WORLD TRADE
ORGANIZATIONG/SCM/Q2/JPN/34
28 October 2002
(02-5923)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by AUSTRALIA1 and the UNITED STATES2
Regarding the New and Full Notification of JAPAN3
The following communication, dated 23 October 2002, has been received from the Permanent
Mission of Japan.
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QUESTIONS FROM AUSTRALIA
DOCUMENT G/SCM/N/71/JPN
61. Tax Measures to Strengthen the Management of Small- and Medium-sized CorporationQ. How is it determined who receives a tax benefit?  Is it restricted to the cheese, polished
barley and wheat flour industries?
Reply
In order to receive a tax benefit, special agricultural processing business should make a plan
on the measures improving its management specified in the emergent measures law for the
improvement of management of special agricultural processing business, submit it to the  governor of
the prefecture administrating the area where the bureau concerned with this plan is located and get apermission which certifies that the plan is appropriate (although it is restricted to small and medium
sized enterprises or agricultural cooperative unions ).
This measure is applied to 12 industries including not only the cheese, polished barley and
wheat industries, but also the citrus fruits processing and rice processing industries etc.
62. Tax Credit When Import of Products Increases
Q1. How is the increase of imports “more th an 5 per cent” determined?  What is this
percentage based on?
                                                     
1 G/SCM/Q2/JPN/33
2 G/SCM/Q2/JPN/32
3 G/SCM/N/71/JPN, G/SCM/N/48/JP N/Suppl.1 & G/SCM/N/71/Suppl.1G/SCM/Q2/JPN/34
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Reply
It is decided according to whether the ratio of the sum of increased import products (the
whole sum of import products in a year (a) minus the whole sum of import products in a base year (‘a
base year’ is the year of which the whole sum of import products is the highest) (b) is beyond 5 percent or not.
The criterion of ‘5 per cent’ is set for the sake of the incentive measure to promote import.
Q2. Which are the main manufactured products  on which tax credits have been claimed?
Reply
In principle, the products, which belong to chapter 5 to chapter 8 of SITC and of which the
tariff is zero.
More concretely, the products are machines, electronic machines and chemical industrial
products and so on.
Nevertheless, though, this measure was abolished at 2002.3.
64. Special Depreciation on Certain Machinery Used for High-Technology Industries in the
area of accumulating High-Technology Manufacturing Industry ("Technopolis")
Q. Is this depreciation on certain machinery  contingent on the use of domestic goods?
Reply
No, it is not on certain machinery contingent on the use of domestic goods.
65. Special Depreciation on Machinery (Relat ed to the Law of Special Measures to
Revitalize Industry)
Q1. How is it determined whether special depreciation on machinery applies?  We note the
main industries for which production data are provided.  Is it restricted to certain industry
sectors (could it apply to other sectors)?
Reply
The special depreciation is applicable to the corporations that make the business restructuring
plan concerning with business revitalization specified in the law of special measures to revitalize
industry, submit to the administrating ministers, get certified that they are doing the business which
belong to the industries specified in that law and th at they are revitalizing its business recognizing the
various and systematic change of business circumstances both inside and outside Japan, and getpermission of the special depreciation when such corporations get machinery for revitalization of
business in the applicable period and use it for its business in Japan.
The applicable industries are prescribed respectively as the industries certified on the
objective criteria that their production and em ployments are decreasing or probable to decrease.
Q2. Are there types of machinery which qualify fo r the special depreciation specified or does
it apply on a sector-specific basis?G/SCM/Q2/JPN/34
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Reply
The types of machinery which qualify for the special depreciation are prescribed as
contributing significantly to the promotion of the change in composition of commodities or services,
the efficiency of production / sales / presentation of services, cultivation of the new demand in Japan,or the cost deduction concerning the production etc.
96. Grant for Promotion of Research and Development of Future Ships
Q.  How are the grants determined under this programme? What are the criteria for
eligibility? Who receives the grants (for example, manufacturers or research institutes)?
