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Legal Market Overview

In an Olympic year for Japan, the country’s economy has been in its own race to stay ahead of the ongoing effects of the covid-19 pandemic. Restrictions, homeworking and border controls have continued to various degrees throughout 2020 and the early part 2021, capped off by and an Olympics without tourism that was naturally unable to offset the cost of holding the games.

However, more positive signs are beginning to appear, with just under 40% of the population fully vaccinated, as of August 2021, various suffering sectors have been able to gradually open up and return to work, including retail, hospitality and the food and drink industries. While the pandemic has closed some doors it has also opened others, accelerating trends in digitisation, telecoms and employment reform.

Mirroring the market more broadly, the legal sector has slowed in some areas and been increasingly active in others. The key names at the top end of the local market remain the traditional powerhouses of Nishimura & Asahi, Nagashima Ohno & Tsunematsu, Anderson Mori & Tomotsune (which will open its London office in 2022, becoming the first Japanese ‘Big Four’ firm to make such a move) and Mori Hamada & Matsumoto, while TMI Associates and Atsumi & Sakai follow close behind in full service capacity; other prominent local firms that provide broad expertise include City-Yuwa Partners, Ushijima & Partners and Oh-Ebashi LPC & Partners.

International investment into Japan continues and the legal sector is no exception, Baker McKenzie (Gaikokuho Joint Enterprise) and Morrison Foerster are the standout foreign firms with large multidisciplinary offerings in the country. Herbert Smith Freehills, White & Case LLP – White & Case Law Offices (Registered Association), Davis Polk & Wardwell LLP and Latham & Watkins Gaikokuho Joint Enterprise are also well established and provide strong practices.

One of the busiest areas of work for firms in Japan has been in the TMT space, where digital and IT service development moves at pace and tech M&A accounted for some of the key deals of 2021. Data protection issues are also at the forefront, with homeworking raising increased risk factors. The ever-growing importance of the technology and finance connection, in the shape of fintech, shows no signs of slowing and the market is active in new product investments and crypto assets, as well as the emerging NFT area.

Investment fund activity slowed during late 2020 and early 2021 while the market waited to see how the pandemic would unfold, but the alternative investment fund area has seen growth and private equity funds continue to be active. The M&A area is a similar story, where back in 2019 Japan saw many cross-border deals and inbound investors, much of this momentum came to a halt in early 2020. This refocused the sector on domestic transactions, which have provided some of 2021’s mega-deals. Another key change has been a noticeable increase in hostile takeover bids of and by Japanese companies.

Elsewhere, the expected influx of covid-19 related insolvencies and restructurings never quite arrived, possibly due to government intervention and support; when issues do occur, larger companies are tending to choose out of court workouts, with court processes unpopular. This looks set to continue to the end of 2021 but many in the legal world, in Japan and overseas, are preparing to be busy with bankruptcy and insolvency work come next year.