VII. INVESTMENT CLIMATE A. Openness to Foreign Investment In April 1991 the Japanese Government amended the Foreign Exchange and Foreign Trade Control Law (which administers foreign investment), replacing the long-standing "prior notification" requirement for all foreign investment with an "ex post facto notification" requirement for investment in non-restricted industries (effective January 1, 1992). "Prior notification" is now required for investment in restricted areas only (see Appendix A). U.S. investment has occurred in some restricted sectors (particularly in the petroleum industry), but the criteria for defining and controlling these sectors remain unclear and potentially inhibits further investment. The Japanese Government also reserves the right to restrict inward investment if it would "seriously and adversely affect the smooth performance of the national economy." The government also restricts industrial siting in certain areas to prevent further over concentration in the environs of Tokyo, Osaka, and Nagoya. These restrictions are applied on a non-discriminatory basis to both foreign and domestic companies alike. Many rural prefectural governments outside these three areas actively seek foreign direct investment in their industrial parks. Based on Structural Impediments Initiative (SII) agreements, the Japanese Government amended the Large Retail Store Law in May 1991 (effective January 31, 1992) making it easier for foreign retailers to invest in Japan. In April, 1994, the Japanese Government relaxed the Law further, taking such measures as: expansion of floor spaces subject to a reporting obligation from 500 square meters to 1,000 square meters; extension of closing time subject to a reporting obligation from 7:00 p.m. to 8:00 p.m.; and, reduction in the number of annual closing days subject to a reporting obligation. Previously, stores were required to inform the Ministry of International Trade and Industry, if they plan to be closed fewer than 44 days per year. This requirement has been reduced to 24 days (effective May 1, 1994). Retailers, however, continue to face major challenges breaking into the domestic distribution network. Restrictions on foreigners acquiring agricultural land and real estate for investment remain. The U.S. business community in Japan cites "administrative guidance" as a form of restriction on foreign direct investment in Japan. In general, business in Japan is more regulated than in the U.S., with much of the regulation taking place privately through consultations between the involved government ministry and industry. There had been no counterpart to the U.S. Administrative Procedures Act in Japan requiring that regulatory laws and practices be formulated in public. Based on SII agreements in 1992, the Japanese Government established an Administrative Procedure Law in November, 1993 (effective approximately October, 1994). The new law contains some relatively weak provisions intended to promote greater transparency in administrative guidance, but the law contains no provisions for rule-making procedures and fails to address many of the transparency issues raised by foreign investors. Tax Treatment of Foreign-owned Firms: Local branches of foreign firms are generally taxed only on income derived from within Japan, whereas domestic Japanese corporations are taxed on their worldwide income. Local branches of foreign firms are also subject to a local inhabitants' tax on the same basis as a domestic firm. Calculation of taxable income and allowable deductions, and payments of consumption tax (sales tax) introduced in JFY 1989, and land value tax introduced in JFY 1992 are otherwise the same as those for domestic companies, with national treatment for foreign firms. The Corporate Tax Act classifies corporations as either foreign or domestic depending on the location of the head office, without regard to the place of incorporation. The U.S.-Japan Tax Treaty provides for the avoidance of double taxation. Dividends distributed by a domestic Japanese firm are subject to a 20 percent withholding tax; the U.S.