About Japan

Japan is the world's third-largest economy and its second-largest developed economy. The country’s automobile, electronics and high-end machinery manufacturing industries all rank in the top three worldwide.

The Japanese government has been actively promoting structural reforms to encourage inward FDI into its economy. Reforms include the designation of a National Strategic Special Zone to attract international businesses and the simplification of administrative procedures to enhance efficiency.

Innovation is a key feature of Japan's economy, and the country is often ranked amongst the world’s most innovative using several measures of global patent filings. Japan's intellectual property development and accumulation, as well as the quality of its research output, are a direct result of the country’s commitment to R&D expenditure, which consistently ranks very high (as a percentage of GDP) amongst G7 countries.

Along with its status as a world-class innovation hub, Japan offers one of the world’s best business environments. It is ranked sixth overall by the World Economic Forum, and is rated highly for its sophisticated IT infrastructure, world-class transportation network, market size and innovation capabilities.

The Japan-China relationship is one of the most important bilateral relationships in the region, and the countries’ ongoing association is key for stability in East Asia. Japan's largest trading partner is China, with both countries highly reliant on each other for trade and inter-country business due to their close geographical proximity. While Japan makes significant FDI into China, it benefits greatly from China’s massive consumer base.


Japan Market Profile Infographic_Small

What solutions are available in Japan?

Solution Description
Interest Optimisation Maximise your interest yield from for your balances held with the bank.
Notional Pooling Cash balances in different accounts are notionally offset to derive the net balance, which is then used to calculate interest.
Sweeping/ Zero Balance Account (ZBA) ZBA are checking accounts with zero balances where funds are physically swept to eliminate excess balances and maintain greater control over disbursements.

Corporate Treasury in Japan

Japan is the world's third-largest economy and a global manufacturing powerhouse. Here, we highlight some of the key benefits relevant to treasury and cash management in Japan.


Financial Market Development

  • The World Economic Forum ranks Japan 12th in the world for its financial system in the Global Competitiveness Report 2019.
  • It ranks Japan 33rd in the world for the soundness of its banks, while it rates the country 7th for domestic credit to the private sector and 15th for non-performing loans.
  • Japan has an excellent business infrastructure, a highly educated workforce and a strong rule of law.
  • Japan has relaxed almost all of its foreign exchange controls. Those that remain have little impact on normal business transactions.


Sophistication of Banking Systems

  • There are 32 city banks and trust banks and 103 regional banks in Japan as well as 39 foreign banks.
  • Japan's foreign-exchange market has an average daily turnover of USD376 billion, accounting for 4.5% of global turnover (Bank for International Settlements Triennial Central Bank Survey 2019).
  • Japan's debt market is dominated by government bonds. Its corporate bond market is the largest and most liquid in Asia. The local currency bond market was valued at USD 11,081.55 billion in June 2020.


Regulatory Bodies

  • The banking industry is regulated by the Financial Services Agency. The Bank of Japan is the central bank.



  • The corporate income tax rate is 23.2% for companies with paid-up capital of more than JPY100 million. For companies with paid-up capital of less than JPY100 million, except for a company wholly owned by a company that has paid up capital of JPY500 million and above, the rate is 15% on the first JPY8 million per annum of taxable income and 23.2% on taxable income in excess of JPY8 million per annum.
  • Companies pay national local corporate tax at 10.3% of their corporate tax liabilities.
  • Other corporate tax liabilities for companies include enterprise tax, local corporate special tax, size-based enterprise tax and inhabitant's tax.
  • When all the above taxes are combined, Japan has an effective tax rate of 30.62%.
  • Resident companies are taxed on their worldwide income, whilst non-resident companies are taxed on Japan-sourced income.
  • Profits of a branch of a foreign company are taxed at the same rate as resident company’s profits. There is no branch profits remittance tax on the remittance of profits to the head office by the branch of a foreign company.
  • The consumption tax (or value-added tax) is 10%, with certain goods and services being zero-rated, whilst others are exempt. A lower consumption tax of 8% is paid on certain goods, including food.
  • Interest expenses that are used for business purposes are generally tax-deductible subject to thin capitalisation rules and earning stripping rules.
  • Stamp duty is levied on certain documents prepared in Japan. The tax is based on the amount stated in the document, up to a maximum of JPY 600,000.
  • Withholding taxes (WHT) of 20% on dividends and 0% or 20% on interest are charged to resident companies. For non-resident companies where no tax treaty is in place, WHT of 15% or 20% is charged on dividends and 0%, 15% or 20% is charged on interest. Where a tax treaty is in place and the non-resident can provide a Certificate of Residence, WHT ranges from 0% to 20% for dividends and 0% to 25% for interest.
  • Japan has tax treaties with more than 80 countries and territories.
  • Japan is a signatory to the Organisation for Economic Co-operation and Development's Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.


