# ![](media/image1.jpeg){width="0.7395833333333334in" height="0.78125in"}  Doing Business in Japan: A Country Commercial Guide for U.S. Companies

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Chapter 1: Doing Business in Japan](#ch1)

-   [Chapter 2: Political and Economic
    Environment](#chapter-2-political-and-economic-environment)

-   [Chapter 3: Selling U.S. Products and
    Services](#chapter-3-selling-u.s.-products-and-services)

-   [Chapter 4: Leading Sectors for U.S. Export and Investment](#ch4)

-   [Chapter 5: Trade Regulations and
    Standards](#chapter-5-trade-regulations-and-standards)

-   [Chapter 6: Investment Climate](#ch6)

-   [Chapter 7: Trade and Project Financing](#ch7)

-   [Chapter 8: Business Travel](#ch8)

-   [Chapter 9: Contacts, Market Research, and Trade
    Events](#chapter-9-contacts-market-research-and-trade-events)

-   [Chapter 10: Guide to Our Services](#ch10)

[[]{#ch1 .anchor}Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 1: Doing Business in Japan

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Market Overview](#market-overview-return-to-top)

-   [Market Challenges](#market-challenges-return-to-top)

-   [Market Opportunities](#market-opportunities-return-to-top)

-   [Market Entry Strategy](#market-entry-strategy-return-to-top)

**Preliminary Notes:**

-   Throughout this *Country Commercial Guide,* annual figures are
    stated on a calendar-year basis unless otherwise specified.

-   The exchange rates used in making currency conversions were the
    annual average of the daily exchange rates calculated by the Federal
    Reserve Bank of New York. These averages were as follows:

> 2002 125.22
>
> 2003 115.93
>
> 2004 108.15
>
> 2005 110.11
>
> 2006 116.31

## Market Overview [**Return to top**](#ch1)

-   **Key Economic Indicators**

> Gross Domestic Product (GDP) in U.S. dollars: 4.9 trillion
>
> GDP per capita in U.S. dollars: 33,100
>
> Real GDP growth rate: 2.8%
>
> Inflation: 0.4%
>
> Unemployment: 4.1%

-   **Trade Statistics**

> In 2006, Japan's balance-of-trade surplus was \$69.6 billion compared
> to \$72.6 billion in 2005. The Japanese Finance Ministry reported that
> the fall was mainly due to the high cost of oil as energy imports
> offset exports of cars and semiconductors. With GDP growth rates of
> 2.75% in 2005 and 2.8% in 2006, Japan has essentially completed its
> post-bubble adjustment, allowing for stable and consistent future
> growth.

-   **Principal Trading Partners**

> In 2006, the top ten exporters to Japan were China, the U.S., Saudi
> Arabia, United Arab Emirates, Australia, South Korea, Indonesia,
> Taiwan, Germany, and Thailand. The top ten importers from Japan were
> the U.S., China, South Korea, Taiwan, Hong Kong, Thailand, Germany,
> Singapore, the United Kingdom, and the Netherlands. The United States
> was Japan's biggest customer and second-largest supplier.
>
> In 2006, Japan's trade surplus with the United States was \$88.4
> billion.

-   **U.S. Market Share**

> In 2006, the U.S. purchased 22.5% of Japan's exports (vs. 22.6% in
> 2005) and supplied 11.8% of its imports (vs. 12.5% in 2005).
>
> Leading U.S. exports to Japan were computers and electronic products
> (\$10.7 billion), transportation equipment (mostly aircraft, for a
> total of \$9.1 billion), agricultural & food products (\$8.1 billion),
> chemicals (\$7.7 billion), and non-electrical machinery (\$5.6
> billion).
>
> Major U.S. imports from Japan included transportation equipment
> (mostly cars and trucks, for a total of \$62.7 billion), computers and
> electronic products (\$27.4 billion), non-electrical machinery (\$24.9
> billion), chemicals (\$7.6 billion), and electrical equipment,
> appliances, and components (\$4.5 billion).
>
> Complete U.S. government foreign trade statistics (exports and imports
> by country and product) are available online from the U.S. Department
> of Commerce, U.S. Census Bureau at
> [www.census.gov/foreign-trade/statistics/country/index.html](http://www.census.gov/foreign-trade/statistics/country/index.html).
>
> Japanese foreign trade statistics (imports and exports) are available
> online from the Japan External Trade Organization (JETRO) at
> [www.jetro.go.jp/en/stats/statistics/](http://www.jetro.go.jp/en/stats/statistics/).

-   **Political Situation / Issues Affecting Trade**

> The U.S.-Japan alliance is a cornerstone of U.S. security interests in
> Asia and is fundamental to regional stability and prosperity. Despite
> the changes in the post-Cold War strategic landscape, the U.S.-Japan
> alliance continues to be based on shared vital interests and values.
> These include stability in the Asia-Pacific region, the preservation
> and promotion of political and economic freedoms, support for human
> rights and democratic institutions, and securing of prosperity for the
> people of both countries and the international community as a whole.
> Japan is one of the world's most prosperous and stable democracies.

## Market Challenges [**Return to top**](#ch1)

-   **Barriers to Market Entry**

> While tariffs are generally low, there are still some barriers that
> impede or delay the importation of foreign products into Japan. For
> more details, please refer to Chapter 5, [Trade Regulations and
> Standards](#chapter-5-trade-regulations-and-standards), of this Guide.

-   **Local Requirements**

> For more details on local requirements with regard to import license
> requirements, restricted or prohibited imports, temporary entry of
> goods, certifications, and labeling requirements, please refer to
> Chapter 5, [Trade Regulations and
> Standards](#chapter-5-trade-regulations-and-standards), of this Guide.

## Market Opportunities [**Return to top**](#ch1)

-   **Best Prospect Sectors**

The best prospects for U.S. exporters in the Japanese market are in the
following sectors: aircraft & aircraft parts, building products,
computer software, education & training services, household consumer
goods, medical equipment, new energy power generation, pharmaceuticals,
and travel & tourism.

-   **Major Projects**

> The major public-works projects currently under way in Japan that
> present significant opportunities for U.S. companies are urban renewal
> projects in various cities, the Okinawa Graduate University, and Tokyo
> Haneda Airport expansion.

-   **Business Opportunities**

> There are excellent opportunities at the moment for U.S. companies in
> financial services, service industries in general, telecommunications,
> and power generation. For more details, please refer to Chapter 4,
> [Leading Sectors for U.S. Export and Investment](#ch4), of this Guide.

-   **Asia Now: Exporting to East Asia & China Just Got Easier!**

> The [Asia Now](http://www.buyusa.gov/asianow/) program brings together
> the resources of U.S. Commercial Service offices in [14 Asia-Pacific
> markets](http://www.buyusa.gov/asianow) and our [Export Assistance
> Centers](http://www.export.gov/comm_svc/eac.html) throughout the U.S.,
> providing American firms with a single point of access for exporting
> to the Asia-Pacific region. To find out more about [Asia
> Now](http://www.buyusa.gov/asianow/), please visit our dedicated web
> site, [www.buyusa.gov/asianow/](http://www.buyusa.gov/asianow/).

## Market Entry Strategy [**Return to top**](#ch1)

U.S. companies that are serious about entering the Japanese market
should consider hiring a reputable, well-connected agent or distributor,
and to cultivate business contacts through frequent personal visits.
Japanese attach a high degree of importance to personal relationships,
and these take time to establish and nurture. Patience and repeated
follow-up are required to clinch a deal. U.S. business executives are
advised to be accompanied by a professional interpreter, as many
Japanese executives and decision-makers do not speak English. For more
details, please refer to Chapter 8, [Business Travel](#ch8), of this
Guide.

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 2: Political and Economic Environment

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [[]{#summary .anchor}Summary](#summary)

-   [Executive Summary](#execsumm)

-   [Major Trends and Outlook](#major-trends-and-outlook-return-to-top)

-   [Balance-of-Payments
    Situation](#balance-of-payments-situation-return-to-top)

-   [Principal Growth Sectors](#principal-growth-sectors-return-to-top)

-   [Agricultural Products
    Market](#agricultural-products-market-return-to-top)

-   [Japan\'s Leading Economic
    Regions](#japans-leading-economic-regions-return-to-top)

-   [Government Role in the
    Economy](#government-role-in-the-economy-return-to-top)

-   [Infrastructure](#infrastructure-return-to-top)

-   [Web Resources](#web-resources-return-to-top)

## Summary [**Return to top**](#chapter-2-political-and-economic-environment)

For background information on the political and economic environment in
Japan, please click on the link below to the State Department's
*Background Notes* for Japan:

<http://www.state.gov/r/pa/ei/bgn/4142.htm>

## Executive Summary [**Return to top**](#chapter-2-political-and-economic-environment)

Japan is a vibrant, prosperous country, with the world's second largest
economy. Japanese consumers spend hundreds of billions of dollars on
food, clothing, travel, entertainment and a wide variety of other
consumer goods and services. The top Japanese firms are among the most
efficient and best-run firms in the world. Unemployment, while high by
historic Japanese standards, is around 4.1% --- lower than in most
developed countries. The average Japanese household has over \$100,000
in savings, and disposable income of about \$4,000 per month. Japan is
one of the largest overseas markets for U.S. exporters, with imports
from the U.S. totaling over \$59 billion in 2006.

For Japan, the decade 1995-2005 was one of slow or no growth; a banking
system struggling to deal with a crushing bad loan problem; a seemingly
unending deflationary cycle; soaring government debt; unprofitable and
often uncompetitive domestic firms; and a political system seemingly
incapable of taking the decisive action necessary to fix these problems.

By all accounts, however, 2005 was the year in which Japan finally
succeeded in pulling itself out of the economic rut it had been mired in
for the past decade. Japan's economy grew at an annualized rate of 3.2
percent in the second quarter of 2005 and 2.8 percent in the third
quarter. Concurrently, capital investment by enterprises increased 3.8%
in the third quarter, and household consumption expenditures rose 2.3
percent during the same period, confirming Japan's slow but steady
emergence from the economic doldrums.

In an economic outlook report published in November 2006, the
Paris-based Organization for Economic Cooperation and Development (OECD)
was cautiously optimistic, stating that "\[T\]he current economic
recovery, the longest in Japan's post-war history, has matured into a
self-sustained expansion driven by private domestic demand." The OECD
projects that expansion will "continue, with growth of about 2% in
2007-08, thanks to buoyant business investment underpinned by record
corporate profits and private consumption. Inflation is expected to
increase only gradually." (*OECD Economic Outlook No. 80 -- Japan).*

Japan's six leading banking groups, which until recently were staggering
under mountains of bad debts, are now all posting record profits. The
Nikkei stock market index keeps on climbing. The persistent deflation of
the past decade is now receding into memory, as the Bank of Japan
cautiously moves away from its recent policy of flooding the capital
markets with liquidity at interest rates of zero or close to zero.

The painful restructuring of the last ten years is finally bearing
fruit. Japan's reinvigorated industrial machine is renewing with
profitability and competitiveness, thanks largely to the efforts of the
private sector. The private sector's efforts are matched on the
government side of the equation as the administration of Prime Minister
Shinzo Abe, following in the footsteps of former Prime Minister
Junichiro Koizumi, continues to push for structural reform of the
economy. Koizumi's pet postal privatization bill successfully having
made it through the National Diet, the coming years should witness a
complete overhaul of Japan's financial services sector as Japan Post's
huge insurance and savings account operations are privatized and open to
competition.

The fact remains, however, that for most U.S. firms the prospects for
structural reform in the Japanese economy are less important than the
fact that Japan remains one of the largest overseas markets for U.S.
goods and services. And in many ways, opportunities for competitive U.S.
companies in the world\'s second largest economy are better than they
have ever been. Japan's consumers buy American products ranging from
music to furniture. Japanese consumers eat almost 60 percent of the
cherries the U.S. sends overseas, and the over four million Japanese who
visit the United States each year buy more than \$12 billion worth of
plane tickets, hotel rooms, restaurant meals, souvenirs and other goods
and services. Japanese firms are major purchasers of U.S. computers,
machinery, medical devices, pharmaceuticals, chemicals and services. As
the Japanese economy has weakened, Japanese consumers have become more
willing to buy imported products and work for foreign firms; and
Japanese firms have become more willing to accept foreign investment and
cooperate with foreign partners. Market barriers have fallen across the
board, and Japan has never been more open to foreign goods and services
than it is today.

The contrast between Japan's somewhat rigid but improving macroeconomic
situation and the significant opportunities that exist in the Japanese
market for competitive U.S. firms is a theme that runs through this
Country Commercial Guide. Contradictions abound. Although a number of
household-name Japanese firms are world-class competitors, many other
Japanese firms are inefficient and uncompetitive in world markets.
Japanese firms tend to have very poor margins, and few Japanese firms
make an adequate return on their invested capital. Competition from
fast-rising competitors --- particularly China and Korea --- is
increasing. Government debt has been climbing steadily over the last
decade, and now exceeds 145 percent of GDP. Local government debt,
corporate debt and consumer debt are all high as well. But Japan also
has fundamental strengths that are easily overlooked amidst the torrent
of bad news. Japan has an enormous base of capital --- physical, human
and financial --- that has been created over the past 50 years. Japanese
society and its political system are stable. Japan has an industrious,
educated population and a cadre of world-class manufacturers. Japan has
a history of economic success in the face of daunting obstacles. And
finally, Japan is rich.

U.S. firms will find excellent markets for their goods and services
across a broad range of sectors. Financial services will continue to be
a growth area as Japan works through its banking problems and attempts
to make its capital markets more efficient. Firms in the energy business
will find new opportunities as Japan deregulates its power generation
market and studies the privatization of the national oil exploration
company. Japan\'s population is aging, and there are growing
opportunities in the \"silver services\" sector, services for the
increasingly healthy, affluent seniors. Japan's government has an
ambitious program to increase the use of information technologies
throughout Japanese society, which will open up new opportunities for
U.S. suppliers of IT equipment and services. Japan's consumers are rich,
sophisticated and highly diverse in their interests and tastes, and U.S.
firms that can find a way to cater to those tastes and interests will
find that the world's second largest consumer market can be very
profitable. More information on these and other markets of opportunity
can be found in the [Leading Sectors for U.S. Exports and
Investment](#ch4) section of this report.

The above-mentioned difficulties notwithstanding, the bottom line is
that the size of the market opportunities in Japan dwarfs any other
overseas market, and competitive U.S. companies should be here.

## Major Trends and Outlook [**Return to top**](#chapter-2-political-and-economic-environment)

Japan is the United States\' largest non-NAFTA trading partner. It is
also the world\'s second largest economy, with a GDP of roughly \$4.9
trillion in 2006. Measured in dollar terms and at current exchange
rates, that is roughly 37 percent of the United States\' GDP, although
fluctuations in the dollar/yen rate can change this figure
significantly. Measured on the same basis, Japan\'s annual output is
almost equivalent to that of Germany and France combined. It is roughly
three times the annual output of China, and eight times that of India.
U.S. exports to Japan were roughly equal to U.S. exports to the United
Kingdom and France combined, and nearly double U.S. exports to China, in
2003.

Viewed as the first of Asia\'s economic miracles through most of the
postwar era, Japan\'s economic growth was sluggish over the last decade,
but its current recovery appears stable. Following the end of the
\"bubble economy\" that centered on property markets in the late 1980s,
the Japanese economy experienced over a decade of uneven and ongoing
stop-and-go reform. The government took aggressive steps to strengthen
ailing banks in 1998 and has made further efforts at financial
restructuring under Prime Minister Koizumi. The Koizumi and Abe
administrations have also sought to begin the process of fiscal
consolidation given Japan's large stock of gross government debt,
estimated by the OECD at 161.1% of GDP in 2005. The strength of the
current economic recovery remains dependent upon continued strength in
private consumption and exports.

The pressing need for Japanese firms to restructure and lower costs has
been felt in terms of layoffs or reductions in salaries, wages, and
bonuses. At the same time, however, the push to find more cost-effective
ways of doing business has led to a reexamination of traditional
*keiretsu* and other buyer-supplier relationships. Manufacturers are now
looking for ways to bring in high-quality, low-cost components and
materials from foreign suppliers. Thus, overseas suppliers are seeing
new opportunities in some areas of the Japanese market, although they
are challenged to supply products at competitive prices.

The ongoing process of financial and corporate restructuring also means
that opportunities for foreign direct and portfolio investment are on
the rise. With banks focused on consolidation and balance sheet
improvement, Japanese firms are increasingly looking overseas for
investment capital. Further, consolidation and reorganization throughout
the Japanese corporate sector has led to a wave of asset sales ---
properties, plant and equipment, and subsidiary companies --- as firms
seek to spin-off poorly performing or non-core elements of their
operations. Some of the most noteworthy foreign investment deals in
recent years have occurred in the financial sector, where the failure of
some institutions and the need to return nationalized assets to private
hands led to a relaxation of long-standing barriers and negative
attitudes toward foreign investment. Business tie-ups, joint ventures,
and distribution affiliations between foreign and Japanese financial
services providers have also accelerated as new opportunities arise as a
result of financial deregulation. Improvements in land and labor
mobility have also raised new possibilities for "green field"
investment, although entry costs for some industries still remain high.
Foreign direct investment into Japan fell to \$61.6 billion in 2005,
down 22.7% from a year earlier. Japanese direct investment abroad fell
3.0 percent year-on-year to \$107.4 billion.

A key demographic trend with profound implications for Japan in years to
come is the aging of its population. Because individual health care
expenditures rise rapidly after the age of 60, the graying of Japan\'s
population will lead to a substantial rise in spending on health care
over the next three decades. By 2035, the Ministry of Health and Welfare
predicts that more than one in three Japanese will be 65 or older (up
from about one in five now). As a result of this demographic shift,
fewer workers will have to support more retirees, and productivity per
worker will need to climb to maintain national output. This will have
implications for the pattern of demand, with greater opportunities in
health care and retirement industries.

+----------------------------------+-----------+-----------+-----------+
| ###### Appendix A                |           |           |           |
+----------------------------------+-----------+-----------+-----------+
| ####### DOMESTIC ECONOMY         |           |           |           |
+----------------------------------+-----------+-----------+-----------+
|                                  | **2004**  | **2005**  | **2006**  |
|                                  |           |           |           |
|                                  | **(       | **(       | **(       |
|                                  | actual)** | actual)** | actual)** |
+----------------------------------+-----------+-----------+-----------+
| Gross Domestic Product           | 4,606.5   | 4,549.5   | 4,363.9   |
|                                  |           |           |           |
| (nominal; \$ billions)           |           |           |           |
+----------------------------------+-----------+-----------+-----------+
| GDP growth rate (real; percent)  | 2.7       | 1.9       | -2.2      |
+----------------------------------+-----------+-----------+-----------+
| GDP *per capita* (\$)            | 36,076    | 35,608    | 34,155    |
+----------------------------------+-----------+-----------+-----------+
| General government spending      | 35.9      | 36.6      | N/A       |
|                                  |           |           |           |
| as a percentage of GDP (nominal) |           |           |           |
+----------------------------------+-----------+-----------+-----------+
| Inflation (CPI; percent)         | 0.0       | -0.3      | 0.3       |
+----------------------------------+-----------+-----------+-----------+
| Unemployment rate (percent)      | 4.7       | 4.4       | 4.1       |
+----------------------------------+-----------+-----------+-----------+
| Average \$ / ¥ exchange rate     | 108.18    | 110.21    | 116.31    |
|                                  |           |           |           |
| (used in this table)             |           |           |           |
+----------------------------------+-----------+-----------+-----------+

+-----------------------------------+---------+----------+-----------+
| ###### Appendix B                 |         |          |           |
+-----------------------------------+---------+----------+-----------+
| ####### TRADE                     |         |          |           |
+-----------------------------------+---------+----------+-----------+
| ***(\$ billions)***               | *       | **2005** | **2006**  |
|                                   | *2004** |          |           |
|                                   |         | **(a     | **(       |
|                                   | **(ac   | ctual)** | actual)** |
|                                   | tual)** |          |           |
+-----------------------------------+---------+----------+-----------+
| Total country exports             | 538.87  | 568.30   | 615.75    |
+-----------------------------------+---------+----------+-----------+
| Total country imports             | 410.36  | 474.52   | 534.42    |
+-----------------------------------+---------+----------+-----------+
| U.S. exports                      | 62.52   | 64.19    | 68.01     |
+-----------------------------------+---------+----------+-----------+
| U.S. imports                      | 126.92  | 134.34   | 145.62    |
+-----------------------------------+---------+----------+-----------+
| Average \$ / ¥ exchange rate      | 108.18  | 110.21   | 116.31    |
|                                   |         |          |           |
| (used in this table)              |         |          |           |
+-----------------------------------+---------+----------+-----------+

## Balance-of-Payments Situation [**Return to top**](#chapter-2-political-and-economic-environment)

Although Japan\'s trade and current account surpluses are the largest in
the world, the country's trade surplus contracted 27 percent in 2005, to
93.8 billion, according to U.S. Embassy calculations based on official
yen-based data. Moreover, the current account surplus also shrank in
2005 compared to the previous year, to \$165.7 billion, a drop of 3.7
percent.

## Principal Growth Sectors [**Return to top**](#chapter-2-political-and-economic-environment)

Japan is now in the midst of the longest period of continuous economic
growth in its post-war history. At the same time, the government in
recent years has undertaken significant structural reform of the economy
thereby creating new opportunities for U.S trade and investment.

In 2001, the United States and Japan launched the Economic Partnership
for Growth which includes the United States-Japan Investment Initiative
designed to identify and remove barriers to cross border investment in
both countries and the U.S.-Japan Regulatory Reform and Competition
Policy Initiative designed to promote economic growth through sectoral
and cross-sectoral regulatory reform. The Regulatory Reform Initiative
includes working groups on telecommunication, information technology,
energy and medical equipment and pharmaceuticals as well as a
cross-sectoral working group that discusses competition policy,
transparency: distribution and commercial law and legal reform

Following the U.S.-Japan Framework Agreement of 1993, new opportunities
developed for U.S. companies to sell to Japanese Government entities,
especially in the fields of computer hardware and software,
telecommunications, medical equipment, pharmaceuticals and construction
services. In recent years, the Japanese Government has also undertaken
measures to increase access for foreign suppliers to the government
procurement market by voluntarily expanding the number of agencies and
lowering the threshold procurement amount covered under WTO rules. In
addition, they revised the following procurement activities so that they
now: (1) hold annual seminars to provide anticipated procurement
information; (2) provide more transparency through public announcements;
(3) provide advance notice of single tendering procedures; (4) provide
separate announcements for procurement under the WTO; (5) provide an
online system for Internet access to all GOJ procurement announcements;
(6) use the overall-greatest-value evaluation method for
telecommunications and medical technology products over 800,000 SDR\'s;
and (7) use complaint review procedures..

Japan is the world\'s second largest market for information technology
equipment and services (telecommunications, computers, peripherals,
software, and multimedia). Fueling the current strong demand for
telecommunications infrastructure is the Japanese government\'s goal to
connect all Japanese businesses, government offices, schools, and homes
by 2010. Current investment in telecommunications infrastructure is more
than \$40 billion (5 trillion yen) annually. Japan\'s recent exponential
growth in the market demand for networking, for IP/broadband-based
communications, Internet applications, wireless communications (3G,
wireless LAN, etc), and satellite communications is expected to continue
for the next decade.

Surveys have shown that Japanese houses are two to three times more
expensive than equivalent American houses, and many Japanese people are
not satisfied with either the quality or price of their current housing
stock. In contrast, imported American-style homes are regarded as
offering high quality, low cost, and earthquake resistance. Hundreds of
U.S. companies in building materials, manufactured housing and home
building industries are already working with Japanese companies to build
American-style 2x4 platform frame construction homes in Japan.

## Agricultural Products Market [**Return to top**](#chapter-2-political-and-economic-environment)

The value of Japan's **agricultural production** has been falling since
the mid-1980s, with key sectors seeing decreasing production in most
years. Cereals, rice, dairy, beef and pork, and fruits and vegetables
are all experiencing this decline to greater or lesser degrees. Rice
remains Japan's major crop, but falling consumption has led to chronic
surpluses. Japanese policy makers are concerned because Japan currently
imports 60 percent of its food (on a calorie basis). Japan's low rate of
self-sufficiency in food production is likely to further decrease since
Japan's farm population is rapidly aging, with more than 70 percent of
farmers over 60 years of age and few young people willing to go into
farming. In addition, the average farm size is only about four acres and
environmental regulations and landownership rules limit any economies of
scale for Japanese agriculture.

To stem the decline in Japan's agricultural sector, the Government of
Japan (GOJ) continues to provide high levels of domestic support and the
government and farm cooperatives still have a powerful influence over
farmers' production decisions. When Japan's Agriculture Basic Law was
revised in 1999, the GOJ set the goal of achieving a food
self-sufficiency rate of 45 percent by 2010. To achieve this, MAFF
encouraged farmers to grow wheat and soybeans in place of rice, and
introduce more market-oriented pricing policies for dairy, vegetable,
and livestock products. However, MAFF has recognized that its goals for
2010 are unrealistic, given the decline in the Japanese agricultural
sector over the past 10 years and has extended the deadline until 2015.
After months of negotiations, Japan finally passed a rice reform program
that will end its costly production adjustment program by 2009. The
program will shift responsibility for production planning from MAFF to
farm co-ops, increase subsidies to large farmers, and open domestic rice
distribution to more players. In 2005, MAFF announced the outline of a
new farm subsidy program that departs from the current
commodity-specific support given to practically all farmers and launches
direct payments targeting larger scale farmers. The new scheme is
scheduled to commence in JFY 2007.

Though domestic protection is still strong, market access has improved
over the years via persistent negotiations in the WTO by the United
States and others that forced Japan to eliminate some of the
agricultural market access barriers for which it was once famous. Where
earlier quotas and outright bans restricted the market for U.S. beef,
citrus, fruit juice, cherries, apples and ice cream, all of these
markets have now, to some degree been opened. However, access issues
still hamper farm trade due to high tariffs on processed food products,
restrictive plant quarantine measures on fruits and vegetables,
trade-limiting quotas, complicated labeling practices, strict inspection
requirements on imported goods that includes a new system for regulating
maximum residue limits, and time-consuming approval processes for
products of biotechnology.

The combination of improved market access and declining domestic
production resulted in excellent export growth for American agriculture
through most of the 1990s, and made Japan our top overseas export
market. In recent years, due in part to the ban on U.S. beef, Japan has
slipped to the number three export market after Canada and Mexico. In
2005, about 13 percent of all U.S. agricultural, forestry and fishery
products exports, valued at \$9.7 billion, were destined for Japan.
While exports have suffered a setback since 1997 due to Japan's
prolonged recession, tough third-country competition, and food safety
and food image concerns, long-term prospects are excellent for the
following reasons: (1) growing consumer demand for value plays to U.S.
strengths (U.S. foods typically cost less than local products); (2)
Japanese agriculture continues to decline, leading to increased
dependence on imports for stable food supplies; and (3) continued
westernization of the Japanese diet away from fish and rice toward
meats, dairy products and other American staples. Export stars include
wheat, soybeans, corn, pork, frozen corn and mixed vegetables, citrus,
wine, cherries, and processed snack foods. For additional information
about U.S. agricultural, food, forestry and fishery product exports to
Japan and other countries, please see the Foreign Agricultural Service
Homepage at
[**www.fas.usda.gov/scriptsw/attacherep/default.asp**](http://www.fas.usda.gov/scriptsw/attacherep/default.asp).

## Japan's Leading Economic Regions [**Return to top**](#chapter-2-political-and-economic-environment)

Japan's capital city, **Tokyo,** is the country's undisputed center of
government, business, higher education, information, media, fashion, and
culture. Most major Japanese companies, trade associations, and foreign
companies have their headquarters or major branches in Tokyo. Despite
the high cost of residential and commercial office space, most U.S.
companies establish a presence in Tokyo because of the need to interface
with their Japanese customers, obtain market information and, in many
cases, to maintain relations with Japanese government ministries.
Consumers in Tokyo are more likely to come into contact with foreign
products, food and styles than elsewhere in Japan, and consumer trends
and fashion often originate in Tokyo.

The population of Metropolitan Tokyo (Tōkyō-to) is 12.4 million, and
including the continuously built up urban areas around the capital
encompassing the neighboring prefectures of Kanagawa, Saitama, and Chiba
brings the total to over 34 million, equivalent to the New York and Los
Angeles metropolitan areas combined. The entire geographical region
centered around the capital --- often referred to as the "Kantō" ---
boasts the two largest cities in Japan, Tokyo and the industrial and
port city of Yokohama and has a combined GRP of \$1.8 trillion, which
accounts for 36% of Japan's total GDP.

