Doing Business With Japan

Overview Why Do Business With Japan?; General Information; Decision-Making Styles; Practical Information; Communication; Establishing Personal Relationships; Eating Customs and Foods; Conclusion; Useful Resources; References; and Appendices.

Why Do Business With Japan?

3rd largest world economy with Gross Domestic Product (GDP) over $5.8 trillion US (“Why Doing”);

4th largest buyer of American products, $65.1 billion in 2013 (“US Export,” 2014);

Major investments in domestic communities coming from Japan, $308 billion in 2013 (Jackson);

Not engaging in business with Japan can lead to disadvantages both domestically and in emerging markets;

Why Do Business With Japan? Cont.

Japanese Prime Minister Shinzo Abe’s new economic policy known as “Abenomics” has led to (“Why Doing”):Rising stock market;Decreased deflation;Domestic demand for personal consumption and

capital investment. Japan has entered into the Trans-Pacific

Partnership (TPP) which accounts for almost 40% of the world’s Gross Domestic Product (GDP) (“Why Doing”);

US Dollar ($) is currently stronger than the Japanese Yen (JPY);

Why Do Business With Japan? Cont.

To promote foreign investment, Japan has:Abolished traditional laws and regulations

that were in place to protect domestic corporations;

Passed new legislation allowing “Triangular Mergers;”

Passed the Foreign Exchange and Foreign Trade Control Law; and

Offers government incentives (“Business and Taxation,” 2013).

US – Japan Tax Treaty allows tax breaks for US companies in Japan.

General Information

Government and Law; Economic Situation; Banking and Finance; Major Products and Services; Currency.

Government and Law

Japan is a constitutional monarchy with a republican system;

The Emperor is the Head of State; The Parliament (Diet) is comprised

of 2 elected houses:The House of Representatives (Lower

House); andThe House of Councilors (Upper

House).

Government and Law cont .

The Prime Minister is the head of the executive branch;

Cabinet Members are appointed by the Prime Minister;

Judicial System is comprised of:Supreme Court; andInferior Courts.

Japanese Self-defense Force (SDF):Ground SDF;Maritime SDF; andAir SDF.

Government and Law cont.

Ministries governing different aspects of industry and government; Ministry of Foreign Affairs; Ministry of Finance; Ministry of Economy, Trade and Industry; Ministry of Health, Labor and Welfare; Ministry of Land, Infrastructure, Transport and Tourism; Ministry of Justice; Ministry of Agriculture, Forestry and Fisheries; Ministry of Education, Culture, Sports, Science and

Technology; Ministry of Internal Affairs and Communications; Ministry of Environment; and Ministry of Defense .

Economic Situation

In 2010, Japan’s GDP showed a positive growth for first time since 2008 global financial crisis;

Large reconstruction projects to recover from 2011 earthquake and tsunami expected to boost economy;

Japan’s GDP was 6.6% of the world’s GDP in 2013

Gross domestic product, current prices (U.S. dollars)

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0 10000 20000 30000 40000 50000 60000 70000 80000 90000

World Japan

Chart1: (IMF, 2014)

Banking and Finance Japanese business depends heavily on

banks for funding and investments; Bank of Japan is central bank;

Issues currency;Acts as final lender;Bank for Japan’s government; andImplements monetary policy.

Major Products and Services

Main Exports: Cars; Electronics; Computers.

Main Imports: Raw material (oil, coal, iron ore, copper, aluminum and wood); Food.

Major Industries: Manufacturing; Construction; Distribution; real estate; Services; and Communication.

Currency

Official currency is Yen (¥), also represented by the International Standards Organization (ISO) currency code JPY;

It is the 3rd most traded currency in the foreign exchange market behind the US dollar ($) and the Euro (€);

Widely used as a reserve currency (Business and Taxation, 2013).

Cultural Aspects

Societal Structure; Hierarchy; Religion; Values; Work Ethic; Family.

