| To make both B-to-B and B-to-C markets in Japan in CY2003 far larger than the forecast sizes of 70 trillion yen (about 10 times larger than the 1998 level) and 3 trillion yen (about 50 times larger than the 1998 level), respectively |
1. Current Status and Tasks
The explosive growth of the Internet and other advanced information and telecommunications networks has been bringing about dramatic changes in many sectors in Japan, such as in people's lifestyle, socioeconomic activities and the manner in which administrative work is handled. Especially in industrial and economic fields, tremendous impact has been appearing on the creation and growth of new businesses in the IT-related sector, and even on the methods of existing economic activities, such as trade and retail practices.
On the other hand, the ratio of e-commerce transactions against all transactions in price terms still remains low in Japan, while a sharp growth can be seen in recent years. For instance, the e-commerce ratio in the B-to-B market in Japan is 3.8%, whereas that of the US is 4.9%. As for the B-to-C market, Japan's figure stands at a mere 0.21%, compared with the 1.37% U.S. figure.
The reasons behind this are believed to be the delay in building information and telecommunications networks in Japan and slowness in deregulation and formation of new rules to meet the increased introduction of IT into the Japanese society.
As a result of the promotion of e-commerce from now on, Japanese economy is expected to revitalize through improving user convenience, making production and distribution more efficient, and creating new businesses. Nonetheless, these will not become a reality unless regulations are revised, new rules prepared and a bundle of measures implemented promptly and intensively in order to win the trust of users and consumers.
<Major indicators concerning e-commerce markets (as of CY2000)>
| Size of e-commerce market | Annual growth rate | Ratio of e-commerce | |
| B-to-B market | 22 trillion yen | 60% | 3.8% |
| B-to-C market | 824 billion yen | 145% | 0.25% |
2. Significance of Policy Measures
E-commerce on the Internet has these characteristics typifying cyberspace: 1) anyone can participate, 2) private-sector initiatives drive markets, 3) speed is very high, and 4) borderless markets are formed. It provides benefits far beyond consequences of a shift from paper-based transactions to online, resulting in shaping e-marketplace1 (B-to-B), net auction markets2 (C-to-C) and other new types of markets that could not be thought of before. Along with these, new trade systems are expected to put in place.
To this end, new rules must be prepared to allow everyone to participate in e-commerce without feeling any anxiety over security. Furthermore, system reforms shall be carried out to respond flexibly to ever-changing user needs. In addition, measures shall be formulated to win participants' trust in e-commerce, for instance, by ensuring transparency and dealing appropriately with unfair practices, while removing barriers to such e-commerce participants as consumers and telecommunications carriers.
Moreover, efforts shall be extended to ensure fair trading of digital content, righteous use of domain names, as well as appropriate protection and use of intellectual property rights.
Finally, it is also very important to set forth internationally harmonized rules, as e-commerce enables borderless trading very easily.
1 e-marketplace: This refers to a trading place on the Internet where assets and services are exchanged between sellers and buyers. (e-marketplace is also called as the Internet Exchange.) This concept is receiving the highest attention in B-to-B e-commerce, as this can benefit both sides by reducing procurement costs for buyers and by increasing marketing opportunities for sellers.2 Net auction market: This refers to a place of auctions set up on the Internet. This is a form of e-commerce market where people bid for displayed goods on the website and the highest bidder by the closing date are entitled to purchase the goods.
3. Priority Policies
1) Review of Regulations
Revisions shall be made to the regulations that are hindering trading and businesses over the Internet, thereby to prepare an environment where private-sector entities can freely be engaged in various economic activities. The Commercial Code shall also be amended to facilitate prompt decision-making by businesses. Furthermore, while introducing the "Advanced Confirmation Procedures on Application of Laws and Ordinances by Administrative Bodies," the interpretation concerning e-commerce under the Antimonopoly Act shall be clarified, taking into consideration the setting of the Antimonopoly Act guideline about it.
i) Reform of regulations hindering e-commerce
To prepare an environment aimed at promoting the use of e-commerce in the private sector, regulations hindering e-commerce shall be reviewed in line with the "Three Year Regulatory Reform Program," which will be formulated by the end of March 2001. For instance, in addition to the law already enacted for the review of the regulations demanding exchanges of tangible written documents between private parties, the regulations demanding face-to-face transactions and necessitating setting up of an office shall be reviewed as indicated below.
