Part 1: Trends in Corporate Restructuring in Japan

September 12, 2024 [No. 127 – 2024]

Mr. Fujikazu SUZUKI
Institute of Labor Education and Culture
Research Center for Solidarity-based Society

 

 

In Japan, corporate restructuring, such as mergers and acquisitions (M&As), has happened frequently since the beginning of the 2000s. One of the main reasons for this was the Japanese government establishing and amending a series of laws to encourage corporate restructuring. This was part of its policies to revitalize business activity and revive industry during the Japanese economy's long period of stagnation after the collapse of the bubble economy in the 1990s. These law reforms included amending the anti-monopoly law to end the ban on pure holding companies, amending the Commercial Code to simplify the transfer and exchange of shares, introducing a company split system, and establishing the Civil Rehabilitation Act.

Looking at the number of M&As in Japan, there were around 500 per year until the middle of the 1990s, then an upward trend is seen from the second half of the decade, with more than 1,000 in 1999. This was followed by a rapid increase in the first half of the 2000s, with 2,578 in 2006. The number of M&As fell between 2008 and 2011 following the global financial crisis, but increased again from the 2010s, keeping at a level of over 4,000 between 2021 and 2023. This is four times the number 20 years before.

According to the Economic Census by the Ministry of Internal Affairs and Communications, the number of private sector companies in Japan was 3.68 million as of June 1 2021. Therefore, the frequency of corporate restructuring through M&As is not very high compared to the whole economy. However, according to the Ministry of Health, Labour and Welfare's General Survey on Labour Relations, the percentage of labor unions answering that "corporate restructuring or downsizing of business departments has been implemented at the company in the past three years" was 21.1% in 2015, 27.4% in 2017 and 24.0% in 2020. Therefore, the frequency of corporate restructuring at companies with labor unions has reached levels that cannot be ignored, and this frequency has been increasing in recent years.

Workers are the people most affected by corporate restructuring. However, the legal system for protecting them during corporate restructuring is not well enough developed, since it consists only of the "Act on the Succession to Labor Contracts upon Company Split," which was established in 2000 together with introduction of the company split system. Given the serious situation caused by the inadequacy of laws to protect workers, "Labor law issues regarding corporate change" (English translation of the Japanese title) (2016, edited by Shinobu Nogawa, Michio Tsuchida, and Ikuko Mizushima), considers, looking from many aspects, the kinds of action required regarding labor law. It points out that, as well as action regarding "frequent disputes" under positive law (i.e., law established by governmental authority), there is an urgent need to overcome limitations on legal interpretation theory.

In this series of articles, I will present several case studies and the results of a questionnaire survey about the response of labor unions and human resources departments to corporate restructuring (which we could call the frontier of labor-management relations). I will also discuss the current situation and future challenges.