Construction and projects in Japan: overview

A Q&A guide to construction and projects law in Japan.

The Q&A gives a high level overview of the main trends and significant deals; procurement arrangements; transaction structures and corporate vehicles; financing projects; security and contractual protections that funders require; standard forms of contracts; risk allocation; excluding liability, including caps and force majeure; contractual provisions covering material delays and variations; appointing and paying contractors; subcontractors; licences and consents; projects insurance; employment laws; health and safety; environmental issues; corrupt business practices and bribery; bankruptcy/insolvency; public private partnerships (PPPs); dispute resolution; tax and mitigating tax liability; and proposals for reform.

To compare answers across multiple jurisdictions, visit the construction and projects Country Q&A tool.

This Q&A is part of the global guide to construction and projects law. For a full list of jurisdictional Q&As visit


Overview of the construction and projects sector

1. What are the main trends in the local construction and projects market? What are the most significant deals?

Main trends

In recent years, the number and volume of construction projects in Japan have been increasing and are expected to continue to increase at least until the Tokyo Olympics, which will be held in the summer of 2020. This increased construction activity reflects the demand arising from the need to:

  • Prepare for the 2020 Summer Olympics.

  • Clean up and rebuild the Tohoku region following the Great East Japan Earthquake of 11 March 2011.

Following the series of large earthquakes that struck parts of Kyushu in mid-April of 2016, which resulted in heavy damage to infrastructure, one can anticipate even greater demands on the construction industry in Japan. As a result, manpower and construction materials have been in short supply, and construction costs have been increasing rapidly.

Coincidentally, there has been a shift from the construction of new infrastructure to the maintenance of existing infrastructure in Japan, which may be another manifestation of the strains on the construction industry in Japan.

In the energy field, the development of solar power plants is continuing, even though the Japanese Government decreased the procurement price of solar power. The development of other types of renewable energy, especially wind power and bio power, has also been increasing.

Major projects

New national stadium (Shin Kokuritsu Kyogijou). Tokyo will be the host city for the 2020 Summer Olympics. In Feburary 2012, Japan decided to build a new stadium on the site of the 1964 Tokyo Olympics stadium, in order to have an appropriate venue for the Olympics. A competitive bid for the design of the new stadium was held, and the design submitted by Zaha Hadid initially won the competition. However, as reports started to emerge that the projected construction costs of a stadium based on Ms Hadid's design would greatly exceed the budget, many people in Japan, including some of Japan's leading architects, started to criticise the design itself. Consequently, Prime Minister Abe cancelled the award of the design to Ms. Hadid. In June 2015, the Olympic stadium project was awarded to a design-build proposal made by a consortium comprised of a major Japanese construction company (Taisei Corporation) and two Japanese design firms. The construction of the stadium is expected to start sometime in 2016.

Kansai International Airport. Another major deal is the concession of Kansai International Airport and Osaka International Airport (Itami Airport). The two airports handled together over 34 million passengers in 2014 and constitute the second busiest airport group in Japan. Under Prime Minister Abe, the Japanese Government started the privatisation process of government-controlled airport operations in order to reduce public debt. This project was actively opened to foreign companies (for example, foreign airport operators and investors), which was quite unique in the Japanese construction market. More than three consortiums were originally considering joining the bid. The main reason why most consortiums did not apply for the bid was the high price of the existing airport buildings and facilities. Ultimately, an international consortium comprised of Orix Corporation, a leading financial services group in Japan, and VINCI Airports (a French airport concession holder, operator and contractor) was the only bidder and was announced in November 2015 as the winner of the concession. As of 1 April 2016, the operations of the two airports were transferred to this consortium under a 44-year concession agreement.

Aichi Toll Road. The Aichi Toll Road project, which is the first toll road concession in Japan under the Private Finance Initiative (PFI) Act, was awarded to a consortium selected through a bid in June 2016. It is planned to start operation under the concession in October 2016.


Procurement arrangements

2. Which are the most common procurement arrangements if the main parties are local? Are these arrangements different if some or all of the main parties are international contractors or consultants?

