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Policy Radar January 2019

This year, the 201st Diet Session will convene on January 20th, and is scheduled to finish on June 17th. Shinzo Abe, the longest serving Prime Minister in history, has vowed to “go ahead with major reforms that will shape our country.” At the top of his priorities are constitutional revision to expand the military scope of the SDF and improvements to the social security system to address the aging population.

Major legislation is expected during this Diet session include the budget for the next fiscal year, reform of the national pension system (to include part-time workers), amendments to the National Strategic Zone Law (to address the concerns voiced by the Cabinet Legislation Bureau), revision of the Copyright Law (including measures to prevent illegal downloads) and amendment of the Referendum Law. The opposition will likely press the ruling coalition on the casino bribery scandal, as well as last year’s Sakura viewing party scandal.

While the Opposition parties are still in talks for a merger between the Constitutional Democratic Party of Japan and the Democratic Party for the People, the LDP and Komeito celebrate their 20th year as government coalition partners.

This month’s edition of Policy Radar focuses on incentives for the development of technology, policy developments in the Finance Ministry, and regulatory changes in IR Policy.

Technology Policy in Japan

Technology Policy in Japan

Government to promote 5G by offering tax incentives

The Japanese Government has decided to draft a law incentivising new industries’ use of 5G communication networks, following recommendations from the LDP’s Research Commission on Tax. The scheme, proposed by the LDP, will allow the government to grant tax benefits and subsidies to companies which, through 5G, are not using materials and products categorised as a security risk when building base stations, factories and smart agriculture. In order to get benefits, companies would be requested to submit their 5G network schemes and get the approval from the appropriate ministries. Government incentives would last three years, giving companies either a 9% tax break or a bonus depreciation of 30% for their investments in 5G.

The chairperson of the panel, Amari Akira, is hoping these measures would help Japan lead America and the EU on 5G development, when taking into account national security (probably referring to the threat posed by China).

The Government has yet to decide on the specifics of the commission proposal, but hopes to see it approved during this parliamentary session.

Government wishes to enhance contract transparency involving tech giants

The Cabinet has completed the outline of a bill which would require large technology companies to enhance the transparency of their contracts with smaller vendors (i.e. online vendors and app operators) utilizing their platforms. If approved as the draft, as provided by the Headquarters for Digital Market Competition (headed by Suga Yoshihide), the law would require internet giants to regularly report to the Government their systems and internal processes.

This parallels the Government’s effort to curve the power of internet companies and their dominant position in the market often leading to outright abuse among smaller firms. Currently, companies are allowed to unilaterally change the terms and conditions of contracts, but under the new law tech giants would be forced to notify vendors about any changes to contracts in advance, giving smaller firms leeway and a say in the process.

The Government will hear feedback and complaints from smaller firms. If companies do not meet the requirements as asked by the law, the Government will be able issue warnings and improvement orders to them. However, if they do not abide by Government orders, the Fair Trade Commission will be allowed to impose fines as established under the Antitrust Law.

The Government has also expressed its intention of creating a framework that would allow the evaluation of status reports of IT Giants through hearings with the smaller vendors. The Cabinet hopes to introduce the bill during this year’s parliamentary session.

Application process for 5G licences opens

The Government has begun accepting license applications for the operation of 5G services. Although service areas will firstly cover large cities, these 5G networks may only be used in a limited amount of sites (i.e. factories and rural areas using smart technologies) which are usually located in rural areas. Services offered by 5G technology will not be limited to mobile operators only, but to the use of machinery, cameras and drones, as well as smart farming tools.

Local governments and firms will be allowed to use such technology in restricted areas through local networks, due to concerns of national security involving the use of public and private information. The Government expects these areas to have different frequencies for 5G than those currently used by mobile operators, but the Internal Affairs and Communications Ministry has guaranteed that it seeks to expand the radio wave frequency for 5G communications sometime in 2020. Local governments or companies will have to file their applications in one of the eleven regional branches of the Communications Ministry. The review of the application will take about a month and a half, as explained by the Ministry.

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