MARKET GUIDES
Japan Guide: How to Grow Your Company into the Japanese Market
May 11, 2023
Are you a global business looking to grow into the lucrative Japanese market? If so, this is the guide for you!
Japan is a unique market with a distinct set of rules, customs, and regulations that set it apart from other global markets. Japanese business culture differs greatly from most Western countries and consumers are very discerning when it comes to choosing products and services.
It can be hard to navigate these cultural requirements if you are unfamiliar with operating in Japan.
In this guide, you'll learn how to adapt your content to thrive in this exciting global market.
Let's get started!
Market overview: What you need to know about Japan
Japan is an East Asia country comprising a series of islands between the North Pacific Ocean and the Sea of Japan. It has a population of over 126 million people, making it the 11th most populous country in the world.
The capital city is Tokyo, which has over double the population of the next largest city, Osaka. Both have strong maritime connections, giving Japan an impressive foundation for logistics.
With its size, wealth, and access to new technologies, Japan presents many opportunities. It is the world's fourth-largest export market and a major trading partner with the USA.
The major challenge comes with Japan's well-known distinct cultural practices that are difficult for foreign companies to navigate. These include norms like lifetime employment, strict hierarchical structures, and complex business interactions.
But Japan is changing. Companies are increasingly adopting western businesses practices. This marks a shift in the market's traditional ways and opens it up to many more foreign countries than before.
Digital adoption in Japan: GDP and demographics
Japan as a market has accepted the digital revolution with an impressive enthusiasm, and claims one of the highest levels of digital connectivity in the whole world. At the start of 2023, the number of internet users was 102.5 million, with an internet penetration of 82.9% of the population.
Social media use is also high in Japan, with 74.4% of the total population using social platforms. However, compared to surrounding markets, Japanese people spend less time interacting on social media.
The Japanese language represents a significant potential for online revenue. It ranks as the 6th most lucrative language in the world and commands 6.4% of the world's online gross domestic product (eGDP). The language represents 2.9% of the total online population.
With such high levels of connectivity, Japan is an ideal market to grow into for online global companies.
What languages are spoken in Japan?
According to a 2018 census, the first language of the vast majority of people in the market (99.2%) is Japanese. This means that you will need to translate your content into Japanese if you want to give your business the best chance of succeeding.
There are also some lesser-spoken languages across the various Japanese islands, including Amami, Kyukyu, Kikai, Miyako, and the critically endangered Ainu language of Hokkaido.
Japan also has a relatively low immigrant population compared to other world markets. The same census showed that 97.8% of population are Japanese nationals. The remaining 2.2% are mainly foreign nationals living in Japan for work. As a comparison, there are an estimated 13.6% of foreign nationals living in the USA.
Although Japanese is the most used language, levels of English are rising, particularly in business settings. Between 13-30% of Japanese people possess English speaking skills. However, only 9% of them say that they are confident using the language.
5 compelling benefits to doing business in Japan
There are many significant benefits you can gain by growing your global business into the Japanese market.
Some of these benefits include:
1. Highly loyal customers
Japanese customers are highly loyal to their favorite brands and companies.
This loyalty can be a significant advantage but also a challenge. If you earn their loyalty, you will be able to rely on people's continued custom long into the future. However, you also have to work harder to move customers away from their existing favorite brands.
The global companies that do well in Japan, are those that make an asset of the fact that they are foreign while providing the exemplary customer service and relationship building that Japanese consumers expect.
2. Access to other Asian markets
As a foreign company, operating in Japan can give you easier access to various Asia-Pacific countries, such as China or South Korea.
Japan is a strong transport hub for the world and its biggest cities are all major ports. This makes the market is a valuable strategic hub for your global expansion.
3. The world's third-largest economy
Japan has the third-largest economy in the world and is one of the richest countries on the planet.
This robust economy provides your company with a valuable potential customer base. People in Japan are both willing and able to buy your products and services.
