II. Government Actions and Opinions
1. Promoting Deregulation
(1) General remarks
The Government is promoting deregulation from the
perspective of expanding domestic demand and promoting
imports, pursuing improvement in the quality of
national life, creating new industries and expanding
consumers' choice, narrowing price differentials
between Japan and the rest of the world and so on. The
Government of Japan decided "Deregulation Action
Program" on march 31, 1995 and decided front loading
of the Program as a three-year plan at the Ministerial
Conference on Economic Measures on April 14, 1995. The
current deregulation efforts are under the basic policy
that economic regulations should be eliminated in
principle with regulated areas only as exceptional, and
that social regulations should be minimized in line
with original policy objectives. Business
opportunities engendered by deregulation should be
open equally to domestic and foreign interests and will
contribute to foreign direct investment in Japan as
well.
(2) Relaxing or abolishing regulation of foreign capital participation
1) Industries related to public order and national
security
Inward investment to particular sectors which could
affect public order and national security, such as
aircraft, weapons, explosives, nuclear power, space
development, electric power, gas, heat supply, water,
telecommunications and broadcasting, and vaccine
manufacturing are subject to prior notification and
examination under the Foreign Exchange Control Law. The
OECD Code of Liberalization of Capital Movements shall
not prevent a member country from taking measures which
it considers necessary for those sectors of public
order ,national security , or public health.
Concerning these reasons, the Government intends to
consider their treatment, on the basis of the progress
of discussions in the OECD such as the Multilateral
Agreement on Investment (MAI).
2) Industries reserved under the OECD Code of
Liberalization of Capital Movements
Of the industries reserved under the OECD Code of
Liberalization of Capital Movements, the Government of
Japan will seek to allow, within the period of the
Deregulation Action Program, investment in mining with
ex post facto reporting, rather than prior notification
which is currently required. With regard to other
industries which Japan continues to reserve
(agriculture, forestry and fisheries; oil; leather and
leather product manufacturing; air transport; and
maritime transport), the Government will continue to
consider this matter, taking into consideration trends
in Japan's socioeconomic situations as well as progress
of discussions at the OECD including the MAI.
(3) Regarding prior consultation concerning notification of foreign direct investment into Japan under the Foreign Exchange Control Law, the ministries and agencies provide consultation as administrative services only when such consultations are requested by investors and the decision on whether to consult is up to the investors. This was made sure among the authorities concerned in October 1994.
(4) Presentation method of banking report on each branch of foreign banks
When a foreign bank has plural branches in Japan, it
is admitted to present a report in a consolidated form
to cover all of the foreign bank's branches thereof
(enacted in fiscal 1995).
(5) Period of stay of foreign firm residents etc.
In fiscal 1996, a research of enforcement
circumstances about the Immigration Control and
Refugee Recognition Act, for the first five years since
the enactment in June 1990, will be carried out, and
according to this research, analysis and reciprocal
view-point, period of stay will be reviewed if
necessary.
(6) International contract notification system
The international contract notification system will
be reviewed to determine what form it should take from
the view-points of economic globalization and easing
the burden on business entity, and steps will be taken
for the relaxation of requirements by the end of fiscal
1996.
(7) Term of employment of foreign faculty member
Term of employment of foreign faculty member at
national universities is left to the discretion of each
university, under the Special Action Law Concerning
Employment of foreign faculty member at National and
Public Universities.
(8) Improving the transparency of administrative procedures
Based on the Law on Extraordinary Measures for the
Promotion of Imports and Facilitation of Inward
Investment, statutes clearly set out the following
approval requirements for investors in specific
domestic investment projects to enable applicants to
readily determine their eligibility: 1) number of years
since founding; 2) ratio of foreign capital; and 3)
project targeted for investment.
Pursuant to the Administrative Procedures Law which
endeavors to secure transparency in procedures, the
standard processing time to designate a foreign
investor as a "designated inward investor" of the Law
on Extraordinary Measures for the Promotion of Imports
and Facilitation of Inward Investment is published as
one month or less given that legally required documents
and application forms are in order and necessary
information is included, and as a result, transparency
is ensured. In fact, applications are generally
approved in a shorter length of time.
(9) International harmonization of standards and certification, specifications standards, and regulations
International harmonization of standards, content
and methods regarding the standards and certification
system and the labelling system are being promoted
further, foreign data acceptance and mutual
recognition are being introduced, in principle.
Further, when standards and certification systems are
being introduced or expanded, their necessity and the
appropriateness of their content is subject to
stringent examination to follow up the Action Program
for Improved Market Access adopted in July 1985 in the
area of standards and certification.
2. Measures of Tax and Finance
(1) General remarks
The current measures of tax and finance for foreign
businesses are aimed at the initial period when foreign
companies enter Japan and become established here.
Specific support measures include facilitating smooth
business operation (taxes), facilitating the raising
of capital (credit guarantees, low-interest loans),
and improving infrastructure. Information on these
programs can be obtained through JETRO and the Japan
Development Bank, and steady progress is being made in
this area.
