How to enter the Japanese market

Market entry models for exporting goods and services

Choosing an appropriate market entry model is essential for businesses looking to export to Japan. Any choice should be informed by factors such as the overarching business strategy, target sector, and business size and maturity. It is important to note that market entry models frequently evolve over time.

Market entry models in Japan may also be influenced by its large domestic multinational enterprises, particularly the seven large trading companies or sogo shosha. These companies play a prominent role in importing and exporting and are heavily involved in global supply chains. Larger Australian businesses may wish to engage with these companies when considering their export options.

A. Direct exporting

In direct exporting, businesses sell directly to a Japanese customer from Australia. Exporting directly to Japan requires a significant level of involvement in the export process, including market research, marketing, distribution, sales, product registration and approval, import-export licencing and receivables.

Direct exporting has some advantages, including:

• Greater control of commercial processes, including sales
• Better margins, as middlemen are avoided
• More direct customer relationships

While there are benefits, direct exporting can ultimately involve higher establishment costs in Japan. It may be necessary to employ dedicated in-house staff and other resources to manage the complexities of exporting and sales. Businesses that use this model may need to consider ways to offset these costs, including employing an agent or distributor to handle local product registrations, while maintaining control over other aspects of the business such as marketing and supply chain management.

A direct export approach should be supported by references, brochures, catalogues, and other product and business information in Japanese language. It also requires businesses to engage with customers regularly to build awareness and understanding of the products they are selling on an exporter’s behalf. In return, a retailer’s understanding of the Japan market can help with product development, pricing and marketing. Selling directly to local retailers can generally cut commissions, reduce travel costs and create an effective conduit to market.

B. Agents and distributors

Many Australian firms doing business internationally rely on agents or distributors. The roles of agents and distributors differ, and they can vary across industry. It is therefore critical that roles and responsibilities are clearly defined early in any agreement.

Agents: Agents act as representatives of suppliers and do not take ownership of the products they sell. They are usually paid on a commission basis, which provides an incentive for them to drive sales. Being based in Japan, they will often represent several complementary products or services. They can be retained exclusively as the sole agent for a company’s goods or services or as one of several agents for the exporter.

Distributors: Unlike agents, distributors buy the goods from exporters and then resell them to local retailers or direct consumers. In some cases, a distributor may sell to other wholesalers who then on-sell to retailers or consumers. Distributors may carry complementary and competing lines and usually offer after-sales service. They earn money by adding margins to product prices. Distributor margins are generally higher than agent fees because distributors have costs associated with carrying inventory, marketing and extending credit for customers.

Choosing an agent or distributor: Whether a business decides to use an agent or distributor, building a close working relationship is essential. Due diligence when selecting an agent or distributor is important and companies should ask for trade references and seek a credit check through a professional agency. It is best to meet any potential agents or distributors in Japan. This will give them an opportunity to demonstrate knowledge of the market and build a business relationship.

C. Online Sales

In 2023, the scale of the domestic B2C ecommerce market increased to 24.8 trillion yen (AUD 256 billion), up by 9.23% from 22.7 trillion yen (AUD 234 billion) in the previous year and 20.7 trillion yen (AUD 213 billion) in the year before making it the fourth largest ecommerce market after China, the United States and the United Kingdom. Its B2B sector is estimated to be worth even more, at AUD 4.8 trillion (JPY 465.2 trillion) , based on all company transactions across all industrial categories.

Japan is a digitalised society, although Japan’s 87 per cent internet penetration ranks well below most other OECD countries that average over 94 per cent. It had 107 million internet users at the start of 2025. There were 99 million active social media users in 2025 equating to 80.5 per cent of the population.

Several government agencies regulate ecommerce in Japan. These include the Ministry of Economy, Trade and Industry (METI) and the Ministry of Internal Affairs and Communication (MIC). Consumer and data protection laws apply to every online transaction and online retailers must follow the Specified Commercial Transactions Law, which is regulated by the Consumer Affairs Agency.

To further protect consumer rights, in 2020, Japan’s Diet (national legislature) passed the Act on Improvement of Transparency and Fairness in Trading on Specified Digital Platforms that requires online retailers to submit an annual report to METI, which is published after review.

