Author: Luke Nottage, Australian Network for Japanese Law

Imagine a transnational regime with these institutional features:

• Virtually free trade in goods and services, including a ‘mutual recognition’ system whereby compliance with regulatory requirements in one jurisdiction (such as qualifications to practice law or requirements when offering securities) basically means exemption from compliance with regulations in the other jurisdiction. And for sensitive areas, such as food safety, there is a trans-national regulator.

• Virtually free movement of capital, underpinned by private sector and governmental initiatives. Read the rest of this entry »

Author: Luke Nottage

Mainstream Australian media provided distressingly meagre coverage of Japan’s exciting general election for the more powerful lower House of Representatives, which saw a remarkable about-face. The centrist Democratic Party of Japan (DPJ) went from 115 to 308 seats, with allies Social Democratic Party (SDP) (the small leftover of the once-powerful Japanese Socialist Party) and the New Party Nippon taking another 7 and 3 seats respectively. Overall, these and other former Opposition parties took 340 seats, whereas the conservative ruling coalition suffered a massive defeat. The Liberal Democratic Party (LDP) dropped to 119 seats, from 300 before the election (and 296 in 2005, the previous election called by Junichiro Kozumi who then retired as Prime Minister). The Komeito dropped from 31 to 21 seats, meaning that the former ruling coalition now only has 140 seats. In short, the tables have turned almost completely since 2005, in a country famous for its aversion to abrupt political changes.

This piece is a reflection on this result and the potential implications it has for policy and law reform in Japan.

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Author: Luke Nottage

The Prime Minister, Kevin Rudd, has just contributed a long essay with this title to the Sydney Morning Herald (25-6 July 2009). Here are some extracts that should be connected to ongoing initiatives and discussions about consumer credit and consumer law more generally:

1. Rudd’s grand plan now for the forthcoming ‘building decade’:

‘It will take time to build the foundations of Australia’s long-term global competitiveness. But we must take time to do it thoroughly. We must take time to invest in the infrastructure of the future, the skills of the future, the competitive tax system we need for the future, an ambitious agenda for competition and regulatory reform, and to maintain the best national balance sheet of major advanced economies.’

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Author: Luke Nottage

Peter Drysdale’s weekly editorial,  along with related postings to this blog and enormous media attention in Australia and elsewhere, focuses ‘on the continuing detention of Rio Tinto executive, Stern Hu, in Shanghai on allegations of espionage’. Drysdale signposts some future analysis of ‘the legal framework under which Hu’s detention has taken place’. He also emphasises that we need ‘a cooperative framework—bilaterally, regionally and globally’ for ‘China’s authorities to avoid damage to the reliability of markets and for Australia to avoid the perception of investment protectionism’.

The most pressing legal (and diplomatic) issues concern China’s criminal justice system, especially when ‘national security’ is allegedly involved. But we need to consider some broader ramifications, including investment treaty protections. Part of the backdrop to the Hu saga could be that nations retain considerable sovereignty when it comes to deciding on the operational ambit of foreign investments. Investment treaties – which may be bilateral or regional, stand-alone or folded into broader Free Trade Agreements – now often entrench substantive liberalisation. But these treaties maintain exceptions for national security or subject investments to national interest tests. So even if Australia and China conclude their current FTA negotiations making it broadly easier for firms from either country to invest in the other, that sort of exception could be invoked by Australia, for example, to block or restrict an investment like the now scuttled proposal by Minmetals to acquire Oz Minerals back in March 2009.

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Author: Luke Nottage

Dr Malcolm Cook and Mr Andrew Shearer at the Lowy Institute in Sydney published last month a short analysis entitled Going Global: A New Australia-Japan Agenda for Multilateral Cooperation:

To help both governments navigate [a] more complicated and uncertain international environment, the paper offers a agenda for enhanced Australia-Japan multilateral cooperation organised around:

- support for American global leadership, and
- reforming post-war multilateralism.

Three areas of international policy are particularly well suited to closer Australia-Japan cooperation in pursuit of these goals: climate change and energy security; nuclear non-proliferation; and official development assistance.

I have doubts about these two foundational principles, especially over the mid- to long-term, given America’s own longstanding ambivalence about multilateralism, and its relative decline particularly since the GFC.

