Custody-Type Trust Company Registration in Japan: Part 2 Guide

This article is Part 2 of our three-part series, A Practical Guide to Japanese Financial Licences. Part 1 covers the licence for management-type trust companies and Part 3 covers the banking licence. For a map of all financial licences, see Japan financial licenses: types and registration.

A custody-type trust company (管理型信託会社) accepts trusts in which the trust property is managed or disposed of only on the instructions of the settlor or an instructing person, or trusts limited to preserving, using and improving the property. It operates on the basis of a registration under Article 7 of the Trust Business Act. Its capital and other requirements are lighter than those of the licensed management-type trust company, but the registration must be renewed every three years. This article sets out the definition, the registration requirements, the rules for instructing persons, the application process and the routes open to foreign groups, in a form you can use to plan an application.

What is custody-type trust business: definition and two categories

The Trust Business Act makes trust business, meaning accepting trusts as a business, subject to a licence from the Prime Minister (Article 3). Within that, it defines custody-type trust business (管理型信託業) as a business that accepts only certain trusts in which the trustee has little discretion (Article 2, paragraph 3), and allows it to be conducted on the basis of a registration instead of a licence (Article 7, paragraph 1). A company holding this registration is a custody-type trust company (Article 2, paragraph 4).

The current Trust Business Act was enacted in 2004 as a complete revision of the former Trust Business Act. It opened trust business to companies other than trust banks and, at the same time, created the registration regime for custody-type trust business, which covers trusts where the trustee has little discretion. A later amendment, made alongside the enactment of the new Trust Act in 2006, added the registration regime for self-settled trusts.

Item 1: instruction-based trusts

These are trusts in which the trust property is managed or disposed of only on the instructions of the settlor or a person to whom the settlor has delegated the authority to give instructions (the instructing person, 指図権者). The trustee does not set the investment policy itself; it executes the instructions.

However, a trust does not fall into this category if the person giving instructions is specified by Cabinet Order as having a close relationship with the trustee through shareholding or personnel ties. If a group company or an officer of the trustee gives the instructions, the trustee in substance holds the discretion itself.

Item 2: trusts limited to preservation, use and improvement

These are trusts in which only acts of preservation, or acts of use or improvement that do not change the nature of the property, are carried out. The Financial Services Agency’s Comprehensive Guidelines for Supervision of Trust Companies, etc. (the Supervisory Guidelines) describe acts of preservation as acts necessary to maintain the current state of the property, acts of use as acts that generate income without changing the nature of the property, and acts of improvement as acts that increase its use value or exchange value.

The dividing line: the trustee’s discretion

Whether a trust is custody-type is decided not by the name of the contract but by whether the trustee retains any discretion over managing and disposing of the trust property. The Supervisory Guidelines state that the registration review checks whether instructions are specified so that no room for the trustee’s discretion arises.

For example, an instruction to sell at an appropriate time leaves the timing to the trustee and may therefore go beyond the custody-type scope. The starting point is to document, at the scheme design stage, who decides what and in how much detail.

How it differs from management-type trusts, self-settled trusts and trust agency business

Business regulation around trusts depends on how much discretion the trustee has and on who is involved in what capacity. The main regimes compare as follows.

The minimum capital and business deposit amounts are based on the Order for Enforcement of the Trust Business Act and materials published by the Financial Services Agency.

Part 1 covers the management-type trust company in detail, but there are three key differences. First, the management type is licensed, and the review extends to its financial base and its ability to carry out the business. Second, its minimum capital and business deposit are more than twice those of the custody type. Third, a management-type company needs approval to amend its statement of business methods, while a custody-type company only needs to notify in advance (Article 13). On the other hand, the custody type carries the procedure of renewing its registration every three years.

Registration for self-settled trusts

A self-settled trust (自己信託) is a trust in which the settlor declares itself trustee of its own property (Article 3, item 3 of the Trust Act). Because it does not involve accepting a trust from another person, it is not usually trust business. However, if the beneficial interests can be acquired by many persons, registration under Article 50-2 of the Trust Business Act is required. The Financial Services Agency explains that many persons means 50 or more.

The Supervisory Guidelines state that the test is whether, in substance, many persons can acquire beneficial interests, including where a single trust has fewer than 50 beneficiaries but trusts with the same terms are created repeatedly, or where splitting the beneficial interests is not prohibited. According to materials published by the Financial Services Agency, the minimum capital is JPY 30 million, any company under the Companies Act (not only a kabushiki kaisha) can register, and the registrant must have the status of the trust property examined by a third party such as an attorney or a certified public accountant. The renewal application period is set by Article 6 of the Order, the same provision as for the custody type.

Registration requirements for a custody-type trust company

The requirements can be read as the reverse of the grounds for refusing registration in Article 10 of the Trust Business Act. The main requirements are as follows.

