While the entry of new airlines two years ago accelerated industry competition in Japan, fares are likely to drop further as full deregulation is introduced today.

The revised Civil Aeronautics Law will eliminate regulations on domestic air fares. As a result, domestic airlines will be given a free hand in deciding their fares, routes and flight frequency.

Aviation deregulation in Japan accelerated in the early 1990s as part of efforts to revitalize the economy. However, the domestic market's de facto monopoly by All Nippon Airways, Japan Airlines and Japan Air System limited the lowering of air fares.

Even when Skymark Airlines and Hokkaido International Airlines (Air Do) entered the market in 1998 with reduced air fares, the big three battled back with discounts, maintaining their practice of offering similar fare systems.

But now times have changed. Industry experts say domestic carriers must devise ways to improve efficiency at home before facing the brunt of foreign competition on the international scene.

Anticipating intensifying competition in the domestic flight market as a result of the law revisions, which were enacted last June, the three major airlines last week unveiled new fare systems for the April-June period.

ANA, the largest domestic airline, set a new fare system that features 10,000 yen tickets for any flights on specific days. ANA President Kichisaburo Nomura said the carrier formed the fare scheme based on a survey of 17,000 people conducted last year.

Rival JAL will introduce an early reservation discount for specific flights. Customers who reserve 21 days before their flights can get up to 60 percent off current prices. A one-way ticket from Tokyo to Sapporo would cost 9,900 yen, 48 percent lower than current prices.

JAS is offering discounts of around 60 percent for any flight on Mondays and Tuesdays. Reservations must be made two months in advance. A one-way ticket for a Tokyo-Osaka flight, for example, will cost only 6,500 yen, compared with the present 16,250 yen.

Although the three airlines' standard fares will rise about 15 percent under the new fare systems, discount tickets will be more readily available, airline officials said.

They said they expect over 95 percent of their passengers to purchase discount tickets, a 15 percent to 25 percent increase over the current numbers. The average ticket price per passenger will fall about 3 percent, they said.

One major concern for the airlines is that total sales might fall because of the introduction of discount tickets.

But ANA's Nomura said he hopes the discount fares help enlarge the domestic market.

"I think deregulation of the flight market is a business opportunity," he said. "We can increase sales by attracting more passengers with the discount tickets."

Skymark and Air Do, the new airlines that triggered the first round of air fare competition in 1998, are likely to respond to the major airlines' moves with discounts of their own.

Takako Yamada, a spokeswoman for Skymark, said her company will look at simplicity in discounting to compete with the big three.

"The new fare systems set by the three major airlines are too complicated for consumers. Although our air fare policy is to offer one price for any flight, we may set simple discount fares to challenge the big three," she said.

A Transport Ministry official said authorities believe deregulation will benefit both consumers and airlines.

"Consumers need to understand discount programs to make good use of various discount fares. And the airlines that address consumer needs precisely will be the ones to survive the severe competition," the official said.