Luke Nottage – Page 28 – Japanese Law and the Asia-Pacific

Economics, Politics, Public Policy and Law in Japan and the Asia Pacific in 2008

All my blogs over July-October 2008, posted originally with full hyperlinks at http://eastasiaforum.org/author/lukenottage/], have been edited and updated as:
Nottage, Luke R., ‘Economics, Politics, Public Policy and Law in Japan, Australasia and the Pacific: Corporate Governance, Financial Crisis, and Consumer Product Safety in 2008’ (November 3, 2008) Sydney Law School Research Paper No. 08/134, Available at SSRN: http://ssrn.com/abstract=1295064 (and forthcoming, early 2009, in Ritsumeikan Law Review)
Some of the individual topics focused more directly on Japanese Law, asterisked below, are also available on this USydney blog:
* 1. Taking the Australia-Japan FTA negotiations to new levels
* 2. Whaling: What can law add to science, economics, ethics and politics?
3. Australia also should ‘Rail at Australian’s Tabloid Trash’ about Japan
* 4. Consumer over-indebtedness in Japan, Australia and the US
* 5. Dodgy foods and Chinese dumplings in Japan
* 6. FDI and corporate governance in Japan
* 7. Investor-state arbitration for Indonesia, Australia and Japan
8. Rivals: China, India and Japan – economic, not Olympic?
* 9. The politics of Japan’s new Takeovers Guidelines
* 10. Tables turned in Japanese and US financial markets
* 11. Lessons from Japan for the US financial crisis
* 12. The financial crisis – and loansharks in Japan and NZ
* 13. Consequences of melamine-laced milk for China, NZ, Japan and beyond
14. Political dynasties in Japan, the US, Australia … but not NZ?
* 15. A New Consumer Agency for Japan?

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A New Consumer Agency for Japan? Consumer Redress, Contracts and Product Safety

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
The Kyoto Shimbun reported last Wednesday the first de facto victory by a consumer representative group in injunction proceedings regarding unfair contract terms. The same page mentioned the Education Ministry’s response to the recent death of a sixth-year elementary student, who choked on some bread provided in school lunches – basically, ‘chew well’! By contrast, Japan’s largest manufacturer of konnyaku (konjac) jelly snacks, MannanLife, halted all production after a one-year-old boy choked to death on 29 July.
But that situation is rather different. It also more directly highlights when and how a new Consumer Agency (shohisha-cho) might emerge in Japan. Ex-PM Fukuda’s Cabinet approved a Bill, but it then resigned without putting it through. It is unclear when and how PM Aso will submit a new Bill, and what line the opposition DPJ will now take, especially given the uncertainty about a possible early general election.

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Consequences of melamine-laced milk for China, NZ, Japan and beyond

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
For weeks I have been tracking this latest evolving food safety scandal, but reports and reactions vary markedly across the region. Media coverage is likely to remain disparate. But the saga should provide lessons for developing bilateral and regional infrastructure to “trade up” to a more harmonized regime, better securing consumer product safety in our FTA era.
At a news conference this Wednesday the Chinese Health Ministry announced melamine limits for dairy products, but declined to provide updated statistics on those so far harmed by tainted products. In September the figures given were 53000 children sickened, 13000 hospitalised, and at least three dead from kidney stones due to drinking products made from milk that suppliers or intermediaries had bolstered with this chemical to hide the fact it had been watered down. Yet the government demands notification if Chinese lawyers decide to represent victims.

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The financial crisis – and loansharks in Japan and NZ

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
In Japanese banking, the big boys are back, as I explained last week: The Economist now confirms it. Indeed, the latter suggests that “if Japanese banks have any unique skill, it may well be in coping with crisis”. Not an obvious point, as evidenced by the collective dithering after Japan’s financial markets collapsed in the early 1990s or the almost completely unexpected 1995 Kobe earthquake. But I suppose the Japanese can be very good at responding systematically, once they establish the broad parameters of the problem.
Anyway, Mitsubishi UFJ has now proceeded to take 21% of Morgan Stanley, and is now considering further integrating its securities subsidiary (involved in US$18.3b of M&A advisory work involving Japanese companies in 2007) with Morgan’s Japanese arm (which did $17.9b). This would challenge Nomura, which did $34.2b (“Aiming to Rival Nomura”, Asahi Shimbun, 4-5 October, p 25); but the latter has also snapped up Lehman’s operations in Asia (mostly Tokyo), hoping to retain many staff to grow its own business.
And on Friday, the US government finally agreed on a public bailout plan for up to $700b, which I reviewed critically earlier in the week. Along with $85b for AIG and $29b for Bear Stearns, this amounts already to 5.8% of GDP, “well above the 3.7% of the savings-and-loan bail-out in the late 1980s and early 1990s” and significantly less than the 24% of GDP committed by Japan after 1997.

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Lessons from Japan for the US financial crisis

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
Many commentators are belatedly pointing out parallels between the financial markets boom and bust cycle in Japan over the 1980s and 1990s, and that now afflicting the US. However, especially when it comes to solutions for the US and hence the world economy, things are not quite as simple as envisaged by Japan’s then financial services minister, Yoshimi Watanabe, who proclaimed in March: “The US should follow Japan’s example and tackle its sub-prime loan problem using public money. The situation is exactly like what Japan saw 10 years ago”.

