Regulatory Compliance: The Complete Guide to Cosmetics & Supplement Labeling, Consumption Tax, and Clearware Labeling Law (Including Prohibited Sales and Penalties)

When overseas manufacturers enter Japan’s e-commerce market through localization, cosmetics and dietary supplements are among the most legally complex product categories. Multiple overlapping laws apply, and ensuring full compliance is one of the most demanding yet essential steps.

By meeting these requirements, brands can avoid administrative sanctions and criminal penalties while gaining consumer trust and sustainable revenue.

1. Regulatory Compliance and Penalties for Cosmetics

1.1 The Pharmaceuticals and Medical Devices Act (PMD Act) and Advertising Regulations

Cosmetics are intended for “cleansing, beautifying, and enhancing attractiveness.”However, excessive claims of efficacy or performance may cause a product to be reclassified as a quasi-drug or pharmaceutical, requiring prior approval.The following types of advertising are prohibited under Article 66 of the PMD Act (Prohibition of False or Exaggerated Advertising):

• Advertising of unapproved pharmaceuticals

• Expressions implying medical treatment

• Claims of efficacy or performance without scientific evidence

[Penalties]

• Administrative Action: Corrective orders issued by the Minister of Health, Labour and Welfare or the Prefectural Governor (Article 72-2)

• Criminal Penalty: Imprisonment of up to two years or a fine of up to 2 million yen (Article 85-4)

• Surcharge System: A penalty surcharge equivalent to 4.5% of sales related to the misleading advertisement (Article 75-2)

[Case Example]An OEM brand advertised an anti-aging serum with the claim “Stops wrinkles.”The brand was found in violation of the PMD Act and received a surcharge order equivalent to 4.5% of sales, resulting in website suspension and advertisement withdrawal.

1.2 Ingredient Labeling and Japanese Language Requirements

All cosmetic containers and packaging must display ingredients and usage warnings in Japanese.

• INCI name with Japanese translation

• Warning statements for specific ingredients (e.g., parabens, alcohol)

• Compliance with specified font size and layout requirements

[Penalties]

• Administrative corrective orders (PMD Act, Article 72-2)

• Non-compliance may result in imprisonment or fines (up to 2 million yen)

[Case Example]A European brand launched products in Japan with English-only labeling.The local government issued a corrective order, after which the brand added Japanese ingredient labels and reported compliance completion.

2. Regulations and Penalties for Dietary Supplements

2.1 Food Labeling Act, Health Promotion Act, and the Functional Food Labeling System

Supplements are classified as “processed foods” under Japanese law and are regulated by both the Food Labeling Act and the Health Promotion Act.

• Mandatory nutritional labeling (protein, fat, carbohydrates, etc.)

• For “Foods with Function Claims (FFC),” scientific evidence and prior notification are required

[Penalties]

• Violation of the Food Labeling Act: Imprisonment of up to one year or a fine of up to 2 million yen (Article 19)

• Violation of notification requirements under the Health Promotion Act: Fine of up to 500,000 yen (Article 70)

[Case Example]A supplement manufacturer advertised “normalizes fatty liver.”The company received a corrective order and criminal referral under the Food Labeling Act.After revising the expression to “supports daily wellness,” its conversion rate improved by 15%.

2.2 Advertising Boundaries under the PMD Act

Even for supplements, expressions implying “treatment” or “disease prevention” fall under the PMD Act and are prohibited.

Prohibited examples: “Prevents lifestyle diseases,” “Guaranteed weight loss”Acceptable examples: “Supports health maintenance,” “For daily nutritional support”

[Penalties]

• Corrective or business suspension orders (PMD Act, Article 72-2)

• Imprisonment of up to two years or fines of up to 2 million yen

3. Consumption Tax (Invoice System) Compliance and Risks

3.1 Registration as a Qualified Invoice Issuer

Businesses with annual sales exceeding 10 million yen are treated as taxable entities and are recommended to register as qualified invoice issuers under the Japanese Consumption Tax (JCT) system.While failing to register itself is not penalized, issuing an invoice without proper registration is a criminal offense.

[Penalties]

• Issuing false invoices: Imprisonment of up to one year or a fine of up to 500,000 yen (Consumption Tax Act, Article 65-4)

• Underreporting or evasion: Additional tax of 10–15% (underreporting surcharge) or 40% in serious cases (penal surcharge), as stipulated under the National Tax General Rules Act

[Case Example]An overseas seller listed products on Amazon without JCT registration and was suspended.After proper registration, operations resumed and sales stabilized.

3.2 Reduced Tax Rate Mislabeling and Additional Tax

Supplements classified as food products are eligible for the reduced tax rate (8%).If incorrectly taxed at 10%, the overpaid amount is treated as a tax overpayment, and a surcharge for underreporting (around 5%) may apply under the National Tax General Rules Act.

4. The Act against Unjustifiable Premiums and Misleading Representations (景品表示法)

4.1 Prohibition of Misleading Representations

This act prohibits representations that mislead consumers about product quality or value.

• “Superior Misrepresentation”: Suggesting quality or performance far beyond reality

• “Advantageous Misrepresentation”: Suggesting price or conditions are more favorable than they are

[Penalties]

• Administrative Orders: Corrective orders for display removal and recurrence prevention

• Surcharge Orders: 3% of total sales (up to 300 million yen) (Article 8)

• Criminal Penalties: Imprisonment of up to one year or a fine of up to 1 million yen for false representations

[Case Example]An online retailer displayed “Regular price ¥10,000 → Now ¥4,980,” but the reference price was found fictitious.The company received a surcharge order of 19.15 million yen.

4.2 Limits on Premium Offers and Sweepstakes

Premiums or giveaways offered in connection with sales are subject to statutory limits.

• For items priced below ¥5,000: maximum value = 20× transaction price (total ≤ 2% of expected sales)

• For items priced ¥5,000 or higher: maximum value = ¥100,000

Exceeding these limits may lead to corrective orders and fines of up to ¥500,000 (Article 38).

[Case Example]A cosmetics company offering unlimited reward points for luxury product purchases was ordered to cease the campaign for exceeding the statutory limit.

5. Compliance and Localization Framework in the Digital Era

• Develop a Legal Matrix: Identify applicable laws by product category

• Standardize Labeling and Advertising Templates: Establish internal approval workflows

• Implement Tax Compliance Systems: Manage JCT registration and invoice issuance

• Conduct Cross-Department Training: Legal, marketing, and quality assurance collaboration

• Engage External Experts: Periodic reviews by pharmaceutical consultants and legal counsel

• Maintain a PDCA Cycle: Monitor updates to government guidelines and legislation

In summary, accurate legal understanding and practical implementation are essential for overseas brands seeking long-term trust and growth in Japan’s e-commerce market.

For cosmetics and supplements, strict adherence to the PMD Act, Food Labeling Act, Consumption Tax Act, and Act against Unjustifiable Premiums and Misleading Representations forms the foundation of brand credibility and sustainable success.

Source (Japanese reference):https://digitalidentity.co.jp/blog/pmd-act/cosme-advertising.html