Recovering Accounts Receivable in Japan｜Warning Signs, First Steps, the Order of Remedies and Prevention

The due date passes and the money does not arrive; the customer proposes to pay half this month; the contact who answered every day becomes unreachable. With accounts receivable the outcome is usually decided at this stage, because a debtor’s assets are finite and the creditor who moves first is the creditor who is paid. What follows sets out, under Japanese law, the points that matter when recovering trade receivables in Japan.

Contents

The warning signs that a receivable is turning bad
The first steps
The order of remedies
Points that decide the outcome in practice
Where the debtor shows signs of insolvency
Prevention is worth more than recovery
In closing
How to contact us

The warning signs that a receivable is turning bad

Late payment that repeats. A few days at first, then a few weeks, with the delay lengthening each time.
A switch from payment in full to payment in part. An offer to pay half this month is rarely a matter of convenience; it usually means liquidity has already tightened.
Contact thins out. The responsible person is replaced, replies slow down, calls go unanswered.
Word in the trade that other suppliers are also being paid late.

Creditors hesitate at this point out of concern for the continuing relationship. But shipping on after the signs have appeared simply enlarges the sum that will not be paid.

The first steps

Three things should be settled before anything else is done.

The amount of the claim and how it arose. Check invoice by invoice the dates of despatch, delivery, acceptance and invoicing, and separate what is admitted from what is genuinely disputed.
The documents. Assemble the contract, any master trading agreement, purchase orders, delivery notes, acceptance certificates, invoices, statements of account and the email correspondence, arranged in date order.
The starting point of extinctive prescription and the time remaining.

Under the Civil Code as amended with effect from 1 April 2020, a claim is extinguished five years from the time the creditor became aware that the right could be exercised, or ten years from the time it could be exercised, whichever comes first. Claims arising before that date remain governed by the earlier rules, including the five-year commercial period and the old occupation-based short periods, so the date each claim arose must be established. Prescription runs separately for each invoice, and a schedule item by item is worth the effort.

The order of remedies

Demand. State the amount, its legal basis and a deadline in writing, and keep a record of telephone calls and emails as well.
Content-certified mail (naiyo-shomei yubin, a Japanese postal certification system). This proves both the content of the demand and its delivery, and postpones the completion of prescription for six months. It buys time only: an action must be filed, or a demand for payment applied for, within that period if prescription is to be renewed.
Provisional attachment (kari-sashiosae). Where assets may be concealed or disposed of, bank deposits, real property or the debtor’s own receivables from third parties may be frozen before the action is filed. The right to be preserved and the necessity of preservation must be shown, and a security bond deposited with the Legal Affairs Bureau, in practice commonly ten to thirty per cent of the sum claimed.
Civil litigation, or a demand for payment (shiharai-tokusoku) or civil conciliation. Where the sum is clear and no dispute is expected, a demand for payment is quicker and cheaper; where the issues are contested, an ordinary action is required.
Compulsory execution. Once a judgment, a settlement record or a demand for payment provides an enforceable title, execution may be levied against bank deposits, accounts receivable, real property and movables. Execution against claims is in practice the most effective.

Points that decide the outcome in practice

Whether the debtor is a company or a sole proprietor. If a company, its representative is in principle not personally liable, so the presence or absence of a joint and several guarantee is decisive. If a sole proprietor, the individual’s own property answers for the debt and execution may be levied directly against personal deposits and real property.
Guarantors. Check the master trading agreement and the reverse of the purchase order for a guarantee clause. Japanese law imposes strict requirements on guarantees given by individuals: a revolving guarantee of a continuing course of dealing is void unless a maximum amount has been agreed.
Retention of title. Where title was agreed to remain with the seller until the price is paid in full, the unpaid goods may be recovered.
The statutory preferential right of a seller of movables (dosan baibai no sakidori tokken). Even without any special agreement, the Civil Code of Japan gives the seller a preferential right over the movables sold. If the goods have been resold, the claim for the resale price may itself be attached by way of subrogation.
Set-off. Where the debtor also holds a claim against the creditor — a deposit, a rebate, a payable arising from another transaction — a declaration of set-off recovers the money at once, without a judgment. It is the fastest and most certain remedy available.
Perfection of an assignment of claims. Where receivables are taken by assignment or given as security, notice to or consent by the debtor bearing a certified date is required (in Japanese practice this is usually achieved by content-certified mail); without it the assignment cannot be asserted against third parties.

Where the debtor shows signs of insolvency

If the debtor has begun to restructure its debts, has called a meeting of creditors, or has petitioned for corporate bankruptcy or civil rehabilitation, pressing for individual payment carries its own risk. The Bankruptcy Act and the Civil Rehabilitation Act of Japan confer a power of avoidance: a preferential payment made to one creditor during the critical period may be avoided by the bankruptcy trustee and ordered to be repaid.

What should first be established is the position of the other creditors, whether the debtor has suspended payments, and whether it has already instructed lawyers. Rather than forcing an individual payment, it is usually safer to take back goods held under retention of title, to exercise set-off, or to assert priority over the property subject to the statutory preferential right. The time available for that judgment is short, so advice should be taken early.

Prevention is worth more than recovery

A credit check at the outset: the certificate of registered matters, financial statements, the register of any real property, and the customer’s standing in its trade.
A properly drafted contract: payment dates, default interest, retention of title, jurisdiction and governing law all recorded in writing.
An acceleration clause, so that a single default makes the whole balance immediately due and supports an application for a provisional remedy.
A joint and several guarantee from the representative where the customer is a company.
A credit limit, reviewed periodically, with shipments stopped once the unpaid balance exceeds it.

In closing

With trade receivables, timing is everything: the debtor’s position deteriorates and prescription runs. Instructions, asset investigation and an application for provisional attachment can all be handled from outside Japan by email and video conference, and we are equally glad to work through the creditor’s own counsel.

How to contact us

Telephone 03-6435-8418 within Japan, or +81-3-6435-8418 from overseas. Lines are open from 08:00 to 24:00 Japan time, including Saturdays, Sundays and public holidays. Enquiries are also received at any hour through the form on this site.

M&A Partners Law Office LPC　Katsuhiro Tsuchiya, Representative Attorney-at-Law (Tokyo Bar Association, Registration No. 26775)　17F Mori Trust Shiroyama Trust Tower, 4-3-1 Toranomon, Minato-ku, Tokyo, Japan

This article is a general explanation based on the laws and practice of Japan as at August 2026 (Reiwa 8). The outcome of any particular matter depends on its own facts, and no specific result is guaranteed.

Contents