Revision of Japan's Deregulation Action Program

1. Agriculture

(1) Clarifying the Range of Pests Subject to Phytosanitary Quarantine

Based on international standards established by the Agreement on the Application of Sanitary and Phytosanitary Measures and further by the Pest Risk Analysis (PRA) measures internationally adopted in October, 1995, Japan will implement PRA specifically in response to pests conditions in Japan. Departng from the current practice of subjecting all pests to quarantine, a proposal has already been submitted to the current ordinary session of the Diet for the legislative revision of the Plant Quarantine Law so that the range of pests subject to quarantine is clearly defined.

(2) Food Additives

(a) Formulating guidelines concerning the designation of food additives

To speed up the procedures for designating new food additives and revising the standards for use of food additives and make them more transparent, guidelines were published on March 22, 1996 that define such items as: procedures for requesting designation or revision the scope of accompanying documentation for these requests; generally used methods for studies required to prepare the documentation and the standard period of time (one year) for processing requests. In conducting evaluation of requests on designation or revision, evaluation results provided by international organization shall be taken into account.

(b) Handling individual items

The revision of standards for use of individual items such as potassium sorbet, sorbic acid, benzoic acid and sodium benzoate used in mayonnaise and other products will be conducted in accordance with the guidelines cited in (a) above once the requests accompanied with necessary documentation will be received.

2. Automobiles

Japan is implementing deregulation measures in accordance with the conclusions reached in the Japan-U.S. Framework Talks regarding autos and auto parts.

3. Construction and Building Materials

(1) The Emergency Priority Program for Reducing Housing Construction Cost In the February, 1996, meeting between Prime Minister Hashimoto and President Clinton in Santa Monica, the Prime Minister informed the President of his initiative for reducing housing construction cost. Upon the instruction of the Prime Minister, the Emergency Priority Program for Reducing Housing Construction Cost was announced officially on March 26 (see Attachment). This Program is a comprehensive one, including not only review of Building Standards but also review of regulations on water supply equipment, JIS and other standards, and expedition of entry procedures for skilled construction workers.
Main items in the Program are listed below.

(a) Comprehensive review of building regulatory framework

The present building regulatory system centering on prescriptive regulations will be changed to performance-based regulations. Water supply equipment regulations will be rationalized.

(b) Facilitate introduction of imported housings and foreign materials and components

Mutual recognition on building codes and international alignment of JIS and other standards will be promoted. As for wood frame construction method, the materials which are certified to conform to overseas common standards may be used for wood frame construction in Japan.

(c) Promotion of leading projects for reducing housing construction cost

Model projects using foreign materials and components by public housing supply organizations will be undertaken. Low cost model housing developments by all prefectures in Japan will be started.

(d) Preparation of positive support organizations for the consumers

"Housing Up Centers" will be established in each of the prefectures to provide information on housing and housing construction materials and components.

(e) Promotion of housing production rationalization program

Support will be provided to medium and small housing manufacturers for enhancing productivity and quality control.

(2) Other Measures

In addition to the measures in the Emergency Priority Program for Reducing Housing Construction Cost, the following measures will also be adopted.

(a) Expanding designated areas where three-story wooden apartments can be constructed

Currently, three-story wooden apartments can only be constructed in areas that are not designated as Fire Protection Districts or Quasi-fire Protection Districts. Based on the results of fire-disaster tests conducted by the Building Research Institute of the Ministry of Construction on March 5, 1996, however, new technology will be developed that will permit the building of the above-mentioned structures in Quasi-fire Protection Districts. Required performance standards will be clarified by the end of fiscal 1997.

(b)JAS System

The designation of two new FTOs (Foreign Testing Organizations) and the simplification of permitting/approving procedure of foreign factories will be done in fiscal 1996.

