( Provisional Translation )


Report of Working Group on Electronic Commerce, Advanced Information and Telecommunications Society Promotion Headquarters
June 1998

Table of Contents


‡TDDomestic and International Advances Toward Promotion of Electronic Commerce
- Domestic Advancements
- International Advancements

‡UDSignificance of Promoting Electronic Commerce
- Scope of Discussion
- Goal and Significance of Promoting Electronic Commerce

‡VDPrinciples for Promoting Electronic Commerce

‡WDSpecific Issues
- Electronic Authentication
- Protection of Privacy
- Illegal and Harmful Content
- Consumer Protection
- Security and Measures Against Crimes
- Rules on Commerce in General
- Electronic Payments, Electronic Money
- Intellectual Property Rights
- Domain Name System
- Taxes
- Tariffs

‡XDGovernment Role in Promoting Electronic Commerce

‡YDFuture Tasks


Certified Public Accountant
Advanced Information and Telecommunications Society Promotion Headquarters Working Group on Electronic Commerce
( Member List )
Chairman: Mr. Nagaaki OHYAMAProfessor
Tokyo Institute of Technology
Members: Mr. Yasuo HATAKEYAMASenior Managing Director,
Business and Operations Isetan Co. Ltd.
Mr. Masao HORIBEProfessor
Chuo University
Mr. Shigeru IKEDAExecutive Vice President,
Multimedia Business Promotion Headquarters Nippon Telegraph and Telephone Corporation
Mr. Hideki KANDAProfessor
Tokyo University
Mr. Masaaki KUROSUMIManaging Director
Sanwa Bank Ltd.
Mr. Akira MATSUO
Mr. Akio MIMURAManaging Director
Nippon Steel Corporation Co. Ltd.
Ms. Nanako TOMINOAdvisor
Housewives' Association ( Shufuren )
Mr. Takashi UCHIDAProfessor
Tokyo University


The Digital Revolution we are in the midst of today is no less revolutionary than the Industrial Revolution. The progress of information and telecommunications technology has made it possible to convert all phenomena into digitized information, which can be shared and exchanged by the people who need it instantaneously throughout the world by means of computer networks. The prevailing world order, underpinned by mass production and mass consumption since the Industrial Revolution, is now being transformed and we are riding the crest of a new age in which value systems are based on the accumulation and distribution of information.
In these changing times, many types of competition are emerging and those countries which are able to ride this new tide will be the leaders in this new age.

Japan is entering this competitive age today. The United States and the European Union announced last year basic policies regarding new international rules pertaining to electronic commerce to be used as a basis for the exchange of value in this new age. Through discussions between the three major regions of the US, Europe and Japan, and through the multilateral fora such as the OECD or the UNCITRAL, international debate regarding electronic commerce is becoming increasingly intense. Japan, too, must take an active role in setting rules to befit this new age, or we will be left behind in the new order, and we will lose our standing in the global community. Unless we provide a business environment which responds to the new rules, our industry and economy will decline and become sluggish in these borderless circumstances of the Digital Revolution.

Fortunately, Japan has been attracting international attention in certain fields such as encryption technology through the outcome of its test-bed projects. The private sector in Japan has contributed greatly to international discussions by providing notable guidelines aimed at establishing international rules.
The fact that solutions befitting the new age are being generated from the private sector's voluntary initiatives is symbolic, reflecting that free competition in the private sector is the only driving force that can respond to the rapid changes we face today. If these free initiatives are to be hindered unnecessarily by regulations, it will be analogous to the proverb "The cure is worse than the disease."
Despite these advanced achievements, Japan certainly does not lead the world in the development and use of electronic commerce today. One reason for this is the slow growth of Japan's economy, which has limited the amount of investment in information-related fields. Furthermore, the fact that the Government has been unable to sufficiently build a business environment which is conducive to the development of electronic commerce is another significant reason for the current situation. As the Government's policy on the various issues related to electronic commerce has been somewhat uncertain, the private sector has inevitably taken cautious steps stopping short of a full-scale introduction of electronic commerce. From the perspective of Japan's contributions to the establishment of international rules, this situation is naturally an impediment. It is also the case that Japan's ministries and agencies are not fully unified in promoting this initiative.