The most common procurement arrangement is a competitive bid based on price only. However, recently, bids based on the price as well as other aspects of the bidders' proposals have been increasing for larger projects. A public bid is required for deals that are subject to the rules of the World Trade Organization. There is no difference between local deals and international deals.


Transaction structures

3. What transaction structures and corporate vehicles are most commonly used in both local and international projects?

Local projects

The most basic construction project will involve an owner and a construction company or consortium. The owner can be:

  • An individual (or a group of individuals).

  • A legal entity (for example, a corporation or a special purpose vehicle).

  • In the case of public works and/or infrastructure projects, a governmental or a quasi-governmental entity.

See Question 4 for further detail on the use of special purpose vehicles and other financing structures.

The most common construction structure is a single construction company or a joint venture that consists of two or more construction companies. In the case of a design-build project, there will usually be a consortium comprised of a design company and a construction company. Alternatively, a large general contractor that has its own architect office will handle the project. In the case of private finance initiative and public private partnership projects that include operation and maintenance, a consortium will be formed among a design company, a construction company, an operation and maintenance company and other types of companies.

International projects

The structures are the same for local and international projects (see above, Local projects).



4. How are projects financed? How do arrangements differ for major international projects?

Land and buildings are separate estates in Japan. For the construction of a new building, the contractor will generally be the owner of the building until the building is completed and delivered to the owner (which is usually the landowner or the lessee of the ground). On receipt of final payment from the owner, the contractor will deliver the completed building to the owner and the building will be registered for the first time in the real estate registry. In this context, owners and contractors typically use common corporate finance debt for construction projects. In practice, the owner pays the construction price to the contractor in several instalments as certain phases of the project are completed. The owner can use corporate finance debt to fund these payments. The contractor will fund the costs of construction through corporate finance debt, which can be repaid as it receives payments from the owner.

Project finance tends to be used in:

  • Private finance initiative projects.

  • Renewable energy projects.

Limited recourse finance is typically used for major real estate development projects.

The two most commonly used structures are the:

  • GK-TK structure. Under this structure, a limited liability company (godo kaisha) (GK) is established as a special purpose company that obtains equity by entering into anonymous partnership agreements (tokumei kumiai) (TK) with passive investors. The GK will also obtain limited recourse debt from banks.

  • TMK structure. Under this structure, a special purpose company (tokutei mokuteki kaisha) (TMK) is established. The TMK obtains equity primarily by issuing preferred equity to investors. The TMK will issue bonds to obtain limited recourse financing from certain qualified institutional investors. A TMK can also obtain bank loans, in addition to issuing of bonds.

The GK-TK structure is often adopted in renewable energy projects involving international investors. There is otherwise no difference between local and international projects.


Security and contractual protections

5. What forms of security and contractual protections do funders typically require to protect their investments?


In the case of corporate finance, the typical security is a mortgage over the land or building owned by the borrower.

In the case of project finance or real estate finance, the security package will include:

  • A mortgage over the land or any other assets involved in the project.

  • Pledges over insurance, bank accounts, equity, and over any rights to claim for payments.

Bonds issued by TMKs (tokutei mokuteki kaisha) (see Question 4) are usually only secured by a statutory preferential lien on the company (ippan tampo).

There is no difference between local and international projects.


In the case of corporate finance, the following contractual protections are typically used to provide credit support to the financing:

  • Parent company guarantees.

  • Guarantees from the company's representative director (in the case of a small company).

  • Mortgages over other real estate property owned by the borrower or its parent company.

In the case of project finance or real estate finance, contractual protections include:

  • Collateral assignment of some assets for security purposes (joto tanpo).

  • Reservation of assignment of contractual rights, which is a security interest that provides the lender the option to have the contract rights assigned to it or to a designated third party on the occurrence of a trigger event.

  • Negative pledges.

  • Representations and warranties by the borrower.

  • Sponsor letters (covering "bad boy" acts and certain other specified risks).

There is no difference between local and international projects.


Standard forms of contracts

6. What standard forms of contracts are used for both local and international projects? Which organisations publish them?

