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 corruption through its penal code, which imposes penalties on individuals and corporate officers involved in bribery. Despite a low incidence of direct cash exchanges for favors, the close-knit relationships among companies and government officials have led to criticisms of an insular business environment, with instances of bid rigging, particularly in public works projects, although such occurrences have reportedly decreased. Recent scandals involving the ruling Liberal Democratic Party (LDP) have highlighted issues of unreported political funds and bribery, prompting calls for reforms and stricter enforcement of anti-corruption laws.

Japan is the world's fourth largest economy and the largest source of foreign direct investment in the United States. Despite its wealth and high level of development, Japan has the lowest inbound foreign direct investment stock as a share of GDP among OECD countries, prompting the government to implement an action plan aimed at doubling this stock by 2030. The economy is characterized by a strong legal and regulatory climate supportive of investors, yet challenges such as corporate governance issues and labor market inflexibility persist.

Japan's investment climate is characterized by a supportive legal and regulatory framework, with strong protections for intellectual property rights and a deep capital market accessible to foreign investors. However, challenges such as a traditional aversion to mergers and acquisitions, weak corporate governance, and inflexible labor laws hinder foreign direct investment, which remains low relative to GDP compared to other OECD countries. The Japanese government is actively pursuing initiatives to improve these conditions, aiming to double inward foreign direct investment to 100 trillion yen by 2030.