From the Substance to the Shadow
The Court Embedded into Japanese Labor Markets*
ISS Discussion Paper Series
F–168
February 2014
This version: June 2016
Masaki Nakabayashi†
Institute of Social Science
The University of Tokyo

Abstract
Modern contract law generally does not allow property rights or similar claims to be madeagainst employees. This undermines a claim on the return on the employer’s investments
in recruiting and training a worker, making them vulnerable to possible infringement froma bystander. Accordingly, employers investment in recruiting and training might become
deficient. Therefore, protecting an employer’s investment, balanced against the mobilityof the labor market for better employer-employee matches, has emerged as an issue inthe transitory phase towards a market-based economy. We explore how the Japanese state
court in its early period addressed this issue in the tight labor market of the silk-reeling industry, the leading industry then. The court first directly protected interests of employers
whose employees were poached, at the expense of workers mobility. Then, it seemed toindirectly govern transactions between employers as a shadow off-the-equilibrium path.
Thus, an employer whose employee was poached and an employer who dud the poaching
would privately negotiate to settle the dispute, using a possible suit as a threat against
the poacher. Examining suits that were actually filed leads to this hypothesis. This indirect governance facilitated labor market mobility with some protection of the original
employer’s claim.
Key words: employment contract; poaching; bystander’s infringement on claim; shadowof the law; Japan.
JEL: N35, K12; J42.
* This research has been supported by a JSPS Grant-in-Aid (22243022 and 25245001).
†

The author is grateful to Akira Wani for his thoughtful suggestions and to Tetsushi Saito for his helpfulcomments. He also appreciates helpful comments from participants in the 11th Annual International Industrial
Organization Conference, 2013, the 23rd Annual Meeting of the American Law and Economics Association,
2013, and the 9th International Conference on Contracts, 2014. Corresponding address: Institute of Social
Science, The University of Tokyo, Hongo 7–3–1, Tokyo 103–0033, Japan. Phone: +81 3 5841 4936. E-mail:mn@iss.u-tokyo.ac.jp

Introduction
This study is a historical analysis of the strategic complementarity between the public andprivate institutions that govern transactions, using the labor market of the Japanese silk-reelingindustry in the late nineteenth and early twentieth centuries as a case study.
An insight into the institutional evolution of governance is that the bigger the market,
the greater role the state court assumes.1 At the same time, even in developed economies
with strong state courts and large markets, private settlements of disputes still matter as ameans of governance. This fact does not mean that litigation is irrelevant to private settlement.
Instead, the possible enforcement of contracts by the court or the costly litigation processitself sometimes affects private bargaining, often in favor of the party whose bargaining power
would have been impaired had the court not existed as an off-the-equilibrium path or a shadowof the law. The state court stabilizes private settlements in that way and hence works in acomplementary way with the private settlement mechanism.2
In the transitory phase to modernization, where the state court is established but its enforcement ability is not yet strong, this complementarity between public and private institutions could have even greater consequences. A weaker state court might vindicate a greater
realm for private institutions. Meanwhile, the existence of a weak but still somewhat potent
state court might stabilize those private institutions through its shadow. Institutional diversity in the early stages of modernization would be better comprehended by addressing thecomplementary roles of public and private institutions.
We focus on labor markets because, as will be discussed below, a transition toward a freelabor market might result in a trade-off between better employer-employee matches throughincreased mobility and the potentially deficient investments in the skill and transportation oflabor. In making trade-offs, labor market institutions tend to diversify during the transitory
phases. In particular, along with modernization, claiming a real right3 to a worker becomes
illegal, which makes claims on workers vulnerable. This might conflict with socially optimal investments in skill acquisition of workers or payments of the transportation costs ofworkers and thus might necessitate institutional arrangement for growth in the labor market.
Such a combination of public and private mechanisms.might then attain better resource allocation than would have been otherwise. At the same time, optimal allocation would hardly beachieved. It is highly likely, the better allocation is a second-best allocation, and institutional
combination that achieves this level of efficiency might not be unique. Therefore, combinationof public and private mechanisms could be a source of institutional diversity in the transitory
phase.
We use the case of the Japanese silk-reeling industry for a straightforward reason. The
silk-reeling industry was the first globally competitive manufacturing industry in both Japanand China, with the Japanese dominating the US market and the Chinese dominating the1

See Dixit (2004), pp. 59-95.
See Dixit (2004), pp. 25-58; Stevenson and Wolfers (2006); and Choi and Triantis (2008).
3“Real right” in civil law is a right connected to a thing rather than a person, including ownership, use,
habitation, usufruct, predial servitude, pledge, and real mortgage. Hereafter, footnotes on legal terms are basedon Garner, ed (1999).
2

1

French market, crowding out Italian rivals in both cases. Meanwhile, institutions in the labor and financial markets in the Japanese, Chinese, and Italian silk-reeling industry showed
great diversity even though they shared technological backgrounds4 with Japan introducing
the traditional hand-reeling techniques from China and the modern machine-reeling technologies from Italy. A focus on labor market institutions is essential to understand the different
historical modernization paths led by the industry in Japan, China, and Italy.
Protection of an employer’s claim on its investment in worker transportation or skill acquisition has been a long-standing economic issue. Often these costs are not covered to a socially
optimal level by the workers themselves, and imperfect financial markets fail to finance them.
Thus, in order to improve welfare, another party must finance these costs. One of the ways
to a finance worker’s transportation or skill acquisition is to protect the claim of the financing
party such that it satisfies requirements for perfection.5 A perfected claim, typically known asa real right, allows the claimant to transfer a claim without agreement from the person who
has signed the bond. An agent upon whom a permanent real right is placed is called a slave.
In some societies, such as in Europe and the United States in the nineteenth century, the claimof the indenture holder was also considered a real right.6
Most agricultural societies had used slaves, indentured workers, or other similar tradable
human workforces at some point in time. As societies and economies developed, the use of
these types of laborers vanished. A possible explanation is that slavery can be a steady state
under a only specific land/labor ratio, and endogenously destabilize along with change in theratio.7 Another is that exclusive contracts, such as indenture contracts, are more efficient ina thin market; semi-thick markets can have multiple equilibria and free contracts are more
efficient in a thick market.8 Thus, while the superiority of the free labour market system is
non-trivial in a transitory phase and hence unstable equilibria of slavery or indentured labor
may arise,9 free labor societies were accompanied by faster growth and the free labor market reached a stationary equilibrium. During this transitory phase, the protection of claims
against human capital emerged as an issue. The liberalization of people necessarily implies aweak claim against investments in human capital and human transportation and hence lower
investments than the socially optimal level, without institutional arrangements.
In the cases of the United Kingdom and the United States, for instance, some form of coercive contracts or the prohibition of enticement was maintained in the agricultural sector andwas inherited by the manufacturing and mining sectors to protect employers’ claims.10 Moremoderate cases in contemporary American society are exceptions to employment at will,114

