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How to Do Business in Japan

Currently the US’s 4th largest trading partner, the U.S. goods trade deficit with Japan was $68.9 billion in 2016. Goods exported totaled $63.3 billion USD, while goods imported totaled $132.2 billion USD.

 

Over the past 70 years, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation have helped Japan develop an advanced economy with products of quality.

 

The words “Made in Japan” have long signified quality and intricacy of design. It’s no wonder that Japan is home to the 4th largest economy in the world.

 

The words “Made in Japan” have long signified quality and intricacy of design. It’s no wonder that Japan is home to the 4th largest economy in the world. The Gross Domestic Product (GDP) in Japan was worth $4939 billion USD in 2016. The GDP value of Japan represents 7.97% of the world economy.

 

Japan is currently the 4th largest trading partner with the US. In 2016, goods exported totaled $63.3 billion USD, while goods imported totaled $132.2 billion USD. The US goods trade deficit with Japan was $68.9 billion.

 
 

Introduction to Japan

 

Japan has four major islands; from north to south they are Hokkaido, Honshu, Shikoku, and Kyushu. Honshu is the largest and referred to as the Japanese mainland. These islands are further divided in prefectures.

 

The cities included here are those with the highest population, not the highest GDPs.

 

The cities included here are those with the highest population, not the highest GDPs. The reason for this is that statistically, Japan calculates GDPs by prefecture, not city. For a list of GDPs by prefecture you can consult the Government of Japan’s Cabinet Office, found in our useful links.

 
 

Major Cities

 
map of japan with push pin on it
 

Tokyo

Tokyo is located on the island of Honshu and has a population of over 13.6 million. The nominal GDP of Tokyo is over $2.5 trillion USD. Strictly speaking, since 1943, Tokyo is no longer a city but a metropolis with 23 wards.

 

The Chiyoda ward contains the Marunouchi district, which is a central commercial district of Tokyo and contains headquarters for many banks and businesses. Another central commercial district of Tokyo in Chiyoda is Ōtemachi, which contains the headquarters for the major Japanese newspapers, as well many commercial businesses.

 

Osaka

With a population of over 8.8 million, Osaka has a GDP of over $341 billion USD. It is home to globally renowned giants like Panasonic and Sharp, but is also characterized by an abundance of small and medium sized businesses which account for over 99% of the total number of businesses.

 

Kyoto

Kyoto has a population of 1.7 million. The nominal GDP of Kyoto is over $84 billion USD. As home to the headquarters of Nintendo and Intelligent Systems, the key to Kyoto’s economy is electronics and information systems. Kyoto is also the a beautiful and historic area, with temples that have been standing for a thousand years.

 

Nagoya

The population of Nagoya is over 2.28 million. As home of Toyota and Mitsubishi, the economy of Nagoya is characterized by the automotive industry. It also houses important businesses in the aviation industry and robotics. Finally, it is home to key ceramics manufacturers.

 
 

Currency

 

The currency of Japan is the Yen (abbreviated JPY or JP¥). It’s the third most traded currency in the Foreign Exchange Market after the US dollar and the euro.

 

US dollars are not typically accepted in Japan. However, the US dollar is a highly traded currency in Japan and you may get a favorable rate if you exchange USD for JPY in Japan.

 

US dollars are not typically accepted in Japan. However, the US dollar is a highly traded currency in Japan and you may get a favorable rate if you exchange USD for JPY in Japan.

 

You can withdraw Yen from an ATM in Japan.

 
 

Language

 

Japanese is the national language of Japan, known by the Japanese as Nihongo. It also serves as the language of business.

 

All Japanese students are required to study English for several years, so many can read and write in English. However their speaking usually isn’t as good, so it may be best to have an interpreter with you in Japan.

 
 

Holidays in Japan

 

Japan has several national holidays. Many Japanese government offices and businesses close during the New Year’s holiday season (December 28-January 3), “Golden Week” (April 29-May 5) and the traditional “O-Bon” Festival (usually August 12-15). When a national holiday falls on a Sunday, the following Monday is a compensatory day.

