Anti-corruption in Japan: an Introduction

Japan is recognised as a country where bribery and other forms of corruption are relatively rare. In fact, according to the “Corruption Perceptions Index 2022”, which is published by Transparency International, Japan is the 18th cleanest country among 180 countries in the world (ranking above the US).

However, Japan still experiences many bribery cases involving politicians or public officials that are uncovered and widely reported every year. In particular, the public has paid close attention to many arrests, including of executives of famous companies in the bribery cases surrounding the Tokyo Olympics and Paralympics, which were widely reported both in Japan and abroad.

In addition, as described below, the OECD Working Group on Bribery (WGB) has pointed out the low number of cases of bribery of foreign public officials in Japan, and has made 17 recommendations to the Japanese government to improve its enforcement. In response, the Ministry of Economy, Trade and Industry (METI) held discussions related to the laws and regulations on the bribery of foreign officials, which led to the amendment of the Unfair Competition Prevention Act (UCPA).

Bribery of both domestic and foreign public officials has received a lot of social attention. Therefore, employees and executives in all companies need to properly understand and comply with anti-bribery and anti-corruption laws and regulations in Japan, and take appropriate measures to prevent any kind of corruption. To help in this regard, this article introduces the latest trends and developments in anti-corruption regulation in Japan.

Bribery of domestic public officials

Overview of the laws and regulations on bribery of domestic public officials

In Japan, bribery of domestic public officials is regulated mainly by the Penal Code (Act No 45 of 1907), under which a public official shall be subject to criminal liability in connection with their duties if they:

• accept, solicit or promise to accept a bribe (Article 197);
• cause a bribe to be given to a third party (Article 197-2);
• act illegally or omit to act appropriately after/before committing a crime under one of the preceding two Articles (Article 197-3); or
• accept, solicit or promise to accept a bribe as consideration for the influence which a public official exerted or is to exert, in response to a request, over another public official so as to cause the other to act illegally or refrain from acting in the exercise of their official duty (Article 197-4).

A person who gives, offers or promises to give such bribes shall also be subject to criminal liability (Article 198).

Under court precedents, “bribery” is defined as unjust remuneration for the services of a public official. The “benefit” is not limited to tangible benefits but could include anything that satisfies one’s desires or demands, such as hospitality, travel and entertainment expenses.

A public official who accepts, solicits or promises to accept a bribe in connection with their duties is punishable by imprisonment for not more than five years. If such a public official agrees to perform an act in response to a request, they are punishable by imprisonment for not more than seven years.

When a public official commits a crime of bribery and consequently acts illegally or refrains from acting in the exercise of their duty, they are punishable by imprisonment for more than one year (Article 197-3 (1)). The same applies when a public official accepts, solicits or promises to accept a bribe, or is involved in a bribe to be given to a third party, or solicits or promises a bribe to be given to a third party, in connection with having acted illegally or having refrained from acting in the exercise of the public official's duty (Article 197-3 (2)). A bribe accepted by an offender or by a third party with knowledge is confiscated.

A person who gives, offers or promises to give a bribe as provided for in Articles 197 through 197-4 is punishable by imprisonment for not more than three years or a fine of not more than JPY2.5 million (Article 198).

It is worth mentioning that only individuals are subject to bribery regulation under the Penal Code; corporations are not.

Recent trends and cases of bribery of domestic public officials

Although bribery is a serious economic crime in Japan with severe penalties, as described above, bribery cases are not uncommon. In fact, the number of bribery cases has increased over the previous year.

According to the White Paper on Crime 2022 published by the Ministry of Justice (MOJ), there were 52 arrests for bribery in 2021, more than double from 2020.

In 2023, several large bribery cases were uncovered and widely reported. For example, the former chief physician of the national hospital was arrested for accepting bribes in return for giving special treatment to a medical equipment manufacturing company, and the former president of the company was also arrested for giving a bribe. Also, regarding allegations that the president of a wind power company gave bribes to a politician, both persons were indicted for bribery.

Tokyo Olympics bribery scandal

The most socially impactful bribery case in recent years was that involving the sponsorship of the Tokyo Olympics and Paralympics. In this case, various companies – such as a business suit retail company, an advertising company, a publishing company and a company manufacturing and selling stuffed toys – gave bribes to a former board member of the Tokyo Olympics Organising Committee, and a total of 15 executives of these companies were indicted for giving bribes. The directors and employees of the Tokyo Olympics Organising Committee, including the board members, are “deemed public officials” under the Act on Special Measures Concerning the Tokyo Olympics and Paralympics. Therefore, the board members are subject to bribery regulation.

