Japan is the third largest economy in the world and doing business in Japan is an option companies should consider if they are looking to expand internationally. Japan has some unique characteristics and policies to be aware of if you are planning to target this market.
The website, If It Were My Home, provides an interesting perspective comparing basic living standards of a person in Japan to a person living in the United States (other country comparisons are also provided on the website).
According to the website, if Japan were your home instead of the U.S., you would:
- be 41.94% less likely to be unemployed
- live 4.9 years longer
- be 92.98% less likely to be in prison
- spend 46.58% less money on health care
- use 44.5% less electricity
- consume 40.61% less oil
- experience 16.44% less of a class divide
These figures are quite interesting. Japan has one of the largest economies, is technologically advanced and compares closely in many ways with the U.S., but a five year longer life span is impressive, among other surprising differences, which may affect your business in this market.
The Japanese Language
Japanese is spoken by approximately 125 million speakers, the majority of whom live in Japan, where it is the national language.
A few items to know about Japanese include:
- The word order is normally subject-object-verb.
- The Japanese writing system is made up of three scripts:
- Kanji (漢字), which uses Chinese characters.
- Hiragana (ひらがな or 平仮名)
- Katakana (カタカナ or 片仮名)
- Sorting in an order is not as easy in Japanese, as it would be for Roman alphabet words, as an example. Kanji characters is a key reason for sorting complications, as are the multiple scripts used in Japanese.
- The use of numbers is mostly shown as Arabic numbering in conjunction with Chinese numbers.
Top Industries in Japan
The leading industries in Japan are manufacturing, fishing and tourism.
Japan is well known for its business success in manufacturing, despite limited natural resources to draw from domestically. Globally, Japan ranks third in manufacturing, behind China and the United States. Japan manufactures about 10% overall of global output.
Japan’s leading manufacturing categories include semiconductors, consumer electronics, optical fibers and automobile manufacturing. While Detroit has the “Big 3” for U.S. auto manufacturers, Japan has eight well-known auto manufacturers: Toyota, Honda, Nissan, Suzuki, Mazda, Mitsubishi, Isuzu and Subaru. In 2017, Toyota became the world’s leading auto manufacturer.
Japan has four of the world’s top 10 electronics manufacturers: Mitsubishi Electric, Panasonic, Sony and Hitachi.
While fishing is a major industry in Japan, it is mainly for domestic use and very little is exported. 90% of their catch is kept for domestic use. Thirty percent of the domestic production comes from fisheries. Japan ranks second in the world for importing fish. Their fish imports are eight times higher than what they produce domestically. Japan imports fish from over 120 countries. China is the largest supplier with about 20% of the overall import business.
In TheTravel.com ranking of countries for international visitors for tourism, Japan ranks 21st. While not among the top tier of world leaders, it is still quite significant. June 2019 saw the highest June visitor count ever at 2.9 million. In 2018, more than 30 million visitors came to Japan providing $41 billion USD to the economy in the cities and in the rural areas.
Popular areas to visit are:
- Golden Pavilion
- Mount Fuji
- Tokyo Imperial Palace
- Tokyo Tower
- Todaiji Temple
- Great Buddha of Kamakura
- Himeji Castle
- Jigokudani Monkey Park
- Hiroshima Peace Memorial
Business Laws and Regulations
In April 2019, Thomson Reuters updated their Q&A guide for establishing a business in Japan.
A couple key points from the report include:
Of the four forms of a business in Japan (stock, limited liability, general partnership and limited partnership) most companies register their business as a stock company. A key reason, as with a limited liability company, is the liability is just that, limited. The limited liability form is a rather recent option for a business in Japan and not yet as popular as a stock company. The two partnership business forms have unlimited liability for the partners involved.
To work in Japan, a foreign national must obtain a work visa. There are many types of work visas and they are specific to the type of position for the job.
Outlook for Doing Business in Japan
While Japan has one of the world’s leading economies and an impressive base of top tier technology companies, it is a country with limited natural resources and an aging population. With the life expectancy being longer than most other developed countries, Japan is incurring costs to support this growing population that is moving out of the workforce and into retirement. The low birth rate has resulted in a deficit for the youth to replace the retirees in the economy. Immigration is not an expected remedy for replacing the workforce as Japan has been resistant to large immigration in the past.
There are many benefits to doing business in Japan, but there are also some things to be aware of for long term investment.