Setting up a business in Japan? Here are 5 things to think about
With its excellent transport links and populous cities, Japan offers a great choice of locations for businesses looking to expand.
Japan has huge potential for UK businesses as it’s one of the biggest economies in the world with a population of over 126 million. Its industries are diverse, ranging from intricate electronics to steel production, and its tech-savvy population is used to using online retailers and services.
To help you decide if Japan provides a great opportunity for your business, here are some of the key things to think about before expanding.
Consider the pros and cons
Japan is a vibrant and varied country so there’s a range of benefits and drawbacks to doing business there. Here are a few pros and cons to think about.
Japan is the third largest economy in the world and the Tokyo stock exchange is the largest in Asia. Add to this the levels of education and disposable income in Japan and you’ve got a very appealing market that offers a vast range of opportunities.
Japan has a highly developed infrastructure, too with good road and railway links that make it easy for goods or staff to move around the country. If you’re planning on importing or exporting goods there are five major ports – plus hundreds of smaller ones – in Japan as well as five international airports.
You’ll need to put some time into learning the expected business etiquette in Japan as there’s more formality than in the UK. Politeness is highly valued and you should treat even the most junior business associate with the utmost respect. You’ll be expected to be fully prepared and punctual for any meeting and may need to take your shoes off before entering offices. There’s etiquette around greeting and eating too, so there’s plenty of opportunity for embarrassment if you haven’t done your research.
Earthquakes are frequent in Japan so if you’re planning on basing your business there or visiting regularly you should prepare and budget for this. Check any structural or other measures you should have in your office, warehouse or factory and make sure all your staff are trained in what to do during an earthquake.
Calculate the costs
To justify expanding somewhere as far away as Japan, the costs involved in set up and operations need to be offset with healthy profits. It’s therefore worth looking in detail at the sort of expenses you’re likely to incur to help you decide if they’ll be sufficiently counteracted by your income.
Japan has a high cost of living, with Tokyo ranking among the most expensive cities in the world. The downside of this is you’ll need to budget for comparatively expensive travel costs and rents as well as wages that will enable your workers to meet this cost of living. The upside is that in Japanese culture there’s an emphasis on high-quality goods and services so as long as your offering is up to a high standard you should be able to charge a premium price.
To ensure that there is no miscommunication and that you’re adhering to expected etiquette it’s worth investing in translation services for your business in Japan. This means budgeting for the cost of having a translator present at meetings and meals with your Japanese business associates, as well as the cost of having important documents translated. To set up or run a company in Japan you’ll need a visa. Your cost analysis should include the expense of applying for a visa as well as associated outgoings like any required start-up capital or rented office space.
- Open up to 20 local currency accounts, with local sort codes, account numbers and IBANs
- Collect secure payments from 130+ marketplaces, overseas buyers and payment processing gateways
- Pay suppliers, partners and staff in 40 currencies without hidden fees
- Pay and get paid easily with local bank details on your invoices
- Lock in conversion rates to manage your currency risk
Check how your sector performs
Japan’s advanced economy is made up of a diverse range of sectors. It’s worth researching how your industry performs to see if there’s an established market for your business or if there’s oversaturation that means you’ll struggle to cut through the competition. To kickstart your research here are some of Japan’s top-performing sectors.
Japan is known for its high-tech advances, ranging from robotics to e-health. The country’s thriving technology sector includes a booming IT and communications industry as well as digital media and biotechnology.
Manufacturing is a major industry in Japan, helped by easy access to vast ports for exporting goods. Goods produced in Japan include computers and optical fibres as well as iron and steel. Motor vehicles are a manufacturing specialism in Japan with Japanese companies including Toyota, Honda and Suzuki.
Financial and business services are a strong sector in Japan. And the country’s fast internet speeds mean UK businesses can easily collaborate with Japanese associates to deliver services online. As well as banking and insurance, retail and real estate are key service industries.
Quickly enter the market with a marketplace
As a fast alternative to your own physical or online store, you can sell your products on a Japanese online marketplace. It’s usually quick to set up a store within the marketplace and you can often start trading immediately. Do your research as some marketplaces will only let you list if your business is based in Japan.
Like in many other countries, Amazon is the leading marketplace in Japan so setting up an Amazon store is a quick way to enter this major market. There isn’t a strong eBay presence in Japan, instead Yahoo auctions is popular and has a similar peer-to-peer selling model to eBay.
More unique to Japan is the popularity of Rakuten. It’s is one of the most popular marketplaces in the country where third-party merchants can sell food products, homeware and apparel, as well as electronics and other categories. Each seller gets their own customisable storefront on the site.
Mercari is a top performing marketplace and offers a mix of lesser-known and major brands as well as consumer-to-consumer selling. Categories include toys, electronics and fashion. Mercari is developing what it offers pro sellers to make it easier to import listings in bulk and manage your inventory.
Pick the perfect location
To help you narrow down your search for a business base in Japan, here’s a quick summary of some of the country’s biggest cities.
Tokyo is by far the biggest city in Japan and is the governmental, financial and administrative centre. Tokyo is the home of many major Japanese companies as well as universities and research institutions. As well as a thriving service industry, there’s a strong manufacturing presence in Tokyo and the busy Tokyo Bay port handles much of the country’s import and export business.
Yokohama is close to Tokyo – just half an hour by train – and the second biggest city in Japan. Offices are usually cheaper to rent here than Tokyo so it’s a good alternative while still providing easy access to the capital. Yokohama is a major port city and its industries include shipbuilding.
Osaka and Kyoto are cities in Japan’s Kansai region. Osaka has one of the biggest train stations in western Japan, providing great links with the rest of the country. The historical city of Kyoto has a booming tourist industry and companies with headquarters here include Panasonic and the Japan Atomic Energy Agency (JAEA).
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