 

You can find a link to an updated list in our useful links section of this guide, but in 2017 Japan will observe the following holidays:

 

HolidayDateObservance
New YearJanuary 1Nationwide
Adult's DayJanuary 9Nationwide
National Foundation DayFebruary 11 Nationwide
Vernal Equinox DayMarch 20Nationwide
Golden Week HolidaysApril 29, May 3, May 4, May 5Nationwide
Marine DayJuly 17Nationwide
Mountain DayAugust 11Nationwide
Respect for the Aged DaySeptember 18Nationwide
Autumnal Equinox DaySeptember 23Nationwide
Ninoy Aquino DayAugust 21Nationwide
Health & Sports DayOctober 9 Nationwide
National Culture DayNovember 3Nationwide
Labor Thanksgiving DayNovember 23 Nationwide
Emperor's BirthdayDecember 23Nationwide

 
 

Working Hours in Japan

 

Although the typical Japanese workweek is Monday through Friday, 9 am to 5 pm, many Japanese business people put in long hours of overtime. In America, working late is not generally the norm. However, in Japan 12 hour days are expected and if you need to work more than that, that’s fine too.

 

“One night when I was working in Japan at a multinational high-tech company I had to stay really late to finish a project. I was there with two other guys until 2am. I decided to sleep in a few hours the next morning, but my phone rang at 9am and it was my boss asking me why i wasn’t at the office. I told him that I was catching up on sleep but that’s when he informed me the other two guys I stayed late with were already in the office. So working 17 hours the previous day did not excuse me to come in a few hours later the next day.” – Rick K., American working in Japan.

 

 

Time Difference

 

Japan operates on Japan Standard Time or JST. It is 9 hours ahead of UTC or 14 hours ahead of Washington, DC during standard time. There is no daylight saving time (though its introduction has been debated).

 
 

Communication from the US

 

Email

Email will likely be the predominate method by which you first contact your overseas supplier. Japanese people are politely addressed by their last name followed by “-san” which is honorific and roughly translates as mister or madame. So Mr. Nakamura would be called Nakamura-san. You should never use a person’s first name unless they explicitly ask you to call them by their first name. So Kenji Nakamura should always be referred to as Nakamura-san, and never Kenji or Kenji-san. In the case Nakamura-san has worked or studied abroad (or in the US) and is accustomed to using their first name, they may ask you to call them Kenji, or even an Americanized version such as Ken.

 

Beware that in Japan names are written in the opposite order to those in the US, that is the last name is written before the first name. What may be confusing is that in Japanese, the name would be written as Nakamura Kenji, listing the family name first

 

Beware that in Japan names are written in the opposite order to those in the US, that is the last name is written before the first name. What may be confusing is that in Japanese, the name would be written as Nakamura Kenji, listing the family name first. But if their business card is written in English, it will usually be written the way Americans are accustomed to seeing with the given name first Kenji Nakamura.

 

Making calls from the US

If you need to contact a supplier within the country, Japan’s phone code is +81, which must be added to the beginning of any phone number. For example: when dialing from the US, you would dial 011 + 81 + the area code (1-5 digits) + the local number (4-7 digits). Note that 011 is the American code for making an international call.

 

In Japan, the area code for Tokyo is 03. For Yokohama, it is 045. However, when dialing from abroad, you need to remove the first 0. So if your contacts phone number (in Tokyo) is 03-4455-6677, you would dial 011-81-3-4455-6677.

 
 

Traveling to Japan

 

With the advent of online supplier directories, you may be able to find a supplier without ever having to travel to Japan. However, the Japanese prefer to know their business partners and meeting them face-to-face is still the best way to establish a long term business relationship.

 

Visas

A visa is not required for US passport holders for durations of stay of less than 90 days, whether the purpose of the trip is for tourism or business. Should you require a longer stay, you can find a link to the visa page of the Japanese embassy in our useful links.

 
 

Using a Cell Phone in Japan

 

Roaming can be quite expensive in Japan and, moreover, there is no GSM network in Japan, so only newer phone (over 2G) will work. There isn’t a network that serves all of Japan, instead, each carrier operates its own network. That means you’ll want to know where you’ll be and what network covers that area before you buy a SIM.

