Japan is undergoing a significant digital transformation (DX), driven by governmental initiatives aimed at enhancing economic competitiveness, improving administrative efficiency, and creating a more convenient society for citizens and businesses alike. Recognizing that outdated regulations and analog administrative practices were hindering progress, particularly highlighted during the COVID-19 pandemic, the Japanese government established the Digital Agency in September 2021 to act as a central command tower for digital reform. A crucial component of this transformation involves overhauling the legal framework to support and accelerate digitalization across various sectors. This article explores key legislative developments, focusing on the Digital Regulatory Reform Promotion Act and revisions to the My Number Act, and their implications for businesses operating in Japan.

The Digital Agency: Spearheading Reform

Established under the Basic Act on the Formation of a Digital Society (Act No. 35 of 2021), the Digital Agency (デジタル庁 - Dejitaru-chō) plays a pivotal role in Japan's DX strategy. Its mission is to promote a "digital society where no one is left behind" by driving digital reforms across government administration and society. The agency is responsible for formulating and implementing key digital policies, overseeing the development of critical government information systems (including the My Number system), promoting data utilization, and ensuring cybersecurity. It acts as a central coordinating body, breaking down silos between ministries and agencies to push forward digital initiatives comprehensively and rapidly.

One of the core pillars of the government's strategy, guided by the Digital Agency, is the "Priority Plan for the Realization of a Digital Society," which is updated periodically (the latest revision being June 9, 2023). This plan outlines concrete measures and targets for digitalization, emphasizing user-centric public services, data utilization for growth, and resilient digital infrastructure. Legal reforms are essential tools for achieving these goals.

The Digital Regulatory Reform Promotion Act (2023)

Enacted in June 2023 (Act No. 63 of 2023), the Act for Promoting Regulatory Reform to Realize a Digital Society (デジタル社会の形成を図るための規制改革を推進するためのデジタル社会形成基本法等の一部を改正する法律 - Dejitaru Shakai no Keisei o Hakaru tame no Kisei Kaikaku o Suishin suru tame no Dejitaru Shakai Keisei Kihon-hō tō no Ichibu o Kaisei suru Hōritsu), often referred to as the Digital Regulatory Reform Promotion Act, is a landmark piece of omnibus legislation amending numerous laws to eliminate "analog regulations."

This Act is based on the "Plan for Comprehensive Review of Regulations in Light of the Digital Principles," adopted in June 2022. This plan identified various types of regulations hindering digitalization, such as requirements for visual checks, on-site inspections, periodic checks, permanent staffing, face-to-face training, physical document posting, and in-person document viewing.

The Act aims to establish a framework for the continuous review and modernization of regulations in line with technological advancements. Its key components include:

1. Establishing Digital Regulatory Reform as National Policy: The Act amends the Basic Act on the Formation of a Digital Society to explicitly state that policies must ensure the effective utilization of information and communication technology (ICT) is not hindered by regulations. It mandates necessary measures to improve public convenience and administrative efficiency through ICT, promoting a self-sustaining cycle of regulatory review.
2. Promoting Effective Use of Digital Technology: It amends the Act on the Promotion of Administrative Affairs Utilizing ICT (Digital Procedure Act) to include provisions requiring the government to take necessary measures for the effective use of ICT in administrative and business processes. This includes the publication and utilization of "Technology Maps" and "Technology Catalogs," which detail how specific digital technologies can replace or streamline existing analog regulatory requirements. These maps aim to guide ministries in proactively considering digital solutions when drafting or revising regulations.
3. The "Digital Legal Framework" (デジタル法制局 - Dejitaru Hōseikyoku) Process: While not creating a physical new agency, the reform introduces a systematic process, sometimes referred to informally as the "Digital Legal Framework" function within the Digital Agency. This involves reviewing new bills and cabinet orders before they undergo formal legal review by the Cabinet Legislation Bureau to ensure they conform to "Digital Principles" (such as digital completion, automation, agile governance). This proactive check aims to prevent the creation of new analog regulations and ensure legislation is designed with digital implementation in mind from the outset.
4. Eliminating Specific Analog Regulations:
   • Mandatory Use of Recording Media: The Act expands the scope of the Digital Procedure Act to facilitate the replacement of procedures requiring submission via physical media (like floppy disks or CD-ROMs) with online submission methods.
   • Physical Document Posting (書面掲示 - Shomen Keiji): Numerous individual laws requiring businesses or administrative bodies to physically post notices (e.g., certifications, fees, business terms, public notices) at specific locations (like offices or storefronts) have been amended. The Act mandates that such information must also be made available for public inspection via the internet (e.g., through websites), significantly improving accessibility. While physical posting is often retained alongside digital means out of consideration for the digital divide, the emphasis shifts towards ensuring online availability.
   • Official Notifications via Posting (公示送達 - Kōji Sōtatsu): Procedures for official notification when a recipient's address is unknown (analogous to service by publication), which traditionally relied solely on physical posting at government offices, are modernized. The amended laws now generally require both making the information available online (via methods specified by ministerial ordinance) and either physical posting or making it viewable on a computer terminal at the relevant government office. This mirrors reforms in the Code of Civil Procedure and aims to enhance the effectiveness of public notices in the digital age.

