Japan does not have a single standalone statute governing the defence sector; rather, the framework is built around the Act for Establishment of the Ministry of Defense, the Self-Defense Forces Act, the Act on the Protection of Specially Designated Secrets, and the Act on Strengthening the Production Base for Defense Equipment and Other Items Procured by the Ministry of Defense, together with related subordinate legislation. Defence procurement is further shaped by the Accounts Act; the Cabinet Order concerning the Budget, Auditing and Accounting; the National Property Act; the Contract Management Regulations; and, for local governments, the Local Autonomy Act and its Enforcement Ordinance. Export control, sanctions and FDI screening are primarily implemented under the Foreign Exchange and Foreign Trade Act (FEFTA) and its subordinate cabinet orders, ministerial ordinances and public notices.

The Ministry of Defense (MOD) is the principal authority for defence-sector regulation, and its external bureau, the Acquisition, Technology & Logistics Agency (ATLA), handles integrated defence equipment development and acquisition, and oversees procurement-related compliance. The Ministry of Economy, Trade and Industry (METI) is responsible for export-control enforcement and trade sanctions, the Ministry of Finance (MOF) for financial sanctions and FDI screening, and the Ministry of Foreign Affairs (MOFA) for sanctions policy and international co-ordination. These authorities co-ordinate where issues overlap, while suspected criminal conduct may also be handled by the police and public prosecutors.

Japanese law does not provide a single, comprehensive statutory definition of “defence” goods, services and technology or “dual-use” items. Instead, different terms and definitions are used under different legal frameworks. For example, the Act on Strengthening the Production Base for Defense Equipment and Other Items Procured by the Ministry of Defense defines “defence equipment and other items” as equipment, vessels, aircraft, food and other supplies, including parts and components, where such items are exclusively intended for use by the Self-Defense Forces.

Under the Three Principles on Transfer of Defense Equipment and Technology, “defence equipment” means “weapons” and “weapons technology”. “Weapons” are items listed in Category 1 of Appended Table 1 of the Export Trade Control Order that are used by armed forces and intended for direct combat, while “weapons technology” means technology relating to the design, manufacture or use of weapons. The Three Principles and their implementation guidelines set out the circumstances in which transfers of defence equipment may be permitted, as well as the framework for reviewing and appropriately managing such transfers. Actual transfers also require, where applicable, export authorisation under the FEFTA.

“Dual-use” items are generally goods or technology that can be used for both civilian and military purposes. Under Japan’s export control regime, goods and technology with civilian applications may be subject to list-based controls under the Export Trade Control Order and the Foreign Exchange Order, in light of their potential for military diversion. These controls cover a wide range of goods and technology, including items such as semiconductors and machine tools. Whether an item is subject to control is determined by whether it meets the prescribed requirements, including specifications and performance criteria. Even where an item is not subject to list-based controls, it may be subject to catch-all controls depending on the end-use and end-user, where the applicable requirements are met.

Japan’s defence-related regulatory framework broadly reflects international security and export control frameworks. These frameworks are implemented primarily through Japan’s security export control regime.

Japan’s security export control regime reflects the arrangements adopted under the Wassenaar Arrangement (WA), the Missile Technology Control Regime (MTCR), the Australia Group (AG) and the Nuclear Suppliers Group (NSG). The goods and technologies subject to control under these multilateral export control regimes are incorporated into Japan’s export and technology transfer controls under the FEFTA and its implementing regulations.

Japan is also a State Party to the Arms Trade Treaty (ATT) and fulfils its obligations regarding the international transfer of conventional arms under the Treaty. In addition, sanctions adopted pursuant to United Nations Security Council resolutions are primarily implemented through the FEFTA and related legislation.

As Japan is neither a NATO nor an EU member state, it is not required to implement NATO collective defence obligations or EU defence-related legislation.

Japan does not have a single standalone statute dedicated specifically to defence procurement. The procurement of the national government is generally governed by the Accounts Act (Act No 35 of 1947); the Cabinet Order concerning the Budget, Auditing and Accounting (Imperial Ordinance No 165 of 1947); the National Property Act (Act No 73 of 1948); and the Contract Management Regulations (Ministry of Finance Ministerial Ordinance No 52 of 1962). Procurement by local governments is generally governed by the Local Autonomy Act (Act No 67 of 1947) and the Local Autonomy Act Enforcement Ordinance (Government Ordinance No 16 of 1947).

In practice, however, defence procurement is principally conducted by the MOD and related central government bodies. Local governments are not generally the primary actors in the defence procurement sphere. Many defence contracts are awarded at the discretion of the relevant government body rather than through competitive bidding, reflecting the limited supplier base, the need for advanced technology and security, and the special character of defence procurement.

The practical operation of defence procurement is also shaped by internal rules and procedures within the relevant authorities, including ministry-level rules and internal committees. A significant part of that operational framework is not found in legislation or other publicly available legal instruments, and is instead implemented through internal, and in some cases unpublished, administrative rules and practices.

Japan’s public procurement framework generally applies to national and local governments, and government-affiliated organisations may operate internal rules broadly aligned with the statutory regime. In the defence sector, however, the principal procuring authority is the Ministry of Defense and its related central government bodies, and many defence contracts are awarded at the discretion of the relevant government body because of the limited supplier base and the technical and security-sensitive nature of the subject matter.

Historically, procurement for defence-related matters was carried out separately by MOD and its related agencies. In 2015, ATLA was established as the organisation responsible for the integrated development, acquisition and export of defence equipment, and procurement of defence equipment was centralised within ATLA. By contrast, procurement of items other than defence equipment continues to be carried out by MOD itself and its related agencies.

The contracts covered by Japanese public procurement rules are those that involve the transfer of economic value from a public entity to a private entity, and the typical contract types include supply contracts, service contracts, and works contracts. In the defence context, procurement is often structured around specialised equipment, related services and works, with the practical focus falling less on the formal contract type than on the technical and security-sensitive nature of the subject matter.

At the domestic level, there are no specific financial thresholds for determining contract coverage, other than the requirement that expenditure under each contract falls within the amount approved in the relevant budget. Accordingly, the applicability of the procurement framework is not determined by a separate defence-specific monetary threshold.

In practice, defence procurement contracts are often based on draft contract terms prepared in advance by the procuring authority. Those draft terms are usually prepared on the basis of standard forms, and the scope for negotiation is generally limited. As a result, the contract that is ultimately signed tends to follow the authority’s pre-prepared draft, substantially as it stands.

