Japan's Consumer Policy 2009

This paper was originally written in 2008 and updated in 2009.

In Japan, consumer policy is increasingly important and has become a topic with an increasingly broad scope. Among a wide variety of policy areas related to consumers, this paper focuses upon certain consumer policies encompassing different goods, so as to avoid detailed discussions on specific goods.

This paper has four pillars: general consumer policy, protection of consumers from fraudulent sales, product safety, and dissemination of information to consumers. This means that any policy measure which focuses upon specific goods, such as housing, finance, medicine, medical services, transport, energy, food or electric appliances is not covered, regardless of the fact that consumers are important stakeholders in such a policy.

This is to give a simple overall picture of consumer policy to readers who have an interest in Japanese administration in general, and not to offer advice on specific regulations. This paper uses simple and clear expressions, and not necessarily legally correct terms. Those who wish to obtain information on each regulation for more specific purposes, such as for concluding contracts, should read the original regulations and guidelines, and not depend on this paper.

Japan experienced an increase in consumer problems during the 1950s and 1960s as its economy grew rapidly. Thus, several important steps were taken in terms of formulating consumer policy in 1960s, such as the establishment of the Installment Sales Act in 1961 and the Act against Unjustifiable Premiums and Misleading Representations in 1962.

Consumer policy has continued to develop since then. The Consumer Protection Fundamental Act, first legislated in 1968, was amended to become the Consumer Basic Act in 2004. In 1973, the Consumer Product Safety Law was legislated. An act to regulate door-to-door sales (first created in 1976), has been amended several times to include provisions over other sales transactions and become the Act on Specified Commercial Transactions. The Consumer Contract Act was legislated in 2000 with provisions on civil rules for relations between consumers and business enterprises.

1. General Consumer Policy
The Consumer Basic Act sets the basic framework for Japan's consumer policies. The Act also sets out the responsibilities of the government, local governments, business operators and consumers.

For example, the Act states that there is a discrepancy in quality and quantity of information and the negotiating power between consumers and business operators. It then states that consumer rights are respected as the basic concept of consumer policies. It also states that business enterprises must secure the safety of consumers and fairness in contracts with consumers, and provide necessary information to consumers in a clear and plain manner. *1

2. Protect Consumers from Fraudulent Sales
2.1 The Consumer Contract Act The Consumer Contract Act was legislated in 2000, setting civil rules on consumer contracts. A consumer contract is a contract between a consumer and a business operator, but it does not include a labor contract.

Under the Act, a consumer can cancel his or her will to conclude a contract under certain conditions. For example, a cancellation is possible if the consumer decided to conclude the contract because the seller had intentionally lied on an important matter or had failed to represent important disadvantageous facts to the consumer. Here, the "important matter" includes information on the goods such as quality and use, and conditions of the contract such as price and terms of payments. A cancellation is also possible if the consumer decided to conclude the contract because the seller had distressed the consumer either by refusing to leave the place despite having been told to go away, or by not allowing the consumer to leave the place.

The Act also includes a rule to nullify unfair provisions in consumer contracts. One example of such an unfair provision is a provision which exempts a business operator from liability to compensate damages to a consumer arising from the business operator's default.*2

In 2006, an amendment was made to the Consumer Contract Act to allow consumer organizations to file injunctions against inadequate business actions. Under the new provisions in the Act, a certified consumer organization can file lawsuits to stop a business operator's solicitation or provision of contracts that are disadvantageous to many consumers.

2.2 Act against Unjustifiable Premiums and Misleading Representations*3
The Act against Unjustifiable Premiums and Misleading Representations has provisions for administrative regulations. The Act aims at preventing inducement of customers by means of unjustifiable premiums and misleading representations.

The government may restrict the maximum value of a premium or the total amount of premiums under the Act. For example, the total amount of premiums that a business can offer is restricted to be within 2% of the expected total sales of the goods.*4

The act also contains regulations to prohibit misleading representations. For example, a seller is prohibited from making any representation by which the quality or standard of goods shown to general consumers are portrayed as being superior to the actual goods so as to unjustly induce customers to purchase. Any representation of price or trade terms of goods that is likely to be misunderstood by general consumers to be much more favorable than the reality is also prohibited.

If there is a violation of the restrictions or prohibited actions mentioned above, the government has the authority to order the entrepreneur concerned to cease the activities that are in violation of the law. The number of orders issued by the government under the Act against Unjustifiable Premiums and Misleading Representations increased between 2004 and 2007 as shown in Table 1.

Table1: Number of orders issued by the government under the Act against Unjustifiable Premiums and Misleading Representations*5

2.3 Act on Specified Commercial Transactions*6
The Act on Specified Commercial Transactions is an act that is frequently used to protect consumers from fraudulent sales. The Act has gone through several amendments to enlarge its mandates, as complaints from consumers have increased.

