RESTRICTED
WORLD TRADE G/SCM/Q2/JPN/4
1October 1996
ORGANIZATION(96-3942)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Questions from theEUROPEAN COMMUNITY Regarding theNew
andFullNotification ofJAPAN1
Thefollowing communication, dated 19September 1996, hasbeenreceived fromthePermanent
Delegation oftheEuropean Community.
_______________
Japan submitted on7August 1995itsnotification ofsubsidy programmes totheWTO pursuant
toArticle 25oftheWTO Subsidies Agreement.
Inthisrespect, theCommunity would liketoobtain clarification onanumber ofissues onthe
notified schemes asdescribed below.
Moreover, theCommunity hasobtained information ondifferent subsidy schemes which were
notnotified totheWTO although their notification seems necessary pursuant toArticle 25.2
Subsidies Agreement.
I. NOTIFIED SUBSIDY PROGRAMMES
Japan notified anumber ofprogrammes which arelisted below. Thepresent analysis also
constitutes arequest forclarification andforfurther information, foreachprogramme, onthespecific
criteria which havetobemetbefore thesubsidy isgranted, andinparticular ifexport performance
isacriterion.
(a) Special depreciation oncertain machinery forhigh-technology industries
- Could Japan clarify whether thisprogramme isgranted under theTechnopolis Law
and/or Special Taxation Measures Law? Canbenefits under bothLaws beconferred
cumulatively?
- Could Japan explain whatthecriteria foreligibility are?
- TheTechnopolisLawprovidesforanadditionalspecialdepreciationoncorporateincome
taxforhigh-technology industries which seems different from adepreciation on
machinery. Could Japan clarify whether thisprogramme iscovered bythenotification
andifnot,provide anotification under Article 25?
1G/SCM/N/3/JPN+Rev.1.G/SCM/Q2/JPN/4
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(b) Grants forthecoalmining industry
- Canacompany benefit cumulatively from thedifferent subsidy programmes forthe
coalmining industry?
- Arethebenefits under these programmes available torelated activities suchassteel
production?
- Could Japan elaborate onthecriteria foreligibility? Isthere aceiling tothe
benefits?
(c) Subsidy andloanguarantee forthepromotion oftextiles
- Could Japan givethecriteria foreligibility?
- Arethesebenefits equally available toimported textiles, domestically produced textiles
andexported textiles (assuggested inthestatistical data)?
- Canthese programmes becumulated withthetaxincentive "additional depreciation
onmachinery"?
- According toapublication oftheMinistry ofFinance (Hojyokin Soran), theTextile
Industry Rationalization Agency operates twodifferent programmes e.g.projects for
promotion ofthetextile industry (senisangyo shinko suishinhi hojyokin) andguidance
onpromotion ofthetextile industry (seni sangyo shinko shidohi hojyokin). Could
Japan explain whether bothprogrammes arecovered bythenotification?
- According toapublication oftheMinistry ofFinance (Hojyokin Soran), thetotalbudget
forbothprogrammesisaround¥507,000,000.CouldJapanexplainwhythenotification
listsafigure of¥72million?
II. ADDITIONAL PROGRAMMES NOT NOTIFIED TOWTO
Japan hasnotnotified alarge number offederal ornational programmes which appear tofall
within thescope ofArticle 25oftheWTO Subsidies Agreement. Theinformation inpossession of
theCommunity would seemtoindicate thattheschemes described below provide financial contributions
which confer benefits tothelocalindustry. Inaddition theschemes areclearly specific (aspertaining
toaspecific sector orcontingent upon exports).
Furthermore, theCommunity notes thatJapan hasnotified onlysubsidies granted bythefederal
authorities. However, itisclearthatalarge number ofsubsidy programmes areadministered bythe
governmentsoftheregions.Inthisrespect,theCommunityidentifiedanumberofregionalprogrammes;
examples ofsuchprogrammes -known totheCommunity -arelisted attheendofthisdocument.
Article 25.2oftheSubsidies Agreement requires that"Members shallnotify anysubsidy ...granted
ormaintained within theirterritories". Consequently, thereisanobligation forJapan tonotify subsidies
granted atalllevels ofgovernment, including theregions.