As a general rule, procurement is conducted through competitive bidding. However, where the subject matter is sensitive or confidential, or where the number of suppliers capable of performing the contract is limited, procurement may exceptionally be carried out by way of a contract with a particular business operator. In practice, this allows the procuring authority to secure the procurement outcome through a more limited and controlled process.

In such cases, the procuring authority may establish qualification criteria in advance and require bidders to submit documents demonstrating that they satisfy those criteria before bidding. A bid submitted by a bidder that does not satisfy the prescribed criteria may be treated as invalid. In the defence sector, this combination of qualification screening and internal review operates in practice as a de facto form of restricted procurement.

Even where a contract is not concluded on a discretionary basis, confidentiality is often reinforced by other means. For example, the content of bidding documents may be disclosed only to those bidders that pass an initial screening, and confidentiality clauses may be included in the contract to impose stricter obligations to protect sensitive information.

As a matter of principle, Japanese public procurement is conducted through competitive bidding. The ordinary procedure is general competitive bidding, while designated competitive bidding is available only exceptionally where the relevant ordinances permit it in specified circumstances.

In the defence sector, procurement may exceptionally be carried out by way of a contract concluded at the discretion of the procuring authority rather than through a fully competitive process. This reflects the limited number of suppliers, the need for advanced technology, and the security-sensitive nature of the subject matter.

Accordingly, while competitive bidding remains the formal starting point, defence procurement may be structured so that the contracting authority can use a more controlled process, including discretionary contracting where confidentiality or supplier limitations make open competition impractical. In that context, the authority may also pre-screen bidders by requiring them to satisfy specified qualification criteria before submission, and bids that do not meet those criteria may be treated as invalid.

Under the Accounts Act, general competitive bidding is the default rule to ensure equal opportunity, procedural fairness and economic efficiency, while delivering cost-effectiveness. Specifically, Article 29-3, paragraph 1 of the Accounts Act provides that contracts are, as a rule, to be concluded by general competitive bidding. However, designated competitive bidding or a contract by discretionary award may be used under certain conditions. The procurement rules for the national government are generally based on the Accounts Act; the Cabinet Order concerning the Budget, Auditing and Accounting; the National Property Act; and the Contract Management Regulations.

Where a contract by discretionary award is contemplated, the budgetary regulations require that the estimated price be determined in advance. The regulations also provide that, as far as possible, quotations should be obtained, and from two or more sources whenever possible. In competitive bidding, the bidder offering the lowest price within the estimated price is to be awarded the contract. Although there is no express statutory rule to the same effect for discretionary awards, it is generally understood, in light of the Ministry of Finance circular, that the contract should also be concluded with the lowest-priced bidder within the estimated price.

A contract by discretionary award is procedurally the simplest form of procurement, and it also allows the procuring authority to select a counterparty by taking into account factors such as creditworthiness and technical capability. At the same time, because it may result in an unfavourable price and does not ensure fair competition, its use is subject to certain conditions. In the defence sector, this form of procurement is used exceptionally, reflecting the limited supplier base and the security-sensitive nature of the subject matter, and defence contracts are often concluded by the relevant government body at its discretion.

The content of defence procurement contracts is determined on a case-by-case basis, depending on the terms of each tender, and it is therefore not possible to state a single uniform rule. As a general rule, offset obligations, industrial participation requirements and sovereign capability conditions are not commonly imposed in Japanese defence procurement. Qualification criteria may be set and disclosed in advance, however, and bids that do not satisfy those criteria may be treated as invalid.

That said, requirements relating to information security and similar considerations may, in practice, result in contract terms that operate to the advantage of domestic companies. Even so, Japanese public procurement is based on the principle of equal treatment, and domestic companies are not, in principle, given preference without objective justification.

Security and resilience considerations are built into defence procurement on a case-by-case basis, depending on the terms of each tender. Where the relevant tender conditions require a certain level of supply security or continuity, the contract will be structured accordingly. In that sense, there is no single uniform rule applicable across all defence contracts.

In practice, security of supply and operational continuity are important factors in defence procurement. Defence goods require advanced technology and security-sensitive handling, and procurement is often carried out through a more controlled process for that reason. The procuring authority may also require bidders to satisfy specified qualification criteria before bidding, which allows it to assess performance capability and supply reliability at the selection stage.

Accordingly, while the content of each contract depends on the specific tender, defence procuring authorities are generally able to address concerns relating to capability, reliability and continuity through pre-bid qualification requirements and the procurement structure adopted for the relevant project.

In Japanese public procurement, the contractor that offers the most advantageous proposal for the procuring authority is generally selected. In practice, however, many defence procurements are awarded through competitive bidding in which price is the decisive factor, provided that bidders satisfy the required qualification criteria in advance. Those qualification criteria are treated as threshold requirements, rather than evaluation factors, and may include the bidder’s capability, technical capacity and other prerequisites for participation.

Where technical capability or other non-price factors need to be evaluated, the Comprehensive Evaluation Method is used. Under this method, the procuring authority evaluates not only price but also other conditions, such as the execution plan, experience in similar work and the ability of technical personnel. In defence procurement, these general evaluation factors are further shaped by the technical and security-sensitive requirements specific to defence equipment. The price for defence equipment is determined by a cost calculation system.

As noted above, procurement is conducted against the background of a pre-determined target price. In general, the contract must be awarded within that target price. The target price is usually not disclosed in advance, and the disclosure or leakage of a target price that is not made public in the procurement process may constitute an offence under the Penal Code and the Act on Elimination and Prevention of Involvement in Bid Rigging, etc, and Punishments for Acts by Employees that Harm Fairness of Bidding, etc.

Contracting authorities may set additional qualification criteria to exclude or shortlist tenderers, provided those criteria are established and disclosed publicly. In practice, notices often treat conflicts of interest or unfair advantages as grounds for disqualification, even though the general procurement regime does not contain an explicit conflict-of-interest rule.

A bidder that does not meet the prescribed criteria may have its bid treated as invalid.

The Japanese procurement regime is underpinned by fairness and transparency, and information relating to public contracts may be disclosed under the Act on Access to Information Held by Administrative Organs (Act No 42 of 1999).

At the same time, defence procurement frequently takes the form of a discretionary contract because of the security-sensitive nature of the subject matter, so the level of procedural openness is often more limited than in ordinary competitive procurement. Contracting authorities therefore balance disclosure against security and technical sensitivity. Contract award notices are published.

