RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/JPN/26/Suppl.1
30 August 1999
(99-3565)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions from the EUROPEAN COMMUNITY1, MEXICO2,
the UNITED STATES3, CHILE4, and POLAND5 Regarding the New and
Full Notification of JAPAN6
Supplement
The following communication, dated 29 April 1999, has been received from the Permanent
Mission of Japan.
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Please find attached Japan's remaining answers to the questions posed by the
European Community, Mexico, and the United States, as well as the answers to the questions posed
by Chile and Poland.
For your information, Japan is still working on a few of the remaining questions from the EC.
QUESTIONS FROM THE EUROPEAN COMMUNITY
II. PROGRAMMES NOT NOTIFIED TO THE WTO
A. NATIONAL PROGRAMMES
Q.5 Subsidy to the cost for development/improvement projects of coastal fishing grounds
Reply
This programme is a public project aimed at improving coastal fishing grounds for more
effective utilization of Japan's exclusive economic zone.  It is expected that this project will contribute to
conservation of fish stocks as well as the marine environment.  The subsidy is granted to prefectural
governments and not aimed at providing financial s upport for any enterprises or industries through the
prefectural governments.  Japan does not consider that this subsidy is subject to the notification
requirements under the SCM Agreement.
                                                     
1 G/SCM/Q2/JPN/21
2 G/SCM/Q2/JPN/24
3 G/SCM/Q2/JPN/22
4 G/SCM/Q2/JPN/23
5 G/SCM/Q2/JPN/25
6 G/SCM/N/38/JPN & Suppl.1G/SCM/Q2/JPN /26/Suppl.1
Page 2
Q.6 Subsidy to the survey cost for development/improvement of coastal fishing grounds
Reply
This subsidy is granted for the survey  which is linked to the projects of
development/improvement of coastal fishing grounds.  Th erefore, the policy goal of this survey is the
same as that of the projects.
Q.7 Subsidy to the development cost of oceanic fishery resources
Reply
This subsidy is granted to the Japan Marine Fi shery Resources Research Centre for the survey
of marine fisheries resources and it is aimed at pr oviding the wide distribution of information from the
survey to the general public, including international society.  This programme does not provide financial
support for any enterprises or industries.  Japan does not consider that this subsidy is subject to the
notification requirements under the SCM Agreement.
Q.8 Grant to the activities for diffusin g enhanced technology of fishery operation
Reply
It seems that the "Grant to th e activities for diffusing enhanced technology of fishery operation"
mentioned by the European Community refers to the gr ant to the fisheries extension services.  This grant
covers part of the necessary administrative expenses borne by prefectural governments to provide
advisory services for the distribution of technologi es as well as knowledge concerning fishery.  The
grant is provided to prefectural governments to co ver personnel costs in prefectural governments and no
financial support is provided for any enterprises th rough the prefectural governments.  Japan does not
consider that this grant is subject to the not ification requirements under the  SCM Agreement.
Q.9 Subsidy to the cost of projects implemented by the regional governments for promoting
the development of fishery
Reply
This programme will be notified this year in light of transparency.
Q.10 Subsidy to the cost of activities implemented by private organizations for promoting the
development of the fishery industry
Reply
This programme will be notified this year in light of transparency.
Q.57 (Increased Expense of Research).  The ta x credit is 20 per cent rather than 10 per cent.
Which figure is correct?
Reply
1. The 10 per cent tax credit related to increased R&D expenses is applied to the designated
enterprises under the Law on the Temporary Measures to Facilitate Business Innovation.  The amount ofG/SCM/Q2/JPN /26/Suppl.1
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tax credit is 10 per cent of the increased R&D expe nses in a certain accounting year as compared with
the highest expenses in and after the previous acc ounting year of the one that includes 1 January 1995.
Note: This tax treatment has been abolished in the FY 1999 tax reform.
2. In addition, the 20 per cent tax credit related to increased R&D expenses is applied to any
enterprises, if the expenses exceed the highest in th e past.  The specified enterprises designated by the
Law on the Temporary Measures to Facilitate Bu siness Innovation mentioned in para.1 can choose
either this 20 per cent tax credit or the 10 per cent tax credit mentioned in para.1.
Note: In the FY 1999 tax reform, this tax treatment has been amended.  The amount of tax credit will
be 15 per cent of the increased expenses as compar ed with the average of the largest three amounts of
the expenses during the previous accountin g periods in the previous five years.