Societal Structure

Collective SocietyDesire to maintain harmony;Conformity;Emotions and opinions not openly

expressed;Tendency to avoid confrontation;Honne and Tatemae;Uchi Soto – Us and Them;The Gaijin complex.

Hierarchy

Importance of hierarchy based in Confucianism;

People arranged in vertical hierarchical relationships;

Many hierarchies in business and society;

Amae – Dependency; Stability of Japanese society depends

on maintenance of these relationships.

Religion

Shinto; Buddhism; Confucianism; Christianity; Islam.

Values Age; Silence; Traditions; History; Religion; Family; Government; Nature; Education.

Work Ethic Loyalty; Ganbari (Doing one’s best); Traditional vs. Modern Attitudes.

Table3: (Laroussi, 2009)

Year Japan USA UK Germany France1980 2,162 ( 209 ) 1,893 ( 146 ) 1,883 ( 125 ) 1,719( 104 ) 1,7591985 2,168 ( 230 ) 1,929 ( 172 ) 1,910 ( 161 ) 1,663 ( 83 ) 1,6441990 2,124 ( 219 ) 1,948 ( 192 ) 1,953 ( 187 ) 1,598 ( 99 ) 1,6831995 1,975 ( 152 ) 1,986 ( 234 ) 1,943 ( 198 ) 1,550 ( 88 ) 1,6801996 1,993 ( 168 ) 1,986 ( 234 ) 1,929 ( 182 ) 1,517 ( 68 ) 1,6791997 1,983 ( 179 ) 2,005 ( 250 ) 1,934 ( 187 ) 1,517 ( 68 ) 1,6771998 1,947 ( 152 ) 1,991 ( 239 ) 1,925 ( 177 ) 1,525 ( 57 ) 1,6721999 1,942 ( 155 ) 1,991 ( 239 ) 1,906 ( 151 ) 1,525 ( 57 ) 1,6502000 1,970 ( 175 ) 1,986 ( 239 ) 1,902 ( 151 ) 1,538 1,5892001 1,948 ( 159 ) 1,943 ( 203 ) 1,902 ( 151 ) 1,529 1,5542002 1,954 ( 171 ) 1,952 ( 213 ) 1,888 ( 135 ) 1,525 1,5392003 1,975 ( 189 ) 1,929 ( 218 ) 1,888 ( 130 ) 1,525 1,5382004 1,996 ( 199 ) 1,948 ( 239 ) 1,888 ( 130 ) 1,525 1,5382005 1,988 ( 200 ) 1,943 ( 239 ) 1,869 ( 125 ) 1,525 1,537

Working hours per year (estimated hours worked by production and manufacturing workers)

*Figures in ( ) are non-scheduled hours worked.

Family

“Traditional/ideal” vs. reality:“Ideal”

○ Eldest son succeeds as head of family;○ Man is head of household;○ Wife stays home to manage house and

children;○ Multi-generational households common.

Reality:○ Nuclear family most common in Japan;○ Family often lives near elder relatives;○ Still common for man to be head of household.

Business Customs

Decision Making; Contracts; Information-Sharing; Customer Relations; Meetings; Feedback and Issue Resolution.

Decision Making Group Consensus vs. Individual Authority; The “Ringi” system; Nemawashi; Benefits of Japanese Decision Making Process; Advice:

Be patient; Anticipate questions and needs; Demonstrate patience; Check in with contacts often; Build personal and professional relationships; Don’t make or push for quick decisions; and Sustain team unity.

Contracts Japanese traditionally view contracts as a

summary of agreement to do business, and not a specific set of promises or limitations that must be strictly followed;

Negotiations:Translate all terms into Japanese;Use plain language;Leave some terms fluid;Be flexible;Long-term repercussions vs. short-term focus;Be prepared for different attitudes; andPersonal relationships are key.

