For years, conservative Japanese law firms largely eschewed foreign expansion, choosing to focus on domestic matters and let the large British and American firms dominate cross-border work.

Not anymore. Over the past 18 months, Tokyo’s Big Four corporate law firms— Nishimura & Asahi, Nagashima Ohno & Tsunematsu, Mori Hamada & Matsumoto, and Anderson Mori & Tomotsune—have been on an overseas expansion tear. In that time, each of them opened an office in Singapore, and Nishimura, which also launched Vietnam offices in 2010, has announced plans for Thailand and Myanmar as well.
The moves have largely coincided with a broader boom in overseas investment by Japanese companies. Many lawyers expect this trend to continue despite the cheap-yen policy of Prime Minister Shinzo Abe’s government, which makes acquisitions abroad more expensive.
“To effectively satisfy the needs of our clients we need to be in the [larger] Asia region,” says Nagashima Singapore partner Yoshikazu Hasegawa.
This isn’t the first time Japanese firms have looked abroad. Several have opened offices in mainland China over the past two decades, and Nagashima opened a New York office in 2010. But this is certainly the most concentrated burst of expansion activity ever in these firms’ histories.
Much of the Japanese firms’ recent focus has been on Southeast Asia, for which Singapore also acts as a regional financial hub. Though still highly competitive, Southeast Asia is somewhat less so than China or Hong Kong, where far more international firms are on the ground.
It’s also a region where Japanese firms may have an advantage. Japan has long been the largest single source of foreign direct investment in the countries of the Association of Southeast Asian Nations (ASEAN); in 2011 it invested around $15 billion in the region, compared to $6 billion from America. It tops the charts in most individual nations in the region, too, often by even wider gaps. In the first three months of 2013, Japanese investors poured almost $3 billion in Thailand, over 20 times as much as their U.S. counterparts.
Those investment flows have become more attractive to Japanese firms as their domestic market has slowed in the past few years. That has meant more firms chasing fewer deals at home, says Nishimura Tokyo partner Yoshinobu Fujimoto, who is overseeing his firm’s expansion into Southeast Asia.
“Competition among law firms domestically is more severe,” says Fujimoto, “and that means legal fees will be more discounted.”
Japanese law firm offices abroad are still relatively small, typically counting only one or two partners. “What we’re doing is quarterbacking those deals and helping Japanese companies structure and negotiate them,” says Tony Grundy, senior of counsel with Mori Hamada in Singapore who moved there in February from Morrison & Foerster’s Tokyo office.
But can they compete with international firms? Squire Sanders Tokyo managing partner Ken Kurosu notes that there is a deficit in experience. “International firms can bring to market the full weight of know-how and a breadth of experience on major matters,” he says.
Indeed, many of the international firms with the largest Japan offices also have some of the biggest and most established Southeast Asia practices, including White & Case and Baker & McKenzie.
Japanese firms recognize these advantages, but think they may have some of their own.
“We have to acknowledge that some so-called international firms have a longer history [in the region], and they are bigger than us and have more offices than us,” says Fujimoto.
But Fujimoto says Japanese firms’ close relationships and cultural affinity with their domestic clients should not be underestimated.
“We know the clients very well,” he says. “We have more experience [serving them] than any other non-Japanese law firm.”
White & Case Tokyo executive partner Brian Strawn doesn’t discount the possibility that Japanese firms will do well with Japanese clients. The language alone may be reason enough for some Japanese companies to choose Japanese firms, he says.
“Japanese corporates really appreciate having someone overseas that they can reach out to in Japanese and communicate,” he says. “For them the language issue is such a big one, because the level of English in Japan is so low compared to other places.”
Baker & McKenzie Tokyo managing partner Yoshiaki Muto says smaller and medium-sized companies that have done few deals outside Japan are most likely to want a Japanese law firm to help them abroad. Those companies that already have done a number of overseas deals will look for services beyond basic transactional advice that larger international firms can more easily provide, he says.
“These purely Japanese firms may need to look for more value-adds to service clients that are already operating in new markets, much in the way that B&M has stepped in to provide counsel on sophisticated matters such as tax, customs, compliance and strategic restructurings,” says Muto.
To quickly gain more practice capability, Japanese firms could consider mergers or alliances with local firms in Southeast Asia. But, given how conservative they have been to date, many think there’s a limit to how far Japanese firms will ultimately go.
“I think it would be highly unlikely that they try to compete and become a multijurisdictional and cross-border firm,” says White & Case’s Strawn.