For U.S. companies, the major advantages of establishing a presence in
Tokyo are the huge concentration of major Japanese and foreign
companies; the largest number of consumers in Japan; the close
collaboration between government, industry, and academia; an
unparalleled location at the hub of Japan's road and rail network, with
9 major ports and Japan's two busiest airports (Narita and Haneda) in
the metropolitan area. In addition, major urban renewal schemes
completed or underway in metropolitan Tokyo are contributing to lower
land and business costs.

Attractive areas for U.S. exporters in the greater Tokyo area are
environmental technologies, biotechnology, information and
telecommunications technologies, medical equipment and welfare services,
and the lifestyle market. In addition to local and regional activities
in support of foreign enterprises, Japan's Ministry of Economy, Trade
and Industry (METI) has selected 4 areas in Japan to receive additional
national assistance for incentives and promotion of foreign direct
investment in particular industries. These areas include Yokohama City
in Kanagawa Prefecture (for IT and electronic components) and Chiba
Prefecture (for biotechnology).

**Kansai** is the historical name given to the nine-prefecture region of
western-central Japan, consisting of Osaka, Hyogo, Kyoto, Shiga, Nara,
Wakayama, Mie, Fukui, and Tokushima. The Kansai region is Japan\'s
second-largest industrial, financial, commercial and population center
after the Tokyo area (Kanto). Located about halfway between Tokyo and
the southern tip of Honshu, Japan's largest island, it is the birthplace
of many of the country's largest trading companies, home to several of
the world\'s largest banks, headquarter to a number of Japan's leading
corporations including Nintento, Kyocera, and Panasonic and, as of 2005,
the world's fifth-largest stock exchange in terms of market
capitalization.

The Kansai region has a richly varied topography and covers an area with
a radius of approximately 150 km (95 miles). While occupying only 11% of
Japan's total land area, the Kansai has a population of some 24 million
people (19% of Japan's total), concentrated primarily in the cities of
Osaka, Kobe, Kyoto and Nara. As the traditional commercial center of
Japan, Kansai is an economic giant, with a modern economy led by digital
consumer electronics, the textile and apparel industry, sporting goods,
electronic components, pharmaceuticals, biotechnology, chemicals and
strong exports to China and the United States. This focus on exports has
also encouraged Kansai companies to expand abroad as more than 5685
companies in the region have overseas subsidiaries. In FY 2003,
Kansai\'s GRP (Gross Regional Product) was 92 trillion yen (\$794
billion at \$1=116 yen). If considered a country in its own right, the
Kansai would rank as the 10th largest economy in the world.

The Kansai region has a very efficient and comprehensive transportation
infrastructure. In August 2007, Kansai International Airport (KIX), the
only 24-hour airport in Japan, is scheduled to put its new, 4000 meter
second runway into service. The second runway will bring the airport\'s
capacity up to 180,000 take-offs and landings annually. Upon completion
of a new passenger terminal building in 2011, this capacity is expected
to further increase to 230,000. As a result of the airport's growth, KIX
has experienced an increase in the number of international flights,
particularly to Asian cities. As such, the airport is considered an
important air-link with China and currently exceeds Tokyo's Narita
International Airport in terms of the number of Chinese cities serviced.
As of December 2006, KIX had 733 flights per week connecting the Kansai
region to 73 destinations in 30 countries. Osaka City's Itami Airport
and the newly opened Kobe Airport also serve regions throughout Japan.
In addition, the major ports of Osaka and Kobe provide extensive
shipping facilities and customs clearance services. The regional rail
network is extremely comprehensive and includes Shinkansen, or "Bullet
Train" service that connects Osaka, Kobe, and Kyoto to destinations
throughout Japan.

Kansai's historical ties to trade and commerce offer many advantages to
American companies looking to enter the Japanese market. The region's
superb transportation, communication and infrastructure links are
supported by a, progressive, entrepreneurial business climate. As a
result, innovative new products ranging from the world's largest high
definition plasma television (103 inches) to instant noodles have found
their start in the Kansai. Consumers in the Kansai, who have a
reputation for being particularly choosy and demanding, have helped make
the region a key test market for new products in Japan. Proctor and
Gamble, among other large consumer goods companies, consider the area an
ideal place to do product testing and market acceptability studies. To
help companies tap into this vibrant economy, the region is also looking
to greatly expand the number of conventions it hosts. In FY2004, 421
conventions were held in Osaka. Lower prices than Tokyo also provides an
incentive for firms to conduct business in the Kansai area. Although
currently ranked as the 6^th^ most expensive city in the world, the
region's land and office rental prices are still 30% less expensive than
those found in Tokyo. Lower labor and housing costs also benefit
companies who have operations in the Kansai.

Although the numbers are down from previous several years, local
governments in the region including cities of Kobe and Osaka, still have
public works projects planned that amount to several billion U.S dollars
of investment. As in previous years, these consist of massive land
reclamation and improvement projects, complexes for commercial use,
industrial and research facilities, waterworks and waterfront projects
(*e.g.,* Kansai International Airport, North Umeda Train Yard
Redevelopment Project). The new domestic airport for the city of Kobe,
also on reclaimed land, is the most recent major project to be completed
and began operations in February of 2006.

The Kansai region is host to more than 1000 national, prefectural,
university-affiliated and private research facilities, making it one of
the primary areas for research and development activities in Japan. To
support this cluster of innovation, the Japanese Government designated
the Kansai region as a hub for the biotechnology industry in 2001. This
was done to support the increasing numbers of pharmaceutical, chemical,
textile, and precision machinery companies who were diversifying into
the biotechnology and bio-genome industries. As a result, several
biotechnology parks were established with the goal of promoting the
exchange and transfer of new technologies as well as to support the
establishment of new venture companies.

As of 2005, this initiative has spurred more than 90 companies to move
to the targeted hub areas in Kobe and Osaka. Similar research centers
focusing on life sciences and biotechnology have also proved successful
in Kyoto, Nara, Wakayama, and Shiga Prefectures. Osaka is also
developing a robotics research center and recently hosted the RoboCup
competition and exhibition in July of 2005.

As of 2005, 279 foreign-affiliated large companies had established their
Japanese headquarters in the Kansai area. This amounts to just 8%
percent of the approximately 3500 major foreign companies operating in
Japan. Of this total, 49% are European and 33.7% are American. Of the
foreign affiliates operating in Kansai, 41.9% are in the manufacturing
industries, such as chemicals and pharmaceuticals, general machinery and
electrical machinery, while the rest are engaged in non-manufacturing
areas such the information technology/service sectors and the wholesale
of machinery and chemicals. One of the most significant recent trends
has been the rapid expansion of U.S. companies in the Japanese retail
sector with store openings for CostCo, GAP, Nike, L. L. Bean, Tiffany\'s
and Coach. High-end goods, in particular, are finding success in the
Kansai. The U.S. luxury jewelry company, Harry Winston, for example, is
set open its largest retail store in the world this year in Osaka.

Because of its geographical and historical ties to the Asian continent,
trade with Asia is particularly large in the Kansai region. The Osaka
Customs Office, which covers Toyama, Ishikawa, Shiga, Kyoto, Nara,
Osaka, and Wakayama Prefectures, reported 13,529 bil. yen (\$123.6
billion \$1=110 yen/2005 exchange rate) in exports and 10,632 bil. yen
(\$96.7 billion) in imports in 2005. These figures represented 6.6% and
14.2% increases respectively over 2004. Exports to Asia accounted for
60.2%, while imports from Asia accounted for 57.0% of the totals.
Exports to the U.S. were 16.4% percent of the total, while imports from
the US represented 9.7% of all imports with a value of \$9.3 billion.
Imports from the U.S. increased by 13.7% in 2005. The first 10 months of
2006 showed a 7.5% increase in imports from the U.S. to the Kansai with
particular increase noted in tobacco, medical products and plastics. The
region is on track for another stellar year with November 2006 data
indicating a 13.3% growth in exports and 14.1% growth in imports over
comparable November 2005 statistics.

The U.S. Commercial Service Osaka-Kobe provides an extensive array of
products and services designed to help U.S. companies capitalize on
opportunities in Japan. The office has national responsibility for the
sporting goods, apparel, textiles, and residential construction
materials sectors and regional responsibility for the medical,
biotechnology, environmental, tourism and high-tech industries. Working
closely with the American Chamber of Commerce in Japan (ACCJ) and other
local multipliers, CS Osaka helps promote American products, services
and tourism through the organization of targeted events, U.S. Pavilions
at trade fairs, market research on emerging commercial opportunities,
business counseling, networking, partnership searches, key
introductions, and advocacy. For more information about the
opportunities in the Kansai for U.S. firms, visit our CS Japan website
at [www.buyusa.gov/japan/en](http://www.buyusa.gov/japan/en).

Strategically located midway between the Tokyo and Osaka metropolitan
areas, the **Chūbu Region** of Japan consists of nine prefectures ---
Aichi, Ishikawa, Fukui, Gifu, Mie, Nagano, Shizuoka, Toyama, and
Yamanashi --- clustered together in the center of Honshu, Japan\'s
largest island (though some of these prefectures are also claimed by
other regions, as mentioned above). Taken together, these nine
prefectures have a total population of 21 million, making Chūbu the
third most populous region in the country. Most of the region\'s
population and industry is concentrated along the Pacific coast, in the
Tokai area (Aichi, Gifu, Shizuoka, and Mie Prefectures).

Chūbu is the manufacturing heartland of Japan and an export powerhouse.
Supported by well-developed infrastructure and advanced manufacturing
technology, the region is home to world-class Japanese manufacturers.
Toyota Motor Corporation is the symbol of the region's global
manufacturers in the transportation equipment sector. Suzuki Motor,
Yamaha, Honda and Mitsubishi have their headquarters or main plants in
the region. World-class auto parts manufacturers such as Denso and
Aishin AW are also based in the region. The Aerospace sector is also
very dynamic, led by Mitsubishi, Kawasaki, and Fuji Heavy Industries,
all of which are major suppliers for Boeing and other aerospace firms
and play key roles in Boeing 787 Dreamliner production. World-leading
machine tools manufacturers such as Yamazaki Mazak and Okuma are major
exporters and important supports to regional manufacturing. In Mie
prefecture, just outside Nagoya, Sharp's flagship Kameyama liquid
crystal panel factory represents a high-technology concentration with
factories of Toshiba, Fujitsu and Toppan. Among the many other global
players in the region are Daido Steel, Brother Industries, Makita,
Noritake, and NGK Insulators.

Led by these globally active manufacturers, Chūbu is known as the region
with perhaps the most vigorous economy in Japan. The region as a whole
accounts for about 18 percent of Japan\'s GDP (roughly equivalent in
size to the economy of India or Brazil) and more than half of Japan\'s
total trade surplus with the United States. Aichi Prefecture, the
political, economic, and transportation center of the region, has ranked
first among all Japanese prefectures in the value of its product
shipments for 28 consecutive years. Indicative of the strong regional
economy, the ratio of labor demand to supply for Aichi is a remarkable
1.94, against the 1.09 national average for Japan (July, 2006).

The Nagoya Station neighborhood in downtown Nagoya, the capital of Aichi
prefecture, symbolizes the region\'s flourishing economy. In fall 2006,
the 47-story Midland Square building opened, and Toyota Motor
transferred its international sales operations from Tokyo to Midland
Square in January 2007, further centralizing its management in the
Nagoya area. Other property highlights in the Nagoya Station area
include the opening of the 40-story Lucent Tower and 33-story Aquatown
in 2007, followed by the 36-story Spiral Tower in 2008.

Reflecting the region\'s strong economy, Chūbu region residents,
traditionally profiled as frugal, are emerging as affluent consumers
with high disposable income. Leading brands have opened flagships stores
in downtown Nagoya including Tiffany, Louis Vuitton, Coach, Prada, the
Gap, Apple Computers, and Hermes.

Nagoya is one of Japan\'s premier industrial and technological centers
as well as a huge market in its own right. Despite being a major
economic center, the city is well known for its high quality of life and
competitive business costs. Housing costs and office rents are
substantially below those found in Tokyo or Osaka. However, in contrast
to the lively global activities of regional manufacturers, Central Japan
has fewer foreign companies than other regions. The ratio of foreign
companies in the Tokai area is mere 1.2% compared with Tokyo (6.9%) and
Kansai (2.3%). Assisted by METI and JETRO, metropolitan Nagoya's three
prefectures --- Aichi, Mie and Gifu --- along with various cities and
chambers of commerce have been actively promoting inbound foreign direct
investment through the "Greater Nagoya Initiative." Dana Japan, Cabot
Microelectronics, TRW Steering Systems, Pfizer Pharmaceuticals, Dow
Chemical, and PPG Industries are examples of American firms that have
set up manufacturing or distribution bases in and around Nagoya.

Through its close relationship with Chūbu public and private sector
entities, the Commercial Service in Nagoya works to uncover commercial
opportunities for U.S. firms in a variety of sectors. CS Nagoya believes
that particularly good prospects exist for U.S. firms in auto, auto
parts, motorcycle, aerospace, manufacturing equipment and systems,
intelligent transportation systems (ITS), environmental remediation, and
business aviation.

The **Kyūshu/Yamaguchi** Region of southwestern Japan consists of seven
prefectures on Kyūshu Island (Fukuoka, Oita, Saga, Nagasaki, Kumamoto,
Miyazaki, Kagoshima) and Yamaguchi prefecture on the southern tip of
Honshu, with a combined population of over 15 million.  The region\'s
\$410 billion economy constitutes Japan\'s fourth largest economic
center, representing about 10 percent of national GDP --- larger than
that of Australia and almost equal to that of South Korea.  This region
is traditionally known as Japan\'s gateway to Asia and enjoys extensive
historical, cultural, and trade ties with continental Asia, particularly
South Korea, Taiwan and mainland China.  The United States remains an
important trading partner, but trade with Asia is predominant and Kyūshu
is becoming increasingly integrated into the East Asian regional
economy.\
\
Kyūshu boasts an economic growth rate above the national average, and
its dynamism stems from a diversified economy that includes many
high-tech industries.  Dubbed Japan\'s \"Silicon Island,\" Kyūshu
accounts for 30% of Japan\'s total production of semiconductors.
 Northern Kyūshu also boasts over 10% of Japan\'s automobile output,
with Toyota, Nissan, and Daihatsu operating state-of-the-art components
manufacturing and final assembly facilities.  Mazda also has a large
assembly plant in Yamaguchi.  Total auto production in Kyūshu is
expected to exceed one million cars annually by 2006.  As a leading
center for research, Kyūshu hosts numerous R&D facilities in such
diverse fields as consumer electronics, biotechnology, robotics, ceramic
materials and high-speed ocean transport carriers.  The southern
prefecture of Kagoshima is home to Japan\'s two space launch facilities
at Uchinoura and Tanegashima.  Other important industries include steel
manufacturing, shipbuilding, tourism, commercial fishing, and
agriculture.\
\
With a population of 1.3 million, Fukuoka City is the economic,
educational, and cultural center of Kyūshu.  While manufacturing is
prevalent in Fukuoka prefecture\'s surrounding areas, the city\'s
economy is services-based, with many large retail outlets and regional
headquarters offices for banking, insurance, and real estate.  Living
expenses (including housing) and office rents are lower than in Japan\'s
other large metropolitan areas.  The city enjoys excellent
transportation infrastructure, including Kyūshu\'s principal
international airport, high-speed ferry service to South Korea, and the
southern terminus for Japan\'s *shinkansen* (bullet train) network.
 *Asia Week* magazine selected Fukuoka as \"the most livable city in
Asia\" in 1997, 1999 and 2000.\
\
The Economic/Commercial Section of the U.S. Consulate in Fukuoka has
been actively assisting U.S. businesses and promoting their interests in
the region for over 40 years.  The Consulate believes many sectors of
the Kyūshu/Yamaguchi economy offer promising opportunities.  With its
long history of openness to foreign influences, the Fukuoka area has an
established reputation as a useful test market for new consumer
products, services, and retail concepts before they are expanded to
wider areas of Japan.  Familiar U.S. retail names (Toys \'R\' Us,
Costco, Starbucks, and The Gap, just to name a few) have an active
market presence.  Major American companies have established research and
production facilities in electronics, computers, and medical devices,
and are also active in architecture, design and construction, energy,
insurance and finance.  In recent years U.S.-based investment funds have
made major acquisitions of hotels and related leisure and retail
facilities in Kyūshu.  Another sector of growing interest is
environmental products and services.  In particular, KitaKyūshu City in
Fukuoka prefecture, a historical center of heavy industry, is seeking to
become a regional leader in environmental remediation and recycling.
 Good export prospects exist in many other sectors, including building
materials, medical equipment, and health care products.

**Northern Japan** --- Two regions make up Northern Japan: Hokkaido and
Tohoku. Together these regions have a combined population of 11 million
and a GRP of approximately \$368 billion. Hokkaido, located roughly 500
miles north of Tokyo, is Japan\'s northernmost island. Sapporo,
Hokkaido\'s capital and largest city, has a population of 1.9 million.
The Tohoku region consists of six prefectures in northern Honshu,
Japan\'s main island. The Commercial Service Sapporo covers four of
these prefectures: Aomori, Akita, Iwate, and Miyagi (in addition to
Hokkaido). Sendai, Tohoku\'s economic and commercial center and the
capital of Miyagi, has a population of just over 1 million.

The region is Japan\'s agricultural heartland, with dairy production and
farming in Hokkaido and highly prized rice growing regions in Akita and
Miyagi. With a GRP of \$146 billion, Hokkaido is first in production of
beets, kidney beans, potatoes, wheat, soybeans, onions, pumpkins,
carrots, radishes, milk, beef and many other agricultural products.
Hokkaido supplies 61.7% of Japan's wheat, 77.8% of its potatoes, and
46.1% of its milk. In addition, Hokkaido also provides 26.5 % of
Japan\'s fish catch. However, Hokkaido people are not, as often thought,
predominantly farmers and fisherman. Only 6.7% of Hokkaido\'s 2.8
million jobs are in farming and 1.8% in fishing. Hokkaido\'s economy
depends on services (67% of the workforce) and construction (13%).

In 2005, northern Japan\'s direct imports from the United States
amounted to approximately \$1.0 billion. More than an additional \$1.0
billion in U.S. imports to northern Japan also entered Japan through
Tokyo, Yokohama and Osaka before being transshipped to their final
destination in the north. These transshipment costs --- and high
transportation costs in Japan, in general --- can add significantly to
the costs of shipping products from the United States to seaports and
airports in northern Japan. As a result, container traffic from the
United States is increasing at the ports in Ishikari and Tomakomai (both
convenient to Sapporo) and Hachinohe (in the Aomori Prefecture) and
Sendai, as a way to reduce transportation costs. In addition, increasing
numbers of U.S. containers are arriving in northern Japan through the
port of Pusan, South Korea (which has a special docking agreement with
the port of Ishikari) as Pusan\'s port and cargo handling charges are
much lower than in those in Tokyo, Yokohama and Osaka. As for rail
links, the construction of the new *Hokkaido shinkansen* (bullet train)
began in May 2005. The local business community expects that this
development will produce major beneficial economic effects.

Northern Japan\'s two main international airports --- Chitose (Sapporo)
and Sendai --- have good passenger and cargo handling capacities and are
eager to develop more international routes. Growing economic ties with
the Russian Far East and the prospect of future development in Russia\'s
oil and gas sector have led to regular commercial flights between
Hokkaido and Sakhalin.

In recent years, Hokkaido has begun to attract tourists from abroad.
Statistics show a rapid increase of tourists from neighboring Asian
countries. Taiwan has led the way with over 276,800 visitors to Hokkaido
in 2005, and Korean, Hong Kong, and Chinese visitors are increasing as
well. The number of tourists from Australia has also shown tremendous
growth in recent years, which, beginning in 2004, has led to seasonal
direct flights between Cairns and Sapporo. The number of Australian
visitors increased from 3,700 in 2000 to 19,000 in 2005.

Sapporo recently topped the list of "the most attractive cities in
Japan", based on a survey of 25,000 people. Three other cities in
Hokkaido made the top 10: Hakodate (#3); Furano (#6); and Otaru (#7).
According to the Hokkaido prefectural government, the total number of
visitors to Hokkaido increased by 30,000 from 2004, amounting to a total
of 6.35 million visitors. The upturn is mostly due to a 20 percent
increase in the number of foreign tourists. Official statistics show
that the number of foreign visitors nearly doubled since 2003 to 514,000
visitors in 2005.

Northern Japan\'s well-developed infrastructure, highly skilled workers,
and relatively low real estate costs, combined with city and regional
government investment incentives, have prompted many U.S. companies to
view Hokkaido and Tohoku as attractive locations for investment and
overseas operations. In 2001, Amazon Japan (Amazon.com's Japanese
subsidiary) established its world\'s ninth Call Service Center. In 2005,
LaSalle Investment built an outlet mall in Chitose. More recently,
Lindal Cedar Homes has built vacation houses in Niseko. Citibank
Investments has also invested in Niseko --- an area that is quietly
attracting extraordinary amounts of foreign direct investment --- with
the purchase of a large resort facility. The impact of this new
investment in the Niseko-Kutchan is creating jobs (nearly 600 to date),
generating revenue and increasing land value (up to 33%), according to
JETRO estimates. Given this trend, more firms are showing interest in
purchasing properties in northern Japan. As for export opportunities,
home building products and interiors, packaged homes, pharmaceuticals,
medical equipment, and marine products continue to be particularly
promising sectors in northern Japan.

**Okinawa Prefecture** has a population of 1.37 million and a GPP (Gross
Prefectural Product) of approximately \$30.7 billion (3,572,100 million
yen / \$1=116.31 yen). By Japanese standards, Okinawa\'s market is
relatively small, but there are still significant opportunities.
American companies are helped by the fact that Okinawans --- because of
their history and culture --- tend to be open to imported foods and
consumer goods, especially from the U.S. Okinawa also has the youngest
workforce in Japan, a workforce that is well educated and is actually
still growing, thanks to a robust birthrate. Okinawa also has the lowest
wage and commercial property rates and a range of tax incentives and
subsidies for potential investors and employers (see below for details).

The two largest sectors of the local economy are construction and
tourism, areas in which U.S. companies excel. One large-scale public
investment project in the works is the establishment of the \"Okinawa
Institute of Science and Technology (OIST),\" a project that is hoped
will play a major "incubator" role in the economic and social
development of Okinawa in the coming years. In FY 2007, the Japanese
Government approved approximately \$75 million to start construction of
one administrative and two laboratory facilities connected to the
project. Overall construction is expected to be completed and the
facility up and running by FY 2012. American companies are expected to
be competitive in the design of on and off campus facility design
projects.

The plan to build a new airport on the nearby island of Ishigaki has
been underway since October 2006. (However, American involvement in the
actual construction is admittedly problematic.) Likewise, the budget for
survey of Naha International Airport's expansion has been approved by
the central government for FY 2007. In addition, the U.S. Naval Hospital
Okinawa, which is the largest overseas hospital in the U.S. Navy system
and currently located at Camp Lester, is in the process of moving to
nearby Camp Foster. This project, which is being resisted by Ginowan
City authorities, is expected to offer business opportunities to U.S.
firms involved in medical equipment and supplies.

The Ministry of the Environment has been consigning the establishment of
production and testing facility for methanol products derived from
sugarcane molasses and bio-ethanol fuel on Miyako Island. As of December
2006, approximately 300 vehicles equipped to use E3 were being test on
the island. The number of cars tested is expected to increase to 1,000
in FY 2007. In addition to bio-ethanol, the Government of Japan is also
planning to establish facilities in Okinawa to showcase solar and wind
power technologies.

The number of tourists visiting Okinawa has grown steadily. In 2006,
over 5.64 million people visited the island --- a record. New Okinawa
Governor Hirokazu Nakaima has stressed his intention to increase the
number of incoming tourists to 10 million during his administration.
Governor Nakaima is the former chairman of the Okinawa Electric Power
Company and former chairman of the Federation of Okinawa Chambers of
Commerce and Industry. In his campaign, Nakaima focused on economic
issues. One of his pledges during the campaign was to reduce the
prefecture's unemployment rate to that of mainland Japan.

Okinawa offers American firms potential business opportunities in
connection with first class resort hotels and hotel operations, marine
sports, out door equipment and related services. In addition, the
continuing development of Okinawa as a retirement center for Japan's
baby boomers may also offer attractive business opportunities. In
increasing numbers, Japanese retirees are expected to move to Okinawa or
travel to Okinawa to take advantage of the warm climate, beautiful
beaches, great food and friendly people.

In connection with the above, there are efforts underway on the island
to create a gaming industry in Okinawa --- with its expected
legalization in Japan in the coming years. In particular, the Urasoe
Chamber of Commerce and Industry has been discussing the development of
a casino resort using U.S. Military land (Camp Kinser) that is expected
to be returned to the municipality in the near future.

Okinawa Prefecture is also promoting policies to encourage the
introduction of FDI. For example, Okinawa has established the first and
--- so far only --- Special Free Trade Zone in all of Japan. Various tax
incentives apply to, not only the Special Free Trade Zone, but to the
Information and Communications Industry Promotion Zone, Special
Information and Communications Industry Zone and Financial Businesses
Promotion Zone as well. These incentives include exemptions on the
payment of national and local taxes. There are other incentives
available only in Okinawa, including subsidies to promote the employment
of Okinawa youth and support measures to reduce domestic and overseas
communication costs.

One sector that has benefited from central government and OPG support
has been Okinawa-based telephone call centers. In all, the OPG has
succeeded in encouraging the investment of 37 call centers and another
73 IT-related companies to the island since 1990. These companies
employee close to 11,000 people --- 9,000 in call centers and 2,000 in
IT. Participating companies include American firms' affiliated
companies, such as IBM, American Home Insurance (AIG), AIU, CITIBANK,
Cisco Systems and Oracle.

## Government Role in the Economy [**Return to top**](#chapter-2-political-and-economic-environment)

Traditionally, the bureaucracy --- created in 1868 --- has played a
leading role in the Japanese economy. The ministries\' power was drawn
from the thousands of required licenses, permits and approvals that
tightly regulated business activity in Japan and by informal, but in
practice virtually compulsory, edicts called \"administrative
guidance.\" The reach of the bureaucracy has been further extended by a
plethora of organizations that perform semi-regulatory functions.
Business in Japan has maintained very close relations with the
bureaucracy and politicians---a set of relationships commonly referred
to as the \"iron triangle.\" Japanese ruling party politicians have
depended on contributions by business. Major companies and industry
associations also provided lucrative *amakudari* (\"descent from
heaven\") employment for high-level bureaucrats retiring from government
service. Bureaucratic paternalism blocked new companies from entering
the market and pushed up prices. Members of the Japanese National Diet
(parliament) have small staffs and traditionally have relied on
bureaucrats for policy initiatives and the drafting of legislation.

The role of government institutions in the economy has been changing
over the past decade as the central government pursues a long-term
program of administrative reform and deregulation. In 2001, the
bureaucracy was reorganized from 22 ministries and agencies to 13. A
Cabinet Office was established and located above the other ministries on
government organization charts to serve as a think tank for politicians
and to coordinate policies among the other ministries. At the same time,
the number of politicians posted to senior positions in the ministries
was increased from an average of two or three to five, to try to
increase the administration\'s control over the bureaucracy. The
reorganization --- together with changes to political contribution laws,
stricter guidelines on the use of administrative guidance, and increased
criticism of *amakudari* employment practices --- is slowly eroding the
strength of the \"iron triangle\" and weakening the bureaucracy\'s
influence over the economy.

All foreign exchange transactions to and from Japan --- including
transfers of profits and dividends, interest, royalties and fees,
repatriation of capital, and repayment of principal --- are, in
principle, freely permitted unless expressly prohibited. Formal Controls
on allocation of foreign exchange and most restrictions on foreign
investment are gone. However, the Japanese Government continues to play
a significant role in promoting certain favored industries. GOJ policy
and regulatory framework continue to favor domestic producers over
consumers. This can sometimes translate into a \"protective attitude\"
when it comes to foreign competition and new products from the outside.

Japan is now emerging from a 15-year economic stagnation and is enjoying
the longest continuous period of economic growth in the post-war period.
Recent structural reform programs have stimulated growth by encouraging
companies to restructure debt, cut costs and improve their bottom lines.
During the 1990\'s, many companies also moved production off shore
prompting fears of a \"hollowing-out\" of Japanese industry but also
leading to lower prices for consumers and increased imports. However, in
areas like industrial goods, deregulation efforts have been less
visible.

