Origins of trusts in Japan and the enactment of the Trust Act and the Trust Business Act

Origins of trusts in Japan

There had long been a concept similar to trust in Japan; however, the current trust system originated in England before developing further in the U.S.

The Secured Bonds Trust Act was enacted in 1905, licensing major banks to conduct secured bonds trust operations. During that time, Japan implemented the secured bonds trust system to bring in the funds, particularly from overseas, necessary to convert the focus of Japanese industry from light industries such as spinning to heavy industries such as iron and steel. The first the trust system targeting industrial companies was introduced. On the other hand, trust companies that specialized in the administration and investment of household assets were also established. The first such company was Tokyo Trust Co., founded in 1906.

Enactment of the Trust Act and Trust Business Act

Japan experienced an economic boom with the beginning of World War I in 1914, which led to the establishment of many trust companies, numbering 488 by the end of 1921.
However, operations varied as there was no trust legislation in place at the time and no prescribed concept of trust operations. Many trust companies lacked sufficient financial strength and credit strength, which led to various negative effects.
Therefore, the Trust Act and the Trust Business Act were enacted in 1922 and came into force in 1923 to clarify the concept of trust and to develop a sound trust system. Japan’s trust system was formally established by the enactment of these two acts, which enabled the subsequent maturation of the system.

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