Foreign Exchange and Foreign Trade Act

The term "capital transaction" means any of the following transactions or actions (excluding an act which falls within the category of inward direct investment or an equivalent action prescribed in Article 26, paragraph (2) (excluding the acts stated in items (ix) and (x) of that paragraph and, among the acts stated in item (xi) of that paragraph, those prescribed by Cabinet Order as being equivalent to the acts stated in items (ix) and (x) of that paragraph) and which is conducted by any of the persons stated in the items of paragraph (1) of that Article):

a transaction involving the accrual, alteration, or extinguishment of a claim (hereinafter referred to as a "transaction involving the accrual, alteration, or extinguishment of a claim") based on a deposit contract (including an installment savings contract, installment deposit contract, money deposit contract, or any other contract prescribed by Cabinet Order as being similar to them; the same applies hereinafter) or trust contract between a resident and a non-resident;

a transaction involving the accrual, alteration, or extinguishment of a claim based on a money loan contract or obligation guarantee contract between a resident and a non-resident;

a transaction involving the accrual, alteration, or extinguishment of a claim based on a sales contract for a foreign means of payment or for a claim between a resident and a non-resident;

a transaction involving the accrual, alteration, or extinguishment of a claim for which payment can be received in a foreign currency, based on a deposit contract, trust contract, money loan contract, obligation guarantee contract, or sales contract for a foreign means of payment or for a claim between a resident and another resident;

a resident's acquisition of securities from a non-resident (including a resident's or a non-resident's acquisition of a right based on which the resident will acquire securities from the non-resident upon the acquirer's unilateral manifestation of the intention for this to occur), or a resident's transfer of securities to a non-resident (including a resident's or a non-resident's acquisition of a right based on which the resident will transfer securities to the non-resident upon the acquirer's unilateral manifestation of the intention for this to occur);

a resident's issuance or public offering of securities in a foreign country, a resident's issuance or public offering of foreign currency securities in Japan, or a non-resident's issuance or public offering of securities in Japan;

a non-resident's issuance or public offering of securities that are denominated or payable in Japanese currency, in a foreign country;

a transaction involving the accrual, alteration, or extinguishment of a claim based on a futures contract on a financial indicator or similar metric between a resident and a non-resident;

a transaction involving the accrual, alteration, or extinguishment of a claim that is payable in a foreign currency based on a futures contract on a financial indicator or similar metric between a resident and another resident, or a transaction involving the accrual, alteration, or extinguishment of a claim that is payable in Japanese currency based on a futures contract on a financial indicator or similar metric (limited to such a contract involving a financial indicator (meaning the financial indicator prescribed in Article 2, paragraph (25) of the Financial Instruments and Exchange Act) of a foreign currency) between a resident and another resident;

a resident's acquisition of real property or rights to real property that is located in a foreign country, or a non-resident's acquisition of real property or rights to real property that is located in Japan;

the delivery and receipt of funds between a corporation's office in Japan and the corporation's office in a foreign country (excluding the delivery and receipt of funds prescribed by Cabinet Order as the delivery and receipt of the ordinary expenses necessary for operating the office and funds involved in an ordinary transaction), beyond as stated in items (i) and (ii); and

a transaction or action prescribed by Cabinet Order as being equivalent to any of the transactions or actions stated in the preceding items.

The transactions stated in the following items are deemed to be capital transactions prescribed in those items, and the provisions of this Act (including Orders based on this Act) apply to the transactions.

a transaction involving the accrual, alteration, or extinguishment of a right to request the transfer of electronic payment instruments based on a contract for management of electronic payment instruments (referred to as a "transaction involving the accrual, alteration, or extinguishment of a right to request the transfer of electronic payment instruments" in this Article) between a resident and a non-resident: capital transactions stated in item (i) of the preceding Article;

a transaction involving the accrual, alteration, or extinguishment of a right to request the transfer of electronic payment instruments based on a loan contract or obligation guarantee contract involving the transfer of electronic payment instruments between a resident and a non-resident: capital transactions stated in item (ii) of the preceding Article; and

a transaction involving the accrual, alteration, or extinguishment of a right to request the transfer of electronic payment instruments based on a contract for buying and selling electronic payment instruments or a contract for exchanging electronic payment instruments with other electronic payment instruments between a resident and a non-resident: capital transactions as stated in item (iii) of the preceding Article.

