Japanese Law Firms Grow US Investments With Weak Economy at Home

Japanese law firms are opening offices in New York and San Francisco as growth opportunities become harder to find in their home country.

Mori, Hamada & Matsumoto, one of Japan’s five largest law firms, is set to open a Manhattan outpost later this year. Miura & Partners, a mid-size firm, this month made its first play stateside through a strategic alliance with Yorozu Law Group, a 20-year-old firm based in San Francisco.

Japan’s legal service providers, like manufacturers and businesses in other industries, are hunting for growth they can’t find at home, given the country’s shrinking population. Japan narrowly avoided a recession at the end of last year, as gross domestic product grew at an annualized 0.1% in the fourth quarter, Bloomberg News reported last month.

“As the Japanese legal market will likely shrink in response to macro-economic factors that Japan is facing, it is a logical decision for a law firm with certain size to globalize,” said Masayuki Atsumi, a partner at Miura & Partners. The firm has 87 lawyers in Japan and abroad.

Japanese net foreign direct investment in the US rose by 20% to $59.3 billion (7.9 trillion yen) last year, according to the Japanese Finance Ministry. It accounted for 40% of Japanese foreign direct investment, the biggest FDI destination for Japan. Net investment in ASEAN countries was $22.5 billion (3.0 trillion yen) in 2022, down 2.8% over the year. It accounted for 13% of total Japanese FDI.

Law firms launching in the US are looking to capture a piece of the lucrative M&A market, serving clients based in Japan, Southeast Asia and the US. They’re taking small first steps and are likely to face stiff competition.

New Targets

Nagashima Ohno & Tsunetmatsu was one of the earliest Japanese law firms to set up an office in New York, launching there in 2010. The firm acquired NY-based Masuda International, which was set up 1992.

“Some Japanese firms are opening offices in New York or other parts of the US because they have completed their office expansions in Southeast Asia and other parts of Asia and they feel it is time to expand in the US to globalize their operations,” Ryo Okubo, partner and co-head of at Nagashima Ohno & Tsunematsu NY LLP in New York, said in an interview.

The firm has one US lawyer and six Japanese attorneys who hold law licenses for both countries. It has 570 lawyers in Japan and overseas.

Its business has evolved since the firm first landed in the US, advising Japanese companies investing stateside. Nagashima Ohno & Tsunematsu now is targeting new Southeast Asian clients doing M&A deals or making other investments in the US.

MHM, the major Japanese firm set to land in New York in the fall, will start with six lawyers and plans to increase its US headcount to 10 attorneys in the next five years, partner Yuto Matsumura said in an interview. It also wants to provide legal services to clients in other major cities, like Boston, Washington, Philadelphia and Chicago, along with Texas, though it has no current plans to set up additional US offices.

The firm now has 557 Japanese lawyers and 160 foreign lawyers, Matsumura said in an interview.

“We have clients and offices in Thailand, Singapore, Indonesia, and Vietnam in addition to Japan,” Matsumura said. “We would like to provide legal services to those Southeast Asian clients who operate in the US or are moving to or investing in the US.”

The firm aims to have less than half of its business be Japanese and other Asian clients in the US. It wants the majority to be US clients investing or doing M&A deals in Japan and Southeast Asia.

MHM is also planning to grow in Bangkok, where the firm has its biggest overseas office. It plans to nearly double the headcount to 200 lawyers in the next five years, Matsumura said.

Miura & Partners was drawn to San Francisco by the city’s location, said Naomi Koshi, a partner in the firm’s Tokyo office.

“We decided to set up a San Francisco office because it is close to Silicon Valley and many Japanese companies are interested in investing and M&A in California,” Koshi said.

Stiff Competition

One challenge is winning the trust of potential Japanese clients, said Okubo, of Nagashima Ohno & Tsunematsu in New York. Some of those companies are convinced their US legal work must be handled by US law firms and lawyers, he said.

“They tend to have this firmly-rooted thinking and it takes a lot of effort to make our Japanese client feel comfortable because we’re a Japanese law firm Okubo said.

Hiring lawyers is another issue. Only a few dozen Japanese lawyers have Japanese and US licenses, moving a Japanese lawyer to the US is costly, and American lawyers expect high salaries, said Okubo, who has licenses for both countries and has worked in New York since 2017.

“Japanese firms may have an advantage on matters intersecting with Japan, but for most matters in the US they will face huge competition for talent and clients going head-to-head with large and rich firms. That will be hard,” Kent Zimmermann, a law firm consultant at Zeughauser Group, said via email.

“They will also be in a crowded competitive environment with a lot of rich and high-profile firms competing for the same lawyers and clients,” Zimmerman said. “This will be challenging.”