Bookkeeping in Japan: What Records Foreign Business Owners Actually Need

Hello, my name is Taisei Koshida, and I am a certified public accountant and licensed tax accountant in Japan.

I assist foreign business owners and entrepreneurs with bookkeeping, accounting, and tax matters in Japan, with support available in English.

One question I often receive is simple: What information do I actually need to keep for bookkeeping in Japan?

For a small business, bookkeeping does not need to be unnecessarily complicated. What matters is keeping enough reliable information to explain your sales, expenses, bank transactions, and other business activities, and to prepare proper Japanese tax returns later.

This is especially important for foreign business owners who use overseas bank accounts, Wise, foreign currencies, overseas credit cards, or accounting records prepared partly outside Japan.

Below is the information I normally check when setting up a practical bookkeeping system for a small business in Japan.

1. What Information Is Needed for Bookkeeping in Japan?

At a minimum, your accounting records should make it possible to identify what each business transaction was, when it occurred, how much it was, and who the other party was.

For most small businesses, I normally start with the following:

• Sales and customer information
• Business expenses and supplier information
• Bank account transactions
• Credit card transactions used for business
• Invoices and receipts
• Foreign-currency transactions and exchange rates
• Payroll and director compensation, if applicable
• Major purchases such as equipment and other fixed assets

The exact amount of information required depends on the business. A consultant with a few transactions each month does not need the same accounting process as a company with employees, inventory, multiple bank accounts, and hundreds of monthly transactions.

For a broader overview of accounting and tax after establishing a business, see
Starting & Running a Business in Japan: Tax and Accounting Guide for Foreign Business Owners.

2. Sales: What Information Should You Keep?

For sales, I normally need enough information to identify the transaction and reconcile it with the amount received.

The basic information includes:

• Date of the transaction or payment
• Name of the customer or client
• Amount
• Currency
• Exchange rate where foreign currency is involved
• Invoice or other supporting document

If the invoice date and payment date are different, both dates can become relevant. The accounting treatment should reflect what actually happened rather than simply treating every bank deposit as sales on the day the money arrived.

This becomes particularly important near the fiscal year-end because income and cash receipts do not always belong to the same accounting period.

3. Expenses and Payments: What Information Should You Keep?

For business expenses and outsourcing fees, the same basic principle applies. The accounting records should show what was paid, to whom, when, how much, and why it was a business expense.

I normally check the following:

• Date of the transaction or payment
• Name of the supplier or payee
• Amount
• Currency
• Exchange rate for foreign-currency transactions
• Invoice, receipt, or other supporting document
• A clear business purpose where it is not obvious from the document

A payment does not become a deductible business expense simply because it was paid from a business bank account or company credit card. The business purpose still matters.

If a receipt is missing, see
Can You Deduct a Business Expense Without a Receipt in Japan?.

4. Bank Accounts, Credit Cards and Wise

Foreign business owners in Japan do not always operate through one Japanese bank account. In practice, I also see Wise accounts, overseas bank accounts, foreign credit cards, and expenses initially paid personally by the owner.

If these accounts or payment methods are genuinely used for the business, the transactions should normally be reflected in the bookkeeping as well. Following the actual flow of funds often makes it easier to reconcile sales, expenses, transfers, and account balances.

Depending on the business, the records may therefore include:

• Japanese bank statements
• Wise transaction data
• Statements from overseas accounts used for business
• Business credit card statements
• Details of business expenses paid personally by the owner or director

The important point for bookkeeping is to identify the business transaction and reconcile it with the actual movement of money.

5. Foreign Currency and Exchange Rates

If your business receives or pays money in U.S. dollars or another foreign currency, the transactions must ultimately be recorded in Japanese yen for Japanese accounting and tax purposes.

The exchange-rate method should be applied consistently.

Depending on the circumstances, the TTM rate for the transaction date or an appropriate average TTM rate can be used. Where there are numerous recurring foreign-currency transactions, using a consistent average rate can make the bookkeeping much more practical.

The exchange-rate method should not be changed from transaction to transaction simply because one rate produces a more favorable result.

6. Invoices, Receipts and Electronic Records

Bookkeeping data alone is not enough. You should also retain the documents supporting the transactions.

Depending on the transaction, these may include:

• Sales invoices
• Supplier invoices
• Receipts
• Contracts
• Bank statements
• Credit card statements
• Electronic transaction records

Electronic records also need to be considered under Japan’s electronic record-keeping rules. Saving documents in an organized way from the beginning is much easier than trying to reconstruct the evidence several years later during a tax audit.

For more information, see
Japan’s Electronic Record Keeping Law: A Practical Guide for Businesses.

7. CSV Data Can Make Bookkeeping Much Easier

When there are many transactions, transaction data in CSV format can usually be imported and processed in the accounting system.

Manually entering information that already exists electronically is usually unnecessary work.

A useful CSV file normally includes fields such as the transaction date, customer or payee, description, amount, currency, and other information needed to identify the transaction.

The exact format does not need to be perfect from the beginning. We first review a practical sample and adjust it if necessary. This avoids spending many hours creating a complicated spreadsheet that later turns out not to be suitable for the accounting system.

