Starting business in Japan is not difficult and neither does it need to be expensive. If your company has a unique and good quality product or service, by carefully controlling its Japanese market entry and start-up costs, it can be profitable in its first 12 – 18 months in the Japanese market: it’s that simple. If there’s a secret to starting business in Japan, then in my experience it’s understanding Japanese business culture and the mentality of Japanese business people well enough to control start-up and ongoing business costs.
This is a good time to start doing business in Japan. The costs of starting business in Japan have reduced dramatically due to almost three decades of deflation affecting Japanese salaries and office rents. Office rents have dropped noticeably as land values failed to recover since the bursting of Japan’s bubble economy at the end of the 1980s (although Tokyo office rents and lease deposits are still high compared to many parts of the world). Japanese salaries have further reduced as companies have used the decades-old recession and deflation as rationale to decrease the summer and winter bonuses traditionally paid to many Japanese employees.
For many employees, guaranteed annual salary increases have become a distant memory. Expectations of jobs for life and other former obstacles to companies setting up a Japanese office or Japanese company, have lessened dramatically in the past two decades. But be aware that this is changing as Japan’s aging and contracting workforce and increased demand for bilingual professionals in the run-up to the 2020 Tokyo Olympics, will make it more expensive to start-up in Japan for companies that delay the decision to enter the Japanese market. Set up now, get established at relatively low cost, and lock-in employees before future inflationary salary pressures emerge. Companies that don’t start business in Japan now will find it much more expensive to start in 2020.
Given the presently low cost of entering the Japanese market, there is no reason a company with a competitive product or service, excellent customer support and a winning attitude, cannot be profitable in Japan within its first eighteen months of Japanese business. Depending on industry-specific factors, your Japanese business could be contributing 30% to your global profits within 5 years.
The first, and maybe most obvious advice I can give to any company thinking of setting up in Japan, is be properly prepared and thinking as a team from Board of Directors to front-line business development, sales and marketing. A properly prepared Japanese market entry will generate substantial levels of revenue, profit and all the glories that go with them. Success doing business in Japan will also greatly enhance a company’s valuation as investors correctly perceive that a company able to succeed in the Japanese market is a company able to succeed anywhere. Conversely, a failed attempt at Japanese business is not only soul-destroying for those involved, but can cost a company heavily both in cash and credibility.