Despite 1 Japan Newsletter July 2025
2 Welcome Welcome to the inaugural edition of our Japan newsletter. In this issue, we explore how Japan’s M&A activity surged to record levels in 2024. Against a backdrop of regulatory reform, shareholder activism, and a shrinking domestic market, Japanese companies are increasingly pursuing both inbound and outbound M&A to sharpen focus and unlock value. In our conversations with major thought leaders in the market, we also learn of the sectors generating the most interest from foreign investors—robotics, green energy, fintech, and pharmaceuticals— highlighting both the innovation driving these industries and the regulatory and operational hurdles that investors must navigate. Beyond big-ticket deals, we delve into Japan’s fast-evolving startup ecosystem, led by Tokyo and increasingly supported by regional hubs like Osaka and Fukuoka. Finally, we consider how cultural dynamics, commercial practices, and legal developments—from revisions to corporate governance codes to enhanced FDI screening— are reshaping the business environment. As Japan continues to open up to foreign capital while redefining its corporate landscape, the opportunities are abundant— but success requires an informed and nuanced approach. Every two months, this newsletter will feature candid conversations with major legal voices from across the Japanese market. They’ll speak with us—so you can hear directly from the people shaping the country’s legal and business future. Editor Lee Saunders
Despite 3 Table of Contents 2 Welcome Culture & Counsel: Business Etiquette & 4 Legal Practice in Japan Japan’s M&A Reaches Record Highs in 10 2024: Where Are We Headed? 18 News in Brief
4 Culture & Counsel: Business Etiquette & Legal Practice in Japan Isaku (Isaac) Uchiyama VP Asia Pacific / Head of Tokyo Office Nishlis Global Legal Marketing
Despite 5 How Japanese Law Firms Win Business, and What Foreign Lawyers Should Know For international law firms and counsel seeking to expand their presence in Japan—or to work more effectively with Japanese clients and firms—understanding the cultural and commercial nuances of the market is essential. Japan remains one of the most sophisticated legal environments in Asia, but its business customs, expectations around relationship-building, and legal marketing strategies differ greatly from Western norms. This article by Isaku Uchiyama, VP Asia Pacific and head of the Tokyo office at Nishlis Global Legal Marketing, provides practical guidance on how Japanese firms approach business development, and how foreign lawyers can build respectful, effective partnerships within the Japanese legal ecosystem. 1. How Japanese Law Firms Win Business: Shifting Strategies in a Traditionally Discreet Market Japanese law firms historically thrived in a culture of discretion and humility, with marketing and business development (BD) efforts traditionally understated. However, the last decade has seen a notable transformation—especially among firms that serve cross-border clients or compete in high-growth sectors like M&A, IP, technology, and dispute resolution. Here are several trends shaping BD in Japan’s legal market: Increased Brand Consciousness: Leading Japanese firms such as Anderson Mori & Tomotsune (“AMT”), Nishimura & Asahi, Mori Hamada & Matsumoto (“NA”), Nagashima Ohno & Tsunematsu (“NOT”) and TMI Associates are investing more heavily in branding (most of them having done a re-brand in the past two years), websites, legal rankings (e.g., Chambers, Legal 500), and thought leadership. While still modest compared to Western standards, this is a clear shift from past reticence. International Alignment: To serve multinational clients, Japanese firms are mirroring global standards in proposal writing, pitching, and credential-based marketing. There’s a growing reliance on experience-based BD, with firms showcasing precedential deals and cross-border experience through curated deal highlights. All the major firms aspire in one way or another to be regarded as international law firms based out of Japan. Sector-Specific Targeting: Japanese firms are becoming more strategic in how they target sectors—focusing on areas like renewable energy, life sciences, AI,
