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Legal Market Overview

Japan’s economy continues to be supported by a healthy mix of outbound and inbound corporate activity. While the Japanese giants – and increasingly smaller, regional entities – maintain their gaze firmly fixed on the overseas markets of the Middle East, Europe, and the US, the economy keeps slowing down. The government, through ‘Abenomics’ continues on its mission to make the country more hospitable for foreign entities such as private equity funds, activist shareholders, and major corporates.

This is nothing new as shareholder activism, simultaneously facilitated by and partially responsible for an ongoing shift in corporate mentality within Japan, has been thriving in Japan for several years. What is new, however, is a newfound love for venture capital into technology, life sciences and pharmaceutical business, mainly in Silicon Valley and Israel. The corporate teams in Tokyo have differing opinions on the significant and future of venture capital in Japan, but its popularity among the major trading houses reveals a true emphasis on technology within the Japanese clients.

On the energy front, the ‘nuclear coma’ within Japan as well as the ‘inevitable death of coal – no matter how clean’ has made rail technology the country’s most attractive export. However, following years of Japanese money flowing into foreign projects, the cycle has begun to come full circle. Increasingly, European and American developers and operators have found great interest in renewable power projects, mainly wind and solar.

Firms operating in these circles underwent significant change in the form of notable team changes. Morrison & Foerster LLP lost three partners to Latham & Watkins Gaikokuho Joint Enterprise, while Herbert Smith Freehills and Ashurst swapped team heads with their London offices. Overall Tokyo remains a rather mobile legal market populated by firms eager to expand their teams but plagued by a considerable lack of available manpower. The need for bilingual mid-level practitioners (both bengoshi and gaiben) is further hindered by the increasing appeal of in-house positions at the major Japanese companies.

Dispute resolution specialists have recently turned their attention away from the previously booming antitrust space – where the major global investigations have calmed down somewhat and the JFTC seems focalised on the Twitters and Googles of the world – and now train their gaze on the corporate scandals that have plagued Japanese companies for the past few years. Internal investigations, disclosure obligations and shareholder transparency sit at the forefront of the clients’ mind. Also important is intellectual property and labour and employment, both of which are due to undergo significant reforms. Japanese authorities are looking at adopting a more European-style patent litigation system featuring limited discovery, allowing the claimant to investigate the defendant’s place of manufacturing without much more. Labour and employment has been a key pillar of ‘Abenomics’ and is currently undergoing reforms with respects to issues such as life-long employment and workplace harassment.

International arbitration also maintains its spot on Japan’s priority list, with the recent opening of new facilities in Kyoto and the incoming unveiling of additional resources in Tokyo.

The real estate space recently saw Withers start its own offering through the hire of a team of five including Gerald Fuji from White & Case. The upcoming Olympic Games and recent Rugby World Cup have been animating the domestic real estate and construction market, which the domestic Japanese firms still dominate. The same applies to the J-REIT work, which is practically reserved for bengoshi outfits.

Traditionally a cash-based society, Japan is gradually starting to embrace fintech and cryptocurrency. While the Big Four tend to advise the megabanks, major trading houses and global tech behemoths, all domestic firms field a team to guide startups and medium-size companies over the regulatory hurdles. This slice of the banking and finance pie seems relatively separate from the international firms who continue to focus on asset finance, project finance, and corporate finance.