Skip to content

The Trade Council

As the world's third largest economy with 127 million consumers, Japan is a very lucrative market for foreign companies. Market entry may seem difficult, but this is not necessarily the case.

Historically, foreign and even Japanese companies have had establishment difficulties. Yet more and more companies are successfully establishing themselves in Japan. A common denominator for these companies is a solid market research prior to establishment. In addition, a number of new government initiatives have opened for new possibilities.

The new Companies Act of 2006 resulted in a not insignificant simplification of the procedures of company establishment. Noteworthy, is the removal of capital requirements for new companies, and the easing of rules related to corporate name restrictions, organization design, and classification of purpose. Furthermore, special programmes and incentives have been implemented in Tokyo, in order to ease the obtainment of visa for foreign entrepreneurs.

Japan, and especially Tokyo, have recently seen a significant development in its start-up environment, with several organizations and programmes directed at European SME’s. Worthy of mention is JETRO, EU-Japan Centre for Industrial Cooperation and incubator options at embassies.

The Japanese market is open for world-class brands, products and services. However, it is essential to make a dedicated and continuous effort to achieve success. When a company is established and accepted, it can end up being an appreciated partner in the long term. The Japanese market is seen as a frontrunner in Asia, and being accepted in Japan can thus serve as an entry for further growth in the region.

Japan’s market structure is in some ways similar to the western European markets. Historically, Japanese companies have been financed primarily by loaned funds. The Japanese industry is divided into two levels: One consisting of world-known, multinational companies like Toyota and Sony. The other level consists of the many and often family owned companies. The latest data from the Ministry of Economics, Trade and Industry (METI) shows that more than 99% of Japanese companies are SME’s with less than 300 employees. These companies contribute to about half of the value of the Japanese industrial production. There are approximately 5.3 million SME’s in Japan, compared to about 12.200 large companies.

Business environment

The Japanese market is often seen as a difficult and closed market, with a considerable number of unclear entry barriers. This has become a misleading perception. Since the Economic Partnership Agreement entered into force on 1 February 2019, the Japanese market has undergone its most extensive opening yet. Specifically, the agreement means that import duties on 97% of all products will be removed, once the Agreement is fully implemented. Besides tariff reductions, the Agreement has also resulted in a better harmonization of international standards, the removal of non-tariff barriers, as well as a well-functioning reporting system for unforeseen trade barriers.

 Follow the Embassy's LinkedIn page for Trade Council news!