As a general matter, material changes to specifications, timing or contract conditions are not permitted during or after the procurement procedure, and a new procedure may be required if the change is material. After a contract has been signed, changes are generally only permitted where they are mutually agreed, justified and not material.

Not necessarily in the legislation itself but, in practice, many standard form contracts with the Ministry of Defense include, in addition to ordinary termination rights, a clause allowing termination for the government’s convenience. In such cases, the contract typically provides for the possibility of compensation for certain damages.

Accordingly, the key point is that termination for convenience is often addressed at the contract level rather than being expressly set out as a statutory ground. The exact position should be confirmed against the applicable procurement rules and the wording of the individual contract.

For procurements covered by the WTO Agreement on Government Procurement (GPA), suppliers may file a complaint under Japan’s Government Procurement Challenge System with the Government Procurement Challenge Review Board, pursuant to the applicable cabinet order and implementing procedures. If the Board finds a breach, it may recommend remedial actions such as a new procurement procedure, re-evaluation of tenders, award to another supplier or termination of the contract. The Ministry of Defence also has an internal Fair Bidding Investigation Committee, which provides explanations, conducts investigations and issues non-binding recommendations when requested by an unsuccessful bidder. The complaint to the Board must be filed within ten days from the date the supplier knew or should have known the basis of the complaint.

In parallel, a bidder may seek damages under Article 1(1) of the Act on State Redress (Act No 125 of 1947) if it can prove that a public officer intentionally or negligently infringed its rights or interests in the course of the procurement procedure, causing loss.

In Japan, the export of defence-related goods, military equipment and dual-use items, the provision of controlled technology, and certain brokering transactions are primarily regulated under the FEFTA.

For defence equipment, in addition to export controls under the FEFTA, policy-level assessments are conducted based on the Three Principles on Transfer of Defense Equipment and Technology and the relevant implementation guidelines.

The key authorities involved are as follows:

• METI – responsible for export licences and technology transfer licences under the FEFTA;
• MOD and ATLA – responsible for defence equipment transfer policy and defence equipment and technology co-operation; and
• the National Security Council (NSC).

These may be involved in policy decisions concerning certain significant defence equipment transfer cases.

Under Japan’s security export control regime, regulated items are specified for both goods and technology as set out below. Japan does not maintain a separate standalone military list.

Goods Controls

For goods, controlled items are listed in the Appended Table 1 of the Export Trade Control Order.

• Category 1 – weapons (defence-related goods);
• Categories 2 to 15 – goods related to weapons of mass destruction and advanced dual-use goods; and
• Category 16 – complementary export controls (applicable catch-all controls based on factors such as the end use and end user).

In particular, defence equipment is primarily regulated as “weapons” listed under Category 1.

Technology Controls

The scope of controlled technology is specified in the Appended Table of the Foreign Exchange Order and is managed in a manner corresponding to the goods control framework.

Examples of controlled technology include:

• design technology;
• production technology;
• use technology; and
• software-related technology.

Relationship With International Export Control Regimes

Japan’s list controls are updated through amendments to relevant laws and regulations, taking into account changes in the consensus reached under international export control regimes, technological developments, and changes in the international security environment.

As noted in 1.4 International Frameworks and Treaty Obligations, Japan’s security export control regime reflects the arrangements adopted under the Wassenaar Arrangement (WA), the Missile Technology Control Regime (MTCR), the Australia Group (AG) and the Nuclear Suppliers Group (NSG).

METI describes Japan’s security export control regime as a system under which countries co-operate to control goods and technology based on agreements reached through international export control regimes. However, Japan does not publish a quantitative assessment, such as, by specifying the extent to which its control lists reflect the lists of each international regime.

Export of controlled defence and dual-use items, the provision of controlled technology and certain brokering transactions are subject to export licensing requirements under the FEFTA. An export licence is required for the export of controlled goods, and a separate licence is required for the provision of controlled technology. Japan does not have a standalone licensing regime for transit. However, certain temporarily landed cargo may require an export licence under the FEFTA where there is a risk that it could be used for the development or production of nuclear weapons or other weapons of mass destruction.

The licensing regime is broadly divided into individual licences and bulk licences.

• Individual licences are issued on a transaction-by-transaction basis and apply to exports and technology transfers involving listed items, as well as transactions that require a licence under Japan’s catch-all controls.
• Bulk licences are available for exporters that satisfy certain requirements, and allow multiple transactions to be conducted without obtaining an individual licence for each transaction. The categories include General Bulk Licences, Special General Bulk Licences, Specific Bulk Licences, Bulk Licences for Specified Subsidiaries, and Special Bulk Licences for Returns and Similar Transactions.

In addition to the licensing requirements under the FEFTA, transfers of defence equipment are subject to a separate policy review framework under the Three Principles on Transfer of Defense Equipment and Technology and the related implementation guidelines.

Export licence applications are generally submitted to METI. Depending on the type of goods or technology, the relevant item under the Export Trade Control Order, the destination and other circumstances, the application is filed with either the relevant Regional Bureau of Economy, Trade and Industry or the Security Export Control Examination Division of the Trade and Economic Security Bureau of METI. Applications for individual export licences are generally submitted electronically through the Nippon Automated Cargo and Port Consolidated System (NACCS).

Individual Licences

An individual licence is obtained for each export transaction. The documents required vary depending on the goods or technology, the applicable control item and the destination, but generally include an export licence application, a statement of the transaction details, copies of relevant contracts and documents supporting the determination of whether the goods or technology are subject to control (such as comparison tables), as well as technical materials such as catalogues and specifications and information concerning the end user or other relevant parties. Depending on the circumstances, additional documents or undertakings may be required to verify the end user, end use or other aspects of the transaction.

Bulk Licences

A bulk licence allows an exporter, subject to maintaining an appropriate internal export control system and conducting proper export controls under its own management, to export goods or undertake other transactions within a specified scope without obtaining an individual licence for each transaction. Depending on the type of licence, requirements concerning the exporter’s Internal Compliance Program (ICP), export control system, ongoing business relationship and other matters may be reviewed.

Processing Times

Processing times vary depending on the nature and complexity of the application. For export licence applications, the standard processing period is generally 90 days from acceptance of the application, although additional reviews or requests for supporting documents may extend the processing time. The applicable processing period may also vary depending on the type of bulk licence sought.

METI reviews each export application on a case-by-case basis using a risk-based approach, assessing whether the export of the relevant goods or technology could undermine international peace and security. In conducting that review, METI considers a range of factors, including the nature and regulatory classification of the goods or technology, the destination country, the end use and the end user. No single factor is determinative; rather, the decision on whether a licence will be granted is made by taking all the relevant circumstances into account.

