Economic Decline and Legal Change:
Considerations from Japan’s Dying Shopping StreetsSean McGinty∗,∗∗I. Introduction
II. The Process of Legal and Economic Change
1. The View from Corporate Law
2. Why Study Economic Decline?
III. The Rise of the Shōten-kai
1. The Shōten-kai Defined
2. Shōten-kai Origins to the Eve of Decline
IV. The Decline of the Shōten-kai: 1980s to Present
1. Overview
2. Zombie Law: Organizational Decline and Change in the SPA Act
3. Ousting: Legal Change in the Regulation of Large Scale Retailers
4. Externalities, New Actors and Transformation: City Governments and Urban
Redevelopment Law
V. Conclusion

I. INTRODUCTION
This article is about the decline of a form of economic organization and the relationshipbetween that decline and changes in the legal framework in which it operates. This focus
is inspired by academic interest in the relationship between economic and legal change
which has emerged in recent years.1 At the risk of oversimplification, the debate largely
boils down to one in which law gravitates over time either towards or away from sets ofefficient rules that produce beneficial economic outcomes. The forces of regulatory∗ Designated Assistant Professor, Nagoya University Graduate School of Law.
∗∗ The author would like to thank Giorgio Colombo, David Green, Časlav Pejović, Moeen
Cheema, Branislav Hazucha and participants in the Young Scholars Workshop: Asian Legal
Studies New Issues and New Scholarship held at the National University of Singapore for
their insightful comments on earlier drafts of this paper. I would also like to gratefully
acknowledge the support for this research provided by the Nagoya University Graduate
School of Law’s Leading Graduate Schools program.
1 Mainly inspired by the development of the legal origins literature, which raises questions
about how legal and economic systems develop. See R. LA PORTA / F. LOPEZ-DE-SIALNES / A.
SHLIEFER and R. W. VISHNY, Law and Finance, in: Journal of Political Economy 106 (1998)
1113; R. LA PORTA / F. LOPEZ-DE-SILANES / A. SHLEIFER, The Economic Consequences ofLegal Origins, in: Journal of Economic Literature 46 (2008) 285.

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competition and demand from various actors2 are among those said to drive legal change
towards economic efficiency, while path dependencies supplied by a variety of historicalendowments3 may prevent such evolution.
The literature suffers from a certain myopia in the sense that it has been primarily focused on rules related to the particular organizational context of the business corporation,such as corporate law and securities regulation, to the extent that our understanding of thisrelationship could more accurately be described as an understanding of how rules in thatspecific context rather than law in general relates to economic change. This paper views
this distinction as relevant due to the fact that the corporation is a remarkably, and perhaps
even uniquely, successful form of economic organization. It fulfills its function – providing a vehicle in which various stakeholders can contribute to an enterprise while minimizing agency costs4 – in such a way that rival legal forms fail to pose a serious competitive
threat to it. Moreover the nature of contemporary economies around the world is one inwhich demand for this function, and thus for the corporate form, remains high.
History, however, is replete with examples of forms of economic organization whichhave gone through periods of successful development only to one day be confronted
with changes to which they could not adopt that precipitated their decline and ultimate
extinction. An understanding of how economic change interacts with legal change which
only focuses on a successful form of economic organization may, in other words, only
be providing us with a partial picture. This paper attempts to shed some light on legal
change in the context of an organizational form which has entered such a period of decline, which is provided by Japan’s shōten-kai. Shōten-kai are collections of small merchants who have co-located in shopping streets within towns and cities across the country. For most of the twentieth century they served as both a key component of Japan’s
retail distribution system and as an integral part of its urban landscape. In addition to
being a physical space the shōten-kai is, like the business corporation, an organizational
form which provides rules that structure economic activity among various stakeholders.
In recent decades a variety of exogenous shocks combined with a series of endogenous
governance problems and changes to the legal environment in which they operate havecontributed to a long term decline of shōten-kai throughout the country.
As an object of legal study, two distinct aspects of shōten-kai tie them to two different legal regimes. The first of these is their role as a form of business organization,bringing together the small merchants that operate on them into a collective entity that
2
3
4

H. HANSMANN / R. KRAAKMAN, The End of History for Corporate Law, in: Georgetown Law
Journal 89 (2001) 439.
LA PORTA/LOPEZ-DE-SILANES/SHLIEFER, supra note 1; L. A. BEBCHUK / M. J. ROE, A Theoryof Path Dependence in Corporate Ownership and Governance, in: Stanford Law Review 52(1999) 127.
This may be an oversimplification, for a more detailed discussion see R. KRAAKMAN / P.
DAVIES / H. HANSMANN / G. HERTIG / K. HOPT / H. KANDA / E. ROCK, The Anatomy of Corporate Law (Oxford 2009) at Chapter 1.

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has a business purpose. The main pieces of relevant legislation are the Shōten-kai Promotion Association Act (SPA Act)5 and the Small and Medium Sized Enterprises Cooperatives Act (SMSEC Act)6, which provide the legal entities in which shōten-kai associations may incorporate. These forms, which are nearly identical to each other, are basedon a cooperative model whose rules share much in common with those of the businesscorporation.7 These rules are intended to allow the main stakeholders to cooperatively
pursue the common goal of promoting their shōten-kai. The second aspect is their role asphysical spaces in the urban environment, where a number of urban planning laws havebeen used to define the relationship of shōten-kai within the urban areas in which they
exist. Historically the most important of these were a series of Acts which gave shōtenkai a significant degree of control over planning decisions with regard to large scaleretailers, their main competitors. A series of major legislative reforms beginning in 1990
however have largely blunted the privileged position of shōten-kai by removing an effective veto power they had been granted over such competition opening nearby. In
more recent years, urban redevelopment law has come to play a larger role in regard toshōten-kai, as cities implement urban renewal schemes that often incorporate large scale
physical reconstruction of shōten-kai and the re-arrangement of property rights on them.
This paper examines the history of legal development in these fields alongside theparallel history of the shōten-kai as economic organizations. The narrative leads to threemajor conclusions which this paper draws about the relationship between declining economic organizations and legal change.
The first is that economic decline may lead to what can be termed “zombie laws.” Theterm is here used to refer to laws in which the process of legal change largely becomes
divorced from the reality of the subject which it is intended to regulate. The law may givethe appearance of relevance and vitality owing to frequent amendments, but in fact has,like a zombie, ceased having a life of its own. A number of factors may contribute to thiseffect. The decline of a given organization may, perhaps unsurprisingly, mean that the
incentives necessary for the type of experimentation and innovation said to drive legal
change in more economically successful models like the corporation simply does not exist.
Erstwhile agents of change may be unable or unwilling to undertake the necessary investments that drive the process. In the shōten-kai context this is exemplified by theirorganizational law. During earlier, more successful periods shōten-kai associations played
5
6
7

Shōten-kai shinkō kumiai-hō, Law No. 141/1962, as amended by Law No. 53/2011.
Chūshō kigyō-tō kyōdō kumiai-hō, Law No. 181/1949, as amended by Law No. 91/2014.
Cooperatives differ from corporations in a number of ways, notably their purpose (to help
members achieve certain goals collectively rather than to earn a return on capital for investors) and differences between the respective relationship between members of a cooperativeand shareholders in a corporation. Generally however they establish the same governancestructure with a board of directors elected by a general meeting of members in charge ofoverseeing the organization, with many common rules governing the ability of the latter tomonitor the former.

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a key role in bringing these Acts into existence and initiating changes which accommodated their interests. They found a legislature and bureaucracy that was willing to accommodate them. As they have declined in recent years, however, the process of legal
change has lost this innovative characteristic. Instead legal change in the area has come tobe mechanically tied to broader changes to cooperative laws in general. These changes do
nothing to address the actual organizational governance problems which shōten-kai face,making these laws largely irrelevant as a means of resolving them.
Secondly, the decline of an economic organization may result in important actors inthose institutions being ousted from leading roles they play in determining legal agendas
that affect not just themselves but also their competitors. In the case of shōten-kai this is
illustrated in relation to the regulation of department stores and large scale retailers. During their successful phase shōten-kai were instrumental in establishing the legal framework that applied to these larger competitors and in ensuring they were strictly enforced.
The onset of their decline has been followed by large scale liberalization of these rules
and significantly curtailed the formal influence of shōten-kai in the process. This has benefitted large scale retailers, whose numbers have increased steadily in recent years.
Finally, the decline of an economic organization, combined with the inability ofzombie laws to adequately react to it, may create externalities for other actors which
force them to act. These actors may have different legal tools at their disposal and may
use these in novel ways to resolve the problems that arise, in effect shifting the arena oflegal change away from the zombie laws and allowing some form of experimentationand innovation to occur. This is visible in the reaction of some city governments to thedecline of their central shōten-kai. Faced with the desire to revitalize their central
shōten-kai while at the same time addressing important governance issues which the
SPA and SMSEC Act are incapable of dealing with, the trend has been for these governments to utilize urban redevelopment legislation to drastically reform their shōten-kai,both in physical and organizational terms.
This paper proceeds as follows. The following section provides a review of the literature on the relationship between economic and legal change that has been developed in
the corporate law literature. It then sets out the case for studying economic decline, referring to institutional economics, a field that has heavily influenced the legal literature
but which, unlike the legal literature, has also focused on the role that declining economic organizations and institutions have on change. The following two sections then present the story of the shōten-kai and its legal framework.8 The first of these examines the8Thus far most English language works on law in the Japanese retail sector have focused on
the regulation of large scale retailers, with shōten-kai and small retailers generally being
mentioned in passing rather than as an object of study in themselves. See F. K. UPHAM, Privatized Regulation: Japanese Regulatory Style in Comparative and International Perspective,
in: Fordham International Law Journal 20 (1996) 396; J. H. GRIER, Japan’s Regulation of
Large Retail Stores: Political Demands Versus Economic Interests, in: Journal of International Law 22 (2001) 1. In Japanese Mitsuhisa Hama has written extensively on shōten-kai