Q.61 (Technopolis)  Is special init ial depreciation applicable for 16 years after approval at the
following rates, rather than  for the notified 14 years?
Machinery, building, etc.
14y – 15y 10%    5%
15y – 16y  9%    5%
Reply
The rates of depreciation for this special tax treatment applied in FY 1997  (April 1997-
March 1998) are as notified in last year's notification.
However, in the FY 1998 tax reform, the term fo r application of the tax treatment was extended
from 14 years after approval of the "Technopolis" plan  to 16 years.  Also the rates of depreciation
corresponding to the extended term were amended as follows:
- machinery acquired 14y-15y afte r approval of the plan 10%
- buildings etc. acquired 14y-15y after approval of the plan   5%
- machinery acquired 15y-16y after approval of the plan   9%
- buildings etc. acquired 14y-15y after approval of the plan   5%
Q.67 (Fishing boats)  The addi tional depreciation rate is 20 per cent rather th an 16 per cent.
Which figure is true?
Reply
In the FY 1997 tax reform, the rate of deprecia tion for fishing boats related to the plan for
structural improvement of small fishery enterprises was decreased from 20 per cent to 16 per cent.
Q.74 (New mineral beds)  The maximum amount of  the reserve shall be whichever is the lower
(1) 12 per cent of the sales amount of the minerals;  or (2) 50 per cen t of the mining income of the
above.  Is this true?
Reply
Yes, the statement is right.  The maximum amount of the reserve is whichever is the lower (1)
12 per cent of the sales amount of the minerals;  or (2) 50 per cent of the mining income concerning
selling the minerals.G/SCM/Q2/JPN /26/Suppl.1
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Note: The rate mentioned in (1) has decreased from 13 per cent to 12 per cent in the FY 1998 tax
reform.
B. SUB-NATIONAL PROGRAMMES
1. Previous notifications
(a) Iwate:  Wood industry stable management fund
Finance Division, General Affairs Depart ment, Iwate Prefectural Government.
The policy objective of this programme is to promote management stability of the lumber and
chip industry.  This Fund is provided to the S hokochukin Bank which lends the money to the lumber
industry cooperative joint association, the lumber industry cooperative associations under the joint
association and the chip industry cooperative associ ation for their running costs.  Therefore, this
programme is unrelated to export.
(b) Tottori:  Subsidies for the establishment in Takeuchi Industrial Park
Finance Division, General Affairs Depart ment, Tottori Prefectural Government.
The policy objective of this programme is to pr omote investments in Takeuchi Industrial Park.
This subsidy is provided to those who establish comp anies in this Park.  Therefore, this programme is
unrelated to export.
(c) Ishikawa:  Subsidy for encouraging investment in Core Noto
Finance Division, General Affairs Departme nt, Ishikawa Prefect ural Government.
This programme ended in fiscal year 1995.  Further, the policy objective of this programme was
to promote the investments in Core Noto.  This subsidy was provided to those who established the
factories in Core Noto.  Therefore, the programme was unrelated to export.
(d) Fukuoka:  Grants for specified areas
Finance Division, General Affairs Depart ment, Fukuoka Prefect ural Government.
This programme ended in fiscal year 1996.  Further, the policy objective of this programme was
to promote the investments in specified areas.  This  subsidy was provided to those who established the
manufacturing and software businesses in specified ar eas.  Therefore, this programme was unrelated to
export.
(e) Fukui:  Fund for the glass industry
Finance Division, General Affairs Depart ment, Fukui Prefectural Government.
The policy objective of this programme is to promote the development of the glass industry.
This Fund is provided to the Fukui credit insuran ce association.  This association deposits the money
with corresponding banks which lend to the glass companies intending to develop sound management
structures through the establishment of a low cost ma nufacturing system etc.  Therefore, this programme
is unrelated to export.G/SCM/Q2/JPN /26/Suppl.1
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There are no grants applicable under the "Saga:  Regional development programme".
All subsidies referred to in B1 and B2 are unde r examination and items subject to notification
will be notified in the 1999 notification.
QUESTIONS FROM MEXICO
Q.4 In the case of Programmes 78:  Measures for Rice, Wheat and Barley, 79:  Measures for
Soybean and Rapeseed, and 80:  Measures for Su gar (pages 91, 93 and 94), what are the criteria
for granting the subsidies concerned and what conditions must be met by the beneficiaries?