Reply
The grant is provided to research and devel opment on higher technology for ships within a
budget. Private bodies (for example, manufacturers or research institutes) can be eligible and the
Corporation for Advanced Transport and Technology selects receivers of grants among applicants.
DOCUMENT G/SCM/N/48/JPN/Suppl.1, G/SCM/N/71/Suppl.1
5. Subsidy for Promoting the Textile Industry
Q. The policy objective of this programme is to “help small and medium local companies to
either new fields or value-added products using local or traditional technologies in order to
build up internal development processes”. What  are the criteria for receiving a grant? Is it
dependant on the use of domestic goods?
Reply
This subsidy is granted to organizations carrying out projects to promote the textile industry
such as those strengthening organizational structure for the purpose of promoting the Textile Industry
on the whole, not contingent upon the use of specific domestic goods over imported goods.
QUESTIONS FROM THE UNITED STATES
I. INDUSTRY
Commission Fees Concerning R&D for New Fuel Oil (Industry, No. 31)Q1. Could Japan please explain how many “private companies” receive funding under this
programme?
Reply
It was one private company that received the funding until 1985 (fiscal year). Since 1986
(fiscal year), the foundation of Petroleum Energy Center had received the funding and carried out this
concerning in cooperative with about 10 companies.
Q2. Which industry sectors received this assistance?G/SCM/Q2/JPN/34
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Reply
Research institute (to 1985), One foundation (Petroleum Energy Center) (since 1986)
Subsidy for the Development of Information Technology which Create new Industry (Industry,
No. 44)
Q1. You stated that the objective of this programme is to “keep strengthening international
competitiveness of industry.”  Could you please  explain further how the subsidy provided to
eligible companies achieves this objective?  Please also explain in detail the eligibility criteria
under this programme.
Reply
In the field of information technology, we supported individual private companies including
small and medium size enterprises developing their ideas and technological seeds that might lead to
new business in future by inviting proposals through our regional branches. The eligibility criteriaunder this programme were as follows;
- New idea or technological seeds which R&D risk is too high by private company’s
own resources, and have potentiality to become business in a certain period of time.
Q2. What types of activities are funded under this programme?  How is the level of subsidies
determined for individual recipients?
Reply
R&D activities in the field of information technology by individual private companies
including small and medium enterprises were funded.  A fund for each recipient was from
￥30 million to ￥100 million per year, and limited to below two-thirds of its total R&D cost.
Q3. During the reporting period, please explain how many companies were aided under this
programme and the industry sectors they represent.
Reply
28 companies, information technology sector (we terminated this subsidy on 29 March 2002).
The Real World Computing (RWC) Programme (Industry, No. 46)
Q1. Please explain what is meant by “contract”, under form of subsidy.
Reply
It was commissioned from METI to Real World Computing Partnership.
Q2. Are the companies listed as having received assistance under this programme
comprehensive of all recipients?  If not, please explain how many companies were aided underthis programme?G/SCM/Q2/JPN/34
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Reply
The Real World Computing Partnership, which was the only organization having received
assistance under this programme, consists of 16 private enterprises and 4 non-profit organizations.
Q3. What types of activities are funded under this programme?  What stage of product
development if funded by this programme?
Reply
Research and development activities of “Real World Intelligence Technology Field”, which
adds information integration and learning/self-organization abilities to current information processingtechnologies in order to handle information in the real world, and “Parallel and Distributed
Computing Technology Field”, which provides opti mal parallel computing ability in response to
various computing demands, were funded.
Fundamental technologies for next-generation information processing were funded.  (This
programme ended in January 2002.)
Subsidy of Expenses to Investigate the Development of Next Generation Airplanes (Industry,
No. 55)
Q1. Please explain what types of activities are funded by the subsidies provided under this
programme.
Reply
This programme subsidizes marketing and tech nology investigation which aims to determine
whether the civil aeroplane (70-120 seat-class) development project will be approved.
Assistance for Development of Civil Aircraft (Industry, No. 56)
Q1. Please explain what types of activities are funded by the subsidies provided under this
programme.