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rise of the shōten-kai as business organizations in the early-mid twentieth century andthe development of legal rules governing both their organizational form and the approval process for their main competitors, department stores, over which they had extensive
influence. The second looks at the period from the 1980s to present in which shōten-kai
have entered a prolonged period of economic decline as organizations. In tracing thechanges to the legal system which have come in this period, the paper examines thethree trends outlined above in relation to the effect of economic decline on legal change.
Conclusions follow.
II. THE PROCESS OF LEGAL AND ECONOMIC CHANGE
1. The View from Corporate Law
The question of how, and in what direction, legal change occurs has in recent years been
examined hand in hand with the question of what constitutes “good” laws when evaluated from an economic perspective. This literature has grown out of the suggestion9 that it
is possible to identify sets of legal rules, and particularly corporate law rules, which produce economically efficient outcomes. This suggested that the existence of certain beneficial economic outcomes in a given jurisdiction could be explained by the existence ofefficient corporate law rules combined with effective means of enforcing them.10 The
question of why certain countries persisted in maintaining rules that seemed to produce
sub-optimal results sparked interest in the relationship between economic and legal
change. While certain economists11 have explained it through the importance of pathdependencies provided by the civil and common law traditions, most legal scholars12
have rejected or downplayed the importance of this factor and instead looked towards
the various actors and processes that drive change. While by no means purporting to be
an exhaustive overview, we can here review some of the main views put forward bylegal scholars on this question of how economic and legal change are related.
One view is that legal change is highly influenced by competitive pressure across jurisdictions to produce more economically efficient rules. Hansmann and Kraakman13 in

9
10
11
12
13

from a legal perspective and this paper has benefitted greatly from his work. See M. HAMA,
Senzen-senchūki ni okeru shōten-kai no no soshiki katsudō [Organizational Activities of
Shōten-kai in the Pre-War and Wartime Eras], in: Kei’ei Kenkyū 56 (2005) 125; M. HAMA,
Shōten-kai shinkō kumiai hō no seiritsu katei to sono igi [The Process of Establishing the
Shōten-kai Promotion Association Act and its Significance], in: Nagoya Gakuin University
Discussion Paper No. 78 (2008).
See references, supra, note 1.
See particularly LA PORTA / LOPEZ-DE-SILANES / SHLEIFER/ VISHNY, supra note 1.
Ibid.
There is a relatively large legal literature reflecting this view. See for example the contributions in M. FAURE / J. SMITS (eds.), Does Law Matter? (Cambridge 2011).
HANSMANN / KRAAKMAN, supra note 2.

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particular have argued that convergence of corporate laws in various jurisdictions on an
efficient, shareholder centric model will be achieved owing to various competitive pressures placed on corporate law, combined with the existence of a powerful interest group– the shareholder class – that favors change in that direction. This view attaches little
importance to the historical origin of the legal system itself and instead views it more as
a competitive process in which the better laws will win out in the end based on the persuasiveness of their own merits. A contrasting view is provided by Roe and Bebchuck14,
who argue that interest groups which benefit from a given arrangement of the law may
be capable of using their influence to block such forces of legal change.
Another view suggests that legal change is more of an evolutionary process of trial
and error in which the law responds to a changing economic environment. Pistor et al15
view the process as being driven by a variety of factors – the demand for corporate law,
the institutional environment, the legal system’s ability to develop different mechanisms
to control corporate agency problems and external competition. They suggest that theflexibility of corporate law in responding to a changing environment is one of its key
functions. Schumpeter’s notion of creative destruction is cited as playing a role in this ascorporate laws evolve in an experimental way, trying new rules and discarding ineffective ones. Legal change may thus vary according to the ability of a legal system to “innovate by allowing sufficient room for experimentation.”16
A third view, which builds upon the previous one, describes it as an iterative process inwhich markets and actors use legal change as a means of restoring equilibrium after scandals or shocks disrupt business as usual. Milhaupt and Pistor17 examine a number of corporate crises and suggest there exists a feedback loop between legal and economic change:“Market change occurs, typically because of the introduction of new technology, the entrance of new players, a shift in consumer demand, or a scandal that reveals damaging
new information about the operation of the market or its participants. Market change ofany type raises new questions … In order to mitigate uncertainty and restore equilibriumin the market, these questions must be answered by someone. In most developed economies, many of these questions are answered by legal actors … Virtually every legal response, in turn, creates new incentives … for market players, who adopt their conduct tothe new rules and push at the margins of the new legal order. These market reactions raise
new questions of their own, and the process repeats itself.”18

14 BEBCHUK/ ROE, supra note 3.
15 K. PISTOR / Y. KEINAN / J. KLEINHEISTERKAMP / M. D. WEST, The Evolution of Corporate Law
A Cross-Country Comparison, in: University of Pennsylvania Journal of International Law
23 (2003) 791.
16 Ibid, at 793.
17 C. J. MILHAUPT / K. PISTOR, Law & Capitalism: What Corporate Crises Reveal About Legal
Systems and Economic Development Around the World (Chicago 2008).
18 Ibid, at 28.

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While there is divergence among these views as to the details, one thing they have incommon is the idea that legal change in this area is a process whose end goal is economic efficiency. In general it can be said that the interaction of various agents on the demand side of legal change – such as shareholders, executives, industry groups and academics – with factors provided by the supply side which control the mechanisms ofchange – the structure of the legal system, the courts, the legislature, administrative
agencies and the availability of successful models for emulation – determines the outcome of the process, which may vary significantly across different jurisdictions basedon the mix of these and their relative influence.
One point that arises is that these agents of change need incentives to animate them,otherwise the process thus described cannot begin. Likewise the legal system itself must
be capable of accommodating these demands in a manner that produces changes to legal
rules. In corporate law such incentives may often exist in the payoff to be had either
from rules that produce net benefits to society (such as reducing transaction costs), orfrom rules that may not produce such benefits to society but which do accrue to certain
constituents. When a form of organization enters economic decline, however, such incentives for investing in legal change may not exist. While this might suggest that legal
change would therefore simply not take place, the experience of the shōten-kai which
will be examined below suggests that this supposition is only partially correct. Before
turning to that experience, however, it is necessary to set out in more detail the case forstudying the relevance of economic decline, which we turn to in the following section.
2. Why Study Economic Decline?
The process of legal change described above largely assumes, not without reason, thatthe underlying function of corporate law is one there is a strong demand for. All themain actors in the field – shareholders, creditors, managers, labor and so on – continue
to have confidence in the corporate form itself, even if corporate scandals do occasionally lay bare weaknesses in certain institutions governing it. By exposing weaknesses orrearranging power relations these incentivize actors to pursue change and may make thesystem itself more responsive to such demands. Such failures, however, do not alter thebasic demand for the corporation as a means of organizing economic activity – the nature of our economies remains one in which it plays a dominant role.
Not all economic organizations share this record of expansion and success, however.
Institutional economics provides us with a relatively rich literature on the decline oforganizations and their relationship with institutional change. “Organizations” are defined by North as “groups of individuals bound by some common purpose to achieve
objectives”,19 while institutions are defined as “humanly devised constraints that shape

19 D. C. NORTH, Institutions, Institutional Change and Economic Performance (Cambridge1990) at 5.

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human interaction”.20 In more simple terms, organizations are teams in a game and institutions provide them with the rules by which they play.21 This framework does not draw
a distinction between rules provided by law and those provided by social norms. Organizations are both determined by their institutional environment and act as agents ofchanges to that environment22 – the corporation for example being defined by law also
plays a major role in prompting changes to that law. Though the concepts of “institutional change” and “legal change” are not synonymous, the similarities between thisview and that developed in the debate on legal change are a result of the influence ofinstitutional economics on that legal debate. 23 Unlike the literature on legal change,
however, institutional economists have devoted a great deal of effort not only to thestudy of successful organizations – and the institutions which they evolve – but also to
those which went into decline and ultimately extinction. Thus our understanding of theprocess of institutional change over time is influenced by the story of medieval merchant guilds just as it is by the rules governing modern business corporations. Acceptingthat “creative destruction” – which implies not only failure of individual corporations
but also longer term decline of economic organizations and institutions which are “destroyed” – plays an important part in our understanding of the process of legal change, it
is curious that legal scholarship has yet to study the issue in this regard.
The term “decline” in this paper draws its meaning from the observation that institutions can be either self-enforcing or self-undermining.24 Self-enforcing institutions arethose in which “all motivation is endogenously provided”.25 In other words, individuals
within the confines of such institutions will act in response to the incentives the rules
create in the expectation that others will model their behavior likewise. Over time thisleads to the institution becoming self-enforcing – individuals will voluntarily model
their behavior on them, which in turn strengthens the institutions on which the behavior
is based. The institutions themselves will impose costs on individual behavior that deviates from the rules while rewarding those that comply, thus ensuring its continued survival and reinforcement.26
Grief, however, suggests that certain institutions reach a point in their development
where they become self-undermining.27 Where the payoffs to individuals for following
the rules decrease the institution may become self-undermining in the sense that theirrules becomes effective in smaller and smaller areas of activity as individuals have re20
21
22
23
24

Ibid at 1.
Ibid.
Ibid at 5.
See in particular the discussion in chapter 1 of MILHAUPT / PISTOR, supra note 17.
Made in A. GRIEF, Institutions and the Path to the Modern Economy: Lessons from Medieval Trade (Cambridge 2006).
25 Ibid, at 15–16.
26 Ibid.
27 Ibid, at 179–180.

