Challenges and Actions in Economic/Industrial · PDF fileChallenges and Actions in Economic/Industrial Policies - The central government, corporations and local governments should

Challenges and Actions in Economic/Industrial Policies

- The central government, corporations and local

governments should work with one another to overcome

the current crisis, solve problems and achieve new

economic/industrial frameworks capable of addressing

the big changes of the time-

September 29, 2011 Ministry of Economy, Trade and Industry

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<Challenges that Japan is currently facing>

Energy stable supply coming under question→“Energy uncertainty since oil shocks”

The Great East Japan Earthquake has severely damaged Japanese citizens’ confidence in nuclear safety that has been underpinning Japan’s energy policies so far. As the earthquake has also shut down or restricted use of the energy infrastructure, such as electricity, oil and gas, Japanese citizens have started questioning the availability of energy supply at times of crisis. In addition, the prospect of long-term electricity shortages and possible higher electricity tariffs are stirring up anxieties about industrial activities and citizens’ daily lives in the future. Japan is currently facing a situation of “energy uncertainty since the oil crisis.”

Japan’s Industry facing “six challenges” at the same time→”Crisis of irreversible industrial hollowing-out”

Japan’s economy has been stagnating since the Lehman Shock. At the same time, domestic industries have been facing a serious stalemate because they are running into the so-called five challenges, such as the stronger yen, higher corporate taxes, lower wages in emerging economies, environmental restrictions, and delayed economic partnerships.

Before the “Industrial Structure Vision 2010”1and “New Growth Strategy,”2which the government launched to solve these problems, could be fulfilled, Japan suffered the Great East Japan Earthquake on March 11, 2011 and accompanying nuclear power plant accident, placing serious damage on daily life, the social infrastructure, local economies and the entire Japanese economy. In particular, massive electricity supply shortages have imposed difficult problems on industry, reportedly bringing about “six problems” at the same time.

Under such a situation, overseas transfers of production or R&D bases, which have already occurred, might be further accelerated. On the other hand, as Japan fails to attract overseas factories to the domestic market, unless the government does not take any policy action, the nation will face the crisis of an “irreversible industrial hollowing-out,” which means industries will permanently disappear from Japan due to overseas outflow of important industries and strategic technologies that will underpin Japan’s growth and job opportunities, In addition, if large corporations continue to move overseas in this way, supporting industries, including SMEs, will also ebb away.

Catch up with the global trend→“Crisis of dropout from the world’s growth”

Looking at the global situation, corporations all over the world are carrying on stiffer competition with their sights set on highly-growing emerging economies. In addition, international competition to secure natural resources surrounding fossil fuels and rare earths is also getting stiffer. On the other hand, the yen is getting stronger rapidly due to the possible slow-down of the global economy, including that of the U.S., and the fiscal crisis in 1 Report of Industrial Competitiveness Committee, Industrial Structure Council (June 3, 2010) 2 Cabinet decision (June 18, 2010)

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Europe. As international competition continues to become stiffer, many nations or corporations

are working on strategic external economic policies or industrial policies seeking economic growth or job opportunities by pushing ahead with government-led all-out economic partnerships, cross-border global corporate reorganizations and market cultivation strategies under the cooperation between the public and private sectors. These actions are sometimes taken through private-public initiatives. Will Japan be able to enjoy new growth or employment by correctly recognizing fluctuations in such an international economic regime? Alternatively, will Japan fail to take quick action and see an outflow of industries or high-level employment that has been achieved so far in the midst of the changing environment? This is the problem that Japan is currently facing.

Since last year, the government has shared such an understanding, opens up the nation and seeks for economic development with the international community. However, since the Great East Japan Earthquake, as the government has no choice but addressing important matters at home, it has failed to take quick action. On the other hand, the ongoing global situation will not allow any delay. Governments around the world are showing active moves, such as entering into economic partnerships with major market nations. Japan is falling into a crisis of dropping out from growth seen around the world without pushing ahead with reopening Japan.

<Pillar policies and their directions>

The central government, corporations and local governments should work with one another to overcome the current crisis, solve

problems and achieve new economic/industrial frameworks capable of addressing the big changes of the time.

The first pillar: Recovering from the nuclear accident and earthquake damage

All-out efforts should be made to settle TEPCO’s Fukushima Dai-ichi Nuclear Power Station accident as early as possible and provide support to earthquake victims.

In addition, in accordance with the “Basic Guidelines for Reconstruction in Response to the Great East Japan Earthquake,”3 the government will make all-out efforts to recover from the damage caused by the earthquake by reorganizing the affected SMEs and supply chains, taking action on double loan problems or corporations with deteriorated capital, or reconstructing facilities/equipment. In this process, recognizing that there can be “no reconstruction for Japan without revitalizing the Japanese economy,” the government will also address industrial hollowing-out by attracting foreign firms at home and enhance R&D bases that will bring about possible growth or job opportunities in the future.

The second pillar: Reflecting on and reviewing traditional energy

3 Decision of the Headquarters for the Reconstruction from the Great East Japan Earthquake (July 29, 2011)

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policies without sanctuary; and earning back trust of corporations and citizens

The government will put top priority on making all-out efforts to prevent near-term electricity shortages.

In the medium and long term, the government will reexamine its nuclear power policies, reform electric power regimes, drastically enhance Japan’s resource/energy stable supply framework, make efforts for achieving sustainable energy saving energies, introduce renewable energies and push ahead with “smart communities” for optimal energy management purposes, aiming to create new best-mix of energies by satisfying the requirements of “safety,” “stable supply,” “economic efficiency” and “environmental friendliness.” Taking these policy actions will prevent the hollowing out of industries and employment as described in the next pillar policy section and will serve to generate new growth as explained in the last pillar policy section.

The third pillar: Standing up against a rapidly stronger yen and industrial hollowing-out, and working to solve problems in the Japanese economy

To quickly address rapid industrial hollowing-out resulting from the rapidly strengthening yen of the moment and the current electric power demand-supply problems, the government will encourage the establishment of production/R&D bases of supply chain core firms or other important technologies/industries that will underpin the Japanese economy or job opportunities in Japan. In addition, the government will also provide support for SMEs that will underpin local economies.

In addition, the government will reduce the corporate tax, push ahead with economic partnerships and move forward to make Japan a hub in Asia, or steadily take other policy actions in accordance with the “New Growth Strategy” as described in the “Overall Picture of Policy Promotion”4 so that corporations will be established in Japan in order to protect industries or job opportunities.

The fourth pillar: Achieving new growth through revitalization of domestic demand, globalized economies and innovations

To achieve Japan’s sustainable economic growth in dwindling birthrate numbers and aging population, it is absolutely necessary to push ahead with business and industrial policies with a view to new domestic demand or global market and draw on stronger demand in emerging economies by opening up the domestic market.

To this end, the government will enhance various policy actions, such as expanding domestic demand, creating new markets ahead of the global trend, cultivating market demand in emerging economies under public-private sector partnerships, pushing ahead with technical innovations, making use of the potential of SMEs, and enhancing strategic business management capabilities.

4 Cabinet decision (August 15, 2011)

<Table of contents>

Chapter 1: Recovering from the nuclear accident and earthquake damage

1. Restoration from the Accident at the Fukushima Dai-ichi Nuclear Power Station, TEPCO��1

1. Addressing the nuclear power plant accident 2. Supporting nuclear accident victims 3. Taking action on harmful rumors

2. Providing support for affected SMEs and achieving new growth from the Tohoku area��2

1. Supporting fund-raising for SME industrial recovery purposes 2. Supporting the reconstruction/recovery of affected SMEs 3. Establishing a new base for achieving new growth from the Tohoku area

Chapter 2: Reflecting on and reviewing traditional energy policies without sanctuary; and earning back the trust of corporations and citizens

1. Addressing electric power shortages and effectively utilizing energy�� 6

1. Addressing electric power shortages 2. Pushing ahead with the effective utilization of energy (establishing and spreading

out “smart communities”)

2. Reexamining nuclear policies and reforming the electric power system�� 8

1. Reexamining nuclear policies 2. Reforming for establishing new electric power generation systems

3. Drastically enhancing resources/stable energy supply schemes�� 11

1. Early reconstruction and enhancement of the domestic energy supply network 2. Establishing stable energy supply schemes on a pan-Asian scale 3. Enhancing the acquisitions of interests in upstream sections 4. Creating stable supply schemes for rare metals and rare earths

4. Realization of a new best-mix of energy sources�� 15

Chapter 3: Standing up against a rapidly stronger yen and industrial hollowing-out, and working to solve problems in the Japanese economy

1. Preventing an outflow of important technologies and industries�� 16

2. Achieving an international equal footing for the domestic business environment�� 16

3. Enhancing economic partnerships with larger markets�� 19

4. Establishing tax/social security schemes compatible with economic growth�� 20

Chapter 4: Achieving new growth through the revitalization of domestic demand, the globalized economy and innovations

1. Expanding domestic demand and creating new markets ahead of the world�� 21

1. Creating “integrated-type new industries” with help of IT integration 2. Promoting new energy industry clusters 3. Achieving growth-type longevity industries 4. Pushing ahead with the Cool Japan 5. Making agriculture a competitive industry 6. Pushing ahead with an advanced industrial structure for new growth potential and corporate system reforms

2. Seizing demand in emerging economies through joint efforts of the public and private sectors�� 27

1. Supporting Japanese firms’ global business operations 2. Strategically pushing ahead with and enhancing infrastructure/systems export 3. Expanding overseas deployment of Japan’s highly-competitive energy/environment technologies/products 4. Pushing ahead with international intellectual property strategy as well as quickly developing international standards

3. Creating future-pioneering technologies ��31

4. Making use of the potential of SMEs and strengthening strategic business capabilities�� 34

1. Making use of SMEs’ strategic business capabilities and enhancing their business capabilities 2. Supporting SMEs’ overseas business expansion 3. Smoothly revitalizing SME business operations and business succession 4. Revitalizing local shopping districts that play important roles in local communities

�The following signs have the following meanings:

�: Legislation-related ��New program-related○�Budget-related (new budget or increased budget) □�Taxation-related��Government investment- and loan-related ��Organization-related��Other policy action

�The terms “initial,” “reconstruction quota” and “supplementary” have the following meanings.

�“Initial”: The project is related with ministerial demand for FY2012 budgetary appropriations. �“Reconstruction quota”: Budget fund for recovery/reconstruction from the Great East Japan Earthquake in ministerial demand for FY2012 budgetary appropriations

�“Supplementary”: The project is related with ministerial demand for the third supplementary budget.

Fund amount data represent the ministerial demand data for FY2012 budget draft; while figures in parenthesis show the FY2011 initial budget.

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Chapter 1: Recovering from the nuclear accident and earthquake damage

1. Restoration from the Accident at the Fukushima Dai-ichi Nuclear Power Station, TEPCO

Efforts have been made for settling the TEPCO’s Fukushima Dai-ichi Nuclear Power Station accident in accordance with the “Roadmap towards Restoration from the Accident at Fukushima Dai-ichi Nuclear Power Station, TEPCO.” The situation is improving steadily, but still remains unpredictable. It is necessary to steadily attain the Step 2 targets and firmly address problems in the medium and long term.

In addition, recognizing that the government has been pushing ahead with nuclear policies as a national strategy, it will firmly work on providing support or paying compensation to nuclear disaster victims.

1. Addressing the nuclear power plant accident

In line with the situation surrounding the nuclear accident and instructions from the Nuclear Accident Prevention Minister, it is necessary to steadily attain the targets of Step 2 and shift to the medium/long-term actions after Step 2.

(1) Restoration from the nuclear accident as early as possible (completing “Step 2”)The central government and TEPCO should work together to steadily attain the state of cold

shutdown by continuing circulating water cooling and achieve the Step 2 target “Release of radioactive materials is under control and radiation doses are being significantly held down” by preventing the diffusion of radioactive materials.