Key Factors

In practice, METI considers, among other things:

• whether the goods are likely to reach the stated end user;
• whether the end user is likely to use the goods for the stated purpose;
• the risk of diversion to uses of concern, including risks arising from the attributes of the end user and the background of the transaction; and
• whether the goods will be properly controlled and managed.

With respect to the end user, METI also examines whether the end user is involved in the development of weapons of mass destruction or other uses of concern, whether there is a clear and credible explanation of the intended use, and the reliability of the end user based on factors such as its business activities and history.

While human rights considerations are not an independent statutory criterion under the FEFTA, the security environment in the destination country and the surrounding region may be relevant, as it may have a bearing on the assessment of risks to international peace and security.

Under Japan’s export control regime, end-user undertakings are not required for exports as a general rule. For applications for individual export licences, depending on the goods or technology and the destination, a prescribed end-use undertaking or other undertaking from the end user or other relevant party may be required where the end user has been identified or certain conditions are met. For bulk licences, obtaining an end-use undertaking may also be a condition of the licence, depending on the type of licence and the goods or technology concerned.

An end-use undertaking may include details concerning the intended use and end user of the goods or technology, as well as restrictions on use for purposes other than those stated, eg, resale, re-export or re-transfer. Exporters are required to inform end users and other relevant parties of the need to comply with the undertaking. In the ordinary course of business, an exporter that becomes aware of non-compliance with an undertaking is required to report the matter promptly to METI. Where an exporter becomes aware of any resale, re-transfer or re-provision, the exporter is required to provide information to METI to the extent reasonably possible.

Japan does not have a comprehensive post-shipment verification system comparable to that of the United States. However, the Japanese government may conduct appropriate checks and request reports or other information where necessary.

For transfers of defence equipment, the Three Principles on Transfer of Defense Equipment and Technology and their implementation guidelines require the recipient government to obtain Japan’s prior consent before any use other than the authorised purpose, or any transfer to a third country. In certain circumstances, confirmation of the recipient’s management system may be accepted in lieu of the recipient government’s prior consent. In such cases, written confirmation, such as an undertaking, may be obtained from the relevant government authority or the person responsible for managing the defence equipment.

Brokering or intermediary activities involving defence-related goods and dual-use items may be subject to Japan’s export control under the FEFTA. A party may require a licence, even if it does not itself transport the goods, where it arranges or facilitates certain transactions between overseas parties.

Where a Japanese resident brokers a sale, lease or gift involving the movement of goods between two foreign countries, prior authorisation (ie, a licence) from METI may be required, depending on the type of goods, the country of shipment, the destination and the intended end use.

Where defence equipment is involved, companies should also consider Japan’s Three Principles on Transfer of Defense Equipment and Technology, which underpin Japan’s policy on defence equipment transfers. Compliance with the FEFTA alone may therefore not be sufficient.

As a general rule, intra-company or intra-group transfers of controlled items or technology remain subject to Japan’s export control regime under the FEFTA. In other words, such transactions are not exempt from export control merely because they take place within the same company group.

Accordingly, transfers such as the export of list-controlled goods or list-controlled technology from a Japanese parent company to an overseas subsidiary, or the provision of design information or technical data to an overseas group company, may require a prior licence from METI, depending on the nature of the goods or technology and the destination.

Although there is no general exemption for intra-group transfers, Japan provides a number of comprehensive (bulk) licensing schemes that may simplify the licensing process where specified conditions are satisfied. For example, companies may be eligible to use the Specified Subsidiary Bulk Licence for exports or technology transfers to qualifying subsidiaries. Where available, this allows multiple eligible transactions to be conducted under a single licence rather than requiring individual licence applications for each transaction.

Certain activities fall outside the scope of Japan’s export control regulations. Examples include the temporary export of goods for the exporter’s own use and the provision of technology that qualifies as being in the public domain under the applicable regulations. Whether an exemption applies depends on the relevant statutory and regulatory requirements and should be assessed on a case-by-case basis.

However, defence-related goods and technology are subject to particularly stringent export controls, and the availability of a bulk licence scheme must be assessed carefully by reference to the scope of coverage and the applicable licence conditions.

For example, the specific subsidiary bulk licence applies only to eligible transactions meeting prescribed requirements. Its scope is limited, and certain particularly sensitive goods and technology, including weapons, are excluded.

Companies should therefore ensure that intra-group transfers are appropriately covered by their internal export control compliance procedures and any applicable licences, before the transfer takes place.       

Penalties and Administrative Measures

Violations of Japan’s FEFTA may result in criminal penalties, administrative sanctions and, in some cases, administrative guidance.

Criminal penalties may be imposed on both corporations and individuals. The applicable penalty will depend on the specific facts and circumstances of the case, including the nature and seriousness of the violation. Potential penalties include:

• corporations – a fine of up to JPY1 billion; and
• individuals – imprisonment for up to ten years, a fine of up to JPY20 million, or both.

Administrative measures may also be imposed, including:

• a ban on exports and technology transfers for up to three years;
• a prohibition on serving as an officer of another company;
• publication of the company’s name on METI’s website in connection with the violation;
• the issuance of warnings; and
• requests to submit a written explanation or an incident report describing the circumstances of the violation and the measures taken to prevent recurrence.

Enforcement Authorities

Japan’s security export control regime is primarily administered by METI. METI conducts compliance inspections to verify that exporters are properly implementing appropriate export controls. Where METI identifies an unauthorised export or technology transfer, it may carry out a post-export review to establish the relevant facts and assess measures taken to prevent recurrence.

At the border, Customs is responsible for export clearance checks. Criminal investigations into suspected violations are conducted by the police and prosecutors.

Voluntary Disclosure

Japan does not have a statutory voluntary disclosure mechanism. However, where a company voluntarily reports an export control violation to METI after discovering it, the disclosure may be taken into account, together with the circumstances of the case, when determining the appropriate administrative sanctions, potentially resulting in a more lenient outcome.

Japan’s sanctions regime is governed principally by the FEFTA, together with cabinet orders, ministerial ordinances, public notices and other instruments issued by the competent authorities.

Japan implements sanctions under the FEFTA as financial, trade and border measures. Financial sanctions restrict payments, deposit/trust/loan transactions, inward/outward investment and securities transfers; trade sanctions limit exports/imports, intermediary trade and certain technologies/services; border measures impose travel bans and bans on entry of vessels/aircraft. The Ministry of Foreign Affairs (MOFA), the Ministry of Finance (MOF) and METI are the relevant authorities: MOFA co-ordinates policy and designations of sanctioned persons, MOF administers financial measures (including some service restrictions), and METI enforces trade controls (and certain financial measures).

