Launching a New Business in Japan

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Table of Contents

History and Background
People
Business Etiquette
Politics
Economy
Legal Environment
Current Events
Decision
References

History and Background

Japan should be seen as an island state off Asia’s eastern seaboard. It is made up of a massive group of islands that form a northeast-southwest arch that spans the western North Pacific Ocean for around 1,500 miles (Jansen et al., 2022). The 4 major islands of the state – Hokkaido, Honshu, Shikoku, and Kyushu – take up nearly all of the nation’s land area. Tokyo, the capital city, is among the most populated capitals around the globe.

The legendary first emperor came to power around 660 BC. The knowledge included in the old Japanese mythology and history allowed for the determination of the date of the first emperor Jimmu’s entrance to the realm, who is said to be the ancestor of the Japanese ruling dynasty (Jansen et al., 2022). In the capital he established, a city named Kashihara, Jimmu passed the ascension to the throne rite on this day.

Japan maintained its active endeavor to establish institutions of power and create standards for interactions between the government and its subjects from the start of the 8th century. The Chinese model was adopted by the Japanese government. Taihoryo was the name of Japan’s first legal code, which was created in 701 and adopted in 702. The country’s first regular capital – Nara – was established in 710 (Jansen et al., 2022). On the foundation of geomantic concepts about the safety of space, the location for its development was selected.

The lack of direct outside cultural impact necessitated a reconsideration of historical borrowings and the creation of authentic Japanese forms of expression. From architecture to belles-lettres, practically every facet of life exhibits this process. Since China was no longer seen as a representative value in 894, Japanese philosophers frequently cite political unrest on the Chinese mainland and the sudden changes of governing dynasties to argue for Japan’s distinction from the Middle State.

Military professions, as well as forceful methods of resolving conflicts, did not have special prestige in traditional Japan. Preference was given to civil officials who were literate and able to compose poetry. However, in the 12th century, the situation changed. From that time until the Meiji Restoration in 1867-1868, a dual power system was established in Japan (Jansen et al., 2022). Emperors continue to perform rituals, while shoguns, and military rulers, carry out real politics, are in charge of foreign relations, and often interfere in the internal affairs of the imperial family.

Traditional Japan did not place a high value on military careers or the use of force to resolve disputes. Civil authorities who could write poems and were educated were given preference. However, things altered in the 12th century (Jansen et al., 2022). From this point on until the Meiji Restoration in 1867–1868, Japan operated under a dual power structure. While shoguns and army rulers conducted actual politics and were in charge of international relations, emperors continued to perform ceremonies.

Japan started to become unified in 1573. It should be noted here that the generals, regarded as the three great unifiers, are possibly the most well-known figures in Japanese history. These are Toyotomi Hideyoshi, Tokugawa Ieyasu, and Oda Nobunaga (Jansen et al., 2022). Their activities are thought to have enabled the nation to be united under the new shogunate. The formal reunification of Japan was accomplished on October 21, 1600.

On September 2, 1945, the USS Missouri witnessed the acceptance of Japan’s unconditional and total surrender, which put an end to World War II. Japan will be under military occupation by the Americans until 1951 (Jansen et al., 2022). The principles that have been ingrained in the Japanese mentality since the turn of the century are completely reevaluated at this time. The divine genesis of the royal line, a previously unquestionable fact, is likewise open to reconsideration. An edict on the creation of a new Japan, signed by Emperor Showa, was released on January 1st and contained a clause titled self-proclaimed emperor by a man.

The foundation of post-war Japanese identification was not one of supremacy but rather of Japanese individuality. Nihonjinron was an emerging tendency in the 1960s (Jansen et al., 2022). Numerous essays published during this trend highlight the distinctiveness of Japanese culture, Japanese thinking characteristics, and the magnificence of Japanese art. World-class events staged in Japan followed the reevaluation of ideals and the emergence of national self-awareness. The first Summer Olympics to be hosted in Asia were organized in 1964, with Japan serving as the host nation (Jansen et al., 2022). Development of Japan’s pride, urban infrastructure amenities, was part of the arrangements for the hosting. The Shinkansen bullet trains, now well-known worldwide, were introduced between Tokyo and Osaka. The Olympics have come to represent Japan’s reintegration into the global community.

