1. Japan >
2. Starting a Business >
3. Introduction

Why Start a Business in Japan?

Japan is probably the most Westernised nation in Asia. You can't really go much further east before arriving back home. Japan practices Western ideology with the unceasing childish extravagance usually reserved for countries like Russia, which have only recently discovered the capitalist playground. Japan has managed the perfect balancing act, the diligent tightrope-walk, between preserving and adopting, seamlessly sewing the Western business ethic into its cultural and historical fabric.

This fascination is not just one-sided, though. Japanese culture has infiltrated many areas of Western life, too. Its art, animation, films, food, literature and sport hold a profound influence on us. The English, especially, love to flaunt their love of sushi, Kurosawa and Murakami. They are our social pretensions and dinner party conversations. And frankly, Japan has never been more name-dropped at the corporate party either.

Japan is relatively accessible in most sectors, mainly due to systematic deregulation over the past two decades, and UK investors are welcomed with idiosyncratic Japanese hospitality, providing they arrive with a long-term promise and a sound market strategy. Japan's economy is generally considered the second largest and successful in the world, with openings in most industries and sectors, from construction and media to food and fashion to healthcare and telecommunications. An entrepreneur's entry options are vaster than Fuji, but far easier to accomplish.

What's the population?

The population of Japan is 126.23 million

Economic Overview

Japan is a major economic power and has the world's second largest economy by nominal GDP. Distinguishing characteristics of the Japanese economy include the cooperation of manufacturers, suppliers, distributors and banks; the guarantee of lifetime employment in big corporations; and strong work ethic.

Only a very small amount of Japan's land is suitable for cultivation, therefore a system of terrace farming is used to build in small areas. This system has resulted in one of the world's highest levels of crop yields per unit area; however, the agricultural subsidies and protection are costly to the economy. Japan imports about 50% of its grain and fodder crops other than rice, and it imports most of its supply of meat. In regard to fishing, Japan has the second largest tonnage of fish caught in the world and accounts for nearly 15% of the global catch.

Japan's main export partners are the United States, the European Union, China, South Korea, Taiwan and Hong Kong. Japan's main exports are transport equipment, motor vehicles, electronics, electrical machinery and chemicals. Japan has very limited natural resources to sustain economic development and thus imports most of its raw materials. Its main import partners are China, U.S., the European Union, Saudi Arabia, UAE, Australia, South Korea and Indonesia. Japan's main imports are machinery and equipment, fossil fuels, foodstuffs, chemicals, textiles and raw materials; all used for its industries.

Japan has low overall taxation compared to Western countries. Less than half of employees pay any income tax at all and VAT is very low at 5%, although corporate tax rates are high.

Japan has a large industrial capacity and is home to some of the world's largest and most technologically advanced producers of electronic equipment, machine tools, metals, ships, motor vehicles, chemicals, textiles and processed foods. Insurance, banking, retailing, transportation, real estate, telecommunications and construction are all major industries in Japan.

Japan is also home to some of the largest financial services companies and business groups such as Sony, Sumitomo, Mitsubishi and Toyota. It is also home to the world's largest bank by asset, Japan Post Bank and others such as Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group.

Working hours

Working hours must not exceed 40 hours per week and 8 hours per day, excluding breaks. However, some businesses are permitted to have their employees work up to 44 hours per week with no more than 8 hours per day. These businesses include retail, beauty services, cinemas, theatres, and businesses related to health and hygiene, as well as restaurants and entertainment businesses with less than 10 regular employees.

Employers must grant employees one day off per week or four days off in any four week period.

Breaks

No less than 45 minutes for working six hours and 1 hour for working eight hours.

Etiquette

Keiretsu (Affiliates): In Japan, business is usually conducted between affiliates of the same corporate group and sometimes it is not easy for non-affiliates to enter into contracts with a corporation who is affiliated.

Nemawashi: If anybody wants to present an idea at a meeting, he/she should first discuss it with all colleagues informally. Therefore when the meeting is held, everyone understands the idea and plan.

Nenko joretsu (seniority system): Although changing, in this system, salaries are decided by age and not according to ability.

Business cards: Exchange of business cards is an obligatory custom at every meeting regarding business. You should make sure you have bi-lingual business cards.

Click here to Ask an Expert about Introduction in Japan