Supermarket Development Regulations in Japan: Navigating the Large-Scale Retail Store Location Law

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

The development of large-scale retail stores, such as supermarkets, in Japan is primarily governed by the Large-Scale Retail Store Location Law (大規模小売店舗立地法 – Daikibo Kouri Tempo Ritchi Hō, hereinafter "LSRSL" or "the Act"). Enacted in 1998 (Law No. 91 of Heisei 10) and fully implemented in 2000, the LSRSL replaced the older Large-Scale Retail Store Act (commonly known as "Daiten Hō"). The Daiten Hō was characterized by direct governmental intervention aimed at adjusting supply and demand to protect existing small and medium-sized retailers. In contrast, the LSRSL shifted the regulatory focus towards preserving the living environment of the area surrounding a new large retail store.

Despite this shift, tensions can arise when developers' plans meet with local concerns, leading to complex interactions with prefectural authorities involving administrative guidance, official opinions, recommendations, and the unique enforcement mechanism of publicly announcing non-compliance. This article explores the legal landscape of these regulations and the avenues for challenging administrative actions under the LSRSL.

The LSRSL Notification and Review Process: A Procedural Overview

The LSRSL does not operate on a permit system (kyoka-sei – 許可制) where the government grants or denies permission to open a store based on economic need. Instead, it employs a notification system (todokede-sei – 届出制) coupled with a review process focused on environmental considerations.

Key procedural steps include:

  1. Operator's Initial Notification (Article 5): A business intending to establish a new large retail store (defined by store floor area) must first notify the prefectural governor of its plans, including details about the store's name, location, operator, opening date, total floor area, facility layout (parking, etc.), and operational methods (hours, delivery routes, etc.).
  2. Public Disclosure and Consultation: The prefecture gives public notice of the notification and makes the documents available for public inspection for four months (Article 5, Paragraph 3). During this period, the store operator must hold public briefing sessions for local residents (Article 7).
  3. Soliciting Opinions (Article 8): The prefectural governor must solicit opinions from the relevant municipality(ies) within four months regarding the preservation of the local living environment. Local residents, businesses, chambers of commerce, and other interested parties can also submit their opinions to the prefecture within this timeframe.
  4. Prefectural Governor's "Opinion" (Article 8, Paragraph 4): Within eight months of the initial notification, the governor, after considering the opinions received and national guidelines (指針 – shishin) issued by the Minister of Economy, Trade and Industry (METI) (Article 4), may state an "opinion" (意見 – iken) in writing to the store operator. This opinion addresses measures deemed necessary to preserve the living environment around the proposed store, covering aspects like traffic congestion, parking availability, noise pollution, waste management, etc. If the governor has no such opinion, they notify the operator accordingly.
  5. Operator's Response (Article 8, Paragraph 7): If an opinion is issued, the store operator must consider it and notify the prefecture whether they will modify their plans in response or maintain their original plans.
  6. Prefectural Governor's "Recommendation" (Article 9, Paragraph 1): If the operator's response is deemed insufficient to address the concerns raised in the opinion, and the governor finds it difficult to avoid a significant adverse impact on the local living environment, the governor may, within two months of the operator's response, issue a formal "recommendation" (勧告 – kankoku) urging the operator to take necessary measures.
  7. Public Announcement of Non-Compliance (Article 9, Paragraph 7): If the store operator fails to follow the recommendation without a justifiable reason, the governor may publicly announce this fact. This is the primary "enforcement" tool under the LSRSL for substantive environmental concerns.
  8. Waiting Periods: Developers must wait eight months after the initial notification before opening the new store (Article 5, Paragraph 4). If the governor issues an opinion, a further two-month waiting period applies after the operator responds to that opinion (Article 8, Paragraph 9). (Note: If the governor states they have no opinion, the initial eight-month waiting period under Art. 5(4) does not apply, as per Art. 8(5)).

Penalties under the LSRSL primarily relate to procedural failures, such as not filing a notification, filing a false notification (Article 17), or opening a store before the expiry of the statutory waiting periods (Article 18). There are no direct penalties for merely disagreeing with the content of an opinion or recommendation.

Challenge 1: Pre-Notification Administrative Guidance and Refusal to Accept Formal Notification

Sometimes, prefectural or local governments, perhaps guided by internal policies (yōkō – 要綱) that go beyond the LSRSL's direct scope (e.g., attempting to regulate store size or operating hours for economic reasons to protect local shopping districts – a remnant concern from the old Daiten Hō era), may engage in administrative guidance (gyōsei shidō – 行政指導) before an LSRSL notification is even filed.