-Japan tax treaty reduces this tax to 10 percent for American shareholders. Interest payable to a nonresident is normally subject to withholding of 20 percent, but the tax treaty reduces this to 10 percent, as long as the interest is not attributable to a permanent establishment in Japan. Royalties and fees paid to a foreign licensor by a Japanese licensee are subject to normal withholding of 20 percent, reduced to 10 percent by the tax treaty. Investment Incentives: The Japanese Government enacted a law in March 1992, entitled a "Law on Extraordinary Measures for the Facilitation of Imports and Foreign Direct Investment in Japan" (effective July 16, 1992; in effect for three years). Under the law, the Government provides to eligible foreign firms in Japan (for criteria, see Appendix B) preferential tax treatments including (1) extension of carry-over periods for losses, (2) accelerated depreciation of assets, (3) exemption of special land- holding taxes, and (4) exemption of stamp duties. Under the law, in June 1993 the Government also established a government-financed business supporting company for foreign firms in Japan, called Foreign Investment in Japan Development Corporation (FIND), which helps foreign affiliates in Japan cope with difficulties facing foreign firms such as unique business practices and hiring qualified workers. In addition, the Japan Small Business Corporation provides the services of "international transaction advisers" to foreign companies at no charge to help them establish "linkages" with small and medium size Japanese companies. In 1984, the government-owned Japan Development Bank (JDB) established a loan program specifically tailored to the promotion of foreign direct investment in Japan. Foreign-owned companies (those in which the ratio of foreign capital is 50 percent or more) are eligible for long-term loans for capital investment. The loan amount may be up to 50 percent of the total investment amount and the loan period can run as long as 25 years. Interest rates are fixed for the life of the loan, and as of May 1994 were set at 4.05 percent, compared to the 4.4 percent private long-term prime rate. Similar low-interest loan facilities for foreign firms have been established by the Okinawa and the Hokkaido-Tohoku Development Finance Corporations as an incentive to foreign firms investing in these regions. Another incentive program is the "technopolis" project sponsored by the Ministry of Trade and Industry (MITI). Under the Law for Accelerating Regional Development Based upon High- Technology Industrial Complexes, MITI and prefectural governments provide various types of assistance to companies locating in areas designated for development as a technology-intensive zone, or technopolis. The aim of this program is to encourage development in relatively underdeveloped rural areas by forming high-tech industrial complexes. As of May 1994, there were 26 areas throughout Japan with the technopolis designation. Preferential depreciation and land tax are offered to technopolis investors. The JDB loans and the technopolis program are available equally to both domestic and foreign companies. B. Conversion and Transfer Policies Under the present law, all foreign exchange transactions are authorized -- including transfers of profits and dividends, interest, royalties and fees, repatriation of capital, and repayment of principal -- unless expressly prohibited. Foreign exchange transactions must go through foreign exchange authorized banks and must be reported. There are also no restrictions on reinvestments, other than the same restrictions on initial investment outlined above. Netting of settlements is prohibited, unless specifically permitted. C. Expropriation and Compensation In the post-war period the Japanese Government has not expropriated or nationalized any enterprises. The Japanese Government is one of the most stable in the world, and also one of the most pro-business. Even in the event that an opposition party won an election, expropriation or nationalization is unlikely in the foreseeable future. D. Dispute Settlement There have been no major investment disputes since 1990. There are no outstanding expropriation or nationalization cases in Japan, and no cases of international binding arbitration of investment disputes between foreign investors and the Government of Japan since 1952. Japan is a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. However, Japan is not a hospitable forum for international commercial arbitrations. Unlike the practice in other OECD countries, where parties to arbitrations can be represented by the person of their choice, in Japan, arbitration proceedings are viewed as the exclusive province of Japanese bengoshi (barristers) with only limited exceptions. As a result, proceedings are commonly handled in Japanese and documents must be translated into Japanese, even though the contract and all negotiations were in English. There are no legal restrictions on access by foreign investors to Japanese lawyers. However, limitations on