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1. Japan export overview
Japan is the world’s third largest economy in the world - bigger than the UK and Germany combined. In 2014 it made up 6% of world Gross Domestic Product (GDP). Japan remains the high-tech powerhouse economy of Asia.
Contact a Department for International Trade (DIT) Japan export adviser for a free consultation if you’re interested in exporting to Japan.
Japan ranks second in the 2013 Global Wealth Report. Japan has:
- 62 Fortune 500 companies
- the highest number of millionaires in Asia
- Tokyo, the city with the most millionaires worldwide in 2012
The amount of personal wealth is high, and personal financial assets are one of the largest asset bases in the world. In 2014 £9.4 trillion in financial assets was held by households.
Japan has the fourth highest spend worldwide on research and development (R&D) at 3.475% of GDP. 20% of the top global R&D spenders are based in Japan. Japan is 29th in the World Bank’s ‘Ease of Doing Business’ rankings. You can set up a company in 14 days.
Around 450 British companies currently operate in Japan from major FTSE 100 companies to small businesses. Visible high street names include Lush, Ted Baker, Burberry and Fortnum & Mason as well as as specialist companies like BrewDog. Larger multinationals such as Barclays HSBC, GlaxoSmithKline and Rolls-Royce also have a strong presence in Japan.
Incentives for UK businesses exporting to Japan include:
- stable place to do business
- strategic stepping stone for other Asian markets
- strong political, trade and social ties between the 2 countries
- highly educated consumers who are early adopters of new products and services
- large and rich consumer market based in urban areas
- Tokyo conurbation is the world’s largest at around 35 million
Strengths of the Japanese market include:
- a huge, open economy
- a cutting edge business culture
- an increasingly globalised outlook
- strong intellectual property (IP) protection
- hunger for new trends and technologies
- high levels of disposable income, particularly older people and young singles living with their parents
You need to adopt a strategic approach rather than an opportunistic one when doing business in Japan. Quick success is possible, but you’re more likely to get long-term benefits by being patient. Do as much market research and planning as possible.
Be prepared to:
- make a longer term commitment
- develop and maintain relationships
- visit regularly
You can now enter the Japanese market directly due to:
- changes in business culture
- recognition of the importance of cost cutting
- easier communication
- a rise in English speaking capable employees
- growth of e-Commerce platforms offering ease of access to foreign companies
However, the majority of small and medium (SME) overseas companies enter the market with the support of local partners.
Read Department for International Trade (DIT) guidance on identifying the right partner and finding the best route to market.
3. Growth potential
3.1 Economic growth
Despite economic issues over the past 20 years, the Japanese market remains vast. Japan is one of the world’s largest exporters and one of the largest overseas investors. Economic growth is heavily dependent on exports.
The International Monetary Fund (IMF) are predicting growth rates of 1% for Japan in 2015 and 1.2% in 2016.
The Japanese government under Prime Minister Abe has been tackling low levels of foreign direct investment into Japan. He has done this by implementing a wide range of economic reforms and policy initiatives to promote growth in Japan. These include:
- new economic stimulus packages
- a boosted monetary policy
- signing new free trade agreements
- breaking down barriers through de-regulation
Watch a short video about the recent changes in the Japanese economy due to ‘Abenomics’.
The service sector accounts for 75% of Japan’s economy, with manufacturing accounting for 22%. SME enterprises make up 99.5% of all Japanese companies.
Important challenges for the Japanese economy after 20 years of low growth include:
- how to boost growth
- reversing price deflation
- dealing with its high level of public sector debt
- adapting to a rapidly ageing society
Japan is well placed to serve as a hub to expand to other Asian markets. Advanced infrastructure and transport systems mean it’s easy doing business in many regions of Japan as well as south east Asia. Strong trade relationships with neighbouring countries provide the opportunity to expand your business further in this region.
3.3 Trade agreements
Negotiations are ongoing between the European Union (EU) and Japan for a comprehensive Free Trade Agreement (FTA). The first round of talks was held in April 2013. An EU-Japan FTA would bring together 2 trading partners responsible for a third of global output. This would have a significant impact on UK-Japan bilateral trade, including improved opportunities for UK exporters.
Read our latest blog to understand more about the context of the FTA and what this could mean for your company.
4. UK and Japan trade
However, on a value added basis, Japan is the 7th largest market. In 2012 UK exports to Japan were worth over £9.4 billion, almost evenly split between good and services
The UK’s biggest visible exports are:
- machinery and mechanical appliances, boilers, nuclear reactors, power generation equipment and vehicles
- chemicals, including medical and pharmaceutical products
Together these industries account for about £2.5 billion. Other successful sectors include:
- scientific and medical equipment
- natural or cultured pearls, precious stones and metals
- food and drink
- apparel and clothing accessories, cosmetics and perfumery
- transport, including shipping, aircraft and spacecraft
- media, including TV, film and publishing
Financial services are the UK’s largest export of services to Japan, valued at £2.6 billion in 2013. Transportation and insurance are also significant, with a combined value of £0.8 billion. Other business services include legal, accounting, advertising and R&D.
Japan is the second biggest market in the world for the UK in royalty and licensing income, accounting for 10% of all such earnings. In 2014 Japan received 325,989 patent applications, of which 1,731 were from the UK.
Read more background information on UK Exports to Japan.
5. Opportunities for UK businesses in Japan
Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.
British companies are succeeding across a wide range of sectors, including:
- consumer goods
- high tech
There has been a recent influx of new companies in the life sciences and energy sectors.
Watch our series of recorded webinars and interviews with experts to keep track of the latest trends and opportunities in your industry area.