Reply
This programme assists an international collaborative joint project, which involves high risk,
in order to promote aircraft industry, and to contribute to the enhancement of industrial technologyamong Japanese companies.
Q2. What are the terms for reimbursement under this programme, i.e., when does the
subsidy have to be repaid?  Have all of the funds been repaid by the recipient companies?
Reply
Companies which were granted this assistance start to reimburse subsidies when cash flow
becomes surplus, and there is no company that has finished to pay off all subsidy until now.G/SCM/Q2/JPN/34
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II. FINANCE
Tax Credit When Import of Products Increases (Finance, 62)Q1. You have stated that the policy objective of this programme is “to promote of import of
product.”  Could you please explain how this programme promotes the importation of products
into Japan?
Reply
The manufacturers are qualified for this system  with the aim of helping increase the imports
of goods, since they are supposed to be generally in a position to utilize the import products, beexpected to import in succession and be the most incentive kind of business, by applying the tax
deduction to the amount of increase in the import products when its rate of increase is above a certain
level.
In addition, this programme was abolished in March 2002.
Q2. Is this subsidy available to all companies in Japan that experience import competition of
more than 5 per cent for a given product-line?
Reply
The corporations who file blue returns and engage mainly in manufacturing in Japan are
qualified.
Special Depreciation on Certain Machinery Used  for High Technology Industries in the area of
accumulating High-Technology manufacturing Industry (“Technopolis”) (Finance, No. 64)
Q1. What is constitutes a “qualified high-technology” industry?  What are the criteria used
to decide how and to who aid under this programme is awarded?
Reply
Designated are the business enterprises, which help develop the advanced industrial
technology or utilize the technology for the produc t development, or manufacturing and the concrete
kinds of business, which outstandingly help promote the industrial development, based on the
advanced technology industries in certain advanced technology industrial group-site areas.
Criteria of ‘qualified high-technology’ industry
The persons who acquire the specified assets and utilize them  for the enterprises of the
business described in (1) in certain advanced technology industrial group-site areas are qualified for
this programme.
Q2. Is this subsidy contingent upon location in a certain geographic region?
Reply
Qualified are the areas that are authorized as certain advanced technology industrial group-
site areas by the law to promote the creation of new business enterprises and are also authorized as
advanced technological group-site areas by the now-defunct law to promote the development of
certain advanced technological group-site areas.G/SCM/Q2/JPN/34
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1. The areas authorized as ‘certain advanced technology industrial group-site areas’ should be
where the corporations are collected which develop the high industrial technology or utilize this
technology for development, manufacturing or sale of products or services or providing services
based on the law to promote the creation of new business enterprises, and besides, the followingrequirements are specified.
(a) The areas should be unities on natural, economic and social conditions.
(b) There should exist universities which conduct studies on advanced technology and
other research institutions.
(c) Indispensable knowledge for the developm ent or utilization of advanced technology
or human resources should be secured.
(d) Rapid transit facilities and informational facilities should be easily available.
2. Concerning ‘certain advanced technology industrial group-site areas’, the following
requirements are specified based on the law to promote the development of advanced technology
industrial group-site areas.
(a) The group-site areas should not be excessive.
(b) The areas should be unities on natural, economic and social conditions.
(c) There should exist quite a few enterprises which are capable of developing advanced
technology or utilizing the technology for product development or manufacturing.
(d) Industrial sites, industrial water and housing sites should be easily procured.
(e) Cities should exist.(f) Universities which conduct education and studies on advanced technology are
necessary.
(g) Rapid transit facilities and informational facilities should be easily available.
Additional Depreciation on Fishing Boat (Relat ed to the Plan for Structural Improvement of
Small and Medium Sized Fishing Enterprise under the Scheme of Extraordinary Law on the
Reconstruction of Fishing) (Finance, No. 68)
Q1. It is unclear which programme the “Plan for Structural Improvement of Small and
Medium Sized Fishing Enterprise under the Scheme of Extraordinary Law on the
Reconstruction of Fishing” refers to.  If this is an additional programme not already included in
your notification, please report the required noti fication details for this programme as well.