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Author: Luke Nottage

On 21 November 2008, the Attorney-General’s Department (AGD) announced a Review of Australia’s International Arbitration Act 1974 (IAA). The aim was to consider whether the Act should be amended to:

-ensure it provides a comprehensive and clear framework governing international arbitration in Australia;

-improve the effectiveness and efficiency of the arbitral process while respecting the fundamental consensual basis of arbitration, and;

-consider whether to adopt ‘best-practice’ developments in national arbitral law from overseas.

The AGD’s Discussion Paper (DP) expressed the hope that a revised IAA would make Australia a more attractive venue for conducting international commercial arbitration (ICA), especially within the Asia-Pacific region. Unfortunately, Australia has missed that boat, with China, Hong Kong and Singapore the clear leaders now in this part of the world.

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Author: Luke Nottage

The former Chair of the Australia Competition and Consumer Commission, Professor Allan Fels, co-authored a column for the Weekend Business section of the Sydney Morning Herald entitled ‘Rudd’s Consumer Activism Over the Top’ (21-2 March 2009, p 5) . Their title is misleading, although they raise some good points in response to Treasury officials’ latest Consultation Paper, ‘An Australian Consumer Law: Fair Markets, Confident Consumers’. On its own terms – let alone compared to developments over recent years in the EU, Japan, and soon Canada – the Paper and the Australian Governments’ current proposals remain a disappointment for Australian consumers.

Yet now should be a perfect opportunity, however belatedly, to implement a better consumer regulatory framework and thereby revive consumer trust. After all, partly through cash handouts to consumers, Australia is trying to spend its way out of a huge recession, itself caused (or at least exacerbated) by regulatory failures and increasingly blind faith in improperly regulated markets. Read the rest of this entry »

Author: Luke Nottage

This year, Australia Day (26th January) fell on Chinese Lunar New Year, so there were a few more events celebrating Chinese traditions as well as the ever more frequent display of Australian flags around Sydney. But the day after, the Sydney Morning Herald ran a front-page story entitled ‘Revealed: secret whale deal‘. It highlighted the Federal Government’s involvement in generating a proposal whereby:

• Japanese whalers could hunt a regulated number of minke whales in its coastal waters, and take many more whales in the North Pacific, under the plan.
• Japan would agree to one of two offers in exchange: either to phase out scientific whaling in the Antarctic entirely, or to impose an annual Southern Ocean limit.
• The proposal was hammered out in secret by an International Whaling Commission drafting group of six nations, which includes Australia and Japan, at a meeting in Britain last month.

With the whaling season already underway, however, Australia’s Environment Minister insists that this is still under negotiation and that the Government remains opposed to any commercial whaling. But one NGO – the International Fund for Animal Welfare – calls this ‘Whalergate’, criticising the opaque nature of the IWC. Read the rest of this entry »

Author: Luke Nottage
(with thanks to Ichiro Araki)

Japan appeared to have recovered from its own financial crisis a decade ago, albeit at the cost of much accumulated government debt. The country was then hit by the collapse of its export markets and the rapid rise of the yen, following the imminent global recession.

Professor Iwao Nakatani, former Chairman of Sony, has urged a radical shift in economic policy in Japan and elsewhere from policy ‘based on neo-conservative economics and the philosophy of small government to one based on Keynesianism and welfare state ideology’.

Some may be sceptical as to whether Japan ever really embraced the former philosophy, and its ascendancy was certainly never as pronounced as in the US, the UK or then Australia.

But deregulation of alcohol distribution is one of Japan’s many transformations over the last decade. It is also the flipside of ever-stricter rules on drink driving, although these rules also reflect a broader trend towards criminalisation of socio-economic deviance, evident in product safety or consumer credit re-regulation.

On the other hand, deregulation is most notable in terms of where you can buy alcohol to celebrate this New Year of the Ox: namely, vending machines and those ubiquitous convenience stores. It is less obvious in what you pay, especially for certain beer substitutes, which reflect differential tax rates.