Local projects

Public construction projects. A standard form contract prepared and published by the advisory board established under the Construction Industry Act (Chuo Kensetsugyo Shingikai is used for traditional public construction projects.

For private finance initiative projects and public private partnerships, the Prime Minister's Cabinet Office published a form for use in simple build-transfer-operate projects, which is a category of projects under the Private Finance Initiative Act. However, this form has not been widely accepted, as many more suitable forms already existed, which are available on the websites of the relevant public entities.

Private construction projects. In traditional private projects, the standard form contract prepared and published jointly by seven major architect associations and construction company associations (Kyu-Shikai Rengou Yakkan) is typically used. No particular form is used when project finance and real estate finance are used, but there are various precedents and sample contracts available.

International projects

Public construction projects. There is no difference between local and international projects (see above, Local projects).

Private construction projects. In international projects, the standard form contract prepared and published jointly by seven major architect associations and construction company associations (Kyu-Shikai Rengou Yakkan) is typically used. However, depending on the bargaining power of the parties, the parties can use the forms prepared by:

  • The International Federation of Consulting Engineers (FIDIC).

  • The Engineering Advancement Association of Japan (ENAA).

  • The American Institute of Architects (AIA).

  • Any other organisations.


Contractual issues

Contractors' risks

7. What risks are typically allocated to the contractor? How are these risks offset or managed?

Price escalation, including labour cost escalation, is a risk typically allocated to the contractor. The exceptions that are typically agreed in the construction contract are that:

  • Any price escalation (including labour cost escalation) after one year has passed from the date of execution of the construction contract is allocated to the owner.

  • The risk arising from dramatic changes of economic condition is allocated to the owner.

Risks relating to ground conditions are usually borne by the owner, unless the condition could have been discovered through an investigation to be conducted by the contractor at the pre- or early construction stage. The owner usually bears the risk of force majeure events, provided that this is reasonable. However, in public projects, the contractor usually assumes responsibility for 1% of damages and increased costs.

In the case of private finance initiative and public private partnerships, the contract usually provides for a much more detailed allocation of risk, as it usually includes provisions relating to the operation/maintenance of the project for more than 15 years.

There is no difference between local and international projects.

Excluding liability

8. How can liability be excluded or restricted under local law?

While it is possible to exclude liability for consequential loss and/or loss of profit, liability for these is not typically excluded. Under the Japanese Civil Code, the general rule is that only damages that can reasonably arise from a breach must be compensated by the party in breach, which may act as a limitation of liability.

Additionally, it is common to establish different defect liability periods for defects caused by gross negligence/wilful misconduct and those arising from other causes.

Caps on liability

9. Do the parties usually agree to a cap on liability? If yes, how is this usually fixed? What liabilities, if any, are typically not capped?

Except for liquidated damages clauses covering delays in completing the work (see Question 11), it is not usual to agree on a cap of liability, although it is legally permitted.

Force majeure

10. Are force majeure exclusions available and enforceable?

Force majeure clauses are enforceable and quite common. The owner generally bears the risk of force majeure events. However, in public construction projects, it is common for the contractor to assume the risk of 1% of the damages and increased costs.

In typical construction contracts, the definition of force majeure tends to be limited to natural disasters. In contracts used in project finance, the scope of force majeure events is commonly wider, and covers any event that cannot be predicted nor avoided.

Material delays

11. What contractual provisions are typically negotiated to cover material delays to the project?

The parties typically negotiate a liquidated damages clause to cover material delays, under which the contractor must compensate for damages up to a maximum of a fixed percentage of the contract price. Usually, the owner can terminate the construction contract if the contractor fails to attempt to cure the delay within a reasonable period. The construction contract usually allows the contractor to propose changes to the scheduled completion time if the delay is caused by the owner or by a force majeure event.

There is no difference between local and international projects.

Material variations

12. What contractual provisions are typically negotiated to cover variations to the works?

Provisions for changing the completion time and the contract price are the most frequently negotiated to cover variations to the works, including those caused by the owner's orders.

