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(Tentative Translation)
In order to ensure proper functioning of the market, competition policy and the promotion of competition in particular, are extremely important. The Antimonopoly Act (Law No. 54 of 1947) provides the most basic rules governing the behavior of market participants and the Fair Trade Commission is expected to play the role of a watchdog of competition policy in order to promote competition in the market and ensure free and fair competition. At the same time, the Commission is expected to supervise the market after regulatory reforms so that acts that would hinder entry into markets will not be carried out and unjust representation that would mislead consumers will not be made.
With regard to government procurement systems, it is necessary to further improve the competitive environment in order to promote free and fair competition among contractors and to establish a system truly acceptable to taxpayers, while securing proper execution of public works.
The purpose of regulatory reforms is to realize an economy and society that will ensure free and fair competition based on rules and the strict enforcement of the Antimonopoly Act, which is the basic set of rules for the market economy. To this end, it is essential to study measures to make the structure and power of the Fair Trade Commission, the enforcement body of the Antimonopoly Act, appropriate for thoroughly enforcing the Antimonopoly Act.
As for power, the Fair Trade Commission only has the power to conduct administrative investigations under the existing laws. Some argue that the Commission should be provided with search and investigative powers for criminal violations of the Antimonopoly Act similar to those enjoyed by the National Tax Administration Agency. However, in light of the fact that, under the Antimonopoly Act, not only an administrative order but also a criminal penalty can be imposed on violators of the Antimonopoly Act, the argument concerning strengthening the power of the Fair Trade Commission to investigate violations of the Act is closely related to arguments concerning how the structure of measures (criminal penalty or administrative order) should be for violations of the Antimonopoly Act.
Therefore, from the standpoint of strict enforcement of the Antimonopoly Act, a comprehensive study should be done as to the structure of measures that can be taken under the Act and the appropriate power to be granted to the Fair Trade Commission.
As for the structure of the Fair Trade Commission, the structure should be strengthened and a study should be done on a more appropriate position of the Commission from the standpoint of independence and neutrality from regulatory authorities.
The Antimonopoly Act restricts stock holding by holding companies and large-scale companies from the standpoint of preventing excessive concentration of economic power. However, it is pointed out that this general concentration regulation has effect of excessively restraint on the business activities of enterprises. Therefore, it is necessary to constantly examine changes of actual economic situations and to take appropriate measures when the continuation of the regulation is deemed no longer necessary.
The Antimonopoly Act prohibits a large-scale company from holding stocks in excess of its capital or its net assets, whichever is larger. However, it is difficult to find any reason for restricting stock holdings beforehand by such formal criteria as capital and net assets from the standpoint of preventing adverse effects on competition.
Therefore, the restriction by such formal criteria as capital or net assets on stock holding by large-scale company should be abolished.
The establishment of a holding company that constitutes an excessive concentration of economic power is prohibited under the Antimonopoly Act.
The Fair Trade Commission explains what kind of holding companies "constitute an excessive concentration of economic power" in its "Guidelines Concerning Holding Companies which Constitute an Excessive Concentration of Economic Power" (Holding Company Guidelines). For example, the Commission defines one type of illegal holding company as one whose group has total group assets exceeding 15 trillion yen and has five or more group companies with each having total assets exceeding 300 billion yen and turnover volume exceeding 600 billion yen.
However, these criteria were set when the ban on holding companies was lifted in 1997 and are not based on research and understanding of the effect on competition of holding companies which existed at that time.
Therefore, the Holding Company Guidelines should be revised on the basis of the actual situation of holding companies and the economy, so that they will not control holding companies excessively.
In government procurement system, it is necessary to realize for low-priced, high-quality public works procurement based on fair procedures, to establish a system truly acceptable to taxpayers and to promote fair competitions among contractors by establishing and managing a competitive and transparent ordering system. The Act for Promoting Proper Tendering and Contracting for Public Works (Law No.127 of 2000) that went into effect in 2001 has made it mandatory to announce criteria for designation for bidding and designation suspension criteria for suspension of qualification as a bidder. However, it is important to further improve the following points:
The open and competitive bidding system for public works used by the central government and other quasi-governmental agencies is superior to the designated competitive bidding system in that it is more transparent and promotes fair competition. It is also the implication of the Accounting Law (Law No. 35 of 1947). At the same time, however, it is pointed out that, under the open and competitive bidding system, it is difficult to eliminate defective, disqualified contractors, and that the quality of public works may decline due to that the contractors not capable of doing the work are awarded.
Therefore, with regard to public works to be ordered by the central government and other quasi-governmental agencies, measures to eliminate defective, disqualified contractors and to secure proper work, such as those described below, should be reinforced and the open and competitive bidding system should be expanded in successive steps. From the same standpoint, the government should prompt local governments to expand open and competitive bidding systems, considering the situation of the central government entities.
Under the present system, local governments can set the minimum tender price when contracting public works, etc. not only in the case of open and competitive bidding but also in the case of designated competitive bidding. However, since designated competitive biddings are held after selecting contractors fully capable of doing work in conformity with the contents of the contracts, there is little reason to eliminate contractors who have tendered at prices lower than the minimum price which is automatically fixed, and it may infringe on the interest of the competitors.
Therefore, local governments that are to conclude public works or manufacturing contracts under the designated competitive bidding system should consider shifting to a low bidding-price investigation system in the same way as the central government public works. This would be put together with taking measures to eliminate defective and disqualified contractors to secure proper implementation of works and to improve the inspection system. Since prefectures and ordinance-designated cities are better able to take measures to secure appropriate execution of public works than other municipalities, they should consider shifting to a low bidding-price investigation system as early as possible with regard to public works to be implemented under the designated competitive bidding system.
Contractors who have committed a certain malicious act in competitive bidding should be prohibited from taking part in tenders for a certain period after that. For example, as for suspending the designation for tenders, it should be specifically written in the qualifications for competitive bidding participation that the contractor in question is not allowed to take part in bidding during the suspension period for open and competitive bidding. A similar prohibition should be specified in the qualifications for designation for tenders.
With regard to large-scale public works, which are subject to open and competitive bidding, a study should be started immediately on reviewing the performance guaranty system (including a study on the method of owner's damage compensation in the case of non-fulfillment of obligations to be performed). For example, introduction of a system that requires contractors taking part in bidding to obtain a guarantee from a financial institution by the time of the bidding, as a system in which only contractors that have managed well enough to finance public works that require a long period commitment.
In order to secure the quality of public works, it is necessary to thoroughly carry out on-site supervision and inspection (including inspection in the course of construction). However, there are opinions that it is difficult for some municipalities to secure such a system.
Therefore, while promoting the further improvement of the competitive environment described in A above, the outsourcing of supervision and inspection, based on the provisions of the Accounting Law and the Enforcement Ordinance of Local Autonomy Law, should be actively utilized. Considering the state of utilizing this, if necessary after consideration, methods of further utilizing the outsourcing of supervision and inspection should be studied.
The active utilization of supervision and inspection outsourcing should be studied also from the viewpoints of administrative reforms and job creation.
Like electricity/gas contracts, lease contracts for business equipment and information equipment (including maintenance contracts for these equipment) are necessary as long as the government exists. However, some argue that it is difficult to finalize the long-term obligations resulting from such kinds of contracts the governmental body concludes as treasury obligation in the budget. Some also point out that it is unreasonable to renew such contracts every year. Meanwhile, others argue that since lease contracts are for a definite period and their values are fixed, they do not fall into the same category of long-term contracts such as electricity and gas contracts.
