Is there an escrow system in Japan?

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The Japanese government operates a public system very similar to escrow called the Deposit system (kyotaku 供託).  Under this system, a party may deposit money (or other negotiable securities) with the government deposit office prior to executing a contract.  Upon completion of the contract the government office will release the money to the relevant party.  This system can be useful if two parties to a contract do not trust each other to keep their promises.  In such case, one party may ask the other to put the money in the Deposit system until the performance is complete to ensure that he won’t break his promise to pay.

However, the Deposit system is rarely used in Japan and many contracts, even large purchases, are based more on a system of trust and relationships.  Furthermore, in certain cases, such as purchasing a home, banks may offer escrow services that essentially perform the same function as the Deposit system.

If you have any questions about the Deposit system, please contact our office for a legal consultation.