JAPAN LAW DIGEST REVISER

JAPAN LAW DIGEST REVISER

Blakemore & Mitsuki Nittochi Building

4-1, Kasumigaseki, 1-chome Chiyoda-ku, Tokyo 100-0013, Japan

Telephone: (81-3)3503-5571 Fax: (81-3)3503-5577/4707 Email: info@blakemore.gr.jp Website:

Reviser Profile

History: The Firm was established in 1950 by Thomas L. Blakemore, who was soon joined by Masatsugu Mitsuki, and the most traditional international law firm in Japan. Since then the Firm has had an uninterrupted history as counsel to Japanese and non-Japanese clients and has developed into one of the most distinguished international law firms in Japan. Although the largest group of clients is U.S. companies that are engaged, or intend to engage, in business in Japan, the Firm also represents and advises client companies from a number of other foreign countries in respect of their businesses in Japan. At the same time, the Firm has enjoyed a steady increase in Japanese clients, corresponding to the postwar rehabilitation and growth of the Japanese economy. We provide all our clients with competent and up-to-date legal advice, particularly in relation to their cross-border business transactions.

Areas of Practice: General Outward/Inward Direct Investment, General International Business; Mergers and Acquisitions; Structured Finance; Securitization; Capital Markets; Banking and Institutional Investing; Commercial and Investment Banking Regulations; Venture Businesses; Litigation, Arbitration; Bankruptcy; Intellectual Property; Admiralty; and General Domestic Affairs.

JAPAN LAW DIGEST

(The following is a list of all Categories and Topics, including cross-references, covered in this Digest.)

Category/Topic

Page

INTRODUCTION CURRENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 GOVERNMENT AND LEGAL SYSTEM . . . . . . . . . . . . . . . . . . 1 HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 OFFICE HOURS AND TIME ZONE . . . . . . . . . . . . . . . . . . . . 1

BUSINESS ORGANIZATIONS AGENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 JOINT STOCK CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . 5 LIMITED PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . 5 PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

BUSINESS REGULATION AND COMMERCE BILLS AND NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 COMMERCIAL REGISTER . . . . . . . . . . . . . . . . . . . . . . . . 6 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 FRAUDS, STATUTE OF . . . . . . . . . . . . . . . . . . . . . . . . . . 6 INFORMATION TECHNOLOGY, INTERNET AND NEW MEDIA . . . . . 6 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 LICENSES, BUSINESS AND PROFESSIONAL . . . . . . . . . . . . . . . 7 MONOPOLIES, RESTRAINT OF TRADE AND COMPETITION . . . . . . 7 NEGOTIABLE INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . 7 SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CITIZENSHIP ALIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 IMMIGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CIVIL ACTIONS AND PROCEDURE ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 EVIDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 INJUNCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 JUDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 LIMITATION OF ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 PRESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SEQUESTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

COURTS AND LEGISLATURE COURTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 LAW REPORTS, CODES . . . . . . . . . . . . . . . . . . . . . . . . . . 8 LEGISLATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

DEBTOR AND CREDITOR ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ASSIGNMENTS FOR BENEFIT OF CREDITORS . . . . . . . . . . . . . 9 ATTACHMENT AND INJUNCTIONS . . . . . . . . . . . . . . . . . . . . 9 BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 EXECUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 EQUITABLE LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 EXEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 GARNISHMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 INSOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PLEDGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

DISPUTE RESOLUTION ALTERNATIVE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . 10 CONCILIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

DOCUMENTS AND RECORDS ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 NOTARIES PUBLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Category/Topic

Page

EMPLOYMENT LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ENVIRONMENT ENVIRONMENTAL REGULATION . . . . . . . . . . . . . . . . . . . . . 11

ESTATES AND TRUSTS ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 DESCENT AND DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . 11 EXECUTORS AND ADMINISTRATORS . . . . . . . . . . . . . . . . . . 11 TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 WILLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

