The essence of the Japanese trust

August 17, 2020
by Noriyuki Morimoto

At the time of its construction of a modern nation, Japan referred to German and French law to design its legal system, while the only exception was the trust law, which was based on Anglo-American common law. That said, reference is not copying, so Japanese trust law is something unique to Japan.

However, even so, the Japanese trust has the same basic structure as the common law trust: there is the original asset owner (the settlor), who externalizes and makes the asset independent in the form of a trust; the benefits generated from the management of the entrusted asset; the beneficiary, who is ultimately entitled to the rights to the trust principal; and trustee in charge of managing the trust property.

Article 29 of the Japanese Trust Act states that “the trustee must carry out trust services in accordance with the main purpose of the trust.” As the Trust Act separately stipulates “the purpose of the trust,” there has been a debate on what this “main purpose of the trust” means.

Kazuo Shinomiya, a former professor of the University of Tokyo and authority on the Trust Act, said that “the main purpose of the trust” was an idealization in the light of what a trust should be: in other words, the purpose the settlor should have intended. The “purpose of the trust” is of course the intention of the settlor, but the “main purpose of the trust” is “the purpose that the settlor should have intended” and “an idealization in the light of what it should be.”

In other words, according to Shinomiya’s theory, a trust has a certain level of agency as an independent group of assets, which represents “the main purpose of the trust” that binds the settlor, beneficiary, and trustee. Therefore, Shinomiya is saying that the trustee should not merely act according to the purpose of the trust, but should act on the basis of “an idealization in the light of what it should be,” which governs the purpose.

This is the essence of the Japanese trust.


[Category /Fiduciary Duty]

Noriyuki Morimoto
Noriyuki Morimoto

Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.