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Policy advice from Japanese companies on artificial intelligence, trade and cryptocurrencies
Over the past decade, a new generation of lawyers has emerged in Japan: part lobbyist, part advocate, they sit between companies and governments, helping shape policy and regulation in some of the fastest-growing and most geopolitically sensitive sectors .
As concerns grow about generative artificial intelligence and the free flow of data across borders, and as sanctions spread due to war and the creation of rival trading blocs, Tokyo lawyers have found a new niche to fill.
Coming from an industrial or government background — and mirroring the work U.S. lawyers have done for decades — both companies and regulators court them to help create rules that allow the former to thrive but give the latter sufficient oversight.
“The scope of companies, products and technologies covered by various types of national security regulations – such as export controls, economic sanctions and foreign direct investment controls – has expanded significantly over the past three to four years” , says Kojiro. Fujii, partner of the Nishimura & Asahi law firm in Tokyo. “And . . . the legislation has been changed to respond to this situation.”
The simple fact, as he explains, is that more and more companies are being dragged into geopolitical conflicts by governments because of concerns about civilian exports that could be used for military use.
Fujii’s career path illustrates the changes underway in his profession. A former senior official in Japan’s powerful Ministry of Economy, Trade and Industry, Fujii took part in a key World Trade Organization case against China and its control of rare earths, which he won in 2014. After being Having moved to the private sector, he now helps lead a team of 50 lawyers specializing in international trade and competition. They helped defend the country’s interests, again before the WTO, in a landmark case concerning Chinese steel exports and anti-dumping duties, won in 2023.
It has also helped companies navigate the increasingly complicated web of semiconductor restrictions stemming from the U.S. administration’s insistence on curbing trade with China, while advising customers on how to access government subsidies.
Japan, like many nations, is seeking to increase its domestic chip-making capacity and is willing to provide significant state funding for the effort, which includes attracting foreign firms. Since 2021, the country has offered billions of dollars Taiwanese semiconductor manufacturing companythe world’s largest contract chipmaker, will build plants in Kumamoto, on the southern island of Kyushu.
While the WTO cases, Fujii says, were clearly framed to promote free trade, semiconductor work is more complicated and highlights the delicate work that lawyers are increasingly busy doing.
“We are not only promoting free trade, but we are also attentive to national security concerns,” he says. And these lead, in effect, to the creation of export controls.
For Takafumi Ochiai, senior partner of the Japanese law firm Atsumi & Sakai, a simple but important change is taking place in Japan. Companies, before the Covid-19 pandemic, were typically those who followed the rules and tended to comply with what regulators decided, she explains. Now they are moving toward an American system in which the interaction between industry and government shapes regulations and policies.
“Information technologies and the rapidly changing political environment due to the use of data and artificial intelligence in business mean that the government cannot control regulatory activity alone,” says Ochiai. So, they have to ask for contributions from the private sector – “even in Japan”.
In 2022, he established the company’s Policy Research Institute, which includes a broad range of experts from public and private organizations, with the aim of advising the government on policymaking. Its lawyers work with more than 20 outside experts – from local government, universities, companies and others – to help develop regulations and policies.
One of the main aspects is how the state should regulate generative AI. “This is a growing industry not only for lawyers, but also for the private sector,” notes Ochiai.
Advised
The largely unregulated cross-border development of cryptocurrencies and other digital assets is another area where lawyers in Japan can provide a bridging function between an industry and the state. After a series of high-profile bankruptcies and scams, governments are trying to balance innovation with protecting consumers and the financial system.
Ken Kawai, a partner at Anderson Mori & Tomotsune in Tokyo, has played a central role in developing regulations in Japan for a rapidly evolving and often controversial industry. A former derivatives trading expert at Japanese bank MUFG, he is working for cryptocurrency trading bodies and major financial institutions to try to shape policy in Japan regarding so-called stablecoins. These digital assets are a form of cryptocurrency nominally pegged to the underlying assets, to limit price fluctuations.
Their relative stability, compared to other highly volatile cryptocurrencies, has made them attractive to investors looking for an equally transportable but more predictable store of value. But they have also suffered high-profile explosions, such as the collapse of TerraUSD in 2022and there are fears that their current incarnation makes them convenient for money laundering or illicit flows.
“We need a bridge between this industry and regulators, so I act as a bridge,” Kawai says. One of a five-person team working on stablecoin regulation, he admits that his work is a “form of lobbying.”
Kawai firmly believes in the potential of cryptocurrencies to change finance by enabling more efficient payments, particularly cross-border. So far, no major financial institutions have launched a stablecoin in Japan pending regulatory approval. But he believes that time will come soon, thanks, at least in part, to his work.