FAMILY ADOPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 DIVORCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 HUSBAND AND WIFE . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 INFANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 MARRIAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

FOREIGN TRADE AND COMMERCE EXCHANGE CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 13 FOREIGN EXCHANGE AND FOREIGN TRADE . . . . . . . . . . . . . . 13 FOREIGN INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 FOREIGN TRADE REGULATIONS . . . . . . . . . . . . . . . . . . . . . 13

HEALTH DRUGS, COSMETICS AND MEDICAL DEVICES . . . . . . . . . . . . . 13 FOODS AND FOOD ADDITIVES . . . . . . . . . . . . . . . . . . . . . 13

IMMIGRATION ALIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 IMMIGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

INTELLECTUAL PROPERTY COPYRIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 TRADEMARKS AND TRADE NAMES . . . . . . . . . . . . . . . . . . . 15

LEGAL PROFESSION ATTORNEYS AND COUNSELORS . . . . . . . . . . . . . . . . . . . . . 15

MORTGAGES CHATTEL MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . 15 MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

PROPERTY ABSENTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 CONVEYANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 CURTESY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 DEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 DOWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

TAXATION ALCOHOL, BEVERAGES AND TOBACCO TAXES . . . . . . . . . . . . 16 BUSINESS TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 CONSUMPTION TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 16 GASOLINE AND SPECIAL FUELS TAXES . . . . . . . . . . . . . . . . 16 GIFT TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 INCOME TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 INHERITANCE TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 LOCAL GOVERNMENT TAXES . . . . . . . . . . . . . . . . . . . . . . 16 STAMP TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 TAX INCENTIVES AND EXEMPTIONS . . . . . . . . . . . . . . . . . . 16 TREATIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 17

TRANSPORTATION MOTOR VEHICLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SHIPPING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

TREATIES AND CONVENTIONS TREATIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

JAPAN LAW DIGEST

Revised for 2007 edition by BLAKEMORE & MITSUKI, of Tokyo.

(Abbreviations used are: B. L. for Bankruptcy Law; C. for Constitution; C. C. for Civil Code; C. L. for Copyright Law; C. C. P. for Code of Civil Procedures; C. E. L. for Civil Execution Law; Com. C. for Commercial Code; Com. L. for Company Law; C. T. for Code of Trusts; C.P.E.L. for Civil Preliminary Execution Law; C. T. L. for Court Law; F. E. T. L. for Foreign Exchange and Foreign Trade Law; L. B. N. for Law of Bills and Notes; L. C. for Law of Checks; L. G. R. A. L. for Law Concerning General Rule of Application

of Law; L. L. C. L. for Limited Liability Company Law; P. L. for Patent Law; T. L. for Trademark Law.)

Note: This revision incorporates legislation through Aug. 31, 2006.

INTRODUCTION

CURRENCY:

Legal currency is yen. Its exchange rate has been floating since Feb. 13, 1973.

GOVERNMENT AND LEGAL SYSTEM:

Japan was occupied by Allied Powers from Sept. 2, 1945 to Apr. 28, 1952, during which time new Japanese Constitution replaced Meiji Constitution of 1889. New Constitution retains institution of monarchy, but defines imperial role as devoid of governmental power except on purely ceremonial matters. (C. 4, 7). Diet of two houses is declared to be supreme organ of state and sole law-making agency. (C. 41, 42). This Diet selects from among its membership Prime Minister who heads and names Cabinet. (C. 66, 67). Majority of Cabinet in turn must be named from Diet members. (C. 68). Cabinet resigns upon vote of nonconfidence or of rejection of confidence of House of Representatives, except when House is dissolved within ten days thereafter. (C. 69). Independent judiciary headed by Supreme Court is given power of judicial review over legislative and executive acts. (C. 76, 81). Selections to Supreme Court are made by Cabinet, but appointees are subject to recall vote of public at next general election and at ten-year intervals. (C. 6, 79). Elaborate bill of rights is contained in Constitution, as well as unique provision renouncing war. (C. 9, 10 through 40).

