2021: Doing Business in Japan

Doing Business in Japan

1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?

Although the COVID-19 pandemic is still beyond control in Japan, the legal business in Japan is active.

Recent amendments to the Foreign Exchange and Foreign Trade Act are impacting the milestone of share acquisitions and new company establishments by foreign entities.

2. From what countries do you see the most inbound investment? What about outbound?

According to the national statistics from 2020, the top 10 countries that invest in Japan are the UK, USA, Switzerland, Singapore, China, France, Netherlands, Hong Kong, Thailand, and Germany. The top 10 countries for outbound investment are USA, Luxembourg, Switzerland, Australia, Netherlands, China, Singapore, Cayman Islands, Thailand and the UK.

We have the impression that the statistics are reflected in our business. Since we have a big client in Singapore who continuously invests in Japanese real estate, we have significant inbound business from Singapore. Furthermore, since we have strong German and Korean practice teams, we have a significant number of German and Korean investments, in both directions.

3. In what industries/sectors are you seeing the most opportunity for foreign investment?

To/from the UK, Hong Kong, and Luxembourg are the main business opportunities are financial investments. With respect to other jurisdictions, the business segments are diverse - manufacturing of transport machinery and its parts, electronics, foods, chemical, healthcare, energy, real estate, aviation, and ship transport, etc.

4. What advantages and pitfalls should others know about before doing business in your country?

Japan belongs to the Roman law system in which statutory law plays an important role, but in the area of labor law, case law plays an important role.

Rules of Employment (RoE) is mandatory if there are 10 or more regularly employed employees, and must be submitted to the competent labor standards supervisory bureau. This RoE is unique and often creates a headache to foreign-owned entities, because – among others - if there is a discrepancy between the RoE and the individual employment agreement, whichever is more advantageous for the employee will apply. Accordingly, the HR of the foreign parent must control both RoE and the individual employment agreement.

The perfection system under Japanese law is unique.

Regulatory – The legal texts tend to be vague as compared within Western countries and the authority tends to have broad discretion. Close contact with the authorities is sometimes very important.

5. What is one cultural fact or custom about your country that others should know when doing business there?

Western-style selling services (especially through a cold call-type contact) do not work. Since human relationships have vital importance, you always need personal recommendations. However, once a good relationship is established, there is a good chance that the client remains loyal.

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