Reply
Relevant information is provided below on the Plan for Structural Improvement of Small and
Medium Sized Fishing Entities under the Scheme of Extraordinary Law on the Reconstruction ofFishing Industry. This information is reported to the WTO to answer the questions, raised by the
United States, in the interest of transparency without prejudice to Japan's position as to whether this is
a required notification to the WTO.G/SCM/Q2/JPN/34
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Objective
The objective of the Plan is to facilitate structural improvements of small- to medium-sized
fishery segments by implementing programmes that intend to reduce the impacts caused bysubstantial changes of international regulations and/or business requirements.
Programmes under the Plan
Two forms of programmes, taxation and finance measures, are prepared under the Plan.
Additional Depreciation on Fishing Boat represents the former form. The latter is a government
contribution to the Agriculture, Forestry, and Fisheries Finance Corporation, a financial institutionfunded by the Government. The Corporation provides a loan at preferred rates for small- to medium-
scale fishermen, when such financing is necessary for achieving the objective of the Plan.
Q2. Please be more specific about the policy objective/purpose of this programme and,
particularly, what is meant by “structural impr ovement of fishing industry.”  To what extent
does this programme improve or increase the existing fishing fleet?
Reply
The policy purpose of Additional Depreciation on Fishing Boat is to enhance energy
efficiency in fishing operation by increasing the ratio of low emission boats. All fishing boats subject
to the additional depreciation must meet certain energy-efficiency standards set by the Government.
This programme does not contribute to any increase in the number of fishing boats. It is the
Government’s policy to limit the number of licensed vessels for resource management purposes. Thiscapacity restriction covers all of fisheries that are eligible for tax deferral under this Plan. As a result,
the actual number of fishing vessels used in these fisheries has been even declining continuously in
recent years.
Q3. What is the “normal” annual depreciation allowed for fishing boats that do not qualify
for this programme?
Reply
The depreciation period of fishing boats is decided between six (6) and twelve (12) years
according to its structure, and the salvage value of the vessel at the end of depreciation period is 1/10
of the amount initially paid at the inception. Fishing entities can choose either fixed-rate or fixed-costdepreciation methods.  The two methods provide different "normal" annual depreciation.  In both
methods, an additional 16 per cent annual depreciation can be applied for five (5) consecutive years
for fishing boats that are qualified under this programme.
The estimated amount of the tax deferral under this programme in FY 2000 is ¥22 million.
Q4. Please explain which “certain fishing businesses” are eligible for the tax deferral under
this programme?
Reply
Eligible fisheries for tax deferral under this Plan are medium trawl fishery, trawl fishery in
East China Sea, skipjack and tuna fishery, surrounding net (purse seine) fishery, salmon and troutG/SCM/Q2/JPN/34
Page 9
gillnet fishery, and squid jigging fishery. Total fishing capacities of each fisheries above are strictly
limited through government licensing systems.
Q5. Is eligibility for this programme continge nt on whether the boat is constructed or
registered in Japan?
Reply
Fishing boats registered in Japan are eligible  for this programme.  The eligibility for this
programme is not contingent upon the vessel's country of origin (i.e., construction country).
Special Depreciation on the Drift for the Mining Industry (Finance, No 71)
Q1. Please provide further explanation of the policy objective of this programme and how
the subsidies help maintain production in the mining industry.  What level of production is
maintained through these subsidies and how?
Reply
In mining industry, it is normal that digging areas progressively become deeper and the
natural conditions deteriorate with continuation of the operation. Therefore, in opposition, the increase
of facilities for maintaining the production or the specific equipment investment (so-called the
additional investment) for switching means of production is required.
These equipment investments, however, do not consist of the income source like other
enterprises nor cause any increase in production capacity or earning capacity but are just aimed at
maintaining the production without lowering the production cost. Therefore, its expenditure does notentail asset value but cost performance.
