TT-667 -- Too Many or Too Few Lawyers? Ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, June 24, 2012, Issue No. 667


- What's New -- Too Many or Too Few Lawyers?
- News -- Lab creates liver and eyeball organ parts
- Upcoming Events
- Corrections/Feedback
- Japan Business Q&A -- Taxes When Leaving Japan
- News Credits

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Although there are lots of good lawyer jokes, they are told
less often in Japan for the simple reason that there is a
remarkable under-supply of them here as compared to other
advanced economies. To get some idea, there is one lawyer
per 250 people in the USA, one per 390 in New Zealand, 590
in Germany, 1,000 in Hong Kong, 4,119 in Japan, and one for
every 5,000 people in China.

It's no surprise that the USA comes first, due to the fact
that the US legal system provides for the concept of
punitive damages and thus there is considerable financial
incentive to sue and on the other hand to defend law suits.
We thank our lucky stars that lottery ticket litigation is
largely a US-centric phenomenon. In Japan, to get damages,
you generally need to show actual invoices and other
documentation showing the real financial impact incurred.
Thus you seldom hear of massive awards in the millions of
dollars range.

Why does Japan have so few lawyers?

Historically Japan has had a very top-down legal culture
and the populace was trained to think that court action was
too hard. Thus people were compelled to either put up with
the situation, create change through peer group pressure,
or to negotiate non-judicial compromises -- all meaning
that the demand for lawyers has traditionally been low.
Indeed, before the government pushed through legislation in
2004 requiring a substantial increase in law schools and
people passing the bar exam, there were only 1,000 people a
year passing the exam -- out of a massive 50,000-60,000
people who actually sat it. Then, of that 2-3% pass-rate,
only 500 a year were accepted into a traineeship with the
Supreme Court's Legal Research and Training Institute. This
traineeship was required in order to get a law licence and
was the choke point which the legal community used to
ensure there were less than 18,000 lawyers for the whole
nation for many decades.

[Continued below...]

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[...Article continues]

The increase in bankruptcies, M&As, and companies cutting
staff and corners meant that there was a surge in court
actions at the end of the 1990's and early 2000's, to the
extent that the government asked the Ministry of Internal
Affairs to ensure that the number of lawyers passing the
bar would reach at least 3,000 people a year by 2010. And
so it was that in 2004 legislation was passed to establish
74 US-style law schools, and to increase the bar pass rate
to 40%-50%. Last year, around 2,063 people passed the exam.

As mentioned, the Japanese legal profession has a vested
interest in controlling the number of lawyers practicing
here, obviously wanting to protect jobs and income levels
(most Japanese lawyers come at a starting rate of at least
JPY30,000/hour). They put up a spirited fight to stop the
2004 legislation, and even today never lose a chance to
bang on about how the surging number of lawyers, which as
of last year was 30,516, is making things tough for
everyone. Surprisingly though, recently their voices were
joined by the Ministry of Internal Affairs, which also said
that there are now too many lawyers.

On hearing how things are getting tougher for lawyers, our
first reaction was to say, "Welcome to the real world". If
the increasing number of lawyers leads to price competition
and better service to clients, then the number of new
lawyers should continue apace. However, if there really is
a glut in lawyers, then the reason is probably the same as
for doctors -- those available are misallocated.

There is apparently about one lawyer per 1,000 people in
Tokyo, which is where most people passing the bar tend to
cluster. While out in more remote parts of the country,
such as Aomori, the number quickly drops to less than one
per 31,000 people. Further, the sector of the community
really needing more legal services is businesses dealing
with foreign counterparties in the course of trade,
litigation, and M&A. This has led to a high demand for
bilinguals -- who are in short supply since the notoriously
tough bar exam ensures that most students are focused on
their law books, not on a second language.

Domestically too, we believe the need for more lawyers is
going to increase. It's pretty clear that once the
government ceases the loans moratorium on small companies
next year, that there will be a huge spike in bankruptcies
and local M&A again -- which will need professionals to
service. At the same time, pressure from foreign
shareholders to have Japan improve its corporate governance
is leading to a surge of lawyers being appointed to
corporate Boards as external directors.

Lastly, it used to be that the main goal for an aspiring
law student was to become a prosecutor or judge, and that
anything else wasn't noble enough. This traditionally was
the only mindset strong enough to see a student through the
years of study and exam disappointment. But as many other
countries have already demonstrated, getting qualified as a
lawyer does not mean the person has to stay one for the
rest of their lives. Rather, they can use the legal
training to sharpen their minds and instead move on to
become successful businesspeople and politicians. Osaka's
Hashimoto is a good case in point.

Our take is that the government should not cut back on the
number of lawyers graduating from the 73 law schools (one
closed down its law department). Instead, it should beware
of anyone saying there are too many lawyers, because most
likely they are one of the elite few looking to protect
their turf.

