Old Ideas Die Hard?: Reform of Secured Transaction Law in Japan and its Impact on the Banking Practice

Abstract:     
The paper analyzes the recent reform to the secured transaction law in Japan. By the 2004 amendments to the Law on Special Rules to the Civil Code Concerning the Perfection of Movables and Assignment of Receivables, it has become possible in Japan to take security of the movables by filing, apparently modeled after the Article 9 of the Uniform Commercial Code (U.C.C.) in the United States. The first part of the paper introduces the backgrounds that led to the reform: although the Japanese case law has long affirmed the transfer by way of security of the movables, it was found to be unsatisfactory, having some practical problems. In the second part, it is shown, through the comparison with the U.C.C., that the Japanese reform did not depart far from the existing case law and left a few significant differences from the U.C.C. The third part argues that the theoretical analysis of the secured transaction has not been developed much in Japan, unlike in the United States, and that it might have been the cause of the differences between the new Japanese law and the U.C.C. Article 9. Finally in the fourth part, it is pointed out that the conflict-of-laws issue has been left unaffected by the reform. The concluding part of the paper observes that the reform to the secured transaction law has not been finished by the statutory amendments in 2004 but could, and should, be continued through the development of case law in the future.

Keywords: secured transaction law, Japan, security, finance, movables, banking, filing, U.C.C. Article 9, conflict of laws, private international law, lex rei sitae

JEL Classifications: D23, F34, G21, N25

Accepted Paper Series