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duced incentives to comply with the rules. This can be triggered by exogenous changes
resulting from technological progress or other means, and can result in a drawn out process of decline rather than immediate collapse of the institution. In general these institutions decline both because these external changes disrupt the incentives they provide forcompliance and because they are incapable of adapting their rules to counter these developments, a pattern which as shall be discussed below largely conforms with the experience of shōten-kai.
The benefit of expanding our understanding of the role of decline with regard specifically to legal change – as opposed to the related but broader concept of institutionalchange – lies in the proposition which this paper tentatively makes that the intertwined
processes of legal and economic change are just as influenced by gradual, long term
declines of organisations which have entered a self-undermining spiral as they are by
successful ones. One key difference between the two which this paper explores in thecontext of the shōten-kai is that viewing legal change as movement either towards oraway from economic efficiency only really makes sense in the latter. One reason for thisis that economic decline itself is often a sign that a given set of institutions are inefficient and structurally unable to remedy those inefficiencies. Their very decline suggeststhat the type of back and forth interplay between economic and legal change which produces rules that enable beneficial outcomes is not occurring. This downside of the storyof economic decline is one which a full understanding of the relationship between legal
and economic change also needs to be informed by.
III. THE RISE OF THE SHŌTEN-KAI
1. The Shōten-kai DefinedThis section presents the narrative of the shōten-kai as it emerged and expanded as aform of business organization in the early-mid twentieth century. This includes the period in which the legal rules governing their organizational forms (as cooperatives) andthose regulating their main competitors (department stores) were developed – a process
over which shōten-kai had significant influence and received significant benefits. Before
setting out that narrative, however, it is first necessary to set out some basic facts related
to shōten-kai, both as businesses organizations and as physical spaces within the urban
environment.
The term shōten-kai is not actually defined in legislation, but the government’s Smalland Medium Enterprises Agency (SMEA)28 defines them as:

28 An agency under the Ministry of the Economy, Trade and Industry which, among otherthings, oversees shōten-kai. See http://www.chusho.meti.go.jp/sme_english/.

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for whether or not it is organized as a legal person).”29

In other words shōten-kai are simply a collection of shops in close proximity to one
another. Within this broad definition there exist a wide range of types of shōten-kai,from small clusters of shops selling mostly daily goods to locals all the way to large
scale shopping districts featuring hundreds of stores selling everything from groceries toluxury brand goods that draw people from around the country.30 Approximately twenty
percent of shōten-kai have fewer than twenty stores while 2.4 percent have more than
two hundred and the average about fifty.31 The vast majority of these are independent,
small scale stores that are usually family run – what are commonly termed “mom andpop” stores. Large scale retailers also operate on some shōten-kai, particularly those inclose proximity to major train stations. Chain stores, particularly convenience stores,
also operate in shōten-kai. Generally, however, these non “mom and pop” type stores
form a very small minority of the overall number of shops located on shōten-kai – inmore than eighty percent of Tōkyō’s shōten-kai there are fewer than ten such stores andin more than a quarter there are none at all.32
The small scale stores that dominate most shōten-kai are generally family based
businesses.33 Studies of individual shōten-kai suggest that roughly half of businesses
were acquired by their current owners through inheritance from earlier generations.34
Most of them own their shops rather than rent and the building itself often doubles as thefamily home, with the first floor devoted to the business and a second floor devoted to

29 Shōten-kai jittai chōsa hōkoku-sho [Report on the Survey of the Condition of Shōten-kai](Small and Medium Enterprises Agency, 2010) (Hereinafter “Shōten-kai Survey”) at 3. Author’s translation.
30 Ibid, at 10. The SMEA provides a four-level categorization which roughly falls between
these two extremes.
31 Ibid.
32 Tōkyō-to shōten-kai jittai chōsa hōkoku-sho [Report on the Survey of the Condition of
Shōten-kai in Tōkyō] Tōkyō City Department of Industry and Labor (2010) at 65.
33 N. YOKOYAMA / D. RYŪ, Henyō suru nihon no shōnin kazoku zō – higashi ajia ni okeru jigyō
keishō no kokusai hikaku kara [The Changing Image of Merchant Families in Japan – International Comparison with Business Succession in East Asia], in: Nihon Seisaku Kinyū
Kōko Chōsa Geppō 4 (2009) 14; D. RYŪ, Nikkan ko’uri-shōgyō ni okeru kōkei-sha umu no
kitei yōin ni tsuite [Concerning the Primary Norms Determining the Existence or NonExistence of Successors in the Japanese and South Korean Retail Business], in: Keizai Riron
366 (2012) 89.
34 D. RYŪ, supra note 33, at 90; Y. FUJIOKA / K. ŌHARA / K. ŌTAKI, Kinrin-kata shōten-kai ni
okeru jū shō kankei-betsu ni mita shōnin kazoku no kyojū tokusei [Habitation Characteristicsof Merchant Families in Neighborhood Shopping Districts Analyzed from the Relation between Commercial Activity and Living], in: Nippon Kenchiku Gakkai Keikaku-kei Ronbunshū [Journal of Architectural Planning AIJ] 586 (2004) 89.

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living space.35 Their business models are highly conditioned by the closed and verticallyintegrated system of distribution that developed in the post-war period. This was primarily characterized by the existence of a large number of small sized wholesalers, and a
relatively long chain between producers and retailers.36 In the 1980s for every retailtransaction that took place in Japan there were 4.2 wholesale transactions that had preceded it, compared to just 1.9 in the United States.37 Manufacturers, wholesalers andretailers generally had close relationships with each other, supported by rebate systems
which encouraged close linkages and made it difficult for new entrants. The lower level
wholesalers who dealt directly with retailers tended to be quite small themselves andspecialized in a relatively limited range of products.38 This, along with the practices ofcertain manufacturers, particularly in the cosmetics and electronics fields, of creatingexclusive relations with large numbers of small stores,39 meant that a large number ofthese small stores themselves specialized in a relatively narrow range of products.
As an organization, shōten-kai bring these small merchants together under a set ofboth formal and informal rules which allowed them to organize collectively. From abusiness perspective the basic idea behind the shōten-kai is the need for small merchants
to both co-locate and cooperate with each other so as to compete in the retail sector.
Operating on their own small retailers face severe disadvantages – they cannot operateon the same scale as large ones, offer the same product range, convenience or prices.
Co-location allows them to overcome some of these by having a variety of businesses
cumulatively offering a wide variety of products and services in one location. Cooperation and organization is also required in order to coordinate the shōten-kai as a business
entity. Among other things this is required to ensure its individual businesses don’t duplicate too many product types. It also allows them to engage in advertising and otherpromotional activities, to plan and finance common facilities, to benefit from certain
economies of scale (in delivery and other areas) and, perhaps most important, to enhance their political power at both the local and national levels.
The organization of such activities inevitably raises agency and free rider problems
which, as with the business corporation, require rules to overcome. Legal rules are ofobvious importance but owing to the close personal nature of these organizations, inwhich all members do business literally on the same street, informal norms and sanc-

35 One survey focusing on shōten-kai in two wards in Yokohama found that 63.1% and 54.8%of the respective shop-keepers owned their shops (though owing to Japan’s property system
not all owned the land their shops were built on). FUJIOKA et al., supra note 34, at 90.
36 See M. MARUYAMA, A Study of the Distribution System in Japan, OECD Economics Department Working Papers No. 136 (1993); M. ITOH, Competition in the Japanese Distribution Market and Market Access from Abroad, in: T. ITOH / A. O. KRUEGER (eds.), Deregulation and Interdependence in the Asia-Pacific Region (Chicago 2000).
37 ITOH, ibid, at 142.
38 Ibid, at 143.
39 Ibid, at 144.

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tions also play a role. These generally must address the questions of how collective decisions are reached, and how the costs and benefits of the collective activity are distributed. For individual shopkeepers the upside of subjecting themselves to these rules are thebenefits that flow to them from the greater numbers of customers coming to the shōtenkai the collective activities generate. The downside is the cost as measured by their contribution to the activities. Where the benefits exceed the costs we can expect the shōtenkai to be a self-enforcing institution – its members voluntarily subjecting themselves to
its rules in order to obtain the benefits.
As outlined in the following sections, shōten-kai development from the 1920s untilroughly the 1980s went through a period of expansion and dominance. This economic
success went hand in hand with their influence on the process of legal change – the period seeing a great deal of legislative activity most of which was designed to benefit them.
It also, however, contained the seeds of their own institutional demise, in which those
who since the 1980s have asserted themselves as shōten-kai have entered a protracted
period of decline.
2. Shōten-kai Origins to the Eve of Decline
While some shopping streets in Japan have a long history, the notion of shōten-kai as abusiness entity that was a subject of government policy and law only began to emerge inthe late 1920s40 shortly following what might be termed the first wave of shōten-kai foundation which occurred in the years immediately following the end of the First World
War.41 Economic disruption caused by the collapse of industries which had expanded
rapidly during the war led to large scale migration of workers to cities in search of employment. Having few marketable skills and entering a market that already had a surplusof labor, many of these new arrivals turned to the retail trade, which required no special
skills and little start-up capital. In the decade between 1920 and 1930, while the population employed in industry declined the numbers employed in the retail trade increased byover forty percent nationwide, numbering nearly four and a half million by 1930.42
A number of problems influenced this newly forming class of small retailers to creatingshōten-kai. Their need to compete with department stores was a major one. Department
stores, which were relatively new at the time, offered greater convenience to consumers
and enjoyed advantages of scale, making them a significant competitive threat to small
merchants. Cooperating and co-locating along the same street was seen as the most effective way of countering this threat. Doing so allowed them to offer consumers a range of
products within a relatively small physical area, something which physically dispersed
40 HAMA, 2005, supra note 8, at 126–128.
41 M. ARATA, Shōten-kai ha naze horobiru no ka? Shakai, seiji, keizai-shi kara saguru saisei
no michi [Why are Shōten-kai in Decline? Exploring Social, Political and Economic History
for a Path to Regeneration] (Tōkyō 2012) at 24–26.
42 Ibid, at 126.