Benefits for Regional Treasury Centres

  • Japan is a treasury centre location for multinational corporations with JPY accounts.
  • Japan has the largest bond market in Asia.
  • A number of Japanese banks are part of the China International Payments System, reducing the cost and time taken to make payments to China.
  • Notional pooling is available in Japan, although it is not widely used as the tax treatment is unclear.
  • Cash concentration is widely available and permitted between resident and non-resident entities.
  • Residents are permitted to establish cross-border physical cash pools within Japan and abroad.
  • Japan has an extensive tax-treaty network.




Banking System

  • There are 206 banks in the country, of which 103 are regional banks, 55 are foreign banks and 32 are city and trust banks. In addition, there are 39 foreign bank agents and 13 'niche banks' offering specialist banking services such as internet banking.
  • Japan's banking sector has undergone extensive restructuring in the changing economic environment of the last two decades to increase scale and efficiencies. This has culminated in the consolidation of regional banks and the creation of three megabanks, Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group, all of which rank in the top 15 of the world’s largest financial institutions.
  • Japan Post Bank, which was the world's largest deposit-holding bank and one of the world's largest financial institutions, was privatised in 2015 and became the largest initial public offering that year. This was part of the financial sector’s restructuring to help boost competitiveness and allow Japan Post Bank to broaden its remit without regulatory restrictions.


Bank Accounts

  • Residents may hold foreign and domestic currency (JPY) accounts domestically and overseas, whereby domestic currency accounts are freely convertible to foreign currency.
  • Non-residents may hold foreign and domestic currency accounts, whereby domestic currency accounts are freely convertible to foreign currency.
  • Interest is available on demand-deposit accounts, including multi-currency accounts.


Legal and Regulatory

  • The Bank of Japan (BOJ) is the central bank with semi-governmental status and the Financial Services Agency (FSA) oversees the banking sector.
  • A company is resident if its head office is based in Japan.
  • Non-residents are persons not domiciled in Japan or who have lived in Japan for less than a year (this may include business travellers). Non-residents are only taxed on Japan-sourced income.
  • Foreign-exchange control is enforced by Ministry of Finance (MOF), the Ministry of Economy, Trade and Industry (METI) and the BOJ.
  • Japan has anti-money laundering and counterterrorism financing legislation (ATML/CTF) in place, and is a member of the Asia/Pacific Group on Money Laundering (APG).
  • Japan has set up a financial intelligence unit, the Japan Financial Intelligence Office (JAFIO), which is a member of the Egmont Group.




Payment Systems


Japan's Real-time Gross Settlement (RTGS) system

  • Owned and operated by the BOJ.
  • Processes high-value (greater than JPY100 million) and urgent JPY-denominated interbank transfers and government bond settlements.
  • Accessed at a dedicated terminal within each bank or through a link to the bank's computer network.
  • Activates final settlement of participants' net balances from other clearing houses.
  • Settles transactions with finality in real time.
  • Final settlement is done between participants' accounts held with the BOJ.
  • 494 direct participants.

Zengin System

Designated time net settlement system

  • Operated by the Japanese Bankers Association.
  • Has 1,201 participants.
  • Processes low-value and non-urgent bulk electronic credit and debit transfers.
  • Final settlement is across participants' accounts at the BOJ through BOJ-NET.
  • Access to ANSER (Answer Network System for Electrical Requests) enables transfers between JPY-denominated accounts in real time.


(Foreign Exchange Yen Clearing System)

Foreign exchange RTGS system

  • Owned and operated by The Japanese Bankers Association.
  • 27 direct participants and 174 indirect participants.
  • There is a network of 315 clearing houses.
  • Processes JPY-denominated cross-border transactions, including trade settlement payments.
  • Processes transactions for non-resident entities and JPY-denominated bond transactions.
  • Final settlement done through RTGS system.


(Bill and Cheques Clearing System)

Cheque and paper-based clearing system

  • Operated by the local bankers associations.
  • There is a network of 323 clearing houses.
  • Tokyo Clearing House processes 70% by value and 33% by volume of all paper-based instruments.
  • Final settlement done across participants' accounts held at the BOJ through BOJ-NET.
  • Funds not available to recipients until next business day after interbank settlement.
  • Tokyo Clearing House has 106 direct and 199 indirect participants.


(Credit and Finance Information Scheme)

Centralised card payment system

  • Owned and operated by NTT Data.
  • Efficient system for B2B, interbank and B2C transactions.
  • Supports debit and credit card and E-money services as well as other payments.
  • Connects to wide network of credit card companies, overseas and national financial institutions, and payment-receiving organisations.
  • Payments are cleared through the Zengin system or other clearing houses after two business days and funds are received after three days.



