USTR Delivers Regulatory Reform Recommendations to Japan 2005

Deputy U.S. Trade Representative Josette Sheeran Shiner presented a lengthy list of
recommendations for regulatory and economic structural reform to the government of
Japan on October 14, according to a press release issued by the Office of the U.S. Trade
Representative (USTR) the same day.

The recommendations, submitted as part of the U.S.-Japan Regulatory Reform and
Competition Policy Initiative (Regulatory Reform Initiative), were designed to help sustain
Japan's renewed economic growth and to open markets for U.S. companies.

"An open, competitive market is critical for our trade relationship with Japan, and
regulatory reform is key to achieving that," Shiner said. "Our continuing work with Japan to
clear away the thicket of regulations that has clogged commerce and hindered the growth in
that country has worked to create a significantly improved business environment and
expanded market access opportunities."

Shiner delivered the recommendations to Japan's deputy foreign minister, Ichiro Fujisaki, in
Washington.

Every year in the fall, the two governments exchange reform recommendations under the
initiative, which was launched by President Bush and Japanese Prime Minister Junichiro
Koizumi in 2001 as a key component of the U.S.-Japan Economic Partnership for Growth.
The recommendations serve as the basis for an annual report to the two leaders, specifying
reform measures to be taken by each side. USTR and the Japanese Ministry of Foreign
Affairs each take the lead for their respective governments.

In 2004, the United States placed special emphasis on Japan's plans to privatize important
government entities, such as the country's postal businesses, which heavily influence
financial and insurance industries.

"Japan Post privatization should be market-oriented and carried out in a transparent way
that establishes a level playing field for all participants in the market," said Shiner.

Shiner praised an October 12 statement by Prime Minister Koizumi before the Japanese
Diet. The premier said that Japan's development depends on structural economic reforms.

The deputy USTR said the United States also applauds the work of Japan's Council for the
Promotion of Regulatory Reform, which has helped to advance Prime Minister Koizumi's
ambitious economic reform agenda.

The 64-page proposal includes recommendations in several areas, including information
technologies, telecommunications, medical devices and pharmaceuticals, energy, antitrust
enforcement, commercial law reform, dispute resolution, financial services and barriers to
imports of agricultural goods. Working groups will begin to meet before the end of 2004 to
consider the reform recommendations. Those initial meetings will be followed by a deputies-
level meeting in early 2005.

"Successful regulatory and structural reform cannot be achieved with quick fixes, but
instead requires a relentless commitment to change and the determination to challenge the
status quo," Shiner said.

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Following is the full text of the USTR press release

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C. 20508

USTR Press Releases are available on the USTR website at www.ustr.gov
2004-78
For Immediate Release:
October 14, 2004

Contact:
Richard Mills / Neena Moorjani
(202) 395-3230

United States Calls on Japan to Bolster Regulatory Reform: Submits Far-Reaching
Recommendations

WASHINGTON, D.C. - Deputy United States Trade Representative Josette Sheeran Shiner
presented the Japanese Government today with extensive reform recommendations
designed to help sustain Japan's recent return to growth and open markets for U.S.
companies. These recommendations build on significant progress achieved in recent years
to reduce the myriad of regulations in Japan, including measures that have substantially
lowered customs processing fees at Japan's international airports for express delivery
services, reduced rates for calling mobile phones, and increased consumer choice in
innovative medicines.

"An open, competitive market is critical for our trade relationship with Japan, and
regulatory reform is key to achieving that. Our continuing work with Japan to clear away
the thicket of regulations that has clogged commerce and hindered growth in that country
has worked to create a significantly improved business environment and expanded market
access opportunities," Shiner said.

"Successful regulatory and structural reform cannot be achieved with quick fixes, but
instead requires a relentless commitment to change and the determination to challenge the
status quo. We particularly welcomed Prime Minister Koizumi's October 12 statement to the
Diet that 'there can be no rebirth and development for Japan without structural reforms,'"
Shiner said.

