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Why Business in Japan? 4 Merits and 4 Demerits of Doing Business in Japan

In this page, we explained about merits and demerits to businessmen who are considering starting a business in Japan.

4 Merits of Doing Business in Japan

  • 1) National character with high ethical standards
  • 2) Respect long-term relationship
  • 3) Asia’s top income
  • 4) 3rd in the world in terms of GDP・6th largest population in Asia

4 Demerits of Doing Business in Japan

  • 1) Many natural disasters
  • 2) Slow in making decision
  • 3) High level of difficulty of localization
  • 4) Telephone call centre of official organization or WEB site don’t support English

4 Merits of Doing Business in Japan

Firstly, we will explain 4 merits of doing business in Japan.

1) National character with high ethical standards

This photo was taken when huge earthquake hit in March 2011.

The way Japanese people lined up properly even after such a major disaster without looting went viral on social media.

According to “Corruption Perceptions Index Asia ranking 2019” by NGO-Transparency International, Japan was third in place. (Singapore was first.) With such high ethical standards, you can start business at ease.

2) Respect long-term relationship

Upon making the decision within the company, we need to have reports called “Ringi-Sho(Approval documents)” stamped by every people concerned to get consensus. This business practice called “Ringi (Getting approval).”

There are pros and cons of this business practice in Japan, however, it has a merit of extremely few cases of changing or cancelling a project once it has started When making decision to do business with a company, we have to go through Ringi to get internal approval. Therefore, once decided, it is possible to make long-term transactions.

3) Asia’s top income

According to www.worlddata.info, the annual income of Japanese in 2019 was 4.49 million yen (about USD 43,000), which is the fourth largest in Asia. (Macau came in 1st, followed by Singapore and Hongkong.)

Japan is proud of having a large number of Asia’s top middle-income group.

Hence, we have large market when selling goods and services in Japan and it is easy to get economies of scale.

4) 3rd in the world in terms of GDP・6th largest population in Asia

In nominal GDP ranking in 2019, Japan was third in place in the world.

From this data, we could say that Japan is a large country with a population of over 100 million and large volume of middle-income population.


4 Demerits of Doing Business in Japan

Next、we will explain about 4 demerits of doing business in Japan.

1) Many natural disasters

Japan has high probability of large earthquake occurring, for example, Great Hanshin-Awaji Earthquake in 1995 and Great East Japan Earthquake in 2011.

Therefore, earthquake countermeasures are incorporated into city planning. However, Japan has been plagued by economic stagnation caused by the earthquake

If you are considering to build a business in Japan, you have to bear in mind about disaster risk.

2) Slow in making decision

This is the other side of “Respect long-term relationship” that we explained as second merit. Japanese value cooperation, thus it takes some time for the organizational decision-making.

On the other hand, it is a fact that there is a business route unique to Japan. When you get a referral from a bank with which you do business, you can talk directly to CEO who has the greatest decision-making authority and “Ringi” becomes just formality.

3) High level of difficulty of localization

Japanese language is highly abstract. When you translate from foreign languages to Japanese, sometimes something doesn’t feel right. There is Japanese-specific expression which only Japanese can understand. Thus, we recommend you to assign Japanese as a marketing representative.

4) Telephone call centre of official organization or WEB site don’t support English.

Most Japanese can’t speak English. Even if there is a department like “International Department”, it is often a name only. Calls or e-mails from foreigners will receive low priority. When you check the web site of public organization for checking license requirements, you may only get Japanese information or when you call them, they may not understand English.

From these experiences, many overseas companies feel that Japan has high entry barrier and they tend to give up on entering Japan market.

If you look at it from the other side, high entry barrier can turn into your company’s strengths if you can find the business partner who understands Japanese and Japanese business practice.

Please contact GPC if you have any questions regarding your market entry into Southeast Asia or vice versa, expand into Japan.
Our consultants will assist in advising the best solutions for your business.