Therefore, from the standpoint of improving lease contracts, research on the actual state of lease contracts should be conducted.
Among the significant tasks in the field of legal affairs is establishing a justice system that is easy to use for the people and developing a legal infrastructure to support energetic business activities.
As for the former, realizing a substantial increase the legal population and utilization of specialists in field specialists in fields adjoining law without delay and studying the status of persons engaged in corporate legal affairs are essential for an early establishment of a user-friendly justice system.
As for the latter, in the light of the severe environment surrounding the current economy, it is important to establish an environment that will facilitate corporate reconstruction and to develop a legal infrastructure that will allow a business operator to choose the form of business most suitable for its own business activities.
Although the judiciary is supposed to be the means to secure human rights and settle disputes in the civil society, it doesn't function properly and the administration settles disputes only a few cases. In order for the judiciary to perform its function properly, it is essential to substantially increase the number of legal professionals. And in order to meet the immediate legal demand from the people, it is necessary to utilize specialists in fields adjoining law. In this connection, the position of persons engaged in corporate legal affairs needs to be studied.
Some of the points above were repeatedly pointed out in the opinions of the Administrative Reform Committee, the Deregulation Committee, and the Regulatory Reform Committee, and in the Three-year Program to Promote Deregulation and the Three-year Program for Regulatory Reform that were adopted by the cabinet. In June 2001, the cabinet decided to realize justice system reform by fully respecting the recommendation of the Justice System Reform Council. In November the same year the Law to Promote Justice System Reform was enacted. We, from the standpoint of promoting regulatory reform, intend to pay attention to actual work toward an early realization of justice system reform.
In order to increase the number of successful candidates for the national bar examination, such an increase should be implemented in a schedule and as soon as possible. The goal should be to work toward around 3,000, which should be realized about 2010 while keeping watch over the progress of the new legal training system, including law schools. The increase to about 1,500 should be realized by 2004.
The number of legal professionals in the various fields of the society is supposed to be determined by market forces based on actual needs of the society. Therefore, even if the number of successful candidates is increased to 3,000, it should not be viewed as the upper limit.
With regard to specialists in fields adjoining law, measures in this regard should be taken immediately to provide judicial scriveners (shiho shoshi) and patent attorneys with necessary authority (the former with the authority to serve as a representatives for litigation in the summary courts, the latter with the authority to serve as representatives in patent infringement lawsuits).
With respect to administrative scriveners (gyosei shoshi), consultants on social insurance and labor (shakaihokenromushi), real estate and building appraisers and other specialists, if it becomes clear in the future that their expertise is necessary in lawsuits and that their performance is suitable, consideration should be given individually with regard to how each of them should be able to participate in a certain scope or form of legal proceedings, such as appearing and making statements in the court.
The status of persons engaged in corporate legal affairs, etc., should be studied and, at least, systems should be arranged, including the specific conditions therefore, for granting qualification as legal professional to those who have acquired a certain level of actual business experience in the private sector after passing the national bar examination.
The year by which the measure should be taken will be considered in the course of preparing the Program for Promoting Justice System Reform.
Article 72 of Lawyers Law (Law No. 205 of 1949) prohibits "a person who is not qualified as a lawyer" from dealing with legal affairs concerning legal cases "for the purpose of obtaining compensation." However, there are opinions that, amid the diversification of company forms, a parent company should be allowed to engage in legal business for its subsidiaries within a certain scope.
There are also opinions that the expertise of specialists in fields adjoining law should be utilized more in legal business outside of the legal proceedings, including ADR.
Therefore, at least, the contents of restrictions of Article 72 of the Lawyers Law should be clarified in some method with regard to contents of services provided by professionals in fields adjacent to legal affairs, the relationship with corporate legal section from the standpoint of responding to changes in the diversification of company forms and other points in order to ensure the predictability of the scope and modes of activities that are subject to restrictions.
The year by which the measure should be taken will be considered in the course of preparing the Program for Promoting Justice System Reform.
With the number of companies in management trouble increasing due to the current severe economic environment, the role of various legal systems concerning the disposal of bankrupt companies has increased in importance. A time-consuming procedure for reconstruction of companies that have poor performances makes it difficult to reconstruct companies that can be rehabilitated or unnecessarily erodes the value of assets.
Based on these views, the Civil Reorganization Law (Law No. 225 of 1999) was enforced in 2000, establishing simple and fast procedures in place of composition procedures. The Law has become one of the important options available for corporate reconstruction.
As for the reconstruction of a stock company, which requires stricter procedures due to the complicated interests involved, there is the Corporate Reorganization Law (Law No. 172 of 1952). However, since it has been pointed out that the corporate reorganization procedure based on the Law is time consuming, it is important to establish a transparent corporate reorganization procedure, which facilitates a speedy and smooth reconstruction of a company. For example, it would be necessary to review the conditions for initiating a reorganization procedure and speed up the procedure for fixing claims.
Therefore, the Corporate Reorganization Law should be revised after conducting a comprehensive study, including easing the conditions for initiating a reorganization procedure and speeding up the procedure for fixing claims, in order to establish a more transparent procedure, which will facilitate a speedy and smooth reconstruction of a company.
In Japan, various organization forms are allowed by the Civil Code (Law No. 89 of 1896), the Commercial Code (Law No. 48 of 1899), the Yugen-Kaisha (limited company) Law (Law No. 74 of 1938), and special laws. There exist anonymous associations and limited partnerships for venture capital investment that are similar to limited partnerships in the U.S.
There are various opinions on the organization forms under the existing laws. Therefore, problems related to laws concerning civil affairs should be listed and studied with regard to how reasonable and sound forms of business organizations should be. Along with them treatment under tax law also should be studied.
Issues in the field of financial services include (1): the further development of the financial system to meet the various financial needs of individual and corporate clients in asset management and funding, and (2): the improvement of the functions of financial institutions through the prompt resolution of the non-performing loan problem, in order to revive Japan's financial sector.
We think it will be of critical importance for the development of the national economy to further promote the abolition or relaxation of regulations that is required to address these issues, while reviewing the achievements of the Japanese Financial Big Bang, and through this, to build the bases for the development of the financial services industry, which we think should be one of the future growth industries.
On this thinking, one of our top priorities for action in this fiscal year will be to drastically speed up the process and accomplish the reform, especially where the paradigmatic transition in supervisory administration "from advance regulation to x-post-facto monitoring" has not yet taken place. The other priority will be to implement specific reforms with regard to regulations for which review is becoming increasingly necessary in light of the rapid changes in the environment surrounding the financial industry.
On this note, a report by the Financial System Council ("New framework of financial services supporting the 21st century," June 27, 2000) points out the necessity for steady efforts to develop, on an across-the-board basis, "transaction rules," "rules for participating companies" and "market rules" for individual financial services, reminding us of the necessity to actively promote individual relaxation or abolition of regulations, while keeping in sight the overall goals of regulations in the financial services fields.
Therefore, we should maintain the above-mentioned perspective of "across-the-board development" of the regulatory system and rules when we consider and realize the specific measures that follow.
Over-the-counter sale of investment trusts by registered financial institutions such as commercial banks began in December 1998, through the so-called financial system reforms to increase convenience for investors. With the growth of sales, the sales system and information-provision system have been improved and as a result, over-the?counter sale in commercial banks has come to be accepted by investors. In these circumstances, Exchange Traded Funds (ETFs) and Real Estate Investment Trusts were introduced this year.
