The right legal infrastructure can help reignite a stagnant economy, as the boom in\u202finvestment and M&A activity\u202fshows.\u202f<\/p>\n\n\n\n\n\n
The recent surge of interest and investment in Japan\u2019s economy can be traced back to legal changes\u202finitiated\u202fmore than a decade ago. The\u202fimpact of these corporate governance reforms\u202f has major implications,\u202fnot only for\u202fbusiness, but for the practice of commercial law,\u202f both in house and in private practice.\u202f<\/strong>\u202f <\/p>\n\n\n\n\n\n Identified as a major theme in our recent\u202fAsia-Pacific 2026 guide<\/a>, the regulatory changes are actively reshaping Japan\u2019s equity markets and turbocharging mergers and acquisitions (M&A).\u202f\u202f <\/p>\n\n\n\n Measures were\u202ffirst\u202finitiated\u202fduring Shinzo Abe\u2019s premiership in the 2010s, with the aims of\u00a0boosting\u202fprofitability and growth\u202fby shaking up the corporate culture. Japan\u2019s ‘lost decades\u2019\u202fof economic stagnation\u202fwere blamed on\u202flow\u202finvestment, linked to\u202fcash hoarding by businesses and\u202fa\u202flack of pressure to create\u202fshareholder value.\u202f\u202f<\/p>\n\n\n\n For that reason, a\u202fcentral pillar of the broad set of\u202fgovernance reforms\u202fwas\u202fthe creation of codes of accountability, targeting both corporate management and institutional shareholders.\u202fThe\u202fCorporate Governance Code<\/a>\u202f(2015, revised 2018, 2021)\u202flays down responsibilities\u202ffor listed companies to\u202fincrease corporate growth and value, with\u202f\u201cattention to the needs and perspectives of shareholders\u201d, explicitly mentioning\u202fminority and foreign\u202finvestors.\u202f\u202f <\/p>\n\n\n\n Meanwhile, the\u202fStewardship Code<\/a> (2014, revised 2017, 2020) puts an\u202fonus on institutional investors to \u201cpromote sustainable growth of the investee company and enhance the medium- and long-term return of clients and beneficiaries.\u201d\u202f\u00a0<\/p>\n\n\n\n In other words, the\u202flongstanding situation in which many businesses\u202foperated\u202fcautiously, building their cash reserves instead of\u202fdistributing them to shareholders or investing meaningfully for growth, could not continue.\u202fBoards\u202fnow\u202fhad\u202fa clear regulatory duty to promote\u202fgrowth and\u202fwould\u202fcome under pressure\u202ffrom shareholders\u202fnewly\u202fmandated to\u202fhold their feet to the fire.\u202f\u00a0<\/p>\n\n\n\n Or at least, that was the idea.\u202f\u202f <\/p>\n\n\n\n But Japan\u2019s corporate culture proved stickier than\u202fanticipated\u202fand,\u202ffor\u202fthe next few years, change was slow and incremental. Things finally took a\u202freal\u202fturn\u202fin the 2020s, when\u202fa\u202flandmark ruling\u202fand the right\u202fmarket\u202fconditions triggered the current\u202finvestment boom<\/a>.\u202f <\/p>\n\n\n\n Learn more\u202fin the Japan sections of our recent Global Practice Guides:\u202f<\/em>Private Equity 2025<\/em><\/a>\u202fand\u202f<\/em>Equity Finance 2025<\/em><\/a>.<\/em>\u202f<\/p>\n\n\n\n\n\n\n\n When the owners of FamilyMart convenience stores decided to sell up, they accepted an offer from Itochu, already a major shareholder, although the price was lower than FamilyMart\u2019s advisors had recommended.\u202f\u00a0<\/p>\n\n\n\n But Oasis Management, a\u202fminority\u202fshareholder headquartered in Hong Kong, wasn\u2019t happy. They felt the company had been undersold, and took the matter before Tokyo District Court, who ruled in their favour. This sent shockwaves through the system and a powerful\u202fpositive\u202fsignal to foreign investors: that Japan\u2019s courts were ready to champion the rights\u202fof minority\u202fshareholders\u202fin buyouts.