Foreign Exchange and Foreign Trade Act

If the Minister of Finance has made it obligatory to get permission pursuant to the provisions of paragraph (1) of the preceding Article, and the minister finds that a person that has conducted a capital transaction which it has been made obligatory to get permission for, without getting that permission, is likely to once again conduct a capital transaction that it has been made obligatory to get permission for pursuant to the provisions of that paragraph without getting that permission, the minister may prohibit the person from fully or partially conducting capital transactions, or, pursuant to the provisions of Cabinet Order, make it obligatory for that person to get permission to conduct capital transactions, but only during a period of up to one year.

If the Minister of Finance finds that a person that has accounted for a transaction or action other than one that is stated in the items of paragraph (3) of the preceding Article (hereinafter referred to as an "ineligible transaction or action" in this paragraph) by placing it in the special international financial transactions account or a person that has violated the provisions of an Order that is based on paragraph (4) of that Article is likely to once again account for an ineligible transaction or action by placing it in the special international financial transactions account or is likely to once again violate the provisions of that order, the minister may prohibit the person from fully or partially accounting for transactions and actions as stated in the items of paragraph (3) of that Article by placing them in the special international financial transactions account, but only during a period of up to one year.

When a bank or other prescribed financial institution, a trust company (meaning a trust company as prescribed in Article 2, paragraph (2) of the Trust Business Act (Act No. 154 of 2004) or the foreign trust company as prescribed in paragraph (6) of that Article), a financial instruments business operator (meaning a financial instruments business operator as prescribed in Article 2, paragraph (9) of the Financial Instruments and Exchange Act which is engaged in the Type-I financial instruments business prescribed in Article 28, paragraph (1) of that Act or the Type-II financial instruments business prescribed in paragraph (2) of that Article; the same applies in Article 55-3) or an electronic payment instruments service provider, etc. (referred to as a "bank or any other form of financial enterprise" in the following paragraph and Article 55-9-2, paragraph (1)) enters into a contract or takes any other action prescribed by Cabinet Order that is connected with a capital transaction as prescribed in Article 20 (referred to as "entering into a contract or taking any other prescribed action in connection with a capital transaction" in the following paragraph) with a customer or a person prescribed by Cabinet Order as being equivalent to them (referred to as a "customer or equivalent person" in this paragraph), it must conduct identity verification with regard to the customer or equivalent person.

The provisions of Article 18, paragraphs (2) through (4) and Articles 18-2 through 18-4 apply mutatis mutandis if a bank or any other form of financial enterprise enters into a contract or takes any other prescribed action in connection with a capital transaction. In such a case, the term "specified funds transfer transaction" in Article 18-3, paragraph (2) is deemed to be replaced with "a contract for a capital transaction prescribed in Article 22-2, paragraph (1)".

The provisions of Article 18, paragraphs (2) through (4), Articles 18-2 through 18-4, and paragraph (1) of the preceding Article apply mutatis mutandis if a person engaging in the currency exchange business (meaning buying and selling foreign currencies or traveler's checks in the course of trade) in Japan (this person is referred to as a "currency exchange operator" in Article 55-9-2, paragraph (1)) exchanges currencies (excluding a small currency exchange prescribed by Cabinet Order) with a customer.

Before a resident conducts an outward direct investment prescribed by Cabinet Order as being likely to cause one of the situations stated in the items of paragraph (4), the resident, pursuant to the provisions of Cabinet Order, must first file a notification of the substance of the outward direct investment, its timing, and other information that Cabinet Order prescribes with the Minister of Finance.

The term "outward direct investment" as used in this Article means a resident's acquisition of securities issued by a corporation that has been incorporated under foreign laws and regulations or lending of money to such a corporation that is prescribed by Cabinet Order as being done for the purpose of establishing a permanent economic relationship with the corporation, or a resident's payment of funds for the establishment or expansion of a branch office, factory, or other such place of business (hereinafter referred to as a "branch office or other such place of business") in a foreign country.