 

If your phone is GSM only, you can rent a phone once you arrive. Most rental companies have kiosks at the airport, while others will mail a phone to your hotel room. ID and a credit card are required to rent a phone.

 
 

The Internet

 

While the majority of hotels in Japan offer free wifi in the rooms, the higher-end Western hotels often charge for wifi in 24 hour units.

 

While the majority of hotels in Japan offer free wifi in the rooms, the higher-end Western hotels often charge for wifi in 24 hour units.

 

There are free wifi hotspots in cafes, bars, convenience stores, tourist desks, the airport and at major railway stations. More common are paid wifi hotspots and they offer short-term access on an hourly, daily, or weekly basis. A 24 hour pass typically costs 500-800 JPY ($4-7 USD) and is available at all of the company’s locations around the city.

 
 

Business resource: Jetro

 

JETRO, or the Japan External Trade Organization, was originally established in 1958 as a government organization that works to promote Japanese exports abroad. It now also encourages investment in Japan and works with small and medium sized business in Japan to reach their full potential.

 
japan-exports
 

It includes an online trade fair database, in which you can search for trade fairs according to several different terms such as type of commodity and location. You can find a link to this database the useful links section of this document.

 
 

Business Culture

 

The Japanese have a saying: “Goh ni ireba goh ni shitagae” which translates as entering the village obey the village and means something like, “When in Rome, do as the Romans.” Japanese society is complex, structured, hierarchical and group-oriented. It places strong emphasis on maintaining harmony and avoiding direct confrontation.

 

Group Orientation

Nagai mono niwa makarero epitomizes the Japanese tendency toward group orientation. The phrase has many English equivalents, such as “Resistance is futile”, “You Can’t Help Getting Tied Up Long Term”, “Don’t rock the boat”, “If you can’t beat them, join them” and “Yield to the powerful”

 

 

In Japan, your identity is derived from your group affiliations: those with your family and your membership in various institutions in society such as your school or company. It is common for someone to mention the name of the business they work for before their own name when meeting someone for the first time.

 

In fact, once these ties are made, they often aren’t undone. Though it’s changed some recently, people in Japan tend to stay with the same company all of their lives. Most people retire from the company they joined right out of college, so their affiliation with their company is strong.

 

Honne and Tatemae

In a geographically small country with a large population, harmony with your neighbors is essential. As a result, emotions are not usually openly expressed. The Japanese value individual opinions, but there is an appropriate way to resolve conflict without confrontation, a way that is indirect and private so neither individual loses face.

 

In a geographically small country with a large population, harmony with your neighbors is essential.

 

Honne (pronounced “hone-nay”) is one’s personal opinion, where Tatemae (“tah-tay-mah-eh”) is what one ought to express in public. Although many cultures make this distinction, US business people often find it frustrating to distinguish between honne and tatemae when meeting business people in Japan.

 

Here’s an example. Whereas one employee may feel a project is a waste of time (honne), he may know his boss or company wants to pursue the project so may refrain from expressing his own opinion, and reply with tatemae or “sounds like a good plan”.

 

Group Decision Making

 
japan-group
 

The Japanese saying ichi ieba ju wo shiru translates as “hear one, understand ten” and is the epitome of wisdom behind Japanese group orientation. A business person who disagrees strongly with the company and insists on maintaining a different opinion destroys the harmony of the group, and consequently is thought of as unwise. In Japan, a person who speaks out regardless of the interests of the group looks ridiculous, and loses credibility or “face.”

 

Group decision-making is essential in Japan, and the process can be described as “bottom-up” rather than “top-down” as it is in the US. Decision-making in Japanese businesses is usually organized so that all company members can participate.

 

The Ringi System: before a business decision is made, a written proposal is circulated among all the people who will be affected by the decision. Its circulation is based on hierarchy and starts at the bottom, working its way up. At each person’s desk it is read, written suggestions are made, and then it is stamped with a personal seal (the equivalent of a signature). This kind of process is also often slower, and US business people should not expect a decision to be turned over in a few days. Patience is key.

 

 

Hierarchy in Japanese Businesses

Japanese people believe that a stable society depends on the proper maintenance of hierarchical relationships. In the group-oriented, relationship-focused culture of Japan, respecting hierarchy is essential to business.