a) Necessary measures shall be taken to allow paperless issuance of commercial papers (CPs)3, one of main fund raising methods for companies, within CY2001. For this purpose, a "Bill Concerning the Transfer and Settlement of Debentures (tentative name)" shall be submitted to the Diet. (FSA)
b) Necessary measures shall be taken to allow settlement of securities trading under a comprehensive system within CY2001. Specifically, the Law for the Registration of Debentures will be revised to the Bill Concerning the Transfer and Settlement of Debentures, and the Central Securities Depository Law will be partially amended, and both of them will be submitted to the Diet. (FSA)
c) The examination standards for the approval of insurance policy sales over the Internet shall be clearly set forth within CY2001. (FSA)
d) Employment systems shall be reviewed within CY2001 so as to allow dispatched workers to be engaged in the broking of property & casualty insurance policies over the Internet. (FSA)
e) Views shall be clarified by the earliest possible date in FY2001 as to the application of the Antimonopoly Act to the regulations on offering premiums over the Internet. (FTC)
f) The current list of authorized pharmaceutical products for mail-order sales shall be reviewed within FY2001 on the basis of the existing regulations, so as to consider addition onto the list of some other pharmaceutical products presently sold at pharmacies. (MHLW)
g) Regulations as to the floor space required for company offices shall be eliminated from FY2001 if such companies are engaged in job placement services solely on the Internet. (MHLW)
h) Discussions shall be made to clarify the desirable use of electronic equipment in delivering documents, so as to pave the way for the facilitation within FY2001 of a "Real Estate Syndication" with the use of electronic equipment at low cost. (MLIT)
ii) Review of the Commercial Code (MOJ)
Necessary revisions shall be made to the Commercial Code to enable the use of the Internet in sending invitations to shareholders' meetings, in exercising the voting rights and other purposes by the time when shareholders' meetings convene in CY2002. This review is intended to allow cost reductions in organizing shareholders' meetings and to facilitate exercising of shareholders' voting rights.
Furthermore, drastic revisions shall be made to the Commercial Code by the time of the ordinary Diet session in CY2002, including reviewing the power balance between shareholders' meetings and the board meetings, reviewing the stock issuance restrictions on net assets and units of contribution, and revising frameworks for enabling issuance of tracking stocks4 (stocks with dividends reflecting performance of units and subsidiaries). These are intended to allow companies to make quick and aggressive decisions and to raise their funds through various methods.
iii) Introduction of the "Advanced Confirmation Procedures on Application of Laws and Ordinances by Administrative Bodies" (MPHPT and relevant office and ministries)
Wide adoption of IT has given rise to many cases of uncertainty in applying existing laws and ordinances to new practices in cyber business. This phenomenon might hinder the growth of new IT business.
In order to deal appropriately with this situation, the "Advanced Confirmation Procedures on Application of Laws and Ordinances by Administrative Bodies" shall be introduced in compliance with the guidelines set in March 2001, for the purpose that the advent of the IT Revolution shall ensure that private companies play business activities promptly and in a fair manner.
iv) Enrichment of guidelines of the Antimonopoly Act (FTC)
The "FTC's Views toward B-to-C E-Commerce--Advertisement" was released in January 2001. From the standpoint of consumer protection in B-to-C e-commerce, this guideline explained the commission's views as to display of premiums in e-commerce transactions under the Act against Unjustifiable Premiums and Misleading Representations and as to easy-to-understand display methods. Revisions shall be made to this guideline within CY2001, if they are found necessary after investigation into the current issues of e-commerce.
3 Commercial Paper (CP): This refers to a single-name unsecured promissory issued on the open market by a company or a financial institution for the purpose of raising short-term working funds.4 Tracking stock: This is a generic term for stocks issued by a company for its specific units and/or subsidiaries. Their dividends reflect performance of the units and subsidiaries concerned.
