JAPAN Trends and Developments Contributed by: Yasushi Kudo, Yukiko Konno and Takayuki Inukai, Nagashima Ohno & Tsunematsu
the Act to the government (the Prime Minister) and, in return, receives individualised analytic outputs gener - ated from analyses that use inbound and outbound telecommunications information. Businesses other than Special-SIOs may also enter into a PA if they qualify as users of business telecommunications ser - vices; foreign-affiliated companies can also be coun - terparties to such agreements. Timeline and enforcement Businesses that have already deployed SICs are not required to file notifications immediately on the Act’s effective date. There is a six‑month grace period from that date, meaning that, in practice, many businesses will be able to file by 31 March 2027. Where a Special- SIO commits a violation, the competent minister may issue orders, require reports, and provide guidance or advice. Given the above, Special-SIOs may aim for strict compliance, and therefore, vendors also should prepare for the Act’s entry into force. Trends in Addressing Cybersecurity Supply Chain Risks Impact of the enforcement of the Proper Transactions Act In May 2025, amendments to the Subcontract Act were enacted. The amended legislation, under its new title: “Act Against Delay in Payment of Fees, etc. to Small and Medium-sized Entrusted Business Opera - tors in Manufacturing and Other Specified Fields” (“Proper Transactions Act”) took effect on 1 January 2026. These amendments broaden the scope of appli - cable transaction parties and introduce additional pro - hibited acts for contractors. Specifically, regarding the expansion of the scope of applicable transaction parties, the amended law introduces a new employee standard. This employee standard includes the following two cases. • First case: the Proper Transactions Act applies when a business operator that is a corporation with more than 300 regular employees contracts with a business operator that is a corporation or individual with 300 or fewer regular employees for manufac - turing outsourcing, repair outsourcing, outsourcing for the creation of information deliverables (limited to program creation), outsourcing for service provi -
sion (limited to transportation, storage of goods in warehouses, and information processing), or trans - portation outsourcing meeting certain conditions. • Second case: the Proper Transactions Act applies when a business operator that is a corporation with more than 100 regular employees outsources the creation of information deliverables (exclud - ing those mentioned above) or the provision of services (excluding those mentioned above) to a business operator that is a corporation or individual with 100 or fewer regular employees. With the addition of these requirements, large enter - prises that demand certain security standards from SMEs acting as suppliers or contractors in their sup - ply chains, thereby imposing certain transaction costs on those SMEs, must re-examine whether their trans - actions fall under the scope of the Proper Transactions Act. Furthermore, the amended law introduces a new pro - hibition against determining payment amounts with - out proper consultation. While the previous Subcon - tract Act already prohibited large enterprises subject to its application from unilaterally reducing subcon - tractor payments or forcing down prices on SMEs also subject to the law, this provision was introduced due to concerns about large enterprises passing on price increases to SMEs during periods of rising transaction costs. Historically, the Japanese Fair Trade Commis - sion (JFTC) interpreted and classified the following actions as prohibited acts under the Subcontract Act: (i) large enterprises subject to the Subcontract Act failing to explicitly consult with SMEs regarding the necessity of passing on price increases during peri - ods of rising transaction costs, and (ii) large enter - prises maintaining prices unchanged without provid - ing reasons in response to price increase requests from SMEs. These were deemed to constitute unfair price suppression. In this sense, it could be argued that determining payment amounts without appropri - ate consultation was already subject to regulation. However, it is important to note that the amendment explicitly lists this practice as a prohibited act. Con - sequently, it cannot be ruled out that the JFTC will strictly enforce the law against such practices going forward.
242 CHAMBERS.COM
Powered by FlippingBook