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A new breed of lawyer has emerged in Japan over the past decade: part lobbyist, part advocate, they sit between companies and governments, helping to shape policy and regulation in some of the world’s 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 because of war and the creation of rival trading blocks, lawyers in Tokyo have found a new niche to occupy.
Drawn from industry or government backgrounds — and mirroring the work done by US lawyers for decades — both companies and regulatory bodies court them to help craft rules that allow the former to thrive but afford the latter sufficient control.
“The scope of the companies and the products and technologies captured under the many kinds of national security-related regulations — such as export control, economic sanctions and foreign direct investment screening — have dramatically expanded in the past three to four years,” says Kojiro Fujii, partner at Tokyo law firm Nishimura & Asahi. “And . . . the legislation has been changed to react to this situation.”
The simple fact, as he lays it out, is that more companies are being dragged into geopolitical tussles by governments due to concerns over civilian exports that may be put to military use.
Fujii’s career path illustrates the changes under way in his profession. A former senior civil servant in Japan’s powerful Ministry of Economy, Trade and Industry, Fujii was part of a key World Trade Organization case against China and its control of rare earths, won in 2014. After jumping to the private sector, he now helps run a team of 50 international trade and competition lawyers. They helped defend the country’s interests, again in front of the WTO, in a landmark case concerning Chinese steel exports and anti-dumping duties, which was won in 2023.
He has also helped companies navigate the increasingly complicated web of restrictions around semiconductors, stemming from the US administration’s insistence on curbing trade with China, while advising clients on how to access state subsidies.
Japan, like many nations, is trying to increase its domestic chipmaking capacity and is willing to provide large amounts of state support for the effort, which includes attracting foreign companies. Since 2021, the country has offered billions of dollars to Taiwan Semiconductor Manufacturing Company, the world’s biggest contract chipmaker, to build plants in Kumamoto on the southern island of Kyushu.
While the WTO cases, says
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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Fee compression may finally be reaching the lucrative indexing industry with global revenues rising less rapidly than fund industry assets last year.
Worldwide revenues for the increasingly influential index providers rose 9.3 per cent to a record $5.8bn last year, according to estimates from Burton Taylor International Consulting, a research and advisory group focused on capital markets.
However, this was comfortably below last year’s 15.5 per cent rise in the assets of open-ended and exchange traded funds (excluding money market funds) globally, according to figures from Morningstar Direct.
The drop in index revenue in relation to fund assets represents a break from recent years, with global index revenues having risen at a five-year compound annual growth rate of 11 per cent, according to Burton Taylor, faster than the 8.5 per cent five-year CAGR of investment assets, based on Morningstar data, even taking into account 2023.
Asset managers have long complained that index providers are taking an ever-larger slice of the revenue pie. While fund management fees have fallen precipitously in recent years, particularly for passive index-tracking ETFs, the sums asset managers in turn pay to index providers have not fallen anywhere near as fast, if at all.
Funds typically pay an annual fee equivalent to about a couple of basis points of assets to an index provider for the right to track or benchmark against a proprietary index. Alternatively their parent companies can pay flat-rate subscription fees for access to a bundle of indices and other services.
As a result of this mixed payment model, growth in index fees is likely to undershoot growth in assets during years when markets rally strongly. However, Brad Bailey, research director at Burton Taylor, believed index fees were genuinely starting to fall.
“There has been considerable cost pressure. We are seeing competition in the index business in terms of fees. These fees really have to go down,” said Bailey, who believed investment bank and hedge fund groups were emerging as competitors to the stock exchanges and specialised index providers that have traditionally dominated the industry.
“The economics are shifting” with “increasing index revenues bringing newer providers to the table, pressuring fees downwards”, Bailey added.
In particular, smaller index providers offering “more attractive pricing” have prompted asset managers to “rethink their previous aversion to lesser-known providers”, he said.
More broadly, “the index business has just exploded”, Bailey
When the Monetary Authority of Singapore (MAS) published a study last year, with consultancy McKinsey, on how to accelerate the retirement of coal-fired power plants in Asia, it was a sign of how the region continues to seek innovative ways to decarbonise its fossil fuel-dependent economies.
