Trapped in tradition

Japan Legal’s future growth depends on its ability to embrace the future, which is evident, and develop its in-house legal market, which is lagging, writes John Church

Japan Legal is to a great extent cornered by demographics and crippled by tradition. The demographics are dictating where growth needs to evolve, but the tradition in terms of legal roles has to a large degree shackled the legal development of the country, in particular with regard to the evolution of in-house counsel.

How the nation moves forward now will be critical to its future success. If it succeeds in harnessing technology, as it is doing in areas like fintech and even space exploration, opportunities will present themselves. And if it can break free from the shackles of tradition surrounding the roles of its in-house lawyers, as much wanted and better-late-than-never developments are indicating, the business sector will be finally equipped to compete with the fast changing demands of international commerce.

Developments in fintech and other tech industries are paramount, as with new sectors like the space industry and gaming, along with crucial reform in areas like intellectual property and labour law.

The product of demographics is having a great bearing on current legal trends, notes Masakazu Iwakura, a senior partner with TMI Associates and professor of law at Hitotsubashi University. “The Japanese population is decreasing and ageing, and therefore the Japanese market continues to shrink, as a result of which listed companies are obliged to enter into foreign markets in order to achieve objectives of continuing growth,” Iwakura explains.

“Many Japanese companies have considered and conducted outbound M&A transactions in various foreign markets. In the 2000s, they went into [China] but most of them failed. Currently, most Japanese companies are executing M&A in Southeast Asian countries, North American countries, and European countries.”

Yoshiaki Muto, a partner at Baker McKenzie, says the US and Western Europe continue to be the most active regions for Japanese outbound M&A, especially in the tech sector. “Within Asia-Pacific, Australia, Indonesia and Vietnam appear to be popular destinations for Japanese outbound deals,” says Muto. “We are also interested in seeing whether the change in the Malaysian administration results in a resurgence in interest in Malaysia among Japanese investors.”