Regarding the type of businesses eligible under the
Law on Extraordinary Measures for the Promotion of
Imports and Facilitation of Inward Investment, the
scope was expanded from fiscal 1995 by abolishing the
requirement that the foreign parent company be a
manufacturing company, and by additionally including
some types of wholesale, retail, and service industries.
The standard processing period for applications is one
month, and efforts are being made to secure
transparency.
(2) Taxation system
1) Special measures under Import and Inward Investment
Law
The Law on Extraordinary Measures for the Promotion
of Imports and Facilitation of Inward Investment was
enacted in 1992 to promote the entry of foreign
businesses into the Japanese market. Foreign companies
designated under this law (designated inward investor)
benefit from special measures; for example, they were
allowed to carry over losses incurred in the first three
business years after establishing their business for
a period of seven years, whereas losses may ordinarily
be carried over for five years. In the fiscal 1994 tax
reform, this period was extended to ten years from
initial seven years, and further, in the fiscal 1995
tax reform, the types of businesses eligible for this
special measure were expanded.
2) Withholding tax rate on dividends received by
non-resident
Regarding the application of a lower tax rate on
dividends, similarly to the withholding tax on
interest and royalties, the tax rate has been lowered
on a reciprocal basis by tax treaties, and the tax rate
should not be lowered unilaterally under domestic law.
In the tax treaties recently concluded by Japan, the
withholding tax rate on dividends between parent
companies and subsidiaries is set at five percent, and
this matter shall continue to be handled under this
policy.
(3) Low-interest loans
Low-interest loans for foreign direct investment
extended by the Japan Development Bank and other
relevant financial institutions were introduced in
1984, and since then the funds available for such loans
have been increased cumulatively. In fiscal 1994, the
maximum loan ratio was raised from forty to fifty
percent. In fiscal 1995, basic facilities for promoting
foreign direct investment were made eligible for
low-interest loans, in order to improve living
conditions for foreign business persons. The total
amount of loans extended falls short of the funds
available. Therefore, fund availability for loans does
not constitute a barrier, and it is expected that this
loan program will be used more widely.
Low-interest loans from the Japan Development Bank may be used
only as capital for facilities, but the funds necessary for
acquiring buildings needed for conducting business operations
include security deposits required when foreign businesses rent
office buildings.
3. Active Publicity on Foreign Direct Investment in Japan, Better Consulting
(1) More active public relations
Active efforts to provide publicity directly to
foreign businesses have been made, with JETRO-
sponsored seminars and symposiums, FIND-sponsored
seminars, and newsletters. Active publicity efforts
will be continued, including the publication of
newsletters reporting on the activities of the Japan
Investment Council and its Expert Committee.
Information on taxation system and financial
incentives, etc. for foreign businesses will also be
disseminated to certified public accountants' and tax
accountants' offices.
(2) Promoting information center functions
JETRO collects and provides information on foreign
direct investment and functions as an information
center. In addition, necessary information is supplied
through overseas advisors on foreign direct investment
retained in 12 JETRO offices abroad and through foreign
direct investment advisors in Japan. A database on
foreign direct investment contains investment climate
information by region on CD-ROM and may be accessible
at 45 JETRO offices worldwide.
(3) Promoting consulting functions
JETRO and FIND offer advisory and consultation
services to foreign businesses in Japan. JETRO also
retains investment advisors for consulting in 12 of its
offices abroad.
Further, in order to provide continued support to
foreign firms interested in investing in Japan reported
by the above overseas advisors, consulting functions
will be strengthened from fiscal 1995 by dispatching
the "Long term direct investment advisor" to North
America and Europe.
4. Improving Local Systems for Accepting Foreign Companies
(1) Local public bodies have adopted various programs
to attract businesses, for example by providing
subsidies, implementing loan programs, and leasing
land. These apply to both domestic and foreign
businesses, and some foreign businesses have taken
advantage of these measures to invest in Japan.
(2) One example of local public body's policies to
promote foreign direct investment is Nagasaki
Prefecture's industrial exchange program with the city
of Essen, in the North Rhine-Westphalia state of Germany,
since September 1990. The Nagasaki Japan Germany
Industrial Exchange Council, established in November
1991, has been the main force behind activities to
foster economic contacts. The Council succeeded in
attracting two German firms in February 1992. It intends
to continue sending and receiving goodwill groups, and
is promoting joint commercial ventures and provision
of technology.
(3) At the municipal level, the city of Yokohama has
a subsidy program to encourage medium and small
companies, including foreign companies, in high-tech
or design industries to establish themselves there.
There is a German Industry Center in Hakusan High-tech
Park, which was built to attract high-tech industries,
and this facility is rented to German companies entering
the Japanese market.
