Japan: Investment in nursing homes

Author: IFLR Correspondent | Published: 10 Mar 2020
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Nagashima Ohno & Tsunematsu

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Investment in nursing homes for the elderly through acquiring real estate or the shares of companies managing such homes is increasing in Japan. Generally, investors should be aware of the relevant regulations in order to consider risks; however, the structure of Japanese laws and regulations on these homes is complicated because there are historically two authorities involved, each having established different regulations. The following is a brief introduction from the latest legal perspective for potential investors.

The first authority involved is the Ministry of Health, Labour and Welfare (MHLW). The MHLW supervises nursing homes based on the Act on Social Welfare for the Elderly. Under this act, there is a concept of 'a fee-based home for the elderly' (Nursing Home), basically meaning a facility that provides services for taking in elderly persons and providing them with nursing care services. The MHLW published guidelines for prefectural governors on the method of administrative guidance for Nursing Homes and the desirable conditions involved, such as staffing, management, internal rules and services.

The second authority involved is the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), which supervises nursing homes under the Act on the Securement of a Stable Supply of Elderly Persons' Housing. This act has another definition for such facilities: 'a residence with health and welfare services for the elderly' (Service Residence), which is rental housing for the aged which provides residents with safety-check services and life-advisory services. The MLIT requires Service Residences to satisfy certain conditions that are generally looser than those of Nursing Homes.

As the descriptions above show, most Service Residences also fall under the definition for a Nursing Home. These Service Residences, therefore, must comply with both the MLIT requirements and the MHLW guidelines. However, in practice, due to the differences between jurisdictions, many of them seem to comply with only the MLIT requirements as Service Residences. Even though, in 2015, the MHLW amended its guidelines and clarified that they applied also to Service Residences that fell under the Nursing Homes definition, the authorities do not as yet appear to be enforcing this policy perfectly. The local authorities directly supervising Nursing Homes tend to overlook non-compliance by Service Residences by applying provisions in the guidelines that use the wording 'in accordance with the type of service provided' and thus allow some flexibility. However, since it is expected that administrative guidance on Service Residences will become stricter to unify the regulations, investors should carefully monitor future activities of the authorities.

Yuuri Asakura