(c) Revising the financing requirements of the Government Housing Loan Corporation

  1. Acceptance of the housing materials for wood frame construction

    When materials conforming to overseas common standards can be used for wood frame construction in Japan (see (1)(b) above), these materials will also be able to use for houses financed by the Government Housing Loan Corporation.
  2. Abolition of added requirements

    Three items of requirement by the Government Housing Loan Corporation, namely, incombustible roof material, fire prevention for three stories wooden detached house, duration standard for three-stories wooden apartment house, will be abolished as of April, 1996, which have been imposed over and above the standards of the Building Standard Law.

(d) Permission to use products equivalent to products with the Better Living (BL) approval mark

In some of the public housing construction projects carried out by the Housing and Urban Development Corporation, regional housing supply public corporations and other public housing supply organizations, the use of products bearing the BL mark is currently required. Before the end of fiscal 1997, however, the use of products that are equivalent to BL products will also be permitted.

(e) Clarifying labor safety regulations for low-rise construction

It will be illustrated how to protect workers in the use of movable scaffolding, or no scaffolding, in low-rise construction, i.e., two stories or less, by the end of fiscal 1996.

4. Import processing

(1) Immediate clearance system upon arrival for certain air cargoes, which allows importers to make an import declaration and obtain an import permission just after reporting cargo arrival to the customs without putting cargo into a "HOZEI" area, will be introduced from April 1996 in view of further facilitation of customs clearance.

(2) The guideline on customs clearance sites for imported goods arriving at Narita International Airport was abolished on 31st March 1996.

(3) Food sanitation procedures have already been computerized since 1st February 1996 and plant and animal quarantine procedures are to be computerized. These systems will be electronically connected with the NACCS (a computerized customs clearance system).

5. Energy Utilities Related Standards

Generators, transformers, and other electrical equipment used by electricity utilities industry are required to meet standards stipulated in the Technical Standards (MITI ordinance based) on the Electricity Utilities Industry Law. Work is under way to revise the Technical Standards by the end of fiscal 1996. Incorporation of performance-based standards in being studied, and harmonization of standards with those of other countries in considered on the basis of harmonization with the International Electrotechnical Commission (IEC) standards.

6. Financial Services

Japan is implementing deregulation measures in accordance with the conclusions reached in the Japan-U.S. Framework Talks regarding financial services. The following measures include aspects that go further beyond the Framework conclusions: deregulation in the fund management of Employees' Pension Fund accounts; deregulation in overseas deposits; and fundamental relaxation of the rule concerning issue of commercial paper.
The following measures, in addition to those included in the Framework conclusions, will be taken to facilitate the further revitalization of the Japanese financial and
capital markets by lowering overseas transactions costs and providing diverse services, with a view to developing open international financial markets similar to those in the United States and Europe:

(1) Measures to expand foreign exchange transactions conducted by securities companies

(a) Extension of the period of forward exchange contracts which can be concluded between DSCs (designated securities companies) and investors

(b) Deregulation on currency-related derivatives with resident investors

(c) Deregulation on currency swaps related to an underwriting

(d) Further deregulation on yen interest rate swaps

(2) Deregulation on external settlements

(a) Fundamental deregulation on account current

(b) Liberalization of special methods of settlement concerning settlement period

7. Investment

(1) Fee-Charging Employment Placement Projects

(a) On the December 14, 1995, The Administrative Reform Committee made some views on significantly increasing kinds of designated job which may be taken on, and inclusion of designated jobs other than inappropriate ones etc., with due consideration to the protection of workers. Respecting these views, the system of the fee-charging employment placement project will be discussed in terms of how it should be. The discussion started already in October 1995 and will continue in 1996. The result of the discussion will be implemented in fiscal 1997.

(b) Procedures for granting, and for renewing, the license of fee-charging employment placement projects will be made clear and simple, and will be given little room for discretion. and a manual will be prepared to make the procedures widely disseminated. Measures in this area will be implemented in fiscal 1996.

(2) Relaxation of Requirements for the Firms to Register on the Over-the-Counter (OTC) Market

The "OTC Market for Special Rule Issues" was established in July, 1995 with the relaxation of going public requirements to allow loss-making corporations to register their stocks.
The registering system and other matters regarding this market were further improved in October, 1995. The types of eligible businesses for registering this market will be further clarified to include new businesses including services on April 1996.