See Federico (1997), pp. 146–190.
“Perfection” is the validation of a security interest as against other creditors by filing a statement with somepublic office or by taking possession of the collateral.
6
See Galenson (1981).
7
See Lagerlöf (2009).
8
See Matouschek and Ramezzana (2007).
9
See Hicks (1969), pp. 130–137; Lagerlöf (2009), p. 335; and Matouschek and Ramezzana (2007), pp.
365–366.
10
See Steinfeld (1991); Hanes (1996); Steinfeld (2001); Naidu (2010); and Naidu and Yuchtman (2013).
11“Employment at will” is employment that is undertaken without a contract that specifies a duration, andthat maybe terminated at any time, by either the employer or the employee, without specific cause.
52which allow for the specific performance of employment contracts despite the employmentat-will doctrine.12
In the case of modernizing Japan, the 1896 Civil Code (Minpo), enacted in 1898, with theenactment in 1890 of Article 22 of the 1889 Constitution of the Empire of Japan,13 generally
did not allow a claim against a person to be considered a real right. Furthermore, regarding
employment contracts, a new employer’s infringement upon the claim of the existing employer
against its employee, known as tortious interference14 in an employment contract, has not beenrecognized as an act of tort as stipulated by the Civil Code. This has been the case since the1900s for the purpose of promoting competition in the labor market and thus improving social
welfare.
Japan was included in the free trade regime instituted by Western powers in 1859. The
biggest Japanese export at that time was hand-reeled raw silk, which was being exported toEurope. However, in the 1870s, when the European market stagnated, Japanese hand-reeled
raw silk lost its competitive advantage over its Chinese counterpart.
In contrast, the US market began to grow from the late 1870s and continued to expand in
the 1880s. Moreover, during this period, the use of power-looms rapidly increased in the US
silk fabric industry. Concentrating on factory-made fabrics for mass consumption, the modern
mechanized US fabric industry exhibited a strong demand for machine-reeled raw silk called“filature” raw silk. Responding to this international shift in demand, the silk-reeling industry
in Japan modernized and drastically increased exports to the United States. Japan’s share of
the US raw silk market reached 50 per cent by the end of the 1880s, and 80 per cent by the
1920s. Due to this demand, raw silk accounted for approximately 30 per cent of Japan’s totalexports before the Second World War.15
Silk-reeling manufacturers in Suwa County, Nagano prefecture, in central Japan led modernization and exports. In Suwa County, the demand for female workers who operated reelingmachines increased by over 10 per cent annually from the 1880s to the 1890s, thereby making
the labor market highly competitive. In 1900, there were 142 silk-reeling factories with a totalof 10,963 basins, which each had to be operated by one reeling worker.16 Workers, most ofwhom were unmarried young women, lived in dormitories at the firm with room and board
paid for them by the firm. The monetary wage paid by the firm was relative-performancebased and the wage differential between the most productive and the least productive wasroughly 6,000-7,000 per cent.17
The demand for workers was met by the inflow of workers from other areas of central
Japan on a semi-macro level over the long term as the higher wages of the sector attracted
workers of higher productivity from distant regions.18 However, the tightness of the regional
labor market during the rise of this industry caused problems at the micro level in the short
12

See Schanzenbach (2003).
Regarding English translation of related acts, see Appendix.
14“Tortious interference” with contractual relations is a third party’s intentional inducement of a contracting
party to break a contract, causing damage to the relationship between contracting parties.
15
See Nakabayashi (2006, 2014).
16
See Nakabayashi (2006), p. 189.
17
See Nakabayashi (2006), pp. 200–203.
18
See Saitô (1998), pp. 60–61.
13

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term. Dual employment contracts prevailed and the movement of workers from one factory
to another factory occurred. It was costly for a manufacturer to recruit workers from distantareas, so manufacturers attempted to prevent workers from moving by imposing large penalties
in employment contracts. This was the only feasible way of having recourse to the court toprotect employers’ claims provided that the Japanese judicial system did not allow coercive
employment contacts.
If the costs of recruiting were not met by the time a worker moved, the supply of labor
would be less than socially optimal. Meanwhile, worker mobility would improve withinindustry matching with performance-based payments.19 Balancing the trade-off between protection of employers’ claims and potentially better employer-employee matches, arrangementson the movement of workers should have been made under some governance.
As we discuss below, the governance of transactions by the court showed two phases. At
the early phase in the 1890s, manufacturers had recourse to the court for employment contract
enforcement when their employees were poached. Damages stipulated in an employment
contract could be enforced by the court. This outcome, however, potentially failed to realize adesirable level of mobility in the labor market. Eventually, employers ceased to have recourse
to the court for enforcing the original employment contracts. Instead, they came to only filesuits for damages for non-fulfillment of employment contracts, presupposing that the original
employment contract not be performed. The details of the cases are consistent with the hypothesis that the employers came to indirectly utilize the court as a device to stabilize theirprivate settlements outside of the court.
The Japanese Civil Code did not officially govern transactions between employers because
it did not allow real rights to be placed on workers, and it thus officially governed only transactions between an employer and an employee. Given that legal constraint, a suit between an
employer and an employee was used as a threat against the outside employer who poached
the employee from the original employer. The court began to work as a shadow in the labormarket. This paper focuses on how the court was embedded into the market, a process during
which the court functioned first as the substantial enforcer of the employment contract andsecond, worked as a shadow to stabilize private settlement.
The indirect governance of the labor market by the court presumably improved resource
allocation. At the same time, one nontrivial shortcoming of indirect governance by the court
was cost. If possible, direct mechanisms between manufacturers would have more efficiently
governed transactions. Indeed, in 1901, silk-reeling manufacturers formed a union-type organization called the League of Silk-Reeling Manufacturers of Suwa (Suwa Seishi Domei, theLeague). The League installed a private registration mechanism for all workers employedby the League member manufacturers in 1903, which means that the League set up a private mechanism for perfection. From that year forward, the League began to privately govern transactions between member manufacturers. Meanwhile, member manufacturers werestrictly prohibited from suing an employee poached by another member manufacturer in the
court. However, this does not mean that this newly installed private mechanism functioned
without potential involvement by the court. Switching to a costly legal fight in the case ofdeviation from the League remained a possibility and operated as a bargaining tool for em19

See Booth and Frank (1999).

4

ployers whose workers were poached, prompting poaching employers to reasonably negotiatewith them. The private mechanism and the court thus came to complement each other ingoverning the labor market.
In the literature on the labor market of the Japanese silk-reeling industry, the worker registration system established in 1903 is often discussed. However, little attention has been paid
to the complementarity between private mechanisms and the court as an off-the-equilibrium
path.20 This is largely because previous works did not study the context in which the League
and the registration system formed when the only outright system was the public institution.
Only the studies by the author present a preliminary analysis of this issue.21 This study focuseson the role of the judicial system in the labor market before the private mechanism was created, which formed the institutional context for the following private mechanism, and provides
a plausible inference of the role of the court.
Section 1 briefly reviews the modernization of Japan’s judicial system and describes thetightness of the labor market of the silk-reeling industry. Section 2 analyses suits related to
employment contracts during the phase when the court directly protected original employers.
Section 3 analyses suits that indicate the court’s indirect involvement in governing transactions
between employers in the later phase.

1

Employment contracts in the silk-reeling industry

1.1

Modernization of judicial system

Before the Meiji Restoration in 1868, Japan was a feudal federation. While the Shogunate had
authority over national security and diplomacy through composing the central government,each feudal lord exerted sovereignty over domestic affairs. The Shogunate itself governed
its own domain including Edo (renamed Tokyo in 1868), Kyoto, and Osaka. As for real
rights placed on people, while both slavery and indenture contracts had been prevalent until
the mid-sixteenth century, human trafficking was prohibited in the late sixteenth century, andindentured workers became less and less common. Since the early seventeenth century when
the Shogunate was established, neither slaves nor indentured workers were a considerable
work force, though some industries such as prostitution used indentured contracts. Under the
Shogunate regime, the judicial system was not separated from the administration.
In 1875, the government promulgated an imperial ordinance for a “gradual transition to
the constitutional system of government,” responding to the liberal and democratic movement
prevalent among the people. Following this ordinance, the Supreme Court was separated
from the Ministry of Justice in 1875, which established judiciary independence, and the 1889
Constitution of the Empire of Japan became effective in 1890, when the Diet, the Japaneseparliament, first opened.
Premier Ordinance No. 103 of 1875 ordered judges to give rulings based on customs if
relevant acts were not yet promulgated, and on the rule of reason if a relevant custom did
20

Representative prior studies include Ishii (1972), pp. 277–290; Tojo (1990); Hunter (2003), pp. 234–240;
and Kambayashi (2007).
21
See Nakabayashi (2001); and Nakabayashi (2003), pp. 289–330.

