Digital Business 2023

What are the key e-commerce legal requirements that apply to B2B e-commerce in your jurisdiction (and which do not apply to non-e-commerce business)?
Japan Privacy
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1. E-Commerce Regulation

1.1 What are the key e-commerce legal requirements that apply to B2B e-commerce in your jurisdiction (and which do not apply to non-e-commerce business)? Please include any requirements to register, as well as a summary of legal obligations specific to B2B e-commerce.

There are no legal requirements that apply specifically to B2B e-commerce in Japan.

1.2 What are the key e-commerce legal requirements that apply to B2C e-commerce in your jurisdiction (and which do not apply to non-e-commerce business)? Please include any requirements to register, as well as a summary of legal obligations specific to B2C e-commerce.

The main legislative instruments relating to e-commerce are the Act on Special Provisions to the Civil Code Concerning Electronic Consumer Contracts and the Electronic Acceptance Notice (Act on Special Provisions), the Act on Specified Commercial Transactions (ASCT) and the Act on Regulation of Transmission of Specified Electronic Mail (ARTSEM). The ASCT requires an e-commerce business operator to notify consumers of certain items, such as the cancellation policy, and prohibits an e-commerce business operator from sending junk emails. The ARTSEM also prohibits an e-commerce business operator from sending junk emails. Additionally, the Consumer Contract Act prohibits an e-commerce business operator from including excessively disadvantageous conditions in its terms of service. Further, some intellectual property (IP) laws may be applied to internet-related issues.

The Ministry of Economy, Trade and Industry (METI) has published the Interpretative Guidelines on Electronic Commerce and Information Property Trading on its website. These guidelines have been updated every year or every few years and their coverage has been expanded. The guidelines contain methods for applying provisions of the Civil Code, the Consumer Contract Act, the Act on Special Provisions and the ASCT to e-commerce business circumstances, including instructions for amendment of the terms of service, protection of minors, various issues related to internet auction services and artificial intelligence (AI) speakers. Further, the guidelines cover application of IP laws, including the Copyright Act, the Trademark Act, the Premiums and Representations Act governing advertisement issues, and other internet-related laws, to e-commerce businesses.

1.3 Please explain briefly how the UK Online Safety Bill, the EU's Digital Services Act and Digital Markets Act or equivalent local legislation may affect digital business in your jurisdiction.

In Japan, there is no local legislation equivalent to the UK Online Safety Bill, the EU's Digital Services Act or the Digital Markets Act. Although there may not be many instances in which rights holders and consumers in Japan directly request intermediary service providers to fulfil their obligations under these pieces of legislation, the government has already started discussions on whether laws and regulations equivalent to such legislation should be introduced.

In Japan, in relation to measures against illegal and harmful information, for example, illegal content as well as illegal and harmful information are being considered. Moreover, rather than strengthening the responsibility of intermediary service providers, policies are being implemented to clarify the criteria for judging such information, to establish contact points, and to provide relief through the use of the sender information disclosure system by infringed persons. In the future, legal measures will also be considered for the transparency of content moderation and, in turn, measures against false information. As to online advertising, in the autumn of 2022, digital advertising was added to the scope of application of the Act on Improving the Transparency and Fairness of Specific Digital Platforms to improve transparency for advertisers and media companies. Also, the Consumer Affairs Agency intends to improve transparency (discipline, etc., for stealth marketing) from the summer of 2023. The Telecommunications Business Act and related guidelines stipulate that, in the case of profiling using personal information, it is necessary for the telecommunications carrier to specify the purpose of use to the extent that the person concerned can predict and assume what kind of processing is being done, while the rules are in place to ensure the opportunity to confirm the person concerned when conducting communication with instructions to transmit information stored in the terminal to the outside.

2. Data Protection

2.1 How has the domestic law been developed in your jurisdiction in the last year?

The Act on the Protection of Personal Information (APPI) is the main legislative instrument for data protection in Japan. The APPI was amended in 2020 and 2021. The Amendment, except for certain provisions, took effect on 1 April 2022. This Amendment is a follow-up to the Japanese government's policy to review the legal system every three years, as stipulated by the 2015 amendment to the Act, which came into full force on 30 May 2017. The Amendment makes reforms to the Act to strengthen the protection of the rights of principals who may be identified by personal information, as well as the supervisory and enforcement powers of the Personal Information Protection Commission of Japan (PPC). The Amendment also aims to promote the utilisation of data in society.

