JAPAN

by Chai May

Country background

• Japan:  Free-market economy is the third-largest in the world.
• Economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services.
• Japan's reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade produced a mature industrial economy.
• Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy.
• Less than 15% of Japan's land is arable. The agricultural economy is highly subsidized and protected.
• Japan normally produces a slight surplus of rice but imports large quantities of wheat, corn, sorghum, and soybeans, primarily from the United States.
• Japan is the fourth-largest market for U.S. agricultural exports.
• Dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, coke, copper, and bauxite must be imported, as must many forest products.
• Japan's labor force consists of some 65.1 million workers (2010 est.), 42% of whom are women. Labor union membership was estimated to be about 10 million in 2007.
• Japan is the world's third-largest economy and a major economic power both in Asia and globally.
• Japan has diplomatic relations with nearly all independent nations and has been an active member of the United Nations since 1956. Japanese foreign policy has aimed to promote peace and prosperity for the Japanese people by working closely with the West and supporting the United Nations.
• Japan is the land of peace and harmony that continues to evolve in a positive unification of tradition and modernisation.
• Japan has formed a distinct model of hierarchy, honour and etiquette that is still reflected in many social and business practices today.
• Japanese culture :

• Wa
• The most valued principle still alive in Japanese society today is the concept of 'wa', or 'harmony'. In business terms, 'wa' is reflected in the avoidance of self-assertion and individualism and the preservation of good relationships despite differences in opinion.
• Kao
• One of the fundamental factors of the Japanese social system is the notion of 'face'. In Japan, causing someone to lose face can be disastrous for business relationships.
• Omoiyari
• In literal terms it means "to imagine another's feelings", therefore building a strong relationship based on trust and mutual feeling is vital for business success in Japan.

Main challenge

• The share of Japan in world export markets may no longer be growing,
• Japan is now going through a period of slow, almost zero. This may be attributed in large part to the instability of financial conditions both in domestic markets and in world currency markets where the yen has appreciated abruptly.
• Japanese firms are likely to retain their lead, especially in more sophisticated products. They appear still to be motivated more by aspirations to increase market share, rather than to maximize their profits, even in the long term.

Living environment

Full support when doing business in Tokyo

• The Tokyo Metropolitan Government-operated Tokyo Business Entry Point provides one-stop support to foreign-affiliated companies and Japanese representatives that engage in business activities in Tokyo. 
• It provides information on licenses, public agency support programs, and answers questions related to business, medical facilities, housing, and other topics related to daily life.
• Promotion opportunities of the six key sectors, Automotive Parts, Retail, ICT, Biotechnology, 

Medical Care and Environment


Japan offers many business opportunities for worldwide buyers and investors interested in Japan's B2B marketplace.

Doing business in Japan

• A contract is a loose agreement to do business, not a document detailing every aspects of the business relationship
• Does not guarantee that the business relationship is good
• Prefer to sign short agreements stating that they will do business, leave details for later
• Personal commitments have a far greater meaning
• Aftercare and long-term relationships are positively encouraged.
• Decisions are made swiftly and efficiently.
• Punctuality is essential in Japan; lateness is as sign of disrespect.
• Begin at the executive level and continue at the middle level. However, decisions will often be made within the group.
•  Business meetings the Japanese will line up in order of seniority
• Low ranking individual can become a manager if his or her performance is good.
• Greater respect to the eldest members in Japanese business culture.
• Age and rank are strongly connected.
• Personal space is highly valued in Japan due to the densely populated areas in which they live. 
• Physical contact, other than a handshake, is never displayed in public.

Major opportunity

• Doing business in Japan locate in Tokyo.
• High concentration of foreign-affiliated companies
• Ease of finding customers and partners, the high number of Japanese companies with headquarters in the city
• Ease of acquiring personnel, and the high concentration of national government agencies in the city.
•  A large number of overseas investment agencies, including the commerce departments of various foreign embassies and foreign chambers of commerce, are located in Tokyo and support the business activities of foreign-affiliated companies in Japan.

