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Japan

Central Department Reform and Non-Action Letter by FSAKomatsu, Koma & Nishikawa, Tokyo

Pursuant to the Central Administrative Department Reform Basic Law (Chuuou Shouchou-tou Kaikaku Kihon-ho), as from January 6 2001, the new administrative departments will be starting in Japan. This reform is aimed at: (i) the administration led by politics; (ii) elimination of "vertically divided administration"; (iii) increasing transparency and accountability of the administration; and (iv) downsizing central government.

For example, the Ministry of Transport (Un-yu-sho), the Ministry of Construction (Kensetsu-sho), the Hokkaido Development Agency (Hokkaido Kaihatsu-cho) and the National Land Agency will become the Ministry of Land, Infrastructure and Transport (Kokudo Kotsu-sho); the Ministry of Education (Monbu-sho) and the Science and Technology Agency (Kagaku Gijutsu-cho) will become the Ministry of Education, Culture, Sports Science and Technology (Monbu Kagaku-sho); the Ministry of Health and Welfare (Kousei-sho) and the Ministry of Labour (Roudou-sho) will become the Ministry of Health, Labour and Welfare (Kousei Roudou-sho); and the Ministry of Post and Telecommunications (Yuusei-sho), the Ministry of Home Affairs (Jichi-sho) and the Public Management Agency (Soumu-cho) will become the Ministry of Public Management, Home Affairs, Post and Telecommunications (Soumu-sho).

With respect to the financial administration, the Ministry of Finance (Okura-sho) will be divided into the Ministry of Finance (Zaimu-sho) and the Financial Services Agency (FSA) (Kin-yu-cho). The new Ministry of Finance will be in charge of the planning for the budget, accounting, taxation, treasury, currency system, investment and financing, administering national property, international finance, administering foreign exchange and administering financial crises. The FSA, that has been in existence since July 2000 having superseded the Financial Supervisory Agency, will belong to the Cabinet Office (Naikaku-hu), which will be newly established by transforming the Prime Minister's Office (Souri-hu), and will be in charge of the inspection and supervision of financial industry, primarily banks and insurance companies. The Securities and Exchange Surveillance Commission (SESC) (Shouken Torihiki-tou Kansi Iinkai), an independent establishment in charge of the inspection of the securities companies, stock exchange, securities trading etc, which has been in existence since 1992, belongs to the FSA. The FSA and the SESC will be cooperating with each other to inspect the securities companies in respect of the wholesomeness of the assets and compliance with the trading regulations.

Beside the organizational reform described above, to increase the transparency and accountability of the administration, the draft orders or regulations will be subject to public comments. In this regard, the Freedom of Information Law (Gyousei-kikan-no Hoyuu-suru Jouhou-no Koukai-ni-kansuru Houritsu) will be helping such procedures.

Further, the FSA recently announced that it will introduce a non-action letter proceeding which is similar to that of the Securities and Exchange Commission of the US from the fiscal year of 2001. A query regarding statutes under supervision of the FSA is planned to be responded to within thirty days. It has been discussed whether frequent queries should be published in the FSA's web site. This procedure has been strongly requested by the US government and is hoped to increase the transparency in cases where foreign financial institutions try to participate in the Japanese market.

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