�Steadily conducting circulating water cooling �Setting up groundwater shielding walls �Setting up reactor building covers

(2) Decommissioning reactors and taking ex-post treatment actionsThe public and private sectors should work together on the R&D on safely and stably

decommissioning nuclear reactors and take ex-post treatments at TEPCO’s Fukushima Dai-ichi Nuclear Power Station after cold shutdown (after Step 2).

○R&D on reactor decommissioning or ex-post treatments of TEPCO’s Fukushima Dai-ichi Nuclear Power Station (such as examining possible decontamination methods for access to reactor buildings, developing survey methods/equipment for inner portion of containment vessels, or developing task support robots usable in a high radiation environment)

(Supplementary) ¥2 billion (new) ○Anti- disaster unmanned system R&D project (Supplementary)

2. Supporting nuclear accident victims

Nuclear power victims livelihood support teams will play central roles in steadily working on livelihood/business reconstruction aid, health management, monitoring and

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decontamination work in collaboration with related ministries/agencies and local governments so that nuclear power accident victims will be able to return to their homes. The government will also make contributions to industrial rehabilitation and employment-security packages for the future in Fukushima Prefecture through the “Fukushima Council on Recovery from Nuclear Disasters.”

With Nuclear Damage Compensation Facilitation Corp. established and the “Nuclear Accident Damages Emergency Measures Act”5 coming into force, the government will push ahead with urgently necessary temporary payments as well as full-scale payments of compensation for damages.

○Works on livelihood/business reconstruction aid, health management, monitoring and decontamination tasks (Supplementary) (* In collaboration with the Cabinet Office)

○Contributing to industrial rehabilitation and employment-security packages in Fukushima Prefecture through the framework of the “Fukushima Council on Recovery from Nuclear Disasters” (such as renewable energy centers, medical centers, plant construction supports, and supports for SMEs) (Also see below)

○Contributing delivery bonds to Nuclear Damage Compensation Facilitation Corp. (Supplementary)

○Setting up call centers for inquiries or counseling services on nuclear disasters and radiation impacts (Supplementary) ¥220 million, (new) [reconstruction quota]

3. Taking actions on harmful rumors

To revitalize business operations in affected areas suffering from decreased sales volume due to harmful rumors resulting from the nuclear accident, the government will enhance radiation inspection programs, provide effective business matching support, product development support, exhibition/event/website-based support or SME overseas expansion support for sales channel cultivation purposes.

○Domestic radiation dose measurement support project (Supplementary)○Subsidies for covering exporter’s radiation dose inspection cost payable to inspection agencies

(Supplementary) ○Exhibitions or other support services for cultivating sales channels of affected projects

(Supplementary) ○Support for SME’s overseas business expansion or local products sales channel cultivation

(Supplementary) ○Support for product development or sales channel cultivation by making use of

agriculture-commerce-industry partnerships (Supplementary)

2. Providing support for affected SMEs and achieving new growth from the Tohoku area

In accordance with the “Basic Policy for Reconstruction from Great East Japan Earthquake,” the government will make all-out efforts for recovery/reconstruction from

5 Act in 1948 on Emergency Measures for Damages resulting from Nuclear Accident

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the Great East Japan Earthquake. The government will take action on double loan problems, address corporations with deteriorated capital, and push ahead with reconstruction of facilities/equipment. In this process, recognizing that there can be “no reconstruction for Japan without revitalizing the Japanese economy,” the government will also enhance R&D bases that will bring about future growth or job opportunities, and will enhance operation bases related with medical services or renewable energies.

1. Supporting fund-raising for SME industrial recovery purposes

Due to the Great East Japan Earthquake, corporations are suffering so-called “double loan problems” as well as possibly deteriorated financial positions in the second half of the FY2011. For this reason, the government will intensively enhance earthquake-related loan/guarantee programs for SMEs and drastically strengthen fund-raising support programs for corporations that have suffered negative impacts from the Great East Japan Earthquake. In addition, in the case of double loan problems, the government will strengthenfinancial/rejuvenation support programs through the “Industrial Reconstruction Organization (tentative name)” or “Industrial Reconstruction Counseling Center (tentative name)” in order to support the corporate rehabilitation of SMEs that fall into excessive borrowing due to earthquake damage.

<For SMEs> ○�Continuing to provide Great East Japan Earthquake Reconstruction Emergency Guarantee

Program and Great East Japan Earthquake Reconstruction Special Loan programs [Budget] (Supplementary)/[The government investment and loan program] (Supplementary)

○� Providing capital-type subordinated loans for SMEs with deteriorated capital [Budget] (Supplementary)/[The government investment and loan program] (Supplementary)

○� Expanding loan programs on expanding job opportunities or setting up new businesses in affected areas

[Budget] (Supplementary)/[The government investment and loan program] (Supplementary) ○Supporting lease fees for SMEs in affected areas (Supplementary) �Setting up and operating “Industrial Reconstruction Organization (tentative name),” which

handles debt factoring ○Enhancing counseling services of “Industrial Reconstruction Counseling Center (tentative name)”

as comprehensive counseling desk on double loan problems (Supplementary) ○Supporting fund-raising of SMEs [Initial: reconstruction quota]

<Supportive programs for medium-sized and large corporations> ○� Expanding emergency loans for addressing earthquake damage

[Budget][Initial: reconstruction quota] (in collaboration with Ministry of Finance) /[The government investment and loan program] (in collaboration with Ministry of Finance)

○Creating new investment programs employing private sector’s funds and knowhow (Supplementary)

○Providing capital-type subordinated loans for addressing earthquake damages (Supplementary) [Initial: reconstruction quota]

2. Supporting reconstruction/recovery of affected SMEs

The government will provide support, such as restoring SME group facilities/equipment, setting up temporary plants/stores, or sending experts for affected corporations facing difficulties in resuming their business operations due to earthquake

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damage.

○Disaster recovery project on group facilities, such as SME associations (group subsidy)6

(Supplementary) ¥50 billion (new) [Reconstruction quota] ○Setting up temporary plants/stores through Organization for Small & Medium Enterprises and

Regional Innovation (Supplementary) ○Affected SMEs support projects ¥50 billion (new) [Reconstruction quota] ○SME business management support for reconstruction/recovery process (dispatching experts and

supporting IT utilization) (Supplementary) ○Improving shopping environment for temporary home residents

¥900 million (new) [Reconstruction quota]

3. Establishing new base for achieving new growth from Tohoku area

By conducting projects for attaining industrial recovery and job creation in the short run as well as solving medium- and long-term problems with a focus on renewable energies and other growing fields as well as the Tohoku area’s competitive sectors, such as R&D on medical supplies/equipment or material engineering, the government aims to create new industries and job opportunities in the Tohoku area and achieve new growth that will serve as a driving force for the Japanese economy. In this process, the government is planning to utilize the third supplementary budget as well as the Reconstruction Basic Act and Reconstruction Special Zone Act.

(1) Establishing renewable energy R&D bases in Fukushima Prefecture, etc.Local universities, AIST (National Institute of Advanced Industrial Science and Technology),

public test agencies, local firms, etc. will work together in the Tohoku area to push ahead with establishing R&D bases working on technical development/demonstration on state-of-the-art photovoltaic power generation, smart communities and floating off-shore wind power generation systems, etc.

○Establishing renewable energy R&D bases in Fukushima Prefecture, etc. (Supplementary)

(2) Establishing a base for the medical industry in Fukushima PrefectureIn Fukushima Prefecture, which is highly competitive in medical industries such as medical

supplies/equipment, the government will push ahead with the development/demonstration of medical supplies/equipment and medical/nursing-care robots and will establish the world’s most advanced international medical service center that accommodates patients at home and abroad.

○Fukushima Drug Discovery Industry Creation Program (Supplementary) ○State-of-the-art medical equipment development/demonstration project in Fukushima Prefecture

(Supplementary)

(3) Creating “Sendai Material Valley (tentative name)”“Sendai Material Valley (tentative name)” will be created as industry-academic-government

6 If a group consisting of several SMEs prepares its recovery plan and gets accredited by the prefectural

government as playing important roles for local economy or employment security, the government will grant subsidies for reconstruction of facilities/equipment necessary for implementing such plans. The government will further examine necessary fiscal funds, paying due attention to the recovery process in the affected areas and local needs.

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collaboration new open innovation base consisting of AIST, public test agencies and industry, with Tohoku University, which is highly competitive in materials, playing central roles. Sendai Materials Valley will work on the world’s top level R&D and commercial applications on state-of-the-art materials that will drastically improve functions and performance of various products.

○Establishing new industry-academic-government collaborative framework in the Tohoku area (Supplementary)

(4) Setting up the “Tohoku IT Integration Consortium Base (tentative name)”By utilizing collaborative relations with overseas firms mainly in the Tohoku area which is

highly competitive in the IT and electronics fields, the government will set up the “Tohoku IT Integration Consortium Base (tentative name)” to reconstruct the Tohoku area mainly in the field of IT integration and create new industries leading to the reconstruction of Japan. The Tohoku IT Integration Consortium Base will work on R&D activities with a view to commercial applications of infrastructure control systems and cyber security as well as IT integration core areas (see below).

○R&D project for creating new industries through IT integration (Supplementary)

(5) Setting up innovation creation bases in Fukushima PrefectureThe government will strongly push ahead with attracting corporations, new facilities and

encouraging capital spending in order to create job opportunities and attract corporations to Fukushima Prefecture, such as achieving quick reconstruction in Fukushima Prefecture and supporting the establishment of innovation bases that will create new businesses or new industries for the future.

○Creating “Cheer up! Fukushima Industrial Recovery Corporate Location Fund (tentative name)” (Supplementary)

○Fukushima Recovery Industrial Park Development Support Project [Initial: reconstruction quota] ○Support for industry-academic-government collaborative consortium R&D facilities for creating

innovations in affected areas (Supplementary)

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Chapter 2: Reflecting on and reviewing traditional energy policies without sanctuary; and earning back the trust of corporations and citizens

1. Addressing electric power shortages and effectively utilizing energy

If nuclear power plants do not resume their operation, a shortfall of approximately10% might occur during peak demand next summer. For this reason, in line with the “Near-Term Energy Demand-Supply Stabilizing Project”7, the government intends to minimize risks of electric power shortages that will pose significant restrictions on the Japanese economy.

In addition, based on demand-supply control systems employing smart grids8, the government will push ahead with “smart communities” that provide local-level optimal energy management services by making full use of energy saving, renewable energy, energy storage and unused heat.

1. Addressing electric power shortages

From the viewpoint of consumers, the government will minimize possible impacts on the economy or daily life, further push ahead with energy saving projects and enhance policy actions that encourage reforms of the demand structure, such as peak shifts and electricity saving programs (including energy storage).

As for enhancing supply capabilities, the government will encourage flexible operations of thermal power plants and provide supportive programs, mainly in enhancing supply capabilities of usable energy resources, such as expanding private power generation and gas utilization, by paying attention to cost-benefit performance.

By taking these policy actions, the government intends to avoid electricity saving practices as much as possible because they will pose obstacles on peoples’ daily lives and economic activities in this winter and the next summer.

With view to medium- and long-term reform of electric power demand-supply structure, the government will strive to drastically introduce renewable energy.

(1) Addressing electric power shortage (demand-side projects)1) Peak shift and electricity saving projects

To encourage electricity saving practices among households and SMEs, the government will strive to drastically introduce BEMS 9/HEMS10, storage batteries, residential-use photovoltaic power generation systems, fuel cells, high- efficiency air conditioning/hot water supply /lighting/ heat insulating systems. In addition, to encourage demand response-type comprehensive energy

7 Decision of the Energy and Environment Council (July 29, 2011) 8 Aiming to appropriately address energy resources output fluctuations resulting from massive introduction of

renewable energy and attain efficient energy utilization, this is an electric power supply/distribution network that employs IT to fluctuate demand from consumer electronics or electric cars in order to efficiently strike a demand-supply balance and achieve a stable electricity supply.

