Japan Corruption Report

There is a low risk of corruption in the Japanese judicial system. Judicial independence is respected in practice (HRR 2017). businesses report confidence in the judiciary’s independence (GCR 2017-2018). Companies report that bribes and irregular payments in return for favorable judicial judgments are rare (GCR 2015-2016). Less than one in twenty citizens perceive judges as corrupt (GCB 2017). Companies express general satisfaction with the efficiency of the legal framework pertaining to their ability to challenge regulations and settle disputes (GCR 2017-2018). The process of appointing Supreme Court judges lacks transparency (SGI 2017) and the general view is that the Supreme Court is often lenient on the government (SGI 2017). Enforcing a contract takes 360 days on average, which is significantly faster than in other OECD high-income countries (DB 2018).

Japan is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and a member state to the International Centre for the Settlement of Investment Disputes (ICSID).

There is a low risk of corruption when dealing with Japan’s police. Businesses report satisfaction with the reliability of the police services (GCR 2017-2018). Less than one in ten citizens perceive most or all police officers as corrupt (GCB 2017). The government has effective mechanisms to investigate and punish abuse and corruption, minimizing risks of police impunity (HRR 2017). However, local public safety commissions allegedly suffer from a lack of independence or adequate authority over police agencies (HRR 2017).

There is a low risk of corruption and bribery for companies when acquiring licenses and other public services. Japan is ranked among the countries where informal payments and bribes in connection with public utilities occur the least (GCR 2015-2016). Nonetheless, a third of citizens think most or all local government councilors are corrupt (GCB 2017). Japan’s regulatory system has increased its level of transparency and new regulations in line with international norms are being developed (ICS 2017). Laws and regulations are normally executed and enforced in a predictable manner (SGI 2017). Regulators are sophisticated and there is no explicit discrimination against foreign investors (ICS 2017). Notwithstanding, foreign firms express concerns that regulators do not solicit sufficient feedback from industry stakeholders when making regulatory decisions, but rather rely on informal connections with domestic firms, which may leave foreign firms with no such connections at a disadvantage (ICS 2017). Regulations in Japan are often formulated in a manner which gives individual bureaucrats a considerable degree of discretion (SGI 2017).

Starting a business in Japan takes slightly longer than in other OECD countries and involves significantly more procedures and costs (DB 2018). Dealing with construction permits takes more time than in other OECD countries (DB 2018). Foreign and national investors can consult the government website for information on setting up a business in Japan.

A tradition of assigning retired government officials to top positions within Japanese companies (known as amakudari) remains a problem in Japan (The Japan Times, Apr. 2017). A recent report by the Education Ministry into amakudari practices found 62 cases in which current and former bureaucrats acted in an illegal manner in an attempt to find jobs for retiring officials at universities and schools; 43 officials were disciplined (The Japan Times, Apr. 2017).

Corruption is a very low risk when dealing with the Japanese tax administration. Irregular payments and bribes very rarely occur when companies make tax payments (GCR 2015-2016). Only one in twenty households perceive most or all tax officials as corrupt (GCB 2017). Companies cite tax rates as the second most problematic factor for doing business in Japan (GCR 2017-2018). In the fiscal year of 2016, tax evasion in Japan was calculated to amount to JPY 16.1 billion (The Japan Times, Jun. 2017). 132 cases of tax evasion were sent to public prosecutors, amounting to a total of JPY 12.3 billion (The Japan Times, Jun. 2017).

Companies, on average, spend slightly less time on filing taxes, but payments have to be made more frequently than in other OECD high-income countries (DB 2018). Japan reduced the corporate tax rate in 2017 (DB 2018).

There is a low risk of corruption when dealing with Japan’s customs administration. Bribes and irregular payments are rare during customs procedures (GETR 2016). Companies express satisfaction with the transparency, efficiency, and time-predictability of customs procedures (GETR 2016). The time and costs involved in complying with import and export procedures takes nearly double the time and costs companies nearly twice as much compared to the average among OECD high-income countries (DB 2018).