The Journal The Authority on Global Business in Japan

Ministry of Economy, Trade and Industry
Can Japan thrive on free trade?

The faceoff between the United States and China over trade policies is causing the frameworks of international accords to fracture. The unwillingness of the two countries to compromise brought the November 2018 Asia-Pacific Economic Cooperation (APEC) conference, held in Papua New Guinea, to an irregular end.

No joint statement was issued at its conclusion—a first since the meetings began in 1993. The administration of US President Donald Trump continues its criticism of China’s unfair trade policies, and the draft of the US statement included an appeal for revision of the World Trade Organization. China, which accused the United States of unilateralism, countered by arguing that the statement contained language opposing such behavior.

The Statement of the Chair, issued five days after the conference, reaffirmed APEC’s objective of promoting free trade; but wording that suggested opposition to protectionism and measures that distort trade were deleted.

At the conference, the United States refrained from imposing additional sanctions on China. But the current round of negotiations have seen US Trade Representative Robert Lighthizer, known to be a hardliner on trade, taking charge.

While the United States and China may have declared a temporary cease fire, the world stands to suffer more disruption this year due to the ongoing trade friction. Meanwhile Japan, if it can demonstrate effective global leadership by waving the banner of free trade, stands to boost its influence.

Ministry of Land, Infrastructure, Transport and Tourism
Fixed office seating to be eliminated

With the conclusion on December 1 in Buenos Aires, Argentina, of the latest G20 summit, Japan, which will host the next meeting in Osaka on June 28 and 29, announced that one of the main pillars of discussion at the 2019 meeting will be cryptocurrency.

The ability to exchange cryptocurrency with others makes trading across inter­national boundaries simple, but it also raises concerns.

The Financial Services Agency (FSA) has been progressing in its consideration of controls on domestic cryptocurrency operators. But, for trade that transcends international borders, additional controls are needed and this will require coope­ration among the countries involved. Japan hopes to lead the discussions and obtain agreement on an effective system.

Cryptocurrency provides a breeding ground for money laundering, funding of terrorist groups, and other crimes, and these concerns will be among the main topics to be discussed in Osaka.

Cryptocurrencies are based on block­chain technology, and all transactions are recorded in a public digital ledger. However, there is no way of assuring the correct identity of a person performing a transaction. Therefore, a key measure to prevent money laundering is confirmation of identity at the time an account is opened.

In April 2017, Japan took the initiative to revise its laws on financing, making it compulsory for cryptocurrency traders to register and requiring identification confirmation when an account is opened.

Relatively few nations have imposed a registration system similar to that of Japan, and measures imposed by a single government face limitations. Even if some countries bolster their controls, lawbreakers may be able to evade the laws by utilizing exchanges in other countries. “We would like to debate the framework of international controls based on methods adopted by Japan, which are the world’s most advanced,” said a representative of the FSA.

Nevertheless, countries such as China have banned cryptocurrencies outright. Others are said to be considering the issuance of cryptocurrencies. This shows the wide disparity in thinking on the matter, and the differing levels of control discourages the formulation of any straightforward solution. While the FSA may have been the first to deal with this issue, doubts are being raised over the government’s ongoing commitment to exercise leadership.

Keizaikai magazine