Japan: Japan Law Year In Review 2016 And Year To Come 2017

Last Updated: 25 January 2017
Article by Linklaters  

Year in Review - Japan Law in 2016

EU Market Abuse Regulations: In July 2016, the Market Abuse Regulation of the EU ("MAR") came into effect. MAR extends the scope of the Market Abuse Directive, the predecessor legislation which it replaces, and is generally applicable to any company which has securities listings on a regulated market or MTF market within the EEA. MAR has extended the scope of the disclosure of insider information, preparation of insider lists and market sounding. In particular, a non-Japanese issuer which both has securities listed in the EEA and is contemplating offering securities into Japan will need to consider the impact of MAR on the common practice of pre-sounding in samurai bond offerings.

Supreme Court Decision on Acquisition Price: On 1 July 2016, the Supreme Court made a decision on the acquisition price of Z-shares (zenbu shutoku joukou tsuki shurui kabushiki) following a takeover bid. KDDI Corporation and Sumitomo Corporation, majority shareholders of Jupiter Telecommunications Co., Ltd. ("JCOM"), conducted a takeover bid for shares in JCOM and, following the bid, the shares of the minority shareholders who had not agreed to the bid were acquired via Z-shares. Some of the minority shareholders claimed that the proposed acquisition price, which was equal to the price offered in the takeover bid, was not a fair price, and they filed a petition for the acquisition price of the shares to be determined. The Supreme Court found that the acquisition price of the shares should be equal to the takeover bid price considering the following facts: (i) certain procedures, which would exclude any arbitrariness in the decision process, had taken place, and the takeover bid was conducted in a manner that is generally accepted as fair; and (ii) there were no exceptional circumstances that caused any unexpected variation in the facts used as a basis for the acquisition. Read more...

Labour Regulations on Reorganisation: On 1 September 2016, the following amendments and guidelines came into force: (i) Amendment to the Ordinance for Enforcement of the Act on the Succession to Labour Contracts upon Company Split; (ii) Amendment to the Guidelines Necessary to Promote the Appropriate Implementation of Measures that the Split Company and Successor Company, etc., Should Take regarding Succession of Labour Contracts and Collective Agreements Entered into by the Split Company; and (iii) Guidelines on Points of Attention for Company, etc. regarding Merger or Transfer of Business.

Amongst other things, in the case of a company split, (i) and (ii) expand the scope of the employees with whom the transferor company must consult, as well as the content of the notifications to be sent to certain employees and said consultations. In the case of a business transfer, (iii) newly requires the transferor company to have a consultation with the employees who will be transferred and with the labour union or a representative of a majority of the employees.

Unfair Competition Prevention Act: The amended Unfair Competition Prevention Act came into force on 1 January 2016. The purpose of the amendment is to strengthen trade secret protection. The amendment (i) expands the scope of trade secrets protection (e.g. expands the scope of punishment for crimes committed outside Japan and provides penalty provisions for attempted crimes), (ii) strengthens deterrence against the invasion of trade secrets (e.g. raises the maximum amount of fines and provides confiscatory regulations), and (iii) improves effective civil remedies (e.g. extends the statute of limitations and shifts the burden of proof to the defendant in certain cases).

Margin requirements for non-centrally cleared derivatives: On 1 September 2016, a set of new regulations for financial institutions (e.g., banks and type 1 financial instruments business operators) which set out the requirements for exchanging variation margin and initial margin when trading non-centrally cleared derivatives (the "Japan Margin Rules") was implemented. These regulations follow an international policy framework dealing with margin requirements for non-centrally cleared derivatives agreed by the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions. The Japan Margin Rules are phased in so that only the financial institutions belonging to large financial groups (in Japan, institutions such as MUFG and Nomura) (the "Phase-one Firms") are subject to the Japan Margin Rules at present.

Financial Instruments and Exchange Act: An amendment to the Financial Instruments and Exchange Act ("FIEA") in respect of the exemption for special business activities for Qualified Institutional Investors (the "Article 63 Exemption") was enacted on 27 May 2015 (the "Amendment") and came into force on 1 March 2016.

