Why would you do business in Japan?

Why would you do business in Japan?

Japan is a significant international commerce market.

After China and America, Japan has the third-largest economy in the world.

As of January 2023, the Tokyo Stock Exchange (TSE) has a total market value of over $5.6 trillion, with over 3,890 listed businesses making it the biggest stock exchange in Asia.

Japan ranks fourth in terms of imports and fifth in terms of exports of products worldwide (Santander Trade Markets, 2023). Japan's economy is highly dependent on international commerce, and it has significant economic relationships with several nations.

37% of the nation's GDP is derived on international commerce (World Bank, 2023).

With a market for computers and telecommunications that is second only to that of the United States, Japan is a technologically and innovative powerhouse, leading the globe in electronics, robotics, automobile production, and infrastructure development.

When it comes to investments in renewable energy and green technologies, Japan is a global leader. Japan was the top-ranked Asian nation in the Green Growth Index in 2021.

Customers with high levels of disposable income who are drawn to upscale, premium products and services define the Japanese market.

Japanese businesses exhibit a global perspective and a readiness to commit to long-term investments in profitable goods and services.

Japan's reputation for quality and innovation is closely linked to the dedication and allegiance Japanese businesses have to their business associates. In addition, Japan has emerged as a hub for the creation of novel ideas and products for several international businesses.

What benefits come with doing business in Japan?

The following are the financial and strategic benefits of doing business in Japan:

A safe basis for corporate operations is provided by a robust financial system, a stable business climate, and strong intellectual property protection.

access to a workforce that is highly educated and competent. Japan has the highest adult education ranking of any G7 nation, coming in at number five overall.

For the transportation of all kinds of products and services, Japan has a highly developed, contemporary infrastructure that includes roads, highways, trains, subways, airports, ports, warehouses, and telecommunications.

Japan is home to five international airports and more than 20 ports. The two main airports servicing the Tokyo area are Tokyo International Airport (HND) and Narita International Airport (NRT), whereas the two major airports serving the Osaka region of Japan are Osaka International Airport (ITM) and Kansai International Airport (KIX). Airports are located. In general, import processes, airports, and ports in Japan are organized and effective.

In only 14 days, a firm may be established in Japan, and after three to five years, prosperous Japanese companies can account for a significant share of worldwide revenues. The time needed to start up a company in Japan may be shortened to 4 days by using Jetro's one-stop business setup services.

Reaching out to the Japanese market opens doors to the larger Asia-Pacific area as well as the domestic market.

Collaboration with Japanese peers may result in technical breakthroughs and product development due to the extremely inventive climate in Japan.

If you are successful in Japan, you may succeed elsewhere because it indicates that you have created a product or service that satisfies the exacting standards of excellence held by the discriminating Japanese market. ..Take a listen to our audio interview with Alex Hughes, the CEO of Rutherford, to find out how her company's line of upscale hand-stitched bridle leather bags helped her flourish in the Japanese market.

Is it hard to get into the Japanese market?

Japan's distinct corporate culture, highly concentrated local competition, and intricate distribution networks may worry foreign businesses.

Nonetheless, the absence of actual geographic barriers made possible by the Internet makes it simpler than ever to contact clients in Japan.

Moreover, mobile payment options and international payment gateways provide practical means of receiving money in other currencies.

Despite having a strong local market in many sectors, Western brands are linked with exoticism and prestige, which drives up demand for Western goods and services among Japanese consumers.

Moreover, the business culture in Japan is not as difficult as many companies think. The essential components of success in business in Japan are perseverance, honesty, deference to one's professional traditions, and a long-term outlook.

For some international firms, language and cultural barriers may seem to be an obstacle. But bridging this gap is what our skilled team of local Japanese business professionals and partners excels at.