On finding that, if residents or non-residents were to unrestrictedly conduct capital transactions (meaning capital transactions as prescribed in Article 20, and excluding those falling under the category of specified capital transactions as prescribed in Article 24, paragraph (1); the same applies in paragraph (1) of the following Article, Article 55-3, and Article 70, paragraph (1)), it would prevent Japan from faithfully performing its obligations under a treaty or other international agreement it has concluded or would cause a situation that would prevent Japan from contributing to international efforts towards international peace, thereby making it difficult to achieve the purpose of this Act, or if a cabinet decision as referred to in Article 10, paragraph (1) has been reached, the Minister of Finance, pursuant to Cabinet Order, may make it obligatory for residents or non-residents seeking to conduct such a capital transaction to get permission to conduct it.

Beyond as prescribed in the preceding paragraph, on finding that, if residents or non-residents were to unrestrictedly conduct capital transactions as prescribed in that paragraph (excluding those for which accounting is handled in the special international financial transactions account), it would cause one of the following situations to arise, thereby making it difficult to achieve the purpose of this Act, the Minister of Finance, pursuant to Cabinet Order, may make it obligatory for residents or non-residents seeking to conduct such a capital transaction, to get permission to conduct it:

it would become difficult to maintain Japan's balance of payments equilibrium;

it would bring about rapid fluctuations in Japanese currency exchange rates; or

the Japanese financial market or capital market would be adversely affected by a massive transfer of funds between Japan and a foreign country.

The term "special international financial transactions account" referred to in the preceding paragraph means an account that a bank or other prescribed financial institution that Cabinet Order specifies establishes with the approval of the Minister of Finance in order to manage its accounting for its investment or procurement of funds in connection with the following transactions and actions (excluding transactions deemed capital transactions as prescribed in the preceding Article) it undertakes in order to allocate deposits that it receives from non-residents (but only corporations established under foreign laws and regulations and any other persons that Cabinet Order prescribes; hereinafter the same applies in this and the following paragraph) and other funds that it procures from non-residents, for use in lending money to non-residents, for use in acquiring securities from non-residents, and for use in other investment in non-residents, separately from its accounting for its investment and procurement of funds in connection with other transactions and actions:

capital transactions as stated in item (i) of Article 20 that constitute transactions involving the accrual, alteration, or extinguishment of a claim based on a deposit contract with a non-resident which is prescribed by Cabinet Order;

capital transactions as stated in item (ii) of Article 20 that constitute transactions involving the accrual, alteration, or extinguishment of a claim based on a money loan contract with a non-resident;

capital transactions as stated in item (v) of Article 20 that constitute the acquisition from a non-resident or transfer to a non-resident of securities (limited to those that Cabinet Order prescribes) issued by a non-resident; and

other transactions or actions prescribed by Cabinet Order.

Cabinet Order provides for transfers of funds between a special international financial transactions account as prescribed in the preceding paragraph (hereinafter referred to as a "special international financial transactions account" in this paragraph and paragraph (2) of the following Article) and other accounts and for other particulars of the accounting in a special international financial transactions account, and also provides for confirmation that the other party to a transaction or action for which the accounting is conducted in a special international financial transactions account is a non-resident and for any other necessary particulars.

If it has been made obligatory for persons to get permission for a capital transaction as prescribed in paragraph (2) pursuant to the provisions of both paragraphs (1) and (2), a person seeking to conduct such a transaction may file a combined application for the permissions under those paragraphs, pursuant to Cabinet Order. In such a case, the Minister of Finance is to decide whether to give permission while also taking into consideration whether the capital transaction under the application would actually cause one of the situations that forms the basis for obliging persons to get permission for that transaction.

If the Minister of Finance, pursuant to paragraph (1) or (2), has made it obligatory to get permission for outward direct investment as prescribed in Article 23, paragraph (2) in connection with which Article 23, paragraph (1) requires a notification to be filed, the minister is to decide whether to give that permission while also taking into consideration whether the outward direct investment under the application for permission would actually give rise to one of the situations stated in the items of paragraph (4) of that Article, in addition to whether it would actually give rise to one of the situations prescribed in paragraph (1) or in one of the items of paragraph (2) that forms the basis for obliging persons to get permission.