Other negotiated provisions

13. What other contractual provisions are usually heavily negotiated by the parties?

The defect liability period is one of the most typically negotiated provisions, especially for projects involving the construction of plants. The defect liability period will differ according to the type of machines and parts of the plant, and the respective bargaining power of the owner and contractor.


Architects, engineers and construction professionals

14. How are construction professionals usually selected? Following selection, how are they then formally appointed?

Architects, engineers and other construction professionals who have licences and/or experience in the field are employed by architect firms, construction companies or consulting companies. In public projects, these companies are selected in principle through a formal tender process. In private projects, these companies or construction professionals are typically selected after the owner receives and reviews competitive quotes.

There is no difference between local and international projects.

15. What provisions of construction professionals' appointments are most heavily negotiated? Are liabilities commonly limited or capped in construction professionals' appointments?

Negotiated provisions

Provisions that are typically negotiated are those related to:

  • Defect liability.

  • The obligation to inspect the plans, ground and other conditions in advance.

  • Change order.

  • Force majeure and insurance.

  • Copyright.


There are usually no provisions on limitation of liabilities. There is no difference between local project and international project in this context.


Payment for construction work

16. What are the usual methods of payment for construction work? Are there ways for the contractor and consultants to secure payment or mitigate risks of non-payment under local law?

Methods of payment

Payments to contractors are usually made by bank wire transfer or instrument (tegata). Cheques are rarely used in Japan. Accordingly, the concept of joint cheque does not exist. Owners usually only make payments directly to the general contractor. On receipt of payment, the general contractor must pay subcontractors within certain legally mandated deadlines.

Securing payment

A contractor can have a statutory retention right (ryuchiken) until delivery of the work product to the owner. It is also possible to register a statutory lien (sakidoritokken) over the land on the real estate registry before starting construction.

The Construction Business Act and the Act against Delay in Payment of Subcontract Proceeds, Etc. protect subcontractors against any unreasonable delay of payment by the general contractor.



17. How do the parties typically manage their relationships with subcontractors?

A general contractor and a subcontractor will enter into a contractual agreement. Parties typically use the standard form contract published by Kyu- Shikai Rengou Yakkan (see Question 6).

Under Japanese law, the client (funder, owner) is not liable to pay a subcontractor directly.



18. What licences and other consents must contractors and construction professionals have to carry out local construction work? Are there any specific licensing requirements for international contractors and construction professionals?

A contractor must have a construction business licence (Construction Business Act (Kensetsugyou-hou)). An architect must have an architect licence (Act on Architects and Building Engineers (Kenchikushi-hou)). These licences are granted by the Minister of Land, Infrastructure, Transport and Tourism or the governor of the local government, depending on the type of licence.

There are no specific licensing requirements for international contractors and construction professionals. International contractors and professionals must comply with the same requirements as those governing domestic contractors and professionals.

To participate in bids for construction projects or procurement held by the national government or local governments, a construction company must be registered on a list prepared by the relevant government. To be registered, the relevant government must verify that certain requirements are fulfilled.

19. What licences and other consents must a project obtain?


In most cases, a building certification (that is, a confirmation of the building plan) must be obtained before construction. The owner is responsible for submitting the application for building certification. Typically, the architect or design firm will submit the application on behalf of the owner. Additionally, the owner must submit a notice of commencement of construction work to the governor of the relevant prefecture.


The owner must have the work inspected by the relevant local government authorities or a certified inspection organisation during the construction period after the completion of certain works specified in the law and local regulations. The owner must apply for building certification within four days after completion of these specified works. After the inspection is completed, a certificate of interim confirmation is issued, and the construction can be resumed.

On completion

A final inspection is required on completion of the construction of the building. The owner must apply for a building inspection within four days after completion of the work. If the building passes the inspection, a certificate of completion is issued.


Projects insurance

20. What types of insurance must be maintained by law? Are other non-compulsory types of insurance maintained under contract?

Compulsory insurance

A construction company must maintain labour insurance and social insurance. Labour insurance includes labour accident insurance. There is no difference between Japanese workers and foreign workers with respect to the availability and coverage of labour insurance.