6 and fintech. Specialized newsletters, client alerts, and webinars are on the rise. Relationship-Led Origination: Despite modernization, Japan remains deeply relationship-driven. Clients still prefer to give work to someone they trust personally—often built over years of faceto-face interaction. Referrals from trusted intermediaries (accounting firms, trading houses, general counsel circles) remain the gold standard for origination. Emerging Role of Foreign Lawyers: Bilingual foreign-qualified lawyers are increasingly important in winning crossborder mandates. These professionals help bridge cultural and legal gaps, especially in negotiations or disputes involving U.S., UK, or Asian jurisdictions. A few of the major Japanese law firms (AMT, NA, NOT) have in recent years restructured to enable foreign lawyers to become partners. 2. Business Culture Tips: A Guide for Foreign Counsel To work successfully with Japanese clients—or with Japanese law firms—it’s not just about legal expertise. It’s about cultural fluency and demonstrating respect for how business is done. Here are key tips every foreign lawyer should know: a. Dealmaking is Patient and Deliberative Japanese clients value consensusbuilding and risk mitigation. Unlike the more aggressive tactics common in Western dealmaking, the Japanese approach tends to be more cautious, with a strong preference for minimizing uncertainty. Don’t rush negotiations. Decisions may involve multiple layers of internal approval—be prepared to explain implications in detail, not just at a high level. b. Face-to-Face (and Now Zoom-toZoom) Still Matters While the pandemic accelerated digital communication, in-person trustbuilding remains foundational. When meetings occur—whether in Tokyo boardrooms or via Zoom—expect a formal tone and clear hierarchies in how people speak. Business cards (meishi) are still exchanged ceremoniously. Learn and respect name order (surname first), use appropriate honorifics, and observe protocol in how seats are arranged and who speaks first. c. Avoid Public Confrontation or OverAggression In both negotiation and litigation, Japanese culture tends to avoid direct confrontation or public shaming. Even if a client is upset, they may not express it openly. Read the air (“kuuki wo yomu”)—a cultural expression meaning to sense unspoken social cues. Show humility, avoid overpromising, and defer where appropriate. d. Build the Relationship First, Ask for Business Later
Despite 7 Whether approaching clients or collaborating with a Japanese firm, the principle of “sincerity before sales” is critical. Jumping too quickly to pitches or proposals may be viewed as transactional or opportunistic. Invest time in understanding their needs, sharing insights, and developing mutual respect before seeking engagement. e. Referrals Are Everything Referrals in Japan are not casual favors—they are reputational commitments. Foreign lawyers looking to win Japanese clients should seek introductions from mutual contacts who can vouch for their integrity and cultural competence. Once you receive a referral, treat it with care, and always report back to the introducer. f. Written Follow-Ups Matter After meetings, send a thoughtful and detailed follow-up email—often in both English and Japanese if possible. Japanese professionals appreciate clarity, formality, and thorough documentation. This is especially important when summarizing action items or next steps. Why All This Matters Legal services in Japan are evolving, but the essence of Japanese business culture remains rooted in respect, trust, and long-term thinking. For foreign law firms or individual counsel, succeeding in Japan requires more than subject-matter expertise—it calls for cultural insight and a deep appreciation for the Japanese way of doing business. Those who invest in the relationship, adapt their communication style, and demonstrate an ability to navigate both legal and cultural terrain will be wellpositioned to earn trust—and work— in one of Asia’s most important and discerning markets. If your firm is looking to deepen its presence or better serve clients in Japan, reach out to Nishlis Legal Marketing Japan for bespoke business development support and market insights.
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10 Japan’s M&A Reaches Record Highs in 2024: Where Are We Headed?
