6th Report of Market Access Ombudsman Council (March 16, 2000)

5-(1) Review of landing examination criteria

1. Complainant: Korean Embassy

2. Ministry concerned: Ministry of Justice

3. Background:

(1) The Immigration Control and Refugee Recognition Act (referred to hereafter as "the Act") is established to assure equitable control on the entry and exit of persons entering or leaving Japan. Under Article 2-2 of the Act, foreigners residing in Japan are required to obtain the status of residence determined by the landing permission, the acquisition of status of residence or by the permission of any change thereof. The statuses of residence are categorized according to the activities permitted to the foreigners etc., and indicate the types of foreigners who may be permitted to land or reside in Japan. The immigration control administration is based on this system. There are currently 27 statuses of residence, classified into the following groups.

1) Statuses of residence based on the activities in which foreigners are authorized to engage in Japan

1] 6 statuses, e.g. "Diplomat" (ambassadors from foreign governments, etc.), and "Official" (employees of foreign government embassies, etc.) (Group 1 in the Annexed Table 1 of the Act)
2] 10 statuses, e.g. "Investor / Business Manager" (managers of foreign-capital companies, etc.), "Legal / Accounting Services" (lawyers, etc.) (Group 2 in the Annexed Table 1 of the Act.)
3] 2 statuses, e.g. "Cultural Activities" (researchers studying Japanese culture, etc.) (Group 3 in the Annexed Table 1 of the Act.)
4] 4 statuses, e.g. "College Student" (students in universities, etc. "Per-College Student" (student in high schools, etc.) (Group 4 in the Annexed Table 1 of the Act.)
5] 1 status, "Designated Activities" (domestic help for foreign diplomats, etc.) (Group 5 in the Annexed Table 1 of the Act.)

2) Statuses of residence based on the personal relationship or status of foreigners

4 statuses, e.g. "Permanent Resident" (individuals granted permission for permanent residence by the Minister of Justice) (Annexed Table 2 of the Act)
Furthermore, regarding 2] (Group 2 in the Annexed Table 1 of the Act) and 4] (Group 4 in the Annexed Table 1 of the Act) above, since the activities of these individuals could affect domestic industry or the lives of the general public, the Article 7, Paragraph 1-(2) of the Act states that unless such activities meet the landing examination criteria set out by the ministerial ordinance, the individual will be refused permission to land.

(2) The activities permitted under the "Investor/Business manager" status are, according to the Annexed Table 1-(2) of the Act, "to commence the operation of international trade or other business, to invest in international trade or other business and to operate or manage that business, or to operate or manage international trade or other business on behalf of the foreign nationals who have begun such an operation or have invested in such a business."
According to the Ministerial Ordinance to provide for Criteria pursuant to Article 7, Paragraph 1-(2) of the Act, cases where the applicant to commence the operation of international trade or other business, the facilities to be used as an office for the business concerned must be in Japan and the business concerned must be maintained in such a scale as to employ at least 2 full-time employees in Japan, in addition to those who operate and / or manage the business.

4. Complaint:

Under the Ministry of Justice's landing examination criteria, the status of residence of "Investor / Business Manager" can be obtained only when the Japan-based company of the foreign company operated by the applicant employs two or more locally-based persons (this, in addition to Japanese nationals, includes foreigners with the status of "Permanent Resident", "Spouse or Child of Japanese National", "Spouse or Child of Permanent Resident", "Long Term Resident" or "Special Permanent Resident"). According to the Ministry of Justice, this rule was established to clarify "a substantial amount of capital" provided for in Article 1(b) of the Japan-US Treaty of Friendship Commerce and Navigation, as condition for the "permission for landing and stay of businesses in which they have invested, or in which they are actively in the process of investing", and where relations with third countries are concerned, this applies to all countries in accordance with the principle of most favored nation status.
However, high wage levels in Japan can make it very expensive for a business to employ two or more locally-based persons when a business is established. In the case of 'venture' businesses and so on, for example, obliging them to employ two locally-based persons as the equivalent of "investing a substantial amount of capital" is something they can ill afford, and it is more appropriate to leave decisions concerning employment up to the business's own judgment.
Where this is concerned, Korea's Law on Investment by Foreigners and Introduction of Foreign Capital does not require that Korean nationals be employed, when non-nationals are granted permission for stay under similar status.
Accordingly, the requirement to employ locally-based persons should be eliminated from the landing examination criteria for permissions for stay under the "Investor / Business manager" status.