Normally, investors cancel or sell their investment trusts at the securities company or registered financial institution at which they purchased them. However, ETFs are designed to be purchased and sold through the market such as the stock exchange, which requires investors to order brokerage houses to purchase and sell ETFs. The current system limits registered financial institutions to the provision of sale brokerage for investment trusts they handled for solicitation, and does not allow registered financial institutions to provide purchase brokerage.
ETFs are securities investment trusts linked to stock indexes and listed on stock exchanges. They are provided for investors as a convenient means of investing in stocks and are expected to contribute to the stimulation of the country's stock market. "The Program for Structural Reform of the Country's Securities Market," published by the Financial Services Agency in August 2001, and the "Reforms Timetable" of the government (September 2001), state that the government "should take necessary measures to enable the handling of ETFs by commercial banks," in order to deliver attractive investment trusts to individual investors, as a means of diversifying the sales channels for stock investment trusts.
The sale of ETFs at registered financial institutions such as commercial banks would contribute to improving convenience for individual investors and vitalizing the country's securities markets.
In this perspective, legislative measures should be taken to enable commercial banks to sell ETFs over the counter.
In the securities settlement system of Japan, the way of settlement varies for each type of security as well as according to whether or not they exist in paper form. We need to improve the system so that it will have fewer settlement risks and become safe and efficient in terms of international standards. This led, in June 2001, to the passing of a law in the Diet concerning the transfer of short-term corporate bonds etc., bringing about "paperless commercial paper (CP)" and the transfer system in the case of CP with a single-layer structure. In the future, we have to bring about paperless corporate bonds as well, in the aim of building an across-the-board and unified securities settlement system for cases in which securities are held hierarchically by financial institutions and securities companies.
In conclusion, we should bring about paperless corporate bonds to speed up securities settlement and make it more secure, and by abolishing the Debenture Registration Law (No.11 law, 1942), create new securities transfer systems for cases in which securities are held hierarchically.
Clause 2, Article 10 of the Bank Law (No.59 law, 1981) provides for "other operations ancillary to banking ("other ancillary operations") besides ancillary operations stated under the Clause, specifying however, no criteria for what operations will fall under the category of "other ancillary operations." And commercial banks are not expressly allowed to use excess capacity legitimately produced out of their proper operations.
The report of the First Subcommittee of the Financial System Council in December 2000 says, "It is preferable that the authorities set out criteria on "other ancillary operations" in order to improve the transparency of administration as well as to make it easy for commercial banks etc. to start new ancillary operations." As for the excess capacity, the report states, "It will be appropriate to have discussions aimed at allowing commercial banks to utilize such operations within the appropriate scope while taking into account the law's purpose of prohibiting commercial banks from dealing with operations other than banking and carefully reviewing what operations are primarily expected to commercial banks."
Furthermore, the "Three-year Program for Promoting Regulatory Reform" (approved by the Cabinet on March 30, 2001) states that this issue will "be studied and brought to conclusion by the end of FY 2001" as a "review of operating scope of commercial banks and insurance companies themselves."
Therefore, in order to improve convenience for customers through suitable measures that respond to their diverse and advanced needs in the rapid environmental changes such as the advent of the information-oriented society and the aging society, the criteria of the "other ancillary operations" should be clarified at the earliest possible time and the scope of ancillary operations should be flexibly expanded, based on the opinions indicated at the First Subcommittee of the Financial System Council.
The amendment of the Commercial Law with respect to the abolishment of the ban on so-called treasury stocks (promulgated on June 29, 2001), allowed joint-stock corporations, on agreement at the stockholders' general meeting, to decrease the amount of their legal reserves exceeding an amount equivalent to a quarter of their capital. Although Article 18 of the Bank Law was revised in line with this amendment, the revision prescribed that the amount of the legal reserves banks may decrease be the part exceeding the amount of their capital from the perspective of maintaining consistency to a conventional regulation regarding the maximum amount of profit reserves as well as the financial health of banks. The revision also requires a procedure to protect creditors at the time of capital decrease (requests to individual depositors etc.) for those wishing to decrease legal reserves.
However, since banks have many depositors, carrying out such requests will effectively work as a constraint. Furthermore, some have pointed out that to make this happen, banks would have to incur huge costs, which raises a problem in terms of the financial health of banks. We think that, as long as banks decrease their legal reserves only by the amount exceeding their capital, which is permitted by the law, the procedure for such decreasing should be improved by making it more reasonable and capable of being practically utilized.
Therefore, as for banks, as in the case of mergers (Article 33 of the Bank Law) and splits (Article 33, Paragraph 2, of the Law), it should be started to consider the possibility of abolishing the legal necessity of requests to individual depositors for the purpose of creditor protection at the time of the decreasing of legal reserves.
Currently, trust banks are required to carry public announcements of the following items in a daily newspaper or the Official Gazette.
Changes made by them in a standard trust contract (in a daily newspaper).
Conclusions or Changes made by them in a loan trust contract (in a daily newspaper). As for trust contracts approved by the prime minister, they must make public announcement of a specified set of items in a daily newspaper (the ways of announcement are not specified).
As for trust contracts of public interest, the conditions of the trust administration and the assets. This must be announced in the Official Gazette at a fixed date once a year (the ways of announcement are not specified).
At a time when the number of Internet users is rapidly growing, making public announcements through the Internet will improve convenience for trustors and beneficiaries, since it offers the same amount of public exposure and easy reference in comparison to public announcement through daily newspapers or the Official Gazette.
The "Interim Draft of the Summary of the Bill Revising a Part of the Commercial Code etc.," published in April 2001, also suggests that joint-stock corporations be allowed to use the Internet to make the public announcements required by the law.
Therefore, a study should be commenced on permitting the use of electronic means for such public announcements by trust banks, in order to improve convenience for trustors and beneficiaries and because of the various merits that come from the use of the Internet.
With respect to the "review of the insurance companies special account," the "Three-year Program for Promoting Regulatory Reform" specifies that "measures should be considered that enable a more rigorous separation of risks between the general account and the special account so that the assets in the special account can be protected for the benefit of customers on possible bankruptcies of insurance companies. In such consideration, the government should also study a measure that will ensure that assets-in-kind are not changed to cash when insurance companies transfer assets to the general account that had been managed in the special account, as well as a measure that will enable them to put insurance premiums directly into the special account (to be examined in FY 2001 and after)."
Since the Insurance Business Law (Law No. 105 of 1995) has no applicable provision in this regard, an insurance company treats its general account and special account equally on the occurrence of bankruptcy. As for the assets managed in the special account, however, customers are basically expected to accept the risk that their value may change, with the cause of the bankruptcy of the insurance company being of no relation.
Also, for cases of putting funds into the special account, direct transfer thereto instead of via the general account could be another possibility.
Therefore, with regards to the assets managed in the special account, given their difference in nature and degree of liability from those in the general account, a study should be commenced on granting a special pre-emptive right to insurance-related claim rights on conditions of the more rigorous separation of risks.
The current law does not permit assets-in-kind (stocks, bonds etc.) to be used on the delivery of assets at the receipt of premiums or cancellation of a contract. However, as their need is growing to trade off the deficit in the accumulated reserve fund for retirement allowances by donating stock holdings to their pension schemes in line with the introduction of the new accounting standards, corporations are hoping for the introduction of a regulation whereby assets-in-kind are accepted as premiums, as a means of unwinding mutually held stocks without exerting adverse influence on the stock market.
Therefore, a study should be commenced on measures for accepting assets-in-kind as premiums and for transferring assets-in-kind to and from the special account.
Currently, insurance contracts that can be added to the special account are limited to (1) variable life insurance, (2) new corporate pensions (qualified retirement pension contracts), (3) employees' pension funds insurance, and (4) national pension fund insurance. A legal measure is needed to add any other insurance products to the special account.