Despite 11 Japan’s M&A activity reached record highs in 2024, fueled by private equity investments and corporate divestitures (Keita Tokura) “This surge underscores Japanese corporations’ efforts to streamline operations, shed non-core businesses, and embrace innovation and diversification, points out Mr. Keita Tokura (AMT). “Private equity firms have emerged as influential players in Japan’s M&A market, capitalizing on undervalued assets and favorable financing conditions. Notable examples include Bain Capital’s acquisition of supermarket and specialty store businesses from Seven & i Holdings and Apollo Funds’ purchase of Panasonic Automotive Systems Corporation, both illustrating how private equity is reshaping Japan’s corporate landscape. Listed companies are increasingly facing pressure from shareholder activism, as investors push them to unlock value and focus on their core competencies. It can be said that the shareholder activism is one of the key factors which is driving M&A activities in Japan.” “Despite global economic uncertainty, Japanese corporations remain highly active in M&A on both the buy-side and sell-side, spanning a wide range of industries,” adds Mr. Junzaburo Kiuchi (TKI). “As Japan’s domestic market continues to shrink, many companies are compelled to either expand their addressable market or focus on core businesses in order to survive and thrive.” It was a privilege to speak with some of Japan’s leading legal minds on the evolving M&A landscape and market trends. We were grateful to catch up with Mr. Keita Tokura, Partner at Anderson Mori & Tomotsune (AMT), one of Japan’s most prestigious law firms. Founded in 1952 and home to nearly 700 lawyers, AMT holds multiple Band 1 rankings across Chambers and Legal 500 and was recently named Japan Firm of the Year at the IFLR Asia-Pacific Awards 2025. The firm also won two accolades at the FT Innovative Lawyers Asia Pacific 2025. We were equally honored to speak with Mr. Junzaburo (JB) Kiuchi, Partner at Tokyo International Law Office (TKI). Dual-qualified in Japan and the United States, and with over 25 years of experience—including senior roles at Freshfields and EY Law Japan—Mr. Kiuchi offered rich insight into the M&A market through both a domestic and international lens. Finally, we thank Ms. May Sakai, Associate at Morrison Foerster’s Tokyo office, one of the most prominent international law firms in Japan, for contributing her perspectives and adding further depth to our debut edition. We sincerely appreciate their time and thoughtful commentary.
12 Key drivers include corporate governance reforms, regulatory changes, and a growing influence of shareholder activism (May Sakai) “We are seeing a sustained and positive trend in increasing M&A deal volume in Japan, supported by an increase in transactions involving private equity firms, agrees Ms. May Sakai (MoFo). “Several external factors are contributing to this momentum, including a weaker yen, shifting investor priorities in the global market, and a growing willingness among traditionally conservative Japanese companies to engage with outside investment, including from private equity. Through our M&A practice, we are observing the increasing appeal of Japanese companies as acquisition targets. This is also evident in the increasing number and size of transactions that our firm has advised on involving senior and mezzanine lenders financing private equity acquisitions of Japanese targets. Domestically, the M&A landscape is becoming more dynamic and open. Key drivers include corporate governance reforms, regulatory changes, and a growing influence of shareholder activism. Management of Japanese companies are placing a greater emphasis on enhancing shareholder value, which is fueling both strategic acquisitions to build on core strengths and divestitures of non-core assets. We expect continued growth in domestic, inbound and outbound M&A transactions.” What should investors abroad know about the hottest sectors in Japan? Mr. Tokura adds: “Japan is home to worldleading industries such as robotics, green energy, and fintech. These sectors are driven by cutting-edge innovation, robust government support, and favorable market conditions.” Japan is a global leader in industrial automation and AI-powered robotics “Japan is a global leader in industrial automation and AI-powered robotics, with companies like Fanuc, SoftBank Robotics, and Yaskawa Electric at the forefront of innovation. The global demand for robotics is expected to grow significantly, fueled by labor shortages and the need for operational efficiencies, making this sector highly attractive for investment. Japan’s transition to renewable energy is a cornerstone of its economic strategy Japan’s transition to renewable energy is a cornerstone of its economic strategy. The government’s Green Growth Strategy actively promotes investments in hydrogen technology, offshore wind projects, and energy storage systems. Japan is a global leader in hydrogen innovation, with companies such as Toyota and Kawasaki Heavy Industries pioneering hydrogenpowered vehicles and infrastructure development.
