GENEVA, Feb 18 - Japan must continue structural reforms to reduce the cost of doing business and make itself a more attractive destination for investment, the World Trade Organisation (WTO) said on Wednesday.
This should result in increased competition and productivity, which lags behind other industrialised countries, it said in a report, prepared in January, for a review this week of Japan's trade policy.
The review is part of a regular process in which each of the WTO's 153 members is scrutinised every few years, giving an opportunity for other countries to question them on aspects of their trade policy.
It noted the government believed in the need to intensify structural reforms which would help reduce or remove distortions to competition that impair economic efficiency.
In terms of domestic policy, Japan's medium and long-term growth prospects depend on its ability to strike a balance between monetary and fiscal policies together with structural reforms, the WTO said.
External factors affecting Japan's prospects include growth in its main export markets -- the United States, the European Union and China -- and energy and raw materials prices, the WTO said, noting recent growth had depended substantially on external demand.
"The adverse effects of the global slowdown on Japan's exports, and thus economic growth, is likely to be exacerbated by the recent appreciation of the Japanese yen, partly due to the unwinding of yen carry trade," it said, referring to speculative purchases of low-interest yen to invest in assets denominated in higher-yielding currencies.
Although Japan is a member of the government procurement agreement and domestic suppliers have no formal preferences, the share of foreign suppliers in the total value of government procurement was only 3.1 percent in 2006, the last year for which data are available, it said.