2025 in Review: Continuity and Progress in Japan’s Maturing Market

The Government of Japan has, for many years, pursued coordinated efforts to promote Japan as a seat for international arbitrations and encouraged the use of international arbitration in Japan. Arbitration-related developments in recent years have highlighted Japan’s continued progress on this path. This article addresses the developments of 2025 and explores whether Japan’s efforts have begun to bear fruit.

Building on the 2024 Reforms: A Year of Legislative Continuity

With Japan’s recent amendments to its Arbitration Act entering into force in 2024, modernizing Japan’s statutory framework and aligning it with contemporary global standards, it is not surprising that no substantive amendments were enacted by the Japanese legislature in 2025. The amendments in 2024 included court-assisted enforcement of tribunal-ordered interim measures, allowing courts to waive Japanese translations in enforcement proceedings, and giving the Tokyo and Osaka District Courts concurrent jurisdiction over arbitration-related matters.

On 1 June 2025, minor technical amendments in Articles 50-52 and 54 of the Arbitration Act entered into effect. These amendments set out penal sanctions for misconduct related to arbitration. While the change itself constitutes the first change to Japan’s Penal Code’s sentencing categories since 1907, the amendments to the Arbitration Act are narrow and align orthography and terminology with the uniform terms for penal provisions. In essence, the previous difference between “imprisonment with labor” and “imprisonment without labor” was replaced by a single unified custodial penalty for “imprisonment”. These revisions do not change the maximum penalties or the elements of specific offenses and therefore do not affect the overall framework governing international arbitration in Japan.

The Japan Commercial Arbitration Association (“JCAA”), Japan’s leading arbitral institution, is yet to update its 2021 Arbitration Rules. With other arbitral institutions in the region amending their arbitration rules more recently, the JCAA may also follow suit in the near future to keep pace with user expectations and new global trends, such as the use of artificial intelligence or third-party funding. Before the current 2021 version, the JCAA updated its rules in 2019, 2015 and 2008, so it appears the time is ripening for the next update. Other arbitral institutions, such as the Tokyo Maritime Arbitration Commission and the International Arbitration Center in Tokyo, amended their arbitration rules in 2024.

Japanese Parties Remain Active Users of Investment Arbitration

The Government of Japan remains open to investment arbitration as a dispute resolution mechanism for the settlement of investor-state disputes, viewing it as an essential tool for Japanese companies to protect their investments abroad. For example, on 6 February 2025, Japan concluded a bilateral investment treaty with the Republic of Zambia that provides for investor-state arbitration as an investment protection mechanism. Japan’s positive attitude towards investor-state arbitration may also reflect the fact that there is no publicly known adverse arbitral award against Japan resulting from an investor-state arbitration.

Japan has also supported the Energy Charter Treaty (“ECT”) and has engaged with its modernization efforts. In December 2024, the Energy Charter Conference adopted the modernized ECT, which was set to enter into force provisionally between all ECT Member States on 3 September 2025 to speed up the application of the modernized framework. However, on 3 March 2025, Japan informed the Energy Charter Secretariat that it would opt out of the provisional application of the amended ECT, joining a number of other Contracting Parties. The Government of Japan did not provide an explanation for its decision. For Japan and Japanese parties, the ECT remains to be applicable in its non-modernized form until the modernized ECT enters into force.

The Japanese economy is one of the world’s largest, and Japanese companies engage in significant outbound foreign direct investment. Despite Japan’s extensive network of investment treaties, the absolute number of cases involving Japanese parties remains relatively low, with only five ICSID-registered cases at beginning of 2025. On 2 December 2025 and 12 December 2025, two groups comprising several hundred Japanese investors filed two separate requests for ICSID arbitration against Switzerland under the Agreement on Free Trade and Economic Partnership between Switzerland and Japan. The claims concern Japanese holders of Credit Suisse AT1 bonds, which were rendered essentially worthless in March 2023 following the Swiss government’s rescue of the struggling bank.

Arbitration Funding in Japan

The latest investment arbitration brought by Japanese investors against Switzerland confirms that Japanese parties make use of third-party funding, as both cases are reportedly funded. However, as of 2025, Japan has not enacted regulations governing litigation and arbitration funding and nor has the JCAA introduced a framework for third-party funding in its arbitration rules. While some uncertainty remains regarding the enforceability and validity of funding agreements, it continues to be the case that, at this stage, Japan appears to tacitly permit third party funding.

Despite the absence of clear regulatory guidance, global litigation and arbitration funders have significantly expanded their presence in Japan in 2025 to explore funding opportunities, including the emergence of the first Japan based litigation funder backed by Japanese capital. Activities included joint seminars from funders and law firms explaining use cases of funding for Japanese companies, and a panel session featuring insights from funders during the JCAA Global Arbitration Forum 2025. This development may provide Japanese parties with greater access to funding and enable the pursuit of claims that might otherwise not be brought. Should the Government of Japan decide to regulate arbitration funding in the future, it is widely expected that such regime would be funding-friendly and would, in principle, permit third-party funding. Such an approach would be consistent with the Government of Japan’s policy of strengthening Japan’s position as a seat of arbitration and facilitating Japanese parties’ use of international arbitration.

Events and Seminars

Japan remained a dynamic hub for arbitration in 2025, hosting numerous conferences, seminars, and networking events from and for the arbitration community. In addition, some events have emerged as annual fixtures that draw strong regional and global participation. Notably, the third edition of the ICC Tokyo Arbitration Day took place in April 2025, with the fourth edition already confirmed for April 2026.

The Japan International Arbitration Week (“JIAW”) returned to Tokyo for its second year following its 2024 debut, featuring the two-day JCAA Global Arbitration Forum (see here and here), the full-day Tokyo Forum on Dispute Resolution organized by Japan’s Ministry of Justice UNCITRAL and ICSID, as well as a full-day joint Japan Association of Arbitrators and Swiss Arbitration Association conference. In addition, at least four side events organized by arbitral institutions, law firms, and professional networks were held in Tokyo at the same time. In 2026, the JIAW is scheduled for its third edition in July 2026.

Conclusion

The arbitration-related developments in Japan in 2025 reflect Japan’s trajectory as a maturing market that continues to develop. To maintain momentum and meet user expectations, stakeholders should consider updating the JCAA arbitration rules in line with global best practices and articulating a clear approach to third‑party funding. Japan already maintains a stable legislative baseline, policy support for ISDS, growing funding activity, and a vibrant arbitration community that continues to attract attention across the region and beyond. With such foundation, Japan appears poised for a breakthrough that would elevate its role as a more prominent player in the arbitration community.