What are the trade effects of these programmes?
Reply
Measures for Rice, Wheat and Barley
This programme covers rice, wheat and barley aiming at stabilizing the balance between supply
and demand as well as the price of these staple crops.  For this purpose, the government providessubsidies and assistance through the following measures:
(i) The government purchases rice, wheat a nd barley from producers (who sell them to the
government), and sells them to wholesalers and users;
(ii) The government subsidizes producers who ship the voluntarily marketed rice;
(iii) The government subsidizes feed barley  user organizations w ho purchase feed barley
from producers.
Japan considers that these measures have no negative effects on trade of these commodities,
because Japan implements the Uruguay Round Ag reement regarding the importation of these
commodities.
Measures for Soybeans and Rapeseed
The subsidy is granted to the producers who consign the selling of the product to agricultural
cooperatives, etc. beforehand, with the amount of diffe rence between the government standard price and
the standard sale price when the standard sale pri ce is lower than the government standard price, in
accordance with the Temporary Measures Law con cerning Subsidies for Soybeans and Rapeseed.
The beneficiaries have to be the producers of soybeans or rapeseed who consign the selling of
them to agricultural cooperatives, etc.
This programme is considered to have very small effects on trade because Japan depends on
imports for the most part of its consumption of soybeans and rapeseed (in 1996, the amount of soybeans
and rapeseed imported was 6.79 million tons while domestic production was 0.15 million tons).G/SCM/Q2/JPN /26/Suppl.1
Page 6
Measures for Sugar
The subsidy is granted to the Agriculture a nd Livestock Industries Cooperation which purchases
and sells sugar that is made of beet or sugar can e produced in specific areas, with the amount of the
difference between the purchasing price and the se lling price, in accordance with the Sugar Price
Stabilization Law and the Law of Agricultu re and Livestock Industries Cooperation.
Japan considers that this programme has very small effects on trade, because this measure is
aimed at stabilizing the sugar price, improving th e sound development of the domestic sugar industry
and, consequently, contributing to ensuring the in come of the farmers of sweetening resource crops.
Q.9 In connection with Programme 91, Agricu lture, Forestry and Fisheries Finance
Corporation Subsidy (page 106), what are its e ffects on the markets for these products?
Reply
The subsidy under this programme is granted to the Agriculture, Forestry and Fisheries Finance
Corporation, for the cost which is necessary to fina nce producers of agriculture, forestry and fisheries
products who need funds to invest in the improvem ent of their management structure and of their
production infrastructure, etc.
Thus, this subsidy has no direct effect on the ma rket price or supply and demand of agriculture,
forestry and fisheries products.  Therefore, it is not possible to estimate what, if any, trade effects this
programme has on the markets of agriculture, forestry and fisheries products.
QUESTIONS FROM THE UNITED STATES
Q1. Throughout the notification, "assistance by budget" is the term most often used to
indicate the type of assistance provided (i.e. form of the subsidy).  Please elaborate further on the
meaning of the term "assistance by budget".
Reply
In Japan's legislation system, budget itself constitutes a legislation or a form of legislation
matter if it does not accompany any laws.  The term "assistance by budget" indicates that the subsidy is
not based on any particular laws but it is granted in accordance with the budget which has passed the
Diet.
Q12. Regarding "Tax Credit for Increased Expens e of Research", and "Special Depreciation
on Machinery", the notification states that companies presenting  the Business Innovation Plans to
a Competent Minister can qualify for a tax credit.  However, the response is unclear as to who can
submit a Business Innovat ion Plan.  Can any company submit a plan and apply for a tax credit?
Reply
These special tax treatments are provided to the enterprises that have their business innovation
plans approved by competent Ministers and are desi gnated by the Ministers as qualifying for the tax
treatments.
The Law on the Temporary Measures to Facilitate  Business Innovation states that enterprises
that belong to the designated industries can formul ate their business innovation plans and apply for their
approval.G/SCM/Q2/JPN /26/Suppl.1
Page 7
According to the Law, the designated industries are:
(i) Those that belong to the mining or  manufacturing sector s whose output and
employment have decreased because of structural and other changes in the domesticand international economic environment;  or
(ii) Those that belong to retail and distribution sectors that are closely related to the mining
and manufacturing sectors mentioned above.
