FATF status

Japan is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The last Follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Japan was undertaken in 2024. According to that Evaluation, Japan was deemed Compliant for 4 and Largely Compliant for 35 of the FATF 40 Recommendations. It remains Highly Effective for 0 and Substantially Effective for 3 of the Effectiveness & Technical Compliance ratings.

Japan's legal framework addresses official corruption, with penalties for individuals and corporate officers involved in bribery, although direct cash exchanges for favors are rare. The Liberal Democratic Party (LDP) has faced significant corruption scandals, leading to investigations and arrests of several members for failing to report substantial unreported payments. Despite Japan's low corruption ranking, concerns persist regarding the enforcement of anti-bribery laws, particularly in foreign contexts, as highlighted by the OECD's evaluations and recommendations for improved legislative measures and proactive investigations.

Japan is the world's fourth largest economy and the largest source of foreign direct investment in the United States, yet it has the lowest inbound FDI stock as a share of GDP among OECD countries, standing at 8.3 percent at the end of 2022. The Japanese government is actively working to improve this situation through initiatives aimed at doubling inward FDI to 100 trillion yen by 2030, while also addressing challenges such as corporate governance and labor laws that hinder foreign investment.

Japan's investment climate is characterized by a supportive legal and regulatory framework, with strong protections for intellectual property rights and deep capital markets accessible to foreign investors. However, challenges such as a traditional aversion to mergers and acquisitions, inflexible labor laws, and historical weaknesses in corporate governance have hindered foreign direct investment, which remains low compared to other OECD countries. The Japanese government is actively pursuing initiatives to improve investment conditions and aims to significantly increase inward foreign direct investment by 2030.