The effects of the Amendment are as follows:

  1. Reinforces the general obligations of personal information-handling business operators to properly handle personal information
    • Expressly stipulates the prohibitions on improper use of personal information.
    • Creates an obligation to report certain personal data leakages to the PPC and notify the affected principals of the same.
  2. Reinforces the principal's rights concerning retained personal data
    • Grants a principal the right to designate the method of disclosing retained personal data.
    • Creates a right to demand for the suspension of use of personal data when a leak has occurred or "there is a possibility for the principal's rights or just interests to be infringed".
    • Amends the definition of retained personal data.
    • Adds certain new items to the list of information that business operators must disclose concerning retained personal data.
  3. Reinforces the protection of principals' interests concerning third-party provision of personal data
    • Adds certain new items to the list of information that business operators must notify to the PPC upon the provision of personal data to third parties using the "opt-out" method (the "opt-out" method refers to a business operator's provision of a principal's personal data to a third party upon notification of certain information to the PPC and disclosure of the same, without obtaining the consent of the principal, and on the condition that the business operator will cease such provision upon a request by the principal).
    • Prohibits business operators from providing (i) improperly acquired personal data to third parties using the opt-out method, or (ii) personal data that has already been provided by the opt-out method to third parties via the opt-out method again.
    • Creates an obligation for business operators to provide certain information on foreign systems for personal information protection to the principal when providing personal data to a third party located in a foreign country.
    • Creates an obligation for business operators to confirm and record certain matters when providing information that is expected to become personal data only when received by the recipient.
    • Creates the principal's right to demand disclosure of records concerning the provision of personal data to third parties.
    • Adds certain items to the list of information that business operators must disclose upon joint use ("joint use" means sharing and jointly using personal data with third parties upon disclosure or notification to the principal, without obtaining the consent of the principal).
  4. Introduces a new concept of "pseudonymously processed information" and adds related provisions
    • Adds a new definition of "pseudonymously processed information", which means information that is processed in a way that prevents an individual from being identified unless the information is collated with other information. In connection with this, the Amendment also stipulates the obligations of business operators that handle such information and exempts them from the obligation to respond to requests for disclosure or suspension of use, etc., by the principal even if such information falls under the definition of personal data.
  5. Expands the scope of extraterritorial application
    • To date, the provisions in the Act subject to extraterritorial application were limited only to certain provisions. The Amendment expands the scope of the extraterritorial application to all the provisions in the Amended Act. The situations and business operators that are subject to the extraterritorial application will also be expanded to broadly cover situations where business operators handle information relating to an individual in connection with the provision of goods or services to persons located in Japan.
  6. Strengthens the PPC's enforcement power and criminal penalties
    • Authorises the PPC to disclose the name of business operators that have breached an order made by the PPC. Furthermore, the maximum fine that may be imposed on a legal entity for a breach of a PPC order or the provision or theft of a personal information database, etc., for the purpose of gaining an illicit profit will be raised to JPY 100 million. The maximum limit for some other criminal punishments will also be raised.
  7. Others
    • Amends certain provisions concerning accredited personal information protection organisations, and introduces provisions concerning responses by the PPC to demands for reports, recommendations, or orders.

2.2 What privacy challenges are organisations facing when it comes to fintech, retail, AI and digital health?


The Japanese Financial Services Agency (JFSA), the authority governing the financial industry, issued APPI guidelines specifically for the financial industry. The guidelines contain especially strict regulations. For example, if a financial institution notifies a data subject of the purpose of personal data utilisation, such notification should be in writing. This regulation might be an obstacle to fintech businesses in the e-commerce context.


The Amendment to the APPI will establish new regulation on collecting and utilising identifier information such as cookies, and information exchanged on Data Management Platforms (DMPs) (platforms for the collection and analysis of user data on the internet) that contain identifier information. The Amendment would greatly affect the online marketing and advertisement business in the retail sector.

