What is the Electronic Document Law?

Overview and Enactment History of the Electronic Document Law

The “Act on Use of Information and Communications Technology in Preservation of Documents in Private Business Operators, etc.” (commonly known as the e-Document Law or Electronic Document Law) was enacted on November 19, 2004, and came into effect on April 1, 2005. This law formally consists of two separate laws: the “General Law” establishes general rules for permitting electronic preservation, while the “Arrangement Law” provides specific arrangements through partial amendments to individual laws.

Revolutionary Role of the Electronic Document Law

With the enforcement of this law, electronic documents evolved from their previous status as “records for information sharing” to “official documents with legal evidentiary power.” This represents an extremely significant change for business operations.

The e-Document Law permits private businesses to substitute electronic storage for the obligation to preserve documents in paper format, covering documents based on approximately 250 laws including the Companies Act, Corporation Tax Act, and Commercial Code. However, documents that require immediate accessibility in emergencies (such as ship documentation, driver’s licenses, permits, and contracts requiring notarization) are excluded from electronic conversion.

The Groundbreaking Significance of the Electronic Document Law

The most groundbreaking aspect of the e-Document Law lies in its recognition of scanner preservation. The Electronic Signature Law, enacted in 2000, only covered documents originally created as electronic data (so-called “electronic documents”). In contrast, the e-Document Law explicitly recognizes that image data obtained by scanning existing paper documents (so-called “digitized documents”) can be regarded as originals if certain technical requirements are met. This provision has enabled companies to digitize vast amounts of accumulated paper documents, realizing both storage space reduction and improved operational efficiency.

Relationship with the Electronic Book Preservation Law

Closely related to the e-Document Law is the “Act on Special Provisions for the Preservation Methods of Books and Documents Related to National Taxes Created Using Electronic Computing Machines” (commonly known as the Electronic Book Preservation Law or Electronic Ledger Preservation Act), which was enforced in 1998. While the Electronic Book Preservation Law, overseen by the Ministry of Finance and the National Tax Agency, targets national tax-related ledgers and documents, the e-Document Law covers a broader range of legally required preservation documents overseen by various government ministries.

The relationship between these two laws can be understood as the e-Document Law functioning as a higher-level framework that establishes the basic structure for document digitization, while the Electronic Book Preservation Law defines more specific requirements for national tax-related documents. With the enforcement of the e-Document Law in 2005, the Electronic Book Preservation Law was also amended to officially permit scanner preservation of national tax-related documents.

Requirements for Scanner Preservation (Provisions under the Electronic Book Preservation Law)

For electronic storage of national tax-related documents such as receipts, the Electronic Book Preservation Law stipulates the following requirements. However, these requirements have been significantly relaxed through major amendments in January 2022 and additional amendments in January 2024.

Input Methods and Timeframes

Two input methods are recognized for scanner preservation: the “early input method” and the “business process cycle method.” With the early input method, documents must be scanned and data saved within approximately seven business days after receipt. The business process cycle method permits scanning promptly (within approximately seven business days) after the elapse of the normal business processing period (up to two months). When adopting this method, business processing regulations must be established in advance.

Image Quality Requirements

Electronic imaging devices must in principle perform color image reading (to enable detection of alterations using correction ink or other means for fraud prevention purposes). A resolution of 200 dpi or higher (sufficient to read 4-point characters) is required. However, for general documents (documents not directly related to money or goods flow), grayscale preservation instead of color is also permitted.

The January 2024 amendment eliminated the requirement to preserve information regarding resolution, gradation, and size when scanning, thereby reducing practical burdens.

Requirements for Ensuring Authenticity

The 2022 amendment significantly relaxed timestamp requirements. Previously, timestamps had to be affixed within three business days of document receipt, but currently any of the following methods for ensuring authenticity is recognized:

1. A method of affixing timestamps within a maximum of two months and approximately seven business days
2. A method using a system that retains a history of corrections and deletions (or a system that does not allow corrections or deletions), confirming that data was saved within the input period
3. A method of establishing business processing regulations and implementing appropriate operations to prevent corrections and deletions

In other words, it is no longer necessary to introduce timestamp services; compliance can be achieved through appropriate systems or internal regulations.

When using timestamps, it is necessary to use timestamps related to time-stamping authority (TSA) certified by the Minister of Internal Affairs and Communications.

Ensuring Readability and Searchability

Electronic data obtained by scanning must be capable of immediate screen display and paper output as needed (ensuring readability). Additionally, search functionality must be ensured using major record items such as transaction date, transaction amount, and business partner (ensuring searchability).

The 2024 amendment eliminated the requirement to maintain information confirming the person who entered record items during scanner preservation or their supervisor, thereby simplifying practical operations.

File Formats

The file formats used for storage are generally PDF (Portable Document Format) or TIFF (Tagged Image File Format). These formats possess characteristics suitable for long-term preservation while maintaining image quality.

Basic Requirements for Electronic Data Storage

The e-Document Law establishes the following four basic requirements that must be ensured in creating and preserving electronic data:

Readability (Accessibility)

Information must be capable of immediate screen display or paper output as needed. Electronic data must be stored in appropriate formats and be reproducible in human-readable form at any time. This includes maintenance of appropriate display devices and software.

