Japanese Attorney at Law - Bengoshi L.L.

Qualified attorney (Japan & NY), CIPP/E & CIPP/US, MCIArb, CFE — guiding Japanese corporate law & compliance.

Defining "Retirement" for Tax Purposes: The Japanese Supreme Court's 10-Year Retirement Allowance Case

Case: Supreme Court, Third Petty Bench, Judgment of December 6, 1983 (Showa 54 (Gyo-Tsu) No. 35: Action for Rescission of Withholding Tax Payment Obligation Notice, etc.) – Commonly known as the "10-Year Retirement Allowance Case" Introduction On December 6, 1983, the Third Petty Bench of the Supreme Court of

Taxing Stock Option Gains in Japan: Employment Income or Temporary Windfall? A Supreme Court Ruling

Case: Supreme Court, Third Petty Bench, Judgment of January 25, 2005 (Heisei 16 (Gyo-Hi) No. 141: Action for Rescission of Income Tax Reassessment Disposition, etc.) Introduction On January 25, 2005, the Third Petty Bench of the Supreme Court of Japan delivered a significant judgment clarifying the income tax treatment of

Business Income vs. Employment Income: A Japanese Supreme Court's Guiding Principles for Professionals

Case: Supreme Court, Second Petty Bench, Judgment of April 24, 1981 (Showa 52 (Gyo-Tsu) No. 12: Action for Rescission of Income Tax Reassessment Disposition) Introduction On April 24, 1981, the Second Petty Bench of the Supreme Court of Japan delivered a seminal judgment clarifying the distinction between "business income&

Untangling Double Taxation: The Japanese Supreme Court on Life Insurance Annuities and Non-Taxable Income

Case: Supreme Court, Third Petty Bench, Judgment of July 6, 2010 (Heisei 20 (Gyo-Hi) No. 16: Action for Rescission of Income Tax Reassessment Disposition) – Commonly known as the "Life Insurance Annuity Double Taxation Case" Introduction On July 6, 2010, the Third Petty Bench of the Supreme Court of

Taxing the Uncollectible? The Japanese Supreme Court on Interest Exceeding Legal Limits

Case: Supreme Court, Third Petty Bench, Judgment of November 9, 1971 (Showa 43 (Gyo-Tsu) No. 25: Action for Rescission of Administrative Review Decision and Income Tax Reassessment Decision, etc.) Introduction On November 9, 1971, the Third Petty Bench of the Supreme Court of Japan delivered a significant judgment concerning the

Beyond the Law Books: Practical Challenges and Strategies in Japanese Debt Recovery

Successfully recovering debt in any jurisdiction is rarely a matter of simply applying black-letter law. It's an endeavor that blends legal knowledge with strategic thinking, procedural acumen, negotiation skills, and an understanding of the broader commercial and ethical landscape. In Japan, this nuanced approach is particularly crucial. Effective

Japan's Unique Approach to Floating Liens on Business Assets: What Does 'Koteika' (Fixation) Mean for Creditors?

For businesses, assets like inventory and accounts receivable are constantly in flux – goods are bought and sold, services are rendered, and payments are collected. For lenders, taking effective security over such dynamic pools of assets is crucial, yet challenging. While Japan doesn't have a statutory "floating lien&

The Role of 'Good Faith' and 'Abuse of Rights' in Japanese Debt Collection and Enforcement

In the intricate landscape of Japanese debt collection and enforcement, the explicit terms of contracts and statutes are not the sole determinants of legal outcomes. Two fundamental principles, deeply embedded in the Japanese Civil Code (specifically Article 1, paragraphs 2 and 3), often play a crucial, if sometimes less predictable,

Perfection and Priority of Security Interests in Japan: A Guide for Foreign Creditors

When extending credit or making investments in Japan, securing your position with collateral is a prudent step. However, merely having a security agreement in place is often not enough. To ensure that your security interest is enforceable against third parties—such as other creditors, subsequent purchasers, or an insolvency trustee

The 'Shadow of the Law' in Japanese Debt Negotiations: How Do Legal Rules Shape Out-of-Court Settlements?

In Japan, as in most sophisticated legal systems, a significant number of debt disputes, restructurings, and workouts are resolved not through formal court proceedings but via out-of-court negotiations and settlements. However, these private negotiations do not occur in a legal vacuum. Instead, they are profoundly influenced by the existing legal

Private Workouts vs. Formal Insolvency in Japan: Key Differences for Creditors

When a business counterparty in Japan encounters financial distress, creditors are faced with a critical decision: should they engage in an out-of-court restructuring, commonly known as a "private workout" (私的整理 - shiteki seiri), or push for, or participate in, formal court-supervised insolvency proceedings (法的整理 - hōteki seiri)? Each

Japanese Debt Collection: How Do Procedural Stages Transform Substantive Rights?

