Japan Legal System

Trinity Western University

MBA 664 R4

Steven Cai 617304

Yuchen(Bob) Feng 631380
Sahar Sisakhti 619261
Xinyi Luo 626878
Makarand Kulkarni 639441
 Contents:
● Japan's Modern Legal System
● Courts
● Setting up a business in Japan
● Costs involving registering a company in Japan
● Tax system in Japan
● Contract Law
● Intellectual property
● Labour Standards in Japan
● Legal risks in Japan
Japan's Modern Legal System

1. Civil law Japan's Diet (the legislative, responsible for

2. Commercial law creating new laws)
3. Criminal law
● The Senate
4. The Japanese Constitution
5. Criminal procedure Law ● The House of Representatives
6. Civil Procedure Law

Three basic features of the Japanese Constitution:

● Reference to the American common law
● Democratic principles
● Pacifist Constitution (Limit military development)
Mixed model legal system
Civil law
Japanese legal
system

Common law

Old civil code New civil code The constitution New law

1890 3 May 1947 1948

1898
Courts

There are five types of ordinary courts in Japan:

(1) Summary Courts,civil conciliation cases and demands for payment.

(2) Family Courts,

Three-tiered judicial system:
(3) District Courts, a summary or district court (first instance),
a high court (second instance) ,
(4) High Courts, handle appeals. a the Supreme Court (appeal).
(5) The Supreme Court, the highest and final court.
 Japanese judicial process

Formal prosecution

Two main forms of prosecution: formal trial and summary proceedings

Saiban-in proceedings are usually conducted for serious crimes,

At the beginning of court proceedings, people will have the opportunity to make
statements and enter defenses.

After hearing the closing arguments of the defense and the prosecution, the judge will
set a date for delivery of the verdict and sentencing.
 Setting Up a Business in Japan
Japan represents a major economy worldwide, having the third largest GDP by nominal in
the world and the fourth largest by purchasing power parity (PPP). It is the world's
second-largest developed economy.

Starting a business in Japan implies several steps.

Steps to start setting up a business in Japan:
1. The first step is to get a Visa to start setting up a business in Japan.
● Foreign nationals are not allowed to start setting up a business in Japan just like that.
To start a business in Japan, you will have to obtain one of the required visas.
● The procedure of getting a visa is quite simple. For business purposes, you will need
to obtain either a 4-Months Business Manager Visa or Start-up Visa.
● You will have to submit your business plan in Japanese to get a recommendation
letter from the local government office.
Steps Continued
2. Opening a Bank Account:
● Choosing a bank and opening an account can appear challenging to foreigners due to
the language barrier and complex bureaucratic procedures, especially to those
planning to start a business.
● The banks which streamline registration process in Japan are:
a) Sumitomo Mitsui Banking Corporation
b) Shinsei Bank
c) Seven Bank
d) Japan Post Bank
Steps Continued:
3. Secure an Office or Shared Space:

The first step of setting a business in Japan procedure is finding an office or shared space.

You have two options –

Rent an office in Japan for the short term

Rent an office in Japan for the long term.

Steps Continued:
4. Get Your Articles of Incorporation Ready:
Articles of Incorporation or Teikan are the bread and butter of setting up a business in
Japan. These documents determine how the company is going to be managed, and they are
different for every type of business structure.
The setting up of a foreign company in Japan requires the following:
● Registry certificate of the parent company
● Notarized Signature attestation
● Seal certificate of each director
● Company seal
● Additionally, we might need a field-specific license to register and run the company.
Steps Continued:
5. Get all the Documents Ready:

Before finally registering the company in Japan, we will need to get a few more documents
aside from the ones in the Articles of Incorporation. These documents include a letter of
agreement from the director and the proof of Comapny’s seal registration completion.

6. File the Application for Business Registration:

Once everything is sorted out, we can file the application for business registration at
Registry Office or Homukyoku.
Steps Continued:
7. Get the Registry Certificate, Seal Certificate, and Corporate Number:

The last step for setting up a business in Japan is Corporate Number.

After the company is registered, we should acquire the Registry Certificate, Company’s
Seal Certificate, and Corporate Number. These documents are required to sign
employment and business contracts and to open our official corporate bank account in
Japan.
Costs involving registering a Company in Japan:

The important costs while opening a business in Japan are:

1. Professional Fees: starting from JPY 250,000 but depending on complexity.
2. Creating a Company Seal: from JPY 5,000
3. Initial Tax Filings: from JPY 90,000
4. Notary and out of pocket expenses: from JPY 50,000.
The other Registration costs are:
1. Paid-in Capital (minimum is JPY 1M but it might go anywhere from JPY 1M to JPY 9.5M at the
start (unless a license or visa application calls for more).
2. Office rent (if you need one) can range anywhere from JPY 50,000 to millions of JPY per month
depending on where and what level of quality of space we are looking for.
3. Recruitment costs for talent are standard 35-40% of gross salary if using a recruiter.
4. Operational and Compliance costs highly depend on our business type.
Tax System in Japan:
There are 6 relevant taxes being paid in Japan.