Based on this awareness, Prime Minister Ryutaro Hashimoto, as the Head of the Advanced Information and Telecommunications Society Promotion Headquarters, decided on September 8, l997, to organize this Working Group on Electronic Commerce (WG) with the goal of developing basic concepts and clarifying major issues regarding the promotion of electronic commerce. The WG has held a total of fifteen meetings, during which views were exchanged between its members and various entities including organizations conducting test-bed projects, industry associations, private certification authorities and related ministries and agencies. The WG has vigorously studied the significance of electronic commerce promotion, its principles, specific issues and future initiatives.
Based on the results of such deliberations and public responses to this WG's Interim Report, which was published last May, basic points of view of the WG are summarized in this report entitled "Japanese Initiative in Promoting Electronic Commerce." Though conclusions have not been reached on various issues due to time limitations, we believe that it is extremely significant that the WG has indicated three basic principles for promoting electronic commerce: leadership by the private sector, the creation by the Government of an environment conducive to advances in this area and international harmonization. We hope that the Government will promptly address the individual issues based on these basic principles.

‡T. Domestic and International Advances Toward Promotion of Electronic Commerce

In order to facilitate the deliberation over our future policies toward the promotion of electronic commerce, the WG has reviewed the recent domestic and international trends concerning electronic commerce as follows:

[Domestic Advancements]
The Government of Japan has designated the years up until FY 2001 as a preparatory period for the bold realization of an advanced information and telecommunications based society. (the Action Plan for Economic Structural Reform - Cabinet Decision, May 16, 1997) Over this period, all of the various measures needed will be formulated, in tandem with the private sector's efforts, in an intensive drive to upgrade Japan's information and telecommunications system to the highest level in the world and to promote electronic commerce in all areas, including, between companies, and between companies and consumers.

From this point of view, in order to assist the private sector, whose independent measures should be a key to the rapid promotion of electronic commerce, many test-bed model projects and basic technologies that have been developed in response to the needs of each industry have been vigorously promoted, and the development of comprehensive infrastructure and a pro-competition environment have been undertaken to provide secure, inexpensive, diverse and abundant information services. In addition to the supportive policies included in the supplementary budgets of the FY 1995 and FY 1996, measures on a magnified scale to promote electronic commerce will be implemented pursuant to the Comprehensive Economic Measures that was released last April.
In addition, vigorous studies have been done both by the government and in the private sector on the issues that have arisen from the private sector's advanced research and test-bed projects.
In the private sector, for example, the Electronic Commerce Promotion Council of Japan (ECOM) has been studying the technological problems encountered and regulations concerning electronic commerce and has succeeded in creating various guidelines including the Certification Authority Guidelines and the Electronic Commerce Privacy Guidelines, the ECOM CASH Clause (pre-paid type electronic money), etc. The Cyber Business Association has drafted the Guidelines on Protecting Personal Information in Cyber Business and has been working in the areas of global interconnection experiments, electronic money and so on. Some of the above-mentioned works are the first of its kind in the world, and have been highly lauded while often being noted in international discussions. In addition to the above-mentioned groups, there are various organizations, such as the Center for Financial Industry Information Systems (FISC) and the Social Security Research Foundation, that have implemented test projects and studies on rule-making. A system of granting privacy-protection marks has been effected by the Japan Information Processing Development Center since last April subsequent to a one year study of the topic, and the Japan Computer Communications Foundation also has begun its system of registration and display of the Personal Data Protection Mark.
In the Government, many ministries and agencies have been studying the issues within their own jurisdictions. Reviewing the works implemented after the establishment of this WG, many reports have been released from such Government bodies as follows:
Nov. 1997: - Committee on the Improvement of the Environment for Electronic Commerce -Ministry of International Trade and Industry (MITI)
Dec. 1997: - Study Group on the Rules for the Flow of Information in the Telecommunications Services -Ministry of Posts and Telecommunications (MPT)
- Committee for the Study of Administration of Amusement Businesses in Response to Changing Times -National Police Agency (NPA)