\u202fTokyo\u2019s High Court upheld the decision<\/a> in 2024, mandating an extra payout to compensate shareholders for the low sale price.\u202f\u00a0<\/p>\n\n\n\n As well as the landmark court ruling, the mid 2020s have seen a significant drop in the\u202fvalue of the Japanese yen against the US dollar. Driven\u202flargely by\u202fa widening interest rate gap\u202fbetween\u202fthe\u202ftwo economies,\u202fone impact has been to make Japanese company valuations look\u202fincreasingly\u202fattractive to international investors.\u202f<\/p>\n\n\n\n\n\n Partner, Investment Management Firm<\/em><\/p>\n\n\n\n The third\u202fkey factor\u202fis China.\u202f\u00a0Concerns\u00a0over\u202fits\u202fongoing trade tensions with the US,\u00a0as well as\u00a0an\u00a0underperforming\u00a0economy,\u202fhave led\u202ffunds to seek alternative Asian markets.\u00a0The\u202f2020s to date have seen billions of dollars withdrawn<\/a> from Chinese markets, and Japan has been a key beneficiary of this reallocated capital.\u202f\u00a0<\/p>\n\n\n\n All of this is adding up to\u202fa\u202fmarked rise in Japanese inward investment\u202facross a broad range of sectors.\u202fBetween 2024 and 2025, private equity\u202f(PE)\u202fand venture capital deals\u202frose by 53%<\/a>\u202fto a\u202f$29 billion\u202ftotal. This\u202faccounts for\u202fmore than a quarter of all deals across the Asia-Pacific region.\u202f <\/p>\n\n\n\n These seismic\u202feconomic\u202fshifts have implications both for the nature of demands on in-house counsel and the market for external legal advice. The impact is\u202fclearly\u202fbeing felt by many of the firm partners, general counsel (GC)\u202fand corporate clients we heard from as part of our extensive research.\u202f <\/p>\n\n\n\n\n\n Partner of a Leading Accountancy Firm in Japan<\/em>\u202f<\/p>\n\n\n\n\n\n The high volumes of deal activity are already\u202fgenerating work\u202ffor\u202fM&A\u202fpractitioners\u202fand other\u202fcommercial lawyers\u202fin Japan.\u202fCompetitive and contested deals\u202fbetween high-profile international players\u202fare increasingly\u202fcommon.\u202fBain Capital and KKR\u2019s\u202fhighly contentious\u202ftussle<\/a>\u202ffor Fuji Soft\u202fis one\u202fprominent\u202fexample.\u202f <\/p>\n\n\n\n Listed take-private deals\u202fand carve-outs are the two most common types of transactions\u202fwe\u2019re\u202fseeing in the market. The rise in investor activism\u202fand\u00a0hostile\u202ftakeover bids, spurred by the\u202fmore\u202ffavourable regulatory regime, means more defence mandates from companies\u202fseeking\u202fto protect themselves.\u202f\u00a0<\/p>\n\n\n\n\n\n Partner and M&A Lawyer, Leading International Law Firm<\/em>\u202f<\/p>\n\n\n\n For corporate in-house\u202fcounsel, the\u202fongoing\u202ftransformation of Japanese business culture\u202fis introducing new complexities: expansion of transparency,\u202f higher\u202frisk\u202fand\u202fa\u202fheavier\u202fregulatory burden.\u202fAdded\u202fto that\u202fis\u202fthe\u202fgrowth in confrontational\u202fpractices\u202fand external pressures, not least from international investors. This\u202fenvironment\u202fcan only accelerate the trend\u202falready\u202freported by\u202fgeneral counsel, that their role is rapidly becoming\u202fthat of\u202fa strategic business partner.\u202f <\/p>\n\n\n\n Watch: The changing role of general counsel<\/strong><\/p>\n\n\n\n