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 through its penal code, which imposes penalties on individuals and corporate officers involved in bribery. Although direct cash exchanges for favors are rare, the insular relationships among companies and government officials have led to issues like bid rigging, particularly in public works projects, though such incidents have decreased recently. A significant corruption scandal involving the ruling Liberal Democratic Party has prompted investigations and calls for reform, highlighting ongoing concerns about the enforcement of anti-bribery laws and the need for stronger accountability measures.

Japan is the world's fourth largest economy and the largest source of foreign direct investment in the United States, yet it has one of the lowest levels of inbound foreign direct investment relative to its GDP among OECD countries. The Japanese government is actively working to improve this situation through initiatives aimed at doubling inward FDI by 2030, despite challenges such as a traditional aversion to mergers and acquisitions and inflexible labor laws. The economy is characterized by a strong legal framework for investment, robust capital markets, and significant government efforts to attract 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, despite these advantages, Japan has one of the lowest levels of foreign direct investment (FDI) as a share of GDP among OECD countries, largely due to cultural aversions to mergers and acquisitions and challenges related to corporate governance and labor laws. The Japanese government is actively pursuing initiatives to improve the investment environment, aiming to double inward FDI to 100 trillion yen by 2030.