However, calls are increasing for the expansion of such products in order to meet the diverse needs of the insurance market. Therefore, legal measures should be taken to expand the range of products that can be added to the special account.
Although commercial banks etc. were allowed in April 2001 to sell insurance products by the Insurance Business Law and the law amending a part of the law concerning exceptional cases of reorganization procedures for financial institutions etc. (Law No.92 of 2000), the range of products is limited to long-term fire insurance related to housing loans, credit life insurance, insurance for assisting debt repayment and overseas travel injury insurance (credit life insurance is limited to the products of the subsidiaries and associated companies of commercial banks etc.).
While the 1997 report of the Insurance Business Council admitted that the sale of insurance products by commercial banks etc. would lead to the improvement of convenience for customers, it also expressed the opinion that the exercise of the predominant standing and influence of commercial banks etc. may lead to (1) wrongs in terms of customer protection and fair competition and (2) banks etc. using information they had obtained through deposits acceptance and settlement without permission. On the other hand, it has been more than two years since commercial banks etc. started to handle investment trusts over the counter, and the environment for protecting insurance contractors has been improved, such as through the enactment of the "Law for the Sale etc. of Financial Products (Law No. 101 of 2000).
Based on these environmental changes, the "Three-year Program for Promoting Regulatory Reform" specifies that "a study should be continued on enabling commercial banks to handle, in principle, all insurance products and on the sale thereof not being limited to the products of their subsidiaries or associated insurance companies, with the conclusion thereon to be arrived by the end of FY 2001."
We consider that the environment is becoming ready for the handling of a wide range of insurance products by commercial banks and that the government should promote the total removal of limitations with a view to improving customers' convenience and promoting competition between delivery channels.
Therefore, a study should be continued to reach a conclusion on the further deregulation of the sale of insurance products by commercial banks etc.
Although the reform of the examination and reporting systems for insurance products has seen significant progress with the liberalization process of insurance triggered by the Financial Big Bang, there are still issues to be addressed in terms of promptly dealing with the ever-varying and advancing needs of insurance contractors and increasing the freedom to develop products.
Specific examples are the reduction of the examination period, the ensuring of the transparency of the examination criteria, the introduction of the file-and-use system and the liberalization of the ordinary insurance contract of corporate insurance products. The "Three-year Program for Promoting Regulatory Reform" of March 2001 and the interim report of the Financial System Council of June 2001 have pointed to similar problems. We think such reforms - the liberalization of the insurance industry - will lead to increased competition between insurance companies as well as the improvement of services that is hoped for by consumers.
Currently, Article 246 of the Enforcement Regulations of the Insurance Business Law sets the standard processing period for applications for approval at 90 days and Article 125 of the Insurance Business Law stipulates 90 days for the examination period for product reporting. The products should be categorized for which examination is possible in a shorter period of time due to the content of the applications for approval or reporting and establish new guidelines reducing the current 90-day examination period for approval and reporting to 60 days.
In order to further ensure the transparency of the examination criteria, the items and content of the "evaluation sheet of the content of the reporting" that is currently used in application or reporting more substantial, as well as the "evaluation sheet of the content for approval" should be improved, so that there will be no differences in understanding between the competent authorities and insurance companies.
From the perspective of enabling the timely sale of insurance products in a fast-moving market, studies should be commenced on the introduction of the file-and-use system for products that are unlikely to cause problems in terms of protecting insurance contractors, while giving due consideration to what corrective measures should be taken when problems occur after the sale has been initiated.
At present, only minor liberalization of ordinary insurance contracts has been made. For example, damage indemnity insurance covering overseas business activities has been liberalized so that corporations can flexibly deal with various foreign or international business practices. Studies should be made on expanding this measure to other kinds of insurance used overseas or internationally.
Clause 1, Article 300 of the Insurance Business Law specifies prohibited or compulsory acts when insurance companies or their sales staffs etc. conclude or solicit insurance contracts. They are: (1) obligation to explain important contract items (Item 1, Clause 1, Article 300 of the Insurance Business), (2) ban on solicitation by notification of false facts (Item 2, ib.), (3) ban on obstructing notification or solicitation by non-notification (Item 3, ib.), (4) ban on soliciting unfair change-over (Item 4, ib.), (5) ban on discounting premiums, repaying part of premiums or providing special benefits (Item 5, ib.), (6) ban on comparative expressions subject to misunderstandings (Item 6, ib.), (7) prohibited acts in connection with expected dividends (Item 7, ib.), (8) ban on the provision of special benefits by certain interested parties. An ordinance of the Cabinet Office bans the so-called solicitation by pressure due to its risk of adversely effecting the protection of insurance contractors.
While these provisions on prohibited acts play an effective role in protecting insurance contractors and maintaining fairness in solicitation, some point out the unclearness of the scope of their applications. Measures should be devised for clarifying these prohibited acts.
For example, when insurance products are approved at the so-called standard tariff or tariff within the approved range, the relationship between the application of a tariff within the approved range and the ban on the discount of premiums, repayment of a part of premiums and provision of special benefits (Item 1, Paragraph 1, Article 300 of the Insurance Business) is provided for by Paragraph 2, Article 300 of the Law, which specifies that the decision of the tariff based on the basic documents (document on the ways of business, ordinary insurance contract and document on the calculation of premiums and responsibility reserves) shall not be subject to the Law. Through discussions with the competent authorities, we have reached the conclusion that it will not be in contravention of Item 5, Paragraph 1, Article 300 of the Insurance Business Law for individual insurance companies to make rational management decisions on specific tariffs within the range set forth in the basic documents.
Meanwhile, as for the issue of whether various free-of-charge services such as consulting services in insurance contracting are tantamount to the provision of special benefits, in terms of preventing prohibitive effects on the activities of insurance companies and their sales staffs, improving consumers' convenience and protecting insurance contractors, the administrative guidelines should be made on the criteria of the "provision of special benefits" under which past cases have fallen more comprehensive, as well as adding to the guideline examples accumulated through the use of the no-action-letter system. This is to clarify whether individual cases come under the provision of special benefits.
As for the restriction of comparative advertising of contract contents etc., there is currently no consistency among financial services (commercial banks, securities companies and insurance companies etc.). They vary from legal restrictions to voluntary rules of the industry (so-called fair competition rules etc.), with some more restrictive than others and some inconsistency among them. The Insurance Business Law and its Enforcement Regulations prohibit comparative advertising which "is likely to lead to misunderstanding," while not clearly specifying contents of prohibited acts and thus effectively producing prohibitive effects on insurance companies and their sales staffs.
Therefore, considering that reasonably provided comparative information will help consumers choose insurance contracts, with regard to the prohibited acts specified by Item 6, Paragraph 1, Article 300 of the Insurance Business Law and Paragraph 4, Article 234 of its Enforcement Regulations, as in the case of the provision of special benefits, the administrative guidelines should be made on the criteria of the "provision of special benefits" under which past cases have fallen more comprehensive, as well as adding to the guideline examples accumulated through the use of the no-action-letter system.
The Consumer Financing Control Law (Law No.32 of 1983) imposes uniform act restrictions on all consumer finance operators for all contracts, irrespective of the attributes or the scale of the loanee. The law does not provide for the issuing of documents in electronic form due to the discussions on the revision of the law in 1999.
The law is created in terms of protecting the interests of the party requiring a fund. There is, however, an argument on the issuing of documents: Is there a necessity to impose the same restriction on the contract made with so-called professionals?