(4) Local public bodies thus offer positive support
measures to attract foreign businesses. The Government
will do its best to publicize such programs as well,
and expects local public bodies to further improve
conditions to receive foreign businesses.
(5) In accordance with the Extraordinary Measures Law to Promote
Imports and Facilitate Foreign Domestic Investment and also to
contribute to promoting acceptance of foreign businesses in local
areas, the Government has been establishing and improving Foreign
Access Zone (FAZ) since 1992. The Government will continue to
establish FAZ, giving as much support as possible, by such means
as providing funds from the Industrial Structure Improvement Fund
based on this law.
5. Improving the M&A Climate
(1) Improving the M&A climate
The Government of Japan views M&A as a form of
ordinary inward direct investment within the scope of
unrestricted economic activity. Since there are no
legal restrictions on M&A in Japan, it is hoped that
the M&A will have a stimulating effect on industrial
activity.
(2) Disclosure requirements
Information on the ownership of the company is already
sufficiently disclosed in the "Shares of the company"
in an annual securities report with a view to secure
fair transactions and protect investors in securities.
Annual securities reports are on display at the
Ministry of Finance for five years from the date of
acceptance. Copies of annual securities report are on
display for the same length of time at locations
including the head office and main branches of the
filing company, and at stock exchange, and are
accessible by anyone.
(3) Cross-shareholding
The Government of Japan is aware that, in general,
cross-shareholding, which is adopted for the purpose
of business relationship building or ensuring stable
management authority of companies, is appreciated to
have been a supporting element of Japanese-style
management by establishing continuous relationship
among companies and enabling stable long-term
management of companies. The Government is also aware,
on the other hand, of the opinions pointing out that
cross-shareholding may present problems of
insufficient supervision of shareholders on their
companies' managements or give rise to anti-competitive
business practices.
To protect investors, the Securities and Exchange Law
includes provisions on the disclosure requirements
regarding take-over bids (TOB) and ownership of large
blocks of shares. However, the purpose of the Law is
to ensure the fairness in transactions and protect
investors through controls on unfair transactions and
disclosure requirements, and not to regulate cross-
shareholding per se.
(4) Reinforcing shareholders' rights
To guarantee that shareholders can vote
appropriately, notices of regular shareholders'
meetings must be accompanied by various financial
statements and be dispatched two weeks before the
meeting date, so that shareholders will have time to
receive the notices and make preparations to attend.
All joint stock companies must also be audited by an
auditor.
The Commercial Code was amended in 1993 to facilitate
derivative lawsuits by shareholder.
(5) Holding companies (Article 9 of the Anti-monopoly Act)
In the "Deregulation Action Program," it is said that
"The Fair Trade Commission will commence study of the
regulation of holding companies to bring about deeper
debate on this matter, based on the existing
prohibition's intent to prevent excessive
concentration of economic power, while fully aware of
the issues of 'keiretsu,' corporate groups, etc. and
with the view-point of making Japan's market more open
as well as of further stimulating business activities
of entrepreneurs, The Commission's study is to reach
a conclusion within three years". The Fair Trade
Commission has just begun this study at present.
6. Distribution
(1) Strict enforcement of the Antimonopoly Act (AMA)
The Fair Trade Commission is going to deal with the
AMA violations vigorously as it has been doing. In
fiscal 1994, the Commission issued recommendations to
eliminate illegal conducts against 21 cases of
violations such as price-fixing and bid-rigging. In
vicious and serious cases that are likely to have
widespread effect on daily life, the Commission has
brought criminal accusations for criminal punishment.
Furthermore, deterrence against the AMA violations
such as price-fixing has been enhanced by increasing
the rate of surcharge calculation and raising the upper
limit of criminal fines.
In order to strengthen efforts in actively
eliminating import-restrictions which violate the AMA
and the AMA violations which may cause price
differentials between Japanese and overseas markets,
the Commission has established the "Task Force for
Import Restriction and Price Differentials between
Japanese and Overseas Markets Issues" since March 1995.
In order to ensure the transparency of the
enforcement of the AMA and to prevent the AMA violations,
the Commission has formulated and published various
guidelines clarifying the interpretation of the AMA
such as the "Antimonopoly Act Guidelines Concerning
Distribution Systems and Business Practices" (July,
1991) to provide guidance on the AMA with regard to
distribution systems and business practices, and the
"Antimonopoly Act Guidelines Concerning the Activities
of Firms and Trade Associations in Relation to Public
Bids" (July, 1994) to present what kind of activities
in relation to public bids by firms and trade
associations may raise problem under the AMA. Moreover
in order to revise the "Antimonopoly Act Guidelines
Concerning the Activities of Trade Associations (Trade
Associations Guidelines)" within 1995, the Commission
published the draft of the revised Guidelines on April
3. The Commission has also been dealing with various
consultations concerning the AMA appropriately.
