Japanese Internet Law and Electronic Commerce

The use of the internet and electronic commerce in Japan has expanded quickly to consumer transactions as well as business transactions.  In the past several years, many businesses are conducting sales through the Internet.  These include sellers selling directly to their customers as well as resellers. Contracts are entered over the Internet, while payments may be made off-line through credit card or bank transfers.

There has been some resistance to e-commerce in Japan due to the fear of fraud by internet sellers and the fear of theft of personal financial data as well as the general concern about the quality of goods sold over the internet.  The government has taken certain measures to promote e-commerce by reassuring consumers.
Despite initial resistance, automobiles are now sold over the Internet in Japan.  Japanese lawmakers have decided to promote the Internet and e-commerce as a means to revitalize Japan's economy, to accelerate business reform, and to challenge American domination of the internet.

Massive public works spending on fiber optics networks has been undertaken and changes have been adopted to eliminate barriers to internet usage and e-commerce in Japan.  In 2000, Japan passed the E-Notification Law which amended a myriad of laws to facilitate e-business.  The Digital Signatures Act was passed to further aid e-commerce transactions. 

Basic Privacy Law
The Basic Privacy Law established basic principles of consumer privacy to restrict unintended usage of and access to personal information by businesses. Laws regarding telecommunications and personal credit information clarify prior laws in these areas.

Ecommerce Contracts Law
The Ecommerce Contracts Law clarifies that internet contracts become effective only when the contracts are received, not when they are sent.  Buyers have the right to reject an online purchase prior to receiving email confirmation of the sale rather than being bound when the seller confirms by email or other means. 

The Law Pertaining to Installment Sales removes a prohibition on cardless internet purchases.  As a security measures, consumers may purchase products online by inputting brief ID numbers instead of divulging full credit card numbers.

Digital Signatures
The Law Pertaining to Digital Signatures and Certification Services ( effective in 2001) provides a procedure under which a business can obtain government approval to certify that certain electronic documents represent the intent of the signer and have the same legal effect as a hand-signed document.  Accreditation may be granted by the government ministry or by an investigating organization designated by the ministry.

Certain problems still impede the broad entry into e-commerce.  The cost of setting up a domain in Japan with a ".co.jp" address for a foreign entity without an address in Japan can be quite expensive. This barrier to entry has slowed smaller foreign businesses from entering the Japanese market.  Although Japanese consumers have the ability to buy from a ".com" website,  some Japanese consumers are deterred by the lack of a Japanese commercial identity because they prefer to deal with firms in Japan in order to avoid credit and delivery concerns associated with a foreign business.

Electronic Money
Electronic money or E money according to Japan’s Ministry of Finance (MOF) is a mechanism for settlement through the transfer of an electronic record issued according to funds paid by a user.  Various private E money initiatives have been started, including projects involving Visa and MasterCard in alliance with Japanese banks and a venture involving Sony, NTT Docomo and Toyota which enable consumers to pay for purchases of up to 50,000 yen online.  However, a universal national E money standard has not emerged from the many schemes.

Japan has not yet formalized intellectual property laws, including copyright and patent laws to encourage broad protections over internet usage.  When passed, these laws will encourage greater usage of the internet and e-commerce in Japan.
It is essential for Japan to adopt modern laws to enable it to advance to a leadership role in information technology in similar fashion to India and Singapore.  The current reform movement needs to be completed rapidly by the government to improve opportunities for rapid expansion of Japanese and international business in the internet and e-commerce in Japan.

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