JAPAN
HIMEJI CASTLE, HYOGO PREFECTURE, JAPAN
By Camilla Sutton
THE ripple effect of the US sub prime crisis hit Japan in early 2009. Businesses, especially in the xport market have suffered. But the Japanese
economy has begun to show signs of recovery and law
firms in Tokyo have been kept busy.
WEAKNESS IN STRENGTH
It took a little longer for Japan to feel the grip of the global financial downturn. Generally speaking, Japanese
financial institutions didn’t engage in sub prime lending
or investment to the same disastrous extent as their
counterparts in the US and Europe. In addition, traditionally Japanese companies have kept greater cash reserves
than many Western companies, so when the credit markets froze up, Japanese companies coped better.
Japan was eventually caught up in the financial turmoil of 2009 because its economy relied heavily on
exports to foreign markets – foreign markets whose
appetite for luxury and high tech goods was significantly diminished as they struggled with recession. ‘A
significant portion of Japan's economy is based on the
export of high value consumer products, such as cars
and electrical goods, as well as commercial and indus-
trial machinery,’ comments Steve Lewis, managing
partner of Gaikokuho Jimu Bengoshi Herbert Smith in
Tokyo. ‘The widespread recessions in the US and across
Europe meant that the volume of exports significantly
decreased as consumers and companies alike cut back
their spending.’
The foreign currency markets also played their part in
dragging Japan’s economy down. ‘The US dollar
becoming weak against the Japanese Yen aggravated
the Japanese economy by weakening Japanese manu-
factures’ competitiveness in the foreign markets,’
explains Masanori Sato, one of the managing partners
of highly respected Japanese firm Mori Hamada &
Matsumoto. ‘Such downturn in the Japanese economy
resulted in the crash of the Japanese stock market,
which in turn caused the deterioration of the financial
health of many Japanese companies, including Japanese
banks,’ he concludes.
The combination of these effects from the credit cri-
sis and the recessions that were felt around the world
caused many large Japanese companies to report signif-
icant losses in the last 12 to 18 months.
‘That said, the recession in Japan was much more of