Despite 13 Japan’s fintech sector is experiencing rapid growth Japan’s fintech sector is experiencing rapid growth, driven by digital transformation and a tech-savvy population. Key areas such as blockchain, payment systems, and digital banking offer substantial growth potential. Japan has taken a proactive approach to cryptocurrency regulation, fostering a favorable environment for blockchain-based solutions. The rise of digital payment platforms like PayPay creates opportunities for foreign investors to collaborate with local firms in this dynamic sector. While these industries present significant opportunities, foreign investors should be mindful of challenges such as stricter foreign direct investment (FDI) regulations and increasingly active investment screening by the Japanese government.” How would you describe the start-up ecosystem in Tokyo, and across Japan? Mr. Tokura explains: “Japan’s start-up ecosystem has undergone a remarkable transformation, with Tokyo emerging as a prominent global innovation hub. The Tokyo Metropolitan Government’s initiatives and activities, such as “Startup Ecosystem Tokyo Consortium” and “SusHi Tech Tokyo,” have played a pivotal role in fostering collaboration among academia, government, business corporations and startups. Beyond Tokyo, regional cities like Osaka and Fukuoka are gaining momentum as emerging start-up hubs, offering lower operational costs and tailored support for entrepreneurs. However, challenges persist. Japan’s access to venture capital remains limited compared to global hubs like Silicon Valley, and cultural factors such as risk aversion continue to influence entrepreneurial activity. Nevertheless, government-backed initiatives and corporate accelerator programs are gradually enhancing funding opportunities and fostering innovation across the ecosystem.”
14 What should investors know from a cultural, commercial, or regulatory standpoint? Mr. Kiuchi points out: “Organizational culture in Japanese companies varies; some operate under a top-down structure, others follow a bottom-up approach, but consensus-building is a central tenet in many firms.” Once Japanese colleagues resonate with the organizational vision, understand their respective roles in the plan, and feel a sense of psychological safety, they collaborate effectively (Junzaburo Kiuchi) “Foreign acquirers and joint venture partners often require time to adapt to how Japanese teams and individuals collaborate and build consensus. However, feedback I frequently receive from non-Japanese clients is that once Japanese colleagues resonate with the organizational vision, understand their respective roles in the plan, and feel a sense of psychological safety, they collaborate effectively, support one another, and work diligently with integrity toward shared goals.” Ms. Sakai adds: “Traditionally, Japan has been cautious toward outside and foreign investment, particularly from private equity firms. The prevailing corporate culture tended to emphasize stability and the interests of internal stakeholders over aggressive growth strategies. Many Japanese businesses hold shares in each other to protect itself from takeovers. In 2023, the Japanese government issued the first major revisions in nearly two decades to its corporate governance code (May Sakai) However, this landscape is changing, driven by both regulatory reforms and broader structural shifts. Notably, in 2023, the Japanese government issued the first major revisions in nearly two decades to its corporate governance code and public takeover guidelines. These reforms aim to stimulate greater activity and transparency in the M&A market. Japan also continues to be a shrinking domestic market, so Japanese companies will continue to look for outbound M&A opportunities. Another significant domestic factor is the growing number of companies facing succession challenges. Many Japanese businesses are led by aging founders without clear succession plans, but which makes them attractive acquisition targets, for example due to their established market presence, operational stability, or proprietary technologies. Additionally, numerous Japanese companies are highly regarded within Japan but have yet to expand their products, services, or technologies globally. These firms present compelling opportunities for investors with a vision for international growth. Combined with accessible financing and a regulatory environment that is increasingly
Despite 15 favorable to investment, these changes have made Japan an attractive market for investors.” Japan places a strong emphasis on long-term relationships, consensusdriven decision-making, and respect for hierarchy (Keita Tokura) Mr. Tokura indicates: “To succeed in Japan, foreign investors must carefully navigate the country’s unique cultural, commercial, and regulatory landscape. Foreign investors are increasingly drawn to Japan’s evolving business landscape, where innovation intersects with tradition. The country’s proactive measures to improve corporate transparency and governance signal a welcoming environment for global collaboration. From renewable energy breakthroughs to fintech advancements, Japan demonstrates its potential as a global leader in technological and economic transformation. These developments, coupled with a progressive shift in corporate culture and regulatory reforms, create fertile ground for foreign investors seeking both stability and growth. Japan places a strong emphasis on longterm relationships, consensus-driven decision-making, and respect for hierarchy. Practices such as nemawashi (informal consensus-building) play a crucial role in negotiations and