From the viewpoint of further promoting fair and free
competition in Japanese economy, the Commission
continues its efforts to enhance widespread
understanding of those guidelines and to deal
vigorously with the AMA violations as well as to ensure
transparency of the enforcement of the AMA and
prevention. The Commission published "Regarding the
Active Implementation of Competition Policy along with
the Formulation of the Deregulation Action Program" in
March 1995, for promoting deregulation and active
implementation of competition policy as one unit.
(2) Resale price maintenance system
The Antimonopoly Act outlaws resale price
restrictions in principle, and this stance has been
upheld in the Supreme Court decision. Resale price
restrictions are not allowed because they unduly
restrict the independence of sellers to set retail
prices, one of the most basic elements of their business
activities; they represent direct interference with
price determination, which should in essence be
determined freely by market mechanisms; and they can
be a basic impediment to fair competition, by depriving
sellers of the means of competing on price.
Accordingly, the same applies to the practice of
setting a maximum resale price and of forcing
distributors to comply with this set price. In other
words, the Antimonopoly Act does not concern itself
with whether resale price levels are appropriate; the
issue is whether manufacturers' interference with how
sellers set their prices constitutes an artificial
impediment to market mechanisms.
(3) Passing on manufacturer discounts to consumers
Lower prices at the retail level as a result of
manufacturer discounts should be achieved through free
competition among sellers by having distributors set
prices on their own. In any case, the Fair Trade
Commission is determined to deal strictly with
violations of the Anti-monopoly Act which interfere
with free pricing and price competition.
(4) Large-Scale Retail Store Law
Measures to apply the Large-Scale Retail Store Law
appropriately were taken in May 1990 and a revised
Large-Scale Retail Store Law was adopted in January
1992. Deregulation measures were enacted in May 1994
and a three-stage deregulation program was implemented.
Efforts will continue to make deregulation measures
effective, and taking into consideration changes in the
distribution environment, the Large-Scale Retail Store
Law system will be reviewed by fiscal 1997.
(5) Review and regulation on premium offers
The Fair Trade Commission will review regulation on
premium offers, considering the conclusion of the study
group concerning the review and clarification of
regulation on premium offers consisting of academics
at the end of March, 1995, as to abolish the
notification of the Commission concerning premium
offers by department stores (subsection 8 of the
Specific Unfair Trade Practices in the Department Store
Industry) and one concerning premium offers to
entrepreneurs, and to increase the upper limit of
premiums set up by notification concerning prize
without connection with transactions, one concerning
premiums offered by lotteries, and one concerning
premiums offered to general consumers not by lotteries,
as well as to take measures to relax the regulation and
to clarify the regulation including the scope of
regulation during fiscal 1995. Then the Commission will
also review, as appropriately, regulation on premium
offers applied to specific industry by notifications
or the fair competition codes.
Regulation on premium offers were reviewed by the Market Access
Ombudsman Council (MOAC) of the OTO and the Government has decided
above mentioned measures at the meeting of Office of Market Access,
with the maximum respect to the MOAC's recommendation.
7. Rectifying Japanese Commercial Practices
(1) Rectifying Japanese-style commercial practices:
keiretsu (affiliated company groups) and industry
association activities
Although certain aspects of keiretsu relationship
are economically efficient, transactions among
companies with the background of keiretsu relationship
must be improved so as not to hamper fair competition
or transparency of transaction, if they prefer
transaction inside of group or bring anti-competitive
business practices and as a result negatively affect
foreign direct investment in Japan.
The activities of industry associations are carried out based
on voluntary participation by individual companies. No foreign
business may be excluded from such associations without
justifiable reason. Business associations' activities are being
overseen and warnings issued in this respect.
8. Lowering High Costs
(1) Land prices
The Basic Land Act was enacted in 1989, and the
Outline of Promoting Comprehensive Land Policies was
adopted by the Cabinet in 1991 to develop comprehensive
land policies covering both demand and supply. The
Government will continue to act in accordance with the
policies of the outline to steadily implement
comprehensive and structural land policies to achieve
reasonable land price levels that are appropriate to
the useful value of the land and ensure appropriate and
rational land use.
(2) Construction costs
According to a study of domestic and international
construction cost levels conducted in 1994 by a
construction-related public corporation, the total
cost of building an office building in Tokyo is 1.35
times (calculated at the exchange rate of $1 = \111)
of the cost of building the same building in Los
Angeles.
The Government thus recognizes the need for efforts
to reduce construction service costs. Specifically, in
December 1994 the Ministry of Construction established
and announced "Action Program to Reduce Public Works
Construction Project Costs", which called for promoting
imports of materials and parts from abroad,
standardizing specifications for materials and parts,
and promoting deregulation. This Action Program is
expected to have a contributory effect in reducing
costs not only in public works projects but in private
sector building as well.