2) Creation of New Rules
In order to promote e-commerce and facilitate smooth information flow, the rules that reflect features of e-commerce and the basic rules for an IT society shall be formulated. In addition, the criminal justice system shall be reviewed to construct a legal infrastructure capable of supporting socioeconomic activities in Japan.
i) Rules for electronic contract and information goods contract5 (METI)
Necessary rules for ensuring security for parties engaged in e-commerce shall be formulated, including the review of the closing timing of contracts between two physically distant parties, which has been based on exchanges via the conventional postal system, and protection measures for contracts signed against true will of the consumers concerned.
a) The rules on civil affairs set forth in the Civil Code shall be reviewed to reconsider the closing timing of contracts between two physically distant parties by means of information and telecommunications networks such as the Internet. Subsequently, necessary changes to the existing systems shall be made within CY2001, for instance, by submitting to the Diet a "Bill Prescribing Exceptions to the Civil Code Related to Electronic Contracts," which is aimed at facilitating the development of e-commerce.
b) Necessary systems shall be prepared within CY2001, for instance, by submitting to the Diet a "Bill for Facilitating Specific Electronic Commerce (tentative name)," which stipulates the user protection measures in trades of software programs
ii) Rules on liabilities of Internet Service Providers (ISPs) (MPHPT)
Necessary rules shall be formulated for the protection of cellular phone users as well as for the clarification of the scope of ISPs' liabilities regarding the information distribution over the Internet, so that ISPs can take prompt and appropriate measures against some parties infringing others' rights and benefits through delivering information on websites, etc.
To this end, a "Bill of Computer Information Transactions (tentative name)" shall be submitted to the Diet within CY2001. In addition, new rules for the websites for cellular phone users shall be introduced from FY2001, with the aim of blocking illegal and harmful information thereon and of protecting personal information.
iii) Revision of the criminal justice system (MOJ)
<Please refer to (6. Ensuring of security and reliability over advanced information telecommunications networks)>
5 Information goods contract: This refers to a contract for trade of such information goods as software and digital content.
3) Appropriate Protection and Use of Intellectual Property Rights
For the realization of an IT society where high-quality information goods are abundantly provided and well used, necessary measures shall be taken to change the contract-related practices and distribution practices of digital content, to ensure appropriate use of domain names, and to create systems for patents/copyrights and other intellectual property rights.
i) Improvement of the traditional contract-related practices and distribution practices of digital content
To help increase the amount of good-quality digital content on the Internet, measures shall be taken to review and change the traditional contract-related practices and distribution practices of digital content into new forms of practices suited for the IT society.
a) Thorough discussions on appropriate policies for ensuring competition in the content market shall be made within FY2001, taking into consideration the current status and some problems regarding content trading and remuneration of content creators. Measures shall also be taken within FY2001 for the creation of rules regarding content production and distribution, such as the drafting of a standard contract form on content work. In addition, an environment, aimed at developing technologies that prevent content duplication, shall be created within FY2002. (METI)
b) Measures shall be taken for the establishment of trade rules and the development of content distribution systems that enable charging on digital content within FY2001, so as to facilitate the smooth distribution of digital video content over the Internet. (MPHPT)
ii) Clarification of the views on the Antimonopoly Act (FTC)
FTC released in July 1999 the " Guidelines for Patent and Know-how Licensing Agreements under the Antimonopoly Act," which described its interpretation of intellectual properties under the Antimonopoly Act. Further efforts shall be made to understand the current status of licensing contracts on software from the pro-competitive policy standpoint and clarify its views on such contracts under the Antimonopoly Act by around the end of FY2001.
iii) Appropriate use of domain names6 (MPHPT, METI)
Along with the increase in value of domain names, an increased number of disputes are arising from some domain names conflicting with trademarks. The reason behind this is the fact that all domain names are virtually given away with little screening on a first-come-first-served basis. This issue is now seen hindering e-commerce and is drawing international attention. Against this backdrop, necessary measures shall be taken to ensure appropriate use of domain names, taking into consideration international trends regarding this issue.
a) Frameworks necessary for ensuring appropriate use of domain names shall be established. For instance, a "Bill to Amend the Unfair Competition Prevention Law" shall be submitted to the Diet within CY2001, in an effort to prevent illicit applicants from obtaining same or similar domain names with existing trademarks.
b) Measures for smooth dispute settlement and dispute prevention shall be implemented, for instance, by enabling the use of Japanese language between two Japanese parties in alternative dispute resolution proceedings based on international rules for domain names and by setting a priority period for registration of new domain names both in Japan and abroad.
iv) Review of the Patent Law (METI)
Measures for the protection of intellectual properties on the Internet shall be discussed within FY2001, including clarifying views as to the protection of software being distributed over the Internet. Subsequently, necessary regulatory frameworks shall be developed including the revisions to the Patent Law.
v) Enhancement of the Copyright System (MEXT)
In response to rapidly diffusing advanced information and telecommunications networks, discussions shall be made on the existing problems concerning the copyright system, and necessary legal systems will be prepared within FY2002, in order to ensure appropriate and fair use of copyrighted works over the Internet.