 

The relationship between customer (higher) and vendor (lower) is one of the many hierarchical relationships in Japanese business culture. Others are the parent company and subsidiary, head office and branch office, manager and subordinate, senior (a person who joined the company earlier) and junior.

 

Japanese people believe that a stable society depends on the proper maintenance of hierarchical relationships. In the group-oriented, relationship-focused culture of Japan, respecting hierarchy is essential to business.

 

Seniority has traditionally been an important criterion for promotion (although there is currently a shift away from this towards giving promotions based on merit). Such expectations based on hierarchy can make it difficult for Japanese to negotiate with someone who is younger or older so in negotiation they expect each side to send people of the same age and position who literally sit across from each other during the discussions.

 

In these hierarchical relationships, each position has certain expectations of the other. For example, a manager is supposed to be concerned about subordinates’ welfare, even to the extent of helping them in their private life. In turn, a subordinate is expected to trust his or her manager’s judgement and not question his or her decisions. One problem in the contemporary Japanese workplace occurs when a manager and subordinate no longer share these same expectations.

 

Because of the global economy, there is an increasing number of people in the younger generation who value individualism and prefer to keep some distance between their private lives and their work and employers.

 

 

There are a multitude of examples of how hierarchy plays out in business culture. Employees of higher rank such as a general manager (buchoo) are often addressed by their title (Buchoo) or their name and title (Tanaka-buchoo). Seating arrangements are based on hierarchy. In a taxi, the seat behind the driver is for the highest ranking person while the seat next to the driver is for the lowest ranking person. Order of speaking is also hierarchical, in that often the highest ranking person speaks last. Japanese language itself reflects hierarchy. A person of higher status speaks polite or casual speech, whereas the person of lower status uses “super-polite” or “respectful” speech (keigo). When Japanese bow to each other, the person of lower status bows more deeply.

 

The Importance of Non-verbal Communication

Overly blunt communication in Japan must be avoided. The more subtly one communicates ideas, both verbally and non-verbally, the more at ease the Japanese listener will become. Communication in Japan always places more emphasis on the listener’s role, rather than the speaker’s. In other words, the speaker’s position is secondary and the listener’s position is primary.

 
japan-body-language
 

There are several non-verbal communication techniques that help to show respect, put the listener at ease, and show appreciation.

 

Synchronization or Mirroring

Taking physical cues from the business person to whom you are communicating, and then copying them, or mirroring them, is a sign of respect and connection. For example, you can drink from a glass when your counterpart does so.

 

Another example of synchronization is waiting to stand up until the Japanese person with whom you are communicating does so. If you are visiting a company and you stand as if to finish the meeting before your counterpart does so, it suggests you want to leave the room and finish the conversation quickly, which is considered rude.

 

Facial Expressions

In Japan, business people tend to hold the same posture throughout a meeting. For this reason, it is difficult to read changes in mood. However, a subtle smile can convey meaning. A smile at the beginning of a conversation is usually an attempt to create a good mood. During the conversation, a smile may be due to pleasure with the outcome of the conversation, embarrassment, congeniality or because of something humorous. On a more personal level, a smile may be in appreciation of praise. A smile at the end of a business meeting generally indicates that both speaker and listener can relax and can become more personal.

 

Eye Contact

 

Although it is necessary in the US, maintaining eye contact is considered confrontational in Japan. The custom is Japan is to look at the adam’s apple of the listener, with only occasional meetings of the eyes.

 

Although it is necessary in the US, maintaining eye contact is considered confrontational in Japan. The custom is Japan is to look at the adam’s apple of the listener, with only occasional meetings of the eyes. Although many Japanese people would find continuous eye contact uncomfortable, some are accustomed to dealing with people from the US. It’s always wise to take your cue from your potential business partner.

 
 

Business Communication

 

The First Meeting

An initial visit to a Japanese business usually serves as a courtesy to introduce the US business and its executives, and also allows the US company to start to evaluate its potential partners.

 

It is unwise to request to speak with only English speaking staff, as this can mean missing the opportunity to meet those of higher rank.