In summary, the Amendment expands the obligations of persons utilising the Article 63 Exemption of the FIEA. The obligations newly introduced by the Amendment include, amongst others, (i) disclosure of information on the internet, (ii) submission of annual business reports to the regulator, (iii) disclosure of annual explanatory documents to the public, (iv) delivery of semi-annual investment management reports to investors, and (v) preparation of certain accounting books in line with the FIEA requirements. In addition, the volume of information that must be provided in the notification under the Article 63 Exemption has been increased by the Amendment. The Amendment applies to persons who have been utilising the Article 63 Exemption since before the Amendment (allowing a grace period in certain cases). Read more...

Amendment to the Banking Act: An act amending the Banking Act and other various acts to facilitate and promote financial technology or "FinTech" was promulgated on 3 June 2016 and will become effective within one year from that date.

The amended Banking Act will provide that, subject to governmental approval, a company that contributes, or is expected to contribute, to the advancement of a bank's business or the convenience of its customers through its IT or other technology may be regarded as a new type of Category Company that will be exempt from the Shareholding Restriction and the Subsidiary Restriction (each capitalised term is defined below). Read more...

Amendment to the Act on Prevention of Transfer of Criminal Proceeds: The amended Act on Prevention of Transfer of Criminal Proceeds came into effect on 1 October 2016. The amendments contain a number of changes that will affect the customer due diligence requirements of financial institutions (including banks, insurance companies and securities companies; each a "Specified Business Operator") when they enter into a specified transaction with their customers, such as providing loans, entering into insurance contracts, selling securities, etc. Read more...

Japan ratified Paris Agreement: On 8 November 2016, Japan ratified the Paris Agreement on fighting global warming, joining the landmark accord creating a new international framework for reining in greenhouse gas emissions that involves nearly all developed and developing nations.

In accordance with the deal, Japan plans to cut greenhouse gas emissions by 26%from 2013 levels by 2030 by switching to more efficient means of power generation: promoting the use of energy-saving light bulbs; restarting nuclear reactors; and supporting the development of renewable projects. Japan also aims for an 80% cut in emissions by 2050.

Amendments to revise the Renewable Energy Act: On 25 May 2016, the Diet, Japan's parliament, enacted a bill to revise the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities (denki jigyou-sha niyoru saiseikanou enerugi-denki no chotatsu ni kansuru tokubetsu sochihou) (Act No.108 of 30 August 2011, the "Renewable Energy Act"). The Renewable Energy Act provides the country's feed-in tariff program (the "FIT program"), which requires power firms to buy electricity generated with renewable energy at fixed prices, with the aim of reducing the financial burden on end-consumers.

Under the revised Act, which is set to take effect in April 2017, a reverse auction system will be introduced to determine purchase prices for electricity generated by large-scale solar power systems. Read more...

Year to come - Japan Law in 2017

Act on the Protection of Personal Information: An act to amend the Act on the Protection of Personal Information was promulgated on 9 September 2015. Apart from a few exceptions that have already come into force (such as the establishment of an independent data protection authority), the amendment will come into force within two years from the date of promulgation. The amendment, among other things, (i) clarifies the definition of "personal information" and sets rules for processing "sensitive personal information", (ii) permits the transfer of "anonymous processed information" (so-called big data) to a third party without obtaining the prior consent of the data subject, and (iii) sets certain restrictions on the transfer of data to countries where the level of data protection is insufficient.

VM (variation margin) Big-bang: From 1 March 2017, all financial institutions subject to supervision by the Financial Services Agency of Japan (the "JFSA") (including small and medium-sized local financial institutions) will be required to exchange variation margin in accordance with the Japan Margin Rules when conducting non-centrally cleared derivatives with financial institutions. This is also the date for margin requirements with respect to variation margin to be implemented globally, and therefore it will be one of the biggest challenges for financial institutions in Japan to comply with those margin requirements in various jurisdictions (tens of thousands credit support arrangements will need to be agreed by then). Financial institutions, regulators (including the JFSA), industry organisations such as International Swaps and Derivatives Association, Inc. and law firms are very keen to support a successful VM Big-bang implementation.

Japan's overseas investment into infrastructure: The Japanese government seeks to invest in infrastructure in various regions. It intends to propose wide-ranging cooperation with Russia. Japan also seeks the chance of exporting high-speed railway technology including the construction of a 350km high-speed rail (HSR) line linking Bandar Malaysia in Kuala Lumpur with Singapore via six intermediate stations. Both projects are strongly supported by the Japanese government, and we expect to see more outbound projects in the social infrastructure sector.

