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2.1 Legislation on trade and investment

The legal framework of trade and investment in Japan consists of Foreign Exchange and Foreign Trade Law, Import and Export Transactions Law, and the relevant government regulations such as Cabinet Orders, Ministerial Ordinances, Circulars, Notices and Announcements. Among these, Foreign Exchange and Foreign Trade Law specifies fundamental issues related to the administration of trade and investment, whereas detailed provisions are promulgated through updated Import/Export Administration Ordinance and Import/Export Rules.

The major legislation governing tariff mainly includes Customs Law, Customs Tariff Law, and Temporary Tariff Measures Law. Customs Law stipulates tariff collection, customs clearance, procedures for the entry and exit of foreign vessels at Japanese ports, and bonded systems. Customs Tariff Law provides for detailed procedures for setting tariff rates and taxable prices, reduction, exemption and reimbursement of tariff, special tariff systems such as anti-dumping duties, and import bans. Serving as a supplement to Customs Tariff Law, Temporary Tariff Measures Law stipulates some provisional tariff rates, tariff reduction, exemption or refund, and the generalized system of preferences (GSP).

In addition, Japan has enacted a number of special laws regulating various specific lines of business, which include, for example, the Law on the Uniform Trademarks for Exports of Small and Medium-sized Enterprises, the Law on the Design of Exported Goods, Plant Protection Law, Infectious Disease Prevention Law, Fertilizer Control Law, Tobacco Business Law, Monopoly of Salt Law, Monopoly of Alcohol Law, Food Sanitation Law, and Trade Insurance Law.

2.2 Trade administration

2.2.1 Import administration

According to the relevant regulations in Japan, imports are divided into two broad categories: free imports and non-free imports.

Free imports refer to those goods imported into the country that do not need to apply for licensing, submit import statements, and present invoices upon clearing customs. Non-free imports refer to those goods that are, according to the Import Administration Ordinance, subject to prior licensing. These cover goods subject to import quotas, specified goods from certain places of origin or shipment, goods requiring prior ratification of the competent ministers, and goods required to go through customs formalities.

2.2.2 Export administration

A member to the Wassenaar Agreement, Japan has joined all the international export control organizations, including Nuclear Suppliers Group (NSG), Australia Group (AG) and Missile Technology Control Regime (MTCR), and subjects all the goods designated in the relevant international treaties to examination and licensing. Based on Foreign Exchange and Foreign Trade Law, Import and Export Transactions Law, and Export Administration Ordinance, Japan's trade regime also provides for export controls, restrictions on the supply of technologies, prior approval and post-export examination of exports.

2.3 Investment administration

Pursuant to Japan's Foreign Exchange and Foreign Trade Law, there is, in principle, no restriction placed upon foreign companies investing in Japan. However, prior application is needed when investing in an industry such as the aircraft and the weapons industry on which the OECD Code of Liberalization of Capital Movements allows for measures of restrictions to protect national security, or in an industry such as the petroleum and the leather industry on which Japan has expressed its reservation to the OECD Code of Liberalization. In addition, the relevant stipulations in the Anti-Monopoly Law prescribing joint ventures, shareholding restrictions and corporate shareholdings also affect foreign direct investment in Japan. At present, foreign direct investment in Japan has, in aggregate, been liberalized, with the notable exception in four major sectors, namely, agriculture- forestry- fishery, mining industry, petroleum industry, and leather industry. However, the Radio Wave Law, the Broadcasting Law and the NTT Law all have prescriptions restricting the access of foreign companies to Japan's telecommunications market. The Law on Vessels, in effect, excludes foreign investors from engaging in Japan's domestic ocean carriage. According to the pertinent articles and clauses in the Law on Vessels, Japan's domestic maritime shipping market is open only to vessels registered in Japan; foreign companies are permitted to invest in Japan's domestic shipping market only after they have established a company in Japan.

2.4 Competent authorities

2.4.1 Government ministries and agencies

As the leading government body in the administration of foreign trade in Japan, the Ministry of Economy, Trade and Industry (METI), with regional bureaus and offices in major Japanese cities, is responsible for the formulation and implementation of trade policies and investment promotion polices, and for the examination, approval and licensing of imports and exports. The METI sets up in its Trade Policy Bureau a Multilateral Trade System Department to handle complaints related to WTO affairs. In principle, Japan's foreign exchange control is the system of filing and putting on record relevant documents after the transaction. The Ministry of Finance (MOF) is responsible for the examination and approval of matters concerning foreign exchange control, and the compilation of financial statistics.

Japan Customs, an agency affiliated to the MOF, is responsible for the administration of the entry and exit of goods, vessels, aircraft and passengers; the collection of customs duties; the examination and approval of the import and export of certain products.

As the central bank in Japan, the Bank of Japan (BOJ) deals with reports, examination and approval of foreign exchange matters.

2.4.2 Other relevant organizations

The activities of Japan External Trade Organization (JETRO) include: helping foreign businesses to invest in Japan; assisting Japanese small and medium-sized firms to expand their exports; helping foreign enterprises to enter the Japanese market; granting economic aid to developing countries; collecting and analyzing foreign economic, trade and investment information; providing business consultancy services; supporting Japanese companies in their overseas operations; conducting research on developing economies; gathering and supplying relevant information about developing countries; and training professional personnel.

By the authorization of the Minister of Economy, Trade and Industry, the Japan Standardization Association, the Chemical Fiber Association, the Fishery Products Association, the Iron and Steel Union, and various exporters and importers associations also play a role in the examination and approval of the import and export of goods in the respective sectors.

The Japan Bank for International Cooperation (JBIC) is an exclusively government- funded policy-oriented financial institution in Japan. Its fundamental mission is to conduct various policy-based financial operations to promote the development of trade, strengthen overseas economic cooperation, and contribute to the stabilization of international financial order and the economic development of developing countries.