 

It is unwise to request to speak with only English speaking staff, as this can mean missing the opportunity to meet those of higher rank.

 

Attire

Many Japanese businessmen tend to wear dark suits of navy blue, dark gray or brown. The suits and neckties that they wear are quite conservative. It is typical for a Japanese businessman to fasten the high button of his suit when he speaks to his US counterpart or when he talks to his superior while standing. It is permissible to have the top button undone while sitting, although if he stands to greet someone, he will fasten it before standing. This is good to know in case you decide to synchronize with or mirror your Japanese counterpart.

 

Women are advised not to wear anything overly feminine, frilly, or lacy, but to dress in such a way that you do not stand out too much. It is better to wear some type of suit than separates, such as a dress with a blazer. In some more conservative business firms, it is offensive to wear a pantsuit. Accessories should be kept to a minimum.

 

Timing

Japanese business people typically take lunch from 12 sharp to exactly 1pm. Appointments must also be scheduled around holidays. (For a list of holidays see useful links below). Arrive early by at least five minutes to any scheduled appointment.

 

Introductions

In Japan, shaking hands is for equals, so it is best to play it safe and bow. The subordinate bows more deeply than the superior. Do not speak while bowing. Bow both at the beginning and the end of your introduction.

 
japan-greeting
 

Many Japanese business men have done business with Americans. So they are used to shaking hands, and not bowing. It’s best to take your cue from your potential business partner to avoid confusion.

 

Say Hajimemashite (this translates to “Nice to meet you,” “How are you?” or “Let’s begin a friendship.”) In Japan people usually introduce themselves by their full name or just their family name. Be aware that last names come first in Japan. It is also common to not go into detail when giving you, but you will mention the name of your company.

 

Business Cards

Higher level people exchange business cards first. It is common practice to accept the card with two hands while standing and bowing slightly as business cards are very personal, like a piece of your identity. Bowing indicates humility and politeness as well as courtesy.

 

Be respectful when you receive the card. It is acceptable to read the card, and then place it on the table or in a case. They’re never to be written on, folded, or just shoved into a pocket.

 

When you hand your card, use both hands on the card, and have the card presented so they can read it. Don’t just hand them out with one hand or fling them across the table like a black jack dealer.

 

Hint: If you’re in a meeting and everyone hands you a card, keep them on the table in front of you in the order of the people sitting around the table. That way you’ll have a reference and won’t forget anyone’s name.

 

 

Small Talk

Generally, Japanese business people are more comfortable writing English than hearing or speaking it. So it is advisable to hire an interpreter as it shows you are respectful and serious about doing business.

 

Although Japanese communication is often indirect, business meetings don’t usually involve much small talk. In particular, don’t talk about yourself too much as the Japanese value humility, and often use self-deprecating speech.

 

Although Japanese communication is often indirect, business meetings don’t usually involve much small talk. In particular, don’t talk about yourself too much as the Japanese value humility, and often use self-deprecating speech.

 

Japanese business people will often use words such as “success,” “confident,” or “profit” to create a positive view of their company. However, specifics will be kept vague. Japanese business people will not typically discuss details of profits and expansion, but if asked will reply with something like “everything is going well.”

 

The vagueness of speech in a Japanese business meeting will often leave their US counterpart wondering what the meeting was about. However, these meetings, more than just maintaining Japanese form, also build trust, confidence, loyalty and commitment for the long term.

 

Gift Exchange or Temiyage

Temiyage, or gift giving, is expected on first meetings in Japan. Presenting a gift implies good will, a friendly attitude and possibly, a desire to do business together. The practice of giving a gift is used in order to express these feelings indirectly rather than to express them verbally, which is too direct.

 

Company logo gifts or gifts of products specific to the US are acceptable. Although quality is important, the gift need not be expensive. The wrapping of the gift and its presentation is as important as the gift itself, and it should be professional. Sets of four are considered bad luck as the word for the number four is pronounced the same as the word for death. It is appropriate, though not necessary, to give gifts that can be shared.

 

Gifts should be received while standing and with two hands to show appreciation. More emphasis is on the act of giving the gift than on its contents. For this reason, and also to save face in the case that the gifts exchanged are of differing values, the receiver does not open the gift in the presence of the giver.

