JAPAN: OSAKA: An Introduction to General Business Law

CURRENT ECONOMIC CONDITIONS IN THE KANSAI REGION

Osaka is the main commercial city in the Kansai region, which is located in the western part of the island of Honshu in Japan. The total area of the Kansai region (including Fukui, Shiga, Osaka, Hyogo, Nara, and Wakayama Prefectures) is 8.3% out of the entire area of Japan (as of 1 July 2021). Out of Japan’s total numbers, Kansai's export customs clearance value (2020) accounted for 22.4% (2021); Kansai’s department stores and supermarkets sales accounted for 17.5% (2021); and Kansai’s shipments of manufactured goods sales accounted for 16.7% (2019). The total population in the Kansai region was 16.9% of the total population of Japan (as of 1 October 2020) and gross regional product in fiscal year 2018 was 15.8% of Japan’s GDP. These numbers show that the total economy of the Kansai region accounts for a little less than 20% of the entire Japanese economy.

The nominal GDP of the Kansai region is almost that of Saudi Arabia (18th in the world). Looking at the composition ratio of gross domestic product in the Kansai region by industry in 2018, the agriculture, forestry and fishery industries accounted for 0.4%, and the manufacturing industry accounted for 22.6%. The tertiary industries (ie, the service sector), which includes wholesale, retail, and real estate industries, account for about three-fourths of the total gross domestic product in the Kansai region. The breakdown of the value of shipments in manufacturing shows that the volume of production chemical, steel, equipment manufacturing, electrical machinery, etc, in the Kansai area is higher than in the whole of Japan, while the production volume of transportation machinery, etc, is lower.

Looking over the past year (2021), while overall economic conditions remained severe due to the impact of the COVID-19 virus, in the first half of the year (2021) some signs of recovery were seen, with production continuing to recover due to increased exports and capital investment. Private consumption, which had been weak under repeated emergency declarations, has shown signs of picking up since October 2021 when the state of emergency declared on 30 July 2021 in Osaka Prefecture and on 17 August 2021 in some other prefectures was lifted.

Nevertheless, production has recently been slowing down, due mainly to the prolonged supply-side constraints, leaving the economy's underlying assessment at a standstill. The value of trade (exports) was favourable against the backdrop of economic recovery overseas, but growth slowed down in the second half of 2021 due to reduced automobile production accompanying supply constraints and economic slowdown in China, which supplies many automobile parts. This slowdown is partly attributable to lower production of transportation machinery, including automobile production in the Kansai region. By country and region, exports were driven by China and Asian NIEs (Asian newly industrialised economies), and, listing by product category, by electronic components such as semiconductors, manufacturing equipment, and construction and mining equipment.

In order for the Kansai economy to continue future recovery, it is essential to continue aggressive capital investment, improve labour productivity, and expand consumption by raising incomes. In addition, while inbound demand is not expected to recover, exports of goods are expected to further capture external demand and lead to the growth of the Kansai economy.

At the same time, there are concerns that the recurrence of COVID-19 and higher prices of energy resources will increase the risks of doing business in the global economy. According to 2020 trade statistics, a higher share of the Kansai region’s international trades comes from China rather than from the domestic market. Since the Kansai region has strong ties with China and other Asian regions, it is thus necessary to closely monitor developments in the Chinese and Asian economies going forward.

The Trends and Developments in the Kansai region 

First, while the spread of COVID-19 resulted in a sharp decline in income from tourism and other inbound activities, the development of hotels is progressing in anticipation of a rebound following the COVID-19 pandemic.

Second, public recruitment and selection procedures were implemented under the Integrated Resort Promotion Act for 'integrated resort' facilities such as casinos, conference hall facilities, recreation facilities, exhibition facilities and hotels. In September 2021, based on the results of an examination by the Osaka City IR Business Selection Committee, an expected project operator was selected. A development plan was submitted to the government by April 2022, and an integrated resort is expected to open in Osaka in 2029.

Third, the World Exposition is scheduled to be held in Osaka in 2025, and various projects for this purpose are expected to progress in the future.

Lastly, the Osaka prefectural government has decided on a strategy to attract foreign financial institutions to Osaka as part of the 'Global Financial City of OSAKA' project.

New legislation, etc 

Major new business-related laws include the Personal Information Protection Act, the Tokyo Stock Exchange's transition to a new market segment, the Whistle-blower Protection Act, and the amendment of the Corporation Act.

The amended Act on the Protection of Personal Information Protection ('Amended Act') came into force on 1 April 2022, following a revision imposing the obligation to notify the Personal Information Protection Commission and the person in question in the event that a certain level of leakage, etc, is discovered. In order to implement the Amended Act, business operators are required to organise the status of handling personal data within the company or providing it to a third party. Foreign business operators that handle personal information related to persons in Japan are subject to orders and onsite inspections under the Amended Act.

On 4 April 2022, the Tokyo Stock Exchange abolished the previous market segments of First Section, Second Section, Mothers, and JASDAQ, launched the new market divisions, consisting of the 'Prime Market', the 'Standard Market' and the 'Growth Markets', and clarified the concept of each market division. The listed companies in the Prime Market need to comply with the principles for the prime market, which were incorporated in the June 2021 revision to the Corporate Governance Code.

The revised Whistle-blower Protection Act came into force in June 2022. Its implementation requires business operators to develop the necessary systems to respond appropriately to whistle-blowing (however, companies with 300 regular employees or fewer only need to "make efforts" to comply).

In addition, the revised Corporation Act, which came into force on 1 September 2022, introduced a system to enable electronic provision of materials for general meetings of shareholders without individual consents of shareholders.