Information Sharing Giving information:

“Nice to Know” vs. “Need to Know” Getting information:

Too much vs. Too little Advice:

Gather as much information as possible; Present all information up front; Probe associates for what information is needed and why; Share “nice to know” and “need to know” information; Do not interrupt a Japanese speaker; Listen patiently; In one-on-one conversations confirm or repeat what the speaker has said; Pay careful attention to hierarchy; Cultivate informal contacts; and Tactfully request unclear information.

Customer Relations

Okyakusama wa kamisama desu – “The customer is god.”

Advice:Exhaust every effort to meet customer

demands;Avoid giving and immediate regular response;Ask customer reason for the request;Look at the big picture;Compromise; andAlways keep the customer informed.

Meetings The team; Know the details; Honne/Tatemae; Humility; Silence may not always be golden; Meetings, meetings, and more meetings; Advice:

Send agenda in advance; State the objective of the meeting is to share opinions; Do not expect or demand immediate response; Call on individuals for ideas; Record main points and summarize at the end; Clarify objectives prior to meeting, reiterate at the beginning; Confirm agreements at end of meeting; Confirm results in writing after meeting; and Meet one-on-one whenever possible.

Feedback and Issue Resolution

Indirect feedback; Use of intermediaries; Constructive criticism vs. praise; Resolving issues; Escalating issues; Advice:

Expect indirect feedback; Consider the person, place, and time when you request feedback; Expect constructive feedback to follow positive feedback; Do not mistake focusing on the negative for negative attitude; Have patience with Japanese problem solving; Respond quickly to requests; and Coach Japanese counterparts on how to communicate urgency of

issues and situational detail.

Practical Information

Language; Time; Public Holidays; Transportation; Appropriate Dress; Business Meeting Etiquette; and Business Cards Etiquette.

Language

Japanese is the official language; English is not widely spoken or

understood; Some larger companies have bilingual

employees; Translators necessary.

Time

No summer daylight savings time; Nine hours ahead of Greenwich Mean

Time (GMT) November to March; Eight hours ahead of GMT April to

October; Standard business hours Monday –

Friday 9:00am – 5:00pm.

Public HolidaysWednesday Jan 1 New Year's Day National holiday

Thursday Jan 2 January 2 Bank Holiday Observance

Friday Jan 3 January 3 Bank Holiday Observance

Monday Jan 13 Coming of Age Day National holiday

Tuesday Feb 11 National Foundation Day National holiday

Friday Mar 21 Spring Equinox National holidayTuesday Apr 29 Shōwa Day National holiday

Saturday May 3 Constitution Memorial Day National holiday

Sunday May 4 Greenery Day National holidayMonday May 5 Children's Day National holiday

Tuesday May 6 Greenery Day observed National holiday

Monday Jul 21 Sea Day National holiday

Monday Sep 15 Respect for the Aged Day National holiday

Tuesday Sep 23 Autumn Equinox National holidayMonday Oct 13 Sports Day National holidayMonday Nov 3 Culture Day National holiday

Sunday Nov 23 Labor Thanksgiving Day National holiday

Monday Nov 24 Labor Thanksgiving Day observed

National holiday

Tuesday Dec 23 Emperor's Birthday National holidayThursday Dec 25 Christmas Observance

Wednesday Dec 31 December 31 Bank Holiday Observance

Table 4: ("Holidays," 2014)

Transportaion

Major airports:Narita Airport – Tokyo;Kansai Airport – Osaka;Central Japan Airport – Nagoya;Fukuoka Airport – Fukuoka.

Shinkansen (bullet train).

Appropriate Dress

Men:Dark suit, white shirt, subdued tie October – April;Grey suit, white shirt, tie May – September;Can wear short sleeved shirt in summer;Do not wear Black suit.

Women:Pants suits or long skirt suits;Same seasonal colors as men;Short or pulled back hair styles;Conservative shoes.

Both make sure to have plenty of business cards!