Japan’s sanctions regime is not structured so that international sanctions frameworks, including those adopted by the United Nations, apply directly within Japan. Rather, sanctions are implemented in Japan as domestic measures under the FEFTA and related Japanese legislation. Under the FEFTA, Japan may impose sanctions in order to comply with international obligations, to co-operate with other countries or the international community in maintaining international peace, or to maintain Japan’s own peace and security. Accordingly, Japanese sanctions may be introduced as domestic implementation of UN-based measures, as co-ordinated measures taken with other countries or the international community, or as measures adopted for Japan’s own peace and security.

Japan implements the arms embargo measures imposed by United Nations Security Council (UNSC) resolutions primarily as domestic measures based on the FEFTA. Specifically, it prohibits or restricts the import, export and transfer of technology relating to arms and related materiel, as stipulated in UNSC resolutions, to sanctioned countries and regions such as North Korea, Afghanistan, the Democratic Republic of the Congo and Iraq.

There is no uniform, comprehensive exception for humanitarian purposes or other grounds; exceptions are limited to those provided for in the relevant UNSC resolutions or in the specific Japanese measures implementing them, and must be verified on a case-by-case basis.

There is no express, generally applicable requirement for defence sector participants, as such, to screen counterparties against sanctions lists under Japanese laws and regulations. That said, making payments to, or engaging in transactions with, sanctioned persons, or exporting goods to prohibited destinations, may constitute a violation of the FEFTA. As a result, many companies as a matter of practice screen customers, suppliers and other business partners against applicable sanctions lists.

Although the regulators do not prescribe a specific screening frequency or methodology, it would generally be prudent, depending on the level of risk, to conduct screening not only at the outset of a transaction, but also when sanctions lists are updated or when there is a change in the transaction, the counterparty or other relevant circumstances. In practice, it would also be advisable to verify the ultimate beneficial owner and end user, and to check for red flags indicating possible sanctions evasion.

As to ownership and control, the FEFTA does not contain a general rule providing for the indirect designation of persons owned or controlled by a directly designated person. However, in the case of sanctions against Russia, MOFA has determined that restrictions on payments and transactions involving deposits, trusts and loans also apply to subsidiaries in which designated Russian or Belarusian entities hold 50% or more of the shares. No equivalent rule on indirect designation applies to Russia-related export bans.

Under Japan’s sanctions regime, the legal framework is generally structured not as an outright prohibition of sanctionable transactions, but rather as a licensing system under which the relevant competent minister’s approval is required and which, in practice, is not granted as a general rule. Accordingly, where a party seeks to engage in conduct covered by sanctions measures, it must apply for the relevant approval and seek to obtain it on an exceptional basis.

For example, in the case of exports or transfers of technology subject to sanctions, application for an export licence must be made. In the case of payments to designated persons, capital transactions such as deposit or loan transactions, and certain service transactions, an individual licence from the MOF must be sought. The circumstances in which approval may exceptionally be granted vary depending on the particular sanctions measure, but approval may, for example, be available in relation to humanitarian assistance.

Japanese sanctions legislation does not provide for extraterritorial application.

Under Japanese law, there are no statutory requirements for a compliance programme specifically tailored to defence-related companies. METI recommends that exporters file a compliance programme to METI, but such filing is voluntary.

That said, the FEFTA requires exporters that repeatedly and continually export goods or provide technology to comply with the exporter compliance standards. These standards are statutory obligations and include, for example, appointing a person responsible for classification determinations, ensuring that personnel engaged in export operations are informed of the latest FEFTA and related regulations, and providing the guidance necessary for compliance. Where the exporter exports list-controlled items for which an export licence is required, additional requirements apply. In practice, compliance programmes are generally prepared in light of these exporter compliance standards.

As for the content of compliance programmes, the Center for Information on Security Trade Control (CISTEC) has prepared a model compliance programme, which is frequently used as a practical reference. METI’s guidance on security export control is also an important source for understanding METI’s compliance expectations.

For violations of financial and trade sanctions, criminal liability may be imposed. For violations of export or import restrictions, the potential penalties for an individual offender are imprisonment for up to five years or a fine of up to JPY10 million (but no more than five times the value of a transaction violating the sanctions), or both. In addition, a company for which the offender works may also be subject to a fine of up to JPY500 million, but no more than five times the value of a transaction in breach of the sanctions.

For violations of export or import restrictions, METI may ban exports or imports for up to three years or prohibit an individual offender from engaging in the activities of a company in a specified business as a director or an officer for up to three years.

Japanese sanctions legislation does not establish a general formal voluntary disclosure programme or a general statutory obligation for defence-sector companies to self-report sanctions violations. However, in practice, voluntary internal review, prompt self-reporting to the competent authority and the implementation of remedial and preventative measures may be taken into account when the authorities determine whether, and to what extent, enforcement action should be taken. Accordingly, voluntary disclosure may operate as a mitigating factor, although there is no formal guarantee of immunity or reduction of penalties.

No significant sanctions enforcement action specifically involving a defence-sector participant has been publicly reported in Japan during the past 12 months.

However, Japan expanded Russia-related sanctions in September 2025, including additional asset-freeze designations and export prohibitions targeting Russian and third-country entities. Japan also reintroduced sanctions against Iran in September 2025 following the reapplication of prior UNSC resolutions, including measures relating to Iran’s nuclear and missile programmes and conventional arms.

Japan’s security legislation is composed of a large number of individual statutes which may be broadly grouped as follows.

Laws Concerning Organisations

These include the Act for Establishment of the Ministry of Defense (which prescribes the Ministry of Defense’s missions, organisation, and jurisdictional affairs) and the Self-Defense Forces Act (which prescribes the missions, structure, command and control, operations, disaster relief dispatches, and other matters concerning the Self-Defense Forces).

Laws Concerning Activities

These include the Situation Response Act (which prescribes civil protection measures and the government’s initial response and response framework for contingencies such as armed attack situations), the Self-Defense Forces Act, the Act on Securing the Peace and Security of Japan in Situations that Will Have an Important Influence on Japan’s Peace and Security (which provides for rear-area support to foreign armed forces in situations that have an important influence on Japan’s peace and security), the Act on Cooperation with United Nations Peacekeeping Operations and Other Operations (which prescribes the conditions and procedures for participation by the Self-Defense Forces and others in UN peacekeeping operations, etc), and the Act on the Protection of Specially Designated Secrets (which provides for a security clearance system for classified information related to national security).