Virtual currency regulation to be newly implemented: On 25 May 2016, the Japanese lawmakers passed a bill that includes amendments to the Payment Services Act (the "PSA") and the Act on the Prevention of Transfer of Criminal Proceeds (the "Criminal Proceed Transfer Act"), both of which will regulate virtual currency exchange transactions.

The introduction of regulatory oversight of virtual currency related transactions is aimed at protecting the users of virtual currencies and ensuring that transactions are transparent and safe. In this connection, Mt. Gox, which previously operated the largest bitcoin exchange in the world, abruptly shut down all transactions of the virtual currency in 2014 after losing bitcoins worth about USD 480 million due to computer hacking. The CEO of Mt. Gox was arrested on suspicion of embezzling clients' cash that was held in the company's bank account. Mt. Gox reportedly kept clients' funds and the company's money in the same bank account, and investigators suspect that the CEO used the clients' funds after the firm's debts exceeded its assets in 2013. Furthermore, a virtual currency's most unique characteristic, and the one thing that makes it different from conventional money, is that it is decentralized. Accordingly, no single institution controls the bitcoin network, and this puts some people at ease because it means that a large bank can't control their money. The Financial Action Task Force (the "FATF") suggests that convertible virtual currencies are likely to present anti-money laundering/counter terrorist financing ("AML/CTF") risks, and the FATF requested Japan, among other countries, to make efforts on cracking down on AML/CTF in respect of risky convertible virtual currencies, including bitcoins. This new law is expected to have adequate AML/CTF measures in place.

Before the amendment to the PSA, bitcoin trading platforms were able to operate freely under Japanese law without any registration and were not subject to Japan's stringent Banking Act and Financial Instruments and Exchange Act. However, following the amendment, virtual currency exchanges are now regulated by the relevant authorities. Namely, under the amended PSA, "virtual currency" means (i) monetary value that can be used by unspecified persons (or transferred to unspecified persons) in exchange for the purchase or borrowing of goods or the provision of a service, and they can be traded via an electronic data processing system, or (ii) monetary value that can be mutually exchanged with an unspecified person (as the counterparty) and can be transferred via an electronic data processing system.

The following person or entity falls under the category of a virtual currency exchange operator ("VCEO"): a person or entity that, in the course of trade, engages in (i) purchases and sales of the virtual currency or exchanges the virtual currency for another virtual currency; (ii) an intermediator or agent of the above transactions; or (iii) custody or safekeeping services in relation to a dealing or broking transaction set forth in (i) or (ii) above. Such person or entity is required to register with the Prime Minister as a VCEO. A foreign entity that engages in the virtual currency exchange business outside of Japan and does not obtain such registration with the relevant regulator shall be prohibited from making solicitations of the businesses indicated in (i) through (iii) above to a resident in Japan.

A VCEO shall maintain a sufficient financial basis to soundly perform the business concerned, take necessary measures to safely control data and information, prepare and preserve the books, manage customer assets separately from corporate assets and submit an annual business report to the relevant regulator. In addition, the new regulation calls for mandatory checks on a VCEO by a certified public accountant or auditing firm in order to inspect how the VCEO is managing its assets and verify its financial statements. The Prime Minister's role is to inspect a VCEO, issue an order to improve its business operation or suspend or revoke the registration as a VCEO.

Following the amendment, a VCEO is now categorized as a "Specified Business Operator" under the Criminal Proceed Transfer Act. Accordingly, a VCEO is required to confirm the identities of its customers at the time of any transaction and to report any suspicious trading to the relevant authorities.

Finally, the amendments left unclear whether the simple purchase of virtual currencies would be subject to Japanese tax. According to an official at the National Tax Agency, bitcoin purchases will likely be subject to Japanese consumption tax unless they are singled out for exemption. In this regard, Japan's regulatory approach seems to differ from that taken by other G7 countries that treat virtual currencies almost identically to other currencies in terms of taxation. However, the Japanese Financial Services Agency (the "JFSA") indicated that it is not aggressively promoting the use of virtual currencies, which explains why the agency only asked the relevant tax authorities for clarification on the tax treatment of virtual currency transactions. As of the date of this newsletter, the JFSA does not seem to be making any moves towards requesting that a consumption tax not be levied on virtual currency transactions. Neither the Japanese legal system nor any regulations recognise sales and transactions made by way of virtual currencies at present, and therefore virtual currency transactions are expected to face many issues and problems going forward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions