No. 35 — September 15, 2000

Feature Article


Jon Choy


"Litigious" is not a word often used — by foreigners or by the Japanese themselves — to describe Japan's government, society or people. Adherence to a social hierarchy, respect for authority, a near-universal belief in a single set of social mores, desire to maintain outward harmony and subjugation of individual concerns to those of the group have guided interactions among the Japanese for centuries, reducing the number of public disputes and limiting the role of judicial proceedings in everyday life. Until recently, a legal complaint filed for any but the most serious matters was considered an embarrassment for the plaintiff, not the defendant. The Japanese often have decried the emphasis that Westerners — Americans in particular — place on legal frameworks and procedures for managing personal, commercial and government interactions.

Yet Japan is, of course, a country where the rule of law exists as part of the foundation of society and government. Almost every major U.S. law has a Japanese counterpart, a fact due only in part to the legacy of the American occupation of Japan after World War II. Compared with U.S. statutes, however, Japanese laws often are vague, leaving many important details to the discretion of the ministry or agency responsible for their implementation. This fuzzy aspect has allowed laws to be bent to novel uses, easing the need to legislate new rules and providing the flexibility to meet changing situations. Foreigners, however, often have made the opposite complaint: that Japan's laws and regulations are too numerous, detailed, restrictive and opaque. The Japanese legal code, they claim, provides domestic competitors and Japanese bureaucrats with many methods that can be used to exclude outsiders from markets or to nullify advantages.

Elements and procedures of Japan's judicial system that originally were intended to encourage out-of-court settlements and to impart flexibility have slowed the judicial process to a snail's pace in practice. While timeliness was not an issue in the past, it is now a top concern because the continuing internationalization of Japanese businesses and the Japanese economy, as well as the gradual movement of Japanese society toward greater diversity, complexity and individualism, have placed increased demands on the country's courts and legal community.

Although Japan often has tinkered with its laws in the past — including a milestone reworking of the Code of Civil Procedure in 1996 — politicians, bureaucrats and citizens now are debating numerous proposed changes to basic features of the legal environment. Progress likely will be halting and uneven, however, the ongoing discussions will provide an unusual window of opportunity for domestic and foreign parties alike to address the many shortcomings of Japan's legal system.

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Weekly Review

--- by Douglas Ostrom

The Japanese economy, characterized in recent quarters by a gait of one step forward and half a step backward, has managed two full steps ahead without any reverse movement. The broadest measure of national output — the gross domestic product — rose in the April-June period at an annualized rate of 4.2 percent on a price and seasonally adjusted basis from the previous quarter, according to data released September 11 by the Economic Planning Agency (see Table). This result was better than projections made three months ago when even government economists forecast a payback for the first quarter's robust expansion of a revised 10.3 percent. It also was a slight improvement from early September. At that time, many analysts were predicting a gain of around 2 percent. However, the components of growth in recent quarters raise doubts about the sustainability of Japan's current recovery.


--- by Arthur J. Alexander

Factory output in Japan has risen by almost 9 percent since sinking to a recession low in December 1998. In fact, in just the first seven months of this year, the seasonally adjusted index climbed at an annualized rate of 4.7 percent. However, despite the vigor of manufacturing output over the last 20 months, the volume of production remains about where it was a full 10 years ago. A five-month moving average of Ministry of International Trade and Industry-compiled data shows no pronounced trend over the decade but, instead, a good deal of up-and-down movement (see Figure 1).


--- by Jon Choy

Prime Minister Yoshiro Mori and his cabinet have set an ambitious goal for Japan: to surpass the United States within five years as the world leader in information technology and use of the Internet. The head of the coalition government had previewed this objective soon after his early July reelection (see JEI Report No. 30B, August 4, 2000). Mr. Mori handed the job of devising the required framework to a new IT Strategy Council led by Nobuyuki Idei, chairman of Sony Corp. The advisory group is expected to have a concrete plan ready within two months. The council will focus on obstacles that are slowing or preventing Japan from participating fully in the Internet economy. Even as local businesses continue to transform themselves into dot-coms, however, the impact of Mr. Mori's grand plan is open to debate.



The gradual evolution of ties between the People's Republic of China and Japan has been on display in recent weeks as top officials from the two nations have met to smooth out some new wrinkles in bilateral relations. From August 28 to August 31, Foreign Minister Yohei Kono was in Beijing where he met (in order) with Foreign Minister Tang Jixuan, the head of the Chinese Communist Party's Organization Department, Zeng Qinghong, President Jiang Zemin, Vice Premier Qian Qichen and Premier Zhu Rongji. Mr. Kono expressed Japan's concerns about China's military modernization program, its overall defense spending, recent violations by its research vessels of Japan's 200-mile exclusive economic zone and activities by the Chinese navy near Japanese waters. In turn, Mr. Kono had to listen to Beijing's continuing exasperation with the Japanese government's refusal to accept its responsibility for inhumane military actions during World War II and recent visits by nearly 20 Japanese politicians and government officials to the annual commemoration at Tokyo's Yasukuni Shrine.

Domestic or foreign, big retailers in Japan have had to learn to navigate a new regulatory regime. Effective June 1, responsibility for determining the conditions under which owners of department stores, supermarkets, specialty shops and similar retail operations can build or expand outlets with floor spaces of 1,000 square meters (10,800 square feet) or more shifted from the Ministry of International Trade and Industry to authorities in the country's 47 prefectures or in 12 major metropolitan regions. The transfer mechanism was the repeal of the 1973 Large Retail Store Law, often dubbed the small retailer protection act, and its replacement by the Large Retail Store Location Law, enacted in May 1998 (see JEI Report No. 21B, June 5, 1998).

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