Scenario: A prefecture, based on an internal guideline, demands that a prospective supermarket developer (Operator X) provide information at the conceptual stage and reduce its planned store size and operating hours to protect a downtown shopping district. Operator X provides some information but refuses to alter its plans, arguing these demands are outside the LSRSL's environmental focus and are akin to the old Daiten Hō's supply-demand adjustments. X then formally submits its LSRSL notification documents. The governor, citing X's refusal to comply with the prior administrative guidance, returns the notification documents (返戻 – henrei), effectively refusing to accept them.

Legality of Returning a Notification

Under Article 37 of Japan's Administrative Procedure Act (APA) (行政手続法 – Gyōsei Tetsuzuki Hō), a notification that meets the formal requirements prescribed by law (e.g., correct form, necessary attachments as required by the statute) is deemed legally effective and the procedural obligation fulfilled when it reaches the designated agency office. This implies that an agency generally cannot refuse to accept or "return" a formally compliant notification.

In this scenario, Operator X could argue that the governor's return of the notification is illegal because:

  1. The LSRSL notification documents themselves presumably met all statutory formal requirements.
  2. The administrative guidance X refused to follow was based on an internal yōkō and concerned matters (economic protection of existing retailers, store size/hour restrictions for non-environmental reasons) that are largely outside the primary scope of the LSRSL, which focuses on the "preservation of the living environment."
  3. Therefore, non-compliance with such extra-statutory or purpose-deviant guidance is not a valid reason to refuse acceptance of a formally proper LSRSL notification.

If a notification is improperly returned or not accepted:

  • Revocation Suit against "Non-Acceptance Disposition"? Characterizing the "return" or "non-acceptance" as an administrative disposition subject to a revocation suit is problematic. Under the APA's framework for notifications, "non-acceptance" of a formally compliant notification is not generally conceptualized as a disposition.
  • Public Law Declaratory Action (Party Litigation): A more appropriate avenue would be for Operator X to file a public law declaratory action (a type of party litigation under Article 4 of the Administrative Case Litigation Act - ACLA) seeking a court declaration that its notification duty under LSRSL Article 5 has been fulfilled and that the LSRSL review process should commence. To succeed, X would need to establish an "interest to sue for declaration" (kakunin no rieki – 確認の利益), which involves demonstrating a current legal dispute and the necessity of a judicial declaration to resolve it and protect X's legal position (e.g., to proceed with the project after the statutory waiting periods, free from the threat of penalties for non-notification).

Challenge 2: Contesting Prefectural "Opinions" and "Recommendations" under LSRSL

Once the LSRSL notification is accepted and the process unfolds, a developer might disagree with the substance of an "opinion" issued by the governor under Article 8(4) or a subsequent "recommendation" under Article 9(1).

Scenario: Operator X submits its LSRSL notification. Following public input concerned with traffic congestion and noise from proposed 24-hour operations, the prefecture issues an Article 8(4) opinion requesting X to: (1) create queuing space for left-turning vehicles, (2) restrict access to left-turns only or build an underpass/overpass for right-turns, and (3) restrict parking lot use from 10 PM to 6 AM due to noise. X argues that the noise minimally exceeds standards and that the other measures are prohibitively expensive and would cripple sales, so it notifies the prefecture of its intent not to comply. The prefecture then issues an Article 9(1) recommendation with similar content. X still refuses.

Are these "opinions" and "recommendations" administrative dispositions that can be directly challenged via a revocation suit?

  • General View: The prevailing understanding is that they are forms of administrative guidance. They lack direct legal binding force to compel the developer to make changes. Non-compliance with the content of an opinion or recommendation does not, in itself, trigger direct legal penalties under the LSRSL.
  • The 2-Month Additional Waiting Period: The fact that an operator must wait an additional two months after responding to an "opinion" (Article 8, Paragraph 9) before opening is a direct statutory consequence of an opinion having been issued, rather than a legal effect imposed by the opinion itself that would render the opinion a disposition. It's part of the statutory timeline allowing for further dialogue and potential issuance of a recommendation.
  • Limited Direct Challenges: If opinions and recommendations are not dispositions, direct revocation suits against them are unavailable.

