Japanese law does not classify offences as misdemeanours and crimes, although there is an act called the Misdemeanour Act. The main piece of legislation is the Penal Code, but many other statutes include provisions dealing with criminal sanctions. The constituent elements of a crime are as follows: the act needs to correspond to the statutory definition of a given crime and the person who committed the act must have had mens rea, ie, either had the intention to commit a crime or acted negligently. A crime must also be "illegal" and this component is missing in a case of self-defence.

Regulatory Provisions and Legislation

The main regulatory provisions and legislation relevant to white-collar crime include the following.

• Penal Code (PC): this contains many provisions on white-collar crime, including fraud, misappropriation and theft as basic categories of related crimes.
• Companies Act (CA): this contains provisions on special breaches of trust (as a specific category of crime related to corporate fraud) committed by corporate directors and other specified company officers. 
• Financial Instruments and Exchange Act (FIEA): this includes provisions on the requirements for proper disclosure of corporate affairs and the prohibition of misconduct in relation to securities transactions, special civil law provisions concerning breaches of these rules, and provisions on administrative dispositions and criminal punishment.
• Act on the Punishment of Organised Crime and the Control of Criminal Proceeds (APOC): this contains provisions on special categories of crimes by organised crime, and provisions in relation to the concealment, receipt and confiscation of the proceeds of a crime. Sanctions can be imposed on organised crime groups as soon as a crime is planned and prepared (conspiracy), before it is effectively committed.

Corporate Fraud (White-Collar Crime) Offences

The main offences relevant to white-collar crime are as follows.

• Fraud (Article 246, PC): this involves defrauding another person and causing the other person to deliver property. Many types of fraudulent acts qualify as crimes. Attempts are also punishable.
• Theft (Article 235, PC): this consists of stealing the property of another person. Withdrawing monies from ATMs using an illegally obtained cash card is a crime. Attempts are also punishable. 
• General breach of trust and special breach of trust (Article 247, PC): this type of crime is committed by an individual who is responsible for the affairs of another, for the purpose of promoting the individual's own interest or inflicting damage on another person, or in breach of the individual's duties and inflicting damage on the property of another. Some forms of misconduct by officers and employees of financial institutions may constitute a breach of trust. When committed by directors (or other specified individuals), such conduct may fall within the category of "special breach of trust" (Article 960, CA). Attempts are also punishable.
• Misappropriation (embezzlement in the course of business activities) (Article 253, PC): this entails embezzlement by one person of the property of another in the course of business. Certain forms of misconduct by officers and employees of financial institutions may constitute such a crime.
• Misconduct in relation to securities transactions (Articles 157, 158, 159 and 197, FIEA): this includes the use of illegal means that can include conduct such as making false statements on important matters, spreading rumours and the use of fraudulent means or other similar acts in relation to securities transactions. Such conduct is prohibited and subject to punishment. Corporations can also be punished for this crime. Attempts are not punishable. 
• Infringement of trade secrets (Article 21, Unfair Competition Prevention Act): obtaining trade secrets through fraudulent acts for the purpose of making wrongful gains and other related misconduct can constitute an offence. 
• Unauthorised computer access (Articles 2–4, 11, Act on Prohibition of Unauthorised Computer Access): accessing computers using another person's ID and password without the permission of the administrator or authorised user can constitute an offence.
• Providing or using a personal information database without permission for unlawful purposes (Article 174, Act on the Protection of Personal Information): when a personal information database is provided or used without permission for unlawful purposes by a personal information-handling business operator, this can constitute an offence.
• Tax evasion (Article 159, Corporation Tax Act): tax evasion through wrongful acts can constitute an offence.
• Misleading representation (Articles 5, 7 and 36, Act against Unjustifiable Premiums and Misleading Representations): misleading general consumers into believing that a product is significantly superior to other products or that the price or other terms and conditions are significantly more favourable than those of competitors, or than they actually are, and failing to comply with a cease-and-desist order, etc, from the supervisory authority can constitute an offence.

Further offences

Sanctions against white-collar crime also apply to the following offences:

• Counterfeiting of private documents (Article 159, PC): this involves the use of documentation in the name of a company without the necessary authority.
• False entries in original notarised deeds (Article 157, PC): this offence involves making an application to register fake directors (or the filing of other matters subject to registration with a registration office, such as the Legal Affairs Bureau), which causes the office to register false information.
• Obstruction of business using fraudulent means (Article 233, PC): obstructing the business of another using fraudulent means can be punished.

All the crimes listed above require intent. Therefore, to secure the conviction of a corporation or an individual, the public prosecutor must prove the occurrence of the criminal act and sufficient criminal intent beyond reasonable doubt.

The applicable limitation periods depend on the type of crime and the amount of the statutory penalty (Article 250, Code of Criminal Procedure or CCP) and they range from one year to 30 years (for offences punishable by death). The limitation period starts running from the time when the criminal act has stopped (Article 253, CCP). Where accomplices are involved, the period starts from when the last criminal act committed by an accomplice has ceased (Article 253, CCP). If the offender is abroad, the statute of limitations is tolled during their time abroad. 

In general, Japanese laws and regulations do not apply to the activities of foreign companies outside Japan, as their territorial scope should be limited to Japan. However, the PC provides that its provisions may apply to a person (regardless of nationality) who commits certain categories of serious crime outside Japan – for example, counterfeiting money, forging official documents and securities, and the unauthorised creation of payment cards with an electromagnetic record (Article 2, PC). Serious crimes committed by a Japanese national outside Japan can be prosecuted in Japan and certain crimes committed against Japanese nationals by non-Japanese offenders outside Japan are punishable (Articles 3-1 and 3-2, PC).

By contrast, the extraterritorial application of administrative powers is generally not specified. In general, Japanese administrative laws and regulations may even apply to acts outside the territory of Japan if they affect or have consequences for persons and properties in the territory of Japan.

In principle, only individuals are criminally liable under Japanese law and most of these crimes are covered by the Penal Code without dealing with juristic persons. In Japan, a body corporate can only be held criminally liable if a specific statutory provision exists (Article 8 of the PC, eg, the dual-liability provision). This generally means that a body corporate can be punished by a fine only after it has been proved that one of its officers or employees has committed a specific crime in connection with the business of that body corporate. 

Administrative sanctions (eg, administrative monetary penalties) can be imposed on bodies corporate without a dual-liability provision being required (eg, under the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade or "AMA").

In the case of a merger, it is understood that the criminal liability of the dissolving company cannot be assumed by the surviving company (24 February 1984, Supreme Court Criminal Cases, Volume 38, No 4, p 1,287).

Civil Remedies

Victims of white-collar offences may seek remedies if the offender’s actions constitute a tort under the Civil Code (Article 709, Civil Code). Proceedings are generally initiated before the district court as the court of first instance, depending on the severity of the matter (otherwise, the summary court for petty claims). Civil proceedings are conducted separately from white-collar criminal cases. For white-collar criminal acts, torts resulting from a breach of duty to provide explanations or the principle of suitability will be taken into account. In addition, the FIEA contains special provisions on the quantum of damages that must be paid by persons who make false statements in security registration statements. Theoretically, contractual liability and unjust enrichment can be pursued as civil remedies, but when the issue is whether a white-collar crime has been committed, it is usually sufficient to seek tort liability. However, there are cases in which contractual liability should be pursued due to the statute of limitations.

Remission Scheme against Organised Crime

In principle, property obtained from a victim as a result of a crime or property derived from such property is not confiscated (Article 19, paragraph 2 of the PC; Article 13, APOC). Under a restitution order system used in this context, concerning the confiscation of the proceeds of crime and the collection of sums equivalent to the proceeds of crime, the public prosecutor's office can conduct procedures to issue remission payments for victims, etc, from confiscated or forcibly-collected property (procedures to issue remission payments), based on the Act on Issuance of Remission Payments Using Stolen and Misappropriated Property. In addition, when a criminal current deposit account is frozen, the DIC and the bank where such deposit account is opened may take the initiative of distributing the funds from such account to the victims (Act on Payment of Damage Recovery Benefits from Funds in Deposit Accounts Used for Crime).

