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This article summarizes key findings from the Japan Business Credit Project (JBCP), which involved more than 30 semi-structured interviews conducted in Japan from 2016 through 2018. It was inspired by important and previously unexplored questions concerning secured financing of movables (business equipment and inventory) and claims (receivables)—“asset-based lending” or “ABL.” Why is the use of ABL in Japan so limited? What are the principal obstacles and disincentives to the use of ABL in Japan? The interviews were primarily with staff of banks, but also included those of government officials and regulators, academics, and law practitioners. The article proposes reforms of Japanese secured transactions law that would address several prevailing problems with ABL. The reforms would move Japanese law toward the modern principles that are epitomized by Article 9 of the UCC in the United States and the UNCITRAL Model Law on Secured Transactions. These proposals also could materially improve Japan’s standings in the World Bank Group Doing Business Rankings.

Three committees with government connections recently have been studying secured transactions law reforms in Japan. We expect that the government will move to a more formal stage of considering reforms in the near future. We are optimistic that the article will be influential on the substance and ultimate enactment of law reforms. Our research illuminates the stark contrast between the situation in Japan and the modern principles of secured transactions law embodied in the UNCITRAL Model Law, which is designed to enhance access to credit through ABL. Finally, the article identifies important new insights for secured transactions law reforms, not only in Japan but in other jurisdictions. These insights are illuminating as well for future business law reforms more generally. In particular, the article explains the value and utility of qualitative empirical research such as the JBCP for the process of law reform.


ABL, access to credit, asset-based lending, business credit, capacity building, claims, equipment, inventory, Japan, law reform, movables, perfection, public guarantee, receivables, registration, secured transactions, security interest, SMEs, UCC, UNCITRAL, civil code, crystallization, Minpō, monitoring, overcollateralization, valuation

Publication Title

University of Pennsylvania Journal of International Law

Publication Citation

43 U. Pa. J. Int'l L. 611 (2022)