Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
U.S. suppliers can find information about Japanese government procurement on the Japan External Trade Organization (JETRO) website (which includes an online database of government procurement notices and invitations published in the National Printing Bureau’s “Official Gazette.” Users can search by publication date, product/service category as well as location.
In addition, Japan’s Ministry of Foreign Affairs (MOFA) has published a document, in English, on Suggestions for Accessing the Government Procurement Market of Japan. MOFA also hosts a Government Procurement Seminar each spring where representatives from central government procuring entities explain their procurement plans for the fiscal year. (While the seminar in 2020 was canceled, MOFA provides more government procurement information.
Japan implemented the WTO Agreement on Government Procurement (GPA) in 1996 to expand opportunities for foreign firms and increase international competition in government procurement in Japan. The Agreement extended coverage to services as well as procurements by “sub-central government entities.” These entities include all prefectural (regional) governments in Japan, major cities and designated municipalities, and a host of other quasi-governmental agencies, corporations, companies, and authorities.
Government procurement contracts covered by the Agreement must have a value above the thresholds (denominated in Special Drawing Rights of the International Monetary Fund or “SDRs”) specified by the Agreement and include the procurement of products and services by purchase, lease, or rental by the agencies and organizations subject to the Agreement. The present threshold for supplies procurement by central government entities is set at 130,000 SDRs (about US$183,478). For sub-central government entities, Japan’s voluntary threshold for supplies is 200,000 SDRs (about US$ 282,274). More information on SDR Valuation.
There are three types of government tendering procedures in Japan covered by the WTO agreement: open tendering; selective tendering; and limited or single tendering.
Under an open tender, the procuring entity publishes an invitation for qualified suppliers to participate in the tendering process. Contracts are awarded to the highest bidder that meets tender requirements.
Selective tendering is done in cases when the number of potential suppliers is limited (due to the nature of the contract), or when open tendering is regarded as inappropriate. In this case, the procuring entity designates those companies it considers capable from a list of qualified suppliers and invites them to bid. The contract is awarded to the bidder with the best offer in terms of tendered price and other required criteria.
Limited or single tenders are used in cases where products or services cannot be obtained through open or selective procurement procedures, there has been an absence of bids in response to public notice, when it has been determined there is a need for protection of exclusive rights such as patents, or when the procurement is of extreme urgency.
Open tender and selective tender invitations are published in Japan’s official (central) government procurement gazette or Kanpo (in Japanese only). The procuring entity publishes the invitation to tender at least 50 days (40 days is required by the GPA) in advance of the closing date for receipt of bids. To increase access opportunities for foreign suppliers, as a voluntary measure, many procuring entities publish notices on the use of limited (closed) tenders at least 20 days in advance of the awarding of a contract. When the tender is announced on open bids, the type and quantity of products, time limits set for submission of bids, and names and contact data of the procuring entity are published within the announcement in English. Notices on selective tendering also outline the requirements necessary for firms to be designated for participation in the tender bidding process.
Most companies find it useful to contact the procuring entity directly with any specific questions before a tender is submitted for consideration. The Japanese government practices the Comprehensive Evaluation Method to satisfy standards set in the Act for Promoting Quality Assurance in Public Works. As of 2019, the Japanese government has introduced a new procurement portal, (mostly in Japanese), to allow prospective suppliers to search procurement information, make and/or track bids, and otherwise follow procedures, such as registration.
Potential suppliers must first be qualified by the procuring agency and registered on the tendering agency’s permanent list of qualified suppliers. Each procuring entity in Japan specifies the qualifications required of any potential supplier participating in open or selective tenders. Procuring entities may review a company’s capacity to implement a contract, including the scale of its business and past business performance.
In most cases, Japanese subsidiaries, agents, or distributors of a U.S. company can register on behalf of the firm. Documents required for qualification are set out in the public notice, but typically include an application form, registration certificate, company history, financial statements, and tax payment certificate. The qualification is usually valid for one to two years. Sealed bids must be submitted to the designated location by the closing date and time specified in the tender notice. Although a 5% guarantee fee is stipulated, payment is usually waived since those participating are normally pre-qualified. If there are tenders made by unqualified suppliers or in violation of the tender requirements, the procuring entity will rule them invalid and notify the unsuccessful bidder. The contract is normally awarded to the lowest qualified bid and bidders are informed of the result in writing by the procuring entity.
In accordance with the 1996 GPA, Japan has established a mechanism to process complaints about procurements by entities other than sub-central government entities. The Office of Government Procurement Review (OGPR), within the Prime Minister’s Office, implements the provisions of the WTO Agreement regarding bid challenge procedures. For procurement by central government entities the Government Procurement Review Board processes and considers complaints in accordance with the specific procedures set out by the OGPR. Prefectural governments and designated cities have established their respective procedures to process complaints regarding procurement subject to the Agreement. Complaints by qualified bidders may be filed with the Secretariat of the Board in the Office for Government Procurement Challenge System (CHANS).
Further information on recent developments regarding Japanese government procurement can be found in Japan’s most recent submission to the WTO Trade Policy Review Mechanism.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the
Japan does not rely on funding from multilateral institutions to facilitate investment projects. Public works and infrastructure projects are funded in various ways, including government bonds and Private Finance Initiative (PFI) and Public-Private Partnership (PPP) arrangements (see reports from the Ministry of Finance, Ministry of Internal Affairs and Communication, and Ministry of Land, Infrastructure, Transport and Tourism). Japan’s major and regional banks play an outsize role in project financing in Japan, although international players are also increasingly active.
The Government of Japan (GOJ) also has programs to promote imports and foreign investment in Japan, including tax incentives, loan guarantees, low-cost loans to Japanese and foreign investors for import infrastructure through the Development Bank of Japan (DBJ) and other loan programs.
Four major public financing corporations, the Japan Bank for International Cooperation (JBIC), the Development Bank of Japan (DBJ), the Japan Finance Corporation (JFC) and Nippon Export and Investment Insurance (NEXI), offer various financial tools and products to encourage imports into, investment in, and exports from Japan.