RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/JPN/19
31 August 1998
(98-3352)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions from POLAND1 and the UNITED STATES2
Regarding the Updating Notification of JAPAN3
The following communication, dated 24 August 1998, has been received from the Permanent
Mission of Japan.
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QUESTIONS FROM POLAND
1. Tax Measures to Strengthen the Management  of Small- and Medium-Sized Corporations
Q. What is the definition of Small- and Medium-Sized Enterprise for the purpose of this
subsidy programme (and also other programmes)?
Reply
The small- and medium-sized enterprise under this programme is:
(i) a corporation whose capital amount is less than ¥100 million;(ii) a corporation that does not have any capital, and has not more than 1,000 full-time
employees;  or
(iii) an agricultural association, etc.However, the corporations which meet the condi tion (i) above are not subject to this programme
when they meet both of the following two conditions:
(a) more than half of their capital or the i ssued stock is held by one large corporation,
whose capital amount is more than ¥100 million, or, if it does not have any capital that
it has more than 1,000 full-time employees;  and
(b) more than two-thirds of their capital or i ssued stock is held by large corporations.
                                                     
1 G/SCM/Q2/JPN/16/Rev.1
2 G/SCM/Q2/JPN/18
3 G/SCM/N/25/JPN & Suppl.1G/SCM/Q2/JPN/19
Page 2
Q. Are there any other additional criteria which must be met by the entity to apply for this
subsidy or is the aid available to every SME en gaging in the agricultural processing business?
Reply
The other conditions to be met are as follows:
(i) a corporation is a special agricultural processor (only SME) regulated by the Temporary
Measure Law to Improve the Management of  Special Agricultural Processor, and has
the plans for the measures to improve management described in the Law;
(ii) the equipment subject to this measure is acquired by 1 March 1999;  and(iii) the equipment under this measure is regulated by the plans and each of their acquisition
cost is not less than ¥2.8 million (in case of leasing, the leasing cost is not less than
¥3.2 million.
Q. Is the aid available to every SME engaging in the agricultural processing business?
Reply
The aid is restricted to the special agricultural  processors regulated by the Temporary Measure
Law to Improve the Management of  Special Agricultural Processor, under which the 12 industries such
as the dairy industry are specified.
Q. More information on some more details ab out application process for this subsidy.
Reply
To enjoy this programme, a corporation is requ ired to attach the specifications about the
calculation for allowable limit for the depreciation amount to the final returns of Corporation Tax.
2. Special Depreciation on Cert ain Machinery used for High- Technology Industries in the
Designated High-Technology Industrial Development Areas ("Technopolis")
Q. Is this subsidy programme applicable only in clearly geographically defined areas?  If yes,
how many of such special zones exist?
Reply
This programme is applicable only in the High-Technology Industrial Development Areas.  The
areas are designated in the development plans appr oved by the competent ministers in accordance with
the Development Promotion Law of High-Technology Industrial Development Areas.  Twenty-six areas
are currently specified.
Q. Are all entities in such zone s covered by this scheme or are there some other criteria of
eligibility?
Reply
This programme is applied only to the High-Technology Industries.  In addition, this
programme is applicable to the equipment or the industrial buildings acquired within 16 years from the
day of the approval and the amount of th e investment is not less than ¥1 billion.G/SCM/Q2/JPN/19
Page 3
3. Q.  Are depreciation programmes listed in th e Japanese notification cumulative, provided
that the given entity meets the criteria of elig ibility of more than one of them (ex. enterprise
engaging in business qualified as necessary for immediate structural improvement and
simultaneously engaging in the business of the textile industry - programmes 24 and 25)?
Reply
Even if more than one programme seems to be cumulatively applicable, only one programme
can be applied practically to one enterprise.  As for programmes 24 and 25, these programmes cannot be
applied cumulatively, because it is applied only to th e business which the enterprise is chiefly engaged
in.
QUESTIONS FROM THE UNITED STATES
Q.1. In your description of the Subsidy for Modernizing Chemical Processes programme,
you state that the purpose of this subsidy is to promote energy saving by developing innovative
process technology.  Please describe what "innovative process technology" means?
Reply
The objective of the programme is to develop innovative technologies for the next generation
that could simplify the existing process or that could change the whole process of current production
system.  Innovative process technology does not merely aim to improve the current process by
slightly reducing material consumption.
For that purpose, the on-going project under this programme focuses on entirely new
concepts, such as:
- Catalytic Conversion of Naphtha to Lower Olefins
- Simple Synthetic Process using Solidified Catalysts
Q.2. The Subsidy for Technical Assistance to Small-Sized Enterprises and the Subsidy for the
Bekko and Ivory Industries are available to assist SMEs.  For purposes of these programmes,
how do you define small- and medium-sized enterprises?