8. Legal Services

(1) A proposal for legislative revision has been submitted to the current ordinary session of the Diet to liberalize representation by foreign lawyers of parties in international arbitrations. The revised law will be implemented within three months of its promulgation in fiscal 1996.

(2) Concerning the employment of "bengoshi" by "gaikokuho-jimu-bengoshi", the review process will be initiated in fiscal 1996, in which the application of the revised Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers will be monitored and surveys conducted to determine whether or not there could be any negative impact related to employment. Efforts will be made to reach a conclusion within fiscal 1997.

(3) Concerning the experience requirements for qualification as "gaikokuho-jimu-bengoshi", and the handling of legal business related to third country law by "gaikokuho-jimu-bengoshi", the review process will be initiated in fiscal 1996, in which the application of the revised Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers will be monitored and surveys conducted on recent trends in the legal systems of other countries. Efforts will be made to reach a conclusion within fiscal 1997.

9. Medical/Pharmaceuticals

(1) Concerning the reimbursement approval process for medical devices, measures will be considered in fiscal 1996 so that reimbursement is made on the basis of provisional prices in cases where no final reimbursement determination is made within three months after a new product has been approved in accordance with Pharmaceutical Affairs Law.

(2) Concerning the scope of pharmaceuticals, a review will be conducted beginning in fiscal 1996 and measures will be implemented so that consideration can be given to approving the distribution, as foods, of certain mineral supplements that come in capsules and other forms similar to those used for pharmaceuticals.

(3) The following measures will be implemented with regard to approvals for the manufacture and import of medical devices.

(a) In fiscal 1997, the scope of implantable medical devices that do not require additional domestic clinical data will be expanded.

(b) In fiscal 1997, required clinical test data will be streamlined for medical devices that are similar in type to approved domestic devices.

(c) In fiscal 1996, revision will be made of guidelines concerning radiation sterilization of medical devices by introducing ISO guidelines.

(d) In fiscal 1996, the approval application process will be streamlined for "set products", where articles already approved for the company are simply combined, in cases where there is no concern that quality control problems will arise.

(e) In fiscal 1996, the scope of medical devices that do not require partial change approval for cases of dimensional changes or addition of components will be expanded.

(4) Measures will be implemented in fiscal 1996 that will make reexamination of soft contact
lenses unnecessary after approval has been granted, even if the method of use is changed through the introduction of additional disinfection methods. The said measures will be implemented when there is no difficulty confirming the effectiveness and safety of the change.

(5) Concerning medical devices that are controlled through dosimetric release (in which the sterilization dose is determined on a prior valuation basis), measures will be implemented in fiscal 1997 that will make sterility tests unnecessary when the devices are shipped. The said measures will only be implemented, however, within the scope of assured safety.

(6) When it poses no problem in terms of product quality, kit products that combine pharmaceuticals with medical devices may be treated as medical devices if so requested, beginning fiscal 1996.

(7) Measures will be implemented in fiscal 1996 that allow announcements stating that notification has been submitted with regard to the transfer of approval for the manufacture and importation of pharmaceuticals and medical devices.

10. Telecommunications

(1) With the establishment of a new mechanism for granting various privileges to public utilities as proviso, the provisions of the Telecommunications Business Law will be amended to abolish item 1 and 2 of Article 10 concerning the prevention of excess facilities etc., so as to ensure smooth entry into Type I telecommunications business.

(2) To ensure transparency in terms and conditions of interconnection and to promote more diverse forms of interconnection with NTT local networks, specific measures will be devised before the end of 1996 regarding such items as: imposing the requirement to interconnect; introducing a rate schedule and tariff system related to
interconnection; and establishing accounts for interconnection and the unbundling of interconnection costs.

(3) Given the considerable development of competition in the mobile communications market, the current authorization system on rates charged for mobile communications including cellular phones, PHS, and radio paging will be replaced by the prior notification system by the end of March, 1997.

