System Reform

The Judicial System Reform Council is presently considering judicial system reform. The Council issued an Interim Report last November. The three main pillars of the reform stated in the Interim Report are as follows: (a) to enhance and strengthen the human resources that connect the public and the judicial system, (b) to construct a judicial system that is easy to understand and to use for the public, and (c) to establish the judicial system upon a firm foundation of the Japanese people with whom sovereignty resides. The Council is engaged in further deliberations to compile a fruitful final report by July 2001 based on the Interim Report, taking into account the opinions and requests of the public.

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