legal practice in Japan by foreign lawyers, the prohibition on Japanese bengoshi joining foreign-based law firms and the small number of Japanese bengoshi capable of handling international business transactions all limit the ability of foreign investors to obtain proper legal advice on doing business in Japan. Foreign lawyers licensed in Japan under the 1986 Foreign Lawyers Law are not allowed to advise foreign investors on investing in Japan as the law views such advice as the illegal practice of Japanese law. The unduly restrictive provisions of Japanese law and the even more rigid enforcement of these restrictions by the Federation of Japanese Bar Associations (Nichibenren) deprive foreign investors of the opportunity to get the type of optimal combination of legal advice a system more in accord with current standards of international legal practice would allow. Recent changes proposed by the Japanese government are unlikely to remedy this unsatisfactory situation. Japan has civil courts for enforcing property and contractual rights, and the courts do not discriminate against foreign investors, but Japanese court procedures make it unattractive to litigate investment and business disputes. Japanese courts are horrendously slow, there are no discovery procedures to compel disclosure of evidence from the opposing party; the courts essentially lack contempt powers to compel a witness to testify or a party to comply with an injunction; and timely temporary restraining orders and preliminary injunctions are almost impossible to obtain. While filing fees for large civil cases were reduced in 1992, they are still based on the amount of the claim, rather than being a flat fee as in the United States. Usually a bengoshi requires an up-front payment before commencing a case; contingency fees, while not unknown, are not common. Since there are insufficient numbers of judges, the courts have high caseloads with witness examinations scheduled one month or more apart-- leading to trials typically lasting 2-5 years in the district courts and a total of 5-10 years for all appeals to be settled. The losing party can delay execution of a judgment merely by appealing--no stay or appeal bond is usually necessary. On most appeals to the high courts, additional witnesses and other evidence are allowed. There is no strict liability and no product liability law, there are no class actions, no jury trials, no treble or punitive damages, almost no attorneys fees. The limited product liability law has been introduced in the Diet, but has not yet been approved. The courts do, however, have powers to encourage mediated settlements. The courts are also passive and deferential to the governmental administration, which acts as a deterrent to using the courts to address significant social questions, challenge the government, or pursue corporate liability. As a result, and due to the Japanese government's policy of artificially restricting the number of new bengoshi to 700 per year, the net effect is to strongly encourage companies to settle out of court. Also, the yakuza--Japanese gangsters--not infrequently engage in activities that are generally handled by lawyers in other societies, collecting personal and commercial debts, settling auto accidents, and evicting tenants. E. Political Violence Political violence in general is rare in Japan, and acts of political violence involving American business interests are virtually unknown. Some far right groups, with reputed associations of Japanese organized crime, have engaged in occasional violent acts against the Japanese media and other Japanese targets. There is also a small number of extreme left- wing groups that have engaged in political violence. However, these groups have been significantly less active in recent years, and in any event have not targeted American business interests. F. Performance Requirements/Incentives Japan does not maintain a system of performance requirements. Japan also maintains no requirements for local management participation or local control in joint ventures or other forms of direct investment, except in restricted sectors. G. Right to Private Ownership and Establishment Japan secures the right for foreign and domestic private enterprises to establish and own business enterprises and engage in all forms of remunerative activity. H. Protection of Property Rights Japan is a member of the World Intellectual Property Organization (WIPO) and is signatory to the GATT agreement on trade-related aspects of intellectual property rights(TRIPS), Paris Convention for the