Mar. 1998: - Study Group on the Legal System of Electronic Commerce / System Subcommittee -Ministry of Justice
- Consumer Business Research Committee -MITI
- Committee on the Large Scale Plant Network Security -MITI
- Study Group on Developing Legal Environment for Advanced Info-Communications Society -MPT
- Committee for Security of the Information Systems / Legislation Subgroup for Measures against Unauthorized Access -NPA
May 1998: - Group to Consider the Convergence and Developments in Telecommunications and Broadcasting -MPT
Jun. 1998: - Working Group on the Preparation of the Environment Toward the Development of Electronic Money and Electronic Payment Systems -Ministry of Finance
- Study Group on Desirable Financial Services for Individuals in the Era of Payment System Revolution -MPT

In addition, related legislation has been in preparation. The Partial Revisions to the Law on Control and Improvement of Amusement Businesses which establishes certain regulations for the businesses which provide juveniles easy access to pornographic images via a computer network such as the Internet, and the Law Concerning Preservation of National Tax Records in Electronic Form which permits the magnetic preservation of records, have already been enacted in the 142nd session of the Diet (January-June 1998).

[International Advancements]

As mentioned above, the United States and the European Union published last year their basic policies regarding issues related to electronic commerce, and on the same subject international discussions on various levels have rapidly progressed to formulate basic principles and to solve specific issues.
In the United Nations Commission on International Trade Law (UNCITRAL), model laws regarding electronic commerce have been enacted. A broad model law on electronic commerce was adopted in 1996 and a model law on electronic authentication is now under development.
In the Organisation for Economic Co-operation and Development (OECD), various issues such as privacy, consumer protection, security and taxes are now under discussion. A first-time ministerial level conference on electronic commerce is scheduled for October in Ottawa. In the Ottawa conference, principles for the promotion of electronic commerce and concrete policies on each of the related issues will be discussed while taking into account opinions from the commercial sector. It will be an important step in the progression of international discussions in this field.
In the World Trade Organization (WTO), discussions about customs duties on electronic commerce have progressed and, at the Second WTO Ministerial Conference which was held last May, the Ministers declared that a comprehensive work programme on electronic commerce should be established and a report on the progress of the programme should be submitted at the Third Session next year. They also announced that Members will continue their current practice of not imposing customs duties on electronic transmissions until further discussion in the Third Session.
The World Intellectual Property Organization (WIPO) adopted the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty in December 1996, and it is expected to embark upon a study regarding a new system for protection of data bases.
The Asia-Pacific Economic Cooperation (APEC) forum adopted the APEC Economic Leader's Declaration and the Ninth APEC Ministerial Meeting Joint Statement last November, in which the importance of electronic commerce was expressed and it was agreed to undertake a work programme to study various issues related to electronic commerce.
Under the current framework, the United States has influenced international discussions by asserting its basic positions regarding the promotion of electronic commerce - leadership by the private sector, minimal involvement of the government, etc. - which were stated in A Framework for Global Electronic Commerce released by President Clinton last July. Such US initiative may be indicative of its confidence in the US information-technology industry and of its national strategy.
On the other hand, the EU seems to intend to formulate a pertinent framework of regulation as described in A European Initiative in Electronic Commerce published in April 1997. For example, each member country of the EU has legislated on the protection of privacy in accordance with a Directive of the Council. In addition, the EU is calling for the establishment of an International Charter on electronic commerce and is now seeking to take the lead in multilateral discussions.
Meanwhile, although the US-EU Joint Statement on Electronic Commerce was released at the US-EU Summit Meeting which was held last December, they were not able to completely resolve differences between their basic standpoints.
The Governments of Japan and the United States have continued vigorous consultations since last year, and, after the publication of the Interim Report of this WG, an agreement was reached last May and the Japan-US Joint Statement on Electronic Commerce was released at the Japan-US Summit in Birmingham. In this Joint Statement, the two governments agreed on two main points: leadership by the private sector and minimal governmnet regulations. This substantive agreement between Japan and the United States will have a positive impact on the multilateral discussions.
Hereafter, between Japan and the EU, government-level talks will aim toward the issuance of a joint statement, and Japan's coordinating role will be very extensive in formulating a substantive agreement among Japan, the United States and Europe.
In the private sector, dialogue has been on-going in frameworks such as the Transatlantic Business Dialogue, the Japan-US Business Council and the US-Japan Business Council, and the EU-Japan Industrialists Round Table.