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shops could not achieve. In effect they were trying to create horizontally oriented department stores, a fact evidenced by the use of terms such as yoko no hyakka-ten43 or heimen no
hyakka-ten44 (“sideways department store”) in the interwar period to refer to them.
This strategy required not only physical co-location, but also organization and cooperation among the individual businesses. Duplication of certain easy to enter businesstypes such as confectionary stores seems to have been a particular problem that organization was needed to control,45 as offering a mix of products and services to consumers
on a given shōten-kai was key to their strategy of competing against department stores.
The merchants on shōten-kai thus began to organize their own associations, shōtenkai, separate from other existing organizations such as local chambers of commerce andneighborhood associations.46 These associations served both as a way of organizing theshōten-kai internally and as a way of exerting political influence. These early shōten-kai
were organized on a voluntary basis without legal foundation, and were modelled onearlier forms of neighborhood associations,47 which themselves had a long history. They
served a number of practical functions – planning and managing communal facilities
such as lighting, drainage and arcade roofs – which required collective action. They
were also a means of coordinating the activities of individual businesses in a more cohesive way for such things as advertising, the creation of voucher or coupon systems, orthe maintenance of delivery vehicles for use by individual businesses.48
These activities required financing which, in the absence of some formalized rules
governing them, would entail both significant agency costs and free rider problems.
With regard to the latter, many of the expenditures made for the benefit of the shōten-kai,such as on advertising, would produce non-excludable benefits for all individual businesses regardless of whether or not they had contributed to the cost, thus giving them an
incentive to free ride on the expenditures of others. With regard to the former, any funds
that the association did create would have to be placed in the hands of the association’s
directors, who might have an incentive to spend them in ways that were either ineffective or in ways that benefitted themselves at the expense of other members. Given thatthe directors of these associations also ran their own businesses on the shōten-kai, thepotential for such conflict of interest transactions was high.49

43 Ibid, at 79.
44 A. ONJŌ, 1930 nendai no toshi chūshō ko’uri-shō: fukuoka-ken no ba’ai [Small and Medium
Urban Retailers in the 1930s: The Case of Fukuoka], in: The Shien 140 (2003) 237, at 240.
45 ARATA, supra note 41, at 56 notes for example that in the 1930s there was one confectionary
store per every 16 households in Tōkyō.
46 HAMA, 2005, supra note 8, at 131.
47 Ibid.
48 Ibid.
49 Illustrated in one reported case involving the director of the Tsurugaoka shōten-kai’s SPA inŌsaka who was found to have tunnelled business opportunities from the SPA to his own private business. Osaka District Court, 29 January 1988, Hanji 1300-134.

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Thus we have the two related problems which shōten-kai in this early period were
faced with. First, how to compete with department stores and second how to organize
themselves. By the end of the 1920s, shōten-kai were beginning to make their presence
felt at both the local and national policy levels with regard to these issues, though thefirst major piece of legislation was one on which they had no influence. In 1932 the Diet
enacted the Commercial Cooperatives Act, which enabled small businesses to form cooperatives to manage their collective affairs. The Act was not specifically designed forshōten-kai and in fact it had not been contemplated that shōten-kai would use it at thetime it was promulgated.50 The cooperatives created under the Act were intended to be
used by traders within a single industry with the goal of allowing them to achieve efficiencies of scale.51 The diverse nature of the individual businesses in shōten-kai, however, precluded them from obtaining such benefits. In 1934, shortly after the Act came into
effect, the government created a committee on reform in the retail sector,52 which, at its
third meeting in 1935, identified commercial cooperatives as the most appropriate form
by which small retailers could organize themselves and recommended that regional governments provide support to them in doing so.53 Tōkyō’s Ningyō-chō Shōten-kai had
been the first to incorporate in 193254 and by 1938 111 had done so.55 These cooperatives in turn began to form regional federations, with the Tōkyō federation of shōten-kai
cooperatives forming in 1938 with sixteen member cooperatives.56 In addition to providing legal rules which would allow them to organize the availability of public subsidies
from local governments also encouraged incorporation. The Tōkyō government, forexample, provided subsidies to the activities of commercial cooperatives which unincorporated shōten-kai were ineligible to apply for. Half the cost of advertising seasonal
sales events, lotteries and other promotional activities undertaken by Tōkyō-basedshōten-kai cooperatives in the 1930s was paid for by the Tōkyō government.57
As to their other problem shōten-kai associations became quite active at the local andnational political levels in the 1930s in lobbying against department stores. At the local
level this initially played out in battles related to fundamental questions of the shape thatcities would take as they experienced rapid population growth.58 A prime question that
arose in some cases was how valuable real estate in central locations would be devel50
51
52
53
54
55
56
57
58

HAMA, 2005, supra note 8, at 128.
Ibid.
Ko’uri-gyō Kaizen Chōsa I’inkai.
HAMA, 2005, supra note 8, at 128–130.
Tōkyō Metropolitan Archives, Shōgyō kumiai hō to shōten-kai shōgyō kumiai [The Commercial Cooperatives Act and Shōten-kai Cooperatives], available online at http://www.
soumu.metro.tokyo.jp/01soumu/archives/0701syoko_kara10.htm.
HAMA, 2005, supra note 8, at 129.
Tōkyō Metropolitan Archives, supra note 54.
Ibid.
ONJŌ, supra note 44, details the process of one such battle in the city of Kitakyushu in the
1930s.

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oped, with proponents of department stores and those of shōten-kai falling on opposing
sides of the issue. Through their shōten-kai associations, and the influence of theirmembers in chambers of commerce, small merchants could mobilize local political opposition to department stores, which in smaller cities were promoted by outsiders wholacked such tools. The convenience and perceived lower prices that department stores
offered, coupled with the prestige they granted to a city, meant that they could however
gain the support of certain key elements of the local political community and thatshōten-kai mobilization was not always successful.59
At the national level shōten-kai found greater success and, with the enactment of the
Department Stores Act in 1937,60 were able to establish a legal regime applied uniformly
across the country which gave them an upper hand in their battles with department
stores. The Act created an industry association, banned acts by department stores thatwere harmful to consumers or other retailers and regulated other aspects of their operations such as store hours.61 Most importantly the Act also established a system throughwhich store operators had to apply to the central government for a permit to open a newstore or expand an existing one. Small retailers would be given a prominent voice within
the process established to issue such permits,62 making this a key protective componentof their overall legal environment.
The Pacific War, which broke out not long after the establishment of this legal framework, caused immense disruption to Japan’s distribution system. Rationing and pricecontrols which became increasingly harsh as the war progressed were introduced and alarge portion of retail activity was driven underground.63 One major effect of this, alongwith the large scale revisions to Japanese law following the War, was that both the Commercial Cooperatives Act and the Department Store Act were abolished. The immediate
post-war years, however, saw a boom in both shōten-kai formation64 and in the opening of
new department stores65, and the same conflicts that existed before the war began to reassert themselves, which ultimately resulted in the recreation of the pre-war regime. With
59
60
61
62
63

Ibid.
Hyakka-ten hō, Law No. 76/1937.
ONJŌ, supra note 44, at 251–255.
The evolution of this process is discussed in Upham, supra note 8.
O. GRIFFITHS, Need, Greed and Protest in Japan’s Black Market, 1938–1949, in: Journal ofSocial History 35 (2002) 825.
64 Most postwar shōten-kai grew out of the black markets that emerged in front of train stations immediately following Japan’s surrender. See for example S. MURAKAMI /H. UMEMIYA, Sengo kōbe ni okeru yami ichi no keisei to henyō: sannomiya jiyū shijō) no
jirei wo chūshin ni [The Formation and Transformation of the Black Market in Kōbe afterWorld War II: The Case Study of the Sannomiya Jiyu Ichiba], in: Kōbe Daigaku Daigaku-in
Ningen Hattatsu Kankyō Gaku-kenkyū Ka-kenkyū Ki’yō [Bulletin of the Graduate Schoolof Human Development and Environment Kōbe University] 4 (2011) 69.
65 The number of department stores increased from 116 in 1948 to 158 in 1953. Y. SHIROTA,
Hyakkaten-hō-seitei ni kansuru kenkyū [A Study on the Enactment of the Department Store
Law], in: Nagoya Bunri Daigaki Kiyō 7 (2007) 71, at 74.

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regard to organizational law the Small and Medium Sized Cooperatives (SMSEC) Act,
still in effect today, came into force in 1949 as a replacement for the Commercial Cooperatives Act. As with its predecessor the Act was not specifically designed for shōten-kai,
but was flexible enough that they could incorporate their associations under it.
The SMSEC Act provides business cooperatives with a governance structure that is
generally similar to that of a business corporation, with rules designed to overcome
agency and free rider problems. The former is dealt with through rules governing thecooperative’s decision making process, what in corporate law is generally referred to as“voice” rights, while the latter is dealt with through rules on membership and on thefinancing of cooperative activities. The cooperatives are run by a board of at least three
directors66 who are elected by the membership and have an auditor tasked with an oversight function.67 Membership is based on the principles of freedom of entry68 and exit69,
with anyone who meets the qualifications of becoming a member being allowed to join,
provided they comply with the formalities. The main default qualification to become amember is that a person be an entrepreneur70, with individual cooperatives being free tostipulate further requirements.
By 1962 approximately fourteen hundred out of twenty thousand existing shōten-kai
had incorporated their associations as business cooperatives,71 meaning that a large majority remained as informal associations. In 1959 this situation came to be viewed as aproblem in the aftermath of the Ise typhoon, which devastated the Tōkai region.72 The
central government recognized that rebuilding damaged shōten-kai needed to be part of
the reconstruction. The fact that most shōten-kai had no legal entity capable of receiving
and managing public money complicated such efforts.
This, along with extensive lobbying by shōten-kai in the Tōkai area, focused attention on the question of how to encourage more to formally incorporate as cooperatives.73
In 1962 this led to the enactment of the Shōten-kai Promotion Association (SPA) Act asa separate piece of legislation that created a cooperative specifically tailored for shōtenkai. Like the SMESC Act the SPA Act established a cooperative form, with most of its
basic features borrowed directly from the former. In a number of areas, however, its
provisions differed in ways that reflected the peculiarities of shōten-kai.
The purpose of the Act, set out in Article 1, makes clear that the organizational goalsof the associations are to both encourage cooperative economic activity (similar to business cooperatives) while improving the environment of the area in which the shōten-kai
66
67
68
69
70
71
72
73

SMSEC Act Art. 35 (2).
Art. 36-3 (2).
Art. 14.
Art. 18.
Art. 8 (1).
ARATA, supra note 41, at 115.
HAMA, 2008, supra note 8.
Ibid.