5not exist for the case. In 1890, the Code of Civil Procedure (Minji Sosho Ho)22 was promulgated and became effective in 1891, which defined the structure of judicial procedures. The
1890 Civil Code,23 based on recommendations from French scholar Gustave Emile Boissonade hired by the government, was promulgated in 1890 but faced strong opposition due to
its radically progressive elements such as making the longest employment contract duration
one year.24 Eventually, it was suspended and not enforced. Longer employment contracts
were then recognized as heavier restrictions on the freedom of workers and thus a protection
employers’ claims.
In 1896, with substantial amendments by authors Kenjiro Ume, Masa-akira Tomii, andNobushige Hozumi, Civil Code Parts I, II, and III were promulgated and became effectivewith Parts IV and V in 1898.25 The amendments did not, however, lean towards conservatism.
In particular, while the 1890 act permitted the cancellation of employment to be restricted bycustom in the relevant region, even if the duration of the relationship was not specified in thecontract (Part of Acquisition of Property, Article 260), the 1896 act permitted cancellation of
the employment contract at any time if the duration was not specified in the contract. Although
it extended the maximum duration of an employment contract to five years (Articles 626 and627) from a one year maximum in the 1890 Civil Code, it did not permit customs to affect thecancellation of an employment contract. The result was that any traditional customs designed
to restrict the mobility of workers ceased to protect the claims of employers. This confirmedthat if there was any recourse, it should be provided by the court.
By 1890, more than 300 ward courts were established as courts of first instance throughout Japan, such that any Japanese resident could walk into a ward court. This court systemorganization has not largely changed since its inception.26 For Suwa County, the ward courtof Kamisuwa was created in 1878. The rule of and protection by law now became available ina real sense to both employers and employees.

1.2

Labor market and contract

In the early 1890s, competition for workers among silk-reeling manufacturers was getting
fierce. In addition to increased wages and side payments,27 certain problems emerged duringnegotiations or after entering into a contract. Every year, in January, manufacturers sent agentsto distant areas to recruit workers. In the Japanese silk-reeling industry, most workers wereyoung females.28 The manufacturers entered into contracts with young women from their late
22

Act No. 6 of 1890, repealed in 2005.
Act No. 28 of 1890, repealed in 1898.
24
Part of acquisition of property, Article 260.
25
Parts I, II, and III: Act No. 89 of 1896, in effect in 1898. Parts IV and V: Act No. 9 of 1898, in effect in1898.
26
In 1890, the population of Japan was approximately 40 million, roughly one-third of that in the 1970s andlater. Japanese citizens had the same or better access to litigation in the late nineteenth century. Indeed, thenumber of civil case filings per person in the 1890s was much greater than that of the 1970s. See Haley (1991),
pp. 96–104.
27
Most of these side payments were in fabric, which female workers desired.
28
The reason why silk-reeling firms preferred hiring young females instead of continuing to use the services
of mature and skilled female workers is another question. See Hunter (2003), pp. 89–143.
23

6

teens to their twenties, and their fathers or their husbands endorsed these contracts.29 In Suwa,
the term of an employment contract was one year or less to end in December and all wages
were paid in one lump sum at the end of December. The average daily wage in the period
examined was 0.2 yen to 0.25 yen,30 and therefore, a worker earned 48 to 60 yen on average
if she worked eight months. A typical example is as follows:
Document 1
Certificate of agreement
Term 1 Since the contract for my daughter Hatsuyo to work for your silk-reelingfactory as a female silk-reeling worker from June to December is now prepared, I
surely receive one yen as an advance, and provided that, she shall not be hired byanother silk-reeling factory for any reason during the duration, and if the contract
is breached and you suffer, let alone relevant costs, I shall immediately pay 20 yen
as damages whenever you request, to which I shall never contest, and therefore, I
submit this certificate of agreement in the customary way.
In this regard, salaries shall be determined by the custom in your region.31

1.3

Further tightening of the labor market and contractual conflicts

Female workers lived in dormitories throughout the year and all living expenses including
meals were provided by the employers. When a contract was made, agents provided an advance on wages. Thus, by cheating the agents, the woman, her father, or her husband could
receive advances from multiple contracts. Contracts other than the one taken by her were
never fulfilled. A local newspaper reported on the situation as follows:
Among silk-reeling manufacturers, there are drones who poach female workers
trained by others to work in their factories, and among female workers, there arecunning ones who enter into employment contracts with several silk-reeling manufacturers, and these not only inflict a loss on honest silk-reeling manufacturers
but also would result in lost control of the female workers’ society and, not least,
affect the silk-reeling industry.32
29

The Civil Code before the Second World War required the agreement of a minor’s guardian when a minor
made a contract (Article 4), and it required the agreement of the head of the household when a woman, even if
she was an adult, made a contract to restrain her body (Article 14)—typically meaning for the woman to work ina factory and to live in a dormitory.
30
See Nakabayashi (2014), p. 262.
31
From Household Head Fusajiro Nakmamura (worker’s farther), and Hatsuyo Nakamrua (worker), Ymagata Village, County of Higashi Chikuma (Prefecture of Nagano) / To Yokichi Imai (emoloyer)/ January, 1893.
Included in “Seishi kojo yakujo sho (Certificate of agreement of silk-reeling female workers),” held by Okaya
Silk Museum, Okaya, Prefecture of Nagano. The “custom” of wage determination was recognized as relativeperformance-based payment by a judgment of the Ward Court of Kamiuwa in 1894 (Case ID: 26(ha)46, 5 May
1894).
32“Seishi kojo yosei no hitsuyo (Necessity of training of female silk-reeling workers),” Shinano Mainichi
Shinbun (The Shinano Daily Newspaper), April 27, 1892. Shinano is the historical name of Nagano prefecture.

7

In the Suwa and Ina regions, silk-reeling manufacturers have recently been offering money to silk-reeling workers who are employed by others to try and poachthem or they offer a piece of fabric for a kimono and other fringe benefits to induce
them.33
Silk-reeling manufacturers of Suwa are now sending their staff [to neighboring
regions] and are competing directly with other local silk-reeling manufacturers,
saying “We will pay you more,” to induce female silk-reeling workers, and so
now is the time when workers will be gratified.34
In the Suwa region...there is a shortage of female silk-reeling workers, and mostfemale workers should not be employed by factories that offer lower wages...
skilled female workers receive offers to work in many factories, and some offer several yen as bribes, offer fabric for kimonos, send spies, reward recruiting
agents, and use the kinds of measures that representatives [of the Diet] do when
they are competing [in a general election].35
Under the terms of the employment contract, the employer would obtain a claim for theemployee to work at his or her factory and the employee would obtain a claim for wages
as compensation for his or her service (1896 Civil Code, Article 623). The value of theemployer’s claim was equal to the cost of recruiting the employee, which included the cost ofsending an agent to recruit the employee, making an advance payment, and the expected profits
the employee would have generated. The tightness of the labor market and the high turnoverof workers made claim protection necessary, given the potential for contract interference byother manufacturers that resulted in dual employment contracts.

2

Direct governance by the judicial system

2.1

Enforcement of employment contract

Until the early 1890s, employment contracts without a specified duration were common.36
However, since then, employment contracts with a duration of one year or less dominated.
Even after the 1896 Civil Code became effective in 1898, which permitted an employment
contract to continue for up to five years, and five-year contracts prevailed in other regions,contracts that had a duration of one year or less continued to be prevalent in Suwa County.
One possible reason for prevalence of one-year contracts is the jurisdiction of the ward courts,
33“Seishi kojo yatoiire no seriai (Competition for employing female silk-reeling workers,” Shinano Mainichi
Shinbun (The Shinano Daily Newspaper), 8 June 1892.
34“Kojo no hippariai (Competition for female workers),” Shinano Mainichi Shinbun (The Shinano Daily
Newspaper), 23 June 1892.
35“Kojo no hippari kyoso ha daigishi no kyoso ni nitari (Competition for female workers resembles the competition of representatives),” Shinano Mainichi Shinbun (The Shinano Daily Newspaper), 7 March 1894.
36
For instance, a contract between Naozemon Oguchi, the employer, and Shinjuro Mitsui, the father of theworker, Yone Mitsui, which was concluded on 9 March 1891, on file at Okaya Silk Museum.