The Ministerial Order under the Law designates 145 industries.
The conditions for approval by  the competent Ministers are:
(i) The sales related to the designated industries are not less than an average of 20 per cent
of the total sales for the previous three years;
(ii) Each annual sales amount in the two cons ecutive years is smaller than the largest
amount of sales in the previous ten years.
In the tax reform for FY 1999, the tax credit for the designated enterprises under the Law on the
Temporary Measures to Facilitate Business Innovation has been abolished.
Q13. Under "Tax Measures to Strengthen th e Management of Small and Medium-Sized
Corporations", SMEs "under the influence of the structural changes of the economy" are eligible
to apply for a tax credit.  However, the response is  unclear as to which industrial sector of SMEs
can apply.  Which industries are under the influence of the structural changes of the economy?
Reply
This special tax treatment is provided to the SMEs that operate the specific businesses
designated by "the Temporary La w Concerning Measures for Smooth Adaptation to Structural Changes
in Economy by Advancement of Specific Small- and Medium-Sized Enterprises to New Fields" such as
manufacturing, printing, software or  information processing services.
Q14. Regarding "Special Depreciat ion on Machinery for Business  Innovation", the notification
states that SMEs belonging to industries in the Area to Activate Accumulation of Creative Skills
can qualify for special taxation measures.  Is the Area to Activate Accumulation of Creative Skills
industry-specific?
Reply
This special tax treatment is provided to the enterprises that belong to the central, core sector
industries designated in the plans to accumulate crea tive skills formulated in each prefecture.  In the
central sector industries there ar e 249 specific industries designated  by the Law on Temporary Measures
for Activation of Specific Regional Industrial Agglomerations and Creative Skills.
Q15. Regarding "Special Depreciat ion on Machinery", the notifica tion states that businesses
engaging in those areas that are qualified as "necessary for immediate structural improvement"
are eligible for special taxation measures.  Which sectors or industries have been targeted as
needing "immediate structural improvement"?G/SCM/Q2/JPN /26/Suppl.1
Page 8
Reply
This special tax treatment is provided to specific industries under the Law on Promotion of
Small- and Medium-Sized Enterprises Modernizati on.  The Cabinet Order under the Law designates 45
industries as specific industries.
As the Law is planned to be abolished in July 1999, this special tax treatment will be abolished
consequently at the same time.
Q16. Regarding "Special Depreciat ion on the Payment to Specific Association", the notification
states that a "member of the specific associatio n" can qualify for special taxation measures.
However, the "specific association" is not named.  What is the specific association?
Reply
This special tax treatment is provided to members of the "special associations" based on the
following laws:
1. Research Association for Mining  and Manufacturing Technology Law;
2. Law on Promotion of Small- and Medium-Sized Enterprises Modernization;
3. Law on Extraordinary Measures for the Struct ural Improvement of the Textile Industries;
4. Special depreciation on facilities (related to the Law on Temporary Measures for Improvement
of Agricultural Product Processing Industry);
5. Law on Temporary Measures for the Activ ation of Specific Regional Industrial
Agglomerations;
6. Law on the Promotion for Traditional Craft Products;
7. Law on Temporary Measures to Promote Business Activities for Rational Use of Energy and
the Utilization Recycled Resources;
8. Temporary Law Concerning Measures for Smooth Adaptation to Structural Changes in
Economy by Advancement of Specific Small- a nd Medium-Sized Enterprises to New Fields,
etc;
9. Temporary Law Concerning Measures for Promotion of the Creative Business Activities of
Small- and Medium-Sized Enterprises;  and
10. Law on Temporary Measures for Enhancin g the Control Method of the Food Production
Process.
Q17. For the following programmes, there is no  time-limit attached nor duration clearly
specified for the subsidy:
• Grant for Promotion of Research and Development of Future Ships
• Measures for Rice, Wheat and Barley
• Measures for Soybean and Rapeseed
• Measures for Sugar
• Measures for Milk and Dairy Products
• Measures for Bovine Meat and Pigmeat
• Measures for Eggs
• Measures for Vegetables
• Measures for FruitsG/SCM/Q2/JPN /26/Suppl.1
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• Resource Propagation Programme for Salmon
• Measures for Cocoons
• Farmers' Pension Fund Subsidy
• Farming Modernization Fund Interest Subsidy
• Fisheries Modernization Fund Interest Subsidy
• Agriculture, Forestry and Fisheries Finance Corporation Subsidy
• Fisheries Trust Fund Subsidy
• Wood Industry Upgrading Funds
Reply
The duration of these programmes are not specifi ed.  While the programmes are not subject to
any fixed completion date, their continuation is co ntingent upon the ongoing annual budget by the Diet.