Accessing digital consumers: Japan is experiencing declining birth rates and a growing elderly population. Despite relatively low inflation, many Japanese shoppers are still price-conscious, and it will be the younger generations of Gen Z and Millennials with the most spending power as they come of age. Despite a high digital penetration rate, majority of Japanese consumers still prefer physical malls and shopping outlets, signifying there is more to do in terms of marketing and building trust with those new to online shopping.

Top product categories for online spending include fashion, electronics and food (Figure 2), as well as DIY and hardware and furniture.

The mobile commerce market has snowballed over the last decade, tripling to around AUD 74.2 billion (JPY 7.2 trillion) as of 2024, with shopping taking the lion’s share of transactions.

After sales services: In Japan, after-sales service is a critical component of the customer experience, deeply rooted in the cultural concept of omotenashi, which emphasizes exceptional hospitality and attentiveness.

To build trust with consumers, online retailers implement robust return and repair policies. Clear guidelines and efficient processes for handling returns or repairs are essential, as they reflect the company's reliability and commitment to customer satisfaction. All customer-facing information needs to be provided in Japanese language.

Search engines: Google is by far the dominant search engine in Japan, followed by Yahoo and Bing. Forty per cent of internet users use search engines to discover new brands and products which is higher than Vietnam (38.3 per cent) , Malaysia (37.7 per cent) , Thailand (37.1 per cent) and Singapore (33.8 per cent).

Figure 2: E-commerce spending on consumer goods (2025), AUD billion

Online sellers and marketplaces: Rakuten Ichiba and Amazon top the list of online sellers with a head to head battle as of May 2025 followed by, Yahoo! JAPAN and Zozotown. Mercari is popular due to the ease in using the app in mobile devices and its market leading position in products such as collectibles, vintage pieces and antiques.

Online sellers can utilise Japan's highly efficient and ubiquitous Takkyubin delivery service.

* market share data based on a survey of consumer use

Social media: Social media is a vital business tool in Japan. There were 99 million active social media users in Japan at the end of 2025. Line is the most popular with 99 million users, followed by YouTube at 78.5 million. Instagram had 63.2 million users and Facebook had 16.5 million users.

Investment environment

While Japan has made efforts to attract foreign investment in recent years, FDI inflows remain inconsistent. In 2024, Japan received AUD 26 billion (JPY 2.52 trillion) down from AUD 30.6 billion | JPY 2.97 trillion in 2023 and 73 billion| JPY 6.79 trillion in 2022. This continues a downward trend in FDI inflows following a peak in 2020 of a whopping AUD 90.1 billion (JPY 8.74 trillion).

The Ministry of Economy Trade and Industry (METI) and Japan External Trade Organization (JETRO) are responsible for coordinating and promoting inward FDI. In 2023, the Council for Promotion of Foreign Direct Investment in Japan, a cabinet-level Council led by the Minister of State for Economic and Fiscal Policy, released a new action plan for attracting human and financial resources from overseas. The plan, revised in 2025 aims to increase inward FDI by 2030 to AUD 1.24 trillion (JPY 120 trillion), or around 20 per cent of GDP.

The priority sectors identified in the plan include digital transformation (DX), green transformation (GX) technologies, semiconductors, bio-pharma and to shore up supply chains of critical items. The Action Plan itself sets priorities and calls for targeted programs and funding mechanisms; subsequent government initiatives have created or proposed specific funds, for example, for semiconductor revitalisation, and there are parallel initiatives and strategies for vaccines/biomanufacturing and ICT. There are also provisions for establishing startup hubs around the country, increasing governmentindustry-academia collaboration and relaxing visa and residency requirements for foreign workers.

Investment rules and regulations

With Japan’s legal framework and economic policies becoming more favourable to foreign investment, it is becoming easier and a more attractive destination for foreign firms. However, Japan still restricts FDI in select sectors. All FDI applications are subject to review under the Foreign Exchange and Foreign Trade Act (FEFTA). The review process is led by the Ministry of Finance, which is joined by other ministries relevant to the investment. In 2023, the government added nine core business sectors to the FEFTA regime. These are deemed ‘Specifically Designated Critical Commodities’ and include storage batteries, magnets, semiconductors and related manufacturing equipment, and fertilisers.

