Japan's 12th trade policy review session

Since December 2012, Japan has implemented an ambitious reform program to overcome deflation and revive the economy after more than a decade of stagnant growth. The program includes a “three-arrow strategy”: monetary easing (targeting a 2% inflation rate as soon as possible through expansion of the monetary base); fiscal stimulus (additional approximately 100 billion USD in January 2013 and an additional 53 billion in December 2013 to stimulate growth); and structural reforms in sectors such as agriculture, energy and health.

Expansionary monetary and fiscal policies have supported the Japanese economy, but are still not enough to achieve strong economic growth. Japan's GDP growth in 2014 only reached 0.9% (down from 1.5% in 2012 and 2013). Authorities recognize that extensive structural reform is necessary to resolve problems over the past several years and achieve sustainable growth in the future. While there has been some progress in this direction, trade and investment liberalization measures need to be further promoted to encourage private investment, increase productivity and enhance competitiveness.

Since 2011, Japan has continuously had a trade deficit. In 2013, the trade deficit index was the largest ever (118 billion USD). Although export turnover increased, import turnover was at the highest level. Fossil fuel imports are the main reason pushing up import turnover, because fossil fuels had to replace nuclear energy after the incident at the Fukushima nuclear power plant in 2011 and the closure of other nuclear power plants.

Foreign investment flows into Japan continue to be lower than in other developed economies. The Japan Revitalization Strategy aims to double FDI by 2020. To achieve this goal, Japan will have to increase the expansion of public-private partnerships, accordingly, it is expected that private capital will pour into infrastructure projects in the next ten years. Japan is the second largest foreign direct investor worldwide, especially in some ASEAN countries, where Japanese subsidiaries often play a leading role in sectors such as automobiles and electronics.

To date, Japan has participated in 13 Regional Trade Agreements (RTA). Accordingly, Japan has excluded a number of sensitive agricultural products (and related products) such as meat and meat products, fish and fish products, milk, rice, plywood and shoe leather, etc. Some of the above products are also not included in Japan's Generalized System of Preferences (GSP).

During the review period, Japan signed an RTA with Australia and reached an agreement in principle with Mongolia. In addition, Japan is negotiating with: Canada, Colombia, China, the European Union, the Gulf Cooperation Council (GCC), South Korea and Türkiye. Japan is also participating in the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP).

In general, Japan's trade policy is relatively stable while the country is actively negotiating RTA, pursuing domestic reforms to improve competitiveness and participating in activities within the WTO framework.

The average MFN tax rate applied by Japan decreased from 6.3% (2012) to 5.8% (2014) due to the increase in unit prices of some agricultural products, leading to a reduction in equivalent value tax (AVE).

Japan rarely uses trade defense measures. The country did not apply any safeguard and countervailing measures during the review period, and only applied anti-dumping duties on electrochemical manganese dioxide from China, South Africa and Spain (extended for 5 years and will expire on March 5, 2019).

Due to many factors, Japan's SPS and TBT requirements are often stricter than international standards, and the costs to meet these quality and safety standards are quite high. As of March 31, 2014, there were 10,525 Japanese Industrial Standards (JIS), of which only 5,823 standards correspond to international standards, and 97% of JIS have been harmonized according to international standards. Currently, Japan is banning the import of beef and chicken from many countries to prevent the spread of certain animal diseases, including mad cow disease and bird flu.
The Antitrust Law was amended in December 2013 to abolish the Japan Fair Trade Commission's (JFTC) hearing procedures for administrative appeals. Once this Law comes into force, any appeal regarding a decision of this Committee shall be subject to the exclusive jurisdiction of the Tokyo District Court to ensure expertise and promote procedural fairness.

Despite changes over the past few years, protection for Japan's agricultural sector remains high compared to other countries. The government aims to provide income support, but market price support is still the main tool. This, together with output- and input-based transfers, is one of the most trade-distorting forms of protectionism.

As ​​one of the countries that consumes the most fish and seafood in the world, Japan has applied many measures to support the seafood industry. After the damage caused by the 2011 tsunami, the country continued to provide budget support with the goal of completing the restoration of fishing port facilities by the end of 2015. Although the MFN tax rate on fish and fish products was 6.2% in 2014 (equivalent to the 2012 tax rate), import quotas are currently applied to some types of fish.

Following the closure of the nuclear power plant due to the Fukushima accident in 2011, a major reconstruction program was planned. The Electricity Business Law has a number of amendments to ensure stable electricity supply, reduce costs, expand choices for consumers and create business conditions.

In the financial sector, the Japanese Financial Services Agency (FSA) has revised the minimum capital regulations for operating international banks and intends to consider applying other types of capital and liquidity measures, within the framework of Basel III.

Overall, although the Japanese economy has had a long period of stagnation and faced several major shocks over the past few years, the country continues to remain an open and transparent economy, but still maintains protectionism in some sectors, especially agriculture. Some unique features help Japan become the third richest country in the world, but others increase the costs of importing, exporting, investing and doing business. Addressing these obstacles is necessary to promote higher and more sustainable growth, and this is also the goal of the third arrow in Japan's current reform program.

WTO trade policy review mechanism

The WTO's trade policy review mechanism has three goals: (i) ensuring members' trade policies are public and transparent through regular review; (ii) enhance understanding among members on international trade issues; (iii) allows for multi-stakeholder assessment of the impact of national trade policies in the global trading system.

The trade policy review will be conducted by the Trade Policy Review Body (TPRB). This body includes representatives of all members of the General Assembly. The frequency of review depends on the member's market share in global trade. Members with large market shares, especially Canada, EU, Japan, and the United States, will be reviewed every 2 years; The next 16 countries are every 4 years.

The special review mechanism focuses on countries with a large market share in global trade, creating a certain advantage for developing countries in understanding the trade policies of developed countries, as well as ensuring compliance with WTO agreements of countries that have a great influence on the world economy.