From this perspective, as for the restrictions on consumer financing, a fact-finding investigation should be conducted, through the competent authorities, focused on (1) the necessity to equally treat individual and corporate clients such as listed companies, (2) the feasibility of electronic documents by financing operators, (3) the possibility to ease the notifying obligation at the time of liquidation of claims credit.
The Installment Sales Law (Law No.159 of 1961) stipulates that corporations must have registered themselves in order to be able to issue credit cards that can be used in the revolving way or the general way (installment plan). Credit cards that banks themselves issue are effectively not entitled to have the two functions since banks already have subsidiaries handling credit cards and they have been corporate financing-oriented and slow in investing their resources in the retail business.
As for the revolving function by banks, the interim report of the Credit Industry Department of the Installment Sales Council says in 1998, " It is appropriate that the function be realized after the government has investigated the effects of the Financial Big Bang on the credit card business and made studies thereon."
The Three-year Program for Promoting Regulatory Reform also states that "as for the lifting of the ban on banks handling the revolving way," "a measure should be taken after making investigations and studies" and "should be taken promptly based on the studies."
We consider that the lifting of the ban will have the big advantage of increasing customers' convenience through responding to customers' diverse needs.
Therefore, as for the solicitation of installment buying using the revolving way for "bank cards," it should be concluded that it be promptly realized after the government has investigated the effects of the Financial Big Bang on credit card business and made studies thereon. Also, it should be commenced to make investigations and studies as early as possible on the general way. ("Bank cards" is the common brand name of the combined credit-cash card issued by the 64 local banks themselves.)
Although the climatic conditions of Japan are not severer than those of other developed countries, its self-sufficiency rate in food is noticeably low. One of the reasons for this is thought to be the dysfunction of the market mechanism - the domestic production of foods has not coped with changes in demand due to the diversification of food consumption.
In the background of this the fact that Japanese agriculture lacks the kind of industrial dynamism by which corporations invest large amounts of funds into research and development for technological breakthroughs, thus giving rise to many related venture companies.
The government has established a law that revised part of the Farm Land Law, which permits the setting-up of joint-stock corporations involved in land-extensive farming as a type of farming corporations. Although this move is appreciable in that joint-stock companies will induce capital investment in the field of agriculture and promote modernization of agricultural management, the number of farming corporations in the form of joint-stock corporations was seven and most of them were converted from existing corporations. More improvements should be made in the conditions under which corporations will adopt the joint-stock corporation form as an farming corporations.
The current Farm Land Law (Law No.229 of 1952) limits the possession of farm land to farming corporations (agricultural associations, unlimited partnerships, limited partnerships, stock corporations or corporations) and imposes the following requirements (Article 2 (7) of the Law).
The corporation's main business shall be agriculture (including the production, processing, storage, transportation and sale of agricultural products and livestock products, manufacture of agricultural materials and consigned farm work).
The members and stockholders of the corporation shall be in principle owners of the farmland, full-time farmers at the corporation such as a local government or an agricultural cooperative or a corporation for rationalized farmland possession.
When the corporation accepts investment from outside in an exceptional case, the total amount of the investment shall be limited to one quarter of the voting rights, with the amount of individual corporate investors limited to one tenth of the voting rights.
The majority of the corporation's directors shall be full-time farmers and engaged in farm work.
Except for the case of a farmer himself setting up a corporation, these requirements seem to effectively make it difficult for a joint-stock corporation without its own farmland to become a farming corporation. In order to promptly materialize an agricultural structural reform for vitalizing agriculture and increasing its sound workhorse, various forms of entities have to enter agriculture. The government should promptly examine the current system and situation including the above-mentioned limitations with regard to investment in farming corporations by joint-stock corporations and take measures to further make it easy for joint-stock corporations to enter agriculture. [Review of the current system to be promptly commenced and measures decided on to be implemented from FY 2002]
The "distribution" that exists between corporate production and household consumption is a very important function in terms of enriching consumption life and improving the quality of life of the people. Distribution corporations, the main providers of distribution, especially retail corporations, form entities with a strong presence in local communities. They also play an important role in the local economy and as an employer in the area.
As consumers' needs have become more and more advanced and diversified in recent years and the society has become further information-oriented, Providers of the distribution function have become varied and complicated by product as well as by area. In order that distribution may function smoothly and consumers can receive distributional services suitable for them, it is necessary to promptly and appropriately set firmer rules aimed at promoting competition in disclosure etc., not to mention eliminating factors obstructing competition between distribution corporations.
Franchise systems are systems that greatly contribute to the creation of new industries in the fields of retail, the food service industry and the service industry, because they enable managers in the headquarters (franchisers) to rapidly promote business by using outside capital and human resources and participants (franchisees) to establish and start their own business using various services provided by the headquarters. The Japan Franchise Chain Association (a corporate juridical person) says that in the fiscal 2000, the total sales amounted to 17 trillion 800 billion yen (up 3.3% from the previous year), the number of chains totaled some 1,000, the number of shops around 200,000 and employees around 2 million.
For a franchise system to function smoothly, it is important that franchisers and franchisees work in cooperation. For this purpose, a contract between both parties has to be entered into in a fair and precise manner. The government has adopted two measures as follows to ensure appropriate contracts.
Law on the Promotion of Small and Medium Retail Business (Law No.101 of 1973):
From the perspective of promoting small and medium retail business, the law requires franchisers to disclose and explain to potential franchisees the contract's contents according to the points prescribed by a ministerial ordinance at the time of entering into a franchise contract. This is especially aimed at retail businesses such as convenience stores.
"Franchise Systems in Terms of the Antimonopoly Law" (Franchise Guideline) (established in 1983)
The guideline gives problem cases of franchise contracts in terms of unfair transactions of the Antimonopoly Law (deceptive solicitation of customers, abuse of superior position etc.), considering the contract's particularities.
Items subject to disclosure by the Law on the Promotion of Small and Medium Retail Business are limited from the international viewpoint. Some of the provisions of the current Guideline on acts by franchisers that come under unfair transactions lack clearness and do not necessarily accurately reflect the actual conditions of the franchise industry in recent times.
Therefore, the government should conduct a prompt fact-finding investigation into the individual items subject to the "obligations of documentation and prior explanation to potential franchisees on entering into a franchise contract," which the Enforcement Regulations of the Law on the Promotion of Small and Medium Retail Business imposes on franchisers. Based on this, the government also should take measures to improve the system. Furthermore, the Guideline should be reviewed to promote fair disclosure and transactions while paying attention to the occurrence of new problems in the current franchise systems.
In recent years, franchise systems have been spreading to a wide range of industries including not only the retail business but also the service industry. Since the Law on the Promotion of Small and Medium Retail Business has as its purpose the promotion of small and medium sized retail business, disclosures and explanatory obligations at the time of contracting stipulated by the law do not apply to industries other than the retail business.
Given that the volume of franchise industries other than retail business franchises has been increasing recently, in order to bring about the healthy development of small and medium companies and venture companies through the promotion and dissemination of franchise chain systems, the government should make adequate fact-finding investigation into service business franchises other than retail business franchises and make prompt studies on appropriate franchise systems including disclosure on franchise contracting as well as the above-mentioned current regulations.
The Large-Scale Stores Law (Law No.91 of 1998), in effect since June 2000, has as its purpose to pursue rational corporate action in order to preserve the environment of the areas where large-scale store chains intend to build new stores. The situation of the law's enforcement is generally good: 379 new stores have been reported in the 16 months from its enforcement to September of this year.