South-east Asia, where Singapore is the financial hub, includes countries that are among the most exposed to the adverse impacts of climate change — such as Vietnam and Indonesia, both of which depend heavily on coal-generated power.
That makes coming up with creative ways to end reliance on fossil fuels all the more urgent — hence the MAS study, which looks at how improving financing structures could persuade coal plant owners to wind them down, voluntarily — ahead of their technical end of life.
The research covers a new type of carbon credit, which would provide a mechanism for generating a revenue stream to compensate coal plant owners for the income forgone from early plant closure.
Coal power: many countries in south-east Asia, such as Vietnam, are still largely dependent on fossil fuels © Alice Philipson/AFP via Getty Images
At stake is how to align the interests of plant owners and lenders. “We must take an ecosystem approach to address the complexities of energy transition,” said Leong Sing Chiong, deputy managing director at the MAS’s markets and development group, speaking at the launch in December of a pilot for the idea, involving two coal plants in the Philippines.
This means bringing investors and businesses with often differing interests together, which is becoming increasingly important as environmental, social and governance (ESG) principles are implemented in Asia.
Demand for legal remedies that align these interests shows no sign of abating, even as a politically driven ESG backlash in the US is throwing up awkward dilemmas for investment managers and others outside Asia. Indeed, law firms in the region are responding to growing pressure from clients to advise on ESG issues, while demonstrating their own commitment to such principles.
At Baker McKenzie’s Melbourne practice, lawyers have been devising a power purchase agreement (PPA) to satisfy the differing commercial interests of a renewable power producer and the buyer of the power, known as an off-taker.
Decades of reliance on coal and gas in Australia has meant that its grid and transmission infrastructure is not always suitable for accommodating renewable power, and upgrades are needed. This means that renewable power project developers may occasionally vary the mix of
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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The bugger with being a contrarian by nature is when the average joe is right. On how many occasions have I taken the road less travelled only to discover hundreds of potholes and a collapsed bridge ahead?
Such as when I went short US equities five months into a post-financial crisis rebound which continues to this day. Or my shunning of residential real estate. London property is too expensive compared with incomes, I warned a quarter of a century ago.
Sometimes crowds really are wise — loath as I am to admit it. The statistician Francis Galton proved as much in 1917 after analysing hundreds of entries in an ox weighing competition. He found the median guess accurate to within 1 per cent.
For some reason, though, I prefer to go down in a blaze of glory alone. Massive groups of people all cheering at the same thing scares me. In contrast, universal doom-mongering — such as over climate-related financial risk — turns me rabidly optimistic.
Staying cheerful is useful when it comes to investing, however. Especially in shares. Observe a long-run chart of the world’s major stock markets and they mostly go up. Hence why buying when those about you are losing their heads is such a winner.
As I reminded a new equity strategist who joined a bank I once worked for. He wanted to make a name for himself by calling the top of the market, against the prevailing view at the time. Only bulls survive your game, I told him. A year later he was gone.
This of course makes me a hypocrite for selling the S&P 500 last September, despite going long at the start of 2023 when everyone else was negative. Still, buying out-of-favour markets has worked well for me this year.
Most commentators have forgotten how negative they used to be on UK equities. Likewise, Chinese stocks only began rallying in February after it was universally agreed they were “uninvestable”. Energy companies were predicted to suffer from the green transition as well as divestment.
All of this goes to explain why I am warming to private equity — as discussed in my two previous columns — after decades of criticising the industry. Not that it cared. The sound of money being made drowned out my harrumphing.
But now everyone reckons you’ll soon be able
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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wildfires are again burning forests in Canada’s oil sands region, with blazes on the outskirts of its main city putting petroleum production at risk.
Nearly 20,000 hectares (49,000 acres) were classified as out of control by Alberta Wildfire on Thursday, burning several kilometres from the oil sands capital of Fort McMurray.
