Legal Market Overview
For Japan and its economy, 2020 was a year defined in many areas by the Covid-19 crisis, as it was for many countries throughout the world. Pre covid-19 the situation in Japan was largely a continuation of the previous year, as M&A continued to be busy, outbound investment was on the rise and foreign businesses and funds maintained an interest in the local market. Post Covid-19 and the significant lockdowns in Tokyo and other areas, many projects were put on hold, finances were challenged and investors were put off by the ensuing uncertainty.
Despite this short term dip, the economy generally remains stable, as does the legal market, with little movement in or between the traditional local powerhouses of Nishimura & Asahi, Nagashima Ohno & Tsunematsu, Anderson Mori & Tomotsune, and Mori Hamada & Matsumoto, as well as the prominent TMI Associates and Atsumi & Sakai. The major international firms active in Japan are also much the same as the previous year; Baker McKenzie (Gaikokuho Joint Enterprise) and Morrison & Foerster LLP are the prominent all-rounders, while Herbert Smith Freehills and White & Case LLP – White & Case Law Offices (Registered Association) provide strong coverage. A number of new practice heads have now had a full year at the helm and improved their teams, most notably Kenneth Lebrun for Davis Polk & Wardwell LLP‘s corporate and M&A team and Stuart Beraha’s TMT practice for Latham & Watkins Gaikokuho Joint Enterprise.
Restructuring and insolvency is an area of increased focus, with some companies suffering bankruptcy due to the turmoil and others looking to downsize; naturally hospitality, tourism, and retail have taken the biggest hits. This has had a knock-on effect in the area of employment, where Prime Minister Abe’s 2018 labour reforms are still in the implementation process for many companies and firms are slow to change. Stricter harassment laws have seen a rise in both sexual and power harassment cases.
Pre Covid-19 the real estate and construction areas were very active, and post lockdown long-term projects continued, however, mid-2020 saw a rise in contentious matters arising from construction delays and an increase in distressed transactions; tourism and hospitality again suffering the most. The active and lucrative J-REIT market is still dominated by the local firms, and concentrated in the big four.
The dispute resolution field has seen some interesting developments in the past few years, notably foreign lawyers now being allowed to represent clients in Japan. Arbitration was also a big focus, stemming from 2018 when in May the Japan International Dispute Resolution Center (JIDRC) was launched; in September the International Arbitration Center in Tokyo (ITAC) was opened and offers arbitration by former judges of the US, South America, UK, Europe, China, Korea, Japan and Australia. In November the Japan International Mediation Center (JIMC) was set up at Doshisha University. These facilities are beginning to prove their worth, in part due to the recent rise in employment and bankruptcy-related disputes.
In terms of where the market is strongest, healthcare and pharmaceuticals are attractive industries for investment, however the real boom sector is technology. Fintech is thriving and M&A in the startup market is increasingly active. The large to mid-size local firms are beginning to redirect resources and expertise to this area, particularly Mori Hamada & Matsumoto and Atsumi & Sakai, who have a jump on the competition in the fintech space. Another talking point in the market is renewables and the drive towards clean energy, solar power, and offshore wind being the largest projects. These trends look set to continue and provide a focus for funds and investors going forward.