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Preventing bribery in companies is essential from a compliance perspective. A company in Japan providing illicit benefits to a Japanese public official may be subject to criminal penalties for bribery under the Penal Code, as well as face significant reputational risks. Additionally, providing illicit benefits to foreign public officials may violate the Unfair Competition Prevention Act (UCPA).

As demand for preventing corruption is increasing both domestically and internationally, this article discusses crimes under Japanese law that may be committed when a company offers illicit benefits to public officials, as well as key points to avoid violating these laws and regulations.

The Penal Code

Under Japan¡¯s Penal Code, if a public official accepts a bribe in connection with their duties, the crime of accepting a bribe has been committed (article 197) and the giver can be charged with giving a bribe (article 198). Although other forms of bribery are also covered in the Penal Code, this is the basic form of simple bribery.

If a company¡¯s employee gives a large sum of money to a public official in charge of permits and licences in a related business field to gain favourable treatment for their company¡¯s permits, that act would also be considered an act of bribery. Allowing such acts undermines the fairness of public officials¡¯ duties and public trust in them, and thus such acts are punished as crimes.

Public officials

The term ¡°public officials¡± includes not only national and local public officials, but ¡°deemed public officials¡± who are considered public officials under the law, such as employees of national university corporations. The recipient of the bribe must be a Japanese public official, but the giver of the bribe does not need to be a Japanese national.

Official duties

If some kind of benefit is provided to a public official entirely unrelated to the public official¡¯s duties ¨C such as receiving a gift from an acquaintance during a private club activity on a day off ¨C and based purely on a private relationship, there is no duty and bribery charges do not apply.

A bribe

A bribe refers to a benefit as an unlawful remuneration for a public official¡¯s duties. It includes not only economic benefits but also non-economic benefits such as positions related to duties.

The bribe must be illicit and of a nature that is not socially acceptable to receive. Actual expenses such as transportation expenses are not unlawful remuneration and therefore not considered bribes.

Likewise, to consider that providing a public official visiting a factory with a glass of water or a cup of coffee as a bribe is unreasonable and not regarded as such because this is considered as socially acceptable. In this context, it is understood that if a gift falls within the scope of customary or social courtesies, it is not considered a bribe.

For example, providing a public official visiting a company for official purposes with inexpensive novelty goods or small samples created for general distribution is considered within the scope of customary or social courtesies, and therefore not a bribe.

On the other hand, giving or paying for expensive meals or gifts during a visit from a public official may be considered a bribe. In practice, evaluating whether something constitutes a bribe is sometimes very difficult to judge. In such cases, it is advisable to seek a lawyer¡¯s advice.

Foreign public officials

Bribery crimes under the Penal Code pertain to Japanese public officials and do not apply to foreign public officials. However, providing illicit benefits to foreign public officials is considered a crime under Japanese law.

The UCPA prohibits providing monetary or other benefits to foreign public officials to obtain illicit business advantages in international transactions, and sets penalties for such actions (articles 18 and 21 of the UCPA).

In cases involving bribery of foreign public officials, both the individual responsible within the company, and also the company itself as a corporation, can be held criminally liable (article 22 of the UCPA).

It should be noted that, unlike bribery under Japan¡¯s Penal Code ¡ª where only the individual who gave the bribe is subject to criminal penalties and not the company they belong to ¡ª bribery of foreign public officials subjects companies to criminal penalties as well.

For example, if an employee of a company provides illicit benefits to a public official of a country other than Japan, that employee may face imprisonment of up to 10 years or a fine of up to JPY30 million (approximately USD190,000), or both.

In accordance with stricter penalties introduced in the 2024 amendment to the UCPA, the company may face an even heftier fine of up to JPY1 billion (approximately USD6.4m).

If an employee of a Japanese company engages in bribery of a foreign public official outside Japan, this act of bribing foreign public officials would constitute a crime under the UCPA.

Before the 2024 amendment to the UCPA, bribery of foreign public officials conducted outside Japan was only punishable if the giver was a Japanese national of a Japanese company. However, since the amendment, non-Japanese nationals of a Japanese company are now also subject to punishment (article 21 of the UCPA). Even if an act of bribery is committed by an employee of a Japanese company outside Japan, that company as well as the employee ¡ª regardless of nationality ¡ª can be held criminally liable as a corporation.

Preventing violations

As mentioned, if bribery occurs in connection with corporate activities and is uncovered by investigative authorities, it not only runs the risk of criminal penalties but also poses significant reputational risks.

In Japan, there is traditionally strong criticism of crimes perpetrated by public officials, and companies that provide illicit benefits to public officials also face strong criticism. Additionally, related evidence such as digital devices may be seized, and if the person responsible is arrested, he or she may be held in custody for a considerable period.

Such situations pose the risk of significant operational disruptions that could threaten the continuation of business activities. Therefore, it is extremely important for corporate risk management to prevent bribery and corruption and avoid legal violations.

Unfortunately, there is no uniform standard such as ¡°providing more than X amount of yen constitutes bribery, while less does not¡±. Whether providing benefits to Japanese or foreign public officials is illegal must be judged on a case-by-case basis, taking into account: the relationship between the giver of the benefit and the public official; the nature and extent of the benefits; the timing of the provision; and general social customs.

In addition, it should be clearly noted that ¡°deemed public officials¡± are also considered to be public officials in the context of bribery crimes. From this perspective, some Japanese companies have established guidelines for preventing corruption that prohibit providing any benefits not only to public officials but also to private business partners.

In principle, providing benefits to private company representatives does not inherently raise issues of bribery or legal violations. Nevertheless, it is believed that by prohibiting all benefit-providing actions, including to non-public officials, they aim to absolutely avoid legal violations.

Avoiding legal violations such as bribery is absolutely important, but balancing this with actively conducting smooth business activities is very challenging.

As such, companies are advised to be completely familiar with the Penal Code and the UCPA, developing perspectives and means to avoid illegal activities, and building a compliance system with the help of experts such as lawyers to continue business activities appropriately.

Key takeaway

As the demand for compliance strengthens globally, avoiding legal violations such as bribery is extremely important for companies to continue their business activities. Understanding the magnitude of risks associated with legal violations such as bribery, and the importance of establishing a compliance framework, is crucial.