The most essential first steps for companies in Japan affected by the Corona crisis are reducing corporate costs and seeking governmental support to the extent offered.

Since no special measures have been implemented for the reduction or payment prolongation with regard to corporate dues, such as rent payments, any measures sought, need to be negotiated with each creditor individually.

With regard to the labor related costs, if the business operations are suspended, the employer may instruct its employees to stay at home and only pay 60% of the employees’ salary during such period if the suspension is attributable to the employer. If the circumstances leading to the suspension qualify as force majeure, the employer however has no obligation to pay leave allowance. Force majeure applies if the suspension is due to external factors which the employer could not influence, and which could not be avoided by the employer despite all reasonable efforts made.

Companies may also negotiate with its employees the reduction of salary payments and taking paid vacation days. A unilateral reduction of salary payments without the employees’ consent or ordering the employees to take paid vacation without having a labor management agreement in place is not feasible in Japan.

For further details on labor related matters please visit our website for legal updates on COVID-19 in Japan.