Non-compulsory insurance

Under construction contracts, contractors often have the obligation to maintain:

  • Liability insurance against personal injury and property damage.

  • Fire insurance.

  • Automobile insurance.

  • Product liability insurance.

It may be possible to obtain single project insurance, depending on the type of insurance required.


Employment laws

21. What are the main requirements for hiring local and foreign workers?

Local workers

There are no specific requirements for hiring local workers for construction work.

Foreign workers

In principle, it is not possible to hire foreign nationals for construction work in Japan, except for foreign nationals who hold certain visas for specialised skills (such as engineers). However, in 2014, the Japanese Government changed its policy and temporarily liberalised the rules governing the ability of foreigners to be employed for construction work. This new system was implemented to address the construction demand arising from the Olympic Games (to be held in 2020). The new system is only applicable for the period between April 2015 and March 2021. Under the new system, a foreign worker who has completed practical education for three years in Japan can be employed for construction work in Japan for several years.

22. Which employment laws are relevant to projects?

The following laws are relevant to projects:

  • Labour Standard Act.

  • Minimum Wage Act.

  • Industrial Safety and Health Act.

23. Must an employer pay statutory redundancy or other payments at the end of a project? Are all employees eligible?

If an employee is hired for a specific limited period (that is, a contract worker), the employer does not need to make any payment at the end of this period.

To terminate the employment of full-time employees, an employer must:

  • Have a justified reason.

  • Make certain payments, in accordance with the applicable laws and work rules.


Health and safety

24. Which health and safety laws apply to projects?

The Industrial Safety and Health Act requires a company to:

  • Designate certain managers responsible for health and safety.

  • Take necessary measures to avoid accidents.

  • Provide health and safety training to its employees.

  • Provide certain required healthcare checks to its employees.

In addition, a construction company has several other obligations, such as installing and maintaining machinery and equipment that are necessary to rescue employees in the event of labour accidents and drilling to rescue employees in labour accidents.

General contractors must take measures to ensure that subcontractors comply with the Act. Failure to comply with the Act can be subject to penalties, which will depend on the nature of the breach (for example, a fine of up to JPY500,000, imprisonment for up to six months, and so on).

If a labour accident occurs, a company must compensate an employee. For example, a company must offer compensation for curing any injury and/or sickness and offer 60 days' salary if the employees cannot work due to the injury or sickness caused by the labour accident). In most cases, this compensation is covered by the labour insurance.


Environmental issues

25. Which local laws regulate projects' effects on the environment?


Under the Air Pollution Control Act, a contractor must not emit any specified gas or material (for example, soot and smoke), and volatile organic compounds, in amounts that exceed the specified limit. This Act also strictly regulates the procedure for certain construction work, including the dismantling of existing buildings containing asbestos. Additionally, there may be stricter regulations at the prefectural level.


Under the Water Pollution Control Act, a contractor must not emit wastewater that fails to comply with water quality standards. In addition, each prefecture may have stricter local regulations.

To discharge wastewater into a river, permission must be obtained from the manager of the river.


Under the Waste Disposal Treatment Act, waste materials produced during construction work must be disposed of in accordance with the Act. In particular, the disposal of waste materials that include asbestos is subject to a special procedure (which is specified in the Act).

Environmental impact assessments (EIAs)

Under the Environmental Impact Assessment Act and the Environmental Impact Assessment Local Regulation, an EIA must be conducted before the commencement of specified projects (for example, toll roads, railways, airports, electricity generation plants, development of residential areas, industrial parks, and so on), depending on the scale of the project, the output of electricity and other criteria.

Sustainable development

Under the Construction Material Recycling Law, contractors must recycle materials obtained through demolition of a project.

The noise and oscillation caused by construction works are also regulated under the Noise Control Act and the Oscillation Control Act.

