1. Purpose of the Amendment
In order to liberalize cross-border transactions to an extent consistent with global standard, and to further vitalize Japanese financial and capital market, we conducted a fundamental review of the Foreign Exchange Control System and have decided to abolish, in principle, (1) permission and prior notification required on capital transactions and (2) the authorized foreign exchange bank system and the money exchanger system.
2. Overview of the Law
(1) Name change
The word "Control" will be deleted. The revised name
will be "Foreign Exchange and Foreign Trade Law."
(2) Chapter 1- General Provisions
"Electronic money" will be included in the definition of the means of payment.
(b) Foreign exchange rates
Previous provisions concerning the fixed foreign exchange rate
system, such as the selling and buying rates of foreign currencies,
will be eliminated and replaced by the following sentence. "Authorities
make efforts to stabilize the foreign exchange rate through such
actions as buying or selling the means of payment."
(3) Chart 2- Authorized Foreign Exchange Banks and Money Exchangers
In order to liberalize foreign exchange business, foreign exchange
banks and money exchangers will no longer need permission from
authorities. At the same time, the designated securities firm
system will also be abolished.
(4) Chart 3- Payment and Receipt of Payments
(a) Method of payment for cross-border transactions
Permission required to engage in netting and other settlements by special method will be abolished and free cross-border payments will be effected.
(b) Conditions necessitating permission
In view of the international requirements regarding the effective
implementation of economic sanctions, we will review those conditions
where permission is required to make remittances abroad or engage
in other external transactions. This will be done to assure the
effectiveness of economic sanctions.
(c) Identification requirements for banks
In the case where a customer is required to get permission before
conducting foreign exchange transactions, bank and other financial
institutions specified by government ordinance (hereinafter "the
Banks") will be obliged to ascertain whether the customer
possesses the required permission. This proposition applies to
foreign exchange transactions by the Postal service.
(d) Prior notification requirements for the export and import of the means of payment
A person who intends to export or import the means of payment
is required to make prior notification of the details, except
in the cases specified by government ordinance.
(5) Chapter 4-Capital Transactions
(a) Abolishment of permission and prior notification requirements in principle
To enable free capital transactions, permissions and prior notification required on capital transactions will be abolished.
(b) Conditions necessitating permission
In view of the international requirements regarding the effective implementation of economic sanctions, we will review those conditions where permissions is required from the Finance Minister and other ministers in charge of capital transactions.
(c) Account for special international finance transactions
The acquisition from non-residence of securities issued by non-residents will be included in the transactions in the account for special international finance transactions.
(d) Foreign direct investments
Prior notification required on foreign direct investments will
be abolished, except for investments in certain industries. Where
prior notification is required, the conditions that would necessitate
a request or order to suspend or modify the proposed foreign direct
investment will be limited.
(6) Chapter 5- Direct investment in Japan
There will be no significant changes in principle. Deregulation
measures have already been implemented through the amendment of
the law executed in 1992.
(7) Chapter 6- Export and Import Transactions
There will be no significant Changes in principle. Provisions
that have little importance these days--such as verification of
the payment method in exports and the submission of a warranty
for imports--will be deleted.
(8) Chapter 6(bis)- Report
Development of provisions concerning the ex-post facto reporting system:
(a) report of payments
(b) report of the identification by banks and other financial institutions
(c) report of capital transactions
(d) report of direct investment in Japan
(e) report of agreements for importing technology
(f) report of foreign exchange business
(g) report of other matters
(a) Special provision for the use of electronic data processing devices
To prepare for paperless reports, ministers in charge shall take the necessary measures, through governmental ordinance, to enable reports and other specific procedures to be done using data processing devices.
(b) Data of implementationThe new law shall come into force on April 1,1998
(c) Development of related provisionsAny necessary developments
of related provisions shall be made.
3. Relationship with the Structural Reform of the Financial System
This amendment of the law is forerunner to the overall structural
reform of the financial system and the success of its execution
will likely have an effect on the streamlining of that reform.
[About the financial system reformation (The Japanese version of the Big Bang)]