In general, it is increasingly possible for foreign companies to
participate in the Japanese market. The Japanese Government has removed
most legal restrictions on exports and foreign investment in Japan. The
U.S. and Japanese governments continue to work on removing
anti-competitive and exclusionary business practices and resolving
market access problems through bilateral dialogue. Under the Economic
Partnership for Growth, launched by President Bush and Prime Minister
Koizumi in June 2001, the U.S. and Japanese governments have worked to
cut regulations in sectors of key economic importance where U.S. firms
are globally competitive --- telecommunications, medical equipment and
pharmaceuticals, energy (including power generation and transmission
equipment), information technology, insurance, and financial services.

While Japan\'s business system is different from the United States,
American companies can successfully adapt. The 1300-company, 3200-member
American Chamber of Commerce in Japan (ACCJ) is the largest overseas
AmCham in the world, and its 40- plus committees and sub-committees are
highly visible lobbyists for U.S. business interests. U.S. Embassy
officers are liaison to over 20 of these committees, and work closely
with the ACCJ on market access and investment issues. Some knotty
regulatory barriers and discrimination still exist, and when a company
cannot solve such problems by itself or through its legal advisers in
Japan, the U.S. Government stands ready to help.

## Infrastructure [**Return to top**](#chapter-2-political-and-economic-environment)

Japan has a fully developed physical infrastructure of roads, highways,
railroads, airports, harbors, warehouses and telecommunications for
distribution of all types of goods and services. Japan is also engaged
in a large, though slightly reduced, expansion of public works projects
both to enhance the business infrastructure and to help stimulate the
economy. However, urban roads and highways remain inadequate,
overcrowded, and toll roads are expensive. In addition, Japan\'s
airports, among the world\'s most expensive, contribute to the high cost
of doing business. Japan\'s port practices are generally opaque and
inefficient by global standards; and import processing, while improving,
remains relatively slow. Japan has recently made progress, reducing
Customs overtime fees by fifty percent and extending hours of operation
at major air and seaports to make them 24/7 facilities. More reforms,
however, are needed if Japan is to once again become internationally
competitive.

## Web Resources [**Return to top**](#chapter-2-political-and-economic-environment)

##### General

U.S. State Department *Background Notes*
[www.state.gov/r/pa/ei/bgn](http://www.state.gov/r/pa/ei/bgn)

Foreign Agricultural Service
[www.fas.usda.gov/](http://www.fas.usda.gov/)

Commercial Service Japan
[**www.buyusa.gov/japan/en**](http://www.buyusa.gov/japan/en)

Ministry of Economy,
[www.meti.go.jp/english/](http://www.meti.go.jp/english/)

Trade and Industry

American Chamber of Commerce
[www.accj.or.jp/accj.or.jp/content/01_home](http://www.accj.or.jp/accj.or.jp/content/01_home)

in Japan (ACCJ)

Venture Japan: Doing Business in Japan
[www.venturejapan.com/index.htm](http://www.venturejapan.com/index.htm)

How to Succeed in the Japanese Market

**Tokyo & Kanto Area**

Tokyo Metropolitan Government (Tōkyō-cho)
[www.metro.tokyo.jp/ENGLISH/](http://www.metro.tokyo.jp/ENGLISH/)

Tokyo Chamber of Commerce & Industry
[www.tokyo-cci.or.jp/english/](http://www.tokyo-cci.or.jp/english/)

Kanto Bureau of Economy, Trade, and Industry
[www.kanto.meti.go.jp/english/](http://www.kanto.meti.go.jp/english/)

(a division of the Ministry of Economy, Trade

and Industry --- METI)

Chiba Prefecture
[www.pref.chiba.jp/english](http://www.pref.chiba.jp/english)/

Saitama Prefecture
[www.pref.saitama.lg.jp/index_e.html](http://www.pref.saitama.lg.jp/index_e.html)

Kanagawa Prefecture
[www.pref.kanagawa.jp/menu/english.htm](http://www.pref.kanagawa.jp/menu/english.htm)

(includes city and port of Yokohama)

City of Yokohama
[www.city.yokohama.jp/en/](http://www.city.yokohama.jp/en/)

**Kansai (Osaka-Kobe)**

Kansai Economic Federation (Kankeiren)
[www.kankeiren.or.jp/English/index.htm](http://www.kankeiren.or.jp/English/index.htm)

Osaka Chamber of Commerce & Industry
[www.osaka.cci.or.jp/e/](http://www.osaka.cci.or.jp/e/)

U.S. Commercial Service Osaka-Kobe <osaka-kobe.office.box@mail.doc.gov>

ACCJ Kansai Chapter
[www.accj.or.jp/content/01_home/kansai](http://www.accj.or.jp/content/01_home/kansai)

**Chūbu (Nagoya)**

Chūbu Economic Federation
[www.chukeiren.or.jp/english/index2.html](http://www.chukeiren.or.jp/english/index2.html)

U.S. Commercial Service Nagoya <nagoya.office.box@mail.doc.gov>

ACCJ Chūbu Chapter
[www.accj.or.jp/content/01_home/Chūbu](http://www.accj.or.jp/content/01_home/chubu)

##### Hokkaido/Sapporo

Hokkaido Development Bureau
[www.hkd.mlit.go.jp/eng/index.html](http://www.hkd.mlit.go.jp/eng/index.html)

Sapporo Chamber of
[www.sapporo-cci.or.jp/worldbusiness/](http://www.sapporo-cci.or.jp/worldbusiness/)

Commerce & Industry

U.S. Commercial Service Sapporo <misa.shimizu@mail.doc.gov>

##### Kyūshu

Kyūshu-Yamaguchi Economic Federation (Kyukeiren)

[www.kyukeiren.or.jp/english/index.html](http://www.kyukeiren.or.jp/english/index.html)

Fukuoka Chamber of Commerce and Industry
[www.fukunet.or.jp/](http://www.fukunet.or.jp/)

Fukuoka Foreign Trade Association
[www.fukuoka-fta.or.jp/](http://www.fukuoka-fta.or.jp/)

U.S. Consulate Fukuoka

Yoshihiro Yamamoto, Commercial Specialist
<yoshihiro.yamamoto@mail.doc.gov>

##### Okinawa

Let's Do Business in Okinawa
[www.okinawa-ric.or.jp/kaigai/eng/index.html](http://www.okinawa-ric.or.jp/kaigai/eng/index.html)

Okinawa Free Trade Zone
[www.pref.okinawa.jp/zone/](http://www.pref.okinawa.jp/zone/)

U.S. Consulate General Naha

Akinori Hayashi, Commercial Assistant <hayashiax@state.gov>

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 3: Selling U.S. Products and Services

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Using an Agent or
    Distributor](#using-an-agent-or-distributor-return-to-top)

-   [Establishing an Office](#establishing-an-office-return-to-top)

-   [Franchising](#franchising-return-to-top)

-   [Direct Marketing](#direct-marketing-return-to-top)

-   [Joint Ventures/Licensing](#joint-ventureslicensing-return-to-top)

-   [Selling to the
    Government](#selling-to-the-government-return-to-top)

-   [Distribution and Sales
    Channels](#distribution-and-sales-channels-return-to-top)

-   [Selling
    Factors/Techniques](#selling-factorstechniques-return-to-top)

-   [Electronic Commerce](#electronic-commerce-return-to-top)

-   [Trade Promotion and
    Advertising](#trade-promotion-and-advertising-return-to-top)

-   [Pricing](#pricing-return-to-top)

-   [Sales Service/Customer
    Support](#sales-servicecustomer-support-return-to-top)

-   [Protecting Your Intellectual
    Property](#protecting-your-intellectual-property-return-to-top)

-   [Due Diligence](#due-diligence-return-to-top)

-   [Local Professional
    Services](#local-professional-services-return-to-top)

-   [Web Resources](#web-resources-return-to-top-1)

## Using an Agent or Distributor [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Establishing a direct presence in Japan is the best way to penetrate the
Japanese market, but this can be an extremely expensive strategy. The
use of agents/distributors is a more realistic marketing strategy for a
small or medium-sized U.S. firm, but this approach requires great care
in the selection of the representative.

Distributors in Japan usually cover a specific territory or industry.
Import agents are often appointed as sole agents for the entire country
(although there is no statutory requirement that this be done). In some
cases exclusivity may be necessary to ensure a strong commitment by the
Japanese agent towards expanding sales. But under no circumstances
should a U.S. company be pressured into handing over control of the
whole market if there is doubt as to the ability or willingness of the
Japanese company to develop the entire market. Regional exclusivity, a
limited term of representation, minimum sales, or qualitative indicators
of sales efforts are good strategies as a safeguard in exclusive agency
contracts.

While the Japanese Fair Trade Commission has guidelines applicable to
exclusive agency contracts, there are no statutory damages required upon
termination of an agency contract. Given the close-knit nature of
business circles and the traditional wariness towards foreign suppliers,
replacing a Japanese agent or distributor could cause reputation
problems if not handled in an extremely sensitive manner. The U.S.
company may be viewed as lacking adequate commitment to Japanese
business relationships. Japanese agents may request "parting
compensation" in the event the foreign exporter decides to dissolve a
business relationship. Since this is a common practice domestically,
U.S. companies should address this eventuality prior to executing a
contract.

A common mistake made by many U.S. firms is to try to use a list of
importers as a basis for "cold calls" on prospective agents. The
Japanese prefer to do business with someone only when they have been
properly introduced and have met face-to-face. To help dispel reluctance
on the Japanese side, an introduction by a \"go-between\" typically
serves to vouch for the reliability of both parties. Appropriate third
parties for such introductions include other Japanese firms, U.S.
companies that have successfully done business in Japan, banks, trade
associations, chambers of commerce, the U.S. Department of Commerce and
the U.S. Commercial Service in Japan. U.S. state representative offices
in Japan, JETRO, the American Chamber of Commerce in Japan (ACCJ), and
Japanese government ministries can also offer assistance.

U.S. companies should be selective in choosing a Japanese business
partner. Credit checks, a review of the Japanese company\'s industry
standing and existing relations with Japanese competitors, and
trust-building are all part of the process. Many problems can be avoided
by carrying out comprehensive and professional due diligence. The U.S.
Commercial Service can help U.S. companies find business partners in
Japan. Find out how by visiting
[www.buyusa.gov/japan/en/partner.html](http://www.buyusa.gov/japan/en/partner.html).

Part of the difficulty in choosing a Japanese agent is assuring that the
agent will devote sufficient attention to expanding the market share of
the U.S. product. A U.S. company should probably avoid a distributor
that targets only limited, high-price niches; is compromised by strong
ties to one particular industry group (*keiretsu*); fails to compete
directly with established Japanese products; or is not prepared to
pursue volume sales for the U.S. exporter. Also, companies should be
wary of distributors that co-handle competitors lines, or products that
are complimentary in nature and could present conflicts of interest for
the distributor.

To attract a Japanese business partner, a U.S. exporter must present an
image of dependability, innovation, superior quality, competitiveness,
and a commitment to building personal relationships. A U.S. company
should show that it is well regarded in its industry; that it has
researched the market; that it is prepared to respond to cultural
requirements (*e.g.,* by preparing high-quality marketing materials in
Japanese on the company and its products/services); and that it responds
promptly to all inquiries from Japan. Frequent communication by fax,
email or phone is crucial. Regular visits to Japan are a must, as are
offers to host new partners on reverse trips to U.S. headquarters to
view manufacturing and operations.

Another important factor that merits consideration in the Japanese
market is sales commissions paid to agents and distributors. Under an
agency contract, the agent normally sells the product to the customer
"back-to-back," at the same price as that paid to the supplier. The
supplier then pays a sales commission to the agent at the percentage
provided for in the agency contract or agreement. Under a
distributorship contract, the supplier sells the product to the
distributor, who is then free to add to the purchase price whatever
markup it chooses in determining the sales price to the customer.
Commission rates vary according to the product and contract terms.
Generally speaking, sales commissions range from 10 to 20 percent for
"spot" (one-time or irregular) transactions, and from 5 to 10 percent
for regular, ongoing business transactions. In the case of bulk
materials (*e.g.,* iron ore or coal), however, commission rates are much
lower, in the neighborhood of 1 to 3 percent. In the case of medical,
laboratory, and scientific analytical instruments, commission rates
typically are much higher, in the neighborhood of 20 percent or even
higher.

[]{.mark}

Occasionally, an American exporter deems it necessary, for various
reasons, to terminate an existing distributor relationship with an
importer in Japan. In such cases, we believe it is essential that the
American company not needlessly alienate its existing partner and
confuse its current end-users by seeking a new agent or distributor.
Japan\'s business world is small and relatively concentrated, both
politically and economically. Business relationships are formed,
conducted, nurtured, and ended with an unusual degree of attention to
appearances and decorum. Extreme caution and diplomacy are therefore
warranted if an overseas company wishes to sever its relationship with
its existing Japanese agent or distributor.

[]{.mark}

Once an agent/distributor agreement is signed and the American company's
products gain a foothold in the Japanese market, the American company
may want to consider establishing a representative office in Japan (see
below) to support the distributor\'s sales and marketing efforts and to
facilitate communications with U.S. company headquarters. A technical
engineer is often best suited for this role because such a person
understands product capabilities and end-user requirements. This is, of
course, more of a long-term consideration, but one that American
companies may wish to consider in putting together their strategic mid-
to long-term plan for Japan.

## Establishing an Office [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Although still costly, establishing a presence and an office in Japan
has become less expensive given recent decreases in the costs of labor,
office rent, and other expenses.

A U.S. company that wishes to collect information or improve
communication with business contacts in Japan may wish to establish a
**representative office.** Such an office can obtain market data and
other information and provide necessary promotional and service support.
A representative office is not subject to Japanese taxes and
establishing an office does not require special approval. However, a
representative office must not involve itself in commercial transactions
or generate income, and therefore cannot directly handle commercial
orders. The liaison office may provide guidance and support to an agent
and manage all marketing activities except for the actual sale.

A **branch office** of a U.S. company can engage in trading,
manufacturing, retailing, services, or other business. A branch office
may take and fill orders and carry out a full marketing program,
including advertising, recruiting a sales force, and performing
promotional activities. A branch office is liable for payment of
Japanese taxes. The branch office must appoint a resident representative
in Japan and must register with the Legal Affairs Bureau of the Ministry
of Justice. Furthermore, the establishment of a branch office is
considered a direct investment under the Foreign Exchange and Foreign
Trade Control Law and requires reporting to the Ministry of Finance
through the Bank of Japan within 15 days after the establishment of the
office. Prior notification is required when the investment involves
types of industries that could endanger Japan's national security, or
disrupt the country's law and order, and which might adversely and
seriously affect the smooth performance of the Japanese economy.
Industry sectors that may be affected include aircraft manufacturing,
arms, nuclear energy and related industries, narcotics and vaccine
manufacturing, agriculture, forestry, fisheries, oil, and leather
product manufacturing.

An alternative to a branch office is a **wholly owned corporation.**
Prior notification is required when the investment involves the industry
sectors listed in the previous paragraph. Setting up a wholly-owned
corporation will involve more time and expense, but it can offer an
effective means to guarantee better protection for proprietary
information, obtain credit, and penetrate markets which have subtle but
substantial barriers to imports.

A fourth approach is to pool resources of several firms having
complementary product lines. Such a group might establish a marketing
association, consortium, or jointly owned export management company, and
set up a sales and service branch or subsidiary office in Japan. The
financial strain affecting many Japanese companies has provided U.S.
companies with excellent opportunities to establish or acquire
businesses in Japan.

U.S. companies should also carefully examine the Japanese Ministry of
Economy, Trade & Industry's (METI) programs for promoting foreign
investment into Japan. Programs include loans available through the
Japan Bank for International Cooperation and the Development Bank of
Japan. Entry-level business-support programs are provided by the Japan
External Trade Organization (JETRO) as well as by some municipal and
prefectural governments. Current information on investing in Japan,
establishing an office, and other JETRO programs for foreign businesses
can be found on JETRO's website at
[www.jetro.go.jp/en/invest/settingup/](http://www.jetro.go.jp/en/invest/setting_up/).

## Franchising [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

The latest industry statistics, which are from 2005, show the total
number of franchise brands at 1,146 (up 5.3% or 58 brands from the year
earlier) with the number of outlets exceeding 234,000. The aggregate
size of the franchise market in 2005 was 19,389 billion yen (\$176.1
billion), as compared to 18,722.3 billion yen (\$173.1 billion) in 2004.
Approximately 38.4 percent of total sales at franchise outlets are from
convenience stores (CVs), and about 20.9 percent from food service
chains.

American franchising has heavily influenced the development of Japan's
franchise industry since the early 1970s. Although Japanese consumers
are generally receptive to American franchise concepts, products and
services must be adjusted to the local flavor to ensure success in
Japan. U.S. franchisers are more often successful when they seek either
a master franchisee or joint venture partner to develop the market in
Japan.

Identifying the right business partner in Japan requires time and
effort, and it can be difficult to find companies that are willing to
invest in master franchise rights in the case of business concepts where
they do not believe there is a market or growth potential in Japan.
Therefore, prudent market research and long-term commitment are required
for foreign companies to launch franchise businesses in Japan.

## Direct Marketing [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Direct marketing, which includes mail order, telemarketing, direct
response television, and Internet sales, is still modest by U.S.
standards, but increasing, particularly in the case of Internet sales.
Internet sales and mail order are attractive methods for suppliers
attempting to reach the Japanese consumers, while bypassing traditional
distribution channels. Recently, shopping through mobile phones has been
rapidly increasing.

Shopping from foreign catalogs, whether hard copy or on the web
(generally referred to as "personal importing"), surged in the mid-1990s
as a combination of novelty, a very strong yen, and an appreciation of
foreign consumer goods grew. Although providing adequate customer
service and handling product returns challenged those firms that did not
have in-country representation, many U.S. companies enjoyed an enormous
expansion of orders from Japan. Since 1996, however, the strengthening
of the dollar and the passing of the "fad" component of the boom has
caused the market to cool considerably. The recovery of Japanese economy
since 2004 has not been reflected in wages and salaries, and consumers'
propensity to spend has not much improved. Nevertheless, opportunities
still exist for companies that can offer Japanese consumers quality
products with unique attributes.

U.S. companies must overcome a number of challenges such as language,
international shipping costs, tariffs, and other issues that pertain
when marketing directly to a Japanese consumer (*e.g.,* sizes in the
metric system). U.S. companies aiming to enter this market should be
prepared to make an investment in service and what is generally referred
to as direct marketing infrastructure. A representative in Japan can act
as a liaison with the U.S. supplier to handle receipt of claims, customs
clearance, and provide assistance in the preparation of
Japanese-language materials. A local representative can also manage
warehousing, and returns. In the case of "personal imports", to which
regulatory systems like import permits generally do not apply, goods
must be shipped directly to the consumer from the United States. Also,
promotion by local representatives of certain items (cosmetics,
supplements, *etc.*) for personal import will be restricted.

## Joint Ventures/Licensing [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

U.S. companies with limited resources or a short investment horizon may
wish to consider product licensing as a way to enter Japan. The direct
costs of finding an appropriate licensee are small compared to other
forms of market entry. Once an agreement is reached, licensing fees and
royalties are low-cost, low-maintenance income for the U.S. company.

However, U.S. companies should note that licensing represents a minimal
form of participation in the Japanese market. Whether a company should
license its technology depends upon several factors.

First, a U.S. company should consider its long-term plans for the
Japanese and other Asian markets. Licensing necessarily means a loss of
control over market strategy, and perhaps "opportunity costs."

Second, U.S. licensors should understand the strength of their company's
patent protection in Japan. Japan uses a "first to file" patent system,
and this has ominous implications should a licensee explore becoming a
competitor. And this does happen.

Finally, the degree to which U.S. firms must disclose trade secrets or
proprietary information is a key consideration.

A Japanese licensee's interest or enthusiasm for a U.S. technology is a
direct reflection of the licensee's assessment of the product's
competitiveness and sales expectations in a technologically
sophisticated market. Thus, a U.S. company's long-term interest might
lie in another form of market entry, even if it carries higher costs and
longer payback periods.

A licensor also sacrifices potential returns from manufacturing and
marketing efficiencies. While Japan is a high-cost country for
marketing, it is also a large market over which to spread the costs of
marketing, even for relatively specialized technology. So, even after
adapting a product for the Japanese market, U.S. manufacturers may
realize better profit margins and market penetration by selling their
own product, as opposed to through a licensee.

Harder to quantify are the costs of managing or in some instances
"policing" the licensing agreement. In the worst cases, a licensee will
improve upon or modify the U.S. product or technology, patent it as its
own, and become a competitor in Japan, the United States, or other
countries.

It is also possible that the Japanese licensee could falsify sales
reports in order to lower its royalties to the U.S. company. The final
drawback of licensing is that it provides the U.S. company with very
little information or practical experience in the market. The Japanese
market is highly demanding and, ultimately, it's important for a U.S.
exporter to have direct experience in order to expand its presence.
Japan is also a very good, though demanding, training ground. U.S. firms
can apply the lessons learned here to other markets, as well as improve
their product or technology through direct contact with the market.

The pitfalls mentioned above account for the declining popularity of
licensing in some industries. However, it may still be the best choice
for products with short life cycles and where short-term income
generation is desirable. Licensing also makes business sense in industry
sectors where market entry costs are prohibitive or where there are
political sensitivities (such as defense-related equipment).

The key to a successful licensing agreement is a Japanese partner whose
goals match those of the U.S. company. A strong licensee will have
something to bring to the partnership as well. For example, the ideal
license agreement might provide for an exchange of technology and
know-how to strengthen both partners. It is essential that the U.S.
licensor maintain close and frequent contact with the licensee, which
should include regular visits to Japan. A local representative, other
than the licensee, can provide additional perspective on the market and
can help represent the licensor to the licensee. 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 provisions of U.S.-Japan tax treaties.

According to Japan's Foreign Exchange and Foreign Trade Control Law, a
foreign company granting a license to an independent Japanese
corporation, either a wholly-owned subsidiary or a joint venture
corporation that involves manufacturing in Japan, must notify the
Ministry of Finance through the Bank of Japan in cases involving the
transfer of specially regulated and/or designated technologies.

Additionally, the export of any form of technical data from the United
States is subject to U.S. export control laws. In this case, a thorough
review of the U.S. Department of Commerce's Export Administration
Regulations (EAR) should precede the signing of any licensing agreement.
To learn more about the EAR, please visit the following web sites:

Bureau of Industry and Security
[www.bis.doc.gov/PoliciesAndRegulations/index.htm#ear](http://www.bis.doc.gov/PoliciesAndRegulations/index.htm#ear)

Government Printing Office
[www.access.gpo.gov/bis/index.html](http://www.access.gpo.gov/bis/index.html).

Joint ventures remain a popular form of selling to Japan. Advantages
include access to local market information and conditions, a stronger
market presence, technology development, and gaining immediate access to
a distribution system and customers. Most joint ventures take the form
of a separate or third company established between a U.S. and Japanese
company, with a range of agreements covering shared functions,
personnel, management, and ownership. In most cases, the Japanese
partner has control over marketing and distribution functions. U.S.
companies should be prepared to share ownership, control, and of course
profits, with their Japanese joint-venture partner, and therefore issues
of communication, trust, and common business interest are crucial.

Joint-venture partnerships that involve technology transfers or license
agreements with Japanese partners have the same pitfalls as license
agreements. The value of the joint venture may diminish as either party
becomes less dependent on the other's marketing prowess, customer base,
or technological innovations. U.S. companies should also understand that
many large trading companies have a large "ready-made" pool of existing
customer relationships. This produces a rapid increase in initial sales,
but once its share of the market is tapped, the Japanese partner often
has little interest in prospecting for new customers, unless the product
has extraordinary technological or price advantages. U.S. firms should
take the same precautions about divulging proprietary know-how in a
joint venture as with license agreements.

A joint venture in Japan can be an unincorporated, contractual joint
venture, or an entity created by the acquisition of the stock of an
existing corporation. More typically, a joint venture is the
incorporation either in the United States (but more commonly in Japan),
of a new company in which the Japanese and U.S. corporation mutually
decide upon management control and the roles and responsibilities of
each party. The Ministry of Finance (through the Bank of Japan) must be
notified of the establishment of any joint venture. In addition, 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 thirty days of its execution.

## Selling to the Government [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

On January 1, 1996, Japan implemented the WTO Agreement on Government
Procurement in an effort to expand opportunities for foreign firms and
increase international competition in government procurement in Japan.
The agreement extended coverage to include the procurement of services
as well as procurement throughout Japan by what are referred to as
\"sub-central government entities.\" These entities include all of the
prefectural (regional) governments in Japan, major cities and designated
municipalities, and a host of other quasi-governmental agencies,
corporations, companies and authorities.

Government procurement contracts covered by the agreement must have a
value not less than the thresholds (denominated in special drawing
rights or "SDRs") specified by the agreement, and include the
procurement of products and services by purchase, lease, or rental by
the agencies and organizations subject to the agreement. Under the
agreement, the specified threshold for procurement by central government
entities is 130,000 SDRs (except for construction and architectural,
engineering and other technical services). As a voluntary measure, Japan
issued SDR thresholds beyond those specified in the agreement, *e.g.,*
100,000 SDRs for procurement by central government entities (again,
except for construction and architectural, engineering and other
technical services). For sub-central government entities, with the same
exceptions as above, Japan\'s threshold is 200,000 SDRs.

There are three types of government tendering procedures in Japan
covered by the new agreement: (1) open tendering, (2) selective
tendering, and (3) limited or single tendering. Under an **open
tender,** the procuring entity publishes an invitation for qualified
suppliers to participate in the tendering process. Contracts are awarded
to the bidder that offers the greatest advantage in terms of price.
**Selective tendering** is done in a case when open tendering is not
necessary because there is only a small number of suppliers that could
participate (due to the nature of the contract), or when open tendering
is otherwise regarded as inappropriate. In this case, the procuring
entity designates those companies it considers capable from a list of
qualified suppliers and invites them to bid. Again, the contract is
awarded to the bidder with the best price advantage. **Limited or single
tenders** are used in a variety of cases for purposes of awarding
contracts without resorting to open competition. Such cases might
include instances where products could not be obtained through open or
selective procurement procedures, where there has been an absence of
bids in response to a public notice, where it has been determined there
is a need for protection of exclusive rights such as patents, or where
the procurement is of extreme urgency.

Open tender and selective tender invitations are published in Japan's
official (central) government procurement gazette or *Kanpō* ---
[kanpou.npb.go.jp](http://kanpou.npb.go.jp/) --- or in an equivalent
regional-level or local publication. The procuring entity publishes the
invitation to tender at least 50 days (40 days is required by the
agreement) in advance of the closing date for receipt of bids. In order
to increase access opportunities for foreign suppliers, as a voluntary
measure, many procuring entities publish notices on the use of limited
(closed) tenders at least twenty days in advance of the awarding of a
contract. When the tender is announced on open bids, the type and
quantity of products, time limits set for submission of bids, and names
and contact data of the procuring entity are published within the
announcement in English. Notices on selective tendering also contain the
requirements to be designated to participate in the tender. It is
important to read the tender notice carefully (the English-language text
is mixed in with the Japanese language text), and most companies find it
useful to directly contact the procuring entity with any specific
questions before a tender is submitted. Japan\'s Ministry of Foreign
Affairs hosts a Government Procurement Seminar every April where central
government procuring entities explain their procurement plans for the
fiscal year. Individual ministries sometimes follow this with their own
seminars as well. Notice of these meetings can also be found in the
*Kanpō* gazette. U.S. suppliers can also find information about Japanese
government procurement on the Japan External Trade Organization (JETRO)
web site at
[www.jetro.go.jp/en/matching/procurement](http://www.jetro.go.jp/en/matching/procurement),
or on the Ministry of Foreign Affairs web site
([www.mofa.go.jp/policy/economy/procurement/q-a.pdf](http://www.mofa.go.jp/policy/economy/procurement/q-a.pdf)),
which has a detailed list of contact points for entities covered by the
agreement as well as a list of related websites.

Potential suppliers must first be qualified by the procuring agency and
registered on the tendering agency's permanent list of qualified
suppliers. Each procuring entity in Japan specifies the qualifications
required of any potential supplier participating in open or selective
tenders. Procuring entities are allowed to review a company\'s capacity
to implement a contract, including the scale of business and past
business performance. In most cases, Japanese subsidiaries, agents, or
distributors of a U.S. company can register on behalf of the firm.
Documents required for qualification are set out in the public notice,
but typically include: an application form, registration certificate,
company history, financial statements, and tax payment certificate. The
qualification is usually valid for one to two years.