Establish an Office

• Options For Foreign Companies
• Representative office
• Simplest form of business structure
• Usually one person with assistant
• Established in preparation for future expansion into branch or subsidiary
• All activities must support and represent parent company
• Monitor activities of Japanese distributors/agents handling
• parent company’s products
• Cannot sell or conduct any “real business”
• cannot generate any profits
• Branch office

• Requires simple registration process
• Registration fee
• Filing the company’s representative “seal”
• Registering tax and related expenses items
• Submitting proxy notifications
• Must appoint an official representative responsible for local operations
• Does not have to be a Japanese citizen, but must be a legal resident of Japan
• Branch offices can earn income and remit to parent company
• Can also be established to conduct activities that do not generate income
• Subject only to income tax on Japan source net income only
• Deduction can be claimed for reasonable head office expenses
• Profits can be remitted to home office; not subject to withholding tax
• Subsidiary corporation(Kabushiki Kaisha (KK))
• A KK is similar to U.S. public corporation, though not listed on the stock market
• Often wholly owned
• Easier to arrange local financing, lease office space, attract local employees
• Prestige
• Indicates long-term commitment
• Limited liability
• Freely transferable shares
• Well-defined procedures of establishment and management
• Requirements
• Minimum capital of approx. $100K
• 25% of shares must be issued
• Three directors; at least one must reside in Japan

Using an agent/distributor

• Finding a Japanese distributor takes longer than in other Asian countries
• Relationships with the Japanese may take several years to develop
• Move slowly
• Build trust
• Many foreign companies in those initial distributor contract negotiations agree to a transfer price (the percentage of the selling price paid by the Japanese distributor to the foreign company) calculated as a percentage of their home market list price, sometimes with a small (10% - 15%) allowance for Japanese market markup built-in.
• Tensions because the foreign company has probably made substantial investments in product modifications and enhancements specifically for Japanese customers and most likely at the request of the Japanese distributor.
• The result is frustration and maybe even litigation as the foreign company becomes convinced it is unfairly subsidizing the distributor's very healthy margins.

Joint ventures/licensing

• Situation improving for foreign companies in Japan
• Must be approved by Ministry of Finance JV staff
• Head office support
•  Foreign manager
•  Familiarity with own company,
• JV and Japanese culture, lifestyle
• Potential problems
• Establishing mutual confidence
• Communication
• Winning overall support

Distribution & Sales channel

• Distribution channels in Japan are very difference as inefficient as they are complex.
• The system is characterized by multiple layers of wholesalers who have developed close, personal  
• relationships with other wholesalers, manufacturers, importers, and retailers.
• Japanese retailers or end-users are unwilling to make the switch to an "unreliable" foreign supplier.
• Fear a lack of commitment on the part of the foreign supplier will lead to problems.
• Fear breakdowns in communication.
• Complexity and lack of transparency of the Japanese system.

Electronic commerce

• E-Commerce in Japan is a growing trend and becoming accessible in English too
•  E-commerce takes off in Japan
• Japanese online retailing is on the rise, and its champion is spreading its wings 

Openness to foreign investment

• Government Attitude Toward Foreign Investment: Liberalizing
• Increased foreign direct investment in enhancement of Japanese economic vitalization, creation of new business, reduction of the disparities between international and domestic prices, import expansion, through introduction of the new technology, management know-how and various kinds of competition among domestic and foreign firms.
• Benefit Japanese consumers, bringing a supply of less expensive and better goods and services and greater selection.
• Further opens Japan's economy, society, and culture.
• Foreign direct investment in Japan, contribute to a balanced development of the global economy and to the creation of peaceful and cooperative international relations.
• Few Formal Restrictions
• The government does not impose export-balancing requirements or other trade-related FDI measures on firms seeking to invest in Japan.
• Risks associated with investment in many other countries, such as expropriation and nationalization, are not an issue in Japan.

Right to private ownership & establishment

• Japan legally maintains the right for foreign and domestic private enterprises to establish and own business enterprises and engage in all forms of remunerative activity.
• Protection of Intellectual Property Rights:
• Register patents and trademarks in Japan to obtain protection
• Obtaining and protecting patent and trademark rights in Japan can be time-consuming and costly, although patent fees have recently been reduced considerably.

