From: OVERSEAS BUSINESS REPORTS (JAPAN 1)
University of Missouri-St. Louis
National Trade Data Bank
ITEM ID : IT MARKET 111091833
DATE : Oct 28, 1996
AGENCY : USDOC, International Trade Administration
PROGRAM : Market Research Reports
TITLE : JAPAN - DESTINATION JAPAN (1) - OBR9405
Program key : IT MARKET
Update sched. : Monthly
End year : 1995
Date of record : 19950321
JAPAN - DESTINATION JAPAN (1) - OBR9405
This article is derived from a report dated May 1994, prepared at the U.S.
Department of Commerce - Washington, DC. The article consists of 48 pages
and includes the first part of a discussion of the economic and commercial
climate in Japan, with emphasis on information useful for potential U.S.
sellers and investors. It includes the following sections:
KEYS FOR BUSINESS SUCCESS IN JAPAN
JAPAN COUNTRY FACT SHEET
THE JAPANESE ECONOMY
JAPANESE BUSINESS CULTURE
NEGOTIATING WITH THE JAPANESE
A Business Guide For The 90's
Prepared by the
Japan Export Information Center (JEIC)
Office of Japan Commercial Programs (OJCP)
With Cynthia Campbell, Allan Christian,
Edward Leslie, Cantwell Walsh, and Bob Francis
U.S. and Foreign Commercial Service, Japan;
U.S. Department of State Economics Section, Tokyo;
U.S. Patent and Trademark Office;
and the National Center for Standards
and Certification Information
U.S. DEPARTMENT OF COMMERCE
International Trade Administration
International Economic Policy
TABLE OF CONTENTS
KEYS FOR BUSINESS SUCCESS IN JAPAN
JAPAN COUNTRY FACT SHEET
THE JAPANESE ECONOMY
Assessing Your Product's Potential in Japan
Assessing Your Company's Potential in Japan
The U.S. Government
Japan External Trade Organization (JETRO)
International Consulting/Market Research Firms
The Export Hotline
Market Entry Alternatives
Establishing an Office in Japan
Representatives, Agents, and Distributors
Choosing Your Method of Market Entry
The Agent/Distributor Service (ADS)
The Gold Key Service (GKS)
Other U.S. Department of Commerce Programs
USA-Japan Trade Expansion Center
State Representative Offices in Japan
Export Trading/Management Companies
The American Chamber of Commerce in Japan (ACCJ)
Japan Chamber of Commerce and Industry
Japanese Department/Chain Stores
Japanese Government Programs
Special Note on Importer Databases and Lists
Attracting a Japanese Business Partner
Choosing a Japanese Business Partner
Keeping a Japanese Business Partner
Replacing a Japanese Business Partner
Distribution and Sales Channels
Sales Service and Customer Support
JAPANESE BUSINESS CULTURE
NEGOTIATING WITH THE JAPANESE
JAPANESE REGULATIONS, STANDARDS, QUALITY MARKS,
AND CERTIFICATION SYSTEMS
INTELLECTUAL PROPERTY PROTECTION
GETTING YOUR PRODUCT THROUGH JAPANESE CUSTOMS
METHODS OF PAYMENT
Export-Import Bank of the United States
U.S. Small Business Administration
TAXATION IN JAPAN
INVESTMENT IN JAPAN
BEST U.S. EXPORT PROSPECTS
REGIONAL OUTLOOK OUTSIDE THE TOKYO AREA
THE JAPANESE GOVERNMENT
JAPANESE IMPORT PROMOTION MEASURES
U.S. DEPARTMENT OF COMMERCE JAPAN EXPORT
PROMOTION PROGRAM (JEPP)
U.S. DEPARTMENT OF COMMERCE SPECIAL INFORMATION PRODUCTS
AND BUSINESS FACILITATION SERVICES FOR JAPAN
Japan Country Marketing Plan (CMP)
Japan Market Information Reports (JMIR's)
US&FCS Japan Services Guide
Obtaining Legal Assistance in Japan
JAPANESE TRADE BARRIERS
WHERE TO RECEIVE EXPORT COUNSELING
WHERE TO RECEIVE MARKET INFORMATION AND TRADE LEADS
GUIDANCE FOR BUSINESS TRAVELERS
LIST OF SELECTED JAPANESE BUSINESS TERMS
ARE YOU READY TO EXPORT?
INTERNATIONAL TRADE ADMINISTRATION/US&FCS DISTRICT OFFICES
The Secretary of Commerce directed the creation of the Japan Export
Information Center (JEIC) in the spring of 1990. The JEIC was mandated to
sharpen the focus and refine the quality of the business counseling and
commercial information provided by the Department of Commerce to the U.S.
business community in support of expanding exports to Japan. Within a few
weeks, we realized that we were missing an essential resource for the
successful accomplishment of our mission. We did not have a basic guide for
potential exporters to Japan. The first edition of Destination Japan
corrected this deficiency by providing a handbook for approaching the
Japanese market. The guide was considered a great success by the U.S.
business community because it was specifically tailored to assist U.S.
suppliers and traders with practical guidance and concrete information on
doing business in Japan.
In preparing this second edition of Destination Japan, we have incorporated
many suggestions from our readers and additional information that was an
outgrowth of our experiences in using the guide for business counseling. No
book can provide an answer to each and every question, but our guide will
enable you to find accurate and substantive information on the most
important issues in selling to Japan. The publication also comes with an
invitation to use the services of the JEIC. We are in business solely to
help you establish a permanent and profitable presence in Japan.
U.S. Department of Commerce
Japan Export Information Center
14th Street and Constitution Avenue, N.W.
Washington, DC 20230
Phone: (202) 482-2425
Note: The term "U.S. and Foreign Commercial Service/Japan (US&FCS/Japan)"
refers to U.S. Department of Commerce operations in Japan. The Department
maintains five offices in Japan in Tokyo, Osaka, Nagoya, Sapporo, and
Fukuoka. The JEIC works closely with these offices to help U.S. companies
export to Japan.
U.S. Department of Commerce programs are accessible to people with
disabilities. This document will be converted to an appropriate alternative
form for applicants with disabilities. Requests for these or other
assistance and accommodation should be directed to the Trade Information
Center. Voice telephone number: 1-800-872-8723. Telecommunications Device
for the Deaf (TDD): 1-800-833-8723.
KEYS FOR BUSINESS SUCCESS IN JAPAN:
BE COMMITTED TO THE MARKET: Japan is a very expensive country in which to
do business. Commitment is generally demonstrated through a firm's
willingness to develop a presence in the market. The management of your
company must be committed to spend money on market research, travel, product
modifications, advertising, intellectual property protection,
warranties/discounts, translators/interpreters, trade shows, renting office
space, and shipping to Japan.
BUILD A POSITIVE COMPANY IMAGE: To succeed in Japan, it is very important
to keep promises and to respond promptly to communications from Japanese
business and trading partners, especially when problems or emergencies
arise. Reliability contributes to ensuring a permanent place in the
market. The Japanese need to know that you will be in the market for the
long term. Ship on time and install quality control mechanisms both before
and after shipment. It is important that you demonstrate to your potential
Japanese partner or customers that your firm is a well-run and
quality-driven operation. Convince the Japanese that they are your most
DEMONSTRATE PATIENCE: Entering the Japanese market requires a long-term
approach; negotiations are likely to be lengthy, initial costs are high, and
returns may be slow in reaching profitable levels. Do not expect immediate
DO YOUR HOMEWORK: You must research the market for your particular
product. You need to know not only market demand, but methods of
distribution, competition, regulations and standards, consumer preferences,
pricing, and sales service.
ASSESS YOUR PRODUCT: Is your product unique in the Japanese market?
Quality, technology, innovation, design/engineering, concept, style,
color/fashion, warranties and customer support, packaging, and price are all
factors that could separate your firm from the competition.
APPOINT A MANAGER FOR JAPAN OPERATIONS: Your success in the Japanese market
largely depends on the quality of your people working on that market.
Ideally, the Japan portfolio should be your manager's sole responsibility.
Select a manager who is attuned to Japanese business customs and practices.
DEVELOP PERSONAL RELATIONSHIPS: Successful business in Japan is dependent
upon the quality of your relationship with your Japanese customers and/or
business partner. For your relationship to grow, you must travel to Japan
on a regular basis.
FIND, ATTRACT, CHOOSE, AND KEEP A QUALITY JAPANESE BUSINESS PARTNER: If you
are not prepared to establish your own operation in Japan, spend a great
deal of time exploring all your options and selecting the best possible
business partner who meets your specific needs. Make sure that your
business partner is not your competition and will have your interests in
mind. You must be able to trust and communicate comfortably with your
business partner. If not, don't sign the contract. Look elsewhere. It is
very difficult to change partners in Japan once a relationship begins.
FOLLOW-UP IS ESSENTIAL: Maintain steady correspondence by fax with
potential Japanese business partners or customers that you are introduced to
or meet at trade shows. Traveling to Japan on a regular basis is expensive
but also necessary.
CREATE A WIN/WIN SITUATION FOR BOTH YOUR FIRM AND YOUR PARTNER: Motivate
your Japanese business partner to work hard for you. If your business is
mutually profitable, your Japanese partner will work harder to sell your
product. Understand their problems and difficulties and offer possible
LISTEN TO YOUR JAPANESE PARTNER AND CUSTOMERS: If you trust your partner
and have a good relationship, then listen to his or her advice or guidance
on marketing, standards, product modifications, distribution, and
intellectual property protection. Your partner is your Japan expert, not
just a trade facilitator.
ADAPT YOUR PRODUCT TO THE JAPANESE MARKET: Product modifications in order
to meet Japanese regulations, standards, or consumer preference or tastes
are usually necessary to compete effectively. Translation of all relevant
product literature is a must.
PRICE TO SELL AGAINST YOUR JAPANESE COMPETITION: With many products, the
acceptance of your product in Japan is based more on its quality and
after-sales service than its price. However, price has now become an
important factor in Japan. In the final analysis, make sure your final
retail price is competitive with that of your competition.
PROVIDE QUALITY SALES SERVICE: Your potential Japanese customers look at
before, during, and after-sales service just as much as at the product
itself. If you do not make arrangements for sales service, you are putting
your product at a serious disadvantage vis-a-vis your Japanese competition.
BE FLEXIBLE: Japan is not like the United States, Latin America, Europe, or
even the rest of Asia. The management of your company must be flexible
enough to learn and possibly adopt new marketing strategies and techniques
USE THE JAPANESE DISTRIBUTION SYSTEM TO YOUR BENEFIT: The Japanese
distribution system is often complex and generally inefficient. To
effectively utilize the system or develop an innovative approach to
circumvent existing distribution practices, you must know and understand how
the system operates for your specific product. Networking with and
providing product presentations for wholesalers and retailers/end-users is
an excellent marketing strategy to build support for your product.
EXPECT SMALL ORDERS AT FIRST: Small initial orders are a natural outgrowth
of competition and very common in Japan. The companies and people involved
with a new product must assure themselves that the item will meet the
specific needs of the customer by testing the market.
SELL AN IDEA OR A CONCEPT: In Japan, perceptions and images are
everything. Your firm should work with Japanese advertising/
market support agencies to produce a strong, positive product and company
image in Japan.
EDUCATE YOUR CUSTOMERS: Many products from the United States are conceived
and designed to sell in a cultural or an industrial environment that may not
currently exist in Japan. Uniqueness is what often gives U.S. products the
edge. However, in marketing to Japan, you must educate your customers about
the product's purpose, use, and quality.
RESPOND QUICKLY TO MARKET CHANGES: You must constantly respond to changes
in the market in order to remain competitive. Stay ahead of your
competition. Innovation in product design and marketing approach are
BE CULTURALLY SENSITIVE: An understanding of the Japanese business
mentality, negotiating style, and a willingness to accommodate Japanese
consumer preferences are extremely important. Learn about Japan -- about
its culture, history, and especially its business practices. The
information will greatly assist your efforts in the Japanese market and help
prevent costly cultural mistakes.
LEARN HOW THINGS ARE DONE IN JAPAN: Only by learning from the Japanese and
how their system works will you be able to develop innovative approaches to
the market. Moreover, more general lessons learned in Japan sometimes may
be applied successfully in other foreign markets or even in the U.S.
JAPAN COUNTRY FACT SHEET
A. Population: 124.764 million
B. Religions: Shintoism, Buddhism, Christianity 1%
C. Government: Parliamentary Democracy
D. Head of State: Prime Minister Tsutomu Hata
E. Language: Japanese
1991 1992 1993
A. GDP ($B, Real) 3,088 3,323 3,788
B. GDP Growth Rate (Real, 1985 Base) 4.3 1.1 0.1
C. GDP per Capita ($, Real) 24,898 26,698 30,362
D. Gov't Spending as a % of GNP 15.7 16.6 18.1
E. Inflation (CPI, %) 3.3 1.7 1.4
F. Unemployment Rate (%) 2.1 2.2 2.5
G. Foreign Exchange Reserves ($B) 69.0 68.7 95.6
H. Average Exchange Rate (1$=) 134.71 126.65 111.20
I. Official Discount Rate (Yr. End) 4.50 3.25 1.75
J. Labor Productivity Index (1990 Base) 102.5 97.1 95.5
K. Domestic Demand (Real, % Growth) 5.0 2.5 1.1
L. Household Savings Rate (%) 13.4 10.2 9.3
A. Total Japanese Exports ($M) 314,525 339,650 360,911
B. Total Japanese Imports ($M) 236,737 233,021 240,670
C. Total U.S. Exports (FAS, $M) 421,614 448,156 464,767
D. Total U.S. Imports (CV, $M) 487,870 532,498 580,544
E. U.S. Exports to Japan (FAS, $M) 48,147 47,764 47,950
F. U.S. Imports from Japan (CV, $M) 92,333 97,181 107,268
Principal U.S. Exports: wood in the rough, automatic data processing
machines, aircraft and parts, electronic integrated circuits and
microassemblies, corn, parts for office machines, cigars and cigarettes,
Principal U.S. Imports: motor vehicles, automatic data processing machines,
parts and accessories for motor vehicles, electronic integrated circuits and
microassemblies, parts for office machines
Foreign Supplier Share of Japanese Imports, 1993:
1. Southeast Asia: 25.2% 4. Middle East: 11.4%
2. United States: 23.0% 5. China (PRC): 8.5%
3. European Community: 12.5% 6. Australia: 5.1%
Current Account Balance: 1991: $ 72.90 billion
1992: $117.55 billion
1993: $131.35 billion
Trade Balances with Leading Partners ($B), 1993:
1. United States: -59.32
2. Southeast Asia: -56.83
3. European Community: -26.26
Tariffs: The average applied Japanese tariff is low (2.9 percent), but on
specific items, particularly foodstuffs and leather goods, both tariffs and
quotas are trade restrictive. Japan has recently eliminated the import
quotas on several agricultural products and foods.
Taxes: On April 1, 1989, the commodity tax was replaced with a general
consumption tax of 3 percent, 4.5 percent on autos, which is levied on the
c.i.f. plus duty value at time of entry.
Licensing of Technology: In cases where a foreign company wants to grant a
license to an independent Japanese corporation, to its wholly owned
subsidiary, or to a joint venture corporation to manufacture in Japan, the
Japanese Ministry of Finance must be notified through the Bank of Japan as
required in the Japanese Foreign Exchange and Foreign Trade Control Law.
Notification must be made within 15 days after the execution of the
licensing agreement. In some instances, it may be necessary to also notify
the Japanese Fair Trade Commission. More stringent regulations apply to
"designated technologies" that have been determined to have significant
influence on the security of the nation and the national economy.
BEST U.S. EXPORT PROSPECTS: electronic components, electrical power
systems, industrial chemicals, building products, franchising, automotive
parts and service equipment, computers and peripherals, telecommunications
equipment, medical equipment, aircraft and parts, and direct marketing
-- Foreign Ownership Restrictions: One hundred percent foreign capital is
allowed in principle except for the following sectors: broadcasting;
telecommunications; electric power generation; domestic rail and air
transportation; arms; gun powder; atomic energy; aircraft; space
development; narcotic manufacturing; vaccine manufacturing; security
guard services; agriculture, forestry, and fisheries; petroleum refining
and marketing; leather and leather product manufacturing; and mining.
-- Total U.S. Direct Investment in Japan, Cumulative: $22.5 billion, 1990;
$24.9 billion, 1991; $26.2 billion, 1992
-- Principal Sectors: Wholesale trade, petroleum, machinery, chemicals and
allied products, and finance.
-- U.S. Share of Foreign Direct Investment in Japan: 42.0% (Japan
FY'1951-1992), 40.5% (April 1, 1992 - March 31, 1993)
-- Japan's Foreign Direct Investment in the United States, Cumulative:
$83.1 billion, 1990; $92.9 billion, 1991; and $96.7 billion, 1992
THE JAPANESE ECONOMY:
With a nominal gross national product (GNP) of $3.8 trillion in 1993, Japan
is the world's second largest economy after the United States. Over the
past several decades, the country has generally enjoyed growth rates higher
than the industrial country average, and many of its export sector producers
have achieved competitive preeminence. However, the Japanese economy is
also marked by widespread structural rigidities -- exacerbated by residual
effects of government policies designed to protect inefficient producers
from foreign and domestic competition -- which impede imports or impair
their price competitiveness (i.e., the complex Japanese distribution
system). These structural rigidities, combined with the macroeconomic
policies pursued since 1990, have tended to slow domestic demand growth and
have contributed to the renewed expansion of persistent external trade
Between 1987 and the first half of 1991, Japan experienced relatively strong
real economic growth, marked by low unemployment. However, growth slowed
significantly beginning in the middle of 1991 and has continued at a rate
well below potential in 1993 and into early 1994. Japan's real GNP growth
rate for 1993 was 0.1 percent. The slowdown was prompted largely by
monetary tightening, leading to the rapid deflation of stock and land
prices, which has helped to slow successively residential investment, plant
and equipment investment, and, lately, personal consumption. The economy is
expected to remain sluggish through at least the first half of 1994.
Together, the United States and Japan account for about 40 percent of the
world's GNP/GDP (gross domestic product). The most striking component of
our bilateral relationship is the United States' chronic merchandise trade
deficit with Japan. While Japan is the second largest overseas market for
U.S. merchandise exports ($47.9 billion in 1993) behind Canada, we have had
an annual merchandise trade deficit with Japan that has exceeded $40 billion
for much of the past decade; it stood at $59.3 billion in 1993. Japan has
also run large global merchandise trade surpluses that hit $106.6 billion in
1992 and increased to $120.4 billion in 1993. The large surpluses have
caused friction with many of Japan's trading partners.
Japan still has a relatively low level of intra-industry trade with the
United States and the world. It traditionally has exported manufactured
goods, and imported raw materials, food, and a low level of manufactured
goods. This situation is due in part to Japan's acknowledged excellence in
producing manufactured goods. However, it also stems from a market
structure and business practices resulting from a policy of economic
self-reliance that was followed for much of the period since the end of the
Second World War. Although the policy has largely ended, the residual
effects remain. Japan's propensity to import manufactured goods is
increasing, but is still relatively low.
Changes that have important implications for U.S. export promotion prospects
are taking place rapidly in Japan. Yen appreciation has reached the point
where the United States is a relatively low-cost producer of manufactured
products. Recession has depressed overall demand, but real change has also
begun. Consumers, hard hit by recession, are suddenly much more cost
conscious. Keiretsu (Japanese industrial groupings) supply and distribution
relationships are weakening as Japanese companies trade across keiretsu
lines. Trade negotiations have opened previously protected sectors, and the
distribution system is restructuring. Firms are increasingly producing and
sourcing overseas. Rents and the price of land have decreased. Absent
residual market restrictions, U.S. companies should be selling much more in
the "best prospect" sectors such as electronic components, electric power
generation equipment, industrial chemicals, building products, auto parts,
computers, telecommunication equipment, and medical equipment where U.S.
companies are world leaders.
Despite Japan's continuing strong export performance, there is concern in
the Japanese business world over the effect of the rapidly appreciating yen
on export sales, as Japan's economy remains in a downturn. Real exports
have begun to drop and even dollar-denominated sales increases are now
slowing. Commercial real estate prices in Tokyo dropped 22 percent during
1992. The Japanese Government has moved to stem the decline with economic
stimulus packages in 1992, 1993, and 1994. However, it is unclear whether
these packages will have the desired effect of substantially increasing
domestic demand. Although the Japanese Government has committed to reducing
the personal income tax rate, it remains to be seen whether and to what
extent the direct tax cut will be offset by increased indirect taxation. It
also remains to be seen what effect the strengthening yen will have on
Japan's GDP growth.
Notwithstanding the economic stimulus packages and the proposed tax cuts,
fiscal policy in Japan has remained relatively tight since 1982, when the
Japanese Government began to take steps to constrain the growth of
government debt. The general government budget (central and local
governments plus social security) has been in surplus since 1987, even
though tax receipts have recently fallen off due to the recession.
After a period of tightening beginning in late 1989, monetary policy moved
into an easing cycle in mid-1991. Seven successive decreases in the Bank of
Japan's official discount rate have brought the rate to a record low of 1.75
percent in September 1993. Lending rates have also fallen, but corporate
borrowing remains weak -- partly due to lack of demand for funds in the
recession, and partly due to credit tightening by banks facing falling asset
prices and a large-scale overhang of bad debt. Money supply growth remains
The Japanese economy continues to undergo transition and structural change.
This situation has primarily been a market-driven response to the
fundamental exchange-rate realignment of the mid-to-late 1980s. Another
central factor has been the focus on deregulation of the economy,
particularly the privatization of public telecommunications and railway
companies and simplification of product standards. Despite progress in this
area, Japan's economy remains heavily regulated, reinforcing business
practices that restrict competition and thus keep prices high. Price
controls remain on certain agricultural products, and bureaucratic obstacles
to the entry of new firms into businesses such as trucking, retail sales,
and telecommunications also have slowed the economy's structural adjustment.
