Japan's Residency Status System: An Explanation of Fundamental Principles and Corporate Legal Responsibilities

In conducting business in Japan and employing foreign nationals, a precise understanding of the Japanese immigration control system, especially the residence status system, is essential. This system establishes the legal foundation for foreign nationals to stay and engage in activities in Japan, and compliance with it is a fundamental element of corporate compliance and risk management. The “Immigration Control and Refugee Recognition Act” (hereinafter referred to as the “Immigration Act”) aims to ensure the fair management of entry and exit of all people entering or leaving Japan and the residence of all foreigners in Japan. Under this law, foreign nationals residing in Japan are, in principle, only permitted to stay and engage in activities within the scope of the “residence status” individually granted to them and the corresponding “period of stay.” Residence status legally categorizes the types of activities and statuses one can have in Japan, directly determining the eligibility and scope of employment. Therefore, for companies to employ foreign talent and maximize their potential, it is crucial to deeply understand the structure and principles of this residence status system and to manage the related legal procedures appropriately. This article will explain the basic concepts, structure, and corporate legal responsibilities in complying with the residence status system, based on specific laws and case law.

The Fundamental Principles of Japan’s Residence Management System

The Japanese residence management system is based on the principle of “permission-based control,” which means that residency for foreign nationals is not inherently guaranteed as a right but is permitted by Japan under certain conditions based on sovereignty. This concept is foundational for understanding the entire system. Article 2-2, Paragraph 1 of the Japanese Immigration Control and Refugee Recognition Act stipulates that foreign nationals must reside in Japan with a status of residence determined at the time of landing permission. This represents the “status of residence-centered principle,” indicating that all foreign nationals residing in Japan must hold some form of residency status.

Furthermore, each status of residence comes with a “period of stay” as defined by the Ministry of Justice Ordinance. This period of stay is the time limit during which one is allowed to stay in Japan under that particular status, and staying beyond this period is generally not permitted. To continue residing in Japan, it is necessary to apply for and obtain permission to renew the period of stay before it expires.

The most critical aspect of this system is that the granted status of residence strictly defines the scope of activities that can be conducted within Japan. In particular, activities that involve remuneration, namely employment activities, are clearly distinguished by the status of residence in terms of their permissibility and content. Engaging in employment activities beyond the permitted scope or staying beyond the period of stay can result in violations of the Immigration Control Act, such as “illegal employment” or “overstaying,” and may lead to severe measures such as deportation. The principle of permission-based control is repeatedly confirmed in case law, as described later, and the granting and renewal of residency status are entrusted to the broad discretion of the Minister of Justice. Therefore, when applying, it is required to substantiate the fulfillment of each requirement in accordance with laws and guidelines, and individual circumstances are reviewed under this broad discretion.

Structure of the Japanese Residency Status System

The Japanese residency status system can be broadly classified into two categories based on the grounds for permission. One is the residency status granted based on specific “activities” conducted in Japan, and the other is the residency status granted based on a specific “status or position.” Understanding this classification is crucial when considering the scope of activities and career paths for foreign nationals employed in Japan.

Residency statuses based on activities are stipulated in Appendix 1 of the Japanese Immigration Control Act and are divided into those that permit employment and those that do not. Representative examples of residency statuses that allow employment include “Engineer/Specialist in Humanities/International Services,” “Business Manager,” and “Skilled Labor.” Individuals holding these statuses are permitted to engage only in the professional work or activities defined by their status. For example, an engineer with the “Engineer/Specialist in Humanities/International Services” residency status can engage in specialized development work but, in principle, cannot engage in simple labor unrelated to their expertise. This personalityistic of having strict limitations on the scope of activities is notable.

On the other hand, residency statuses based on status or position are defined in Appendix 2 of the Japanese Immigration Control Act and include “Permanent Resident,” “Spouse or Child of Japanese National,” and “Long-Term Resident.” These residency statuses are granted based on a specific status or strong ties to Japan, and therefore, in principle, there are no restrictions on the type of activities. Consequently, individuals holding these statuses can freely engage in any lawful employment activities, regardless of job type or industry, just like Japanese citizens.