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is located (unique to the Act). In keeping with this additional purpose, another major difference is that the SPA Act ties the associations created under its provisions to a geographically defined district. Article 6 (1) defines the district of a shōten-kai as one in which atleast thirty retail or service businesses operate within close proximity of each other.
Membership is also defined in a somewhat looser way than that for business cooperatives under the SMESC Act. Whereas members in business cooperatives must be entrepreneurs, Article 8 of the SPA Act, while by default defining all merchants within ashōten-kai’s district as meeting the membership qualification, also allows associations todesignate in their articles of association other types of people as meeting the membership qualification. In order to be formed, an association requires two thirds of those whomeet the membership requirements to agree to become members, a higher requirement
than the half needed to form a business cooperative under the SMESC Act.
In most other respects, however, the rules governing SPA do not differ significantly
from those of business cooperatives. While the intention behind the SPA Act was to encourage shōten-kai to incorporate, only some have done so. As of 2009 about seventeen
percent of shōten-kai, 2,378 in total, have incorporated under the SPA Act. A further eightpercent, 1,147, continue to be organized as business cooperatives under the SMSEC Act,
while the vast majority (10,942, approximately seventy five percent) remain as unincorporated voluntary associations.74 Nearly half of unincorporated shōten-kai in Tōkyō cite
their small size and declining number of members as their reason for not incorporating.75
With regard to the regulation of the main competitors of shōten-kai the Department
Store Act was revived in 1956 and the new Act, as with its predecessor, set up a permit
system for the opening or expansion of department stores. The application process wasadministered by the Ministry of International Trade and Industry (hereinafter “METI”,
its current acronym) and required the refusal of an application where granting it would
have a harmful effect on small or medium sized merchants, thus continuing the strong
position of shōten-kai in that regime. Changes in the retail environment, particularly thedevelopment of supermarkets in the 1960s which were not subject to the Act, led to its
abolition in 1973 and the introduction of the Act on the Adjustment of the Business Activities of the Retail Industry in Large-Scale Retail Stores (hereinafter “LSRSAct”).76 The main change introduced by the new Act was the inclusion of these newentrants under its regulations. It did not change the central consideration given to protecting small retailers from harm, though it did change the system from a permit to a
notification and adjustment one.77 The process of notification and adjustment established

74 Shōten-kai Survey, supra note 29, at 9.
75 Tōkyō Shōten-kai Survey, supra note 32, at 33.
76 Dai-kibo ko’uri-tenpo ni okeru ko-uri-gyō no jigyō katsudō no chōsei ni kansuru hōritsu,
Law No. 109/1973.
77 UPHAM, supra note 8 at 405.

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by METI required promoters to gain consensus approval from local small businesses.78
This process imposed severe costs on promoters, in some cases taking as long as ten
years to gain approval.79 Thus, the Act constituted a continuation of the policy of giving
small retailers significant power over large ones.
This brief sketch of the historical development of shōten-kai and the legal rules provide some observations on the connection between legal change and an economically
successful organization. The shōten-kai in this period were able to carve out a legal environment which greatly benefitted themselves. This involved a fair deal of innovation –such as the use of cooperatives in a context which they were not designed for – and responsiveness from the legal system to demands for change from these actors – as exemplified by the introduction of the Department Store and LSRS Act. Despite this, the narrative is also difficult to view in efficiency terms. The regulation of large scale stores
was particularly geared towards protecting an inefficient model of retail distribution
over its more efficient rivals. Despite the lack of a convincing efficiency based explanation, there is a clear connection between the development of shōten-kai as business organizations and the development of legal rules governing both those organizations andtheir main competitors, department stores.
IV. THE DECLINE OF THE SHŌTEN-KAI: 1980S TO PRESENT
1. Overview
In 1982 the number of small scale retail shops in Japan with 1-2 employees reached1,135,903, with an additional 520,830 having only 3–4 employees.80 By 2007 these numbers had fallen to 503,844 and 252,68781 respectively, more than a fifty percent decrease
within a single generation. One effect of this has been the devastation of a large proportion of shōten-kai, reflected in overwhelming degrees of pessimism being expressed byshōten-kai associations as to their business prospects.82 The problem of shuttered shōtenkai – long lines of permanently shuttered stores dominating neighborhoods – has becomea problem not just for small merchants but also for cities and other stakeholders.
There have been three trends in legal change that have gone hand in hand with theeconomic decline of shōten-kai. The first is related to their organizational law and isevident in relation to both the SPA and SMSEC Act, though owing to space concerns
and its more direct connection to shōten-kai, the discussion here will focus on the former.

78 For a detailed discussion of this process see: Ibid at 404–416.
79 Ibid.
80 Statistics Bureau Ministry of Internal Affairs and Communications, Japan Statistical Yearbook 2014 Chapter 13, “Domestic Trade and Services” available online at http://www.
stat.go.jp/english/data/nenkan/index.htm.
81 Ibid.
82 Shōten-kai Survey, supra note 29, at 42.

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The decline of shōten-kai has created serious organizational governance problems whichmight be expected to have resulted in changes to the SPA Act, whose rules are specifically intended to address governance issues. In fact, since the 1980s there has been arapid increase in amendments to the Act, but these have had very little connection to theactual governance problems their economic decline has raised. Instead, these reforms
have largely been either technical in nature or have consisted of large scale reforms copied directly from corporate law in a more or less mechanical process while leaving theseunderlying problems unresolved. The second relates to the regulation of large scale retailers. The economic decline of shōten-kai has coincided with a significant erosion of
their once-central position in this area. Reference to their interests has been formally
removed from the legislation and the liberalization of the process for approving large
stores has allowed them to continually increase in numbers as small retailers shrink.
Finally, one externality caused by the decline of shōten-kai as business organizations has
been the decaying of the central neighborhoods of many towns and cities. This has
forced cities to take a much more active role in shōten-kai, in particular through the useof urban redevelopment legislation to implement large scale redevelopment plans. In
addition to changing the physical architecture of shōten-kai, these also address many of
the organizational problems which the SPA Act has been incapable of solving.
2. Zombie Law: Organizational Decline and Change in the SPA Act
A number of institutional failings within shōten-kai have contributed to their decline.
Most shōten-kai are endowed with attributes that make it very difficult for their organizations to respond to the types of changes that they are confronted with. The first has to
do with the nature of individual businesses within shōten-kai and their ownership of themain physical asset of shōten-kai – their stores. As noted earlier, many of these businesses are based on business models that no longer make economic sense. The beginning of the decline of shōten-kai in the 1980s matches closely with the generation of
shop-owners who established themselves in the immediate post-war period reachingretirement age.83 These people have a very family-centred notion of business84, but lacksuccessors to hand the business down to. In part this is likely a result of their children
being unable or unwilling to bear the costs of taking over a failing business. This lack ofsuccessor problem is cited as by far the most pressing problem faced by shōten-kai.85
The failure of these individual businesses and the lack of successors for them would
not necessarily pose a problem to shōten-kai in circumstances where new businesses

83 T. MUSHA, Local Governance and the Central City Redevelopment in a Provincial City: A
Case Study of Matsumoto City, Nagano Prefecture, in: Annals of the Japan Association of
Economic Geographers 53 (2007) 50 provides an example of the changing situation of theseshop-owners during this period.
84 ARATA, supra note 41, at 27–30.
85 Shōten-kai Survey, supra note 29, at 49.

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could move in to replace them, but a number of factors have contributed to preventingthat from happening. One of these is the fact that most of the shops also double as theresidences of the shopkeepers, who generally own the property rather than rent it. 86
When their business fails, instead of moving on they often continue occupying the property, incorporating the former store space into their living quarters. In addition to feelings of attachment to the neighborhood they may have, tax incentives also encouragesuch behavior.87 As more and more of the physical stores within a shōten-kai get converted to this purpose, it becomes harder and harder for those remaining to attract customers, thus contributing to a downward spiral that is difficult to reverse. This vulnerability of shōten-kai to the unchecked use of property within them is one which the organizations running them – SPA, business cooperatives or informal associations – haveno formal means of controlling.88 In the past when these small businesses were successful, this lack of control was not a problem since individual shopkeepers had adequate
incentives to maintain their property as a business. As these businesses have collapsed
however, the lack of such control has emerged as one of the seeds of the decline ofshōten-kai. The inability to replace failed individual businesses with new ones prevents
many from stemming, let alone reversing, the downward spiral they are stuck in.
A second factor is the decline of participation in shōten-kai organizations by individual shopkeepers. These shopkeepers, being in close daily contact with each other,
formed relatively strong community bonds which discouraged behavior that was detrimental to the group and encouraged contributions to collective activities.89 Moreover, ata time when small businesses were flourishing, these shopkeepers had an incentive tomaintain good relations with neighbors in the shōten-kai as their own business prospects
in part depended on the collective success of the neighborhood.
As these small businesses slowly move towards closure, however, their owners haveless and less incentive to adhere to the rules of the group or actively contribute to its
activities. This is another area where the rules on their organization pose a problem – itis not possible for SPA to compel such contributions or even to require property or business owners within the shōten-kai to become members. This creates a free rider problem
86 FUJIOKA et al, supra note 34, at 90.
87 Some of the barriers to exit for retiring merchants are discussed in Chapter 4 of MCKINSEYGLOBAL INSTITUTE, Why the Japanese Economy is not Growing: Micro Barriers to Productivity Growth (2000) at 11–13.
88 One exception is underground shōten-kai (chika-kai) which, owing to their unique situation,
developed in ways that necessitated central ownership of the physical property. The businesses in them are tenants who rent from a management company that generally has ties
with the shōten-kai SPA. Since they are tenants, contractual obligations can be used to prevent the type of problem described above from developing. The problem of enforcing ruleson given divisions of property rights in older neighborhoods is explored in R. C. ELLICKSON,
New Institutions for Old Neighborhoods, in: Duke Law Journal 48 (1998) 75.
89 Community bonds within shōten-kai are discussed in MUSHA, supra note 83; ARATA, supranote 41.