Protection of Industrial Property, and other key treaties governing the protection of patents and trademarks. In the fall of 1994, the Japanese government will introduce legislation to make patents valid for 20 years from filing date. Currently, patents are valid for 15 years from date of publication, not to exceed 20 years from date of filing. Japan has a law to protect layout designs of semiconductor chips. While Japan administers its laws on intellectual property protection on a non-discriminatory basis, a number of statutory provisions and their implementation pose obstacles to investment in Japan. Delays in granting patents remains an issue of concern. In some cases, patent issuance may take over 10 years after the filing of a request for examination and on average 5-6 years in 1992, the most recent year for which statistics are available. Registering a trademark can take 3-4 years. These delays are mainly due mainly due to the backlog of requests to examine over 578,000 pending patent and utility model applications and 505,000 unexamined trademark applications in December of 1992 to be examined by only about 1000 patent and utility model examiners and 117 trademark examiners. Through an increase in examiners, and adoption of an electronic on-line application system, the JPO reduced the backlog of unexamined patents and utility models to 2 years and 4 months, while the backlog of unexamined trademark applications increased to 2 years and 6 months. The JPO discontinued utility model examinations on January 1, 1994, a change which has the potential to greatly reduce pending rates. Other problem areas include the pre-grant opposition system, which requires individual responses to each objection, and the excessively narrow interpretation of patent claims by examiners and the courts, which encourages large numbers of applications to cover slight variations in known technology. Japan's Patent Law has a number of compulsory licensing provisions, including Article 92, which provides that a patent holder has the right to request the holder of an earlier patent for a non-exclusive license of the earlier invention in order to practice the subsequent invention; if no agreement is reached, the subsequent patent holder may petition the Japanese Patent Office to grant a non-exclusive license and set the royalty rate. Other problem areas in Japan's patent system include the publication of all applications 18 months after filing, allowing competitors access to a patent long before the applicant gets any patent protection, and the lack of a discovery procedure to allow the owner of a process patent to seek evidence of suspected infringement. In January 1994, the JPO agreed to drop the requirement of filing applications in Japanese only (the U.S. Patent and Trademark Office accepts foreign-language applications, if followed by a timely translation). By July 1, 1995, foreign nationals will be able to file English language applications with a Japanese translation to follow within 2 months. In 1992, the JPO improved its protection of trademarks in three ways. Registration is now allowed for both trademarks and service marks. Registration is now by product within a class, rather than registration of an entire class. Japan's first-to-file trademark system also has a new requirement that an applicant show what business it is engaged in. This is in effect an "intent to use provision" which will make unauthorized registration of a well- known foreign mark more difficult. However, it is expensive and time-consuming for the foreign owner to successfully challenge an unauthorized registration if the mark is not well-known in Japan. Japan's Unfair Competition Law, which includes protection for trade secrets, was revised in May 1993, with the changes effective from May 1994. The revision will provide for the first time a cause of action against third parties who knew or should have known that the information was a trade secret and that the person from whom they acquired the secret did not have authorization from the trade secret owner to disclose the secret. The revision, however, still does not allow judges to prevent public disclosure of testimony and evidence identifying the trade secret. Japan's Copyright Law and accession to the Berne and Universal Copyright Conventions provide for exclusive rights to (1) copy or reproduce works; (2) translate (subject to a compulsory license provision), revise, or otherwise adapt or prepare program derivative works; (3) distribute copies of the work; and (4) publicly communicate the work by performance, display, or