The Japanese Government has made some progress in deregulating portions of
its distribution system, specifically, the reform of the Large-Scale Retail
Store Law. In the area of land use, the government has eliminated tax
preferences for agricultural land in major urban areas. However, additional
deregulation is crucial to progress in opening markets further and reducing
trade and current account imbalances.
Japanese Government spending policy has given an indirect boost to the
competitiveness of a number of Japanese industries. In the past, the
government directed considerable public and private resources to targeted
industry sectors, but has been moving away from such industrial policy
measures, partly in response to criticism of Japan's export-oriented
policies by its major trading partners. The Japanese Government continues
to promote high technology cooperation among firms and plays a direct role
in organizing these efforts, using off-budget resources and small amounts of
appropriated funds to contribute to investment projects and
government-private sector efforts. By encouraging the spread of technology
throughout Japan, the government allows Japan's huge keiretsu to focus on
the fiercely competitive Japanese marketplace and overseas markets.
Exporting is about making money, about expanding the number of customers for
your product and making a profit from the increased demand. By ignoring
foreign markets, you are turning away millions of potential customers -- you
are automatically relinquishing sales and market share to your domestic and
foreign competition. Expanding your world sales will improve your economies
of scale and lower your production costs. Companies in this position can
lower prices, spend more on research and development (R&D), and concentrate
on quality improvement and innovations. For a company in today's global
environment, ignoring foreign markets is no longer tenable.
Where are the bulk of your future customers? Where are profits to be made
in the 21st century? What part of the world has been experiencing
phenomenal economic growth rates for the last several decades? The answer
to all three of these questions is Asia. Asia is where the greatest
potential for future customers and future profits lie. Asia is experiencing
tremendous growth in population, discretionary income, infrastructure
development, R&D, and manufacturing. Past and present export success and
economic development policies on the part of Asian countries have led to an
unprecedented surge in national wealth. Given the fact that increased
infrastructure development and R&D expenditures, along with a continued
emphasis on manufacturing, will only strengthen these economies, this
economic success will likely continue into the next century.
Growth in Asia has come at a cost. Asian consumerism has had to take a
backseat to production-oriented government and export-oriented corporate
policies. However, as standards of living have risen and more and more
Asians have had a taste of a better life, their appetite for more consumer
goods has become voracious. Asia, as a marketplace, is any company's dream
come true. More Asians will be spending more money on the widest selection
of consumer products imaginable. Moreover, with much emphasis still on the
development of a manufacturing base and infrastructure, sales of industrial
goods and high technology products will continue to advance.
Japan is a key center of business for the entire region. The Japanese
Government and Japanese corporations play a leading regional role in
industry, trade, finance, and technology. Japan's industrial and trade
success is the envy of other Asian nations that aspire to match Japan's
economic success. Japanese investment and foreign aid (which is
administered through the Japanese Official Development Assistance program)
is aggressively sought by countries throughout Asia. These financial flows
give the Japanese Government and Japanese corporations an important economic
presence in Asia.
Japan would make a great springboard for your company in expanding its
business throughout the entire region. American companies with successful
track records in Japan find it relatively easy to expand throughout the rest
of Asia. However, it is also important for your firm to realize that Japan,
by itself, represents a tremendous opportunity for your business. The size
of the Japanese economy, $3.8 trillion in 1993, is not only the largest in
Asia, it is the world's second largest economy after the United States. In
fact, the economies of certain geographical regions in Japan are larger than
the GDP of many countries in the world. Japan imports more from the United
States than from any other country. In 1993, after Canada, Japan was the
largest single importer of American products in the world. Japan has a
highly educated and efficient labor force, a stable government, an economy
driven by high levels of household savings and capital investment, and a
huge and growing domestic market.
Over the next several years, despite the current recession, Japan will offer
many new business opportunities -- in infrastructure build-up, as the
tremendous economic growth has brought a need for airports, roads, bridges,
and housing; in leisure, as the Japanese worker finds more time and money to
spend off the job; in retirement communities and health care with the
graying of Japanese society; in changing and broadening consumer tastes, as
the average Japanese consumer has become more cosmopolitan with greater
exposure to foreign products; and in Japan's large Official Development
Assistance projects, as Japan assumes a larger role in international
Most importantly, the recent rapid appreciation of the Japanese yen against
the U.S. dollar (the endaka) provides tremendous opportunities for American
products and services through increased price competitiveness. Many
Japanese consumers and businesses are looking for new suppliers, often
overseas, for the first time. As Japan has become a high-cost producer,
many Japanese firms are now finding it necessary to import in order to
remain profitable. Moreover, a liquidity crunch has forced many Japanese
buyers to terminate comfortable, yet inefficient, supplier relationships in
order to maximize profits. Structural changes are also now occurring in
Japan's inefficient distribution systems. All these changes are opening
doors that had long been closed to U.S. exporters.
Market presence in Japan should be a vital goal of your company's
international marketing strategy for reasons other than profit. More and
more U.S. companies are learning that the best way to respond to Japanese
competition at home and in world markets is to become involved in the
Japanese market. By competing with the Japanese on their own turf, your
firm is denying your Japanese competitors a safe haven and comfortable
margins in their home market to bankroll advances into other markets.
In Japan your firm will gather information on your Japanese competition and
new Japanese technology. Japanese companies spend a tremendous amount of
time and resources in creating new technologies and innovations. Your firm
needs to keep abreast of these developments in order to plan appropriate
Experience gained in Japan responding to the demands of the Japanese market
can result in improvements to your products manufactured and sold throughout
the world. Many American companies, reacting to Japanese consumer demands,
have developed new products or innovations in their product line that have
led to tremendous successes in other markets. Moreover, competition in
Japan is so fierce that your firm's marketing tactics and skills will
undoubtedly improve simply by competing and learning. Many U.S. companies
have discovered from experience in the Japanese market that an emphasis on
quality, sales service, innovation, and buyer/seller relationships can lead
to a winning business mix in all markets.
When faced with the challenge of entering and establishing a sustained sales
presence in Japan, many U.S. exporters have determined that large profits
can be realized more quickly with less effort by focusing attention on
markets not as difficult to initially penetrate. However, in making this
decision, two important elements are often overlooked. First, the arena of
economic growth, commercial development, and strategic importance is
shifting from the Atlantic to the Pacific Basin. East Asian economies will
create the largest growth in demand for consumer and industrial goods well
into the next century. Second, U.S. suppliers must realize that
head-to-head competition with Japanese exporters is absolutely unavoidable
in the U.S. domestic market and third country markets around the world --
especially in Asia.
As the old saying goes, nothing worthwhile is ever easy. Why is it
difficult to export to Japan? The media conveys the impression that the
Japanese Government has erected numerous trade barriers that make it
virtually impossible for your company to export to Japan. We hear over and
over again that the Japanese employ unfair trade practices that put American
products at a disadvantage vis-a-vis their Japanese competition.
The reality is that there are relatively few formal trade barriers in Japan
imposed by the Japanese Government. The average applied tariff in Japan is
now one of the world's lowest at 2.9 percent, and for many manufactured
products, nonexistent. Moreover, there are very few product areas that are
still affected by a quota system. This is not to say that there are no
problems in the form of formal trade restrictions in Japan. Many
agricultural goods and a few nonagricultural goods such as leather footwear
do confront high tariffs and quotas. Nevertheless, when you compare the
formal trade restrictions your company may face in other foreign markets
with the ones in Japan, you will find that Japan does not seem to be such a
difficult market to enter.
If all of this is true, why does the United States have such a huge trade
deficit with Japan? The answer is complicated. It is true that Japan is a
difficult country in which to do business. The reasons for this situation
vary and will be discussed throughout this guide. Our advice is based on
our interaction with hundreds of U.S. companies that have done business or
that have attempted to do business in Japan. We have learned from their
successes and their failures. Our intention is to pass on these experiences
so that your firm can benefit. We hope your company will then avoid the
pitfalls that have defeated previous attempts by some U.S. firms to export
to Japan and learn the techniques that have made some U.S. firms so
The following is a descriptive outline of challenging elements your company
will face in trying to do business in Japan. While these conditions may
seem insurmountable, many can be overcome with patience and hard work. The
key is to accurately identify what the potential difficulties are and then
develop strategies that address them. If your company spends the right
amount of time and effort in correctly analyzing the situation and devising
a viable market strategy, your firm will substantially improve its chances
of gaining market share and making money.
NEGATIVE IMAGE OF FOREIGN PRODUCTS AND COMPANIES: Foreign products and
companies suffer from an image problem in Japan -- too many Japanese have
the outdated and inaccurate opinion that foreign products are inferior and
that foreign companies are not reliable business partners. This mind-set
cannot only hamper your ability to sell your product in Japan, but also your
ability to develop a relationship with a potential Japanese business
partner. Two frequently heard criticisms of American companies in Japan are
that U.S. companies do not understand the unique characteristics of the
Japanese market and do not adapt their product to the market. American
firms are often perceived to be impatient, legalistic, short-term oriented,
and difficult to work with. On the positive side, this image may be
changing as U.S. products, services, and companies are now once again being
considered among world-class leaders and they are again price competitive.
DOING BUSINESS THE JAPANESE WAY -- BUILDING SUCCESSFUL RELATIONSHIPS:
Japanese business executives tend to be very conservative. They prefer to
deal with individuals and companies that they feel they can rely on and
trust. Consequently, the Japanese do business not solely on traditional
capitalist motives such as buying the best product at the lowest price, but
also on the quality of the relationship between buyer and seller. From
their perspective, this century-old system has created a business
environment of mutual understanding and cooperation. Japanese business
executives believe that a sense of harmony must exist for business
arrangements to be truly successful over the long term. The Japanese tend
to shy away from potential business partners who they sense will be
unreliable or difficult to relate to. They equate poor relationships with
excessive and unpredictable costs and lost business.
Thus, success in Japan has a direct correlation with the strength of your
company's personal relationships with your Japanese business partners and
customers. Although you might have a high-quality, innovative product, at a
competitive price, your company will not succeed unless you build and
cultivate good personal relationships. It is strongly recommended that your
firm establish a presence in the market by establishing a representative or
branch office in Japan. If this is not possible, your Japanese partner
(agent, representative, distributor, joint venture partner, etc.) will be
the key to your success in the market.
JAPANESE DISTRIBUTION SYSTEM: Japanese distribution systems are very
different from our own in the United States. They can be inefficient, are
often complex, and usually rely on personal relationships. It is not
uncommon to have two or three wholesalers for your product between importer
and retailer with a price mark-up at each step. These wholesalers, who
wield a tremendous amount of influence with retailers, are often tied in
with each other, Japanese manufacturers, or Japanese trading companies.
Especially frustrating is the difficulty most foreign companies face when
trying to circumvent this nontransparent system. Structural changes are now
occurring in the distribution system that should make it easier for U.S.
exporters to penetrate the Japanese market.
KEIRETSU: Understanding keiretsu is extremely important in understanding
how the Japanese economic system works. Keiretsu, or integrated corporate
groupings, are a structural arrangement of Japanese firms that are
characterized by close business relationships intertwined with long-term
commitments among their members. Keiretsu firms are tied in with one
another through cross shareholdings, long-standing buyer-supplier
arrangements, interlocking directorates, the exchange of personnel among
member firms, access to credit and marketing channels, management ties
through presidents' clubs, and the sharing of information concerning product
development and distribution.
There are two kinds of keiretsu: horizontal and vertical. Horizontal
keiretsu are headed by a major Japanese bank and often include an insurance
company, a general trading company, a shipping line with supporting
companies, a real estate firm, and groups of companies in chemicals, mining
and metals, electric products, heavy industry, and other industrial and
service sectors. The six major horizontal keiretsu are Mitsubishi, Mitsui,
Sumitomo, Fuyo, Dai-Ichi Kangyo, and Sanwa. Vertical keiretsu connect
manufacturers and parts suppliers, and/or manufacturers, wholesalers, and
retailers. Major vertical keiretsu include Toyota, Nissan, Hitachi,
Matsushita, and Nippon Steel.
To outsiders, the behavior pattern of these industrial groupings is similar
to that of monopolistic industrial conglomerates. Member firms are often
given preferential treatment, vital information is shared, inexpensive
capital is readily provided, and price fixing occurs. A key advantage for
these economic giants is their large pool of available capital and the lack
of pressure to maximize profits for the short term. Keiretsu banks are
willing lenders to support the long-term market strategies of their
manufacturing affiliates. Cross-shareholdings by keiretsu affiliates also
reduce the need for short-term profits.
Thus, keiretsu can afford to sell their products at or below cost, focusing
on market share rather than seeking immediate profit -- although recent
economic conditions are adversely affecting their ability to continue this
practice. Once the market is secured and competition weakened, profits can
be maximized. The keiretsu system also provides a security blanket. For
instance, a keiretsu company will not have to constantly prove its
reliability or creditworthiness to other member companies. Long-term ties
allow for innovations that put greater demands on suppliers, including the
just-in-time delivery system. The Japanese Government is permissive of the
keiretsu's monopolistic/oligopolistic behavior and antitrust is not readily
enforced in Japan. The keiretsu are also protective of their own,
epitomizing "the old boy network" in the Japanese business world. They
represent a considerable business barrier to nonmember Japanese firms and a
considerable trade barrier to foreign exporters.
Cracks have recently appeared in the keiretsu structure. Because of yen
appreciation and a greater emphasis on maximizing profits due to the
liquidity crunch, keiretsu members today are now more likely to buy products
from non-keiretsu member suppliers (both foreign and Japanese) than ever
before. Some U.S. companies have successfully penetrated keiretsu and have
enjoyed some of the advantages of membership.
PROVIDING FOR SALES SERVICE AND CUSTOMER SUPPORT: Japan is so competitive,
and Japanese consumer expectation levels are so high, that companies doing
business in Japan differentiate themselves not only on the basis of product
quality and price, but sales service and customer support. It is one of the
most important aspects of the "product package" that the Japanese buyer has
come to expect. If no consideration has been given to sales service
(before, during, and after the sale), your product will be severely
disadvantaged vis-a-vis your competitors' products.
REGULATIONS, STANDARDS, AND CERTIFICATION SYSTEMS: Complying with foreign
regulations, standards, and certification systems is simply one of the costs
of doing business overseas. Japan is no different. Unfortunately, Japanese
regulations, standards, and certification systems do not always conform to
international norms. Some U.S. companies have had difficulties in obtaining
approval for innovative products or the use of certain materials. Others
have found the costs to modify their products to meet Japanese requirements
excessive. Standards and certification problems in Japan can be classified
into one of three general categories: (1) lack of transparency, (2) lack of
acceptance of foreign test data, and (3) lack of harmonization with
EXPENSE OF DOING BUSINESS IN JAPAN: Japan is an extremely costly place to
do business. Everything having to do with Japan seems expensive: market
research, travel to Japan, entertainment charges, participation in a trade
show, office space, advertising, legal assistance and guidance, and freight
and import broker charges.
The key to your success in Japan is the commitment of your resources --
including your time, money, and personnel -- to develop a market for the
long term. If you prepare well, exercise patience, and demonstrate
commitment, then you will likely reap substantial benefits from your efforts.
ASSESSING YOUR PRODUCT'S POTENTIAL IN JAPAN: The first question your firm
must answer is, why would the Japanese buy our product? Your product may
sell well in the United States and other countries, but that does not
necessarily mean it will be well received in Japan.
Japan is a well-developed, industrialized country with a very high standard
of living. Competition for most types of products, ranging from consumer
goods to high-technology industrial products, is extremely fierce. It is
difficult to sell a commonly available product with no outstanding or unique
feature or price differential. As a rule of thumb, your product must be
unique or different to find a market in Japan. Quality, technology,
innovation, design and engineering, concept, style, color or fashion,
warranties and product support, packaging, and/or price are all factors that
could separate your product from both Japanese domestic and foreign
The Japanese preach quality constantly. It is the single most important
factor about your product that potential Japanese importers and customers
will consider. Today, many Japanese are convinced that only the Japanese
can manufacture products of superior quality. You must demonstrate to your
potential business partners that your product quality is on par with the
Japanese. Quality includes reliability, consistency, craftsmanship, and an
aesthetic balance between material, form, and color. Quality must be a
strength of your product, not a liability.
Quality control should be monitored before and after shipment to Japan. Be
certain that your shipping companies in Japan take great care when
delivering the merchandise. If your product arrives damaged or late, your
Japanese customers will not care who is responsible; they will however take
their business elsewhere. It is not uncommon for Japanese importers to
refuse to accept entire shipments if one defect or damaged item is
detected. Too many U.S.-Japan business relationships have soured because of
damaged or defective products. Don't take any chances. In the end, it will
cost you more to fix the problem than it would have cost to prevent the
Another important factor you must assess is can you adhere to mandatory
regulations and meet the voluntary product standards? Both domestic and
foreign-manufactured products must comply with Japanese Government
regulations that guarantee safety and quality control. If your firm's
product does not presently meet these requirements, you must adapt your
product. See the section titled "Japanese Regulations, Standards, Quality
Marks, and Certification Systems" for more information.
While U.S. companies do not like to hear often that modifications to their
product may be necessary, redesigning the product or making changes on the
production line could be necessary. It may mean the difference between
successfully developing a market in Japan and a few initial export sales.
Remember, in order for your product to sell well in Japan, it must meet
Japanese tastes and preferences. Adapting to these tastes and preferences,
when necessary, will only increase the appeal of your product with Japanese
consumers (i.e., scaling down furniture or apparel sizes, "Japanization" of
computer software, etc.). Your firm would do no less when selling in the
United States. In fact, product modifications for the Japanese market have
often led to the development of a superior product in the U.S. domestic
Another consideration to keep in mind is that the Japanese will look at more
than just the product itself. The entire product package, including price,
sales service, and delivery are important factors for the Japanese business
person in deciding whether or not to import the product. Will the American
company provide assistance in marketing and advertising the product? Will
warranties or product support, including replacement of defective products
and repairs, be provided? The answers to these questions will largely
determine the Japanese's decision on whether or not to do business with your
company. In some cases, sales service and product support will be handled
by the importer/distributor/representative. In other instances, your firm
may have to make arrangements (with the guidance and consent of your
Japanese business partner, of course) for a third party to handle some sales
or other product support services.
ASSESSING YOUR COMPANY'S POTENTIAL IN JAPAN: The second step required is
for your firm to develop a written export strategy. Make no mistake about
it, exporting to Japan is very difficult without a comprehensive marketing
plan. Poor planning will most likely lead to poor sales and will alienate
you from your Japanese business partner. Written plans highlight strengths
and weaknesses more readily and are a great help in formulating and refining
an export strategy. They indicate to potential financial lenders and
Japanese business partners that your company is making a serious entry into
the market. In the end, a solid export strategy will not only save your
firm time and money, but it will significantly increase your chances for
success in the market.
Commitment is the first key and it must start at the top. Is your firm's
top management committed to the Japan export effort based on a realistic
assessment in terms of time and money required to penetrate the market?
Commitment to the Japanese market will entail costs; Japan is not a cheap
place to do business. It will probably cost your firm at least $20,000 to
obtain customized market research, find potential business partners, and
visit Japan twice during initial market entry. Subsequent visits to Japan,
at least twice per year, will strengthen business relationships and help
promote your product. Additional costs include product modification,
registration of patents and trademarks in Japan, compliance with Japanese
standards and regulations, translation services, interpreters, and employing
a qualified team of advisors (advertising agency, accounting firm, attorney,
freight forwarder, and banker). Trade shows -- an excellent medium to
collect market research, promote your product, and find potential partners
-- are a costly venture. In order to make money in Japan, you must spend
money. There are no short cuts into the Japanese market.
Your expectations should not be concentrated on immediate payback -- getting
established and developing relationships in Japan takes time. You may have
to wait one to two years to turn a profit. If exporting is viewed as a
quick fix for a slump in your domestic sales or will be neglected when
domestic sales pick up, you may wish to rethink your decision to approach
the Japanese market. Once you are established in Japan, the rewards can be
Your management must be able to adapt to the unique market conditions in
Japan. Listen to the advice of your Japanese partner. Do not go into Japan
believing that the same sales and marketing techniques that made your
company successful in the United States or other foreign markets will ensure
success in the Japanese market. This belief is a common mistake of American
firms seeking to enter the Japanese market and can lead to potentially
disastrous consequences for your company. Listen to and read about business
executives who have succeeded or failed in Japan -- learn from their
strategies. The typical U.S. firm, regardless of size, is not well informed
about how business is done in Japan. An experienced marketer can usually
tell if a foreign company will succeed in Japan simply by listening to the
company's management. If management actually shows an active interest in
learning about the complexities and differences of the Japanese market and
is willing to adopt a marketing approach better suited to this market, then
the company has half the battle won.
However, at the same time, it is not always necessary to do everything "the
Japanese way." Often, the Japanese partner's interest differs from that of
the U.S. company (i.e., high price, low volume). The Japanese way may only
reflect the business interests of the Japanese partner and may run counter
to the interests of the U.S. company. You should be flexible, but you also
should follow common sense. After all, we hope part of the attraction for
your product or service is its uniqueness. If everything is done the
Japanese way, your firm may lose the factors that distinguish your firm from
your competitors. If you are unsure of your partner's advice, rely on
professional market research firms to provide you with the answers.
Ideally, your firm should appoint a proven manager for its Japan
operations. Most importantly top decision-makers should consult with this
"Japan expert" before making decisions since he or she will be the
individual most intimate with the conditions surrounding the market. If not
resident in Japan, he or she should visit Japan at least twice a year. This
person should be in constant communication with your Japanese partner and
keep management up-to-date on the latest developments and be able to handle
crisis situations. Remember, market conditions may dictate modifications in
your firm's product. Your Japan manager's input into this kind of decision
may determine the success of your firm's efforts. In addition, when selling
the product or providing for product support, a company representative who
knows the product, not just the marketing strategy, should be in Japan to
answer specific technical questions or hold seminars.
