--- title: "FEFTA: Payments, Trade, and Inward Investment" description: "Explains Japan's Foreign Exchange and Foreign Trade Act rules on payments, capital transactions, inward direct investment, export controls, and reports." date: 2026-05-31 category: Law Commentary tags: [Investment, Trade] draft: false --- The [Foreign Exchange and Foreign Trade Act](https://elaws.jp/view/324AC0000000228) provides Japan's framework for foreign exchange, foreign trade, external transactions, inward direct investment, and controls needed for peace, security, sanctions, balance of payments, and currency stability. Investors, exporters, financial institutions, foreign companies, and compliance teams consult it when checking whether a payment, capital transaction, investment, export, import, or report is subject to permission, notification, confirmation, or administrative order. This article covers selected core provisions of the Act and does not decide whether a specific investment or export requires prior filing or permission. ## Purpose, Scope, and Definitions The Act begins from a principle of freedom for external transactions, with minimum necessary control or adjustment. Articles 1, 5, 6, 7, 8, 9, and 10 provide the basic frame. Article 1 states that foreign exchange, foreign trade, and other external transactions are conducted freely in principle, and that the Act uses minimum necessary control or adjustment to promote normal development of external transactions, maintain peace and security of Japan or the international community, maintain balance of payments and currency stability, and contribute to sound development of Japan's economy. Article 5 extends the Act to specified acts abroad by representatives, agents, employees, or other workers of corporations whose main offices are in Japan, and to specified acts abroad by persons domiciled in Japan or their agents and workers. Article 6 defines key terms such as Japan, foreign country, Japanese currency, foreign currency, Resident, Non-Resident, means of payment, foreign means of payment, electronic payment instruments, cryptoassets, precious metals, securities, foreign-currency securities, claims, goods, and property. Article 7 authorizes the Minister of Finance to determine and publicly notify the basic foreign exchange rate and arbitrated foreign exchange rates. Article 8 requires payments in transactions or acts subject to the Act to be made in the currency designated by the Minister of Finance. Article 9 authorizes the competent minister, in urgent cases involving rapid changes in international economic circumstances, to order temporary suspension of transactions, acts, or payments subject to the Act for a period prescribed by Cabinet Order. Article 10 allows the Cabinet to decide that countermeasures should be taken where especially necessary to maintain Japan's peace and security, with subsequent Diet approval procedures in Article 10(2) and termination rules in Article 10(3). ## Payments, Banks, and Verification Chapter III regulates payments and related checks by banks and payment intermediaries. Articles 16, 16-2, 17, 17-2, 17-3, 17-4, 18, and 18-6 are core provisions for payment restrictions and financial-institution duties. Article 16 allows the competent minister, in specified situations such as faithful performance of treaties or other international commitments, contribution to international efforts for peace, a Cabinet decision under Article 10, balance-of-payments necessity, or enforcement necessity, to impose a permission requirement on payments from Japan to foreign countries or payments between Residents and Non-Residents. Article 16(5) prohibits making payments connected with transactions or acts that require permission, approval, or notification under the Act without satisfying those requirements, except as provided by Cabinet Order. Article 16-2 allows the competent minister to prohibit or require permission for specified payments by a person who conducted payments without required permission and is likely to repeat such conduct. Article 17 requires banks and other specified financial institutions to confirm, before conducting foreign exchange transactions for customers, that the customer's payment does not fall under listed restricted-payment categories or, if it does, that the required permission, approval, notification, or other procedure has been completed. Article 17-2 authorizes the Minister of Finance to order a bank or similar institution to take measures to conduct Article 17 confirmation properly and, where necessary, to suspend or restrict foreign exchange business until measures are taken. Article 17-3 applies the same framework to funds transfer service providers, and Article 17-4 applies it to electronic payment instruments transaction service providers and related persons. Article 18 requires identity confirmation for specified foreign exchange transactions, and Article 18-6 applies related obligations to electronic payment instruments transfers. ## Capital Transactions and Inward Direct Investment The Act separately regulates capital transactions and inward direct investment. Articles 20, 21, 22, 23, 26, 27, 28, 29, and 30 are key provisions for investments, loans, guarantees, and