Business Meeting Etiquette Call to confirm meeting 1-2 hours prior; Always be early; Plan exact agenda; Wait to be seated; Take lots of notes; Send any documents requiring signatures in

advance; Hierarchy; Gifts; Bring lots of business cards.

Business Card Etiquette Double sided; Exchanged at formal and informal

meetings; Always stand when exchanging; Proper technique; Do’s and Don’ts; Remember the importance!

Communication

Cultural Foundations of Japanese Communication;

Greetings; Customs and Courtesies; Manners and Etiquette; Communication Gaps; and Useful Resources.

Cultural Foundations of Communication

Group Orientation; Hierarchy; Situational Behavior; and High Context Communication.

Group Orientation

Desire to maintain harmony; Conformity; Emotions and opinions not openly

expressed; Tendency to avoid confrontation; Honne and Tatemae; Uchi Soto – Us and Them; and The Gaijin complex.

Hierarchy

Position; Status; Seniority; and Age.

Situational Behavior

Interpersonal communication styles; Attitudes toward conflict; Politeness vs. factual honesty; and Attitudes toward self-disclosure.

High Context Communication Cater to the group; Less is more; Word choice; and Things left unsaid.

Greetings Ohayou gozaimasu (Ō-hi-yo go-zi-mas) – Good

morning. Used until 10:00am; Konnichiwa (Kō-n-nē-chi-wa) – Hello or good day.

10:00am – 6:00pm; Konbanwa (Kon-ban-wa) – Good evening. After 6:00pm; Watashi wa______ desu (Wa-ta-she wa ______ des) – I

am _______; O-namae wa nan desu ka (Ō-na-mī wa nan des ka) –

What is your name?; Hajimemashita (Ha-jē-mash-ta) – Nice to meet you; Yoroshiku onegaishimasu (Yo-rō-sh-ku ō-ne-ga-shē-

mas) – Please to make your acquintance; Moshi Moshi (Mu-shē mu-shē) – used to answer phone.

Customs and Courtesies

Bowing; Omiyage; Day ends when the boss

leaves; San, Chan, and Kun; Stay to left on escalators; Appropriate gestures; Shoes; Kimonos;

• Polite refusal;• Laughing;• Seating;• Taxis;• Humility;• Bathing; and• Tipping.

Manners and Etiquette

Avoid excessive eye contact;

Posture; Do not point; Cell phones on transit; Gum chewing; Punctuality;

• Conservative dress;• Shouting;• Nose blowing;• Sarcastic remarks and

gestures;• Escort your guest; and• Tattoos.

Communication Gaps Indirect or Ambiguous Expression; Unintended Tone; Japanese English; Grammar, Word C

hoice, and Pronunciation; and Nonverbal Communication.

Indirect or Ambiguous Communication

Japanese “Yes…”; “We’ll think it over” or “We’ll consider it”; “I understand”; “This is urgent”; “We will raise your salary after a while”.;

“We should have dinner sometime”.

Unintended Tone

“You had better attend the meeting”; “Maybe I think so”; “Do you understand?” “Is that clear for

you?”; “It’s difficult for you to understand

Japanese culture, but…”; “WHY don’t you join us?”

Japanese English

Borrowed words; Unique meanings; Abbreviations; and Direct translation.

Grammar, Word Choice, and Pronunciation

Word choice; Stress; Written vs. spoken; Katakana Eigo; Hiragana; and Katakana;

Nonverbal Communication

Nonverbal vs. verbal the Japanese choice;

Laughter; Drawing breath through teeth; and Silence;

Establishing Personal Relationships

Be humble; Show interest; Be polite; Be respectful; and Socialize.

Eating Customs

Oshiburi; Ittedakimasu and

Gochisosama deshita; Drinking rules; Family style food; Individual orders; Chopsticks; Pick up bowls; Sushi;

• Dipping;• How do I eat that?;• Avoid unappetizing

conversation;• Slurping;• Burping;• Everything in its

place; and• Paying the bill.