9 Building energy management system. This is a system designed to reduce energy consumption by managing operations of building equipment/facilities.

10 Home energy management system. This is a system that provides network connections between residential energy consuming equipment and supports residential energy management services, such as monitoring equipment operation status or energy consumption status and providing remote/automatic control services.

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utilization in line with demand-supply situations, the government will also encourage enhancement of supply-side infrastructures, such as introducing a flexible electricity bill menu and smart meters. In addition, to encourage peak shifts and electricity saving practices in this way, the government will examine the feasibility of new legislation for consumers and suppliers.

2) Further pushing ahead with energy saving programs

To achieve sustainable energy saving practices compatible with confortable life and economic growth, the government will further push ahead with energy saving programs, including examining the feasibility of new legislation, such as supporting installations of energy saving facilities/equipment, developing energy saving technologies (see below), and enhancing programs in the civilian sector that shows an upward trend of energy consumption. By doing so, the government aims at conducting the work schedule of the present Energy Basic Plan ahead of initial schedule.

<Electricity saving support under “Electricity Saving Support Eco Subsidy (tentative name)”> ○Supporting installations of energy management systems (BEMS/HEMS) (Supplementary) ○Supporting installations of stationary lithium ion batteries (Supplementary) ○Supporting installations of residential-use photovoltaic power generation systems

(Supplementary) ○Supporting installations of consumer-use fuel cells (Ene Farm) (Supplementary) ○Supporting installations of high-efficiency air conditioning, hot water supply, or lighting

equipment at buildings (electricity saving refurbishing works) (Supplementary) ○Encouraging installations of high-efficiency gas air conditioning equipment (Supplementary)

[Initial: reconstruction quota]

<Actions including new legislation for encouraging peak shifts or electricity saving practices> � To encourage comprehensive energy utilization incorporating energy saving, renewable

energies and energy storage, the government will examine the feasibility of new legislation for consumers and suppliers.

�Encouraging introduction of a flexible electricity bill menu that employs smart meters (peak-load pricing)

�Installations of smart meters at households by power utilities (installation of smart maters for 80% of aggregate demand within the next five years)

�Encouraging standardization between smart meters and HEMS/BEMS for data compatibility purposes

○Contributing to peak shifts through encouraging introduction of electric cars equipped with storage batteries (see below)

<Actions including new legislations for further pushing ahead with energy saving practices> � Examining the feasibility of new legislation on enhancing energy saving projects in consumer

sector ○Supporting energy saving capital spending by SMEs ¥34.6 billion (¥44.6 billion) ○Supporting energy saving at houses and buildings ¥14 billion (new)

(2) Introducing renewable energy and addressing electricity supply shortage (supply-side policy actions)

Paying due attention to cost-benefit performance, the government will address supply capability shortages in the immediate future by flexibly operating thermal power plants by power utilities and expanding private power generation systems and gas utilization owned by corporations and households.

From the viewpoints of enhancing power generation capacities of renewable energies in the immediate future and reforming the electricity demand-supply structure in the medium and long term, the government will strive to drastically expand electric power supply capabilities by combining renewable energies feed-in-tariff program, facility installation support programs and review of applicable regulations.

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In this process, the government will intensively work on R&D on photovoltaic power generation or other systems that will gain popularity if their cost or efficiency gets improved. In addition, it will continue demonstration/R&D projects on off-short wing generation or other projects that employ potentially promising technologies but are still posing some technical problems (see below). By these programs, the government aims to attain better performance than the present Energy Basic Plan (i.e., expanding the percentage of renewable energies to 20% of primate energy supply by the year 2020).

<Expanding electricity supply capabilities of thermal power generation> �Flexibly operating thermal power plants in use, and launching new thermal power plants ○Improving efficiency of thermal power generation ¥3.61 billion (¥1.1 billion)

<Expanding utilization of private power generation> ○Encouraging installations of private power generation systems

(Supplementary) [Initial: reconstruction quota]

<Expanding utilization of renewable energy, gas, etc.> � Expanding introduction of renewable energy through the FIT program � Pushing ahead with regulatory reforms for expanding utilization of renewable energy

(reexamining rules on electric power systems, etc.) ○Demonstration/R&D on renewable energy technologies (see below) ○Electric power systems stabilization program ¥2.44 billion (¥1.24 billion) ○Encouraging installations of gas cogeneration ¥3.8 billion (¥2.03 billion)

2. Pushing ahead with the effective utilization of energy (establishing and spreading out “smart communities”)

To create smart communities that provide regional-based optimal energy management services, the government will identify possible problems through demonstration projects, solve problems that are posing obstacles and provide support for spreading out smart communities.

In addition, by working with other policy actions related with infrastructure/systems exports, the government will support overseas expansion of energy saving or renewable energy-related projects as well as the overseas expansion of smart communities consisting of approximately 650 firms, including a private-public collaborative unit, the “Smart Community Alliance.” In addition, the government will create smart communities as Japan’s new energy-related industry cluster by employing expertise and knowhow available at home and abroad (see below).

� To encourage comprehensive energy utilization incorporating energy saving, renewable energies and energy storage, the government will examine the feasibility of new legislation for consumers and suppliers (see above).

○Encouraging the spread of smart communities, including demonstrations of smart communities in four regions in Japan ¥15.68 billion (¥18.4 billion)

○Pushing ahead with overseas demonstration projects on technologies/systems related to smart communities in accordance with intergovernmental agreements, etc.

¥20.4 billion (¥19 billion)

2. Reexamining nuclear policies and reforming the electric power system

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As for nuclear safety, METI will spin off the nuclear safety regulation section of NISA (Nuclear and Industrial Safety Agency) and will make all-out contributions to the launch of new organizations or systemic reforms in order to establish new safety regulations/programs by breaking away from the “safety myth” of the past. In addition, METI will also review nuclear policies including nuclear fuel cycle-related policies, without prejudgment.

Furthermore, the government will drastically reexamine the electric power system to achieve a new electric power demand-supply structure that will achieve a stable supply, environmental friendliness and economic efficiency.

1. Reexamining nuclear policies

To restructure a trustworthy nuclear safety regime, in line with the “Basic Policy on Organization Reforms related with Nuclear Safety Regulations”11, the government will drastically enhance and reexamine nuclear safety regulations/organizations. In addition, it will strive to enhance disaster prevention programs and push ahead with supporting technical development projects for improving the safety of nuclear power plants.

In accordance with nuclear safety-related experiences and expertise that Japan has learned as lessons from the earthquake this time, the government will contribute to nuclear safety in the world by jointly holding international conferences on nuclear safety with the International Atomic Energy Agency (IAEA), enhancing collaborations with the IAEA or other international organizations, or conducting bilateral technical cooperation, etc.

It will also examine nuclear policies, including nuclear fuel cycle policies, without prejudgment.

The government will also push ahead with the present nuclear collaborative projects with other nations by paying attention to diplomatic negotiations so far and avoiding damaging mutual trust relationships with other nations.

�� Spinning off the nuclear safety regulation section of NISA from METI and setting up the “Nuclear Safety Agency (tentative name)” as an affiliated agency of the Ministry of Environment

� Drastically reexamining ordinary nuclear safety regulations in line with IAEA reports � Drastically reexamining possible actions on nuclear disasters ○Supporting locations where nuclear power plants are located ¥12.334 billion (¥130.05 billion) ○Enhancing off-site centers nationwide (Supplementary) ○Enhancing nuclear disaster prevention programs in collaboration with local governments

¥6.49 billion (new) ○Conducting surveys on composite geologic risk evaluation resulting from earthquakes or tsunami

disasters (Supplementary) ○Comprehensive observatory surveys on underground water for forecasting an East Nankai or

South Nankai Earthquake (Supplementary) ○ R&D on technologies contributing to improving safety programs at existing nuclear power

stations ¥5.98 billion (new) ○Holding nuclear safety-related international conferences in Japan jointly with IAEA

¥360 million (new)

11 Cabinet decision (August 15, 2011)

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○Contributing to nuclear safety in the world by making use of Japanese technologies or experiences ¥350 million (¥320 million)

�Checking out nuclear policies including nuclear fuel cycle-related policies, without prejudgment

2. Reforming for establishing new electric power generation systems

To establish an electricity supply regime tolerable to earthquake damage or accidents, the government will enhance large-area interconnected grids or interregional electricity supply programs by strengthening its involvement in supply planning and strengthening interregional interconnected grids.

To address higher electricity costs, the government will encourage participation of ordinary power utilities, independent power utilities (IPPs)12, newly-launched retailers (PPS) 13 or other suppliers and take necessary actions to smoothly utilize private power generation systems or cogeneration systems.

In addition, in line with discussions on possible approaches on nuclear power generation or future energy best-mix, the government will examine necessary policy action for establishing effective and efficient electric power supply programs, such as separation between power generation and power distribution.

(1) Enhancing wide-area interconnected grids or interregional electricity supply programsTo enhance wide-area interconnected grids or interregional electricity supply programs, METI

will examine the feasibility of strengthening the central government’s involvement the supply planning processes of power utilities.

It will also examine the enhancement of interregional interconnected grids, including the addition of frequency converters by power utilities14and provide support for the enhancement of emergency responsive capabilities of power utilities.

�Examining the feasibility of the central government’s stronger involvement in supply planning process

�Adding frequency converters by power utilities and developing/conducting plans on enhancement of interregional interconnected grids

(2) Striking a demand-supply balance with participation of various suppliers and achieving an efficient supply framework

From the viewpoints of encouraging various suppliers such as IPPs, PPS, private power generators, cogeneration systems and reducing costs through accelerating competition, the government will drastically reexamine the feasibility of the separation between power generation and power distribution, scope of liberalization of retail services, or cost-based fare systems on the entire electric power system.

�Examining possible electric power system reforms to achieve demand-supply balance and efficient supply framework with participation of various suppliers, including reexamining the consignation rule program

12 Independent power producers. Due to an amendment to the Electricity Enterprises Act in 1995, ordinary suppliers are able to supply their electric power to power utilities for wholesale purposes.

13 Power producer and suppliers: Provide electric power through power distribution lines owned by ordinary power suppliers to consumers with a contract electric output of 50kw or larger.

14 Converters for interconnecting two alternating current systems with different frequencies. Japan has two frequency zones: 50Hz for Eastern Japan; and 60Hz for Western Japan, with the Fuji River in Shizuoka Prefecture serving as the border.

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� Examining possible utilization of wholesale electric power, such as IPPs � Reexamining the entire electric power system, including separation between power generation

and power distribution, scope of liberalization of retail services, or fare systems

3. Drastically enhancing resources/ stable energy supply scheme

The Great East Japan Earthquake has revealed the fact that Japan’s energy supply systems are vulnerable to natural disasters because such disasters can fragment oil/gas supply systems and interrupts interregional electric power supply programs. For this reason, the government will reconstruct domestic supply programs for stable energy supply purposes and set up a robust energy demand-supply structure at home and on a pan-Asian scale in order to create a stronger resources/energy supply framework in Japan.

As Japan depends on imports for more than 90% of its energy demand, a stable energy supply from overseas is absolutely necessary. In particular, as demand for natural gas gets stronger due to increased electricity supply from thermal power generation after the Great East Japan Earthquake, a stable supply of energy, including from natural gas, is becoming more important. While competition for resources is getting stiffer due to stronger energy demand among emerging economies and the structural rise of energy prices, the government will strongly support the acquisition of upstream interests by Japanese firms by making use of the merits of a stronger yen, aiming at a stable energy supply.

As rare earths15 are facing a seriously tight supply on a worldwide scale, the government will enhance overseas materials procurement activities, develop alternative materials, and establish a stable domestic resource recycling scheme.