26. Do new buildings need to meet carbon emissions or climate change targets?

Under the Act on Rationalisation of Use of Energy, Etc., contractors are subject to a "best efforts" obligation to save energy in accordance with the national standard for large scale buildings. The "net zero-energy building" is a recommended target, but not yet an obligation. Some local governments (for example, the Tokyo Metropolitan Government) also issued local regulations that require large scale offices to decrease carbon emissions.


Prohibiting corrupt practices

27. Are there any rules prohibiting corrupt business practices and bribery (particularly any rules targeting the projects sector)? What are the applicable civil or criminal penalties?


The Criminal Act prohibits providing and receiving bribery to and from a government official.

Under the Political Funds Control Act, a company can only make donations to certified political parties and their registered funding organisations, and cannot donate to individual politicians. This Act also imposes other restrictions on donations (for example, restrictions on the amount of donation made by the same person/company).


The following criminal penalties apply:

  • A person who provides a bribe can be subject to imprisonment for up to three years or to a fine of up to JPY2.5 million.

  • A person who receives a bribe can be subject to imprisonment for up to seven years.

  • A person who provides money for lobbying can be subject to imprisonment for up to one year or to a fine of up to JPY2.5 million.

  • A person who violates the Political Funds Control Law can be subject to imprisonment for up to three years or to a fine of up to JPY500,000.



28. What rights do the client and funder have on the contractor's bankruptcy or insolvency?

In the case of bankruptcy of the contractor, the bankruptcy trustee can decide whether to continue existing construction contracts (Bankruptcy Act). Although the owner typically has a contractual right to terminate the construction contract if the contractor becomes insolvent or bankrupt, the right of the bankruptcy trustee to continue or terminate the contract has priority. Therefore, if the bankruptcy trustee decides to continue an existing contract, the owner will not be able to exercise its contractual right to terminate. However, the owner can send a formal request to the bankruptcy trustee to indicate whether it wishes to terminate the construction contract. If the owner does not receive a response within a reasonable time, the contract is deemed to be terminated.



29. Are public private partnerships (PPPs) common in local construction projects? If so, which sectors commonly use PPPs?

PPPs are becoming more popular in Japan. In December 2015, the Japanese Government issued a guideline encouraging the ministries and the local governments to consider using PPP and private finance initiative models for public works, rather than other models. The sectors that use PPPs include:

  • Education (for example, schools).

  • Leisure (for example, stadiums).

  • Meetings, incentives, conferences and exhibitions.

  • Transportation (for example, airports).

  • Environment (for example, waste disposal pants, filtration plants, and so on).

  • Government offices.

  • Healthcare (for example, hospitals).

The Japanese Government requests the ministries and the local government of cities with populations of 200,000 or more to prepare regulations by the end of March 2017 prioritising PPP.

30. What local laws apply to PPPs?

The Act on Promotion of Private Finance Initiative (PFI) specifically provides the legal framework for PFI in Japan.

31. What is the typical procurement/tender process in a PPP transaction? Does the government or another body publish standard forms of PPP project agreement and related contracts?

The process in PPP transactions is governed by the:

  • General tender process provisions for public tenders, as specified in the Cabinet Order on Budgets, the Settlement of Accounts, and Accounting, the Local Autonomy Act, and the Act for Promoting Proper Tendering and Contracting for Public Works.

  • Act on Promotion of Private Finance Initiative (PFI Act).

The main stages of the tender process are as follows:

  • The relevant public authority publishes an outline of the project plan.

  • The public authority determines that the project will be conducted under the PFI Act.

  • The public authority publishes the tender documents, including information on the tender process and selection system, essential information on the project, contract forms, work requirements, monitoring system, draft agreements to be executed by the public authority and so on.

  • The public authority selects the winning bidder, taking into account both the price and the proposals submitted.

See Question 6 for details on standard forms of contracts.


Dispute resolution

32. Which are the most common formal dispute resolution methods used? Which courts and arbitration organisations deal with construction disputes?

Formal dispute resolution methods

Court litigation is the most common method used for resolving construction disputes.

In the case of international projects, arbitration or mediation under the rules of the Japan Commercial Arbitration Association (JCCA) are sometimes used as an alternative.