decision-making processes. Building trust, demonstrating commitment, and understanding these cultural nuances are essential for establishing successful partnerships. Japan offers a stable and transparent market, characterized by high consumer spending power and a strong demand for quality. Localization is key to success, as Japanese consumers value products and services tailored to their preferences and needs. Companies that invest in understanding local tastes and delivering personalized experiences are better positioned to thrive in this competitive market.” What legal developments, regulatory shifts, policy reforms and global issues are impacting foreign investment into Japan? Mr. Tokura states: “In recent years, Japan has implemented significant legal and regulatory changes that have reshaped its foreign investment landscape. The multiple amendments to the Foreign Exchange and Foreign Trade Act (FEFTA) since 2019 introduced stricter screening processes for foreign investments in sectors deemed critical to national security. Global factors such as U.S. tariffs and geopolitical tensions are influencing Japan’s investment environment. The weakening yen has made Japanese assets more attractive to international investors, although it has simultaneously increased import costs for Japanese businesses. A key milestone in this evolving regulatory framework was the promulgation of the Economic Security Promotion Act in May 2022. This act designates certain products as “Specified Critical Products,” whose supply disruptions could significantly
16 impact citizens’ survival, daily lives or economic activities. In line with this, the Japanese government has identified specific business sectors linked to these critical products as “core businesses” under FEFTA.” Mr. Kiuchi adds: “Meanwhile, the Japanese government persists in its efforts to promote investment in Japan. Through various guidelines, statements, and legal reforms, it both supports and pressures corporations to strengthen financial benchmarks—such as return on equity (ROE)—enhance corporate governance, ensure fair treatment of shareholders, engage more proactively with investors, and improve transparency and disclosure. Additionally, the government pushes for the unwinding of cross-shareholdings, which are known to weaken management discipline. These policies have facilitated activist shareholders in presenting their arguments and garnering support from institutional and retail investors, further integrating activism into Japan’s corporate environment. The mindset of corporate leaders in Japan has evolved as well. Increasingly, they are open to pursuing hostile takeovers—now more commonly referred to as “unsolicited takeovers” in official contexts—of industry peers. Many are also willing to consider significant restructuring initiatives, including divestitures of core businesses or substantial workforce reductions, even during periods of profitability. For these macroeconomic reasons, M&A activity in Japan remains strong. While fluctuations driven by geopolitical events, currency movements, and other external factors are inevitable, I do not foresee any shift in the long-term trend.” Thorough upfront research on the regulatory environment Mr. Kiuchi adds: “As in any jurisdiction, Japan has regulations that may seem counterintuitive or difficult to navigate. While these are rarely deal-breakers, conducting thorough upfront research on the regulatory environment—aligned with your acquisition goals—is essential to avoid unexpected challenges during negotiations. Many M&A failures stem from a lack of understanding of Japan’s cultural and business practices. Again, it is important to research the industry ecosystem in your chosen field, identifying the expectations of key players—whether you intend to align with traditional norms or disrupt them.” First significant revisions in nearly two decades to its corporate governance and public takeover guidelines Ms. Sakai indicates: “A major shift occurred in August 2023 when Japan’s Ministry of Economy, Trade and Industry (METI) issued the first significant
Despite 17 revisions in nearly two decades to its corporate governance and public takeover guidelines. The previous version, published in 2005, generally supported the adoption of takeover defense measures. In contrast, the revised guidelines now promote openness to M&A as a strategic solution and emphasize the importance of shareholder interests in corporate decision-making. This regulatory evolution reflects a broader trend toward stronger corporate governance in Japan. Over the past decade, there has been a marked increase in the number of Japanese companies with independent directors who play an active role in key strategic decisions. Additionally, the rise of shareholder activism has placed further pressure on management to enhance shareholder value. This is often cited as leading to increased proposals for spin-offs, carve-outs of non-core assets, and even sales of the company itself. Further, financing conditions continue to be favorable in Japan, with interest rates remaining relatively low compared to other major markets. This supports both domestic and cross-border transaction activity. We think that these legal reforms, shifts to corporate governance, and favorable market conditions will continue to lead Japan towards an even more robust and active M&A environment. Longstanding cultural and structural barriers are shifting, and the regulatory framework and environment continues to adapt to prioritize transparency and shareholder value. We are optimistic that Japan presents a compelling landscape for strategic global investment.”