Class Actions

In principle, US-style class actions are not available in Japan. However, certain organisations certified by the prime minister (the secretary-general of the Consumer Affairs Agency) of Japan are permitted to file actions against business operators to request injunctions to end or prevent violations of the Consumer Contract Act committed by business operators against a large number of unspecified individuals. Furthermore, organisations that are specifically certified among these consumer organisations are entitled to file actions for the "confirmation of common obligations" and can take judicial action to ascertain the rights of such consumers. However, these consumer organisations may not represent consumers without their individual consent.

Legal Reform

The main development in relation to white-collar offences was the launching in June 2018 of a plea-bargaining system following a reform of the Criminal Procedure Code. The plea-bargaining system allows a suspect and a defendant to enter into negotiations with prosecutors. Under this system, evidence of criminal conduct by or testimony about the criminal conduct of third parties (individuals or companies; suspect third parties) can be provided in return for criminal charges being reduced or withdrawn. The system covers white-collar crimes such as fraud, bribery, embezzlement and antitrust offences and certain offences relating to tax matters and trading in financial products and instruments.

There are various ways in which an individual or company (co-operating party) can co-operate with prosecutors in relation to the suspect third party. These include assisting with the collation of evidence, responding truthfully and fully in investigation interviews in an authorities' investigation or in a court trial. To prevent a co-operating party from providing false information on a suspect third party in the hope of a reduced penalty, a co-operating party found to have provided false information may be subject to criminal sanctions, including imprisonment of up to five years.

Case of Foreign Bribery in Thailand

In July 2018, the Tokyo public prosecutors’ office indicted three executives of a Japanese power plant manufacturer for bribing public officials in Thailand in connection with a thermal power plant construction project, in violation of the Unfair Competition Prevention Act, which prohibits bribing of foreign public officials. This is the first case in Japan in which the plea-bargaining system was used. At first instance, the Tokyo District Court found all three defendants guilty. However, one of the defendants, a former director, contested the ruling, and the Tokyo High Court in the second instance ruled that he was not the main offender but just assisted in relation to the bribery. The case was then heard by the Supreme Court and in May 2022, the decision of the Tokyo High Court was reversed by the Supreme Court, resulting in the confirmation of the decision of the Tokyo District Court.

Case of Securities Fraud and Other Corporate Fraud

In November 2018, the Tokyo District public prosecutors’ office arrested and indicted the former CEO of an automobile manufacturer on charges of (i) false statements regarding compensation in the company's annual securities report, and (ii) aggravated breach of trust under the CA. The former CEO was detained for over three months, with repeated arrests and denials of bail requests. He then fled abroad in December 2019 while on bail and criminal proceedings have been suspended in the middle of the pre-trial proceedings. By contrast, a former director and subordinate of the former CEO, who was also indicted, was convicted in 2022. The decision is noteworthy because the credibility of the testimony obtained through the plea-bargaining system was carefully scrutinised by the judges and the former director was acquitted of some of the charges.

Two main types of authorities are involved in relation to the prosecution, investigation and enforcement of corporate or business fraud.

Authorities with Powers over Criminal Cases

The authorities with authority over criminal cases are the police and the public prosecutor's office. They usually have the power to conduct compulsory investigations but often make enquiries or interview suspects on a voluntary basis. As an additional punishment to the principal sentence for a criminal offence, the courts may confiscate the proceeds of crime, etc, or collect a sum of money equivalent to them. For white-collar crimes, the public prosecutor's office has established special investigation departments in Tokyo, Osaka and Nagoya, and the police also often have special divisions, but there is no special court for white-collar crimes.

Authorities with Powers under Administrative Laws and Regulations

Those with authority under administrative laws and regulations are divided into ministries and agencies. White-collar crimes are often dealt with by the Japanese financial authorities, as such crimes frequently involve financing. They have regulatory authority over financial institutions (including banks and insurance companies) to ask questions, conduct site inspections and order the submission of reports and materials. The financial authorities generally conduct investigations into financial institutions on a voluntary basis for the purpose of requiring them to improve their business procedures in accordance with applicable laws and administrative guidance (financial inspections are based on Article 25 of the Banking Act, etc, and penalties are imposed for evading such inspections). 

By way of example, the Financial Services Agency of Japan (FSA) is responsible for ensuring the stability of the financial system, protecting investors and carrying out surveillance over securities transactions. The Securities and Exchange Surveillance Commission (SESC) is entrusted by the FSA with daily market surveillance, inspections of securities firms, inspections of disclosure documents and related activities.

In addition to the FSA, the Japan Fair Trade Commission (JFTC) is also important as an administrative authority on white-collar offences. The JFTC is the domestic competition watchdog. Its members are experts in law or economics, and it performs its duties as an independent administrative commission. Its organisational unit (the general secretariat) takes charge of the JFTC's clerical affairs in infringement investigations and supervises cases involving infringements of the AMA.

The Consumer Affairs Agency has general regulatory authority over misleading labelling, and the competent authorities for individual laws regulating labelling and advertising in specific fields (eg, the Pharmaceutical Affairs Law) are also regulatory authorities.

Administrative sanctions

Non-compliance with the administrative regulations may give rise to administrative sanctions, which can include the cancellation of an entity's business licence, suspension of all or part of a business, business improvement and report, administrative fines (karyo) or the imposition of a surcharge (kachokin). Surcharges are distinguished from administrative fines in Japan.

In general, the authorities mentioned in 2.1 Enforcement Authorities have discretion as to whether to initiate an investigation. There are no specific acts dealing with initiating an investigation (except for the Act on Prohibition of Private Monopolisation and the Maintenance of Fair Trade Act). An investigation can be triggered by many different factors – damage reports, first-hand or third-party crime reports, self-surrender, reports by third parties including a whistle-blower’s report, news and other media, etc. The provisions of the Administrative Procedure Act (eg, notice hearings) do not apply to investigations directly aimed at gathering information (Article 3, paragraph 1, item 14 of the Act).

In the field of competition law, the JFTC can start investigations on its own initiative based on its own internal information. Third parties can report suspected violations to the JFTC under Article 45 of the AMA. The JFTC must consider the allegations and if the report is sufficiently detailed and in writing, the JFTC must let the third party know whether it will take action in response to the report.

Power to Conduct Searches and to Compel Disclosure

In principle, in criminal cases, having obtained a warrant issued by a court (Article 218, CCP), the police or the public prosecutors have the power to conduct the necessary searches (including obtaining evidence). The requirement is "when it is necessary in connection with the investigation of a crime", which is broad (Article 218 of the CCP). In the context of a compulsory investigation, they have the power to search and inspect, seize, arrest and detain subject to obtaining the necessary warrants. Requests can also be made on a voluntary basis. Rejection of a request for a voluntary hearing may trigger an arrest if certain suspicion exists.   

The administrative authorities of licensed enterprises (eg, the FSA) usually have the power to conduct on-site inspections. The requirement is broad, as in the case of criminal investigations (eg, an inspection of a bank "when it is deemed necessary to ensure the sound and proper operation of the bank's business"). Administrative agencies cannot conduct investigations by suppressing defiance, while any avoidance or prevention/blocking of an on-site inspection usually constitutes a crime, provided the administrative authority asks the police to conduct a criminal investigation. It is often difficult for enterprises to file an action to revoke administrative dispositions like an investigation, as such an investigation cannot end until the court decides to revoke or suspend it. As an alternative to a compulsory investigation, the administrative authorities often ask relevant enterprises to submit information on a voluntary basis.

The administrative authorities can decide to conduct a dawn raid (this is customary practice by the JFTC in relation to cartel investigations), especially when they have concerns about the destruction or concealment of evidence.

Questioning Powers, etc

In criminal cases, the police or the public prosecutors can interrogate a suspect when they arrest or detain such a suspect with a warrant issued by a court (Article 198, CCP). The requirement for arrest is "when there is probable cause to suspect that the suspect has committed a crime (Article 199, CCP). They can also interview a suspect on a voluntary basis. Plea bargaining (limited to cases involving the criminal conduct of third parties, as opposed to one’s own) was introduced into Japanese law recently (Article 350-2 and after, CCP) and public prosecutors can therefore now grant immunity from prosecution to a witness, although the courts tend to scrutinise the credibility of the testimony of such witnesses. 

