Comments of the United States Government on the "e-Japan Strategy II (Draft)" Issued by the IT Strategic Headquarters

June 12, 2003

The United States Government appreciates the opportunity to provide comments on the ge-Japan Strategy II (Draft)" (e-Japan II) and commends the IT Strategic Headquarters (ITSH) for providing the public with this important opportunity to participate and provide input in the Government of Japanfs development of the second stage of the e-Japan Strategy focusing on the utilization of IT. The United States agrees with and supports the ITSHfs recognition of the key role that the IT sector has in bringing about structural and regulatory reform and in revitalizing Japanfs economy as well as the need to spur growth and the utilization of IT in several key sectors such as medical care, finance, education and government services.

Japan has notably accomplished or undertaken several of the policy objectives laid out in the original e-Japan Strategy. However, progress remains to be seen for several other key objectives. The issues addressed by the original e-Japan Strategy and its Priority Policy Programs continue to be important because they will affect the development of the IT sector in Japan, which has consequences for the global economy. Therefore, the United States urges Japan to complete the implementation of the key objectives in the original e-Japan Strategy as necessary in such areas as removing persistent legal and other barriers that continue to hinder e-commerce and continuing structural and regulatory reform in the telecom sector. The United States hopes that e-Japan II and the subsequent "Priority Policy Program" are - in practice - a continuation and evolution of the ongoing efforts under the original e-Japan Strategy, and not a replacement for unfinished business.

As indicated by the e-Japan II report, Japan is at a critical juncture for successfully realizing the tremendous growth potential of its IT sector. Therefore, the United States urges the ITSH and the Government of Japan to address these equally important overarching concerns that are necessary to ensure the successful implementation of e-Japan II and lead to the revitalization of Japanfs economy through the utilization of IT:

Technological Neutrality: The Government of Japan's response to the potential presented by IT has been to propose a range of policy initiatives, many of which have considerable merit, such as promoting and expanding the utilization of IT in key sectors including government services, deploying a next-generation communication infrastructure, and focusing on security. In implementing these policies the United States urges Japan not to resort to low-growth responses (i.e. promotion of specific companies, technologies and standards), which would introduce distortions into the market, prevent true innovation and market-oriented responses, and would only continue to hobble the IT sector. In order to achieve Japanfs goal of increasing the international competitiveness of its own companies in IT, the sector must be open to the most competitive suppliers of technologies, regardless of whether those suppliers are Japanese or foreign.

Private Sector Leadership: Policies to promote the utilization of IT require a new approach that involves significant and continuous private sector leadership. The United States highly commends and supports the ITSHfs stated role for government under its principle that the gprivate sector takes the lead and the government supports them.h The United Statesf experience with regard to the IT sector is that the governmentfs most important role is to ensure that competition and the innovation that drives it are free to flourish. The United States urges the Japanese Government to recognize that most of the policy goals and measures that will be incorporated in the "Priority Policy Program" will require consultation between the Government and private sector, including foreign companies and other interested parties, on a continuing basis. The United States commends the ITSHfs plan to establish a new evaluation organization comprised of private sector experts that will become an experts committee under the ITSH ("Experts Committee"). The United States urges the ITSH to ensure that experts from non-Japanese entities are included and can participate in this Experts Committee. The ITSH and the evaluation process of e-Japan II can only benefit from the expertise and international perspective of experts from non-Japanese entities, especially in light of the borderless nature of IT and Japanfs principal goal of becoming a global leader in IT.

Transparency and Public Comment Opportunities: The Government of Japan's decision to develop a Priority Policy Program to accomplish the goals of e-Japan II is also welcome. The ITSH must ensure that the Priority Policy Program clarifies specific measures on how policies/goals are to be implemented and that the Priority Policy Program is made available for public comment as well as review by the new gExperts Committee.h As this Priority Policy Program is developed and implemented, it is also important to recognize that many of the complex and crosscutting issues involved with the e-Japan II policies and goals will require consultation between the government and private sector on a continuing basis. The most appropriate way to facilitate private sector input would be through the regular use of an open and transparent public comment process throughout the development and implementation of e-Japan II, beginning with the Priority Policy Program. Given the importance and priority that Japan has placed on e-Japan II, the Government of Japan should ensure that a minimum 30-day comment period is provided for the Priority Policy Program. In addition, the Government of Japan should ensure that any Cabinet orders, ministerial ordinances, notifications, guidelines or other measures prepared for the purpose of implementing the Priority Policy Program and any related subsequent policy goals and measures are also subject to the Public Comment Procedure; and that an adequate public comment period is provided. Finally, the public comment process must be meaningful and so, the United States urges the ITSH to ensure that comments received are seriously considered and reflected in the final measures and actions that are implemented.

