Micro matters

That Japan is expected to weather the effects of the global liquidity crisis better than other countries in the region may be something of a given, as the volume of transactional work has not dried up, and its banks, financial institutions or stock market have not crumbled.
But, as is so often the case, the mere appearance of financial turmoil is more than enough to shake investor confidence and, along with it, client behaviour - and the case is no different in Japan.

Sato notes that while the ‘real’ effects of the credit turmoil gripping the west are yet to be seen in Japan, investors and clients are already shying away from the more risky products on the market. “As always, investors in financial and capital markets are really attuned to what may or may not be existent, really attuned to real or perceived risks and so a lot of financial transactions are being put on hold." 

According to Oishi, one area in which these tendencies are most obvious is in relation to securitisation and structured finance practices across Japan. 
"Financial transactions have taken a hit of late," he says. "If you ask financial lawyers what their workload is like at the moment, most will say that things are much quieter than this time last year." 
Sato notes: "People seem to be scared by asset backed securities; they are not sure if the products they are seeing at the moment - and, more so, the assets underlying them - are good or bad." 
According to Bohrer, the current shift in client behaviour has also heralded a shift in client expectations. 
“What we have been seeing is that our clients are looking to us not only to assist them with the standard things – documentation and so on – but also to help them understand local market practices,” Bohrer says. “This is a significant turn and they are looking to us to play overall deal manager, to recommend different advisors, to connect them with other people – for want of a better term, be their right-hand man.” While these issues run to the core of the client-lawyer relationship, far broader issues of firm management are also likely to come under closer attention in the months ahead, legacies which many believe will outlast the tumultuousness of the current economic situation. Issues such as law firm branding and marketing, profitability and individual partner performance – areas which in Japanese law firms are widely seen as bastions of traditional notions of firm management – are all tipped to undergo a change designed to make Japanese law firms less organisationalcentric and more commercially and management oriented.“There has traditionally been a lot less focus on management of profits per partner, and a lot of emphasis on client retention and care,” says Dixon, who notes that the current economic climate may force firms to focus on maintaining profitability. “You cannot take your clients for granted, yes, but today you never know when one of them will go bust.” Bohrer agrees, stating that problems which arise from rapid growth being experienced by Japanese domestic firms impose on them the need to be flexible in terms of management styles. “With Japanese law firms growing quickly, many will find there’s a need to look at dedicated management models, and I know some are looking at modelling theirs on the US, UK or European systems,” he says. But Bohrer and others say that this does not mean a wholesale adoption or copying of these blueprints. Rather, as Bohrer notes, there will be a “Japanese solution,” one that realises the realities of practising law in Japan. ALB

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