Japan: Where persistence pays

AS the world’s third-largest economy, Japan is always going to be attractive to ambitious Western companies. But those who succeed are in it for the long game.
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01.08.17
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Japan offers a wealth of opportunity to those who can gain a foothold in the market.

But doing business there not only requires careful negotiation of cultural norms that have perplexed many a Westerner, you’ll need to show commitment, respect and patience.

So says Daisaku Yukita, deputy director general of the Japan External Trade Organisation (Jetro), which has helped some 16,000 foreign companies to enter the Japanese market and more than 600 companies set up an office there.

“It might be frustrating if you meet with a Japanese company in business terms,” he admits. “Decision-making is very slow but we are just cautious. Once you have a good relationship, it will last forever.”

Japan places 34th in the World Bank’s Ease of Doing Business rankings. While below the UK (7th), South Korea (5th) or Australia (15th), it ranks higher than Belgium, Italy or South Africa, and is way ahead of India or China.

A springboard to Asia?

Jetro, which promotes trade with the archipelago, insists opportunities abound for those willing to put in the time and effort.

Despite being similar in size to Germany, Japan has roughly twice the UK’s population. Taken alone, the economy of the densely populated Kanto region – which includes Tokyo and Yokohama – almost matches Russia’s in size, according to Jetro.

Graphic showing size of Japan's regional economies [Copyright: Jetro]
Japan's regional economies [Copyright: Jetro]

Two other regional economies are comparable to that of Switzerland, while others are of similar size to those in Sweden, Finland, Austria and Hungary.

“If you come to Japan, you can get these seven countries’ economic impact at the same time,” says Yukita, who addressed a Quay Business Forum networking event at Birkenhead’s Maritime Knowledge Hub.

“Products that become successful in Japan become popular in other Asian markets. Coca-Cola developed Aquarius for Japan but now it’s travelling around the world.”

What are the opportunities?

The UK and Japan have a good trading relationship, with nearly 1,000 Japanese companies employing some 140,000 people in the UK. Carmaker Nissan, Hitachi Rail, Toshiba and SoftBank are among the major players.

According to Kosuke Wada, first secretary at the Japanese Embassy in London, Japan’s ageing society presents opportunities in the life sciences sector. He says the country’s regulator, the Pharmaceuticals and Medical Devices Agency, is expanding and accelerating research.

“The Japanese Government is welcoming life science research in Japan, especially in regenerative medicine. IT and real-world data is the key to the cost effective service.”

Japan is keen to sell itself as an innovation hub, spending more on research as a percentage of GDP than any other G7 nation.

Meanwhile, Daisaku Yukita says the country also expects a huge economic impact from the 2019 Rugby World Cup and 2020 Tokyo Olympics.

“There will be a wide range of demand for procurement, information systems, infrastructure, security and transport. It’s not too late [to get involved in contracts]. Local governments are willing to receive application from overseas so that’s a great opportunity.”

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He admits the process can be difficult. While procurement opportunities are listed in English on Jetro’s website, applications must be written in Japanese and companies generally need their own entities in Japan.

However, the not-for-profit trade organisation Export to Japan, which is backed by the UK government and British Chamber of Commerce in Japan, says the country’s wealthy consumers “have an affection for the best of British” across food and drink, design and digital creations.

“That’s without all the corporations looking to access British know-how in the areas of chemicals, construction, engineering, transportation, communications, consulting, energy, biotechnology, pharmaceuticals and a myriad of others.”

High numbers of single-parent households can prove a fertile ground for UK exporters, it adds.

So what are the challenges?

According to Export to Japan, the country’s unique business culture, complicated distribution channels and high concentration of domestic competitors can seem daunting.

But it adds: “There is an exoticness and status associated with Western brands that drives Japanese consumer demand for Western products and services.”

Daisaku Yukita says Japanese customers often require a lot from overseas contacts, and prefer dealing with companies that open an office in the country.

But Jetro can help, providing newcomers with information on potential partners, regulations and contacts, as well as offering free temporary office space in Tokyo for up to 50 days.

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Produced by the 2018 International Business Festival, in partnership with Wordscapes.