(3) Price deferential between domestic and world prices
Although price levels in industrialized countries
are generally higher in international terms, in Japan
the cost of food, clothing, housing and other basic
consumption items, and for energy and intermediate
input such as services for industry, is much higher than
abroad due to price structure distortions. Studies and
analysis are being undertaken to determine how to
rectify and reduce this high cost structure, and
measures to expand imports, deregulate, rectify and
improve business practices, and pass on yen
appreciation gains are being steadily implemented. The
Government will continue to take specific steps to
rectify and lower the disparity between domestic and
international prices.
(4) Wages
Wage levels in Japan, compared with other countries, are high
when calculated with foreign exchange rate, partly because of
radical yen appreciation in the past few years: wage index
(Japan=100) in manufacturing at 1993 exchange rates ($1 = \111),
indicates 72 in the United Kingdom, 83 in the United States, 122
in Germany (former West Germany) and 83 in France. However, the
principle is that wage level should be voluntarily determined
through collective bargaining, based on the sense of well-
balanced macroeconomic conditions and workers' welfare.
9. Land Use
(1) Restrictions on land acquisition
Non-resident foreigners acquiring real estate for
purposes other than residential purposes are required
to report to the Minister of finance under the Foreign
Exchange and Foreign Trade Control Law. However,
foreigners are under no unfair restrictions compared
to Japanese nationals where acquisition of property,
including farm land, is concerned.
(2) Leasing of land
The minimum length of the initial lease contract is
set at 30 years for ordinary contracts for leasing land,
and at 10 years for period lease contracts for business
purposes, to ensure stability of leasing rights and
from the perspective of the economic and social
viability of buildings. The current Land Lease and
House Lease Law was revised only two years ago and the
Government is not planning any further revisions to
shorten the leasing period.
The issue of whether to apply the revised Land Lease
and House Lease Law to existing commercial contracts
was thoroughly discussed when the law was revised. To
ensure the stable livelihood of leaseholders and
tenants, and to maintain the stability of existing
contractual relationship, it was decided not to apply
the provisions regarding renewal to existing contracts,
and the Government does not intend to apply these
provisions.
(3) Land taxes
In accordance with the "fundamental principles of
land policy" of the Basic Land Act, and to impose a fair
and appropriate tax burden on land and to reduce the
advantage of land as an asset, in the 1991 revision of
the land tax system ,the following measures were taken;
1) a land value tax was introduced; 2) a more
appropriate tax on profits from the sale of land was
introduced; 3) special provisions regarding
inheritance and fixed asset taxes on farmland located
within the city limits of specified cities in the three
major metropolitan areas were reviewed; 4) a
comprehensive review of the special land ownership tax
was undertaken; 5) more appropriate and balanced
valuation of land for inheritance tax purposes was
adopted; and 6) more appropriate and balanced valuation
for the fixed asset tax was introduced.
(4) Restrictions on land use
Where zoning is concerned, urban residential,
commercial and industrial districts are designated
appropriately and land use restrictions are adopted to
create a well-functioning urban structure and a sound
urban environment. Height and other restrictions on
buildings are in place to ensure sufficient sunlight,
light and ventilation and to secure a good living
environment in urban areas.
Accordingly, simple relaxation of such restrictions
is inappropriate as this could lead to a deterioration
of urban living conditions.
However, less stringent height restrictions are in
effect for projects which contribute to creating a
pleasant urban environment, and the Government
undertakes to make use of this system.
In addition, by the revision of the Urban
Redevelopment Law etc. (implemented in May 1995), scope
of district planning system was enlarged. As a result,
relaxation of floor area ratio owing to width of front
road and of height became possible, when position of
wall surface or height of buildings are guided as a
whole according to characteristics of a district.
Also, in the district mainly used as a residential area, floor
area ratio owing to width of front road was relaxed when wall
alignments are designated, and height restriction relating to
front road was relaxed as well when a building faces road with
certain width.
10. Supporting Employment and Livelihood-related Issues
(1) Securing personnel
Public Employment Security Offices throughout Japan
provide employment counseling and referral services
free of charge and endeavor to secure personnel to meet
requests from all types of employers, including foreign
businesses. In particular, when employers require
large numbers of personnel or employers are likely to
attract large numbers of suitable job-seekers because
of the type of positions offered, joint interview
sessions between prospective employers and job-seekers
are arranged in an effort to meet employers' needs.
Where new school graduates are concerned, student
employment centers are set up in major cities around
the country for university graduates to provide job
information and referral services and to support
university job referral services. These services are
provided free of charge to all businesses, including
foreign businesses.
Concerning managerial personnel and special and
technical personnel, the Personnel Banks were
established in 25 main cities in Japan and foreign firms
can take benefit of free personnel services according
to their needs.
The labor turnover in managerial personnel is largely
due to temporary transfer. Foundation Industrial
Employment Security Center operates supporting
business for the labor turnover through temporary
transfer. The companies including foreign firms, which
need to secure middle-management personnel through
temporary transfer, can take benefit of its free
service.
The Government will continue to support efforts by
foreign firms to secure personnel through such
activities.