People

The vast bulk of the populace is made up of Japanese nationals. They have a close ancestry with other eastern Asian peoples. The divisiveness of the population into four groups – warriors, farmers, craftsmen, and merchants – with a peer group above and an exile category below existed throughout the Edo era (1603–1867) (Jansen et al., 2022). This social class structure is almost vanished, with little to the extent of discrimination at all. Since the Japanese saw themselves as members of a particular ethnic unit, any social class system that exists lacks the ethnic foundation that can emerge in mixed society. Ainu-originated Japanese citizens and, to a much smaller degree, Okinawan people are among the rare exceptions, along with individuals who are considered resident foreigners (especially Koreans). A limited number of people in Japan are of Chinese heritage.

The Ministry of the Interior and Communications estimated that as of October 1, 2021, Japan had a total population of 125,502,000, a 0.51% decrease from the previous year (Jansen et al., 2022). Since comparable statistics became available in 1950, this population drop has been the biggest and is still growing. However, a number of factors indicate a decreased pace of demographic growth and decline per prefecture. Only in the prefecture of Okinawa is the growth being noticed. In contrast to the prior year, the growth rate is 0.07%, and it is now falling (Jansen et al., 2022). The population drop is evidently greatest in the Tohoku area and on the Sea of Japan side, with the darker the blue hue, the larger the decline. The decline surpasses 1% in 11 prefectures, including Akita, Aomori, Yamagata, and Nagasaki. Additionally, population growth changed into a fall in five prefectures, and the pace of reduction accelerated from the prior year in 33 prefectures.

Tokyo, one of the prefectures, has 14.01 million residents, or 11.2% of the nation’s total population, making it the most populous prefecture (Jansen et al., 2022). The next largest cities are Kanagawa, Osaka, and Aichi. The three largest urban agglomerations in Japan – Tokyo with 36,862,000 residents, Nagoya with 11,233,000 residents, and Osaka with 18,115,000 residents – combine their populations to reveal that 52.8% of the nation’s population resides in these three metropolises (Jansen et al., 2022).

Business Etiquette

Altruism, teamwork, and teamwork are constantly cultivated in Japanese society. Individuality is determined by belonging to a social group. Therefore, in business, the Japanese attach great importance to the willingness to make concessions and self-discipline. Rooted in Confucianism, hierarchical structures always determine a person’s position in a group and in society. Status depends on factors such as age, profession, company, and marital status. The hierarchical system requires an attitude corresponding to a high status (Open Yokohama, 2017). To maintain harmony in society and maintain a clear hierarchical structure, showing respect for others is one of the most important cogs of communication. Respect is conveyed through words, behavior, etiquette, body language, and other nuances of non-verbal communication.

When doing business, the Japanese have increased requirements for formalities. Bowing is an integral part of the behavior of Japanese society. It is used when meeting to attract attention, show gratitude, and express sympathy or apology (Open Yokohama, 2017). Moreover, the exchange of business cards in Japan is a whole ceremony. It is believed that a business card represents a person, so it must be treated with respect.

The pillars on which successful business relations with the Japanese are built: are sincerity, compatibility, and trust. Sincerity means that one makes compromises and is understanding and willing to do business on a personal level. Compatibility is when partners see that one is concerned about the reputation of the company, establishing personal relationships and that they are not focused solely on the financial side of the issue. The emphasis on maintaining harmony has led to the development of various forms of expression of thoughts (Open Yokohama, 2017). Cultural background is to avoid direct and harsh statements, and there is less chance of not offending anyone.