Sealed bids must be submitted to the designated place by the closing
date and time specified in the tender notice. Although a 5 percent
guarantee fee is stipulated, payment of the fee is usually waived since
those participating are normally pre-qualified. If there are tenders
made by unqualified suppliers or in violation of the tender
requirements, the procuring entity will rule them invalid and notify the
unsuccessful bidder. The contract is normally awarded to the lowest
qualified bid and bidders are informed of the result in writing by the
procuring entity. Pursuant to the 1996 agreement, Japan has established
a mechanism to process complaints about procurements by entities other
than sub-central government entities. Complaints by qualified bidders
may be filed with the Secretariat of the Board in the Office for
Government Procurement Challenge System (CHANS), Coordination Bureau,
Cabinet Office. For additional information, please visit
[www5.cao.go.jp/access/english/chansmaine.html](http://www5.cao.go.jp/access/english/chans_main_e.html).

## Distribution and Sales Channels [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Traditionally, imported consumer goods have been found at larger outlets
such as department stores and discount houses. But there has been
dramatic growth in specialty retailers, notably foreign names that
import foreign goods.

This direct importing --- bypassing trading houses and as many other
intermediaries as possible --- has become increasingly popular as
companies become leaner and more cost conscious.

As larger retail outlets have spread in Japan, the regulation of "large
stores" (those with more than 500 square meters of sales space) is now
part of the bureaucratic landscape. In 2000, the Large-Scale Retail
Store Location Law went into effect. The law gives local authorities the
power to regulate new large stores on the basis of environmental
considerations. The Japanese Ministry of Economy, Trade and Industry has
clarified its intent to assure that stiffer environmental standards be
used and that the new law will be applied with reasonable uniformity to
all localities. The law applies to new store openings and to significant
changes in the business operations of existing stores (such as an
expansion of floor space or an extension of business hours). Many
municipalities are taking advantage of the law to draft ordinances that
mandate parking space provisions and operating restrictions that are
stricter than national norms or those recommended by METI.

Japanese deflation has made consumers appreciate low prices. Large
foreign distributors and retailers who have survived fierce competition
in their home and other markets have entered Japanese. For example, Toys
\'R\' Us, which entered the market in 1991, now operates 140 stores in
Japan. Wal-Mart, which is in the process of buying out a Japanese chain
store, Seiyu, has several hundred stores in Japan. In 2002, Germany's
Metro opened its first store in partnership with Marubeni and the United
Kingdom\'s Tesco entered Japan by acquiring a medium-size supermarket
chain.

However, Japanese consumers do not always accept foreign retailing
practices and it's important for U.S. firms to consider partnering with
a Japanese firm. The experience of France's Carrefour, one of the
world's largest retailers, offers a valuable lesson. In early 2005,
after a presence of a just over four years, Carrefour sold all eight of
its Japanese stores to a domestic company. At the time of the
divestiture, Carrefour announced that its strategy had not been
effective in Japan\'s environment and that it should have entered the
market in partnership with a Japanese firm. This result came about
despite Carrefour's attempt to style its newest stores according to
traditional Japanese tastes and expectations.

## Selling Factors/Techniques [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

To be successful in Japan, U.S. exporters must pursue sustained personal
contact with their customers. A visiting U.S. company representative
should accompany the firm's Japanese agent or distributor on visits to
existing or potential customers. Such joint sales calls demonstrate a
commitment to clients and are an excellent way to obtain market
feedback.

A common mistake of U.S. companies in this market is failing to provide
ample support for Japanese business partners after enjoying initial
success. Needless to say, this quickly sours the honeymoon period. It's
important to prevent a distributor from implementing a conservative,
low-volume, high-markup marketing strategy that protects its own
interests but fails to develop the full sales potential of the U.S.
product. To avoid this: stay engaged!

To increase their chances for success, U.S. exporters also should learn
how to negotiate and maintain relationships with Japanese. Japanese
language skills and familiarity with the nation's culture and etiquette
can be invaluable. Be prepared to attend after-hours social events:
these informal gatherings go a long way towards establishing mutual
trust and understanding between new partners. It has been said that most
business deals in Japan are made "after five."

Initial contact between Japanese firms is usually formal and made at the
executive level, with more detailed negotiations often delegated to the
working level. Typically, the first meeting is to become acquainted, to
establish the interest of the calling party, and to allow both sides an
opportunity to size each other up. Don't expect too much from a first
meeting --- sometimes the actual business subject may be overtaken by
more mundane topics. A series of meetings with a large number of
Japanese company representatives is common, as part of the "sizing up"
process. Business negotiations may proceed slowly, as the Japanese side
might prefer to avoid an agreement rather than being criticized later
for making a mistake.

While many Japanese business executives speak some English, a skilled
and well-briefed interpreter is essential to prevent communication
problems. A good interpreter is worth the extra money and firms who
choose to skimp on or forego this expense significantly reduce their
odds of success. Though there are some U.S. firms that do business in
Japan without a signed contract, written contracts between U.S. and
Japanese firms is an accepted practice. Contracts satisfy tax, customs,
and other legal requirements. Japanese companies prefer shorter and more
general contracts as opposed to lengthy, detailed documents spelling out
every right and obligation in detail. Again, personal contact and
relationships are important and a contract should be viewed as just one
element of a broader effort to create a mutual understanding of
obligations and expectations.

## Electronic Commerce [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

According to the statistics published in March 2006 by the Ministry of
Economy, Trade and Industry (METI), the market size of
business-to-business (B2B) electronic commerce in Japan in 2005 was
140.4 trillion yen (\$1.3 billion). The industry sectors that are the
biggest users of B2B electronic commerce are wholesalers (41.7 trillion
yen or \$379 billion), followed by electronic/IT (21.9 trillion yen or
\$200 billion), and transportation-related parts and equipment (21.7
trillion yen or \$197.5 billion). The same report noted that the market
size of the business-to-consumer (B2C) electronic commerce market in
2005 at 3.5 trillion yen (or \$31.4 billion), and identified the biggest
users of B2C electronic commerce as IT/telecommunication (858 billion
yen or \$7.8 billion), general retail (832 billion yen or \$7.6
billion), electric appliances (380 billion yen or \$3.5 billion), and
travel and accommodations (360 billion yen or \$3.3 billion).

People in Japan, especially young consumers, are counting more and more
on state-of-the-art cell phones to access the Internet, check
information, buy tickets and goods, listen to music, play games, and
even watch TV. In the B2C market, shopping-related mobile e-commerce
accounted for 407 billion yen (\$3.7 billion) in 2005 for
shopping-related sectors (not including contents such as music and
games, advertisements, solutions, *etc.*), according to Ministry of
Internal Affairs and Communication's report. This indicates a 57%
increase from the previous year and represents 12% of the total BtoC
e-commerce market. Mobile e-commerce is expected to continue to grow
rapidly as the use of QR codes and flat-fee systems get more popular,
and the easy payment/collection methods that mobile phones provide will
further contribute to the growth. U.S. companies that wish to expand
their Internet sales transactions into the mobile market should select
the products and construct new web pages that fit nicely on the small
screen of cell phones as one part of their B2C e-commerce strategy.

In 2004, METI, the Next Generation Electronic Commerce Promotion Council
of Japan, and NTT Data Institute of Management, Inc. jointly published
"Survey on the Current Status and market Size of Electronic Commerce for
2004" in English at:

[www.meti.go.jp/policy/itpolicy/statistics/ECEnglish2004.pdf](http://www.meti.go.jp/policy/it_policy/statistics/EC_English2004.pdf).

Though no updated version of the full survey is currently available, a
summary of METI's survey report for 2005 was posted on METI's home page
on June 26, 2006, at:

<http://www.meti.go.jp/english/newtopics/Backissueindex.html>.

## Trade Promotion and Advertising [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Because many U.S. products fit a cultural or industrial environment that
may not exist in Japan, educating the Japanese consumer about a
product\'s purpose, use, features, and quality might be necessary.
However, not all companies can afford to place advertisements in
Japan\'s major national daily newspapers or commercials on Japanese
television. Regional and local newspapers and television stations and
daily sports newspapers are less expensive and might make sense for a
product with strong potential in a specific region. A more affordable
option for small- to medium-size or new-to-market U.S. companies might
be advertising in some of Japan\'s 2,250 weekly or monthly magazines.
These publications often represent a cost-effective means to reach a
specific target consumer --- whether gourmet or gardener, cyclist or
camper. For industrial and commercial products, Japan\'s many industrial
daily, weekly or monthly newspapers and trade journals might offer the
best advertising option. Japan has relatively few radio stations (Tokyo
has just four AM and six FM stations), but radio advertising is worth
investigating.

Most of Japan\'s broadcast and print media do not deal directly with
advertisers but go through Japan\'s top five advertising agencies:
Dentsu, Hakuhodo, Asatsu, Tokyu Agency International, and NTT
Advertising. Generally, mood or image advertising achieves the best
results. Hard sell, comparative, or combative advertising used to be
considered bad taste and counterproductive, but comparative advertising
is becoming more mainstream in an increasingly competitive and tight
economy.

Japan's railways, as the primary transportation option for commuters in
major cities, carry more than 21 billion passengers every year. So,
transit advertising should not be overlooked. Transit advertisements can
be found inside commuter rail cars, buses, and in stations.
Advertisements inside trains and buses include hanging flyers, framed
posters, stickers, and flat-panel video. As with other media and
outlets, the major advertising agencies control space. Another common
means of introducing, promoting, and selling consumer goods is to
participate in large events such as regional import bazaars or U.S.
product festivals at shopping centers. Such public events can be a
cost-effective means to deliver a product message to a large audience
and allow new-to-product consumers to sample and purchase. Industry
specific trade shows might include some exhibition days that are open to
the public, thus providing another means of reaching a large consumer
audience.

Advertising and promotions should be part of a coordinated strategy,
usually in cooperation with an advertising agency and/or a PR firm. A
slick advertising campaign in the hottest magazine can go bust if it's
not coordinated with a distribution program that makes the product
available to consumers.

Advertising agencies and PR firms can also assist U.S. firms with free
or low cost publicity.

It is key for any U.S. exporter to get plugged into Japan's trade event
circuit: not only in Tokyo and Osaka, but also in the huge regional
economies and industrial centers where 65 percent of more than 1,000
international conferences, seminars, and trade shows take place.
Regulatory officials and decision-makers throughout Asia are showing up
at these events in increasing numbers, so a U.S. firm's message has the
potential to stretch into other Asian countries.

U.S. firms should also consider U.S. Department of Commerce-sponsored
trade shows and trade missions, as well as events that U.S. states and
industrial organizations sponsor. In some cases, U.S. government
facilities such as rooms at the U.S. Consulates in Osaka, Nagoya,
Fukuoka, and Sapporo can be used for trade promotions, seminars,
meetings, and receptions. Interested companies should inquire directly
with the consulates regarding the prospects and costs for a single
company promotion.

## Pricing [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Tough economic times have made price an increasingly important
consideration for Japanese consumers. Traditionally, many people made
their buying decisions based on a product\'s attributes, quality, and
brand name and they were willing to pay more for superior quality.
However, Japanese consumers are now more price conscious and notions
such as bargains and value have become mainstream. If an imported
product can be purchased more cheaply than a domestic product, consumers
will be interested. This has proven to many Japanese that U.S. products
can be affordable and of a quality that's similar or even superior to
Japanese goods.

This recent ability to compete on price has opened doors for U.S.
products. However, landed cost is only one part of a total pricing
scheme and should not be the only consideration for U.S. firms
interested in exporting to Japan. Distribution mark-ups often cause
imports to price at levels far higher than comparable domestic products.
For instance, shipping costs between the port of Osaka and Tokyo have
been shown to be three times higher than shipping costs from the U.S.
West Coast to Osaka. A good example is imported U.S. apparel products,
where street prices often are three to four times FOB.

Japanese manufacturers traditionally set prices at each level of the
distribution chain and enforce compliance using complicated rebate
systems. This price maintenance has come under pressure from consumers
who are demanding lower prices and from manufacturers who themselves
find the rebate system burdensome. As distribution practices have
undergone reform, costs have been coming down and distributors have
gained additional flexibility in selecting and purchasing items.

The pricing structure of imported goods varies according to the types of
distribution channels and services importers or wholesalers provide
(*e.g.,* inventory, advertisement costs, packaging costs, financing,
acceptance of unsold/returned goods, etc). It is a multi-layered system
with established lines of product flow. In recent years, more and more
middlemen have either been eliminated or forced to cut prices.

As Japanese consumers have become more price-sensitive, markups along
the various distribution stages have tended to become smaller. There are
now some retailers who import products directly in order to offer lower
retail prices. But U.S. suppliers should understand that retailers
usually import smaller quantities. And other importers and wholesalers
usually are uninterested in representing products that retailers import
directly.

Finally, U.S. exporters should also consider yen fluctuations in their
product pricing and sales strategies.

## Sales Service/Customer Support [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Excellent product service and customer support throughout the sales
cycle are highly important in Japan. This includes establishing a close
working relationship with and long-term commitment to a U.S. exporter's
potential Japanese partners. Every effort should be made to answer
technical questions in detail, to ensure delivery dates are met, and
that other issues regarding shipments are absolutely clear. Problems
most often arise from misunderstandings, lack of communication, language
difficulties, and differing business practices.

The arrival times and condition of shipments are critical. Shipments
should arrive on time, they should be well packed, and they must not be
damaged upon arrival. Customs documentation should be complete and
accurate; if it is not, the entry of the merchandise could be delayed
or, in certain cases, the merchandise might be returned to the sender.
Japanese buyers are highly concerned with the quality of packing and
have used poor packaging as an explanation for market entry problems.
Missed deadlines and goods damaged through poor shipping practices will
lead to lost business. Many U.S. companies that have succeeded in Japan
have established a local presence to handle sales and to provide
customer support and service. In some cases, local agents or
distributors can provide this support.

## Protecting Your Intellectual Property [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

*See* below, under Chapter 6, [Investment Climate](#ch6).

## Due Diligence [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

A U.S. company resident in Japan is not legally required to use a
Japanese attorney for filings, registrations, contracts or other legal
documents, which can be prepared by in-house staff, but retaining a
competent Japanese attorney *(bengoshi),* patent practitioner
*(benrishi),* or other legal professional is a practical necessity. A
U.S. company not resident in Japan should also retain competent Japanese
counsel. Patents and trademarks must be filed through a Japanese agent,
which should be a licensed attorney or patent practitioner.

In recent years, Japanese industry has been shaken by a record number of
bankruptcies. Japanese commerce has also witnessed an unprecedented
number of mergers and acquisitions. This rapid pace of industrial
restructuring has created an increased level of risk for American
companies selling into Japan.

The U.S. Embassy in Tokyo continues to see trade dispute cases of all
kinds. It has become more common for small- and medium-sized Japanese
trading companies to run into payment problems. Importers, wholesalers
and distributors without real estate assets may find it more difficult
to obtain trade financing in the present environment. Banks in Japan
have become less inclined to provide credit to small- and medium-sized
enterprises of all types. Larger companies with excessive debt may also
experience problems obtaining financing.

As a result, American companies are well advised to perform due
diligence procedures and check the *bona fides* of their Japanese agents
and/or customers. To address this need, the U.S. Commercial Service has
just launched a new fee-paying service called "ICP (for International
Company Profile) Japan." For more information about this service, please
e-mail
[Tokyo.Office.Box@N0SPAM.mail.doc.gov](mailto:Tokyo.Office.Box@mail.doc.gov).
Alternatively, please refer to the \"Business Service Providers\"
section of CS Japan's website at
[www.buyusa.gov/japan/en/bsp.html](http://www.buyusa.gov/japan/en/bsp.html).

## Local Professional Services [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

CS Japan's website features lists of business service providers in
different fields who may be of assistance to U.S. exporters in Japan.
Although these lists are not comprehensive, and inclusion does not
constitute an endorsement or recommendation by the U.S. Commercial
Service or by the U.S. Government, they are a useful starting point for
firms that need professional services in Japan. Please click on the
following links and you will be taken straight to the list of business
service providers that are of interest to you:

-   [Accounting, Auditing, and Tax
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=84110000)

-   [Advertising](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=82100000)

-   [Business Administration
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80160000)

-   [Business
    Consulting](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80100000)

-   [Computer and Internet
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=81110000)

-   [Distributors, Sales Agents, and
    Importers](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80141700)

-   [Education and Training
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=86000000)

-   [Engineering
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=81100000)

-   [Entertainment
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=90150000)

-   [Hotels and Meeting
    Facilities](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=90110000)

-   [Human
    Resources](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80110000)

-   [Insurance
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=84130000)

-   [Legal
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80120000)

-   [Market
    Research](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80141500)

-   [Marketing, Public Relations, and
    Sales](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80141600)

-   [Patent and Trademark Law
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80121604)

-   [Real Estate
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80130000)

-   [Relocation
    services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80111506)

-   [Restaurants and
    Catering](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=90100000)

-   [Security and Personal
    Safety](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=92120000)

-   [Telecommunications](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=83110000)

-   [Trade Show and Exhibition
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=80141900)

-   [Translation and
    Interpretation](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=82110000)

-   [Transportation, Freight Forwarder and Storage
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=78000000)

-   [Travel
    Facilitation](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=90120000)

-   [Other Business
    Services](http://www.buyusa.gov/japan/en/bsp.html?bsp_cat=99999999)

or visit our web site at
[www.buyusa.gov/japan/en/bsp.html](http://www.buyusa.gov/japan/en/bsp.html).

## Web Resources [**Return to top**](#chapter-3-selling-u.s.-products-and-services)

Information on investing in Japan, establishing an office, and other
programs for foreign businesses:

Japanese External Trade Organization (JETRO)

[www.jetro.go.jp/en/invest/settingup/](http://www.jetro.go.jp/en/invest/setting_up/)

Information on doing business in Japan:

> American Chamber of Commerce in Japan (ACCJ)
>
> [/www.accj.or.jp/accj.or.jp/content/01_home](http://www.accj.or.jp/accj.or.jp/content/01_home)
>
> Venture Japan: Doing Business in Japan
>
> How to Succeed in the Japanese Market
>
> [www.venturejapan.com/index.htm](http://www.venturejapan.com/index.htm)

Information on business service providers in Japan:

U.S. Commercial Service, American Embassy, Tokyo

[www.buyusa.gov/japan/en/bsp.html](http://www.buyusa.gov/japan/en/bsp.html)

Foreign Agricultural Service, American Embassy, Tokyo

[www.usdajapan.org/](http://www.usdajapan.org/)

U.S. Embassy, American Citizen Services

[tokyo.usembassy.gov/e/tacs-main.html](http://tokyo.usembassy.gov/e/tacs-main.html)

Information on Japanese government procurement:

[www.jetro.go.jp/en/matching/procurement](http://www.jetro.go.jp/en/matching/procurement)

Office for Government Procurement Challenge System (CHANS)

Coordination Bureau

Cabinet Office

[www5.cao.go.jp/access/english/chansmaine.html](http://www5.cao.go.jp/access/english/chans_main_e.html)

E-commerce marketplaces:

Marketplace name: TWX21 (Hitachi)

Products: MRO (Maintenance, Repair, Operations), *etc.*

[www.twx-21.hitachi.ne.jp/eindex.htm](http://www.twx-21.hitachi.ne.jp/e_index.htm)

Marketplace name: SC Grainger (Japanese only)

Products: MRO (Maintenance, Repair, Operations)

[www.monotaro.com/](http://www.monotaro.com/)

Marketplace name: Alpha Purchase (Japanese only)

Products: MRO (Maintenance, Repair, Operations), *etc.*

[www.alphapurchase.co.jp/homepage/index.html](http://www.alphapurchase.co.jp/homepage/index.html)

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[[]{#ch4 .anchor}Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 4: Leading Sectors for U.S. Export and Investment

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

Complete U.S. government foreign trade statistics (exports and imports
by country and product) are available online from the U.S. Department of
Commerce, U.S. Census Bureau at
[www.census.gov/foreign-trade/statistics/country/index.html](http://www.census.gov/foreign-trade/statistics/country/index.html).
A table showing U.S. exports to Japan in 2006 by product/commodity group
is available on CS Japan's web site at
[www.buyusa.gov/japan/en/mom.html](http://www.buyusa.gov/japan/en/mom.html)
(under "Market Overview").

Japanese foreign trade statistics (imports and exports) are available
online from the Japan External Trade Organization (JETRO) at
[www.jetro.go.jp/en/stats/statistics/](http://www.jetro.go.jp/en/stats/statistics/).

> [Agricultural Sector](#agricultural-sector-return-to-top)

#### Commercial Sectors

-   [Aircraft / Aircraft Parts
    (AIR)](#aircraft-aircraft-parts-air-return-to-top)

-   [Building Products (BLD)](#building-products-bld-return-to-top)

-   [Computer Software (CSF)](#computer-software-csf-return-to-top)

-   [Education & Training Services
    (EDU)](#education-training-services-edu-return-to-top)

-   [Household Consumer Goods (HCG)](#HCG)

-   [Medical Equipment (MED)](#medical-equipment-med-return-to-top)

-   [New Energy Power Generation
    (POL/ELP)](#new-energy-power-generation-polelp-return-to-top)

-   [Pharmaceuticals (DRG)](#pharmaceuticals-drg-return-to-top)

-   [Travel & Tourism (TRA)](#travel-and-tourism-tra-return-to-top)

## Agricultural Sector [**Return to top**](#ch4)

The United States remained Japan's top supplier of farm products, with a
22 percent market share in 2005, despite a beef import ban. However,
China, Latin America, Australia and Russia have grown as strong
competitors for the United States. U.S. farm exports to Japan decreased
slightly in CY 2005 to \$9.7 billion. However, pork and processed foods
showed good growth and corn, soybeans and wheat exports remained strong.
At 40%, the Japanese food self- sufficiency rate is the lowest of all
industrialized countries, compared to the U.S. rate of 119%. The
Japanese also spend a very high percentage of their income on food
(almost 20% compared to 10% in the United States). In 2005, the value of
Japan's consumer food and beverage market was \$584 billion. For
complete agricultural statistics, please visit the web site of the U.S.
Department of Agriculture's Foreign Agricultural Service at
[www.fas.usda.gov/ustrade](http://www.fas.usda.gov/ustrade).

Opportunities exist for a range of agricultural products, in particular,
processed and consumer ready food products. For U.S. companies to tap
into this dynamic market, they should be aware of several key factors
affecting food purchase trends. These factors are a rapidly aging
population, diversification of eating habits, emphasis on high quality,
increasing demand for convenience, and food safety concerns. Exporters
interested in the Japanese market should make note that three of the
biggest annual food related trade shows in Japan and all of Asia are:
Foodex Japan, International Food Ingredients & Additives Exhibition and
Conference (IFIA) Japan, and Health Ingredients (HI) Japan.

Japan's population is aging faster than any other country in the world.
According to Japan's National Institute of Population and Social
Security Research, by 2010 23 percent of the population will be over 65
years of age. Coupled with the fact that Japanese life expectancy is the
highest in the world, there is a strong demand for \"healthy foods.\"
Such concepts as \"functional foods\" are well understood, and many
products certified by the Ministry of Health, Labor and Welfare as FOSHU
(Food for Specific Health Use) are commonly consumed. Food products that
are seen to have some health benefit, for example lowering cholesterol
or containing a high level of antioxidants, have an advantage in Japan.

Since the 1960\'s, the Japanese diet has become dramatically
westernized. In 1960, the source of per capita protein consumption was
32% from rice, 24% from seafood, 5% from meat and 3% from dairy
products. In 2005, the percentages became 12%, 22%, 17% and 10%. Rice
and tofu-based products have been replaced by meat and dairy as the main
source of protein.

In addition to this move towards westernization, food trends have
recently become more complex. Various ethnic foods are also becoming
popular and are often combined with Japanese cuisine creating \"fusion\"
foods. Another aspect of diversification is the trend of \"individual
eating\", or convenience foods. Because of the busy, fast paced
lifestyle of modern Japanese, it has become less common for all family
members to eat together. \"Individualization\" of eating makes
convenience an essential factor. Microwave (or semi- prepared) food and
Home Meal Replacement (HMR) cuisine has become an indispensable part of
life and are sold in supermarkets, restaurants and convenience stores
such as 7-Eleven and Lawson's that are now found all over Japanese
cities.

Economic stagnation and declining income have made people more
price-conscious than in the past, however quality continues to be the
most crucial factor in food purchasing decisions. Food safety has also
become an important consideration for most Japanese consumers, who are
more sensitive to perceived risk than the average American consumer.

The retail sector remains the focus of U.S. investment in Japan's food
industry. Wal-Mart now owns 54% of Seiyu, and was the third largest
Japanese supermarket in terms of food sales in 2005. U.S. investment in
Japan's agricultural sector is limited to a few large-scale ventures in
the livestock and grain sectors.

## Web Resources [**Return to top**](#agricultural-sector-return-to-top)

Statistics on U.S. agricultural exports
[www.fas.usda.gov/ustrade](http://www.fas.usda.gov/ustrade)

USDA/FAS Reports
[www.fas.usda.gov/scriptsw/attacherep/default.asp](http://www.fas.usda.gov/scriptsw/attacherep/default.asp)

Trade Shows in Japan:

*Foodex Japan*
[www.imexmgt.com/index.cfm?fuseaction=calendar.factsheet&showid=181](http://www.imexmgt.com/index.cfm?fuseaction=calendar.factsheet&showid=181)

*IFIA Japan 2007*
[www.ejkrause.com/ifiajapan/](http://www.ejkrause.com/ifiajapan/)

*Health Ingredients Japan*
[www.hijapan.info/en/](http://www.hijapan.info/en/)

U.S. Food Related Info [http://www.myfood.jp](http://www.myfood.jp/)

Agricultural Trade Offices in Japan <http://www.greatamericanfood.info/>

Japanese Ministry of Agriculture,
[www.maff.go.jp/eindex.html](http://www.maff.go.jp/eindex.html)

Forestry, and Fisheries

Japanese Ministry of Health, Labor,
[www.mhlw.go.jp/english/index.html](http://www.mhlw.go.jp/english/index.html)

and Welfare

## Aircraft / Aircraft Parts (AIR) [**Return to top**](#ch4)

### Overview [**Return to top**](../../../../../../../../C:/DOCUME~1/HISANA~1/LOCALS~1/Temp/notes5852E6/#AIR)

+--------------------------+---------------+-------------+------------+
| ***(millions of US\$)*** | **2004**      | **2005**    | **2006**   |
|                          |               |             |            |
|                          |               |             | ***(est    |
|                          |               |             | imated*)** |
+--------------------------+---------------+-------------+------------+
| Total Market Size        | 13,937        | 14,538      | 15,338     |
+--------------------------+---------------+-------------+------------+
| Total Local Production   | 8,828         | 9,387       | 9,603      |
+--------------------------+---------------+-------------+------------+
| Total Exports            | 2,528         | 3,467       | 3,917      |
+--------------------------+---------------+-------------+------------+
| Total Imports            | 7,637         | 8,618       | 9,652      |
+--------------------------+---------------+-------------+------------+
| Imports from the U.S.    | 6,696         | 7,416       | 8,226      |
+--------------------------+---------------+-------------+------------+

> (Note: These figures are unofficial estimates based on information
> obtained from the Ministry of Finance and the Society of Japanese
> Aerospace Companies)

Japan continues to offer a lucrative market for imported aircraft and
aircraft parts, including aircraft engines. Long-term relationships ---
some spanning over fifty years --- between U.S. aircraft and aircraft
parts makers and Japanese manufacturers and trading firms has given the
United States an overwhelming presence in Japan's market.

In the civil aircraft market, Japan\'s two largest carriers, Japan
Airlines (JAL) and All Nippon Airways (ANA), have consistently selected
Boeing aircraft, including cargo freighters, virtually eliminating
commercial aircraft orders from Airbus.

Annual production of Japan's aircraft manufacturing industry is valued
at approximately \$10 billion. The industry is heavily geared towards
meeting the needs of the Japanese Defense Ministry (MOD). Other
production supplies frames, wings, and other parts and components to
foreign aircraft manufacturers such as Boeing, Airbus, Embraer, and
Bombardier. Of the total domestic production in 2005, defense orders
accounted for 54 percent and exports for 27 percent.

Further growth in Japan's industry is expected to result from
international joint projects (such as Boeing's 737, 777, and 787),
domestic development of military patrol and transport aircraft, and
feasibility studies of a new environmentally friendly small jet.

U.S. suppliers of proven aircraft and aircraft parts are well positioned
for tapping into the coming decade's expanding opportunities.
New-to-market suppliers should consider partnering with trading firms
that are knowledgeable about and connected to aircraft industry
networks.

