Regulatory Developments The Japanese media market is massive. No country in the world prints more newspapers per day, and few countries have such a high rate of television penetration and viewing. Some 3,600 separate magazine titles publish over 4 billion copies per year, while the advertising market is the second largest in the world. Although these figures suggest a thoroughly modern industry, it is difficult to maintain that the Japanese media is functioning in a similar way as in other leading markets in the world. The Japanese media industry continuously places emphasis on traditional face-to-face meetings and harmonious relations, resulting in a rather closed market, difficult for outsiders to penetrate. Closed and exclusive business practices pervade most sectors of the media industry. In journalism for example, the prevalence of the kisha clubs effectively controls the flow of information from official sources to consumers. Although membership at kisha clubs was extended to include properly accredited European journalists in 2002 following criticism from the Delegation of the European Commission to Japan, the nature of these clubs makes them structurally inclined to favour the source rather than the public's right to information, Moreover, the fact that freelance and magazine journalists - including Japanese nationals - are still barred from joining the kisha clubs constitutes a de facto restriction on press freedom. Currently dominated by a handful of firms, the advertising industry employs methods that are not in line with international standards. The cost of media buying, for example, is often not disclosed by agencies to advertisers, a practice that clearly benefits the agency. The largest agencies have a near total monopoly of the market and maintain a status quo by agreeing not to interfere in each other's business. The dominant agency is directly involved in monitoring both print and television, casting further doubt on the impartiality and fairness of the industry. In comparison, the media market in countries such as the UK or France are much more competition driven. In the case of the UK, auditing of circulation numbers is thorough and provides transparency for advertisers, whereas in France, legislation makes the disclosure of fees and rewards mandatory. As a result, advertisers are properly protected in both markets. The Japanese government has been slow in taking on the issue of media convergence. Piecemeal legislation has delayed the transformation to a consumer-driven media market and prolonged the dominance of the quasi-monopolistic traditional broadcasting firms. Rather than enabling the access of smaller players to the growing content-provision area of the Internet, the status quo has been protected, limiting user access to new content via new technologies. An effective flow of information and a transparent communications structure are of crucial importance to allow for deeper economic integration across borders. Prospects for EU-Japan Economic Integration Japan is one of the most media-intensive societies and holds the second largest advertising market in the world worth nearly 6 trillion yen (37 billion euros) in 2006. After the economic hardship of the past decade, demand for advertising has started to grow again and overall expenditures have increased for the past three years. The media and advertising industry in Japan remains relatively closed and highly influenced by the government, public organisations and mega corporations. European companies and foreign journalists have specifically highlighted the limited flow of information to foreign press, the restrictive kisha club system and the lack of transparency and competition in the advertising industry. Recent attempts by new IT companies to buy into or merge with 'old' media organisations have so far failed. As a competitive global economy that aims to attract foreign investment and become an international financial centre, Japan should take measures to promote the free flow of information and foster market competition in the communications sector. Priorities
Key Issues and Recommendations ■ Competition and transparency in advertising Yearly status report: no progress. The advertising market in Japan lacks fair competition. Publishing companies are not required to transfer advertising positions to the paying advertiser and sell positions to the middlemen - the advertising agencies - without knowledge to the end user - the advertiser. Advertisers are normally not informed about the net fares, information made available only to the publisher and advertising agencies. This practice leads to monopolisation and a structural bias for established interests. The industry also lacks reliable and meaningful circulation figures putting buyers and newcomers to the industry at a further disadvantage. The Fair Trade Commission has been looking into these problems, but corrective measures have not yet been undertaken in the sector. Recommendation:
■ Broadcasting and telecommunications convergence Yearly status report: new issue. The broadcasting and telecommunications industries have long been highly regulated areas, due to the high impact they have on the public. However, the current structure of the sector, with dominant vertical players along with the lack of a comprehensive legal framework, is inhibiting the development of a converged market, where consumers can choose how and when to view contents. While convergence of media and IT is progressing in Europe and North America, Japan has been slow to provide the necessary direction to the market actors and is only now trying to catch up. Recommendation:
■ Reporting of financial information Yearly status report: some progress. Financial news regarding listed companies is often leaked in advance to the largest business-daily newspaper ahead of the scheduled release date, placing foreign media at a major disadvantage. The Japanese government has openly claimed an interest in boosting foreign investment, therefore the needs of these investors - and the media who serve them - should be met in a fair and equal manner. Recommendation:
■ Kisha Clubs Yearly status report: no progress. The kisha club system still nurtures an environment where public organisations and semi-private companies control the flow of information, to the detriment of fair and unbiased reporting. Loyalty is rewarded by "leaks" of sensitive information, further perpetuating inherent bias in the media. Recommendation:
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