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that applies not just to retiring shopkeepers but also to active ones – they can easily benefit from SPA activities that attract customers but cannot be forced to contribute to thecost of those.
In Tōkyō roughly one third of shopkeepers in shōten-kai are not members of their respective shōten-kai association, a proportion that has risen steadily in recent years.90 A
perceived lack of merit to the association’s activities, a desire to avoid the cost and corporate policies for chain stores against joining are among the main reasons given forrefusal to join.91 These can pose serious problems to the types of collective activities that
may be necessary to promote the shōten-kai as a business entity. This difficulty was
illustrated in the Happy Road Ōyama case92 in which an SPA had approved a major renovation for the shōten-kai’s common facilities with the costs to be partially covered by alevy placed on members. The defendant, a business operator in the shōten-kai, refused topay, arguing that he was not a member. The Tōkyō district court held that, having notcompleted the formalities for membership in the SPA Act the Defendant in fact was nota member. Crucially, however, the Court also noted the extreme weakness of the SPA
with regard to its ability to elicit contributions from recalcitrant members:“[…] the Shōten-kai Promotion Association Act contains the principles of freedom of entry
and exit in regards to membership of a Shōten-kai Promotion Association… and it cannot
be denied that within the shōten-kai managed by the Plaintiff there exist both members andnon-members. It is naturally possible for there to be non-members who receive benefits
from an association’s activities, but these cannot be forced to become members simply byvirtue of having received such benefits. Furthermore, once a person has joined an association they can simply avoid having to pay the levy by exiting the association.”93

As the italicized portion of the judgment highlights, even when a business is a memberof an SPA it can easily avoid bearing the costs of such projects by simply leaving the
SPA altogether – an act which the SPA has no formal means of preventing. The increasing incidence of free riding among shopkeepers is evidence of the eroding power ofsocial bonds and other incentives to induce cooperative behavior and the failure of thelegal rules to provide any way of overcoming this.
Considering these facts, it is easy to see the seed of the shōten-kai’s demise that wasplanted relatively early in their development. Social norms and economic incentives forcooperation were initially sufficient to overcome any problems the absence of rules controlling the use of property or compelling contributions may have caused. As thesenorms and incentives have changed, however, the weak power of the organization has
90 In 2010, shōten-kai in Tōkyō had on average 48.7 shop-keepers who were members of theshōten-kai association, 11.4 applying to become members, and 29.7 non-members. Tōkyō
Shōten-kai Survey, supra note 32, at 37.
91 Ibid at 58.
92 Tōkyō District Court, 26 July 2007.
93 Author’s translation, emphasis added.

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come to the fore. In order to survive as a viable business, shōten-kai need to be able toreplace failing businesses with successful ones and to enlist the cooperation of those
new businesses with collective goals. The current set of institutions governing them does
not allow most of them to do so.
Reforming the legislation governing their organizations, principally the SPA Act94, isan obvious place to look for a legal response to these organizational problems. Case law
involving shōten-kai is relatively scarce and what exists is mainly at the district court
level, where judgments are of little precedential value.95 As indicated in figure 1, the
SPA Act has however been amended a number of times since it was enacted in 1962.96
During the 1960s and 1970s amendments to the Act came at a snail’s pace of one per
decade. When the shōten-kai enter their decline in the 1980s, however, legislative activity begins to rise, with two amendments in the 1980s, seven in the 1990s and seventeen
in the decade from 2000–2009. While the overall data set is extremely small, there has
been a definite trend towards an increasing frequency of amendments to the Act.
Table 1: Legislative Amendments to SPA Act by Decade 97

When examined from a qualitative view, however, the significance of this trend becomes less pronounced. Virtually all of the legislation amending the Act prior to 2005
was technical in nature, consisting mainly of updates made to harmonize the Act with
94 While the remainder of the section focuses on the SPA Act, the SMSEC Act has gone
through an almost identical series of changes.
95 A search of Westlaw found only five judgments involving SPA as litigants, only one ofwhich was at the appellate level.
96 Law No. 53/2011; Law No. 74/2008; Law No. 74/2007; Law No. 75/2006; Law No.
50/2006; Law No. 87/2005; Law No. 154/2004; Law No. 147/2004; Law No. 150/2004;
Law No. 76/2004; Law No. 79/2002; Law No. 45/2002; Law No. 150/2001; Law No.
129/2001; Law No. 80/2001; Law No. 42/2001; Law No. 126/2000; Law No. 76/2000; Law
No. 160/1999; Law No. 146/1999; Law No. 87/1999; Law No. 96/1997; Law No. 72/1997;
Law No. 97/1994; Law No. 89/1993; Law No. 75/1981; Law No. 79/1980; Law No.
23/1974; Law No. 36/1965.
97 Ibid.

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amendments carried out to other legislation. These did not affect the substance of the
Act in any meaningful way.
In the period from 2005 to 2006, however, there were a series of amendments that
did introduce a fairly wide range of substantive changes to the Act. These amendments
were carried out in a series of three acts98 promulgated over a one year period, which
updated a large portion of the Act and introduced a significant number of governancerelated reforms. In the first round among the reforms was the introduction of the position of representative director, a requirement that directors abstain from voting on matters in which they have a personal interest, more detailed rules on the rights of creditorsand members to inspect SPA documents and the accounting books and a requirementthat minutes of the general meeting be taken. The penalties for violating various provisions of the Act were also substantially increased. The second, more minor, revision
specified the rules on agency and delegation authority of the representative director.
In 2006 a third piece of legislation introduced significant reforms to the auditor andofficer systems. The new provisions created governance rules applicable to those SPA
with membership above a certain threshold, defined by ordinance as 1,000 members.99
For large SPA it became necessary to appoint at least one outside auditor. The functionof auditors were also expanded, having until that point been limited to the auditing offinancial documents it was enlarged to include the auditing of the director’s performanceof their duties.100 This new function was mandatory for large SPA, but could be opted
out of by small SPA through provision in their articles limiting the auditor to reviewing
financial records.101 The new provisions also placed limits on the investment of surplus
funds by large SPA to government bonds and accounts at designated financial institutions. Other reforms applied to all SPA regardless of membership. These included enhanced disclosure requirements with regard to financial reports, introduction of a duty tomaintain copies of the accounting books for a ten year period, stricter liability rules for
directors, application of the Companies Act provisions with regard to members’ actions
against directors, and reducing the term of directors from three years to two.
The overall package of reforms provided by this legislation is clearly aimed at increasing the accountability of directors to the membership, particularly with respect tolarge SPA. They were also not specifically tailored to the problems of SPA or shōten-kai
in general. Rather they were subsidiary elements of much larger reforms to cooperative
laws being carried out at the same time that similar major reforms were being carried

98 Law No. 87/2005; Law No. 50/2006; Law No. 75/2006.
99 It is worth noting that less than three percent of shōten-kai have as many as 200 businesses(the highest number on the scale by which the SMEA measures shōten-kai size), let alone
one thousand. The number set for these provisions is so high that it is doubtful that even asingle SPA exists to which they would apply.
100 SPA Act Art. 46-3 (2).
101 SPA Act Art. 46-3 (4).

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out in corporate law.102 Reforms in that area, which began in the 1990s, have generally
sought to strengthen the influence of shareholders in corporate governance103, and in2005 the sections of the Commercial Code dealing with corporations were replaced by aseparate Companies Act. This change necessitated the harmonization of provisions inother Acts to reflect the update, including in the SPA Act which made numerous references to the former Commercial Code. In addition to these harmonizing provisions, theabove noted substantive reforms to the SPA Act, particularly the increased disclosure
requirements, stricter rules for directors and increased oversight mechanisms are quite
similar to central corporate law reforms.
While extensive, these reforms largely fail to address the organizational problems
that exist with SPA. One reason for this may simply be the inappropriateness of the SPA
Act as a venue for meaningful reform. The types of changes that might resolve these
problems – such as rules compelling membership by business owners in an SPA’s district or placing restrictions on the use of property within them – are not ones which thecooperative model based on voluntary membership used by the Act is suited to providing. The fact that it is a national piece of legislation uniformly applicable also makes it
somewhat inflexible to local circumstances. In other countries facing similar problemsof shopping street decline, legal responses incorporating these types of solutions havebeen carried out at the municipal level for that reason.104 Moreover, the declining economic significance of shōten-kai, coupled with the rapid decline in the numbers of small
merchants, has significantly reduced the political influence they can bring to the legislative process.
Regardless of the reason, the point to be drawn here is that legal change in this area
has not been a reaction to, or in fact at all related to, the economic decline of the shōtenkai. The reforms do nothing to address, or even attempt to address, the governance problems of shōten-kai and instead largely mimic the substance of reforms in corporate law.
They can thus be described as “zombie laws” in so far as the relevance of the directionof change within them to economic change.
3. Ousting: Legal Change in the Regulation of Large Scale Retailers
With regard to the regulation of large scale retailers an obvious preliminary questionthat arises is if changes to that regime, which was largely designed to protect inefficient
102 An overview of the 2005 corporate law reform can be found in N. NAKAMURA, The Revision of Japanese Company Law and its Modernisation, in: 24 Waseda Bulletin of Comparative Law 1 (2006).
103 For an overview of corporate law reform prior to 2005 see R. J. GILSON / C. J. MILHAUPT,
Choice as Regulatory Reform: the Case of Japanese Corporate Governance, in: American
Journal of Comparative Law 53 (2005) 343.
104 Particularly through the use of Business Improvement Districts. See generally R. BRIFFAULT,A Government for Our Time? Business Improvement Districts and Urban Governance, in:Columbia Law Review 99 (1999) 365.