Japan is experiencing a boom in airport infrastructure development:

-   the Central Japan International Airport (Centrair) opened in Nagoya
    in February 2005;

-   Nagoya Airport recently was re-designated as a commuter flight base;

-   Kobe and Kitakyushu Airports were completed in 2006;

-   the Haneda, Narita and Kansai Airports are scheduled for further
    expansion.

These developments should create exciting opportunities for regional
airlines and corporate jet operations.

### Best Prospects/Services [**Return to top**](../../../../../../../../C:/DOCUME~1/HISANA~1/LOCALS~1/Temp/notes5852E6/#AIR)

Commercial aircraft and aircraft engines, business jets, helicopters,
aircraft parts and supplies, avionics.

### Opportunities [**Return to top**](../../../../../../../../C:/DOCUME~1/HISANA~1/LOCALS~1/Temp/notes5852E6/#AIR)

\"Japan Aerospace 2008,\" October 1-5, 2008, at Pacifico Yokohama
Convention Center, Yokohama, Japan, organized by the Society of Japanese
Aerospace Companies (SJAC). For more information, please visit
[www.japanaerospace.jp/](http://www.japanaerospace.jp/).

### Resources [**Return to top**](../../../../../../../../C:/DOCUME~1/HISANA~1/LOCALS~1/Temp/notes5852E6/#AIR)

CS Japan Contact: Mr. Hisanao Aomori (Tokyo)
<Hisanao.Aomori@mail.doc.gov>

Society of Japanese Aerospace Companies
[www.sjac.or.jp/](http://www.sjac.or.jp/)

## Building Products (BLD) [**Return to top**](#ch4)

### Overview [**Return to top**](#building-products-bld-return-to-top)

+-------------------------+--------------+------------+---------------+
| ***(millions of U.S.    | **2004**     | **2005**   | **2006**      |
| \$)***                  |              |            |               |
|                         |              |            | **(*          |
|                         |              |            | estimated)*** |
+-------------------------+--------------+------------+---------------+
| Total Market Size       | 118,172      | 115,778    | 110,622       |
+-------------------------+--------------+------------+---------------+
| Total Local Production  | 108,331      | 106,364    | 101,701       |
+-------------------------+--------------+------------+---------------+
| Total Exports           | 1,853        | 2,122      | 2,109         |
+-------------------------+--------------+------------+---------------+
| Total Imports           | 11,694       | 11,536     | 11,031        |
+-------------------------+--------------+------------+---------------+
| Imports from the U.S.   | 1,116        | 953        | 907           |
+-------------------------+--------------+------------+---------------+

> *(Note: The above statistics include residential and commercial
> building products and are unofficial estimates. The exchange rates
> used are* *108.15 yen/US\$ for 2004, 110.11 yen for 2005, and 116.31
> yen for 2006.)*

Improving economic conditions in Japan in 2006 have helped to stem the
slide of commercial and residential property construction in Japan. As a
result, housing starts are expected to increase to 1.27 million in 2006.
This marks a significant turnaround in the Japanese construction
industry, which saw annual housing starts fall to the 1.15 million level
between 2002 and 2004. The improving quality of Japanese constructed
homes/apartments, moreover, has also led to increases in home
renovations/home improvement projects in Japan. As the Japanese economy
continues to improve, combined with an increasing population of aging
baby-boomers who look to modernize their homes, this trend is expected
to continue. As a whole, these trends bode well for the building
products in Japan which is expected to increase in terms of Japanese Yen
value in 2007, but decline slightly in dollar terms as a result of the
appreciating U.S. dollar against the Yen.

The major exporters competing with companies in the United States are
China, Canada, the countries of East Asia and Scandinavia. Since many
Japanese companies are not all that familiar with imported building
products, it is important for manufacturers and exporters to provide
information on how to use their products, as well as to pay close
attention to after sales service.

### Best Prospects/Services [**Return to top**](#building-products-bld-return-to-top)

Since it is extremely difficult for US products to compete with Chinese
and other Asian building products on price, it is important to avoid
price competition. US building products that have some unique features
have increased potential in Japan. Wood windows and doors, vinyl
windows, kitchen and bathroom faucets, paints and insulation materials
are currently examples of imported building products that are doing well
in the Japanese market.

### Opportunities [**Return to top**](#building-products-bld-return-to-top)

The Japan Management Association (JMA) organizes the Japan Home &
Building Show ([**www.jma.or.jp/jhbs/**](http://www.jma.or.jp/jhbs/)).
This show is a U.S. Department of Commerce certified trade show. CS
Japan and JMA will co-organize a USA Pavilion in the show in November
2007. For further details, please contact
[**Kazuhisa.Takabatake@mail.doc.gov**](mailto:Kazuhisa.Takabatake@mail.doc.gov).

The Economic Research Association, a private association which publishes
information concerning building materials and building technologies,
manages the \"Kenchiku Shizai" database on its Japanese-only website
([**www.kensetsu-plaza.com/**](http://www.kensetsu-plaza.com/)). This
database lists many imported building materials that can be reviewed by
Japanese general contractors and architectural design firms. This
website may be a good gateway to disseminate product information of U.S.
commercial building material manufacturers. Inquiries for registration
of product information should be addressed to
[**media@zai-keicho.or.jp**](mailto:media@zai-keicho.or.jp).

A group of Japanese architectural design firms who originally
established a database for their own use have since made it open for
other architectural design firms and general contractors. This useful
database, known as "Archimap," can be found at
[www.archimap.ne.jp/](http://www.archimap.ne.jp/) (in Japanese only).
Direct all inquiries to <info@archimap.ne.jp>.

### Resources [**Return to top**](#building-products-bld-return-to-top)

CS Japan Contacts:

> Residential Building Products: Mr. Kazuhisa Takabatake (CS Osaka)
> <Kazuhisa.Takabatake@mail.doc.gov>

Commercial Building Products: Mr. Koji Sudo (CS Tokyo)

> <Koji.Sudo@mail.doc.gov>

Building Materials/Housing Mailing List

CS Osaka-Kobe sends "CS Market Research" reports on the Japanese housing
market to U.S. companies by e-mail. To be placed on our broadcast e-mail
lists, please register at
[www.buyusa.gov/japan/en/mailing.html](http://www.buyusa.gov/japan/en/mailing.html).

Useful Websites:

Japanese Ministry of Land Infrastructure and Transport (MLIT)

[www.mlit.go.jp/english/index.html](http://www.mlit.go.jp/english/index.html)

Building Center of Japan (BCJ)

[www.bcj.or.jp/en/](http://www.bcj.or.jp/en/)

Evergreen Building Products Association

[www.ep.org/](http://www.ep.org/)

CS Japan's Website on "Residential Building Products, Housing and
Interior Textiles"

[www.buyusa.gov/japan/en/housing_textiles.html](http://www.buyusa.gov/japan/en/housing_textiles.html)

Economic Research Association (English)

[www.zai-keicho.or.jp/english/index.html](http://www.zai-keicho.or.jp/english/index.html)

## Computer Software (CSF) [**Return to top**](#ch4)

### Overview [**Return to top**](#computer-software-csf-return-to-top)

+---------------------------+-------------+-------------+------------+
| ***(millions of U.S.      | **2004**    | **2005**    | **2006**   |
| \$)***                    |             |             |            |
|                           |             | **(e        | **(es      |
|                           |             | stimated)** | timated)** |
+---------------------------+-------------+-------------+------------+
| Total Market Size         | > 132,065   | > 137,880   | > 146,880  |
+---------------------------+-------------+-------------+------------+
| Total Local Production    | > 128,258   | > 132,050   | > 140,390  |
+---------------------------+-------------+-------------+------------+
| Total Exports             | > 292       | > 800       | > 980      |
+---------------------------+-------------+-------------+------------+
| Total Imports             | > 3,326     | > 4,500     | > 4,950    |
+---------------------------+-------------+-------------+------------+
| Imports from the U.S.     | > 3,003     | > 3,310     | > 3,540    |
+---------------------------+-------------+-------------+------------+

> *(Note: The above statistics are unofficial CS estimates.)*

Japan's software business has been growing steadily as Japan's
investment in IT has shifted from hardware and network infrastructure to
software and services. By industry sector, manufacturing, finance,
information services, and government procurement are currently the major
buying segments. In fact, these four segments together currently account
for over 60% of total market revenue.

Given Japan\'s increased focus on the protection of personal information
--- a \"privacy\" law was established in 2005 --- Japanese businesses
are increasingly interested in IT security.

### Best Prospects/Services [**Return to top**](#computer-software-csf-return-to-top)

Information security software, embedded software for consumer
electronics and other software products that utilize improved hardware
and network infrastructure.

### Opportunities [**Return to top**](#computer-software-csf-return-to-top)

For U.S. exporters, the Japanese software market is attractive in terms
of the size and demand for quality software imports. This trend should
continue as the Japanese software industry historically struggles with
increasing development costs and a lack of skilled engineers. There are
three key elements to launching software products into the Japanese
market: (1) localization --- localization includes Japanese translation,
testing, and customization. Software suppliers are required to provide
not only translations but to consider Japanese business customs and
culture to meet local client needs; (2) support capability --- Japanese
language support is mandatory; and (3) product quality --- quality
control is one of the most important considerations for Japanese users.

Event: **WPC Expo 2007**

Date: October 2007

Venue: Tokyo Big Sight

Organizer: Nikkei Business Publication, Inc.

Web:
[expo.nikkeibp.co.jp/wpc/english/index.html](http://expo.nikkeibp.co.jp/wpc/english/index.html)

### Resources [**Return to top**](#computer-software-csf-return-to-top)

Computer Software Association of Japan (CSAJ)

[www.csaj.jp/english/index_e.html](http://www.csaj.jp/english/index_e.html)

Japan Information Technology Services Association (JISA)

[www.jisa.or.jp/english/index.html](http://www.jisa.or.jp/english/index.html)

CS Japan Contact: Mr. Toshihiro Matsuda (Tokyo)
<Toshihiro.Matsuda@mail.doc.gov>

## Education & Training Services (EDU) [**Return to top**](#ch4) 

### Overview [**Return to top**](#education-training-services-edu-return-to-top)

+----------------------------+-------------+-------------+-------------+
| ***(millions of US\$       | **          | **          | **          |
| except where otherwise     | 2004/2005** | 2005/2006** | 2006/2007** |
| noted)***                  |             |             |             |
|                            |             |             | ***(es      |
|                            |             |             | timated)*** |
+----------------------------+-------------+-------------+-------------+
| Total Market Size          | 994         | 925         | n.a.        |
|                            |             |             |             |
| of Japanese students       |             |             |             |
+----------------------------+-------------+-------------+-------------+
| Foreign Students in U.S.   | 565,039     | 564,766     | n.a.        |
|                            |             |             |             |
| (no. of individuals)       |             |             |             |
+----------------------------+-------------+-------------+-------------+
| Japanese Students in U.S.  | 42,215      | 38,712      | 39,000      |
|                            |             |             |             |
| (no. of individuals)       |             |             |             |
+----------------------------+-------------+-------------+-------------+

> *(Note: Market size figures are unofficial estimates.)*

In 2005/2006 a total of 564,766 foreign students studied in the United
States, of which 38,712 were Japanese students. This was a drop of 8.3%
from the previous year. However, the United States has been and still is
the most popular destination for academic programs. In terms of the
number of students studying in the United States, Japanese students
ranked fourth after students from India, China and Korea. Foreign
students' (and their spouses') spending in the United States (tuition &
living expenses) was estimated to be about \$13.5 billion dollars in
2005/2006.

Sixty-four percent of Japanese in the United States are enrolled in
undergraduate programs, and 21 percent in graduate. This is in sharp
contrast to Chinese and Indian students, who mainly enroll in graduate
programs. Among the Japanese students enrolled in higher educational
institutions, women account for about 56 percent. In addition to the
38,712 students noted above, tens of thousands of Japanese go to the
United States for short-term language studies.

### Best Prospects/Services [**Return to top**](#education-training-services-edu-return-to-top)

Interest in two-year colleges is continuously growing, especially for
schools with lower TOEFL requirements. Graduate studies in the United
States are also becoming more attractive to Japanese students, with MBA
programs being especially popular since Japan does not have equivalent
programs. With the post-World War II "baby boomers" retiring in
2007-2009, we expect a good number of new retirees will enroll in
two-week to one-year study programs abroad.

### Opportunities [**Return to top**](#education-training-services-edu-return-to-top)

Event: **U.S. University Fairs (IIE Fairs)**

Dates: October 20-21, 2007

Web:
[www.iiehongkong.org/fairs.htm](http://www.iiehongkong.org/fairs.htm)

### Resources [**Return to top**](#education-training-services-edu-return-to-top)

CS Japan Contact: Ms. Mieko Muto (Tokyo) <Mieko.Muto@mail.doc.gov>

Market reports are available through the USEAC offices nearest you or
through our Homepage.

## Household Consumer Goods (HCG) [**Return to top**](#ch4)

### Overview [**Return to top**](#HCG)

+------------------------+-------------+------------+------------------+
| ***(Millions of        | **2004**    | **2005**   | **2006**         |
| U.S.\$)***             |             |            |                  |
|                        |             |            | *                |
|                        |             |            | **(estimated)*** |
+------------------------+-------------+------------+------------------+
| Total Market Size      | 35,035      | 35,884     | 36,709           |
+------------------------+-------------+------------+------------------+
| Total Local Production | 30,900      | 31,500     | 32,094           |
+------------------------+-------------+------------+------------------+
| Total Exports          | 834         | 902        | 919              |
+------------------------+-------------+------------+------------------+
| Total Imports          | 4,969       | 5,286      | 5,534            |
+------------------------+-------------+------------+------------------+
| Imports from the U.S.  | 209         | 183        | 159              |
+------------------------+-------------+------------+------------------+

> *(Note: CS Japan has estimated the above statistics based on
> information from World Trade Atlas \[trade statistics database by
> GTI\] and JETRO\'s Marketing Guidebook 2004.)*

The household product category is broad and includes a wide range of
goods. Here, household products are defined as tableware, kitchenware,
small home electronic appliances, furniture & home furnishings, interior
fabrics, lamps, and other. 58% of U.S. imports in this group are in the
furniture & home furnishings category, followed by table and kitchenware
at 17%.

According to the 2005 National Census, Japan had 49 million households
with a total population of 127 million. Young consumers are sensitive to
home fashion, wishing to assert their distinctive lifestyles.
Middle-aged consumers are strongly interested in keeping up with their
health and wellness in spite of time constraints and the demands of life
and work. Overall, Japanese consumers are spending more time at home,
and the concept of nesting or staying home and relaxing is gaining broad
social acceptance.

It is important to note that the product lines in household goods stores
are becoming increasingly global, while Japanese consumers' lifestyles
are growing more and more diversified. To respond to the diversified
demands of the market, Japanese importers expect high-mix low-volume
production, flexible distribution in small lots, and prompt delivery
from foreign exporters.

### Best Products/Services [**Return to top**](#HCG)

As Japanese consumers value home comfort, U.S. home furnishing companies
offering quality products with distinctive design that appeal to the
Japanese will find significant opportunities in the Japanese market.

Generally, Japanese consumers are willing to pay premier prices for
quality, functionality, and design. Also, they are sensitive to safety
and cleanliness. For example, antibiotic or anti-odor functions are
almost common for products like kitchenware or bathroom goods. Interest
in eco-friendly business areas, such as organic products, is still high.

### Opportunities [**Return to top**](#HCG)

Event: The 63rd Tokyo International Gift Show

Dates: February 13-16, 2007

Venue: Tokyo International Exhibition Center
([www.bigsight.jp/](http://www.bigsight.jp/))

Web: [**www.giftshow.co.jp/**](http://www.giftshow.co.jp/)

Products: Giftware

Event: **The 2nd International Homefashion Fair**

Dates: April 4-6, 2007

Venue: Tokyo International Exhibition Center
([www.bigsight.jp/](http://www.bigsight.jp/))

Web:
[www.giftshow.co.jp/english/framepage.htm](http://www.mesago-messefrankfurt.com/)

Products: Housewares such as tabletop, cookware, and kitchen
accessories, cutlery and cleaning goods, small and major appliances,
furniture and home furnishings, lightings, outdoor living and gardening
items, giftware and other household consumer products.

Event: **Interior Lifestyle/Ambiente Japan**

Dates: June 6-8, 2007

Venue: Tokyo International Exhibition Center
([www.bigsight.jp/](http://www.bigsight.jp/))

Web:
[www.interior-lifestyle.com/en/index.html](http://www.interior-lifestyle.com/en/index.html)

Products: Housewares such as tabletop, cookware, and kitchen
accessories, cutlery and cleaning goods, small and major appliances,
furniture and home furnishings, lightings, outdoor living and gardening
items, giftware and other household consumer products.

Event: International Furniture Fair Tokyo

Dates: November 21-24, 2007

Venue: Tokyo International Exhibition Center
([www.bigsight.jp/](http://www.bigsight.jp/))

Web: [**www.idafij.or.jp/en/index.html**](http://www.idafij.or.jp/)

Products: Furniture and home accessories

### Resources [**Return to top**](#HCG)

CS Japan Contact: Ms. Rika Saito (Tokyo)
[**Rika.Saito@mail.doc.gov**](mailto:Rika.Saito@mail.doc.gov)

International Development Association of Furniture Industry of Japan

> [**www.idafij.or.jp**](http://www.idafij.or.jp/)

Japan Housewares Importers Association
[www.jhi.or.jp](http://www.jhi.or.jp/)

## Medical Equipment (MED) [**Return to top**](#ch4)

### Overview [**Return to top**](#medical-equipment-med-return-to-top)

+----------------------------------+--------+------------+-----------+
| ***(millions of U.S. \$)***      | **     | **2005**   | **2006**  |
|                                  | 2004** |            |           |
|                                  |        | ***(est    | ***(esti  |
|                                  |        | imated)*** | mated)*** |
+----------------------------------+--------+------------+-----------+
| Total Market Size                | 19,069 | 18,270     | 18,218    |
+----------------------------------+--------+------------+-----------+
| Total Local Production           | 14,207 | 13,670     | 13,533    |
+----------------------------------+--------+------------+-----------+
| Total Exports                    | 3,983  | 3,910      | 3,910     |
+----------------------------------+--------+------------+-----------+
| Total Imports                    | 8,845  | 8,510      | 8,595     |
+----------------------------------+--------+------------+-----------+
| Imports from the U.S.            | 5,140  | 4,795      | 4,890     |
+----------------------------------+--------+------------+-----------+

> *(Note: The figures for 2003 and 2004 are the latest official figures;
> statistics for 2005 and 2006 are unofficial estimates)*

The Japanese medical equipment and supplies sector ranks second in the
world and continues to be an extremely successful market for American
firms, representing an important sector where the United States has
consistently achieved trade surpluses with Japan. The value of Japan\'s
medical device sector has been approximately \$18 billion for the last
few years. Traditionally, imports account for approximately 40 percent
of this figure, with American firms supplying approximately 60 percent
of all imported products. Total U.S. sales in this sector, including
local production by American companies, are valued at more than \$6
billion annually.

A major revision of the Pharmaceutical Affairs Law in 2005 increased the
burden on applicants both in financial and practical terms due to its
complicated regulations. In fact, the number of new device applications
made to the Pharmaceutical and Medical Device Agency (PMDA) has
decreased since 2005 to about 2 applications per quarter whereas the US
FDA receives about 10 applications per quarter. Japanese medical device
importers have became extremely conservative when selecting new partners
or devices to import. To cope with the situation and to eliminate the
current 2-3 year "device lag," the Ministry of Health, Labor and Welfare
(MHLW) established in October 2006 a study group to consider quicker
approvals for the medical devices and in-vitro diagnostics that are
generally available in the United States and Europe but not yet in
Japan.

On the reimbursement side, the Japanese Government reduced medical
service fees by 3.16% in JFY 2006 --- the largest cut ever made. Of the
total reduction, 1.36% will come from doctor\'s fees (which had been
previously cut by 1.3% in 2002) and the remaining 1.80% will come from
regular drugs (1.60%) and medical devices (0.20%). Although the cut on
the medical device portion was limited to 0.2%, medical device companies
are receiving requests for further discounts from end users as doctor's
fee saw a large cut. It is expected that the Japanese Government will
continue focusing on reducing medical device prices in order to
counterbalance increasing healthcare expenditures resulting from Japan's
aging society. Overall, Japan\'s market for medical devices is expected
to exhibit flat to negative growth in 2007.

### Best Products/Services [**Return to top**](#medical-equipment-med-return-to-top)

American firms will continue to see sales prospects in the more
technologically sophisticated product categories. Those products include
pacemakers, advanced interventional cardiology products, artificial
implants, catheters and stents. Other areas of projected strong demand
include software and other products used in medical information systems
and health IT.

### Opportunities [**Return to top**](#medical-equipment-med-return-to-top)

Event: **The International Modern Hospital Show 2007 (IMHS2007)**

Dates: July 11-13, 2007

Venue: Tokyo Big Sight

Web:
[www.noma.or.jp/hs/index-e.html](http://www.noma.or.jp/hs/index-e.html)

Products: Healthcare equipment, medical devices and materials, nursing
care related devices and health care information systems.

Event: **HOSPEX Japan 2007**

Dates: November 14-16, 2007

Venue: Tokyo Big Sight

Web:
[www.jma.or.jp/HOSPEX/english/index.html](http://www.jma.or.jp/HOSPEX/en/index.html)

Products: Hospital and welfare facilities, medical treatment equipment,
medical information systems, and healthcare/welfare support equipment
and related devices.

### Resources [**Return to top**](#medical-equipment-med-return-to-top)

CS Japan Contact: Mr. Hiroyuki Hanawa (Tokyo)
<Hiroyuki.Hanawa@mail.doc.gov>

Ministry of Health, Labor and Welfare (MHLW)
[www.mhlw.go.jp/](http://www.mhlw.go.jp/)

Pharmaceutical and Medical Device Agency (PMDA)
[www.pmda.go.jp/](http://www.pmda.go.jp/)

Advanced Medical Technology Association (AdvaMed)
[www.advamed.org/](http://www.advamed.org/)

The American Chamber of Commerce in Japan (ACCJ),

Medical Devices and Diagnostics Subcommittee
[www.accjmedtech.com/](http://www.accjmedtech.com/)

Japan Federation of Medical Device Associations
[www.jfmda.gr.jp/](http://www.jfmda.gr.jp/)

(JFMDA)

## New Energy Power Generation (POL/ELP) [**Return to top**](#ch4)

### Overview [**Return to top**](#new-energy-power-generation-polelp-return-to-top)

+--------------------------+--------------+--------------+------------+
| ***(millions of U.S.     | **2004**     | **2005**     | **2006**   |
| \$)***                   |              |              |            |
|                          |              |              | ***(est    |
|                          |              |              | imated)*** |
+--------------------------+--------------+--------------+------------+
| Total Market Size        | > 3,361      | > 3,475      | > 3,813    |
+--------------------------+--------------+--------------+------------+
| Total Local Production   | > 5,325      | > 6,603      | > 6,691    |
+--------------------------+--------------+--------------+------------+
| Total Exports            | > 2,241      | > 3,398      | > 3,426    |
+--------------------------+--------------+--------------+------------+
| Total Imports            | > 277        | > 270        | > 548      |
+--------------------------+--------------+--------------+------------+
| Imports from the U.S.    | > 9          | > 17         | > 16       |
+--------------------------+--------------+--------------+------------+

> *(Note: The above statistics are unofficial US&FCS estimates.)*

In this report, the term "New Energy Power Generation" refers to wind,
photovoltaic, waste, and biomass power generation. On June 4, 2002,
Japan ratified the Kyoto Protocol to the United Nations Framework
Convention on Climate Change. Based on the Kyoto Protocol, Japan is
committed to reducing its greenhouse gas emissions in the year 2010 to a
level six percent lower than it recorded in 1990. To secure this
reduction, the Japanese government has set an ambitious goal to increase
new energy power generation levels by tenfold over 1999 levels. To
accomplish this, the Japanese government enacted the Renewable Portfolio
Standards (RPS) Law in June 2002 and provides industrial subsidies for
new energy development. The RPS law requires Japanese electric utilities
to use renewable energy sources for a certain percentage of their sales.
The RPS mandate has generated a flurry of activity by utilities to
ensure compliance with this new policy target.

### Best Products/Services [**Return to top**](#new-energy-power-generation-polelp-return-to-top)

Best products include products and services related to wind power,
photovoltaic power, biomass.

### Opportunities [**Return to top**](#new-energy-power-generation-polelp-return-to-top)

Private entities or municipal governments that are not covered by World
Trade Organization (WTO) government procurement agreements conduct many
new energy power generation projects. Therefore, most of these projects
are closed to the public for bidding purposes. However, by partnering
with Japanese firms and through continued efforts, U.S. companies should
be able to increase their market share.

### Resources [**Return to top**](#new-energy-power-generation-polelp-return-to-top)

CS Japan Contact: Mr. Kenji Kobayashi (Tokyo)
<Kenji.Kobayashi@mail.doc.gov>

Useful Websites:

New Energy and Industrial Technology Development Organization (NEDO)

<http://www.nedo.go.jp/english/index.html>

## Pharmaceuticals (DRG) [**Return to top**](#ch4)

### Overview [**Return to top**](#pharmaceuticals-drg-return-to-top)

+-----------------------------+-------------+------------+------------+
| ***(millions of U.S. \$)*** | **2004**    | **2005**   | **2006**   |
|                             |             |            |            |
|                             |             | ***(est    | ***(est    |
|                             |             | imated)*** | imated)*** |
+-----------------------------+-------------+------------+------------+
| Total Market Size           | 67,518      | 63,325     | 65,178     |
+-----------------------------+-------------+------------+------------+
| Total Local Production      | 60,419      | 56,354     | 58,045     |
+-----------------------------+-------------+------------+------------+
| Total Exports               | 1,176       | 1,154      | 1,154      |
+-----------------------------+-------------+------------+------------+
| Total Imports               | 8,275       | 8,125      | 8,287      |
+-----------------------------+-------------+------------+------------+
| Imports from the U.S.       | 1,139       | 1,118      | 1,151      |
+-----------------------------+-------------+------------+------------+

> *(Note: The figures for 2003 and 2004 are the latest official figures;
> statistics for 2005 and 2006 are unofficial estimates.)*

Japan continues to be the world's second largest consumer of
pharmaceuticals and the largest international market for American
pharmaceutical firms. Each year, sales of prescription drugs in Japan
total about \$60 billion. Japan's imports of foreign pharmaceuticals
account for almost 10 percent of the total market, yet would be closer
to 45 percent if direct imports, local production by foreign firms and
compounds licensed to Japanese manufacturers were included. Allowing for
that, American pharmaceutical firms have actually achieved a market
share approaching 20 percent.

Although Japan is the world's second largest pharmaceutical market,
Japan currently lags behind the United States, EU and many Asian markets
in terms of access to new medicines. The Ministry of Health, Labor and
Welfare (MHLW) acknowledged the need to reduce the delays in the
introduction of new drugs and positioned "Approval System Reform" as one
of its most important issues. In October 2006, MHLW created a study
group to discuss this "drug lag" in order to accelerate patients' access
to effective pharmaceuticals. In December 2006, the Council for Science
and Technology Policy (CSTP), one of the Cabinet Office's four councils
addressing policy questions, approved its reform report, which included
proposals such as doubling the number of reviewers at the Pharmaceutical
Medical Device Agency (PMDA) in the next three years, increasing the
fees paid by manufacturers to fund the costs for additional reviewers
and deregulating employment rules to allow hiring staff from industry.
MHLW is expected to give serious consideration to the CSTP
recommendations.

MHLW also recognized the need to create higher incentives for
manufacturers to develop new drugs in Japan through a more appropriate
pricing system. Japan's new Prime Minister Abe is placing great
importance in economic growth and his "Innovation 25" strategy
underscores fostering innovation in medicine as one of Japan's top three
priorities. While these are positive developments for the pharmaceutical
industry as a whole, Japan continues to face the problems of a rapidly
aging society and is, therefore, examining ways to limit the growth of
healthcare spending through means such as changes to its reimbursement
pricing policies. In 2006, the Japanese Government considered doubling
the frequency of price revisions from once every two years to once every
year. Although Japan decided not to conduct a price revision in Japan in
JFY 2007, the proposal may be revived in coming years. Overall, Japan\'s
market for pharmaceuticals is expected to exhibit flat to slightly
positive growth in 2007 partly due to this lack of a price revision in
2007.

### Best Products/Services [**Return to top**](#pharmaceuticals-drg-return-to-top)

Japan's aging population is generating increased demand for
pharmaceutical treatments for such chronic illnesses as cardiovascular
problems, diagnostic reagents, digestive problems, diabetes, and cancer.
It is also expected that the Japanese government will further promote
the use of generic drugs to ease the cost burden on its healthcare
system.