By applying the special depreciation to equipment investments for maintaining the production
and avoiding capitalizing assets without earning capacity, the financial soundness and the level of the
production are maintained and as a result the stable supply of energy and minerals are secured.
Special Depreciation on the Payment to Specific Association (Finance, No. 72)
Q1. What types of new products or new technologies are developed for the shipbuilding
industry under this programme?
Reply
No concrete cases are readily available. This programme is not directly related to new
products or new technologies of fisheries.
Q2. Please explain whether and to what extent the fisheries industry benefits from this
programme.
Reply
No immediate benefits are recognized for fishing industry.G/SCM/Q2/JPN/34
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III. AGRICULTURAL, FORESTRY AND FISHERIES
General Question Related to FisheriesQ. Does Japan maintain any subsidy programm es, not already notified, administered by
either the central or sub-national governments, th at benefit the fisheries sector in any of the
following ways:
(a) Payments to promote the scrapping of existing fishing vessels, or the sale or
assignment to other uses of those vessels.
(b) Payments that directly or indirectly promote the construction of new vessels.
(c) Payments targeting the construction of ne w, or the extension of existing, fishing
port facilities.
(d) Payments to fish marketing or promot ional campaigns, or for market studies
and consumer surveys.
Reply
This information is reported to the WTO to answer the questions, raised by the United States,
in the interest of transparency without prejudice to Japan's position as to whether this is a required
notification at the WTO.
Japan has subsidies to fund scrapping of existing vessels.  The majority of the scrapped
vessels in recent years are tuna ling-liners, large- to midsize purse seiners and other coastal/offshorefishing vessels.  The Japanese buy-back programmes are designed to completely scrap the vessels,
without allowing resale or reassignment of the vess els, so that no fishing overcapacities are exported
to any other places in the world. In fact, the exported capacity created another resource conservation
problems including the issues of "flag of convenience" operation of vessels.  In addition, all fishing
licenses of the scrapped vessels are revoked.  In light of these considerations, the Japanese buy-back
programmes contribute only to the reduction of the capacity.
The subsidies are appropriated from the Government budget annually and are transferred to
trust funds in the same fiscal year.  Actual expended amount from the trust funds in a given year is
usually different from the appropriated amount of the Government budget of that year, because both
amounts fluctuate from year to year.  Approximately ¥4.6 billion are appropriated from the
Government budget in the case of FY 2000.
Japan does not have payments that directly promote the construction of new vessels. It is
somewhat difficult to provide a reply to the question on a payment that indirectly promotes the
construction of new vessels because the definition of the term "indirectly promote" is unclear. For
your information, there is an interest subsidy progra mme to assist structural adjustment of small- and
midsize- fishery under certain conditions, called the Fisheries Modernization Fund Interest Subsidy.
More details on this programme are provided in this document. It should be noted that Japan has
specific policies to restrict the number of fishing vessels as well as the size of each vessel and,
therefore, this subsidy programme does not eventually contribute to net increase of total number
and/or tonnage of fishing boats used for eligible fisheries under this programme.
Japan has payments targeting the construction of new or the extension of existing fishing port
facilities. This is a Government programme to establish regional infrastructures, in an effort to
improve maritime transportation bases, to ensure safe navigations, and to enhance quality of peoples’G/SCM/Q2/JPN/34
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living environment in regional communities including disaster prevention. These infrastructures
include breakwaters, public wharves, navigation routes, roads, water supply and sewerage systems,
and park facilities. This fund does not constitute direct payments to fishing industry.
Japan has a financial assistance for an information dissemination programme on fishery
products targeted for general consumers. The programme called "Fishery products consumption
improvement programme" has the annual budget of ¥72 million (FY2000). The purpose of the
programme is to promote total use of sea-food and to minimize discards at consumer level. The fund
is used to create brochures and hold symposiums to provide general public with information on the
importance of the sustainable use of limited fishery resources. This programme does not discriminate
against foreign products.