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small retailers, may have caused the decline of shōten-kai. The beginning of the decline
in small retailers, however began in the early 1980s when the enforcement of these rules
was actually at its height.105 It thus cannot be said that weakening of these regulations inand of itself has caused the decline of shōten-kai.
Over the course of the 1980s, political pressure from the United States in the context
of its Structural Impediments Initiative (SII), as well as domestic pressure from industry
groups like Keidanren 106 began to be placed directly on the central government forchanges to the regulation of large scale retailers. In 1990 METI began to relax the approval process, with amendments that set an upper limit of eighteen months on thelength of time an application for approval could take, removing the requirement for consensus from local merchants (though still requiring consultation) and a lengthening of
their permitted operating hours.107 The following year the Diet amended the LSRS Act,further liberalizing the process. Immediately following these changes the number ofapplications from large scale retailers increased108 and the decade of the 1990s saw asteady rise in the number of such stores.109
The largest reform, however, came at the end of the decade when the Act was abolished and replaced with the Act on the Measures by Large-Scale Retail Stores for the
Preservation of the Living Environment (“MLSRSPLE Act”).110 This new law had asignificantly different focus than previous ones dating back to the first Department
Stores Act of 1937. Whereas the previous Acts had explicitly existed for the purpose of
ensuring that small scale retailers were not harmed by the opening of large scale ones,
the new Act completely dropped language to that effect. These changes formally meantthat regulation in this area was no longer conceived as a means of protecting small scaleretailers and instead is focused on the need to incorporate large scale retailers into theirenvironmental context. It is, in other words, less a law concerned with the regulation ofbusiness and more a law concerned with urban planning and development.
This new positioning is reflected in the content of the MLSRSPLE Act. As with previous Acts, it establishes a process by which plans for the opening or expansion of alarge scale retail shop can be approved. A significant change is that the application process is handled at the prefectural level rather than by METI, with the promoter being

105 UPHAM, supra note 8, at 409–410.
106 Ibid at 420.
107 Ibid at 422.
108 M. MINEO, Dai-kibo ko’uri tenpo ni kansuru shutten kisei no hensen to hyōka wakugumi[On the Changes and the Evaluative Frameworks of Government Regulations concerning
the Large Scale Retail Stores], in: Keiei Ronshū 71 (2008) 106, at 108.
109 Between 1984 and 2004 the number of retail stores with 50–99 employees went from 11,562
to 16,896 and for those with over 100 employees from 4,697 to 7,343. The largest jumps inboth came following the 1990 reform. See Statistics Bureau, supra note 86.
110 Dai-kibo ko’uri tenpo ritchi-hō, Law No. 91/1998, as amended by Law No. 91/2000.

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required to notify the prefecture of various aspects of the plan111 and to hold a publicbriefing session to detail the plan112. Local residents and business owners are entitled tosubmit opinions to the prefecture on such plans “on matters to be considered for preserving the living environment of the surrounding area.”113
Initial skepticism114 that the new Act, by placing administration of the approval process in the hands of local governments which were more likely to be beholden to local
merchants, would merely continue the previous protective function have proven unfounded. In reality the period has seen a significantly different trend which has madesuch concerns obsolete. The number of large scale retailers has continued to grow, but
this growth has largely taken place in suburban areas far removed from shōten-kai.115
Moreover many of the department stores and other large retailers which establishedbranches in central locations in previous periods have begun to close them. This has inpart been driven by changes in the large scale retailing business, which experienced anumber of major bankruptcies in the early 2000s, and also by changes to zoning rules bysmaller municipalities in the suburbs seeking to attract such stores.116 Since these large
stores often acted as anchors which attracted customers to neighboring businesses, theirflight to the suburbs has ironically caused further problems for shōten-kai. The main
point to be noted here, however, is that the economic decline of the shōten-kai has gone
hand in hand with a decline in their relevance both within the system of regulating large
scale retailers itself and to the process of changing that system.
4. Externalities, New Actors and Transformation: City Governments and Urban
Redevelopment Law
The decline of shōten-kai as business organizations stuck in a downward spiral has had
the side effect of seriously damaging the neighborhoods in which they exist. Many ofthem, particularly in small and mid-sized towns and cities, have been given an almost
ghost-town like appearance. This has created serious concerns not just for the shopkeepers themselves but also for city governments, since for many the central neighborhoods
that form their most public face are shōten-kai mired in urban decay.
One response taken by cities has been to use urban redevelopment legislation to undertake large scale redevelopment of shōten-kai in their downtown cores. From the perspective of the theme of this paper the interesting point of these plans is that, through avariety of measures, they provide functional solutions to the governance problems that
111 Art. 5.
112 Art. 7.
113 Art. 8 (2).
114 See MCKINSEY GLOBAL INSTITUTE, supra note 87.
115 N. KOMAKI, Locational Changes in Large-scale Retail Stores in the Tokushima Urban Region: Locational Regulations Perspective, Doctoral Thesis, available online at http://giswin.geo.tsukuba.ac.jp/sis/thesis/nobuhikokomaki.pdf, at 56–58.
116 Ibid, at 70–75.

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the SPA Act fails to resolve. In essence cities have stepped in and, using legislation froma completely different area, been able to address shortcomings in the “zombie law” thathas failed to keep pace.
The Takamatsu Marugame shōten-kai in Takamatsu, a mid-sized city which is the capital of Kagawa prefecture, provides an illustrative example.117 The shōten-kai lies in thecity centre and stretches along several blocks of a pedestrian only street covered by anarcade roof. Since the late 1980s it has suffered from many of the problems outlined
above, and has seen yearly decreases in the number of visitors.118 The plan being implemented in Takamatsu, which is part of a larger city revitalization plan, has made use of the
Urban Redevelopment Act.119 This law, promulgated in 1969, provides the legal basis forurban redevelopment projects throughout Japan through re-alignments of property rights.
Article 110 of the Act allows for a rights conversion (kenri henkan) in furtherance of suchprojects. In effect this allows, where the unanimous consent of the affected property holders has been obtained, for the collective pooling of property rights to land in order to build
a structure across multiple lots as part of urban redevelopment plans.
The redevelopment, which is still ongoing, has fundamentally changed the physicalnature of the shōten-kai. Using the rights conversion mechanism older, small shops havebeen demolished and replaced with much larger structures. These structures containresidential units on upper floors and retail space on lower ones, with separate leases foreach in order to avoid the problem of retiring shopkeepers continuing to use their storesas residences. The new buildings are managed by a special purpose corporation, withcapital provided by the city government and the Shōten-kai’s SPA.120 The land is rented
from its original owners, who have a term contract with a management company whichhandles the rent payments between the special purpose corporation and the landowners.
The alteration of the physical nature of the shōten-kai and the structure of property
rights distribution has significant governance effects. To begin with they bring new entities into the governance framework which have more power than SPA over businesses
within the shōten-kai. In particular the fact that a management company has tenancy
agreements with the businesses in the new buildings gives them bargaining power which
can mitigate the free rider problem by incorporating the shōten-kai costs into the rent
and making membership in the SPA a contractual obligation. The creation of residential
spaces physically separated from retail spaces also effectively eliminates the problem ofretiring shopkeepers continuing to occupy store space.

117 See K. KIKUCHI / S. BENIYA, Shōten-kai he no tenanto mikkusu shuhō dōnyū ni kansuru
chōsa kenkyū [A Research Study on Introducing Tenant Mix Methods to Shōten-kai], in:
Matsuyama Daigaku Ronshū [Matsuyama University Review] 18 (2006) 111, at 121–124.
118 Ibid, at 121.
119 Toshi saikaihatsu-hō, Law No. 38/1969, as amended by Law No. 89/2014.
120 KIKUCHI / BENIYA, supra note 117, at 124.

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Similar redevelopment projects have been pursued in other cities going back to the
1980s when the problem became an issue for city governments.121 Their interest here
lies not so much in their effects on the physical environment of the city, but in the factthat they provide a functional solution to the governance problems that the SPA Act isincapable of addressing. The issue has, owing to the self-undermining nature of theshōten-kai as an organization, been transformed as a legal problem from one centred on
the laws of cooperatives to one more firmly rooted in urban redevelopment law, which
offers a much different tool kit for solving the problems that have arisen.
It should be noted, however, that it is not a comprehensive solution to the shōten-kai
problem at large for a variety of reasons. To begin with, the large scale investments that
go into such projects mean that they can only be used in a very small number of shōtenkai – limited to those located in the downtowns of mid- to large sized cities. Secondly,
these plans by their nature engender a number of reactions by the small merchants
whose property will be used – many of whom opt to retire and do not re-open once theredevelopment is completed. 122 This changes the character of the “new” shōten-kai,
which has a completely different character as an organization and operates under a completely different set of institutions than the old one. In effect the law, in responding to
the economic changes, is used to create new institutions and organizations which will
replace the old. Thus the transformation of these governance issues from the realm oforganizational law to urban redevelopment law is not a mere formality but represents thecreation of a fundamentally different type of organization governed by a different set of
institutions.
V. CONCLUSION
The story of the shōten-kai and their relationship with the legal rules affecting themoutlined herein provide us with some insights on the relevance of economic decline tolegal change. As shōten-kai emerged as a form of economic organization in the earlytwentieth century, they provoked changes in the legal system which provided their associations with a series of legal forms and gave them a key position within the regulationof their main source of competition. Despite the massive disruption caused by the Second World War, this basic framework of rules established in the 1930s remained largely
unchanged through to the 1980s. Shōten-kai throughout the period were an effective
agent of legal change, pushing their interests and finding a legislature and bureaucracythat was willing to accommodate them. Group interest, rather than economic efficiency,
was the main goal of this process and the rules generally reflect that – promoting a formof retail trade that was generally inefficient but which benefitted small retailers greatly.

