Japanese firms are looking south to Singapore and beyond as they seek relief from a grim home market
Facing a shrinking domestic market and increasing outward capital flows from Japan, the ‘big four’ Japanese law firms have looked to the south of the region for growth. Japanese firms’ expansion into Singapore and South East Asia marks a radical shift in focus.
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Anderson Mori & Tomotsune, one of the big four, has recently expanded its domestic and regional network. In March the firm added three new offices in Singapore, Shanghai and the Japanese city of Nagoya to its offerings in Tokyo and Beijing.
The firm, which has a close relationship with Slaughter and May, says demand for its services in South East Asia from clients across financial services, manufacturing and retail meant a launch in Singapore was necessary.
The Bank of Tokya-Mitsubishi UFI and Nippon Life Insurance, for example, are longstanding clients in Singapore. Meanwhile, last year the firm advised Nippon Life Insurance on a sizeable joint venture with Indian life insurance company Reliance Capital Asset Management.
“Many of our clients have established a regional headquarters in Singapore to manage their investments and business in the South East Asia region – the number and value of client matters with a South East Asia element handled by the firm has doubled over the past two to three years,” says banking & finance partner Ko Hanamizu, who has relocated from Tokyo to Singapore to head the new base.
Nishimura & Asahi, another big four firm, already has offices in Ho Chi Minh City and Singapore, and continues to expand its coverage in the South East Asia region. It opened an office in Yangon in May 2013 and is in the process of setting one up in Bangkok, which will launch in July.
The firm notes that its latest expansion in the region is driven by the fact that Myanmar is attracting attention as a fast-growing market and Japanese companies are also making inroads into Thailand.
Nishimura’s managing partner Masaki Hosaka says the firm’s strategy is to better connect its domestic branch networks with its foreign networks to assist manufacturing clients such as Toyota-related companies. For example, the firm worked closely with Allen & Gled-hill advising Toyota Tsusho Corporation in its acquisition of a stake in Singapore-listed Sin Heng Heavy Machinery in May 2012.
Japan was one of the first Asian jurisdictions to open its door to foreign firms. The market officially allowed foreign practitioners to provide foreign legal advice in 1986, when it introduced the system of Gaikokuho-Jimu-Bengoshi (GJB, meaning registered foreign lawyers). In 2005, due to the rapid globalisation of the Japanese economy, the country lifted prohibitions on the employment of local lawyers by GJBs, setting up joint enterprises with Japanese lawyers and sharing profits between GJBs and locals.
Since then, the number of foreign firms and GJBs has increased considerably, as indicated in the 2012 White Paper on Attorneys by the Japan Federation of Bar Associations. According to the paper, the number of GJBs in April increased from 241 in 2006 to 357 and there are around 40 foreign law joint enterprises set up between a GJB and a Japanese lawyer or a legal professional corporation.
The message from Linklaters Japan is that the magic circle firm is back on track, following some challenging years in the Tokyo market. The firm’s Tokyo office claims it is now configured “in the right way”, having previously worked for a client base that was too heavily weighted towards inbound M&A work. Things came to a head in late 2011 when two corporate partners left the firm with six associates for Baker & McKenzie. Linklaters has since emphasised the greater integration of its Tokyo office with its regional and international network.
Another magic circle firm, Clifford Chance, has just celebrated its 25th anniversary in the world’s second largest economy. Like every other firm on the ground it has targeted as many outbound investment-related instructions as it can handle. Its Tokyo offering acts not only for Japanese corporates with strong balance sheets and access to cheap debt, but also for the lending banks financing such investment.
While the expat community has gone from strength to strength, substantial growth can also be found in the domestic legal profession. From 2006 to 2012 the total number of lawyers grew by 45 per cent, from 22,021 to 32,088. Some 17.4 per cent of them are female.
The number of law firms in the country also increased from 11,686 in 2007 to 13,653 in 2012. However, only a handful of domestic firms have more than 100 lawyers, while 99 per cent have fewer than 50.
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