Fisheries Modernization Fund Interest Subsidy (Agr iculture, Forestry and Fisheries, No.  91)
Q1. Do the Government of Japan, or region al governments provide funding for this
programme?
Reply
Both national and regional governments provide funding for this programme.
Q2. Is support provided through loans, or through grants?
Reply
The form of the support is an interest rate subsidy.
Q3. To what extent do the subsidized interest rates provided by the government differ from
normal commercial interest rates?
Reply
Actual differences between commercial and the subsidized interest rates are within a range of
1.25 per cent to 0.1 per cent in FY 2000.
Q4. Please explain further the purpose of this aid.  Provide specific examples of projects that
have benefited from this aid.
Reply
The purpose of the programme is to contribute to the introduction of advanced fisheries'
management for structural adjustment of coastal small fisheries. The programme, for example,
supports renewal of fishing boats and equipments for artisanal fishery in an effort to facilitate
improvement worker's safety in small scale coastal operations.
This subsidy apparently does not contribute to the increase of fishing capacity, judging from
the fact that the number of the coastal fishing boats, as well as the production amount of coastal
fishery, are decreasing continuously although these coastal fisheries are eligible to receive this
subsidy.G/SCM/Q2/JPN/34
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Fund for the Activities Implemented by Non-governmental Organizations for Promoting
Sustainable Fisheries (Agriculture, Forestry and Fisheries, No. 94)
Q1. Please discuss in more detail the purpose and objectives of this subsidy.
Reply
This fund supports various comprehensive activities to promote sustainable fisheries. Specific
examples of the activities are;
(a) to hold seminar meetings to improve knowledge of local fishery instructors and
fishermen on the data requirement for fishery resource management schemes, so thataccurate information collection practice can be established for better resource
management.
(b) to hold symposiums to discuss measures to prevent pollution caused by aquaculture.
(c) to collect information and host symposiums to facilitate dialogues between sports and
commercial fishermen.
(d) to organize beach clean up activities and hold educational session to conserve coastal
environment.
(e) to investigate and analyze past incidents of illegal fishing in order to create a manual
for local authorities to prevent poaching.
Please also note that information on another programme is provided below as an answer to
Question 3.
Q2. To what extent can proceeds under this programme be used to improve or expand
existing fisheries capacity?
Reply
As shown in the above, the programmes are directed to assist educational, information
collection, and capacity building activities for the sake of public convenience. The funds under this
programme are not payable to private fishing entities. The programme does not assist any net increase
of fishing capacity.
Q3. Please provide more information on and examples of how this programme is used to
promote “distribution, processing and consumption of fishery products.”
Reply
Relevant programme supported by this subsidy is Fishery Products Quality Enhancement
Programme, which intends to promote safety handling of sea-food in various stages in food
distribution such as production and processing. The fund used here is to create instructive manuals for
quality control of food and to hold educational sessions. The programme is carried out without
discriminating against foreign products.G/SCM/Q2/JPN/34
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IV. TRANSPORT
Grant for Promotion of Research and Development of Future Ships (Transport, No. 96)Q1. Please discuss in more detail the purpose and objectives of this subsidy.
Reply
This subsidy promotes research and development of future ships in order to put Japanese
shipping transportation in better condition. No relationship exists between this subsidy and Japanese
fishery.
Q2. To what extent can proceeds under this programme be used to improve or expand
existing fisheries capacity?
Reply
The purpose of this subsidy is to put shipping transportation in good condition with
researching and developing higher technology for ships.  Improvement or expanding of fisheries
capacity is not the purpose of this subsidy.
Q3. Please provide more information on and ex amples of how this programme is used to
promote “distribution, processing and consumption of fishery products.”
Reply
This subsidy is not for fishery products.
Q4. During the notification period, what portion of this subsidy went toward R&D for
fisheries vessels?
Reply
No part of this subsidy went toward R&D for fisheries vessels during the notification period.
Q5. What stage of the research is funded under this programme?
Reply
The research is expected on the nearly practical stage.
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