Eating Don’ts Eat while walking; Bite fingernails or lick fingers; Gnaw on pencils or pens; Skewer food with chopsticks; Stand chopsticks up in rice; Point with chopsticks; Wave your chopsticks around or play with them; Rub or roll your chopsticks together; Pour soy sauce on rice; Add wasabi to soy sauce; Take wads of napkins, sugar packets, or “souvenirs”

when you leave restaurants; Put cream or sugar in Japanese tea; or Help yourself, wait until host offers something.

Foods

Bento Box Pickles

Miso soup RamenGyoza

Rice

Useful Resources

Websites Japanesepod101; Lang8; Rikaichan; Anki; Omniglot; Japanese-lesson.com; Easyjapanese.org; Japanese.about.com; Freejapaneselessons.com; Jishi.org; Jgram; iKnow; Tae Kim’s Guide to Japanese.

Smart Phone Apps• Tengugo Kana;• Tengugo Kanji;• Kanji Quiz;• JED;• Kanji Draw;• Kanji Recognizer;• Kanji Senpai;• Kanji Sensei;• Easy Kanji;• Kanji Renshuu;• Tae Kim’s Guide to Japanes

e.

Conclusion

Japan has been one of the world’s top economies for several decades. The entry of Japan into the Trans-Pacific Partnership will serve to increase manufacturing and trade opportunities. This partnership along with the tax benefits of the US-Japan tax treaty, incentives offered by the Japanese government, and Japan’s need to recover from the economic downturn and rebuild after recent natural disasters, means that now is a prime time to invest in the Japanese market.

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Appendices

Geography; Japan in Figures; Common Sayings; Setting up a Business in Japan.

Geography

Located in the northern Asia Pacific area Japan is comprised of 5 major islandsHokkaido;Honshu;Shikoku;Kyushu; andOkinawa.

Japan in FiguresLand Area 377,727 sq km

Population: 127,817,277 (World Bank)

Population density: 33 5sq km

Life expectancy: Men 80 yrsWomen 87 yrs

Adult literacy: 99%

Average per household 2.5

Divorces per 1,000 : 1.9

Table1: ("Business Culture")

J a p a n i n F i g u r e s C o n t .

Currency: Yen

GDP: US$ 4,901bn in 2013 (IMF, 2014)

GDP per heads: US$ 38,491bn in 2013 (IMF, 2014)

Employment (% of total): Agriculture 45%Industry 28%Services 68%Unemployed 5%

Main Exports:Type: Capital equipmentIndustrial suppliesConsumer durable goods

Destinations: (% total) China 19%USA 16%South Korea 8%Hong Kong 6%

Main Imports:Type: Industrial suppliesCapital equipmentFoodConsumer durable goods

Main countries of origin: China 22%USA 11%Australia 6%Saudi Arabia 5%

Table2: ("Business Culture")

Common Sayings O-genki desu ka (Ō-gen-kē des-ka) – How are

you? Genki desu (Ge-n-kē des) – I am well. Genki dewa arimasen (Ge-n-kē de-wa a-lē-ma-

sen) – I am not well. Mama desu (Ma-ma des) – So so/I am ok. Ittekimasu (Ē-te-kē-mas) – I’ll be back, used when

leaving. Itterasshai (Ē-te-ra-shī) – Come back soon, used

as the response to ittekimasu. Nanji desu ka (Nan-jē des ka) – What time is it?

Common Sayings Dewa mata (De-wa ma-ta) – See you later. Ja mata (Ja ma-ta) – See you later, less formal. Mata ashita (Ma-ta a-shē-ta) – See you

tomorrow. Shitsurei shimasu (Shē-tsu-ray shē-mas) –

formal expression used when leaving someone's presence or leaving in the middle of a gathering.

Sumimasen (Su-me-ma-sen) – excuse me/sorry.