‡U. Significance of Promoting Electronic Commerce

[Scope of Discussion]

* The scope defined by the term "electronic commerce" varies according to which system is constructed for which field. Therefore, the scope differs with the objective of the discussion.

* This WG has been entrusted with the basic and broad mission of formulating the fundamental policies for promoting electronic commerce and of clarifying the issues. Thus, the definition of "electronic commerce" used in this context is the most all-encompassing possible in order that the discussions and the hearings and studies conducted from time to time address the resolution of the broadest possible issues.

* Likewise, the definition of "electronic commerce" applied in this WG is not limited to transactions over the global network realized by Internet technology, but it also applies to all economic activities conducted through computers and networks by all economic entities. Whenever deemed necessary, a specific definition will be set according to each more specific issue being addressed.

[The Goal and Significance of Promoting Electronic Commerce]

* The benefits brought by promoting electronic commerce are as follows:

(Social Benefits)
- The correction of the high cost structure, the increase in the level of convenience in our daily lives, and the freeing up of more leisure time can be achieved through the reduction of various social costs, which apply to all strata of society. Also, by building new human relationships through the expansion of communication networks, the diversification of lifestyles will be promoted.
- It will foster a paradigm shift from a society based on mass production and mass consumption to a society which values the accumulation and distribution of information resources. This new society will contribute to the resolution of such social issues as protection of the environment and natural resources.
- Computer networks will facilitate the instantaneous exchange of transactions across national borders and will radically transform our social and economic structure. Also, international relations in all sectors of society will be promoted in line with globalization.

(Economic Impacts)
- Through the promotion of economic activities aimed at achieving global and borderless optimal efficiency through computer networks, competition on a global scale will be intensified, triggering global economic structural changes.
- The improvement of productivity in the private sector, the reform of corporate structures, the rationalization of distribution systems and the disintermediation will provide an impetus for the structural reform of Japan's economy.
- Investment across all industrial sectors in electronic commerce will stimulate economic growth in general and lift the economy out of the current economic difficulties.
- Electronic commerce will spur the development of information and communications related technologies, and of new business opportunities in many fields that utilize these technologies, creating additional job opportunities.

* Upon consideration of these benefits in conjunction with the current situation of Japan, promoting electronic commerce is particularly important and demands immediate attention in Japan.
Today, as Japan is confronted with the urgent task of promoting economic structural reform, stimulating economic recovery and strengthening the global competitiveness of Japan's industry, electronic commerce will emerge as one of the most potent driving forces for achieving those goals.

* Though the promotion of electronic commerce is such an urgent issue for Japan, the initiative of the Government in this area still remains insufficient.

* Electronic commerce is global in nature. Since a year ago, international discussions have rapidly progressed regarding the formulation of the basic grounds for establishing international rules for electronic commerce. Unless we make a significant contribution to this discussion and take full action in this formative period of electronic commerce, Japan will be left behind as the structure of electronic commerce evolves rapidly in the global context. Japan should play an active role, considering the strength of its technological capabilities, cultural values and business practices.

* The proposals presented by this WG will serve as the basis for the creation of the policies of the Government of Japan with regards to electronic commerce, and therefore, will play a crucial role in its promotion thereof.

‡V. Principles for Promoting Electronic Commerce

* The private sector must take the lead in the development of electronic commerce in light of the rapid pace of progress in the information and telecommunications technology areas and the vast potential for the expansion of electronic commerce.