The Japanese like to do business with calm, willing-to-compromise, and sincere people. Extroverts are perceived as arrogant and arrogant people. At the beginning of negotiations, you need to be modest, not speak directly, do not threaten (Open Yokohama, 2017). One cannot rush to answer, categorically disagree with the statements of partners, as well as always remember diplomacy, but at the same time, leave concessions and discounts until the end of the meeting. Further, silence is considered a virtue. If there is silence during the negotiations, there is no necessity to panic (Open Yokohama, 2017). The Japanese like to reflect on being aware of the information received. Sometimes they may even cover their eyes when they are silent, and it is never necessary to break the silence first.

Politics

Japan should be considered a constitutional monarchy that has an official Diet involving two legislative institutions – the House of Councilors and the House of Representatives. The head of the government is the prime minister; currently, this is Kishida Fumio (Jansen et al., 2022). The Japanese emperor has minimal power in political matters, like many other monarchs of the world. The government, the constitution, and the people consider the emperor the symbol of the state and the unifier of the nation.

The constitution on which the current government is founded specifies the division of power among the legislative, executive, and judicial departments. The chief judge of the Supreme Court and the prime minister are now appointed by the Diet, respectively. The emperor is also responsible for convening Diet sessions, purveying legislation and treaties, and bestowing state honors, all with the wisdom and consent of the administration.

Following the nuclear strike during World War 2, Japan and the United States had strong relations. Foreign and security policy concerns are discussed in their interrelation. Additionally, it enjoys good ties with other industrialized nations including Germany, the UK, India, and France (Jansen et al., 2022). The government tends to admit that in foreign direct investment and trade strategy, diplomatic contacts are crucial.

Economy

The financial estimates place Japan’s yearly GDP at 4.911 trillion US dollars in 2020, making it the third-largest in the world (Statista, 2022). The per capita income in the state was $39,048 and ranked 22nd in the world (Statista, 2022). Within the scope of the mentioned indicator, after China, it is ranked second in Asia, and third overall. Some of the most important industries in the world, including those in food, textiles, pharmaceuticals, shipbuilding, industrial machinery, and technology, are based in Japan. Yamaha, Nissan, Mazda, Suzuki, Honda, and Toyota are well-known global automakers. It should be stressed that the economy of the nation is both free and managed.

Industrial raw materials, wood, aluminum, copper, ore, steel, coal, gasoline, and oil are a few of the major imports into Japan. Australia, Germany, South Korea, the USA, and China are the top importers. Industrial printers, vehicles, electronic equipment, and other goods are among Japan’s top exports. Thailand, Hong Kong, South Korea, China, and the US are its top export markets. Due to the growth of exports, the value of the Japanese yen has increased; the current rate – 1 USD equals 148,78 yen. The unemployment rate was 2.80% – no increase since 2020 (Statista, 2022). These essential indicators reveal a great extent of significance and wealth in the country.

Legal Environment

The law system of the country is founded mostly on legislation and codes of conduct, with precedents also possessing a significant role. Six legal systems that make up Japan’s civil law system were tailored to Japanese conditions and heavily impacted by France and Germany. The ultimate law of Japan is the Constitution, which was adopted following World War II (Jansen et al., 2022). The ability to assess the legality of legislation and other government actions belongs to an independent court. Japan is also a member of such organizations as the UN, ASEAN, APEC, G20, and G7.

The Foreign Exchange and Foreign Trade Act governs international investments in Japan. The primary enforcement agencies for the legislation are the Ministries of Finance and Economy, Trade, and Industry. Based on the sort of investment, other authorities, like the Bank of Japan, may also be engaged (Jansen et al., 2022). Japan has very minimal limitations on incoming foreign direct investments. There are no limitations on foreign investors buying property in Japan, although they are required to notify the Ministry of Finance within 20 days after the transaction (Jansen et al., 2022). Some exceptions can be applied. A 20-year patent is awarded, and there are yearly payments. Patents are created according to the first-to-file rule, just like trademarks.

