Japan is among the 20 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory's rank indicates its position relative to the other countries and territories in the index.
There is virtually no petty corruption; and apart from among segments of the political and managerial class, moral condemnation of corruption is near universal. Yet at the same time corruption is a structural component of Japan’s power structure. Political contributions — mostly of the illicit sort — are an essential lubricant of co-operative interactions in Japan’s fractious power triangle. Political corruption is endemic in a system run by an oligarchy operating in a gift culture.
Japan’s penal code covers crimes of official corruption, and an individual convicted under these statutes is, depending on the nature of the crime, subject to prison sentences and possible fines. With respect to corporate officers who accept bribes, Japanese law also provides for company directors to be subject to fines and/or imprisonment, and some judgments have been rendered against company directors.
Independent academic experts stated that ties among politicians, bureaucrats, and businesspersons were close and corruption remained a concern. NGOs continued to criticize the practice of retired senior public servants taking high-paying jobs with private firms that rely on government contracts. The traditional practice (known as amakudari) of assigning retired government officials to top positions within Japanese companies. Amakudari employees are particularly common in the financial, construction, education, transportation and pharmaceutical industries.
The direct exchange of cash for favors from government officials in Japan is extremely rare. However, the web of close relationships between Japanese companies, politicians, government organizations, and universities has been criticized for fostering an inwardly “cooperative”—or insular—business climate that is conducive to the awarding of contracts, positions, etc. within a tight circle of local players. This phenomenon manifests itself most frequently and seriously in Japan through the rigging of bids on government public works projects. However, instances of bid rigging appear to have decreased over the past decade. Alleged bid rigging between construction companies was discovered on the Tokyo-Nagoya-Osaka maglev high-speed rail project in 2017, and the case is currently being prosecuted.
The Ministry of Justice reported prosecutions of 85 suspects for bribery in 2015, and the Supreme Court reported convictions of 41 individuals for bribery in 2015. There were regular media reports of investigations into financial and accounting irregularities involving high-profile politicians and government officials.
Japan’s Act on Elimination and Prevention of Involvement in Bid-Rigging authorizes the Japan Fair Trade Commission (JFTC) to demand that central and local government commissioning agencies take corrective measures to prevent continued complicity of officials in bid rigging activities and to report such measures to the JFTC. The Act also contains provisions concerning disciplinary action against officials participating in bid rigging and compensation for overcharges when the officials caused damage to the government due to willful or grave negligence. Nevertheless, questions remain as to whether the Act’s disciplinary provisions are strong enough to ensure officials involved in illegal bid rigging are held accountable.
Japan has ratified the OECD Anti-Bribery Convention, which bans bribing foreign government officials. However, there are continuing concerns over the effectiveness of Japan’s anti-bribery enforcement efforts, particularly the very small number of cases prosecuted by Japanese authorities compared to other OECD members.
For vetting potential local investment partners, companies may review credit reports on foreign companies which are available from many private-sector sources, including, in the United States, Dun & Bradstreet and Graydon International. Additionally, a company may inquire about the International Company Profile (ICP), which is a background report on a specific foreign company that is prepared by commercial officers of the U.S. Commercial Service at the U.S. Embassy, Tokyo.
Several government agencies are involved in combating corruption, including the NPA and the National Tax Administration Agency. In addition, the Fair Trade Commission enforces anti-monopoly law to prevent unreasonable restraint of trade and unfair business practices, such as bid rigging. The Japan Financial Intelligence Center is responsible for preventing money laundering and terrorist financing. The National Public Services Ethics Board polices public servants suspected of ethics violations. The Board of Audit monitors the accounts of corporations in which the government is a majority shareholder. Anticorruption agencies generally operated independently, effectively, and with adequate resources, although some experienced staffing shortfalls.
There is a low risk of corruption in the Japanese judicial system. Judicial independence is respected in practice. Businesses report confidence in the judiciary’s independence. Companies report that bribes and irregular payments in return for favorable judicial judgments are rare. Less than one in twenty citizens perceive judges as corrupt. Companies express general satisfaction with the efficiency of the legal framework pertaining to their ability to challenge regulations and settle disputes. The process of appointing Supreme Court judges lacks transparency and the general view is that the Supreme Court is often lenient on the government. Enforcing a contract takes 360 days on average, which is significantly faster than in other OECD high-income countries.
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