There are opportunities across all sectors in this large and developed market. The top 5 opportunities are:
5.1 Shift towards low carbon
Securing long term energy supplies is a top priority for Japan. Growth areas are low carbon energy generation and technological solutions which conserve energy with Smart technologies at the forefront.
Japan is also witnessing a new wave of start-up culture with significant focus on emerging technologies.
Contact Yukiyo Miyakita, Head of Manufacturing and Industrial Team for more information on advanced engineering.
Contact Etsuo Watanabe, Head Technology Team for more information on smart technologies.
5.2 Globalising business environment
Japanese companies are looking to expand their operations in overseas markets due to a shrinking domestic market. Developing talent, use of English, managing risks and a global workforce are the main challenges. There are long term opportunities for UK providers in:
- education and training
- human resources
- project management
Contact Naomi Takegoshi, Head Consultancy and Services Team for more information on Japan’s globalising business environment.
5.3 High-spending consumers
Japanese consumers demand quality, and spend more of their disposable income on consumer goods than other comparable markets. Companies with heritage, authenticity and originality built in to the company or product brand are well received. It’s a highly competitive market and you should be ready to adapt your products to suit local tastes.
Recently there has been a huge increase in non-Japanese spenders from neighbouring Asian countries with rich tastes and plenty of cash.
Specific opportunities exist for UK companies:
- in fashion
- in design
- in food and drink
- with Royal Warrants
Contact Akiko Yanagisawa, Head Creative and Lifestyle Team for more information on consumer goods.
5.4 Ageing society
Japan has one of the fastest ageing societies on the world. In 2010, approximately 23% of Japan’s population were over 65 and is predicted to increase to 40% by 2055. This is creating opportunities in:
- medical devices
Contact Kaori Arai, Head Life Sciences and Chemicals Team for more information on opportunities.
5.5 2020 Olympic and Paralympic Games in Tokyo
Japan has a strong domestic industry and previous experience in hosting sports events. However the success of the 2012 Olympic and Paralympic Games in London means Japanese firms are looking to UK companies for their experience and expertise in range of areas. These include:
- safety and security, including cyber
Watch our recorded webinar for more information on the Tokyo 2020 Olympic opportunities.
Japan will also host the 2019 Rugby World Cup which represents further opportunities for British companies. Japanese organisers will be watching and learning still from the UK as it hosts the 2015 Rugby World Cup.
Contact Tim Johnson, Head of Olympics Team for more information on opportunities.
6. Start-up considerations
Make sure you thoroughly research the market. Background work includes:
- research into products, competitors, market strategy
- testing your products
- speaking to Japanese buyers at international trade shows
- getting an initial market assessment from experts
UK companies considering entry into the Japanese market have a variety of options including:
- establishing a representative office, Japan branch office, Japanese subsidiary or Limited liability partnership (LLP)
- entering into a joint venture or strategic alliance with an existing Japanese business
- buying an existing Japanese business.
The Japanese government lowered the required capital for setting up a joint stock company (KK) to 1 yen from 10 million yen in 2003 to promote start-ups. It is possible to set up a company in 14 days.
When setting up a business in Japan, a good understanding of Japanese business law is essential. Japanese laws can differ considerably from what you may be used to in the UK.
7. Legal considerations
You should seek legal advice from English speaking lawyers in Japan before entering into a joint venture or similar type of partnership. Lists of English speaking local lawyers and chartered accountants are available on request from the Department for International Trade (DIT) team in Japan.
The Japan External Trade Organisation (JETRO) produces a guide on ‘Laws and regulations on setting up business in Japan’.
7.1 Standards and technical regulations
Japanese domestic standards often differ from international norms.
The Japanese Standards Association has responsibility for Japanese industrial standards covering a wide range of business areas and topics.
7.2 Intellectual property
There are Japanese laws governing the registration and protection of IP rights relating to patents, utility models, trademarks and copyright. Japan’s trademark law offers equal protection for Japanese and foreign nationals. UK companies with an intention to develop business in Japan can register their trademarks with the Japan Patent Office (JPO). Companies can do this even if they don’t have an office in Japan.
Japan operates a ‘first-to-file’ system, which means that a trademark can be registered even if it’s not yet in use. Once registered, a trademark is protected for 10 years. ‘First-to-file’ applies also to patents and you’re advised not to publicise an invention until it has been registered. The protection period for patents is 20 years.
You can find details on the registration procedures and the fees involved on the JPO website.
8. Tax and customs considerations
You can find information on tax in Japan for businesses in JETRO’s ‘Taxes in Japan guide’.
The Japan Customs website introduces the customs system and trade procedures. It also provides links to regional offices.
You can find more information on import tariffs in non-EU markets on the Market Access Database.
9. Business behaviour
Japanese is the only official language. English is spoken by growing numbers, but many Japanese are sometimes too polite to let you know when they don’t fully understand. Keep what you say simple and straightforward. Repeat key points if you’re not clear on what has been agreed.
Contact Department for International Trade (DIT) Japan for details of local translators and interpreters.
Small details can have a positive impact:
- give out and accept business cards with both hands
- supply hard copies of your company literature
- professionally wrap gifts
- accept social invitations
Read Department for International Trade (DIT) Japan’s Business Etiquette guide for more details on business behaviour in Japan.
10. Entry requirements
British nationals can visit Japan for up to 3 months without a visa. Your passport should be valid for the duration of your stay.
10.1 Travel advice
If you’re travelling to Japan for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.
Contact a Department for International Trade (DIT) Japan market specialist at the British Embassy in Tokyo or British Consulate General in Osaka.
Visit Export to Japan for the latest Japan market information, events, opportunities and exclusive offers for UK exporters.