Market entry models for investing

Choosing an appropriate market entry model is essential for businesses looking to invest in Japan. A business’ size, sector and growth strategy will help determine which market entry model fits best. Investment models frequently evolve over time as businesses enter and expand in a market.

A. Representative office

Opening a representative office (RO) can be a useful and an economical first step to explore business opportunities in Japan. Representative offices are not permitted to conduct sales. However, they may survey the market, gather information, purchase goods and engage in promotional activities. It does not require registration to establish a RO.

Establishing a RO in Japan

B. Branch office

Establishing a branch office in Japan allows a company to engage in the commercial activities prohibited for ROs. A branch office can commence business operations after securing office location, registering necessary information and determining branch office representative. Services provided by a Japanese branch office are not independently decided by them. Decision making rests with an organisation authorised by the foreign company.

Establishing a branch office in Japan

C. Subsidiary company

A foreign company opting for a subsidiary company in Japan may either establish a joint-stock corporation (Kabushiki-Kaisha (K.K.), limited liability company (Godo-Kaisha) or a similar entity as per Japan’s Companies Act. All types of subsidiary companies may be established by completing appropriate procedures stipulated by law. Joint stock corporations and limited liability companies have liabilities limited to the assets contributed by equity participants. Limited liability companies exercise greater freedom through their articles of association compared with joint stock corporations. =

A Limited Liability Company (LLC) is one of the most common form of foreign-owned enterprise in Japan. Benefits of an LLC include the ease of transferring partial or full ownership and securing funding from local financial institutions. An LLC is taxed as a corporate entity. The effective corporate tax rate (including national and local taxes) is around 29.7%– 30.8%, depending on company size and income.

This market entry model is suitable for a wide range of sectors, although there are some restrictions for infrastructure, sectors that are considered critical, real estate and media investments. Seek professional advice on the best structure for your business.

Establishing a Joint Stock Corporation (Kabushiki-Kaisha) in Japan

Establishing a Limited Liability Company (Godo-Kaisha) in Japan

D. Joint venture

A joint venture (JV) is an agreement between two or more parties to work together on a specific project, rather than an ongoing business. JVs can be an effective way to undertake research and development, and create a new product or provide a new service.

Joint ventures can be an attractive opportunity for foreign companies to work with a Japanese company and grow without purchasing a company. The two companies can combine their resources and skills to overcome market barriers, share risks, responsibilities and costs.

JVs are recognised by Japanese law as subsidiary companies which are either limited or unlimited liability partnerships. Foreign companies prefer limited liabilities to avoid responsibility for a subsidiary’s debts. The two types of limited partnerships are Joint-stock Corporation or Kabushiki Kaisha (KK) and Limited Liability Company or Godo Kaisha (GK). Unlimited partnerships are of two types - Unlimited Partnerships or Gomei Kaisha and Limited Partnerships or Goshi Kaisha.

Success in Japan requires businesses to tailor their product or service to the market. This should be based on detailed analysis of consumer trends, price consciousness, branding, marketing and advertising, and payment methods. Consumer profiles and tastes are changing, largely due to demographic and technological shifts. As Japan’s population ages, Generation X, followed by Millennials and Generation Z will emerge as the most influential consumer groups.

Traditional retail is at risk of being disrupted by a growing ecommerce market. 90 per cent of the population of internet users aged 16 to 64 use a smartphone to access the internet while 53 per cent use their devices for shopping online.

Businesses entering Japan should adjust their value propositions to cater to emerging consumer trends. Introducing premium product lines, focusing on sustainability, and tailoring products and services to increasingly health- and wellness-conscious consumers of the younger generations can provide businesses with a competitive edge.

Japan’s household disposable income has dipped in recent years but is projected to increase between 2024- 2026 (Figure 3). Understanding the characteristics, aspirations and spending habits of this emerging group of consumers is crucial for businesses looking to tap into the segment.

Consumer trends in 2025

Figure 3: Median disposable income per household (2016-2026f), AUD, current prices

Price consciousness

Japan’s national income per capita is AUD 53,548 (JPY 5.2 million) with an ageing population that is still value conscious. Australian businesses targeting the Japanese market benefit from a similar consumer environment.

