Debt collection in Japan? Kaoru Haraguchi gives the inside view

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Jan. 28,2014
Reykjavik, Iceland ( — The past two decades of evermore expansive globalization have witnessed, among other things, a swelling tide of accounts receivables and debt collection costs in transnational trade.

Operating out of a hub of pan-Asian and global trade, Kaoru Haraguchi, the founder and manager of one of Japan’s leading law firms and international debt collection agencies, shares with a notable story about his experience of this trend. He also gives us the inside view from the debt collecting trenches in Japan.

Established in 2003, Haraguchi’s law firm, Haraguchi International Law Office, has achieved specialization in areas of law that range from the legal assistance of domestic and international companies to international succession and debt collection and corporate reorganization and civil revitalization. With law degrees from Chou University and the University of Chicago Law School and with over 35 years of professional experience in international legal matters, Haraguchi is one of Japan’s focal figures in terms of the global dimension of cross-jurisdictional trade. He is also an avid ping pong and tennis player.


DEBITUM.BIZ: How did you end up in debt collection?
HARAGUCHI: About 10 years ago, I got an email from a New York debt collection agent requesting us to assist their client in collecting debt from its Japanese debtors. Since then we have been collecting countless debts owed by Japanese debtors (both companies and individuals) to foreign creditors.


DEBITUM.BIZ: What would say are the three most important tasks for a debt collector?
HARAGUCHI: To discover the issues related to each debt, timely contact, and patient negotiation.


DEBITUM.BIZ: How do your family and friends view your job?
HARAGUCHI: They see debt collection as necessary for international transactions and travel.


DEBITUM.BIZ: Why do you like your job?
HARAGUCHI: Because it enables me to communicate with people around the world and to understand the various transactions on which different debts and debt-related issues are based.


DEBITUM.BIZ: What kind of relationship do you have to creditors and debtors?
HARAGUCHI: We do not have a face-to-face relationship with creditors located outside of Japan unless they come here on a visit. We contact domestic debtors mainly by letter, fax, email, and telephone.


DEBITUM.BIZ: Can you describe your job in three sentences?
HARAGUCHI: In Japan, under the Article 72 of the Practicing Attorney Law Act, only a qualified attorney may collect debts owed by a Japanese debtor to a foreign creditor. We are one of a very few law firms that has more than ten years experience in international debt collection and that is also a member of an international debt collection network.


DEBITUM.BIZ: What has been the most striking debt collection story in your time as a debt collector?
HARAGUCHI: Recently, we collected debts of 30 million yen (approximately $300,000) from the third largest Japanese clothes wholesaler. Although the letter of credit issued by the Japanese bank clearly stated that the clothes should not be released without delivery of the relevant documents, the company used its connection with the shipping company to acquire the clothes. It then promptly sold the clothes to a Chinese retailer (timing in China is critical for cheap clothes sales in the summer).


We reviewed the relevant sales contracts and the letter of credit. We interviewed the creditor, the sales agent, and the Japanese company. We discovered that the activities of the Japanese company were not merely in breach of the letter of credit arrangement; they also constituted criminal fraud. Upon pointing out this issue, the company expressed its reluctance to pay all the debts immediately.


DEBITUM.BIZ: What do you see as the most challenging issue for the Japanese debt collection industry in the year ahead?
HARAGUCHI: As long as there are debtors and their debts, we will continue to collect debts either through amicable negotiation or litigation. Most Japanese debtors do want to repay the debts they owe, though. The problem we may have in the next year would be the growth, or lack thereof, of the Japanese economy. If Prime Minister Abe’s economic reform policy fails, more debtors in Japan will lose the chance to recover and will thus most likely end up having to file for bankruptcy.


DEBITUM.BIZ: What law or laws does Japan need to introduce in order to improve the situation of Japanese creditors?
HARAGUCHI: We do not see any issues here in relation to the creation of new legislation for the protection of Japanese creditors.


DEBITUM.BIZ: How would fluctuating interest rate changes influence debtors’ behaviour?
HARAGUCHI: I believe the interest rate of the debts should be decided by the creditors and debtors based on the risk associated with the transaction from which the debts arise. We have interest rate restriction laws, but mere restriction does not really solve any issues. I do not think changes in the interest rate would have a great influence on the debtors’ behaviour.


DEBITUM.BIZ: Ditto with changes to the statute of limitation?
HARAGUCHI: Technically speaking, the statute of limitation would release the debts, and changes to the statutory limitation period would have an influence on the debtors’ behaviour. The limitation period is, however, designed to avoid losing the critical evidence to sort out the issue by sacrificing the lazy creditor, and therefore I do not think the changes to the statutory limitation period would not, in practice, have great influence on the debtors’ behaviour.


DEBITUM.BIZ: How has computerization influenced your company?
HARAGUCHI: Computerization has made our lives both easy and difficult. Without computers, we would not be able to collect debts and record and report case-relevant information. We, as human beings, would also in no way be able to memorize and produce the vast volume of information a computer does. The problem of computerization, however, has been the pace of updating the software, the hardware, and the disc operation system. Regular updates cost much money in the long run and cost much time in learning how to operate the new technology. Such costs cause the pain in my eyes and hands, and some pain on our firm’s balance sheet.


DEBITUM.BIZ: Is it easy for you to find employees with the right profile for the debt collection profession?
HARAGUCHI: Yes, finding the right employees has not presented many difficulties so far.


DEBITUM.BIZ: What role do on-site debtor visits play in the Japanese debt collection industry?
HARAGUCHI: We do not think on-site debtor visits have much influence on debt collection efforts in Japan. Most debtors wish to repay the debt due, but punctual payment is not always possible. Sometimes the debtor has a strong argument in its defence, such as when it invokes the quality of the products shipped by the creditor. In most cases, the debt issue can be sorted out without undertaking any on-site visits. In other words, on-site debtor visits do not change the situation if the debt does not exist or if the debtor does not have the financial ability to repay.


Mr. Haraguchi can be reached at kharaguchi(at) For more information on Mr. Haraguchi and Haraguchi International Law Office, please visit


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