JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
1. General 1.1 Main Sources of Law
were several large-scale transactions where hotel assets were sold to foreign real estate funds, indicating the strong appetite of foreign funds for Japanese hotels due to the increase of inbound tourism and the recent trend of tra - ditional Japanese companies to turn to asset- light strategies. Another trend is rising inflation stimulating investments in inflation-resistant real estate, such as residential, hotel and retail prop - erties. Overseas investments are also increasing. For example, in 2024, Sekisui House REIT, Inc acquired two real estate properties in the United States. In contrast, new large-scare develop - ment projects have stalled somewhat because of the rising cost of materials and labour. A new type of real estate fund, security token offerings, have also been increasing over the past few years and will attract more attention going forward. For more information on market trends, see our Chambers article Japan: An Introduction to Real Estate. 1.3 Proposals for Reform New legislation concerning real estate trans - actions for national security purposes became effective on 20 September 2022. The Act on Investigation and Regulation on Use of Prop - erties in the vicinity of Significant Facilities and Border Remote Islands will authorise the Japa - nese government to: • designate close monitoring areas and enhanced close monitoring areas; • investigate persons using the properties located within these areas and the use of these properties; and
The Civil Code provides the general legal frame - work for real property and real estate transac - tions, including ownership, co-ownership, superficies, easement and security interests and for sale and purchase and leasing transactions. In addition to the Civil Code, the Law on Unit Ownership of Buildings governs unit ownership ( kubun shoyu ken ) and the relationship between the unit owners of a multi-unit building, while the Land Lease and Building Lease Law applies to leases of buildings and leasehold interests or superficies in land for the purposes of owning a building on a parcel of land. Since this Law was enacted to enhance protec - tion of the tenant’s interest, some provisions are mandatory and cannot be circumvented by the parties to a land lease or building lease. There are also court rulings relating to land leases and building leases which have established legal doctrines that generally restrict the lessor’s rights and protect the tenants. 1.2 Main Market Trends and Deals The Japanese economy is experiencing inflation for the first time in many years. In March 2024, the Bank of Japan exited from the negative interest policies it introduced in February 2016. It further increased its policy rate in July 2024. While increases in the policy rate would result in increasing interest payments for real estate funds, these factors may positively affect the real estate market going forward. The Japanese real estate market is still active of late and is attracting particular attention from abroad due to the relatively low interest rates and the depreciation of the yen. In 2024, there
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