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Tables turned in Japanese and US financial markets

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
In 2003, financial journalist Gillian Tett wrote a book with a self-explanatory title: Saving the Sun: How Wall Street Mavericks Shook Up Japan’s Financial World and Made Billions (Harper Collins). It epitomized a school of thought proclaiming a dramatic shift in Japan towards US-style corporate governance more generally. On 24 September, still writing for the Financial Times, Tett concluded that if she were writing her book again, she “would give it a more upbeat slant. Anyone know the Japanese for ‘eating humble pie’?”. The Japan Society of Scotland has already suggested “sunao ni ayamaru (to apologise obediently without protesting)” or “memboku wo ushinau (to lose face)”! Japan’s big financial institutions are certainly now back on the world stage, picking up some big pieces from America’s own financial crisis. And Japanese policy-makers and other commentators now want to lecture the US on how to deal with it.
Who would have thought, even a year ago, that Nomura Securities would be buying up the now-insolvent Lehman Brothers’ operations in Asia (including those in Australia, involving a total 3000 employees – with half in Tokyo) and then Europe (2500 employees)? And for just US$225m and “a nominal sum”, respectively, out of cash reserves of almost $6b Nomura has raised since April? Or that Mitsubishi UFJ, which spent $3.5b to buy out the Union Bank of California, would now be committing up to $9b to take 10-20% of Morgan Stanley, another precarious “Big Five” Wall Street investment bank? Or that Sumitomo Mitsui, which recently spent $1b for 2% of Barclays bank in the UK (which in turn has bought Lehman’s US operations), is prepared to invest US$1-3b in Goldman Sachs if requested by that other precarious Wall Street firm? Or that Mizuho would have recently pumped $1.2b into Merrill Lynch, another troubled firm that took refuge with the Bank of America in a $50b merger announced on 15 September?

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The politics of Japan’s new Takeovers Guidelines

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
As outlined in FDI and Corporate Governance in Japan, in the context of growing inbound FDI and M&A activity, Japan is developing a hybrid approach to setting parameters for hostile takeovers. It is worthwhile taking a closer look at a third Report recently from a Study Group playing a major role, along with the courts, in elaborating Guidelines on permissible defensive measures. The Group’s membership seems to be changing, and differences are emerging compared to both the Anglo-Australian and American approaches to substantive rules on takeovers as well as the process for defining them.

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Investor-state arbitration for Indonesia, Australia and Japan

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
Interesting responses by Andrew MacIntyre and others follow Peter McCawley’s recent posting on the East Asia Forumblog, throwing light on Indonesia’s electricity crisis. Further to my subsequent posting on burgeoning FDI into Japan, yet the recent blocking of an English fund’s bid to expand shareholdings in the J-Power wholesaler, I wonder what Indonesia’s overall experience has been in attracting foreign investment into power projects. From Wells and Ahmad, Making Foreign Investment Safe (OUP, 2007), I do know of three major investments that resulted in arbitrations after Indonesia suspended many projects following the Asian Financial Crisis a decade ago. These already involved some involvement from Australia and especially Japan. Hence the question: why and how should we provide for investment arbitration in the Australia-Japan FTA or in ASEAN+ agreements?

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FDI and corporate governance in Japan

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
With Non-Performing Loans finally under control and economic recovery underway since 2002, Japan has also experienced a revival in FDI outflows. Many commentators focus on the large stocks built up in China, but there has also been steady interest in investing in Australia. Rather than tourism and property developments, Japanese firms have been quietly investing in infrastructure projects, and Nomura is reported recently as a possible buyer of the Australian investment banking arm of ABN AMRO.
A more remarkable development is the expansion of inbound FDI, particularly under the former Koizumi government. Fueled by a broader boom in M&A world-wide, Japan’s inflow rebounded to US$22 billion in 2007, and foreign investment stocks doubled over the last five years. But flows and stocks are still low by OECD standards relative to GDP, especially compared to the US, the UK and now Australia.
The Fukuda government has also sent more mixed messages recently. The Transport Ministry tried to include a blanket one-third cap on foreign shareholdings in Japanese airports. But others including the Financial Services Agency objected that this would choke off other inbound FDI, so this provision was dropped in March. The government is now considering the introduction of measures that more directly regulate the understandable security concerns arising from operating airports. Macquarie Airports Management Ltd, which already owns 19.9 percent of Haneda Airport, will be following this ongoing debate especially carefully.

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Dodgy foods and Chinese dumplings in Japan

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]
Australia’s Productivity Commission recommended in 2006 several ways to improve our consumer product safety regulatory regime, which dates back to the 1970s. In 2008 it published a more comprehensive Inquiry Report to strengthen our entire consumer law and policy framework. Several recommendations, like an obligation on suppliers to report serious product-related accidents to regulators, will start to bring Australia up to the higher standards expected and implemented in Japan since the 1990s. Those track the higher priority given recently to consumer protection particularly in the EU.
Japan and the EU illustrate the thesis of ANU Professors John Braithwaite and Peter Drahos that “global business regulation” can accommodate both economic deregulation of protected sectors domestically, and improved “social regulation” or a safety net for vulnerable groups of citizens. Japan also shares with the EU a greater concern about risks potentially affecting consumers or the environment. By contrast, as Berkeley Professor David Vogel has pointed out, since the 1980s the US has become much more concerned about risks to national security. Australia seems to have gone the same way. Yet such differing risk perceptions remain under-appreciated particularly in the Australia-Japan context.

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