Trust Act 2006 in Japan ～Current Basic Act on Trusts in Japan

Abstract

Trust Act 2006 was the first full-fledged revision in 84 years since the enactment of the Former Trust Act, with no significant revision having been made during this period. This revision scaled up the Former Trust Act, which contained 75 Articles, into the one with as many as 271 Articles (excluding the clauses concerning charitable trusts ). In this respect, it is more like making a new statute rather than changing the existing one. The modern trust system was first introduced to Japan in the Meiji Era. Initially, due to the ambiguity of the definition of trust, unwholesome dealers sprouted up one after another under the name of trust business. In response to the growing need to enact a trust law in order to crack down on such dealers, the Former Trust Act was established as the basic law on trust. Due to such historical backdrop, the Former Trust Act was of extremely regulatory nature. Subsequently, trust became popular in Japan especially in the form of commercial trust where trust banks undertake trusts as trustees, and the total trust liabilities reached 701 trillion yen as of the end of September 2006 (Trust Companies Association of Japan). Despite such movements, the Trust Act had been maintained almost as it was, containing clauses that were not fit for the changing economic situation. For instance, while the major type of trust assumed at the time of the Former Trust Act was created to retain property, the correctly popular type of trust is the one to invest in securities and loans using the initial trust property . The former Act was unsuitable for the investment methods which were becoming more complex and international. It was also unable to respond to the increase of collective trusts created for multiple beneficiaries. In consideration of all of these problems, the revision law aimed to make the Trust Act befitting the economy and society of today, while keeping the balance with protection of beneficiaries, and to set up provisions on new types of trusts, including trusts with certificate of beneficial interest and limited liability trusts. The keyword to the revision law as a whole is increasing flexibility. This concept has been advocated for the Companies Act and other legislative measures as well. Flexibility is more emphasized for the trust system as compared to other legal systems, and the lawmakers considered that in order to extend this merit in trusts, the regulations on trust should also be made flexible. As the revision made various clauses more flexible, it somewhat seems to have modified the features of trusts that have conventionally been regarded as their intrinsic nature. The revision covered a wide range of matters, but it will be easier to understand its essence when viewing it from the perspective of moving from unification to diversification, that is to say, the revision was designed, with the emphasis on flexibility of trusts, to allow diversified methods of using trusts in a proper way.