broadcast. With respect to computer programs, however, Japan's copyright protection appears to be weaker than that of other developed countries. Computer programs are not clearly given "literary work" protection and Japan's copyright law excludes algorithms, rules and programming languages. Sound recordings are protected under neighboring rights provisions from unauthorized rental for one year from date of first release in the country of origin followed by a right of remuneration for 49 years. I. Regulatory System: Laws and Procedures Compared with the U.S., antimonopoly laws are not as strictly enforced in Japan. Based on SII agreements, the Japanese Government amended the Antimonopoly Act in April 1991 (effective July 1, 1991) and the Japan Fair Trade Commission published a "Guideline for Management of the Antimonopoly Act," which clarifies the criteria for applying the Act to business practices, particularly "keiretsu" (corporate grouping) transactions. In the second annual report of SII in 1992, the Japanese Government pledged to carry out a sweeping review of Antimonopoly Act exempted cartel systems under individual laws (47 systems under 28 laws as of June 1992) by the end of March, 1996. J. Bilateral Investment Agreements The 1952 U.S.-Japan Treaty of Friendship, Commerce and Navigation gives national treatment and most favored nation treatment to most U.S. investments in Japan. Japan has similar treaties with many of its trading partners. Japan also has bilateral investment protection treaties with Egypt, Sri Lanka, the People's Republic of China, and Turkey. Japan is presently negotiating bilateral investment treaties with Pakistan, five of the six ASEAN countries (Malaysia, Thailand, the Philippines, Singapore, and Indonesia), and five East European countries (Poland, Hungary, Romania, Bulgaria, and the Czech Republic). Slovakia and two Latin American countries (Argentine and Peru) have been requesting Japan to establish such a treaty, but actual negotiations have not yet inaugurated. K. OPIC and Other Investment Insurance Programs OPIC insurance and finance programs are not available in Japan. Japan has been a member of the Multilateral Investment Guarantee Agency (MIGA) since it was established in 1988. Japan's capital subscription to the organization is the second largest among member countries, after the United States. L. Labor One of the most commonly noted features of Japanese labor and management practice is the lifetime employment system. Most large companies traditionally hire both white-collar and blue-collar workers directly after graduation, and provide extensive training programs for most workers. Companies have been willing to go to the expense of training because both the employer and the employee generally share the expectation that the worker will stay with the same company until retirement. Workers are generally promoted up the company ladder based primarily on seniority and education, rather than job performance. With the rapid aging of the workforce and growing labor shortages, however, this pattern has been changing recently, and "headhunters" have started to appear in Japan, an unheard phenomenon even a few years ago. Further, the economic downturn has made management take steps beyond shifting employees within the company or production group to urging them to take more leave, letting some employees go, and decreasing the numbers of incoming employees in seriously affected industries such as electronics, automobiles, and financial services. While the traditional pattern of lifetime employment remains the norm for large companies, its future viability is unclear. In return for the job security offered by the lifetime employment system, Japanese production workers tend to be some of the most productive in the world, although average productivity still lags behind the U.S. The average worker is highly educated, disciplined, and motivated. Labor unions are usually organized on an enterprise basis, rather than by craft. Strikes occur, usually during the annual spring wage negotiations, but last only a short time. Nominal wage levels, on a dollar basis, have risen significantly due to the yen's sharp appreciation relative to the US dollar, but wage hikes have been quite moderate with a 3.06 percent average increase in 1994, for example. Companies are expected to offer a number of fringe benefits not commonly given in the U.S., such as low-cost housing for both single and married employees, recreation facilities, and low interest loans for home purchases; and annual summer and winter "bonuses" can be as much as the equivalent of three months wages. Some foreign companies have had difficulty in recruiting Japanese management staff, in part due to the perceived lack of security in working for a foreign company. Many companies find they have to pay salaries well above the average in order to recruit top-quality people. However, foreign firms are sensitive to this problem, and are stepping up their efforts to recruit top university graduates. M. Foreign-Trade Zones/Free Ports Japan no longer has any free-trade zones or free ports. Customs authorities, however, do allow the bonding of some warehousing and processing facilities in certain areas adjacent to ports on a case-by-case basis. As discussed in Section A above, the Japanese Government established a new law in March 1992, entitled a "Law on Extraordinary Measures for the Facilitation of Imports and Foreign Direct Investment in Japan" (effective July 16, 1992; valid for three years). Under the new law, the Government helps access to the Japanese market for foreign goods and capital at government- designated "Foreign Access Areas." Customs authorities allow the bonding for the Areas as a whole. N. Capital Outflow Policy Post-1985 yen appreciation and a shift in Japan's trading pattern in Asia have prompted many Japanese companies to make major direct and portfolio investments in other countries. At the end of JFY 1992 (March 31, 1993), Japan's cumulative direct investment abroad totaled $387 billion, of which 80 percent has been made since 1985. The Japanese government believes that overseas direct investment will expedite the industrial adjustment of the Japanese economy through its effects of replacing exports and expanding re- imports from Japanese "transplants" overseas. The government has been encouraging Japanese firms to invest abroad by offering loans and insurance. Investment in developing countries also is viewed as a means of promoting the economic well-being and development of those countries. Investment in developed countries is encouraged as a means of securing access to markets and of easing protectionist sentiments in areas where Japanese imports have heavily penetrated local markets. APPENDIX 1 Restricted Investment Sectors Requiring Prior Notification: Agriculture Forestry Fisheries Metal Mining Coal and Lignite Mining Crude Petroleum and Natural Gas Production Non-metallic Mineral Mining Tobacco Manufactures Fur apparel and apparel accessories Manufactures of Miscellaneous Chemical and Allied Products. (This sector is non-restricted except for explosives, gelatin, and adhesives.) Paving Materials Miscellaneous Petroleum and Coal Products. (This sector is non-restricted except for petroleum products.) Manufacture of Rubber and Plastic Footwear and its Accessories Leather Tanning and Manufacture of Leather Products and Skins Manufacture of Electrical Generating, Transmission, Distribution, and Industrial Apparatus (This sector is non-restricted except for industries related to aircraft, ordinance, atomic power, and space development.) Manufacture of Communication Equipment and Related Products. (This sector is non-restricted except for industries related to aircraft, ordinance, atomic power, and space development.) Ship Building and Repairing, and Manufacture of Marine Engines. (This sector is unrestricted except for industries related to aircraft, ordinance, atomic power, and space development.) Manufacture of Aircraft and Parts Miscellaneous Transportation Equipment. (This sector is non-restricted except for industries related to aircraft, ordinance, atomic power, and space development.) Manufacture of Ordnance Electricity Generation and Distribution Gas Heat Supply Water and Water Supply Railways, Coastwise Transport, and Inland Water Transport Air Transport Airplane Services Ordinary Warehousing (This sector is non-restricted except for industries related to petroleum reserves.) Communication Postal Services Telephone and Telegraph, Except Wire Broadcasting Telephone (This sector is non-restricted except for Type I Telecommunications Business defined by Article 6 of Telecommunications Business Law.) Services Incidental to Communication (This sector is non-restricted except for telecommunications of Type I Telecommunications Business carrier in accordance with Article 15 of Telecommunications Business Law.) Regional Financial Institutions for Agriculture, Forestry, and Fishery Exchanges and Exchange Clearing Houses Bicycle, Horse, Motorcar, and Motorboat Race Companies Radio and Television Broadcasting Guard Services APPENDIX 