1. Early reconstruction and enhancement of the domestic energy supply network

The government will strive to restore oil/gas bases damaged or destroyed due to the earthquake as soon as possible.

Then, in preparation for possible recurrence of serious earthquakes, the government will create stronger energy supply networks for oil, gas and electric power at the time of crisis.

(1) Reestablishing oil/gas supply networks in affected areasThe government will strive to restore gas terminals, LNG bases, SS (service stations) and

other oil/gas supply networks damaged due to the earthquake as soon as possible.

○� Restoring LNG bases, SS (service stations) and other oil/gas bases damaged or destroyed due to the earthquake as soon as possible [Budget] (Supplementary)/[ The government investment and loan program] ¥11.5 billion (new)

15 One of the 31 types of rare metals. It collectively refers to 17 types of elements, such as dysprosium and cerium. As exports from China, which accounts for approximately 96% of the world production output, have been decreasing, the global demand-supply balance will possibly tighten.

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(2) Maintaining/enhancing stable energy supply schemes at the time of disastersWhile paying due attention to environmental friendliness and policy actions on low population

areas, as well as maintaining oil products distribution networks, the government enhance core oil bases and core service stations for quickly supplying oil and gas to affected areas at the time of disasters, strengthen supply schemes in preparation for possible disasters, and further strengthen oil stockpiling programs, including contingency planning.

In addition, it will examine the enhancement of interregional interconnected grids, including addition of frequency converters, and provide support for enhancement of emergency responsive capabilities (see above).

○Enhancing oil the products/oil gas supply regime in preparation for the reoccurrence of disasters (Supplementary) ¥18.9 billion (new)

� Examining the feasibility of new legislation on enhancing the oil supply framework in preparation for disasters

○ Investigating/analyzing the appropriate infrastructure, such as gas pipelines that are tolerant to natural disasters and support stable energy supply

(Supplementary)

2. Establishing stable energy supply schemes on a pan-Asian scale

As energy demand in Asia is estimated to rise at an explosive pace, joint efforts will be necessary on a pan-Asian scale. For this reason, the government will push ahead with advanced energy consumption and create an international collaborative scheme on a pan-Asian scale to stably supply energy, including during emergencies.

To be more specific, the Economic Research Institute for ASEAN and East Asia (ERIA)16 will play central roles to develop East Asia energy demand-supply outlooks, prepare master plans for electric power infrastructures or emergency response mechanisms and push ahead with the concept of low-carbon model cities.

○Enhancing international collaborative framework on a pan-Asian scale, with ERIA playing a central role ¥710 million (¥90 million)

�Playing a leading role in energy issues in Asia with ERIA serving as core unit in the EAS framework

�Pushing ahead with energy saving and low-carbon practices in Asia by utilizing the APEC framework

3. Enhancing the acquisitions of interests in upstream sections

In light of stronger demand for resources on a worldwide scale, mainly in Asia, as well as the structural rise in resource prices, it is necessary to drastically enhance resource procurement efforts. In particular, as demand for natural gas gets stronger due to expanded electric power supply from thermal power plants, the government will strongly support acquisition of upstream interests by Japanese firms by making use of the merits of a stronger yen. It will also strive to strengthen further stable supply of rare metals and rare earths, which are showing rapid price rises.

To be more specific, the government will drastically enhance overseas resource

16 Economic Research Institute for ASEAN and East Asia. It is an international research organization that analyses problems in East Asia, plans possible policy actions and suggests recommendations through policy research and statistics collection activities that will contribute to economic integration in East Asia.

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procurement activities by 1) creating packages with infrastructure development projects, 2) enhancing risk money supply, and 3) strengthening R&D capabilities.

In addition, the government will also push ahead with investigation/R&D efforts to exploit domestic resources, the most stable energy resources for Japan.

(1) Creating packages with infrastructure development projectsIn line with the needs and development phases in resource-rich nations, the government will

create comprehensive packages with human resource development programs, program support projects, industrial development projects and infrastructure/systems export projects for resource-rich nations and push ahead with strategic resource procurement and negotiations on natural resources rights from long-term perspectives. In this process, the government will push ahead with private sector interaction projects among business organizations and other private-public collaborative projects.

�Pushing ahead with public-private sector dialogues at multilateral meetings, such as the “Japan-Arab Economic Forum”

�Expanding bilateral collaborative frameworks with high propriety nations and enhancing high-level dialogues

○Securing stable energy supply by enhancing relationships with oil-producing nations through conducting collaborative projects suitable to needs of oil-producing nations and encouraging Japanese firms’ investment in oil-production nations

¥2.5 billion (new) ○Acquiring resources interests through resource exploration support for foreign governments by

using a hyper spectral sensor ¥2 billion (¥2.17 billion)

(2) Enhancing risk money supplyThe government will examine the feasibility of drastically enhancing risk money supplying

capabilities of Japan Oil, Gas and Metals National Corporation (JOGMEC) and enhance/expand public financial support programs, aiming to strengthen finance capabilities for resource procurement purposes.

�� Examining the feasibility of expanding JOGMEC’s investment in development projects on natural gas or metallic minerals or mineral exploitation/development projects on coal or geothermal resources

[The government investment and loan program] ¥94.67 billion (¥12.1 billion) ○Investing in asset acquisitions on rare earth mines through JOGMEC investments

(Supplementary) ○Investing in natural gas-related minerals exploitation and asset acquisition projects

(Supplementary) ¥52.95 billion (¥8.5 billion)

(3) Strengthening R&D capabilities.The government will aim to expand/increase resource procurement agencies (developers),

such as the proactive participation of user firms, including automakers, consumer electronics firms and camera manufacturers, flexible international collaboration projects, and JOGMEC’s proactive mineral exploitation projects with particularly high risk. In addition, it will transfer coal resources development operations of the New Energy and Industrial Technology Development Organization (NEDO) to JOGMEC, aiming to enhance operations of JOGMEC as a “comprehensive resource developer.”

�Encouraging proactive participation of user firms � Examining the feasibility of proactive mineral exploration projects of JOGMEC

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� Examining the feasibility of transferring NEDO’s coal resources development operations to JOGMEC

(4) Conducting surveys/R&D for developing domestic resourcesTo develop oil and natural gas in the sea near Japan as the most stable energy sources for

Japan, the government will push ahead with exploitation with the exploration vessel “Shigen,” conducting surveys on promising sea areas and R&D on production technologies of methane hydrate. In addition, it will further enhance commercialization of marine mineral resources, such as submarine hydrothermal deposits and cobalt-rich crust. By using the knowhow on resource development of JOGMEC, the government will further push ahead with developing geothermal resources as Japan has the world’s top-level geothermal resources, which are still underdeveloped.

○Basic surveys on domestic oil natural gas resources ¥16.17 billion (¥16.14 billion) ○Methane hydrate development support project ¥15.32 billion (¥8.93 billion) ○Marine mineral resources basic survey project ¥650 million (¥650 million) ○Deep-sea mineral basic survey project ¥3.82 billion (¥660 million) ○Geothermal resources exploitation support survey ¥10.25 billion (new)

4. Creating stable supply schemes for rare metals and rare earths

As for rare metals or rare earths, it is extremely dangerous to heavily depend on certain supplier nations because they are unevenly distributed. In this context, the government will further work on supporting R&D on alternative materials at rare metal/rare earth user firms, supporting installations of production equipment and pushing ahead with recycling/stockpiling of rare metals/rare earths. While absorbing a price hike in the entire supply chain as well as limiting necessary end users, the government will take the most appropriate actions for each mineral type, paying due attention to the current progress status and economic rationality.

<Maintaining rare earths import volumes> ○Acquiring mine assets, such as rare earths mines through investment in JOGMEC (see above) ○Pushing ahead with resources procurement through exploitation on rare earths mineral deposits

¥2.29 billion (¥2.09 billion)

<Alternative materials development> ○Rare metals alternative materials development project ¥820 million (¥740 million) ○Next-generation automobile-use high-efficiency motor magnetic materials technical development

¥4 billion (new) ○ Rare earths consumption reduction/substitutive technology development (Supplementary)

<Pushing ahead with recycling> �Developing a “Rare Metals Recycling Action Plan (tentative name)” ○R&D/demonstration of rare metals recycling ¥240 million (new)

<Enhancing stockpiling> ○Rare metals stockpiling project ¥480 million (¥420 million)

<Limiting end-users> �Examining the feasibility of encouraging corporations to reduce rare earths consumption by

limiting necessary end users of rare earths

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4. Realization of a new best-mix of energy sources

In addition to starting to drastically reexamine the current “Energy Basic Plan,” the government will launch a new best-mix of energy sources, taking into consideration the short, medium and long term. In this process, the government will suggest several scenarios including costs, CO2 emissions and examine possible best mix by checking out advantages and disadvantages of each scenario.

In the short term (1-3 years), the government will put emphasis on stable energy supply in order to underpin “reconstruction/recovery” in affected areas and “revitalization of the Japanese economy.”

In the medium term (3-10 years), it will strike a balance between economic efficiency and environmental friendliness while keeping stable supply, aiming to attain “sustainable growth.”

In the long term (10-20 years), it will achieve the world’s strongest energy demand-supply structure based on outcomes of innovations.

�Starting to discussions at Advisory Committee on Energy and Natural Resources to drastically reexamine the “Energy Basic Plan”

�Striking balance between “safety,” “stable supply,” “economic efficiency” and “environmental friendliness” and developing basic policies on “Innovative Energy and Environment Strategies,” which will serve as a driving force for future economic growth, around the year-end, with the Energy and Environment Council playing a central role

�� Energy and Environment Council will develop “Innovative Energy and Environment Strategies” consisting of a new best-mix (New Energy Basic Plan) around the next summer.

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Chapter 3: Standing up against the rapidly stronger yen and industrial hollowing-out, and working to solve problems in the Japanese economy

1. Preventing outflow of important technologies and industries

To urgently address rapid industrial hollowing-out resulting from a considerably stronger yen and electric power demand-supply problems, the government will attract to domestic market production/R&D bases of important technologies/industries if they underpin the Japanese economy or employment in Japan. They include unsubstitutable parts or materials that serve as core products in the supply chain. At the same time, it will provide support SMEs capital spending that will underpin the local economy.

○Supporting establishment of domestic base of large corporations or SMEs (Supplementary) [Initial: Reconstruction quota]

○Pushing ahead with set-up of domestic bases of innovative low-carbon technology-intensive industries ¥10 billion (¥7.14 billion)

2. Achieving international equal footing for the domestic business environment

To enhance Japan’s locational competitiveness that has further deteriorated due to the Great East Japan Earthquake, the government will further push ahead with policy actions on the longstanding “five challenges,” such as the stronger yen, a higher corporate effective tax rate than the international standard, lower wages in emerging economies, the global warming problem, and delayed economic partnerships, including TPP (see below). In addition, the government will take quick and sweeping actions on electric supply shortages, higher electricity costs (see above) and vulnerable supply chains because these factors have further deteriorated the business environment in Japan after the Great Earthquake.

(1) Achieving an internationally equal footing in the tax system, such as reducing the corporate effective tax rate

To enhance Japan’s locational competitiveness, the government aims to reduce the corporate effective tax rate as soon as possible.

As with other nations, Japan will make efforts to make the naphtha tax exemption program a permanent scheme as set forth in the main rules because naphtha is used in many petrochemical products, etc.

In addition, from the viewpoint of encouraging capital spending in local areas and mitigating paperwork imposed on corporations, the central government will encourage local governments to reexamine local corporate taxation practices, such as internationally unusual municipal property taxes on depreciable assets, in the discussions on local tax/fiscal reforms.