Q18. Finally, please explain why the following subsidy programme was not included in your
subsidy notification:
Business Reform Law (or "Law on Special Measu res to Facilitate Business Reform by Specially
Designated Businesses"/Law No. 61 of 1995)
Japan's Business Reform Law grants various types of assistance to businesses which fit
certain categories that are affected by the st ructural changes in the domestic/international
economic environment.  Numerous companies in various industrial categories receive government
assistance in the form of low in terest loans, reduction in comp any registration tax, tax reduction
for R&D, special depreciation, and tax reduction  for real estate acquisition and replacement of
long-term assets.  This law is to be effective until 30 June 2002.
Reply
The low interest loan was already notified unde r "Support for Business Innovation" in No. 2 of
G/SCM/N/38/JPN (Japan's 1998 notificati on).  As to special tax treatments, tax credits for the increased
expense of research and special depreciation on mach inery related to the Law of Temporary Measures to
Facilitate Business Innovation were already notified in the same notification.
It should be noted that Question No. 12 relates to this subject.
QUESTIONS FROM CHILE
Q1. What are the expected and actual effects, if any, of measure No. 85 on fruit imports?
Reply
The effect of the notified measure on fruit imports is considered to be negligible because the
amount of payments provided under this programme is extremely small compared with the total
domestic fruit output (0.095 per cent of the output in 1996).
Q2. What are the expected and actual effects, if any, of measure No. 86 on salmon imports?G/SCM/Q2/JPN /26/Suppl.1
Page 10
Reply
It is not possible to estimate what, if any, effects this programme may have on trade, because
this programme is aimed at maintaining the stability of the Japanese salmon stocks.
Q3. What are the expected and actual effects, if any, of measure No. 93 on wood imports?
Reply
It is not possible to estimate what, if any, trade effects may result from this programme,
because there is no relevant data available.
QUESTIONS FROM POLAND
Q1. Tax Credit for the Increase Expense of Research (57)
Special Depreciation of Machinery (62 and 65)
Could Japan please provide us with some more information on the criteria of eligibility
under these schemes as the decision here seems to be to a large extent a discretionary decision of
the Minister?
Reply
These special tax treatments are provided to  the enterprises that have their business
innovation plans approved by competent Ministers and are designated by the Ministers as qualifyingfor the tax treatments.
The Law on the Temporary Measures to Facilitate Business Innovation states that enterprises
that belong to the designated industries can formulate their business innovation plans and apply for
their approval.
According to the Law, the designated industries are:(i) Those that belong to the mining or  manufacturing sectors whose output and
employment have decreased because of structural and other changes in the domestic
and international economic environment;  or
(ii) Those that belong to retail and distribution sectors that are closely related to the
mining and manufacturing sectors mentioned above.
The Ministerial Order under the Law designates 145 industries.
The conditions for approval by competent Ministers are:
(i) The sales related to the designated industries are not less than an average of 20 per
cent of the previous three years;
(ii) Each annual sales amount of the consecutiv e two years is smaller than the largest
amount of sales in the previous ten years.G/SCM/Q2/JPN /26/Suppl.1
Page 11
In the tax reform for FY 1999, the tax credit for the designated enterprises under the Law on
Temporary Measures to Facilitate Business Innovation has been abolished.
Q2. Special Depreciation or Tax Credit on the Manufacturing Machines when Import of
Products Increases
Could we please receive more detailed information on sectors of production covered by
this scheme?
What are the procedures of application connected with this programme?
Reply
1. Sectors of production covered by the scheme
This special tax treatment is provided to "corporations mainly engaging in manufacture",
whose sales related to manufacturing, including the electric and gas power industry, heat supplying
industry, mining industry, construction industry and Type 1 Telecommunications Business designated
by Telecommunications Business Law, exceeds 50 per cent of the total sales.
2. Procedures of application
In order to apply for the tax treatment, corp orations should submit the detailed statements
concerning calculation of the tax credit or the limit for depreciation expenses with their tax returns.
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