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The companies that are successful at doing business in Japan are among the top companies in the world.
However, it’s no secret that it is a challenge to succeed in Japan. Many companies fail when attempting to translate their message and strategy to the local market because they don’t understand it.
Japan is a country of protocols and one where you must dedicate time to building business relationships before you try to sell anything.
If you want to hire employees in the world’s third-largest economy, you must learn the ropes of doing business in this fascinating country.
Table of Contents
Why do business in Japan?
If your company properly prepares itself for the challenges of doing business in Japan, you can gain access to:
- The largest stock exchange in Asia
- A combined market cap greater than 5.6 trillion U.S. dollars
- 10 percent of the world’s economy
- Consumers with a high level of disposable income
- A large workforce
- First-class infrastructure
In addition to this, Japan is a critical player in the international market and is a nation built around facilitating global commerce.
What are the pros and cons of doing business in Japan?
Perhaps the largest pro of doing business in Japan is access to one of the largest markets in Asia, and the world. However, Japan offers other significant advantages for your organization.
Pros:
Knowledgeable consumers
Consumers in Japan are ready to pay a premium for your high-quality products. Japanese consumers see the long-term cost benefits of a more expensive product over a lesser-performing model.
Gateway economy
Japan is known as the “gateway into Asia” with a market-driven economy ideal for ventures and opportunity. Japan is also a significant consumer center in Asia, and achieving success in this market can lead to success all across the region.
Accessible company registration
As far as registering your company, Japan’s is relatively accessible. The average timeframe for registering a company in Japan is two to four weeks.
Highly educated workforce
According to Trading Economics, Japan’s working-age population with advanced education is 79.9 percent. The Organization for Economic Co-operation and Development (OECD) ranks Japan with the second-highest percentage of adult education, at 50.5 percent.
Strong economic performance and outlook
According to Fortune, “Japan’s gross domestic product beat analysts’ expectations to rise 3% in the last quarter of 2020 versus the previous quarter, boosted by private consumption, a jump in exports, and an influx of private investment.”
Regardless of the complications brought on by the global pandemic, Japan is expected to continue to be one of the global economic powers in the future. Focus Economics predicts that Japan will remain the third-largest economy in 2024, with a GDP of US$5.6 trillion.
A major player in industry and tech
Japan makes 25 percent of the world’s high-tech products. In addition, the annual revenues of Japan’s top electronic makers are almost as significant as the economy of The Netherlands.
So, as you can see, while there are major upsides to doing business in Japan, but what are the cons?
Cons:
Difficult talent acquisition
According to the 2018 Manpower Global Talent Shortage survey, out of the 43 countries surveyed, Japan was the most difficult for hiring. In addition to this, Japan has a job to application ratio of 1.06 — one of the lowest in the world.
Aging population
Twenty-five percent of Japan’s population is over 65 years old and is expected to climb to 40 percent by 2060, according to the World Economic Forum.
Picky consumers
We know what you are thinking, weren’t Japanese consumers a pro? Well, it depends on your approach. They are knowledgeable, which means that they have standards and are also demanding.
What does this mean? You must be willing to redesign or adapt your products or services to meet their expectations.
Time-consuming and costly entity setup
While registering your business might be a straightforward procedure, setting up an entity in Japan can be a lengthy affair. You need to deal with various offices, plus the expenses associated with the required capital.
Filing articles and paperwork can cost anywhere from 450 to 20,800 Japanese yen.
Filing articles and paperwork can cost anywhere from 450 to 20,800 Japanese yen. Click To TweetFew instances of English communication
Even though English classes are standard across Japan, few professionals have a conversational English level. This means that interviews and business, in general, should be conducted in Japanese. According to Michael Page, Japanese takers of the Test of English for International Communication (TOEIC) ranked 40 out of 48 countries.
Why do companies fail in Japan?
Tokyo-based consultancy and digital agency Plus Alpha Digital says that there are several mistakes that international companies make in Japan.
1. Most companies assume that they will get by with English. They underestimate the language barrier and fail to understand that communicating in Japanese is a must.
2. Companies often assume that the amount they invest locally is similar to the amount they need to invest in Japan. This often results in insufficient investment and an early exit.
3. There is a general lack of understanding when it comes to the local market. Some organizations think they can get by with sheer effort or money alone. However, assuming that success in their home market will translate to Japan has toppled even some of the biggest companies in the world.
5. Overlooking the fact that, even with help, companies can end up choosing the wrong partner that has insufficient local market knowledge.
What are some tips for doing business in Japan?
It’s easy to fall prey to mistakes when doing business in another country. Japan is particularly tricky since it is an unknown territory for many companies.
Don’t assume anything
We all develop biases according to our local business cultures and backgrounds, but applying those assumptions in business interactions around the world could significantly hurt your chances of success in new markets.
Whichever customs you have, assume that everything is done differently. This will ensure you approach and develop business strategies correctly rather than acting on instinct.
Take your time
Japan is not a land where business is conducted at lightning speed. Professionals may expect you to take the time to clearly communicate your company’s message and point of view.
Adapt and tailor everything
You need to rethink your business approach, content, marketing strategy, and even some of your products. Not doing so could set you up for an early market exit.
Become a brand name
This should be your goal in every market. However, in Japan, most companies have a legacy, which means that a strong brand image can help you make it to the top.
Hold on to your candidates
Currently, in Japan, there are 160 positions for every 100 job seekers. This means that you’re not going to be rejecting applicants left and right, but waiting for applications to come in.
Across the world, job-hopping has become common. In Japan, jumping from company to company is looked down upon, so if you want to attract and retain professionals, make sure that they see the long-term picture.
Currently, in Japan, there are 160 positions for every 100 job seekers. Click To TweetBuild relationships
Business relationships in Japan go beyond economic interests or legalities. It would be best if you took the time to build fruitful and respectful bonds with everyone you encounter.
Find the right partner
The best thing you can do is learn as much as possible and find the right experts who have already done the legwork and have the knowledge to help you succeed.
How can you hire employees in Japan?
At this point, you are thinking that doing business and hiring in Japan certainly seems like a complex task — and it is. The good news is that it is not a mystery why companies have failed: they were unprepared.
Expanding to Japan can be a significant step for your company’s international goals. However, like anything valuable, there is work that must be done. That said, this does not mean that you have to do it all alone.
Today, the advantage is that there are employment models that allow companies to hire in Japan without the need to set up an entity or deal with any local registration processes.
The Employer of Record (EOR) model allows companies to hire international employees quickly and affordably. An EOR has an international entity established and takes care of payroll, taxes, benefits, and HR processes.
An EOR offers companies complete protection against international liability by taking on 100 percent of compliance responsibility.
EORs provide a team of in-country experts who can onboard your candidates seamlessly and help you ensure your employees remain happy and engaged.
The great advantage of an EOR is that it allows you to test Japan’s market by hiring just a couple of employees without making a large commitment.
Learn more about doing business in Asia Pacific and working with an EOR in Japan.