□Reducing the corporate effective tax rate □Making the naphtha tax exemption program a permanent scheme as set forth in the main rules

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□Reexamining municipal property tax on depreciable assets

(2) Revitalizing the domestic automobile market, etc.By revitalizing domestic automobile market via reexamination of auto body taxation, the

government will strive to avoid industrial hollowing-out through revitalizing domestic markets and increasing the number of corporations at home.

□Reexamining auto body taxation (3) Making Japan a hub in Asia

Lawmakers will aim to pass “Bill on Special Measures on Encouraging R&D Activities of Specified Multinational Corporations (Asian Hub Promotion Bill)” at the Diet. Then, the government will develop the “Asian Hub and Inward Direct Investment Promotion Program (tentative name)” by the year-end and launch the policy package consisting of 1) attracting corporations to Japan by enhancing incentives such as mitigating corporate tax, granting corporate location subsidies, utilizing special zone programs or reexamining immigration management practices, 2) improving Japan’s business environment to the world-class level, and 3) providing living environment friendly to foreigners.

By taking these policy actions, the government will aim to attract more than 300,000 high-value-added corporate bases at home a year and to double job opportunities provided by multinational corporations (raising 750,000 job opportunities to 2 million by the year 2020).

� Passing the “Asian Hub Promotion Bill” in the Diet as soon as possible �Developing the “Asian Hub and Inward Direct Investment Promotion Program (tentative name)”

� Strategically attracting enterprises at home (enhancing incentives)

The central government, JETRO and local governments will work together to attract foreign firms to Japan in “All Japan” efforts by passing the “Asian Hub Promotion Bill” incorporating a reduction of corporate tax and quicker immigration procedures, granting business location subsidies, providing selective support through “Asian Hub Special Zones (tentative name)” (aiming to set up such special zones at 3 locations by 2012), and pushing ahead with accepting skilled foreign human resources based on a “points program.”

○Asian Hub Business Location Promotion Program ¥570 million (¥590 million) � Setting up “Asian Hub Special Zones (tentative name)” � Granting “points-based” preferential immigration treatment (permanent residency, spouse’s

working permits, etc.) � Conducting surveys on the creation of new residence visa status for foreign new business

owners, encompassing preparations for starting new businesses, establishing new firms and conducting business operations.

� Improving the business environment

Analysts have been pointing out that “closed and unusual market practices,” “stringent regulations and business licenses” and “complicated administrative procedures” are creating obstacles when foreign firms intend to launch new businesses in Japan. For this reason, the government will continue pushing ahead with relaxing regulations, enhance one-stop services for foreign investors and intensify English information services for international business purposes so that foreign firms will be able to smoothly operate their business activities here in Japan.

�Enhancing/expanding JETRO’s one-stop services (JETRO will serve as the one-stop service provider of inward direct investment-related information services, which were dispersed among multiple ministries/agencies in the past; and the government will launch administrative procedures agency services related with foreign investments.)

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�Accepting applications for administrative procedures in English and intensifying policy-related information services in English

� Improving the living environment

Some skilled foreign workers are starting to cease working in Japan after the Great East Japan Earthquake facing objections from their accompanying family members. To improve the living environment so that highly-skilled foreign workers as well as their family members will be able to lead their life without anxieties, the government will increase international schools, provide medical services in their mother languages and provide housing-related support.

� Setting more flexible requirements for setting up international schools �Providing better environment so that foreigners will have access to medical services without

anxiety �Supporting fostering international medical coordinators �Encouraging one-stop and English-based services in local governmental administration

procedures for the daily life of foreign residents �Providing information for smoothly finding residences without the need of a guarantor

(4) Addressing global warmingAs a sharp drop of CO2 emissions at home due to nuclear power generation is unlikely from

now on, the government will take fine-tuned policy actions and set aside necessary revenue sources for energy saving/new energy programs (see above) and the expansion of the domestic credit program,17 and will reexamine the feasibility of global warming-related programs, paying due attention to impact of the earthquake damage and review the results of energy policies.

In addition, in relation to future negotiations on global warming, the government will tenaciously work on negotiations at COP 17 or COP 18 to establish an equal and effective international framework encompassing all of the major nations, and will contribute to global warming countermeasures projects on a worldwide scale by deploying Japan’s highly-competitive environmental technologies/products in overseas markets (see below).

○�Expanding the domestic credit programs that make use of offsets, carbon footprints or CSR ¥2.96 billion (¥1.01 billion)

�Encouraging industry to develop low-carbon society action plans □Introducing a “Tax to Combat Global Warming” as soon as possible to enhance energy-derived

CO2 emissions reduction programs �Reexamining the feasibility of global warming countermeasures projects, paying attention to

review results of energy policies �Negotiating at COP 17 or COP 18 to establish an equal and effective international framework

encompassing all of the major nations

(5) Creating stronger domestic supply chainsBy strengthening collaborations between upstream and downstream sectors, the government

will strive to create stronger, highly-efficient supply chains capable of addressing risk factors. In addition, a business environment for stable industrial activities is essential for creating stronger supply chains. To this end, the government will examine appropriate services for industrial safety purposes, aiming to further improve industrial safety.

�Supporting the development of business continuity plans (BCPs) 18

17 In the domestic credit program, greenhouse gas emissions reduction volumes are accredited for SMEs by using technologies/funds provided by large corporations. SMEs may use their reduction volume for attaining their targets in voluntary action plans or trial emissions trading schemes.

18 Business continuity plan: A comprehensive action plan that analyzes/assumes possible risks preventing continuation of business operations in advance and stipulates minimum tasks necessary for business.

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�Sorting out and standardizing well-balanced specs/parts �Sorting out important points for antimonopoly law purposes in relation with concerted activities

at the time of emergency ○ Creating advanced distribution/logistics systems by visualization of supply chains

(Supplementary) ¥1.02 billion (new) [Reconstruction quota] � Examining appropriate industrial safety civil services

3. Enhancing economic partnerships with larger markets

As the domestic market has been shrinking, drawing on stronger overseas demand is essential to achieve sustainable growth in Japan. However, as corporations might further flow out from Japan, affected by the negative impact of the Great East Japan Earthquake, Japan is more likely to get left behind from economic growth in the world. For this reason, Japan needs to enhance economic partnership efforts with major market nations in order to revitalize the Japanese economy.

The Economic Integration Agreement (EIA) with the EU will eliminate the competitive disadvantage of Japanese firms over companies of South Korea, which has already entered into an FTA for the European market. The EIA also has the potential to back up reforms of Japan’s economic structure through industrial cooperation and rule-making, including regulations or standards in the state-of-the-art sectors.

In addition, the Japan-China-Korea FTA and Comprehensive Economic Partnership in East Asia (CEPEA) are expected to deepen economic relationships between Japan and high-growth East Asian markets and will serve as the foundation for strengthening Japan’s global supply chains. Taking advantage of these trends is important for achieving economic growth while opening up the domestic market to the world.

Furthermore, the Trans-Pacific Partnership (TPP) is an attempt to create a seamless 21st Century business environment in the Asia Pacific region through reducing tariffs, harmonizing regulations and improving the efficiency of supply chains.

In this context, while firmly maintaining the “Basic Policy on Comprehensive Economic Partnerships,” 19 the government will work on drastic domestic reforms, including enhancing competitiveness necessary for high-level economic partnerships, and push ahead with “economic partnerships for deeper relations,” such as the EIA and a Japan-China-Korea FTA. It will make final a decision on participating in TPP negotiations as early as possible.

<EIA> By steadily working on scoping tasks to determine the outline of negotiations, Japan aims to

formally participate in EIA negotiations, with view to the timing of the G20 Summit meeting in November 2011.

<Japan-China-Korea FTA> To finish off the industry-academic-government joint research project during the current

fiscal year and take follow-up actions thereafter, the government will accelerate the said joint research project, aiming to form a consensus to start negotiations at the Japan-China-Korea summit scheduled in the next year.

continuation as well as estimated restoration time and possible countermeasures. 19 Cabinet decision (November 9, 2010)

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<CEPEA> While strategically making use of ERIA that is influential in ASEAN economic integration,

the government aims to set up a new working group at the East Asia Summit in November 2011 that examines the feasibility of liberalization of trade investment and start negotiations as soon as possible.

<TPP> To make a decision to participate in TPP negotiations as soon as possible, the government

will collect information, provide correct information to local governments and citizens in general, and examine the possible impact on domestic industry, including the impact of the rule-making process.

4. Establishing tax/social security schemes compatible with economic growth

Japan’s socioeconomic systems, including social security programs, are created, assuming that a larger number of younger people will support a smaller number of senior citizens. If this trend continues, future generations and currently working generations will face excessively heavy burdens, sending down investment for the future. Japan will possibly fail to maintain economic viability and its social security system in the future.

In this context, to achieve a virtuous cycle between economic growth and social security and create active socioeconomic structure even under dwindling birthrate and aging population, the government will steadily push ahead with social security and taxation integrated reform.

�Steadily pushing ahead with social security and taxation integrated reform �� Industrial Structure Council will analyze what kind of impacts the social security and

taxation integrated reform will pose on Japan’s economic/industrial structures and examine appropriate social security scheme compatible with economic growth.

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Chapter 4: Achieving new growth through the revitalization of domestic demand, the globalized economy and innovations

1. Expanding domestic demand and creating new markets ahead of the world

Both the domestic and global markets are facing fluctuations in the existing industrial/business structures, bringing about changes in sources of value added. Under such a situation, it is becoming important to create new business models or new industries that will stipulate new consumer demand beyond the conventional framework.

The government will strongly support corporations that will generate new values as well as new ventures, start-ups and other projects that will draw on overseas economic vitalities, aiming to shift away from stagnation through new growth.

1. Creating “integrated-type new industries” with help of IT integration

You are unable to maintain your competitive edge by simply addressing a specific business field, technology or market (because competition structure has changed in the market). Rather than simply depending on its competitive edge in element technologies, Japan will support the creation of IT integration-based 20 new system industries (integration-type new industries), which are supposedly deployed overseas from the beginning and are capable of flexibly coping with changes in industrial structure.

Among these new industries, the government aims to take control21 of the following six system areas (*) at the global level, such as “control systems,” “integrated platforms,” “social systems,” and other priority areas in which Japan has a competitive edge. To this end, industry-academic-government joint programs that encompass various industries/sectors will take necessary actions by forming a “Integration System Industry Forum (tentative name)” and providing support to system design/development efforts.

(* Six priority areas)

Rather than marketing Japan’s highly-competitive elemental technologies or individual products/services separately, the nation should launch a new high-value-added businesses by creating a new packaged system incorporating elemental technologies or individual products/services with control software by making use of IT. At first, the nation will create new

20 It means creation of new value added, businesses or social systems by combining different industries or companies via IT.

21 Taking control over system fields will lead to gaining control over important portions of competitors’ attractive equipment or contents, bringing about a competitive edge over competitors. ��Control system”: IT-based system that controls equipment performance or information flow. This includes

systems that control electric power demand and supply on the community basis by introducing renewable energies or storage batteries.

��Integrated platform”: IT-based platform that bundles information or services and provides them to many people through communications network. For example, if you have a platform that provides integrated information on energy demand-supply or transportation, you will be able to provide new services because a lot of people are using your information.

��Social system”: IT-based system that supports the society’s framework. For example, this kind of system includes network systems that underpin various programs/schemes in power utilities or medical sectors.

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businesses in the following six areas in which Japan has competitive edge over elemental technologies.

These areas include: 1) smart communities; 2) smart healthcare industry; 3) robots incorporated in social systems; automobiles and transportation systems serving as information terminals; 5) smart agri-systems; and 6) content creative business.

(1) Forming an “Integration System Industry Forum (tentative name)”To create the integration new businesses, the government will encourage cross-industrial

partnerships by forming an “Integration System Industry Forum (tentative name).” The Forum will extract/sort out images of appropriate social systems, examine business architectures, provide necessary information and reexamine related regulations.

