Starting a business in Japan

There are many factors you need to consider when starting a business in Japan.

Location

Companies looking to enter the Japanese market for the first time face a number of location options. The choice of place is increasingly about serving specific niches and less about trying to offer all things to all customers. With the economy dominated by services and manufacturing, economic activity is heavily concentrated in Japan’s cities. 

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Financing your business venture

Understanding the additional costs associated with conducting business overseas is essential to making an informed decision. Adequate funding will be critical to your success, and a detailed financial plan is crucial. Your financing options could vary according to whether you are exporting, importing or investing. 

Risks

Japan is a low-risk destination for doing business compared with most other countries in Asia. The 
rule of law is well established and contracts are easily enforceable. Corruption is minimal in Japan, resulting in a world ranking of 18 out of 168 countries by Transparency International 2015 for control of corruption. 

Researching Japan

There is no single business structure that holds the key to unlocking the Japanese market. Cultivating a wide network of local contacts in government, while gaining an understanding of local practices, will help lower your compliance risks and assist you in choosing the most appropriate business structure.

Australian businesses looking to enter the Japanese market can establish the following structures:

  • A joint-stock company called a Kabushiki Kaisha (KK)
  • A company similar to a limited liability company called 
a Godo Kaisha (GK)
  • A registered branch office
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Culture

Japan’s unique culture has been shaped by trends
and forces from within and outside the country. Modern Japanese culture can be seen as the mutual reinforcing of ancient Shinto, Buddhist and Confucian traditions overlaid with modern institutions.

Confucianism, which emphasises obedience, authority and age. Shintoism is also deeply ingrained in Japanese culture, and its focus on ritual has a particularly strong impact on Japanese business practices. Conflict avoidance and the cultivation of harmonious relationships is also an important aspect of Japanese culture.

Japan is a racially homogenous society, with 98.5 per cent of people identifying as ethnic Japanese. Korean (0.5 per cent) and Chinese (0.4 per cent) make up the largest minorities. Ethnic minorities native to Japan include the Ainu in the north and Ryukyuan in the south.

Business etiquette

While Japanese people have in recent times become more exposed to the practices of other cultures, traditional Japanese principles continue to underpin many customs and business practices.

  • Age and status: Respect for age and status is very important in Japanese culture, with hierarchy affecting
all aspects of social interactions.
  • Business cards: The exchange of business cards (meishi) is an essential part of initial meetings in Japan and follows a strict protocol.
  • Japanese names: As in many parts of Asia, Japanese family names come first, and are followed by the given name.
  • Bowing and handshakes: Bowing is an important part of everyday life in Japan, including in the business context.
  • Building relationships: Japan is a more relationship- oriented culture than Australia, particularly when it comes to doing business.
  • Dress code: Appearance is very important, and Japanese people tend to dress more formally than Australians.
  • Gender equality: Although gender equality is increasing and is a key goal of current reforms, men still dominate the Japanese workplace.
  • Modesty: Japanese culture values modesty and humility

Building Relationships with the Japanese

Investing in relationships is very important to succeeding in Japan. The strength of business relationships can determine many aspects of commercial life, including access to credit, procurement and contracting. Investing in business relationships involves face-to-face time with a person of similar age and status, with a strong emphasis on loyalty and trustworthiness. Having contacts in Japan with whom you have good working relationships may also help you access critical market information and learn about new opportunities.

Australia – Japan: Bilateral Relationship

Japan looms large among a handful of Australia’s most important international partners. The Japan-Australia relationship is long-standing, massively rewarding economically (for both), ever-widening and increasingly close politically.

The signing of the Japan Australia Economic Partnership Agreement (JAEPA) in July 2014 was a monumental event in the history of the bilateral relationship. It promises to bring the two economies and societies even closer together, and to underwrite a new era of growth in trade of goods and services that were previously constrained by government-imposed barriers and restrictions.

Want to learn more? Explore our other Indonesia information categories or download the Japan Country Starter Pack.