2 Criteria for Eligible Foreign Affiliates: Firms with more than one-third of their capital owned by foreign manufacturing firms which: (1) have established any manufacturing, designing, developing and sales facilities within five years, and (2) have business activities which are regarded as contributing to: (a) the harmonious development of the Japanese economy with the international economic community; (b) the vitalization of the Japanese economy and improvement in the life of Japanese citizens through expanding the wide range of product choice for Japanese consumers; and (c) the stimulation of the exchange of technologies and know-how between Japan and foreign countries. O. List of Major Direct Investments Listed below are U.S. companies who invested at least $1 million in Japan between 1985 and 1991. The statistics reflect Japan's Ministry of Finance data which prior to September 1986 included information on foreign direct investment in Japan using company names broken down by new establishment of foreign affiliates, new capital participation in Japanese companies, and additional investment in already established affiliates. Since October 1986, however, the Ministry has published only the nationality of the foreign investing company and has stopped publishing data on additional investment in already established affiliates. Furthermore, since January 1992 the Ministry has stopped publishing all data concerning foreign investing companies in Japan. According to the Ministry, this is because: (1) starting January 1992, the "prior notification requirement" for all foreign investment in Japan was replaced with an "ex post facto notification"requirement; and, (2) many foreign investors have strongly requested protection of private business information. Yearly yen/dollar conversion rates used are as follows: 1985: 240; 1986: 170; 1987: 150; 1988: 130; 1989: 140; 1990: 145; and 1991: 135. I. Newly Established US Affiliates Amount of Investment (millions of U.S. dollars) Percent of Affiliate US Investor Ownership Established Line of Business ----------------------------------------------------------- Becton 3.1 Japan Becton Mfg/Trading Dickinson (100) Dickinson Pharmaceuticals Investments AT & T 1.7 AT & T Mfg/Trading Int'l Inc (51) Ricoh OA Equipment Morgan 4.2 Morgan Trust Banking Guaranty (100) Bank Int'l Finance Bankers 4.2 Japan Bankers Banking Trust Co. (100) Trust Bank Citibank 11.8 Citi Trust Banking Overseas (100) Bank Investment Borg/Warner 1.2 Warner Mfg/Trading Automotive (49) Diesel Eqmt Compressors E.I. Du Pont 1.5 MRC Mfg/Trading De Nemours (50) Du Pont Artificial Marble General 5.8 Karsonic Mfg/Trading Motors (49) Harrison Auto Parts Eastman 14.7 Kodak Mfg/Trading Kodak (50) Nagase Cameras Phillips 17.6 Tore/Phillips Mfg/Trading Petroleum (50) Petroleum Synthetic Fibers General 5.4 GEM Chemical Mfg/Sales Electric (51) Chemicals U.S. 1.3 YS Cirle Agent for Air & (50) Air Service Marine Transport Companies U.S. 1.9 Asahi Komag Mfg/Sales (100) Electronics Products U.S. 2.9 Fanuc GE Mfg/Sales (90) Automation Programable Asia Controllers U.S. 1.3 Morgan Investment (100) Stanley Consulting Investment Consulting U.S. 1.3 Shearson Investment (100) Lehman Global Consulting Asset Mgmt U.S. 3.1 Byron/Jackson Mfg/Sales (100) Industrial Machinery U.S. 3.3 Japan Mfg/Trading (33.3) Crymate Auto Parts Systems U.S. 1.5 BMG Victor Advertising (50) U.S. 13.6 Kodak Film Develop- (51) Imagica ment & Printing U.S. 1.0 Air Liquid Mfg/Sales (100) Pacific Compressors U.S. 66.7 Prudential Life Insurance (100) Life Insurance U 2.7 Tonex Mfg/Sales (100) Petro. Resin U.S. 1.0 Rosenberg Investment (51) Asset Mgmt Consulting U.S. 5.2 Rockwell Exp/Imp/Sales (100) Int'l Telecom. Eqmt U.S. 2.3 Japan Lin- Mfg/Sales (100) coln Elec. Welding Mach. U.S. 1.2 Burns Hynd Exp/Imp/Sales (100) Contact Lens U.S. 1.4 Cannon Star Mfg. of Inside (50) Eye Lens U.S. 1.2 Japan Inter- Mfg. of ICs (67) Connection Systems U.S. 1.5 Imprimis Imp/Sales (100) Technology Memory Eqmt U.S. 3.1 Prudential Investment (100) Investment Consulting Consulting U.S. 7.7 Du Pont, Exp/Imp/Sales (100) Tore, Kebler Textile fiber U.S. 3.5 Open Ark Development of (100) Software U.S. 6.4 J. Walter Advertising (100) Thompson U.S. 1.4 Capsugel Mfg. (100) Pharmaceuticals U.S. 1.6 Cabbot Japan Imp/Sales (100) Inorganic Chemicals U.S. 1.7 Yukijirushi Imp/Sales (50) Dole Soft Drinks U.S. 3.2 Wanner Farm Exp/Imp/Sales (100) Pharmaceuticals U.S. 1.1 Teijin Mfg. Chemicals (50) Hercules U.S. 1.0 Asia Realty Leasing/Management (100) Real Estate U.S. 1.2 Japan Fleet Automobile (34) Service