Potential Japanese business partners will also look at the track record of
your firm both in the United States and other foreign markets. Is your
company recognized as a well-managed, quality-driven organization? Does it
have previous export experience? What is the history of your company and is
it a financially capable creditworthy business partner? What is your
company's market position in the United States? These are all questions
your potential Japanese partners will ask. They will be looking for a
solid, dependable business partner with a successful history.
Be certain your company can cover the costs of financing an export
transaction. In order to compete in Japan, your firm must present
attractive trade financing options to Japanese importers. Many Japanese
companies use promissory notes (yakusoku-tegata or yakute), which act as
I.O.U.'s with a promise to pay at a later date -- typically 90 to 120 days.
Japanese banks often provide their Japanese clients with short-term
financing by discounting the notes or providing a rollover to avoid cash
flow problems. Your deal with a Japanese importer may hinge on similar
terms. Never assume that your bank will provide financing once you receive
a purchase order. You should meet with your bank early on in the
negotiating process to discuss your export strategy and potential financing
needs. It may be necessary to obtain the support of the Export-Import Bank
of the United States or use a nontraditional financing tool such as
forfaiting or factoring. For more information, see the sections titled
"Methods of Payment" and "Export Financing."
MARKET RESEARCH: As mentioned previously, the first step for your company
is to determine if there is a market for your product in Japan. Substantial
preparatory homework will be essential to analyze your product's potential
in Japan, including such factors as competition, distribution channels, and
the best way to gain sales exposure in the market. Market research will
help you make good strategic decisions and prevent expensive mistakes.
Market research will also help your firm identify prospective importers and
customers. Most importantly, it should answer the all important question of
whether of not your product has potential in Japan.
If your preliminary research seems to indicate that Japan may be a promising
export market, you should seek more detailed information to confirm it.
Some market research is available for free from the U.S. and Japanese
Governments, but your firm will probably need to know more specific
information regarding your product than a general report can provide.
Obtaining customized market research is very expensive in Japan. However,
before you start making travel plans, it could save your company a lot of
time and effort if you can confirm first that your product is potentially
viable in Japan.
Here are five possible sources of market research on Japan for your company:
The U.S. Government: Many of the various U.S. Government agencies produce
market research for American companies interested in exporting products
overseas. In particular, the U.S. Department of Commerce (for manufactured
products and fishery products) and the U.S. Department of Agriculture (for
agricultural commodities and processed food products) can provide
sector-specific market research for free or at a nominal fee. Other
agencies such as the U.S. Department of Transportation and the U.S.
Department of Energy may also be of assistance, if appropriate.
The U.S. Department of Commerce makes available to U.S. exporters
industry-specific market research on manufactured products, fish products,
and services for most foreign markets. The reports, titled Industry
Sub-Sector Analyses (ISA's), provide information on various specific product
markets and include sections on statistical data, market assessment, best
sales prospects, competitive situation, market access, and a list of key
organizations, trade events, and publications. In addition, the Commerce
Department also prepares valuable International Market Insight (IMI)
reports. These smaller, spot reports contain more time-sensitive
information on recent industry-specific market developments, trade
opportunities, and intra-country regional conditions. Both ISA's and IMI's
are available on the National Trade Data Bank (NTDB). If ISA's or IMI's do
not answer your company's specific questions, it may be necessary for your
firm to contract out for more specialized and customized market research.
Two resources that we regularly refer to throughout this guide and strongly
recommend that you obtain are the National Trade Data Bank (NTDB) and "A
Basic Guide to Exporting." The NTDB is a "one-stop" source for export
promotion and international trade data collected by 17 U.S. Government
agencies. Updated each month and released on two CD-ROM, the NTDB enables a
user with an IBM-compatible personal computer equipped with a CD-ROM reader
to access over 100,000 trade-related documents. The NTDB contains (1) "A
Basic Guide to Exporting," (2) country and industry specific market
research, (3) the "World Fact Book," (4) "The Industrial Outlook," (5) the
"Foreign Trade Barriers Report," (6) "Business America Magazine," (7) the
Foreign Traders Index, (8) foreign trade and employment trends, (8) the
"Export Promotion and Trade Event Calendar," and much, much more. The NTDB
is also available at over 1,000 federal depository and university libraries
nationwide. The NTDB can be purchased for $35 per monthly issue or $360 for
a 12-month subscription. For a listing of local federal depository or
university libraries equipped with the NTDB, call the U.S. Department of
Commerce's Trade Information Center at 1-800-USA-TRADE. For ordering and
other specific information, call the NTDB staff at (202) 482-1986.
The 1992 edition of A Basic Guide to Exporting helps business develop an
export strategy, find economic market research, ship overseas, complete
export documentation, respond to overseas inquiries, and take advantage of
available government export assistance programs. A Basic Guide to Exporting
is a publication of the International Trade Administration, U.S. Department
of Commerce. To order a copy, call GPO at (202) 783-3238. Ask for stock
number 003-009-00604-0. The cost is $9.50.
The Commerce Department offers the Customized Sales Survey (CSS), a more
comprehensive service for those companies that are prepared to make a
serious initial commitment to the Japanese market. The CSS is a custom
market research service designed to provide advice and key facts about your
product potential in Japan that cannot be found in broader industry surveys.
The CSS provides answers to nine key marketing questions about your product
in Japan: (1) Does the product have sales potential in the market? (2) Who
is supplying a comparable product locally? (3) What is the usual sales
channel for getting this type of product into the market? (4) What is the
going price for a comparable product in this market? (5) Are purchasers of
such products primarily influenced by price or other competitive factors,
such as credit, quality, delivery, service, promotion, brand, etc.? (6) What
is the best way to get sales exposure in the market for this type of
product? (7) Are there any impediments to selling this type of product in
this market, such as quotas, duties, or local regulations that might impede
sales? (8) Who might be interested and qualified to represent or purchase
this company's product in the market? and (9) If a licensing or joint
venture strategy seems desirable for this market, who might be an interested
and qualified partner for the U.S. company?
Answers to these questions are obtained from on-the-spot, personal
interviews conducted by private-sector market research firms in Japan. The
researchers conduct a CSS by interviewing expert local sources, such as
importers, distributors, end-users, or local producers of comparable
products. The final CSS will be completed and sent to you in approximately
60 days. The CSS in Japan costs $3,500.
The CSS is confined to standard, off-the-shelf products, rather than
specialty or custom-built products. Standard products are typically shown
and priced in catalogs, are influenced by normal competitive factors, have
relatively straightforward distribution channels, and have a number of
suppliers and potential agents that can serve as contact points.
If you wish to order a CSS on your product, you will be asked to provide
answers to the following specific questions:
(1) What is the product and how does it work?
(2) What special features, attributes, and advantages does it have that
distinguish it from the competition?
(3) What is it used for?
(4) Who needs the product?
(5) How is this product typically distributed and marketed in the United
States and, if applicable, in other countries?
(6) What types of firms or individuals would you suggest be contacted in
the target country to provide answers to the nine CSS survey questions
(i.e., agents, distributors, retailers, physicians and like
professionals, plant engineers, etc.)?
(7) Are you currently represented in the market, and if so, who is your
Clear and concise answers to these questions are needed, as the researcher
must have a full understanding of your product and its marketing
characteristics to conduct a thorough comparison with other competing
products in the market. For further information and an application for the
CSS, contact your nearest U.S. Department of Commerce district office (see
the section titled "International Trade Administration/US&FCS District
Offices" for contact information).
The CSS, like other U.S. Department of Commerce products and services,
promotes products made in the United States. Products manufactured outside
the United States will only be considered if they are distributed and sold
in the name of a U.S. firm, and if the U.S. content is more than 51 percent
of the value of the finished product.
The Japan External Trade Organization (JETRO): JETRO, a Japanese Government
organization, produces industry-specific market research reports on the
Japanese market for U.S. and other foreign exporters. Of particular note
are its market research reports under the series heading of "Your Market in
Japan." These reports range from general consumer goods to high technology
products and include sections on market overview, market trends,
distribution system, import system, advice on approaching the market,
standards and regulations, and related organizations and trade events. You
should call JETRO and ask for an up-to-date publications list on all
available documents. Each JETRO office has an extensive commercial library
that includes many valuable resources. JETRO is now placing much of its
information in electronic databases. The six current JETRO databases are:
the Potential Importers Database (contacts of Japanese importers), JETRO
Publications in English Database (listing of over 300 trade-related
publications), Market Trends in Japan Database (over 800 reports on the
Japanese market for specific products), Your Market in Japan Database
(electronic version of the market research series), Japan Trade Directory
Database (listing of Japanese importers, exporters, and service companies),
and the Japan Regional Investment Guide Database (overview of regional
investment environment in Japan). See the section titled "The Japanese
Government" for a listing of JETRO offices in the United States.
Industry/Trade Associations: Some associations have very good international
trade divisions that produce reports on various foreign markets or market
conditions. Your association may also keep current information on the
latest foreign regulations, standards, and trade statistics. Association
members might provide valuable information and guidance on approaching the
Japanese market, including cost assessments, finding potential partners,
intellectual property protection, and other matters related to exporting to
Japan. Several U.S. industry associations have established offices in Japan
to support their members' export activities.
International Consulting/Market Research Firms: Like the Commerce
Department's Customized Sales Survey (CSS), international consulting and
market research firms can generally provide customized market research
specific to your product and the Japanese market. Unfortunately, customized
market research for Japan is expensive. The $3,500 cost of a CSS is likely
more economical than private consultants or market researchers who will
often charge double that rate. However, if your firm wants to seriously
approach the Japanese market and substantially increase the chances for
success, market research is necessary. You need to be informed of all
variables and conditions that will affect your marketing efforts.
Of course, your company will want to compare costs and benefits of each
option. You should carefully examine the capabilities of the
consulting/market research firm that you may employ in order to determine
whether or not it is capable of providing advice on exporting to Japan, and
in particular, exporting the type of product that your firm manufactures. A
list of market research and business consulting firms in Japan is available
in a U.S. Department of Commerce publication titled Business Support
Organizations in Japan, 1992. The guide has been placed in the National
Trade Data Bank.
The Export Hotline: The Export Hotline is a private-sector, fax retrieval,
international trade information service designed to help companies learn
about strategic global markets, including Japan. Using a new fax-on-demand
technology, the Export Hotline allows callers to use their fax machines to
request and receive reports on a single call. By calling 1-800-872-9767
toll free from their telephone, callers immediately receive back on their
fax machines a four-page brochure which includes instructions on how to use
the service, a registration form, and the menu and codes of available
reports. The information is free. Users pay only the cost of the fax
transmission. A typical report is fairly brief, averaging 6-10 pages, and
much of the information is summarized from U.S. Department of Commerce
Industry Sub-Sector Analyses and other country specific reports.
MARKET ENTRY ALTERNATIVES: There are many vehicles for market entry into
Japan, each offering greater or lesser profits, control, and risk. Your
decision on which market entry alternative to use must be guided by your
financial resources, commitment to the market as it relates to your global
sales strategy, intellectual property protection considerations, and time
horizon. Regardless of the method, you should be taking a long-term
approach to Japan.
Establishing an Office in Japan: If your company can afford the investment,
you should seriously consider establishing a representative or branch office
in Japan. This office will allow your firm the most direct control of its
operations in Japan and will help ensure the quality of sales service and
general marketing efforts, such as advertising and
wholesaler/retailer/end-user support and relations. Moreover, an office
provides your company with a base for gathering firsthand information on the
competition, emerging technologies, and developing market trends. Setting
up operations in Japan is the ultimate proof of your commitment to the
market. Realistically, this is the most pragmatic way for your firm to
develop effective personal relationships with your customers. Your Japanese
competition is constantly making the rounds and talking with your potential
customers in order to build relationships and promote their products. Your
firm needs to pursue the same strategy. The Japanese are more likely to do
business with those people who they like, and trust, and who they feel are
committed to the market.
Establishing an office in Japan can prove to be an expensive proposition
primarily because office space is not cheap, and salaries for Japanese
nationals are high. Most U.S. companies hire Japanese nationals because of
their intimate knowledge of the local culture and business practices and
their expertise in a particular industry sector. Japanese nationals are
also more cost effective than dispatching Americans with no industry
contacts in Japan. However, in many cases, Japanese nationals are reluctant
to work for foreign companies because they are worried that they will not
have stable employment. Nevertheless, hiring quality personnel is
absolutely essential as they will be your eyes and ears in the market.
Most American firms that set up in Japan tend to establish their offices in
Tokyo. In some cases, especially if you intend to network with Japanese
Government ministries, this might be the preferred method. However, U.S.
firms should look at alternatives such as Osaka in the Kansai region,
Sapporo in Hokkaido, Fukuoka in Kyushu, or Nagoya in Aichi Prefecture.
These locations offer a number of different advantages over Tokyo. First of
all, for many industry sectors, the Tokyo market is already saturated by
foreign companies. Thus, Japanese interest in foreign companies in Tokyo
tends to be less than it might be in other regions. Also, since many
foreign companies seek agents/representatives/importers in Tokyo, many
quality distributors will have already signed agreements with your foreign
or domestic competition. Second, the cost of opening up an office in other
regions tends to be dramatically lower than Tokyo. Recognizing the current
downturn in the Japanese economy, some of these regions can offer real
bargains. Important organizations in Kansai and Hokkaido are very
interested in attracting foreign direct investment and offer special
incentives to attract foreign business.
The Commerce Department publication Business Support Organizations in Japan,
1992 lists some executive office support and executive search firms in both
the Tokyo and Kansai regions. This publication is available on the National
Trade Data Bank (NTDB). The Commerce Department's U.S. and Foreign
Commercial Service (US&FCS) in Osaka has prepared a two-part report on the
rental market in the Kansai, which is also available on the NTDB. For more
information on this subject, see the section of this guide titled
"Investment in Japan."
REPRESENTATIVE OFFICE: A foreign company that wishes to collect information
or to facilitate contacts in Japan should consider establishing a liaison or
representative office. This liaison office could be used to obtain market
data, provide information to potential clients, and develop relationships
with key elements in the distribution system to provide the necessary
promotional and service support. A representative office is not subject to
Japanese taxes, and it is not necessary to obtain special approval from the
Japanese Government to be established. However, a representative office
must not involve itself in commercial transactions (as defined in the
Japanese Commercial Code) or generate income; therefore, it cannot handle
orders directly. The liaison office may function by providing guidance and
support to an agent, and managing all marketing activities except for the
BRANCH OFFICE: To go a step beyond a representative or liaison office, you
can establish a sales or branch office. A branch office can engage in
trading, manufacturing, retailing, services, or other business. To set up a
branch office, your company must appoint a resident representative in Japan
and must register with the Legal Affairs Bureau of the Ministry of Justice.
In addition, the establishment of a branch office is considered a direct
investment under the Foreign Exchange and Foreign Trade Control Law.
Because of this designation, your firm must also notify the Ministry of
Finance through the Bank of Japan within 15 days after the establishment of
the branch office. For certain regulated sectors, obtaining a license is
not possible for foreign firms. These regulated sectors include
broadcasting; electric power generation; domestic rail and air
transportation; arms; gun powder; atomic energy; aircraft; space
development; narcotic manufacturing; vaccine manufacturing; security guard
services; agriculture, forestry, and fisheries; petroleum refining and
marketing; leather and leather product manufacturing; shipbuilding; and
mining. In addition, significant restrictions remain for foreign firms in
the financial services and telecommunications sectors. For these sectors,
Ministry of Finance notification must be made prior to the establishment of
the branch office.
A branch office may take and fill orders, and is liable for payment of
Japanese taxes. Moreover, a branch office may carry out a full marketing
program, including arranging for advertising, recruiting a sales force, and
performing all necessary promotional activities.
SUBSIDIARIES: Another alternative is to incorporate your own subsidiary
company in Japan. For most sectors, the Japanese Government allows the
establishment of a wholly owned subsidiary corporation. However, as with
establishing a branch office, certain sectors are restricted. Setting up a
wholly owned subsidiary is much more complicated and will involve more time
and expense, but it can offer an effective means for your company to
manufacture locally, guarantee better protection for proprietary
information, and penetrate some markets which have subtle but substantial
barriers to imports. Moreover, there is a perception in Japan that
companies that establish subsidiaries are more committed to the market than
companies that set up representative or branch offices.
ALTERNATIVE OPERATIONS: A fourth approach is to pool resources of several
firms that have complementary product lines and want to sell in Japan. Such
a group might establish a marketing association, consortium, or jointly
owned export management company, and set up a sales and service office in
Japan. This operation may take the form of a liaison office that handles
contacts with agents, distributors, and customers. Considering the
importance of brand image in Japan, group members may wish to consider
adopting a group logo that would be a universally recognized and accepted
identity for their product line. This approach is not widely used by U.S.
firms in Japan, but has been successfully employed by a number of European
groups. You may also consider piggybacking your product with a
complementary line of a firm which is successfully exporting to Japan.
For additional information on establishing an office in Japan, hiring
Japanese nationals, living, or investment in Japan, refer to the following
publications (listed in chronological order):
Setting Up an Office in Japan. American Chamber of Commerce in Japan
(ACCJ), 1993. This and other ACCJ publications are available through the
U.S. Chamber of Commerce at (202) 463-5460.
Cost of Doing Business in Japan. U.S. and Foreign Commercial Service/Japan
(US&FCS/Japan), 1993. Available on the National Trade Data Bank.
Living in Japan. ACCJ, 1993.
Establishment of a Representative Office in Japan. Japan External Trade
Organization (JETRO), 1992. New York Office -- (212) 997-0400.
Setting Up a Business in Japan: A Guide for Foreign Businessmen; Questions
and Answers. JETRO, 1992.
JETRO White Paper on Foreign Direct Investment. JETRO, 1992.
Employment Practices of American Companies in Japan. ACCJ, 1991.
Finding a Home in Tokyo. ACCJ, 1991.
Setting Up a Business in Japan: A Manual. JETRO, 1991.
Guide to Investment in Japan. Industrial Bank of Japan, 1991. Washington,
D.C. Office -- (202) 835-0455.
Guide to Direct Investment in Japan. Japan Development Bank, 1991.
Washington, D.C. Office -- (202) 331-8696.
Survey of Direct U.S. Private Capital Investment in Research and Development
Facilities in Japan. National Science Foundation, 1991. Washington, DC
Office -- (202) 357-9558.
Japanese Takeovers: The Global Contest of Corporate Control. W. Carl
Kester, published by the Harvard Business School, 1991.
A Guide to Entry, Residence and Registration Procedures in Japan for Foreign
Nationals. Ministry of Justice, 1990. Available through Overseas Courier
Service (OCS) America at (703) 528-4500.
Employment of Foreign Nationals; Questions and Answers. Ministry of
Justice, 1990. Available through OCS America.
Acquiring Japanese Companies: Mergers and Acquisitions in the Japanese
Market. Kanji Ishizumi, published by Basil Blackwell, Inc., 1990.
Setting Up & Operating a Business in Japan: A Handbook for the Foreign
Businessman. Helene Thian, published by the Charles E. Tuttle Company, 1988.
Labor Pains and the Gaijin Boss: Hiring, Managing and Firing the Japanese.
Thomas J. Nevins, published by The Japan Times, 1984.
Representatives, Agents, and Distributors: An overseas sales representative
is the equivalent of a manufacturer's representative in the United States.
A representative develops sales on behalf of the company represented. The
representative usually avoids handling competitive lines and concentrates on
complementary lines. The sales representative usually works on a commission
basis, assumes no risk or responsibility, and is under contract for a
definite period of time (renewable by mutual agreement). The contract
defines territory, terms of sale, method of compensation, reasons and
procedures for terminating the agreement, and other details. The sales
representative may operate on either an exclusive or a nonexclusive basis.
Often widely misunderstood, an agent is a representative who normally has
authority to make commitments on behalf of the firm which is represented.
Many companies in the United States have stopped using the term and instead
rely on the term representative, since agent can imply more than intended.
Any contract should state whether the representative or agent does or does
not have legal authority to obligate the firm to sales transactions or
The foreign distributor is a merchant who purchases merchandise from a U.S.
exporter and resells it at a profit. The foreign distributor generally
provides support and service for the product, relieving the U.S. company of
those responsibilities (but this should be discussed and formalized in the
contract). The distributor usually carries an inventory of products, a
sufficient supply of spare parts, and maintains adequate facilities and
personnel for normal servicing operations.
Selecting a representative, agent, or distributor is the most common option
for market entry by U.S. firms. On the positive side,
representatives/agents/distributors should be able to educate you if you are
unfamiliar with the Japanese market, distribution channels, regulations and
standards, and business practices. On the negative side, your success in
Japan largely depends on your Japanese business partner's capability and
level of interest in selling your product. In addition to not being able to
directly control your own business in the market, you will also have to
share a greater percentage of the profits with your partner.
In most instances, it is not required to notify the Japanese Government of
the appointment of a Japanese representative/agent/distributor. The only
two exceptions are in cases of exclusive agreements of over one year in
which the distributor is a competitor with a 10 percent or greater market
share and/or possesses the third or higher market share position within the
distributor's industry in Japan or the distributor agreement contains
restrictions on the resale prices of the distributor. In such instances,
the distributor agreement must be filed with the Japanese Fair Trade
Commission within 30 days after the execution of the agreement.
Licensing: Licensing product technology is an alternative with considerable
appeal. A firm can immediately contribute to its bottom line with little
investment or direct cost. What is often overlooked, however, is the missed
opportunities and the indirect costs of licensing.