 

Common gifts you might receive from Japanese business people include: food snacks, handkerchiefs, japanese fans, and sake.

 
 

Business Negotiations

 

Japanese business meetings are often less animated and more formal compared to those in the US. That coupled with their overall indirect communication style can sometimes leave you wondering how your potential business partner feels about the deal.

 

Japanese sometimes seem to say one thing and then do another because they are withholding their true feelings (honne) in the public setting of a meeting, voicing only their official opinion (tatemae). To learn a person’s true feelings the relationship must be close and the setting must be appropriate. This difference in Japan often leaves US counterparts confused, and missing what they would call a “straight answer.”

 

Indicating “Yes” and “No”

 

What a Japanese Person SaysJapanese Intent
“Yes”“I’m listening to you”
“I understand you”
“I understand you, but don’t agree with you”
Positive responses are often indicated by the inclusion of specifics. For example, in order for something to be considered “urgent” a deadline or timeline must be included.
“No”Rarely used, pay attention to non-verbal cues such as long pauses, a tilt of the head, or sucking in of breath. Verbal cues include interjections such as “hmm…” and vague responses.

 

Drinking with your business partners is often expected. In Japanese culture, they believe your true self comes out when you’ve been drinking. Business meetings will often carry over from the boardroom to the bar. However, the culture can also be very forgiving about faux pas made when someone has had a few drinks. Read the room and take a cue from the people you’re with. But most times, getting a bit tipsy with your business partners is a regular part of doing business.

 

The Contract

Japanese business contracts are significantly less detailed than those in the US. In Japan, a contract is viewed more as a piece of paper that expresses a willingness to do business than a specific set of promises and limitations that must be adhered to and can be litigated. To request detailed conditions is considered a breach of trust and could jeopardize the relationship with your supplier.

 

This does not necessarily mean that you need to abandon US contracts in Japan altogether. Instead, consider the following:

 

  • Think of all communications as relationship building and then think of the relationship as a personal contract instead of a legal one.
  • Keep some terms of the contract flexible.
  • Keep the terms simple so they can be easily translated.
  • Have the contract translated into Japanese.
  • Recognize that the contract is not the end-all and be-all, but that amendments can be made through subsequent communications with your supplier.
  • Try to meet a Japanese partner in person to find out why he or she cannot adhere to the contract.
  • Expect there to be differences in attitudes toward contracts depending on whether the business is large or small

 

 

Making Payment

 

Veem knows that one of the most time consuming parts of working with businesses overseas is making payments. As a small business owner you don’t want to waste your valuable time at the bank when you could be working on your business. Not only that, transfer fees can add up, and you never get the exchange rate you think you should. Get rid of the hassle, waiting, and hidden fees, and pay your suppliers through Veem.

 

It’s a connected payments platform that avoids the fees and delays of traditional bank wire transfers. Veem offers convenient features that the banks can’t, like real-time payment tracking and end-to-end customer support, to ensure your money arrives intact and on time. Veem uses multi rail technology to make international wire transfers that are insured.

 

With Veem you’re assured that our staff has verified your supplier by confirming their bank details and making sure that they have passed all regulatory compliance requirements.

 
 

Regulations and Permits

 

Hire a Customs Broker

A customs broker acts as your liaison with the government, takes care of the paperwork of importing, and helps you navigate any regulations. They can also help you to estimate import costs and how long your shipment will take to be imported. Failing to comply with customs regulations can be very costly, so just be sure to add your custom broker’s fee as an expense you must cover with the sale of your goods.

 
 

Useful links

 

About Japan:

CIA World Factbook: Japan
Statistics by Prefecture: The Government of Japan’s Cabinet Office

(Hint: you can use google to translate the page)

 

Holidays in Japan

Cabinet Office of Japan

 

Getting a Visa

VISA: Japanese Embassy in US

 

Traveling in Japan

Japan Tour Guide

 

Regulations on Importing to the US

SBA: Office of International Trade

 

Finding a Customs Broker

National Customs Brokers and Forwarders Association of America
International Federation of Customs Brokers Associations

 

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