Overview of the Japanese Market

Thanks to its highly qualified workforce, superior technology, and well-developed infrastructure, Japan has the third biggest economy in the world. It is home to some of the most prominent companies in the world, like as Toyota, Sony, Toshiba, and Panasonic, and has a GDP of over $4 trillion. Japan's position as an economic powerhouse is largely due to its broad industrial landscape, which includes the automotive, electronics, robotics, and healthcare industries.

Japan has led the world in technical innovation for a very long time. The nation's many patents and accomplishments across a range of industries serve as examples of its dedication to research and development. This setting provides firms with access to state-of-the-art technology and chances to collaborate with top research institutes.

With a population of over 126 million, Japan has an affluent and astute consumer base with substantial buying power. This is a market that appeals to companies, particularly those who sell luxury and high-end items.

The workforce in Japan is renowned for its discipline, diligence, and high degree of education. The nation's robust work ethic is advantageous for companies seeking competent personnel and a dependable staff.

Japan is a desirable location for companies wishing to purchase parts and work with reputable suppliers because it is a crucial component of global supply chains.

Similar to other nations, Japan is experiencing significant societal transformations, such as a fast aging of its population. For instance, it offers advantageous chances for enterprises with a focus on the senior care industry and other industries. Education is another sector with bright futures as more parents understand how important it is to give their kids a more global perspective and how important it is to start learning the English language at a young age.

The New Capitalism Initiative, which outlined an economic strategy to boost investment in people, start-ups, research, technology, innovation, and green and digital changes, was released in June 2023 by Prime Minister Fumio Kishida. The purpose of the additional investment is to address concerns like climate change and worker pay sustainability while also promoting economic development.

Japan's innovative corporate culture, details:

There are 31 Japanese Fortune 500 firms.

With 2.8 million people with a net worth of more than $1 million, Japan has the highest number of millionaires in Asia and the fourth highest number worldwide.

IP appetite, particularly in the domains of business services, biopharmaceuticals, and high-end electronics.

Japan places a great deal of significance on intellectual property and has several laws protecting it.

Young businesspeople are questioning the status quo.

At 3.39% of global GDP, Japan has the fourth-highest R&D spending worldwide.

It's also a reliable environment to do business since people honor their word and deadlines are met.

Doing business in Japan is less surprising than in other parts of the area since intellectual property is adequately safeguarded and responses to inquiries, payments, and deliveries are made on time.

Japan is promoting entrepreneurship by enacting new laws that facilitate company creation, provide tax breaks, and assist international business owners.

With 3.3% of GDP allocated to R&D, Japan has the eighth-highest GDP in the world (2021).

Japan is a reliable location to do business because of the hard work, discipline, attention to detail, and respect that are part of Japanese culture.

Doing business in Japan is less unexpected than in other parts of the area since intellectual property is well safeguarded and transactions, supplies, and inquiries are handled quickly.

Japanese customers having large amounts of discretionary cash

With 2.8 million Japanese billionaires who appreciate innovative, premium products, services, and technology, Japan represents a sizable potential market for foreign businesses wishing to expand their operations.

Customers place a great deal of emphasis on the final product's quality, elegance, dependability, and feeling of tradition. Nowadays, a large number of customers are retired and eager to enjoy the rewards of their hard work. Many of them earned their money during Japan's explosive economic growth. Individuals over 60 have a lot of extra money that they are willing to spend on their family or themselves.

The amount of personal wealth is substantial: families own $12.8 trillion in net financial worth, which is about equivalent to the US GDP

Japanese customers have a fondness for foreign items ranging from fashion to automobile, food and beverage, design, and the newest digital innovations. And that's without taking into account all the businesses that want access to global data in fields such as biotechnology, pharmaceuticals, chemicals, manufacturing, engineering, communications, transportation, energy, and consultancy.

The importance of interpersonal and commercial ties in Japan

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Japanese dating

The distinctive blend of accuracy and humility, tradition and innovation, characterizes Japanese corporate culture. The skill of fostering relationships is one of the main tenets of Japanese business success. In Japan, cultivating and maintaining solid interpersonal ties is not only polite, but also a necessary part of doing business. Gaining an understanding of the value of establishing relationships in Japanese corporate culture might be crucial for success in this fast-paced industry.