Licensing is a very limited form of market participation. High potential
returns from marketing and manufacturing efficiencies are lost, and very
little market information is gained. Often licensing agreements prove to be
short-lived as the licensee develops the ability to become a competitor to
the licensor in all markets. Indirect costs of managing and policing the
licensing agreement are also often overlooked. There are many cases of
licensees underreporting sales and under-remitting royalty payments. The
wisdom of licensing technology depends on the status of a company's patents
in Japan, together with the degree to which the company must disclose trade
secrets to its licensee. Licensing as a route of market entry into Japan
has become increasingly unpopular with American companies in certain
industries. There is a long history of Japanese companies improving upon
American products and technologies and then exporting the improved product
back to the United States -- becoming a major competitor.
The key to success in a licensing agreement is to have a partner whose goals
coincide with your own. Indirect expenses should be anticipated, and the
contract should provide for a cross-technology exchange between licensor and
licensee. To properly manage the licensing agreement, you must have a
highly qualified individual administer the contract. This individual should
maintain close contact with the licensee and keep current on the Japanese
market by visiting Japan regularly. A carefully constructed and executed
licensing agreement can prove beneficial, but the risks and costs should be
thoroughly investigated and fully considered.
Royalties paid by the Japanese licensee to the U.S. licensor are subject to
a 20 percent withholding tax which may be reduced to 10 percent if the
necessary documentation is filed under the U.S.-Japan Tax Treaty.
According to the Foreign Exchange and Foreign Trade Control Law, foreign
companies interested in granting a license to an independent Japanese
corporation, its own wholly owned subsidiary, or joint venture corporation
in order to manufacture in Japan must notify the Ministry of Finance through
the Bank of Japan within 15 days of the execution of the licensing
agreement. However, notification must be made in advance of the execution
of the licensing agreement in those cases involving the transfer of
specially regulated and/or designated technologies, in which case a report
must be filed with the Ministry of Finance and other appropriate Japanese
Special regulations apply to the following sectors based on the U.S.-Japan
Treaty of Friendship, Commerce, and Navigation and the Code of
Liberalization of Capital Movements of the Organization for Economic
Cooperation and Development: broadcasting; telecommunications; electric
power generation; domestic rail and air transportation; arms; gun powder;
atomic energy; aircraft; space development; narcotic manufacturing; vaccine
manufacturing; security guard services; agriculture, forestry, and
fisheries; petroleum refining and marketing; leather and leather product
manufacturing; and mining.
Moreover, the Japanese Government has specified the following 12 areas as
the designated technologies which have significant influence on the security
of the nation and the interest of the national economy: aircraft, arms, gun
powder, atomic energy, space development, electronic computers, electronic
parts for electronic computers for next generation, appliances for laser
processing and light communication, innovative materials, salt electrolysis
by nonmercurial methods, petroleum production at sea bottom, and leather and
In addition to the regulations already mentioned, if the license agreement
is exclusive, extends beyond one year, and the licensee is a competitor with
a 10 percent or greater market share and/or is ranked third or higher in the
respective Japanese industry, notification must also be given to the
Japanese Fair Trade Commission.
Joint Ventures: The advantages of establishing a joint venture partnership
in Japan are greater ease in identifying and hiring local personnel and
securing immediate access to your partner's distribution system and
customers. This entry vehicle will also require your company to share
profits and control with your Japanese partner. As with selecting agents or
distributors in Japan, you must also be able to trust and communicate
comfortably with your partner. Make sure that the interests of you and your
joint venture partner coincide. A joint venture partnership involving
technology transfer agreements with a Japanese business partner with whom
you do not have confidence or with a principal competitor will probably not
be a good strategic business decision by your firm. Exporting American-made
products, as opposed to joint ventures that manufacture in Japan, helps
reduce the risk of releasing proprietary know-how that gives the U.S.
company a competitive edge. The value of your joint venture arrangement may
diminish as your Japanese partner improves on or becomes less dependent on
the technological innovations your company developed.
It is possible to set up a joint venture in Japan through an unincorporated,
contractual joint venture; acquiring stock in an existing corporation
(although this can prove to be extremely difficult unless you have the
consent of the Japanese corporation); or through the establishment of a
newly incorporated company in which the Japanese and U.S. corporations
mutually decide upon management control and the roles and responsibilities
of each party. If the joint venture is intended to last more than one year,
the joint venture agreement must be submitted to the Japanese Fair Trade
Commission for review within 30 days after its execution. In addition,
similar to establishing a branch office, the Legal Affairs Bureau of the
Ministry of Justice and the Ministry of Finance (through the Bank of Japan)
must be notified.
Direct Marketing: A relatively recent development has been the significant
growth of direct marketing in Japan. Direct marketing is becoming accepted
as an alternative sales channel for suppliers attempting to reach the
increasingly affluent Japanese consumers, while bypassing the traditional
middleman. Japan is already the world's largest door-to-door sales market,
with automobiles, cosmetics, detergents, cleaning supplies, and other home
and kitchen items enjoying substantial growth. Moreover, the demand for
shopping through the mail or by telephone has grown tremendously in Japan in
Many successful catalog sales and telemarketing companies in Japan are
leading retailers, manufacturers, wholesalers, newspaper and magazine
publishers, broadcasting stations, advertising agencies, banks, credit card
issuers, and finance companies. Retail and catalog sales are still
inseparable in the minds of both merchants and consumers. Japanese
consumers may be reluctant to try catalog shopping if the credibility or
track record of the catalog company is unknown or questionable. The
Japanese customer demands top quality for every product and is meticulous
about the packaging and condition of the package on arrival. Traditionally,
returning goods for exchange and claims is very common. That is why many
successful Japanese catalog companies have retail shops where the customer
can examine the product and return it if necessary. Since customers take
these services for granted, regardless of whether they buy at a retail shop
or through mail order, direct marketing should not be considered a perfect
escape from the Japanese distribution system and customer service.
Moreover, all cost factors such as postage, distribution, warehousing,
delivery, and personnel must be considered.
Without a well-established and well-recognized market position, it is
unrealistic for a U.S. company to expect to buy a mailing list, send an
English-language catalog directly from the United States to individual
Japanese customers, and be inundated with orders. U.S. companies aiming to
enter this market should at least be prepared to make an investment in
service functions -- a representative in Japan can act as a liaison with the
U.S. supplier to handle receipt of claims, customs clearance, public
relations, and the preparation of a Japanese-language catalog. Warehousing
and delivery can also be managed by the representative. Additional
information on direct marketing in Japan is available on the National Trade
Data Bank. An excellent publication on direct marketing overseas, with an
overview section on Japan is, U.S. Postal Service International Direct
Marketing Guide (with 1993 Addendum), published by Braddock Communications,
Inc., 1992 (Phone: 703-549-6500).
Franchising: The franchising industry has become a multibillion dollar
business in Japan. Originally developed in the fast food area, it has
expanded into a variety of new sectors. U.S. participation in the Japanese
franchising industry is highly visible under familiar names such as
McDonald's, Kentucky Fried Chicken, Mr. Donuts, Subway Sandwiches, Denny's,
and Sizzler among others.
Because successful franchises tend to depend heavily on the long-term
investment capability and marketing expertise of a Japanese partner, many
U.S. companies select a joint venture operation as the method to enter the
market. In general, the details of a master franchise agreement are not
disclosed. However, there are certain similarities among franchise
agreements. Most U.S. franchisors usually do not try to recruit actual shop
operators in Japan directly from the United States. Instead, U.S. firms
concentrate their efforts on finding a master franchisee, which is usually
either a Japanese company or a joint venture between the U.S. franchisor and
a Japanese company. In some cases, it may even be a wholly owned subsidiary
of the U.S. company. The master franchise holder is then responsible for
the actual recruitment of Japanese franchisees. Usually, the master
franchisee will provide to the U.S. company a lump-sum payment, payable over
a certain period of time, in addition to royalty payments which range from
around 1 to 5 percent of the sales. Of course, the more assistance the U.S.
company can provide, such as point-of-sale systems, the higher the
percentage. Special attention should be paid to expectation levels of both
parties to avert future problems. Terms should be formalized for
contractual rights and responsibilities, trade mark protection, and
CHOOSING YOUR METHOD OF MARKET ENTRY: If you have determined that both your
product and your company are right for the Japanese market and have done
your homework, including market research, then comes the difficult task of
market entry. Considering the unique character of the Japanese market and
the complexity of the distribution and regulatory systems, a presence in the
Japanese market is absolutely essential for new-to-market exporters. This
presence can be in the form of a representative or agent (an individual or
organization that represents you and your product, or an actual physical
presence by your firm), a representative or branch office, subsidiary, or
joint venture. Of course, our best recommendation for your firm would be to
operate and staff your own office in Japan. Having your own office would
guarantee direct control over your Japan operations and help you better
contain the costs of product marketing and distribution.
If your company is not ready to open an office in Japan, then you must find
an appropriate Japanese business partner. This partner is the organization,
company, or person with whom you will work to develop and sustain a market
presence in Japan. This partner could be an agent, representative,
importer, distributor, manufacturer, licensee, franchisee, or joint venture
partner. Your cooperation, attention to detail, and involvement will
determine their success, and yours.
Why is a Japanese intermediary or business partner even necessary? Wouldn't
it be much cheaper and more efficient to approach the end-users or retailers
directly with your product? Business in Japan is dependent on the personal
relationships within the Japanese distribution system. These relationships,
while influenced by motivations of profit, are reinforced by factors such as
reliability, trustworthiness, personal loyalties, friendships, and
tradition. Japanese end-users and retailers are very conservative in making
their buying decisions. They are not likely to switch suppliers, especially
to "unreliable" foreign ones, when they are satisfied with their present
business relationships -- even if a supplier can offer cheaper prices.
A well-respected Japanese agent/distributor/importer who has long-standing
ties in a particular Japanese distribution system would have a much easier
time finding buyers for your product. To risk-averse Japanese buyers, these
Japanese middlemen serve as insurance in guaranteeing suitability of a new
business partner and can help ensure the timely delivery of a quality
product with the appropriate level of sales support and service.
Not only do Japanese buyers often prefer to have their foreign suppliers
work through a Japanese middleman, but working through the middleman may
also be your firm's best market entry tactic. You need someone in Japan to
market and advertise your product, take orders, resolve potential delivery
problems or bottlenecks, and implement customer support and sales service.
Your partner is essential for obtaining information on Japanese regulations,
standards, and quality marks, and might also make decisively important
suggestions on product modification with respect to consumer taste. Your
partner is there to physically import the product, arrange payment, and keep
you informed of market developments. This last point is one to remember and
take advantage of. Products cycles are relatively short in Japan. What is
an advanced product or in fashion today can be outmoded and unfashionable
tomorrow. Your firm must be continuously kept aware of market trends and
product developments to remain competitive in Japan. You must have a
representative make the rounds and maintain good relations with wholesalers,
retailers, and end-users. Your partner must regularly promote your product
with these players in order for your product to receive appropriate
attention and support. Since personnel of your Japanese competitors are
visiting distributors and customers nearly everyday to emphasize their
commitment, they have an inherent advantage over your firm unless you
establish a presence in the market.
Finding the appropriate Japanese partner is a challenge. A common mistake
made by many U.S. firms is to try to use a list of importers as a means of
first contact. Fax machine or correspondence inquiries will not work in
Japan. The Japanese prefer to do business with someone only when they have
been properly introduced and meet face-to-face. You should find a respected
third party to provide a proper introduction (aisatsu) for your firm to
potential buyers of your product. Because the Japanese are so conservative
in their approach to looking at new suppliers, a persuasive endorsement
about the quality of your product, the dependability of your firm, and the
character of your staff will help open closed doors. In reality, the third
party is serving as a guarantor of the reliability of your firm as a trading
partner, and the third party introduction will help dispel reluctance on the
Japanese side. Appropriate third parties can be other Japanese firms, U.S.
companies that have successfully done business in Japan, banks, trade
associations, chambers of commerce, U.S. federal and state governments, the
Japanese Government, or other business intermediaries.
The following is a list of different methods and services to locate
potential Japanese business partners:
The Agent/Distributor Service (ADS): The U.S. Department of Commerce's ADS
is an overseas search service to identify potential agents, representatives,
or distributors for your product in the Japanese market. U.S. and Foreign
Commercial Service (US&FCS) officers in Japan prepare a customized list
identifying up to six Japanese prospects who have expressed an interest in
representing you in the market. Since the processing time at the U.S.
Embassy ranges from 30 to 45 days, you should allow for sufficient lead
time. When filing for the ADS, you should give as much information as
possible about your product and company; this is the only way US&FCS/Japan
can perform a refined search for appropriate partners. Every ADS package
should include product and company literature (preferably in Japanese) and a
sales letter. Note that illustrations or photographs of products can be
crucial in overcoming the natural resistance of some potential Japanese
business partners to reading sales information written in a foreign
language. The sales letter should start "Dear Sir/Madam" and provide
answers to the following questions, where appropriate:
(1) What is the background of your company in the United States? You should
provide information on year established, number of employees, capital,
annual sales, a reference bank, and a history of your company. Also, it
helps to know what other types of products your firm manufactures and
the markets where your company is currently exporting.
(2) Why are you interested in exporting to the Japanese market? Has your
firm already developed a marketing plan/strategy for the market? What
are your company's goals/vision for success in the Japanese market?
(3) Why would the Japanese buy your product? What separates it from the
competition or makes it unique to the market? Which aspect of your
product are you most proud?
(4) Does your company have the flexibility to alter the design, size, or
style of the product to meet Japanese standards or consumer tastes?
Modification would include metrification of products, manuals, and sales
(5) Are you prepared to translate product literature?
(6) If your firm does not manufacture the product, do you have authorization
from the manufacturer you represent to sell in Japan?
(7) Are you prepared to visit Japan to meet the company and hold further
(8) What type of business partner are you looking for in Japan (agent,
representative, distributor, manufacturer, etc.)? IMPORTANT NOTE: The
ADS does not include a search for a licensee or joint venture partner.
(9) Does your firm presently have a Japanese partner? If so, why are you
seeking a new one? Does your original partner understand that you are
seeking new arrangements? If you already have representation in Japan,
your original partner might not be happy with you looking for additional
partners, and this could lead to potentially disastrous business
conflicts (see the section titled "Replacing a Japanese Business
An introductory letter enables Japanese companies with limited English
language proficiency to quickly comprehend, direct, and process the more
detailed information contained in the literature. While it may appear as an
unnecessary formality to a company unfamiliar with the Japanese market, it
is essential for being taken seriously as an ADS applicant. Of course, it
would aid your efforts if the letter were also professionally translated
into Japanese. Finally, you need to provide a price list (f.o.b. and/or
c.i.f.). The cost of an ADS is $250 per product. Contact your local U.S.
Department of Commerce district office to initiate an ADS (see the section
titled "International Trade Administration/US&FCS District Offices" for
Many manufacturing firms have exclusive marketing agreements or their own
sales channels in Japan. If any of these manufacturers have given exclusive
distribution rights in Japan to another firm, the U.S. Department of
Commerce is precluded from performing the ADS. Sales by an unauthorized
distributor could lead to trade disputes and possible legal action.
The Gold Key Service (GKS): The GKS is a business facilitation initiative
of the U.S. Department of Commerce. It focuses on making appointments for
U.S. business executives visiting Japan. Through the GKS, the Commerce
Department can arrange up to four appointments per day for you with
potential agents, distributors, or importers that have been identified in an
Agent/Distributor Search (ADS) or by yourself. If you wish, appointments
can also be arranged with industry associations, Japanese Government
officials, and other key contacts. The appointments are set up by a
private-sector contractor. A comprehensive briefing by US&FCS/Japan is
included in the GKS basic package. This consultation will include a
briefing on the market for your product in Japan, provide you with
background information on each appointment, and alert you to developments in
your industry sector in Japan.
To initiate the GKS, send the following documents at least four weeks prior
to any meetings to be scheduled through the GKS (to arrange meaningful
appointments and organize a briefing for the user, US&FCS/Japan requires a
minimum of four weeks to prepare for the GKS):
(1) The Gold Key Service Application Form, which you may obtain from
US&FCS/Tokyo by fax (011-81-3-3589-4235).
(2) 10-15 packages of your product literature (preferably translated into
Japanese), including price lists. Each package must include an original
cover letter (addressed to "Dear Sir/Madam:") describing in detail the
purpose of your trip.
The Gold Key Service Application Form will ask for the following information:
(1) Please provide traveler's name, title, company name, address, telephone,
and fax as well as the date(s) requested for the GKS. Please also
provide the following company information: year established, size,
annual sales, and bank reference.
(2) Please describe your company and your company's main products or
(3) Please describe the products or services you wish to sell in Japan and
their uses. What special features, attributes, and advantages do they
have that distinguish them from the Japanese, U.S., and other
(4) What are your company's objectives in the Japanese market?
(5) What is the purpose of your visit to Japan?
(6) What are your objectives for requesting the Gold Key Service? What
types of business contacts are you looking for?
(7) Please identify any current representation or prior experience of your
products in Japan.
(8) What type of distribution do your products have in the United States?
(9) Please describe your current competitors in the United States and Japan.
(10) Please describe any special features of your company's operations, or
interests in Japan, that would help US&FCS/Japan in identifying
Japanese contacts for you.
(11) Please list the names of any potential agents, distributors, or
importers with whom you would like US&FCS/Japan to set up appointments
(12) Please list the names and/or types of any other companies, government
agencies, or organizations with whom you would like US&FCS/Japan to set
up appointments for you.
(13) Please rate your ability in spoken Japanese (none, basic greetings,
simple conversation, or advanced)? Will you need an interpreter
arranged for your GKS meetings?
The Commerce Department cannot always guarantee a full schedule of
appointments since the number of appointments made depends on the interest
in your company and products in the Japanese market, and the timing of your
visit. The rates for the basic GKS are 30,000 yen (approximately $270 at
110 yen/dollar) for the one-day service and 20,000 yen (approximately $180)
for the half-day service plus the 3 percent Japanese national sales tax
(Consumption Tax). Payment may be made after arrival in Japan directly to
the International Transaction Center, Ltd., in yen or by American Express,
MasterCard, Diners Club, or by VISA credit cards. The basic service rate
will be the same for Tokyo, Osaka, and Nagoya.
If you require additional services such as interpreters, translation,
secretarial support, temporary office space, meeting rooms, etc., US&FCS can
arrange these through the contractor, the International Transaction Center,
at an additional cost. Please be aware that the December 27 - January 8 New
Year's holidays, the April 24 - May 8 "Golden Week" holidays, and the August
8 - 20 "o-bon" holiday period should be avoided when traveling to Japan on
Allow five days for the materials to reach Tokyo by air courier. By
international mail, allow seven days. Send to:
US&FCS Gold Key Service
U.S. Embassy, Tokyo
1-10-5 Akasaka, Minato-ku
Tokyo 107 JAPAN
Alternatively, you may use U.S. domestic express mail (allow three days), or
U.S. domestic first-class mail (allow seven days). Send to:
Gold Key Service
U.S. Embassy, Tokyo
Unit 45004, Box 204
APO AP 96337-0001
The GKS is not a substitute for the ADS. The search and the fees are
separate. If you would like to search for potential agents or distributors
that you would like to meet as part of the GKS, you should apply for an ADS
search. This clarification is necessary to prevent confusion in
distinguishing between the ADS and GKS. Because relationships and proper
introductions are so important in Japanese business culture, the GKS can
really open doors for U.S. companies seeking contacts in Japan.
Trade Events: Trade events provide an excellent opportunity for your
company to introduce itself and its products to the Japanese market. U.S.
companies that participate in trade fairs, trade missions, and matchmaker
trade delegations in Japan can accomplish several key marketing objectives.
Making contacts with Japanese importers, distributors, and agents is an
obvious benefit. Many business partnerships have been formed through these
initial introductions. Participation would also enable your firm to gauge
the interest of the Japanese in your product, specifically by learning which
product qualities appeal most (or least). This interaction is an
opportunity to listen to suggestions on how the product can be better
adapted to the Japanese market. Many exhibitors will also use this
opportunity to publicize their local sales outlets. In addition, trade
shows will provide you an opportunity to observe the product presentation of
your competitors and assess the effectiveness of their techniques.
The U.S. Department of Commerce, including US&FCS/Japan, is actively
involved in organizing and recruiting for trade fairs in Japan, and
organizing and leading trade missions and matchmaker trade delegations to
Japan. To obtain a listing of Commerce-sponsored trade events, refer to the
Japan Country Marketing Plan (which will be replaced by the Japan Country
Commercial Guide in fiscal year 1995). Both reports are/will be made
available on the National Trade Data Bank. The Department also certifies
trade fairs in Japan organized and recruited by reputable American private
management companies. In addition, the Department recruits Japanese buyer
missions to visit private sector-organized-recruited trade fairs held in the
United States. Descriptions of various types of trade events follow:
TRADE FAIRS: Trade fairs are product or service demonstrations for a
particular industry sector or theme. When the U.S. Department of Commerce
organizes/recruits a show, it will establish a U.S. section or pavilion,
featuring American-made products and their exhibitors. Some of these trade
fairs feature only American exhibitors. The Trade Development (TD) area of
the Department's International Trade Administration (ITA), which houses
industry specialists, and the US&FCS unit of ITA are the organizers and
recruiters of Commerce trade fairs. For information on these type of
events, contact the Japan Export Information Center (JEIC) at (202) 482-2425.
