On 30 October 2026 the Japan Fair Trade Commission (JFTC) announced that it had issued a recommendation to Nikko Co., Ltd. under Article 7(2) of the pre-amendment Subcontract Act. The company had deducted amounts from payments due to its subcontractors under the label of "discounts", which was found to violate the prohibition on reducing subcontract payments.
This page summarises the JFTC press release and the attached announcement, summary diagram, statutory extracts and recommendation.
Overview
| Item | Details |
|---|---|
| Date announced | 30 October 2026 |
| Announced by | Japan Fair Trade Commission |
| Company | Nikko Co., Ltd. (head office: Yao, Osaka) |
| Business | Manufacture and sale of bolts and similar products used in construction machinery, automobiles, power generation equipment and so on |
| Stated capital | JPY 30 million |
| Legal basis of the recommendation | Article 7(2) of the pre-amendment Subcontract Act (applied as before under Article 2(2) of the Supplementary Provisions of the amending Act) |
| Provision violated | Article 4(1)(iii) of the pre-amendment Subcontract Act (prohibition of reducing subcontract payments) |
| Subcontractors affected | 16 |
| Amount deducted | JPY 17,128,945 in total |
| Period of deductions | December 2024 to December 2025 |
| Repayment | Full amount paid on 5 October 2026 |
Facts of the violation
According to the "Reasons" section of the recommendation, between November 2024 and November 2025 Nikko entrusted 16 subcontractors with manufacturing bolts and similar products that it sells. At the time, Nikko was a corporation with stated capital of more than JPY 10 million and not more than JPY 300 million, and the 16 subcontractors were individuals or corporations with stated capital of JPY 10 million or less.
Between December 2024 and December 2025, in order to secure its own profits, Nikko deducted a total of JPY 17,128,945 from the payments for these entrustments, calculated by applying a fixed rate to the amounts and by similar methods, under the label of "discounts".
On 5 October 2026 Nikko paid the 16 subcontractors the full JPY 17,128,945 it had deducted.
The recommendation states that Nikko reduced subcontract payments without any reason attributable to the subcontractors, which falls under Article 4(1)(iii) of the pre-amendment Subcontract Act and violates that paragraph.
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Try for free →Background described in the published materials
The JFTC's summary diagram of the recommendation states the following:
- Nikko began the deductions about 20 years ago, when it changed its means of payment from promissory notes to cash
- Under the Subcontract Act, where payment was switched temporarily from promissory notes to cash at the subcontractor's request, deducting an amount equivalent to short-term borrowing interest ("interest deduction") had been permitted
- In this case, however, the company had continued paying in cash for a long period after the switch, so it was not a temporary change
- Under the Toritekihou, payment by promissory note is prohibited, so such interest deductions are not permitted
The same diagram explains that a reduction of subcontract payments violates Article 4(1)(iii) of the pre-amendment Act regardless of its label (discount, sponsorship fee, deduction and the like), method or amount, and even if the subcontractor agreed to it.
Content of the recommendation
The recommendation requires Nikko to:
- Confirm by board resolution that
- - deducting from subcontract payments amounts calculated by applying a fixed rate and similar methods, to secure its own profits, falls under Article 4(1)(iii) of the pre-amendment Subcontract Act and violates that paragraph; and
- - it will not in future reduce payments for manufacturing entrustments without a reason attributable to the small and medium-sized contractor
- Take the measures necessary to improve its internal systems, such as providing Toritekihou training to its purchasing staff, so that it does not reduce such payments in future
- Make its officers and employees fully aware of the fact that it received the recommendation, the content of the recommendation (excluding the appended table), and the measures taken under items 1 and 2
- Notify its small and medium-sized contractors of the fact that it received the recommendation, the content of the recommendation (excluding the appended table), and the measures taken under items 1 to 3
- Report promptly to the JFTC the measures taken under items 1 to 4
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Statutory wording
According to the statutory extracts in the published materials, Article 4(1) of the pre-amendment Subcontract Act provides that a parent business operator that has entrusted manufacturing or other work to a subcontractor must not engage in the acts listed, and item (iii) lists "reducing the amount of the subcontract payment without any reason attributable to the subcontractor".
Article 7(2) of the pre-amendment Act provides that, where the JFTC finds that a parent business operator has engaged in any of the acts listed in Article 4(1)(iii) to (vi), it is to recommend that the operator promptly pay the amount reduced or take other necessary measures.
Under the current Toritekihou (the Act on Preventing Delay in Payment of Consideration to Small and Medium-sized Contractors for Manufacturing Entrustment and Other Work), Article 5(1) provides that a commissioning business operator that has entrusted manufacturing or other work to a small and medium-sized contractor must not engage in the acts listed, and item (iii) lists "reducing the amount of the payment for the manufacturing entrustment or other work without any reason attributable to the small and medium-sized contractor".
Item (ii) of the same paragraph lists failing to pay the payment after its due date, and states in parentheses that this includes delivering a promissory note in payment.
As to recommendations, Article 10(1) of the current Toritekihou provides that, where the JFTC finds an act violating Article 5, it is to recommend that the violating commissioning business operator pay the amount reduced or take other necessary measures.
Which law applies
According to a note in the announcement, the Subcontract Act was amended by Act No. 41 of 2025 and became the Toritekihou. The announcement explains that the pre-amendment Subcontract Act applies to manufacturing entrustments made up to December 2025, and the Toritekihou applies to those made from January 2026.
The published materials set out the following correspondence of terms:
| Pre-amendment Subcontract Act | Toritekihou |
|---|---|
| Subcontract payment | Payment for manufacturing entrustment or other work |
| Parent business operator | Commissioning business operator |
| Subcontractor | Small and medium-sized contractor |
Sources
- JFTC, "Recommendation to Nikko Co., Ltd." (30 October 2026, Japanese) https://www.jftc.go.jp/houdou/pressrelease/2026/oct/261030_kinki_toriteki.html
- JFTC, announcement, summary, statutory extracts and recommendation (PDF, Japanese) https://www.jftc.go.jp/houdou/pressrelease/2026/oct/261030_kinki_toriteki.pdf
- e-Gov Law Search, Act No. 120 of 1956 (Toritekihou, Japanese) https://laws.e-gov.go.jp/law/331AC0000000120
This page is compiled from material published by government agencies and from statutory text. Please consult a lawyer where a decision is needed on a specific matter.
