The Japan Fair Trade Commission has announced that, from 1 January 2026, the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (the "Subcontract Act") became the Act on Prevention of Delay in Payment, etc. to Small and Medium-sized Entrusted Business Operators in Manufacturing and Other Entrustment (abbreviated in Japanese as the "Toritekihou").
This article sets out what the JFTC published, together with the statutory text as confirmed on the e-Gov law database. It contains no legal assessment or advice from this firm.
Background
The amending act is the "Act Partially Amending the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors and the Act on the Promotion of Subcontracting Small and Medium-sized Enterprises". According to the announcement it was enacted on 16 May 2025, promulgated on 23 May 2025, and took effect on 1 January 2026.
The e-Gov database likewise records the enforcement date as 1 January 2026 and the same amending act.
The name and the terminology changed
| Item | Before | After |
|---|---|---|
| Name of the act | Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors | Act on Prevention of Delay in Payment, etc. to Small and Medium-sized Entrusted Business Operators in Manufacturing and Other Entrustment |
| Entrusting side | Parent business operator | Entrusting business operator |
| Entrusted side | Subcontractor | Small and medium-sized entrusted business operator |
| Consideration | Subcontract proceeds | Manufacturing-entrustment consideration |
The change in terminology is visible in the text. Article 4 begins "Where an entrusting business operator has made a manufacturing entrustment, etc. to a small and medium-sized entrusted business operator", and Article 5 is headed "Matters to be observed by entrusting business operators".
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Try for free →Points of the amendment as published by the JFTC
The JFTC lists the following points.
・Addition of an employee-number criterion to the scope of application ・Addition of specified transport entrustment to the covered transactions ・Prohibition of unilateral determination of consideration without appropriate consultation ・Prohibition of payment by promissory note and similar means ・Strengthening of enforcement across ministries (guidance and advice by the competent ministry)
How the prohibition on promissory notes reads
Article 5, paragraph 1, item 2 provides:
"(ii) failing to pay the manufacturing-entrustment consideration after the payment due date has passed (including issuing a promissory note, or using a means of payment other than money or a promissory note that is difficult to exchange for money equivalent to the amount of the consideration by the payment due date, in respect of payment of that consideration)."
The text expressly treats the use of a payment means that cannot readily be exchanged for the full amount in cash by the due date as a failure to pay.
Specified transport entrustment
The main clause of Article 5, paragraph 1 contains a parenthetical excluding items 1 and 4 "where a service entrustment or a specified transport entrustment has been made", confirming on the face of the text that specified transport entrustment falls within the covered transactions.
Disclosure obligation
Article 4 requires an entrusting business operator, immediately upon making a manufacturing entrustment, etc., to disclose in writing or by electromagnic means the content of the entrusted party's deliverable, the amount of the consideration, the payment due date and method, and other matters, as prescribed by JFTC rules.
Where disclosure was made by electromagnetic means and the entrusted party requests a written document, it must be delivered without delay (Article 4, paragraph 2).
Conduct prohibited by Article 5, paragraph 1
As set out in the text:
(i) refusing to receive the deliverable without cause attributable to the entrusted party (ii) failing to pay the consideration after the due date (including issuing a promissory note, etc.) (iii) reducing the amount of the consideration without cause attributable to the entrusted party (iv) requiring the entrusted party to take back goods after receipt, without cause attributable to it (v) unfairly setting a consideration markedly lower than that ordinarily paid for the same or similar deliverables (vi) compelling the purchase of designated goods or the use of designated services, absent a legitimate reason (vii) reducing the volume of transactions, suspending transactions, or otherwise treating the entrusted party disadvantageously because it reported a violation to the JFTC or others
Primary sources
・Japan Fair Trade Commission, "Small and Medium-sized Entrusted Business Transaction Optimization Act" https://www.jftc.go.jp/partnership_package/toritekihou.html
・e-Gov, Act on Prevention of Delay in Payment, etc. to Small and Medium-sized Entrusted Business Operators in Manufacturing and Other Entrustment (Act No. 120 of 1956) https://laws.e-gov.go.jp/law/331AC0000000120
About this article
This article summarises information published by a Japanese government body, compiled by our editorial team. It has not been reviewed by an attorney and contains no legal assessment or advice on any specific matter. Please contact us for advice on a particular case.