* The basic role of the Government is to create an environment which is conducive toward encouraging private sector activities.
The Government should avoid imposing unnecessary regulations or restrictions. In cases where regulations are considered, they must be clear and transparent, and must not give cause for any uncertainty to parties to transactions.
An appropriate role for the Government should be reviewed for every specific issue.

* Also, in light of the global nature of electronic commerce, it is important for Japan to actively participate in discussions regarding international harmonization and global standards, while adjusting its policy with international organizations and foreign governments, and advancing Japan's standpoint.

‡W. Specific Issues

* To ensure wide acceptance of electronic commerce and its successful development, transactions must be conducted under a secure and reliable environment, so that any risk that may exist for the parties involved in the transaction can be eliminated as much as possible.
Since electronic commerce is, after all, an electronic version of conventional economic activities, the basic concepts and rules which have been applied to conventional commercial transactions should be applied to electronic commerce as well.
However, problems may arise which are unique to electronic commerce and which are not necessarily limited to electronic commerce but will require new solutions due to the easy distribution of electronic information. Conventional approaches may not work sufficiently to solve these problems. It is, therefore, necessary to study these problems as they arise and seek solutions while taking into account the rapidity of technological innovation. And, as it is necessary, the current rules should be reviewed or interpreted to be clearer.

* From this perspective, taking into consideration international trends, this WG has continued its discussions from various angles and extracted the following specific issues which the policies of Japan should address.

[Electronic Authentication]
Electronic authentication is used to verify the identity of a person with whom data is being exchanged electronically, and to verify that the data has not been tampered with. It is a basic element necessary to ensure the security of electronic commerce.
However, the required level of authentication and its function will vary according to the form of transaction. Various authentication methods and technologies are being rapidly developed, and electronic authentication issues are actively being discussed in the international community. Therefore, it is necessary to continue studying the authentication system in its entirety, with government involvement, ensuring that parties to transactions may freely choose the authentication method that best meets the requirements of the particular transaction format.
As the disclosure of information is required to judge the reliability of an electronic authentication system, self-regulation of the private sector in respect of the formulation of guidelines should be encouraged.
The Government is expected to promote the autonomous development of such electronic authentication technology and guidelines. At the same time, the Government is also expected to negotiate with foreign governments to ensure that regulations introduced in foreign countries are kept to a minimum and that they do not discriminate against authentication methods of other countries, since such regulation could become a barrier to the promotion of international electronic commerce. Furthermore, the Government should also actively support attempts to establish impartial and neutral international standards of a secure electronic authentication system. The Government is also expected to study the possibility of application of an electronic authentication system and an electronic notary system which will be based on the current public administrative authentication services, including the commercial registration system.
So-called "electronic signatures" should at least be accorded the same legal status as handwritten signatures and seals. Thus, the Government should continue the research necessary to achieve this goal, including the clarification of basic rules regarding the rights and responsibilities of the parties to transactions. At the same time, it is required to take into consideration the compatibility of Japan's system with international efforts, for instance, the UNCITRAL preparatory work to draft a model law which has been under way since 1996.

[Protection of Privacy]
With the development of information and telecommunications technology, it has become possible to process large amounts of information rapidly, and to accumulate, search, use and alter the information easily. Under such circumstances, the protection of personal data has rapidly become even more necessary than in the past. The ease with which information is distributed is indispensable in the development of electronic commerce, but the full protection of personal data must be ensured.
However, since the content, usage and the method for collection of personal data differ according to types of industry and business, the private sector should take the initiative to formulate guidelines, registration systems and granting mark systems specific to each area of industry and business. On the other hand, governmental regulations concerning entities dealing with highly confidential information, such as personal credit data and medical data, which could be damaging if leaked, should be taken into account.
The Government will be required to promote independent efforts in the private sector, and will be expected to review the situation, taking into consideration legal regulations. In order to alleviate the anxiety of consumers regarding infringement on their privacy, the Government should make the necessary efforts to encourage businesses to disclose to consumers the manner in which they protect personal data. Consumer consultation services should be augmented as well. while making such efforts, it is necessary to take into consideration the conformity of Japan's policies with the OECD Guidelines Governing the Protection of Privacy and Transborder Flows of Personal Data and with other international discussions in progress.
For personal data held by public agencies, at the national level, the Government has been adequately protecting personal data by the Act for Protection of Computer Processed Personal Data held by Administrative Organs enacted in 1988. Also, as of April 1997, about 40% of the local governments in Japan had enacted their own ordinances to protect personal data held by local government organizations, and 159 local governments had also enacted rules to protect personal data held by private sector organizations. It is necessary to carefully consider the protection of personal data in the future as well.