It is, however, a fact that some retail corporations call for the improvement of the application of the law by local governments. Although the application of the law is committed to local governments as part of local administration, keeping the government from being actively involved in individual projects of new stores, it is important to make sure that the purpose of Article of the Law (the Law's purpose ought to be fully reflected in policy measures of local governments) is respected so that appropriate application of the law will be secured and local governments will not impose additional restrictions or apply it in an arbitrary manner.
Therefore, the Ministry of Economy, Trade and Industry and each Office of Economy and Industry should give interpretations of the Law to local governments as appropriate through the Consulting Room about the Large-Scale Stores Law set up in each Office and promptly provide technical advice and recommendation based on the Local Autonomy Law (Law No.67 of 1947) if cases not complying with the purpose of Article 13 of the Law occur.
The Guideline was prepared based on Article 4 of the Law and provides for basic points that the founder of the new store should take into account, the meeting of parking needs and the specific points concerning the lay-out and management of the store in terms of the generation of noise etc. The Guideline is supposed to have necessary review within five years of the enforcement of the Law by the interim report (May 1999) by the Industrial Structure Council and the Small and Medium Corporations Policy Council.
However, because appraisal of the Law's enforcement is becoming clearer with two years after its preparation passing and more than one year after its enforcement, the government should promptly make studies aimed at reviewing the Guideline by the end of FY 2004.
As for the electric power supply system, the partial liberalization of retailing led to the entry into the market of new market participants and the reduction of electricity tariffs including charges for commissioned delivery for retail, confirming that there has been a certain effectiveness to the competition promotion measures so far. New market entrants' share of the total supply, however, is still small. And although the income and expenditure of commissioned delivery of the current connection-supply system is disclosed on the basis of the rules established by the administration, some say the validity and transparency of the calculation of the connection-supply tariffs and back-up charges due to accidents are insufficient. Moreover, although existing power supply companies have reduced tariffs for users including those subject to regulation - a "result of making the system effective, there still is no competition between the existing power supply companies which have an overwhelming share of the market: just small-scale competition between their subsidiaries involved in private power generation."
Although it has been only a little more than one year since the current system was established, some issues have been already pointed out, as have been mentioned above. It is important to clarify the issues including the promotion of competition between existing power companies in terms of the national economy.
As for urban gas supply, supply for large users contracting 2 million cubic meters or more per year was liberalized in 1995, bringing about an end to gas companies' monopoly in their own individual areas. In 1999, the liberalized volume was reduced to 1 million cubic meters or more per year and commissioned delivery through pipelines was established with the aim of promoting competition in the liberalized market. This move has achieved a certain degree of success, such as the fact that new market entrants have begun to supply gas in some areas, but their combined supply remains at around 2% of the supply of all the large users.
In the future, it will be necessary to aim to further improve users' benefits by building a more competitive gas market through the further expansion of the scope of liberalization while at the same time securing a stable supply. Above all, natural gas has been attracting attention as a clean form of energy and it will be very important to reduce the cost of supplying it through the building of a competitive market in terms of maintaining and developing a competitive economy and society while overcoming the global environmental constraints that Japan will have to face. On the other hand, in order to ensure that the competitive gas market functions effectively, it will be necessary to consider investment-promotional measures to strengthen the domestic pipeline network etc., which is not necessarily adequate as the gas supply base, as well as to develop rules for its use in the interest of the public.
Based on the above-mentioned awareness of the issues and the direction of studies, the government should make studies and reviews through the Electric Power Department of the General Resources and Energy Investigating Committee etc. and direct the Ministry of Economy, Trade and Industry to promptly reach a conclusion. [To be implemented in FY 2002 (Examination and conclusion)]
In the present situation in which the liberalization of retailing is limited, there is the possibility that user' calls for the expansion of options will not be adequately answered. To meet such a demand, the government should develop an investment environment for large-scale electric resources by developing a large-area mutual supply-loaning system of electric power and large-area power supply networks so that total liberalization will be realized, on the condition that a stable supply of electric power is secured. If the significant problem occurs of a rapid total liberalization entailing a very large effect, the government should specify conditions and dates etc. for implementing a total liberalization as well as immediately expand the scope of liberalization, at least to high-voltage electric power.
When expanding the scope of liberalization, if the so-called principle of the same volume at the same time is applied to users including users of lower-than-high-voltage electricity, the costs of installing meters would be huge, raising the possibility that this would be a barrier for new market entrants. Therefore, for the means of securing the same volume at the same time, a review of the system toward making it more flexible should be made while taking into account the technical factor that the principle has to be observed in the system of electric power supply as a whole. Although existing power companies will have to bear the costs of the adjustment of the differences of power use that is conducted as a part of neutral serial power management, an appropriate system should be built that would prevent existing power companies from exercising their power of monopoly.
While some consider that the nationwide development of a wholesale electric power market would be effective for realizing optimal power supply in compliance with economic rationality, others take the view that such an isolated measure would not be very effective because power companies currently supply areas independently. At any rate, under the current system, electric power supply is limited and there will be a need for a wholesale electric power market in terms of enabling a more flexible supply. Another possibility is that the trading of electric power through the market will put pressure on existing power companies to compete when they generate and sell electric power. The development of a wholesale market will enable the development of means of hedging the risks involved in the transaction of electric power. On the other hand, the overseas effort to create a wholesale market did not succeed, and led to the damaging of the stable supply of power. This example should be taken into account in developing a wholesale market.
In developing a wholesale market, preparatory measures should be taken such as unified nationwide tariffs for commissioned delivery, installment of facilities for converting frequency and realization of a commissioned delivery that will enable spot transactions in order to ensure that market principles function effectively while paying attention to the level of reliability of supply and efficiency.
As for the current connection-supply system, as has been mentioned above, some users have pointed out the necessity that it be improved. The points put forward should be dealt with appropriately at the appropriate time, based on the "Guidelines on appropriate power transactions" and the "Guidelines for resolving disputes regarding power transactions," as well as being reviewed as necessary. And in order to increase transparency when new market entrants use the connection system, the government should make them adopt more rigorous separated accounts and take preparatory measures to secure fairness when both existing companies and new entrants use the system. Such measures would decrease tariffs for commissioned delivery.
Although some say that so-called "connected power lines" will be essential for competition between existing power companies and for the promotion of new market entrants, others say existing power networks effectively form networks completed within each power company because they have been developed to perform the duty of area supply and in terms of fairness, with the result that adequate development of connected power lines has not been made in the country.
In order that existing power companies and new entrants may compete actively and the wholesale power market may function effectively, the government should develop a system for developing a nationwide power network including the strengthening of "connected power lines," while at the same time considering our country's particularity in that it imports most of its energy so that there is not much difference in the costs of establishing power sources between areas including the cost of procuring fuels. In doing so, a new system in the framework of a liberalized market should be introduced, replacing the current rules for sharing the cost of building power lines based on area monopoly and the principle of comprehensive costs.
Further, while securing a stable supply, a scheme should be devised for securing the neutrality of the power transmission sections of the existing companies including the possible separation of the generation and transmission sections, which have been developing power sources and power lines planning respectively, within the same company.
As for key power lines such as connected power lines, while recognizing the necessity to develop them from a national perspective, a system should be built for realizing the preparation of rules and plans for developing power networks by entities not constrained by existing power companies, such as power transmitting companies and Independent System Operators (ISO) in foreign countries.
When rules and plans for developing power lines are prepared from the national perspective to build a system centered on connected power lines, for the purpose of securing its effectiveness, the government should take into account the measure adopted in foreign countries that makes bidding mandatory for constructing power lines (neutral power line-developing entities such as transmitting companies and ISOs prepare rules for bidding), introduce the principle of competition in the development of power lines and build a system that will realize the most efficient power network possible.
