Washington International Law Journal


Problems with sub-prime loans roiled financial markets worldwide in 2007 and brought renewed attention to predatory lending practices by loan brokers in the United States. Questionable lending practices, however, plague consumer financial markets worldwide, including one of the largest, found in Japan. This Article addresses the Japanese response to systemic problems in its consumer finance market. Over the last forty years, the judiciary has led and the Diet followed. Most recently, in 2006, the Supreme Court handed down a series of decisions that turned the single most important earnings driver for the consumer finance industry into dead letter law. The Diet followed with legislative revisions. Both actions have imposed restrictions unheard of in the United States and drastically reshaped the financial industry in Japan. This Article analyzes these recent changes and places them in context. Doing so offers more than description and a point of comparison. It provides a window into the evolution of Japanese private law. It provides evidence that challenges the conventional wisdom on Japan. The Japanese judiciary is neither weak nor ineffectual. It is not limited to following the dictates of the Liberal Democratic Party or bureaucracy or filling in legislative lacuna. It has not limited itself to activism in the service of stability or community. In private law matters, it has come to act aggressively: repeatedly invalidating black letter law and providing substantive as opposed to procedural justice. This work shows the Japanese judiciary has not evolved into a monolithic bureaucracy, but one often driven by activist lower courts. The historical context and discussion of recent developments in consumer finance law offers insight into legal changes affecting the Japanese financial markets today, as well as the evolution of the role of law and the rule of law in Japan.

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