The administrative authorities of licensed enterprises (eg, the FSA) usually have the power to ask questions and order them to submit a report. The requirement and sanction for non-compliance are generally the same as for administrative inspections. The administrative authorities often interview and monitor the relevant enterprises on a voluntary basis.

In criminal cases, the suspects and the accused have:

• the right to remain silent (Article 198, CCP); and 
• the right of confidential communication with a defence attorney (Article 39, CCP). 

These rights are based on the constitution. However, attorney-client privilege is not recognised under Japanese law in this context, but attorneys have the right to refuse to seize documents, etc, pertaining to their client. Attorneys are also not allowed to attend the interrogation of suspects during criminal investigations.

Unlawfully obtained evidence may be excluded by a court, taking into account the seriousness of the illegality, the necessity to prevent procedural violations and to solve cases. Appeals against the retention or seizure of evidence can be filed with a court (Article 430, CCP). Attorney-client privilege is not available throughout examinations conducted by the administrative authorities, with the limited exception of cartel matters under the AMA and related guidelines established by the JFTC. In addition, the administrative authorities do not in practice permit counsel to be present at such examinations.

Power to Obtain Evidence Abroad

In addition to the foregoing, in criminal cases, the police or the public prosecutors may obtain evidence located abroad with the co-operation of other jurisdictions in pursuance with international assistance arrangements other than voluntary investigative assistance in the course of diplomatic relations. If the evidence is located abroad, the administrative authorities will request the relevant Japanese corporation or Japan branch office to submit such evidence or may seek to collect such evidence with the co-operation of the foreign countries' competent agencies in accordance with applicable mutual legal assistance treaties (if any) or on a voluntary basis.

Power of Arrest and Detention

Arrests and detentions are made to prevent escape and destruction of evidence and are a means of criminal investigation. They are also utilised in practice by the police and public prosecutors to interrogate suspects and defendants. Arrest is generally allowed if requested by the police and public prosecutors, if deemed necessary by a court. Detention may be allowed if requested by the public prosecutors following arrest and if deemed necessary by a court. An appeal may be filed against a detention order (Article 429, CCP). The period of arrest is up to 72 hours and the period of detention is up to 20 days. There is no right to bail before indictment. When indictment takes place during detention, detention continues after the indictment and can be renewed if deemed necessary by the court. The defendant may be entitled to bail with a few exceptions, such as, reasonable cause to suspect that the accused may conceal or destroy evidence (Article 89, CCP). A court can also allow a defendant to post bail on its own authority when it deems it appropriate (Article 90, CCP).

There is no specific statutory or regulatory obligation to conduct an internal investigation under Japanese law, even if there is a suspicion of wrongdoing. The decision to commence an investigation is at the discretion of the company. However, many companies decide to conduct internal investigations when they discover potential breaches, in order to assess their potential exposure ahead of a formal investigation by the regulators and to ensure that directors and senior management discharge their duties to the company. Companies generally conduct a preliminary internal investigation as soon as they become aware of the possible existence of past or ongoing misconduct, to assess the seriousness of the matter and the impact on their business, and to decide whether to conduct a full-scale investigation. It is common practice to involve outside counsel in both the preliminary internal investigation and the full-fledged investigation.

Director’s Duty of Care

A director’s duty of care to a company could prompt senior management to commence internal investigations. Under the Companies Act, if a director fails to conduct an investigation despite being aware of the possibility of misconduct, the director may be found to be in breach of their duty to mitigate losses or damage suffered by the company. Furthermore, industry-specific statutes or regulations may indirectly compel a company to conduct investigations. For example, when a pharmaceutical company or medical device manufacturer becomes aware of issues relating to the efficacy or safety of its pharmaceutical or medical devices, it must report the issue to the authorities and an investigation, even preliminary, must be conducted beforehand.

Self-Regulated Organisations

Self-regulated organisations, such as the Japan Exchange Regulation (JPX-R) have established their own guidelines concerning the obligations of listed companies to make an effort to conduct investigations when they become aware of misconduct.

Co-operation

Evidence for criminal cases in Japan can be obtained from foreign countries based on a treaty or agreement regarding mutual legal assistance in criminal matters with Japan (eg, agreements with the US, South Korea, China, Hong Kong, the EU, Russia and Vietnam, except for cases that do not constitute a crime according to the acts of the country). For foreign countries that have not entered into a treaty or agreement, co-operation is conducted through diplomatic channels based on the principle of reciprocity (Act on International Assistance in Investigation and Other Related Matters). Assets derived from criminal activity can be seized in a foreign jurisdiction based on treaties or agreements, and through diplomatic channels. Japan has concluded and ratified the Convention against Transnational Organized Crime, which allows for requests for assistance – relating to organised crime – between authorities in signatory countries, not through diplomatic channels.

Administrative authorities usually share information on a bilateral and multilateral basis.

Blocking Statute

There is no statute that is clearly and explicitly intended to block the assertion of foreign jurisdictions within Japan.

Extradition

The Japanese government has entered into extradition treaties with the USA and Korea. Moreover, there are multilateral treaties with provisions on extradition to which Japan is a party, such as the United Nations Convention against Transnational Organized Crime and the United Nations Convention against Corruption. The Extradition Act exists as a domestic implementing law.

Only public prosecutors have the authority to prosecute (Article 247, CCP). In most cases, public prosecutors ultimately decide to prosecute criminal cases based on the results of a police investigation. However, public prosecutors may proceed with investigations independently from the police. If the administrative authorities become aware of the existence of a crime in connection with the relevant laws and regulations under their jurisdiction, they must file a complaint in relation to the crime with the police or the public prosecutor's office.

The public prosecutors' office decides at its discretion whether to prosecute by taking into consideration, for example, the possibility of proving the criminal offender's guilt, the severity of the damage, and the chances of reaching a settlement (although a (high) probability of settlement is not enough). However, a criminal case will be commenced if the Committee for the Inquest of Prosecution (a committee composed of 11 members elected by lot from among citizens) resolves that the case should be prosecuted, even if the public prosecutor has decided not to prosecute. 

There are no clear guidelines or standards for prosecuting.

Under the CCP, there is no deferred prosecution system or non-prosecution agreement scheme. See 2.8 Plea Agreements, which can have a relatively similar effect.

A plea-bargaining system was launched in June 2018, following a reform of the CPC. The plea-bargaining system allows a suspect and a defendant to enter into negotiations with prosecutors in the presence of their attorneys. Under this system, evidence of criminal conduct by or testimony on the criminal conduct of third parties (individuals or companies; suspect third parties) can be provided in return for criminal charges being reduced or withdrawn. The system covers white-collar crimes such as fraud, bribery, embezzlement and antitrust offences and certain offences relating to tax matters and trading in financial products and instruments.

There are various ways in which an individual or a company (co-operating party) can co-operate with prosecutors in relation to the suspect third party. These include assisting with the collection of evidence, responding truthfully and fully in investigation interviews and providing full disclosure of information in an authorities' investigation or in a court trial. To prevent a co-operating party from providing false information on a suspect third party in the hope of a reduced penalty, a co-operating party found to have provided false information may be subject to criminal sanctions, including imprisonment of up to five years.

In recent cases, a court has held that statements based on plea agreements "should be carefully examined from the viewpoint of whether there are circumstances in which their credibility should be positively recognised, such as the existence of sufficient corroborative evidence, such as objective evidence or statements by credible third parties", and that "statements without direct corroborative evidence should be examined more carefully from the viewpoint of the nature and the  content of the statement and the viewpoint of whether the content of the statement is certain in light of the stable facts related to the statement".

See 1.1 Legal Framework. In addition to the offences covered by the PC and other laws, the CA also imposes sanctions against the fraudulent activities of corporate officers and employees. The CA specifies many types of corporate crime, including the following.

Special (Aggravated) Breach of Trust 

A director can be criminally liable for aggravated breach of trust under the CA if they act in breach of their duties for the purpose of benefiting improperly themselves or in the interest of a third party, or to inflict damage on the company’s assets (imprisonment of up to ten years and/or a fine not exceeding JPY10 million).

Endangering a Company’s Assets

This includes:

• making false statements or concealing facts about the company’s capitalisation or subscription payments (imprisonment of up to five years and/or a fine not exceeding JPY5 million);
• acquiring shares unlawfully at the company’s expense;
• distributing a dividend of surplus in breach of the law; and
• disposing of corporate assets in speculative transactions outside the scope of the corporate purpose.

