What are the highest and lowest interest rates allowed in Japan?

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Interest-free loans are allowed under the Japanese Civil Code so parties are free to contract into zero-interest loan agreements as they wish.  However, there are limits on how much interest a lender can charge on a loan.  The Interest Rate Restriction Law provides that the maximum allowed interest rate is 15% annually for amounts of 1 million yen or more.

Therefore, while parties are normally allowed to agree to whatever terms they want in a contract, a term that sets an interest rate of 20% would be illegal.  This does not necessarily mean that the entire contract would be invalidated.  Instead, it is more likely that a court considering a 20% interest clause would simply reduce the amount of interest to the legally allowed maximum of 15%.

If you have any questions about contracting in Japan, please contact our office to set up a legal consultation.