Comparative secured transactions law: how and to what extent do global standards affect the reform of Japanese inventory financing law

Abstract

Abstract Since March 2021 Japan has been undertaking official legislative discussions at the Committee of Secured Transactions Law Reform under the Legislative Council of the Ministry of Justice Japan to draft a statute of secured transactions of personal property. These discussions are now in their final stages. Enhancing the reliability and feasibility of security devices for inventory financing is the core purpose of the proposed legislation. As a result of policy-making decisions, the conventional Japanese security device of ownership transfer for security purposes will not be replaced by a new regime which reflects the modern principles originating from the UCC9 and illustrated in the UNCITRAL Model Law on Secured Transactions. However, the significance of such global standards in the context of Japanese law has been two-fold. First, they illustrate what conventional Japanese law achieves through its own alternative rules. Second, the Council Committee is likely to propose several changes to refresh our conventional security device by adding new principles which have traditionally been of less concern to Japanese practitioners. In this article, the author substantiates the influence of these global standards on Japanese legislation. This article focuses on the functional approach taken by the ownership transfer type security interest, the rules relevant to publicity of security interests as modified by the first-to-register-or-possession rule as suggested by global standards, the concept of aggregate of inventory as collateral as modified by registration to cover perfection in security interests in goods joining the aggregate after a debtor's dishonest disposition, and the assignment of accounts receivables accompanied with ownership transfer of inventory which may be viewed as functionally close to security interests in proceeds of inventory.