Artificial intelligence (AI)

If a business operator handling personal data intends to change the purpose of personal data utilisation, the operator must obtain prior consent from the relevant data subject. The purpose of utilisation in the AI business often changes because AI technology enables unexpected uses of personal data. In the e-commerce context, obtaining prior consent from existing customers and users requires extensive costs and time, which may be unrealistic from the commercial viewpoint of an AI business.

Digital health

Healthcare-related personal data is subject to special protection as sensitive data under the APPI. The special protection prohibits entities from obtaining sensitive data without a data subject's prior consent. Additionally, there are some security guidelines for healthcare-related personal data in Japan, and the requirements specified by these guidelines might be an obstacle to digital healthcare businesses in Japan.

2.3 What support are the government and privacy regulators providing to organisations to facilitate the testing and development of fintech, retail, AI and digital health?

Fintech / Retail / AI

The Diet of Japan enacted a bill in 2020 to create "super cities" where AI, big data and other technologies are utilised to resolve social problems. The revision stipulates procedures to change regulations in various fields at a stroke to create such smart cities. In such cities, data-linking platforms to collect and organise various kinds of data from administrative organisations and companies in a cross-sectoral way will be established for autonomous driving, cashless payments, telemedicine and other services to be introduced. Thirty-one municipalities submitted applications to be selected as "super cities", which will be reviewed by the government.

Digital health

The Next-Generation Medical Infrastructure Act (Jisedai-iryo-kiban-ho) was enacted in 2017 and has been in effect since 2019. The Act clarified that de-identified clinical records could be used for research, insofar as that data is collected and processed by a government-approved database manager and processor. Only two groups (each consisting of one manager and one processor) have so far been approved under the Act.

3. Cybersecurity Framework

3.1 Please provide details of any cybersecurity frameworks applicable to e-commerce businesses.

The Basic Act on Cybersecurity, enacted in November 2014, while not specific to e-commerce businesses, provides a basic legal framework for cybersecurity. Among other things, this Act provides a basic framework on the responsibilities and policies of national and local governments for the enhancement of cybersecurity. Furthermore, the Act requires critical information infrastructure operators (e.g., financial institutions, railroad operators, airlines and other transportation operators, as well as utility providers) and network operators (e.g., telecommunications network operators) to enhance cybersecurity on a voluntary and proactive basis, and to cooperate with national and local governments in taking measures for the enhancement of cybersecurity.

3.2 Please provide details of other cybersecurity legislation in your jurisdiction. If there is any, how is that enforced?

With regard to industries that support social infrastructure, the Cybersecurity Action Plan for Critical Infrastructure has been formulated on a regular basis in accordance with Article 14 of the Basic Act on Cybersecurity (Promotion of Ensuring Cybersecurity by CII Operators, etc.) to ensure that cyber attacks are not neglected, and government agencies and relevant infrastructure operators have been preparing for cyber attacks based on this. The New Cybersecurity Strategy announced in September 2021 clearly stated that China, Russia, and North Korea are suspected of having national involvement in cyber attacks against Japan, and emphasised that securing "free, fair and secure cyberspace" on a global scale, which is exactly what Japan should aim for, is in a critical situation.

In light of this critical situation, in February 2022, the Advisory Panel on Economic Security Legislation (Advisory Panel) released its "Recommendations on Economic security Legislation". In response to this trend, the Economic Security Promotion Act, which was enacted on 11 May 2022, introduced a system in which the government conducts a preliminary review when an infrastructure company introduces important equipment (including systems) (the system is scheduled to be applied by February 2024).

4. Cultural Norms

4.1 What are consumers' attitudes towards e-commerce in your jurisdiction? Do consumers embrace e-commerce and new technologies or does a more cash-friendly consumer attitude still prevail?

In Japan, e-commerce service providers such as Rakuten, Yahoo! and Amazon began to take off in the late 1990s as a result of wider use of the internet. E-commerce services initially took the form of B2C transactions. With the proliferation of smartphones and social network services (SNS), however, various e-commerce sites were gradually established, including those offering C2C-type services, such as Mercari, a marketplace that enables the sale and purchase of used goods between individuals, and provides experiential services. Although the use of e-commerce services is common in Japan, cash is still the most common method of settlement for the purchase of goods and services in physical stores. Despite that, and as described under question 4.2 below, cashless settlement is rapidly gaining prevalence in Japan as a result of government-introduced measures.