acquisition of shares or voting rights. Article 20 defines Capital Transactions, including deposit contracts, trust contracts, money lending, guarantees, securities acquisition, derivatives contracts, and other transactions listed in that article. Article 21 allows the competent minister, in specified cases involving international commitments, international peace efforts, Article 10 countermeasures, balance-of-payments concerns, or enforcement needs, to require permission for Capital Transactions by Residents or between Residents and Non-Residents. Article 22 provides restrictions and permission requirements for specified transactions where necessary to prevent circumvention or secure implementation of Chapter IV. Article 23 allows the competent minister to require prior notification for specified Capital Transactions if necessary in light of international commitments, international peace efforts, Article 10 countermeasures, or other listed grounds. It also authorizes recommendations and orders after notification, subject to the conditions and procedures in that article. Article 26 defines Foreign Investor and Inward Direct Investment, etc. The definition includes acquisition of shares or equity, consent to substantial changes in business purposes of domestic corporations, establishment or extension of branch offices in Japan, loans to domestic corporations, acquisition of bonds, and other categories stated in the article. Article 27 requires prior notification for specified Inward Direct Investment, etc. and allows the competent minister to recommend changes or discontinuance where the investment is likely to impair national security, disturb public order, hinder public safety, or have significant adverse effects on smooth management of the Japanese economy. Articles 28, 29, and 30 provide related rules for specified acquisitions, technology introduction contracts, and ex post facto reports. ## Export, Import, and Service Transactions FEFTA is also the legal basis for trade controls. Articles 24, 25, 48, 52, and 53 are the main statutory provisions before turning to export-control orders and ministry regulations. Article 24 authorizes restrictions on specified service transactions where necessary to fulfill international commitments, contribute to international peace efforts, implement Article 10 countermeasures, or maintain peace and security. Article 25 requires permission for specified transactions involving technology, including transactions between Residents and Non-Residents or transactions concerning provision of technology, where the Cabinet Order conditions apply. It also contains provisions concerning specified acts that may lead to technology transfer. Article 48 provides that a person intending to export specified goods must obtain permission where required by Cabinet Order for international peace and security or other statutory grounds. Article 48(3) also allows export approval requirements where necessary for implementation of Article 10 countermeasures or other purposes stated there. Article 52 allows import approval requirements for specified goods where necessary for international commitments, economic order, or other statutory grounds. Article 53 authorizes the competent minister to prohibit, for up to the statutory period, a person that violated export or import control provisions from conducting exports or imports, and to prohibit specified officers or employees from engaging in exports or imports for a corporation. These trade-control provisions are implemented through Cabinet Orders and ministerial orders, so the Act identifies the authority while subordinate rules identify many controlled goods, technologies, destinations, and procedures. ## Reports, Inspections, and Penalties The Act uses reporting, inspection, and penalty provisions to secure compliance. Articles 55-7, 55-8, 55-9, 55-10, 68, 69, 70, 71, and 72 are useful enforcement landmarks. Article 55-7 authorizes the competent minister to request reports from persons who conducted or intend to conduct transactions, acts, or payments subject to the Act, where necessary for enforcing the Act. Article 55-8 authorizes officials to enter offices, business places, and other places of persons subject to reporting obligations, inspect books and documents, and question related persons, within the limits and purposes stated there. Article 55-9 concerns collection of information and statistics on foreign exchange and foreign trade. Article 55-10 authorizes administrative agencies to exchange information necessary for enforcement of the Act. Article 68 and Article 69 contain penalties for serious violations, including violations of permission requirements and orders under specified provisions. Article 70 and Article 71 set additional penalty categories, and Article 72 contains dual-liability rules for corporations and other principals where representatives, agents, employees, or other workers commit violations in connection with the business. The compliance structure therefore requires reading in layers. The Act gives the authority, Cabinet Orders and ministerial orders specify many controlled categories and procedures, and official notices or forms often determine the practical filing path.