In the world of debt collection, creditors often operate under the assumption that their substantive rights—the right to payment, the validity of a security interest, or the terms of a contract—are fixed and that legal procedures are merely the tools to enforce these pre-existing rights. However, the Japanese

Understanding 'Collective Order of Debt Collection' in Japan: How Does It Impact Creditor Strategies?

When a debtor faces financial distress and multiple creditors are vying for recovery, the situation is rarely a simple one-on-one contest. Instead, a complex web of inter-creditor relationships emerges. Japanese legal thinking, particularly in the realm of debt recovery and insolvency, employs the concept of a "Collective Order of

Special Clauses in Japanese Guarantee Agreements: What Should I Look Out For?

Guarantee agreements are a cornerstone of lending and commercial transactions in Japan, providing creditors with an additional layer of security. While the Japanese Civil Code sets out default rules governing guarantees, it is common practice for these agreements to contain "special clauses" (特約 - tokuyaku) that significantly modify

The Principal Debtor in Japan Was Discharged in Bankruptcy. Is My Guarantor Still Liable?

When a business or individual guarantees a debt, they provide the creditor with an alternative source of repayment should the principal debtor default. But what happens if the principal debtor goes through formal insolvency proceedings in Japan and receives a discharge of their debts? Does this "fresh start"

My Japanese Guarantor Paid the Debt. What Rights Do They Have Against the Principal Debtor (and Me)?

When a guarantor steps in to fulfill a principal debtor's obligation to a creditor, a new set of legal relationships and rights comes into play. The guarantor, having shouldered the debt, naturally seeks recourse. Under Japanese law, a paying guarantor is primarily equipped with two significant rights: a

Voluntary Sale of Mortgaged Real Estate in Japan: How Does It Work and When Is It Preferable to Foreclosure?

When a borrower defaults on a mortgage, the traditional path to recovery for the lender is often a court-supervised foreclosure auction. However, foreclosure can be a lengthy, costly, and sometimes value-diminishing process. In Japan, as in many other jurisdictions, a "voluntary sale" (任意売却 - nin'i baikyaku)

My Japanese Debtor Leased Out Mortgaged Property. Can I Claim the Rent?

When a debtor defaults on a loan secured by a mortgage over leased real property, the lender (mortgagee) naturally looks to all available sources of recovery. Beyond the eventual sale of the property itself, the rental income stream it generates can be a significant asset. In Japan, mortgagees have established

Enforcing My Mortgage in Japan But Someone's Occupying the Property. How Do I Handle It?

Successfully enforcing a mortgage on real property can be a complex undertaking in any jurisdiction. In Japan, one of the significant hurdles a mortgagee might encounter is dealing with individuals or entities occupying the mortgaged property. These occupants could range from the debtor themselves, legitimate tenants, to those whose presence

I Sold Goods on Credit in Japan and My Buyer is Insolvent. What Are My Purchase Money Security Interest (PMSI) Rights?

Selling goods on credit is a fundamental aspect of commerce, but it carries the inherent risk of the buyer defaulting on payment, especially if the buyer subsequently becomes insolvent. In Japan, sellers who provide goods on credit have access to certain legal mechanisms to secure the unpaid purchase price, akin

Taking Security Over Fluctuating Inventory in Japan: How Does It Work and What are the Risks?

For businesses involved in manufacturing, retail, or distribution, inventory represents a significant portion of their assets. Consequently, for lenders, this same inventory can be a vital source of collateral. However, inventory is by nature dynamic—constantly being acquired, processed, and sold. Taking effective security over such a fluctuating pool of

Offsetting Debts in Japan: When Can I Use Set-Off Against a Financially Distressed Counterparty?

The right of set-off (相殺 - sōsai), allowing parties who owe each other mutual debts to cancel them out to the extent of the smaller debt, is a commercially intuitive and efficient mechanism. In Japan, as in many jurisdictions, it serves not only as a straightforward method of settling accounts

Securing My Claim in Japan: How Effective is Assigning My Debtor's Future Receivables?

In modern commerce, a company's accounts receivable – the money owed to it by its customers – are often one of its most significant assets. For creditors, tapping into this stream of current and future income can be a crucial way to secure loans or other obligations. Japanese law provides

My Debtor in Japan Transferred Assets to Avoid Paying Me. What Are My Legal Options?

It's a creditor's nightmare: you're owed a significant sum, and you discover your debtor has suspiciously transferred assets, seemingly to put them beyond your reach. This scenario is not uncommon, and Japanese law provides a specific, powerful remedy for creditors facing such situations: the

My Japanese Debtor Isn't Paying, But Their Customer Owes Them Money. Can I Collect Directly?

As a creditor, one of the most frustrating situations is when your debtor defaults on their obligations, especially if you know the debtor is owed money by a third party. You might wonder if there's a way to bypass your debtor and collect directly from their customer or