Coordination Among Ministries Centered in ITSH: The United States strongly supports the ITSHfs recognition of the need to eliminate vertical divisions among the ministry/agency structure, and to strengthen the ITSHfs role in coordinating and ensuring the implementation of consistent and effective measures among the various ministries and agencies involved. To ensure successful implementation of e-Japan II, complex and crosscutting issues cannot be neatly boxed into separate agency structures but require continuous interagency coordination. The United States urges the Government of Japan to provide and support the ITSH with the resources and coordination mechanisms needed to successfully manage and coordinate the necessary implementing measures between the relevant ministries and agencies.

Comments on Specific e-Japan II Measures
Intellectual Property (under the gIntellecth measures): The United States notes Japanfs plans to gcreate an environment where Internet distribution is possibleh for private and all other broadcasting content. However, several points related to protection and enforcement of intellectual property rights in the proposed measures need clarification. For example, the smooth distribution of digital contents, the gcopyright contract system,h and improvements to the systematic and technical frameworks to develop a copyright contract system are unclear. In this regard, the United States would have serious problems and concerns about any gcopyright contract systemh under which television broadcasting signals and content could be distributed over the Internet pursuant to a compulsory, non-voluntary or statutory license. We also urge that the expressed sensitivity to the gcontent rights holdersh of broadcast companies and program production companies be extended to include the rights of broadcasting entities in protecting against the involuntary distribution over the Internet of their program-carrying signals.

The strategy document should make clear that activities such as digitalization, creation of archives, and international and domestic dissemination, which are to be encouraged, must take place with the consent of the copyright holder or within the scope of statutory exceptions that meet international standards. Under gConcrete Numeric Targets,h it should be made clear that the Internet distribution contemplated must be with the consent of both the broadcasting companies and the program production companies (assuming that the latter hold copyright), rather than either one or the other. Finally, the proposed measures state that digital contents should be appropriately protected, but there is no explanation of what is appropriate and who will decide. The United States urges Japan to clarify these points in the implementing Priority Policy Program and make the specific measures available for public comment. The United States also urges Japan to ensure that any digital rights management system gsolutionh is a market-driven solution and not government imposed.

Finally, Japan has recognized the economic importance of intellectual property along with IT in revitalizing Japanfs economy, and has made the development and protection of intellectual property a top priority. The Intellectual Property Strategy Headquarters (gIPSHh) is currently developing an gIP Promotion Planh which will include measures to achieve Japanfs IP goals. Given the integral and growing role that IP has in expanding the utilization of IT, the United States urges the ITSH to coordinate closely with the IPSH in developing concrete measures to utilize IP to ensure that intellectual property rights are adequately protected and enforced.

Government Services: The United States respectfully submits the following recommendations on how best to achieve the goals and measures listed to improve government systems. These recommendations are based on very similar measures already taken or being planned in the United States, and are in the spirit of the joint language on advancing e-government included in the First Report to the Leaders under the Regulatory Reform and Competition Policy Initiative. As a threshold requirement, the Government of Japan needs to increase transparency on several levels (i.e. the type and amount of information that is made available to the public) to facilitate these e-Japan II goals. It is important for the ministries and government officials to have a positive attitude towards utilizing IT for information disclosure, as well as for opening up to public participation what has been traditionally an internal policymaking process. The technology to make this possible already exists and is in widespread use (the Internet). In a similar vein, because e-government systems will impact and benefit all kinds of users, there will be a need to actively engage and consult with the private sector (including NGOs) during the development of such systems. The United States also urges the Government of Japan to ensure that e-government is not bureaucracy-centric, and focus on making transactions convenient for citizens and businesses. This includes making its e-government services and information available online 24 hours a day, 7 days a week, as indicated by the draft e-Japan II. The establishment of the CIO Council in September 2002 is another positive step towards offering more user-centric services, because it encourages cross-ministry coordination in the design and implementation of e-government. The United States urges the ITSH to work closely with the CIO Council in achieving Japanfs e-government goals. In addition, the United States strongly recommends that the Government of Japan consult with other governments as well as the private sector on glessons learned and best practices,h from which it could benefit by incorporating both technical and managerial techniques for e-government.