4. A strong global perspective
Many Japanese companies already have a strong global perspective. They operate on the global stage and are willing to make long-term investments into promising products and services.
This global perspective is an invaluable asset for foreign companies, as local companies are familiar with the dynamics of global business.
5. Culture of innovation and development
Japanese companies are well known for their quality products, high levels of innovation, and commitment to their customers. As a result, Japan has become a hub for many foreign companies looking to develop new products and concepts.
This focus on innovation creates a dynamic environment where businesses strive to stay ahead of the curve. Simply operating in Japan can drive better quality and service in your entire business.
Compliance and regulations in Japan you should know about
As a global business, you need to be aware of Japan's regulations and compliance requirements. These will be different depending on your specific industry.
Although entering the Japanese market may have been difficult in the past, this has changed a lot in recent years. The Japanese government has set ambitious targets to increase the amount of foreign investment coming into the country.
To achieve these targets, the government has implemented a set of incentives designed to attract foreign investments and business operations. These include tax deductions for research and development activities, lower rents in designated economic zones, and various grants. Limited liability companies established by multinational corporations are also exempt from certain reporting requirements.
If you are looking for information on the regulations in Japan, the Ministry of Finance (MoF) and Ministry of Economy, Trade, and industry (METI) are the key government bodies to be aware of.
What is the political climate like in Japan?
The political climate in Japan is one of stability and collaboration. The Japanese government works hard to maintain high economic growth and is currently focused on solving the problems caused by an aging population.
Japan has a constitutional monarchy. The Emperor serves as the head of stage, but only has authority for ceremonial purposes. The government makes the decisions that are likely to affect your business. It consists of the Executive, the Legislature, and the Judiciary, each of which has separate powers.
There are also various free trade agreements that apply in Japan, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP), the EU-Japan Economic Partnership Agreement (EPA), and the U.S.-Japan Trade Agreement (USJTA).
The 5 keys to successful sales in Japan
The unique business and cultural etiquette can introduce some challenges for foreign companies trying to sell in Japan.
Here are 5 keys to successful sales in Japan:
1. Focus on the group, not the individual
Japanese culture is heavily focused on group unity over individual achievement. This makes it quite different to the USA.
When talking about the benefits of a product or giving praise during a sales pitch, it's important to show respect for the entire team. Singling out an individual for special recognition can make them feel embarrassed or uncomfortable.
2. Avoid the hard sell
In Japan, it is impolite to push people for quick decisions or pressure customers. Hard selling just doesn't work.
When you have finished your sales pitch, avoid pressuring individuals for a decision. The Japanese prefer to make decisions through consensus and trying to hasten the process can be considered impolite. When you respect this, it will help establish trust in your business relationship.
3. Be punctual and respectful
Punctuality is highly valued in Japanese business and culture. It is considered a central aspect of business etiquette.
It's important to arrive on time for all meetings or even a bit early. Arriving 10 minutes early will show your respect for the host and reflect positively on your company as a dependable partner.
4. Follow the lead of Japanese competitors
Don't make the mistake of entering the Japanese market blindly — without considering the business landscape.
If you want to succeed in the Japanese market, it helps to understand and even imitate the sales and support strategies of your local competitors. But don't shy away from the fact that you are foreign. Successful foreign companies in Japan are often those that take advantage of their differing business culture.
5. Use rewards programs
The high levels of customer loyalty in Japan mean that earning loyalty should be one of your top priorities.
Rewards programs are a notable strategy for encouraging repeat purchases. According to one survey, 47% of Japanese consumers prefer to buy from websites that offer them rewards for loyalty.
Where to get further help on moving into Japan
Do you have plans to expand your business into the Japanese market?
With Rubric, you can make that transition with the help of our team of experts. Our team has a wealth of experience localizing content for the Japanese consumer and we understand what it takes to succeed in this market.
We can help you ensure that your transition into Japan is seamless and that your product or service has the best chance of success. We can also provide you with advice on how to streamline your localization process, helping your company to speak more efficiently to the Japanese market.