6 Domain name: A domain name can be regarded as the "address" of a computer connected to the Internet; it is used to identify the party at the other end of the communications line over the Internet.
4) Consumer Protection
For the promotion of e-commerce, it is vital to prepare an environment where consumers can feel safe upon using e-commerce. In particular, measures shall be taken to prevent troubles to be inflicted on consumers, and also dispute settlement procedures shall be considered in case where troubles happen.
i) Protection of personal information
A framework shall be prepared to ensure that the people can use advanced information and telecommunications networks without feeling unease, by ensuring the protection of personal information while giving due consideration to the usefulness of itself.
a) Preparation of the basic regulatory framework for the protection of personal information
With the aim of protecting individuals' rights and interests, while giving due consideration to the usefulness of personal information, necessary systems shall be developed, for instance, by submitting to the Diet a "Bill on the Protection of Personal Information" within CY2001. That bill will include basic principles regarding the appropriate handling of personal information, obligations that must be fulfilled by companies utilizing databases of personal information for their businesses, and measures that shall be implemented by the government. (Cabinet Secretariat)
b) Preparation of the law on the protection of personal information by sector, including the telecommunications sector.
Necessary measures shall be taken for the protection of personal information in respective sectors. Specifically, a bill on the protection of personal information in the telecommunications sector shall be submitted to the Diet by FY2002, based on the "Bill on the Protection of Personal Information." (MPHPT and relevant office and ministries)
ii) Information provision to consumers
For the growth of e-commerce, it is indispensable to prepare an environment, by ensuring protection of consumers, where consumers can utilize IT feeling at ease.
It is therefore very important in the field of e-commerce that this goal is pursued voluntarily by private-sector organizations. On the other hand, the government shall set rules for consumer protection in response to increasing number of troubles consumers encounter in e-commerce trading. The government shall also provide useful information to consumers and raise their awareness of e-commerce to help them avoid troubles on their own.
a) To deal with the increasing number of troubles in online shopping, a new provision has been created in the Specific Commercial Transactions Law, in addition to the existing regulation on the representation of advertisements, to stipulate the obligation to make the page design easy to understand for consumers applying for purchase of goods. Relevant rules will be further formulated regarding such regulations on online shopping within CY2001, and the Internet Surf Day7 shall be extended from FY2001 to implement monitoring constantly for appropriate enforcement of these rules. (METI and relevant office and ministries)
b) In order to deal with troubles in e-commerce, consumers' seminars targeted for the elderly shall be held on an average of 40 times annually in each prefecture by FY2001. In addition, training seminars shall be held at the consumer centers throughout the nation targeting some 180,000 consumers, with the aim of introducing them the ways of improving day-to-day consumers' life by the use of IT devices. (Cabinet Office)
c) In preparation for the enforcement of effective regulations against misleading representation in B-to-C e-commerce, a more tight surveillance system shall be put in place from FY2001. (FTC)
iii) Development of alternative means of dispute resolution, or alternative dispute resolution (ADR)
It is essential to nurture trust of consumers in e-commerce, by preparing a system that allows consumers, in the event of disputes, to choose their most favorable settlement method from a variety of options.
Efforts shall therefore be made to prepare an environment for the development of simple yet varied ADR, in an attempt to minimize the burden on consumers at the time when international disputes and disputes requiring in-depth knowledge of IT skills are on the rise.