If the trade fair is a Commerce Department certified event, the private
sector show organizer will establish a U.S. pavilion or offer U.S. companies
booth space amongst exhibitors from other countries. Certified trade fairs
offer U.S. companies the opportunity to participate in trade events that
have been given the official support and approval of the U.S. Department of
Commerce. For information on certified trade fairs, contact the Trade Fair
Certification Program in the Office of Export Promotion Services at (202)
TRADE MISSIONS: Trade missions to Japan often encompass meetings with
potential importers, agents or distributors, Japanese and American industry
associations/representatives, Japanese Government officials, and
US&FCS/Japan. Trade missions are sometimes scheduled to coincide with a
major trade fair of interest to the mission companies. These events not
only give a U.S. firm an opportunity to initiate business contacts with
potential importers and distributors, they also provide an ideal opportunity
to gather valuable insights while surveying the market potential for the
company's product line. ITA's Trade Development unit recruits and organizes
trade missions for Japan and other international markets. For information
on Commerce-organized-recruited trade missions to Japan, contact the JEIC at
Under the auspices of its Certified Trade Mission program, the Commerce
Department also grants official government approval for trade missions
planned, organized, and recruited by U.S. industry trade associations,
agencies of state and local governments, chambers of commerce, and other
export promotion groups. Department approval and support for these missions
is granted to applicants that agree to abide by the "Conditions of
Participation." Department support includes ongoing advice and assistance
to mission organizers; the arrangement of in-country briefings by industry
experts and US&FCS/Japan staff; setting up one-on-one business appointments
with potential agents, importers, and distributors; business receptions; and
advance mission publicity. For more information, contact the Certified
Trade Mission program in the Office of Export Promotion Services at (202)
MATCHMAKER TRADE DELEGATIONS: Matchmaker trade delegations to Japan are
custom-tailored introductory missions that bring together U.S. exporters and
potential Japanese business partners. These missions are recruited and
organized by the Office of Export Promotion Services. Individual business
appointments for U.S. companies are scheduled in advance; background checks
on prospective partners are provided; in-country market briefings are given
by industry specialists, Japanese Government officials, and the US&FCS/Japan
staff; and interpreting services are provided free of charge. For more
information, contact the Matchmaker Trade Delegation program in the Office
of Export Promotion Services at (202) 482-3119.
FOREIGN BUYER PROGRAM: U.S. trade shows that are selected for the Foreign
Buyer Program are an excellent forum for U.S. companies to introduce
themselves and their products to potential foreign business partners. The
Foreign Buyer Program, in conjunction with US&FCS posts in foreign
countries, recruits buying delegations from foreign countries to attend
prominent trade shows in the United States. US&FCS promotion efforts abroad
focus on publicizing the export interests of U.S. companies participating in
U.S. trade shows. The foreign buyer delegations are recruited by travel
agents who work closely with US&FCS trade specialists in planning and
organizing the trip. US&FCS trade specialists accompany the Foreign Buyer
Program groups to the United States as expert advisors and interpreters.
They also make the necessary arrangements to provide export counseling for
U.S. exhibitors, translation assistance for buyers and exhibitors,
comprehensive postings of the business interests of foreign buyers, and
conference rooms for private business meetings. For more information,
contact the Foreign Buyer Program in the Office of Export Promotion Services
at (202) 482-0481.
THE U.S. TRADE CENTER: US&FCS/Japan operates an exhibition facility called
the U.S. Trade Center, located in the World Import Mart, Sunshine City
Complex, Ikebukuro, Tokyo. The U.S. Trade Center is available to American
firms and their Japanese representatives who wish to actively promote their
products and services in the Japanese market. Its modern facility,
accessibility, and professional staff make the U.S. Trade Center highly
favored by both American and Japanese business executives, and it is ideal
for single or multi-company exhibitions, seminars, technical product
demonstrations, conferences, receptions, and other promotional events.
Other services to assist your efforts are also available. For more
U.S. Trade Center MAILING ADDRESS:
7th Floor, World Import Mart U.S. Trade Center
3-1-3 Higashi-Ikebukuro, c/o U.S. Embassy, Tokyo
Toshima-ku Unit 45004, Box 229
Tokyo 170 JAPAN APO AP 96337-5004
OTHER TRADE EVENTS: There are many trade events in Japan that do not have
any official U.S. Department of Commerce involvement. Many of these events
are large, reputable trade shows well-known within their respective
industries. However, some trade events are not always what they purport to
be, and some exhibitors have incurred significant financial losses as a
result. As a word of warning, any individual or company considering
participation in a trade fair that does not have U.S. Department of Commerce
involvement or support should check the credentials of the show organizer.
This investigation may be accomplished by asking your U.S. industry
association if they or other companies in the association are familiar with
the show organizer or the specific trade show. If your association and its
member companies are unfamiliar with the show or show organizer, then your
firm should ask the show organizer for contact information on U.S.
exhibitors who have participated in the organizer's previous trade fairs.
You should then contact these exhibitors and ask their opinion of the show
To obtain a listing of the major trade fairs held in Japan (only some of
these events will have official U.S. Department of Commerce involvement),
contact any of the seven Japan External Trade Organization (JETRO) offices
in the United States (see "The Japanese Government" section of this
publication for contact information). JETRO publishes a guide titled List
of Trade Fairs in Japan. In addition, the Japan National Tourist
Organization also publishes a periodic guide titled Exhibitions and Events
in Japan. It can be obtained free of charge through the Japan National
Tourist Organization. The number for the New York Office is (212) 757-5640.
TRADE FAIR PRESENTATIONS: U.S. exhibitors at trade fairs should prepare
their booth displays and product presentations to convey an image of
quality. Japanese consumers place much importance on the packaging and
presentation of products. A product that is not carefully presented in a
well-designed package or booth may lead the Japanese consumer to believe
that the exhibited product is not high quality. A Japanese buyer is also
likely to think that a company which does not bother to present its product
in an appealing fashion could not be that concerned with servicing the
Another consideration when preparing product displays at trade fairs is the
competition for the attention of visitors. Companies that most successfully
attract visitors to their booths are those that create interactive,
elaborate booth displays. Displays that involve participatory activities
gain the attention of visitors who might otherwise have bypassed the display.
Visitors to your booth will be interested in gathering brochures and other
literature on your company and products. It is very important that this
information be in Japanese. To many, this point is obvious, but despite
investing the time and money to attend the trade show, some U.S. companies
still do not translate their product literature. For products that need a
clear definition of their unique characteristics, leaving the literature in
English will negatively impact a company's success rate in attracting
potential Japanese importers and distributors.
Other U.S. Department of Commerce Programs: While these other Commerce
Department programs may be more economical for your firm in finding
potential Japanese business partners, they will not provide the critical
introduction by a respected third party. Nevertheless, these options do
provide a less expensive route in determining whether or not there is
interest in your product.
THE FOREIGN TRADERS INDEX (FTI): The FTI is a list of over 50,000 foreign
companies interested in doing business with U.S. firms. The list is
compiled by US&FCS officers at U.S. embassies around the world. The FTI
includes agents, importers, manufacturers, retailers, wholesalers,
distributors, licensing partners, advertising agencies, service companies,
marketing firms, banks, and trading companies. The database provides U.S.
exporters with names, addresses, products handled, company size, and other
relevant information. The FTI is available to the public on the National
Trade Data Bank.
TRADE OPPORTUNITIES PROGRAM (TOP): TOP provides U.S. companies with current
sales leads from foreign firms seeking to buy or represent products and
services. TOP leads are printed daily in The Journal of Commerce, a
privately produced trade and transportation newspaper that publishes news
and analysis on international trade (Phone: 1-800-221-3777). TOP leads are
also distributed electronically via the Department of Commerce Economic
THE ECONOMIC BULLETIN BOARD (EBB): The EBB, a personal computer-based
electronic bulletin board, is an on-line source for trade leads as well as
for the latest statistical releases from the Bureau of the Census, the
Bureau of Economic Analysis, the Bureau of Labor Statistics, the Federal
Reserve Board, and other federal agencies. Also available on the EBB are
the latest International Market Insight (IMI) reports from US&FCS/Japan.
Subscribers to the 300/1200/2400 bps EBB pay an annual registration fee of
$35, which includes a $12 credit for access time to the system. Continued
access is billed quarterly at $0.20 per minute between 8 a.m. and 12 noon
EST, $0.15 per minute between noon and 6 p.m. EST, and $0.05 per minute at
all other times and on weekends and holidays. Subscribers to the 9600 bps
EBB pay an annual registration fee of $100, and all access time is billed
quarterly at $0.50 per minute at all times. The EBB is also available
Contact EBB staff at (202) 482-1986 or try the EBB as a guest user by
dialing (202) 482-3870 with your personal computer and modem (8 bit words,
no parity, 1 stop bit).
THE ECONOMIC BULLETIN BOARD/FAX: Use your fax machine to receive trade
leads and the latest trade and economic information from the Federal
Government. No subscription fees are required. Access EBB/FAX by dialing
1-900-RUN-A-FAX (1-900-786-2329) from your fax machine. The charge is $0.65
per minute. For more information contact EBB/FAX at (202) 482-1986.
JAPANESE GOVERNMENT TENDER ANNOUNCEMENTS: Japanese Government entities are
interested in purchasing a wide range of goods from telecommunications
equipment, computer equipment, and scientific and testing instruments to
other, less sophisticated products and supplies.
All Japanese Government tender documents are in Japanese. In most cases,
English documents are not available, and English is not acceptable when
submitting tender documents [Nippon Telegraph and Telephone (NTT) tenders
are exceptions in that they may be submitted in English]. To facilitate
information gathering and applications for tender documents, you should
appoint a local agent or representative (local representation, though not
mandatory, is strongly recommended because of short deadlines and the
necessity to submit bids and other documentation in Japanese). Chances of
successfully bidding on these tenders without some representation in Japan
are very limited. Prospective bidders for government procurement must also
be pre-qualified by the government agency to whom they wish to sell, and
they must pursue the tender under competitive bidding practices.
Some Japanese Government entities utilize lists of qualified suppliers -- a
selective tendering system. From December to February every year, an
announcement for qualification screening will appear in the official
Japanese Government gazette, the Kampo, with information on procedures and
criteria for becoming a pre-qualified bidder for a particular agency. To
become a qualified supplier, firms and/or their agents must apply for
qualification screening. Each agency specifies in the Kampo an open period
prior to the beginning of the Japanese fiscal year, which starts April 1
(most firms apply in January or February) for receipt of the applications.
If a company misses this open period, applications for the qualification
screening may still be submitted. However, in such a case, the validity
term will be from the date when qualification is given to March 31 of the
year given by the announcing agency.
Specific tender notices are published in the Kampo at various times,
generally 50 days prior to the time of bid. Under the provisions of the
Procurement Code of the General Agreement on Tariffs and Trade (GATT),
foreign companies are permitted to bid on specific invitations prior to
qualification provided there is sufficient time to complete the
To assist firms competing for Japanese Government procurement contracts, the
U.S. Department of Commerce has extended its Trade Opportunities Program to
disseminate summaries of translated tender announcements on the Electronic
Bulletin Board. Tender announcements also appear in the Commerce Business
Daily on a regular basis, which is a daily listing of U.S. Government
procurement invitations, contract awards, subcontracting leads, sales of
surplus property, and foreign business opportunities (for a sample copy,
call 202-482-0632). Commerce Business Daily is available in electronic form
on Compuserve and on GENIE's Air Force Forum. U.S. Department of Commerce
district offices can also assist potential U.S. bidders by identifying firms
that provide translation services.
The U.S. Embassy in Tokyo does not purchase Japanese Government tender
documents on behalf of individual U.S. firms nor does the embassy process
Japanese Government tenders on behalf of U.S. firms. All documents and all
qualifying bids and contracts must be prepared in Japanese and sent by U.S.
firms directly to applicable Japanese Government agencies. Suppliers who
are not prequalified or in the prequalification process are not eligible to
request bid solicitations. Under no circumstances should unqualified
suppliers make a request in English for bid documents.
You can contact the appropriate Japanese Government ministry through your
agent or representative in Japan. If you do not have a partner in Japan,
the following companies may be of assistance:
Mr. Robert F. Connelly Mr. William R. Connelly
Procurement Services Int'l K.K. Procurement Services Int'l, Asahi
Sanbancho Plaza #206 USA, Inc.
7-1 Sanban-cho, Chiyoda-ku 4182 Ulyses Way
Tokyo 102 JAPAN Golden, CO 80403
Phone: 011-81-3-3234-6921 Phone: (303) 898-4769
Fax: 011-81-3-3234-6915 Fax: (303) 277-9419
Mr. Kiyoshi Tsukada Mr. Noboru Kaneyasu
Chief, YDB Division Fuji Chimera Research
Yano Research Institute, Ltd. Institute, Inc.
POLA Ebisu Building FK Bldg., 2-5 Nihonbashi
3-9-19 Higashi, Shibuya-ku Kodenma-cho, Chuo-ku
Tokyo 150 JAPAN Tokyo 103 JAPAN
Phone: 011-81-3-5485-4616 Phone: 011-81-3-3664-5815
Fax: 011-81-3-5485-4681 Fax: 011-81-3-3661-5134
Mr. Y. Watanabe Mrs. Mie Teno
Vice President Managing Director
Fujikasei Co., Ltd. Deltapoint International Ltd.
Takasago Building 8F KB-6 Bldg. 6, Sanbancho
1-13-16 Awaza, Nishi-ku Chiyoda-ku
Osaka 550 JAPAN Tokyo 102 JAPAN
Phone: 011-81-6-532-7431 Phone: 011-81-3-3221-1751
Fax: 011-81-6-532-7435 Fax: 011-81-3-3221-1753
Gateway Japan, in a cooperative venture with Procurement Services
International (PSI) in Tokyo, can provide your firm with daily tender
announcements (detailed summaries in English that identify contracting
agencies, technical standards, bid deadlines, and other key information),
prior award information, including contract size and contract recipient, and
additional business support information. Contact:
National Planning Association
1424 16th Street, N.W.
Washington, DC 20036
Phone: (202) 265-7685
Fax: (202) 797-5516
Note: The U.S. Department of Commerce does not officially endorse these
The following two publications on Japanese Government procurement may also
Questions and Answers on Government Procurement Contracts: Guide to the
Government Procurement Market of Japan. Japanese Ministry of Foreign
Affairs, April 1993. (Contact: First International Organizations Division,
Economic Affairs Bureau, Ministry of Foreign Affairs, Kasumigaseki 2-2-1,
Chiyoda-ku, Tokyo 100, JAPAN. Phone: 011-81-3-3580-3311 ext. 2536. Fax:
Ministry of Posts and Telecommunications Procurement Guide, 3rd edition.
Japanese Ministry of Posts and Telecommunications, 1990. (Contact:
Supplies Department, Minister's Secretariat, Ministry of Posts and
Telecommunications, 1-3-2 Kasumigaseki, Chiyoda-ku, Tokyo 100, JAPAN.
Phone: 011-81-3-3504-4241. Fax: 011-81-3-3580-6499.
More information on Japanese Government tender announcements can be obtained
from the report Japanese Government Procurement Statistics, available on the
National Trade Data Bank.
COMMERCIAL NEWS USA: This U.S. Department of Commerce catalog-magazine is
published ten times a year by US&FCS to promote U.S. products and services
in overseas markets. Commercial News USA is disseminated in paper copy to
125,000 business readers via U.S. embassies and consulates in 141 countries,
and to more than 650,000 private-sector and foreign government electronic
bulletin board users in 18 countries. Selected portions are also reprinted
in newsletters that are tailored in content and language to the individual
country and distributed to potential buyers, agents, American Chambers of
Commerce abroad, and other multipliers. U.S. firms can have their products
or services highlighted for a fee that varies by the size of the listing.
To obtain more information, call your local Commerce Department district
office or Commercial News USA staff at (202) 482-4918.
USA-Japan Trade Expansion Center: The USA-Japan Trade Expansion Center,
which began operation in July 1992, was conceived in 1987 by a joint
committee of Japanese Diet members and U.S. Congressmen. The center's main
purpose is to increase opportunities for American small and medium-sized
businesses to export their products and services to Japan. The center is
operated and administered by the Florida Small Business Development Center
Network out of the University of West Florida and the U.S. Foundation for
International Economic Policy (headquartered in Washington, DC), but will
service the entire country through 800 Small Business Development Centers
within the United States. The Japan office is located in Osaka, in the
Kansai region. The center offers the following services to U.S. businesses:
(1) In-depth international trade counseling and skills training as well as
(2) Skills training in "How to do business with Japan."
(3) Translation services in Japan and the United States, as well as
providing administrative support to those firms visiting Japan.
(4) Access to basic market data, expert international trade resources, and
(5) Matchmaker conferences and trade missions.
(6) Assistance in developing individual/industry business videos and product
(7) Trade leads in Japan.
(8) Temporary office space in Japan.
Funding for this project is provided by the Japanese Ministry of
International Trade and Industry with matching funds supplied by the U.S.
Small Business Administration. For more information, contact Ms. Teri
Silvestri at (904) 444-2060 or Mr. Quentin Wilson at (314) 721-5194.
State Representative Offices in Japan: Many U.S. states have their own
representative office in Japan. For a list of state offices in Japan, see
the US&FCS Japan Services Guide, which is available on the National Trade
Data Bank (NTDB). State offices are designed to promote exports from and
encourage investment in their respective states. You should contact your
state government in order to determine what assistance it can provide to
your firm. Your state's representative office in Japan will usually be
connected with your state's office of international trade, department of
commerce, economic development division, or a similar organization. A
listing of these organizations with appropriate contact information is
available on the NTDB.
Industry/Trade Associations: If you are a member of an association, you
should contact it to determine what assistance or information on exporting
to Japan it may have. International departments that focus on promoting
trade can provide information on marketing; testing, standards, and
certification; and intellectual property protection. Members of the
association serve as excellent sources of information and may be able to
introduce your company to a potential partner in Japan. Some U.S.
associations with offices in Japan include the American Electronics
Association, the American Hardwood Export Council, the American Plywood
Association, the Motion Picture Association of America, the Pharmaceutical
Manufacturers Association, the U.S. Semiconductor Industry Association, the
U.S. Automotive Parts Industry, and the Western Wood Products Association.
Your association may also have a good working relationship with a Japanese
industry or trade association. There is a Japanese industry or trade
association for almost every product sector. Japanese associations are
powerful players in Japan's economy. The associations exert a tremendous
amount of influence over their respective industries. In terms of
development of industry standards to regulate both quality and safety, the
associations work intimately with their governing ministry to ensure both
political and industry objectives are met. These close ties originate from
the early 1950s and 1960s when the associations were created by the
ministries and are cemented in the practice of "amakudari" where retiring
government officials are given choice positions in the association
Joining a Japanese association in your product sector could be a tremendous
advantage, especially in terms of having a highly respected ally providing
recommendations to Japanese firms on the character of your company and the
quality of your product. Obtaining industry-specific information is also a
payback. However, Japanese associations tend to be protective of their
membership. Your firm should realize that these members are potential
competitors and that your interests may collide with theirs.
Export Trading/Management Companies: Export trading and management
companies are American, Japanese, or other foreign trade intermediaries or
middlemen that provide clients with a variety of services. Each trading
company is unique in the combination of services it offers and the products
it handles. Some trade intermediaries deal in a wide range of trade
facilitation services while others specialize in a few. Such services can
include advertising and promotion; consolidating shipments from a number of
suppliers to lower freight rates; preparing customs documentation; finding
suitable distributors and interested overseas buyers; providing credit
checks on overseas traders and buyers; market research; translation; and
taking title to the goods.
The major Japanese trading companies (sogo shosha) are the overseas vanguard
of the Japanese economy and account for a substantial portion of Japan's
exports and imports. The nine largest sogo shosha are Itochu, Sumitomo,
Marubeni, Mitsui, Mitsubishi, Nissho Iwai, Tomen, Nichimen, and Kanematsu.
Each sogo shosha is one element of a keiretsu. Most have manufacturing
subsidiaries or affiliates and serve as conduits for technology transfer
through licensing agreements. Sogo shosha deal with thousands of products,
ranging from high technology equipment to basic agricultural goods, although
a significant portion of their trade involves bulk items such as
agricultural products, industrial materials, textiles, and equipment for
Sogo shosha act as trade intermediaries between buyers and sellers at all
stages of product and trade flow -- from raw material extraction, through
production and distribution, to the end-user. They are willing to play
whatever role is necessary to make the project or transaction work -- trade
catalyst, joint partner, consortia organizer, and supporter of major project
management. The combination and scale of the activities of these trading
companies throughout the world set them apart from almost all other types of
commercial organizations. They perform functions that in the United States
would be performed separately by import/export companies, freight
forwarders, banks, law firms, accounting firms, and business consultants.
Sogo shosha have vast communication networks and have an extensive presence
in most foreign markets.
It is not unusual that much of a sogo shosha's assets are committed to
financing suppliers and customers. Sogo shosha derive financial strength
from their keiretsu's bank (often a major stockholder). Bank loans are used
to acquire or establish firms to obtain a production base or enter resource
development. The sogo shosha also reloan funds to clients.
Japan has more than 6,000 trading companies. Japanese trading companies
also include many small, specialized firms (senmon shosha) that represent
the primary Japanese equivalent to U.S. trade intermediaries. These smaller
firms limit themselves to a narrow range of products and handle most phases
of the product's journey through customs to the end-user. They often can
provide greater assistance for products that require after-sales service
such as electronic instruments and medical equipment.
The third distinctive type of trading company is the captive type, which is
owned by a Japanese manufacturer and performs the foreign trade function for
that manufacturer. A captive trading company is of primary interest to
those U.S. exporters who wish to export to a specific Japanese company.
The choice between using a Japanese or an American trading company should be
based on informed knowledge of the market and the ability of the firm to
effectively represent and market your product. In considering an export
intermediary, your firm must determine whether or not the company has the
appropriate knowledge and experience doing business in the Japanese market.
