By Brian Bremner Pity today's Japanese college students. The media are filled with stories about massive layoffs at Toshiba and the post-war jobless rate, which is at a record high. Headlines warn of Japanese deflation, and excess labor, capacity, and debt. In a couple of years, these students will be job hunting in what is sure to be a tight labor market.
Maybe they ought to think about law school. Seriously. Believe it or not, Japan needs more laywers -- a truckload of them. That's right, the country that abhors conflict and has long looked aghast at the U.S. legal system needs in-your-face sharpies unafraid to haul CEOs and bankers in front of judge for a bit of bloodletting when appropriate. But it also needs them to facilitate the kind of shareholder activism, financial workouts, and corporate restructuring that Japan will face in the years ahead.
BANKRUPTCY BACKLOG. The lawyer shortage is being keenly felt just now. Take Japan's bankruptcy court. Companies are going bust left and right, but there are maybe 300 or so lawyers familiar with Japan's bankruptcy code, and a dearth of judges has produced a glacial case backlog. One noted bankruptcy attorney, Shozo Miyake, told me that some judges are so overwhelmed they barely have time to read up on their cases. And once a case gets heard, it can take years to resolve.
Japan has purposely kept the judiciary in check with skimpy budgets and just one state-sanctioned law school, the Legal Training & Research Institute. For starters, undergraduate law students must pass one of the toughest entrance exams in the world. It takes the average student five tries to succeed, and only one attempt is allowed each year. Then aspirants must pass muster in interviews with the school's examiners before they can enroll. The Tokyo-based institute now can handle about 1,000 students per graduating class. Today, Japan has roughly 20,000 practicing lawyers, vs. some 900,000 in the U.S.
The good news, especially for smart kids at Tokyo or Keio universities now weighing their options, is that the government finally recognizes that a healthy and thriving judiciary is important for Japan's economic health. Settling commercial disputes is a fair, transparent, and relatively quick manner is becoming a top priority.
CHANGES. A government judicial panel is encouraging universities to set up postgraduate law schools and hopes to boost the number of lawyers to 50,000 or more by the next decade. Already, about a dozen of the top universities are talking about setting up a U.S.-style network of law schools geared to practical study of the law. A new and less rigorous bar exam likely will be instituted.
True, 50,000 Japanese lawyers would still be a small number compared to the U.S., but on a per-capita basis it would put Japan near such European countries as France. And this isn't to say that Japan's long-standing tradition of resolving disputes out of court is anything but admirable and shouldn't be maintained. Japanese police stations and local governments have experienced mediators that help settle small disputes. (Corporate America, take note. Nobody likes trial lawyers here, either.)
Still, when it comes to serious stuff, such as government negligence that harms ordinary folks or some scandalous product defect, aggrieved parties are often out of luck. The dearth of lawyers makes litigation both frightfully expensive and time-consuming. Also, it's not unheard of for unsavory companies to use criminal gangs to handle debt collection or rough up a potential claimant.
WINNERS AND LOSERS. What's really needed is a change in mind-set. Yes, litigation is messy and expensive. And the excesses of the U.S. legal system aren't worth emulating. But legal conflict creates winners and losers, sets precedents, and discloses sensitive information about ill deeds to the public. Punitive damages help deter crooks and corporate malfeasance. Maybe, just maybe, a terrible injustice to the little guy gets undone.
For Japan's economic overhaul to work, it needs a deep and sophisticated judiciary. It's time, dare I say it, to send in the lawyers. Bremner, Tokyo bureau chief for BusinessWeek, offers his views every week in Eye on Japan, only for BW Online