Indirect Challenges or Other Recourse Against Opinions/Recommendations

While direct revocation might be off the table, a developer is not without options:

  1. Formal Non-Compliance: As Operator X did, the developer can formally notify the prefecture of its decision not to implement the changes suggested in the opinion (Article 8, Paragraph 7) or recommendation.
  2. Grounds for a Later State Compensation Claim: If the opinion or recommendation was based on clearly illegal grounds (e.g., considerations entirely outside the LSRSL's environmental scope, or factual assertions with no reasonable basis) and adhering to it would cause undue damage, or if not adhering to it leads to an illegal public announcement causing damage, this might form part of a subsequent state compensation claim.
  3. Focus on the Public Announcement: The primary leverage the LSRSL gives the prefecture regarding a recommendation is the power to publicly announce non-compliance. Therefore, legal challenges often focus on this stage.

Challenge 3: The Threat or Actuality of Public Announcement of Non-Compliance

If a developer does not follow an Article 9(1) recommendation, the governor "may publicly announce such fact" if there is no "justifiable reason" for the non-compliance (Article 9, Paragraph 7).

Pre-Announcement Challenge: Seeking a Civil Injunction?

If a developer believes the underlying recommendation was illegal or that they have a justifiable reason for not complying, can they pre-emptively sue to stop the public announcement?

  • Type of Suit: A public announcement is often viewed as a factual act rather than an administrative disposition. Therefore, a challenge would typically take the form of a civil injunction suit (民事差止訴訟 – minji sashitome soshō) in a civil court, arguing that the impending announcement is an illegal act (e.g., defamatory, an abuse of authority if based on an illegal recommendation) that would cause irreparable harm to the company's reputation and business.
  • Difficulty: Success in obtaining such an injunction can be difficult. Courts may be hesitant to interfere with a statutory administrative process if the recommendation was, on its face, validly issued and non-compliance is a fact. The developer would need to strongly argue the illegality of the underlying recommendation or the clear existence of a "justifiable reason" for their non-compliance.

Post-Announcement Challenge: State Compensation Suit

If the public announcement is made and causes quantifiable damage (e.g., lost sales, damaged brand reputation), a state compensation suit (国家賠償請求訴訟 – kokka baishō seikyū soshō) under Article 1 of the State Redress Act against the prefecture is a viable option.

  • Grounds for Illegality: The success of such a suit would depend on proving the illegality of the public announcement itself. This, in turn, often requires demonstrating:
    • The illegality or gross unreasonableness of the underlying recommendation that was not followed. If the recommendation itself was flawed (e.g., demanded measures far exceeding what was necessary or reasonable to protect the living environment, or was based on incorrect facts or irrelevant considerations), then publicizing non-compliance with it could be illegal.
    • The existence of a "justifiable reason" for non-compliance that the prefecture improperly ignored when deciding to make the announcement.
    • Procedural unfairness in the decision to publicly announce, such as a complete lack of opportunity for the developer to explain why their non-compliance was justified before the announcement was made.
  • Focus on "Living Environment": The LSRSL's primary concern is the impact on the local living environment (traffic, parking, noise, waste, etc.). Arguments and plans should squarely address these issues. Direct economic protection for existing retailers is not its stated purpose, though local authorities might attempt to introduce such considerations via informal guidance or interpretations of "living environment."
  • Proactive Engagement: Actively participate in public briefing sessions and respond thoroughly and reasonably to opinions and recommendations from the prefecture. Document all communications and the rationale behind your plans and responses.
  • Understand Waiting Periods: Be mindful of the statutory waiting periods before a new store can be opened.
  • The "Public Announcement" Leverage: Recognize that the threat of public announcement of non-compliance is the prefecture's main tool to encourage adherence to its recommendations. Assess the potential impact of such an announcement and the strength of your "justifiable reasons" for any non-compliance.

Conclusion

The Large-Scale Retail Store Location Law in Japan establishes a unique regulatory model that attempts to balance the development of large retail stores with the preservation of the surrounding community's living environment. It eschews direct economic controls on store openings, opting instead for a process of notification, public consultation, and administrative recommendations, backed by the potential for public disclosure of non-adherence. For developers, navigating this system requires a clear understanding of its procedural steps, the nature of administrative "opinions" and "recommendations" as forms of guidance, and the specific legal avenues available to challenge actions perceived as unlawful or unreasonable, particularly focusing on the critical stage of potential public announcement.