4.2 Do any particular payment methods offer any cultural challenges within your jurisdiction? For example, is there a debit card culture, a direct debit culture, a cash on delivery-type culture?

Cash is still the most common medium of exchange in Japan. According to a report titled "Report on the Future of Cashless Payment" issued by the METI on 20 March 2023, the ratio of cashless payment is 32.5%. The most popular methods of payment after cash are credit cards and prepaid instruments followed by QR code payment services. Debit cards are much less popular in Japan.

It is noteworthy that, since 2018, an increasing number of companies have entered or expanded their businesses into the mobile payment market. For example, many companies launched QR code payment services (such as PayPay, Line Pay and the like) between 2018 and 2019. It is reported that the number of users of PayPay exceeded 55 million people (which is nearly half the population in Japan) in February 2023.

According to the METI's report, the Japanese government's cashless payment target is 40% by the end of 2025 and 80% in the future.

4.3 Do home state retailer websites/e-commerce platforms perform better in other jurisdictions? If so, why?

In our view, the answer is unfortunately "no".

4.4 Do e-commerce firms in your jurisdiction overcome language barriers to successfully sell products/services in other jurisdictions? If so, how and which markets do they typically target and what languages do e-commerce platforms support?

According to a survey published by the Japan External Trade Organization (JETRO) in February 2023, 35.5% of respondents use e-commerce, of which 65.6% use it for overseas sales. The largest destination of these outbound sales is China and, aside from the United States, most sales are to other Asian countries. Accordingly, language does not appear to be a major barrier.

With that said, a negligible number of Japanese e-commerce platform operators have achieved significant success overseas.

4.5 Are there any particular web-interface design concepts that impact on consumers' interactivity? For example, presentation style, imagery, logos, currencies supported, icons, graphical components, colours, language, flags, sounds, metaphors, etc.

Japanese consumers seem to prefer web interfaces that are both user friendly and aesthetically pleasing.

4.6 Has the COVID-19 pandemic had any lasting impact on these cultural norms?

Digital payments are becoming more popular in Japan, with more people avoiding physical cash amid the COVID-19 pandemic.

5. Brand Enforcement Online

5.1 What is the process for online brand enforcement in your jurisdiction?

Online piracy

Typically, enforcement would begin by obtaining the postal address of an online brand infringer and sending a cease-and-desist letter requesting that the infringer cease its infringement and pay damages caused by the infringement. If the infringer does not cease its infringement, the next step would be to file an action in court. Civil remedies designed for IP do not include search orders and freezing injunctions.

Although an injunction that prevents the infringer from using the IP is possible, freezing injunctions as to the infringer's assets are not provided in relation to IP infringement. Provisional attachment under the Civil Preservation Act and attachment under the Civil Execution Act are available for monetary claims, including a claim for compensation of damages based on IP infringement, both of which may be similar to freezing injunctions.

Furthermore, many infringers hide their real name and postal address in an effort to avoid receiving a cease-and-desist letter from an IP rights owner or a court. In that case, it would be necessary to obtain the infringer's name and postal address from an internet service provider. The process to obtain that information may take from a few weeks to several months.

Domain names

The owner of a trademark may challenge a registered "pirate" domain name. However, the owner will often seek dispute resolution through the Japan Intellectual Property Arbitration Center (JIPAC), certified by the Japan Network Information Center (JPNIC), regarding .jp domain names under the JP-Dispute Resolution Policy (JP-DRP). In these dispute resolution proceedings, the owner of the trademark may demand cancellation of the registered domain name or transfer of the domain name to the owner.

5.2 Are there any restrictions that have an impact on online brand enforcement in your jurisdiction?

There are no specific restrictions that have an impact on online brand enforcement.

6. Data Centres and Cloud Location

6.1 What are the legal considerations and risks in your jurisdiction when contracting with third party-owned data centres or cloud providers?