Mutual trust and harmony are key to Japanese corporate culture

In Japanese corporate culture, the idea of harmony is fundamental to the process of developing relationships. In commercial partnerships, harmony and mutual trust are vital to develop. It is founded on a sincere, long-term commitment to collaboration and mutual progress and goes beyond simple transactions. Upholding good faith entails settling conflicts politely and coming up with solutions that work for everyone, gradually building confidence.

Maintaining Face and Reputation in Japan

When negotiating in business, the idea of "face saving" is critical. This involves preserving the honor and reputation of both the other party and yourself. Japanese businesspeople take great care to avoid embarrassing or dehumanizing their rivals. Even in difficult circumstances, they work hard to maintain their reputation since losing it may have a long-lasting detrimental effect on relationships and commercial opportunities.

Japanese fidelity and devotion

Japanese companies place a high importance on commitment and loyalty among its partners, customers, and staff. One should expect and be rewarded for their loyalty to one's job or business partner. This commitment ensures the survival of commercial endeavors by fostering a feeling of stability and security in partnerships. All parties concerned may then become more dedicated and committed as a result.

Japanese dating

In Japanese corporate culture, connections are developed gradually. The process of reaching a transaction or formalizing a partnership generally entails several meetings, social events, and discussions from this long-term viewpoint. By using this method, both parties may have a better grasp of each other's requirements, preferences, and expectations, which guarantees a mutually productive commercial partnership.

In Japan, decisions are made by consensus

In Japanese corporate culture, reaching an agreement on decisions is highly valued. Before making a business choice, this approach entails speaking with all relevant stakeholders and securing unanimous permission. Since judgments made in solitude may upset the delicate balance of commercial relationships, this is consistent with the need of acting in good faith.

regional portrayal in Japan

Since they will be able to lessen the likelihood of misunderstandings and misinterpretation, a local representative or partner with experience doing business in Japan may be quite helpful. They will be able to comprehend the lines of behavior and language used by your Japanese colleagues. Will elucidate them for you. Hear Bango's audio conversation on the value of local representation to learn more.

In Japanese communication and etiquette

In Japanese corporate culture, etiquette, formality, and politeness are valued highly. In both written and spoken communication, it's important to address others with the proper honorific titles and to convey thanks and respect in the right ways. These courtesy acts show a genuine dedication to maintaining polite and respectful interactions rather than being meaningless routines. See our piece on business etiquette in Japan here.

Support and patience in the Japanese market

Generally speaking, Japan makes decisions at a much slower rate than other foreign marketplaces. It normally takes persistence and regular follow-up to close a contract. Things may move rapidly, however, once the Japanese decide to do business with you.

Japan's Adaptation to the World

The world of international business is vibrant and diversified, even though Japanese business culture has its own distinct traditions and practices. Even though Japanese businesses have expanded internationally and taken on many cultural norms and practices, they have managed to hold onto the fundamental relationship-building values that are ingrained in their society.

In summary

It is impossible to overstate the value of establishing relationships in Japanese corporate culture. It adds to Japan's total economic strength and lays the groundwork for fruitful, long-lasting corporate collaborations. Companies that are aware of and sensitive to the subtleties of Japanese relationship-building techniques have a better chance of succeeding in this cutthroat and tightly regulated industry. The qualities of harmony, trust, loyalty, and dedication, together with the skill of effective communication and manners, may help one negotiate the intricate web of business connections in Japan and fully realize their potential for mutual progress and success.

What is meant by keiretsu?

Japanese businesses have always operated within unofficial associations known as keiretsu.

Keiretsu is a collection of businesses whose shareholdings and commercial connections are interconnected.

Small stakes in each other's businesses, focused on a core bank, are owned by member firms. This approach shields each business from stock market swings and takeover attempts, allowing for long-term planning in creative ventures.

