About Japan

Japan's is the world's third-largest and the second-largest developed economy in the world. The country is home to the world's third largest automobile manufacturing industry and the largest electronic goods industry.

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

A key feature of Japan's economy is its innovation, often being ranked amongst the worlds' most innovative countries in several measures of global patents fillings. Japan's intellectual accumulation has led to the country being consistently ranked first amongst all G7 countries in terms of research funding and quality of research.

Along with its status as a world-class innovation hub, Japan has the best business environment, as ranked by World Economic Forum, with its business-friendly policies, sophisticated IT infrastructures, world-class transportation infrastructure and a skilled labour force.

The Japan-China relationship is one of the most important bilateral relationship to ensure stability in East Asia. Japan's largest trade partner is China, with both countries highly reliant on each other for trade and inter-country business due to their close geographical proximity. While China is reliant on Japan for FDI into its economy, Japan relies on China to tap into its massive consumer base.

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 centre. 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 19th in the world for financial market development in The Global Competitiveness Report 2015-2016. 
  • It ranks Japan 28th in the world for the soundness of its banks, while it rates the country highly for access to loans, financing through local equity markets and venture capital availability.
  • Japan has excellent business infrastructure, a highly educated workforce and a strong rule of law.
  • Japan has relaxed almost all of its foreign-exchange controls. The Ministry of Finance must be notified about the import or export of cash worth more than JPY1m. Direct investment is still subject to some controls.


Sophistication of banking systems:

  • There are 195 banks operating in Japan, including four city banks, 16 trust banks, and 105 regional banks. There are also 55 foreign banks.
  • Japan's foreign-exchange market has an average daily turnover of USD 399 billion, accounting for 6.1% of global turnover (Bank for International Settlements triennial global survey 2016).
  • Japan's debt market is dominated by government bonds. Its corporate bond market is the largest and most liquid in Asia.


Regulatory bodies:

  • The banking industry is regulated by the Financial Services Agency. The Bank of Japan is the central bank.
  • Exchange controls are administered by the Ministry of Finance, the Ministry of Economy, Trade and Industry and the Bank of Japan.



  • Corporation Tax is 23.4% for companies with paid-in capital of more than JPY100m. For companies with paid-in capital of less than JPY100m it is 15% on the first JPY8m per annum and 23.4% on income over this amount.
  • Companies pay national local corporate tax at 10.3% of their corporate tax liabilities.
  • Other corporate taxes include enterprise tax, local corporate special tax, sized-based enterprise tax and inhabitant's tax, which when combined with corporation tax give a total corporate income tax burden of 30.86% for large corporations, falling to 30.62% from April 1, 2018.
  • Domestic companies in Japan are taxed on their worldwide income. Foreign companies are taxed on income sourced in Japan.
  • Branch profits are liable for the same tax as corporate profits. No withholding tax is imposed on the repatriation of branch profits to the head office.
  • Consumption tax (VAT) is charged at 8%, rising to 10% on October 1, 2019. Exports and certain services to non-residents are taxed at 0%.
  • Stamp duty is levied on certain documents prepared in Japan. 
  • Japanese corporations pay withholding tax of 20% on dividends and 0% or 20% on interest. Foreign corporations where no tax treaty is in place pay WHT of 15% or 20% on dividends and 0%, 15% or 20% on interest. Where a tax treaty is in place WHT ranges from 0% to 20% for dividends and 0% to 25% for interest.
  • Interest on loans is deductible, unless the payment is to related parties in the same corporate group.
  • Japan has tax treaties with around 110 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 of 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 195 banks, of which 105 are regional banks, 55 are foreign banks and 20 are city and trust banks. In addition, there are 36 foreign bank agents and 15 'niche banks' offering specialist banking services such as internet banking. 
  • The banking sector is dominated by four major banks: Bank of Tokyo-Mitsubishi, Sumitomo Mitsui Banking Corporation, Resona Bank and Mizuho Bank. Together they make up 51% of total banking assets in Japan.
  • Japan's banking sector has undergone a restructure in the last two decades to increase efficiencies in the changing economic environment. This has culminated in the consolidation of regional banks and the creation of three of Japan's major banks, Bank of Tokyo-Mitsubishi, Sumitomo Mitsui Banking Corporation and Mizuho Bank.
  • Japan Post Bank, which was the world's largest deposit-holding bank and one of the world's largest financial institutions, was privatized in 2015 and was the largest initial public offering that year. This was part of the financial sector restructure 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: Available to 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 JPY 100 million) and urgent JPY-denominated interbank transfers.
  • 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 and with finality transactions in real time.
  • Final settlement is done between participants' accounts held with the BOJ.
  • 538 participants, of which 456 are banks.


Zengin System

Designated time net settlement system

  • Operated by the Japanese Bankers Association.
  • 1,289 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 Bankers Association.
  • 202 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.



(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:

  • 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 (autodebits):

  • 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.    



  • Cheques are still a prominent cashless form of payment, especially for retail and commercial payments. However, cheques are in decline due to the increasing use of electronic payments. There are severe penalties if a payer cannot honour cheques.


Card payments:

  • Card payments have become increasingly popular, 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.
  • 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.


Promissory notes

  • Common form of payment for B2B.
  • Discount note market allows access to working capital finance.
  • Processed through BCCS.




Recent developments


Instant Money Transfer App Developed

Blockchain firm Ripple has joined forces with a consortium of Japanese banks to launch a smartphone application enabling users to carry out instant domestic money transfers through a bank account, phone number or QR code. MoneyTap, which will initially be available from three banks this autumn, will utilise the RippleNet blockchain network, bypassing the fees that are currently charged on domestic money transfers.

Read more about the development here


Line to Offer Cryptocurrency Trading

Japanese messaging app Line is looking to offer its 168 million users the ability to trade cryptocurrencies through their smartphone. The company, which has launched a new division called Line Financial Corporation, has applied for a licence with the Financial Services Agency to enable it to also offer loans and insurance. It already offers a payment service called Line Pay, which has 40 million users.

Read more about the development here


Megabanks to Launch Cashless Payment System

Japan’s three largest banks are working together to create a cashless payment system. Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group are looking to develop a standardised smartphone payment system that uses QR codes. They aim to rollout the system in the 2019 fiscal year, after which both large banks and smaller regional ones will be invited to join the network.

Read more about the development here.



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Sources: IMF World Economic Outlook database, October 2016; CIA World Factbook; Trading Economics; PwC

Please note that the information contained in this document, assembled based on information available and accurate as at July 2017, is of a general nature only and is subject to change whether for economic, political, social or other reasons.

Last updated on 20 May 2018