(4) The liberalization process for connecting both ends of a leased line with the public switched network will be accelerated, and full liberalization will be achieved in 1996 for domestic leased lines, and 1997 for international leased lines.

(5) MPT will compile, in fiscal 1996, an example of contract document based upon those that new satellite digital program supplying broadcasters will make public, and will further seek revision of Broadcast Law for the introduction of prior notification instead of existing approval procedures regarding Pay-TV services provided by the program supplying broadcasters in fiscal 1997.

(6) To further clarify governmental ordinances on the licensing of broadcasting stations, a manual on the procedure will be compiled in fiscal 1996. A manual putting together CATV-related ordinances will also be developed for the same purpose in fiscal 1996.

11. Transportation

(1) Efforts to relax the trucking business district regulation will continue to be promoted in light of economic and road conditions and other factors, and the schedule will be clarified. It will be relaxed on April 1, 1996 at the first stage.

(2) Regulations on trucking freight rate will be studied and necessary measures will be taken with a view to relaxing freight rate regulations, including adopting an ex post notification system and other freer systems. The sphere of rates for which cost account statements are not required to be attached to rate notifications will immediately be expanded, and studies will be made and necessary measures will be taken for abolishment of this requirement in the future.

(3) The standard of minimum number of vehicles required in a trucking business will be lowered in stages and unified to a nationwide five trucks per district in the future. The schedule for this deregulation will be clarified. It will be lowered on April 1, 1996 at the first stage.

12. Competition Policy

(1) Enforcement of the Antimonopoly Act (AMA) will be strengthened, and measures, including criminal accusations, will continue to be taken to vigorously and actively address violations of the AMA, such as price cartels and bid-riggings.

(2) To ensure that, after deregulation, regulation is not replaced by administrative guidance which restricts competition, the ministries and agencies concerned will carry out the necessary coordination in advance with the Japan Fair Trade Commission (JFTC), based on the intent of the "Antimonopoly Act Guidelines concerning Administrative Guidance."

(3) Violations of the AMA by trade associations will continue to be strictly addressed, with continuing efforts made to make known to the public the contents of the Trade Association Guidelines, which were revised in October, 1995.

(4) The review of the AMA exemption systems under individual laws has come to the conclusion that, among the existing 47 systems, 33 systems will be abolished and 4 systems will be limited with regard to the scope of exemption. Abolition and other necessary measures will be implemented by the end of fiscal 1998 in accordance with the findings of the review. In order to handle those cases that require legislative measures to abolish the exemption systems, a package of adjustment bills will be submitted to the Diet. Concerning the AMA exemption systems other than those under individual laws, necessary studies will continue to be conducted with every effort made to reach timely conclusions.

(5) Concerning the AMA exemption systems with regard to resale price maintenance (RPM) for designated items, the existing timetable will be advanced so that the necessary steps to revoke all of the remaining designated items (i.e., pharmaceuticals and cosmetics) are taken within fiscal 1996, and the results of these steps are put into effect by the end of fiscal 1996. Also, wish regard to copyrighted works for which RPM exemption is authorized, the scope thereof is to be limited and clarified by the end of fiscal 1997.

(6) Concerning the international contract notification system, a review will be conducted with a view to abolishing the system in principle, and conclusions regarding this review will be reached by the end of fiscal 1996.

(7) The following relaxation in premium regulations has come into force since April, 1996; the cap on premium value on lotteries, prize competition and premiums has been raised from ¥50,000 to ¥100,000 for general prizes and from ¥200,000 to ¥300,000 for joint prizes; the cap on premium value on premiums to general consumers has been abolished; and the cap on premium value on open lottery has been raised from ¥1 million to ¥10 million.

(8) Concerning the strengthening of the JFTC, its structure and the number of its staff will be reinforced and the executive office (jimu-kyoku) of JFTC will be reorganized into the general Executive Bureau (jimu- sokyoku) in fiscal 1996.

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