Branding

Branding is as critical in Japan as in any market, and companies need to research and understand the specific tastes of consumers to achieve success. In Japan, as in much of Asia, prominent high-quality brands are in demand, though new entrants are becoming increasingly popular. For example, Japan’s second-hand marketplace Mercari has found huge success by offering premium brands for less. New brands can establish a reputation in the Japanese market through targeted promotion campaigns. Australian products, with an emphasis on Australian origin, can be a marketing tool for businesses expanding into Japan, particularly in the food and beverage and agricultural sectors.

Marketing

Trade marketing to distributors and retailers is a popular and effective way for businesses to gain traction in the Japanese market. A trade show can be a useful starting point. These are effective ways to reach new consumer bases and potential clients, while also offering insights into the operations of competitors and providing a forum for networking and relationship building.

Japan hosts some 370 trade shows each year across the food and beverage, fintech, travel and innovation sectors. Sales promotions can also help establish a brand with high-impact campaigns. With smartphone penetration at 96 per cent, digital marketing methods are a mainstay in Japan. Email, text, search engine optimisation and social media are integral parts of a comprehensive marketing campaign. Marketing and promotional material – at trade shows, sales promotions or anywhere else – should be provided in Japanese.

Advertising and media

With near-total internet and smartphone penetration, digital advertising is essential in Japan. The largest audience as measured by total potential ad reach is Line, followed by YouTube and X (Twitter) (Figure 4). Potential ad reach on Snapchat has increased the most, growing 59.8 per cent year-on-year in 2025.

Advertising is heavily regulated in Japan. The Japan Advertising Review Organization (JARO) has set self-regulatory guidelines and codes of conduct that provide standards for ethical practices and aims to prevent offensive or misleading advertising.

Additionally, the Act against Unjustifiable Premiums and Misleading Representations (AUPMR) prevents unrealistic claims in advertising. The Act against Unfair Competition prevents deceptive advertising practices.

Figure 4: Digital advertising audiences in Japan (2025)

Digital payments

Cash is still the preferred method of payment in many individual restaurants and smaller outlets, and Japan does fall behind digitally compared to ASEAN economies. Digital payments including credit and debit cards are slowly catching up. The cashless payment ratio in 2024 was 42.8%, and the government goal of 40% has been achieved. METI will continue to make necessary improvements to boost the ratio to 80%.

QR codes are also becoming more popular and are accepted in many places for smaller purchases. PayPal, LINE Pay and Rakutan Pay are frequently used by shoppers. Konbini payments allows consumers to pay for goods and services ordered online at the counter of their local convenience store.

For larger purchases, debit cards are still the main payment methods.

Figure 5: Payment methods for B2C e-commerce (2025), %

A well-considered market entry strategy should take a systematic approach that supports long-term success. This section summarises the factors businesses should consider when formulating an approach to the Japan market into a series of key questions.

Asialink Business provides advisory services and capability training programs to help organisations understand and access opportunities in Asian markets. For any questions about any aspect of a Japan market entry strategy, please contact us. Austrade’s Japan office also provides services and support to Australian businesses with an interest in Japan (details can be found in Section 5.2).

Calibrating Ambition

• What is your company’s aspiration for the market?
• What are the challenges and risks you will need to mitigate?

Consumers

• What is the current or potential demand for your product or service in Japan?
• Who are the primary customers / consumers for your product or service in the market?
• How will you tailor your product or service to local preferences?

Competitors

• Who are your competitors in the market, and what is their offering?
• How does your product or service compare to competitors on price?

Sales, Brand and Marketing

• What is your unique value proposition for the market?
• What is the ideal mix of marketing and sales channels to reach your target customers?
• Is your marketing strategy aligned with your identified consumer base and value proposition?

Mode of Entry

• What is the right market entry model for your business?
• What are the specific geographies you should target?

Delivery Partners

• Does your team have the right mix of skills and expertise to support your market entry?
• What partnerships will contribute to your business’ success in the market?
• What external advice do you need to commission?

Operating Model

• What changes do you need to make to your business across areas such as operations, HR, finance and IT?

← Back to Understanding Japan |  Go to Business practicalities in Japan →