The phased implementation of this Act (some parts effective immediately, others within one or three years) signifies a determined effort to systematically identify and remove regulatory bottlenecks hindering digital processes across the board.

Revisions to the My Number Act (2023)

Simultaneously, Japan revised the Act on the Use of Numbers to Identify Specific Individuals in Administrative Procedures (行政手続における特定の個人を識別するための番号の利用等に関する法律 - Gyōsei Tetsuzuki ni okeru Tokutei no Kojin o Shikibetsu suru tame no Bangō no Riyō tō ni kansuru Hōritsu), commonly known as the My Number Act, in June 2023 (Act No. 48 of 2023). The My Number system assigns a unique 12-digit individual number to all residents of Japan (including foreign residents) for administrative purposes.

Initially, the use of the My Number was strictly limited to three fields: Social Security, Taxation, and Disaster Response. The 2023 revisions significantly broaden its application and streamline related processes, aiming to enhance administrative efficiency and public convenience further. Key changes include:

1. Expansion of My Number Utilization Scope:
   • Broader Principle: The Act's basic principles (Article 3) were revised to explicitly state the aim of promoting My Number utilization not just in the original three fields but also in "other administrative affairs." This signals a fundamental policy shift towards wider use.
   • Specific New Affairs: The revisions specifically add new administrative tasks where My Number can now be used. These include procedures related to national qualifications (e.g., for barbers/beauticians, small vessel operators, architects), vehicle registration, and applications concerning residency status for foreign nationals. This aims to simplify procedures requiring identity verification across different administrative domains.
2. Streamlined Addition of New Use Cases:
   • "Quasi-Statutory Affairs" (準法定事務 - Jun Hōtei Jimu): A significant change allows the use of My Number for administrative tasks deemed "equivalent in nature" to those explicitly listed in the Act's annexes, provided this equivalence is defined by a competent ministerial ordinance. This potentially allows for faster expansion of My Number use for similar administrative tasks without requiring immediate legislative amendments for every new case, though it necessitates careful governance to define "equivalent."
   • Information Linkage (情報連携 - Jōhō Renkei) via Ordinance: For administrative affairs already legally permitted to use My Number, the Act now allows the necessary information linkage between government bodies to be enabled simply through ministerial ordinances, rather than requiring explicit mention in the law itself. This is intended to accelerate the process of enabling data sharing (using the secure Information Provision Network System, which does not use the My Number itself for linkage but rather derived codes) for legally permitted purposes. Records of such information linkage remain accessible to individuals via their "Mynaportal."
3. Integration of My Number Card and Health Insurance Card: The revisions pave the way for phasing out traditional health insurance cards (scheduled from December 2, 2024) and integrating their function into the My Number Card. Individuals will use their My Number Card for online eligibility verification (online shikaku kakunin) at medical institutions. Provisions are included for issuing temporary "Eligibility Confirmation Certificates" (資格確認書 - shikaku kakunin-sho) for those without a My Number Card or facing situations where online verification isn't possible, ensuring access to healthcare.
4. Addition of Phonetic Readings (Furigana) to Names: To address issues with name readings in administrative systems, the revisions mandate the addition of furigana (phonetic readings in kana) to names in official family registers (koseki) and resident records (jūminhyō), and subsequently on the My Number Card itself.
5. Streamlined Registration of Public Money Receiving Accounts: The process for linking bank accounts for receiving government benefits (kōkin uketori kōza) is simplified, particularly for existing benefit recipients like pensioners, potentially allowing registration based on informed consent obtained via mail or implied consent after a non-response period.