(2) Employment-related subsidies and grants
Foreign and domestic businesses alike are eligible
for employment-related subsidies if the business is
eligible for unemployment insurance. Public employment
stabilization offices distribute pamphlets and
endeavor to provide information to business operators.
(3) Bilateral pension agreements
As international contacts grow, it is becoming
important to protect the right to receive pensions and
to eliminate double eligibility. The Government
recognizes the greater need today to conclude bilateral
or multilateral international pension calculation
agreements. Several unofficial working level
conferences have already been held in preparation to
conclude such agreement with Germany and the United
States, two countries with which contacts are plentiful.
An agreement with Germany on pensions for elderly has
been more or less finalized, and adjustments must be
made in the area of disability pensions, where the
Japanese and German systems differ considerably. With
the United States, the basic points have been discussed,
and talks toward reaching an agreement are continuing.
In any case, the Government is continuing its efforts
to conclude pension agreements with these two countries
at an early date.
(4) School education
Non-Japanese children are not obliged to enroll in
Japanese compulsory education system, but if they wish
to do so they are accepted in public schools offering
compulsory education. After entering school, non-
Japanese are under the same condition as Japanese on
the principles of equality and non-discrimination
(e.g., no tuition will be required).
(5) Schools for non-Japanese
Schools for non-Japanese, including international schools, are
to be established independently, in accordance with the
respective needs and conditions. Since most such schools are
currently authorized as 'miscellaneous schools' by the
prefectural governor, they are entitled to preferential tax
treatment, etc.
11. Intellectual Property, Patents
(1) Shortening time required at the Patent Office
The Patent Office is aware that granting rights in
a prompt and proper manner is its most important mission
in industrial property policy. Efforts are being made
to shorten the examination period. By increasing the
number of examiners, promoting computerization
"Paperless Project", utilization of specialized
outside agency for prior art search, and strictly
selecting applications, the examination period, which
lasted three years at the end of 1988, has been
shortened to two years and four months at the end of
1993.
(2) Review of the requirements for claims
Under the revised Patent Law (scheduled to be enacted
in July 1995), the requirements for claims and
descriptions have been changed to internationally
harmonized system. The requirements for description of
invention have been so changed that the invention be
described clearly and sufficiently. These revisions
will make it possible to offer the most appropriate
protection to the fruits of technological development
for a variety of technologies.
(3) Objection system after granting of patent
The pre-grant opposition system under the law before
revision is useful for granting stable rights. However,
since the right cannot be granted before the term of
opposition has expired, or because granting of patent
rights was delayed if a number of oppositions are raised,
Japan decided in August 1994 to shift to the post-grant
opposition system, based on the result of the
Japan-United States Framework for a New Economic
Partnership. The revised law has already been ratified
by the Diet, and is scheduled to be implemented in
January 1996.
(4) Prohibition of registration of well-known trademarks
Under the provisions of the Paris Convention, Japan's
Trademark Law clearly sets down the protection of
foreign well-known trademarks, and such trademarks are
given increased protection. Trademark examination
standards, which set out how examination should be
carried out, provide for increased protection of
foreign well-known trademarks and are being applied.
(5) Provision concerning scope of patent claims
The Industrial Property Council has discussed
methods, including stipulation the Doctrine of
Equivalents, of interpreting claims in patent
infringement cases. However, 1) since existing laws do
not exclude the application of the Doctrine of
Equivalents; 2) since the matter is currently under
examination by the Grand Bench of the Court of the
Appeals for the Federal Circuit (CAFC) in the United
States; and 3) regarding legislating the Doctrine of
Equivalents, because of the question of whether to make
this the principle or the exception, and because of the
connection between this and pleas for publicly known
technology, it is inappropriate to adopt stipulation
at this time. This issue should be thoroughly discussed
over the medium term.
(6) Collecting evidence of activities of suspects in patent infringement cases
Japan doesn't have such a discovery system as in the
United Kingdom or the United States. However, the law
of civil procedures authorizes the court to have
necessary evidence presented in a trial. The Patent Law
also includes provisions to order presentation of
documents needed to calculate the amount of damages in
cases of patent infringement. For this reason, the
current system does provide a system under which patent
holders can collect evidence necessary for a trial in
an actual suit.
(7) Effective protection of trade secrets
Taking into consideration the importance of the
protection of trade secrets and the international
harmonization of national laws, the Unfair Competition
Prevention Law, amended in 1990, provides the right of
demanding cessations in addition to the existing post
facto claim for damages against the misappropriation,
improper use or disclosure of trade secrets, then the
trade secrets has been already protected in the side
of substantive law.
With regard to the closed court procedure for the
protection of trade secrets, Article 82 of the
Constitution, which specifies that courtrooms shall be
open to the public, severely restricts the
circumstances in which exceptions to the open trial
principle can be made to allow a closed trial; as
follows. A case may be tried in a closed courtroom only
if a court unanimously decides that opening the trial
is expected to have a deleterious effect on public order
or morals, and even in such cases, if the issue relates
the people's fundamental rights in the Clause 3 of the
Constitution and so on, the trial shall not be closed.
