# Statutory Interest Rates in Japan　2023

Mar 08, 2023

1. Basic Rules Regarding Statutory Interest Rates in Japan

Article 404 of the Civil Code stipulates that the interest rate based on the statutory interest rate shall apply to claims that accrue interest if no declaration of intent is made, and the statutory interest rate is 3% per year. However, Paragraph 3 of the same article stipulates that the statutory interest rate is subject to change every three years, and the Ministry of Justice ordinance defines the criteria for this change. Therefore, it is necessary to investigate the fluctuation system to see what the statutory interest rate will be in the future.

Ministry of Justice: Law Amending a Portion of the Civil Code (Amendment of the Law of Obligations)
https://www.moj.go.jp/MINJI/minji06_001070000.html
ChatGPT summary of key points

The statutory interest rate in the Civil Code is set at 3% per annum from April 1, 2021, and will be reviewed every three years.

The statutory interest rate varies according to the average interest rate calculated for each period, called the base rate.

The base rate is the average of the average interest rates on short-term loans for the five-year period from January of the year six years prior to the year in which each term begins to December of the year two years prior, and is announced in the Official Gazette by the Minister of Justice at least one year before the first day of each term.

The change in the statutory interest rate will be made when the rate changes by 1% or more from the base rate occur, corresponding to the change in the base rate (with fractions of less than 1% rounded down).

The base rate for the second period (from April 1, 2005 to March 31, 2026) is notified as 0.5% per annum. The base rate for the first period was 0.7% per year.

2. statutory interest rate for the second period

Statutory interest rate until March 31, 2020 = 5% per annum

Statutory interest rate from April 1, 2020 to March 31, 2023 = 3% per annum

Statutory interest rate from April 1, 2023 to March 31, 2026 = 3% per annum

Statutory interest rate on and after April 1, 2026 ⇒ Undetermined (subject to change)

（法定利率）
(Statutory Interest Rate)

Article 404(1)Unless the parties manifest a particular intention with respect to a claim which bears interest, the rate of the interest is the statutory interest rate as of the time when the interest first accrues.

(2)The statutory interest rate is 3% per annum.

(3)Notwithstanding the provisions of the preceding paragraph, pursuant to the provisions of Ministry of Justice Order, the statutory interest rate is to change pursuant to the provisions of the following paragraph for each term consisting of three years.

(4)The statutory interest rate for each term is the rate calculated by adding or deducting the rate equivalent to the difference between the benchmark rate for the most recent term during which there was a change in the statutory interest rate pursuant to the provisions of this paragraph (hereinafter referred to as the “most recent term of change” in this paragraph) and the benchmark rate for the current term (any part of the ratio which is less than 1% is disregarded), to or from the statutory interest rate for the most recent term of change.

(5)The term “benchmark rate” prescribed in the preceding paragraph means the rate announced by the Minister of Justice as the rate calculated by dividing, by 60, the sum of the average interest rate for short-term loans for each month (meaning the average of the interest rates for loans (limited to loans for a term of less than one year) extended by banks in each month)) during the period from January of the year six years prior to the year which contains the first day of each term to December of the year two years prior to the year which contains the first date of each term (any part of the rate which is less than 0.1% is disregarded), pursuant to the provisions of Ministry of Justice Order.