JAPAN: OSAKA: An Introduction to General Business Law
Trends and Developments in the Kansai Region
Against the backdrop of heightened international geopolitical tensions and a resurgence of COVID-19, 2022 was marked by surges in energy and raw material prices, abrupt currency fluctuations, and a global inflationary trend. As a result, the economic and societal environment around the Kansai region underwent significant upheaval.
In 2023, although there remains uncertainty regarding the future, influenced by the unstable international climate, rising energy prices, and concerns over economic slowdowns in Western nations and China, progress is anticipated in proactive initiatives aimed at sustained growth in the Kansai economy. This progress is spurred by efforts to address societal challenges, such as green transformation (GX) and digital transformation (DX), the creation of new demand through solutions, and increased investment in human resources, especially in the lead-up to the 2025 Osaka-Kansai Expo.
On 11 October 2022, Japan lifted entry restrictions for foreign tourists, encompassing short-term visa exemptions and the resumption of individual travels. As a result, after approximately two-and-a-half years, Japan reopened its borders to foreign tourists, essentially “opening the nation” to inbound travel. Concurrently, between the autumn of 2022 and the autumn of 2023 (as of this writing), a historic depreciation of the yen is underway, with tourism demand for Japan, especially from the West, on the rise.
In Kansai, facilities have been publicly solicited and selected based on the Integrated Resort Promotion Law. An Integrated Resort (IR) comprises facilities such as a casino, conference facilities, recreational amenities, exhibition halls, and hotels. In September 2021, based on an evaluation by the Osaka City IR Operator Selection Committee, a prospective business operator was chosen. Included among these entities is MGM Resorts International, renowned for its Las Vegas casinos. While the Japanese government approved the IR development plan of Osaka Prefecture and Osaka City in April 2023, the certification was delayed beyond initial expectations. Consequently, Osaka Prefecture and Osaka City announced a postponement of the IR’s opening from the originally planned 2029 to approximately autumn of 2030.
The current economic conditions in the Kansai region
Located in the western part of Honshu, the Kansai region has Osaka as its primary commercial city. The region, which includes Fukui, Shiga, Kyoto, Osaka, Hyogo, Nara and Wakayama prefectures, occupies 8.3% of Japan’s total land area (as of 1 July 2022). Its export clearance rate is 22.4% (2021), department store and supermarket sales make up 17.5% (2021), and the manufacturing shipment value stands at 17% (2020). Kansai’s total population constitutes 16.9% of Japan’s entire population (as of 1 October 2021), and its gross regional product was 15.4% in FY 2019. These figures suggest that Kansai’s economy represents just under 20% of Japan’s total economy.
Kansai’s nominal GDP is next to that of the Netherlands, ranked 17th globally. Examining the industry composition of Kansai’s GDP in 2018, agriculture, forestry and fisheries make up 0.3%, and manufacturing makes up 22.5%. Wholesale, retail, and real estate, categorised under tertiary industries, account for approximately three quarters of the total. Considering the composition of manufacturing shipment values, Kansai has a higher share in sectors such as chemicals, steel, machinery manufacturing, and electrical machinery compared to the national average, with transportation machinery being underrepresented.
Reflecting on the last two years, 2022 showed signs of vulnerability in production – particularly in industries such as electronic components and devices, and transportation machinery – as well as in housing investment, due to events such as the invasion of Ukraine, lockdowns in China, supply constraints, and surging prices for raw materials and components. However, with the lifting of COVID 19-related restrictions, the retail and service sectors witnessed a return of customer traffic in 2023, primarily driven by individual consumption, hinting at a gradual recovery. In addition, due to a global semiconductor supply relaxation, 2023 saw a rebound in industries such as production machinery and transportation machinery. This year also showed improved supply conditions, with an uptick in equipment investment and exports, marking a slight revival in production.
Observing the number of foreign passengers using Kansai International Airport’s international flights, there’s been a significant recovery recently, notably since the relaxation of border measures in October, such as the removal of entry caps and the lifting of entry bans on individual foreign tourists. Additionally, tax-free sales in Kansai’s department stores are helping them recover, although both figures remain below the pre-COVID 19 levels of 2019.
Trade (export) amounts were steady throughout 2022 and 2023, even though there was a brief slowdown due to China’s lockdown. Factors such as the rapid depreciation of the yen and robust overseas demand have played a role. By country and region, Asia and the US are leading, and by product, inorganic compounds, pharmaceuticals, semiconductors and other electronic parts drive exports.
Moving forward, as inbound tourism demand is expected to recover, there is anticipation for further capturing of overseas demand through exports of goods and services, thereby contributing to Kansai’s economic growth. Observing the 2021 trade statistics, Kansai, compared to the national average, has a notably high share of exports to China. Given Kansai’s strong ties with the Asian regions, especially China, it is important to closely monitor developments in the Chinese and Asian economies going forward.
New legislation in Japan
Major new business-related laws include amendments to the Disclosure Ordinance, Labour Standards Act, Road Traffic Act, Telecommunications Business Act, and Consumption Tax Act.
On 31 January 2023, an amendment to the “Cabinet Office Ordinance on Disclosure of Corporate Information” related to the Financial Instruments and Exchange Act came into effect. The ordinance requires listed companies to disclose “information on human capital and diversity” in their securities reports meant for public inspection. In certain cases, they are obliged to include details such as the ratio of female managers, the paternity leave uptake rate among men, and the wage disparity between men and women.
On 1 April 2023, the amended Labour Standards Act came into force. It raised the overtime pay rate for those working more than 60 hours a month, and lifted the ban on wage payments through digital money.
On 1 April 2023, the amended Road Traffic Act was enacted, allowing for “Level 4” autonomous driving on public roads. “Level 4” refers to a state of complete autonomous driving under specific conditions, such as in sparsely populated areas or on highways, where no intervention from the driver is required.
On 16 June 2023, the amended Telecommunications Business Act was enacted, introducing new regulations on cookies. Businesses operating online services using cookies are obliged to inform users about the nature of the transmitted user information (eg, device ID, browsing history, or behaviour history), the name of the recipient, and the purpose of use. Separately, under the Personal Information Protection Act, there is an obligation to obtain user consent via pop-up displays and similar methods when using cookies.
On 1 October 2023, the amended Consumption Tax Act was enforced, introducing a new invoice system. This system requires a document (a qualified invoice) detailing the consumption tax rate, amount of consumption tax, and other legally defined content levied on goods and services to be provided.