The Japanese Large Scale Retail Store Law

The Japanese Large Scale Retail Store Law

Historically Japan has had many small retailers. In Japan half of the stores have only one or two employees, and 90 percent of the stores employ nine or fewer people.

This is no accident. For many years the development of Japan's large retailers was stunted by the Large Scale Retail Store Law. This law has origins in the 1950s, but due to pressure by a politically powerful army of small retailers, the law was strengthened in the late 1970s.

The law originally provided a system whereby a large retailer would simply notify local retailers of plans to build a large store in the area. Local shopkeepers then would have a chance to comment on the new store. However the national law was revised to prevent almost any new store over 500 square meters, or 5,400 square feet, from being established.

Because studies indicate that large stores are much more likely to sell imported goods, the United States in the late 1980s moved to have Japan's Large Store Law revised.

The US was not the only one displeased with the law. Many large Japanese retailers were frustrated because they had been trying in vain for up to 10 years to get new, large stores opened.

The law even encouraged corruption because large retailers often had to make payments to influential locals to gain acceptance of a new store. The US and large retailers won in 1990 when the Large Store Law reverted to its original intent of notification only.

Now large retailers must notify local merchants as to the opening of a store, but shopkeepers can no longer stop the new store from opening. All new stores must be allowed to open within one year after they have notified the community.

The deregulation in large stores had an immediate effect. Whereas large store openings before deregulation numbered about 200 a year in the 1980s, in 1990 nearly 700 large stores opened.

Large stores also were allowed to stay open later. Before deregulation, most large stores had to close by 6:00 p.m. After 1990, they could stay open until 7:00 p.m. This is still not as late as many smaller stores, but it is an improvement.