In fact, these tax rates may well violate WTO law. Yet there is probably not enough financial reward for potential beer exporters to Japan to encourage their home governments to sue Japan. So an implication for FTA negotiators , even those from Australia, may be to seek some offset advantage in their overall bilateral deal with Japan, which would further undermine the entire multilateral WTO framework. Read the rest of this entry »

Author: Luke Nottage

If you are one of those many more short-term visitors to Japan nowadays, and even if you are an old hand, watch out for signs setting out various rules that may be unexpected or new. Like these two signs:

The bigger one to the bottom left is one of many signs we see increasingly around Japan in English (and sometimes now Chinese or Korean). The text is small but reads: “In the Beautification Enforcement Areas you will be fined up to 30,000 yen for littering regardless of your nationality or status”. The kind of prohibition and penalty you might expect in Singapore. Not in Japan, where local communities have long taken pride in being tidy – although that has not excluded individuals or dodgy firms from dumping their rubbish in distant communities! But what is meant by the round blue sign up on the right? Read the rest of this entry »

Author: Luke Nottage

I’ve lived in Kyoto for five years, on or off, and visited Japan’s delightful former capital once or twice a year over the last two decades. But this is the first time that I’ve been struck by how many visitors from abroad there seem to be here these days. And not just at the main tourist spots, or now that the autumn colours are at their most resplendent.

Some preliminary statistical analysis suggests that I am not victim to the “availability” bias, for once, but also that the rise in foreign visitors may not be limited to Kyoto. And the sudden appreciation of the yen, combined with the global financial crisis, already appears to impacting on inbound tourism.

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Author: Luke Nottage

The Kyoto Shimbun reported last Wednesday the first de facto victory by a consumer representative group in injunction proceedings regarding unfair contract terms. The same page mentioned the Education Ministry’s response to the recent death of a sixth-year elementary student, who choked on some bread provided in school lunches – basically, ‘chew well’! By contrast, Japan’s largest manufacturer of konnyaku (konjac) jelly snacks, MannanLife, halted all production after a one-year-old boy choked to death on 29 July.

Not so sweet... From flickr.com

But that situation is rather different. It also more directly highlights when and how a new Consumer Agency (shohisha-cho) might emerge in Japan. Ex-PM Fukuda’s Cabinet approved a Bill, but it then resigned without putting it through. It is unclear when and how PM Aso will submit a new Bill, and what line the opposition DPJ will now take, especially given the uncertainty about a possible early general election.

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Author: Luke Nottage

I was hoping to share some views on Japan’s general election for its all-important Lower House, as a counterpoint both to the US presidential election scheduled for 4 November, and the distinctly less widely publicised general election called for 8 November in New Zealand. But Japan’s new Prime Minister Taro Aso now seems unlikely to call an election very soon. So instead I share some comparative observations on the prevalence – even, perhaps, the intensification – of family dynasties in Japanese politics. Read the rest of this entry »

Author: Luke Nottage

For weeks I have been tracking this latest evolving food safety scandal, but reports and reactions vary markedly across the region. Media coverage is likely to remain disparate. But the saga should provide lessons for developing bilateral and regional infrastructure to “trade up” to a more harmonized regime, better securing consumer product safety in our FTA era.

At a news conference this Wednesday the Chinese Health Ministry announced melamine limits for dairy products, but declined to provide updated statistics on those so far harmed by tainted products. In September the figures given were 53000 children sickened, 13000 hospitalised, and at least three dead from kidney stones due to drinking products made from milk that suppliers or intermediaries had bolstered with this chemical to hide the fact it had been watered down. Yet the government demands notification if Chinese lawyers decide to represent victims. Read the rest of this entry »

Author: Luke Nottage

In Japanese banking, the big boys are back, as I explained last week: The Economist now confirms it. Indeed, the latter suggests that “if Japanese banks have any unique skill, it may well be in coping with crisis”. Not an obvious point, as evidenced by the collective dithering after Japan’s financial markets collapsed in the early 1990s or the almost completely unexpected 1995 Kobe earthquake. But I suppose the Japanese can be very good at responding systematically, once they establish the broad parameters of the problem.

Photo: Robert Gilhooly/Bloomberg News

Anyway, Mitsubishi UFJ has now proceeded to take 21% of Morgan Stanley, and is now considering further integrating its securities subsidiary (involved in US$18.3b of M&A advisory work involving Japanese companies in 2007) with Morgan’s Japanese arm (which did $17.9b). This would challenge Nomura, which did $34.2b (“Aiming to Rival Nomura”, Asahi Shimbun, 4-5 October, p 25); but the latter has also snapped up Lehman’s operations in Asia (mostly Tokyo), hoping to retain many staff to grow its own business.

And on Friday, the US government finally agreed on a public bailout plan for up to $700b, which I reviewed critically earlier in the week. Along with $85b for AIG and $29b for Bear Stearns, this amounts already to 5.8% of GDP, “well above the 3.7% of the savings-and-loan bail-out in the late 1980s and early 1990s” and significantly less than the 24% of GDP committed by Japan after 1997.

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