Net assets deserve particular attention. If the company is set up with exactly JPY 50 million of capital, incorporation costs and losses around the start of operations may push net assets below the threshold. In practice, capital is set with the cash flow from application through the first few years after registration in mind, including the funds lodged as the business deposit.

On personnel, the Supervisory Guidelines list as review points whether the compliance, internal audit and financial management functions are independent from the sales and trust property management functions, and whether people with the necessary knowledge and experience are assigned to the trust property management function and others. Even a small organisation needs to show a division of roles that provides checks and balances.

Rules for instructing persons and scheme design

In an instruction-based custody-type trust, the instructing person makes the substantive investment decisions. The Trust Business Act imposes the following duties on persons who, as a business, give instructions on how trust property is managed or disposed of (instructing persons).

• Duty of loyalty (Article 65): give instructions loyally for the beneficiaries, in accordance with the purpose of the trust.
• Rules of conduct (Article 66): do not instruct transactions on terms different from normal terms that harm the trust property; transactions unnecessary in light of the purpose of the trust, the state of the property or the management and disposal policy; or transactions intended to benefit oneself or anyone other than the beneficiaries by using information about the trust property (except those specified by Cabinet Office Order).

Where the instructing person is a fund manager or asset management company, consider separately whether it needs a registration under the Financial Instruments and Exchange Act, such as for investment management business. Registering a custody-type trust company does not by itself settle the regulatory position of the whole scheme.

Points to check in the design

• Who is the instructing person, and is there a close relationship with the trustee as specified by Cabinet Order?
• The scope and level of detail of the instructions. Are there clauses that leave room for the trustee’s judgement?
• How the trustee responds when there are no instructions, or when instructions breach laws or the contract.
• The procedure for replacing or resigning the instructing person, and how beneficiaries are notified.
• How instructions are received, recorded and kept, and the trustee’s verification steps.

A custody-type trust company acting as trustee is not relieved of responsibility simply by following instructions. The duty of loyalty and the duty of care of a prudent manager (Article 28) also apply to custody-type trust companies. It is important to set out, in the statement of business methods or internal rules, how to respond to instructions that are clearly unreasonable.

Typical uses of custody-type trusts and why groups start with the custody type

The actual business of each custody-type trust company depends on its statement of business methods. Descriptions published by operators show the following areas.

• Safeguarding money (escrow): holding deposits and purchase prices in real estate sales, or consideration in M&A transactions, in trust until conditions are met.
• Real estate administration: rent management, and real estate administration trusts for property owners planning asset succession.
• Business succession and family wealth: placing an owner’s assets in trust and designing the instructing person and beneficiaries to pass them to the next generation.
• Other administration: administration of monetary claims, securities and similar assets that requires no discretion on the trustee’s part.

In large transactions such as securitisations, the organisation and creditworthiness required of the trustee are also greater. Whether a trust can be accepted within the custody-type scope depends on the property and the instruction structure, so it is assessed case by case. The Financial Services Agency publishes a list of licensed and registered trust companies; the list as of 31 March 2026 shows 38 companies, management-type and custody-type combined.

Why start with the custody type

Even financial groups that ultimately aim for the management type sometimes consider a staged approach that begins with custody-type registration. The reasons are as follows.

• Capital and deposit: minimum capital of JPY 50 million and a business deposit of JPY 10 million, lower than the management type (JPY 100 million and JPY 25 million).
• Procedural weight: registration instead of a licence, and amendments to the statement of business methods need only advance notification.
• Track record: the group can build its trust administration, segregation and reporting functions while operating them, and gain experience in dialogue with the authorities.

However, the custody type can only accept trusts without discretion. Conducting management-type business requires a separate licence under Article 3. Confirm at the outset your long-term business plan and whether the custody-type scope can generate revenue.

Conduct rules, notifications and reporting after registration

Because custody-type trust companies are included in the term trust company (Article 2, paragraph 2), most of the conduct rules for trust companies apply to them as they are. The main obligations are as follows.

In addition, as specified business operators under the Act on Prevention of Transfer of Criminal Proceeds (犯罪収益移転防止法), trust companies must implement anti-money laundering and counter-terrorist financing (AML/CFT) measures such as customer verification at the time of transactions, record keeping and suspicious transaction reporting. The authorities supervise through reporting requests and inspections, and in case of violations may issue business improvement orders or other measures, or revoke the registration (Article 45).

In practice, explanations and document delivery for each trust, and preparing trust property status reports, form the core of daily operations. Bringing the receipt, execution and recording of instructions into a single workflow, and preventing gaps with systems and checklists, matters both in the registration review and in inspections after registration.

Application process, competent authority and routes for foreign groups

The application for registration as a custody-type trust company is submitted to the Director-General of the Local Finance Bureau with jurisdiction over the head office (Ordinance, Article 12). Powers under the Trust Business Act are delegated from the Prime Minister to the Commissioner of the Financial Services Agency, and part of them to the Directors-General of Local Finance Bureaus (Article 87).