The differences between these two categories have a direct impact on corporate human resource management strategies. Employees with residency statuses based on activities are expected to contribute within their field of expertise, but changes in job placement or job content may require an application for a change in residency status. In contrast, employees with residency statuses based on status or position can be flexibly placed in various departments and roles within the company, allowing for long-term personnel development and career planning.

Renewal of Period of Stay and Change of Status of Residence Under Japanese Immigration Law

Foreign nationals residing in Japan who wish to stay beyond the permitted period of stay, or who wish to engage in activities different from those currently permitted, must go through legal procedures. Specifically, these are the applications for “Renewal of Period of Stay” and “Change of Status of Residence.” Neither of these procedures is automatically granted; they are subject to discretionary judgment by the Minister of Justice.

The renewal of the period of stay is stipulated in Article 21 of the Japanese Immigration Control and Refugee Recognition Act. According to this article, the Minister of Justice may grant the renewal of the period of stay only when “there are sufficient and appropriate reasons to deem the renewal appropriate.” When determining the presence of “sufficient reasons,” the applicant’s activities during their stay, compliance with tax payments and public duties, and conduct are comprehensively reviewed. For example, if there is a history of legal violations or criminal records, the likelihood of the renewal being denied increases.

On the other hand, the change of status of residence is based on Article 20 of the Japanese Immigration Control and Refugee Recognition Act. This procedure is necessary, for example, when someone residing in Japan under the status of “Student” graduates and then takes employment with a Japanese company, requiring a change to the status of “Engineer/Specialist in Humanities/International Services.” Here too, the Minister of Justice may grant the change of status only when “there are sufficient and appropriate reasons to deem the change appropriate,” allowing for a similarly broad discretion as with the renewal process.

It is important to note that whether these applications are granted depends on the administrative agency’s judgment, taking into account individual circumstances. Applicants must not only demonstrate that they meet the formal requirements but also persuasively prove, with objective documentation, why the continuation of their stay or change of activity is necessary and acceptable to Japanese society.

Residency Status and Case Law: The Significance of the McCarran Case Under Japanese Immigration Control

One of the most important judicial decisions symbolizing the extensive discretionary power of the Japanese administration within the residency status system is the Supreme Court Grand Bench decision on October 4, 1978 (Showa 53), commonly known as the ‘McCarran Case.’ This precedent underpins the fundamental philosophy of Japan’s immigration control administration to this day and provides the legal background that companies must understand when managing the residency of foreign nationals.

The case involved Mr. McCarran, an American citizen, who filed a lawsuit seeking to overturn the Minister of Justice’s denial of his application for renewal of his residency period. One of the reasons for the denial was Mr. McCarran’s participation in political activities opposing the Vietnam War and the Japan-US Security Treaty during his stay in Japan.

The Supreme Court made several important judgments in this case. Firstly, it stated that the Japanese Constitution does not guarantee foreign nationals the freedom to enter Japan or the right to continue residing in the country. Secondly, it ruled that the decision to permit a foreigner to reside in Japan, as well as to renew their residency period, is a matter of national sovereignty and is entrusted to the broad discretion of the Minister of Justice.

Thirdly, and most importantly, it indicated that while foreign nationals are entitled to fundamental human rights such as freedom of expression during their stay in Japan, these rights are granted only ‘within the framework of the Japanese residency system.’ In other words, when deciding on the renewal of residency, even if the political activities are legal, the content of those activities and their relation to Japan’s national interests can be considered, and the decision to deem the continuation of residency inappropriate falls within the range of the Minister of Justice’s discretion.

The judgment implies that the permission for a foreign national to reside in Japan is judged not merely on compliance with the law but also on a more comprehensive view of whether the individual’s overall activities are favorable to Japanese society and national interests. For companies, this suggests a significant risk factor: to maintain the residency status of foreign national employees, it is not enough to focus solely on their work performance and compliance at the workplace. The employees’ overall social behavior could also be taken into account during the review process for residency renewal.

Compliance with the Japanese Residency Status System and Corporate Legal Responsibility

When employing foreign nationals, compliance with the Japanese residency status system is not merely an administrative requirement; it carries significant legal responsibilities. Japan’s Immigration Control Act imposes strict verification duties and responsibilities on employers to prevent illegal employment, and failure to comply can result in severe penalties.