�Forming the “Integration System Industry Forum (tentative name)”

(2) Supporting design/development of integration systemsThe government will provide support to corporate consortia in integration new business when

they draw the overall system architectures, collect necessary elemental technologies or contents by involving related firms and develop/demonstrate the overall systems. In addition, the government will also work on developing/demonstrating tasks on cross-sectional problems (security of big data).

○R&D project for IT integration-based new business creation ¥1.5 billion (new) ○Fundamental technology development for improving credibility/safety of big data underpinning

integration new businesses ¥770 million (¥740 million) ○Pushing ahead with concentrating/standardizing probe data22 ¥500 million (¥170 million)

(3) Supporting supply of risk money and formation of core firmsWhen commercializing IT integration systems, stakeholder firms need to have their common

targets on commercialization and mutually share commercialization data to flexibly and strategically launch new business. Through risk money supply from the Innovation Network Corporation of Japan,23 the government will provide support formation of core firms ((1) jointly establishing operating firms that will integrate individual technologies or systems; (2) forming a consortium mainly through acquisition of other firms, etc.)

� Supplying risk money from the Innovation Network Corporation of Japan (Supplementary) ¥10 billion maximum (¥40 billion maximum)

�Pushing ahead with “new firm selling contents overseas” projects bound for overseas markets

2. Promoting new energy industry clusters

Markets for renewable energies, energy saving and smart communities are expanding on a global scale because active efforts are made at home and abroad in order to address constrained energy supply and environmental restrictions. Industrial groups that support these sectors will see significant business opportunities in the future. Japan has a competitive edge in these sectors to a certain extent, but it is losing it in cost competitions in some cases. For this reason, it is necessary to reduce production costs, improve

22 Vehicle’s location data collected with GPS equipped with the car body 23 It is a corporation invested both by the public and private sectors. It is established in accordance with “ Act

on Special Measures for Industrial Revitalization and Innovation” in order to provide support to cutting-edge technologies and commercialization of patent rights.

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technologies and strategically maintain/strengthen Japan’s competitive edge with view to trends in the world market.

To be more specific, Japan should make efforts to maintain/strengthen its competitive edge in the parts/materials sectors, over which the nation has been competitive so far. In addition, the system integrator sector enjoys a higher profit ratio, but Japanese system integrators are playing second fiddle to overseas companies. For this reason, Japan will strive to enhance competitive edge in the system integrator sector, aiming to accelerate market entry in the system integrator sector.

The government will support R&D and demonstration projects. In addition, as foreign nations are making government-led international standardization efforts on a full-scale basis, it will also provide comprehensive support to strategic and quick international standardization projects of Japanese firms. Japan is highly competitive in wind power generation, storage battery and fuel cell projects because the nation has strong manufacturing capabilities in these fields. For this reason, the government will encourage venture businesses and SMEs to tap into these markets.

<R&D/demonstration projects> ○Encouraging the spread of smart communities, including the demonstration of smart communities

in four regions in Japan (see above) ○Pushing ahead with overseas demonstration projects on technologies/systems related to smart

communities in accordance with intergovernmental agreements, etc. (see above) ○Demonstration/R&D on energy saving technologies ¥12.8 billion (¥10.99 billion) ○Demonstration/R&D on renewable energies ¥28.06 billion (¥16.36 billion)

� Photovoltaic power generation-related ¥12.68 billion (¥8.04 billion) � Wind power generation-related ¥7.51 billion (¥4.51 billion) � Small- and medium-size hydro power generation-related ¥3.27 billion (¥1.23 billion) � Biomass energy-related ¥2.5 billion (¥1.58 billion) � Ocean energy-related ¥2.1 billion (¥1.0 billion)

○Demonstration/R&D on storage battery technologies ¥9.5 billion (¥7.48 billion) ○Demonstration/R&D on fuel cell technologies ¥11.92 billion (¥7.56 billion) ○Encouraging introduction of clear energies to automobiles ¥45.71 billion (¥28.21 billion)

<Supporting international standardization> ○Enhancing common platforms, such as new energies ¥1 billion (new)

<Encouraging market entries by venture businesses and SMEs> ○New energy technical innovation/business creation project ¥2 billion (¥1.6 billion)

3. Creating growth-type longevity industries

To take advantage of the dwindling birthrate and aging population as a driving force for new growth, the government will push ahead with growth strategies in a longevity society, such as creating new industries through pushing ahead with “life innovations” in medical services and nursing care sectors.

In particular, medical-related industries are estimated to grow sharply in the future due to the aging population, but the fiscal balance of Japan’s public insurance programs is getting tighter. In this situation, the government will strive to create health-related services independent of public insurance programs as a new industry, leading to job opportunity creation and the development of local economies. In addition, by satisfying high-growth overseas demand, the government will achieve growth of medical-related industries.

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By making use of the high-level technical capabilities of Japanese manufacturers, the government aims to create innovative medical products and medical/welfare equipment from Japan.

By pushing ahead with “life innovation” in the medical services and nursing care sectors in this way, Japan aims to create new markets worth approximately ¥50 trillion in total by the year 2020.

(1) Pushing ahead with developing/commercializing Japan-made medical services “marketable in the world” and drawing on overseas demandThe government will push ahead with developing/commercializing state-of-the-art medical

equipment and regenerative medical techniques that make use of Japan’s competitive edge manufacturing technologies or stem cell-related technologies. It will also promote overseas business expansion by packaging medical services/equipment and IT systems, and make efforts to attract overseas patients for medical services in Japan (such as providing one-stop services and overseas information services).

○Pushing ahead with global sales growth in medical equipment/services ¥1.4 billion (new) ○Cancer ultra-early detection/treatment equipment R&D project ¥1.1 billion (¥680 million) ○Next-generation alternative technologies R&D project ¥550 million (¥430 million) ○Drafting guidelines for encouraging R&D/commercializing medical equipment, etc.

¥70 million (¥70 million) ○Evaluation-based technology development project for putting stem cells in practical use

¥1.5 billion (¥230 million)

(2) Creating/fostering industries that will underpin sustainable social security schemeThe government will push ahead with developing/putting into practice tailor-made medical

services and early diagnosis technology life support robots that will contribute to efficiently providing medical and nursing care services. In addition, it will also promote creating/commercializing and spreading out uninsured services in collaboration with medical and nursing care institutions.

�Research project on regulatory reform and industry creation in medical and nursing-care-related sectors

○Pushing ahead with creating regional healthcare industry (Supplementary) ¥900 million (new) ○Life support robots commercialization project ¥1.3 billion (¥1.15 billion)

(3) Supporting market entries, start-ups and new business creations by SMEs or non-medical firmsTo support manufacturers’ market entries to the medical sector and start-up of new bio

ventures, the government will improve business environment and also support joint R&D projects between SMEs and medical-related institutions.

○Hospital-company collaboration support project for developing/improving problem-solving-type medical equipment ¥2.5 billion (¥1 billion)

○Drafting guidelines for encouraging R&D/commercializing medical equipment, etc. (see above)

4. Pushing ahead with the Cool Japan strategy

By setting target at China and India where rapid population growth and rising incomes are expected, the government will selectively push ahead with the Cool Japan strategy,

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aiming to attract overseas sightseers. In addition to this initiative, the government will foster younger creators, and improve

the business environment or appropriate programs in which creators at home and abroad will work together in an organized manner so that Japan will continue business creation at home and will see the sustainable development of cultural business.

Through these efforts, the government will strive to expand the market size of Japanese fashion, contents and tourism to ¥8-11 trillion (from the current approximately ¥2.3 trillion) in 2020, out of the total market size of the world’s cultural industry.

(1) Strategically putting emphasis on China and IndiaBy forming consortiums in collaboration with large companies that have sales channels with

the creative resources of SMEs, Japan will push ahead with marketing Cool Japan contents in overseas markets.

To be more specific, with a view to the characteristics of each product, Japan will push ahead with marketing efforts targeting China and India by drafting strategies for each of 1) high-end products for which brand formation and market penetration will go hand-in-hand, 2) mass-marketing products directly permeating into emerging economies, such as high-growth China and India; and 3) products marketed to target nations, such as China and India, after setting up local networks of overseas Chinese and overseas Indians (Chinese and Indian markets via Singapore) due to regulatory circumstances in the target nations. To push ahead with these efforts, the government will utilize intergovernmental frameworks to encourage improvements in the business environment of strategic target nations.

<Strategy for China> Through holding symposiums by housing creators, establishing business models and

conducting Japan-China movie interaction programs (Beijing, Shanghai and Tokyo in November), Japan will push ahead with international joint production efforts, take countermeasures on pirated copies and promote the distribution of legitimate copies.

<Strategy for India> With strategic the target set at Delhi and Mumbai, the government will enter into MOUs with

Indian commerce/industry chambers or government organizations to provide support for contents joint production, mutual interactions in the fashion apparel field and holding G-mark exhibitions in the design field. In addition, Japanese embassies overseas and JETRO will enhance their local business support.

○Creative industry overseas expansion promotion project ¥920 million (¥11.15 billion)

(2) Holding international trade fairs as a foothold for overseas business expansionThe government will hold international trade show “CoFesta (Japan International Contents

Festival)” to support SME’s overseas expansion mainly in the contents industry. In addition, Japan will deliver its outstanding points to the world through EXPO 2012 Yeosu

scheduled to be held in South Korea.

�Holding “CoFesta” trade show ○Japan’s exhibition at EXPO 2012 Yeosu (May to August 2012) ¥990 million (¥940 million)

(3) Improving the creative environment at homeThe government will strive to make the stage for highly-promising young creators and foster

producers by sending them overseas. It will also relax residence status requirements for creators from overseas that do not have

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working permits in accordance with the present criteria. By doing so, it will introduce a new program that will grant working permits, aiming to attract creative human resources from all over the world.

�Fostering producer human resources by sending them abroad � Creating new residence status for creative professions

5. Making agriculture a competitive industry

The government will continue enhancing the agricultural environment so that agriculture in Japan, which plays important roles as a major industry underpinning local economies, will generate profits, sustainably develop as business operations and serve as one of the industries underpinning Japan in the future. In addition, the government will also strive to make agriculture a competitive industry by employing SME supportive measures to support their business operations, introducing manufacturing technologies or business improvement knowhow, providing matching services with consumers and farmers and expanding exports bound for rapidly-expanding Asian markets.

(1) Creating “competitive agriculture” by introducing “entrepreneurship” and innovations in agriculture

To foster/enhance entrepreneurial agricultural business owners, the government will strive to make agriculture a profitable business through consolidation of farmland, provide support for improving business operations via business consulting services or SME support programs, and examine the feasibility of reducing costs of fertilizers and agricultural machinery.

To improve agricultural productivity and increase profitability at production sites, the government will strive to support introduction of the newest technologies, reduce production costs, improve work efficiency and utilize IT.

<Introducing “entrepreneurship” in agriculture> �Spreading out management practices enhancement programs, such as setting up corporations to

enhance the management capabilities of agriculture businesses, and encouraging the utilization of SME support programs, including business counseling services

�Encouraging fund formation for SMEs engaging in agriculture/forestry/fisheries businesses (such as food processing)

�Examining the feasibility of cutting down the costs of fertilizes and agricultural machinery in collaboration with MAFF

<Innovations> ○Cutting-edge agriculture/commerce/industry collaboration commercialization research project

(Supplementary) ○Cutting-edge agriculture industrialization system demonstration project

¥2.2 billion (new) [Reconstruction quota]

(2) Connecting agriculture with consumers and the worldAs with other industries, the agricultural sector should produce what is needed in the market to

attain business growth. The government will push ahead with increasing value-added products and setting up new brands by creating new products that consumers want and by directly connecting farmers and consumers via “regional producers,”24 while identifying various market

24 Human resources that commercialize highly-competitive local agricultural products or food products on their

own and cultivate sales channels for these products by setting up trustworthy relations with local producers.