Accordingly, as long as this article is the prerequisite,
it is difficult to interpret the Constitution
permitting closed court procedures for the protection
of corporate secrets or technological information, and
to change the law to allow this.
(8) Acceptance of opinions from foreign companies
The Patent Office holds forums with the American
Intellectual Property Law Association (AIPLA), the
Pacific Intellectual Property Association (PIPA), the
Federation International des Conseils en Propriete
Industrielle (FICPI) and other groups and has regular
meetings with American and European patent agents and
companies to hear their opinions on the Japanese patent
system. These opinions have been reflected in revisions
to laws or their application, and as a result, measures
to introduce systems for filing patent applications in
English, for filing an objection to a patent after
patent rights have been granted, and for restoring
lapsed patent rights, have been taken as a result. To
achieve harmonization with international practices,
the Patent Office will continue to provide
opportunities for discussion with foreign companies
and will endeavor to take actions reflecting the
comments and requests presented to it.
(9) Review of practice of granting compulsory license
The Paris Convention and the TRIPS Agreement include
provisions concerning the compulsory license, which is
permitted under certain conditions. Further, as a
result of Japan's ratification of the Marrakech
Agreement, the relevant clauses of the law regarding
transfer or abrogation of the compulsory license have
been amended to conform with the provisions of the TRIPS
Agreement.
(10) Publication of unexamined application after the expiration of 18 months from the filing date
In Japan, the content of patent applications are laid
open after the expiration of eighteen months from the
filing data. This is to inform the public of the
contents of the patent application once a certain period
after application has elapsed, regardless of the stage
of examination, and to avoid instability in corporate
activities, duplicated research, or duplicated
investment which could occur if the contents of patent
application for are not made public for long periods
due to delays in examination. To protect patent holders,
the Japanese patent system also allows them, under
certain conditions, to demand the payment of
compensation from the third party has commercially
worked the invention, the said third party laid open.
(11) Evidence disclosure system for suspects in patent infringement cases
As described in (6) above, Japan has a system
permitting patent holders to collect the necessary
evidence in cases of actual trials. In addition, in the
case of a patent for an invention of a process of
manufacturing a new product, there is also a provision
to assume that a product identical to the one in
question has been manufactured according to the
patented process, to lighten the patent holder's burden
of providing proof.
(12) Introduction of English application
Revisions to the law have been passed by the Diet and
effective on and after July 1995, applicant may file
patent application in English, provided that a Japanese
translation of the application is followed within two
months of the application date.
12. Government Procurement
(1) Providing foreign businesses with more opportunities for market access
Government Procurement in Japan is carried out in
observance of the GATT Agreement on Government
Procurement. The Government has made every effort to
make procedures more transparent and fair, and to
facilitate participation by competitive domestic and
foreign suppliers. Moreover, in order to provide
foreign businesses with more opportunities for market
access and bring more competition among domestic and
foreign businesses, from fiscal 1994, the Government
has decided to give more careful consideration to
disclosure of prior information at the earliest stage
possible. It has also carried out various voluntary
measures of "GATT plus" such as introduction of the
overall greatest value evaluation method, prior
announcement of single tendering, and establishment of
complaint review procedures, to secure transparent and
fair procedures.
The ratio of foreign products among the Government
Procurement items in 1991 was 14.8% in Japan, a higher
ratio compared to the United States (9.4%), and the
European Community (2.0%, 1990). In 1992 this ratio in
Japan was 20.8%.
(2) Voluntary measures on Government Procurement
As voluntary measures of "GATT plus," concerning
products in general, the "Action Program on Government
Procurement" in February 1994 and "Procedures for
Government Procurement on Products (Operational
Guidelines) in March 1994 were decided. Concerning
telecommunications and medical sectors the "Measures
on Procurement of Telecommunications Products and
Services" and "Measures on Procurement of Medical
Technology Products and Services" in March 1994 and
"Operational Guidelines" in October 1994 were decided.
Concerning computers, the "Measures Related to
Japanese Public Sector Procurements of Computer
Products and Services" was decided in January 1992. The
main points of these procedure improvement measures are
as follows:
1) Provision of information supply at early stage
i) Publication of related information in a seminar on
Government Procurement and making information
available for public by each entity on a list of item
which is estimated at no less than 100,000 SDRs at the
beginning of the fiscal year (publication by official
gazette (Kanpo) is applied for procurement no less than
800,000 SDRs for products in general and 100,000 SDRs
for telecommunications and medical technology
sectors).
ii) Improvement of procedures for Request for
Submission of Materials for market research and for
Request for Comments before notice of procurement
(applied for procurement no less than 800,000 SDRs for
products in general) shall be made.
iii) Publication of an official gazette compiling
official gazette (Kanpo) notices relating Government
Procurement, development of a JETRO database of
Government Procurement information (from April 1995),
and prior announcement in official gazette for single
tender procurement no less than 100,000 SDRs.