8

which assumed jurisdiction over employment contracts whose duration was one year or less.37
A suit to enforce of an employment contract whose duration was longer than one year had tobe filed at the District Court of Nagano, a distant city. If the regional labor market became
tight, workers mobility increased, and employers wanted their claims to be protected by the
court at a reasonable cost, Thus employers made the duration of contracts one year or less sothat they could file a suit at the nearby Ward Court of Kamisuwa.
Further, from the early 1890s, employment contracts began to stipulate the payment ofdamages by an employee when the employee failed to fulfill the contract. The clause sought
enough damages to prevent the worker from moving. In the suits described in Tables 1, 2, and3, damages were 3 to 20 yen in the early 1890s, 20 yen in the late 1890s, and in the 1900s,
as the labor market tightened, the maximum amount jumped to 100 yen.38 Damages totaling
20 yen or more amounted to half or more of a year’s wages. By including such closes intheir contracts, manufacturers attempted to deter the movement of workers to other factories.
Indeed, employers did not hesitate to file suits against employees who failed to perform theiremployment contracts. While those from the very early period have been lost, civil cases filed
at the Ward Court of Kamisuwa from December 1892 to June 1896 and from December 1899
have been preserved. Tables 1, 2, and 3 contain summary results of all preserved adjudications
related to employment contracts in the silk-reeling industry through December 1901.39
INSERT Table 1, Table 2, and Table 3 HERE

2.2

Liberalization of the market

At the same time in the 1900s, in order to prompt free competition, it came to be acceptedthat it was not an act of tort as stipulated by Article 709 of the 1896 Civil Code40 for an
37
The 1890 Code of Civil Procedure, Article 14. Note that when an employer laid off an employee, theemployment contract was assumed to be canceled such that the employer lost his claim to have the employee
work and the employer was not obliged to pay wages (See Case 1 below).
38
Damages were 20 yen in most cases in the 1890s and increased to 100 yen at maximum in the 1900s.
However, if the value of the object was more than 100 yen, then jurisdiction over the case was assumed by theDistrict Court of Nagano, a distant city. Thus in practice, a smaller amount, for instance the 25 yen cited in Case
4 below, was requested. Until the early twentieth century, damages were left to the contracting parties and were
not restricted by any act or judicial precedent.
39
For summaries of individual cases, see Nakabayashi (2001), pp 147–160. Adjudications of civil cases were
preserved by the High Courts and for fifty years after pronouncement were, temporarily entrusted to national
universities from 1994 to 2001, and were transferred to the National Archives of Japan in 2001. The author was
permitted to access the original adjudications when they were temporarily held by the University of Tokyo.
40
Chapter 5 Torts, Article 709 on Damages in Torts states “A person who has intentionally or negligently
infringed any right of others, or legally protected interest of others, shall be liable to compensate any damages
resulting in consequence.” Article 709 of Chapter 5 is a general clause of tort for intention or negligence as are
Articles 1382 and 1383 n the French Civil Code (see Saito (2015), pp. 95–96). The Japanese title of Chapter 5
Tort is Fuho koi, whose French translation by Masa-akira Tomii, one of the drafting authors of the bill was Des
actes illicites (see Motono and Tomii (1898), p. 168), which means “the unlawful acts” in English. However, in
French legal terms, the counter part of the concept “tort” in the common law is in fact délit, which means “offense” in English. Actually, actes illicites is a French translation of the German concept unerlaubter Handlung,which means again “unlawful acts.” Such a roundabout transfer of this legal concept from the continental law

9employer to infringe on another employer’s claim to an employee by poaching, unless thepoaching employer physically restrained the employee. The employee was still liable forobligations stipulated by the original employment contract, but the poaching employer was notliable for damages caused by poaching.41 It was thus technically impossible for the original
manufacturer to find recourse to the court to claim the right to an employee against a poaching
employer.
An example of the court’s tendency to promote free competition is also observed regarding layoffs. It was common among silk-reeling manufacturers to lay workers off during adownturn in the export market. When the export market recovered, manufacturers called backworkers with whom they had concluded employment contracts. Case 1 below was filed in1904 by a manufacturer against a worker who had begun to work for another employer whilelaid off, seeking damages for the non-fulfillment of the employment contract. The manufacturer did not operate his factory in the spring season, but he reopened it in the summer season.
The employee understood that her employment contract was canceled in the spring season,
began to work at another factory, and did not respond to the employer’s call for the summer
season.
Case 1: Suit for damages for non-fulfillment of employment contract / Katsuhei Ito (plaintiff,
manufacturer) vss Kiroku Aikawa (defendant, the defendant worker’s father / Judge:
Yoshiyuki Ariizumi / Court: Ward Court of Kamisuwa / Date: 15 October 1904 /Result: Loss of plaintiff / The text: Dismissal of the claim / Responsibility for thecost of suit: Plaintiff.
The Ward Court of Kamisuwa concluded that the request from the manufacturer should bedismissed, explicitly stating:Document 2
It is unequivocal that this case is a bilateral contract, and hence, if the plaintiff
wants to blame the third party Teru [employee]42 for violation of the contract, heshall not avoid verifying that he had prepared for his own obligation, and further,Teru’s obligation, her service to the plaintiff, could not be performed unless theplaintiff began operation, but, nonetheless, the plaintiff himself did not operate in
the spring season and still asserts that Teru is responsible for the non-fulfillment
and intends to request damages, which is strongly unlawful.

2.3

Two types of transactions governed by the court

In the mid-1890s, two kinds of suits related to employment contracts were filed by employers
at the Ward Court of Kamisuwa: (1) suits for the enforcement of the employment contract
occurred because Japanese scholars and lawmakers introduced the basic structure of the civil code system from
France and built their own system inspired by German law. Meanwhile, the word “tort” as an English legal termis originally French, but it is not a formal legal term in the French legal system.
41
See Ishizaka (1908a, 1908b, 1908c); Suehiro (1914); Wagatsuma (1940), pp. 13–14, 79–80; and Yoshida(1991), pp. 7–150.
42
In this case, the defendant was Teru’s father, who was the party in the employment contract.

10

or for damages, and (2) suits for damages for the non-fulfillment of the employment contract. If the court should deliver a judgment in favor of the plaintiff (employer), regarding
the former, the court would deliver a judgment ordering the defendant (employee) to fulfill
the employment contract, or to pay the amount covering the employer’s damages, as requiredby the contract (Table 1). On the other hand, for the latter, the court would simply order the
defendant (employee) to pay the amount covering the employer’s damages. While suits for theenforcement of the employment contract or for damages still had recourse to the court for theenforcement of original employment contracts, suits for damages based on the non-fulfillmentof an employment contract were only for damages to compensate for the value of the originalcontract that was not expected to be performed.

3

To the shadow on the market

3.1

Transformation of employment contracts

Suits related to employment contracts changed by the end of the 1890s. From 1900, suits
requesting enforcement of the original employment contracts disappeared. From that point, allrelated issues turned into suits requesting only damages for the non-fulfillment of the original
employment contract (Tables 2 and 3).
Among transactions governed by the court, we can assume two types of real transactions:(1) actual transactions between an employer and an employee, when a worker did not fulfill
the contract typically because of illness and consequent withdrawal from the labor market, and(2) virtual transactions between relevant employers, when a worker moved to another factory.
What form of judgment did the court deliver in the first case? The court would dismiss theclaim by the plaintiff (an employer) because the 1896 Civil Code allowed for an immediatecancellation of an employment contract for an “unavoidable reason” (Article 628),43 which
typically was the illness of an employee. Indeed, in a case of non-fulfillment caused by theillness of a worker, the court denied non-fulfillment of the contract, recognized the terminationof the contract, and dismissed the claim of the manufacturer, pursuant to Article 628 of the1896 Civil Code.
Case 2: Case requesting damages for non-fulfillment of the employment contract: Case ID
38(ha)177 / Sehei Hayashi (plaintiff, manufacturer) vs. Matsuzaemon Kimi Tanaka(defendant, father of the worker, Kimi Tanaka)/ Judge: Naoya Kawachi / Court: The
Ward Court of Kamisuwa / Date: 11/21/1900 / Result: Loss of the plaintiff / The
text: Dismissal of the claim / Responsibility for the cost of suit: Plaintiff.
In Case 2, the defendant himself did not refer to Article 628 in his pleadings, probably
because he did not know the effect of the article and was too poor to consult a lawyer. Never43

Article 628 states, “Even in cases where the parties specified the term of employment, if there are unavoidable reasons, either party may immediately cancel the contract. In such cases, if the reasons arise from thenegligence of either one of the parties, that party shall be liable to the other party for damages.” For interpretationof Article 628 of the 1896 Civil Code, see Ume (1897), pp. 686–687 and Matsunami, Niho and Niida (1903),
pp. 1210–1214.