Laws Concerning Personnel

These include the Act for Establishment of the Ministry of Defense and the Self-Defense Forces Act, the Act on the Salary, etc of Employees of the Ministry of Defense (which prescribes the salaries, allowances, and working conditions of MOD personnel), and the Self-Defense Forces Personnel Ethics Act (which prescribes ethical standards in the performance of duties by Self-Defense Forces personnel and regulates relationships with interested parties).

Additional Law

In addition, separate from the above, the Act on Strengthening the Production Base for Defense Equipment and Other Items Procured by the Ministry of Defense is a law related to the procurement of defence equipment. All of these laws fall under the jurisdiction of the Ministry of Defense, including its external bureau, ATLA.

In Japan, access to certain classified information held by the government requires the obtaining of a security clearance. There are multiple legal frameworks that serve as the basis for security clearance, depending on the sensitivity and nature of the information in question. In transactions with the MOD, the security clearance system under the Act on the Protection of Specially Designated Secrets (the “SDS Act”) is often used. Accordingly, the discussion below focuses on that system.

The SDS Act provides a security clearance system for information that falls in the category of “specially designated secrets”. This consists of certain categories of classified information which, in other countries, would be classified as top secret or secret; including information relating to defence.

Under the security clearance system based on the SDS Act, there are two types of clearance: Facility Clearance and Personal Clearance. Facility Clearance is granted by the ministry or agency disclosing the specially designated secret, and the review takes into account matters such as the person responsible for measures to protect secrets, internal rules concerning the protection of secrets, training on secret protection, and facilities and equipment for the protection of secrets. Personal Clearance is likewise granted by the ministry or agency disclosing the specially designated secret, and the review takes into account matters such as involvement in espionage or terrorist activities, criminal and disciplinary history, past misconduct in handling information, drug abuse and its effects, mental illness, moderation in alcohol consumption, credit standing, and other financial circumstances.

Sensitive government information in the defence field is broadly divided into the following categories: (i) specially designated secrets (as described in 5.2 Security Vetting and Clearance Requirements); (ii) Ministry of Defense confidential information; and (iii) equipment-related confidential information. With respect to each of (i), (ii) and (iii), the details of the rules governing access to, handling of, and disclosure of such information are to be set forth in the contract with MOD. While the content of the restrictions may differ depending on the category of secret, the general framework is as follows.

Establishment of an Organisational Structure

For each category of secret, a general supervisor responsible for overall protection must be designated, and managers, custodians and other responsible personnel must be assigned under that supervisor. In addition, employees who need to handle such secrets are to be limited to the minimum necessary, designated as secret handlers, and reported to ATLA.

Establishment of Internal Rules

It is necessary to establish internal rules covering basic policies for the protection of secrets, the structure of the secret protection organisation, designation of secret handlers, receipt and storage of secret documents and items, inspections, secret protection facilities, and procedures in the event of an incident, among other matters.

Training

Secret handlers must receive training before actually handling secrets, as well as periodic training at least once a year, and records of such training must be maintained.

Establishment and Management of Facilities and Equipment

Strict access restrictions must be imposed on secret protection facilities, and certain structural standards are required for ceilings, walls and floors; entrances and windows; alarm devices and perimeter fencing; and storage containers such as safes. Secret protection facilities must also be subject to regular inspections, access control, and the preparation of access logs. Information processing systems used to handle secrets are likewise subject to stringent requirements concerning personnel, physical security, communications, and access control.

Response in the Event of an Incident

In the event of an incident, the relevant party must immediately confirm the facts and take measures to prevent the further spread of information, and must promptly report the matter to ATLA and the relevant Regional Defense Bureau. If a leak occurs, contractual penalties may apply, and in some cases such penalties may range from 5% to as much as 60% of the contract amount. In addition, legal penalties may be imposed on secret handlers under applicable laws and regulations.

It should also be noted that the confidentiality obligations under contracts with the Ministry of Defense continue even after termination of the contract.

Japan has a designation system for critical infrastructure under the Act on the Promotion of Economic Security, and a designation system for critical infrastructure under the Basic Act on Cybersecurity; however, under neither system are specific defence assets or capabilities subject to designation.

The Ministry of Defense requires private companies that handle certain information held by the Ministry to comply with the Information Security Standards for the Procurement of Equipment and Services, in order to implement information security measures throughout the supply chain involved in defence procurement. These standards are positioned as a special contractual clause in contracts between MOD and private companies, and compliance is required both of the private company that is a party to the contract and of any subcontractor engaged by that company to handle the relevant information.

In Japan, there are no laws or government guidelines that explicitly restrict procurement by specifying particular countries or suppliers. On the other hand, not only in the defence field but also generally across government agencies and related bodies, cybersecurity in IT procurement is promoted pursuant to the Memorandum on Procurement Policies and Procedures for Goods and Services by the Government, etc in Relation to IT Procurement (10 December 2018). Accordingly, when procuring information systems, equipment, services, etc, decisions are made based on the security standards set forth in that memorandum.

In addition, in procurement contracts of MOD involving information systems, a “Special Clause Concerning Supply Chain Risk Response in the Procurement of Information Systems” is included in the contract. This special clause addresses risks in the supply chain of information systems and their components, such as the embedding of malicious programmes, theft of information, and the incorporation of unauthorised functions. To this end, it provides for measures to manage information systems so as to prevent unintended modifications, the submission of information concerning the contractor and employees involved in the performance of the contract, the obligation to accept audits by the MOD, and compliance with specified security standards.

Japan currently has no comprehensive law addressing domestic espionage, terrorist activities, or similar threats, whether in the defence sector or more generally. Measures to address such threats are taken pursuant to contracts with the Ministry of Defense, and where such threats materialise, responses are dictated not only by the relevant contracts but also by the Penal Code and other applicable laws.

Under contracts with MOD, provisions are established requiring contractors to take appropriate measures in the event a security incident is suspected or detected, as well as obligations to report such incidents to MOD and provisions concerning contractual penalties.

In contracts requiring the handling of confidential information and protected information, the Ministry of Defense requires any business operator that wishes to participate in the bidding process to submit, at the pre-bid stage, certain documents including matters relating to FOCI to MOD, and to confirm that the business operator’s relationship with foreign entities and its system for safeguarding confidential information comply with MOD’s requirements.

