REGULATORY INSIGHT

Transaction records under Japan's revised Subcontract Act (Toriteki Act) — the 18 items of Article 7, and records that show price talks took place

22 October 2026

Who has to show what, and from when

On 1 January 2026, Japan’s Subcontract Act became the Act on Preventing Delay in Payment to Small and Medium-sized Contractors in Manufacturing Consignment, etc. — the Toriteki Act. The commissioning business must specify the terms in writing or electronically when placing an order (Article 4) and must record the course of each transaction and keep that record for two years (Article 7). The old “Article 3 document” and “Article 5 records” carry over under new article numbers.

The scope has widened. A headcount test now sits alongside the capital test (for manufacturing and similar consignments, a commissioning party with more than 300 employees dealing with a contractor of 300 or fewer; for other services and similar, more than 100 and 100 or fewer). A commissioning business with little capital but many employees can now be caught. Japanese subsidiaries of overseas groups, which are often thinly capitalised, should check where they now fall. Consignment of the carriage of goods by the shipper has also been brought in.

Enforcement is under way. Since September 2026 recommendations have been issued applying the new Act, and in October one was published for late payment by way of promissory notes.

What the Act and rules set out

• Terms to be specified (Article 4): names of the parties, date of consignment, description of the work, date and place of delivery, price, payment date and so on. Electronic means may be used without the contractor’s consent, but a paper document must be given on request
• Items to be recorded (Article 7 and rules): 18 items, including the date and content of delivery received, inspection results, changes and redoing of work with reasons, increases or decreases in price with reasons, and the amount, date and means of payment, and late-payment interest
• Retention: two years. Failing to create or keep records, or creating false records, is subject to criminal penalty, with corporate liability
• Promissory notes: no longer usable for orders placed on or after 1 January 2026. Electronically recorded claims and similar that cannot readily be turned into cash by the due date are treated, in principle, as late payment
• Setting prices without consultation (Article 5(2)(iv)): where a contractor asks to discuss price, setting the price without engaging in consultation or giving the necessary explanation is prohibited. Leaving a price unchanged counts as setting it, just as raising or lowering it does

Where it gets difficult in practice

1. The Article 7 items span ordering, receiving, inspection and payment. Where the purchasing system, inspection records and payment data sit apart, assembling all 18 items for a single transaction takes time, and something goes missing
2. The course of price consultations is not among the Article 7 items listed in the JFTC seminar materials. Yet it is the commissioning business that will need to show that it consulted and gave the necessary explanation. Unless requests, responses and supporting material are kept and linked to the transaction record, a decision to hold a price can look like a unilateral one
3. The headcount test turns on the contractor’s regular employees. Numbers change after the relationship begins, and the application of the Act with them, so when and on what basis the test was applied needs to be kept
4. Orders placed up to December 2025 remain under the old Act. In transitional dealings, records have to distinguish, by order date, which Act and which provision they serve

Carry it by hand, or build it in

There are two ways to meet a requirement like this. One is to carry it by hand: write the procedures and have people check and record. The other is to build in a mechanism that leaves the record you will be asked for as a matter of course.

The first is quicker to start, but it breaks down as the procedures and the people involved multiply. Exceptions accumulate, the granularity of the record drifts, and you lose the ability to establish the scope afterwards. The second puts the design effort up front, but keeps you able to check after the event.

We research and develop technology that carries conformity with regulation as a mechanism rather than as manual routine, and we hold the results as patent applications. See Domains for more.

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