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How Japanese authorities are responding to COVID-19

May 06, 2020

How Japanese authorities are responding to COVID-19

The impact of COVID-19 has affected both individuals and companies alike. Many are faced with contract termination and difficulties in meeting agreed obligations. While the ultimate decider is the court, the judicial system is currently unable to meet the demands.  Under normal circumstances, the DIET would form solutions for problems caused by COVID-19, but they too are overwhelmed. Therefore, the government is actively making decisions to offer some guidance to the general public. Let’s examine a few ways how Japanese authorities are responding to COVID-19.

 For construction companies

The Ministry of Land, Infrastructure, Transport and Tourism (MILT) stated that If a contractor made an offer to a local government regarding any construction/work currently undeconstruction in the areas subject to the emergency declaration, the  local government shall discuss with the contractor and reconsider the construction period. They need to take necessary measures such as change of contract price and temporary suspension with considerations to the contractors’ requests where it is difficult to procure human resources and equipment for work. Even when the construction site is not subject to the emergency declaration they need to check the situations and take appropriate measures. “ 

The interpretation of “force majeure” shall be applied, except for businesses involved in the maintenance of public infrastructure such as rivers and roads and the maintenance of public infrastructure. 

Delay in payment of rent (Ministry of Justice – Legal Affairs Bureau) and treatment of tax loss for exemption (MILT) 

Similarly, the doctrine that three months of non-payment of rent amounts to a ground for termination is not applicable 

“The Japanese Civil Code interprets that in order to terminate a lease contract for rent nonpayment, it is necessary that the trust relationship between the landlord and the tenant is destroyed. Ultimately, it will be a case-by-case decision. However, even if the rent is unpaid for about three months due to the impact of COVID-19, the relationship of trust can be deemed as not been destroyedAn eviction request may not be accepted in some cases, based on the circumstances. “ 

Treatment of loss 

The MILT announced that if the landlord waives the payment of rent, the loss of rent shall not be deemed as a donation.  

Exemption of Accounts Receivable to Business Partners in the Event of a Disaster 

If a 9-4-6-2 corporation is a business partner of a client, etc. affected by a disaster (hereinafter referred to as a “client” up to and including 9-4-6-3), it shall be deemed that the client is a “business partner”. The same shall apply for a reasonable period of time after the occurrence of the disaster. This means the period during which the business partners affected by the disaster are in the process of recovery. This is for the purpose of supporting the recovery of the business partners affected by the disaster.  

In the event that all or a part of accounts receivable, contract money receivable, loans and other similar claims have been discharged within a specified period of time (hereinafter referred to as the “period of time”), the amount of loss resulting from such discharge shall not be considered as a donation. 

The same applies to the case where the existing terms and conditions are changed, such as the exemption of all or part of the lease payments, interest on loans, installment payments related to installment sales, etc. that have already been stipulated in a contract prior to the occurrence of the disaster, and to the case where the existing terms and conditions are changed for new transactions after the occurrence of the disaster. 

Absence allowance and wages (Ministry of Health, Labour and Welfare)  

The Ministry of Health, Labour and Welfare asks employers to make efforts to avoid disadvantages to the workers by discussing with each employee their benefits and change of work schedule…etc.  regardless of whether the business is closing voluntarily or in response to closure requests from the government.   

Employment adjustment subsidies are paid to employers who are forced to reduce their business activities due to economic reasons. These subsidies are paid out in proportion to the amount of absence allowance paid by the employer. This is regardless of the necessity of absence allowance under the Labor Standards Act. In light of the recent impact of COVID-19, special measures have been taken throughout the country, such as increasing the subsidy rate to 90% for small and medium-sized enterprises and 75% for large enterprises, regardless of regular or irregular employment, for enterprises that do not lay off workers and maintain their employment.  

In addition, if a small and medium-sized enterprise (SME) that has received a request for leave of absence from work from the prefectural governor maintains employment without dismissal, etc., and meets certain requirements, such as paying 100% of the absence allowance, the government will proactively support business owners by, for example, increasing the subsidy rate for the entire absence allowance to 100%. 

Sometimes, a company voluntarily refrains from business and takes workers off work in response to a request for cooperation. This can be done in accordance with the Act on Special Measures against Swine Flu, for example. Even so, the obligation to pay the absence allowance based on the Labor Standards Act does not disappear. 

Article 26 of the Labor Standards Act

According to the Labor Standards Act, the employer must pay an allowance of 60% of pay during the absence. However, the absence must be due to reasons attributable to the employer. In the case of absence from work due to force majeure, the employer is not obliged to pay the absence allowance. But in order to be able to say that the absence from work is due to force majeure, it is necessary that the following two elements are satisfied.  

(1) The cause of the accident is an accident that occurred outside the business. 

(2) The accident is unavoidable even though the business owner has exercised the utmost care as an ordinary manager. 

For example, a company receives a request for cooperation or a request to voluntarily refrain from doing business. The government may do this based on the Act on Special Measures against Swine Flu, for example. This may be a factor that occurs outside the business that makes business operations difficult.   

To fall under (2), an employer must show they made every concrete effort to avoid absence from work. Some relevant questions are: 
1.Has the possibility for workers to work from home been sufficiently considered? 

2.Is there no other job the workers can do for the company outside of usual the workplace?   

Determination of the situation would be on a case-by-case basis. 

  Sales of masks (Fair Trade Commission)

When it comes to the sale of masks, how are Japanese authorities are responding to COVID-19?

Would it be a problem under the Antimonopoly Act if manufacturers instructed retailers to sell these products at prices below a certain level? This would prevent the retail prices of masks, sanitizers, etc. from rising too much.

1 The act of a manufacturer, etc. to bind the selling price of a retailer is a problem under the Antimonopoly Law if there is no justifiable reason (binding on the resale price). 

2 However, as the spread of the new coronavirus infection progresses, the act of a manufacturer, etc. instructing a retailer to sell a product such as masks at a certain price or less for a limited period of time so that the retailer does not set an unreasonably high price is not a problem under the Antimonopoly Law, because it is usually recognized that there is a justifiable reason for the act, which is in the interest of the consumer in purchasing the product concerned. 

3 Furthermore, if the instruction to sell at a certain price or less would induce an increase in the retail price of the goods, it cannot be accepted that there is a justifiable reason. 

See Antitrust Law, Article 2, paragraph 9. 

What do you think of how Japanese authorities are responding to COVID-19?

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