### Opportunities [**Return to top**](#pharmaceuticals-drg-return-to-top)

Event: **CPhI Japan 2007**

Dates: April 18-20, 2007

Venue: Tokyo Big Sight

Web: [www.cphijapan.com](http://www.cphijapan.com/)

Products: Active pharmaceutical ingredients, contract manufacturing,
biotechnologies, additives, fine chemicals, and intermediates.

Event: **INTERPHEX JAPAN**

Dates: June 20-22, 2007

Venue: Tokyo Big Sight

Web: [www.interphex.jp](http://www.interphex.jp/)

Products: Raw materials, additives, materials processing machinery and
equipment.

### Resources [**Return to top**](#pharmaceuticals-drg-return-to-top)

CS Japan Contact: Mr. Hiroyuki Hanawa (Tokyo)
<Hiroyuki.Hanawa@mail.doc.gov>

Ministry of Health, Labor and Welfare (MHLW)
[www.mhlw.go.jp/](http://www.mhlw.go.jp/)

Pharmaceutical and Medical Device Agency (PMDA)
[www.pmda.go.jp/](http://www.pmda.go.jp/)

Pharmaceutical Research and Manufacturers of America
[www.phrma-jp.org/](http://www.phrma-jp.org/)

The Japan Pharmaceutical Manufacturers Association
[www.jpma.or.jp/](http://www.jpma.or.jp/)

## Travel and Tourism (TRA) [**Return to top**](#ch4)

### Overview [**Return to top**](#travel-and-tourism-tra-return-to-top)

+-----------------+--------+-------+-------+-------+--------+-------+
| (millions of    | **     | **2   | **2   | **2   | **     | **2   |
| US\$)           | 2000** | 001** | 002** | 003** | 2004** | 005** |
+-----------------+--------+-------+-------+-------+--------+-------+
| Total outbound  | \$     | \$4   | \$4   | \$4   | \$     | \$4   |
| market          | 42,112 | 3,796 | 2,591 | 4,150 | 47,422 | 7,316 |
+-----------------+--------+-------+-------+-------+--------+-------+
| Outbound to the | \$     | \$1   | \$1   | \$1   | \$     | \$1   |
| U.S.            | 14,011 | 1,705 | 0,922 | 1,000 | 13,094 | 6,520 |
+-----------------+--------+-------+-------+-------+--------+-------+
| ***(millions of | **     | **2   | **2   | **2   | **     | **2   |
| people)***      | 2000** | 001** | 002** | 003** | 2004** | 005** |
+-----------------+--------+-------+-------+-------+--------+-------+
| Number of       | > 17.8 | >     | >     | >     | > 16.8 | >     |
| outbound        |        |  16.2 |  16.6 |  13.3 |        |  17.4 |
| travelers       |        |       |       |       |        |       |
+-----------------+--------+-------+-------+-------+--------+-------+
| Number of       | > 5.06 | >     | >     | >     | > 3.75 | >     |
| outbound        |        |  4.10 |  3.63 |  3.17 |        |  3.88 |
| travelers to    |        |       |       |       |        |       |
| U.S.            |        |       |       |       |        |       |
+-----------------+--------+-------+-------+-------+--------+-------+

*(Note: Data for 2006 is not available. The above statistics are
unofficial estimates.*

*Sources: U.S. Department of Commerce, Office of Travel and Tourism
Industries, Japan Tourism Marketing Co.)*

Japan has for many years been the largest overseas travel and tourism
market for the United States. However, immediately following the
September 2001 terrorist attacks on the World Trade Center in New York,
Japanese outbound travel dropped considerably, especially to the United
States. Another sharp drop occurred in 2003 because of concerns raised
by the SARS epidemic and the Gulf War. Since 2001, the increase in
Japanese outbound travelers to the United States has been slow compared
to the Japanese traveler\'s return to other countries, but even so,
Japanese visitors to the United States still accounted for almost
two-thirds of all Asian visitors in 2005. Regarding spending, Japan is
the number one market for the United States regarding travel and
passenger fare receipts, followed by the United Kingdom and Canada.

The United States is one of the most popular destinations for Japanese
travelers, many of whom are repeat visitors. Over 70 percent of the
repeat travelers visited the U.S. mainland or Hawaii last year. Other
competitive long-haul destinations for Japanese tourists are European
countries, especially for first-time travelers. Short-haul destinations
such as South Korea and China remain very competitive, and received over
one quarter of all outbound Japanese travelers. A majority of Japanese
tourists throughout the 1990s were females, typically groups of single,
working women and "mother & daughter" trips. However, the male market is
growing, and by 2003 had overtaken the female market. Males in their 30s
and 40s are now the majority of Japanese travelers to the United States.

Package tour/group trips are still the most popular and convenient way
for Japanese travelers to make their arrangements. However, individually
arranged travel known as Foreign Independent Travel (FIT) is gaining in
popularity, mainly due to the many options now available on the
Internet. Travelers with a specific purpose and with previous overseas
travel experiences tend to choose FIT. FIT that meets travelers'
specific needs is emerging as a new trend, as are Special Interest Tours
(SIT).

Pamphlets and Internet marketing still have a large influence on
consumer decisions concerning destinations. On the other hand,
"word-of-mouth" information, such as Internet blogs and the
recommendations of well-traveled friends have an increasing influence on
the consumer. The most significant change in the Japanese market is the
introduction of "dynamic packages" to the market in the past few years.
Dynamic packages are travel products with revolutionary booking tools
that can be put together over the Internet through e-commerce/online
travel agents. Travelers put travel components into their shopping carts
and buy the components they want in order to tailor the travel to their
needs and desires. This is having a great impact on the distribution
system of the Japanese travel and tourism industries.

For market entry, good local partners are a must. To take advantage of
new market trends, establishing relationships with E-commerce/online
travel agents is important, and online agents are looking for travel and
tourism content and/or components for dynamic-packaging. In order to
reach out to Japanese consumers to cultivate their interests and to
stimulate their motivations for travel, media exposure is also a key to
success for U.S. travel and tourism service suppliers. To obtain media
coverage, U.S. travel and tourism service suppliers are encouraged to
cooperate and participate in media familiarlization trips and film
locations.

### Best Products/Services [**Return to top**](#ch4)

Internet booking is expected to become a major method of making
reservations, especially for FIT and SIT travelers. This applies not
only to airplane tickets and hotels, but also to package tours and
personalized and/or tailored tours, such as "dynamic packages." Efforts
to improve the convenience of travelers using the internet to book, or
to develop systems for promoting special offers to internet bookers,
will grow the Japanese tourism market even more.

Today, Japanese travelers have more overseas experience and can act on
their own; thus they tend to look for something new and out of the
ordinary. The use of car rentals in travel has expanded their sphere of
action and led them to discover ways of finding new attractions. Those
who have experienced these new attractions become heavy repeaters.
Package tours that include the use of rental cars have been developed.
The introduction of "dynamic packaging" and package tours using car
rentals that are designed to meet travelers\' new interests will
stimulate the travel market in 2007.

### Opportunities [**Return to top**](#ch4)

**[U.S. Tourism Online Showcase]{.underline}**

Dates: Any time \[now available\]

Organizer: Commercial Service Japan

Phone: (81-3) 3224-5087

Fax: (81-3) 3589-4235

E-mail: <Yumiko.Okubo@mail.doc.gov>

Web: <http://www.buyusa.gov/japan/en/tourism06.html>

**[\"SeeAmerica Week --- Japan\" Events]{.underline}**

\(1\) TIA SeeAmerica Educational Seminar

Dates: September 2007 \[dates TBD\]

Place: Tokyo \[venue TBD\]

\(2\) TIA Media Market Place/Media Reception

Dates: September 2007 \[dates TBD\]

Place: Tokyo \[Venue TBD\]

Organizer: Travel Industry Association of America (TIA) Japan Office

Phone: (81-3) 5413-6352

Fax: (81-3) 5413-6355

E-mail: <kinoue@tia.org>

Web: [www.tia.org](http://www.tia.org/)

\(3\) JATA World Travel Fair - SeeAmerica Pavilion

Dates: September 14-16, 2007

Venue: Tokyo Big Sight

Organizer: Japan Association of Travel Agents (JATA)

Phone: (81-3) 5501-3215

Fax: (81-3) 5501-3218

E-mail: <koda@jata-net.or.jp>

Web:
[www.jata-net.or.jp/english/index.htm](http://www.jata-net.or.jp/english/index.htm)

Pavilion coordinator: Japan Visit USA Committee

Phone: (81-3) 5472-7609

Fax: (81-3) 5472-6341

E-mail: <toyoda@japan-usa.co.jp>

Web: [www.japan-usa.co.jp/](http://www.japan-usa.co.jp/)

**[SeeAmerica Workshops]{.underline}**

Dates: Fall 2007 \[dates TBD\]

Places: Osaka and Nagoya \[venues TBD\]

Organizer: Japan Visit USA Committee

Phone: (81-3) 5472-7609

Fax: (81-3) 5472-6341

E-mail: <toyoda@japan-usa.co.jp>

Web: [www.japan-usa.co.jp/](http://www.japan-usa.co.jp/)

### Resources [**Return to top**](#ch4)

**[Commercial Service, U.S. Embassy, Tokyo]{.underline}**

Ms. Yoko Hatano, Commercial Specialist Catherine Spillman, Commercial
Attaché

E-mail: <Yoko.Hatano@mail.doc.gov> E-mail:
<Catherine.Spillman@mail.doc.gov>

**[Japan Visit USA Committee]{.underline}**

Phone: (81-3)-5472-7609

Fax: (81-3) 5472-6341

Web: [www.japan-usa.co.jp](http://www.japan-usa.co.jp/)

**[Travel Industry Association of America (TIA) Japan
Office]{.underline}**

Phone: (81-3) 5413-6352

Fax: (81-3) 5413-6355

Web: [www.tia.org](http://www.tia.org/)

**[Japan Association of Travel Agents (JATA)]{.underline}**

Phone: (81-3) 3592-1274

Fax: (81-3) 3592-1268

Web: [www.jata-net.or.jp](http://www.jata-net.or.jp/)

**[Overseas Tour Operators Association of Japan (OTOA)]{.underline}**

Phone: (81-3) 5470-9501

Fax: (81-3) 5470-9503

Web: [www.otoa.com](http://www.otoa.com/)

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 5: Trade Regulations and Standards

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Import Tariffs](#import-tariffs-return-to-top)

-   [Trade Barriers](#trade-barriers-return-to-top)

-   [Import Requirements and
    Documentation](#import-requirements-and-documentation-return-to-top)

-   [U.S. Export Controls](#u.s.-export-controls-return-to-top)

-   [Temporary Entry](#temporary-entry-return-to-top)

-   [Labeling and Marking
    Requirements](#labeling-and-marking-requirements-return-to-top)

-   [Prohibited and Restricted
    Imports](#prohibited-and-restricted-imports-return-to-top)

-   [Customs Contact
    Information](#customs-contact-information-return-to-top)

-   [Standards](#standards-return-to-top)

-   [Trade Agreements](#trade-agreements-return-to-top)

-   [Web Resources](#web-resources-return-to-top-3)

## Import Tariffs [**Return to top**](#chapter-5-trade-regulations-and-standards)

According to the Japan Tariff Association
([www.kanzei.or.jp/english/](http://www.kanzei.or.jp/english/)), the
average applied tariff in Japan is one of the lowest in the world. In
addition, import duties on many agricultural items continue to decrease,
and tariffs in many major sectors, such as autos and auto parts,
software, computers, and industrial machinery are zero. However, certain
products including leather goods, certain processed foods and some
manufactured goods have relatively high tariff rates. While Japan\'s
import tariffs are relatively low overall, the nation's average
agricultural import tariff (roughly 50 percent) is among the world\'s
highest for industrialized countries. By comparison, the average
agricultural import tariff is 12 percent in the United States and 30
percent in the European Union.

The Customs and Tariff Bureau of Japan\'s Ministry of Finance
administers tariffs. As a member of the Harmonized System Convention,
Japan shares the same trade classification system as the United States
(limited to six-digit code). Japan\'s tariff schedule has four columns
of applicable rates: general, WTO, preferential, and temporary. Goods
from the United States are charged WTO rates unless a lesser
\"temporary\" rate exists. Japan\'s preferential system of tariffs
grants lower or duty-free rates to products imported from developing
countries.

A simplified tariff system for low-value imported freight valued at less
than 100,000 yen, such as small packages for personal imports,
simplifies determination of tariff rates. This system also eliminates
the extra time necessary to classify the product and its precise value,
and thereby minimizes customs brokers\' handling charges. Importers can
choose either the normal rate or the simple tariff, which could be
higher or lower. Japanese Customs can provide an advance ruling on
tariff classification and duty rates (see [Customs Contact
Information](#customs-contact-information-return-to-top)).

## Trade Barriers [**Return to top**](#chapter-5-trade-regulations-and-standards)

While tariffs are generally low, Japan does have barriers that impede or
delay the importation of foreign products into Japan. Although
competition, U.S. and other foreign government pressure, as well as
other factors have lessened the impact of these impediments, U.S.
companies may still encounter non-tariff barriers such as the following:

-   standards unique to Japan (formal, informal, *de facto,* or
    otherwise);

-   a requirement for companies to demonstrate prior experience in
    Japan, effectively shutting out new entrants in the market;

-   official regulations that favor domestically-produced products and
    discriminate against foreign products;

-   licensing powers in the hands of industry associations with limited
    membership, strong market influence, and the ability to control
    information and operating without oversight:

-   cross stock holding and interconnection of business interests among
    Japanese companies that disadvantages suppliers outside the business
    group;

-   cartels (both formal and informal) and;

-   the cultural importance of personal relationships in Japan and the
    reluctance to break or modify business relationships.

The tools available to overcome these non-tariff barriers depend on the
industry, the product or service\'s competitiveness, and the creativity
and determination of the firm\'s management. In addition, it is
important to note that these non-tariff barriers exist in a highly
competitive market --- Japan is a large and sophisticated market, and
the competition can be fierce. A fair number of companies have benefited
or failed simply as a result of timing and general economic conditions.

## Import Requirements and Documentation [**Return to top**](#chapter-5-trade-regulations-and-standards)

Japan assesses tariff duties on the CIF value at *ad valorem* or
specific rates, and in a few cases, charges a combination of both.
Japan\'s Ministry of Finance maintains a website at
[www.customs.go.jp/index_e.htm](http://www.customs.go.jp/index_e.htm)
that describes import clearance and customs procedures, and provides
contact information and other detailed information in English.

Japanese customs regulations can be cumbersome, difficult to understand,
and sometimes frustrating, but they are largely mechanical. Nearly all
customs difficulties result from first time applications. Japanese
customs officials are generally very helpful when it comes to explaining
procedures and regulations, and once these are understood and followed,
difficulties are usually minimal.

Japan prohibits the importation of certain items including narcotics,
firearms, explosives, counterfeit currency, pornography, and products
that violate intellectual property laws. In addition, Japan imposes
restrictions on the sale or use of certain products including those
related to health such as medical products, pharmaceuticals,
agricultural products, and chemicals. For these products, Japanese
Customs reviews and evaluates the product for import suitability before
shipment to Japan. See below for additional information prohibited and
restricted imports.

Certain items may require a Japanese import license. These include
hazardous materials, animals, plants, perishables, and in some cases
articles of high value. Import quota items also require an import
license, usually valid for four months from the date of issuance. Other
necessary documents for U.S. Exporters may include an Import Declaration
Form (Customs Form C-5020) and a certificate of origin if the goods are
entitled to favorable duty treatment determined by preferential or WTO
rates. In practice, shipments from the United States are routinely
assessed using WTO or "temporary" rates without a certificate of origin.
Any additional documents necessary as proof of compliance with relevant
Japanese laws, standards, and regulations at the time of import may also
apply.

Documents required for customs clearance in Japan include standard
shipping documents such as a commercial invoice, packing list, and an
original and signed bill of lading, or, if shipped by air, an air
waybill. Air shipments of values greater than ¥100,000 must also include
a commercial invoice. The commercial invoice should be as descriptive as
possible on each item in the shipment. The packing list should include
the exact contents of each container, the gross and net weights of each
package, and all container measurements using metric sizes.

## U.S. Export Controls [**Return to top**](#chapter-5-trade-regulations-and-standards)

As an active member of the Wassenaar Arrangement as well as various
other international export control regimes, Japan enjoys the least
restrictive treatment under U.S. export control law. In response to the
threat from global terrorism, the Japanese government has implemented
\"catch-all\" controls to prevent Japanese firms from exporting goods
and technologies that could be related to the development of weapons of
mass destruction. In APEC, Japan has a leading role in regional export
control with its Asian trading partners. At the same time, however,
Japanese firms are engaged in business activities with countries against
which the United States currently has embargoes. As such, U.S. exporters
are encouraged to conduct thorough research and background checks
pertaining to any potential sale of controlled or sensitive items, in
particular for transactions that may involve possible transshipment
through Japan.

For the latest in U.S. export and re-export control regulations, please
contact the Department of Commerce Bureau of Industry and Security (BIS)
at [www.bis.doc.gov/](http://www.bis.doc.gov/).

For defense-related articles, contact the Department of State Office of
Defense Trade Controls at
[www.pmddtc.state.gov/](http://www.pmddtc.state.gov/).

For current U.S. embargo information, contact the Department of Treasury
Office of Foreign Assets Control at
[www.treas.gov/offices/enforcement/ofac/](http://www.treas.gov/offices/enforcement/ofac/).

## Temporary Entry [**Return to top**](#chapter-5-trade-regulations-and-standards)

Japan is a member of the International Convention to Facilitate the
Importation of Commercial Samples and Advertising Materials under the
ATA Carnet System. Use of a c*arnet* allows goods such as commercial and
exhibition samples, professional equipment, musical instruments, and
television cameras to be carried or sent temporarily into a foreign
country without paying duties or posting bonds. A *carnet* should be
arranged in advance by contacting a local office of the United States
Council for International Business
([www.uscib.org/](http://www.uscib.org/)) or its New York office by
phone (212-354‑4480) or by e-mail (<info@uscib.org>).

Advertising materials, including brochures, films, and photographs, may
enter Japan duty free. Articles intended for display - but not for
sale - at trade fairs and similar events are also permitted to enter
duty free but only when the fair or event is held at a bonded exhibition
site. After the event, these bonded articles must be re-exported or
stored at a bonded facility. A commercial invoice for these goods should
be marked "no commercial value, customs purposes only" and "these goods
are for exhibition and are to be returned after conclusion of the
exhibition." It is also important to identify the trade show or
exhibition site, including exhibition booth number (if known), on
shipping documents.

## Labeling and Marking Requirements [**Return to top**](#chapter-5-trade-regulations-and-standards)

Correct packing, marking, and labeling are critical to smooth customs
clearance in Japan. Straw packing materials are prohibited. As noted
above, the Japanese Measurement Law requires that all imported products
and shipping documents show metric weights and measures. For most
products there is no requirement for country of origin labeling, though
some categories such as beverages and foods do require such labeling. If
labels indicating origin are later determined to be false or misleading,
the labels must be removed or corrected. False or misleading labels
which display the names of countries, regions or flags other than the
country of origin, and/or names of manufacturers or designers outside
the country of origin are not permissible.

Japanese law requires labels for products in four categories: textiles,
electrical appliances and apparatus, plastic products and miscellaneous
household and consumer goods. Because the relevant regulations apply
specifically to individual products, it's important for U.S. exporters
to work with a prospective agent or importer to ensure the exporter's
product meets applicable requirements. Generally, most labeling laws are
not required at the customs clearance stage, but at the point of sale.
Consequently, it is most common for Japanese importers to affix a label
before or after clearing customs.

## Prohibited and Restricted Imports [**Return to top**](#chapter-5-trade-regulations-and-standards)

Japan strictly prohibits entry of narcotics and related utensils,
firearms, firearm parts and ammunition, explosives and gunpowder,
counterfeit or imitation coins or currency, obscene materials, or goods
that violate intellectual property rights. Restricted items include but
are not limited to certain agricultural and meat products, endangered
species and products such as ivory, animal parts and fur whose
international trade is banned by international treaty, and more than two
months' supply of medicines and cosmetics for personal use. In addition,
Japan imposes restrictions on the sale or use of certain products
including those related to health such as medical products,
pharmaceuticals, agricultural products and chemicals. For these
products, Japanese Customs reviews and evaluates the product for import
suitability before shipment to Japan. The use of certain chemicals and
other additives in foods and cosmetics is severely regulated and follow
a "positive list" approach. For more information on prohibited and
restricted imports visit the Q&A section on the Japan Customs web site:
[www.customs.go.jp/index_e.htm](http://www.customs.go.jp/index_e.htm).

## Customs Contact Information [**Return to top**](#chapter-5-trade-regulations-and-standards)

Ministry of Finance

3-1-1 Kasumigaseki, Chiyoda-ku

Tokyo 100-8940

Japan

Phone: +81/3/3581-4111

[www.mof.go.jp/english/tariff/tariff.htm](http://www.mof.go.jp/english/tariff/tariff.htm)

[www.customs.go.jp/index_e.htm](http://www.customs.go.jp/index_e.htm)

Customs Counselors System in Japan

Tokyo Headquarters

Phone: +81/3/3529-0700

[www.customs.go.jp/zeikan/seido/telephone_e.htm](http://www.customs.go.jp/zeikan/seido/telephone_e.htm)

Japan Tariff Association

Chibiki 2nd Bldg., 8F

4-7-8 Kojimachi, Chiyoda-ku

Tokyo 102-0083

Japan

Phone: + 81/3/3263-7221

Fax: + 81/3/3263-7972

[www.kanzei.or.jp/english/](http://www.kanzei.or.jp/english/)

APEC Tariff Database

[www.apectariff.org/](http://www.apectariff.org/)

## Standards [**Return to top**](#chapter-5-trade-regulations-and-standards)

-   [Overview](#overview-return-to-top-9)

-   [Standards Organizations](#standards-organizations-return-to-top)

-   [Product Certification / Conformity
    Assessment](#product-certification-conformity-assessment-return-to-top)

-   [Accreditation](#accreditation-return-to-top)

-   [Public Comment on Technical
    Regulations](#public-comment-on-technical-regulations-return-to-top)

-   [Labeling and Marking](#labeling-and-marking-return-to-top)

###  Overview [**Return to top**](#standards-return-to-top)

> Many domestic and imported products alike are subject to product
> testing and cannot be sold in Japan without certification of
> compliance with prescribed standards. Knowledge of, and adherence to,
> these standards and their testing procedures can be the key to making
> or breaking a sale. Product requirements in Japan fall into two
> categories: technical regulations (or mandatory standards) and
> non-mandatory voluntary standards. Compliance with regulations and
> standards is also governed by a certification system in which
> inspection results determine whether or not approval
> (certification/quality mark) is granted. Approval is generally
> required to sell a product or even display it at a trade show;
> unapproved medical equipment may be displayed if accompanied by a sign
> indicating that the product is not yet approved for sale. To affix a
> mandatory quality mark or a voluntary quality mark requires prior
> product type approval and possibly factory inspections for quality
> control assessment. Regulated products must bear the appropriate
> mandatory mark when shipped to Japan in order to clear Japanese
> Customs. Regulations may apply not only to the product itself, but
> also to packaging, marking or labeling requirements, testing,
> transportation and storage, and installation. Compliance with
> \"voluntary\" standards and obtaining \"voluntary\" marks of approval
> can greatly enhance a product\'s sales potential and help win Japanese
> consumer acceptance.
>
> There are two ongoing trends in Japan regarding standards. One is a
> move toward reform of such standards, and the other is a move toward
> bringing them into harmony with prevailing international standards.
> While reform is underway, a long list of laws containing mandatory
> standards remain on the books and most have not been translated into
> English. Therefore, it is important that a Japanese agent or partner
> be fully aware of the wide variety of legislation that could affect
> the sale of the exported product in Japan. Major laws stipulating
> standards that apply to products in Japan include the following:

-   Electrical Appliance and Material Control Law

-   Consumer Product Safety Law

-   Gas Utility Industry Law

-   Food Sanitation Law

-   Pharmaceutical Affairs Law

-   Road Vehicles Law

-   Building Standards Law

###  Standards Organizations [**Return to top**](#standards-return-to-top)

> The Japan Industrial Standards Committee (JISC) plays a central role
> in standards activities in Japan
> ([www.jisc.go.jp/eng/index.html](http://www.jisc.go.jp/eng/index.html)).
> Its mission consists of four elements: (1) establishment and
> maintenance of Japan Industrial Standards (JIS), (2) administration of
> accreditation and certification, (3) participation in international
> standards activities, and (4) development of measurement standards and
> technical infrastructure for standardization. JISC publishes plans
> each month for the preparation of new and revised JIS drafts on its
> website at
> [www.jisc.go.jp/eng/jis-act/drafts-preparation.html](http://www.jisc.go.jp/eng/jis-act/drafts-preparation.html).
>
> Existing JIS standards are reviewed and revised every 5 years. Once a
> new or revised draft JIS standard has been prepared, JISC posts these
> draft standards for a sixty-day public comment period. The JISC
> website also provides information regarding how foreign entities may
> participate in the JIS drafting process.
>
> The \"voluntary\" JIS mark, administered by the Ministry of Economy,
> Trade and Industry (METI), applies to nearly 600 different industrial
> products and consists of over 8,500 standards. Adherence to JIS is
> also an important determinant for companies competing on bids in the
> Japanese government procurement process. Products that comply with
> these standards will be given preferential treatment in procurement
> decisions under Japan\'s Industrial Standardization Law. JIS covers
> all industrial products except for those products regulated by
> specific national laws or for which other standard systems apply
> (*e.g.,* the Pharmaceutical Affairs Law and Japan Agricultural
> Standards).
>
> The Japan Agricultural Standards (JAS) mark is another \"voluntary\"
> but widely used product quality and labeling mark. JAS applies to
> beverages, processed foods, forest products, agricultural commodities,
> livestock products, oils and fats, products of the fishing industry,
> and processed goods made from agricultural, forestry, and fishing
> industry raw materials. Specific JAS marks exist for various types of
> plywood, paneling, flooring boards, lumber, and timber. The JAS
> marking system is administered by Japan\'s Ministry of Agriculture,
> Forestry and Fisheries (MAFF). Japan's Ministry of Health, Labor and
> Welfare (MHLW) administers separate mandatory standards for quality
> labeling of processed foods and beverages.

###  Product Certification / Conformity Assessment [**Return to top**](#standards-return-to-top)

> The Japan Accreditation System for Product Certification Bodies of JIS
> Mark
>
> (JASC) is an accreditation program defined by the Japanese Industrial
> Standards (JIS) Law, and operated by the JASC office in METI. JASC
> accredits product certification bodies in the private sector and
> allows them to certify companies so that they may place the JIS Mark
> on their products. A list of Japanese and foreign organizations
> accredited by JASC as \"JIS mark\" certification bodies is available
> on the JISC website at
> [www.jisc.go.jp/eng/jis-mark/acc-insp-body.html](http://www.jisc.go.jp/eng/jis-mark/acc-insp-body.html).
> This list provides contact information as well as the JIS field of
> certification for these testing organizations.
>
> The two major non-governmental accreditation bodies in Japan are the
> Incorporated Administrative Agency (IAJapan---within the
> quasi-governmental National Institute of Technology and Evaluation)
> and the Japan Accreditation Board for Conformity Assessment (JAB).
> IAJapan operates several accreditation programs including the Japan
> National Laboratory Accreditation System (JNLA) and the Japan
> Calibration Service System (JCSS). IAJapan\'s website
> ([www.nite.go.jp/asse/iajapan/en/index.html](http://www.nite.go.jp/asse/iajapan/en/index.html))
> provides lists of laboratories accredited under its programs, and
> laboratories accredited by JAB can be found at
> <http://www.jab.or.jp/english/index.html>.
>
> A limited number of testing laboratories in the United States not
> listed on the websites noted above have also been designated by
> various Japanese government agencies to test and approve U.S. products
> for compliance with Japanese mandatory certification systems and laws.
> Products not covered by these arrangements must be tested and approved
> by Japanese testing labs before these products can be sold in Japan.

Conformity assessment bodies recognized by Japan for electrical
appliances can be viewed on the METI
website:http://www.meti.go.jp/english/policy/denan/procedure/07.htm. For
additional information on third-party conformity assessment for
electrical products in Japan, visit:
http://www.meti.go.jp/english/policy/denan/procedure/06.htm.

###  Accreditation [**Return to top**](#standards-return-to-top)

Please see the [Product Certification / Conformity
Assessment](#product-certification-conformity-assessment-return-to-top)
section above.