Japanese Cabinet consists of one Prime Minister and Ministers of State of no more than 14 in number; provided that up to three additional ministers may be added if necessary. Directly under Cabinet, which is headed by Prime Minister, are, at present, Cabinet Office, Ministries of Justice; Foreign Affairs; Finance; Education, Culture, Sports, Science and Technology; Health, Labor and Welfare; Agriculture, Forestry and Fisheries; Economy, Trade and Industry; Land, Infrastructure and Transport; Environment; and Public Management, Home Affairs, Posts and Telecommunications. Prime Minister appoints head of each Ministry from among Ministers of State. Japan is divided into prefectures which in turn are subdivided into municipalities. Both prefectures and municipalities possess certain powers of self-government which are determined by Diet. (C. 92, 94).

HOLIDAYS:

Legal holidays are, Jan. 1, 2d Mon. of Jan., Feb. 11, Vernal Equinox, Apr. 29, May 3, May 5, 3d Mon. of July, 3d Mon. of Sept., Autumnal Equinox, 2d Mon. of Oct., Nov. 3, Nov. 23 and Dec. 23. In case any of these days falls on Sun., next Mon. becomes legal holiday. When day other than Sun. or holiday falls between two legal holidays, such day becomes holiday.

When final day for performance of legal obligation, or making of designation, delivery, or act of execution falls on legal holiday, or Sunday, period of time is extended through following day, either through specific provision of law or custom. (C. C. 142; Com. C. 520; L. B. N. 72, 77; L. C. 60; C. C. P. 95; Code of Criminal Procedures 55; Law of National Taxation General Rules 10).

In addition to legal holidays, Jan. 2, Jan. 3, Dec. 31 and Sats. are bank holidays.

OFFICE HOURS AND TIME ZONE:

Japan is in the +09:00 GMT time zone. Office hours are generally from 9 a.m. to 5 p.m.

BUSINESS ORGANIZATIONS

AGENCY:

Valid declaration of intention by agent, made within scope of his authority and with showing that he acts for a principal, binds or accrues to benefit of principal. (C. C. 99). Similar declaration of intention made in absence of revelation of principal, as a general rule, binds only agent unless opposite party knows or should have known of principal's relationship. In commercial transactions, principal is bound but opposite party may demand performance of contract from agent if he does not know of principal's relationship. (C. C. 100; Com. C. 504). In noncommercial transactions, contract made as agent by one without authority is not valid against principal unless ratified. (C. C. 113). Opposite party may request ratification within reasonable time and has right of cancellation until ratified. (C. C. 114, 115). When authority cannot be provided or ratification obtained, agent is bound at option of opposite party either to perform or to pay damages. (C. C. 117).

Role of agent may be assumed by person who has no legal capacity. (C. C. 102). Unless specified, powers of agent are limited to performance of acts of preservation, utilization or improvement which do not change fundamental nature of object of agency. (C. C. 103). Creation of a subagency is not permitted except with permission of principal or where unavoidable reason exists. (C. C. 104). No agent may act for both parties unless so authorized, or unless in discharge of obligation. (C. C. 108). Person who has represented to third parties creation of agency relationship is responsible for acts done by ostensible agent within ostensible scope of authority. (C. C. 109). If agent acts beyond

his authority and opposite party has reasonable grounds to believe agent is acting within his authority, principal is responsible for such act by agent. (C. C. 110). Agency ceases with: (1) Death of principal (except when principal dies in case of commercial agency), (2) bankruptcy, death or adjudication of incompetency of agent, and (3) upon completion of term provided by contract. (C. C. 111; Com. C. 506).