When business concerns with their own power generating facilities supply power to their neighbors, except in the case of certain electricity business and particular supply, they are currently not allowed to install power lines themselves, and are forced to use power companies' lines for commissioned delivery charges. The government should permit them, on principle, to freely construct power lines while paying attention to viewpoints in terms of the national economy. In doing so, it should also review the authorization system for that particular supply which will be unnecessary in liberalized sections on the liberalized construction of power lines as well as make studies on open access to networks built by new entrants.
The government should also take measures regarding rules for managing power serial lines while taking into account the measures adopted in foreign countries by which, with the aim of dispelling concerns over neutrality in competition in electric power using power lines, entities other than existing power companies prepare the rules and, based on them, conduct fair and neutral management of power serial lines. It should secure a system under which new entrants will be able to disclose their technology information to managers of power serial lines. This will also be important in securing the stable management of power serial lines and maintaining the quality of power.
Some take the view that a decision that existing power companies being in charge of this function will be a problem not only in terms of discriminational management but also in terms of promoting competition between them. The government should devise a system in which the rules are established by a neutral entity.
In order for new entrants to be able to smoothly use commissioned delivery, the government should also introduce a system in which technology information is disclosed to new entrants and they are able to check the idle capacity of the power lines when necessary, while taking into account the maintenance of the security of the network.
It is essential to secure the cutting-off of information between commissioned delivery and other sections of the existing companies in order to realize fair commissioned delivery, the development of power lines and rules for management of power serial lines.
Some have pointed out the issue of the information wall before the partial liberalization, but it is currently left to voluntary efforts by existing companies, which have taken measures such as establishing regulations for handling information. Some new entrants, however, have raised questions about the current information wall. As for the neutrality of the power transmitting section, some say the separation of the generation and transmission sections is desirable while others say it is appropriate to consider other measures for securing nationwide neutrality because it is necessary to weigh up the impact on the management of power serial lines and because transmission networks are currently independent from each other. The government should take measures for securing neutrality, fairness and transparency, including the complete organizational separation of generating and transmitting sections, while taking into account the above views, the systems in foreign countries and the conditions of the management of the current system.
With the view to securing the neutrality of the sections of commissioned delivery, transmission and serial power management and to further promoting competition in power generation and the sale of electric power, some say it is preferable to make conduct ex-post-facto monitoring of commissioned delivery from more professional viewpoints as well as the supervision of the market from more independent and neutral viewpoints.
For this reason, the government should establish an administrative organization equipped with advanced expertise for monitoring the market as well as an organization for promptly resolving disputes with more independence, neutrality and transparency. This organization will work in cooperation and competition with general policy measures for competition since its purpose is to promote competition in a field of high expertise. The organization and general policy measures for competition must be interactive so that results will be attained in market supervision.
The scope of liberalization of the urban gas business (for large-volume users contracting 1 million cubic meters or more per year) is equivalent to around 37% of the total urban gas supply. As has been mentioned above, it would hardly be true to say competition has adequately been promoted for new market entrants. The government should promote competition, enabling more users to enjoy the fruits of liberalization such as reduced tariffs and improvements in services by expanding the scope of liberalization for majority users contracting less than 1 million cubic meters per year too.
In line with this, the approval system for large-volume users in the scope of liberalization should be reviewed, including its possible abolishment.
In Japan, investment has been made in pipelines, especially of liquefied natural gas (LNG) bases, in individual areas, resulting in an insufficient number of pipelines connecting areas of greater consumption. And as the total area covered by urban gas is only 5% of the country, pipelines do not necessarily form an adequate network except for metropolitan areas. The development of a nationwide pipeline network, however, constitutes one of the most important factors in developing a competitive environment for the gas market. Immediate development of the network is needed in terms of promoting dispersed power sources also.
Therefore, for the primary purpose of developing a network of arterial pipelines, the government should in principle, by making an exception for regulations about areas covered by the new pipeline installer, approve the free supply of gas through branch pipelines to the liberalized section at whatever points of land the new pipeline passes (even if the points are within the area of another urban gas supply company). A measure for increasing investment incentive should also be implemented such as allowing such pipeline installers to set an increased tariff for a fixed period of time.
As for the existing pipeline networks, the revision of the Gas Utility Law in 1999 introduced commissioned delivery using pipelines of existing gas supply companies. Commissioned delivery, however, is currently allowed only for four large urban gas supply companies (Tokyo Gas, Osaka Gas, Toho Gas and Seibu Gas).
In order to further effectively promote competition in a gas market where liberalization is progressing, it is essential for market participants to multiply their means of obtaining and supplying gas. To develop such a competitive environment, further expansion of the use of pipeline networks and LNG bases by third parties is needed while promoting the development of infrastructure by enhancing motivation to invest into pipelines.
Therefore, firstly as for the existing pipelines, the use by third parties of pipelines with high public interest such as pipelines possessed by gas suppliers other than the four major urban gas supply companies should be further expanded. As for LNG bases too, the most effective appropriate measure for expanding third-party use of them should be sought from the perspective of promoting new entry into the gas market. Furthermore, as for the liberalized tariffs for commissioned delivery of the four major gas companies, more rigorous separated accounting for increased transparency in the calculation thereof should be observed in terms of fair competition and a rigorous information wall mechanism should be built in order to secure further transparency and fairness as liberalization expands. These measures would reduce the tariffs for commissioned delivery.
The gas market in Japan is divided roughly into two halves: 27 million users are supplied by urban gas companies (general gas suppliers and simplified gas suppliers) and 25 million users by liquefied propane gas companies. The first half of the market is shared by more than 200 general gas suppliers and a little more than 1,700 simplified gas suppliers and the second half by around 28,000 liquefied propane gas suppliers. Since the gas business has its economies of scale, it will be in the long-term interest of users for such a segmented market to be integrated through competition, thus bringing about a reduction in costs.
Therefore, the government should review the categories of general gas suppliers, simplified gas suppliers and liquefied propane gas suppliers in order to enable gas market participants to compete under fair conditions. In the process, the government should make studies on the use of LNG by simplified gas suppliers with a view to allowing such use.
The field of transport is vital for the life of the people and industrial activities. Therefore, its revitalization and improvement of its high cost structure is an essential requirement for socio-economic development. Since this is a field with a number of regulations, a variety of regulatory reforms have been implemented in recent years. Implemented reforms include a change of the licensing system to a permission system, that from a permission system to a registration system in such a field as warehousing. And change to a report system for charges and fares in each field, accompanied by overall abolition of regulations to adjust supply and demand. Those measures may be compatible with the points repeatedly made by a series of plans regarding regulatory reform. In these plans, it has been pointed out that regulation regarding entry and rates of charges should be further liberalized. It has also been pointed out that regulations, even if they are necessary, should be changed to the lowest possible levels, reflecting relevant socio-economic changes.
Based on this, revitalization of the industry through regulatory reforms must be continuously advanced. In addition, there remain a number of issues, including one-stop services in procedures for applications and notifications involving several ministries and agencies to keep pace with the recent introduction of IT.
Solving these problems steadily is of importance in terms of benefits for social and economic activities.
As for charge and freight regulations, the current prior notification system should be changed to an ex-post facto report system to set charges and freight regulations that meet users' needs in a flexible way. The obligatory notices of charges and freight should be basically abolished, except for cases such as door-to-door courier services of which users are general consumers.
