How to Open a Company Bank Account in Japan

Every month Venture Japan incorporates new KK and GK companies for clients; every month we also manage opening bank accounts for them. Ten years ago, opening a corporate bank account in Japan for a new Japanese company was simple; we would walk into a local branch, complete some forms, and walk out with a passbook 45 minutes later. These days opening a corporate bank account in Japan for a new Japanese company is a completely different experience that can take 4 – 6 weeks to complete and often result in the bank declining.

Ten years ago it was rare for a Japanese bank to decline to open a bank account for a new company; nowadays no service provider can guarantee a successful opening and all experience refusal rates as high as 50%. If any service provider guarantees first-time success “because we have insider contacts”, it is misleading you and opening itself, the bank, and possibly your Japanese company, to investigation by the Ministry of Finance. Ultimately it is the degree to which a new company can satisfy a bank’s strict anti-money laundering (“AML”) and know your customer (“KYC”) review that determines if the bank will accept or decline its application to open a new account.

The challenge of satisfying a Japanese bank’s strict AML and KYC requirements is worsened by an apparent lack of agreement between the Ministry of Finance (which regulates the banks) and the Ministry of Justice (which regulates company legal matters). For example, in 2015 the Ministry of Justice ruled that KK companies and GK companies no longer need a resident representative director, but can be managed by entirely non-resident directors. A company without a resident director is legitimately formed, but if it applies to open a bank account, the bank will very likely refuse due to AML concerns (this may be mitigated if the company has employees in Japan who can meet with the bank or very strong credentials).

So how do you improve the chances of a major Japanese bank (Mizuho, MUFG, SMBC, or Resona) accepting your Japanese company’s application to open a corporate bank account? As noted above, it’s not going to happen because your service provider has insider contacts at the bank, but rather because your company can give the bank’s vetting staff confidence in its legitimate business ability. The bank’s only concern is to protect itself from future accusations of having opened an account for a company that then used the account for nefarious purposes, such as laundering gangster money, funding terrorist or other illegal organizations, receiving payments from fraudulent or illegal activities, etc. The banks AML and KYC checks (which branch managers do not have authority to overrule), are thus designed to confirm that:

1. The company is owned by legitimate shareholders who are real people and not part of a larger illegitimate or illegal structure.
2. The company’s directors are genuine business-people with experience in, and detailed knowledge of, the company’s business.
3. The company has a physical, not virtual, office.
4. The company has a justifiable business.
5. The company is adequately and legitimately funded to perform its business.

Application Procedure. Each bank has a similar procedure for vetting applications to open corporate accounts:

1. As the first step, the company completes an online application form (in Japanese), including uploading pertinent supporting documents. None of the major banks presently accept walk-in applications and if attempted, will probably politely point the applicant to the online application portal.
2. The bank’s branch closest to the company’s registered address reviews the application and after 2 – 3 weeks will either: (1) decline to open the account, (2) request further documents, or (3) request an in-person visit to the bank. If it declines the application, the bank will not give any specific reasons for its decision and will decline to answer any questions regarding it.
3. Assuming the bank requested an in person visit, either the company’s representative director or ordinary director, or a knowledgeable and credible employee, should attend. The meeting will be in Japanese, so for non-Japanese, language skill or an interpreter is essential.
4. Assuming the bank is satisfied with the answers it receives at the in person meeting, it will open the account.

The process usually takes 4 – 6 weeks to complete.

Convincing the bank through the online application and supporting documents is clearly critical to a successful application, which brings us to how to satisfy the bank about the points noted in the section above.

1. Shareholders. Shareholders of privately-held Japanese companies are not public record, so the bank will request details of each shareholder and, if a shareholder is a corporation, details of its ultimate beneficial shareholders. We recommend full disclosure upfront, because the bank will decline an application if it suspects the applicant is attempting to hide any shareholder’s true identity.
2. Directors. As noted above, a KK or GK company does not need any resident directors, but the lack of one can cause a bank to decline to open a bank account. The bank’s concerns are: (1) if all directors are non-resident, it could be they intend to use the bank account to funnel money into (or out of) Japan for illegal purposes while evading the possibility of detention in Japan, and (2) more simply that there will be no local director the bank can talk with if issues arise with the account.
3. Employees. If there are no resident directors, but the company has a senior experienced local employee who understands the company’s business in detail, the bank is likely to overlook the absence of resident directors. The emphasis is on senior and experienced; in our experience, putting a young and relatively inexperienced local employee in the in person meeting with the bank will probably result in the bank declining the application.
4. Office. Banks tend to be very suspicious of companies registered at virtual office addresses, mainly because: (1) leases for such offices are month to month and easily ended, and (2) the company will have no infrastructure (desks, office equipment, etc.) invested in the office, meaning there is nothing to anchor it there. A virtual office address gives the bank a strong sense of a company’s lack of commitment to its business and, unless other factors convince the bank otherwise, it will probably reject an application to open a corporate account.
5. Collateral. Even with a virtual office address and without a resident director or local employee, it is possible the bank will accept an application if your Japanese company can provide very strong collateral. For example, some of our clients are multinationals with hundreds of millions of dollars annual revenue, with excellent banking relationships in other territories, and with very strong business plans and investment strategies for their Japanese business. Even though (for corporate governance reasons) they have no resident directors in Japan and are in the pre-hiring phase using a virtual office address, they successfully opened bank accounts because their global credentials are so strong. If your Japanese company can provide very strong supporting collateral to the bank, it is possible that even with other factors being negative, the bank will accept the application to open a corporate account.