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needs. In addition, it will attain high-profitability for farmers by expanding new sales channels for them.

In addition, regional producers, agricultural cooperatives, JETRO and other related units, and corporations with appropriate knowhow should closely work together to support the overseas expansion of Japan’s agricultural business.

<Directly connecting farmers and consumers> ○Supporting higher profitability in agriculture through agriculture/commerce/industry

collaboration with consumer needs identified ¥2.2 billion maximum (new) [Reconstruction quota]

�Organizing regional producers �Supporting sustainable matching services with supermarkets or department stores

<Overseas expansion support> �JETRO will set up “agriculture-forestry-fishery products exports counseling desks,” provide

support to matching with overseas local partners and enhance overseas “rescue organization” capabilities

�Encouraging further utilization of trade insurance programs through getting across information among farmers

○Gaining understanding or sending outstanding points of Japanese foods and agriculture through exhibitions by agriculture/commerce/industry partnerships in affected areas (Supplementary)

6. Pushing ahead with an advanced industrial structure for new growth potential and corporate system reforms

Paying attention to the aforementioned trends 1.-5., the government will upgrade Japan’s industrial structure by identifying industry sectors that will cultivate new potential demand at home as well as sectors that will yield high-value added in international work-sharing. As environmental and energy problems are attracting attention from an increased number of people in the world, the government will suggest possible policy directions by examining the appropriate industrial structure compatible with energy constraints. In line with these policy directions, the government will selectively allocate policy resources, such as supporting attracting overseas firms to Japan and the Innovation Network Corporation of Japan’s capital supply services.

By pushing ahead with corporate system reforms in Japan to overcome taxation, labor/human resources and financial problems that pose problems in improving Japan’s competitive edge through industrial reorganization or expanding active firms or high-growth business sectors, the government will selectively deploy business management capabilities to high-growth sectors, and improve the environment so that new growth will be attained.

�“New Industry Structure Committee (tentative name),” Industrial Structure Council will examine the feasibility of upgrading industrial structure compatible with international work-sharing and energy constraints as well as appropriate solutions for corporate system reforms.

2. Seizing demand in emerging economies through joint efforts of the public and private sectors

By supporting Japanese firms’ global operations mainly in high-growth emerging

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Asian economies, such as the export of infrastructures/systems, taking the Cool Japan strategy (see above), and encouraging overseas expansion of Japan’s highly-competitive environment technologies/products, the government will strive to seize overseas demand to enhance the vitality of industries in Japan.

1. Supporting Japanese firms’ global business operations

By encouraging investment agreements, cultivation of emerging economy markets through summit-level diplomacy and overseas M&A of Japanese firms in order to draw on demand in emerging economies, including high-growth Asian nations, the government will support corporate overseas expansion that will bring about positive impacts on employment and the economy in Japan.

In addition, with globalization accelerating, the government will create an appropriate environment to continuously foster “global human resources” that have high-level linguistic/communication skills as well as multicultural experiences and are capable of playing active roles in the international arena.

(1) Cultivating emerging economy markets through summit-level diplomacyThe government will strive to set up a stable business environment in overseas markets by

taking advantage of industrial development opportunities at summit-level diplomacy or public-private partnership programs. In addition, it will push ahead with the cultivation of emerging economy markets by encouraging the overseas M&A of Japanese firms, supplying risk money and enhancing collaboration with international organizations engaging in business operations for the next middle income group.25

�Pushing ahead with business expansion to emerging economy markets by making use of the ASEAN economic ministers’ visit to Japan (roadshow), the Japan-Arab Economic Forum, the 40th anniversary commemorative events for Japan-China Friendship (in 2012) and the Japan-China Energy Conservation Forum

� Granting overseas expansion funds from Innovation Network Corporation of Japan (Supplementary) ¥10 billion maximum (¥40 billion maximum)

�Supporting the overseas expansion of Japanese firms by jointly holding business promotion forums for the next middle-income group in collaboration with international organizations

�Examining appropriate private-public partnership promotion projects for seizing demand from next middle income groups (developing a “New Middle-income Market Strategy (tentative name)” by the end of this fiscal year)

�JETRO’s support for seizing demand from the next middle-income class

(2) Eliminating entry barriers and smoothly handing back profitsThe government will work on eliminating foreign capital restrictions in foreign nations

because such restrictions will yield entry barriers for overseas expansion of Japanese firms. To smoothly conduct debt collections and fund back-flow from emerging economies, the

government will work on harmonization and signing of treaties related to the taxation system, license regulations and investment regulations and will encourage counterpart nations to improve

25 In emerging economies, the next middle-income group means a group of people estimated to shift to the

middle-income group in the future (annual revenue of approximately $3,000-$20,000). The middle-income group is estimated to encompass 5.3 billion people globally in 2030, creating a ¥68 trillion market. Seizing demand from middle-income groups in rapidly growing emerging economies is important in the medium and long run.

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their programs or actual program operations by utilizing bilateral negotiations or annual reports on compliance with international trade agreements.

�Expanding investment agreement networks, such as a Japan-China-Korea investment agreement �Expanding tax treaty networks, including an amendment to the Japan-U.S. tax treaty �Pushing ahead with public-private partnerships for actively engaging in rulemaking in overseas

markets �Encouraging emerging economies to improve their operations of intellectual property or

competition-related legislation or improve/eliminate unfair license restrictions (by utilizing bilateral negotiations, WTO regular committees, or annual reports on compliance with international trade agreements, or establishing collaborative relations with Europe and the U.S.)

�Developing, diffusing and providing information services on manuals on taxation problems in emerging economies, providing information on intellectual property-related regulations, such as trade secret-related programs, and developing reference data or manuals on written contract formats

(3) Fostering “global human resources”METI will work with the “Public-Private Partnership Human Resources Development

Roundtable Meeting,” MEXT and Japan International Cooperation Agency (JICA) to provide support for fostering global human resources.

�The Research Institute of Economy, Trade and Industry (RIETI) 26 will develop/provide educational contents on Asian business for top management and next-generation leaders

�JICA will support young corporate workers’ overseas experiences in emerging economies �Supporting overseas internship programs for students (cultivating companies that accepts

internship students, and diffusing/encouraging “Gap Years”)

2. Strategically pushing ahead with and enhancing infrastructure/systems export

It is necessary to strategically push ahead with infrastructure/systems export, taking into consideration the local conditions and characteristics of each nation/region. The public and private sectors will work together to strategically push ahead with infrastructure/systems export.

To be more specific, Japan aims to win new orders by taking the following actions: 1) actively getting involved from project formation and planning phases, 2) enhancing and promoting the appeal of technical capabilities to satisfy the partner nation’s needs so as to be selected among competitors, and 3) providing comprehensive packages including finance support and technical aid, and making use of summit-level diplomacy.

(1) Actively getting involved from project formation and planning phasesBy utilizing Japan’s technologies/experiences, suggesting infrastructure system projects

beneficial to the partner nation in collaboration with the private sector as well as in collaborative relations with the importing country, and also paying attention to resource procurement strategies, the government will actively cultivate potential opportunities to draw on overseas demand.

○Conducting feasibility surveys for encouraging infrastructure/systems export ¥3 billion (¥650 million)

�Marketing Japan’s infrastructure by holding seminars or inviting VIPs ○Getting involved from project formation phase by providing support in development planning

26 A think tank set up in 2001. It aims to provide evidence-based policy proposals through theoretical/practical research activities as well as synergy effects with policymakers.

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process through JICA ¥1.4 billion (¥1.5 billion)

2) Enhancing and promoting the appeal of technical capabilities to satisfy the partner nation’s needs so as to be selected among competitors

Japan will actively make an appeal of advantageous points of Japan’s infrastructure/systems, such as the energy/environmental field, bullet train systems that withstood unprecedented earthquake, and aerospace/satellite-related technologies usable for disaster control. To this end, the government will hold local seminars, send experts, invite experts to Japan, provide training sessions to experts and conduct local technical demonstration sessions through NEDO. To improve proposal-making capabilities or its competitive edge in the future, Japan will strive to develop infrastructure/systems-related technologies with an increased competitive edge.

○International R&D/demonstration projects in environment and medical fields 31.5 billion (¥2.44 billion)

○R&D on Advanced Satellite with New System Architecture for Observation (Optical) ¥2.44 billion (new)

○R&D on Integrated Mobile Data Processing System ¥1.27 billion (new) ○R&D on Advanced Satellite with New System Architecture for Observation (SAR)

¥3.3 billion (¥70 million)

3) Providing comprehensive packages including finance support and technical aidsBy resuming JICA’s overseas investment loans, the government will expand supportive

programs for projects not covered with public finance programs. In addition, it will introduce new financial schemes in collaboration with partner nations to further enhance financial support. In addition, it will examine the feasibility of enhancing trade insurance capabilities that would encourage infrastructure/systems exports.

Technical assistance to emerging economies and local investment promotion efforts will serve as a part of our package when Japan suggests infrastructure system proposals. In this context, the government will strategically work on technical assistance to emerging economies and local investment promotion efforts by utilizing these efforts to enhancing appealing points of our proposals. Then, the government aims to win new orders for infrastructure/systems projects by leveraging top executive sales efforts.

�Creating “Japan-India Joint Infrastructure Fund (tentative name)” � Examining the feasibility of new legislation for enhancing trade insurance capabilities ○Fostering human resources in importing nations related with infrastructure/systems export

projects (Supplementary) ¥1.2 billion maximum (new) �Making proposals by packaging Japanese firm’s investment promotions and infrastructure

development projects, such as local base development projects �Working on summit-level sales efforts through policy dialogues with other nations

3. Expanding overseas deployment of Japan’s highly-competitive energy/environment technologies/products

Japan will make contributions to global warming-related policy actions by pushing ahead with overseas marketing of Japan’s highly-competitive environment technologies/products, including energy-saving products, high-efficiency coal thermal power generation and CCS, through forming bilateral agreements using the “bilateral offset credit program (tentative name),” which flexibly and expeditiously evaluates overseas greenhouse gas emissions reduction volumes, or through helping developing nations address negative impacts of climate change, or through demonstration projects or

- 31 -

technological development projects at home and abroad. In addition, by utilizing the GAP (Green Aid Plan) and the GPP (Green Partnership

Program), the public and private sectors will work together to diffuse Japan’s highly-competitive environmental technologies/products in overseas markets, such as emerging economies.

○�Accelerating domestic discussions and bilateral negotiations for creating bilateral offset credit programs ¥240 million (¥240 million)

○Demonstration/R&D on CO2 retrieval/storage technologies (CCS) ¥11.64 billion (¥6.29 billion) ○Deploying Japanese technologies overseas through providing support to global warming-related

policy actions ¥300 million (new) �Conducting GAP/GPP policy dialogues with emerging economies in public-private partnerships

4. Pushing ahead with international intellectual property strategy as well as quickly developing international standards (see below)

The government will enhance intellectual property-related international infrastructure as well as intellectual property strategies of Japanese firms, including SMEs, and establish quick international standard proposal frameworks (see below), so that Japanese firms will be able to work on their business operations smoothly and gain an edge over competitors in Asia and other markets in the world.

To be more specific, it will push ahead with mutual utilizing of patent examination results (the Patent Prosecution Highway program) and the international harmonization of patent programs and their actual operation. In the future, it aims to create a global patent system program in which patent rights granted in Japan will hold good all over the world. It will also push ahead with developing foreign patent search systems capable of searching patents in China and South Korea, and introducing the world’s standard patent classification scheme (International Patent Classification Harmonization 10-year Plan).

