JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities
Selling loan receivables to professional, institu - tional investors who can comply with the MLB Act may be a practical option. However, under - writing transactions – ie, the transfer of loan receivables immediately after a loan transaction – are not usually entered into. Instead, a loan provider is more likely to sell the loan receiva - bles for financial purposes after it has had suf - ficient time to observe performance of the loan receivables. 4.3 Sources of Funds for Fiat Currency Loans Most of the funds raised for loans are lender- raised capital. Securitisation of online lending receivables has not been typical and it is also uncommon to raise funds for specific lending transactions from general investors. 4.4 Syndication of Fiat Currency Loans Online lending services in the form of syndicated loans are not available in Japan.
There is no significant business or regulatory dif - ference in online lending based on whether the borrower is an individual or a corporation. With the exception of commercial banks and certain banks incorporated for specific pur - poses, engaging in the loan business requires registration under the Money Lending Business Act (the “MLB Act” ) and is subject to the MLB Act regulations. Under the MLB Act, a loan pro - vider must prepare a written contract and certain explanatory documents and receipts. Further, the interest rate of a loan is subject to: • the Interest Rate Restriction Act; and • the Act Regulating the Receipt of Contribu - tions, the Receipt of Deposits, and Interest Rates. Loan interest rate per annum must not exceed 20% for loans with a principal amount of less than JPY100,000, 18% for loans with a prin - cipal amount of between JPY100,000 and JPY999,999, or 15% for loans with a principal amount of JPY1 million or more. These regula - tions apply to loans to corporate borrowers as well as individual borrowers. 4.2 Underwriting Processes In Japan, loan providers do not engage in under - writing for non-professional investors. If a non- bank loan provider sells its loan receivables, its assignee would also be subject to the MLB Act regulations. This regulatory restriction makes it difficult to implement the underwriting of loan receivables for non-professional investors.
5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails
A payment rail widely used by traditional banks in Japan for domestic fund transfers is the Jap - anese Banks’ Payment Clearing Network, also known as “Zengin Net” . However, it is not man - datory for banks or fund transfer service provid - ers to use this payment rail. Indeed, more and more fintech service providers are offering fund transfer services or other payment services that do not involve existing payment rails, such as services using stablecoins.
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