Telecommunications

November 2001  

The European Union and Japan agreed to put a pact on mutual recognition of standards on goods in four areas into effect in January 2002. The agreement will help Japanese manufacturers slash export costs dramatically. In the past, Japanese manufacturers have had to apply on a product-by-product basis for EU standards authorization on goods for export to the 15-nation market. Some 2% of the export price of goods originating in Japan arises from the cost of obtaining standards authorization overseas, a figure that rises when indirect expenses are taken into account. Once the pact goes into effect, Japan and the EU will recognize each other's standards in the areas of electronics, chemicals, telecommunications equipment and medicines, meaning that Japanese firms will merely need to meet benchmarks set by domestic bodies. The two sides plan eventually to expand the pact to include products in other categories. (November 28, the Nihon Keizai Shimbun)

Until recently the telecommunications sector was teetering, with major carriers reporting deteriorating earnings. NTT DoCoMo Inc. saw a net profit decline for the first time in six months, with NTT East Corp. recording a pretax loss in the same term. Nippon Telegraph and Telephone Corp. (NTT) is expected to forecast a consolidated net loss for the year through March 2002, while KDDI Corp. has decided to cut the salaries of its directors. The severe business environment has prompted even telecom giant NTT to engage in a debilitating price war. NTT recently offered a large company, which outsources operation of an internal backbone communications service to KDDI under a long-term contract, a 30% discount on the service, which costs 6 billion Yen a year. NTT also offered to shoulder any penalties the company would have to pay to cancel the agreement with KDDI. Over the last three years, three undersea cables connecting Japan and the U.S. were laid, bringing the total number to seven. However, demand has failed to keep up with the increased supply. The capacity utilization rate of the high-speed communications cables is predicted to be below 10%, and prices have fallen by half in just one year. The price competition also spread to the DSL (digital subscriber line) market. After Yahoo Japan Corp. and other firms rushed into the market from various sectors, fees for the high-speed Internet connection service were reduced. While consumers have benefited from the cheaper prices by the fierce competition, DSL service providers, which entered a lucrative market, are suffering. To weather the hardship, NTT is expected to shift its focus to identity authorization, fee administration, video distribution and other online services. However, NTT may face another round of severe competition from overseas firms. The strongest potential rival is Microsoft Corp., which recently released its Windows XP operating system. The U.S. software giant has set its sights on the Internet service market on the strength of Windows XP, which features broad online authorization and fee administration functions. In 1996, aggregate capital investment in the telecom industry reached 5 trillion Yen, nearly four times that in the auto industry, lifting it to a level rivaling the electricity sector. But spending shrank to 3.7 trillion Yen last year, accounting for 8.6% of overall private capital investment in Japan, down from 11% in 1996. (November 19, the Nihon Keizai Shimbun)

Since China is expected to join the World Trade Organization (WTO) by the end of this year, Japan is considering filing a complaint with the trade body regarding China's retaliatory tariffs on Japanese automobiles and other products. Chinese authorities imposed the retaliatory tariffs on Japanese autos, cellular phones and air conditioners after Tokyo imposed temporary import curbs on Chinese agricultural products as an emergency measure. Although the safeguard measure expired, Beijing's tariffs on Japanese goods are still in place. Tokyo aims to resolve the difference through government-level talks while preparing to file the complaint with the WTO. The Japanese government is confident that they will prevail as China's tariffs violate WTO rules in two ways. The trade body forbids discriminatory tariffs against certain member nations, and Beijing's tariffs on Japanese goods exceeded the rates when it filed for membership. But insiders fear that the filing of the complaint would greatly upset Beijing and kill any realistic chance of a resolution through bilateral talks. Imports of Chinese agricultural products have increased sharply since the temporary safeguard measure expired. Government officials replied that they would soon formally impose a safeguard measure if statistics bear this out. Tokyo had initially planned to hold talks with China until the fact-finding period runs out Dec. 21, but it might decide to invoke a formal safeguard measure before that. (November 14, the Nihon Keizai Shimbun)