A resident that has filed a notification under paragraph (1) must not conduct the outward direct investment stated in the notification until the final day in the 20-day period that starts on the day that the Minister of Finance receives the notification; provided, however, that the Minister of Finance may shorten the 20-day period on finding there to be no special problems in light of the substance of the outward direct investment stated in the notification or any other circumstances.

If the outward direct investment under a notification referred to in the preceding paragraph were undertaken, the Minister of Finance, pursuant to Cabinet Order, may issue a recommendation to the person filing the notification of the outward direct investment to modify the substance of the investment or discontinue it, but only if the minister finds that the outward direct investment would cause one of the following situations and make it difficult to achieve the purpose of this Act or if a cabinet decision referred to in Article 10, paragraph (1) has been issued; provided, however, that the period during which the minister may issue a recommendation to modify or discontinue this is within 20 days from the day on which the minister receives the notification:

it would have a significant adverse effect on the smooth operation of the Japanese economy; or

it would compromise international peace and security or interfere with the maintenance of public order.

Notwithstanding the provisions of paragraph (3), a person that is issued a recommendation under the preceding paragraph must not undertake the outward direct investment under the notification referred to in paragraph (3) until the final day in the 20-day period that starts on the date on which the person is issued that recommendation.

A person that is issued the recommendation under paragraph (4) must notify the Minister of Finance, within 10 days from the day on which the person is issued the recommendation, of whether or not the person will comply with the recommendation.

A person that has notified the Minister of Finance of compliance with the recommendation pursuant to the provisions of the preceding paragraph must conduct the outward direct investment that is subject to the recommendation in accordance with the recommendation.

Notwithstanding the provisions of paragraph (3) or (5), once a person notifies the Minister of Finance, pursuant to the provisions of paragraph (6), of compliance with a recommendation, the person may undertake the outward direct investment subject to the recommendation even if 20 days have not yet passed since the person was issued the recommendation.

If a person that has been issued a recommendation under paragraph (4) fails to notify the minister as under paragraph (6) or notifies the minister of non-compliance with the recommendation, the Minister of Finance may order the person issued the recommendation to modify the substance of the outward direct investment or discontinue it; provided, however, that the period during which the minister may issue an order to modify or discontinue this is within 20 days, starting from the day on which the minister issues the recommendation under paragraph (4).

Beyond as prescribed in each of the preceding paragraphs, Cabinet Order prescribes the procedures for recommending modifications to the substance of outward direct investment and for recommending the discontinuance of outward direct investment, and also provides for other necessary particulars of these recommendations.

If the obligation to obtain the permission of the Minister of Finance has been imposed pursuant to the provisions of Article 21, paragraph (1) or (2) with respect to outward direct investment that is required to be notified pursuant to the provisions of paragraph (1), the resident that makes that outward direct investment is not required to file the notification, notwithstanding the provisions of paragraph (1); in this case, if a notification under that paragraph has already been filed with respect to that outward direct investment, that notification (limited to a notification concerning outward direct investment that was not actually being made at the time the obligation to obtain permission was imposed pursuant to the provisions of Article 21, paragraph (1) or (2) (excluding outward direct investment for which notice of acceptance of a recommendation to discontinue has been given pursuant to the provisions of paragraph (6) and outward direct investment that has been ordered to be discontinued pursuant to the provisions of paragraph (9))) is deemed to be an application for the permission that it has been made obligatory to obtain pursuant to the provisions of Article 21, paragraph (1) or (2), filed on the date of that notification, and if a recommendation under the provisions of paragraph (4), a notice under the provisions of paragraph (6) (limited to one stating acceptance of a modification to the content), or an order under the provisions of paragraph (9) (limited to one concerning a modification to the content) has been made with respect to the outward direct investment covered by that notification, that recommendation, notice, or order is deemed not to have been made.