JAPAN Law and Practice Contributed by: Makoto Terazaki, Taku Matsumoto, Suguru Yokoi, Naoko Takasaki and Jun Suzuki, Anderson Mori & Tomotsune
4. Compliance, Sanctions and Embargoes 4.1 Sanctions Legislation and Regulatory Framework Japan’s sanctions regime is governed principally by the FEFTA, together with cabinet orders, ministe - rial ordinances, public notices and other instruments issued by the competent authorities. Japan implements sanctions under the FEFTA as finan - cial, trade and border measures. Financial sanctions restrict payments, deposit/trust/loan transactions, inward/outward investment and securities transfers; trade sanctions limit exports/imports, intermediary trade and certain technologies/services; border meas - ures impose travel bans and bans on entry of vessels/ aircraft. The Ministry of Foreign Affairs (MOFA), the Ministry of Finance (MOF) and METI are the relevant authorities: MOFA co-ordinates policy and designa - tions of sanctioned persons, MOF administers finan - cial measures (including some service restrictions), and METI enforces trade controls (and certain finan - cial measures). Japan’s sanctions regime is not structured so that international sanctions frameworks, including those adopted by the United Nations, apply directly within Japan. Rather, sanctions are implemented in Japan as domestic measures under the FEFTA and related Japanese legislation. Under the FEFTA, Japan may impose sanctions in order to comply with international obligations, to co-operate with other countries or the international community in maintaining international peace, or to maintain Japan’s own peace and security. Accordingly, Japanese sanctions may be introduced as domestic implementation of UN-based measures, as co-ordinated measures taken with other countries or the international community, or as measures adopt - ed for Japan’s own peace and security. 4.2 Arms Embargoes Japan implements the arms embargo measures imposed by United Nations Security Council (UNSC) resolutions primarily as domestic measures based on the FEFTA. Specifically, it prohibits or restricts the import, export and transfer of technology relating to arms and related materiel, as stipulated in UNSC reso -
lutions, to sanctioned countries and regions such as North Korea, Afghanistan, the Democratic Republic of the Congo and Iraq. There is no uniform, comprehensive exception for humanitarian purposes or other grounds; exceptions are limited to those provided for in the relevant UNSC resolutions or in the specific Japanese measures implementing them, and must be verified on a case- by-case basis. 4.3 Screening and Due Diligence Requirements There is no express, generally applicable requirement for defence sector participants, as such, to screen counterparties against sanctions lists under Japanese laws and regulations. That said, making payments to, or engaging in transactions with, sanctioned persons, or exporting goods to prohibited destinations, may constitute a violation of the FEFTA. As a result, many companies as a matter of practice screen customers, suppliers and other business partners against appli - cable sanctions lists. Although the regulators do not prescribe a specific screening frequency or methodology, it would gener - ally be prudent, depending on the level of risk, to con - duct screening not only at the outset of a transaction, but also when sanctions lists are updated or when there is a change in the transaction, the counterparty or other relevant circumstances. In practice, it would also be advisable to verify the ultimate beneficial own - er and end user, and to check for red flags indicating possible sanctions evasion. As to ownership and control, the FEFTA does not contain a general rule providing for the indirect des - ignation of persons owned or controlled by a directly designated person. However, in the case of sanctions against Russia, MOFA has determined that restric - tions on payments and transactions involving depos - its, trusts and loans also apply to subsidiaries in which designated Russian or Belarusian entities hold 50% or more of the shares. No equivalent rule on indirect designation applies to Russia-related export bans.
124 DEFENCE CONTRACTS 2026
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