###  Public Comment on Technical Regulations [**Return to top**](#standards-return-to-top)

> Each Japanese ministry posts draft regulations for public comment on
> their respective websites. These draft regulations can also be found
> in a consolidated list, available in Japanese on the e-Gov web portal
> ([search.e-gov.go.jp/servlet/Public](http://search.e-gov.go.jp/servlet/Public)).
> The website was designed to help facilitate public participation in
> Japan's regulatory process by improving the public\'s ability to find,
> view, and comment on regulatory actions.
>
> It should be noted that although U.S. entities may submit comments on
> draft regulations, the amount of time given for submissions varies
> widely and all comments must be submitted in Japanese. To assist U.S.
> entities that wish to participate in the Japanese regulatory process,
> Commercial Service staff at the U.S. Embassy in Tokyo prepare a weekly
> summary translation in English of selected public comment
> announcements by Japanese government agencies. This translation is
> available at
> [www.buyusa.gov/japan/en/mac.html](http://www.buyusa.gov/japan/en/mac.html).
>
> Finalized technical regulations and standards are published in
> Japan\'s national gazette known as the *Kanpō*
> ([kanpou.npb.go.jp/](http://kanpou.npb.go.jp/), Japanese only).

###  Labeling and Marking [**Return to top**](#standards-return-to-top)

As noted above, Japanese laws requiring product certification and
labeling are numerous. A good reference for information on these
requirements is JETRO\'s Handbook for Industrial Product Import
Regulations available at:

> [***www.jetro.go.jp/en/market/regulations/index.html***](http://www.jetro.go.jp/en/market/regulations/index.html).

## Trade Agreements [**Return to top**](#chapter-5-trade-regulations-and-standards)

As of February 2007, Japan has entered into economic partnership
agreements (EPAs) with Singapore, Malaysia and Mexico. Given its
favorable effect on trade and economic growth in both countries,
Singapore and Japan reached a new agreement on a revised outline of the
EPA in January 2007. Japan signed an EPA with the Philippines in
September 2006, and is also expected to sign one soon with Thailand.
Japan recently reached basic agreement on an EPA outline with Chile,
Brunei and Indonesia. India and Vietnam held first rounds of
negotiations with Japan in January 2007, and Australia and Switzerland
agreed to commence negotiations in 2007. In 2006 Japan launched
negotiations with the Gulf Cooperation Council (GCC-Bahrain, Oman,
Qatar, Saudi Arabia, United Arab Emirates and Kuwait) on an FTA covering
trade in goods and services. The second round of negotiations was
concluded with the GCC in January 2007. Japan is also pursuing
negotiations with the Association of Southeast Asian Nations (ASEAN),
however, no negotiation has been held with the Republic of Korea since
November 2004. Study groups exploring future bilateral EPAs with Japan
have also been established with Canada and South Africa. Japan is a
member of APEC, which has established a goal of APEC-wide free trade and
investment for developed economy members by 2010, and for all APEC
member economies by 2020.

Economic partnership agreements (EPAs) are broader than traditional free
trade agreements (FTAs), which are generally limited to the reduction or
elimination of tariffs on goods and other barriers on investment and
trade in services. EPAs expand beyond FTAs to harmonize economic systems
through the free movement of people, goods, and capital within a region.
Japan's EPAs include economic activities such as tourism, intellectual
property rights protection, standardization of customs and trade
regulations, and the controlling of anti-competitive activities, among
others things.

## Web Resources [**Return to top**](#chapter-5-trade-regulations-and-standards)

Japanese import clearance and customs procedures:

Japanese Ministry of Finance

[www.customs.go.jp/index_e.htm](http://www.customs.go.jp/index_e.htm)

Japanese Customs:

Japanese Ministry of Finance

[www.mof.go.jp/english/tariff/tariff.htm](http://www.mof.go.jp/english/tariff/tariff.htm)

Customs Counselors System in Japan

[www.customs.go.jp/zeikan/seido/telephone_e.htm](http://www.customs.go.jp/zeikan/seido/telephone_e.htm)

Japan Tariff Association

[www.kanzei.or.jp/english/](http://www.kanzei.or.jp/english/)

APEC Tariff Database

[www.apectariff.org/](http://www.apectariff.org/)

U.S. export control procedures:

U.S. Department of Commerce

Bureau of Industry and Security (BIS)

[www.bis.doc.gov/](http://www.bis.doc.gov/)

(for defense-related articles)

U.S. Department of State

Office of Defense Trade Controls

[www.pmddtc.state.gov/](http://www.pmddtc.state.gov/)

(for current U.S. embargo information)

U.S. Department of the Treasury

Office of Foreign Assets Control

[www.treas.gov/offices/enforcement/ofac/](http://www.treas.gov/offices/enforcement/ofac/)

Obtaining a temporary-entry *carnet:*

United States Council for International Business

Local Offices ---[www.uscib.org/](http://www.uscib.org/)

N.Y. Office --- <info@uscib.org>

[www.atacarnet.com/](http://www.atacarnet.com/)

Standards:

Japan Industrial Standards Committee (JISC)

> [www.jisc.go.jp/eng/index.html](http://www.jisc.go.jp/eng/index.html)

International Accreditation Japan (IAJapan)

[www.nite.go.jp/asse/iajapan/en/index.html](http://www.nite.go.jp/asse/iajapan/en/index.html)

Japan Accreditation Board for Conformity Assessment (JAB)

> [www.jab.or.jp/english/index.html](http://www.jab.or.jp/english/index.html)

Japanese government regulations:

> (for public comment updates)
>
> U.S. Commercial Service
>
> American Embassy Tokyo
>
> [www.buyusa.gov/japan/en/mac.html](http://www.buyusa.gov/japan/en/mac.html).

(for finalized technical regulations and standards)

Japan National Gazette (*Kanpō*)

[kanpou.npb.go.jp/](http://kanpou.npb.go.jp/) (Japanese only)

Labeling and marking requirements:

Japan External Trade Organization (JETRO)

[www.jetro.go.jp/en/market/regulations/index.html](http://www.jetro.go.jp/en/market/regulations/index.html)

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[[]{#ch6 .anchor}Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 6: Investment Climate

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

A. [Government Attitude to Foreign Investment: Attracting FDI a Policy
Priority](#a.-government-attitude-to-foreign-investment-attracting-fdi-a-policy-priority-return-to-top)

> A.1 [Openness to Foreign Investment: Few Restrictions, but Unique
> Challenges](#a.1-openness-to-foreign-investment-few-restrictions-but-unique-challenges-return-to-top)
>
> A.2 [Conversion and Transfer Policies: Largely
> Uninhibited](#a.2-conversion-and-transfer-policies-largely-uninhibited-return-to-top)
>
> A.3 [Expropriation and Compensation: Virtually No
> Risk](#a.3-expropriation-and-compensation-virtually-no-risk-return-to-top)
>
> A.4 [Dispute Settlement: No Outstanding Cases in Investment
> Area](#dispsettle)
>
> A.5 [Performance Requirements and Incentives:
> None](#a.5-performance-requirements-and-incentives-none-return-to-top)
>
> A.6 [Right to Private Ownership and Establishment: Secure for Foreign
> Business](#righttoprivown)
>
> A.7 [Protection of Intellectual Property Rights: A Well Developed
> System, but Can Be Time-Consuming and
> Costly](#a.7-protection-of-intellectual-property-rights-a-well-developed-system-but-can-be-time-consuming-and-costly-return-to-top)
>
> A.8 [Transparency of Regulatory System: Toward More
> Openness](#a.8-transparency-of-the-regulatory-system-toward-more-openness-return-to-top)
>
> A.9 [Capital Markets and Portfolio Investment: Less Than
> Perfect](#a.9-capital-markets-and-portfolio-investment-less-than-perfect-return-to-top)
>
> A.10 [Political Violence: Rare to
> Unknown](#a.10-political-violence-rare-to-unknown-return-to-top)
>
> A.11 [Corruption: Evolution Towards Stricter Ethical
> Standards](#a.11-corruption-problems-remain-despite-obvious-progress-return-to-top)

B. [Bilateral Investment
Agreements](#b.-bilateral-investment-agreements-return-to-top)

C. [OPIC and Other Investment Insurance Programs: Not
Available](#c.-opic-and-other-investment-insurance-programs-not-available-return-to-top)

D. [Labor: Toward More
Flexibility](#d.-labor-toward-more-flexibility-return-to-top)

E. [Foreign-Trade Zones / Free Ports / Special Zones for Structural
Reform](#e.-foreign-trade-zones-free-ports-special-zones-for-structural-reform-return-to-top)

F. [Foreign Direct Investment Statistics: Steady Increase in Japan\'s
FDI Stock in CY2004](#f.-investment-data-return-to-top)

G. [Web Resources](#web-resources-return-to-top-1)

## A. Government Attitude to Foreign Investment: Attracting FDI a Policy Priority [**Return to top**](#ch6)

## A.1 Openness To Foreign Investment: Few Restrictions, but Unique Challenges [**Return to top**](#ch6)

Japan, as the world's second-largest economy and the United States'
fourth-largest trading partner, is an important potential destination
for U.S. foreign direct investment (FDI). The Government of Japan (GOJ)
imposes few formal restrictions on inward FDI, and has removed or
liberalized most legal restrictions that previously applied to specific
business sectors. In addition, since 2001, the government has made
increasing Japan's stock of FDI an economic policy priority recognizing
its potential for enhancing Japan's competitiveness and contributing to
sustainable economic growth. Then-Prime Minister Junichiro Koizumi in
February 2001 announced a national goal of doubling Japan's stock of
FDI, as a percentage of GDP, within five years. Despite its best
efforts, the GOJ fell just short of that goal. Nevertheless, in June
2006, the government set a further goal of increasing the nation's stock
of FDI to 5 percent of GDP by 2010. Immediately upon taking office in
September 2006, Prime Minister Shinzo Abe publicly renewed that goal and
on a number of subsequent occasions has reiterated his government's
commitment to improving Japan's investment climate.

Japan is now in the midst of the longest period of continuous economic
growth in its post-war history. At the same time, the government in
recent years has undertaken significant structural reform of the economy
thereby creating new opportunities for FDI. Together, these factors have
led to growing merger and acquisition (M&A) activity. Since 1999, the
annual level of M&A in Japan has more than doubled. Most of these are
domestic transactions but there has been a slower, if steady, increase
in cross-border deals as well.

The GOJ does not impose export balancing requirements or other
trade-related FDI measures on firms seeking to invest in Japan. Risks
associated with investment in many other countries, such as
expropriation and nationalization, are also not of concern in Japan

Nevertheless, foreign investors who want to establish or enhance their
presence in Japan face a number of unique challenges, many which are
matters of private business practice rather than of government
regulation. The most notable of these include:

-   A high overall cost structure that makes market entry, exit, and
    expansion expensive;

-   Cultural and linguistic challenges to doing business;

-   Corporate practices and market rules that inhibit foreign
    acquisition of Japanese firms, such as insufficient financial
    disclosure practices, cross-holding of shares among companies
    belonging to the same business grouping, and a low proportion of
    publicly traded common stock relative to total capital in many
    companies;

-   Exclusive buyer-supplier networks and alliances maintained by some
    business groups that limit competition from foreign firms and
    domestic newcomers;

-   Labor practices which inhibit labor mobility, repress productivity,
    and negatively impact development of skills;

-   Public wariness about "hostile" foreign takeovers.

All of these issues continue to be addressed in government-to-government
talks and progress has been made in some areas.

Despite the increase in FDI since the mid-1990s, Japan continues to have
the smallest amount of inward foreign investment as a proportion of GDP
of any major OECD nation. According to the 2006 World Investment Report
issued by the United Nations Conference on Trade and Development
(UNCTAD), the current ratio of FDI to GDP in Japan is 2.2 percent,
compared to 13.0 percent in the United States, 37.1 percent in the
United Kingdom, 18.0 percent in Germany, and 28.5 percent in France.
UNCTAD's report ranks Japan as 131 among 141 countries in terms of the
ratio of FDI to GDP, although Japan's Inward FDI Potential Index is
ranked 22 in terms of the amount of FDI money received. Foreign
participation in mergers and acquisitions also lags in Japan. According
to Recof, a Tokyo-based M&A consultancy, the total number of M&A
transactions in Japan 2006 was 2,764, up 1 percent from the previous
year, but only 148 of those deals involved foreign buyers. Japan's
relative lack of inward foreign investment also acts to limit the
potential growth of imports.

On a yen basis, FDI stock in Japan rose from 3.0 trillion yen at the end
of 1998 to 11.9 trillion yen at the end of 2005. According to OECD
figures, Japan's inward FDI fell sharply in 2005 to \$2.8 billion after
several years of solid growth. In part, this reflected sales by a number
of foreign funds that had purchased shares in distressed assets during
Japan's banking crisis of the 1990s. In addition, there were several
large disinvestments by foreign companies facing difficulties in home
markets, most notably, General Motors' sale of 17 percent of Suzuki
Motor Corporation for \$2 billion in April 2006 and Vodafone's \$15.5
billion sale of its Japanese cellular telephone business to the Japanese
firm Softbank in March 2006.

Meanwhile, Japan continues to run a significant imbalance between inward
and outward FDI (see Table 1b). Japan's outward flow of foreign direct
investment rose almost 47 percent in CY 2005 to \$45.8 billion, up from
\$28.8 billion in CY 2003.

In recent years, the GOJ has taken welcome steps to address
investment-related problems. Reforms in the financial, communications
and distribution industries have encouraged foreign investment into
these sectors. At the same time, reform of Japan's corporate code,
bankruptcy laws and accounting principles are also helping to attract
foreign investment into Japan. The Japan External Trade Organization
(JETRO), a quasi-governmental entity, and the Ministry of Economy, Trade
and Industry (METI) have the lead in implementing programs to attract
greater foreign investment to Japan. At the regional level, a number of
prefectural and city governments are intensifying efforts to attract
foreign investors.

The most significant FDI-related legislative change in recent years has
been the revision of Japan's Company Law. This new law, approved June
29, 2005, entered into force on May 1, 2006. The most significant
provision in regard to FDI is the easing of rules on the use of foreign
stock as consideration in cross-border mergers. Previously,
consideration given to shareholders of merged companies was generally
limited to cash or stock of the surviving company. This restriction
served as a disincentive to otherwise advantageous mergers. Under the
new Company Law, the surviving company can provide cash or shares of its
foreign parent company instead of, or in addition to, its own stock in a
procedure known as a triangular merger. However, under pressure from
business interests, the GOJ delayed implementation of the law's
triangular merger provision until May 2007 in order to allow firms time
to determine whether to adopt defensive measures against hostile
takeovers.

In anticipation of these new provisions coming into force, the Diet in
December 2006 took up discussion of the tax treatment of cross-border
triangular mergers. Although the relevant Diet tax panel agreed, in
principle, to extend tax deferral to cross-border triangular mergers,
certain conditions may make the use of this type of transaction
impractical for the majority of deals especially those involving new
entrants to the Japanese market. Final rules will be set out in
government ordinances scheduled for completion in the first quarter of
2007.

Also relevant to investors, particularly in the financial sector, is the
new Financial Instruments and Exchange Law passed by the Diet in June
2006. The bulk of its provisions will come into effect in 2007. By
amending or abolishing 93 previous laws regulating banking, securities,
investment and real estate trusts, the law establishes a broad new
framework for the regulation of financial instruments and services. The
government\'s stated purpose in amending the law is to establish a
flexible regulatory system with a uniform set of rules for similar
financial instruments while enhancing protections for investors and
promoting financial innovation. The law, inter alia, establishes rules
for tender offers (TOBs) that clarify the shareholding limits which
trigger a mandatory TOB, extend the minimum time period for TOBs, and
require greater disclosure of the size and price of share purchases by
large-scale investors in order to protect the interests of smaller
shareholders.

**Liberalization of Investment Restrictions**

Japan has gradually eliminated most of the formal restrictions governing
its FDI regime. In 1991, the GOJ amended the Foreign Exchange and
Foreign Trade Control Law (which also controls foreign investment) to
replace the long-standing \"prior notification\" requirement for all FDI
with an \"ex post facto notification\" requirement for investment in
non-restricted industries. \"Prior notification\" (and thus case-by-case
approval) is now required only for investment in certain restricted
sectors, including agriculture, forestry, petroleum,
electrical/gas/water utilities, aerospace, telecommunications, and
leather manufacturing. Administrative approval for foreign investment in
some of these sectors is quite certain, while in other sectors it is
likely to be subject to greater scrutiny based on \"national
sovereignty\" or national security concerns. In December 2006, METI
announced 2006 the formation of a working group made up of academics and
business representatives to recommend updating the list of restricted
sectors with special attention given to materials and technology that
could be used in the production of weapons of mass destruction. The
working group is to submit its recommendations in the first quarter of
2007.

U.S. investment has become increasingly common in some traditionally
restricted sectors, particularly in the petroleum and telecommunications
industries. The only legal restriction on foreign ownership in Japan\'s
telecommunications sector applies to Nippon Telegraph and Telephone
(NTT): foreign investment in NTT is limited by law to one third.
Japan\'s Radio Law and Broadcasting Law limits foreign investment in
broadcasters to 20 percent, or to one third for a broadcaster
categorized as facility-supplying. Under a revision that passed the Diet
in October 2005, foreign ownership of Japanese companies investing in
terrestrial broadcasters will be counted against these limits. However,
these limits do not apply to communications satellite facility owners
and program suppliers or to cable television operators.

Several sections of the Japanese Anti-monopoly Law (AML) are relevant to
FDI. Chapter four of the AML includes extensive antitrust provisions
pertaining to international contract notification (section 6),
shareholdings (sections 10 and 14), interlocking corporate directorates
(section 13), mergers (section 15), and acquisitions (section 16). The
stated purpose of these sections is to restrict any shareholding,
management, joint venture, and M&A activities that constitute
unreasonable restraints on competition or involve unfair trade
practices. These provisions are not intended to discriminate against
foreign companies or to discourage FDI.

**Limitations on Facility Development, and Availability of Investment
Real Estate**

While the nationwide average price of real estate fell for 13
consecutive years (from 1992 to 2005), real estate prices in major urban
areas, although less than half the 1991 price level, have now leveled
off and remain high. Potential foreign investors find high prices of
commercial office space can be an obstacle to investment in Japan. Lack
of information on land prices and ownership also impedes foreign and
domestic investors, by making it harder to assess the real asset value
of potential business partners or acquisition targets. In the major
urban areas of Tokyo and Osaka there is significant new commercial real
estate under construction at the end of 2006, which may ease prices
somewhat in the future.

Revisions to the Securities Investment Trust Law enacted in 2000 lifted
the ban on real estate investment trusts (REITs) to permit marketing of
mutual funds that invest in property rights. In November 2006, there
were 39 REITs listed on the Tokyo Stock Exchange, holding more than 4
trillion yen in real estate assets. REITs are increasing demand for
transparency and accurate pricing in the real estate market.

Aiming to increase the liquidity of Japanese real estate markets, the
government has progressively lowered capital gains, registration, and
license taxes on real estate in recent years. It also reduced
inheritance and gift taxes to promote intergenerational transfer of land
and other assets. More changes in tax policy and accounting standards
could increase real estate liquidity, but the market is still hampered
by a shortage of legal and accounting professionals, lack of information
on prices and income flows, and taxes that discourage real estate
transactions. Beginning April 2001, the Japan Institute of Certified
Public Accountants introduced a new standard that required companies to
write off substantial losses (50 percent or more) on real estate
inventories acquired for sale or development, further encouraging
liquidity in real estate markets.

Japan continues to restrict the development of industrial and commercial
facilities in some areas in an attempt to prevent excessive
concentration of development in the environs of Tokyo, Osaka, and
Nagoya, and also to protect land designated as optimal for agriculture.
On the other hand, many prefectural governments outside the largest
urban areas make available property in public industrial parks.
Generally speaking, Japan\'s zoning laws give local Japanese officials
and residents considerable discretionary authority to screen almost all
aspects of a proposed building. These factors effectively reduce the
real estate available for development and often lead to delays in
construction and higher building costs.

**Corporate Tax Treatment**

Local branches of foreign firms are generally taxed only on corporate
income derived from within Japan, whereas domestic Japanese corporations
are taxed on their worldwide income. Calculation of taxable income and
allowable deductions, and payments of the consumption tax (sales tax),
are otherwise the same as those for domestic companies, with national
treatment for foreign firms. Corporate tax rules classify corporations
as either foreign or domestic depending on the location of their
"registered office," which may be the same as --- or a proxy for --- the
place of incorporation.

The United States has a new bilateral tax treaty with Japan that came
into full force in January 2005. The treaty generally allows Japan to
tax the business profits of a U.S. resident only to the extent those
profits are attributable to a "permanent establishment" in Japan, and
provides measures intended to mitigate double taxation. Cross-border
dividends on listed stock are not subject to source country withholding
tax if the parent company owns 50 percent or more of the foreign
subsidiary. Interest on financial transactions payable to a nonresident
as well as royalties paid to a foreign licenser also is no longer
subject to source country withholding tax.

A special tax measure allows designated inward investors to carry over
certain losses for tax purposes for ten years rather than for the normal
five years. In JFY 1996, the scope of losses that qualify for this
special measure was expanded. As part of the JFY 2003 tax reform,
Japan's effective corporate tax rate, including local taxes, was reduced
from 40.87 percent to 39.54 percent. Corporate tax reform proposals for
FY 2006 abolished tax breaks for IT-related investments and created new
tax incentives for advanced software investments.

The option of consolidated taxation was made available to corporations
since April 2002. Consolidated taxation was intended to facilitate
investment and corporate restructuring, because the losses usually
expected from a new venture or recently acquired subsidiary can be
charged against the profits of the parent firm or holding company.

**Investment Incentives**

In Japan, both government and the private sector are increasingly
promoting inward FDI. In 2002, the Cabinet established FDI promotion as
one of the key strategies for revitalizing the Japanese economy and
resolved to put teeth into the measures needed to attract investment. In
2003, the Japan Investment Council (JIC) prepared a report setting out a
"Program for Promoting Foreign Direct Investment," which discussed five
target sectors and 74 specific measures. (For details of the report, see
<http://www.investment-japan.net/index.htm>) During the JIC's March 2006
meeting, with the original goal of doubling Japan's stock of FDI close
to achievement, the Council proposed a new goal "to increase the balance
of FDI into Japan to 5 percent of the country's GDP, double the present
percentage by 2010." To support this objective, the JIC established the
Program for Acceleration of Foreign Direct Investment in Japan at its
June 2006 meeting.

The Japan External Trade Organization operates the Invest Japan Business
Support Center, a one-stop office providing investment-related
information and services to foreign companies. (More detailed
information is available at <http://www.jetro.go.jp/investjapan/>). In
addition, all concerned ministries have established information desks as
a source of investment information and a resource to help investors
navigate administrative procedures.

Local governments are also increasing their efforts to attract foreign
capital, both through outreach to prospective foreign investors and by
offering business start-up support services and limited financial
incentives. Ongoing efforts to decentralize fiscal authority in Japan
may give local governments the ability to offer tax breaks in the
future. JETRO supports local governments\' investment promotion efforts.
Detailed information on FDI promotion at the local level is available in
English on the JETRO website listed above.

The Japanese Government launched the "Special Zones for Structural
Reform" initiative in 2003, and to date the GOJ has approved
approximately 550 Special Zones. Building on ideas developed by local
governments and private companies, this program designates certain local
areas as exempt from one or more national regulations in order to
develop the areas' special features. In theory, local governments can
use this Special Zones initiative to obtain regulatory exemptions that
can significantly improve the investment environment, such as zones that
liberalize restrictions on ownership of hospitals, schools, and
agricultural enterprises or allow localities to introduce exemptions for
visas/resident qualifications to expand the acceptance of foreign
engineers, tourists and exchange students. In practice, however, the
Special Zones Office has rejected about 70 percent of all Special Zones
proposals since the start of the initiative --- in most cases due to the
objections of the GOJ ministry or agency involved. Moreover, while a
handful of approved Special Zones have addressed investment climate
issues, most zone applications have not sought to create significant new
opportunities for foreign investors. The Headquarters for the Promotion
of Special Zones for Structural Reform, however, continues to invite
ideas on new zones from all sources, including domestic and foreign
governments and private enterprises. In November 2006, the government
announced plans to extend indefinitely the law governing these
structural reform zones which was due to expire March 31, 2007.

## A.2 Conversion and Transfer Policies: Largely Uninhibited [**Return to top**](#ch6)

All foreign exchange transactions to and from Japan --- including
transfers of profits and dividends, interest, royalties and fees,
repatriation of capital, and repayment of principal --- are, in
principle, freely permitted unless expressly prohibited. With the 1998
revision of the Foreign Exchange Law, Japan moved to an ex-post
notification system. This means that all foreign exchange transactions
(unless specifically prohibited, including certain foreign direct
investments, listed in the Appendix of the law) no longer require prior
notification or approval. In addition, the law eliminated the authorized
foreign exchange bank system, whereby foreign exchange transactions all
had to go through certain registered banks. All other restrictions on
methods of payment --- including netting of settlements --- were also
removed, enhancing the ability of foreign and Japanese financial firms
to offer a fuller range of services in Japan. This has led to lower
foreign exchange transaction costs for non-financial firms as well.

Japan is an active partner in the struggle to choke off terrorist
financing. In coordination with other OECD members, the GOJ has
strengthened due-diligence requirements for financial institutions. The
Diet passed a "Know Your Customer" law in 2002. Beginning January 2007,
customers wishing to make cash transfers exceeding 100,000 yen (\$850)
must do so through bank clerks, not ATMs, and must present an ID or
other verification document. These changes could have an impact on the
transfer of funds.

## A.3 Expropriation and Compensation: Virtually No Risk [**Return to top**](#ch6)

[]{#dispsettle .anchor}In the post-war period, the GOJ has not
expropriated or nationalized any enterprises, with the exception of the
nationalization in 1998 of two large capital-deficient banks and, in
2002, of two small failed regional banks. Expropriation or
nationalization of foreign investments is unlikely in the foreseeable
future.

## A.4 Dispute Settlement: No Outstanding Cases in Investment Area [**Return to top**](#ch6)

There have been no major bilateral investment disputes since 1990, and
there are no outstanding expropriation or nationalization cases in
Japan. There have been no cases of international binding arbitration of
investment disputes between foreign investors and the GOJ since 1952.
Japan is a member of the 1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitration Awards. However, it has long been
considered an inhospitable forum for international commercial
arbitration. The Japan Commercial Arbitration Association, the only
organization that arbitrates international trade and investment-related
disputes, had 103 cases submitted to it between FY 1999 and FY 2005. For
FY 2005 the JCAA had 36 cases, of which 26 were continuation cases from
the previous year. 16 of the 36 cases went to arbitration and 10 were
carried over to 2006.

There are no legal restrictions on access by foreign investors to
Japanese lawyers, and significant reforms in laws governing legal
services and the judicial system are increasing the ability of foreign
investors to obtain adequate legal advice on doing business in Japan --
despite some foot-dragging on implementing rules by the Federation of
Japanese Bar Associations (*Nichibenren*).

Based on the Program for Promoting Justice System Reform endorsed by the
Cabinet in March 2002, the Diet passed legislation to promote
cooperation and collaboration between Japanese lawyers (*bengoshi*) and
foreign lawyers qualified under Japanese law (*gaiben*) in 2003. The
Amendment to the Special Measures Law Concerning the Handling of Legal
Business by Foreign Lawyers", which took effect in April 2005, made the
following changes:

> a\. Eliminated the prohibition on the employment of Japanese lawyers
> by foreign law firms qualified under Japanese law;
>
> b\. Eliminated the regulations on joint enterprises between *gaiben*
> and *bengoshi*; and
>
> c\. Abolished legal provisions governing specified joint enterprises
> (*tokutei kyodo jigyo*) and the establishment of joint enterprises
> between foreign lawyers qualified under Japanese law and Japanese
> lawyers or Japanese lawyer professional corporations (*gaikokuho kyodo
> jigyo*).

As a result of the enactment of the Amendment:

> a\. These joint Japanese/foreign joint legal enterprises (*gaikokuho
> kyodo jigyo)* organized as a single law firm or as separate firms can
> provide integrated legal advice and legal services on any and all
> matters within the competence of its members;
>
> b\. *Gaiben* and *bengoshi* in these enterprises can adopt a single
> law firm name of their choice;
>
> c\. *Gaiben* and *bengoshi* in such enterprises may determine the
> profit allocation among them freely and without restriction;
>
> d\. *Gaiben* are permitted to hire Japanese lawyers to work with them
> directly or in a joint legal enterprise or in a Foreign Japanese Joint
> legal office (*gaikokuho-jimu-bengoshi jimusho)* composed of multiple
> *gaiben*;
>
> e\. *Gaiben* and Japanese lawyers continue to be permitted on an ad
> hoc basis to enter into relationships that involve the sharing of
> profits and expenses.