18 News in Brief
Despite 19 Japanese Firm Increased Q1 Capital Spending by 6.4% In the first quarter of 2025, Japanese firms increased capital spending by 6.4% year-on-year, reaching a record ¥18.8 trillion ($130 billion), driven by robust domestic demand in sectors like food and real estate. However, export-oriented industries such as automobiles and factory equipment saw declines in investment, attributed to concerns over U.S. tariffs introduced by President Trump’s administration. While corporate profits and sales rose, the looming threat of tariffs poses risks to future earnings and wage growth, potentially impacting the Bank of Japan’s economic projections and plans for interest rate adjustments. Learn more at Reuters. Uptick in M&A Transactions In 2024, Japan experienced a significant uptick in mergers and acquisitions (M&A), with a total of 4,700 deals—marking a 17.1% increase from the previous year. This growth was evident across all three market categories: domestic (IN-IN), inbound (OUT-IN), and outbound (IN-OUT). The overall value of these transactions rose by 8%, partly due to several large-scale deals, including Nippon Life Insurance Company’s USD 8.2 billion acquisition of U.S.-based Resolution Life. Notably, outbound M&A activities between Japan and ASEAN countries were particularly robust, with Singapore and Vietnam emerging as key destinations. In the first quarter of 2025, Japanese companies continued this momentum, executing 1,171 M&A deals valued at USD 50.2 billion—a 67.4% increase in value compared to the same period in 2024. This data is sourced from RECOF Corporation, a Tokyo-based M&A advisory firm specializing in cross-border transactions, particularly between Japan and Southeast Asia. Learn more at RECOF. Japan To Expand Investments in Africa Japan is intensifying efforts to expand its investments in Africa, aiming to reduce its economic dependence on China. This strategic shift is driven by Japan’s emergence from a prolonged period of deflation, which has revitalized the private sector’s willingness to engage in overseas ventures. Takehiko Matsuo, vice-minister for International Affairs at the Ministry of Economy, Trade and Industry, highlighted this renewed commitment during a visit to Abidjan, Ivory Coast, emphasizing Japan’s intent to transition from being primarily a donor to becoming a proactive business partner across the African continent. Learn more in Japan Times here.
20 Intellectual Property: Japan Increasing IP Competitiveness Japan is actively enhancing its intellectual property competitiveness by integrating artificial intelligence (AI) into its innovation strategies. The government is exploring policies that recognize the patent rights of individuals who develop AI technologies used to create new inventions, aiming to stimulate domestic innovation and attract global tech investment . This initiative aligns with Japan’s broader efforts to modernize its legal frameworks, including the enactment of its first law promoting safe AI use and development . As Japan positions itself at the forefront of AI-driven innovation, these developments present significant opportunities for legal professionals to engage with evolving IP laws and cross-border collaborations. The strategy set a target to raise the country’s standing in the World Intellectual Property Organization’s Global Innovation Index to fourth or higher by 2035. Japan ranked 13th in 2024, coming below South Korea in sixth and China in 11th. Learn more in Science Japan. Real Estate: Tokyo beats New York in record quarter for Japan real estate investment Japan’s real estate sector achieved a significant milestone in the first quarter of 2025. According to Jones Lang LaSalle, Tokyo attracted $11 billion in property investments, surpassing New York’s $7.3 billion. This marks the first time since 2007 that Japan’s quarterly real estate investment has exceeded 2 trillion yen. Official figures reveal a 23% year-on-year rise in nationwide investment, fueled by foreign capital capitalizing on Japan’s low interest rates. Foreign investors played a pivotal role, doubling their activity and accounting for about 32% of Tokyo’s transactions. The office sector led the way, dominating deal volume, while retail and hotel sectors also saw notable growth. Osaka and Nagoya also ranked among the world’s most active markets.
Despite 21 Wind Energy Development Japan’s Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure, Transport and Tourism have designated five offshore areas near Tokyo as “preparation zones” for wind energy development—underscoring the government’s commitment to decarbonisation and energy security. This strategic move targets accessible sites near the nation’s capital, advancing Japan’s climate goals and accelerating renewable energy generation close to its largest demand center. As part of a centralised push, JOGMEC will conduct site surveys in Niijima and Kozushima to inform future project planning.
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