�Pushing ahead with the Patent Prosecution Highway �Working on international comparison joint research work on patent law and practices �Pushing ahead with the International Patent Classification Harmonization 10-year Plan �Examining the feasibility of participating in the international industrial design registration

program, (the “Hague Agreement”) ○Assistance to Regional SMEs for Filing Applications Abroad ¥150 million (¥80 million) ○Encouraging applications for design registration ¥50 million (new)

3. Creating future-pioneering technologies

To draw a picture of future growth by overcoming unprecedented industrial hollowing-out and Japan’s structural problems, such as energy/environmental constraints, a lower birthrate and dwindling population, the central government should revitalize Japan with dream-inspiring “future-pioneering technologies” (*) not lying on an extension of existing technologies. To do so, it should selectively make R&D investments after narrowing down possibly promising fields in which the central government should open up new ways forward with R&D activities.

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To this end, the government should first create new national projects, taking into consideration R&D problems in the past, such as research projects with less important themes or shorter research periods, escorted convoy-type projects, research outcomes that get dispersed during or after the research period, or overlapping research investments. By doing so, it should set up new frameworks under the industry-academic-government collaboration so that researchers will be able to work on long-term projects.

To steadily apply research outcomes of these long-term projects to business activities, it is necessary to quickly obtain international certificates and strategically manage intellectual properties. In this context, the government will create an appropriate environment to do so.

(* Examples of future-pioneering R&D projects)

�“Quantum dot-type solar cells”: Significantly improve power generation efficiency �“Lithium air batteries”: Significantly improve electricity storage density �“Extremely-low AC loss superconducting cables”: Significantly reduce power transmission loss �“Rare earth-free high-efficiency motors”: Significantly reduce energy loss of motors �“Innovative catalyst technologies”: Synthesize chemicals from CO2. �“Next-generation electronics”: Significantly reduce electricity consumption of electronic equipment, such as servers.

(1) Strengthening new schemes to push ahead with long-term R&D projects on a nationalscaleTo avoid research projects on less important topics and to correct the government's

compartmentalized public administration, ministries should cooperate with each other on academic research activities and commercialization research activities in an integrated manner. The government will create new framework to push ahead with long-term projects in a cross-sectional manner, such as examining the feasibility of the central government’s budget commitment for several years, aiming to predict future markets and encourage private investment.

○Budget fund for working on future-pioneering research projects ¥34.96 billion (¥7.03 billion) �Larger R&D project categories through collaboration with the Council for Science and

Technology and MEXT

(2) Conducting future-pioneering R&D projects by a stronger players’ union, and pushing ahead with strategic commercializationCurrently, R&D projects tend to fall into a convoy-fleet approach. Researchers bring back

their research outcomes (intellectual properties) to their companies during and after the project period, and each company will redundantly invest in these R&D projects. For this reason, analysts point out that these firms are unable to win in international competition.

In this context, the central government should employ technical research association schemes and designate a union consisting of a few stronger players with highly-competitive technologies and business operations, and selectively push ahead with future-pioneering R&D projects in a government-led approach. In addition, the stronger players’ union should manage the resultant research outcomes in an integrated manner and prevent unnecessary redundant investment or delay in commercialization due to some reasons attributable to participant companies.

�Conducting future-pioneering R&D projects by technical research associations consisting of stronger players, and requiring the technical research associations to manage their research

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outcomes in an integrated manner

(3) Reforming TLOs and universities for enhancing government-industry-academia collaborationTo enhance capabilities of TLOs and university intellectual property headquarters, the

government will evaluate (or visualize) activities of TLOs and university intellectual property headquarters, and encourage consolidation of their capabilities. In addition to conventional technical transfer capabilities, matching services with domestic/foreign firms as well as project management capabilities should be added as new capabilities, aiming to consolidate and expand business-academia collaboration.

To provide appropriate an academic environment to work on high-level discussions or research activities with excellent university staff or international students all over the world, the government will encourage globalization of universities based on objective index on attracting excellent faculty staff or students. At the same time, it will take preventive measures on technical leakage via international students, etc.

It will steadily foster high-quality technical human resources by making use of R&D opportunities.

�Drafting evaluation indexes for TLO and university intellectual property headquarters �Drafting appropriate indexes for pushing ahead globalization of universities �Steadily implementing trade secret management guidelines at universities

(4) Establishing quick international standard proposal frameworks and enhancing certification frameworksJapanese firms should acquire international certification in an integrated manner with their

business strategies and win in competitions with foreign rivals to avoid the situation that they have better technologies than foreign rivals but lose in project operations. To this end, in addition to the present framework, the government will create new international standard proposal scheme (“Top Standard Program (tentative name)”), which does not require consensus formation within trade groups.

Among the four legislations on product safety (Consumer Product Safety Act, Electrical Appliance and Material Safety Act, Gas Business Act, and LP Gas Act27), METI will reduce the categories of items controlled in accordance with the Electrical Appliance and Material Safety Act, create specific safety guidelines for technical standards and introduce new frameworks harmonious with international schemes, aiming to help Japanese firms quickly and smoothly expand their business operations to the global market.

In addition, Japan will drastically enhance safety its evaluation/certification infrastructure, which will underpin the smoother commercialization of research outcomes. To be more specific, the government will develop evaluation standards and conduct pilot certification on the safety/performance of new technologies in an integrated manner with R&D activities, aiming to improve knowledge and visibility of domestic certification authorities. In the medium and long term, domestic certification authorities will conclude MOUs or business alliances with certification authorities at home and abroad so that they will be able to diversify their service lineup and provide one-stop services.

�Creating a “Top Standard Program (tentative name)” ○Supporting international standard drafting works of companies that quickly suggest their

international standard drafts by making use of the “Top Standard Program (tentative name)” ¥1.33 billion maximum (new)

� Creating larger categories of controlled items in accordance with four items of legislation on

27 It is officially called the “Law Concerning the Securing of Safety and the Optimization of Transaction of Liquefied Petroleum Gas.”

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product safety, and 2) creating specific safety guidelines of technical standards �Conducting pilot certification in an integrated manner with R&D activities �Encouraging/supporting certification authorities to deepen their business alliances

4. Making use of the potential of SMEs and strengthening strategic business capabilities

Due to the Lehman Shock and the Great East Japan Earthquake, the government has been providing SMEs with various supportive measures, including financial support, so far. To continue providing fund-raising support for SMEs, pull out the potential of SMEs as much as possible and further enhance their strategic business management capabilities, the government will provide investment support and overseas expansion support for SMEs. As the same time, it will also enhance supportive measures for business rehabilitation and smoother business succession.

It will also strive to revitalize shopping districts that play important roles in local communities, which serve for daily life of local residents by underpinning economies and job opportunities in local areas still suffering from difficult circumstances.

1. Making use of SMEs’ strategic business capabilities and enhancing their business capabilities

To develop the potential of SMEs as much as possible and further enhance their business capabilities, the government will provide supportive programs, such as enhancing SME’s human resources recruitment and technical capabilities, and strengthening their strategic business capabilities by deploying their business resources in an integrated manner or utilizing “relationship banking,” which is provided by local financial institutions having a lot of contacts with SMEs.

(1) Further enhancing business capabilities by utilizing “relationship banking”The government will strive to further enhance SME’s business capabilities by utilizing local

financial institution’s financial and business management supports provided in an integrated manner (“relationship banking”). In addition, it will foster human resources of local financial institutions engaging in relationship banking services.

�Examining introduction of new program for encouraging integrated financial and business management support

�Further pushing ahead with “financial collaboration programs” for enhancing partnerships between METI regional bureaus and local financial institutions

○Discounting the guarantee a fee rate on credit guarantees ¥450 million (new) ○Highly-practical support staff program ¥20 million (new)

(2) Enhancing strategic business capabilities through integration (merger) of business resourcesBy investing in SMEs intending to consolidate their business resources, the government will

help SMEs’ efforts in which they will acquire business resources from other SMEs through

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M&A in order to enhance their strategic business capabilities.

○Enhancing business capabilities of SMEs intending integration of their business resources (Supplementary) ¥2 billion (new)

(3) Providing an appropriate environment for enhancing SMEs’ business capabilitiesBy identifying/improving business conditions through introducing new accounting rules for

SMEs, enhancing Japan’s “manufacturing technologies” essential for overcoming the stronger yen, and supporting human resources development projects, the government will enhance activities of SMEs, including small enterprises, and strengthen loan and guarantee programs. In addition, it aims to reduce the corporate effective tax rate on SMEs as soon as possible.

<Enhancing financial business capabilities> �Drafting new accounting rules for SMEs ○Improving SMEs’ strategic business capabilities by employing IT or cloud

(Supplementary) ¥500 million (new)

<Enhancing technical capabilities> ○Enhancing manufacturing SMEs’ technical capabilities

(Supplementary) ¥13.3 billion (¥15 billion) ○SME intellectual property utilization support project ¥1.8 billion (¥1.8 billion) ○Supporting government-industry-academia collaboration joint research teams' demonstration studies

for creating innovations in local areas ¥320 billion (new)

<Fostering human resources, human resources recruitment/retaining support> ○New university/high school graduates job hunting support project (vocational practical training at

SMEs) (Supplementary) ○Fostering human resources, human resources recruitment/retaining support project for local SMEs

(Supplementary) ¥500 million (new) ○High-skill global management human resource fosterage project for SMEs (Supplementary)

<Business environment improvement> □Reducing the corporate effective tax rate for SMEs ○Extending safety net guarantees, etc. (Supplementary) ○�Expanding safety net loans

[Budget](Supplementary)/[ The government investment and loan program] (Supplementary) ○Enhancing counseling services of the “subcontractor rescue organization” (Supplementary)

2. Supporting SMEs’ overseas business expansion

The government will enhance SMEs’ overseas business expansion support programs, such as enhancement of sales channel cultivation support and policy-based finance, and reinforcement of countermeasures on technical outflow, so that SMEs will cultivate market demand at home and abroad in the globalized economy by leveraging their own strong points, rather than simply depending on build-to-order manufacturing from large corporations.

� Examining introduction of new programs to improve environment for SMEs’ overseas business expansion

○SMEs’ overseas business expansion support program (Supplementary) ¥2.3 billion (¥2.5 billion)

○Enhancing business capabilities of SMEs intending overseas business expansion (Supplementary) ¥3.5 billion (new)

○Enhancing global product capabilities and technical outflow countermeasures as joint projects by SMEs (Supplementary) ¥3 billion (new)

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○Shoko Chukin Bank’s interest subsidy and guaranty insurance program on overseas expansion fund (Supplementary)

○Establishing overseas business expansion support centers in each regional bloc to provide support to SMEs drafting/implementing their overseas business expansion plan (Supplementary)

�Enhancing JETRO’s training programs for financial institution staff

3. Smoothly revitalizing SME business operations and business successions

The government will provide an appropriate environment and enhance related programs for supporting SMEs’ business rehabilitation and business succession by reinforcement of capacities of SME rehabilitation support councils and the expansion business succession centers with a view to the ever-changing financial environment.

○Enhancing capacities of SME rehabilitation support councils ¥4.91 billion maximum (¥4.2 billion maximum)

○Expanding business succession centers (Supplementary) ¥4.91 billion maximum (¥4.2 billion maximum)

4. Revitalizing local shopping districts that play important roles in local communities

To revitalize shopping districts that play important roles in local communities, the government will provide support to shopping district programs for solving local social problems, such as the aging population (e.g., the creation of barrier-free environments) and revitalizing shopping districts, including those in affected areas.

In addition, the government will also provide support for shopping districts if they are working on revitalizing commercial activities in collaboration with community-building firms and in collaboration with local community development plans so that shopping districts will fully exert their important capacities in the local community.

○Affected areas support program through revitalizing local commerce (Supplementary) ○Local commerce revitalization support program (Supplementary) ○Local commerce revitalization program ¥2 billion (new)

Challenges and Actions in Economic/Industrial · PDF fileChallenges and Actions in Economic/Industrial Policies - The central government, corporations and local governments should

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