Your firm must also be careful about using large Japanese trading
companies. You must evaluate the importance of your business to the
Japanese company. If the Japanese trading company deals in hundreds of
millions of dollars of merchandise and your Japan sales amount to one or two
million dollars per year, your Japanese trading company most likely will not
devote a substantial amount of time and energy needed for successfully
developing the Japanese market for your company. In addition, personnel
from the major trading companies tend to be generalists, lacking specific
industry knowledge or experience. Many Japanese trading companies serve as
commercial intelligence collectors for their keiretsu, which may include
your chief competitor in all markets. Your firm needs to make sure that
your company has established a trusting relationship with the Japanese
trading company before divulging any trade secrets or proprietary
The Office of Export Trading Company Affairs within the International Trade
Administration of the U.S. Department of Commerce (1) promotes the formation
and use of American export trading companies and export management
companies, (2) offers information and counseling to businesses and trade
associations regarding the U.S. export intermediary industry, and (3)
administers the Export Trade Certificate of Review program, which provides
limited antitrust protection to U.S. firms for joint export activities. The
office manages The Export Yellow Pages, which is a directory of U.S. export
trading companies, banks, and service organizations. To register your
company in this free directory, contact the Office of Export Trading Company
Affairs at (202) 482-5131.
The American Chamber of Commerce in Japan (ACCJ): Founded in 1948, the ACCJ
has actively sought to promote the development of commerce between the
United States and Japan. The ACCJ works with business and government
organizations in Japan and the United States to exchange ideas and opinions
and seek resolution of problems and issues affecting the bilateral
relationship. The ACCJ performs two important functions for its members:
(1) it apprises them of the unique market conditions they will confront
while conducting business in Japan and (2) where possible, assists them in
solving difficulties members encounter. Residing in Japan is not a
requirement for membership.
The ACCJ produces several excellent publications, including the 1991 study,
Trade and Investment in Japan: The Current Environment. Besides providing
an evaluation of the current structural economic environment in Japan, this
study also identifies key factors for those American companies that have
succeeded in Japan, with the idea that their approaches and experiences
could be used in guiding others in the development of future strategies for
Japanese market entry or expansion. See the "Relevant Publications" section
for other ACCJ publications. For more information, contact:
The American Chamber of Commerce in Japan
Fukide Building No. 2
4-1-21 Toranomon, Minato-ku
Tokyo 105 JAPAN
Japan Chamber of Commerce and Industry (JCCI): The JCCI publishes a trade
directory, the Standard Trade Index of Japan (see "Relevant Publications"),
and many of the regional chambers of commerce and industry in Japan publish
trade opportunities or bulletins listing foreign products and companies.
The Osaka Chamber of Commerce and Industry (OCCI) and several municipal and
business groups sponsor the annual Global Business Opportunities Convention
(G-BOC), which is held in Osaka, Japan. G-BOC provides an opportunity for
your company to be introduced to potential Japanese business partners.
American companies can contact the OCCI for additional information on G-BOC:
2-2 Marunouchi 3-chome 2-8 Hommachibashi
Tokyo 100 JAPAN Osaka 540 JAPAN
Phone: 011-81-3-3283-7854 Phone: 011-81-6-944-6403
Fax: 011-81-3-3216-6497 Fax: 011-81-6 944-6409
Japanese Department/Chain Stores: Department stores in Japan typically
carry thousands of items ranging from consumer electronics to gourmet foods
with supplying wholesalers numbering in the hundreds. Japanese
department/chain stores tend to be very conservative when it comes to buying
decisions. Hit hard by the recession, these risk-adverse retailers are
reluctant to take on any new product line unless they are convinced that it
has above-average sales potential in the Japanese market.
Japanese department/chain stores prefer to deal through "reliable" business
partners (i.e., Japanese trading companies, wholesalers, or manufacturers)
with which they have an established relationship. Most Japanese department
stores buy merchandise on a consignment basis and return unsold goods to
suppliers. This practice enables the department stores to minimize overhead
and inventories at the expense of suppliers. It is also not unusual for the
Japanese trading company, wholesaler, or manufacturer to provide sales
staff, customer service and product support, and advertising for the product
line. In effect, the supplier becomes a tenant of the department store.
Some Japanese stores are establishing central purchasing offices, and some
of the large superstore and department store chains have direct buying
offices in the United States. Unless your product is unique in some manner
and you have been properly introduced by an appropriate third party,
Japanese stores may not be very receptive to your offers. Some Japanese
department stores with buying offices in the United States are:
Daimaru, Inc. Hankyu, Inc.
19401 South Vermont Avenue 2951 28th Street
Suite A-204 Suite 3010
Torrance, CA 90502 Santa Monica, CA 90405
Phone: (310) 516-9716 Phone: (310) 396-8710
Fax: (310) 516-9578 Fax: (310) 396-3026
Isetan of America, Inc. Matsuzakaya America, Inc.
666 5th Avenue, 12th Floor 460 East 3rd Street
New York, NY 10103 Los Angeles, CA 90013
Phone: (212) 767-0300 Phone: (213) 626-0133
Fax: (212) 767-0307 Fax: (213) 626-7936
Mitsukoshi, Inc. Takashimaya, Inc.
465 Park Avenue 693 Fifth Avenue
New York, NY 10019 New York, NY 10022
Phone: (212) 753-5580 Phone: (212) 350-0100
Fax: (212) 355-7161 Fax: (212) 350-0192
Three of the largest department stores in Japan, Seibu, Marui, and Tokyu, do
not have buying offices in the United States.
Japanese Government Programs: In recent years, the Japanese Government has
implemented a number of programs to assist foreign companies seeking to
export to Japan. These programs represent Japan's response to the concerns
voiced by foreign governments dissatisfied with Japan's persistent global
merchandise trade surplus (for more information, see the section titled
"Japanese Import Promotion Measures"). The programs can offer some
assistance to American exporters. The primary agent of the Japanese
Government for trade promotion activities is the Japan External Trade
Organization (JETRO). At the very least, you should obtain JETRO
publications list of available market research reports and other helpful
trade-related materials. A review of JETRO's activities, programs, and
publications is provided in the JETRO Import Promotion Activities 1990-1993
Progress Report. A more detailed description of JETRO and a list of its
offices here in the United States is covered under "The Japanese Government"
section of this publication. JETRO services that can help you find business
IMPORT PROMOTION CENTERS: Each of the nine new Import Promotion Centers
will consist of three functional spaces:
(1) Antenna Shop: These test marketing booths will display and market
new-to-market foreign goods which are deemed to have the highest
potential for success in the Japanese market.
(2) Event Space: Designed for exhibitions, trade fairs, and other events
aimed at promoting imports and enhancing sister-city relationships,
these spaces will showcase products identified by JETRO and foreign
trade organizations as possessing strong potential in the Japanese
(3) Information Space: Staffed by JETRO advisors, this area will provide
Japanese consumers with information and data on direct imports, import
availability, and other import-related information.
The JETRO Import Promotion Centers are now open in Osaka, Yokohama, Sapporo,
Sendai, Nagoya, Hiroshima, Takamatsu, and Fukuoka. Another Import Promotion
Center will be opened in Kobe. Most of the cost of the services will be
borne by JETRO, with the users paying for such items as insurance and
JETRO BUSINESS SUPPORT CENTERS (BSC): The JETRO BSCs provide American
companies that are making their initial approach to the Japanese market with
free temporary office space in Japan and business facilitation services.
Features include office space, a Help Desk, a business library, linkup with
JETRO databases, and business meeting space. The Help Desks are comprised
of JETRO advisors and staff. These market experts will be readily available
(1) Provide information on product markets and import procedures.
(2) Offer advice on market strategy and avoiding or solving problems that
your company may face in Japan.
(3) Compile a list of business contacts and assist with making appointments.
(4) Recommend outside companies to provide interpreters, secretaries, and
other fee-based services.
The Tokyo BSC was opened in March 1993 and others will soon open in Kobe,
Osaka, Nagoya, and Yokohama. Before arriving in Japan, successful
applicants authorized to use the BSC will be assigned a primary advisor and
are required to communicate with that advisor to obtain contacts, arrange
business appointments, and otherwise prepare to make their stay as
productive as possible. The length of stay can range from two weeks to two
months. JETRO will determine the actual authorized length of stay based on
the applicant's qualifications and space available at the time of the
IMPORT PROMOTION CENTERS WITH BUSINESS SUPPORT FUNCTIONS: In this program,
the services offered at JETRO's Import Promotion Centers will be combined
with the services of the Business Support Centers (BSC), with the result
being comprehensive centers for foreign businesses to begin or expand their
exports to Japan. Import Promotion Centers with Business Support Functions
will be opened in Kobe, Osaka, Nagoya, and Yokohama.
JETRO POTENTIAL IMPORTER DATABASE: Created to help foreign exporters find
Japanese importers, the Potential Importer Database identifies Japanese
companies and the merchandise they want to import. Its data are accessible
from each of JETRO's seven U.S. offices. Updated regularly, the database
now contains 11,000 contacts. JETRO also distributes contact lists through
JETRO POTENTIAL EXPORTER DATABASE: Created to help Japanese importers find
foreign exporters, the Potential Exporter Database provides the names of
U.S. companies interested in exporting to Japan with full product
descriptions. This on-line NEC computer database is available for use by
Japanese importers at JETRO's Local Internationalization Centers in 51
locations throughout Japan. To take advantage of this database, your firm
needs to complete the required forms and return them to one of the JETRO
offices in the United States for forwarding to Tokyo.
JETRO EXPORT TO JAPAN STUDY PROGRAM: Since 1990, JETRO has been hosting the
"Export to Japan Study Program," inviting business people to Japan in order
to gain a firsthand understanding of the Japanese market, as well as to
develop business contacts and opportunities.
The first half of this ten-day program is focused on lectures and case
studies. The second half concentrates on the initial marketing of products
that participants want to export to Japan. As part of the program, JETRO
assists in making the necessary contacts with potential importers. JETRO
also provides a round-trip airline ticket, accommodation during the
participants' stay in Japan, and arrangements for any program-related
activities in Japan.
JETRO IMPORT PUBLICATIONS: JETRO produces and disseminates several
publications in Japanese in which your firm can advertise your product. For
more information, contact the JETRO office nearest you.
Special Note on Importer Databases and Lists: Cold calling, faxes, and
letters to prospective Japanese customers have never had a high success rate
in Japan; however, there are always exceptions to the rule. If you wish to
pursue this method, we suggest the following:
(1) Prepare product brochures, a cover letter clearly expressing your
objectives, and a business reply form. All should be in Japanese.
(2) If a Japanese firm expresses interest, begin regular correspondence.
(3) If the Japanese company expresses continued interest and seems
qualified to represent you in Japan, then plan a visit to Japan to meet
the firm's executive staff.
ATTRACTING A JAPANESE BUSINESS PARTNER: To attract a Japanese business
partner, your company must first present an image of company dependability,
demonstrate superior product quality and price competitiveness, prove its
commitment to the market, and build personal relationships with potential
business partners. Concentrate on building your company's image in Japan by
ensuring that everything that your company does radiates an image of quality
and appears well-managed. If the Japanese feel that your company is not a
quality organization, they will make negative assumptions about the
dependability of your firm and the quality of your product. Developing a
well-planned market strategy and demonstrating that you have researched the
market can help avert these suspicions. A high-quality brochure in Japanese
on your company and product, and promptly responding to all inquiries from
Japan in a professional and timely fashion, will go far in proving your
worth as a business partner.
Second, your firm must demonstrate that your product is superior to domestic
and foreign competition by some unique feature, quality, or price. Remember
to make price comparisons at the end of the distribution chain, not just
c.i.f. Since packaging and product presentation are also very important in
Japan, do not overlook these aspects when showing your product.
Third, make it known to your potential partners that you are committed to
the market and looking at Japan for the long term, not just for spot sales.
They should know that you are willing to work hard and closely with them to
make sure that your mutual efforts will be successful. Show the Japanese
your willingness to adapt your product and marketing methods to the unique
characteristics of their market and make arrangements for sales service.
When you have selected a partner, be sure to work with him or her and share
responsibility for all aspects of the export effort (advertising, marketing,
sales service, etc.). Let your partner know that your business in Japan is
as important as your business in the United States.
Finally, build personal relationships or friendships with your potential
partners. In order to accomplish this, you must be in constant contact.
Communication is crucial. Daily contact, by fax or phone, is not unheard of
and regular visits to Japan are a must. You should invite your potential
partner to visit your business operations in the United States and spend a
certain amount of leisure time eating and socializing together. Often, the
most critical business decisions will not be made at the conference table at
your first meeting, but only after the Japanese have had an opportunity to
examine your character and personal integrity during informal settings.
The pattern of close business relationships between Japanese parts suppliers
and manufacturers allows development of new products to progress from the
design stage on, significantly reducing development costs by sharing
technology. If you are a component parts supplier, it would greatly benefit
your company to have your product engineers/designers work with your
potential Japanese counterparts over the long term and develop a permanent
relationship at the working level.
CHOOSING A JAPANESE BUSINESS PARTNER: Establishing a presence in Japan is
the best mechanism for your firm to penetrate the market. If this is not
possible, then selecting an appropriate Japanese business partner becomes
the most important factor in determining your success in the market. Most
American companies with quality products that have failed in Japan have done
so because they picked the wrong Japanese business partner or the
relationship soured between the two parties. You should be as selective in
choosing your Japanese business partner as your partner will be in choosing
you. Conducting background checks are extremely important, but as with
business anywhere, they can never guarantee that your potential business
partner will work for your best interests. Your firm must decide if you can
work with your potential partner effectively. You should feel good about
the relationship and trust your partner before cementing an agreement. If
not, you should continue your search.
Your export business should be important to your Japanese partner, and the
partner should devote enough attention to the product to strengthen your
market position. Very few potential agents or distributors will have the
courage to challenge major competitors and go after the mass market. Try to
avoid the representative or distributor that targets limited, high-price
niches, whether in industrial or consumer products, and rarely gives U.S.
exporters what they truly want -- volume sales. The following is a 12-point
checklist to guide you in choosing a trading partner in Japan:
(1) Does your prospective partner have knowledge and expertise in your
product area, including information on market trends and the
(2) Does your partner have a thorough understanding of Japanese
regulations, standards, quality marks, and certification systems that
might affect your product?
(3) Can you use the distribution network that your partner owns? What
geographic coverage can your partner provide? Can the product be
delivered outside of the major cities?
(4) What is the quality of your partner's employees, and what team will be
working for you?
(5) What is the size of the sales force, and what percentage of the
partner's time will your product receive?
(6) What is your partner's corporate culture? Are you the partner's first
experience with an international company?
(7) How does your partner handle strategic planning? Has a thorough
analysis been done to determine what it will cost to handle your product?
(8) How is your partner positioned in the marketplace and what are your
partner's long-term goals? Are these compatible with yours?
(9) What is your partner's attitude toward advertising and promotion? Have
you found a savvy marketer?
(10) Is there a conflict of interest between your product and your partner's
product or does your product complement your potential partner's
existing product line?
(11) Do you have support from the senior management of the Japanese company
and are they accessible to you?
(12) Does the contract provide adequate intellectual property protection for
Ask questions. Determine if your potential partner has a compatible
motivation for handling your products, and common goals as far as market
penetration and strategy are concerned. Some American companies make the
mistake of selecting a Japanese business partner who is in fact their chief
competitor in the market or who has a relationship with their chief
competitor. Your firm must research your potential partner and analyze the
potential partner's business background before you enter into any
agreement. In fact, Japanese competitors may approach you with an offer for
exclusive representation. In this way, they can lock you out of the market
by controlling your accessibility to sales channels. Your Japanese
competitor would then also benefit by obtaining vital information on your
company's products. One publication that can help identify potential
conflicts of interest is a Dodwell Marketing Consultants publication titled
Industrial Groupings in Japan: The Anatomy of the "Keiretsu" (10th Edition,
1992/93). Moreover, it is always a good idea to obtain customized
background information on your potential business partner. Credit reporting
agencies with an office in Japan are a good source of information. Five
such credit reporting agencies that have expressed an interest to
US&FCS/Japan in having U.S. firms employ their services (and other services
Consumer Credit Clearance, Inc. Dun & Bradstreet Business
Kihoh Building, 2-2 Kojimachi, Information Services K.K.
Chiyoda-ku 4-17-30, Nishi Azabu, Minato-ku
Tokyo 102 JAPAN Tokyo 106 JAPAN
Phone: 011-81-3-3222-0490 Phone: 011-81-3-5485-0451
Fax: 011-81-3-3222-5869 Fax: 011-81-3-5485-0646
(credit reporting, (credit reports, business
collection services) marketing services, collections)
Teikoku Databank America, Inc. Tohmatsu & Company
(New York Office) MS Shibaura Building
750 Lexington Avenue 4-13-23, Shibaura, Minato-ku
28th Floor Tokyo 108 JAPAN
New York, NY 10022 Phone: 011-81-3-3457-7321
Phone: (212) 486-2637 Fax: 011-81-3-3457-1695
Fax: (212) 486-2638 (accounting firm, business
(credit research, database) consulting services)
Tokyo Shoko Research, Ltd.
1-9-6, Shinbashi, Minato-ku
Tokyo 105 JAPAN
A U.S. Department of Commerce service that could also assist your company is
the World Traders Data Report (WTDR). For a $100 fee, commercial officers
in the U.S. Embassy in Japan will prepare customized evaluations on your
potential trading partners. Commercial staff check the firm's standing in
the local business community, creditworthiness, and overall reliability and
suitability as a trade contact. Your firm should allow 30 days for
preparation. Contact your local Department of Commerce district office for
more information or to implement the service.
Once you begin selling your product through a Japanese partner, your partner
will usually consider itself your exclusive distributor for the Japanese
market and will be offended if you seek other distributors. This is why
spot sales to various distributors are inadvisable. If you decide to sell
your product line to a Japanese company, a company which you do not intend
to enter into a sole distribution agreement with, you better make this clear
early in your negotiations.
Japanese importers/distributors do tend to prefer exclusive relationships,
not only for the obvious reasons, but because the need to develop close,
personal relationships is an important aspect of the Japanese business
mindset. In some cases, your company may find the only Japanese companies
interested in doing business with you are those that request an exclusive
agreement. Through your meetings with potential partners and your own
business instincts, you must determine how adamant the Japanese side is on
exclusive agreements. Exclusive agreements do work, as long as you are
comfortable with your partner and are confident of the commitment and
ability to adequately address your needs and concerns. Nevertheless, do not
be pressured into an exclusive arrangement if you are not happy with the
geographic coverage or capabilities of your distributor. This situation
could do more harm than good. Moreover, it is possible to cover most of
Japan by assembling a group of importers, each concentrating on a certain
region. However, this tactic will require great diplomacy on the part of
your firm and possibly additional time mediating territorial disputes.
Once you enter into a relationship with a Japanese business partner, it may
be quite difficult to change partners or even find new partners (see
"Replacing a Japanese Business Partner"). With this in mind, be selective
and take the time to get to know a potential partner. It might be advisable
to suggest an evaluation trial period of six months to one year for all
parties concerned. Set realistic mutual qualitative and quantitative
goals. If these goals can be met and the relationship remains strong, then
a long-term contract can be explored.
KEEPING A JAPANESE BUSINESS PARTNER: Your partner is not merely a middleman
who is selling your product because your company lacks the capital or
expertise in setting up your own operation in Japan. Most likely, your
Japanese business partner has a more extensive knowledge than you on the
market, the distribution system, regulations and standards, competition, and
the best way to gain market exposure. A partner also has the contacts and
the network to effectively promote your product. This depth and range of
information give your partner an inherent advantage over you in controlling
your product's position in the market and contribute to your dependency and
reliance on your partner.
Too many Japanese-American business relationships sour after a successful
honeymoon period. A common mistake made by American companies in Japan is
the failure to provide adequate support for their Japanese business partner
after the sale.
Demonstrate commitment and professionalism by working closely with your
Japanese partner on all aspects of the marketing effort and product
support. The more your company shows an interest in the market or assists
in providing support to your Japanese business partner, the more committed
your partner is likely to be in promoting and selling your product in
Japan. You must always remember that your Japanese partner is also taking a
risk. In order to allay some of your partner's fears, your firm should
consider carrying some of the import risk. This will help prevent your
partner from implementing a conservative marketing strategy, including
extraordinary price markups, that will protect their interests, while
leaving your product's full sales potential undeveloped. The more that you
do to assist your partner and help solve problems, the more effort will be
made to ensure that your product does well -- and that you both make money!
Pay attention to Japanese consumer preference. When your Japanese partner
makes a suggestion on product modification, it is to increase the
attractiveness of the product to the average Japanese end-user. The
Japanese market is so competitive that any unique characteristic could give
your firm an advantage and make a vast difference in terms of product sales
and market share. Of course, you need to evaluate the costs and benefits of
product modification, but you should weigh these against the potential sales
growth generated from a product better suited to consumer preferences. Just
as importantly, let your partner know you realize the value of these
The Japanese market requires that you make timely improvements and advances
(kaizen) in your product line to remain competitive in Japan. If your
competitors realize that your firm has successfully identified a new hot
market niche, they could flood it with lower cost imitations. You must stay
ahead of your competition! Innovation in product design and marketing are
key factors. Your company and your partner must identify those aspects of
your product (quality, image, reliability, price, function, etc.) and
product package (sales service, advertising, warranties, and product
support) that set you apart from the competition. Moreover, your company
and your partner must make sure that these features and benefits are
communicated to consumers in Japan.
Maintaining effective relationships in Japan is difficult unless you travel
to Japan regularly to visit your Japanese partner and buyers. Once the
business deal is finalized, personnel from your firm should continue to make
at least two to four trips a year to build on the relationship, strengthen
ties, and network with others in the distribution system (visiting
wholesalers, retailers, or end-users with your partner), and discuss your
market strategy. You can be certain that your Japanese competition is doing
the same thing. These efforts will pay off. Once you have established a
close, friendly relationship, you will find your Japanese business partner
to be extremely loyal and reluctant to terminate your relationship.
Close relationships also act as a safeguard in protecting your company's
interests in the market. Japanese companies without a strong obligation to
maintaining the relationship are more liable to do an inadequate job in
marketing your product or worse, steal or copy your firm's product or
technology. While the Japanese are no worse at doing this than others,
losing intellectual property is a major concern about doing business in
Japan. As a matter of fact, your firm does not even have to be involved in
the Japanese market to be vulnerable. Japanese companies and trading
companies are heavily involved in commercial intelligence collection. The
way to defend your firm's proprietary information is to develop a
relationship with an ally in Japan who will work to protect your rights and
interests in the Japanese market. You must also take precautionary steps to
protect trademarks and patents.