Finally, the United States commends the ITSH for recognizing the importance of procurement reform in improving e-government, at both the central and local levels of government. The United States would like to emphasize that fair and open competition can facilitate the procurement of high-quality, interoperable information systems at reasonable prices. New procedures, such as the measures agreed upon in the memorandum of agreement among the ministries on the procurement of information systems revised on March 19, 2003, should be implemented in a transparent and consistent manner throughout all ministries. Furthermore, a cross-ministerial body such as the CIO Council should be given the authority to evaluate whether these measures are effective. Increasing the technical expertise of procurement officials involved in e-government will also contribute to fair and open procurement of information systems.

Deployment of Next-Generation Information Communications Infrastructure: The United States notes the substantial progress that Japan has made since its original e-Japan initiative in 2001. Much of this progress was brought forth by Japan's instituting of competitive reforms, which allowed new entrants to compete in Japan's marketplace. However, much work remains to be done in this area. Indeed, this sector is a prime example of the need for structural and regulatory reform that the ITSH has identified as the gpillar of reformsh for e-Japan II. The United States highly commends the ITSHfs recognition that the strategy for e-Japan II will fail without structural reform; and that regulatory reform is both necessary for deployment of a next-generation Information Communications Infrastructure and ga key factor to the overall Japanese economy.h As Japan moves forward in implementing e-Japan II, the United States looks forward to further regulatory progress to increase competitive safeguards for new entrants. Such reforms will enable market-based solutions, technological innovation, and lower prices for Japan's consumers.

A broader concern in the telecom sector is the risk that the government's eagerness to pursue gindustrial policyh targets could favor certain technologies over others and, unwittingly, have systemic anti-competitive consequences. For example, current interconnection policies, unless changed, may permit NTT East and West to use their market power to dominate the voice market and cross-subsidize its services in the data market. Therefore, one of the most important tasks for Japan in its efforts to facilitate greater investment and growth in information technology is to improve the climate for competition in its telecommunications sector. Without such reform the emergence of a gnetworked economyh in Japan will remain constrained by the exclusionary, inefficient structures and practices of Japanfs gold economy.h

Safe and Secure Utilization Environment: The Government of the United States agrees with Japanfs recognition of the importance of ensuring the security and reliability of information systems and networks, including those used by governments, the private sector, and individual users, as Japan seeks to promote greater utilization of IT. The United States supports the measures expected to be undertaken by the Government of Japan in the area of information security, including distribution of patches, education and awareness, assigning responsibility/accountability within public sector entities, performing evaluations and audits, and R&D, and believes they are appropriate.

The United States commends Japan for planning to create a technical guideline and a specialized audit system by 2005. Although these are positive steps, due to the highly networked nature of government computing systems, a more centralized approach is critical to provide effective, government-wide management and oversight of the related information security risks. This approach should include a comprehensive framework for establishing and ensuring the effectiveness of controls over information resources that support central government operations and assets. Minimum controls required to protect central government information and information systems should be developed and maintained, as well as mechanisms for oversight of ministry information security programs.

Although all of the information security measures listed that are to be undertaken by the private sector are important, the Government of Japan should state clearly in the upcoming Priority Policy Program how it intends to encourage or work with the private sector to accomplish these goals.

The Government of the United States greatly appreciates and supports the efforts of the ITSH to ensure and provide public participation in the development and formulation of e-Japan II. The United States looks forward to meaningful participation and collaboration throughout the implementation process for the policy goals and measures of the upcoming Priority Policy Program, as well as on other emerging issues related to IT.