Key Aspects of Japan’s Civil Code Reform Enacted in April 2020″

Hello everyone! From the perspective of an administrative scrivener, I will explain the key points of the Civil Code reform enacted in April 2020.

This reform modifies the core parts of the Civil Code established in the late 19th century, with particular attention to four major discussion points.

  1. Review of the Statute of Limitations for Obligations

Before the amendment, the statute of limitations for general obligations was 10 years, and for commercial obligations, it was 5 years. However, this was based on medieval European customs and did not entirely fit with modern Japan. Under the new system, the statute of limitations is set to 5 years from the time the right is known or 10 years from when the right can be exercised (20 years for personal injury compensation), making it a more rational framework.

  1. Revision of the Legal Interest Rate

The legal interest rate is used when no interest rate is set between parties. Previously, the rate was set at 5% for civil cases and 6% for commercial cases, which was excessively high given current market standards.

Therefore, with this amendment, both civil and commercial rates have been unified at 3%, with a review every three years in line with market interest rate fluctuations.

  1. Strengthening the Guarantee System Regulations

There were many cases where individuals became guarantors for business loans at the request of small and medium enterprise owners, leading to bankruptcy or suicide.

As a result, strict regulations on personal guarantees for business loans have been introduced, requiring confirmation by a notary public to ensure the guarantor understands the risks involved.

  1. Introduction of Rules for Standard Contract Terms

Previously, Japan lacked clear rules for contract terms unilaterally set in consumer contracts and others.

With the amendment, rules have been established to protect users, such as negating the effect of unfair terms.

That’s all for the key points, narrowed down to four. For more details, please see the materials provided by the Ministry of Justice.

Author: Administrative Scrivener Mitsuo Nakamura (Tokyo Administrative Scriveners Association)