REPLACING A JAPANESE BUSINESS PARTNER: It is very difficult to change
business partners in Japan or find representation if your have previously
pulled out of the market and your company decides to reenter. In the former
case, new potential partners will be wary because of the failed relationship
with your previous Japanese partner. In the latter case, Japanese companies
will be frightened off by the apparent lack of commitment to the market.
Nevertheless, some American exporters occasionally wish to change Japanese
business partners. The reasons for this decision may vary. If the U.S.
product does not sell well within the first year, the American exporter
often incorrectly assumes that the Japanese partner has not done the job.
However, there are other factors that must be considered, including the lack
of patience of management in the American firm, insufficient support
provided by the U.S. firm, poor sales service, or an unwillingness to adapt
the product or marketing strategy to meet the needs of the Japanese market.
Likewise, some Japanese business partners fail to deliver services they
promised, some U.S. exporters select poor business partners, and some
business relationships sour. If you have established a good and trustful
working relationship with your partner, you should be able to determine what
the problems are.
The fact is it is difficult to change partners in Japan. Business in Japan
is driven by personal relationships. Terminating the relationship between
you and your Japanese trading partner may alienate you from the entire
business community. Furthermore, it is almost impossible to keep a search
for another partner secret from the original partner. The impact on the
existing relationship and overall business in Japan could prove fatal.
Most Japanese industries are tightly knit, with headquarters of major
companies and trade associations in Tokyo, and business people in them know
which Japanese company represents which U.S. company. The slightest changes
in distribution or in relationships with customers is noticed in Japan. The
staff of any company contacted would most likely contact your present
partner's staff to ask about your intentions. If this situation were to
occur, your current Japanese partner would probably stop sales efforts
immediately, resulting in no new orders for your company for the time it
might take to find a new Japanese partner, if your company can find one at
all. If your company does not notify your present partner of the search,
your company's efforts to secretly replace your partner could seriously
injure your firm's reputation in Japan -- a reputation that would take a
long time to repair. To make matters worse, your former partner probably
will not have the nicest things to say about your company when references
are sought by new potential partners.
One possible strategy for your company if it must seek a new Japanese
business partner is to keep your current partner as a nonexclusive
distributor/agent/representative for one product in your product line.
Independently gather sufficient information about the Japanese market and
distribution channels for the other products in your product line. Explain
to your current partner the need for these products to have different
distribution channels. Your current partner should be assured that a new
partner for your other products would complement your present partner's
efforts in other industries and/or geographic areas, rather than compete
with the present partner for the same pool of known potential customers.
You should then explain to your potential new partner that your old Japanese
partner would not be as strong in distribution of your other products.
Having a rational nonthreatening strategy will make the transition easier
and avoid an embarrassing and time-consuming split with the present
partner. If on the other hand, your company wants to terminate its business
relationship with the current partner altogether, the situation will become
more sensitive and potentially confrontational. To avoid conflict, you
should visit the partner to give him or her a persuasive explanation for
terminating the contract and carefully observe the contractual termination
The more market information that your company has, the better position it
will be in to persuade the Japanese partner that your company's needs for
another partner are reasonable and "cannot be helped" because of
demonstrated limits to the Japanese partner's marketing or distribution
capabilities in that field. Even if the Japanese partner is not persuaded,
this information would be valuable in persuading a potential Japanese
partner that the switch to a new partner was rational and fair, and was
justified to your previous partner, rather than the result of unpredictable
and unreliable behavior on your part. The best course of action is to avoid
the problem by doing your homework and making sure your first Japanese
partner is right for your firm and its product(s).
DISTRIBUTION AND SALES CHANNELS: Distribution channels in Japan are very
different from those in the United States. The system is characterized by
close, personal relationships between manufacturers, importers, retailers,
and multiple layers of wholesalers. These conditions have led many U.S.
new-to-market exporters to criticize the complexity and lack of transparency
of the system. However, fundamental change is occurring within the
distribution system that should help U.S. exporters. These changes include
the necessity to consolidate distribution channels due to financial
pressures originating from the current recession, the emerging open price
system, and changes in the Japanese Large-Scale Retail Store Law.
It is not easy for a foreign firm to circumvent wholesalers or sell direct
to Japanese end-users or retailers. There are various reasons for this.
First, Japanese retailers and end-users tend to be very loyal to their
suppliers. Personal relationships have usually been developed over years,
and the Japanese will not want to change distributors if they are involved
in a comfortable relationship. Second, ethnocentrism is sometimes a
factor. Some Japanese are sometimes reluctant to deal with foreign
companies. Third, many retailers and end-users are afraid, and not without
reason, that if they alienate their traditional suppliers by buying from a
different source, other products that they rely on from their Japanese
suppliers will be shipped late or undershipped as retribution for failed
loyalty. Fourth, foreign suppliers in Japan, whether justified or not, have
a reputation for late shipments and poor sales service. Fifth, Japanese
retailers and end-users rarely have import experts and must depend upon
trading companies or importers with good English language capability,
extensive knowledge of import procedures, and overseas financing
capabilities. For this reason, even large prestigious department stores are
inclined to rely on outside sources for importing rather than doing it
themselves. Sixth is the common usage of the tatene ("fixed quotation" or
"set price") system.
TATENE AND THE EMERGING OPEN PRICE SYSTEM: During most of the postwar
period, Japanese manufacturers of consumer goods have set prices for each
level of the distribution channel using the tatene price system (TPS).
Under the TPS, manufacturers set prices to wholesalers, secondary
wholesalers, retailers, and consumers. It is a manufacturer's rebate that
enables the TPS to work. As long as everyone in a distribution system
abides with the TPS, they are entitled to rebates at the end of the
manufacturer's fiscal year (in extreme cases, rebates may be as large as 14
percent of the purchase amount). In return, manufacturers request that
distributors buy their products in accordance with manufacturers' sales
targets. Thus, the system always pressures distributors to buy more than
they can sell. The TPS has dominated Japanese distribution for decades.
Originally, the purpose of the rebate was to encourage wholesalers and
retailers to attain superior sales performance. However, the system
solidified to the point that nearly all manufacturers in a given industry
now give similar rebates to all their buyers. Thus, the efficacy of the
incentive has been reduced. Moreover, the financial burden of giving
virtually automatic rebates as a reward for maintaining set prices has
become unbearably heavy for many manufacturers. External factors that are
also forcing change include: (1) emerging price consciousness among
Japanese consumers due to the economic recession and pending modifications
to the Japanese lifetime employment system and subsequent fears of
unemployment; (2) pressure for wholesalers and retailers to sell at discount
prices to reduce inventory due to chronic oversupply; and (3) complex rebate
schemes that have bred complicated paperwork, which has become an expensive
and totally unproductive cost of doing business.
These factors are forcing an open price system to emerge in Japan in the
consumer goods sector. In the past, U.S. products were often rejected by
Japanese distributors for unclear or unstated reasons. Under TPS,
manufacturers' prices were always fixed, reliable, and simple -- providing
dealers and consumers with predictable business transactions. Under the
open price system, however, wholesalers and retailers will be able to decide
prices independently. This system will drastically change methods of
discounting and advertising. The transparency of business transactions
should significantly increase.
Because the TPS is designed for market oversupply, it encourages the
practice of henpin (returning unsold items to suppliers at no cost).
However, under the open price system, the return of unsold goods must be
reduced to offset lower margins by manufacturers. The distributor's role in
selecting and purchasing items will become more important. Accordingly, you
and your business partner may wish to approach Japanese retailers (or
wholesalers) with a store-delivered yen price, instead of a U.S. dollar
While the open price system still faces severe resistance in most industries
in Japan, it is clearly an idea whose acceptance is growing rapidly. Its
growth over the last few years signals the beginning of an important change
for U.S. suppliers.
RETAILING AND CHANGES IN THE LARGE-SCALE RETAIL STORE LAW: The number of
retail outlets in Japan is nearly the same as in the United States, despite
the fact that the population of Japan is roughly half that of the United
States and Japan is slightly smaller geographically than California. An
important feature of buying patterns has been low consumer mobility combined
with high population density. Surveys indicate that most Japanese consumer
purchases occur within a closely defined neighborhood, where a large number
of small retail ("mom and pop") stores account for roughly half of all
retail sales. Many of these stores cannot secure credit by themselves or
maintain large inventories. They often have financial, ownership, or
exclusive arrangements with major Japanese manufacturers, industrial groups,
or trading companies and are served by three or more wholesalers. The key
to the multiple-layer system is the ability of the Japanese wholesalers, in
their capacity as middlemen, to provide appropriate and timely market
information as well as financial support to smaller manufacturers and
retailers with limited resources. Retailers also rely on wholesalers to
maintain large inventories because of limited space and high storage costs.
Significant alterations in Japan's Large Scale Retail Store Law have eased
restrictions on opening new large retail stores (supermarkets, chain stores,
etc.). The original law protected small mom and pop operations. Led by
large retailers like Toys R Us, there has been a substantial increase in the
number of applications to open new retail stores since the reforms have been
announced. The emergence and growth of self-service discount stores and
superstores is helping to reduce the layers in the distribution system and
CAPITAL GOODS: Direct sales are more common for expensive, high-technology
equipment. In some capital goods sectors, Japan has a number of small firms
that function as subcontractors for larger manufacturers. Small and
medium-sized firms supply the majority of manufacturing industries with most
of their products. To sell to these firms, it is often necessary to follow
a multilayered distribution system and develop relationships with product
engineers and designers.
DISTRIBUTION STRATEGY: If the market is one in which there is a large
number of small end-users located throughout the country, it may be
necessary to rely on a network of wholesalers. Where the buyer universe is
relatively concentrated among a limited number of large firms, marketing may
be direct or through a single intermediary. Distribution channels in Japan
vary considerably from industry to industry and product to product with
particular differences between consumer and capital goods. A key question
for you to answer is, "Who controls access to the channels of distribution
for my market?" Of course, it would be to your advantage if the
distribution system for your product is independent and not substantially
influenced by your chief competitors. However, if the distribution system
is of the proprietary type (directly controlled by Japanese manufacturers)
or quasi-captive type (strongly influenced by Japanese manufacturers), you
will face a greater challenge. It might be necessary to negotiate a deal
with one of the manufacturers or develop strategies to circumvent these
Your company needs to establish an office in Japan or find a partner who can
help you navigate distribution channels. Where are price mark ups occurring
and by how much? Can your firm entice the wholesalers to keep mark ups
down? What are these wholesalers doing to enhance the sales potential for
your product? If you do not have an office in Japan, your partner must help
you answer these questions. You must determine the identity, location, and
needs of your customers before choosing an appropriate distribution
channel. In addition, your firm should study the existing distribution
system for similar products in Japan and learn how to utilize it to your
firm's advantage. It is vital that your firm choose wholesalers that
distribute to retailers selling in sufficient volume. If you circumvent
existing channels or develop an innovative approach before your firm
completely understands the existing system and the personal relationships
involved, your company can potentially do more harm than good.
Industry sources stress that good communications often determine the level
of commitment distributors make to products. Once your firm is doing
business in Japan, it is very important that your Japanese business partner
maintains close relations with wholesalers and end-users. Moreover, when
visiting Japan, it would be a good idea to work with your partner in making
product presentations to these players, thereby demonstrating your
commitment and capabilities. Because your Japanese competitors are
constantly visiting those in their distribution network, your partner (and
personnel from your firm when visiting Japan) should be calling on your
potential Japanese buyers to prove your commitment as well. Developing
close relationships entails making business trips and socializing after
hours. In Japan, the wholesaler often performs the marketing function for
overseas suppliers. Do not fall into the trap of trusting the wholesalers
with sole responsibility for making product presentations to retailers and
end-users. Since it is your product, you and your business partner are in
the best position to effectively highlight its strengths and attributes.
Normally, manufacturers in Japan provide sales support, including
after-sales service, advertising, and assistance in handling consumer
complaints. Despite the emerging open price system, it still may be
necessary to offer rebates. Although henpin is on the decline, it is still
practiced and it could inflate prices of products since importers and
wholesalers must charge more to cover their risk. Recently, manufacturers
in Japan have also supplied advanced retail support involving computerized
data processing systems that provide retailers with point-of-sale
information about customers and electronic ordering systems. The necessity
of providing retail support depends on the size of the retailers involved --
smaller retailers will require more assistance from your firm, your business
partner, and your wholesalers. Perhaps a cooperative venture with all
parties concerned could be arranged.
While completely market-driven, transparent procedures remain far from
mainstream, cracks in the old Japanese distribution system have appeared.
The current economic recession, increased price-consciousness and
competition, and the necessity to develop strategies to streamline
distribution to reduce the high costs associated with existing channels have
contributed to these changes. Moreover, these cracks should continue to
widen in the future. Many Japanese companies are modifying marketing and
sales strategies to take advantage of these developments. Products will be
distributed increasingly based more upon end-user or retailer needs than
PRICING PRACTICES: When exporting, some U.S. exporters fail to price their
product correctly because they neglect to take into account the various
added costs of exporting. These export costs can include the sales
commission of your Japanese partner, insurance and freight costs, finance
charges for the transaction cycle (i.e., bank fees and charges for a letter
of credit), marketing costs for Japan, and possibly duties and taxes. To
pay for these various costs, your firm may have to raise prices or induce
your Japanese partner to take on some of the costs. Raising prices may seem
to be the easiest route, but you must realize that the Japanese distribution
system may dramatically increase your product's price before it reaches the
end-user and thus make it uncompetitive.
The acceptance of your product in the Japanese market is based primarily on
its quality and after-sales service, not its price. However, pricing
analysis is a critical aspect of marketing in Japan for your company. Mark
ups at the various levels of the Japanese distribution system have caused
some imported items to be priced at levels that are uncompetitive with
Japanese domestic products, even though the landed price of the imported
product was comparable or lower. Prices of competitive Japanese products
can usually be taken as a starting point for tracing back through
distribution channels the appropriate margins for each link in the chain.
You should carefully examine the margins that are provided by both the
domestic and foreign competition and compare the cost of establishing your
own channels. Negotiations with a prospective agent should be conducted to
determine a realistic selling price, which would include reasonable and
acceptable mark ups. Your company should attempt to eliminate from its
export price all purely domestic costs involved in marketing the product in
the United States.
The recent recession in Japan has made price a much more important factor
for Japanese consumers. However, a company can not rely solely on price to
compete in Japan. Japanese consumers look at the entire "product package"
-- quality, innovation, uniqueness, packaging, sales service, and
warranties. Products that compete on the basis of image may be negatively
affected by "bargain" price reductions, as these tend to cheapen the image
of these products with Japanese consumers. The Japanese usually will pay
more for superior quality. Conversely, Japanese consumers will no longer
accept the traditionally high prices for imports. Today, most Japanese will
tell you they are looking for high quality at "reasonable" prices. Now the
difference between "bargain" and "reasonable" may only be a matter of
semantics, but pricing is an important consideration in addressing Japanese
Thus, your firm must walk a delicate tightrope when pricing your product.
Always keep in mind that wholesalers play a significant role in Japan, often
involving themselves in advertising, sales service, and other marketing
activities along with the importer. Since wholesalers are often wary of
risks associated with imported products, your company must understand that
wholesaler margins are often higher for foreign products than those for
domestic products. In addition, the Japanese retailer practice of buying on
consignment drives up prices to accommodate the expanded risk for
wholesalers. The more substantive assistance your company provides to
importers and wholesalers, the more likely your products will be offered at
lower price mark ups. By working closely with your Japanese business
partner and sharing in the responsibility of the export effort (advertising,
marketing, and sales service), you will be reducing the import risks and
costs for your partner. This assistance will help you convince your partner
to accept adequate, but not exorbitant, margins and prevent the product from
being priced out of the market. In the final analysis, make sure your final
retail price is competitive with similar products.
SALES SERVICE AND CUSTOMER SUPPORT: Sales service (before, during, and
after the sale) and customer support are critical elements in doing business
in Japan and should be considered part of the "product package." Your
company should make every effort to answer technical questions and make sure
that shipments are made on time and handled with the greatest of care. If
there is a problem, rectify it as soon as possible and offer sincere
apologies. Make strict arrangements for quality control (both before and
after shipment) -- do not rely solely on the shipping company. Sometimes
goods will be damaged in transit. To Japanese buyers, it does not matter
who is at fault, they will simply take their business elsewhere next time.
It is likely that your company will need to maintain an after-sales service
operation in Japan. Of course, the best mechanism and the most certain way
to ensure quality control is to establish your own office in Japan. If this
is not possible due to financial considerations, you must make arrangements
either with your Japanese partner or an acceptable third party. With
appropriate training, your partner should be able to answer all technical
inquiries on your product line.
ADVERTISING/CONSUMER EDUCATION: Marketing and advertising are an important
part of business success in Japan due to the sophisticated nature of the
Japanese consumer. Following the United States, Japan ranks second in the
world in advertising expenditures, and the advertising industry in Japan is
highly developed and complex. This section provides basic information on
Japanese advertising to help U.S. companies better prepare for the Japanese
market. The information in this section was compiled from interviews with
local Japanese press contacts, and from the publications Dentsu Japan
Marketing/Advertisement Year Book by Dentsu Inc. and Business Cost Data '93
by Keizai Chosa-Kai.
OVERVIEW OF THE JAPANESE ADVERTISING INDUSTRY: As in the United States,
advertisements in Japan appear in a variety of places, ranging from
nationwide TV/radio broadcasts to small ads in local papers. Each
advertising medium sets its own rates, based on a variety of factors.
However, much of Japan's advertising media does not deal with clients
directly, but through advertising agencies. Japan's top-five advertising
agencies are Dentsu Inc., Hakuhodo Inc., Tokyu Agency International Inc.,
Daiko Advertising Inc., and Asatsu Inc.
Ad space is often periodically sold or contracted to major agencies to be
sold to their clients or to secondary agencies. Although advertising media
often have their own sales divisions to sell ad space, such divisions
usually depend heavily on the sales of the ad agencies as well. Advertising
costs differ depending on the agency and conditions, and can be very
Most Japanese companies spend generously on advertising in order to
publicize their name and build a favorable image for their company or
products among consumers. Brand recognition is of prime importance,
especially for firms new to the market. Japanese advertising is for the
most part entertaining, using celebrities, attractive graphics, music or
catchy slogans, rather than analytical logic, to convince the audience of
the value of the products or the manufacturer. This technique is usually
referred to as "mood" advertising. Image is everything. In general,
comparative or combative advertising does not work in Japan.
With the current slump in the Japanese economy, most Japanese companies have
reduced their advertising and promotion expenditures, and advertising
agencies and related industries have been hit particularly hard, making the
current environment more favorable for newcomers. Costs are now very
negotiable, and agencies, looking for any business, are cooperative even
with small companies. Interested advertisers should negotiate with several
agencies to compare services and costs.
NEWSPAPERS: Japanese newspapers are classified into three types, according
to scope of distribution. National newspapers, based in Tokyo or Osaka, are
dailies whose circulation, covering the entire country, is counted in the
millions. National dailies accept advertisements for either national or
regional coverage. Regional and local papers also exist, based in
prefectural capitals. There are also a number of topic-specific daily
papers (mostly focusing on business or sports).
There are generally two types of newspaper advertisements: (1)
advertisements below the articles on the bottom of the page, which occupy
one to five columns of open space, and (2) miscellaneous announcements that
occupy small spaces, such as classified ads or inserted windows spaced among
articles. The unit (per column) price for space is usually lower for
evening issues than morning issues, for ads on pages other than the social
affairs pages, for larger ads, or ads on a long-term repetitive contract.
Advertising divisions or branch offices of newspaper companies usually deal
directly with clients. The price of the ad is based on the advertiser's
request for date of issue, page, design, and color of the ads. However, the
date, page, and position of the ads are not always guaranteed, as newspapers
always place priority on ensuring enough space for articles and ensuring
that the tone of the advertisements matches that of surrounding articles.
The advertiser may be charged an extra 10 percent or so to reserve a date or
a page/layout. In addition to charging for space, newspaper companies will
provide production services if necessary. Production fees vary and are
charged separately from the space fee.
MAGAZINES: Approximately 2,250 monthly or weekly nationwide magazines are
published in Japan. Generally, magazine subscribers are more focused in
terms of age group or interests compared to newspapers. Advertisements in
magazines tend to be colorful, graphic, and cost more (especially for
magazines with a larger circulation). The back cover of a magazine is the
most expensive ad space, followed, in order, by the inside front cover, a
full color "gravure" (a photographic engraving), the inside back cover, and
inside pages. The sales divisions of some publishing companies provide
clients with limited information, including the date of issue, page, layout
of the space, color of print, price, etc. Prices decrease with repeat ads.
Because advertising space is presold to major agencies, magazines,
especially general magazines and women's magazines, usually do not accept
advertisements directly from clients. Since the best ad spaces are
generally held by the major agencies, which determine the priority of ads,
it is often difficult for small or new businesses to get space where they
want. Advertisers that work under contract with one agency often receive
some advantages such as priority space, quantity discount, marketing and
advertising consulting, etc. Specialty magazines follow the same kind of
procedure as newspapers, with the publishing company's sales department
dealing directly with clients.
BROADCASTING: There are two types of television and radio broadcasting
advertising. "Time" advertising sponsors a program, while "spot"
advertising is a simple commercial. The time commercial is usually 30
seconds, and the basic set price includes three 30-second spots in a
30-minute program. On top of this set price, broadcasters charge a
production fee and network fee. The network fee relates to the cost of
using Nippon Telegraph and Telephone Corporation's (NTT) circuits to
broadcast a program. The production cost covers all expenses incurred in
producing a program. A spot commercial is usually 15 seconds on TV and 20
seconds on radio. Since the spot commercial is solicited by local stations,
the cost is based on the length of the commercial only.