The former executives of the business suit retailing company were convicted by the Tokyo District Court on 21 April 2023. The former chairperson was sentenced to two years and six months in prison, with a four-year suspended sentence, for the following reasons.

• The defendants' requests in return for bribes to the board member covered a wide range of matters, including the selection of sponsors, and the bribes were paid 31 times over a period of two years and six months, amounting to a total of JPY28 million.
• The bribes have harmed society's trust in the fairness of the officials involved in the operation of the Tokyo Olympics and Paralympics, a sporting event that has attracted worldwide attention and is considered to be of particular national importance.

Starting with this case, there have been a series of guilty verdicts in other cases. Such judgments are highly informative and useful to learn the backgrounds and root causes that led executives of even famous companies to give bribes to domestic public officials.

Bribery of foreign public officials

Overview of the laws and regulations on bribery of foreign public officials

In 1997, Japan ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In 1998, the UCPA was amended to treat bribery of foreign public officials as a crime. Japan is also a signatory of the United Nations Convention Against Corruption, which includes provisions requiring legal action against the acceptance of bribes by domestic public officials and bribery of domestic and foreign officials.

Under the UCPA, offering, promising or giving bribes to foreign officials in order to obtain an improper business advantage in the conduct of international business is prohibited (Article 18), and “the principle of territorial jurisdiction” is adopted. Therefore, in cases where any elements constituting bribery have been committed in Japan, or the result of bribery has occurred in Japan, the person committing the bribery is punishable for bribery of a foreign public official, regardless of their nationality. The “principle of nationality” is also adopted, so that Japanese persons who bribe a foreign official outside Japan are punishable for bribery of a foreign public official.

Recommendations of OECD Convention

The WGB is responsible for overseeing and promoting the implementation of the OECD Convention, and conducts peer reviews among the parties to the Convention. It has conducted peer reviews of Japan on four occasions and published the results in the form of an “Assessment Report” with recommendations for Japan.

On 27 June 2019, the WGB published its fourth review report on Japan. It expressed its concern about Japan’s attitude toward investigation into the bribery of foreign public officials, as follows.

• Twenty years after the Convention’s entry into force, the WGB remains concerned that Japan has still not given full effect to its foreign bribery offence.
• Overall, Japan has only detected 46 allegations of foreign bribery, half of which the WGB brought to Japan’s attention. Japan has investigated 30 of the 46 known allegations, resulting in the conviction of 12 individuals and two legal persons in five foreign bribery cases. This is particularly low given the size of Japan’s economy and the high-risk regions and sectors in which its companies operate.
• The police and the prosecution lack proactivity in their foreign bribery investigations.
• The MOJ’s role in transmitting or clarifying certain allegations may have contributed to unnecessary delays (from one to nine years) in the opening of investigations. The WGB remains concerned by the police’s continued lack of involvement in foreign bribery cases.

In addition, the report made 17 recommendations to Japan and especially urges Japan to submit a written report in one year regarding the following key recommendations.

• Take urgent steps to further extend the statute of limitations on foreign bribery to an appropriate period, to ensure the effective prosecution of foreign bribery or to introduce the possibility of suspending the limitation period during the investigation with the aim of achieving the same goal.
• Enact legislation to substantially increase the statutory maximum fine for natural persons convicted of foreign bribery.
• Urgently review its legislation to ensure that Japan has jurisdiction over foreign bribery offences, including when bribes by Japanese companies operating abroad are paid by non-Japanese employees.
• Raise the statutory maximum or provide alternative grounds to impose higher fines (eg, the amount of the bribe given or the unlawful benefit obtained), to ensure that the fine imposed will be effective, proportionate and dissuasive, even in large-scale corruption cases

Amendment of the UCPA in 2023

In response to the above recommendations of the OECD, the Working Group on Bribery of Foreign Public Officials of the Subcommittee on Unfair Competition Prevention of the Intellectual Property Section of the Industrial Structure Council of the METI released a “Report on Strengthening Disciplinary Rules for the Crime of Bribery of Foreign Public Officials” in March 2023. The report proposed the following four amendment of the UCPA:

• sanctions against natural persons;
• sanctions against legal persons;
• a statute of limitations of prosecution; and
• applicable jurisdiction (punishment of foreign crimes) over corporations.