Courts and arbitration organisations

The Tokyo District Court and Osaka District Court have a separate department dedicated to construction disputes only. Members of these departments include construction specialists, from whom the court can obtain advice. At the outset of the litigation process, the court will often require the parties to try to resolve their dispute through a court-supervised conciliation (chotei) procedure.

The JCCA offers arbitration and mediation services to international parties ( (in English)).

The Committee for Adjustment of Construction Work Disputes offers the following dispute resolution services to domestic parties ( (in Japanese)):

  • Arbitration (chusai).

  • Mediation (assen).

  • Conciliation (chotei).

33. What are the most commonly used alternative dispute resolution (ADR) methods?

Conciliation at the Construction Dispute Resolution Board (kenchiku funsou shinsakai) , which is the ADR organisation established under the Construction Business Act, is the most popular form of ADR method for domestic construction disputes. In international construction disputes, arbitration under the rules of the Japan Commercial Arbitration Association may be the most common form of ADR method.

See also Question 32.



34. What are the main tax issues arising on projects?

The taxes arising on projects include:

  • Real estate acquisition tax (fudousan shutoku zei), which is imposed on the acquisition of land and buildings based on the purchase price, and is payable to the tax office of the prefecture in which the project is located.

  • Registration and licence tax (touroku menkyo zei), which is imposed on registration of ownership, use rights and security over real estate property, and is payable to the Government's Legal Affairs Bureau.

  • Fixed asset tax (kotei shisan zei), which is imposed on owners of real estate and payable to the city or municipality in which the project is located.

No acquisition tax is payable in the case of a newly constructed building, but registration and licence tax will be payable when the building is first registered by the contractor or first owner.

The amount of the registration and licence tax and fixed asset tax is calculated based on the assessed value of real estate property in the area (Rosenka), which is determined and published by the head of the National Tax Office. The Rosenka is updated every three years, reflecting the actual increase or decrease in value of real estate of the area. However, there is no tax that reflects the increase in land value following completion of a specific project. Additionally, there are no contributions imposed in order to fund infrastructure.

35. Are any methods commonly used to mitigate tax liability on projects? Are there any tax incentives to carry out regeneration projects?

Mitigating tax

Temporary reductions of real estate acquisition tax and registration tax are available to acquisitions by special purpose entities known as tokutei mokuteki kaisha (TMK) that meet certain requirements. These reductions will be applicable until 31 March 2017.

In addition, if real estate is acquired in the form of a trust beneficial interest:

  • Real estate acquisition tax will not be payable.

  • Registration tax will be significantly reduced.

It may be possible to reduce the amount of income tax liability of an entity owning a project if that entity is a TMK or if a GK-TK (godo kaisha - tokumei kumiai) structure is used, which can benefit from tax pass-through treatment in certain circumstances. However, a tax specialist should be consulted to confirm the availability of these tax benefits in any particular situation. See also Question 4 for further detail on available financing structures.

Tax incentives

Tax benefits and incentives include:

  • Green investment tax cuts, which reduce the tax applicable to renewable energy projects and emission limitation facilities of a certain scale.

  • Reduction of fixed asset property tax on newly built residential properties, especially for properties that obtained a certificate of residence in good condition for a long period.

  • Tax reductions for carrying out seismic reinforcement work and other renovation work on residential properties.

  • Tax reductions relating to the maintenance and regeneration of specific areas (for example, historical buildings).


Other requirements for international contractors

36. Are there any specific requirements that international contractors or construction professionals must comply with?

There are no particular requirements specifically applicable to international contractors or construction professionals because of their international nature.



37. Are there any proposals to reform construction and projects law? Are there any new legal or regulatory trends affecting projects?

Reform proposals

On 1 September 2016, several laws aimed at promoting the redevelopment of cities came into effect. The purposes of the changes are to enable the cities to compete with major foreign cities, and to encourage the redevelopment of local cities into more compact but active cities. Following the enactments, plans for the rehabilitation of several cities around Tokyo were approved and will be implemented.


See Questions 21, Foreign workers and 29.