Japanese companies must pay huge taxes to the government on all their income. Foreign companies must pay taxes to the Japanese government on the income they receive from Japan. The country has divided taxes into four categories: corporate tax, special local corporate tax, corporate tax, and tax on residents of the country. Corporate tax in 2021 was 23.2%, and the government plans to reduce the corporate tax rate to 20% (Sekiguchi et al., 2021).

Current Events

The Japanese administration had its approval ratings drop below the key threshold of 30%; a decline of this magnitude frequently resulted in the resignation of the head of state. Because it frequently results in the retirement of the cabinet, as well as in the election of a new governmental leader, Japan considers a critical level below 30% (Kawamoto, 2022). Earlier, after Yoshihide Suga’s government’s popularity rating fell to 29% and he resigned as prime minister; as a result, Kishida was appointed to the position. Such a state of affairs may imply an exact degree of political uncertainty in the country. In the case of re-elections, the governmental course in many spheres – including business – can be undetermined for a certain period.

Then, for the first time since 1990, the exchange rate for the Japanese yen at a Tokyo auction decreased to 147 yen per dollar. Information on the US consumer price index’s fluctuations, which came out to be greater than anticipated, are linked to the yen’s sharp decline (Fujioka et al., 2022). The US Federal Reserve keeps increasing the discount rate, while the central bank in Tokyo maintains it at a negative level, which is the major cause of the Japanese yen’s prolonged and fast decline. This approach to fiscal policy is very different from that of the US and Japanese central banks. The national currency is an important indicator of economic stability in a country. The Japanese case shows that currently, the national yen is weak, which requires actions from the monetary system. This may affect the business environment negatively – depending on the new regulations’ character.

Finally, Japan eased entrance restrictions put in place in response to the coronavirus epidemic, reopening the nation to visitors for the first time in 2.5 years. Most of the limitations on admittance for professional and academic reasons have been abolished (Mao, 2022). To accomplish this, the present prohibition on the issuing of tourist visas for individual visitors was withdrawn, and allow for brief visa-free trips to Japan were reinstated for 68 nations. Additionally, coronavirus prevention strategies are getting considerably milder. Entrants just need to show proof of three vaccinations with one of the WHO-recognized vaccine varieties or a negative PCR test performed no earlier than 72 hours before departure. This piece of news indicates a notable opportunity both for the country’s economy and many business sectors that provide products and services domestically. Foreigners are a good option to increase international brand awareness and expand a client base.

Decision

The presented report reveals the majesty and greatness of Japan as a country with rich history, favorable economic, legal, and political environments, unique business etiquette, and significant culture. The Japanese and their traditions may serve as a foundation for the creation of a productive and enduring company in case of strict adherence to the settled rules and standards. Japanese business law gives many opportunities for foreign investors, and the legal climate here is soft in general. The state’s international inclusion is another notable factor – many transnational companies are present there, trade is developed, and the population demonstrates a great purchase capacity. However, the current events show that soon, Japan may be affected by some political and economic fluctuations resulting in some degree of uncertainty. For a start-up, this is a negative factor that should be considered thoroughly. Still, the discovered economic, legal, and political system allows assuming that Japan has a solid foundation to overcome the depicted challenges and that the economy’s sectors will not suffer drastically. Taking into account all the arguments given, the final decision is to launch a company in Japan.

References

Jansen, M. B., Hurst, G. C., Notehelfer, F. G., & Hijino, S. (2022). Japan. Britannica. Web.

Kawamoto, A. (2022). Delving deeper into Kishida’s post-Abe trust crisis.The Japan Times. Web.

Mao, F. (2022). Japan to lift restrictions on foreign tourists.BBC News. Web.

Fujioka, T., Nohara, Y., & Mogi, C. (2022). Japan keeps up yen warnings, declines to say if intervened.The Japan Times. Web.

Statista. (2022). Economy – Japan. Web.

Sekiguchi, K., Higashi, Y., & Oyama, H. (2021). Doing business in Japan: Overview. Practical Law. Web.

Open Yokohama. (2017). Business etiquette in Japan. Web.

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