The fires are in a region of Alberta province where energy companies mine thick bitumen deposits to be upgraded into synthetic crude oil. The growth of the oil sands industry has enabled Canada to become the world’s fourth-largest oil producer, producing 6 per cent of global supply.
The oil sands produced 3.2mn barrels a day in 2023, according to the Canadian Association of Petroleum Producers. Rystad Energy, a consultancy, said in a report that 2.1mn b/d of marketable output could be at risk if the fires materially worsen, or 1.7mn b/d if announced maintenance outages are taken into account.
The potential for output being shut comes as the oil market is vulnerable to geopolitical tensions in the Middle East and Russia.
The US is the largest buyer of oil from Canada. The price discount of heavy Western Canadian Select oil and US benchmark West Texas Intermediate crude has narrowed in the past week from $14.60 a barrel to $13.81 a barrel.
“If we did see a material supply impact metastasise out of these wildfires, then that could tighten the market a little more, and there could be upward price pressure potential,” said Thomas Liles, vice-president of upstream research at Rystad.
While cooler temperatures and rain have improved conditions, the fire remains uncontrolled and more than 6,000 people have evacuated from Fort McMurray, where a third of jobs are in mining and oil and gas extraction, according to the local economic development agency.
“This evacuation is a stark reminder that our province lives alongside the threat of wildfires and other natural disasters,” said Danielle Smith, the premier of Alberta, in an update on Wednesday.
Alberta has recorded 323 wildfires so far this year, scorching 30,000 hectares (75,000 acres).
Devastating wildfires swept through Alberta in 2016, which destroyed more than 2,000 homes and forced oil companies to cut more than a fifth of daily oil production. So far, oil sands producers have not reported disruptions. One of them, Cenovus, said it would “continue to monitor all areas of operation
The European Commission is ready to take steps to ensure the start dates for new bank capital rules on the trading book will align globally across all jurisdictions, Risk.net has learnt. With uncertainty clouding the timing of the US implementation for these new prudential standards, this makes it more likely the European Union will alter its own go-live date.
“We are very aware of the issue and the relevance of the market risk standard for the global level playing field,” says an EC spokesperson
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Retail sales rose by 2.3% in April from a year ago, the National Bureau of Statistics said. Industrial production rose by 6.7% in April from a year ago, beating expectations for 5.5% growth. But fixed asset investment rose by 4.2% for the first four months of the year, lower than the 4.6% expected increase. China was also scheduled Friday to kick off a six-month program for issuing decades-long bonds to fund strategic projects. Pictured here is a BYD factory producing new energy-powered trucks in Huai’an, China, on February 21, 2024. Nurphoto | Nurphoto | Getty Images
BEIJING — China reported data Friday that pointed to slower growth on the consumer side while industrial activity remained robust.
Retail sales rose by 2.3% in April from a year ago, the National Bureau of Statistics said. That was less than the 3.8% increase forecast by a Reuters poll, and slower than the 3.1% pace reported in March.
Industrial production rose by 6.7% in April from a year ago, beating expectations for 5.5% growth. That was also a marked pickup from 4.5% in March.
But fixed asset investment rose by 4.2% for the first four months of the year, lower than the 4.6% expected increase.
Real estate investment steepened its pace of decline, and was down 9.8% year-on-year for the first four months of 2024.
Infrastructure and manufacturing investment during that time both slowed their pace slightly from the level reported as of March.
The urban unemployment rate in April was 5%. The bureau has previously said it would publish the breakdown by age in the days following the overall data release.
Retail sales grew by 6.8% year-on-year during a recent holiday period from April 29 to May 3, according to China’s Ministry of Commerce.
The ministry said retail sales of home appliances rose by 7.9% during that time, while that of automobiles climbed by 4.8%, boosted by nationwide trade-in incentives.
“Major indicators of industry, exports, employment and prices improved overall, with new driving forces maintain[ing] rapid growth,” the bureau said.
Some consumers who are uncertain about their future income and other aspects will remain cautious about spending, said Bruce Pang at JLL.
But he noted that improving employment data and growth in services consumption indicated retail sales could improve down the road.
The statistics bureau said in a statement that the April