2.3.1 Categories of sales under the Act on Specified Commercial Transactions The major categories of sales covered by the Act are as follows:

(1) Door-To-Door Sales
Typical cases are those in which sellers conclude sales contracts in places other than a store, such as at the home of a consumer. It also includes cases in which sellers approach consumers somewhere outside of their stores, such as at roadsides, and take them into the stores where sales contracts would be concluded.

(2) Mail Order Sales
Mail Order Sales include cases in which consumers send their orders by postal mails and cases in which consumers send their orders by e-mail.

(3) Telemarketing Sales
Telemarketing Sales include cases where sellers make telephone calls to consumers and solicit them to conclude sales contracts.

(4) Multilevel marketing transactions
The legal definition is rather complicated, but one of the characteristics of Multilevel Marketing Transactions is what the Act calls as "specified profit," which is a transaction fee provided by another person engaged in the resale.

(5) Specified Continuous Service Offers
The services under this category are specified by a cabinet order. The cabinet order lists services relating to which a substantial number of complaints were filed by consumers. Offers of the following services with prices higher than 50,000 yen are provided for in the cabinet order:

• - Aesthetic services for a period longer than one month
• - Language education for a period longer than two months
• - Private teaching for a period longer than two months
• - Cram school for a period longer than two months
• - Personal computer school for a period longer than two months
• - Services to introduce marriage partners for a period longer than two months



(6) Business Opportunity Related Sales Transactions
An example of sales transaction under this category is sales of a PC by a seller who induces consumers to buy the PC by telling them that they may receive a profit by engaging in work using the PC.

2.3.2 Administrative regulations by the Act on Specified Commercial Transactions

The provisions of the Act on Specified Commercial Transactions can be categorized into administrative regulations and civil rules. Administrative regulations set a number of obligations and prohibitions applicable to businesses that sell goods (including services) to consumers. If a minister or a prefectural governor finds that a business has acted in contravention of the regulation, he/she can issue an order, including ordering the business to suspend operation.

For example, a door-to-door seller must clearly indicate to the person solicited, prior to the solicitation, the name of the seller, the fact that the purpose of the seller is to solicit a sales contract, and the type of the goods that are being sold. If a consumer says that he/she is willing to buy the goods, the seller must immediately deliver a document containing the details such as the price, the time and method of payment, the time of delivery, and additional matters stated in the cabinet order such as information on the cooling-off period. Such a seller is prohibited from misrepresenting information on matters such as quality, price, the time and method of payment and the time of delivery. Also, such a seller is prohibited from intimidating a consumer in order to make him/her conclude a sales contract.

In the case of Mail Order Sales, the Act has a number of provisions including those relating to advertisements. For example, a mail order seller must indicate information such as the selling price and the time and method of payment. Misleading advertisements that lead consumers into believing that a product is vastly better than it is in reality are prohibited. The Act also has provisions on advertisements by e-mails.

The Act also has provisions to prevent fraudulent sales in other categories of sales transactions.

The government has been strengthening enforcement of the Act both by itself and through the actions of local governments to which the enforcement authority of a number of provisions has been delegated. The government has been encouraging local governments to step up their enforcement activities by trainings of local administrators and sending out messages to encourage enforcement of the Act. Thus, orders to suspend businesses and other administrative orders under the Act increased between 2003 and 2007, as shown in Table 2. The number slightly decreased in 2008.

Table 2. Number of enforcements of administrative regulations stated in the Act on Specified Commercial Transactions

Year	FY 2003		FY 2004		FY 2005		FY 2006		FY 2007
Total orders	26		40		80		84		180
Type of orders	A*	B**	A*	B**	A*	B**	A*	B**	A*	B**
by METI	0	7	10	6	22	13	25	5	34	6
By local governments	0	19	0	24	3	42	11	43	79	61
(note) A  *: Orders to suspend businesses             B **: Other administrative orders

The Act also has provisions on punishment for violation of its regulations, such as imprisonment and fines. When needed, the government sometimes discloses violations of the regulations to the police, who enforce punishment.

2.3.3 Civil rules in the Act on Specified Commercial Transactions
The Act has provisions on civil rules. The most commonly used provisions are those on cooling-off periods.

For example, in the case of Door-To Door Sales, Telemarketing Sales or Specified Continuous Service Offers, a consumer may withdraw his/her application for a sales contract or rescind such a sales contract within 8 days from the date on which he/she received a document containing the details of the sales, which is mentioned in 2.2.2. However, there are some goods for which cooling-off cannot be applied.

In the case of Multilevel Marketing Transactions and Business Opportunity Related Sales Transactions, the cooling-off period is longer; 20 days. There is no provision for cooling-off in the case of Mail Order Sales.