These changes collectively aim to make the My Number system and the associated My Number Card a more central piece of Japan's digital administrative infrastructure, extending its utility far beyond the original scope.

The Role of the Personal Information Protection Commission (PPC)

As the use of digital tools and data, particularly sensitive information linked via the My Number system, expands, the role of the Personal Information Protection Commission (PPC - 個人情報保護委員会 - Kojin Jōhō Hogo Iinkai) becomes increasingly critical. Established initially to oversee the My Number system and later expanded to cover the entire Act on the Protection of Personal Information (APPI) across both private and public sectors (following the 2021 APPI amendments unifying separate laws), the PPC acts as Japan's independent data protection authority.

The PPC is responsible for:

• Issuing guidelines and interpreting the APPI and My Number Act.
• Monitoring and supervising the handling of personal information and My Number data by businesses and government agencies.
• Conducting investigations and audits.
• Issuing guidance, recommendations, and administrative orders in case of violations.
• Cooperating with international data protection authorities (evidenced by its role in maintaining adequacy decisions with the EU and UK).

The digital reforms, especially the expansion of My Number utilization and information linkage, place greater emphasis on the PPC's oversight function. Ensuring that administrative efficiency gains do not come at the cost of individual privacy requires robust supervision and enforcement by the PPC. The government's Basic Policy on the Protection of Personal Information (revised April 2022) explicitly tasks the PPC with collaborating with administrative agencies, providing guidance on data governance, and strengthening its role as the "command tower" for personal information protection policy.

Implications for Businesses

These digital and legal reforms present both opportunities and compliance challenges for businesses, including foreign companies, operating in Japan:

• Streamlined Administrative Procedures: The move away from analog regulations, such as physical document submission/posting and towards online processes, should eventually reduce administrative burdens and costs. Businesses need to adapt to new digital platforms and procedures implemented by various government agencies.
• Expanded Use of My Number: While primarily impacting individuals and government administration, businesses dealing with employee data or specific regulated sectors (like those involving national qualifications) need to understand the contexts where My Number information might be legitimately requested or used in administrative filings made on behalf of employees or clients. Strict adherence to the My Number Act's limitations on collection and use remains paramount.
• Enhanced Data Protection Compliance: With the unification of data protection rules under the APPI and the PPC's strengthened oversight role, businesses must maintain high standards of personal data governance. The expansion of information linkage within the government also indirectly raises the stakes for data accuracy and security across the board.
• Navigating Regulatory Change: The principle of continuous regulatory review embedded in the Digital Regulatory Reform Promotion Act means businesses must stay informed about ongoing changes to regulations affecting their specific industry. The publication of Technology Maps may provide insights into future regulatory directions.
• Adapting Business Models: The broader push for DX encourages businesses to leverage digital technologies not just for compliance but also for innovation, potentially opening new service models or improving customer interactions facilitated by digital government infrastructure (like simplified identity verification using My Number Cards).

Conclusion

Japan's commitment to digital transformation is evident in these significant legal reforms. The Digital Regulatory Reform Promotion Act and the revisions to the My Number Act represent foundational steps towards creating a more efficient, convenient, and digitally integrated society and administration. By systematically dismantling analog regulations and expanding the utility of digital infrastructure like the My Number system, Japan aims to boost its economic vitality and improve public services. For businesses, adapting to this evolving digital and legal landscape requires proactive engagement with new procedures, a continued focus on robust data protection compliance under the PPC's watch, and an understanding of the government's long-term vision for a digitally empowered nation. The journey is ongoing, and further adjustments and reforms are likely as technology and societal needs continue to evolve.