JAPAN Law and Practice Contributed by: Hiroaki Takahashi, Kaoru Sato, Kenji Miyagawa and Koji Kawamura, Anderson Mori & Tomotsune
1. Specific Financial Asset Types 1.1 Common Financial Assets According to the report by the Japan Securities Dealers Association and the Japanese Bankers Association (Securitisation Market Trends Survey Data), the total issuance amount of securitisation products in fiscal year 2023 was JPY4,217.5 bil - lion, decreasing 12.5% from fiscal year 2022, while the number of issues was 218, 14.7% up year-on-year. The report also shows that there was an increase in the securitisation product issuance amount for fiscal year 2023 by underlying assets, the amount of leases, consumer loans, shopping credits and “others”, whereas RMBS and CDO decreased. In addition, looking at the securitisa - tion product issuance amount by product type, the amount of “trust beneficiary rights” was JPY2,721.2 billion (64.5% of the total), followed by bonds with JPY8,782 billion (20.8%). 1.2 Structures Relating to Financial Assets From the viewpoint of the transaction structure, the following three types are to be considered in most transactions. Godo Kaisha (GK) Structure A GK used as an SPE for securitisation could finance its purchase of assets by way of debts (loans and bonds) and/or equities (shares). However, a GK is not eligible for the special tax treatment applicable to tokutei-mokuteki- kaisha (TMKs), and a GK’s profits are subject to corporate tax in the same way as standard corporations conducting actual business. There - fore, tokumei-kumiai (TK) investments are more frequently used than shares, due to the impact on the GK’s taxable income. The distribution of profits to TK investors may be regarded as
“expenses” to be deducted from profits for cor - porate tax purposes. The structure in which TK investments are used to reduce a GK’s taxable income is generally referred to as the “GK-TK structure”, where the originator sells the assets to a GK for the purchase price, which is funded by way of bonds and/or loans and TK invest - ments. Theoretically, the GK-TK structure is available for any type of asset securitisation. However, in practice, the GK-TK structure is predomi - nantly used for real estate securitisation or non- recourse financing for real estate, while mone - tary claims are securitised by the trust structure discussed under Trust Structure. For the GK-TK structure for real estate secu - ritisation, it is important to note that the Real Estate Specified Joint Enterprise Act (the “Joint Enterprise Act”) will apply if the GK owns real estate itself. This will require the GK to obtain pre-approval ( kyoka ) from the government (the Ministry of Land, Infrastructure, Transport and Tourism, the Financial Services Agency, or the local municipality). The Act was amended in 2013 to facilitate a GK being used as an SPC to implement the GK-TK structure. The rules for conducting business by a GK were relaxed and GKs could utilise the GK- TK structure through a filing, rather than seek - ing permission. However, new GK-TK structures have rarely taken advantage of this amendment because the new filing scheme requires the del - egation of the business of real estate transac - tions to approved real estate operators ( 3-go- jigyosha ) and of the solicitation for the purchase of TK investments to approved brokers and dealers ( 4-go-jigyosha ) for TK investments. The Act was further amended in 2017 to facilitate the GK-TK structure by requiring merely filing rather
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