Generally, there are no legal considerations or risks when contracting with third party-owned data centres or cloud providers. As to security considerations, the METI published the Information Security Management Guidelines for the Use of Cloud Services. The guidelines include access control, back-up, and employee management issues.

Hospitals and clinics in Japan are required to store patients' data on a cloud server that is subject to Japanese laws, such as business continuity plan (BCP) measures.

6.2 Are there any requirements in your jurisdiction for servers/data centres to be located in that jurisdiction?

Generally, there are no requirements for servers/data centres to be located in Japan.

This is the case even in the area of financial services, where regulations tend to be more stringent than for other industries. Moreover, financial institutions are not prohibited from using cloud services. As stated in question 3.2 above, however, financial institutions are required to meet the standards stipulated in laws and guidelines relating to cybersecurity, including the Center for Financial Industry Information Systems (FISC) Guidelines.

Please note that concerns about the risk associated with storing personal information in servers/data centres located in certain other countries have been growing recently among Japanese citizens.

7. Trade and Customs

7.1 What, if any, are the technologies being adopted by private enterprises and government border agencies to digitalise international (cross-border) trade in your jurisdiction?

No specific technology has been adopted by private enterprises or government border agencies to digitalise international trade.

7.2 What do you consider are the significant barriers to successful adoption of digital technologies for trade facilitation and how might these be addressed going forward?

We believe the main barrier is the insufficient use of digital technologies by smaller companies in Japan, with the solution being the offering of tax incentives to these companies to adopt digital technologies in their businesses.

8. Tax Treatment for Digital Businesses

8.1 Please give a brief description of any tax incentives of particular relevance to digital businesses in your jurisdiction. These could include investment reliefs, research and development credits and/or beneficial tax rules relating to intellectual property.

There used to be no specific tax breaks available for digital businesses. However, the 2021 tax reform bills, which were passed by the Diet on 26 March 2021, include digital transformation investment tax incentives.

Specifically, digital transformation-related investments based on a business plan, certified under the revised Industrial Competitiveness Enhancement Act, made by 31 March 2023 will either be eligible for a 3–5% tax credit or for 30% special depreciation. The total value of investments eligible for this relief is up to JPY 30 billion. The deadline of this incentive has been extended to 31 March 2025.

8.2 What areas or points of tax law do you think are most likely to lead to disputes between digital businesses and the tax authorities, either domestically or cross-border?

Following tax reforms in 2015, certain transactions in which services are received by business operators and consumers located in Japan from foreign business operators will be deemed domestic transactions and accordingly subject to Japanese consumption tax.

A brief outline of the 2015 tax reforms is as follows:

  1. a destination principle was adopted for "provision of telecommunications services" in respect of the place-of-supply criteria applicable to provision of cross-border services;
  2. foreign business operators "providing consumer telecommunications services" are required to register with the relevant tax office in advance;
  3. domestic business operators who are recipients of the "provision of telecommunications services for businesses" from a foreign business operator are required to file a tax return (i.e., a reverse charge mechanism). However, the term "provision of telecommunications services for businesses" refers to services where recipients thereof are limited to ordinary business operators based on the nature of the services or the terms and conditions of the transactions. Simply put, this reverse charge mechanism is only applicable to certain B2B transactions; and
  4. business operators with a taxable sales ratio of 95% or more that engage in transactions that are otherwise subject to reverse charges will be exempt from reverse charges on such transactions for the time being.

Disputes may arise in respect of the 2015 tax reforms if the exemptions thereunder are lifted in the future. At present, however, no major dispute has arisen in respect of the 2015 tax reforms.

9. Employment Law Implications for an Agile Workforce

9.1 What legal and practical considerations should businesses take into account when deciding on the best way of resourcing work in your jurisdiction? In particular, please describe the advantages and disadvantages of the available employment status models.

The main methods of retaining human resources for an enterprise are employment (whether permanent, fixed-term or otherwise) and outsourcing (on a contractual basis).

The advantages and disadvantages of employment for companies are as set forth below:


  • The company, as an employer, essentially has the right to instruct an employee on the method, content, place and other matters pertaining to the employee's work.
  • Employees are obligated to devote themselves to their work.