Illegal employment is primarily classified into three types. First, employment by individuals who do not have residency status or who remain in Japan beyond their authorized period. Second, employment without obtaining permission for activities outside of one’s residency status, such as “Temporary Visitor” or “Student,” which do not generally allow employment. Third, employment that exceeds the scope of activities permitted by one’s employment-eligible residency status.

Companies have a legal obligation to verify that a foreign national they wish to employ has the proper residency status to work legally. This verification is primarily conducted through the “Residence Card,” which requires careful examination of the “Permission to Engage in Activity other than that Permitted under the Status of Residence Previously Granted” section on the back, the expiration date of the residency period, and the “Employment Restrictions” field on the front.

Particularly noteworthy is the “Crime of Promoting Illegal Employment” defined in Article 73-2 of the Japanese Immigration Control Act. This provision imposes a penalty of imprisonment for up to three years or a fine of up to 3 million yen, or both, on those who engage in or facilitate illegal employment activities. A critical aspect of this crime is that an employer can be subject to punishment even if they were not clearly aware that the foreign national they employed was an illegal worker, provided there was negligence, such as failing to verify the Residence Card. In other words, the excuse of “I didn’t know” is not valid if there was a failure to fulfill the verification obligation.

This legal system effectively assigns companies the role of frontline monitors and supervisors in immigration control. Therefore, it is essential for companies to establish a continuous compliance system that not only verifies Residence Cards at the time of hiring but also regularly manages the status of residency and expiration dates during the employment period, and supports appropriate renewal procedures to avoid serious management risks, including criminal penalties.

Recent Cases of Facilitating Illegal Employment Under Japanese Law

The legal risks for companies regarding the crime of facilitating illegal employment are not merely theoretical. In recent years, even prominent companies have faced charges for this crime, demonstrating the realistic threat it poses to businesses.

One particularly noteworthy case occurred in 2021 when Nakamuraya Co., Ltd., a major food manufacturer, was prosecuted for allegedly facilitating illegal employment. The issue at hand was not a simple case of employing undocumented workers. The company had accepted Nepalese employees with “Engineering, Humanities, International Services” visas through a staffing agency but had them working on tasks such as making Japanese sweets, which were different from the specialized work permitted by their visas.

This case contains several important lessons for businesses. First, the risk of illegal employment arises not only when hiring individuals without proper residency status but also when allowing employees with valid visas to engage in activities outside the scope permitted by their status, known as “unauthorized activities.” This is a risk that can inadvertently occur, especially in large corporations where job assignments may be changed easily at the site level.

Second, according to reports, the company’s representatives continued employment knowing it was illegal, citing labor shortages as the reason. This clearly indicates that business necessities do not justify violations of the law.

Third, this incident demonstrates that companies receiving dispatched workers (the clients) can also be held responsible for facilitating illegal employment. It is not acceptable for client companies to neglect their verification duties, assuming that “the staffing agency should have checked.” Similar cases have been reported in various industries, including staffing agencies, construction companies, and Japanese language schools, showing that this is not an issue limited to any specific sector. From these cases, it is evident that the most potential compliance risk for modern companies lies not only in hiring oversights but also in the mismatch between residency status and actual work tasks during employment.

Summary

As outlined in this article, the Japanese residency status system is a strict and systematic framework that provides the legal basis for the stay and activities of foreign nationals in Japan. At its core lies the fundamental principle that residency is not a right but a privilege granted at the discretion of the nation. For companies employing foreign talent and conducting business activities, a precise understanding and adherence to this system is an absolute prerequisite. In particular, establishing an internal management system to correctly recognize the limitations of activities defined by residency status and to avoid serious legal risks such as the crime of promoting illegal employment is an essential requirement in modern corporate management. Compliance is not a one-time procedure at the time of hiring but a management issue that should be continuously managed throughout the employment period.

Monolith Law Office has a wealth of experience in providing legal services to a wide range of domestic and international clients on matters involving Japanese Immigration Control Law. Our firm is staffed with multiple experts proficient in international legal affairs, including English speakers with foreign attorney qualifications. We can offer comprehensive legal support ranging from assistance with the acquisition, renewal, and change of residency status for foreign talent employment to the construction of compliance systems to avoid illegal employment risks, and administrative responses in the event of any issues. In the increasingly complex field of international human resource management, we are ready to robustly support your business from a legal standpoint.