Business customs

• Business Meeting Etiquette
• Casual American-style attire is still uncommon in the Japanese business place, dress appropriately for the occasion when meeting counterparts on business.
• Seating arrangement will be determined by the status of the participants. Do not just sit anywhere.
• Highest ranking person from the host side will sit at the head of the table.
• When the meeting is finished, wait until “top person” has stood up before standing up.
• Non-alcoholic drinks will probably be served at the beginning of the meeting Wait for the “top person” to drink from his glass before starting on yours.
• Gifts are always appreciated. Consider bringing a small souvenir give to your host. 
• Social Interaction
• Do not be offended if an invitation turns out to have been just talk and don't aggressively
• Japanese are unlikely to invite you into their homes. It is normal for dinner meetings to be held in restaurant 
• Japanese love to drink alcohol with and after dinner. Do not say “No”, try to drink.
• If alcohol is served, DO NOT drinks from the bottle. You should pour the beverage into a cup and then drink.
• Tipping is not customary in Japan.
• When eating with your hosts, try to eat some of everything and look like you are enjoying the food. They'll appreciate hearing that you like their food
• Business Card Exchanges Guidelines:
• Cards are exchanged at the beginning of a meeting, make sure you have enough available for everyone.
• It is best to stand up when exchanging cards with those of higher rank.
• Facing your counterpart, bow slightly and hand your card (with the Japanese side pointing up!) either with your right hand or both hands. The same rule applies when receiving a card from someone else.
• Make time to review your counterpart's card carefully. Show interest in and respect to the other party.
• DO NOT shove the card into your back trouser pocket!
• If you are meeting in passing, then carefully place the card in a shirt pocket or in a wallet or notebook.
• If you are seated at a meeting, place the card gently on the table in front of you.
• The Japanese hand out their business card at the drop of a hat.

Local time, business hours, & holidays

• Time: 
• Japan is 14 hours ahead of U.S. Eastern Standard Time (EST)
• 13 hours ahead of Eastern Daylight Time (EDT) from April to October. 
• 8:00 a.m. EST in New York City corresponds to 10:00 p.m. the same day in Tokyo. 
• 8:00 p.m. EST in New York City corresponds to 10:00 a.m. the next day in Tokyo.
• Hours: 
• The typical Japanese workweek is Monday through Friday, 9:00 a.m. to 5:00 p.m., although many Japanese office workers put in long hours of overtime. 
• Flex work hours have become popular at some large companies. 
• Majority of Japanese take their lunch break promptly at 12:00 noon and return to the office at 1:00 p.m. sharp.
• Holidays: 
• When a national holiday falls on a Sunday, the following Monday is a compensatory day. 
• Many Japanese companies and government offices traditionally close during the New Year's holiday season (December 28-January 3), "Golden Week" (April 29-May 5) and the traditional “O-Bon” Festival (usually August 12-15).

Fact Facts

Population	127.08 million. Population growth rate (2011 est.): -0.278%
Capital	Tokyo. Other cities--Yokohama, Osaka, Nagoya, Sapporo, Kobe, Kyoto, Fukuoka.
Area	377, 835 sq. km. (145,902 sq. mi.); slightly smaller than California
Ethnic groups	Japanese, Korean (0.5%), Chinese (0.4%).
Religious	Shinto and Buddhist; Christian
Major Language	Japanese
Monetary Unit	Yen the basic unit of money in Japan; equal to 100 sen
Major industries	Machinery and equipment, steel and non-ferrous metals, textiles, autos, chemicals, electrical and electronic equipment, ships, and processed foods.
Major exports	Cars, electronic devices and computers. Most important trade partners are China and the USA, followed by South Korea, Taiwan, Hong Kong, Singapore, Thailand and Germany.
Major Imports	Has a surplus in its export/import balance. The most important import goods are raw materials such as oil, foodstuffs and wood. Major supplier is China, followed by the USA, Australia, Saudia Arabia, South Korea, Indonesia and the United Arab Emirates
GDP	$5.391 trillion (official exchange rate); $4.338 trillion (PPP). Real growth rate (2010 est.): 3%.
GDP per capita	$34,200