11

theless, the judge dismissed the claim of the plaintiff on his own authority, which indicates thestrong intent of the court to find against the plaintiff. Given that employers typically lost incases where employees withdrew from the labor market due to illness, we can therefore inferthat employers usually sued employees when they moved to another factory.
When a worker moved to another factory that offered a higher wage, it was unlikely thatthe worker would come back at will. The manufacturer could make a claim for damages
against the worker and then negotiate with the new employer. This seems to be the reason
why suits for the enforcement of employment contracts disappeared by the end of the 1890s,
and it is possible that court adjudications began affecting negotiations between employers.
Moreover, in many cases, defendants (employees) lost suits for damages by default and insome cases, plaintiffs (employers) also lost by default (Tables 1, 2, and 3). The losing party
was responsible for the cost of the suit including fees paid to the court and hence, a loss bydefault would have cost the absent party more than responding.44 Such cases are understandable if it is the relevant manufacturers settled disputes outside of court. Thus, damages seems
to have been virtually used as a bargaining chip by the manufacturer from whom the worker
had moved.
In practice, the recruiting cost could be compensated by worker’s renunciation of the unpaid wage of the worker who moved. It was observed by contemporary officials in the early
1900s that most of the poaching occurred before mid-August because movement to anotherfactory implied a worker’s waiver of unpaid wages and would barely be compensated by apossibly higher wage from a new employer beyond August.45
Until the end of the 1890s, workers also filed suit for unpaid wages (Table 1). Out of eightsuits, two were suits filed as objections to a loss by default of the defendant, the employer, andthus there were six real disputes filed by six different employees. Out of these six suits, twowere filed in May or June for the past year’s wages, and three were in December for unpaid
wages for the year until the date of filing. A possible interpretation is that after the defendant
worker moved from one employer to another employer, the settlement did not go through andthe worker filed suit.
Further, a suit for damages filed by a manufacturer and that for repossession of belongings
filed by a worker in Table 2 were related, and they are easier to understand if we assume
private negations outside of court.
Case 3: Suit for repossession of belongings: Case ID 33(ha)153 / Chie Tanaka (plaintiff,
worker) vs. Sehei Hayashi (defendant, manufacturer) / Judge: Naoya Kawauchi /Court: The Ward Court of Kamisuwa / Date: October 22, 1900 / Result: Favor ofplaintiff / The Text: The defendant deliver belongings of the plaintiff to the plaintiff.
/ Reason: Default. / Responsibility of the cost of suit: Defendant.
Case 4: Suit for damages on nonfulfillment of employment contract: Case ID 33(ha)186, Sehei Hayashi (plaintiff, manufacturer) vs. Chie Tanaka (defendant, worker) / Judge:
44

Article 72, 1890 Code of Civil Procedure. In the majority of the suits examined by this study, no lawyer
was hired and the parties themselves appeared in every procedure.
45
See Ministry of Agriculture and Commerce, Department of Commerce and Manufacturing, Factory Surveillance Section (Noshomusho Shokokyoku Komuka Kojochosakakari) (1903), p. 180.

12

Naoya Kawauchi / Court: The Ward Court of Kamisuwa / Date: November 28,
1900 / Result: Loss of plaintiff / The text: Dismissal of claim / Reason: Default /Responsibility of the cost of suit: Defendant.
On 22 November, Hayashi requested an order of payment to the court demanding 31.25
yen out of 5 yen in advance, 100 yen in contracted damages and 1.25 yen for the cost of thedemand procedure, to Chie Tanaka. Tanaka did not pay it and Hayashi filed a suit against
Tanaka demanding the amount, which was Case 4 above. Tanaka did not attend the oralproceeding on 28 November, and lost by default. The point here is that the judgment of thesuit filed by Tanaka for repossession of belongings, which Tanaka left at Hayashi’s dormitory,
Case 3, was delivered on 22 October, prior to the date of request by Hayashi for an order ofpayment, 22 November, and the date of delivery of Case 4, 28 November.
In Case 3, Hayashi lost by default, which indicates that the negotiations might have beenclose to a settlement. However, the request by Hayashi for an order of payment on 22 November, preceding Case 4, indicates that negotiations were continuing at that point. Finally, inCase 4 on 28 November, Tanaka lost by default, which seems to indicate that a settlement had
been reached. The plaintiff in Case 4, Hayashi, was one of the largest manufacturers in Suwa
and actively negotiated with other member manufacturers after the private registration systemof the League of Silk-Reeling Manufacturers of Suwa was established in 1903.46
Therefore, the change in the type of suit from the mid-1890s to the early 1900s can beinterpreted to reflect a change in transactions: from between an employer and an employee
to between employers. Moreover, in the 1900s, the court seemed to recognize that the transactions between manufacturers were held in parallel with the official transactions between amanufacturer and a worker in the court. The court did not protect an employer’s claim if it
was concluded that the employee was not poached as seen in Case 2 above.
In addition, suits for payments of wages filed by employees disappeared in 1900 (Tables
2 and 3). As settlements outside the court prevailed and went through smoothly, they becameless necessary to use as bargaining chips when a worker changed employers.

3.2

Indirect governance of trades between employers by the court

In summary, a possible inference can be made that the judicial system indirectly governedtransactions between employers in the labour market (Figure 1). Let C denote a deal in the
court that follows the articles of the 1890 Code of Civil Procedure, and let S denote a deal
outside of court. Then, the process of negotiation under this indirect governance could be
depicted as follows:
INSERT Figure 1 HERE
(S −1)When worker W moves from manufacturer MA to manufacturer MB and does not fulfill the employment contract with MA , MA investigates to whom W moved and requires
MB to send W back to MA , or to compensate the value of MA ’s claim.
46

See Tohoku University, ed (1969a, 1969b, 1970).

13

(C − 1)MA has recourse to the Ward Court of Kamisuwa to order W (or the head of her
family) to pay the amount to cover damages for the non-fulfillment of the employment
contract, following which the court makes a decision to order W to pay the same (1890
Code of Civil Procedure, Article 383). To request the court for an order of payment, theplaintiff (MA ) paid the initial cost (0.025 to 1.525 yen) to the court,47 which was to be
paid by the losing party after delivery of judgment.
(S − 2)MA and MB negotiate for a settlement, whether balancing out a part or all of thedamages by the unpaid wages of W held by MA , or by sending W back to MA . If they
arrive at a settlement at this stage, the negotiation ends. If not, the process goes to thenext stage, possibly with W filing a suit for wage payment against MA .
(C − 2)W (actually MB ) files an objection to vacate the decision within 14 days after (C1),and then the suit begins (Articles 386, 389, 390, and 501).
(S − 3)If they reach a settlement after (C2), the negotiation ends. MA does not require thecourt to set a date for oral proceedings, which means the discontinuance of the suit, or
MA is absent on the day of the oral proceedings and then loses by default; his claim isdismissed by the court. If they do not reach a settlement, they go to the next stage.
(C −3)MA attends but W does not attend the oral proceedings, and then MA wins by default;
the court delivers a judgment ordering W to pay an amount to cover the damages (Article
248).
(S − 4)If they reach a settlement, the negotiation ends. If not, the process moves forward.
(C − 4)W (MB ) files an objection against the judgment by default within 14 days after (C3),and then (C3) is repeated (Article 255).
(S − 5)They reach a settlement. The negotiation is complete.
(C − 5)MA loses by a default judgment, W (MB ) loses by a default judgment, or W (MB )loses by acknowledgment (Articles 229, 247, and 263). The judgment at this stage is anultimatum to MB , because W (MB ) cannot make another objection against the judgment
by default (Articles 255 and 260).
The litigation costs including initial cost paid at (S − 1), were to be paid, in principle, by
the losing party (Article 72) as well as damages in the case after the delivery of judgment. The
primary role of the court summarized above was the adjusting the point of disagreement in
47

