Japan Legal Update, Vol. 15 | June 2016
Amendment to the Banking Act, Etc.
An Amendment to the Banking Act, Etc. (the "Amendment") was enacted on May 25, 2016. The rapid innovation of information technology ("IT"), particularly advances in financial technology ("FinTech"), will have a material impact on the future of payment and other financial services. The Amendment amends the Banking Act, the Payment Services Act, and other related Acts for the purpose of strengthening financial systems by addressing the shifting terrain of financial services. The Amendment will come into force on a date to be specified by a Cabinet Order within a period not to exceed one year from the date of promulgation (June 3, 2016), and includes the following:
Relaxed Regulations Regarding Investment in FinTech Companies. Under the current Banking Act, banks are limited in the extent to which they may engage in non-banking activities and are prohibited, with certain exceptions, from acquiring or holding more than 5 percent (or, for bank holding companies, 15 percent) of the voting rights of a non-banking company. Under the Amendment, banks and bank holding companies will be permitted, subject to approval by the Financial Services Agency, to acquire and hold voting rights exceeding the limits described above in a company that uses IT to engage in business that will contribute to the sophistication of the banking industry or an improvement in convenience for end users.
Registration Requirement for Operators of Virtual Currency Exchange Businesses. The Amendment introduces the definition of "Virtual Currency," defined as proprietary value that, among unspecified persons, (i) can be used to settle payments for goods and/or services and exchanged with legal currency or (ii) can be exchanged with another Virtual Currency, and that can be transferred using an electronic data processing system. The Amendment requires an operator of a Virtual Currency Exchange Business (defined as a business involving the exchange of Virtual Currency to a legal currency or another Virtual Currency) to be registered by the Prime Minister. In addition, in order to prevent money laundering or the financing of terrorism, a registered operator of a Virtual Currency Exchange Business will be required to take certain identity verification procedures, among other steps.
The Amendment mainly affects banks and existing virtual currency exchangers. The provisions of the Amendment are not limited to the items described above but also cover a broad range of other items. Therefore, a company that believes that a certain development in FinTech may create a new business opportunity should carefully consider whether the Amendment may impact its future business.
Enactment of an Amendment to the Code of Criminal Procedure, Etc. (May 24, 2016)
This Amendment, which introduces a plea-bargaining system, was enacted on May 24, 2016. The system allows that for certain crimes, subject to the consent of the counsel for the suspect, a plea agreement may be reached between the prosecutor and the suspect whereby the prosecutor agrees not to prosecute or to request a light penalty in return for cooperation from the suspect that implicates another person criminally. The system is applicable to certain economic crimes including, without limitation, violations of the Tax-related Acts, the Antimonopoly Act, and the Financial Instruments and Exchange Act. The system will come into force within two years from June 3, 2016.
Decision on the Enforcement Date of the Partial Revision of the Electricity Business Act (Third Stage) (May 24, 2016)
Last year, as part of the third stage of the Electricity System Reform, provisions for the full liberalization of entry into the gas retail market were outlined along with provisions regarding the "legal unbundling" of the electricity transmission and distribution sectors. In relation to such provisions, the Cabinet has decided to approve the Cabinet Order that stipulates that: (i) the enforcement date of the provisions for the full liberalization of entry into the gas retail market is to be April 1, 2017; (ii) the acceptance of applications for prior registration filed by new entrants to the gas retail market before launching the full liberalization is to start on August 1, 2016; and the deadline for applications filed by general gas utilities for approval under the Wheeling Service Provisions is to be July 29, 2016.
Enactment of an Amendment to the Defined Contribution Pension Act (May 24, 2016)
This Amendment, which was enacted on May 24, 2016, simplifies the necessary procedures to introduce a defined contribution pension plan (the Simplified Defined Contribution Pension Plan) for companies that have 100 or fewer employees. It also enables such companies to make additional contributions for their employees who join an individual-type defined contribution pension plan. The Amendment will come into force within two years from June 3, 2016.
First Publication of the Name of an Enterprise Engaging in Illegal Overtime (May 19, 2016)
Since May 2015, the Ministry of Health, Labour and Welfare has been supervising enterprises engaging in illegal overtime in multiple locations and has publicly disclosed information regarding such entities. On May 19, 2016, the director of the Chiba Labor Bureau revealed the name of an enterprise that was subject to supervision for illegal overtime work in excess of 100 hours per month at multiple locations. It was the first time for a government agency to publicly disclose the name of an enterprise undergoing administrative guidance due to illegal overtime.
Agreement in Principle on the Tax Information Exchange Agreement with the Republic of Panama (May 23, 2016)
This Agreement provides for the effective exchange of information regarding tax matters between tax authorities and is expected to contribute to the prevention of international tax evasion and tax abuse.
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John C. Roebuck
Christopher G. Grant
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