1. Map the scheme: chart the property to be held in trust, the settlor, beneficiaries and instructing person, and the content of instructions; confirm that the scheme fits within the custody-type scope and whether other laws, such as the Financial Instruments and Exchange Act, need to be addressed.
2. Prior consultation: explain the business plan and scheme to the competent Local Finance Bureau. For cases with many issues, it is common to plan for several rounds of consultation.
3. Incorporation and organisation: incorporate a kabushiki kaisha with a board of directors and company auditors or equivalent, and pay in the capital. Secure officers and staff, and prepare the statement of business methods, internal rules, AML/CFT, segregation arrangements and workflows.
4. Application: submit the application and attachments. It is common to be asked to amend documents or provide further explanations during the review.
5. Registration: entry in the register of custody-type trust companies and notification.
6. Business deposit and notification: lodge JPY 10 million with the deposit office nearest the head office (or conclude a qualifying contract), notify the authorities, and only then start business (Article 11).
7. Ongoing operation: continue notifications and reporting, and apply for renewal every three years.

The time the review takes varies widely with the complexity of the scheme and the state of preparation. Check the current practice, including any standard processing period, with the competent Local Finance Bureau.

Routes for foreign groups

There are two main routes for a foreign trust company or financial group to conduct custody-type trust business in Japan.

• Register a Japanese company (subsidiary): all of the requirements above must be met. The parent company, as a major shareholder, becomes subject to duties such as notification of its voting rights.
• Register a branch as a foreign trust business operator: a person conducting trust business abroad under foreign law can conduct custody-type trust business through its principal branch, the base of its trust business in Japan, and its other branches in Japan, once the principal branch is registered (Article 54). The registrant is called a foreign custody-type trust company and must appoint a representative in Japan.

The choice between a subsidiary and a branch depends on the home regulator’s views, how capital is held in Japan, tax, and how Japanese clients and counterparties will view the entity. The Financial Services Agency has a Financial Market Entry Office (拠点開設サポートオフィス) that supports foreign firms entering Japan, but whether trust business registration falls within its support, and whether an application can be made in English, must be confirmed in advance.

Documents about the overseas parent, such as corporate registration documents, financial statements and officers’ career histories, are generally required with Japanese translations, which takes time to prepare. The home-country authority may also require approval of, or notification about, establishing an overseas base, so plan the Japanese and home-country procedures in parallel. How to secure officers and staff based in Japan is another point to decide early.

Common review issues and a pre-application checklist

The review focuses less on the form of documents than on whether the scheme stays within the custody-type scope and whether the organisation matches the scale and content of the business. The main issues that can be read from the Supervisory Guidelines and other sources are as follows.

• Remaining discretion: instructions are not specified enough, leaving room for the trustee’s judgement.
• Instructions from closely related persons: a group company or officer of the trustee acts as instructing person.
• Lack of independence: compliance, internal audit and financial management are not independent from the functions handling sales or trust property management.
• Insufficient personnel: staff responsible for trust property management or internal audit lack the necessary knowledge and experience. Nominal appointments tend to be problematic.
• Eroding net assets: losses after incorporation bring net assets below the minimum capital amount.
• Missed renewal: if the validity period passes without renewal, the registration loses effect and is deleted.

Pre-application checklist

• For each planned trust, you can explain whether it falls under item 1 or item 2 of Article 2, paragraph 3
• You have mapped the relationship between the instructing person and the trustee and confirmed there is no close relationship as specified by Cabinet Order
• You have a kabushiki kaisha with a board of directors and company auditors or equivalent, and capital of at least JPY 50 million
• Your income and expenditure projections for the first few years keep net assets at or above JPY 50 million
• You have arranged JPY 10 million for the business deposit, or a qualifying substitute contract
• You have prepared the statement of business methods, internal rules, workflows and segregation procedures
• You have AML/CFT arrangements in place (customer verification, record keeping, suspicious transaction reporting)
• You have compiled information on the parent company as major shareholder and prepared its notifications
• You have checked whether other laws apply, such as the Financial Instruments and Exchange Act or the Real Estate Brokerage Act (宅地建物取引業法)
• You have assigned a person and a system to track the renewal deadline three years after registration

Summary and how TIMOA can help

The custody-type trust company regime lets a company enter trust business through registration and with relatively modest capital, by limiting its business to trusts without discretion. However, whether a scheme qualifies depends on its details, and after registration the conduct rules for trust companies and renewal every three years continue to apply. If you may later move to the management type, keeping the future licence in mind from the initial design reduces rework.

Working with partner professionals, TIMOA supports the whole process: incorporating the Japanese company, organising the business plan and scheme, preparing for prior consultation with the Local Finance Bureau, drafting internal rules and application documents, and managing notifications after registration. Matters requiring legal judgement are handled by our partner attorneys and other professionals. For details, see our Permits & Financial Licenses service.

Other parts of this series

• Part 1: Licence for management-type trust companies
• Part 3: Banking licence