The system has been commended for fostering connections rather than the hostile interactions that were previously present between suppliers and buyers.

Keiretsu partnerships are often seen as being lasting and including more than just economic ties; they also include social and personal ties.

Japanese businesses are required under the keiretsu structure to only do business with other member firms. However, because of the difficult economic circumstances in recent years and the high degree of merger and acquisition activity in Japan, keiretsu's significance has somewhat diminished.

In modern Japan, one might encounter instances of both competitive bidding and situations where preserving long-standing commercial ties takes precedence over obtaining the best deal. In light of this, we counsel UK businesses to investigate and comprehend the keiretsu structure inside their intended industry or company area and then tailor their business strategy appropriately.

business etiquette in Japan

Japanese corporate etiquette is centered on politeness and sensitivity. It's possible that formality is the primary difference between Japanese and Western business etiquette, but don't let that deter you—Japan operates much like the rest of the world.

Here are some pointers to assist you on your journey

Trade with other countries helped Japan rise to prominence in the global economy. Like much of Asia, you should be mindful of and respectful of cultural and business etiquette difficulties, but you won't lose out on a wonderful opportunity by giving your business card with one hand or showing up at the incorrect location in your pajamas. Positioned incorrectly inside the elevator. Businesspeople in Japan are astute and aware that Western methods may vary.

Rather of concentrating on a checklist of dos and don'ts, attempt to remember certain Japanese principles that will enable you to react as best you can to any circumstance, even if it's using chopsticks to eat a tough piece of raw fish. to discuss or with whom. The first discussion at the conference table.

Timeliness

It's a real stereotype. In Japan, meetings and events may begin as early as 3:03 p.m. Basically, being on time is a need. The consistency and dependability of what is undoubtedly the most sophisticated public transit system in the world serve to bolster this profound cultural point.

In a meeting, unlike in the UK, you cannot build rapport by whining about trains since, (a) they are punctual and, (b) your Japanese counterpart would expect you to account for any potential delays in your schedule. Would anticipate being accountable.

Therefore, it is advisable to constantly aim to come early. You won't be living next door to a so-called Japanese salaryman, and you'll be pleased to know that Tokyo boasts more restaurants and coffee shops per capita than any other city in the world. Can sit. waiting for his next meeting...

Words

Remember that hardly everyone in business and government speaks English well, therefore an interpreter is often needed. When speaking in English at a meeting, make sure you talk slowly and clearly and avoid using humor, colloquial language, regional dialects, or idiomatic phrases.

order and deference

In Japanese, the word "teacher" literally means "someone born before you." Respect for senior citizens and/or the elderly is a basic social value that logically permeates the corporate world. Therefore, resist the need to direct everything you say to the person who speaks English the best, since they are often at the bottom of the hierarchy.

exchanging and obtaining business cards

In order to have double-sided business cards with one side in English and the other in Japanese, British firms are encouraged to convert their business cards into Japanese. While not required, this may have advantages.

Holding your business card with both hands in the two corners nearest to you, face the recipient of the card with the Japanese text on the front.

Advice: To ensure proper orientation, place your corporate logo at the top of the Japanese-language side.

Start exchanging business cards with the senior member of the Japanese company/group, bending slightly in the process, and go on with this custom in the Japanese employee hierarchy.

When you are given a business card in Japanese, grab hold of the lowest corners with both hands and politely say "Thank you" while examining it.

Throughout the meeting, business cards need always stay on the table. Japanese business cards should always be handled with care; never put notes on them or tamper with them.

agreement

Compared to Britain, Japanese culture places a greater emphasis on group dynamics. This value is evident in many ways that you will witness, but in a commercial setting, the most significant manifestation is the way decisions are made.

Even if the most senior or appropriate person is there, insisting for an on-the-spot call during a meeting is seldom helpful. It is better to be patient since Japanese businesses take a while to establish internal agreement and don't react well to perceived outside pressure.