Payment Instruments


Credit Transfers

  • By value, the the largest form of cashless payment in Japan.
  • High-value and urgent credit transfers cleared and settled through BOJ-NET in real time.
  • High-value and urgent cross-border credit transfers or those for non-residents are processed through FXYCS same day (before 21.00) and final settlement is done through BOJ-NET.
  • Low-value, non-urgent and bulk credit transfers (such as payroll, supplier and third-party payments) are settled through the Zengin system same day, and those for non-residents through FXYCS same day, with final settlement done through BOJ-NET.


Direct Debits (auto debits)

  • Used for low-value, regular payments such as utility bills.
  • There is no formal direct debit system, with processing shared among the banks and done semi-manually, resulting in lengthy periods for payments to be finalised.


Card Payments

  • Bank cards (credit or debit) are still the leading payment method, with card usage doubling in the last ten years and every person in Japan owning 2.5 cards on average.
  • The main cards in circulation are JCB, MasterCard, Visa, American Express, Diners Club, UFJ Card, UC and Nicos, and all are EMV-compliant.
  • Debit cards are the most commonly used payment card, but only account for a small proportion of the total value of card transactions.
  • Credit card and debit transactions are settled through CAFIS and credit cards are cleared through individual card-issuing schemes and debit cards through the Zengin system.
  • As of March 2019, there were 283.9 million credit cards in circulation that were used for almost a third of cash-less transactions.


Online Payments

  • The government’s Growth Strategy 2017, which outlined monetary, fiscal and structural policy tools to ensure consumption and investment growth, detailed the legal and regulatory framework to support the development of the financial technology (fintech) sector.
  • The government has set a target to double digital payments from 20% to 40% of total transactions over ten years as part of its “Society 5.0” future investment strategy. It is also phasing in a change in the law to make it easier for depositors to give third parties access to their accounts and data in an effort to promote digital payments.
  • 65% of online payments are made by credit and debit cards. 
  • The use of digital wallets has expanded rapidly in recent years, mainly for low-value payments. E-commerce has experienced a steady uptake with 71% penetration for consumer transactions, and this figure is estimated to grow to 74% by 2022. However, security concerns still put off many consumers from using digital wallets. The most common local digital wallets and prepaid top-up cards are Line Pay, Suica, Nanaco and Edy, although Apple Pay and Android Pay also have a presence.
  • Japan’s e-commerce market is worth JPY15.9 trillion, a quarter of which is mobile commerce.
  • An electronic commerce and internet company, Rakuten, has diversified to become Rakuten Bank, a bank and payment card provider. It also offers its own digital currency, Rakuten Super Point.
  • JPQR, a unified QR-code standard compatible with eleven existing QR code systems, was launched in July 2020 with payment facilities planned for 100,000 stores nationwide by the end-2020.
  • A common form of payment in Japan is a post-purchase proximity payment facility, ‘Konbinis’, operated through the convenience store Konbini. Konbinis allow final payments to be made within six days of purchase by bank transfer or ATM (Pay-easy method) or at the post office or a Konbini store. ID must be shown when making payment.


Digital Currencies

  • In 2017, a licensing system was introduced for cryptocurrencies, as stated in the Growth Strategy 2017, and all exchanges have to be registered with the FSA.
  • Cryptocurrencies are legally accepted as a means of payment. Japan is currently a market leader in digital-asset exchanges.


Cash, Cheques and Notes

  • Cash is still widely used, and is the most common form of payment for individual consumers. The amount of cash currently in circulation accounts for about 20% of Japan’s GDP and is the highest percentage in the world, according to the Bank of International Settlements.
  • Cash remains the dominant payment method of choice for 70% of Japanese consumers for in-store purchases.
  • Cheques are used mostly for commercial payments, but their usage is in decline due to the increasing use of electronic payments. There are severe penalties if a payer cannot honour cheques.
  • Promissory notes, or P-Notes, are a common form of payment for B2B. The discount note market is a key source of working capital finance for Japanese companies. Notes are processed through BCCS.



Japan Market Profile Infographic

1 CT = Consumption Tax (rising to 10% on 1 October 2019)

2 For companies with paid-up capital of more than JPY100 million

3 (Progressive) max rate for incomes over JPY40 million, non-resident flat rate of 20.42%



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Sources: IMF, World Economic Forum, PwC, US Department of Commerce, Bank of Japan, Financial Services Agency, Bank for International Settlements, Asian Development Bank, OECD,The Paypers, McKinsey & Company.

The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. The information is assembled based on information available and accurate as at Oct 2019.

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