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An environment better suited to the Internet and cellular phones is urgently needed for the development of the rapidly growing “new economy” in Japan, the Posts and Telecommunications Ministry said in a report released Tuesday.

The ministry’s 2000 white paper on telecommunications called for narrowing the “digital divide,” lowering communications fees and dealing with Internet content considered harmful. The digital divide refers to the gap in access to information technology among people and regions.

In the annual report, the ministry said the rapid popularization of the Internet and cellular phones is accelerating structural changes in the economy and people’s lives.

The proportion of Internet users to the general population stood at an estimated 21.4 percent — or 27.06 million people — in 1999, a rise of 8 percentage points from 1998. That figure is projected to surge to 60.1 percent — or 76.70 million users — by 2005.

The number of subscribers to communications terminals such as cellphones and personal handy-phone systems is expected to rise from about 57 million at the end of March to 79.03 million by the end of March 2006, the ministry said.

It also expects e-commerce — consumer activity conducted via the Internet — to be worth about 7.129 trillion yen in 2005, 20 times its 1999 level.

Internet-related firms, including personal-computer makers and Internet service providers, are expected to rack up sales exceeding 31 trillion yen by 2005.

Overall, the percentage of Internet users in rural areas and low-income groups remained below average in Japan, reflecting the digital divide, the ministry said.

The ministry said there is a need for fixed, lower fee services nationwide, noting that the monthly cost of Net usage in Japan was between 8,000 yen and 13,000 yen per user, against 5,200 yen in New York.

It also called for a system to be established to combat the distribution on the Internet of information deemed harmful or illegal, such as obscene pictures.