8. Start With One Month Instead of Preparing the Entire Year

When setting up bookkeeping for a new client, I first review one month of data as a sample.

We review the format, identify missing information, decide how unusual transactions should be handled, and make any necessary changes before the client prepares the rest of the year.

This saves unnecessary work for both the client and the accounting office.

I have seen cases where a client carefully prepared a large amount of information that was not actually needed, while information that was important for Japanese accounting was missing. Checking one month first avoids repeating the same problem for the entire year.

9. Small-Business Bookkeeping Does Not Need to Be Unnecessarily Complicated

Not every small business needs a complicated monthly accounting process.

If a bank, investor, overseas parent company, or management team requires accurate monthly financial statements, then a proper monthly closing is important.

However, for a small owner-managed business that mainly needs reliable accounting records, tax planning, and an accurate annual tax return, making every monthly closing unnecessarily detailed can waste both time and money.

The bookkeeping should be practical while maintaining enough information to prepare the accounts properly and explain the transactions if the Japanese tax office reviews them later.

If you are eligible for the Blue Form system, proper bookkeeping is also connected with important tax benefits. See
Blue Form (Aoiro Shinkoku) in Japan: Benefits and Deadlines.

10. Keep Your Accounting Records With a Future Tax Audit in Mind

Accounting records should not be prepared only to produce a tax return.

Several years later, you may need to explain why a payment was treated as a business expense, what an overseas transfer represented, why a certain exchange rate was used, or how a balance in the accounting records was calculated.

That is why unclear transactions should be dealt with while preparing the bookkeeping rather than trying to remember what happened several years later during a tax audit.

For a practical explanation of what happens during an audit, see
How Tax Audits Work in Japan: What Foreign Business Owners Should Expect.

11. Bookkeeping and Accounting in Japan With English Support

Koshida Accounting and Tax Office provides bookkeeping, accounting, and tax services in Japan for foreign entrepreneurs and small business owners.

Our accounting support can include organizing bookkeeping procedures, reviewing accounting data, preparing accounting records, Japanese tax filings, tax planning, and dealing with accounting and tax questions that arise during the year.

We also work with other professionals when company registration, visas, social insurance, or other specialist support is required.

For foreign business owners, the goal is not to make Japanese accounting more complicated. The goal is to create a system that gives us the information we actually need and that you can continue using without wasting unnecessary time.

12. Frequently Asked Questions About Bookkeeping in Japan

Do I Need to Keep All Receipts in Japan?

As a general rule, accounting records and supporting documents should be retained for seven years in Japan.

In practice, a normal tax audit often focuses on the most recent three years. If serious problems are found, the review can extend to five years, and in more serious cases, up to seven years.

For that reason, receipts, invoices, and other supporting documents should be properly organized and retained rather than discarded after the tax return is filed.

Can I Keep My Accounting Records in English?

The accounting books themselves should be maintained in Japanese.

However, there is no need to translate original business documents, such as invoices and contracts, into Japanese simply for bookkeeping purposes. If English is the natural language used in your business, those documents can remain in English.

The important point is that the transactions can be properly understood and recorded in the Japanese accounting books.

Can I Use Wise or an Overseas Bank Account for My Business?

Yes. If Wise or an overseas bank account is genuinely used for the business, it can of course be used.

In many cases, it also makes sense to reflect the flow of funds through those accounts in the accounting records. This makes it easier to reconcile sales, expenses, transfers, and account balances with the actual movement of money.

Do I Need to Prepare Perfect Monthly Financial Statements?

Not always. A business that needs monthly reports for a bank, investor, parent company, or management decisions should have an appropriate monthly closing process. A small owner-managed business may need something simpler.

The bookkeeping still needs to be reliable, but complexity by itself does not make accounting better.

What Should I Send My Accountant Every Month?

It depends on your business, but the starting point normally includes sales data, expense data, bank and credit card transactions, invoices and receipts, foreign-currency information, and details of any unusual transactions. If you have employees or directors receiving compensation, payroll-related information is also required.

Should I Prepare a Full Year of Bookkeeping Before Asking an Accountant to Review It?

No. When setting up a new bookkeeping system, I first review one month of data.

We check the format, identify missing information, and correct any problems before the same process is repeated for the remaining eleven months. This avoids doing the same thing incorrectly for an entire year and saves unnecessary work for both the client and the accounting office.

Need Help With Bookkeeping and Accounting in Japan?

If you run a small business in Japan and need bookkeeping, accounting, or tax support in English, Koshida Accounting and Tax Office can help you set up a practical accounting process and prepare the records required for Japanese tax filings.

If you already maintain your own bookkeeping, we can also review the records and help determine what needs to be corrected or added for Japanese accounting and tax purposes.

For a broader explanation of accounting, payroll, consumption tax, corporate tax planning, and other issues involved in running a business in Japan, see
Starting & Running a Business in Japan: Tax and Accounting Guide for Foreign Business Owners.

If you would like to discuss your bookkeeping or accounting in Japan, please
contact Koshida Accounting and Tax Office through the inquiry form.