The Environment for International Investment and Japan

- Views on MAI Negotiations -

Issues Regarding Japan's Investments Climate

The Advancement of Deregulation

Japan must not only contribute to the economic growth of the recipients of its foreign direct investments, but also must provide a sufficient market for inward investment. In the fact, regulations in the Japanese market are obstructing the entry of new businesses, both domestic and foreign, and must fulfill its responsibility to the world by promoting deregulation strongly. The expansion of foreign direct investment in Japan that will spring from the advancement of deregulation will not only contribute to international economic growth, but also increase the vitality of the Japanese economy, widen the Japanese consumer's range of choices, and increase the welfare.

We will actively support the efforts by the Government to promote deregulation. We must fulfill our self-responsibility to accept the pain of deregulation, and not only utilize the fruits of a revitalized market, but also re-evaluate irrational commercial practices.

Dynamic Policies for Investment in Japan

The current level of growth of direct investment in Japan is far lower than that of Japan's foreign direct investment. In order to alleviate this situation, we have to improve our efforts toward deregulation and the transparency of our administration. In addition, comprehensive policies for investment in Japan are essential to the creation of new business. Japan should make efforts to implement dynamic measures in order to facilitate the smooth entry and business activities of foreign-affiliated companies, including expanding tax reduction measures; concluding a portable pension agreement; lifting the prohibition on the establishment of pure holding companies; introducing a consolidated tax payment system; and developing a favorable interest rate system for government-related banks. In addition, we anticipate the effective utilization of Japan's investment incentives by overseas investors.

A Commitment to Formulate International Rules

As a responsible member of international community, Japan must take part in the establishment of an international environment for investment and continually contribute to the stimulation of investment. Following upon the success of the GATT Uruguay Round Talks, our commitments to the WTO, and our contributions to APEC, Japan should participate actively in rule-making during the MAI negotiations. Japan, as the OECD Member from Asia, has the responsibility of formulating measures which enable the making of preparations for non-OECD Member countries to join the MAI in a step-by-step process.

It is also very important for Japan to advance domestic deregulation measures in order to lead the way in providing a freer market for investment.

Furthermore, Japan has concluded bilateral investment agreements (BITs) with only four countries, and there is no sufficient system currently in place for protecting its overseas investments. The changing structure of Japan's industry makes it necessary for Japan to maintain a sound and rational mechanism for returning home the fruits of its overseas investments. In this sense as well, we believe that a meaningful MAI will lead to many benefits.