If MOD determines that such requirements are not satisfied, the business operator is required to take corrective measures, including the establishment of necessary rules and other arrangements, to put an appropriate protection system in place.       

Export controls, economic sanctions, and FDI screening are mechanisms designed to safeguard the security of the nation and its people from an economic perspective. Under Japanese law, these measures are positioned as part of the economic security legal framework and are considered to form part of the broader body of national security-related legislation. In addition to the above, the economic security legal framework includes a variety of other individual regimes, such as support measures for ensuring the stable supply of critical products, the development of advanced technologies and important overseas business activities; screening systems to ensure the reliability of critical infrastructure; the patent application non-publication system (“secret patent” regime); and the security clearance system for information important to economic security. Such economic security legislation has been designed in a manner consistent with traditional security legislation in the defence sector. For example, certain technologies that can be diverted for military use are subject to export controls and the non-publication regime for patent applications, and companies holding such technologies are subject to FDI screening.

Important national security matters in Japan are deliberated by the National Security Council (the NSC; chaired by the Prime Minister and comprise the Chief Cabinet Secretary, the Minister for Foreign Affairs, the Minister of Defense, and others). The National Security Secretariat (NSS), which serves as the NSC’s secretariat, co-ordinates important matters relating to Japan’s national security among the relevant ministries and agencies.

Japan’s foreign direct investment (FDI) screening regime is principally governed by the Foreign Exchange and Foreign Trade Act (FEFTA). Screening is conducted by the Ministry of Finance (MOF) and the minister having jurisdiction over the relevant business. The FEFTA is designed to permit foreign investment in principle while allowing pre-screening of investments that may raise national defence or security concerns. There is no standalone statute that directly targets the defence sector as such.

In sectors related to defence, typical defence industries such as weapons manufacturing, related equipment manufacturing and defence-related industries are overseen by the MOD, while related businesses such as aircraft manufacturing, space exploration, dual-use items and cybersecurity are supervised, depending on the business line, by the MOD, the Ministry of Economy, Trade and Industry (METI) and other relevant ministries, separately or jointly. Many of these businesses fall within the scope of the designated core sectors under the FEFTA, which are designated for highly sensitive businesses subject to more exacting review, and the conditions for exemption from prior notification are correspondingly stricter.

Under the FEFTA, FDI screening applies to: (i) inward direct investments by foreign investors in domestic entities; and (ii) specified acquisitions. Inward direct investments include share or business acquisitions and the establishment of joint ventures and subsidiaries. Specified acquisitions are shares or other equity interests in domestic entities acquired from other foreign investors, including in unlisted companies. Listed companies are caught in principle from 1% of shares or voting rights; unlisted companies are caught regardless of the percentage acquired. Pure licence agreements are not caught. There is no monetary threshold.

That said, foreign investors satisfying certain conditions may benefit from an exemption from prior notification, provided that they refrain from appointing directors or statutory auditors, proposing the divestment of functions or assets of the designated business, and accessing non-public information relating to the target’s technology. In core sectors, further restrictions apply, including restrictions on attending board or committee meetings and making written recommendations.

If a transaction falls within the relevant scope, prior notification is mandatory, and there are no exceptions based on turnover, asset size or transaction value. There is no optional notification regime as such, but investors may seek formal confirmation of whether a filing is required through the Bank of Japan and may also consult the competent authorities in practice.

If a notifiable transaction is implemented without prior notification, the authorities may order the return of the acquired shares or other necessary measures, and may also impose criminal penalties. If the omission is identified after the transaction, the investor is expected to submit the notification that should originally have been filed, together with a case investigation form, and to obtain clearance, even after the transaction.

Notifications are filed with the MOF and the competent minister through the Bank of Japan. As a general rule, a 30-day standstill period applies after filing, although this is reduced to two weeks for transactions that are not considered to raise national security concerns, and may be shortened further in appropriate cases. On the other hand, the standstill period may be extended for up to five months where necessary.

In practice, pre-filing consultations are often used to clarify issues, and it is prudent to allow sufficient time, especially for large transactions or transactions involving core sectors. If review cannot be completed within the standstill period, the filing must be withdrawn and resubmitted, and the overall process may take more than one or two months. In particularly sensitive defence-related businesses, the practical review period may exceed six months, including pre-filing consultations and resubmission.

The core question in the review is whether the investment is likely to have a material adverse effect on national security, public order, public safety or the smooth functioning of the Japanese economy.

The relevant factors include the attributes of the investor, the target company and the contemplated investment, as well as the likelihood of leakage of technology or information, the stability of supply, the investor’s ownership and control structure, compliance history, board appointments, shareholder proposals and access to non-public information.

These factors are not expressly enumerated in the FEFTA itself, but are instead reflected in the review criteria published by the MOF and the relevant ministries. Accordingly, the competent authorities have a degree of discretion, although in practice, the review is generally conducted within a reasonable range, taking into account precedent and co-ordination among the ministries.

Where the authorities consider that conditions are required for clearance, they typically propose undertakings to the foreign investor and, after discussions, if the investor accepts them, the conditions are recorded in the filing and become part of the clearance terms. If the investor later breaches those conditions, the breach may result in an order to change or suspend the investment and may also attract criminal penalties.

Typical undertakings include restrictions on the appointment of directors or management, restrictions on access to sensitive information, the maintenance of domestic business sites and production systems, and prohibitions on altering or abolishing key businesses.

If the matter cannot be resolved through voluntary undertakings and agreement, and the investor does not comply with changes recommended by the authorities, the authorities may issue an order to change or suspend the investment.

Until recently, the only recorded suspension recommendation/order was the 2008 case involving a UK fund’s investment in Electric Power Development Co, Ltd. However, in April 2026, a suspension recommendation/order was issued in connection with MBK Partners’ acquisition of Makino Milling Machine Co, Ltd.

If a transaction is implemented before clearance is obtained, it may be subject to criminal penalties and an order to return the shares or take other necessary measures. An appeal and litigation are available if the investor disagrees, but in practice, there are limited avenues for meaningfully circumventing the authorities’ decision.

The FEFTA does not set out any general rules on golden shares, but neither does it prohibit them. Accordingly, outside the foreign investment screening framework, it is possible in individual transactions for the government to hold a specific single share and thereby retain veto rights over key corporate matters such as dissolution, mergers and amendments to the articles of incorporation.