Inviewoftheabove, Japan isrequested toexplain whytheregional programmes listed below
havenotbeennotified, toprovide notifications inthestandard Article 25format ifappropriate and
tonotify anyother subsidies granted bytheregions which fallwithin thescope ofArticle 25.2.G/SCM/Q2/JPN/4
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NATIONAL ORFEDERAL PROGRAMMES
1. Equity capital under theLawofExtraordinary Measures fortheStructural Improvement of
theTextile Industry
Although Japan notified theLoan Guarantee programme forstructural improvement ofthe
TextileIndustry,theCommunityfoundthattheIndustrialStructureImprovementFund(ISIF)administers
another programme providing capital infusion totextile companies.
Under thisprogramme, aneligible company could obtain upto2/3oftheauthorized capital
from theISIF. Thelegislation provides thatnospecific rateofreturn isrequired.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
2. Assistance fortheestablishment ofChemical Uranium Concentration Technologies
TheMinistry ofInternational Trade andIndustry (MITI) gives grants toprivate enterprises
which areinvolved inthedevelopment ofchemical methods foruranium enrichment. Theprogramme
isestablished bytheLawonspecial accounts forelectric power development acceleration measures.
Thegrants cover upto1/3oftheexpenses.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
3. Assistance forthePromotion ofInternational Cooperative Development ofCivil Aircraft
TheInternational Aircraft Development Fund issues grants toprivate (andpublic institutions)
topromote theinternational development ofcivilaircraft. Theprogramme isestablished bytheAircraft
Industry Promotion Lawandthegrants cover upto50percentoftheexpenses.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
4. TaxConcessions forSoftware Businesses
Pursuant totheSpecial Taxation Measures Law, allsub-federal governments havetheright
togrant taxconcessions toenterprises engaged insoftware development.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
5. Preferential Loans from theJapan Development Bank
TheJDB, apublic institution, provides loans atpreferential interest ratestonewindustries,
newtechnologies andcompanies diversifying theirbusiness.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
6. Japan Finance Corporation
TheJapan Finance Corporation provides general andspecial purpose loans toSMEs inJapan
(Japan Finance Corporation forSmall Business Law). SME meeting thegovernment 'spolicy criteria
areeligible forloans atpreferential rates. Anequipment loancanbeaslarge as¥600 million.
TheCommunity requests Japan tonotify thisprogramme under Article 25.G/SCM/Q2/JPN/4
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7. Japan Small Business Credit Insurance Corporation
Under theSmall Business Credit Insurance Corporation LawandtheSmall Business Credit
Insurance Law, thesmall business credit insurance corporation issues credit insurance toSMEs at
preferential rates. Thecredit guarantees canbeupto¥220 million.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
8. Assistance forOpen Fundamental Software Technology Project
TheMinistry ofInternational Trade andIndustry developed asubsidy scheme forthepromotion
anddevelopment ofsoftware projects. TheInformation Technology Promotion Agency isresponsible
forselecting eligible projects. Grants cover upto67percentoftheproject costs.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
9. Incentives under theIndustrial Structure Improvement Fund (ISIF)
Pursuant totheLawofTemporary Measures toFacilitate Industrial Structural Adjustment,
theISIFgrants interest ratesubsidies, equity capital and/or loanguarantees toindustries located in
economically depressed areas. Theinterest rateis4.2percent; theequity capital infusion isupto
¥0.5billion andtheloanguarantee covers upto100percentoftheloan.
TheCommunityrequestsJapantonotifythisprogrammeunderArticle25.CouldJapanprovide
thecriteria foreconomically distressed areas?
10. Subsidies fortechnological improvement ofSMEs
MITI provides grants tocover expenses forinvestments innewtechnology, newproduction,
pollution prevention. Theprogramme foresees adirect subsidization byMITI orajointsubsidization
byMITI andalocalgovernment.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
11. Special depreciation allowance forexpenses ofresearch fordevelopment ofmining and
manufacturing industries
Pursuant toseveral legislations suchastheSME Modernization Promotion Law, aspecial
depreciation allowance isgranted tofacilitate theprovision offunds toresearch associations forthe
development ofmining andmanufacturing industries.