Integrity

Measures must be in place to confirm and prevent destruction, damage, alteration, deletion, or falsification of electronic records. Mechanisms are necessary to ensure data authenticity and detect any unauthorized changes or deletions. Specifically, this includes implementing backups, access restrictions, and preserving audit trails (records of who performed what operations and when).

Confidentiality

Measures must be in place to prevent unauthorized access and information leaks. It is necessary to prevent viewing or removal by unauthorized persons through appropriate access management, encryption, physical security measures, and other means.

Retrievability (Searchability)

Information must be systematically organized to enable efficient search and retrieval of necessary information. Implementation of search functions that can quickly locate necessary information from large volumes of data is required.

The application level of these requirements is specifically defined by each ministry through ministerial ordinances, depending on the importance of target documents and the magnitude of impact should destruction, falsification, or leaks occur. While readability is stipulated as a mandatory requirement across all ministries, the degree of requirements for integrity, confidentiality, and searchability varies according to document type.

Stipulation of Specific Requirements through Ministerial Ordinances

The e-Document Law adopts an approach where specific methods and technical requirements for electronic preservation are not stipulated in the law itself but are determined by each ministry through ordinances according to the nature of target documents. This is because document importance, falsification risk, and business impact vary greatly depending on document type.

Response by the Ministry of Health, Labour and Welfare

The Ministry of Health, Labour and Welfare promulgated the “Ordinance on Use of Information and Communications Technology in Preservation of Documents in Private Business Operators, etc. Based on Provisions of Laws and Regulations Under the Jurisdiction of the Ministry of Health, Labour and Welfare” (Ministry of Health, Labour and Welfare Ordinance No. 44) on March 25, 2005 (Heisei 17), clarifying requirements for electronic preservation in the medical and welfare fields.

Furthermore, for the field of pharmaceutical approval applications and clinical trials, the “Guidance on Use of Electronic Records and Electronic Signatures in Applications for Approval or Licensing of Pharmaceuticals, etc.” (Notification No. 0401022, April 1, 2005) was issued, commonly known as the Japanese ER/ES Guidance (Electronic Records/Electronic Signatures Guidance).

Characteristics of the Japanese ER/ES Guidance

The Japanese ER/ES Guidance defines requirements for using electronic records and electronic signatures in pharmaceutical and medical device approval applications. This guidance was developed in a form compatible with Japanese legal systems while referring to the U.S. FDA (Food and Drug Administration) 21 CFR Part 11 regulation.

The ER/ES Guidance stipulates requirements for electronic records from three perspectives: “authenticity,” “readability,” and “preservation.” Authenticity means that records are complete, accurate, and reliable, with clear responsibility for creation, modification, and deletion.

Approach to Electronic Signatures and Timestamps

The Japanese ER/ES Guidance adopts a flexible interpretation regarding electronic signatures. While the guidance recommends digital signatures using electronic certificates issued by certified specific certification service providers based on the Electronic Signature Law, it does not necessarily mandate this. What is important is “ensuring quality and quality assurance levels equivalent to those of work processes using paper documents and handwritten signatures.”

Regarding timestamps, the ER/ES Guidance requires accurate timestamp recording in audit trails, but this can be addressed with date and time information automatically recorded by computer systems. The use of timestamp services certified by the Minister of Internal Affairs and Communications is positioned as one option for cases requiring more advanced authenticity assurance.

This approach aims to enable flexible responses in practice, avoiding excessive burdens on companies while achieving appropriate quality assurance. It is required to set appropriate management levels according to the importance of target documents or records and the degree of risk.

Important Changes to the Electronic Book Preservation Law from January 2024

Under the amended Electronic Book Preservation Law that came into effect in January 2022, complete mandatory preservation of electronic transaction data was originally scheduled for January 1, 2024. A grace period was provided until December 31, 2023, but after this period ended, from January 1, 2024, transaction information electronically exchanged (invoices, receipts, contracts, etc.) must in principle be preserved as electronic data.

This covers all electronic transaction data, including PDF invoices received by email, receipts downloaded from e-commerce sites, and credit card statements. Printing these out and preserving them in paper format is no longer permitted in principle.

This mandatory requirement applies to all business operators (corporations and sole proprietors) regardless of company size. However, as a transitional measure for small and medium-sized enterprises whose systems are not ready, preservation of printed documents under certain conditions is permitted when the director of the competent tax office recognizes “considerable reason.”

Business Efficiency and Compliance through Digitization

Through the development of the e-Document Law and Electronic Book Preservation Law, companies can now enjoy numerous benefits including reduced paper document storage space, improved searchability, streamlined business processes, and disaster backup security. However, proper implementation of electronic preservation requires planned initiatives including system development, establishment of internal regulations, and employee training.

To respond to the mandatory preservation of electronic transaction data in particular, it is necessary to understand one’s own transaction formats and select and implement appropriate storage systems. Additionally, systems must be prepared to present and submit electronic data during tax audits.

Document digitization is not merely a change in storage methods but serves as an important catalyst for promoting digital transformation (DX) of entire business processes. Appropriate compliance with the Electronic Document Law and Electronic Book Preservation Law has become a critical management issue for all companies to achieve business efficiency improvements and enhanced corporate competitiveness while ensuring legal compliance.