A recent example is METI’s position that, as a condition for support for Rapidus, a next-generation semiconductor project aimed at domestic production of advanced semiconductors, the government will hold a golden share with veto rights over important management matters. This is intended to address economic security risks such as acquisitions by foreign investors and the outflow of critical technology and information overseas, and is characterised by its use in combination with public financial support.

The FEFTA captures the establishment of joint venture (JV) companies and subsidiaries as inward direct investments, so JVs involving foreign partners may be subject to review depending on the ownership percentage and nature of the business. In practice, the key issues are the attributes of the investor, the nature of the target business and the management of access to non-public technical information, so the drafting of the JV agreement should address board composition, information access, voting rights and proposal rights from the outset.

There is no FEFTA-specific regime governing technology transfer or IP ownership in JVs. These issues should instead be addressed through individual contractual arrangements and by reference to export control rules, the Unfair Competition Prevention Act and other relevant laws.

FDI and national security review are conducted by MOF and the ministry having jurisdiction over the business, whereas merger control and competition law review are separate procedures conducted by the Japan Fair Trade Commission (JFTC) under the Anti-Monopoly Act. There is no express statutory co-ordination mechanism between the two regimes. Nevertheless, METI, the Ministry of Land, Infrastructure, Transport and Tourism, and the JFTC have published a case collection concerning areas where economic security and competition law overlap, and the JFTC’s merger guidelines are also being revised to reflect economic security considerations, including the improvement or maintenance of supply stability as a potential pro-competitive effect.

Japan does not have a single investigative authority for defence-related regulatory breaches; jurisdiction depends on the applicable regulatory regime. MOD and ATLA oversee defence procurement and may supervise and inspect the performance of government contracts, including through contractual audit and information-access rights. METI investigates potential export-control violations and may require reports, conduct on-site inspections, examine records and question relevant persons. MOF exercises similar investigative powers in relation to financial sanctions within its jurisdiction. Suspected criminal offences may additionally be investigated by the police and public prosecutors, including through court-authorised searches and seizures.

Regulatory investigations in the defence sector may be triggered by whistle-blower reports, voluntary disclosures, information obtained from other authorities or customs, irregularities identified through audits or contractual inspections, or routine regulatory reviews. In the export-control context, METI accepts voluntary reports from exporters concerning suspected unlicensed exports, unlicensed technology transfers or other potential FEFTA violations and may conduct a post-shipment review to establish the facts, causes and remedial measures. Defence procurement contracts may also impose specific reporting obligations, for example, in relation to information-security incidents, depending on the applicable contractual provisions. However, there is no general statutory obligation requiring all defence-sector companies to self-disclose every suspected regulatory or contractual breach; any mandatory reporting obligation depends on the relevant law, regulation or contract.

The investigative powers available in the defence sector depend on the applicable regulatory regime. MOD and ATLA do not have general statutory investigative powers over private defence companies as such; rather, their powers primarily arise in the context of defence procurement contracts, including supervision and inspection of contract performance and contractual audit, document-access and information rights. In the export-control context, METI may require reports, conduct on-site inspections, examine books and records, and question relevant persons. MOF has comparable powers in relation to financial sanctions within its jurisdiction. Where suspected conduct may constitute a criminal offence, the police and public prosecutors may conduct criminal investigations, including interviews and, with judicial authorisation where required, searches and seizures.

Classified or security-sensitive information remains subject to applicable secrecy and information-security requirements during an investigation. Specially Designated Secrets are subject to statutory restrictions on access, handling and disclosure, while defence procurement contracts may impose additional safeguards for other sensitive defence information. These protections regulate the handling of the information but do not generally exempt it from a lawful investigation.

MOD and ATLA do not have general statutory dawn-raid powers over private defence companies, although defence procurement contracts may provide for inspections, audits and access to relevant records. METI and the Ministry of Finance have statutory powers to conduct on-site inspections under the FEFTA. Although the FEFTA does not generally require prior notice, such inspections are not typically characterised as “dawn raids”, and their practical conduct depends on the circumstances. By contrast, in criminal investigations, the police and public prosecutors may conduct searches and seizures pursuant to a judicial warrant, and such searches may be carried out without prior notice to the entity concerned.

Japan does not recognise a broad attorney-client privilege identical to that in some common-law jurisdictions. However, attorneys are subject to professional confidentiality obligations, and civil and criminal procedure provides certain protections against compelled disclosure or seizure of confidential lawyer-held information. National-security or classified-information rules do not generally extinguish these protections, but separate statutory and contractual restrictions may govern access, handling and disclosure of classified material.

MOD and ATLA may suspend a supplier from participating in procurement (“designation suspension”) where specified grounds are met, including misconduct relating to procurement, bid-rigging, criminal conduct or other conduct making the supplier unsuitable as a contracting party. The duration depends on the applicable MOD rules and seriousness of the conduct. Japan does not have a single statutory “self-cleaning” regime. Remedial measures, co-operation, recurrence-prevention programmes and other mitigating circumstances may nevertheless affect the authority’s assessment or the duration of suspension, depending on the applicable rules.

Defence contract disputes are generally subject to ordinary civil litigation procedures, and there is no specialist court dealing exclusively with defence matters. Where criminal conduct is involved, ordinary criminal procedure applies. There is no separate litigation regime specifically for defence-related classified information. However, civil procedure provides mechanisms to restrict access to court records containing trade secrets or other confidential information and to limit the production of documents containing certain official, technical or professional secrets. In criminal proceedings, special rules may restrict the seizure of materials containing official secrets unless the relevant supervisory authority consents. These protections operate alongside applicable secrecy legislation, including the Act on the Protection of Specially Designated Secrets, and contractual confidentiality obligations.

Japan’s Whistleblower Protection Act applies across industries, including the defence sector, where its statutory requirements are met. It protects qualifying workers and certain other persons against dismissal and other detrimental treatment for protected reports. Reports may be made internally, to the competent administrative authority, or, subject to stricter conditions, to certain external parties. Defence-sector reports may therefore be made, depending on the subject matter, to MOD/ATLA, METI or another authority with enforcement jurisdiction.       

Legal entities may face criminal liability for certain breaches of defence-related regulation where the relevant statute provides for corporate liability. Many regulatory statutes contain “dual punishment” provisions under which, where an officer or employee commits an offence in connection with the corporation’s business, both the individual and the corporation may be punished. The FEFTA, for example, provides for corporate liability for certain export-control violations, and similar liability may arise under other regulatory legislation. By contrast, corporate criminal liability does not automatically arise for every offence; the relevant statute must provide a legal basis for holding the entity liable.