Editorial

Author: | Published: 5 Jan 2004
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Since IFLR published the first edition of The IFLR Guide to Japan a year ago, economic realities in the country have forced lawmakers and regulators to take a more flexible approach. In turn, new and more sophisticated deal structures are emerging.

Perhaps the most noticeable change is the shift in business culture. Companies have succumbed to the need to restructure their organizations. Financial institutions, plagued by the burden of bad debt, could no longer keep tied relationships intact and have had to sell non-performing loans through the securitization and distressed debt markets. Shareholders are exerting more control and asking searching questions of management.

Lawyers and bankers have used changes in policy and ethos to find new ways to make money and, at the same time, to help revitalize the economy. Leveraged finance transactions, private equity deals, squeeze-outs of minority shareholders, real estate investment trusts and corporate reorganizations through mergers and acquisitions are all becoming more common.

Yet good financial health is still a long way off for Japan. The banking system, as UBS' Fumitaka Eshima tells IFLR on page 6, needs stabilizing. The likely effectiveness of the new Industrial Revitalization Corporation of Japan is in question. The large pension fund deficit poses risk for foreign investors looking long-term at the country.

In January 2003, prime minister Koizumi announced the government's policy goal to double foreign direct investment in five years. But so far only half measures and makeshift policies have materialized to encourage merger and acquisition activity, which is the best way for the government to realize its objective. Far-reaching reforms are needed. For instance, foreign companies should be allowed to enter into cross-border stock-for-stock transfers or triangular mergers.

It is in the context of the many legal challenges Japan still faces that IFLR publishes this guide. The changing yet complex legislative and regulatory environment can make it difficult for counsel and other market participants to keep track of developments that affect their business activities.

Specialist practitioners from Japanese and foreign law firms provide detailed analysis on the latest trends in regulation and the law and why they matter. We hope you will find the guide a useful tool and one that you will refer to often.