121 For a detailed case study see MUSHA, supra note 83.
122 Ibid.

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In the 1980s the fortunes of the shōten-kai abruptly shifted and they entered a periodof economic decline which continues to this day. The path of legal change amidst thisdecline is difficult to characterize in terms of a trial and error search for economicallyefficient rules. The process more resembles a broad transformative shift as the decline ofactors who dominate one legal field – small merchants in SPA – result in that body oflaw becoming less relevant while new actors who dominate different legal fields – city
governments and urban redevelopment law – come to the fore. The degree to which thisprocess is applicable in other contexts where different forms of economic organization
have entered decline is not an issue which this paper has directly considered, but is one
that remains a subject for further research.

SUMMARY
This paper is about the economic decline of shōten-kai, a form of business organization
created among small merchants on the shopping streets of Japan’s cities, and the relationship of that decline to legal change. The main focus is placed on a consideration of
how the decline of a business organization may affect the legal framework that has developed around it. The purpose in doing so is to fill a lacunae in the literature on therelationship between economic and legal change which thus far has largely focused on
the business corporation. The perhaps unique degree of success that the business corporation has achieved as a means of organizing economic activity means that this focus
has left our understanding of how law responds to the decline of such forms unexplored.
Shōten-kai provide us with a somewhat peculiar context in which to explore this issue.
While small merchant organizations and shopping streets have a long history in Japan,
modern shōten-kai have their roots in the early twentieth century when large numbers of
new arrivals to the country’s growing cities entered the retail trade. Faced with the needto compete with another relatively new market entrant – department stores – these small
shop owners began co-locating and organizing with each other as a means of surviving.
By the 1930s two areas of law had come to be of particular relevance to them. First, theCommercial Cooperatives Act, enacted in 1932, came to be used by shōten-kai as ameans of formally incorporating their associations as cooperatives and by 1938 morethan one hundred had done so. Secondly, the Department Stores Act, established in 1937,
placed strict regulations on the operation of department stores and gave small merchants a crucial voice in the system for granting permits for the opening or expansion of
new ones, thus providing shōten-kai with a great deal of protection from their main rivals.
This legal framework, which served both organizational and protective functions forshōten-kai would be temporarily interrupted by the Pacific War but was re-establishedin the post-war years. With regard to their organization, in 1949 the Small and Medium
Enterprise Cooperatives Act was enacted, followed in 1962 with the Shōten-kai Promo-

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tion Association (SPA) Act which created a cooperative specifically designed for shōtenkai. Today more than three thousand shōten-kai are organized under these Acts. The
Department Stores Act was likewise revised in 1956 and its system expanded in 1973
under new legislation which regulated all forms of large scale retailer.
The development of the law thus described occurred in a context in which small merchants, mainly organized in shōten-kai, dominated Japan’s retail system. In the early
1980s, however, the fortunes of shōten-kai took a turn for the worse, with the number ofsmall retailers entering a sharp decline that continues to this day. Once bustling shopping streets in many cities now look more like ghost towns as long rows of permanently
shuttered shops have become a common sight. The decline can be attributed to a numberof economic and social changes which, in combination with a rigidity in the governancestructure of shōten-kai, have placed many in a self-undermining spiral which they cannot reverse.
This paper identifies three trends in the above noted legal framework which havecome about in conjunction with this economic decline of shōten-kai. The first relates totheir organizational law. Shōten-kai face significant governance problems yet these havenot spurred changes to the SPA Act, the main piece of legislation that provides theirassociations with a governance framework, to address them. This may be the result of
the limits of the cooperative form upon which it is based to address the unique problems
they face, and also the result of the weakened role of small merchants within the law
making process. A second trend has been an overhaul of the regulation of large scaleretailers beginning in the early 1990s which has formally removed reference to small
retailers. The third trend has been the use of urban redevelopment law by city governments in ways that overcome some of the governance problems that shōten-kai themselves are unable to deal with.
ZUSAMMENFASSUNG
Der Beitrag setzt sich mit dem wirtschaftlichen Rückgang der shōten-kai, einer Formder Geschäftsorganisation von Kleinunternehmern in Japans städtischen Einkaufsstraßen, und dem Verhältnis dieses Rückgangs zu Rechtsänderungen auseinander. Der
Schwerpunkt liegt dabei auf der Frage, welche Auswirkungen der Bedeutungsverlust
einer Unternehmensform auf den rechtlichen Rahmen hat, der um diese Organisationsform herum entstanden ist. Das Ziel ist, dadurch eine Lücke in der Literatur zum Verhältnis zwischen ökonomischem und rechtlichem Wandel zu schließen, die sich bisherüberwiegend auf die Kapitalgesellschaften konzentriert hat. Der herausragende Erfolg
der Kapitalgesellschaften als Vehikel zur Strukturierung wirtschaftlicher Aktivitäten hat
zur Folge gehabt, dass die Frage, wie das Recht auf einen Bedeutungsverlust bestimmter Organisationsformen reagiert, weitgehend unerforscht geblieben ist.
Shōten-kai bieten uns einen etwas ungewöhnlichen Kontext, um dieser Frage nachzugehen. Während die Organisation von Kleinunternehmen und Einkaufsstraßen eineNr. / No. 39 (2015)

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lange Geschichte in Japan haben, finden sich die Wurzeln der modernen shōten-kai am
Anfang des Zwanzigsten Jahrhunderts, als eine große Anzahl von Neuankömmlingen indas Handelsgewerbe in Japans Großstädten eintrat. Durch die Konfrontation, plötzlich
mit diesen relativ neuen Marktteilnehmern – Kaufhäusern – konkurrieren zu müssen,begannen sich die Besitzer kleinerer Läden zu sammeln und sich zusammenzuschließen,um so überleben zu können. In den 1930ern wurden zwei Gesetze besonders wichtig fürsie: Erstens das Gesetz über Handelsgenossenschaften, erlassen im Jahr 1932, welchesvon den shōten-kai als Vehikel zur formalen Eingliederung ihrer Vereinigungen als Kooperativen eingesetzt wurde. Im Jahr 1938 hatten sich bereits über 100 Vereinigungengenossenschaftlich organisiert. Das zweite war das 1937 erlassene Gesetz über Kaufhäuser, das den Geschäftsbetrieb von Kaufhäusern streng regulierte und Kleinunternehmen eine entscheidende Stimme im Vergabesystem von Lizenzen zur Eröffnung oder
Erweiterung von Kaufhäusern gab, wodurch den shōten-kai ein starker Schutz gegen
ihre Rivalen geboten wurde.
Dieser Gesetzesrahmen, der sowohl organisatorische als auch Schutzfunktionen für
die shōten-kai erfüllte, wurde zwar durch den Pazifischen Krieg vorübergehend ausgesetzt, jedoch in den Nachkriegsjahren wieder hergestellt. In Bezug auf ihre Organisation
wurde 1949 das Gesetz über den Genossenschaftsverband mittelständischer Unternehmen erlassen, gefolgt vom Gesetz zur Förderung von Shōten-kai-Vereinigungen im Jahr
1962, welches eine Form der Genossenschaft schuf, die speziell auf die shōten-kai zugeschnitten war. Heute sind mehr als 3.000 shōten-kai nach den Vorgaben dieses Gesetzesorganisiert. Das Kaufhausgesetz wurde 1956 überarbeitet, und sein Regelungskonzept
im Rahmen einer neuen Gesetzgebung von 1973 auf alle Formen von großen Einzelhandelsgeschäften ausgeweitet.
Die eben beschriebene Entwicklung des Rechts entstand in einem Kontext, in dem
Kleinunternehmen, überwiegend als shōten-kai organisiert, das Einzelhandelsgewerbe
in Japan dominierten. Anfang der 1980er wandelte sich das Schicksal der shōten-kai
allerdings zum Schlechteren; die Zahl der Kleinunternehmen begann stark abzunehmen.
Dieser Abwärtstrend dauert bis heute an. Einst belebte Einkaufsstraßen gleichen heutzutage in vielen Orten Geisterstädten, in denen langen Reihen von auf Dauer geschlossenen Läden inzwischen zu einem normalen Anblick geworden sind. Der Bedeutungsverlust kann auf eine Vielzahl von ökonomischen und gesellschaftlichen Veränderungenzurückgeführt werden, welche viele der shōten-kai, in Kombination mit der Starrheit
ihrer Governance-Struktur, in eine unumkehrbare Spirale der Selbstschwächung getrieben hat.
In diesem Beitrag werden drei Trends im Kontext des oben genannten Gesetzesrahmens identifiziert, die aus dem wirtschaftlichen Rückgang der shōten-kai resultieren.
Der erste betrifft die organisationsrechtliche Gesetzgebung. Obwohl die shōten-kai mit
erheblichen Governance-Problemen konfrontiert sind, haben diese Probleme sich nicht
in einer Reform des Gesetzes zur Förderung von Shōten-kai-Vereinigungen niedergeschlagen, das den Governance-Rahmen für diese Vereinigungen bildet. Dies könnte eine

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Folge der begrenzten Möglichkeiten genossenschaftlicher Strukturen sein, auf die spezifischen Probleme der shōten-kai reagieren zu können. Es könnte zudem auch eine Folge
der verringerten Rolle der Kleinunternehmen im Gesetzgebungsprozess sein. Ein zweiter
Trend liegt in der in den 1990ern beginnenden Reform der Regulierung von großen Einzelhändlern, in deren Zuge die offizielle Bezugnahme auf Kleinunternehmen entfallen ist.
Der dritte Trend besteht in dem Einsatz von Maßnahmen der Stadtplanung zur Überwindung einiger der Governance-Probleme, welche die shōten-kai selbst nicht überwinden können.
(Die Redaktion)