Reply
In the subsidy for the Technical Assistance to Small-Sized Enterprises, we define a small-
sized enterprise as an enterprise which has 20 or less employees in the textile industry.  The definition
is based on the Small and Medium Enterprises Basic Law.
For the Subsidy for the Bekko and Ivory Industries, the definition of small and medium-sized
enterprises of the manufacturing industries provided by the Small and Medium Enterprises Basic Law
is applied, i.e. enterprises with 300 or less employees or with ¥100 million or less capital.
Q.3. For both the Grant for Promotion of Research and Development of Future Ships and
the Development Expenditure Subsidies for the Commercialization of Energy-Related
Technology, please explain what percentage of th e project the grant covers and whether there
are any stipulations as to how the funds can be used.  In addition, regarding the second
programme, would you please describe under what circumstances the grant is reimbursed?G/SCM/Q2/JPN/19
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Reply
The Grant for Promotion of Research and Development of Future Ships:
1. The Grant covers less than 50 per cent of the expenditure of the project.
2. The Grant must be used along the plan of the project approved by the Government.The Development Expenditure Subsidies for the Commercialization of Energy Related Technology
1. The subsidy covers up to 2/3 of the R&D expenditure.
2. It is stipulated that the subsidy covers the R&D expenditure such as for equipment and
facilities, materials and labour in the prospectuses for Assistance for Development of Practical
Technologies Related to Energy Rational Use, Assistance for Development of Practical Technologies
Related to Oil – Substitute Energy and Assistance for Development of New and Practical Technology
for Power Generation.
3. When the subsidized company makes a profit by  utilizing the R&D results within five years
after the completion of the R&D, the company must reimburse a certain proportion of the profit.
Q.4. Regarding the Special Depreciation on Certain Machinery Used for High Technology
Industries in the Designated High-Technology I ndustrial Development Areas, please specify
what industries qualify as high-technology industries.
Reply
"High-technology industries" are industries th at explore high industrial technology for
developments or industries that utilize high industrial technology for developments or production of
their manufactures.  The Minister of Finance specifies the industries as they are fully contributable to
industrial developments based on high industrial technology.  Twenty-four industries (e.g. the
industrial robot manufacturing industry) are specified under this programme by the Minister of
Finance.
Q.5. You state that the purpose of the Capital Investment and Loan for R&D Projects
Concerning Key Technology is to facilitate R&D projects in key technologies in the private
sector through assistance in the form of a capi tal investment loan.  Please specify (1) what
industries/companies are included in "key technologies", (2) what percentage of the project the
assistance covers, and (3) whether there are any stipulations regarding how the funding can beused.
Reply
1. The eligibility to carry out R&D projects concerning key technology is not confined to certain
industries or companies.
2. The investment ratio covered by this programme is up to the limit of 70 per cent of the funds
needed for R&D.  The upper limit of loan covered by this programme is 70 per cent of the R&D
expenditure.
3. The law for the facilitation of research in ke y technologies stipulates that the Japan Key
Technology Centre provides funding necessary for R&D expenditure in the private sector in the formG/SCM/Q2/JPN/19
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of capital investment and loans.  The funding covers the R&D expenditure including equipment,
facilities, materials and labour.
Q.6. In your description of the Industrial Science and Technology Frontier Programme
(ISTF) and the New Sunshine Programme , both of which fund R&D, you state that assistance is
provided in the form of a "contract" to research  organizations.  What percentage of the project
does the assistance offer and are there any stipulations concerning how the funding can be
used?  What is meant by "creative R&D" which is funded under the ISTF programme?  In
addition to the two previously mentioned programmes, the Real World Computing (RWC)
programme also provides assistance in the form of a contract.  Would you please explain what
investment is covered when in the form of a contract?
Reply
Industrial Science and Technology Frontier Programme (ISTF)
1. This programme is conducted by contract between the Government and the organization with
a certain project rather than providing assistance to such organization.
2. The law concerning the improvement of the System for Research and Development in the
Field of Industrial Technology stipulates that the New Energy and Industrial Technology
Development Organization (NEDO) can entrust fundamental R&D to R&D organization under a
contract.  The funding covers the costs for R&D activity such as employment of researchers and
purchase of instruments in accordance with the law.
3. "Fundamental and Creative R&D" means that R&D which leads to an innovative technology
system or technological breakthrough for the purpose of economic or social development.
New Sunshine Programme
1. This programme is conducted by contract between the Government and the organization with
a certain project rather than providing assistance to such organization.
2. The funding is used to promote innovation technology development, which solves energy and
environmental issues.  The Law concerning Promotion of the Development and introduction of
Alternative Energy stipulates that NEDO can entrust such technology development to R&D
organization under a contract.
Real World Computing (RWC)
Japan is conducting R&D projects such as the Parallel and Distributed Computing
Technology and the Real World Intelligence Technology Project under The Real World Computing
(RWC).
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