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+++ NEWS

- FDI into Japan target to double
- Labs create liver and eyeball organ parts
- Bain takes big leap into TV shopping
- 75% of Taiwanese feel close to Japan
- Joi Ito appointed to NY Times board
- Yahoo Japan, Askul j/v on logistics

=> FDI into Japan target to double

A Cabinet Office foreign direct investment (FDI) panel has
said that it wants to double FDI into Japan from the
current JPY17.5trn in 2011 to JPY35trn by 2020. The panel
recommends focusing on energy and medicine, enticing
foreign investors with tax exemptions and other
preferential treatment. In particular the government wants
foreign investors to set up in disaster-hit areas. One
interesting fact, the panel said that there were 750,000
people employed by foreign firms -- about 1.25% of the work
force. ***Ed: While it's hard to imagine most companies
being interested in Japan due to its high taxes, high yen,
and over-regulation, for those firms looking for excellent
R&D and production and who have sufficient profit margins,
such as the cosmetics industry, Japan is still a viable
place to set up in.** (Source: TT commentary from, Jun 23, 2012)

=> Labs create liver and eyeball organ parts

In what sounds like science fiction, scientists at Yokohama
City University have succeeded in creating a "liver bud", a
first step to a full working liver, from human skin-derived
IPS cells. The liver fragment was implanted into a mouse
and functioned like a natural organ. Also this week, Kobe's
RIKEN Center for Developmental Biology announced that it
has created a precursor to a human eyeball, from retinal
stem cells. Both groups are hoping to grow and harvest
human organs for transplants. (Source: TT commentary from, Jun 23, 2012)

=> Bain takes big leap into TV shopping

Apart from money, one thing Bain Capital Japan doesn't lack
is guts. The company has announced that it will be buying
50% of the Jupiter TV shopping channel from Sumitomo, for
approximately JPY100bn (US$1.3bn). This investment comes on
top of Bain's buyout of Skylark restaurants from Nomura and
Domino's Pizza Japan from Duskin and Ernie Higa. Sumitomo
and Bain will apparently use the partnership to set up
similar TV shopping ventures in China and elsewhere in
Asia. (Source: TT commentary from, Jun
22, 2012)

=> 75% of Taiwanese feel close to Japan

Japan's diplomatic channel in Taiwan, the Interchange
Association, Japan, has released the results of a
1,000-person survey which shows that Japan is still very
favorably regarded by Taiwanese. Amongst the results were:
1. Favorite country/region -- 41% Japan, 8% China, 8% USA,
6% EU, 37% no opinion.
2. Feel a close connection -- 75% Japan
3. Countries Taiwan needs to be close to -- 39% China, 29%
Japan, 15% USA, 3% EU
4. Desirable travel destinations -- 39% Japan, 32% EU, 14%
China, 5% USA, 4% SEAsia, 3% South Korea
5. Reasons not to travel -- 50% radiation fears, 28% strong
yen, 12% earthquake fears. (Source: TT commentary from, Jun 22, 2012)

=> Joi Ito appointed to NY Times board

A big congratulations to Joi Ito, who was a founding
partner in Digital Garage here in Tokyo. Ito was just
appointed an external director for the board of The New
York Times, in addition to his existing position as
director of MIT's Media Lab. (Source: TT commentary from, Jun 23, 2012)

=> Yahoo Japan, Askul j/v on logistics

One important way that outdoes its competitors
is in how it can combine individual orders into a single
package -- reducing shipping costs to the consumer and the
need to receive multiple mailings. This has required a
huge warehousing investment by, but over time
the business model has paid off in user loyalty. Now,
Yahoo Japan and office supplies company Askul have decided
to form a joint logistics venture to compete with Initially both firms will use Askul's existing
6 logistics centers, but plan to spend JPY485bn to build
another 7 facilities, which will help them triple their
shipping capability from the current 410,000 items daily
to 1.24m a day. (Source: TT commentary from,
Jun 23, 2012)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.



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Entrepreneur's Handbook Seminar 29th of September, 2012

If you have been considering setting up your own company,
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founder of over 17 start-up companies in Japan, will be
giving an English-language seminar and Q&A on starting up
a company in Japan.

This is an ideal opportunity to find out what is involved,
and to ask specific questions that are not normally
answered in business books. All materials are in English
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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

=> No feedback this week.


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=> Question

I am planning on leaving the country in the next 6-12 months.
Do I have to pay national and local taxes if I leave? If I
don't, what happens?

*** Answer

Yes, you have to pay both national and local taxes when you
leave. If you don’t, you will be subject to a penalty for
failure to pay, as well as interest on the unpaid amount.

For national taxes, you have to file a tax return and pay tax
by March 15 of the following year of your departure. If you
are not in the country such that you can file your taxes on
your own, it is common to have a tax attorney take care of the
filings on your behalf. In this case, you should inform your
local tax office before your departure from the country that
this individual will be filing on your behalf. If you don’t
have a tax attorney or prefer to not use one, you should finish
your tax returns and payments by yourself before you leave.

For local taxes, continue reading here:


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