Mechanics U.S. 35.7 Jpn Int'l Non-Life Insurance (100) Non-Life Insurance U.S. 3.6 Policrome Mfg. Offset (100) Japan Printing Materials U.S. 1.4 Jpn Morton Trade/Leasing (100) Real Estate U.S. 1.1 SP Pacific Mfg. Industrial (51) Plastic Board U.S. 1.1 Chino Exp/Imp/Sales (50) Foxboro Measuring Mach. U.S. 61.8 Jpn Ford Housing Loans (100) Service U.S. 2.0 Jpn Business Exp/Imp/Sales (68) Land Computers U.S. 1.4 Konagura/ Sales of Frozen (50) Nissui Foods U.S. 1.2 Ube/Rekisen Mfg. (50) Chemicals U.S. 1.7 Japan AFI Real Estate (100) Leasing U.S. 1.6 Logo Vista Translation (45) Eqmt System Sales U.S. 34.5 Orient Aion Life Insurance (50) Life-Insurance U.S. 2.4 Federal Imp/Sales (100) Mogul Autos U.S. 3.3 Borden, Mfg.Ice-cream (100) Japan U.S. 1.0 Fabricant, Imp/Sales (100) Japan Diamonds U.S. 1.7 Amp Development of (100) Technology, Electric Terminals Japan U.S. 1.7 MCA Victor Sales of Records (100) U.S. 1.1 AT&T Soft- R & D on Informa- (80) ware Japan tion Communication U.S. 15.6 Orix-Omaha Life Insurance (30) Life Insurance U.S. 2.2 Harman Exp/Imp/Sales (100) Int'l AV Equipment U.S. 1.8 Shin-nichi-ka Mfg. Paints (50) PPG U.S. 1.6 M.F.S.I. Exp/Imp/Sales (49) Semiconductor Mfg. Equipment U.S. 13.1 Leadlight Mfg. Magnetic (50) S.M.I. Heads U.S. 6.2 Tucaserla Telecommunication (21) Tokyo Business U.S. 7.4 Wise Eizai Pharmaceutical (50) Sales U.S. 3.7 Warner Mikal Movie Theater (50) Mgmt U.S. 2.6 S.S.F. Sales of Aluminum (100) Japan Alloys U.S. 4.4 Kansai Telecommunication (20.2) Digital Phone Business U.S. 1.9 Shinkodia Maintenance of (100) Japan Communications Equipment II. New Participation in Japanese Companies Amount of Investment (USD Million)/ Percent of Japanese US Investor Ownership Company Line of Business ----------------------------------------------------------- Goodyear 5.0 Toyo Giant Mfg. Tire Tube Tire & (30) Tire Rubber Merrell Dow 5.2 Funai Mfg/Trading Pharmaceu- (17.3) Pharmaceu- Pharmaceuticals ticals AIU 2.25 Art Move Auto Transport & Insurance (4) Center Moving Services General 6.0 Koyo Mfg/Sales Electric (17.92) Electronics Electrical Appliances Union 3.3 Iwatani Mfg/Sales Carbide (5) Gas Oxygen & Others AIU 77.9 Construction Mfg/Sales Insurance (32) Service Construction Mach. Nippon- 13.8 ASMO Mfg/Sales Denso (10) Auto Parts America Spence Cliff 1.8 Takushin Construction of Corp. (75) Construction Leisure Facilities U.S. 1.7 Nittaku Sales of Health (96.5) Trading Foods U.S. 16.7 Japan Lace Mfg/Trading (21.9) Lace and Textiles U.S. 1.3 Arrow Mfg/Sales (49.8) Pharmaceuticals U.S. 6.8 First Financing (1.1) Finance U.S. 30.8 Yomyo Sangyo Real Estate (14) Leasing U.S. 26.7 Sumitomo Mfg. (26) Norgatac ABS Resin U.S. 1.5 Yagi Euro Forex Dealing (15) U.S. 1.1 Kisho Elec. Mfg. Audio (10) Equipment U.S. 1.4 NKOEG & Imp/Sales (49) G Opt Elec. Semiconductors U.S. 1.2 Razna Imp/Sales (50) Software U.S. 2.86 Yokokawa Exp/Imp/Sales (50) Johnson Air Conditioning Controls Systems U.S. 1.3 Sumikin- Mfg. Alloys (33) Mori Corp. U.S. 1.3 System Bank Information (35) Treatment System Consulting III. Capital Increase to Increase the Ratio of Ownership Amount of Investment (USD Million)/ Percent of Japanese US Investor Ownership Affiliate Line of Business ---------------------------------------------------------- Oxirane 4.2 Sumi Alco Mfg. Chemicals Technology (50) TRW Inc. 1.2 Tokai TRW Mfg/Sales (98.3) Auto Parts Norton 2.5 Norton Mfg/Trading Company (97.79) Company Ceramics Weidner 5.0 Plabis Trading Communica- (28.52) Int'l Computer Software tions Inc. Chrysler 64.6 Mitsubishi Mfg/Trading Corp. (20) Automobile Automobiles Goodyear 3.4 Toyo Giant Mfg/Trading Tire and (50) Tire Tubes Rubber Automatic 2.1 Japan Asko Mfg/Trading Switch (100) Machine Parts Merrell Dow 1.9 Funai Mfg/Trading Pharmaceu- (23.6) Pharmaceu- Pharmaceuticals ticals AVX Corp. 2.2 AVX Mfg/Trading (99.74) Batteries Pacific Tech 2.1 Zax Mfg/Sales Venture Fund (12.2) Electronics Equipment Merrell Dow 1.5 Funai Mfg/Sales Pharmaceu- (28.4) Pharmaceu- Pharmaceuticals ticals Brunswick 1.8 Nikole Mfg/Sales Valve and (36.05) Machinery Control Merrell Dow 1.8 Funai Mfg/Sales Pharmaceu- (41.1) Pharmaceu- Pharmaceuticals ticals Merrell Dow 13.0 Funai Mfg/Sales Pharmaceu- (55.6) Pharmaceu- Pharmaceuticals ticals Mitsubishi 16.4 Mitsubishi Mfg/Trading Heavy Indus- (24.9) Automobile Automobiles try America ARA Service 2.9 AM Service Restaurants (45.45) Mitsui & 1.7 AM Service Restaurants Company (45.45) America General 23.2 Yokogawa Mfg/Trading Electric (75) Medical Products System Merrell Dow 16.9 Funai Mfg/Sales Pharmaceu- (84) Pharmaceu- Pharmaceuticals ticals