1. Consumption tax
2. Income tax
3. Inheritance tax
4. Corporate tax
5. Alcohol tax
6. Tobacco tax
Corporate Tax:
The income of corporations established in Japan is subject to taxation in Japan regardless
of where it was sourced. Corporations established in foreign countries are grouped into one
of the tax classifications according to when the business year started. The taxes collected
are :

1. Corporate tax
2. Local Corporate tax
3. Corporate inhabitant tax
4. Enterprise tax.
5. Special local corporation tax
Classification of Tax Rate:

Items Type of entity Filing to

under tax laws
1. Capital of 100 Million Yen or Treated as small and medium sized Subject to size based tax
less company

2. Capital of more than 100 Million Treated as a large corporation No size based tax is applied
Yen

3. Capital of 100 Million or less ( Treated as a large corporation No size based tax is applied
Parent company of 500 Million or
more)
Tax Rate Applicability:
1. Effective tax rate applicable:

a) Corporate Tax 23.20%

b) Local Corporation Tax 2.39% (23.20 *10.30%)

c) Inhabitant Tax 2.41% (23.20 * 10.30%)

d) Enterprise Tax 1.18

e) Special Local Corporation Tax 2.60% (7.00% * 37.00%)

Final Effective Tax Rate = (a+b+c+d+e-d) 30.62%

Contract Law
Juridical person's capacity to hold rights

A claim by a juridical person that entered a contract for profit and now asserts the
contract to be invalid because it is outside the purposes provided in its articles of
incorporation would not be upheld by courts.
The origin of a contract's binding effect
When ‘the parties' intent’ is agreed as the binding force of the contract, the content
of the contract must be truly satisfactory to the parties. This is because ‘being
bound by desire’ first make sense as a reason for parties entering into contracts
when there is true satisfaction with the contents of the contract. Consequently,
statutes are used to prepare systems to ensure this ‘true satisfaction’. In short, if
‘true satisfaction’ is not present regardless of the external form of the contract, its
binding power must be denied.
Mental Capacity
In abstract terms, mental capacity can be referred to as the psychological capacity that enables
one to determine the nature of one's own actions. Legally, manifestation of intention without this is
deemed to have no effect (be invalid). Whether or not there is mental capacity is determined in
light of the nature of the act.

For a person with a particular manifestation of intention to claim “there was no mental capacity at
the time so that manifestation of intention is invalid”, that person must prove there was a loss of
mental capacity at that time, and this is more often than not difficult. In addition, an ordinary 12
year old child certainly might have mental capacity, but that would not be the case in relation to
making a real estate transaction based on correct judgment. For persons without the capacity to
understand complex transactions, in other words for persons without the capacity to determine
whether or not entering into a contract is either necessary or beneficial to them, there must be
protection even if there is mental capacity.
Capacity to act:
Minor
A minor is a person who has not reached the age of 20 (Civil Code Art.4). A minor is not
deemed to have the reasoning capacity (or competence) to participate in transactional society
alone.

Adult wards
The Family Court may order the commencement of guardianship at the request of the person
in question, or a family member who is within a specified degree of kinship if a person
constantly lacks the capacity to discern right from wrong (Civil Code Art. 7). In practice,
regardless of the extent to which a person lacks the capacity to understand, a person does
not become an adult ward until these procedures are undertaken.
Person under curatorship
A person under curatorship is a person who has become, at the request of specified persons, subject to an order of the
Family Court for commencement of curatorship. While not stating that the person lacks the capacity to discern right from
wrong (a ‘lack’ of capacity would mean an adult ward) this applies for persons whose capacity is deemed to be extremely
insufficient (Civil Code Art.11).

Persons under assistance

Even if there is insufficient capacity for understanding, but not to the extent that would meet the criteria for an adult ward or
person under curatorship this by itself would not mean there is a lack of capacity to for example, conclude contracts.
However, there are still concerns about whether the contracts can be concluded properly. Nevertheless, on the application
of the person or specified persons (this requires the consent of the person) the Family Court may order that the consent of
an assistant be required for some of the acts prescribed in article 13 (1) of the Civil Code (the acts for which a person under
curatorship must obtain the consent of his/her curator). An act which requires such consent may be rescinded if it was
performed without such consent.
Protection of the intellectual property
Trademark Protection