Other CA Offences

These include:

• the use of false documentation;
• disguising capital contributions through borrowings; 
• providing consideration for the exercise of shareholders' rights; and
• bribery (a director can be criminally liable for giving or accepting a bribe under the CA if they accept, solicit or promise to accept property benefits in connection with corporate duties in response to a wrongful request).

Fraud and embezzlement are covered by the PC.

General

In Japan, various statutes prohibit bribery and classify it as a crime. The PC sets out the general prohibition on bribery of Japanese public officers, the CA prohibits bribery with respect to directors, the Unfair Competition Prevention Act prohibits the bribery of foreign public officers, and the Act for Punishment of Gain from Intercession Activity prohibits bribery of members of parliament, the diet etc. In addition, the Act for the Regulation of Political Funds and the Public Officers Election Act regulate political contributions. The National Service Act and the National Public Service Ethics Act regulate the conduct of national public servants and the receipt by national public servants of benefits from certain persons and organisations. Regarding rules concerning gifts, hospitality and other business courtesies, the National Public Service Ethics Board has provided specific guidance in the form of the code of ethics for national public officials regarding permissible gifts, business courtesies, and facilitation payments in an administrative disciplinary context in Japan. 

Public Officials

The PC prohibits both paying a bribe to public officials and receiving a bribe from public officials. The PC generally prohibits a public official from accepting, soliciting, or promising to accept a bribe in connection with their duties. It also prohibits a person from giving, offering or promising to give a bribe to a public official. Employees of state-owned or state-controlled entities, such as the Bank of Japan, national universities, and Japan Tobacco, are usually deemed to be public officials and are subject to the bribery provisions of the PC, or similar provisions under special laws. The intent to commit the offence (awareness of the bribe) is required.

Sanctions under the PC – unless otherwise provided, the maximum prison term for a person found guilty of bribery is 20 years. A public officer found guilty of receiving a bribe, excluding specified offences, may be punished with imprisonment with work for a term of not more than five years. With respect to the said specified offences, acceptance of a bribe on request by a public officer may be punished with imprisonment with work for a term of not more than seven years and if the public officer consequently acts illegally or refrains from acting in the exercise of their duty, the prison term will be aggravated for 1– 20 years. Imprisonment with work consists of confinement in a penal institution with assigned work. A person found guilty of giving, offering, or promising to give a bribe may be punished with imprisonment with work for not more than three years or a fine of not more than JPY2.5 million. 

A person who jointly commits the crime of bribery or induces another to commit the crime of bribery, may be punished as severely as the principal. However, a person who is merely an accessory to the commission of the crime of bribery is subject to a lesser punishment.

Foreign Public Officials

Japan amended the UCPA in 1998 (criminalising the bribery of foreign public officials in international business transactions) in order to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 1997. Japan became a party to this Convention in 1998.  The UCPA prohibits the payment of bribes to foreign public officials. Article 18(1) of the UCPA provides that "no person shall give, offer or promise to give any money or other benefits, to a foreign public official, for the purpose of having the foreign public official act or refrain from acting in a particular way in relation to their duties, or having the foreign public official use their position to influence another foreign public official to act or refrain from acting in a particular way in relation to that official's duties, in order to obtain illicit gains in business with regard to international commercial transactions". A violation of the UCPA is subject to imprisonment of up to five years and/or a fine of up to JPY5 million. If an individual who violates the UCPA's foreign bribery provision is an employee, agent, officer or director of a company, and the bribe is made in connection with the company's business, the company is subject to a fine of up to JPY300 million. 

The Ministry of Economy, Trade and Industry (METI) has published best practice guidelines entitled "Guidelines for the Prevention of Bribery of Foreign Public Officials", which were last amended in May 2021.

Private Commercial Bribery

No general Japanese law prohibits commercial bribery among private persons. However, bribery of board members of companies is a crime under the CA. Directors or statutory auditors are prohibited from accepting, soliciting or promising to accept property benefits in connection with their duties, and those who have provided or offered or promised to give such benefits will be punished. The CA also makes bribery or the provision or request of benefits in relation to the exercise of shareholders' rights a crime. 

Specific laws also regulate the provision of advantages or benefits between private parties. For example, the FIEA generally prohibits Financial Instruments and Exchange Business Operators (FIEBOs), such as securities companies, banks and so on, from providing property benefits to clients to make up for losses in securities or derivative transactions.

The Cabinet Office Ordinance on financial instruments and exchange business, etc, restricts FIEBOs and their officers or employees from providing a special advantage to clients. The Ordinance also restricts the staff of registered credit-rating agencies (CRAs) from receiving, demanding or accepting an offer of money or goods that exceeds JPY3,000 per case from their clients in general. No criminal punishment is applicable to these acts. However, FIEBOs or CRAs may be subject to administrative action by the relevant regulatory authority.

No statute imposes a specific obligation to prevent bribery and influence peddling. There is no obligation to maintain a compliance programme to prevent bribery. However, the CA requires the directors of a corporation to establish internal control systems, including a system to prevent unlawful conduct. Failure to do so constitutes a breach of a director’s duty of care. 

There is no systematic market practice in combating corruption and corporate crime. However, in general, most, if not all, listed companies in Japan have established or strengthened their internal control systems and compliance procedures by, for example, rolling out in-house education and training courses, strengthening internal audit rules, increasing audit frequency and setting up credible whistle-blowing systems and hotlines.

Insider Trading

The FIEA prohibits insider trading under Articles 166 and 167; unfair trading under Article 157; spreading rumours, using fraudulent means and committing assault or intimidation under Article 158; and market manipulation under Article 159 (collectively referred to as "market abuse").

Regulatory authorities and guidelines

The regulatory and supervisory authorities relevant to insider trading and market abuse are the following.

The FSA

The FSA is responsible for ensuring the stability of the financial system, protecting investors and carrying out surveillance over securities transactions.

The SESC

The SESC is entrusted by the FSA with daily market surveillance, inspections of financial instruments firms, inspections of disclosure documents and related activities. 

Both the FSA and the SESC periodically issue and update guidelines relating to the FIEA. In addition, there are several self-regulatory organisations, such as the Japan Exchange Regulation (JPX), the Japan Securities Dealers Association (JSDA), and the Japan Investment Advisers Association (JIAA), which also publish self-regulatory guidelines for the prevention of insider trading.

Offences

The following are insider trading offences under the FIEA.

Insider trading by a corporate insider (Article 166, FIEA)

Any person listed below ("Corporate Insider") who has come to know a material fact pertaining to the business or other matters of a listed company ("Material Fact") and makes a sale, purchase or other transfer for the value or acceptance of such transfer for the value of shares of the listed company before the Material Fact is publicised, has violated the insider trading laws, as set out in the FIEA.

A Corporate Insider includes:

1. an officer, agent, employee or other worker ("Officer") of the listed company (including its parent company and subsidiaries) who has come to know a Material Fact in the course of their duty;

2. a shareholder entitled to the right to inspect accounting books of the listed company who has come to know a Material Fact in the course of such an inspection;

3. a person with statutory authority over a listed company who has come to know a Material Fact in the course of the exercise of such authority (eg, a public officer with the statutory authority to grant permissions, and initiate investigations or inspections);

4. a person that has concluded, or who is in the process of a negotiation to conclude, a contract with the listed company who has come to know a Material Fact in the course of the conclusion, negotiation or performance of the contract;

5. an Officer of a juridical person listed in points 2 or 4 above, who has come to know a Material Fact in the course of their duty; 

6. a person that has, within one year, ceased to be a person listed in the first to fifth points above;

7. a person who has received information on a Material Fact, from a person listed in the first to sixth points above;

8. an Officer of a juridical person who has received, from a person listed in the seventh point above, with the same juridical person, information on a Material Fact in the course of their duty. 

Material Facts include:

• a decision by the organ of the listed company which is responsible for making decisions on the execution of the operations of the listed company to carry out certain important matters;
• the occurrence of certain important facts in the listed company;
• the existence of a significant difference with the latest publicised forecasts of sales, current profits, net income, and dividend of the listed company; and
• any other important matters which would have a significant influence on investors' decisions (catch-all clause).