  • It is difficult to terminate an employment agreement even if the employee does not prove to be a good fit for the company. In Japan, as compared to the United States. or Europe, the thresholds beyond which employment contracts may be deemed justifiably terminated are very high, rendering it considerably difficult for a company to dismiss its employees.

The advantages and disadvantages of outsourcing for companies are as set forth below:


  • It is easier to terminate an outsourcing contract, relative to the termination of an employment contract.
  • No labour management is necessary under an outsourcing contract.
  • Companies are not required to procure employment insurance, social insurance, and the like for the relevant personnel who perform work under an outsourcing contract.


  • It is difficult for a company to procure the commitment of an outsourcee unless such commitment is required under the terms of the relevant outsourcing contract.
  • Outsourcing contracts can be easily terminated.

9.2 Are there any specific regulations in place in your jurisdiction relating to carrying out work away from an organisation's physical premises?

There are no specific regulations in Japan on telecommuting. Such arrangements are essentially governed by the internal rules of individual companies.

In recent years, the Japanese government has been promoting a "work style" reform. As a result, telecommuting has come under the spotlight and efforts have been made to promote remote work arrangements.

9.3 What long-term effects or changes are likely to result from the COVID-19 pandemic?

"Working from home" is becoming the norm for tech companies during the pandemic, depending on the company and type of job. In general, working styles are likely to become more flexible than before.

10. Top 'Flags' for Doing Business as a Digital Business in Different Jurisdictions

10.1 What are the key legal barriers faced by a digital business operating in your jurisdiction?

Although not specific to digital businesses, certain regulations in Japan may affect foreign investments in Japanese tech companies. A brief outline of these regulations is set forth below:

  1. the Foreign Exchange and Foreign Trade Act (FEFTA) requires prior notification of inward direct investments by foreign investors in certain industries to be given to the regulators (the Prior Notification Requirement);
  2. the list of industries subject to the Prior Notification Requirement (Restricted Industries) was expanded on 27 May 2019 for the purpose of enhancing cybersecurity. The new industries added under the expanded list can be broadly categorised into (i) manufacturers of information processing equipment and parts, (ii) manufacturers of information processing software, and (iii) information service providers; and
  3. the list of Restricted Industries could be broadly interpreted to include a wide range of start-ups, including tech companies.

Additionally, enactment of regulations applicable to digital platform operators is forthcoming. Specifically:

  1. on 18 February 2020, a "bill to improve transparency and fairness of certain digital platforms" was approved by the Cabinet; and
  2. to improve the transparency and fairness of transactions on digital platforms, the bill, when enacted, will require digital platform operators designated by a separate Cabinet Order to take the following measures:
    1. disclose information on the terms and conditions for usage of the digital platform;
    2. develop systems and procedures necessary to ensure fair provision of the digital platform; and
    3. report the operational status of the digital platform (in response to which the Minister of Economy, Trade and Industry will evaluate and publicise the operational status of the digital platform).

10.2 Are there any notable advantages for a digital business operating in your jurisdiction?

There are no notable advantages for a digital business operating in Japan.

10.3 What are the key areas of focus by the regulator in your territory in respect of those operating digital business in your territory?

The FSA focuses on regulating cryptocurrencies and online payment services in the financial industry and the PPC focuses on regulating human resources, healthcare and telecommunication business in the data protection area.

11. Online Payments

11.1 What regulations, if any, apply to the online payment sector in your jurisdiction?

We have assumed for the purposes of this response that online payments include prepaid payment instruments and money transfers. Based on this assumption, the Banking Act or the Payment Services Act (PSA) will be applicable to online payments in Japan.

Money transfer services are regulated under the Banking Act and other legislation applicable to other depository institutions, which require those who wish to provide such services to obtain the requisite licence from the JFSA. An exception to this is that money transfer services be provided if a firm undergoes license or registration as a funds transfer service provider (FTSP) under the PSA. The revised PSA came into force on 1 May 2021. The revised PSA classifies funds transfer services (FTS) into the following: (1) FTS involving remittances exceeding JPY 1 million per transaction ("Category 1 FTS"); (2) FTS involving remittances up to JPY 1 million per transaction ("Category 2 FTS"); and (3) FTS involving remittances up to JPY 50,000 per transaction ("Category 3 FTS"). A provider of Category 1 FTS ("Category 1 FTSP") must be authorised to operate by the JFSA and comply with the stricter code of conduct than a provider of Category 2 FTS ("Category 2 FTSP"), while a provider of Category 3 FTS ("Category 3 FTSP") may operate if registered with the JFSA and is subject to a more relaxed code of conduct than a Category 2 FTSP.

