Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

JAPAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: April 1, 1964.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)A license from the MOF and the METI is required for capital transactions between residents and the following nonresidents: (1) organizations, high officials, and persons affiliated with the former Iraqi regime, in accordance with a UN Security Council resolution; (2) former Yugoslav President Slobodan Milosevic and affiliated persons; (3) Al-Qaida and the Taliban, and individuals, groups, and organizations associated with terrorism; (4) former Liberian President Charles Taylor, his immediate family, and senior officials of the former Taylor regime, in accordance with a UN resolution; and (5) in accordance with a UN resolution, individuals and entities who violated the arms embargo to the Democratic Republic of the Congo; (6) individuals constituting a threat to the peace and national reconciliation process in Côte d’Ivoire; (7) individuals impeding the peace process in Darfur, Sudan; (8) entities and individuals involved with the Democratic People’s Republic of Korea’s missile or WMD programs; and (9) entities and individuals engaged in the Islamic Republic of Iran’s nuclear and other activities.
References to legal instruments and hyperlinksForeign Exchange and Foreign Trade Law.
Exchange Arrangement
CurrencyThe currency of Japan is the Japanese yen.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the yen is determined on the basis of supply and demand in the foreign exchange market. However, the authorities intervene when necessary to counter disorderly conditions in the market. The principal intervention currency is the dollar.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThere are no officially set rates in the forward market, and forward exchange transactions are based on free market rates.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangementsNo.
Administration of controlThe exchange and trade control system is operated mainly by the MOF, the METI, and the Bank of Japan, which acts as the government’s agent. Import- and export-reporting requirements are handled by the METI.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)Exports and imports of gold exceeding one kilogram in total weight must be declared to the MOF through the customs authorities.
On external tradeYes.
Controls on exports and imports of banknotesExports and imports of banknotes (including checks, traveler’s checks, promissory notes, and securities) in both domestic and foreign currency exceeding the equivalent of ¥1 million in value must be reported to the MOF through the customs authorities.
On exportsYes.
On importsYes.
References to legal instruments and hyperlinksForeign Exchange and Foreign Trade Law.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyControls apply to deposits of foreign-currency-denominated funds with resident financial institutions by an insurance company that would cause the sum of its assets denominated in foreign currency to exceed 30% of its total assets.
Held abroadControls apply to deposits of funds with nonresident financial institutions by an insurance company that would cause the sum of its assets denominated in foreign currency to exceed 30% of its total assets.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresCertain goods are subject to import restrictions under the Import Control Order for reasons of national security, public health, and environmental and moral protection. Imports of these goods require prior approval from the METI. For the restricted items, authorization from the METI and an import quota certificate are required. For the importation of certain other goods from specific countries or shipping areas, individual authorization must be obtained from the METI. Import settlements effected under special methods require authorization from the METI.
Negative listYes.
Open general licensesYes.
Licenses with quotasYes.
Other nontariff measuresCertain illicit goods, including drugs, guns, and counterfeit goods, are prohibited from being imported under the Customs Law.
Import taxes and/or tariffsThe Japanese tariff system is stipulated by the Customs Law, Customs Tariff Law, and Temporary Tariff Measures Law. The harmonized classification schedule annexed in the Customs Tariff Law sets out both the classification and the corresponding customs duty rate (called the general rate) of particular products. The rate actually applied, however, is not necessarily the general rate. The Temporary Tariff Measures Law sets out the temporary rate for certain products, which in these cases prevails over the general rate. In addition, when the customs duty rate in the WTO Concession Schedule (so-called WTO rate) or the rate set forth by the Economic Partnership Agreement (so-called EPA rate) is lower than the general rate (or the temporary rate, if applicable), the WTO rate or EPA rate is applied. For designated developing countries, the Customs Tariff Law and the Temporary Tariff Measures Law also provide a preferential rate, which is applicable to certain products and lower than any of the above rates.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExport restrictions may be applied either globally or to certain destinations, and these may cover export volume, export prices, or other conditions. Exports of specified raw materials for foreign processing and reimportation require individual licenses. Certain goods are subject to export restrictions under the Export Control Order for reasons of international security and environmental protection.
Without quotasYes.
With quotasYes.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase abroad by residentsControls apply to the acquisition or repurchase by an insurance company of securities issued on a foreign financial market that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Bonds or other debt securities
Purchase abroad by residentsControls apply to the purchase by an insurance company of securities issued on a foreign financial market that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
On money market instruments
Purchase abroad by residentsControls apply to the acquisition or repurchase by an insurance company of securities issued on a foreign financial market that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
On collective investment securities
Purchase abroad by residentsControls apply to the purchase by an insurance company of securities issued on a foreign financial market that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Controls on derivatives and other instruments
Purchase abroad by residentsControls apply to the purchase of or swap operations by an insurance company in instruments and claims denominated in foreign currency on foreign markets that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Controls on credit operations
Financial credits
By residents to nonresidentsControls apply to credits and loans granted to nonresident borrowers by an insurance company that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Controls on direct investment
Outward direct investmentOutward direct investments by residents in the following industries require prior notification: (1) fisheries, (2) manufacturing of leather or leather products, (3) manufacturing of weapons, (4) manufacturing of equipment related to manufacturing weapons, and (5) manufacturing of narcotics.
Inward direct investmentPrior notification is required for inward direct investments (1) in aircraft, armament, nuclear power, space technology, and explosives production industries for national security reasons; (2) in electricity, gas, heat supply, telecommunications, broadcasting, water, railroad, and passenger transport industries for reasons of public order; (3) in biological and security industries for public safety reasons; (4) in oil, leather and leather products, agriculture, forestry and fisheries, air transport, and maritime industries to ensure the smooth operation of the national economy; and (5) by foreign investors of countries with which there is no treaty or other international agreement with Japan concerning inward direct investments, etc.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsControls apply to the acquisition by an insurance company of real estate abroad that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsNo.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsControls apply to the purchase by an insurance company of securities issued on a foreign financial market that would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Limits (max.) on investment portfolio held abroadControls apply to (1) the purchase of or swap operations by an insurance company in instruments and claims denominated in foreign currency on foreign markets, (2) credits and loans granted to nonresident borrowers by an insurance company, and (3) deposits of funds with nonresident financial institutions by an insurance company if these would cause its assets denominated in foreign currency to exceed 30% of its total assets.
Limits (min.) on investment portfolio held locallyControls apply to the (1) purchase by an insurance company of securities in foreign currency on the domestic market, (2) purchase of or swap operations by an insurance company in instruments and claims denominated in foreign currency of domestic markets, (3) credits and loans granted by an insurance company in foreign currency to resident borrowers, and (4) deposits of foreign-currency-denominated funds with resident financial institutions by an insurance company if these would cause its assets denominated in foreign currency to exceed 30% of its total assets.
References to legal instruments and hyperlinksn.a.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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