The regulations regarding business areas are currently based on the prefectural level as a general rule, and have been extended to the economy block level for expanded business areas. In light of enabling efficient and mobile operations by truckers, the business area system itself should be abolished so that they may freely expand their business to the national level. Along with this the number of vehicles in possession, one of the requirements for permission, which is now 15 in the case of expanded business areas, should be uniformly reduced to 5 nationwide.
In regards to the taxi business, regulations to adjust supply and demand are to be abolished in February 2002, and a licensing system is to be replaced by a permission system, with an emergency adjustment measure that allows measures to adjust supply and demand under certain conditions. Needless to say, this measure should be a last resort to ensure that the regulation has the impact it is supposed to. Because of this, its requirements and procedures must be continually reviewed, and applications of this measure should be strictly limited to extreme cases. In addition, accountability should be fulfilled in such cases.
The taxi business, as well as the port transport industry, a field of the transport industry, are two places where the approval system of change still remains. Credit can be given to a certain extent to great flexibility in the case of the charges for long distance fares of fixed rates in specific zones. This has been achieved by standards for approval of charges that have been recently recommended. These, however, should be operational in a real sense. Credit is also given to a new system in which approval of fares within a certain range uses a simplified procedure, accompanied by the abolition of divisions based on the types of cars and businesses. However, approval of charges below that range is subject to an individual examination. This individual examination should be conducted only in terms of the basic principles checking on "prohibition of overtaking," "unfair competition," as well as "discriminative handling," while strictly limiting this to the regulation related to upper limits even under the approval system, and not allowing intervention in the form of discretional judgment by the authorities.
The coastal shipping provisional measures include providing grants to those who have disposed of the vessels in their possession as well as collecting levies from shipbuilders. This measure has been introduced while considering the influence of the dissolution of the former tonnage adjustment scheme, and was done in order to revitalize coastal shipping.
However, the length of the period of providing grants, which is 15 years, means a substantial burden on new ship builders, because they have to pay levies when they build a new ship. Moreover, the funds financed for the said project have been used considerably over the 3 years since the beginning of the project. Also, it is assumed that the pace of the growth of the Japanese economy will be moderate for the time being. Given the situation there could be additional payments depending on the fluctuation in demands for vessels while a sufficient new shipbuilding that can offset the payment may not be expected. Under such circumstances, borrowing for the coastal shipping provisional measures may progressively increase.
In order to avoid this situation, further reductions in unit prices of the grant are required along with appropriate and transparent measures.
Since November 2000, the 9 main ports including Tokyo and Yokohama have seen implementation of regulatory reform such as abolition of the regulation to adjust supply and demand, replacing of a licensing system with a permission system, and the change of the approval system for charges and fares to the prior notification system.
Regulatory reforms have been implemented in advance at the 9 main ports based on the final report of the former Administrative Reform Committee. This report pointed out that the port transport industry had experienced a history of confusion in the past, and taking this into consideration, deregulation must be carried out on a step-by-step basis following a due procedure so that no confusion should be caused (December 12, 1997). It should also be noted that the final objectives are to abolish the licensing system and to change the current charge regulation to a notification system.
It took 2 years and 8 months from the time the cabinet made its decision in March 1998 regarding the regulatory reform in the 9 main ports. A consideration of the above-mentioned regulatory reform in the remaining ports should be started as the second step, so that a conclusion could be obtained during FY 2003.
With regard to this regulation, a relevant investigation was to be conducted during FY 2000 in accordance with the Three-year Plan for Promotion of Deregulation f 2000. The Three-year Plan for Promotion of Regulatory Reform of 2001 prescribed that a conclusion on this matter should be obtained by FY 2003. On the other hand, since the recent economic recession is largely due to the delay in structural reforms (including regulatory reform) in Japan, it is required to further promote regulatory reforms in various areas and to advance the timing of their implementation.
As for the handling of the regulation concerning motorcycles carrying a passenger on national highways and motorways, needless to say, towards the issue of ensuring safety there have been strong requests by some people for a review of this regulation. Taking this into consideration, the final conclusion should be reached at the earliest possible time in FY 2003, by advancing the schedule by making the most of the past data and accelerating experiments for demonstration.
With regards to procedures related to import and export at harbors, applications should be processed electronically as a rule, with a view of enhancing the competitiveness of Japanese harbors and improving the efficiency of physical distribution. Also, from this point of view, it is of great importance to introduce one-stop services. However, as a matter of fact, it has taken some time for this to be realized.
At this point, work is under way so that specifications of necessary systems will be developed during FY 2001, under the cooperation of relevant ministries and agencies with the target of starting their operations in FY 2003. The requisites are: that the systems are user friendly, have low cost requirements for operation, pay due attention to international standards and are simple in terms of their procedures. For these reasons, the ministries and agencies concerned should promptly draw grand designs and accelerate their consideration and coordination in cooperation so that systems, which meet the above requisites, can be operational at the earliest possible time in FY 2003. At the same time they should be making efforts to improve the existing partial systems.
As regards baselines/standards and inspection/examination (hereinafter referred to as 'standards certification, etc.'), the competent authorities reviewed the matter from a cross-sectional approach, with basic ideas such as minimizing direct regulation by the Government to the utmost through transition to self-confirmation and the third-party certification, and necessary measures were taken accordingly. In addition, the 'Progress Report of Reviewing the System of Standards Certification, etc.' was prepared in April 2001.
In response to the above-mentioned review results, each of the Ministries is to further review the issue based on the following guidelines: a) review of the range of standards certification, etc. in which the Government is involved; b) change to a system based on self-confirmation and self-security; and c) harmonization with international standards, performance standardization and the elimination of overlapping examination.
We have been discussing, from the perspective of, the basic policy of minimizing involvement by the administration through change from advance regulation to ex post facto regulation and so forth, while giving due consideration to opinions and requests both from outside and within with respect to standards certification, etc. The following issues seem to require immediate regulatory review in the aim of ensuring harmonization with international standards and so forth.
Concerning the technical standard conformity validation system for communication terminals such as telephones and modems, and the technical standard conformity certification system for certain wireless equipment such as PHS phones, review must proceed on the introduction of a self-declaration system that assumes expansion and enhancement of post actions such as recovery orders and more strict penalties, taking into consideration the characteristics of the targeted areas, with a view of harmonizing the system with systems in other countries.
The Electrical Appliance Safety Law (Law No. 234 of 1961) has 'types' that are within the range admitted to have equal qualities in securing product safety for structure, material, capabilities, etc., as units in notification by a business operator. Since April 2001 (amendment of 1999 Law), previously unnecessary notification by type categories have been obligatory for electrical appliances other than those specified, increasing the burden for business operators. Rational changes for items included in the type categories should be considered so that regulation can be minimized in the light of the Law's purposes in categories necessary for examining business operators by the Administration in spot inspection and so forth. [To be discussed promptly]
As for the international technical standards regarding electrical appliances, revision is under way according to the progress of technologies, and for the current domestic standards, strenuous efforts are being made on conformation work so as to achieve conformation at the earliest possible time. [Implementation of measures is targeted for FY 2001] It is also important to continue efforts for international conformity through timely revision based on the movements of international standards.
As it is important in promoting regulation reform to alleviate the burden of the people relating to application to administrative offices, each of the ministries and agencies concerned need to start discussion at the earliest possible time on items included in the attached schedule regarding application procedures, and take necessary measures accordingly.
In addition, since opinions and requests concerning simpler and rationalized procedures include those asking for the abolition of attached documents even though attachment is no longer required, it is necessary for each of the ministries and agencies to publicize to the people the measures that have been taken, as well as to permeate the effect among the competent authorities such as local branches.