For one bill filed, 0.025 yen was to be paid and additionally 0.3 yen when the value of the object was morethan 5 yen and 10 yen or less, 0.6 yen when value of the object was more than 10 yen and 20 yen or less, 1.5 yen
when value of the object was more than 20 yen and 50 yen or less, or 3 yen when value of the object was morethan 50 yen and 100 yen or less was to be paid to the court (Article 2 of the 1890 Act of Civil Procedure Cost,
Act 64 of 1890 and Article 2 of the 1890 Act of Documentary Stamp for Civil Procedure, Act 65 of 1890). As
the average damages requested were 20 yen until 1900, and 1.525 yen was required up front in order to begin
litigation.

14

the bargaining between both manufacturers. Possible enforcement of the payment of damages
increases the disagreement payoff of MA and by doing so, pushes the bargaining solution
in a direction in favor of MA . If the possible solution is adjusted such that it satisfies MA ’s
participation constraint, MA would remain in private settlement negotiations with MB andthe transaction could improve efficiency. A judicial process could help stabilize a private
governing mechanism, and thus the public and private mechanisms here could complement
each other.

3.3

Litigation as an off-the-equilibrium path

This might be a bit more complicated when a common discount factor, or the same level ofpatience, among employers cannot be assumed. To the average employers to whom workers
moved, the possibility of a suit should be sufficient to make them accept a private settlement.
Therefore, on-the-equilibrium path, a suit should not have been initiated. However, in reality,
some employers might have smaller discount factors than others. In the legal procedures
described above, the 1890 Code of Civil Procedure sets forth four stages of legal costs: (1)an order (Article 386), (2) a suit at the Ward Court (Articles 377 and 390), (3) a suit at theDistrict Court (Article 396), and (4) an appeal to the Court of Appeals or the Supreme Court(Article 432) where the cumulative legal costs discontinuously increase. In the period studied
here, no case was sent to the district court in Nagano. The cost of the standard process was
about 7 yen for each party, excluding the fee paid for a lawyer and damages.48 In addition, it
took a long time to reach a settlement. Taking into account that the cost to recruit a worker
without including an advance was about 0.5 yen and an advance was about 1 to 2 yen in thelate 1890s,49 the transaction cost under indirect governance by the court until procedure (2)already seems large.
Given the cumulative legal costs and additional transportation costs, a suit at the district
court was an off-the-equilibrium path for any market participant. By switching the transaction
costs, the court could adjust to different discount factors and encourage the parties to return toprivate settlement.
Indeed, the number of suits was not significant given the number of workers. For over
10,000 employees, the number of suits in Table 1 looks rather small. We can also cite anumber of negotiations settled by the office of the League of Silk-Reeling Manufacturers
after the League set up the registration system and forbade member manufacturers to file suitagainst an employee who was poached by another member manufacturer in 1903. In 1904,
the total number of cases settled by the office was 67 and the volume since then did not tend
to decline.50 The number is greater than the number of suits before 1903 but still seems to besmall given the size of of the labor market. While member manufacturers were required to48

The cost included the initial cost for a bill filed, the cost of catchpole, the cost of demand procedure, postal
fees, telegraph fees, transportation costs, the cost of public notice and the cost of enforcement that were necessary
for the legal procedure by the court, pursuant to Articles 5, 6, and 7 of the 1890 Act of Civil Code Procedure
Cost.
49
See Nakabayashi (1999), p. 16.
50
See Tohoku University, ed (1969a), pp. 11-37.

15

pay annual membership fees, there was no fee for individual arbitration by the office. Thus,
the marginal governance cost was only the opportunity cost of time. Either before or after
the registration system was established, the on-the-equilibrium path continued to be private
settlement. The equilibrium strategy was private negotiation, outside of the court before 1903,
and without arbitration by the office of the League after 1903. If the manufacturer from whom
a worker moved had a discount factor smaller than the equilibrium strategy required, he went
to the court before 1903, and to arbitration by the League from 1903. By providing a lesscostly off-the-equilibrium path, the governance mechanism covered a broader spectrum of
manufacturers.

Conclusion
In the labor market of the Japanese silk-reeling industry in the late nineteenth and early twentieth centuries, three mechanisms of governance were feasible. First, the court directly deterred employee turnover and protected employers’ claims by enforcing original employment
contracts as written in the 1890s. However, the strict enforcement of original employment
contracts and the suppression of labor mobility were not desirable for the silk-reeling industry
in Suwa County as a whole, because it might have hindered potentially better employment
matches.
Following this phase, in the 1900s, suits for non-fulfillment of the original employment
contract disappeared, and only suits for damages for non-fulfillment of the original employment contract were filed, presupposing that the original employment contract would not be
performed. This change does not contradict the hypothesis that silk-reeling manufacturers began to privately negotiate as a means to resolve conflicts, which ran parallel to a suit in court.
This indirect governance could address the point of disagreement for the original employer, set
the bargaining solution in a direction that favored the original employer, and satisfy participation constraint of the original employer. The original employer was encouraged to participate
in the transaction to realize a more efficient allocation of labor resources.
A shortcoming of this indirect governance was the high litigation costs. In 1901, silkreeling manufacturers organized the League of Silk-Reeling Manufacturers of Suwa, andwithin the League, they established a registration system under which every single employee
hired by a member manufacturer was to be registered. Furthermore, member manufacturers
were prohibited from filing suits to request damages for non-fulfillment of employment contracts against employees who moved to another member manufacturer.51 The possibility of acostly bargaining process through litigation by the court prompted settlement within the private registration system, which reduced transaction costs in the labor market. Further, thisprohibition by the League of member manufacturers to sue a worker who was poached byanother member manufacturer is in line with our inference that, preceding the explicitly designed registration system, there existed an informal settlement mechanism in the shadow of
the court.
51

See Nakabayashi (2003), pp. 308–309.