An issuer of prepaid payment instruments is required to comply with applicable rules under the PSA. Where a prepaid payment instrument is only usable for payments to the issuer for its goods or services, such issuer will not be required under the PSA to undergo any registration, although they would still have to comply with certain notice requirements. Specifically, if the amount of unused value in prepaid payment instruments that are only usable to pay for the issuer's goods and services exceeds JPY 10 million as at the relevant base date (being the end of March and September of each year), the issuer of such prepaid payment instruments will be required to submit a written notice to the JFSA under the PSA. On the other hand, issuers of prepaid payment instruments that are usable not only for payments to the issuer for its goods or services but also for payments to other parties designated by the issuer (third-party businesses) will be required to undergo registration as an "issuer of prepaid payment instruments" under the PSA.

11.2 What are the key legal issues for online payment providers in your jurisdiction to consider?

FTSPs are subject to a code of conduct. Such code of conduct requires an FTSP to, among others, make security deposits of an amount equivalent to the services provided, to the official depository nearest to the service provider's business office, take measures for customer protection, properly manage information security, and conclude contracts with designated dispute resolution organisations. FTSPs are also subject to KYC requirements under the Act on Prevention of Transfer of Criminal Proceeds, which is the primary Japanese AML law.

On the other hand, those who have submitted a written notice to issue prepaid payment instruments for their own business and those who are registered to provide prepaid payment instruments usable for payments to third-party businesses are subject to a code of conduct in respect of prepaid payment instruments. Such code of conduct requires issuers of prepaid payment instruments to, among others, provide information on themselves and the prepaid payment instruments they issue, make security deposits of at least 50% of the total amount of the issued – but yet-to-be-used prepaid payment instruments – to the official depository nearest to the issuer's business office, refrain from making refunds to holders of the prepaid payment instruments they have issued, implement complaint processing measures and manage information security.

12. Digital and the Green Economy

12.1 With the current global emphasis on the environment and sustainability, is there any current or anticipated legislation in that area that is likely to impact digital business in your jurisdiction?

The Japanese government and the business sector believe that the digital transformation (DX) should promote Sustainable Development Goals (SDGs) and advocate for the concept of "Society 5.0" as a connection between the two. Japan is aiming to achieve "Society 5.0", a human-centred society where high integration of cyberspace and physical space can promote economic development and solve societal issues. In July 2021, the METI released a report titled "GOVERNANCE INNOVATION Ver. 2: A Guide to Designing and Implementing Agile Governance", in which it explains that implementing "Agile Governance" will be necessary for achieving "Society 5.0". For example, the report proposes sharing medical data among hospitals and clinics for the purpose of making medical treatment more effective. The 2021 amendment to the APPI clarifies some data protection issues in the healthcare sector, aiding the realisation of "Society 5.0".

12.2 Are there any incentives for digital businesses to become 'greener'?

National and local Japanese governments have established new legislation covering tax incentives and government subsidies for the business sector, promoting SDGs. For example, the METI has set energy-saving goals aimed at the data centre sector, in which data centre businesses must meet SDG targets in order to receive government subsidies.

12.3 What do you see as the environmental and sustainability challenges facing digital businesses?

The cryptocurrency sector is sometimes criticised due to the fact that the mining of cryptocurrency consumes excessive electrical power, which is disadvantageous to SDGs. On the other hand, because of the distributed nature of blockchains, no central authority "owns" the information, which lessens the risk that a master copy could be lost to hacking or a disaster. This makes blockchains not only a truly independent archive of records – a virtual ledger – but also one of the safest and most trustworthy data transportation systems available today. These characteristics promote SDGs in various situations such as improving the effectiveness of aid by the United Nations Development Programme.

Originally published by ICLG.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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