2) Introduction of the overall greatest value
evaluation method
The overall greatest value evaluation method is taken
to the extent possible for those procurement, in which
the principle of the lowest-price award method does not
work efficiently. The evaluation standard (including
standardized guides in each field) for the overall
greatest value evaluation method applied for computers,
telecommunications equipment and medical technology
was made. The standard value applied for the overall
greatest value evaluation method in telecommunications
and medical technology sectors will be reduced
gradually from 800,000 SDRs in fiscal 1995 to 385,000
SDRs in fiscal 1998.
3) Establishment of Complaint Review Procedures
Complaint review procedures are executed by establishing the
independent Government Procurement Review Board (in principle
concluding within 90 days and reviewing within 45 days in case
of rapid examination; reviewing within 25 days in case of rapid
examination in telecommunications and medical technology
sectors). From January 1996, a complaint-application procedures
will be introduced and managed based on the new Agreement on
Government Procurement. All necessary preparations are currently
being made.
13. Dispute Resolution
(1) Activities of foreign lawyers
Because of the globalization of the world economy and
increasing interdependence in trade and investment,
the OTO Advisory Council undertook a review of Japanese
systems and regulations with a view to achieving
international harmonization. In accordance with the
Council's report, the law has been amended to relax
regulations concerning the work experience
requirements of foreign lawyers and to allow joint
enterprises between foreign and Japanese lawyers.
As to the issue of representation of parties by
foreign lawyers in international arbitration, the
Market Access Ombudsman Council of the OTO has
delivered a recommendation that a conclusion which has
logic acceptable internationally should be reached
soon at the Study Commission on the Representation of
Parties in International Arbitration established by
the Ministry of Justice and the Japan Federation of Bar
Associations and necessary measures including the
adjustment of law should be taken promptly on the basis
of the conclusion. The Office of Market Access meeting
has decided the measures respecting the recommendation
to the maximum extent.
(2) Shortening the time required for legal procedures
The issue of lawsuit procedures is inseparably linked to the
execution of the judiciary's powers, and from the viewpoint of
separation of the three powers, it is inappropriate to take this
matter up in the Japan Investment Council, which is a government
body. However, since 1990 the Legislative Council of the Ministry
of Justice has been undertaking a comprehensive review of civil
lawsuit procedures and if the laws on such procedures are amended
based on its findings, this will contribute to shortening the
time required to examine cases.
14. Others
(1) Improving market access
Improving access to the Japanese market will bring
free and vital economy and society more open to the
international community. Better market access is also
an important issue from the view-point of expanding and
balancing trade and investment, and the Government is
actively promoting the use of the functions of the Trade
Council (Import Board) and the OTO, improving the
environment for foreign investors, and carrying out
deregulation.
(2) Promoting horizontal integration
Government policy has always welcomed foreign
investment in Japan. The Japan Investment Council,
chaired by the Prime Minister, was established to
promote investment in Japan in order to establish
harmonious contacts with the world economy, and the
Council will continue to make efforts to expand foreign
investment in Japan, including the promotion of
horizontal integration. The Economic Planning Agency
is conducting studies to promote direct foreign
investment in Japan, and will provide feedback on study
findings to the Council as much as possible, to enable
the ministries and agencies concerned to formulate
effective policies. The EPA will operate the Council
to expand foreign investment in Japan and promote
horizontal integration.
(3) Transfers of foreign employees to regional areas
It is pointed out that in Japanese companies,
transfers are considered an essential component of
human resources policy from the view-point of human
resources development and staff assignments, and are
unavoidable in companies operating over a large area
to ensure management efficiency and response to
business conditions. However, this issue also affects
personal lifestyles, and since individuals are entitled
to have some choice in the matter, in general this
matter should be thoroughly discussed by the persons
concerned in individual companies.
The Ministry of Labor will undertake to improve
working conditions to ensure that transfers do not
place an undue burden on workers.
(4) Handling of comments and requests
Comments and requests presented to the Expert
Committee of the Japan Investment Council are studied
by the concerned ministries and agencies which make up
the Council, and, where possible, are reflected in
policies adopted. The Expert Committee discusses
certain selected topics in depth.
(5) Strengthening the activities and functions of the OTO
The organization and functions of the OTO were
strengthened in February 1994. Currently the OTO
consists of the Office of Market Access, headed by the
Prime Minister, and of the Market Access Ombudsman
Council, which is composed of scholars and experts who
present neutral views to the OTO. In addition, since
1992 the OTO has, as a more positive action, had the
Market Access Ombudsman Council compile
recommendations on needed measures based on the
complaints raised by foreign business and others
concerning the standards and certification system and
other market opening issues, including direct
investment. The Government is to decide actions
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