On 7 June 2023, the UCPA was amended to strengthen regulations on bribery of foreign public officials. The amendments increase statutory penalties for natural persons and legal entities, and expand the scope of punishment to include bribery by non-Japanese individuals of the executives or employees of Japanese companies overseas. The amended UCPA is scheduled to go into effect within one year from 14 June 2023, which is the promulgation date thereof.

First, the penalty for natural persons who bribe foreign officials became more severe. The maximum amount of the fine for natural persons rose from JPY5 million to JPY30 million, which is the highest maximum fine for natural persons in Japan at the time of writing. In addition, the maximum term of imprisonment increased from five years to ten years, which is the longest term of imprisonment for economic crimes in Japan at the time of writing. As a result of the ten-year maximum term of imprisonment, the statute of limitations for prosecution was increased from five years to seven years.

The penalty for corporations whose employees or executives bribe foreign officials also became more severe. In Japan, a corporation alone is not subject to criminal penalties. A corporation is subject to criminal penalties only when a dual punishment provision is stipulated, punishing not only the executive or employee who committed the crime but also the corporation to which the executive or employee belongs The maximum fine for corporations under the dual punishment provision in the UCPA increased from JPY300 million to JPY1 billion, which is the highest maximum amount of fine for corporations in Japan at the time of writing.

In terms of the severity of the criminal penalty for both natural persons and corporations, the bribery of foreign officials has become one of the most serious economic crimes in Japan.

The bribery of foreign public officials by non-Japanese executives or employees of a corporation whose principal office in Japan is added to the scope of criminal penalty of the UCPA. Specifically, in cases where a non-Japanese employee who belongs to a Japanese corporation bribes a public official of a foreign country in connection with the business of the corporation, said employee could be punishable even if they are not Japanese and the criminal act occurs in a foreign country.

How to reduce the bribery risk for business

In order to reduce the risk of bribery, it is effective for a company to develop and operate an anti-bribery system as part of its internal control system.

The METI published the revised version of the “Guidelines for the Prevention of Bribery of Foreign Public Officials” (the Guidelines) in May 2021. The Guidelines describe in detail a compliance system for the prevention of bribery of foreign public officials by businesses; and introduced three important perspectives:

• the importance of the attitude of and message from top management;
• a risk-based approach; and
• the necessity of taking action at the subsidiary level based on the bribery risk.

In addition, the Guidelines introduce desirable preventative system methodologies for businesses, and indicate the following six desirable elements to be included in a preventative system:

• the formulation/announcement of basic policies;
• the formulation of internal rules (eg, approval rules for high-risk activities such as the act of socialising or the appointment of third parties or rules for disciplinary punishment or censure);
• the development of organisational frameworks;
• the implementation of educational activities in the company;
• audits; and
• review by the management.

Although the Guidelines were prepared from the perspective of preventing bribery of foreign public officials, the basic points and suggestions presented in these Guidelines are also very useful for preventing bribery of domestic public officials in Japan. The formulation of basic policies and internal rules and educational activities are highly effective to prevent bribery of both domestic and foreign public officials.

Conclusion

As explained in this article, there have been major developments regarding anti-bribery regulations in Japan, including the revelation of serious cases in which executives of famous companies bribed public officials and the strengthening of laws to prevent bribery of foreign public officials under the amended UCPA.

The author believes that bribery cases have not been eliminated, not only because of greedy motives of individuals or corporations to gain business advantages and deficiencies in internal controls and governance, but also due to the lack of proper legal knowledge among executives and employees.

If executives and employees fully understand the content of laws and regulations on bribery, including the severity of the penalties and the reputational damages to the company after bribery is found, they would realise how unprofitable and shortsighted it is to engage in bribery to gain immediate profit. Also, if executives knew that the discovery of bribery would severely damage themselves and their companies, they would be able to firmly refuse to get involved in bribery even if public officials demand a bribe. It is not easy to disseminate correct legal knowledge and ethical standards to all executives and employees, and it will be important for management to continuously disseminate messages and conduct periodic education and training programmes. Hopefully this report will be of some help in this regard.