[Illegal and Harmful Content]
The problem of illegal and harmful content is a serious issue today due to the rapid spread of the Internet, the large volume of information that is widely distributed, and the fact that such information can be downloaded instantaneously at home or any place. If this problem is left unsolved, trust in the Internet will be lost, impeding the development of electronic commerce. Additionally, it could be damaging for the sound education of children.
Content which is considered illegal under the current laws regarding obscenity or libel is also illegal when transmitted over networks, and must be regulated accordingly.
Access to content that may not be illegal but may be harmful to children should be restricted based on the judgment of the user (parent). And since current technology precludes the provider from knowing the age of the user, users (parents) should utilize filtering systems and other methods, and the private sector, including providers, should self-regulate.
The Government is expected to make the necessary efforts to improve the effectiveness of governmental control of illegal content, to apply adequately new laws that are legislated to restrict a business from making pornographic content available to clients through the Internet, to promote the improvement of technologies such as filtering systems, to encourage network providers to establish independent guidelines, and furthermore, to educate both content providers and users. For commercial activities that are harmful to children such as the transmission of pornographic content, the Law on Control and Improvement of Amusement Businesses has been amended to remedy the current situation.

[Consumer Protection]
In current commercial transactions, the consumer of electronic commerce is comparatively disadvantaged in terms of acquiring knowledge and information. Consumer troubles related to electronic commerce have been on the rise recently. Therefore the consumer should be accorded the same level of protection offered any ordinary transaction (transactions made in an off-line environment) by being provided with appropriate and sufficient information regarding the transaction. Measures should also be implemented to avoid any trouble that may arise and to offer appropriate remedies for consumers when damages occur. At the same time, full consideration should be given to specific characteristics of electronic commerce such as its borderlessness.
The current legal system in place for consumer protection was created by various laws designed to cover each correspond type of commercial transaction and partially relies on the independent self-regulation of businesses. Thus, parallel with the efforts to clarify the interpretations of the current laws as they apply to the new technologies and the establishment of complaint processing systems, businesses should be encouraged to devise voluntary countermeasures such as the formulation of adequate guidelines to ensure consumer protection. Whenever deemed necessary, any modifications to the legal system should be considered. It is also necessary for Japan to positively participate in the active discussions OECD regarding establishment of guidelines and to make efforts in ensuring international conformity and formulating an international cooperative framework.
For advertisements transmitted directly to the consumer via networks, exaggerated and deceitful advertisements should be regulated basically within the framework of relevant laws such as the Pharmaceutical Affairs Law and the Travel Agency Law. However, for the unilateral transmission of such advertisements, an organization should be established for examining advertisements and receiving complaints, and filtering technology should be developed and made widely available.

[Security and Measures Against Crimes]
To develop and promote electronic commerce, the network, as the basic infrastructure, should be protected against violations actions such as unauthorized access and infection by computer viruses. To ensure the security of networks, thorough measures should be implemented so that such intrusions can be prevented and the offenders can be arrested and indicted. To this end, the establishment of appropriate laws should also be considered.
The Government must promptly respond to new types of crimes commited through computer networks. However, since the ability to locate a criminal whose identity is only manifested electronically and to control such types of crimes is limited, it is important to prevent these criminal activities from occurring, and to establish measures that effectively protect potential victims. To this end, besides educating users, it is necessary to further develop related technology and to formulate guidelines and necessary legislation in order to establish an adequate security system containing measures to protect against, for example, unauthorized access and abuse of cryptographic technology. Such measures should be formulated to comply with the principles prescribed in the OECD Guidelines for the Security of Information Systems (1992) and the OECD Guidelines for Cryptography Policy (1997).
With regards to other crimes such as money laundering schemes aided by the use of networks, the formulation of minimal legal restrictions that protect consumers should be considered while taking note of the balance with existing commercial regulations.

