Japanese Companies Achieve Global Compliance Standards, Yet Face Internal Reporting Challenges

The Evolution of Compliance in Japan: Progress and Challenges

Japan's compliance landscape has shown remarkable growth in recent years, with a recent report by global leader NAVEX, based in Oregon, shedding light on the current status of risk and compliance within Japanese corporations. Conducted between April and May 2025, the research surveyed 999 business professionals across six major markets, including Japan, to uncover the nuances of compliance maturity and the lingering issues that remain.

Rising Maturity in Compliance Programs

The report highlights that 49% of respondents from Japanese companies assess their risk and compliance programs as being in either the 'managed' or 'optimized' phases of maturity. While this figure slightly trails behind the 56% reported in the United States, it nonetheless signals a consistent improvement in the establishment of compliance frameworks and governance initiatives.

Low Adoption of Internal Reporting Hotlines

Despite advancements in compliance management, a concerning statistic emerges: only 47% of Japanese companies have implemented internal reporting hotlines. This places Japan at the lowest adoption rate when compared to the US (59%) and the average across the six major countries surveyed (53%). Additionally, channels for anonymous or third-party reporting are not common, underscoring a profound cultural issue where employees may feel hesitant to voice their concerns. Alarmingly, 20% of Japanese respondents reported negative media coverage related to compliance issues within the last three years, surpassing the global average and the US rate of 12%.

Insufficient Whistleblower Protection Policies

The introduction of whistleblower protection policies is also lagging, with only 24% of organizations in Japan formally documenting such policies. This is significantly lower than the 61% in the US and 49% among the six major countries surveyed. The introduction of hotlines does not necessarily alleviate employee fears of retaliation, suggesting that a clear policy framework, ongoing leadership advocacy, and transparent processes are essential to building employee trust.

Key Compliance Challenges: Privacy and Cybersecurity

Among compliance challenges, privacy and cybersecurity violations are paramount concerns in Japan. As threats evolve, data protection emerges as a critical factor in maintaining trust within organizations. The rise of sophisticated cyberattacks and the expansion of data ecosystems through cloud and AI technologies have amplified digital risks, making information security and personal data governance top priorities for many companies.

AI's Role in Compliance Decision-Making

Interestingly, 38% of Japanese organizations reported that their compliance departments are actively involved in decisions related to AI utilization, slightly higher than the average of 33% in both the US and the six major countries. As AI integration grows, Japanese companies are taking proactive measures to embed compliance into algorithm transparency, data governance, and bias management, reflecting the rising recognition of AI governance as a critical component of modern compliance strategies.

Insights from NAVEX's CEO

NAVEX's CEO, Andrew Bates, commented on this intricate scenario, stating, "Japan's evolving whistleblower protection laws are driving a culture of ethics and compliance transformation. While the maturity of programs is encouraging, the absence of fundamental elements like hotlines and anti-retaliation policies underscores the ongoing need for investment in governance infrastructure and effective compliance programs. This report also points out that Japanese boards have a higher percentage (56%) of members with compliance experience compared to their counterparts in the six major countries (43%), indicating strong leadership involvement in risk monitoring."

Conclusion

NAVEX has established itself as a global leader in ethics, risk, and compliance management solutions, trusted by 75% of Fortune 100 and 500 companies, totaling over 13,000 organizations worldwide. The NAVEX One platform enhances risk and compliance programs by leveraging industry-leading benchmark data and insights. With its headquarters in Lake Oswego, Oregon, NAVEX continues to shape the future of governance, risk, and compliance across the globe. Learn more about NAVEX directly from their website.