1. Scope of protection
2.“New-type trademark” protection
Many Japanese companies have been requested to protect these trademarks, and in view of
the fact that these trademarks can gain a practical use by protection, (1) Sound marks (2)
Color per se marks without delineated contours, (3) Motion marks, (4) Position marks and
(5) Hologram marks, which have already been broadly protected overseas are in the scope
of protection of trademarks
3. Unique of the Trademark
(1) Sound This refers to the sound of the trademark as well as the pronunciation of any characters used therein. Going by the standard of English
language education in Japan, it can reasonably be assumed that most Japanese people will be able to understand the pronunciation of English
words or Japanese words written in alphabetical characters correctly. However, the same cannot be said for words of other languages. Therefore,
in order to avoid confusion, it is preferable to add Japanese kana characters showing how to pronounce the trademarks consisting of words in
foreign languages other than English to ensure that the proper pronunciation is protected.

(2) Meaning This refers to the meaning inferred from the characters that comprise the trademark. In the case of a trademark in a foreign script, the
words "Black Cat", for example, would conjure up the image of a black cat in the minds of Japanese people, however the German words
"Schwarze Katze" or the Spanish words "Gato Negro" would not immediately spark the appropriate feline image in people's minds, and it is
possible that they are recognized as coined words which do not have a specific meaning. Therefore it is possible that such trademarks could not
exclude other trademarks which do cause people to imagine a black cat if registered as trademarks. In this situation, it may be better to obtain
separate protection for a trademark which consists of a Japanese translation of the original foreign-language phrase.

(3) Appearance Trademarks consisting of characters that Japanese people are unable to recognize as written characters, such as Mongolian or
Hindi, are treated as trademarks consisting of devices. This means that the trademark owner is unable to reap any benefits that a trademark
consisting of written characters may have, so one idea is to apply for a separate registration of trademarks consisting of a Japanese translation or
Japanese characters denoting the pronunciation of the foreign-language phras
Protection of Design
1. Scope of the Protection
 A protection system unique to Japan
Japan's Design Law provides a system of protection that is very unique to this country.

(1) Related design system: Under Japan's Design Law, not only are designs originally registered in relation to a
certain object protected, but similar designs related to that object and filed in a certain period are also protected.

(2) Design of a set of objects: Under the provisions of Japan's Design Law, design applications and registration
usually follow a one-design-per-object principle

(3) Secret designs: Japan offers a system that allows a registered design to be kept a secret for a certain period
upon application. This is known as the "Secret Design" system.

(4) Partial designs: The partial design system was introduced allowing registration of parts of shapes or forms
with distinct characteristics.

(5) Protection of screen designs: screen designs under the certain conditions are now protected within the scope
of designs which forms a part of goods
 Japanese Labor Standards Act versus Canada
Under Canada labor law, employees are required to work a five-day week (Monday-Friday), most
provinces expect employees to work 40 hours weekly.

Any work done in excess of the statutory working hours (i.e. 40 hours or more a week) must be
calculated and paid at 25% or more of the employee’s normal wages, and at least 35% for work on
statutory holidays.

Employers may not discharge or discipline employees who have worked for them for more than
13 consecutive weeks because of absence due to the illness or injury of the employee.

In the event that a worker is absent from work as a result of injury or sickness due to work in
relation to your company, it is prohibited to dismiss him/her during his/her period of absence plus 30 days
thereafter.
 Japanese Labor Standards Act versus Canada
if the employer chooses to terminate a position, they must either:
provide the employee with at least 2 weeks' written notice.
in lieu of such notice, pay the employee 2 weeks' regular wages.
In the event of the dismissal of a worker, an advance notice of at least 30 days before
dismissal is required.

It is strictly prohibited to discriminate by nationality or another status of any worker.

discrimination is prohibited in employment with regard to job application forms, job

interviews, and recruitment advertisements related, to employment.
 Japanese Labor Standards Act versus Canada

Wages must be paid in currency (except in special cases) directly to the workers at
least once a month and on a fixed date. In the event that a worker resigns, you (the employer)
must pay said worker any outstanding wages within 7 days following said worker’s request for
payment.

Subsection 11 requires employers to:

Establish regular pay periods and pay days, and Pay all wages earned in each pay period no
later than the pay day associated with the pay period.
 overview of the key legal risks when doing business with Japan
● Cannot transact in Japan on a going concern basis. Cannot open bank account, lease property
etc, so contracts must be signed by CA company or an individual representative personally.

● Registration of branch office required: must appoint individual representative (branch

manager) who must be a Japanese resident (but not necessarily a Japanese national).

● Unlimited liability: Branch office does not have seperate legal status, so CA company is
ultimately responsible for branch office's liabilities on unlimited basis.

● Must have at least one director who must be a Japanese resident (but not necessarily a Japanese
national).