The decisions, occurrences, difference in settlement of account information, and the catch-all clause, which are similar to the above with respect to the subsidiaries of the listed company, are also included in the Material Facts.

Insider trading in connection with a tender offer (Article 167, FIEA)

The same punishment for insider trading by a Corporate Insider (see above) will be imposed on a person who has come to know a fact concerning the launch or suspension of a:

• tender offer; or 
• purchase of more than 5% of the shares of a listed company (collectively, a "Tender Offer"). 

Acts of communicating information and acts of advising transactions (Article 167-2, FIEA)

A person listed in the eight numbered points above in relation to insider trading by a Corporate Insider, who has come to know a Material Fact, must not inform another person of such Material Fact and must not advise another person to sell or purchase stock of the subject listed company, for the purpose of letting such other person make profits or avoid losses, before such Material Fact is publicised. If such other person proceeds to conduct insider trading after receiving the information or advice mentioned above, the person who informed such Material Fact or provided such advice will be punished.

Insider trading offences are not strict liability offences in terms of criminal penalty. Criminal intent by the person who committed the insider trading offence must therefore be established. Attempts to commit insider trading offences are not punishable. An insider trading action can be brought against both individuals and corporate bodies.

Penalties

A person who commits insider trading can be punished by imprisonment for up to five years and/or a fine of up to JPY5 million (Article 197-2(13), (14) and (15), FIEA). The property/earnings gained through insider trading will be confiscated and any shortfall will be collected from the offender (Article 198-2, FIEA). If the violation is committed by its representative, agent or employee, a company can be punished by a fine of up to JPY500 million (Article 207(1)(ii), FIEA). 

In addition, the FSA may order a person who commits insider trading or a person who violates the said regulation regarding communicating information to pay an administrative surcharge (Article 175, 175-2, FIEA).

Market Abuse

The FIEA prohibits the following (Article 157, FIEA):

• the use of wrongful means, schemes, or techniques with regard to the sale, purchase or other transaction of securities and so on; 
• the acquisition of money or other property by misrepresenting important matters or omitting important matters necessary to avoid misunderstanding with regard to the sale, purchase, or other transaction of securities and so on; and
• the use of false quotations in order to induce the sale, purchase or other transaction pertaining to securities and so on.

In addition, the spreading of rumours, use of fraudulent means, assault, or intimidation for the purpose of carrying out the sale, purchase, or other transaction of securities, or causing a fluctuation of quotations on securities, are prohibited (Article 158, FIEA).

The FIEA also prohibits market manipulation. The following are the main acts prohibited as market manipulation (Article 159, FIEA).

• Conducting a series of trades that mislead other investors into thinking that trading of a certain listed security is active, with the purpose of creating an environment in which other investors want to trade in said security ("intention to solicit"). Also, conducting a series of trades to influence the market price of the security for the same purpose.
• Making trades without intending to effect a transfer of rights ("wash sales"), or conspiring with others on certain trades ("collusive trading") with the purpose of misleading other investors regarding the overall trading environment, such as leading them to believe that trading is active.

Penalties

A person who commits market abuse can be punished by imprisonment for up to ten years and/or a fine of up to JPY10 million (Article 197(1)(v), FIEA). A person who commits market abuse and sells or purchases securities at prices that are the result of market abuse, with the intent of making economic gains, can be punished by up to ten years' imprisonment and a fine of up to JPY30 million (Article 197(2), FIEA). The property/earnings gained through market abuse will be confiscated and any shortfall will be collected from the offender (Article 198-2, FIEA). If the violation is committed by its representative, agent or employee, a company can be punished by a fine of up to JPY700 million (Article 207(1)(i), FIEA).

In addition, the FSA may order a person who commits administrative market abuse to pay a fine under the FIEA (Article 174, 174-2, FIEA).

Tax evasion is punishable under the law applicable to each type of tax. If a taxpayer under-reports its payable tax amount, fails to file a tax return or fails to pay withholding tax by the due date, the tax authorities can impose additional tax, which is collected as an administrative penalty. Delinquent tax can also be applied.

Under-Reporting

The penalty tax for under-reporting is 10% of the tax increment (the difference between the unreported and reported taxes) resulting from a correction or an amended return when the original final return was filed on or before the due date. If the tax increment exceeds the tax amount of the original tax return filed by the due date, or JPY500,000 (whichever is greater), 15% additional tax is applied to the excess amount. Notwithstanding the general rules as mentioned above, in a case where a taxpayer who has not been notified of the commencement of a tax audit files an amended tax return voluntarily, the additional tax is not applied. In the case of a voluntarily amended return filed by a taxpayer who has been notified of the commencement of a tax audit without awareness of the possible correction based on the audit, a 5% additional tax is applied. In this respect, if the tax increment exceeds the tax amount of the original tax return filed by the due date or JPY500,000 (whichever is greater), 10% additional tax is applied to the excess.

Failure to File a Tax Return

In the case of failure to file a tax return, the extra tax is 15% of the principal amount of tax determined by the tax office or set out in a final or amended return when the final tax return was filed after the statutory due date. Where the principal amount exceeds JPY500,000, the rate of the additional tax increase becomes 20% with respect to the excess. Moreover, an extra 10% is added to those rates if extra tax for failure to file or a heavy additional tax has been imposed within five years with regard to the tax in question. Notwithstanding the general rule, where a taxpayer who has not been notified of the commencement of a tax audit files a tax return voluntarily after the statutory due date, a 5% additional tax is applied. In addition, if a taxpayer who has been notified of the commencement of a tax audit files a return voluntarily without any awareness of the possible correction or determination based on the audit, 10% additional tax is applied (15% to the excess amount of the principal tax over JPY500,000).

Withholding Tax

In the case of additional tax for failure to pay withholding tax, 10% of the unpaid amount of the principal tax is added in a case of payment notification after the deadline. However, where a taxpayer voluntarily pays the tax after the due date, the rate of extra tax is reduced to 5%. 

Tax Evasion

In the case of tax evasion, additional penalty tax applies at the rate of 35% for under-reporting tax and for failure to pay withholding tax, and 40% for failing to file a tax return. Moreover, an extra 10% is added to these rates if either an additional tax for failure to file or a heavy additional tax is imposed within five years with regard to the same tax. In addition, a tax offender may be subject to imprisonment for up to ten years or a fine not exceeding the evaded tax, or both.

Obstruction

In the case of a tax audit by the tax authorities, a taxpayer is punishable by imprisonment for up to one year or a fine of up to JPY500,000 if they do not answer, or provide a false answer or obstruct/interfere with the audit. 

Corporate Duties

A company may be liable to a criminal fine if an officer or employee is found guilty of a corporate income tax offence.

Companies Act (CA)

According to the CA and its implementing regulations, joint stock companies and membership companies (of the limited liability company type) must prepare accurate accounting books in a timely manner (Articles 432 and 615, CA), and joint stock companies must publish their balance sheets and, where applicable, their profit and loss accounts (Article 440, CA).

According to the CA and its implementing regulations, when a director (or applicable person) of a company fails to prepare accounting books or record balance sheets properly, they will be subject to an administrative monetary penalty of no more than JPY1 million (Article 976, CA). In addition, when the director (or other relevant person), in soliciting subscribers for shares of the company, uses documents concerning such solicitation that contain false statements about important matters, the director (or other relevant person) may be subject to imprisonment with labour for no more than five years, or a fine of no more than JPY5 million, or both (Article 964, CA). 

Financial Instruments and Exchange Act (FIEA)

According to the FIEA and its implementing regulations, a person who conducts a public offering of securities must prepare financial and accounting documentation in accordance with the rules on terms, format and preparation methods applicable to financial statements (Article 193, FIEA). These documents must be submitted to the FSA as part of the securities registration statement at the time of the public offering, and annual securities reports (in addition to semi-annual securities reports and for listed companies, quarterly securities reports) must also be drawn up and disclosed to the public.

According to the FIEA, failure to submit any required financial statement or report will be subject to a penalty, depending on the type of document. For example, a person who conducts a public offering before a securities registration statement has been accepted, or fails to submit an annual securities report by the prescribed time, will be subject to imprisonment with labour for no more than five years, or a fine of no more than JPY5 million, or both (Article 197-2, FIEA). Also, a person who has made false statements about important matters regarding those documents will be subject to imprisonment with labour for no more than ten years, or a fine of no more than JPY10 million, or both (Article 197, FIEA). 

In addition, if the above-mentioned violation of provisions of the FIEA is committed by an officer or employee of a corporation, the corporation will also be subject to a fine – for a violation of Article 197, a fine of not more than JPY700 million; for a violation of Article 197-2, a fine of not more than JPY500 million (Article 207, FIEA). Furthermore, if such a violation is committed, it will be subject to a separate order by the FSA to pay a surcharge of a prescribed amount, depending on the type of violation (Articles 172 to 172-4, FIEA).

Cartels

The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade, commonly known as the Anti-monopoly Act (AMA), governs cartels (and bid-rigging). Cartels are prohibited as an "unreasonable restraint of trade", defined as "business activities, by which any enterprise, by contract, agreement or any other means irrespective of its name, in concert with other enterprises, mutually restrict or conduct their business activities in such a manner as to fix, maintain or increase prices, or to limit production, technology, products, facilities or counterparties, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade" (Article 2(6), AMA).

The JFTC is the government agency responsible for enforcing the AMA and can conduct primary investigations and impose cease-and-desist orders and administrative fines (surcharge payment orders). The surcharge amount is calculated as a percentage (10%) of total sales of the products or services concerned. The calculation period covers a period of ten years preceding the date on which the JFTC starts its investigation and the period under the statute of limitations is seven years. In addition, the maximum surcharge amount imposed can be increased by 50% for those who obstruct an investigation, on ringleaders and repeat offenders for breaches, on those with subsidiaries that have been subject to a surcharge payment order within the past ten years, and by those having succeeded in the business connected to the violation from other enterprises that have violated the law over the past ten years. There is also a framework allowing the JFTC to factor in the degree of co-operation and award a corresponding discount to the fines.

Criminal Sanctions

In addition to administrative sanctions, firms and individuals can face criminal sanctions for cartel violations. The filing by the JFTC of a criminal accusation to the Prosecutor General is the exclusive means by which a criminal prosecution can be brought against firms and individuals for cartel violation of the AMA (Article 96(1), AMA). Cartel violations may result in a fine of up to JPY500 million for firms, or imprisonment of up to five years and a fine of up to JPY5 million for individuals.

In a recent case, although the AMA does not state whether it applies to acts committed overseas, Japan's Supreme Court ruled on 12 December 2017 that the JFTC could impose administrative surcharges on firms that join cartels established overseas if the cartels could impair free competition on the Japanese market. This was the court's first decision approving the application of the AMA to cartels created abroad. Foreign companies had agreed to set the minimum price of cathode ray tubes for televisions to be sold to local subsidiaries of Japanese companies. In 2010, the JFTC decided that these companies had formed a price cartel and ordered one of them to pay a surcharge of about JPY1.37 billion.

Other Restraints

The JFTC is required to impose surcharges (administrative fines) if an enterprise is found to be engaged in certain conduct. The surcharges are calculated by applying certain rates to the sales of relevant goods or services during the violation period (up to ten years). The sales calculation methods and surcharge rates differ according to the type of conduct, as follows. 

• Private monopolisation by controlling business activities, 10% of sales (increased by 50% if the enterprise has been ordered to pay surcharges or subject to a similar order for private monopolisation or restraint of trade during the past ten years), and private monopolisation by specified exclusionary conduct, 6%.
• Unfair trade practices (concerted refusal to deal, discriminatory treatment, predatory pricing and resale price maintenance) corresponding to a repeat violation within ten years, 3% of sales. A rate of 1% and a different calculation method apply to abuses of superior bargaining position (ASBP) for which a payment order can be imposed for the first violation.

Criminal sanctions may apply for private monopolisation under the AMA but have so far never been imposed. Enterprises face a maximum criminal fine of JPY500 million.

Penal Code

A person who defrauds another person of property can be punished by imprisonment for not more than ten years (Article 246, PC).

Act on Specified Commercial Transactions (ASCT)

The Act on Specified Commercial Transactions regulates transactions related to door-to-door sales, mail order sales, telemarketing sales, multilevel marketing transactions, provision of specified continuous services, business opportunity sales transactions, and door-to-door purchases. Taking door-to-door sales as an example, it is prohibited to make misrepresentations about the performance or value of a product. Those who violate this rule may face business improvement, business suspension, or business prohibition. Violators may also be subject to imprisonment for up to three years or a fine of up to JPY3 million.

Act Against Unjustifiable Premiums and Misleading Representations (AUPMR)

This regulates premiums and representations in connection with transactions of goods and services in order to ensure fair competition and thereby protect the interests of general consumers. The AUPMR prohibits certain acts, including the following misrepresentations, which would trigger the imposition of an administrative fine on a business that has made the following misleading representations (Article 5):

• any representation where the quality, standard or any other content of goods or services is portrayed to general consumers as being much better than that of the actual goods or services, or much better than those which other businesses supply, contrary to fact; or
• any representation by which the price or any other trade terms of the goods or services could be misunderstood by general consumers to be much more favourable than the actual goods or services supplied, or to be much more favourable than those of other businesses that supply the same kind or similar goods or services.

A cease-and-desist order would be issued to stop the misrepresentations and prevent any recurrence. The administrative fine is 3% of sales that were made during the misrepresentation period. If the business that made the misrepresentation can prove that it did not know the representation was misleading and that it has paid a fair amount of attention to whether it was misleading or not, the administrative fine is not imposed. If the business reports the misrepresentation before the government starts an investigation, the administrative fine is reduced by half. If the business makes a plan to refund consumers to compensate for the misrepresentation, and if such a plan is approved and carried out by the business, the administrative fine is reduced or eliminated.

Cybercrimes and Computer Fraud

• The Penal Code prohibits the creation, provision, release, acquisition and storage of malware with the intention of applying or using such malware in the electronic device of another person. The offence can result in imprisonment with work for up to three years or a fine of up to JPY500,000; or two years' imprisonment with work or a fine of up to JPY300,000 for acquisition and storage (Articles 168-2 and 168-3, Penal Code).
• The Unfair Competition Prevention Act dealing with the unauthorised acquisition, use or disclosure of trade secrets (including those that are electronically stored), imposes imprisonment with work for a maximum of ten years, a maximum fine of JPY20 million or both (Article 21, UCPA) (see below).
• The Act on the Prohibition of Unauthorised Computer Access, dealing with phishing and unauthorised access to identifying information, imposes imprisonment with work for up to one year or a fine of up to JPY500,000 (Article 12); unauthorised access, including hacking, is punishable with imprisonment for up to three years or a fine of up to JPY1 million.

Also relevant are: the Act on the Protection of Personal Information on data protection; the Telecommunications Business Act which seeks to protect the secrecy of communications (Article 41-3); and the Act on the Punishment of Activities Relating to Child Prostitution and Child Pornography, and the Protection of Children, which prescribe severe punishment in relation to child pornography and related offences in Japan (fines and up to five years' imprisonment).

Protection of Company Secrets

The UCPA protects trade secrets and shared data with limited access (Article 2). A trade secret is technical or business information useful for commercial activities, such as a production method, sales method, or any other technical or operational information useful for business activities that is controlled as a secret and is not publicly known. Shared data with limited access means technical or business data that is handled as data to be provided to specific persons on a regular basis and is accumulated in substantial quantities by electronic, magnetic or other methods that cannot be recognised by human senses alone (excluding information that is kept secret). According to Article 21, a person who uses or discloses a trade secret acquired by the following means is subject to imprisonment for up to ten years or a fine of JPY20 million, or both: through fraud (which means the act of deceiving, assaulting or intimidating a person), theft of property, by breaking into facilities, using unauthorised access under the Unauthorised Computer Access Act, misappropriating a recording medium containing trade secrets (meaning a document, drawing or a recording medium on which trade secrets are described or recorded), and other unlawful means. Among the persons to be punished: a person who was an officer or employee of the trade secret holder, to whom the trade secret holder had disclosed trade secrets, and who, for the purpose of wrongful gain or causing damage to the trade secret holder, has offered to disclose the trade secrets; or a person who receives a request to use or disclose the trade secrets, while holding that position, in breach of their legal duty regarding the management of the trade secrets, and who uses or discloses the trade secrets after leaving that position. 