5. Results of deliberation:

According to the Ministry concerned, the criteria related to the "Investor / Business manager" status were originaly required to ensure the stability and continuity of the business. The Ministry stated that even under current conditions, this continues to be an appropriate requirement and that there was no need to review, these criteria and the way of their application. However, the Ministry, after studying the issue in the OTO process, indicated the following : (1) Even if two locally-based persons are not necessarily employed, when an investment "in such a scale" is made, applicants can be granted landing permission under the "Investor / Business Manager" status. But in the actual application of the examination criteria, the intention of requiring an investment "in such a scale" to employ at least two locally-based persons has not been entirely understood accurately. Applicants will be granted permission to land in Japan under the "Investor / Business Manager" status in cases where it is acknowledged that the business has made a substantial amount of investment in such a scale in Japan, even if the business does not actually employ two locally-based persons. (2) Further, the Ministry will make efforts to establish examination guidelines which are as practical as possible, based on actual examples of application. This stance on the Ministry's part is commendable.
As the Ministry concerned is aware, since no guidelines exist for judging specifically how much an investment "in such a scale" to employ at least two locally-based people required for granting permission to land is, in case such people are not actually employed, it is difficult for immigration bureaus in various regions of the country to conduct examination when two locally-based people are not employed. In the business climate of the past few years, there have been spreading companies in new types of businesses such as Internet-based business and so on have been spreading, which can conduct operations on a continual and stable basis even if they do not necessarily employ two locally based people, and it is necessary to actively accept these businesses from the perspective of promoting inward investment.

Based on the above, the Ministry concerned should take the following measures concerning the "Investor / Business Manager" status of residence.

(1) Where criteria for the "Investor / Business Manager" status of residence are concerned, the applicant will be granted permission to land as an investor or manager, if an investment "in such a scale" to employ at least two locally-based people is made, even if such people are not actually employed. However, since this was not always the case under current mode of the application of examination criteria, regional immigration bureaus should be notified immediately that in the future, they should grant applicants permission to land in Japan under the "Investor / Business Manager" status in cases where it is acknowledged that a substantial investment in such a scale has been made in Japan, even if two locally-based persons are not employed.

(2) In order to clarify the scale of investment equivalent to employing at least two full-time employees, the Ministry should draw up, during 2000, practical examination guidelines applying to cases where two persons are not employed.

(3) Regarding new types of businesses, for example Internet-based businesses and so on which can conduct operation of a substantial scale on a continual and stable basis even if they do not necessarily employ two locally-based people, these businesses should be positively accepted from the perspective of promoting inward investment, and according to the above guidelines investment should be smoothly made and landing and stay of their managers should be controlled.

Government decision (March 21, 2000)

5-(1) Review of landing examination criteria

The following measures will be taken concerning the "investment and management" permission for stay.

(1) Where criteria for the "investment and management" permission for stay status are concerned, applicants will be granted permission to land as investors or managers, if "an investment equivalent to" hiring two locally-based people is made, even if such people are not actually hired. However, since this has not always been applied consistently under current application of examination criteria, regional immigration bureaus will be notified immediately that in the future, they should grant applicants permission to land in Japan under the "investment and management" status in cases where it is acknowledged that a considerable investment has been made in Japan, even if two locally-based persons are not employed.

(2) In order to clarify the scope of operations staffed by two or more regular employees, the ministry will draw up, during 2000, practical examination guidelines applying to cases where two persons are not employed.

(3) Regarding new types of businesses, for example Internet-based businesses and so on which can continue operating stably and continuously on a certain scale even if they do not necessarily employ two people, these businesses will also be actively accepted from the perspective of promoting inward investment, and based on the guidelines established, measures will be taken to smoothly administer the landing and stay of their investors or managers.