Product Liability.--Product Liability Law (``P.L.L.'') took effect on July 1, 1995. P.L.L. provides for special rules to be applied to case of product liability in preference to general negligence principle under Civil Code, which otherwise would apply. Under P.L.L. party which manufactured, processed or imported product as business (``manufacturer'') is made liable for damages if product which manufacturer delivered, i.e., released to market, injured another party's life, body or property because of ``defect'' in product, i.e., lack of safety which product is supposed to provide. Also, liable under P.L.L. in same way as ``manufacturer'' are (a) party which placed its name, mark or other feature on product to represent that party is ``manufacturer'' of product, (b) party which made representation on product which would mislead others that party is ``manufacturer'' of product and (c) party which is comparable to ``manufacturer'' under circumstances. Manufacturer or deemed manufacturer shall be exempt from liability under P.L.L. (a) in case where defect could not have been discovered in light of state of scientific or technical knowledge at time when product was placed in market or (b) in case where product was used as part of raw material of another (primary) product, where defect in part or material was result of design directed by primary manufacturer and where manufacturer or deemed manufacturer was not negligent regarding defect.

Right to damages under P.L.L. shall be extinguished by prescription after three years from time that injured party or his/her legal representative became aware of injury and of party who is liable under P.L.L. Also, action for damages under P.L.L. is not available ten years after manufacturer or deemed manufacturer delivered product, except for action for damages caused by material harmful to human health when it is accumulated in human body or for damages which can be recognized after certain incubation period, for which ten-year period shall be counted from time that damages are recognized.

ASSOCIATIONS:

See topic Corporations.

CORPORATIONS:

Legal personality may be acquired by means of procedures outlined in Civil Code, Company Law, or special acts of legislation, as well as by means of special legislative charter. Although legal persons are classified in many ways such as private and public, or for profit and for public welfare, all are grouped together for convenience under title ``corporations''.

Legal Persons Under the Civil Code.--Civil Code recognizes two categories of legal persons (often termed juridical persons) which are organized in public interest--associations (Shadan) and foundations (Zaidan). Association is formed by a group of persons, and is governed by articles of association prepared at time of its organization. (C. C. 37). Foundation is aggregation of property which has been set aside and dedicated to particular purpose through act of endowment. (C. C. 39). Both associations and foundations must be organized with approval of competent authorities in connection with religious worship, teaching, charity, art, or some similar public purpose. (C. C. 34). Operations of both are subject to supervision of competent authorities, and legal existence of both may be terminated upon completion of dissolution which may be caused upon occurrence of any event specified in articles of association or endowment, or bankruptcy or annulment of approval for incorporation, or fulfillment of objective provided in articles of association or endowment or impossibility of such fulfillment. Associations may also be dissolved by resolution of general assembly of members or when no member remains. (C. C. 67, 68). Normally general assembly of members of an association elects directors while directorate of a foundation may either be self-perpetuating (if so provided in original act of endowment) or appointed by court. (C. C. 37, 40). Both associations and foundations can act only through legally authorized officials, and both are liable for damages for acts committed by officials in course of conduct of their duties. (C. C. 44, 53). If any damage has been done to other persons by act beyond scope of business, members and directors having supported resolution for such matter and directors and other representatives having carried it out shall be jointly and severally liable for damage compensation (C. C. 44).

Business corporations are legal persons organized under Company Law and related acts.

Four classes of business corporations or companies are provided by Company Law-- partnership companies (Gomei Kaisha), limited partnership companies (Goshi Kaisha), limited liability corporations (Godo Kaisha) and joint stock corporations (Kabushiki Kaisha). Certain special acts provide for specified purpose company (Tokutei Mokuteki Kaisha) whose business purpose is securitization of specified assets, and investment company (Toshi Hojin) whose business purpose is to invest in specified assets. Each may be organized without special act of government approval through compliance with legal conditions of formation and subsequent registration; provided that each of specified

See note at head of Digest as to 2006 legislation covered. See Topical Index in front part of this volume.

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