Foreign Exchange and Foreign Trade Act (FEFTA)

The Ministry of Finance (MOF) and the Ministry of Economy, Trade and Industry have the authority to impose financial/trade sanctions under the FEFTA. Japanese authorities exercise trade control by way of appropriate implementation of measures that are in compliance with the FEFTA, such as screening for import/export permission and approval, and on-site inspection and disposal of illegal exports. Furthermore, Japan actively exchanges information with other countries, and collects information concerning the circumventing of exports to countries of concern and relevant sensitive technology that may be targeted for circumventing export, in order to increase effectiveness in trade control. 

Export Control

The legal structure of Japan’s export control system is extremely complicated. It is a mix of primary legislation and secondary legislation:

• the FEFTA provides the legal basis for export control in Japan;
• the Export Trade Control Order specifies the controlled goods pursuant to the provisions of Article 48-(1) of the FEFTA; and
• the Foreign Exchange Order specifies the controlled technology, including software, pursuant to the provisions of Article 25-(1) of the FEFTA.

The FEFTA defines the basic framework and the principles of the control of exports of weapons and dual-use items, and technology transfers; and the need for a licence from the Minister of Economy, Trade and Industry (METI). Any person who conducted a transaction subject to the provisions of Article 25-(1) or 25-(4) without obtaining a licence as stipulated in the article faces criminal penalties (Article 69-(6)).

Any person who meets either of the following conditions will be subject to a penalty of not more than seven years' imprisonment or a fine not more than JPY20 million, or both (in some case, five times the value of the items involved exceeding JPY20 million): any person who conducted a transaction subject to the provisions of Article 25-(1) or 25-(4) without obtaining a licence or who exported goods subject to Article 48-(1) without obtaining a licence. 

Not more than ten years' imprisonment or a fine up to JPY30 million, or both, applies for the export of specific technology designated by Cabinet Order as being used for the development, manufacture or use of nuclear weapons; chemical or bacterial substance for military use; equipment used for spraying such substance, or rockets or unmanned air vehicles used for delivering it; or specific kinds of goods stipulated in Article 48-(1) but set forth in the Cabinet Order as those that are used specifically for nuclear weapons or for the development of such weapons, etc.

Foreign Direct Investments

Depending on the type of business in which the target entity is engaged or the nationality of the foreign investor, the FEFTA requires a foreign investor to submit a prior notification and/or a post-transaction filing through the Bank of Japan to the MOF and relevant ministries.  The FEFTA also prohibits certain investments in foreign companies by Japanese investors without the prior approval of the authorities. The violation of such requirements or prohibitions is subject to administrative and criminal penalties

Customs Act

Under the Customs Act, the export or import of prohibited items, being exempted from customs duties through deception or other acts of falsification; exporting or importing goods by making a false declaration or producing falsified documents; and other acts; are subject to administrative and criminal penalties.

Harbouring Criminals and Suppressing Evidence

A person who harbours or enables the escape of another who has committed a crime punishable with a fine or a harsher punishment, or who has escaped from confinement, will be punished by imprisonment for up to three years or a fine not exceeding JPY300,000 (Article 103, PC). A person who damages, counterfeits or alters evidence relating to the criminal case of another or who uses counterfeit or altered evidence, will be subject to the same sanctions (Article 104, PC). Regarding perjury, a sworn witness who gives false testimony can spend three months to ten years in jail (Article 169, PC). 

The APOC contains provisions on special categories of crime carried out by organised crime and provisions in relation to the concealment, receipt and confiscation of the proceeds of a crime.

Under the PC, two or more persons who commit a crime jointly are deemed to be principals and a person who induces another to commit a crime may be treated in sentencing as a principal (Articles 60 and 61). An accessory or person who aids a principal is also punishable, but the punishment is less than the punishment of the principal (Articles 62 and 63).

The following laws prohibit or restrict money laundering: 

• the APOC;
• the Act on Prevention of Transfer of Criminal Proceeds (APTCP); and
• FEFTA.

These laws are supplemented by the Guidelines on Anti-money Laundering and Combating the Financing of Terrorism issued by the FSA. JAFIC, which is established within the National Police Agency (NPA), is the relevant financial intelligence unit (FIU) under the Financial Action Task Force on Money Laundering (FATF) regime. JAFIC collects and analyses information on money laundering.

The APTCP and FEFTA impose obligations on financial institutions to use certain measures for the purpose of preventing money laundering and terrorist financing, which include KYC (customer identification), record-keeping of customers' transactions, and reporting suspicious transactions to the authorities. Non-compliance with these obligations can lead to administrative sanctions by the relevant authority.

The APOC prohibits the following conduct in connection with money laundering. 

• Concealing or attempting to conceal facts relating to the acquisition and disposal of the proceeds of a crime, or concealing or attempting to conceal the source of proceeds of a crime. A person who violates the provision is subject to imprisonment for up to five years or a fine of up to JPY3 million, or both.
• Accepting the proceeds of a crime. A person who violates the provision is subject to imprisonment for up to three years or a fine of up to JPY1 million, or both. 
• Planning to carry out criminal acts for a criminal organisation, terrorist group or organised crime group involving two or more persons with one or more of the said persons conducting preparatory acts such as securing funds or goods, or inspecting relevant places in advance of carrying out crimes in accordance with a plan. A person who violates the provision will be subject to imprisonment with or without labour for up to five years.

Obtaining bank books or cash cards with the intention of receiving banking services by passing oneself off as another person is punishable under the Act on the Prevention of Transfer of Criminal Proceeds.

Passing oneself off as another person to receive, transfer, or solicit a transfer of deposits or savings is punishable under the Act on the Prevention of Transfer of Criminal Proceeds.

Terrorist Financing

The following laws set out matters in relation to combating the financing of terrorism (collectively known as the "CFT regulations"): 

• the Act on Punishment of the Financing of Criminal Activities for the Purpose of Intimidation of the General Public and of Governments ("Terrorist Financing Suppression Act"); 
• the APTCP;
• the FEFTA; and 
• the Act on Special Measures concerning the Freezing of Terrorist Assets (ASMFTA), implemented by Japan in accordance with UN Security Council Resolution 1267.

These laws are supplemented by the Guidelines on Anti-money Laundering and Combating the Financing of Terrorism issued by the FSA.

JAFIC is also the relevant FIU under the FATF scheme. JAFIC collects and analyses information in relation to the financing of terrorism. 

Furthermore, the MOF is also in charge of the CFT regulations. The MOF has the authority to supervise, monitor and inspect suspicious cross-border financings which may be associated with terrorism under the FEFTA.

There are no special defences for white-collar offences, either criminal or administrative. In criminal cases, the prosecutor bears the burden of proving all the elements of a crime, like the identity of the offender, fulfilment of criminal legal requirements, illegality, and intent. There is no general rule regarding the burden of proof in administrative litigation, which is determined on an individual law provision basis. Aside from simple crimes, defendants often claim that their conduct was legitimate and based on a legitimate business purpose. In each case, such claims will be challenged in the presence or absence of fulfilment of criminal legal requirements, illegality, and intent.

Lack of Intent

All crimes listed in 1.1 Classification of Criminal Offences require intent, and to secure the conviction of a corporation or an individual, the public prosecutor must prove the occurrence of a criminal act and sufficient criminal intent, beyond reasonable doubt. A possible defence would therefore be lack of intent. 

Dual Liability

In principle, only individuals are criminally liable but a body corporate can be held criminally liable if a specific statutory provision exists in the form of a dual liability provision. A company’s liability could be discharged or mitigated if the company can show it has exercised due care in its oversight of the individual who may be criminally liable (eg, when dealing with the acts of a rogue employee). 

Compliance Programme

With respect to the company’s liability in the context of dual liability, the existence of a compliance programme or in-house training could be an important fact to prove there was no negligence. Moreover, the fact that a company implements a compliance programme and in-house training may be viewed favourably by the prosecutors or courts when determining prosecution or punishment.    

