During the 19th century, a legal code had been adapted from European law, in part to fend off foreign powers. The Meiji constitution, in effect from 1889 to 1947, exerts little restraint on the emperor, but also calls for a representative government. The new legal system requires a word to be invented for the concept of rights.
A series of military coups emboldens factions in the military. The first economic control laws set the stage for later state control and expropriation of private enterprises for military purposes, but the laws are not yet fully implemented.
Far-reaching control and mobilization laws allow military branches to seize control of businesses. A black market emerges in response to price controls.
Following the surrender, the U.S. issues the Basic Initial Directive, laying out a program of democratization, demilitarization, and reform. A constitution drafted by the Americans passes in 1947, introducing a variety of rights and reinforcing the concept of rule of law. But as the occupation government becomes institutionalized, problems such as favoritism and politically motivated loans arise.
Lawyers and judges are few, trials long, and civil judgments rarely enforced. Contracts are brief and flexible, while "administrative guidance" is often verbal and at the discretion of bureaucrats. Vague and unwritten rules put foreigners at a disadvantage in the administration of laws, and also delay a modern financial system, a problem that growth obscures until the 1990s.
Links between organized crime and legitimate business have economic consequences as gangsters regularly extort money from firms by threatening to disrupt shareholder meetings. Prime Minister Tanaka resigns and is later jailed briefly in connection with a Lockheed bribery scandal, but he retains behind-the-scenes influence.
New laws increase auditing requirements for firms, but reporting is still inadequate, misleading, and insufficiently independent. This allows troubled companies to misrepresent their health and continue to access capital through affiliated banks. Banking reforms in 1988 attempt to reduce ties between finance and organized crime.
The flexible, unwritten rules and personal relationships praised during the boom years are now blamed as the slump reveals the need for transparency and consistency. Domestic reform advocates now join foreign businesses in pushing for rule of law. In the late 1990s new administrative, financial, and judicial reforms are enacted.
In a sign of the disruptive effects of the lengthy recession, crime rates surge, and arrests plummet in 2001-02. Both crimes by youth and crimes against children are on the rise. The government fears that Japan is losing its reputation as the "safest country on earth."
back to top