Summer 2023 is coming to an end… not that it feels like it here in Tokyo!

The last few years have been turbulent. Recovery from the COVID-19 pandemic, Russia’s invasion of Ukraine, and the consequent global energy crisis have had economies around the world on the brink of recession. Of course, this has had a knock-on effect on hiring needs and capabilities, although less than one might have anticipated.

Overall, law firms absorbed the shockwaves spread across global economies between 2022-2023 and, despite a slowdown in revenue growth, performed well in the first 3 quarters of 2023. With some recently setting rather ambitious growth goals for the next few years (Hogan Lovells $3bn by 2028) and others engaging in large-scale mergers (Allen & Overy and Shearman & Sterling) . These are positive signs that the top-tier global legal market is relatively buoyant despite continued disruption from outside influences.

In Japan, both domestic and international firms are looking to grow. The shrinking of the Japanese legal market due to macroeconomic factors, is pushing Japanese firms to globalize as top-tier and mid-tier firms announce the opening of new overseas offices. Meanwhile, more international firms with offices in Tokyo are hoping to establish a foreign law joint enterprise, to tap into domestic legal work and expand their Japanese client base. Our consultants specializing in private practice moves are working with top firms to identify key talent in this often challenging market, helping firms to grow and develop to remain competitive.

Despite the global slowdown of M&A activity and ever-increasing competition for domestic work in Japan, an emerging trend across Asia Pacific and Europe has seen domestic firms rising in the M&A rankings ‘at the expense of larger international firms.’ However, the competition with international firms remains strong. The most recent example is Nishimura & Asahi announcing their foreign law joint enterprise, allowing foreign-qualified lawyers to become equity partners. N&A surely hopes that this move will attract lawyers qualified outside of Japan who are experienced in cross-border M&A and other international transactional practices. As the second of the Japanese Big 4 to take this step, domestic firms are recognizing the importance of cross-border economic activity and the subsequent need to attract foreign talent. We anticipate movement by foreign partners and senior lawyers to N&A, as we have seen since 2020 when Anderson Mori & Tomotsune became a foreign joint enterprise.

Whilst law firms are experienced in finding opportunities even in challenging economic environments, corporations tend to be more vulnerable in economic downturns. Whilst we remain busy across the finance, healthcare, technology and entertainment sectors, our consultants focused on in-house moves have noted that overall, the in-house market demand is still below 2019 levels, albeit increasing month-on-month.

One key element remains constant in the Japanese market, however; it is always challenging to find strong candidates in this market. That is where we add obvious value, of course, but employers should do their best to promote their organization and sell candidates on the opportunities they can offer.

Looking ahead, for the final months of 2023 and into the New Year, we expect to remain busy as firms seek to carry their momentum from this year into 2024!