Common Sayings Ano (A-nō) – used to get someone's attention. Eto (E-tō) – “um” used as a filler word. Wakarimasu (Wa-ka-lē-mas) – I understand. Wakarimasen (Wa-ka-lē-ma-sen) – I do not

understand. Yukkuri hanashite kudasai (Yu-k-ku-lē ha-na-

sh-tay ku-da-sī) – speak more slowly please. Kaite kudasai (Ka-ē-te ku-da-sī) – write it

down please.

Common Sayings Mō ichido itte kudasai (Mō ē-chi-dō ē-t-te ku-

da-sī) – Say that again please. Mō ichido onegaishimasu (Mō ē-chi-dō Ō-

ne-ga-shi-mas) – one more time please. Eigo ga wakari masu ka (Ī-go ga wa-ka-li

mas ka) – Do you understand English? Eigo wa dekimasu ka (Ī-go wa de-ki-mas ka)

– Do you speak English? Yukushite kudasai (Yu-ku-sh-te ku-da-sī) –

Translate for me please.

Common Sayings Kore wa doiu imi desu ka (Ko-ray wa dō-ē ē-me

des ka) – What does this mean? Kore wa donna fu ni hatsuon shimasu ka (Ko-

ray wa dō-n-na foo nē ha-t-su-o-n shē-mas ka) – How do you pronounce that?

Chotto matte kudasai (Chō-t-tō ma-t-tay ku-da-sī) – One moment please.

Kore wa nan desu ka (Kō-re wa na-n des ka) – What is this?

Sore wa nan des ka (Sō-re wa na-n des ka) – What is that?

Setting up a Business in Japan

Business Organizations Available to Foreigners;

Forming a Company; Cost of Information; Capital and Transfers; Shareholders and Board of Directors; Registration of Corporation; and Reporting and Auditing Requirements;

Business Organizations Available

Companies: Gomei Kaisha (similar to a general partnership); Goshi Kaisha (similar to a limited partnership); Godo Kaisha (similar to the US concept of a limited liability

company (LLC)); and Kabushiki Kaisha (K.K.) the predominant form of company in

Japan, which officially translates as a limited liability business corporation (“Business and Taxation,” 2013).

Branches of foreign companies; Partnership:

Tokumei Kumiai (silent partnership); and Nin-I Kumiai (more similar to a conventional US partnership).

Sole proprietorship (“Business and Taxation,” 2013).

Forming a Company

Promoter; Two methods to incorporate a company:

Hokki-setsuritsu; andBoshu-setsuritdu.

Company Act; Unfair Competition Prevention Act; Foreign Exchange Law; and Articles of Incorporation.

Cost of Information

Costs of incorporating a K.K.:Revenue stamp: 40,000 yen

Notarization fee: 50,000 yen

Registration fee: 7/1,000 of paid-in-capital, minimum of 150,000

yen

Bank commission: 2.5/1,000 of paid-in-capital

Capital and Transfers ¼ of authorized capital issued upon incorporation

of public companies; Total amount of authorized capital must be

provided for in the Articles of Incorporation; Notice filed with the Financial Service Agency when

total amount of shares is 500 million yen or more; Cash contribution required in principle; Promoter can contribute assets:

Securities;Property; andEtc.

Investigation of assets.

Shareholders and Directors

Boshu-setsuritsu (incorporation with offering);

Hokki-setsuritsu (incorporation without offering);

Meetings held by elected directors; and

Representative directors appointed in meeting held at head office.

Registration of Corporation Articles of Incorporation notarized; Full payments of subscription; Board of Directors appointed; and Representative Director files application

for registration of incorporation with the Legal Affairs Bureau.

Reporting and Auditing

National Taxation Office; Local Taxation Office; Labor Standards Inspection Office and

Public Employment Security Office; Social Insurance Office; Two laws in Japan which govern auditing

requirements:The Financial Instruments and Exchange Act;

andThe Company Act.