WTO URGES JAPAN TO REFORM, FREE TRADE

Geneva, February 16 (Reuters)- Japan must liberalise its foreign trade as part of wide-ranging structural reforms to restore competitiveness and boost growth, the World Trade Organization said on Tuesday.

Looser macro-economic policies, albeit offset by the appreciation of the yen that reinforces deflationary pressures and saps export competitiveness, have helped Japan's economy recover from the global financial crisis, the WTO said.

But these policies do not address long-standing structural problems, including a rapidly aging population, reflected in sluggish growth for a decade in real gross domestic product and productivity, it said in a report prepared for a regular review of Japan's trade policies.

"These problems can be addressed more effectively by far-reaching structural reforms, of which trade liberalisation is an integral part," the WTO said. "However, structural reforms have, if anything, slowed since 2009”.

The report was prepared in early January and so does not reflect some recent reform initiatives by Prime Minister Naoto Kan.

The report notes that the government has been moving towards income support in agriculture -where productivity is lower than in the rest of the economy- from price support.

But agriculture continues to benefit from substantial government support including higher tariffs than on other sectors, quotas, income support and in some sectors production controls, it said.

In its own report for the review, the Japanese government noted that Japan was the world's biggest net importer of food and was particularly keen to strengthen international trade rules on export prohibitions and restrictions.

Brazil, a major food exporter, expressed concern at the high level of trade barriers and subsidies distorting trade in agricultural goods with Japan.

Brazilian trade official Estanislau Amaral also told the review that Brazil wanted more information about Japanese government support for civil aircraft as it could break WTO subsidy rules.

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