Submitted under the U.S.-Japan Regulatory Reform and Competition Policy Initiative
(Regulatory Reform Initiative), the recommendations presented to the Japanese
Government today cover key areas such as information technologies, telecommunications,
medical devices and pharmaceuticals, energy, and competition policy.

In this year's recommendations, the United States is placing a special focus on Japan's
plans to privatize key government entities. In particular, Prime Minister Koizumi is carrying
out a bold plan to privatize Japan's postal businesses, a process that has important
implications for fair competition in the banking, insurance, and express delivery sectors. "
Japan Post privatization should be market-oriented and carried out in a transparent way
that establishes a level playing field for all participants in the market," said Shiner.

The United States also applauds the work of the Council for the Promotion of Regulatory
Reform (which has played a central role in advancing Prime Minister Koizumi's ambitious
economic reform agenda) and commends the progress Japan has made to establish
deregulation zones around the country to stimulate local growth. In addition, the 64-page
document includes key recommendations in the following areas:

--Information Technologies: Strengthen protection of intellectual property rights by
extending the term of protection for sound recordings and other works, and by implementing
stronger measures to stop online piracy of digital content; remove regulatory barriers to e-
commerce and enhance the security of online transactions; reform e-government
procurement to improve market access.

--Telecom: Reform Japan's interconnection regime for both fixed and mobile services to
bring interconnection rates to competitive levels; make Japan's spectrum management and
wireless licensing regime more flexible, transparent, and reliant on objective regulatory
criteria.

--Medical Devices and Pharmaceuticals: Speed the approval processes for medical devices
and pharmaceuticals to provide patients with timely access to advanced products; stimulate
innovation through pricing reforms.

--Energy: Increase the competitiveness of Japan's gas and electricity markets and help
reduce energy costs by providing greater opportunities for third-party access to
transmission grids, pipelines, and gas terminal facilities.

--Competition Policy: Bolster antitrust enforcement by increasing administrative fines on
Antimonopoly Act violators and by introducing a corporate leniency policy for
whistleblowers; strengthen penalties against government officials who instigate bid rigging.

--Transparency and Other Government Practices: Improve Japan's public comment
process to give the private sector more meaningful opportunities to input into the
development of regulations; remove technical barriers that impede the import of agricultural
goods.

--Commercial Law Reform: Permit modern merger techniques (i.e. triangular and cash
mergers), and facilitate their use by affording them appropriate tax treatment.

--Legal System Reform: Facilitate resolution of legal disputes in Japan by promoting
effective Alternative Dispute Resolution (ADR) processes that would include allowing non-
lawyers to act as neutrals in ADR proceedings.

--Financial Services: Enhance Japan's no-action letter system; allow foreign banks to
engage in trust and banking businesses on equal footing with domestic banks; permit lenders
to satisfy disclosure requirements under Japan's Money Lending Business Law through e-
notification.

--Distribution: Lower the cost of doing business in Japan by reducing landing and user fees
at Japan's major international airports, which are among the highest in the world.

Deputy USTR Shiner presented the recommendations to Deputy Foreign Minister Ichiro
Fujisaki in Washington, D.C. today. Each year, the two Governments exchange reform
recommendations in the fall under the Regulatory Reform Initiative, which was launched by
President Bush and Prime Minister Koizumi in 2001 as a key component of the U.S.-Japan
Economic Partnership for Growth. The recommendations serve as a basis for an annual
report to the two leaders, specifying reform measures to be taken by each Government.
USTR is the lead agency for the U.S. Government for this Initiative while the Ministry of
Foreign Affairs takes the lead for the Japanese Government.

Building on progress achieved over the past three years, the Working Groups will begin
meeting this fall to consider this year's reform proposals. These initial meetings will be
followed by a deputies-level meeting early next year.

A summary and detailed annex of the reform recommendations can be found on the USTR
Web site.