[Rules on Commerce in General]
The rules that govern commercial transactions through networks should be determined by the parties to the transaction under the principle of party autonomy, as is true for all current commercial transactions. However, since business practices utilizing electronic commerce have not yet been fully developed, model agreements and guidelines are particularly useful in clarifying legal relations of the parties involved and eliminating uncertainty from the transactions. Therefore, initiatives to formulate such model agreements and guidelines should be promoted.
Electronic commerce will involve situations not covered by the current civil and commercial codes which are premised on face-to-face/paper-based declaration of intent. Thus, it is necessary to review anew and clarify specific ground rules concerning the requirements of traditional transactions, such as transactions by unauthorized parties and requirements for taking priority over a third party in respect of an assignment of claims. The effectiveness of stipulations and incorporation by reference should also be considered thoroughly. However, full consideration must be given to the diversified nature of transactions in the electronic environment, the rapid progress of technology, and compatibility with international agreements such as the UNCITRAL Model Law on Electronic Commerce adopted in 1996. Care must also be taken to ensure that the smooth development of electronic commerce will not be hindered, while monitoring the integration of practices.

[Electronic Payments, Electronic Money]
Electronic payments and electronic money are still in the early developmental stage, and the framework for use has not yet been established. In the future, new transactional methods may emerge as well. In this context, it is important in the immediate future to promote developing technologies, free experimentation and creativity in the private sector. On the other hand, it is necessary to provide users with appropriate protection, to ensure the reliability of payment systems that are trusted by users and to promote the development of electronic payments and electronic money.
The Government should attempt to balance these two objectives, and in the near future, while monitoring private sector initiatives, it should study the legal environment of this new field.
Specifically, the Government must undertake responsibility of establishing fair regulations for the governance of electronic money and electronic payments, a system of user protection, requirements for validating the issuer of electronic money, and measures for responding to cases when the issuer of electronic money becomes insolvent.

[Intellectual Property Rights]
With developments in information technology, it has become easy to copy or alter digital information. Computer networks like the Internet and digital storage media have become widely used as the preferred means of electronic communication. These changes enable us to easily transmit information to the general public without any special technology or commercial funding. To promote the development of electronic commerce, we should discuss the framework for designing the protection of intellectual property while taking into consideration these characteristics of information technology. However, the issues concerning intellectual property rights in the context of promoting of electronic commerce include the complicated relations among the various parties involved. In addition, in order to solve these issues, many technological obstacles may have to be overcome.
The Government should promote the review of intellectual property lagislation, based on the outcomes of the research conducted by WIPO including the new treaties adopted in 1996. At the same time, the Government should discuss protection systems for intellectual property rights from the open perspective of finding adequate solutions not only through reviewing intellectual property laws but also through the means of other related legislative action. The Government is also expected to positively support the development of management technologies for intellectual property rights.
It is also imperative to protect industrial property reghts which are technological bases in the development of electronic commerce.

[Domain Name System]
The domain name represents the address of the host computer which is connected to the Internet. The system of registration and management of domain names should be fair, market-based and open to the international community.
So that registered trademarks are not infringed upon, it is necessary to ensure right of trademark through the process of the registration of domain names, and to set up a system for accepting and processing complaints.

With the development of electronic commerce, economic activities will become complex and globalized, and it will become increasingly difficult to accurately grasp the concrete details of transactions: who, when, where and how these transactions were conducted and in what volume. As a result, it will become necessary to devise appropriate taxation methods.
Taxation of electronic commerce must be fair, neutral and simple. Since electronic commerce is global in scale, it will also be important to establish a taxation structure which is consistent with international tax laws in order to avoid dual taxation or tax leakage. From this perspective, Japan must make efforts to contribute to the progress of the ongoing tasks of the OECD.

