Payment Terms Legislation In Japan

The Subcontract/Shitauke Act is aimed at payments from larger companies to smaller ‘subcontractors’, with a maximum term of 60 days from the performance or delivery. Company size thresholds and payment criteria vary across industries.

Prevention of Delay in Payment under Government Contracts (Act No. 256 of 1949) sets a maximum term of 40 days for government construction projects, and 30 days for other services to public entities. If the terms are not specified in contract then the default payment term is 15 days from receipt of invoice.

The Designation of Specific Unfair Trade Practices by Large-Scale Retailers Relating to Trade with Suppliers by the Japanese Fair Trade Commission does not apply specific maximum payment terms to the industry but it does restrict delayed payment in response to certain disputes.

The statutory interest rate for commercial transactions is 3%, as set out in article 404 of the civil code. The rate is reviewed every three years and was most recently set on 1 April 2023. This replaces the older commercial code law of 6%, and was implemented in 2020 through the amendment of the laws of obligations.