Japanese Law and Trade Relations

The World and I, August 1999 | Go to article overview

Japanese Law and Trade Relations


To the Editor:

Ever since Matthew Galbraith Perry signed a treaty with the Tokugawa Shogunate on March 31, 1854, ending the self-imposed isolation of Japan, the trade relationship between Japan and the United States has been adversarial. [On the state of Japan's economy and financial system see: "From Model to Morass" by Robert Manning, The World & I, December 1998, p. 40--Ed.] This attitude is explicitly seen in Japanese laws, although recently the Experts Committee of the Japan Investment Council recommended how to facilitate "foreign direct investment in Japan." Of the seven main points, only two fer to foreign trade. They are: (a) make further efforts to promote deregulation, and (b) establish a system to provide information about foreign direct investment.

Granted the judiciary that controls the activities of domestic and foreign enterprises in any given country is an internal affair of that particular country. But Japan-U.S. trade disputes have brought into focus the contradictory aspects of their legal systems, and as a consequence some of these incompatibilities are sure to escalate into political issues in the near future.

Laws in Japan have historically been encumbrances to work your way around. A good law has several essential attributes: It is crystal clear; it focuses on a specific and clearly defined form of illicit conduct or practices; and it prescribes a solution or penalty commensurate to the harm done by the misdeed. If laws that do not satisfy the above criteria are kept in the statute books, they are maintained not in the cause of justice but for the benefit or convenience of the state.

The Japanese trade laws are of a different world. They are made intentionally ambiguous, and the Japanese are content because the laws benefit them most agait foreigners. For example, what is called "administrative guidance" is just a bureaucratic mechanism, but it has more binding force than laws decreed by the legislature.

Foreigners, especially Americans, are puzzled and dissatisfied by these laws. Take for instance mergers and acquisitions, which are common practices in America. Although there is less opposition to acquisitions and mergers in Japan today, the immovable obstacles are still in place: The Japanese Commercial Code does not allow companies to own their own stocks, and holding companies are illegal because they infringe on the Japanese Anti-Monopoly Law.

Another drawback is the abuse of foreign trademarks. Japanese authorities are lackadaisical in prosecuting violators. A company or individual, foreign or Japanese, can apply to register a trademark, but not all are granted. …

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