A wide range of Japanese contracts contain a seijitsu kyōgi jōkō, a good-faith consultation clause. A typical version reads: “Matters not provided for in this contract, or doubts about its interpretation, shall be resolved by the parties through consultation in good faith, in accordance with the purpose of this contract.”
Changed Circumstances
Japanese law knows a principle of changed circumstances, jijō henkō no gensoku, under which a contract can be adjusted after an unforeseen change. It is treated as an exception.
In 1997, the Supreme Court ruled on a golf course whose slopes had collapsed. For the principle to apply, the court said, the change must be one the parties could not foresee and could not be blamed for. A golf course operator could not normally claim that a slope collapse was unforeseeable, and the court refused to apply the principle.
Rent Adjustment
Article 32 of Japan’s Act on Land and Building Leases lets either party to a lease demand a higher or lower rent for the future. This applies when the rent has become unreasonable because of changes in taxes, in land or building prices or other economic conditions, or compared with rents of similar buildings nearby.
It applies “regardless of the terms of the contract.” Only an agreement not to raise the rent for a fixed period limits it.
Subcontract Act
Japan’s Subcontract Act, enacted in 1956, forbids a parent company to reduce the agreed price it pays a subcontractor. If it does, the Japan Fair Trade Commission can recommend that it stop and restore the losses the subcontractor suffered.
From January 2026, the law carries a new name, the Act on Ensuring Fair Transactions with Small and Medium Contractors.
Price Negotiation Month
In 2021, Japan’s Small and Medium Enterprise Agency designated every March and September as a Price Negotiation Promotion Month. The first one was held in September 2021. Its purpose is to encourage buyers to let suppliers pass on rising labor and raw material costs.
Prices Kept Unchanged
On December 27, 2022, the Japan Fair Trade Commission published the names of companies that had kept their purchase prices unchanged without discussing them explicitly with suppliers during price negotiations. It published them under Article 43 of the Antimonopoly Act, in an investigation of possible abuse of a superior bargaining position. About 4,030 other companies received warning letters but were not named.
The commission stated that publishing the names did not mean that the companies had broken the law.
Wage and Price Changes
A construction contract form published by Japan’s Ministry of Land, Infrastructure, Transport and Tourism includes Article 26: “Change of the contract price based on changes in wages or prices.”
Flexible and Rigid
Rinki ōhen (臨機応変): taking the right measures to suit the time and the situation.
Shakushi jōgi (杓子定規): like a ladle used as a ruler. A rigid way of doing things that applies one standard or rule to everything.
Memorandum
In Japanese business, an oboegaki, a memorandum, records what both sides have agreed. When the terms of a contract change after signing, the parties may record the change in an oboegaki. Exchanging one serves as evidence that both sides agreed to the added or changed terms.
Steel Prices Every Six Months
Toyota negotiates with steelmakers such as Nippon Steel, buys steel in bulk, and sells it at low prices to its affiliated parts makers. The price of this supplied steel is reviewed every six months. It is linked to the cost of raw materials such as iron ore and coking coal.