a) Efforts shall be made to improve the existing consultative organizations' ability to settle disputes and to link ADR agencies via a network within CY2001, thereby providing a one-stop service to consumers. Furthermore, new ADR schemes for B-to-C e-commerce shall be prepared, utilizing a market mechanism under the Trust Mark System8. (METI and relevant office and ministries)
b) Based on the final report to be compiled by July 2001 by the Judicial Reform Council and the outcome of reviews on ADR legislative system at UNCITRAL (United Nations Commission on International Trade Law), preparatory work shall be started from CY2001 for expanding and revitalizing ADR including the issues of intervention and mediation. Discussions shall also be commenced on the measures of strengthening the relations between ADR and court proceedings. (MOJ and relevant office and ministries)
7 Internet Surf Day: On this day, sites of online shopping are checked to see if these are violating the obligations regarding advertisement displays and prohibition on misleading advertisements under the Specified Business Transactions Law. Those service providers, suspected of violating such laws and ordinances, are advised to observe them to ensure appropriate laws and ordinances. This event is thus aimed at ensuring appropriate trading among consumers, protecting consumer benefits, and raising public awareness of rules in the Internet trading.8 Trust mark system: Jointly promoted by the Japan Direct Marketing Association and the Japan Chamber of Commerce and Industry from the viewpoint of consumer protection, this is to grant a mark on service providers who have met certain requirements as a decent service provider. The system was launched in June 2000 with the aim of helping consumers in choosing trustworthy service providers. Some 450 service providers are granted the mark as of the end of February 2001.
5) Other Issues
As small- and medium-sized enterprises (SMEs) in Japan are seen playing a central role in heightening competitiveness of the Japanese economy, efforts shall be actively made to raise SME owners' awareness of the benefits of using IT and to help ensure their business resources required for doing so.
In addition, measures shall be implemented for further promotion of global e-commerce transactions, while promoting the creation of an internationally harmonized IT society.
i) Development of IT common infrastructure targeted for SMEs (METI)
If SMEs can deal appropriately with the IT Revolution, it should bring them new possibilities such as expanded trade relations through the Internet. Among various forms of responses seen in Japan to the IT revolution, the eagerness of SMEs, who constitute the base of the Japanese economy, for the introduction of IT in their quest for greater business efficiency and growing sales is a key to the rebirth of the Japanese industry. With this goal in mind to enable about half of Japanese SMEs to be engaged in e-commerce via the Internet within FY2003, such measures will be taken comprehensively, for instance, as the development of the common infrastructure linking their craftsmanship and commercial activities and as the support of SMEs to acquire business resources for IT-based management.
To this end, some forms of support that are tailored to the specific case of each SME -- its size, business category, operation as well as the level of IT introduction -- shall be provided by the end of FY2003. Specifically, training and seminars shall be held to SMEs, and advisors shall be developed and dispatched to them. Also, a common infrastructure shall be created, including the development and the promotion of standard software and systems, in order to help SMEs to be linked with each other via networks. In promoting the IT introduction into SMEs in a way of matching their varied cases, the information provision services shall be improved, and IT loans or other support measures shall be set up, in order to help SMEs supplement their business resources, which often run short.
ii) Preparation of an environment for the use of IC cards9 (METI)
Projects shall be conducted to verify security of e-commerce based on IC cards, thereby to present a multipurpose system model by FY2003.
Efforts shall also be made to pursue the adoption of international standards on electromagnetic features of the IC card by FY2003, by participating in the ISO's initiative for the setting of IC card international standards. In addition, while promoting exchanges and cooperation between Japanese and foreign companies, international efforts shall be made for the creation of a standard model of a secure IC card system by around FY2003.
iii) Development of the internationally harmonized e-commerce environment
In light of the feature of e-commerce, which is borderless in nature, Japan shall work together with other nations/economies having close socioeconomic ties to harmonize each other's e-commerce systems, thereby forming an IT society where international harmonization in IT is maintained.
a) Several provisions aimed at harmonizing the IT-related systems between Japan and Singapore shall be included in the Japan-Singapore Economic Partnership Agreement, which is scheduled for signing within CY2001. (MOFA, MPHPT, METI)
b) In order to enable electronic and one-stop procedures in trade, efforts shall be made to connect the Japan-made trade finance EDI (electronic data interchange)10 system with governmental customs process systems in other parts of Asia by FY2001. (METI)
c) As the promotion of global e-commerce cannot be pursued without an international infrastructure for electronic signature and authentication, international efforts shall be made to enable mutual recognition across nations in certifying the authentication service by CY2003. (MPHPT, MOJ, METI)
9 IC card: A card about the same size as a credit card, which has a built-in IC (integrated circuit) as the information storage device.10 Trade finance EDI: This is a system to prepare electronic documents (e.g., B/L, invoice) for various trade procedures (e.g., procedure for transfer of the right of goods, freight contract, insurance contract) involving consignors, shipping and forwarding agents, financial institutions and other companies concerned, and then transmit them via the Internet.