Similar to this, there are situations where giving a pitch calls for less is more. Give yourself plenty of time to ask clarifying questions, and don't give up if they appear unusually thorough or methodical.

business gathering

Setting the agenda in advance gives everyone the opportunity to prepare their points of discussion and translate the agenda into their own language; this is particularly useful if there will be a language barrier.

Bring a product brochure and business information with you when you make your first visit to a Japanese firm.

Wait to be seated when you are taken to the meeting room since there are customs around seating individuals according to their rank within the firm.

In Japanese greetings, one should first state their surname or family name. For instance, John Smith would be called Tanaka Hiro (the family name is Tanaka).

In Japanese, the honorific "san" is used before the individual's name. For instance, Tanaka Hiro would be referred to as Tanaka-san. Unless you're very close, you shouldn't address a Japanese person by their first name.

The Japanese accept our Western tradition of using our first names, but they will follow it with the honorific "san". John-san as a gesture of respect. Alternatively, they may address you using the Western form Mr/Mrs/Miss + surname. In commercial dealings, the courteous form Surname + Number should always be used.

Because it's considered proper business etiquette, Japanese individuals take copious notes during meetings, demonstrating their interest in what the other person has to say.

Non-disclosure agreements (NDAs) are not used by the Japanese; however, if you need a signature, send it well in advance of the meeting. If you present the NDA at the start of a negotiation or meeting, the Japanese side will be embarrassed and may refuse to sign it until it is legally reviewed, which could take several weeks. They may also decide not to meet again.

Consider hiring an interpreter for a business meeting to make sure you get the most out of it.

It is crucial to remember that the Japanese will only conduct business with you if they trust you personally. Since relationships are built on trust, it is best not to send different staff members to every meeting.

Relationship development is so important that you should plan to have dinner or drinks with your clients occasionally; it's not typical for husband and wife to be invited out for a business dinner, but it's a much more relaxed setting than a board room, and you can get to know each other better.

expertise

In Japan, the conductor of a bullet train will bow into each cabin even if no one is looking. This is because doing things well and being seen doing them are crucial.

Many Japanese will come to hasty and possibly permanent conclusions if, during a meeting, your slides don't progress without any unexpected noises (the volume did not include on when you were practicing), you forgot to bring important literature, or you can't remember the concession you were prepared to give.

This is not to say that everything in Japan needs to be really serious; in fact, having a drink with someone and belting out a Beatles song at karaoke would probably be a positive thing for business. Just make sure you prepare in a manner that will maximize the effect.

inventiveness

Innovative British companies and IP-hungry local corporations make excellent partners because, although they are culturally sensitive, the Japanese are ideal early adopters as well as new ideas. Don't lose that different standpoint or unique edge that can make the deal work in your efforts to be culturally sensitive.

Japan's achievements

a collection of interviews with CEOs and founders of foreign firms that provide first-hand stories of how their businesses succeeded in Japan

Rutherford

Having worked with a Japanese distributor for more than a decade, Alex Hughes is well-versed in the tight collaboration and financial commitment needed to make a successful entry into the Japanese market.

Q-Games:

How Nintendo sent a 17-year-old British programmer to Japan, where he went on to build one of the country's most prosperous independent game production firms.

Walker's Shortbread

In this episode, Jim Walker, co-managing director of Walkers Shortbread Ltd., whose goods are now a mainstay in souvenir stores across Japan, shares some fantastic insights on his company's entry into the Japanese market.

London Urban Dispensary:

The managing director and founder of Urban Apothecary London, Tajinder Banwait, offers some insightful information on his company's entry into the Japanese market.

Bango:

After Bango recently acquired the worldwide payments division of NTT DoCoMo, a major Japanese telecoms company, we got in touch with Andy and Anil to talk about how they went about gaining credibility and making a name for themselves in the Japanese market.

Hello:

Angel investor, startup, entrepreneurship, recruiting locally, finding partners in Japan, localization, and more are among the topics covered by Ryo Umezawa's perspectives.