2024: 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?

Japan's currency, the Japanese Yen, has been significantly devalued compared to other major currencies, such as the US dollar and Euro, which is fueling inbound investment in project finance and real estate. On the other hand, Japan’s domestic economy’s growth rate is quite modest, causing many Japanese companies to seek growth overseas, fueling a huge influx of outbound investment. Japan also aims to cut carbon emissions to tackle climate change, and many renewable energy projects, most recently offshore wind farms, are also ongoing and planned.

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

We see many inbound investments from the United States, Germany, Korea, Singapore, and Taiwan. For outbound investment, we see many projects in Southeast Asia, such as Indonesia, Vietnam, and Malaysia.

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

We see the most opportunity in renewable energy projects, as we have a government initiative to raise the percentage of non-carbon generating renewable energy. Development projects of resort areas are also gaining steam, as governments (both national and local) are trying to boost the tourism industry to capture foreign tourists.

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

The advantage of doing business in Japan is that the commercial and legal systems here are quite stable and predictable, and we do not have sudden changes in government policy that may hurt investments. Also, the legal system is business-friendly in that we do not have discovery or class-action lawsuits, and overall, Japan is not a litigious country. However, on the working level, the government issues many guidelines, which are legally non-binding but work as de facto regulations. These may be difficult to follow without professional guidance.

Culturally, Japan is a monolingual country, and Japanese proficiency is necessary to succeed in business. National and local governments, especially, only use Japanese, as do the courts. Many domestic companies, too, are more comfortable using Japanese than English, and if your customers are mostly consumers, then there is no option but to use Japanese.

In some industries, such as software, Japan has established reseller/distributor networks, and if you are new to the Japanese market, it is essential to have contracts with these instead of trying to sell directly to consumers. Once you are established and well-known in Japan, direct sales channels become easier to establish.

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

Japanese companies have a strong hierarchical system, and it is essential to acknowledge who the head person is in a project and treat the person with respect, such as placing the person’s email address first in the recipients’ section. If using Japanese, there is a rather strict business language protocol that is being used (e.g., messages always start with a greeting expressing gratitude, and end with an epilogue asking to take care of the issue), and unless you are a close friend, deviating from the protocol would be considered rude/rustic. Especially, addressing someone by their first name is a taboo in Japanese. On the other hand, when running a project, you do not address the top person but those at the working level, but you still need to be careful of the seniority among them, too. Interestingly, Japanese businesspersons do not require similar protocols when communicating in English but rather follow the norms used in English (for example, addressing persons by their first name).

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