TheCommunity requests Japan tonotify thisprogramme under Article 25.
12. Special depreciation oncorporate income taxtopromote employment anddevelopment in
underdeveloped areas
Enterprises which haveacquired specific equipment orbuildings forbusinesses inindustries
inspecific areasareeligible forataxconcession of8-50percentofincurred expenses. Theprogramme
started in1971 andwasduetoexpire in1996 butcanbeextended.
TheCommunity requests Japan tonotify thisprogramme under Article 25.Could Japan specify
whatareas aredesignated asbeing "underdeveloped"?G/SCM/Q2/JPN/4
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13. Subsidy formeasures tocopewithpollution intheleather shoes industries
(Seikagyo Kogai Taisakuhi Hojyokin)
Thisprogramme operated byMITI, aimstoimprove technology intheleather industry. The
Community considers thatthetitleoftheprogramme ismisleading since itimplies environmental
assistance while theprogramme aimstoprovide benefits totheproduction ofleather.
TheCommunity requests afullnotification ofthisprogramme under Article 25.Could Japan
clarify inparticular thepurpose oftheprogramme?
14. Fund ofguarantee andobligations
Thisprogramme provides forfinancial assistance tocompanies fortechnical research and
collection ofdata.
- TheCommunity requests afullnotification ofthisprogramme under Article 25.
- Could Japan clarify whatindustries mainly benefit from thisfund?
- Could Japan explain howthefundisfinanced and,inparticular, whatamount is
provided bytheJapan Leather Industry Association?
REGIONAL PROGRAMMES
Thefollowing isa(non-exhaustive list)ofregional programmes which theCommunity believes
should havebeennotified andonwhich theCommunity requests further clarification. TheCommunity
requests Japan tonotify theprogrammes described below andsupply thefollowing information: policy
objective, budget, subsidy perunit,criteria foreligibility, number andnature ofbeneficiaries, duration
ofthesubsidy, statistical datapermitting anassessment ofthetradeeffects ofthesubsidy inaccordance
withthequestionnaire (adopted bytheWTO Subsidies Committee on21July1995document G/SCM/6
of9August 1995).
1. TOKUSHIMA
1.1 Assistance forthepromotion ofregional location
2. HOKKAIDO
2.1 Wood industries upgrading funds
2.2 Programme forthepromotion ofregional industries
5. SHIMANE
5.1 TheShimane Prefecture Enterprises Establishment Fund
6. TOTTORI
6.1 Emergency Economic Measure Special Fund
6.2 Cool Summer Measure FundG/SCM/Q2/JPN/4
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6.3 Prefectural Enterprise Establishment Fund
6.4 Prefectural Enterprise Establishment Promotion Fund
6.5. Subsidy forestablishment inTakeuchi Industrial Park
7. GUNMA
7.1 Prefectural subsidy forestablishing enterprises
8. IWATE
8.1 Wood industry stable management fund
8.2 Prefecture industrial location promotion funds
9. NIIGATI
9.1 Subsidy forthesupport oftechnological development
9.2 Subsidy forthepromotion ofenterprise location inToko Industrial Zone
10. AKITA
10.1 Funds forsecuring andlabour force ofSME's
10.2 Funds forimproving themanagement ofSME's
10.3 Funds forthepromotion ofsmall scale enterprise
10.4 SME'Sshort-term operating funds
10.5 Financial aidforthepromotion ofregional location
10.6 Financial aidforequipment modernization
10.7 Equipment leasing programme
11. NARA
11.1 Funds forthegeneral development oftheRegion
12. NAGASAKI
12.1 Plant Establishment Funds
13. KUMAMOTO
13.1 Kumamoto Establishment Promotion SubsidyG/SCM/Q2/JPN/4
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14. MIYAGI
14.1 Enterprise establishment promotion subsidy
15. FUKUOKA
15.1 Prefectural grants forspecified areas
15.2 Funds forpromotion ofenterprise establishment
16. ISHIKAWA
16.1 Subsidy forlocation ofhigh-technology
16.2 Subsidies forencouraging investment inCore Noto