Reforms of Japanese Corporate Law and Political Environment

Abstract

Corporate law shapes the fundamental business environment and affects various stakeholders such as shareholders, managers, employees, and creditors. Each stakeholder has an incentive to influence the reform process of corporate law. The many corporate law reforms in Japan reflect her rapidly changing business environment. It is important to understand the behavior of various stakeholders by examining the politics of the reform process of corporate law. This paper attempts to provide an analysis of the changing political balance among various stakeholders of corporate law.

Before 1997, legal academics in the Legislative Council played a mitigating role in the legislative process, thereby achieving the well-balanced development of Japanese corporate law. Although legal academics had a weak democratic foundation, they were crucial for fair political compromises among various corporate stakeholders. In contrast, since 1997 the legislative process of Japanese corporate law has become more democratic. Corporate managers, who are a politically strong interest group, significantly influence corporate law reforms, while shareholders and creditors, who are politically silent, do not. And the bureaucrats of the Ministry of Justice do not have the power or the effective tools to resist the influence of corporate managers.

However, it seems that politicians are trying to return to the middle road voluntarily. In the 2014 reform of Japanese corporate law, politicians did not simply follow the interests of corporate managers, but rather tried to achieve a balance among various stakeholders of corporate law. This change may be caused by the change of electoral rules for the House of Representatives.