2.3.4 Amendments of the Act on Specified Commercial Transactions and the Installment Sales Act
In recent years, an increasing number of consumers, especially elderly consumers, have become victims of fraudulent sales such as Door-To-Door Sales using high-pressure tactics. In many of these cases, consumers were forced to sign contracts to purchase large amounts of goods, and credit companies issued credits to be used for such purchases. Also, as Internet-based marketing and sales grow rapidly, trouble has also increased.

Thus, amendments were made to the Act on Specified Commercial Transactions and the Installment Sales Act in 2008. The Installment Sales Act is an act that has provisions to regulate sales credits. The outline of the amendments is described in the Annex 1.

3. Product Safety

3.1 Reporting of Serious Accidents


In order to prevent serious accidents associated with consumer products, Consumer Product Safety Law*7 requires reporting on such accidents. Any manufacturer or importer of a consumer product, who becomes aware of a serious accident that has occurred while a consumer is using its product, is obliged by law to report the incident to the government. This requirement covers all consumer products except automobiles, medicine and other products that are regulated by other laws and rules. "Serious accidents" include accidents causing death, amputation of body parts, carbon monoxide poising and fires, etc.*8

The information on accidents thus obtained is publicized through the website of the government on product safety in Japanese*9. When necessary, the Minister may order manufacturers or importers to recall products in order to prevent further accidents.

Retailers and persons engaged in the repair and installation of consumer products who obtain information on a serious accident associated with the product are to notify manufacturers or importers of such a product. Retailers/distributors should cooperate with the manufacturer or importer in order to prevent further accidents in the case of a product recall ordered pursuant to the Law.

3.2 Safety Measures on Accidents by Age-related Deterioration of Consumer Products
Amendments were made to the Consumer Product Safety Law for the enhancement of safety measures concerning age-related deterioration of consumer products in November 2007. The amendments, which took effect in April 2009, introduced a maintenance support system for products used over the long term. The outline of the amendments is described in Annex 2.*10

4. Disseminating Information to Consumers
Consumers are likely to have less information than businesses, which tends to create disadvantages on the part of consumers. Thus, the government has made an effort to provide information to consumers, as an important part of its consumer policy. In order to make sure that information reaches consumers effectively, it is necessary to be aware of the fact that most consumers do not have enough knowledge or time to digest large amounts of information, giving rise to the need for this information to be translated into layman's terms. Thus, a number of institutions collaborate to provide appropriate information to consumers in accessible ways.

The Cabinet Office has provided information to consumers through its website. It also has implemented several programs, such as dispatching experts in consumer education, and engaging in activities known as "Consumer Month" every May*11. From September 2009, these activities are undertaken by the Consumers Affairs Agency.

The National Consumer Affairs Center of Japan (NCAC) provides information useful to consumers through its website*12. NCAC works as the core of a network of consumer centers run by local governments across Japan. NCAC gathers information from the consumer centers, analyzes it, and publicizes it to consumers. In addition to its website, it issues publications including a monthly magazine called "Kokumin Seikatsu," in which information such as recent consumer problems and policy measures are publicized in Japanese*13.

Other Ministries also have websites for consumers. For example, the Ministry of Economy, Trade and Industry (METI) has websites for product safety*14 and for preventing consumer fraud*15, both in Japanese. METI also distributes leaflets, sometimes in collaboration with consumer organizations.

In the area of product safety, the National Institute of Technology and Evaluation (NITE) collects information on accidents, conducts product safety testing, and transmits the data to consumers and businesses*16. NITE has a website to provide information including recent accidents, recall and other company announcements related to product safety*17. NITE also issues periodical publications in Japanese which contain technical analysis and some product safety testing results*18.

Figure 1 shows a section of a leaflet on product safety for children created by METI and translated into English by NITE.

Figure 1:

Local governments play an important role in providing information to consumers and their consumer policy sections sometimes collaborate with other sections such as welfare and education. For example, the Tokyo Metropolitan Government is enthusiastic about providing a variety of interesting content for consumers on its website*19.

The Consumers Affairs Agency and Consumer Commission were created on 1 September 2009*20. Their creation has changed jurisdictions of government offices. For example, the Act against Unjustifiable Premiums and Misleading representations was under the jurisdiction of the Fair Trade Commission, and the Act on Specified Commercial Transactions was under the jurisdiction of the Ministry of Economy, Trade and Industry (METI) till August 2009. From September 2009, they are under the jurisdiction of the newly created Consumer Affairs Agency. Information on accidents related to consumer goods, which used to be publicized by each ministry in charge of the industry producing such goods, is now publicized by the Consumer Affairs Agency.