16

This “shadow” of the court, in Dixit’s terms, could affect bargaining powers favoring employers from whom workers moved. The potential threat was not restricted to the enforcementof damages. The costly legal procedure itself prompted settlements outside of court as discussed by Choi and Triantis.52
In transition, there was some friction. In 1903, the first year of the registration system,
negotiations between two manufacturers—Kanetaro Katakura, the largest manufacturer, andKahachiro Kasahara, a much smaller manufacturer–stalled when the latter filed a suit against
a worker whom the former poached even though filing a suit violated the League’s bylaws.
Responding to inquiries by the office of the League, Kasahara argued that he filed the suit
because the advance paid to the worker was not repaid. The office suggested that Katakura
repay the advance and that Kasahara drop his suit, and the negotiation was settled.53 This caseindicates that private negotiations existed in parallel with litigation prior to the establishmentof the registration system. In addition, it shows that the existing court still worked to stabilize
a new private mechanism by presenting the weaker party with a bargaining chip in the off-theequilibrium path. After this case, there were no suits against a worker who moved to anothermember factory, and the office of the League processed several dozen negotiations a year. A
thorough analysis of the new private mechanism is left for future research.
It is difficult to verify the existence of working economic institutions, either public or
private, when they are actually working because working institutions are somehow in Nashequilibria from which no player wants to deviate. Only if some dispute that might destabilize
an institution occurs, will some traits of the working institution be left. Furthermore, only if
the traits are examined later will it be established that an economic institution existed and actually worked. In this sense, without historical analysis, any game-theoretic prediction about
an institution is one of potentially infinite logical possibilities. A contribution of this historicalanalysis is to suggest a hypothesis on the complementary nature of private and public mechanisms that worked together as an economic institution a century ago in Japan and to present
evidence that is consistent with this hypothesis.
Lastly, let us consider how the institutional arrangement this paper deals with be related toa broader context of Japan’s modernization. As reviewed in the introduction, in the Westernworld, the state court directly enforced coercive employment contracts and indenture contracts, which suited the real economy in transition towards full liberalization of labor market.
Meanwhile, Japan adopted the state-of-the-art Western law in the late nineteenth century although the real economy was still in a transitory phase. The adoption was not superficial. As
seen in Case 1 and Document 2, trust in the liberalization of labor market was deeply embraced in mind set of educated members of society such as judges. The divide between the
educated elites and the reality of the economy prevented the court from directly governing
coercive contracts in the transitory phase of the Japanese economy. The court, if at all, only
indirectly governed trades between employers, and the institutional complexity promoted creation of the private registration system. The divide between the educated elites and the real52

See Choi and Triantis (2008).
Case 2 of 1903, “On interpretation of Article 6 of the Bylaws of the League,” Petitioner: Kanetaro Katakura,
Defendant: Kahachiro Kasahara, Related female worker: Takeno Maruyama, Date of pleading: April 7, 1903.
Tohoku University, ed (1970), p. 16.
53

17

economy, which resulted in institutional complexity in Japan’s case, might give an insight tobetter understand not only nineteenth century Japan, but also a broader range of emerging
economies in general.

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Appendix: Related acts
Original texts are in Japanese. The acts were translated into Japanese by the author, withthe exception of articles other than Article 14 of the 1896 Civil Code, which were translated by the Ministry of Justice, Government of Japan. That translation can be obtained at:
http://www.japaneselawtranslation.go.jp/, last accessed on February 12, 2014. The acts wereand are effective only in the sense of the original Japanese texts.
The 1875 Acquaintance of Procedure of Court (Saiban Jimu Kokoroe), PremierOrdinance (Dajokan Fukoku) No. 103 of 1875.
Article 3:

In a civil case, judgment should be based on the custom if there exists norelevant statute law and should be based on the rule of reason if no relevant
custom exists.

1890 Court Organisation Act (Saibansho Kosei Ho), Act No. 6 of 1890, in effect in1890 and repealed in 1947.
Article 14:

Ward court has jurisdiction over civil suits below,· · · snip· · ·D. Suits related to a contract whose duration is one year or shorter between
employer and employee.

The 1889 Constitution of the Empire of Japan (Dai Nippon Teikoku Kenpo), in
effect in 1890, amended in 1946, and the amended constitution (Nippon Koku Kenpo)
in effect in 1947.
Article 22:

Every subject of Japan shall have freedom to choose and change his/her
residence within the confines of the law.

The 1890 Civil Code (Minpo), Act No. 28 of 1890, planed to be in effect in 1893,
postponed to be in effect in 1892, and repealed in 1898.

21

Part of acquisition of property, Article 260: (1) A servant, a manager, an assistant manager, worker and other employee may perform a duty receiving salary or
wage determined by annual, monthly, or daily basis.
(2) Employment may be canceled by a request of cancellation in advancefrom either party after the duration specified as a custom of the relevant region expires or at any time if there is specific custom; provided, however,
that, the request should not be made without prejudice or malice.
Part of acquisition of property, Article 261: (1) Duration of employment should never
be longer than five years for a menial, a manager, and an assistant manager and longer than one year for a worker and other employee; provided,
however, that, this never obstructs provisions below related to apprenticeship contract.
(2) If a duration longer than stipulated above is contracted, the duration
can be shortened at the will of either party; provided, however, that, it
never obstructs renewing the contract.
The 1890 Code of Civil Procedure (Minji Sosho Ho), Act No. 29 of 1890, in effectin 1891 and repealed in 2005.
Article 188: (1) Both parties are allowed to agree to suspend the procedure of suit;provided, however, that, the suspension never keeps unextendable period
from proceeding.
(2) If both parties fail to appear on the date for oral argument, then thelitigation proceeding is discontinued until one of the parties petitions foranother designation of the date for oral argument.
(3) If one of the parties does file a petition of the preceding paragraphwithin one year, it is recognised that the principal action and the counterclaim are withdrawn.
Article 229: If the litigated claim is waved or the defendant acknowledges the claim at
the oral argument, the court at the request should pronounce a judgmentof dismissal or loss.
Article 246: If the plaintiff or the defendant fails to appear on the date of oral argument,
the court at the request of the other party pronounces a default judgment.
Article 247: If the party who fails to appear is the plaintiff, the court should pronouncea dismissal of the plaintiff by a default judgment.
Article 248: If the party who fails to appear is the defendant, the court recognises thatthe defendant has convicted the statement about the fact by the plaintiff
and if the court recognises that the claim by the plaintiff is legitimate, thenthe court should pronounce a loss of the defendant and if the court does
not recognise it as legitimate, then the court should pronounce a dismissal.
Article 252: (1) In the following cases, a request of default judgment is dismissed;
provided, however, that, the plaintiff and the defendant who appears may
22request postponement of oral argument.
First The plaintiff or the defendant who appears is not able to give a necessary evidence about conditions to be examined by the court’s own authority.
Second Document of the statement about the facts or the request is notserviced at an appropriate time to the plaintiff or defendant who failed toappear.
(2) If the oral argument is postponed, the plaintiff or defendant who has
failed to appear should be summoned on the renewed date.
Article 255: (1) The plaintiff or defendant judged by default may enter an appeal against
the judgment.
(2) The period of an appeal is fourteen days, and this period is unextendable period and begins by service of the judgment document.
(3) An appeal may be entered even before service of the judgment document.
Article 257: (1) An appeal that is obviously unforgivable, fails to satisfy legal formality
or is entered after the period should be dismissed by the presiding judge.
(2) An immediate appeal against the ruling of the dismissal may be enteredat the upper court.
Article 258: Except for the case of the preceding article, the court should serve thedocument of the appeal to the other party, set a new date of oral argument
about the appeal and summon both parties.
Article 260: If an appeal is recognised as legitimate, the suit is restored to the phase
before the absence.
Article 263: (1) If the plaintiff or the defendant who entered an appeal fails to appear
on the date of oral argument or the date of postponed oral argument, except for the cases stipulated in Article 252 and Article 254, the court at
a request of the other party who appears pronounces a dismissal of theappeal by a renewed default judgment.
(2) An appeal may not be entered against the renewed default judgment.
Article 377: (1)There should be at least three days between the date of oral argument
and the service of the complaint document.
(2) In a case of urgency, this period may be shortened to twenty four hours· · · snip· · · .
Article 383: (1) The ward court gives an order of payment· · · snip· · · .
Article 384: (1) Giving an order of payment may be requested by a document or astatement.
(2) This request should satisfy the following matters.
First Indication of the both parties and the court.
Second Indication of the amount, the object and the statement. If claims
are several, indication of for the amount, objet, and the statement for each23