Main construction organisations

National General Contractors Association of Japan

Main activities. This is a national organisation comprised of 47 local general contractors associations. Each local general contractors association provides seminars, training, employment networks, and so on.


Japan Federation of Construction Contractors

Main activities. The Federation carries out research activities and provides opinions, training and publications.


The Architectural Association of Japan

Main activities. This Association provides publications, seminars and training seminars.


Online resources

Ministry of Land, Infrastructure, Transport and Tourism (MLIT)


Description. The website of the MLIT (official and up to date) provides information concerning new trends, regulations, guidelines and practices.

Japan Regulations


Description. This is an official and up-to-date legal database maintained by the government.

Contributor profiles

Russell K Kawahara, Partner

Atsumi & Sakai

T +81 3 5501 1054
F +81 3 5501 2211

Professional qualifications. California, US, Attorney-at-Law, 1982; Japan, Registered Foreign Attorney (Gaikokuho Jimu Bengoshi), 2002

Areas of practice. Real estate; real estate finance; construction.

Non-professional qualifications. Juris Doctor, University of Chicago Law School; BA in Economics and History with Distinction, Stanford University

Recent transactions

  • Representation of corporate, financial institutions and investment funds in connection with cross-border real estate transactions, including:
    • construction, acquisitions and disposals of commercial, residential, retail, hotel, and resort properties;

    • secured financings structured as loans or TMK bond issuances;

    • joint ventures and investment structuring;

    • workout and distressed asset transactions; and

    • asset management issues.

  • Consistently ranked as one of the leading foreign real estate lawyers in Japan, including by Chambers Asia Pacific and Asialaw Profiles.

Languages. English, Japanese

Professional associations/memberships. State Bar of California; Dai-Ichi Tokyo Bar Association; Urban Land Institute, Japan Chapter (Executive Committee).


  • Construction and projects in Japan, Construction and Projects Global Guide 2015/16, Practical Law, (Thomson Reuters) (co-author)
  • Global Legal Insights - Corporate Real Estate, First Edition, Japan Chapter, Global Legal Group (2014) (co-author).
  • Real Estate Investment in Japan, Rechtshandbuch Immobilien Investitionen, chapter on Japanese real estate investment, Verlag C.H.Beck (2009) (co-author).

Miho Niunoya, Partner

Atsumi & Sakai

T +81 3 5501 1163
F +81 3 5501 2211

Professional qualifications. Japan, Attorney-at-Law (Bengoshi)

Areas of practice. Domestic and overseas construction; PPP; energy; project finance; resolution of construction disputes.

Non-professional qualifications. LLM, Northwestern University School of Law; LLB, Hitotsubashi University

Recent transactions

  • Advising on the construction of a large scale national hospital.
  • Advising clients in the meeting, incentive travel, convention and exhibition industry.
  • Advising clients on city development, various water supply and waste water treatment facilities, and waste disposal plants.
  • Advising on the development and mergers and acquisitions of various solar power facilities.
  • Dispute settlement relating to a power plant in a South East Asian country.
  • Awards consistently granted in the construction and energy areas by Chambers, Legal 500, IFLR, The Best Lawyers, and Asialaw Profiles.

Languages. English, Japanese

Professional associations/memberships. Tokyo Bar Association; Engineering and Consulting Firms Association, Japan; Housing Dispute Review Board Management Committee, Tokyo Bar Association.


  • Getting the Deal Through - Construction 2017, Japan Chapter, (Law Business Research Ltd) (co-author).
  • Getting the Deal Through - Public-Private Partnerships 2017, Japan Chapter, (Law Business Research Ltd) (co-author).
  • Construction and Projects in Japan, Construction and Projects Global Guide 2015/16, Practical Law, (Thomson Reuters) (co-author).
  • Recent Change of Regulations and Practice in Construction and Energy in Japan", LawyerIssue (2016).
  • Rapid growth in the Japanese PFI/PPP and infrastructure sector. Euromoney Yearbooks - Privatisation & Public Private Partnership Review 2013/14.
  • Euromoney Institutional Investor PLC (2013).

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