Official discussions for the creation of the Consumers Affairs Agency started in 2008, when Prime Minister Fukuda announced that he was determined to build a powerful organization for administration within the Government for consumers, and inaugurated the Council for Promoting Consumer Policy to discuss the matter*21. The Diet discussed the matter in spring of 2009, and decided upon the creation of the new agency.

Shortly after the creation of the Consumer Affairs Agency, a new administration was established by Prime Minister Hatoyama on 16 September 2009. Consumer policy remains important under the Hatoyama administration. In his Policy Speech at the Diet in October, he mentioned consumers' perspective as follows;

Annex 1. Amendments to the Act on Specified Commercial Transactions and the Installment Sales Act

The amendments to the Act on Specified Commercial Transactions and the Installment Sales Act passed the Diet in June 2008, and most of the amendments were enacted in December 2009. The amendments cover many points and those mentioned below are just some examples of the amended matters*23.

1. Plugging of legal loopholes

The new Acts are applicable on a wider scale. For example, the previous provisions on Door-To-Door Sales were applicable only to those goods listed in the cabinet order. Although the list was quite extensive, malicious sellers found legal loopholes to avoid regulations by selling new goods not yet included in the list. The new cabinet order created negative lists; for example, cooling-off periods would not be applicable to sales of funeral services. Under the new regulation, new goods are regulated until any strong case of inconvenience about the regulation is found and the goods are included in the negative list.

Provisions on installment sales were also amended to add applicable cases. The previous Installment Sales Act applied only when the payments involved more than three installments. The new Act may be applied to cases when a consumer pays only once or twice as long as the last payment is to be made more than two months after the purchase.

2. Strengthening regulation on Door-To-Door Sales

The amendment forbids a door-to-door seller to solicit again within certain period of time once the consumer expresses his/her refusal to the solicitation.

Also, if a consumer concludes a contract with a door-to-door seller to purchase an excessive amount of goods, much more than the amount which a consumer normally needs, the amended Act allows the consumer to cancel the contract during the one year period after its conclusion, except in cases where a consumer has had a special reason to conclude such contract.

3. Strengthening regulation on consumer sales credit

In Japan, two types of consumer credits are often used for sales activities; credit cards and "individual credit" in which credit companies provide credit to consumers on a case by case basis. The credit card companies have been required to be registered to the government, but the "individual credit" companies were not and were often used by malicious sellers. Thus, the new Installment Sales Act requires "individual credit" companies to be registered, and forbids them to provide credit for consumer contracts resulting from solicitation forbidden by the Act on Specified Commercial Transactions such as solicitation by door-to-door sellers telling lies to consumers. If a consumer cancels a contract with a door-to-door seller because the seller lied to him/her, he/she can also cancel his/her credit contract and ask the credit company to pay back the amount that he/she has already paid.

Also both credit card businesses and "individual credit" businesses are forbidden to provide excessive amounts of credit to a consumer, which surpasses his/her ability to repay the debt.

4. Strengthening regulation on Mail Order Sales including Internet sales

The new Act on Specified Commercial Transactions set a default rule for returning goods for refund: if conditions for returning goods are not clearly specified in the advertisement, a consumer can return the item that he/she purchased within 8 days. In this case, the consumer is responsible for shipment costs.

Also, the new Act changed the regulation for sending e-mail advertisements from opt-out to opt-in: an e-mail for advertisement can not be sent to a consumer unless the consumer has asked for such an e-mail to be sent.

The new Installment Sales Act strengthened regulations to protect information on credit cards.

Annex 2. Amendments to the Consumer Product Safety Law for the enhancement of safety measures concerning age-related deterioration

In relation to the abovementioned amendments, products are divided into two categories, each of which has its own regulation system, as explained below.

1. The Long-term Use Consumer Product Safety Inspection System

The products to be regulated under this system include the following;

1. Those using petroleum
      Water heaters
      Bathtub water heating units
      FF hot air-expelling heaters
2. Those using gas
      Water heating units (indoor installation)
      Bath water heaters (indoor installation)
3. Those using electricity
      Built-in dishwashers
      Bathroom dryers

The potential risk of these products causing serious accidents as a result of aging is relatively high. Therefore, the manufacturers and importers of such products are required to provide maintenance information for consumers as appropriate and to set up a system to offer inspections. Those who purchase one of the products mentioned above submit user registration to the manufacturer or the importer, and when the standard period of use considered in the design of the product approaches its end, the manufacturer or importer must notify the owners of the product*24.

2. The Long-term Use Consumer Product Safety Indication System

The products included in this category are electric fans, ventilators, air conditioners, CRT televisions and washing machines. There are certain risks of these products causing accidents as a result of aging, but the seriousness is not as high as for those in the first category. Thus, the manufacturers and importers of such products are required to indicate the standard period of use considered in the design of the products.