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Staff writer

Disagreements were left unresolved Friday as Japan and the United States ended four days of talks in Tokyo over the 1994 and 1996 bilateral agreements about insurance markets.

The Finance Ministry said Japan has fulfilled all its deregulation commitments, but the U.S. Trade Representative disagreed and intends to have further discussions with the ministry by July 1 to narrow gaps.

Accounts by the two sides indicate they are interpreting part of the agreements differently. It also appears that while Tokyo was insisting it has met the conditions explicitly included in the 1996 agreement, Washington was largely trying to ensure substantial effects of deregulation.

It is unclear how the issue will develop in the coming weeks since the ministry has no intention to compromise. It was the fourth time representatives from the two governments met to check progress on deregulation since a 1994 agreement was put in place. The 1996 accord complements the preceding pact.

“Some progress in deregulating the primary sector has occurred,” Deputy U.S. Trade Representative Richard Fisher said at a Tokyo news conference. But “the deregulating of the primary sector is incomplete,” he added.

The U.S. has three major concerns about Japan’s deregulation, according to Fisher: reform of rating organizations for nonlife insurers, the Finance Ministry’s approval process of new products and a Japanese nonlife insurer’s activity in the so-called third sector.

The two rating organizations, which set mandatory rates of auto insurance and other nonlife insurance for member firms, are to be reformed, effective July 1. Relevant bills cleared the Diet last week to permit free competition in rate setting. But Fisher said their “cartel-like activities” may continue by, for instance, collecting and distributing expense data of member firms.

Japanese officials said this issue is outside the 1996 agreement, which required Japan to scrap the obligations of member insurers to use the rates. Fisher also said the ministry has not met the requirement to approve new applications of differentiated products within 90 days. Some American insurers have experienced delayed processing and resistance by the ministry, he added.

But ministry officials said there has been no such application submitted and thus there is no way to violate the agreement. As for third-sector regulation, Fisher said a cancer rider product being marketed by Tokio Marine Life Insurance Co. violates the agreements. The rider has the same characteristics as stand-alone insurance, which is prohibited by the agreements, Fisher said.

Under the agreements, life insurance subsidiaries of Japanese nonlife insurers are not allowed until 2001 to sell stand-alone cancer insurance. Japan’s fulfillment of all the required deregulation in the primary sector — where life and auto insurance belong — is prerequisite for full liberalization.

Tokio Marine’s cancer rider is clearly a “new and expanded product” prohibited by the 1994 agreement, Fisher said, although Japanese officials disagreed. Fisher also said there should be no new similar license granted.

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