There are no exempt industries and/or sectors for the white-collar criminal offences described in 1.1 Classification of Criminal Offences.

Bribery of Domestic Officials

There is no definition of a bribe in the PC. However, it is generally interpreted as an advantage given to a public official to influence the performance of their duties. A bribe is not limited to a monetary or property benefit and can include the satisfaction of a demand or desire of the official. Gifts, travel, meals, entertainment, or free lease of property are generally viewed as an advantage.

However, it should be noted that gifts, gratuities and other things within the scope of social courtesy are not deemed to be bribes, while the criteria for what is within the scope of social courtesy are unclear.

Bribery of Foreign Officials

There is no provision in Article 18 of the UCPA that clearly allows small facilitation payments, and the bribery of foreign public officials in Japan will not be exempted from punishment just because the bribe is a small facilitation payment. There is no clear "safe harbour" rule for small facilitation payments under the UCPA or the guidelines on bribery of foreign officials issued by METI, and provided the prerequisite, "in order to obtain illicit gains in business with regard to international commercial transactions", is fulfilled in specific cases, this payment will constitute the offence of bribery of foreign public officials under the UCPA, regardless of whether or not it is a small facilitation payment. However, the following acts are less likely to be regarded as a bribe: 

• providing promotional products for general distribution (eg, calendars and souvenirs that are widely distributed); 
• providing sweets and drinks at business meetings;
• use of company cars when foreign officials visit the company for business purposes when such use is needed for transportation purposes; 
• providing inexpensive seasonal gifts according to local customs; and
• providing travel and meal expenses when the inspection of a factory and laboratory facilities is needed, and where their display is not sufficient to gain understanding of a company's products, services and quality.

Safe Harbours and Insider Trading

Certain transactions that are considered as not undermining the fairness and credibility of a securities market are exempt from the insider trading regulations under the FIEA (Article 166, paragraph 6 and Article 167, paragraph 5). These include over-the-counter or negotiated transactions conducted between specific persons who have unpublished material information pertaining to a listed company; the acquisition of shares through the exercise of share options; and transactions based on contracts or plans made before becoming aware of material information.

Surrender Under the PC

The punishment of a person who has committed a crime and denounced themselves before being exposed as a suspect by an investigative authority may be reduced. This rule also applies with respect to a crime which cannot be prosecuted without a criminal complaint, and to a person who turns themselves in to a person who has the right to make a criminal complaint (Article 42, PC).

Leniency Under the AMA

Cartels and bid-rigging are caught by Articles 3 and 6 of the AMA, which prohibits unreasonable restraints of trade.

The AMA sets out a leniency system first introduced in 2006 and recently revised. The leniency programme operates as a system whereby administrative surcharges are waived or reduced on the condition that the enterprises that have been involved in cartels or bid-rigging voluntarily report these activities to the JFTC. The sooner they report their activities to the JFTC before it initiates an investigation, the more surcharges they will be exempt from. Under the new system:

• all enterprises have the opportunity to co-operate in the JFTC’s investigations voluntarily;
• before an investigation starts –
1. the first enterprise to report its involvement in a cartel or bid-rigging violation to the JFTC is entitled to full exemption from administrative surcharges;
2. the second enterprise that reports a violation is entitled to a 20% reduction in administrative surcharges;
3. the third, fourth and fifth enterprises that report a violation are entitled to a 10% reduction in administrative surcharges; and
4. the sixth and any other enterprises that report a violation are entitled to a 5% reduction in administrative surcharges;
• after a dawn raid takes place and within 20 days thereafter, enterprises that report a violation are entitled to –
1. a 10% reduction in administrative surcharges provided not more than five applicants applied before the dawn raid; and the number of eligible beneficiaries is limited to three after the dawn raid; or alternatively
2. a 5% reduction in administrative surcharges applies.

In addition to these uniform rates, a further discount rate may be applied according to the degree of co-operation with the investigation at a rate depending on the timing of the application. Enterprises that report a violation before a dawn raid are entitled to a reduction in administrative surcharges of up to 40%, while those applying after the dawn raid are only entitled to a reduction of up to 20% (eg, if an applicant ranks second before the dawn raid and co-operates with the investigation, it can be awarded an additional rebate of up to 40% on top of the standard 20% reduction, ie, a total of up to 60% reduction).

Guidelines issued by the JFTC clarify how it assesses an applicant’s level of co-operation and values the evidence submitted by the applicant.

When more than one enterprise of the same group commits an infringement, group enterprises can file a single joint application, in which case the same leniency status/pecking order is granted to all group enterprises named as applicants on the form. To be eligible for a reduction, applicants must not be involved in illegal activities after the JFTC has commenced its investigation. Applicants that engage in certain activities can be disqualified and lose the benefit of leniency.

Plea Agreements

See 2.8 Plea Agreements.

Other Co-operation or Self-Disclosure

Apart from the legal systems above, the administrative authorities, prosecutors or courts may consider co-operation and self-disclosure as being a factor to reduce administrative dispositions, surcharges, criminal charges or punishment.

The Whistle-Blower Protection Act (WPA) provides that a business operator is not authorised to dismiss or treat a worker (which may include retired employees and officers) unfavourably on the basis of the worker's whistle-blowing, or to claim damages against them suffered by the business operator as a result of the worker's whistle-blowing, where both: 

• the worker's whistle-blowing is made to a prescribed reporting destination about a reportable fact (ie, any prescribed criminal act or act subject to an administrative disposition under which the violation is punishable) that has occurred, or is about to occur, in a business operator's organisation where said worker works; and
• the worker's whistle-blowing meets the prescribed requirements (eg, the absence of malicious or wrongful purpose, or in the case of whistle-blowing to an administrative body, believing in the occurrence of the reportable fact and submitting a document written about the prescribed matters).

According to the amendments to the WPA effective from 2022, companies must establish a system to appropriately respond to whistle-blowing (with an effort obligation for companies with fewer than 300 employees).

Detailed guidance on how business operators should establish whistle-blowing systems (Guidelines for Appropriate and Effective Implementation of the Whistleblowing System) has been issued by the Consumer Affairs Agency, together with commentaries on the said Guidelines. The requirements include having a proper policy, a helpline, disciplinary sanctions in case of breach of the internal whistle-blowing rules, rules prohibiting retaliation and the inappropriate treatment of whistle-blowers, and rules dealing with confidentiality and information leakage. The fact that such an internal whistle-blowing system is established is not a safeguard.

There are no special legal incentives for whistle-blowers.

Under the Japanese criminal justice system, the burden of proof lies with the prosecutors who must prove in court that the defendant has committed the crime – that is, a court will render a judgment of not guilty and acquit the defendant of the charge unless the prosecutor proves beyond reasonable doubt that the defendant has committed the crime for which they were indicted (Article 336, CCP and Article 31, the constitution). There is no institutional presumption mechanism beyond inferences in individual fact-finding by the court. This is no different in white-collar crime.

With regard to administrative sanctions, an administrative disposition is valid unless rescinded by the court, so the person who received the disposition needs to file a lawsuit (this is a kind of presumption mechanism). There is no general rule regarding the burden of proof in administrative litigation, which is determined on an individual law provision basis. The standard of proof has been expressed as: “Certainty of veracity to the extent that an ordinary person would not raise doubts.”

The court is responsible for setting the punishment within the parameters set by the applicable statutes at its discretion, taking into consideration various factors, such as, how the defendant committed the crime, the seriousness of the damage, the motive for the crime, the defendant's criminal record, whether the defendant compensated for the damage, and whether the defendant is remorseful. In this regard, the court may render suspended sentences if certain conditions are met, eg, if the defendant is a first-time offender and is sentenced to imprisonment of not more than three years (Chapter 4, PC).

Although the range of said parameters is wide, there are no clear guidelines or standards for setting the punishment. However, due in part to the availability of sufficient data on past sentences, the punishment of similar cases has not, to date, greatly varied in Japan.

As part of the sentencing procedure, after the examination of the evidence, the prosecutor must state their opinion, including the sentence, and the defendant and their attorney can also state their opinions. The court is not bound by these opinions, but in practice, a somewhat more lenient sentence than that suggested by the prosecutor is often given.

There are no rules or guidelines governing the assessment of penalties in the event of a plea agreement.