Broadcast TV advertising is managed by the major advertising agencies.
Although the rates are similar for each company, the actual costs vary
greatly depending on the relationships among the TV broadcaster, the ad
agency, and the advertiser, and are affected by such factors as the
popularity of the program, the time segment, the size and influence of the
agency, the advertiser's budget, etc. For instance, TV companies and ad
agencies tend to give priority to large-scale advertisers for the most
popular time segments, perhaps with a discounted fee, while expecting the
same advertiser to purchase spots during a less popular time segment. If
two advertisers of similar size or prestige compete for the same time slot,
the larger agency's client usually obtains the right to advertise at that
time. Therefore, it can be difficult for new or small businesses to
penetrate the popular time segments, at least at first. Radio or local TV
broadcasting companies, however, tend to be less exclusive with advertisers
and refer advertisers to the appropriate contract agencies.
TRANSIT ADVERTISEMENT: In Japan, railroads are the primary means of
transportation for commuters in major cities and carry over 21 billion
passengers annually. Transit advertisements are located either inside
vehicles or at train/bus stations. Ads inside vehicles usually include
hanging posters, framed posters, or stickers. The rates for these ads are
determined by the number of ads, contract duration, and the number of
transit routes used. Costs for ads at stations vary with style, size,
duration, and how much commuter traffic transits through the station, and
vary from a small poster hung for a few days at a local station to a huge
permanent electrical sign at a terminal station in a large city.
Most private commuter lines are at the core of large conglomerates, which
usually include department stores, entertainment/amusement facilities, real
estate developers, financial service companies, etc. These related
companies provide each other with assistance in promotion and
advertisement. Advertisers in the same group can obtain priorities and
discounts, and competitors may not be able to purchase ad space.
Public transportation companies generally do not deal directly with
advertising clients. Companies periodically conduct tenders or drawings to
assign space to advertising agencies for that period. The designated
agencies apply for space for clients and provide production service for an
extra fee. Compared to magazines and broadcasting, transit advertising fees
tend to be consistent with all parties concerned, and prices do not differ
much with the secondary agencies.
MAJOR ADVERTISING AGENCIES: The following are the major advertising
agencies in Japan.
Dentsu Inc. Hakuhodo Inc.
1-11-10, Tsukiji, Chuo-ku 3-22, Kanda Nishi-cho, Chiyoda-ku
Tokyo 104 JAPAN Tokyo 101 JAPAN
Phone: 011-81-3-3544-5111 Phone: 011-81-3-3240-8111
Fax: 011-81-3-3545-1764 Fax: N/A
Tokyu Agency Int'l Inc. Daiko Advertising Inc.
4-9-17, Akasaka, Minato-ku 4-3-39, Miyahara, Yodogawa-ku
Tokyo 107 JAPAN Osaka 532 JAPAN
Phone: 011-81-3-3470-1611 Phone: 011-81-6-392-8008
Fax: 011-81-3-3423-3714 Fax: 011-81-6-392-8004
Asatsu Inc. Dai-Ichi Kikaku Co., Ltd.
1-9-6, Shimbashi, Minato-ku Hibiya Kokusai Building
Tokyo 105 JAPAN 2-2-3, Uchisaiwai-cho, Chiyoda-ku
Phone: 011-81-3-3575-3111 Tokyo 100 JAPAN
Fax: 011-81-3-3574-8764 Phone: 011-81-3-3595-1311
Dentsu, Young & Rubicam Inc. Yomiko Advertising Inc.
Kyobashi K-1 Building 1-8-14, Ginza, Chuo-ku
2-7-12, Yaesu, Chuo-ku Tokyo 104 JAPAN
Tokyo 104 JAPAN Phone: 011-81-3-3567-7889
Phone: 011-81-3-3278-4811 Fax: 011-81-3-3564-3360
I & S Corporation Asahi Advertising Inc.
1-5-3, Nihonbashi Muromachi, 3-2-16, Kyobashi, Chuo-ku
Chuo-ku Tokyo 104 JAPAN
Tokyo 103 JAPAN Phone: 011-81-3-3274-1371
Phone: 011-81-3-3246-8585 Fax: 011-81-3-3272-7349
CONSUMER EDUCATION: Because many products from the United States fit into a
cultural or an industrial environment that may not currently exist in Japan,
consumer education is often necessary. Uniqueness is what often gives U.S.
products an edge in Japan, but potential customers may not readily see the
product's purpose, use, and quality. For example, until recently, many
Japanese did not have much time for recreational activities due to the long
Japanese workweek. One U.S. outdoor sporting goods company found that it
was necessary to produce an instructional video (in Japanese, of course) for
its customers on how to go camping in order to assist its marketing
efforts. Consumer education is not just important for consumer goods, but
high-technology industrial goods as well.
JAPANESE BUSINESS CULTURE:
An understanding of and sensitivity to Japanese business and social
practices is of great importance in establishing and maintaining strong and
successful business relationships in Japan. This understanding or lack
thereof can be the determining factor as to whether or not your firm
succeeds in the Japanese market. Unfamiliarity or indifference to local
business practices usually indicates a lack of commitment on the part of the
exporter, and may lead to misunderstandings and bad feelings between both
sides which could result in the loss of business opportunities.
Japanese society is complex, structured, hierarchial, and group-oriented
with strong emphasis on maintaining harmony and avoiding confrontations.
The Japanese's strong desire for relationships (amae) play a primary role in
Japanese society as well as in business. A meaningful relationship is a
requirement for success in the Japanese market. This requires mutual trust,
confidence, loyalty, and commitment for the long term.
The American businessperson should be aware that the Japanese are very
practical and are fluid in their efforts to maintain harmony. These
characteristics lead to less emphasis on absolutes. The Japanese have been
described as being intuitive thinkers. This description is reflected in how
they respond to varying circumstances and in relationships, including
business dealings. Simultaneously, they also can be very logical (as
Americans define this term) when necessity dictates.
The concept of obligation is extremely important in Japan, though it is
weakening among the younger Japanese. Obligations (giri) are created
through education, employment, favors, or assistance granted. They appeal
to the Japanese sense of duty and honor. Not to repay obligations (such as
duty and loyalty to an employer) will cause a "loss of face" for the person
who is perceived as indebted. A foreigner in Japan must understand the
significance of obligation because it relates to the relationship between
seller and buyer as well.
The Japanese are group-oriented. This orientation takes numerous forms,
starting from an early age and continuing through life. These groups can be
social, scholastic, or business. You will constantly encounter them at all
levels of Japanese society, in companies, schools, universities, and
government agencies. Group orientation influences how business is done and
even whether it is going to be done. The thoughts and feelings of the group
are considered before a member does anything or makes a commitment of any
kind that may affect or involve the group. Thus, decisions are made by
consensus which, of course, hinders individual initiative. A Japanese will
avoid anything that reflects badly on the group or causes embarrassment or
loss of face. The Japanese have two words that describe this group concept,
soto/uchi (outside/inside). This has been expressed by some Japan experts
in the American vernacular as "us versus them."
Group decision-making in Japan differs from that in the United States and
has been generally described as from the bottom up, not from the top down.
There are exceptions to this general norm, especially in family businesses
founded since the end of the war and in smaller second tier firms. However,
in most cases, decisions are made by consensus. Even in the large family
firms, where decisions are made at the top, the process is usually managed
so that company members have a sense of participation.
Gift giving is quite popular in Japan. Gifts representing your regional
location in the United States or your company are appropriate. Quality is
important, but the gift does not have to be expensive. The packaging of the
gift is as important as the gift itself and should be done professionally.
If the Japanese give you gifts, do not open the packages in front of them.
In Japan, the number four is considered unlucky (as the word four sounds
like the work for death in Japanese), therefore do not give a four piece
Sensitivity to cultural differences will be appreciated by the Japanese you
encounter in both social and business environments. Many Americans may
assume that because meetings and correspondence are carried out in English,
Western social and business norms apply. While Japanese business executives
do not expect foreigners to be perfectly knowledgeable about all business
and social customs, you will find that accommodation to such customs and
practices is well worth the effort.
NEGOTIATING WITH THE JAPANESE:
The objective in negotiating an agreement is to create a win/win situation
for both your firm and your potential Japanese business partner. It must
also motivate your partner to effectively represent your interests in Japan
and promote your product. Because your potential Japanese business partner
maintains certain advantages over your firm, in terms of capabilities and
access to critical information, your firm will rely heavily on your partner
to succeed in the Japanese market, and depending on the circumstances, you
may exert little control over your own business in Japan.
The Japanese are usually very professional, polite, and modest. When doing
business in Japan, do not appear to be too aggressive or overbearing. Be
honest and be yourself, but exercise patience with business negotiations
that often proceed more slowly than you would like. Let your potential
partner know what your position is and why. Do not be afraid to address
your concerns. Sell your product and your company's strengths, but do not
come across as a braggart.
Initial contacts between Japanese firms are usually formal and made at the
executive level, while more detailed negotiations are often carried out at
the working level. The main purpose of a first meeting (the aisatsu
meeting) is to get acquainted, establish the broad interest of the calling
party, and allow both sides an opportunity to "size each other up" to
determine whether or not more substantive discussions are desirable. At the
first few meetings, the Japanese will probably discuss everything but the
elements of the actual business negotiation. The typical Japanese company
views a business relationship as being long term, close, and reliable.
Japanese management wants to know as much as possible about prospective
business associates. The Japanese will invariably inquire about your
company's history and operations, your position in the firm, and even your
education. You will be asked about your company's strategy for the Japanese
market. Presenting a well-prepared Japan strategy indicates your company's
understanding of the market and serious commitment to doing business in
Japan. When the Japanese side feels comfortable about the prospects of a
new business relationship with you and you have established the credibility
of yourself and your company, they will begin considering the particulars.
Do not expect to have a contract signed by the time you leave the first
meeting. The objective of your first few meetings is to establish rapport
and trust between the two parties. Attempting to pressure your potential
partner into a contract will only alienate your firm from the potential
partner. Personal feelings should be set aside, especially anger. The
Japanese have difficulty in determining an appropriate way to react to
extreme displays of emotion.
The first step in starting a business relationship is to approach the
Japanese company at the appropriate level, which can vary from top to lower
management. Even though you obtained an appointment with one individual,
you will find that you will be meeting several company representatives,
sometimes as many as five or six, in a group. The senior Japanese person
will usually be seated furthest from the door and the rest in descending
order by rank with the junior person nearest the door. You should arrange
their business cards on the table in the order they are seated across from
you. This will assist you in keeping their names straight.
For your first meeting with the Japanese firm, be sure to have your business
cards (meishi) in English on one side and Japanese on the reverse. Business
cards are exchanged extensively in Japan and serve as a useful reference and
record of contacts. Make sure you bring enough. The exchange of business
cards, usually at the start of a meeting, helps to formalize the
introduction process and establishes the status of the parties relative to
each other and their place of business. You should attempt to familiarize
yourself with the etiquette of exchanging cards, as well as other Japanese
social practices. The traditional Japanese greeting is the bow, although
most Japanese dealing with foreign business executives will expect to shake
hands. A nod of the head or slight bow by a foreigner in acknowledgement of
a Japanese bow is appreciated. Japanese business executives do not normally
deal on a first name basis in business relationships, and initial business
and social contacts are characterized by politeness and formality.
A visual presentation will capture your Japanese audience's attention. A
copy of your company's annual report and literature describing your products
or services will be effective tools. If possible, all or some of the
materials should be professionally translated into Japanese, even if it is
only in an abbreviated version. Information on the top executives of your
company should also be available. A set of these documents in a kit form
should be presented to all Japanese attending the meeting. You should go
through the material step by step, succinctly explaining each important
point. The purpose of this first meeting is to initiate contact and
introduce your company, your products or services, and yourself.
At this stage, a person will be assigned the responsibility to handle the
preparation of the business proposal and negotiations with you. Your
contact will prepare the initial proposal with any changes or modifications
that have developed from discussions with you. The written proposal is then
distributed to those sections in the company that are affected by the
company's interest in your product or service. This system of circulating
the proposal for comments and input (ringi seido) is the common method for
reaching a consensus decision. This method, which advocates development of
a final proposal from bottom to top, is known as nemawashi. Trying to
expedite this process by going to the top executive or other senior managers
is usually counterproductive, since your approach is addressed to an
executive who is not directly involved in the proposal preparation.
The group decision-making process that is universal in Japan may make it
impossible to receive a prompt response. The Japanese negotiator represents
a group, and until internal agreement has been reached on issues under
discussion, no commitment can be made. For this reason, you should not
expect an immediate answer, but should recognize that negotiations normally
extend over a long period of time. Recognizing that it takes a longer time
to cultivate business relationships in Japan than in the United States,
American business executives should not come to Japan expecting to settle
their business in just a few days or they will depart in frustration, having
made no progress.
During meetings, the Japanese tend to remain silent for long periods of
time. Don't let this make you nervous. These periods of silence do not
indicate a loss of interest or disagreement with what you are saying. Be
patient through these periods and try to discern first if the Japanese have
completely understood what you have said. They are known for being great
listeners. To many Japanese, Americans talk too much and do not listen
enough. Do not interrupt when someone is speaking; interrupting is
considered very rude. The Japanese also rely heavily on nonverbal
communication, although there is less eye contact. They tend to look to
nuances, inferences, and signals to convey intent. Thus, while American
negotiators are inclined to focus on tactics and press for agreement as a
negotiating objective, Japanese negotiators prefers to probe, feel out the
other party, and be relatively certain of the other side's position before
presenting a proposal on which both sides can agree.
One source of confusion in business communication may come from the Japanese
language itself. The word "hai" means yes in Japanese but its usage
varies. "Hai" is often used to mean "yes, I understand what you said"
rather than "yes, I agree." It is usually safer to assume that a Japanese
person is not making a decision but instead is acknowledging and
understanding what has been said. The Japanese also find it difficult to
say "no." The Japanese language is less precise than English and allows the
Japanese to be deliberately vague. The concept of saving or losing face is
an important one, and the Japanese are able to avoid confrontation,
embarrassing situations, and direct rejection by their use of indirect
Interpreters are widely used in business meetings between Japanese and
foreign firms. While many Japanese business executives speak some English,
the use of a good interpreter can avoid miscommunication. The effective use
of an interpreter requires preparation, including a thorough briefing of the
interpreter in advance on the background of the meeting, and, in particular,
on any technical aspects that may be covered. Using an interpreter
efficiently can make or break a potential business deal. Always bring your
own interpreter, even if the Japanese side is supplying one and even if the
Japanese side speaks English as well. Try to always use the same
interpreter. Have the interpreter debrief you after the meeting on the
meaning of nonverbal signals, the mood of the meeting, and the side
conversations among members of the Japanese team. After a meeting (or trade
show, if applicable), go through the business cards and other information
that you have collected. Have the interpreter translate the cards not
already translated and clarify those that are, especially titles. Get the
interpreter's impression on who is in charge, whether the people you have
met have the ability to make decisions, and what the next move of the
Japanese side may be. Speak slowly and clearly, avoid idioms or slang that
may be difficult to translate, and look at your Japanese counterparts, not
the interpreter, when speaking.
Japanese business executives emphasize good faith over legal safeguards in
business relationships and have little confidence in detailed contracts that
attempt to cover all possible contingencies. The Japanese preference is for
broad agreements and mutual understanding, so that when problems arise they
can be handled flexibly on a case-by-case basis. Thus, discussions with
Japanese entities should be comprehensive. Before entering into a
contractual agreement, both sides should thoroughly and openly discuss the
arrangement and their expectations to avoid misunderstandings later. The
Japanese approach business negotiations in a tentative manner, developing a
relationship in stages: first, a limited arrangement; then, if the
relationship is mutually satisfactory, it may be expanded into a broader,
more binding agreement.
Though it is not uncommon to hear that some firms do business in Japan
without a signed contract, your firm should insist on having a written
contract. Contracts should be part of a greater effort to create an
understanding of mutual obligations and expectations. By using legal
safeguards such as contracts and intellectual property protection along with
establishing a close, personal relationship with your Japanese business
partner, your firm will increase its chances of developing a mutually
satisfactory business relationship. Since Japanese are accustomed to
international business dealings, the foreign preference for more formal and
structured contractual obligations is recognized and contracts have become a
universally accepted practice in Japan. For your own security in terms of
legal, tax, customs, and accounting requirements, you should have legal
safeguards in place.
An agent or distributor agreement should be transparent and flexible. It
should include specifics on territory; sales activities (promotional
efforts, sales literature, pricing structure, after-sales service, and
performance requirements); what should be considered confidential
information; reasonable reporting requirements; patents, trademarks, and
copyrights; acceptance of orders and shipments; commissions; discontinuation
of products; relationship between parties; subagents; product warranties;
effective date and duration of agreement (termination clauses for both sides
including scenarios for breach, insolvency, and change in ownership); rights
and obligations upon termination; indemnity; no assignment; and
arbitration. Performance requirements and termination clauses (for both
parties) should be formalized. With respect to termination clauses,
remember that the Japanese tend to be anxious about the dependability and
commitment of American companies in Japan. In negotiations, you must
respond to these concerns and not give your Japanese business partner any
reason to think that you might be quick to terminate a relationship.
Japanese prefer the security of long-term, reliable, and exclusive business
arrangements -- which has obvious business advantages. Moreover, once a
commitment is made, it is for the long term, and it becomes quite difficult
to break an agreement and find a new Japanese business partner. The
decision on whether or not to accept an exclusive versus a nonexclusive
relationship depends to a large extent on the strength of your negotiating
position, your partner's capabilities, and how comfortable you feel with
your Japanese business partner. If your firm produces a unique or
state-of-the-art product that is highly sought after by a number of Japanese
representatives, then your negotiating strength is far stronger than if you
are dealing with only one interested potential Japanese business partner who
is insisting on an exclusive agreement. Perhaps a phase-in relationship
could be agreed upon, where arrangements are made for a six-month to
one-year trial period for both parties. In some instances (where the
Japanese partner does not have the distribution network or capabilities you
require to market the product, where you do not trust or feel comfortable
with your potential partner, or you are concerned about the loss of
intellectual property), it might be wiser for you to walk away from the
The Japanese dislike confrontations. To the Japanese, they are embarrassing
and to be avoided whenever possible. Legal actions are not commonplace.
Disputes tend to be counterproductive and usually end in loss of face for
all those involved. With respect to issues that are important to your
company, demonstrate strength and confidence but do not force your potential
Japanese counterpart into a corner. If the issue cannot be resolved, be
gracious and polite, and then take your business elsewhere. Do not burn
your bridges. End the discussions on a harmonious note. This will only
help your business in Japan over the long term.
During commercial dispute settlement, the Japanese legal system tends to be
slower and more cumbersome than its U.S. counterpart. In general, Japanese
companies are more apt to seek out-of-court dispute settlements and avoid
judicial proceedings. A copy of the 1952 U.S.-Japan Commercial Arbitration
Agreement is available from the reference desk at the American Arbitration
Association at (212) 484-4127. Although the agreement provides a framework
for dispute settlement between American and Japanese companies, it is not
suggested that your firm seek arbitration in Japan. The restrictions on
U.S. lawyers from representing parties in arbitration proceedings in Japan
is one of the five issues in the U.S.-Japan legal services negotiations that
have been continuing for almost ten years. The Japan Commercial Arbitration
Association also requires arbitrators (the "judges") to be resident in Japan.
The following are typical Japanese negotiating tactics:
(1) The Japanese usually respond to the other party's proposal -- rather
than taking the initiative.
(2) The Japanese tend to single out specific elements and negotiate one
element at a time -- rather than packaging a deal.(3) The Japanese tend to maintain a relatively quiet response mode at
meetings after stating their official position. They usually give the
interlocutor enough maneuverability to allow the other party to keep
giving away bit by bit.
(4) Once a concession is made, it becomes the new baseline (without a
counter-concession on the Japanese's part), and the Japanese move on to
the next item. Their strategy usually is to keep whittling away one
concession at a time.
(5) The Japanese use time and patience to wear down their opponent --
consciously planning on long, drawn out periods of successive meetings.
(6) The Japanese negotiating team never has the authority to commit in a
"give and take" type approach. They are usually only authorized to
receive offers and communicate prior authorized consensus positions.
(7) The Japanese tend to use the "bad guy" ploy extensively, that is,
constantly referring to other organizations such as Japanese Government
agencies or authorities as the scapegoats in pressuring for concessions.
How to respond:
(1) Do not expect rapid progress.
(2) Learn to be quiet and accept long pauses in discussions. Out wait the
Japanese until they respond constructively to your last proposal.
(3) Do not make successive individual concessions -- insist on a package
(4) Do not make a follow-on proposal with further concessions until the
Japanese respond to the current proposal with concessions on their
part. Set an agenda for the next meeting accordingly.
(5) Do not fall for the "cultural differences" ploy. Be polite but direct.
You can expect the Japanese to understand Western business practices and
culture. They should be prepared to compromise and accommodate on those
issues which you identify as vital and absolutely essential. However,
you should likewise show an appreciation of Japanese culture. Showing
appreciation will help facilitate negotiations. It is not unusual to
have a number of side letters outlining agreements on particularly
(6) Keep records on concessions by both parties.
(7) Have a fluent Japanese speaker present at negotiations to preclude
private discussions during meetings and to ensure the translations are
(8) Negotiate from a position of strength and confidence. The Japanese do
not respond positively to real or perceived weakness, nor do they
respond to idle threats and intimidation.
This file extracted from Dept. of Commerce National Trade Data Bank (NTDB)
CD-ROM SuDoc No. C 1.88:996/11. Processed 03/12/1997 by software developed
by RCM (UM-St. Louis Libraries) / OBR_0026