In Japan, no customs duties are imposed on content transmitted electronically. With regard to the customs duties on electronic commerce, at the Second WTO Ministerial Conference held last May, a declaration was adopted in which it was stated that a comprehensive study on electronic commerce should be implemented by the Third Session the next year, and that Members would continue their current practice of not imposing customs duties on electronic transmissions. In order to promote global electronic commerce, Japan should actively participate in discussions in the WTO or in other international fora, while adhering to the WTO Agreement. At the same time, the imposition of customs duties should be considered immediately both from the legal and practical perspective, including, for example, the issue of how each country views the relationship between the customs duties imposed on imported software which is recorded on physical storage devices such as CD's and the same software which is transmitted over the Internet .

‡X. Government Role in Promoting Electronic Commerce

The Government should address the following issues in order to promote electronic commerce and to support the development of the market, in addition to the topics discussed above.

* In order for electronic commerce to progress and become prevalent in all areas of people's lives, the Government should rapidly provide the necessary groundwork.
The Government should enhance the reliability and security of networks and promote the advancement and diversification of networks with the understanding that networks are the basis for electronic activities. The development of basic technology, standardization of systems and assurance of compatibility should also be promoted. In order to offer secure, low cost, diverse and large-volume communications services, a comprehensive infrastructure must be developed immediately, and an environment that fosters competition must be created. The Government should also encourage investment in the advanced information and telecommunications sector and carry out measures that will facilitate the development of vibrant businesses such as venture businesses.

* Efforts should also be made to improve user interfaces and increase education and training regarding computer literacy so that all people including the elderly and the disabled can participate in electronic commerce.

* Furthermore, in addition to the above-mentioned strategies to lay necessary groundwork, the Government itself, as one of the major economic players, should take the lead in improving on-line public administrative services such as on-line public procurement, on-line applications, electronic documentation and one-stop services. Many of these proposals have already been included in the Revision of the Basic Plan for Promoting Administrative Informatization (Cabinet Decision, December 20, 1997) and the steady implementation of these measures is called for.

‡Y. Future Tasks

[Tasks Requiring Immediate Government Action]
* The Action Plan for Economic Structural Reform, (Cabinet Decision, May 16, l997), states that "the Government should urgently review all institutional issues necessary for the full-swing introduction of electronic commerce and, based on the results of the review, should implement the necessary measures by the year 2001." However, such reviews and measures should be accelerated to the extent possible, and the results of the deliberations by this WG should also be fully considered.

[Tasks for Integrated Action among Ministries and Agencies]
* Specific reviews should not only be conducted by each ministry and agency, which have jurisdiction over specific sectors, or by its councils and research committees. This is because the issues such as electronic authentication or protection of privacy transcend ministerial boundaries, and urgently require clear and comprehensive government policies. All ministries and agencies should coordinate their efforts, under the supervision of the Advanced Information and Telecommunications Society Promotion Headquarters, on such issues of common concern and promote the initiatives in a unified manner. To this end, a necessary framework should be established.

[ Review of the Basic Guidelines]
* The Basic Guidelines on the Promotion of an Advanced Information and Telecommunications Society (Decision of the Advanced Information and Telecommunications Society Promotion Headquarters, February 21, l995) should be revamped comprehensively based on the results of the deliberations by this WG, with a view to reformulating our strategy. The review of this basic plan should be implemented based upon the understanding that an advanced information and telecommunications society should be promoted focusing on, in addition to the conventional informatization of the public sector, creating an environment which is fully conducive to private sector initiatives utilizing the newest information and telecommunications technologies.

[Follow Up]
* International discussions regarding electronic commerce are expected to become even more intense hereafter. The environment surrounding electronic commerce is to change rapidly as new issues arise with the development of new technologies, and as current problems are resolved by the newly introduced technologies. Therefore, follow-up on the Government's electronic commerce should be conducted and results reported to the Advanced Information and Telecommunications Society Promotion Headquarters at least once a year.