claim.
Third Request of giving an order of payment.
Article 386: (1) An order of payment is given without examining the obligor.
(2) An order of payment should indicate matters of the request set forth initem 1 and item 2 of Article 384 and state an order that, if an immediate
execution is desired to be avoided, the claim should be met within fourteendays from the date of service of this order document and the designatedamount of the cost of procedure should be paid to the obligee, or an appeal
to the court should be entered.
(3) The period in the preceding item may be shortened to twenty fourhours for exchange and three days for other claims at request.
Article 388: The obligor may enter an appeal against the order of payment by a written
or oral statement.
Article 389: (1) If the obligor enters an appeal against whole or part of the claim at an
appropriate time, the order of payment ceases to be effective but has aneffect of lis pendens.
(2) The service of the document of the order of payment should be servedto the obligee.
Article 390: In the case where an appeal is entered at an appropriate time, if jurisdictionof the suit to be filed with regard to the claim belongs to a ward court, thesuit is recognised to be filed at the same time of service of the document of
the order of payment, and the date of oral argument is decided according
to the provision of Article 377.
Article 391: (1) If jurisdiction of a suit to be filed with regard to the claim belongs to award court, it should be noticed to the obligee at an appropriate time thatan appeal has been entered.
(2) If the obligee fails to file a suit within a month from the date of thenotice at the court with jurisdiction, lis pendens cease to be effective.
Article 392: (1) If an appeal is entered at an appropriate time, the cost of demand procedure may be recognised to be a part of court costs of the suit to be filed· · · snip· · · .
Article 393: (1) An order of payment declares that the order may be provisionally executed after the period indicated in the order unless the obligor enters an
appeal before the declaration of the provisional execution.
(2) The provisional execution should be declared by the order of execution
to be attached to the order of payment and the order of execution should
indicate the cost of procedure calculated by the obligee.
(3) An immediate appeal may be entered against an order to dismiss therequest by the obligee.
Article 394: (1) An order of execution is the same as a judgment by default with adeclaration of provisional execution, and an appeal against the order of24execution may be entered following the provisions from Article 255 to
264 · · · snip· · · .
Article 501: A provisional execution may be declared at a request by the court’s own
authority in the followings.
First Pronouncement of judgment of loss by acknowledgment.
· · · snip· · ·Article 502: A provisional execution may be declared at a request in the followings.
· · · snip· · ·Third A suit with regard to a contract between an employer and an employee whose employment duration is within one year. · · · snip· · · .
The 1896 Civil Code (Minpo), Part I, Part II, and Part III, Act No. 89 of 1896,
effective in 1898.
Article 4:(1) A minor must obtain the consent of his/her statutory agent to perform
any juristic act; provided, however, that, this shall not apply to an act
merely intended to acquire a right or to be relieved of a duty.
(2) A juristic act in contravention of the provision of the preceding paragraph may be rescinded.

Article 14:(1) A wife is required to be permitted by her husband to perform followingacts.
· · · snip· · ·Third to conclude a contract that entails body restraint.
(2) A juristic act in contravention of the provision of the preceding paragraph may be rescinded [this article was repealed in 1947].

Article 92:

In cases there is any custom which is inconsistent with a provision in any
law or regulation not related to public policy, if it is found that any party
to a juristic act has the intention to abide by such custom, such custom
shall prevail.

Article 99:(1) A manifestation of intention made by an agent representing that thesame is made on behalf of the principal within the scope of the agent’s
authority binds the principal.
(2) The provision of the preceding paragraph shall apply mutatis mutandis
to any manifestation of intention made by a third party to an agent.

Article 415: If an obligor fails to perform consistent with the purpose of its obligation,
the obligee shall be entitled to demand damages arising from such failure.
The same shall apply in cases it has become impossible to perform due toreasons attributable to the obligor.
Article 466: (1) A claim may be assigned; provided, however, that, this shall not apply
to the cases where its nature does not permit assignment.
(2) The provisions of the preceding paragraph shall not apply in cases
where the parties have manifested their intention to the contrary; provided,25however, that such manifestation of intention may not be asserted against
a third party without knowledge.
Article 623: An employment contract shall become effective when one of the parties
promises to the other party that he/she will engage in work and the otherparty promises to pay remuneration for the same.
Article 625: (1) An employer may not assign his/her rights to third parties unless theemployer obtains the employee’s consent.
(2) An employer may not cause third party to work on his/her behalf unless the employee obtains the employer’s consent.
(3) If an employee causes any third party to work in violation of the provisions of the preceding paragraph, the employer may cancel the contract.
Article 626: (1) If the term of employment exceeds five years, or employment is tocontinue during the life of either party or any third party, either party may
cancel the contract at any time after the expiration of five years; provided,
however, that said five years shall be ten years with respect to employment
for the purpose of apprenticeship in commerce and industry.
(2) If a person intends to cancel a contract under the provisions of thepreceding paragraph, he/she must give notice three months in advance[1947 Labour Standard Act (Rodo Kijun Ho), Act No. 49 of 1947, hasoverridden this article in its effect such that this article has been ineffective
since 1947].
Article 627: (1) If the parties have not specified the term of employment, either party
may request to terminate at any time. In such cases, employment shallterminate on the expiration of two weeks from the day of the request to
terminate.
· · · snip· · ·Article 628: Even in cases where the parties specified the term of employment, if there
are unavoidable reasons, either party may immediately cancel the contract.
In such cases, if the reasons arise from the negligence of either one of theparties, that party shall be liable to the other party for damages.
Article 709: A person who has intentionally or negligently infringed any right of others, or legally protected interest of others, shall be liable to compensate
any damages resulting in consequence.

26

Table 1 Civil suits related to employment contracts filed by silk reeling manufacturers, December 1892 to June 1896.
Favor
Loss of defendant Loss of defendant Loss of plaintiff
Total
of
settlement
bybybyplaintiff
default
acknowledgement
default
Filed by employer
Suits for enforcement of contract ordamages

8

6

0

3

1

2

Suits for damages for the
nonfulfillment of employment
contract

5

4

0

3

1

0

Suits for payback of the cost of
training

0

0

0

0

0

0

Filed by employee or her agent
Suits for wage payment
8
5
0
0
0
2
Suits for repossession of belongings
0
0
0
0
0
0
Source : 'Kamisuwa ku saibansho minji Hanketsu genpon tsuzuri' (Judgments of Civil Cases, delivered by the District Court ofSuwa).
Notes : All related judgments delivered from December 1892 to December 1901, and kept by the Branch in Suwa of the District
Court of Nagano, are covered. Suits for payback of the cost of training were filed when a young (about 15-year old) worker
did not fulfill the apprentice employment contract.
Table 2 Civil suits related to employment contracts filed by silk reeling manufacturers, December 1899 to December 1900.
Favor
Loss of defendant Loss of defendant Loss of plaintiff
Total
of
settlement
bybybyplaintiff
default
acknowledgement
default
Filed by employer
Suits for enforcement of employment
contract or damages

0

0

0

0

0

0

Suits for damages for the
nonfulfillment of employment
contract

24

22

0

17

0

2

Suits for payback of the cost of
training

0

0

0

0

0

0

Filed by employee or her agent
Suits for wage payment
Suits for repossession of belongings
Notes : See notes of Table 1.

0
1

0
1

0
0

0
1

0
0

0
0

Table 3 Civil suits related to employment contracts filed by silk reeling manufacturers, January 1901 to December 1901.
Favor
Loss of defendant Loss of defendant Loss of plaintiff
settlement
by
Total
of
by
by
plaintiff
default
acknowledgement
default
Filed by employer
Suits for enforcement of employment
contract or damages

0

0

0

0

0

0

Suits for damages for the
nonfulfillment of employment
contract

20

17

0

13

0

0

Suits for payback of the cost of
training

5

3

1

2

0

0

Filed by employee or her agent
Suits for wage payment
Suits for repossession of belongings
Notes : See notes of Table 1.

0
0

0
0

0
0

0
0

0
0

0
0

Figure 1 Indirect governance of transactions between manufacturers by the court when a worker changes
employer.

Official governance of transaction between MA and W
Real transaction between MA and MB
Damages paid by MB through W

The Ward Court of Kamisuwa
Suit for damages for

Judgment ordering W to pay

non-fulfilment of contract

the amount covering the damages

Negotiation between MA and MB
Manufacturer MB

Manufacturer MA

Premium
wage
Employment contract

Employment contract
Unpaid wages

Nonfulfillment of contract by W

Worker W

Worker W
W moves to MB from MA