In another significant step, the Cabinet adopted in March 2002 a
judicial reform program with the following results:

-   To increase the number of legal professionals, raised the annual
    number of persons who pass the Bar Examination to 1,500 by 2004 and
    to 3,000 by around 2010; and in cooperation with the Ministry of
    Education, Culture, Sports, Science and Technology, introduced a new
    system of law schools, starting in April 2004.

-   In 2003 the Diet passed a new Alternative Dispute Resolution (ADR)
    Law, including a major revision of the existing Arbitration Law and
    improvement of the legal framework for arbitration, including
    international commercial arbitration. The ADR Law will come into
    effect by May 31, 2007. Foreign lawyers qualified under Japanese law
    can represent parties in ADR proceedings taking place in Japan in
    which one of the parties is foreign or foreign law is applicable, at
    least to the extent such representation is not inconsistent with the
    law. The United States continues to urge Japan to promote
    alternative dispute resolution mechanisms by ensuring that "foreign
    lawyers qualified under Japanese law", foreign lawyers and
    non-lawyers can act as neutrals in any international arbitration or
    other international alternative dispute resolution (ADR) proceedings
    that take place in Japan, in whole or in part, regardless of the
    governing law or matter in dispute.

-   To increase the speed and efficiency of civil litigation, in 2003
    the Diet passed the Law Concerning Trial Facilitation which aims to
    reduce by half the length of time required to complete court trials
    through measures to promote efficient scheduling of hearings,
    increase significantly the number of judges and court personnel, and
    facilitate litigants\' collection of evidence at early stages of
    litigation.

-   The Diet passed a partial amendment of the Administrative Case
    Litigation Law, which came into effect on April 1, 2005, to
    strengthen judicial oversight over administrative agencies.

-   The Diet passed the Law on the Establishment of the Intellectual
    Property High Court. The first Intellectual Property High Court was
    established in Tokyo on April 1, 2005.

More generally, Japan's civil courts enforce property and contractual
rights, and the courts do not discriminate against foreign investors.
However, they are sometimes ill suited for litigation of investment and
business disputes. As in many other countries, Japanese courts operate
rather slowly. As noted above, the Judicial Reform Promotion
Headquarters is enacting a number of changes to speed the conduct of
trials.

In addition, the courts lack contempt powers to compel a witness to
testify or a party to comply with an injunction, and timely temporary
restraining orders and preliminary injunctions are very difficult to
obtain. Filing fees are still based on the amount of the claim, rather
than a flat fee. Lawyers usually require large up-front payments from
their clients before filing a lawsuit, with a modest contingency fee, if
any, at the conclusion of litigation. Contingency fees familiar in the
U.S. are relatively uncommon. A losing party can delay execution of a
judgment merely by appealing, and in appeals to the high courts,
additional witnesses and other evidence are sometimes allowed.

Courts do have power to encourage mediated settlements, and the courts
have a supervised mediation system. Parties can manipulate this system
to delay resolution, however, and because judges move frequently,
continuity is often lost. As a result, it is very common for companies
to settle out of court.

## A.5 Performance Requirements and Incentives: None [**Return to top**](#ch6)

[]{#righttoprivown .anchor}Japan does not maintain a system of
performance requirements. Japan also maintains no formal requirements
for local management participation or local control in joint ventures or
other forms of direct investment, except in restricted sectors.

## A.6 Right to Private Ownership and Establishment: Secure for Foreign Business [**Return to top**](#ch6)

Japan legally maintains the right for foreign and domestic private
enterprises to establish and own business enterprises and engage in all
forms of remunerative activity.

## A.7 Protection of Intellectual Property Rights: A Well Developed System, but Can Be Time-Consuming And Costly [**Return to top**](#ch6)

Protection of intellectual property rights is an integral part of every
successful U.S. exporter\'s basic market strategy in Japan. It is
necessary to file applications to register patents and trademarks in
Japan to obtain protection, but prior patent filing in the United States
can provide certain advantages if applications are filed promptly in
Japan. A U.S. patent or trademark attorney can provide informal advice,
but it is necessary to hire a Japanese lawyer or patent practitioner
*(benrishi)* registered in Japan to prosecute the patent or trademark
application. In conformity with international agreement, Japan maintains
a non-formality principle for copyright registration --- *i.e.,*
registration is not a pre-condition to the establishment of copyright
protection. However, the Agency of Cultural Affairs maintains a registry
for such matters as date of first publication, date of creation of
program works, and assignment of copyright. U.S. copyrights are
recognized in Japan by international treaty. U.S.-produced semiconductor
chip design-layouts are protected for ten years under a special law if
they are registered with the Japanese "Industrial Property Cooperation
Center" --- a Japanese government-backed public corporation.

Obtaining and protecting patent and trademark rights in Japan can be
time-consuming and costly, although patent fees have recently been
reduced considerably. While the process to safeguard such rights might
seem prohibitive, lack of protection would permit competitors both in
and outside of Japan to copy a product or production process. Even when
intellectual property rights have been acquired, pirating of technology
and designs can occur in Japan, as in other countries. Each company in a
trading or licensing agreement should understand clearly what its rights
and obligations are with respect to the intellectual property rights
owned or acquired by the other. Such a clear understanding helps to
create a good rapport based on mutual trust, thereby ensuring the
success of the trading or licensing agreement.

######## Patents, Trademarks, Utility Models and Designs

Unlike U.S. patent law, patents are granted to the first to file an
application for a particular invention, rather than to the first to
invent. Although Japan accepts filings in English (to be followed by a
Japanese translation), companies should ensure that translations of
their applications are perfect, as significant negative ramifications
may result from translation errors. Prompt filing in Japan is crucial
because printed publication of a description of the invention anywhere
in the world, or knowledge or use of the invention in Japan, prior to
the filing date of the Japanese application, would preclude the grant of
a patent on the application. Also, unlike the United States, where
examination of patent applications is automatic, an applicant must
request examination of his patent application in Japan within three
years of filing.

As is true in many countries, all patent applications are published 18
months after filing. If, during the examination, the Japanese Patent
Office (JPO) finds no impediment to the grant of a patent for a
particular invention, it publishes the patent application in the Patent
Public Gazette a second time, including any changes that have been made
during the examination. Under a recent amendment to the Patent Law,
parties may contest the terms of a patent grant immediately after
issuance by the Patent Office (for a period of up to six months), rather
than prior to registration as had been the previous practice. The patent
is granted and valid for 20 years from the date the application is
filed.

According to the latest JPO statistics in CY-2005, it takes an average
of 26 months from the request for examination of application to First
Action. An applicant can request accelerated examination, and efforts by
the Patent Office to make the documentation necessary for the
preliminary research required to request accelerated examination
available electronically are expected to lower the cost of such requests
to the applicant. During the examination period, limited effective legal
protection exists. In 2006, JPO and USPTO announced two agreements that
should make the examination process more efficient. The Patent
Prosecution Highway pilot project, which began in July 2006, permits
USPTO and JPO to be able to use results of examination in first office
for an application to the second office. In November, an agreement on
Priority Document exchange was reached which allows the second office to
pull up an electronic copy of the \"Priority Document\" from the first
office.

Japan\'s Trademark Law protects trademarks and service marks. As is the
case with patent applications, a resident agent (usually a lawyer or
patent agent) must prosecute the trademark application. And as with the
processing of patent applications, Japan\'s trademark registration
process can be slow. Any company planning on doing business in Japan
should file for trademark registration as early as practicable. Japan is
subject to the Madrid Protocol (effective March 14, 2000) and trademarks
registered at the WIPO Secretariat will be protected among member
countries.

Japan\'s Utility Model Law, as amended in the Unfair Competition
Prevention Law in April 2005, also allows registration of utility
models, a form of minor patent with a 10-year term of protection.
Additional changes in 2005 provided for a reduction of registration fees
and the ability to apply for patent rights based on Utility Model
rights. A separate design law allows protection of designs, with a
15-year term of protection from the date registration was made.

######## Unfair Competition and Trade Secrets

Protection for trademarks in Japan prior to registration is provided
under the Japanese Unfair Competition Prevention Law. Under this law,
the owner of the mark must demonstrate that the mark is well known in
Japan and that consumers will be confused by the use of an identical or
similar mark by the unauthorized user. Since 1990, Japan amendments to
the law have provided some protection from theft of trade secrets, such
as know-how, customer lists, sales manuals, and experimental data. The
law, which was amended completely in 1993, also provides for injunctions
against wrongful use, acquisition, or disclosure of a trade secret by
any person who knew or should have known that the information in
question was misappropriated. Amendments to the law in 2005 strengthened
protection of trade secrets by introducing criminal penalties as well as
by raising penalties. The judicial process, however, makes the
enforcement of rights without loss of trade secrets difficult.

## A.8 Transparency of the Regulatory System: Toward More Openness [**Return to top**](#ch6)

Over-regulation in Japan continues to restrain economic growth, raise
the cost of doing business, restrict competition, impede market entry
and exit, and impede investment. It also raises prices and increases the
cost of living for Japanese consumers and for foreign businesses
operating in Japan. Typical of highly regulated economies, Japan suffers
from misallocation of resources, less than optimal foreign investment
and a lack of entrepreneurial innovation. In addition to slowing growth,
government over-regulation lies at the heart of many market access and
competitive problems faced by U.S. companies in Japan.

An essential prerequisite for a vibrant Japanese economy is a regulatory
system that is transparent, fair, predictable and accountable and which
guarantees domestic and foreign firms alike full access to information
and opportunity to have input into the regulatory decision-making
process. The Japanese Government has made greater transparency a
crosscutting theme of its regulatory reform initiatives. Systemic
measures set out in the GOJ's 2004 Plan on the Promotion of Regulatory
Reform are contributing to needed improvements in the transparency and
accountability of the Japanese regulatory system. They include the
following: wider use of the Public Comment Procedures for Formulating,
Amending and Repealing Regulations; strict enforcement and promotion of
the use of the 1994 Administrative Procedure Law; increased transparency
of administrative guidance; full and effective implementation of the Law
Concerning the Disclosure of Information Retained by Administrative
Agencies; expanded use of the "no-action letter" system; comprehensive
and objective evaluation of the regulatory process; and examination of
the need, effects, and costs of new proposed and existing regulations.

Building on these measures, the United States in its annual Regulatory
Reform Initiative submissions has recommended that the Japanese
Government undertake additional improvements in its regulatory system to
support Japan's reform efforts and to ensure universal access to
government information and the policymaking process. Japan has taken
welcome steps in recent years to improve its Public Comment Procedures
(PCP), but the effectiveness of these revisions remains to be seen. The
United States continues to urge the GOJ to take concrete steps to ensure
the spirit of the revised PCP is adhered to, including compelling
ministries and agencies to provide minimum 30-day public comment periods
unless there is a genuinely urgent need to do otherwise; seriously
consider public views submitted and incorporate them into final
regulations where appropriate; publish draft regulations at the earliest
possible time to allow interested parties sufficient time to analyze
issues and prepare meaningful public comments; and provide sufficient
time between the closing of a comment period and the finalizing of
regulations so that comments can in fact be incorporated. In addition,
given the often-significant role of advisory councils and other
government-commissioned study groups in Japanese policy development, the
United States also recommends measures to increase their transparency
and provide greater opportunities for public input into deliberations of
these groups. The United States further recommends that Japan take
further steps to enhance the effectiveness and increase the usage of
Japan's "no-action letter" system, which provides regulated firms with
an opportunity to seek clarification of an administrative agency's
interpretation of laws and regulations.

The United States continues to hold bilateral working-level discussions
in an effort to encourage the Japanese to promote deregulation,
competition policy, and administrative reform measures that could help
revive the Japanese economy, increase imports and foreign direct
investment into Japan. The reader should consult the National Trade
Estimate Report on Foreign Trade Barriers, issued by the Office of the
U.S. Trade Representative (USTR) for a detailed description of Japan's
regulatory regime as it affects foreign exporters and investors.

In an effort to increase the transparency of Japan\'s regulatory system
to foreign investors, the Cabinet Office is coordinating a
government-wide effort to produce consistent translations of selected
Japanese laws and regulations into foreign languages, starting with
English. In December 2006 the Cabinet decided to establish a section at
the Justice Ministry beginning in JFY 2009 to handle English
translations of Japanese laws and regulations concerning businesses as
part of measures to promote more foreign investment, according to press
reports. The new section will take over this work from a task force on
judicial reform at the Cabinet Secretariat which had been doing the
translations, but will be disbanded at the end of JFY 2008. In JFY 2009,
the Justice Ministry will also set up a new Web site that allows users
to search for legal terms and clauses.

## A.9 Capital Markets and Portfolio Investment: Less Than Perfect [**Return to top**](#ch6)

Japan maintains no formal restrictions on inward portfolio investment,
and in fact foreign capital occupies an increasingly important place in
Japanese capital markets. Informal restrictions on management
participation of foreign shareholders limit the attractiveness of
Japan\'s equity market to foreign investors, although some firms have
taken steps to facilitate exercise of shareholder rights by foreign
investors, such as permitting electronic proxy voting.

######## Environment for Mergers and Acquisitions

Japan's aversion to M&A activity is fading, accelerated by the unwinding
of extensive corporate cross-shareholding brought about by
implementation of improved accounting standards and new government
mandates that banks divest cross-held shares above a set level of
holdings.

Friendly transfer of wholly owned and majority-owned subsidiaries
remains by far the more common form of M&A in Japan. Similarly,
owner-operated unlisted firms --- which traditionally would only sell
out as a last resort before bankruptcy --- are becoming more amenable to
acquisition, including by foreigners. Particularly in the more modern,
more service-oriented sectors of the economy, purchase by foreigners is
less of a badge of shame than in years past.

Still, there remain a number of key factors limiting greater entry into
the Japanese market through M&A with unlisted firms --- including tax
policy, weak accounting and disclosure practices, Japan\'s
underdeveloped OTC stock market (which if more developed would reduce
the risks involved in M&A), lack of readily available information on
firms that might be acquired, and the relative shortage of M&A
\"infrastructure\" in the form of specialists skilled in making matches
and structuring M&A deals. Many senior business executives remain wary
of foreign M&A which they see as inherently hostile and based largely on
short-term profit motives although public and media perceptions of
cross-border M&A is improving.

The Tokyo Stock Exchange "Mothers\" Exchange, established in 1999 to
encourage start-ups and venture capital investments with less-stringent
listing criteria for emerging companies than the main Tokyo bourse, has
few listed firms and suffers from a lack of liquidity.

**Commercial Law Revisions**

A major revision of Japan\'s commercial laws is nearing completion. In
2001, new laws designed to facilitate procedures for spin-offs to
establish new firms and to transfer divisions from one company to
another went into effect. Important legislation was passed in 2002 and
2005 that has significantly increased the flexibility of capital
structure and improves corporate governance:

In June 2005 the Diet passed a new Company Law that revised and combined
Part II of the existing Commercial Code with existing laws governing
limited liability companies (*yugen gaisha*) and audits under the
Commercial Code. The Company Law, the bulk of which entered into force
in May 2006, introduced changes to facilitate corporation start-up and
make corporate structure more flexible, including elimination of minimum
capital requirements for joint-stock companies (*kabushiki kaisha*),
merged a number of different corporate structures and created a new
corporate form (*godo kaisha*) modeled on the U.S.-style limited
liability company.

Included in the new law was a provision --- Article 821 --- which has
created uncertainty among foreign corporations that conduct their
primary business through their company branches in Japan\'s market. As
written, Article 821 appears to prohibit such branches of foreign
corporations from engaging in transactions in Japan on a continuous
basis. While supplementary steps were taken in Japan\'s Diet prior to
passage of the new Company Law to clarify the provision\'s intent and
assure companies that the Japanese government would not apply Article
821 to legitimate entities, there remains some legal uncertainty for
these branches, particularly with respect to private litigation that
could be brought against their directors and officers. In bilateral
talks on investment and regulatory reform, the U.S. Government has urged
that Japan make revisions to the Company Law to clarify Article 821. The
Japanese government, for its part, has undertaken to ensure that Article
821 does not adversely affect the operations of foreign companies that
are duly registered in Japan and conduct their business in a lawful
manner.

######## Improvements in Corporate Governance

In addition, the Diet has enacted a number of revisions to the
Commercial Code and the Industrial Revitalization Law to ensure
efficient corporate governance, including amendments:

> 1\. Providing publicly traded companies the option of adopting the
> U.S.-style corporate governance system instead of complying with the
> statutory auditor (*kansayaku*) requirement. This new option requires
> the appointment of executive officers and the establishment of a board
> committee system in which at least the audit, nomination and
> compensation committees would be composed of a majority of outside
> directors. Initially available only under the Industrial
> Revitalization Law, which requires companies to submit their company
> revitalization plans to the METI Minister to obtain authorization, the
> new measure is available for companies in general under the new
> Company Law; and
>
> 2\. Permitting companies to use the Internet or other electronic means
> to provide notices of shareholders' meetings and other similar
> communications to shareholders upon individual consent, and permitting
> shareholders to exercise their voting rights through the use of
> electronic devices. In addition, companies are permitted to meet their
> mandatory disclosure requirements for balance sheets (and profit and
> loss statements) by making the full text available for five years in
> an electronic format.

**Cross-shareholding and M&A**

Potential foreign investors in Japan frequently point out that extensive
cross-shareholding in Japan greatly complicates market-based merger and
acquisition transactions and reduces the potential impact of
shareholder-based corporate governance. Such corporate governance
practices result in senior management emphasizing internal loyalties
over shareholder returns and can lead to premature rejection of M&A
offers. However, Japanese companies are starting to unwind
cross-shareholdings, a process that has accelerated in recent years
under the pressure of difficult corporate finances and stricter
accounting requirements. Similarly, more corporations are hiring outside
directors and placing greater emphasis on shareholder value in their
management practices.

To assist corporations in reducing the unfunded liabilities of corporate
pension funds and to accelerate the unwinding of cross-shareholdings,
the Japanese government implemented legislation in 2000 that allows
corporations to transfer shareholdings to their related corporate
pension funds. If the shares are directly transferred, the pension fund
is able to properly execute shareholder rights and sell the shares if it
is deemed in the best interests of the pension-holders. However, many
firms prefer the alternative of indirect transfer of shares through a
trust whereby the sponsoring corporation retains voting rights and
effectively influences when the shares can be sold. In 2001 the GOJ
created the Banks\' Shareholdings Purchase Corporation to facilitate
sale of bank cross-held shares.

In another useful innovation, the Diet approved amendments to the
Company Law permitting domestic stock swaps, through which one of the
parties becomes a wholly owned subsidiary company and the other a parent
company. The GOJ provided special tax treatment to allow deferment of
taxes on capital gains on stocks involved in such swaps at the time of
exchange and transfer. However, for a foreign investor to take advantage
of these new rules, it must legally establish a Japanese subsidiary firm
to act as the counterpart to the stock exchange/transfer.

Japan\'s new 2005 Company Law provided for increased flexibility in
compensation for M&A transactions, including permitting cross-border
stock swaps in triangular merger transactions involving Japanese public
companies. These provisions will take effect in May 2007. However, in
anticipation of the new provisions, the LDP Tax Panel in December 2006
proposed tax rules, which, depending on how they are interpreted in
subsequent ordinances, could greatly, limit the effectiveness of the
triangular mergers structure for newly entering investors and limit the
potential benefits of the new law in terms of increasing inward FDI.

**Accounting and Disclosure**

Accounting and disclosure standards are an extremely important element
in assessing and improving any nation's environment for mergers and
acquisitions. Before any merger or acquisition can take place, it is
critical that the merging or purchasing corporations have the best
possible information on which to make business decisions. Implementation
of so-called "Big Bang" reforms since 1998 has significantly improved
Japan's accounting standards.

A shift to consolidated accounting was made mandatory in JFY 1999 and
\"effective control standards and influence\" standards were introduced
in place of conventional holding standards, expanding the range of
subsidiary and affiliated companies included for the settlement of
account. Consolidated disclosure of contingent liabilities, such as
guarantees, began in 1998. Since JFY 2001 all marketable financial
assets held for trading purposes including cross-shareholdings and other
long-term securities holdings are recorded at market value in Japan.

Also starting in JFY 2000, companies were required to disclose unfunded
pension liabilities by valuing pension assets and liabilities at fair
value. Fixed asset impairment accounting went into effect in JFY 2005.
This new rule would require firms to record losses if the recoverable
value of property, plant or equipment is significantly less than book
value.

The greater focus on consolidated results and mark-to-market accounting
is already having an impact and is encouraging unwinding of cross-held
shares. Corporate restructuring is accelerating, and companies are
rushing to reduce pension under-funding. Banks have stared disposing of
low-yield assets. While the recent improvement in accounting standards
and growth in M&A activity have been welcome, they have also exacerbated
the shortage of accounting professionals.

######## Taxation and M&A

Preferential tax treatment of initial public offerings remains a
problem. Under current regulations, if a company is sold in an M&A
transaction before an IPO listing, a 10 percent capital gains tax rate
applies for listed stocks. (Japan adopted a standard 20 percent capital
gains tax rate applicable from January 1, 2004. However, the capital
gains tax rate on sales of listed stocks will remain 10 percent through
the end of 2007. Tax changes proposed in December 2006 would, if
approved extend this reduced rate through 2008). Under a series of
special measures Japan has adopted to promote venture businesses, if the
founding shareholder of a qualified company sells shares in the company:

-   a 10 percent capital gains tax rate will apply if the sale is made
    prior to public listing in an M&A transaction

-   a 5 percent rate will apply if the shares are sold by the end of
    2007 *and* within three years of listing

-   from 2008, a 10 percent rate will apply to shares sold by the
    founding shareholder within three years of listing.

######## Bankruptcy Laws

An insolvent company in Japan can face liquidation under the Bankruptcy
Act or take one of four roads to reorganization: the Civil
Rehabilitation Law, the Corporate Reorganization Law, corporate
reorganization under the Commercial Code, or an out-of-court creditor
agreement.

In 2000, Japan overhauled its bankruptcy law governing small and medium
size firm bankruptcies by enacting the Civil Rehabilitation Law, which
focuses on corporate restructuring in contrast to liquidation. The law
provides improved protection of debtor assets prior to the start of
restructuring procedures, eases requirements for beginning restructuring
procedures, simplifies and rationalizes procedures for the examination
and determination of liabilities and improves procedures for approval of
rehabilitation plans. Japan's Corporate Reorganization Law, generally
used by large companies, was similarly revised in 2003. Amendments made
corporate reorganization for large companies more cost-efficient,
speedy, flexible and available at an earlier stage. By removing many
institutional barriers to the restructuring process, the new bankruptcy
regime has already accelerated the corporate restructuring process in
Japan.

In the 1990s, most corporate bankruptcies in Japan were dealt with by
out-of-court creditor agreements because court procedures were lengthy
and costly. Also the fact that bankruptcy trustees had limited powers to
oversee restructuring meant that most judicial bankruptcies ended in
liquidation, often at distress prices. In 2001, a group of Japanese
bankruptcy experts published a set of private rehabilitation guidelines,
modeled after the UK-based INSOL guidelines, for out of court corporate
rehabilitation in Japan. Out of court workouts in Japan tend to save
time and expense, although they sometimes also lack transparency and
fairness. In practice, because 100 percent creditor consensus is
required for out-of-court workouts and the court can sanction a
reorganization plan with only a majority of creditors' approval, the
last stage of an out-of-court workout is often a request for a judicial
seal of approval.

######## Credit Markets

Domestic and foreign investors have free access to a variety of credit
instruments at market rates. In general, foreign companies in Japan have
not experienced significant difficulties in obtaining funding. Most
foreign firms obtain short-term credit by borrowing from Japanese
commercial banks or one of the many (close to one hundred) foreign banks
operating in Japan. Medium-term loans are available from commercial
banks, as well as from trust banks and life insurance companies. Large
foreign firms have tended to use foreign sources for long-term financial
needs, although increasingly sophisticated derivatives products are
becoming available to assist in hedging foreign investors' perceived
risk.

## A.10 Political Violence: Rare to Unknown [**Return to top**](#ch6)

In general, political violence is rare in Japan, and acts of political
violence involving American business interests are virtually unknown.

## A.11 Corruption: Problems Remain Despite Obvious Progress [**Return to top**](#ch6)

The penal code of Japan covers crimes of official corruption. An
individual convicted under these statutes is subject, depending on the
nature of the crime, to penal servitude ranging from one month to
fifteen years, and possible fines up to three million yen or mandatory
confiscation of the monetary equivalent of the bribe.

Although the direct exchange of cash for favors from government
officials in Japan is extremely rare, some foreign Japan-watchers have
described the situation in Japan as "institutionalized corruption." The
web of close relationships between Japanese companies, politicians,
government organizations, and universities has been said to foster an
inwardly-cooperative business climate that is conducive to the awarding
of contracts, positions, etc. within a tight circle of local players.
This phenomenon manifests itself most frequently and most seriously in
Japan through the rigging of bids on government public works projects.
During 2006 three prefectural governors were forced to resign and faced
criminal prosecution for colluding with construction firms on the award
of public works contracts in exchange for bribes or political support.

The Japanese authorities have acknowledged the problem of bid rigging
and have taken a series of steps to address it. In addition to the
longstanding laws on bribery of public officials and misuse of public
funds, the Japanese government has passed legislation aimed specifically
at eliminating official collusion in bid rigging. The Bid-Rigging
Prevention Act, which came into effect in January 2003, authorizes the
Japan Fair Trade Commission (JFTC) to demand central and local
government commissioning agencies to take corrective measures to prevent
continued complicity of officials in bid-rigging activities, and to
report such measures to the JFTC. The Act also contains provisions
concerning disciplinary action against officials who have participated
in bid rigging and compensation for overcharges when the officials
caused damage to the government due to willful or grave negligence. New
ground was broken in 2005 when the JFTC invoked the Bid-rigging
Prevention Act for the first time against a central government agency in
the wake of a major bid-rigging scandal involving executives of the
state-owned corporation in charge of highway construction and
maintenance. Previous applications of the Act had been directed only at
local authorities. Nevertheless, questions remain as to whether the
Act\'s disciplinary provisions are strong enough to ensure that
officials who facilitate illegal bid rigging will be held accountable.

Complicating efforts to combat bid rigging is the phenomenon known as of
*amakudari* whereby government officials retire into top positions in
Japanese companies, usually in industries that they once regulated.
*Amakudari* employees are particularly common in the financial,
construction, transportation, and pharmaceutical industries --- which,
not coincidentally, are traditionally heavily regulated. Foreign
companies usually do not enjoy such pipelines into the bureaucracy, and
thus are somewhat disadvantaged in their ability to understand and deal
with laws, regulations, and informal ministry guidance. This
disadvantage has been ameliorated somewhat in recent years by the
introduction of more transparent administrative procedures. In addition,
egregious examples of bid-rigging undertaken through *amakudari*
connections have led to reform efforts. For example, following the May
2005 revelation of a major bid-rigging conspiracy tied to government
tenders for steel bridge construction, both the Ministry of Land,
Infrastructure, and Transport (MLIT) and the Japan Highway Public
Corporation issued new, stricter guidelines on post-retirement
employment by officials and executives. In 2006, MLIT took an additional
measure against *amakudari* by requiring all companies doing business
with the Ministry to disclose whether they have employed former MLIT
officials on their staffs. The Japanese government also announced plans
to introduce legislation during the 2007 regular Diet session that would
allow the imposition of prison sentences on any central government
officials who pressure companies to provide them with post-retirement
jobs or who, after retirement, seek favors from their previous
government agencies for their new private-sector employers.

While there have been some high profile exposures of officials having
either given or accepted bribes, the Japanese government does not have
an aggressive record of criminal prosecution. Those prosecuted have
generally received suspended sentences. Nevertheless, surcharges applied
by the JFTC and fines imposed by the courts on companies for violations
of the Anti-monopoly Act have increased significantly, particularly
since new amendments to the Act came into effect at the beginning of
2006. Early evidence indicates that these measures have had a deterrent
effect on bid rigging, with winning bids for government contracts
dropping precipitously from over 90 percent of the government\'s
estimated cost to only 50-60 percent on some major projects. Despite
these improvements at the central government level, however, indications
are that bid rigging remains rife in Japan\'s localities. As of the end
of December 2006, 18 of Japan\'s 47 prefectures had yet to implement
fully central government guidelines for open bidding on public works
projects and less than half of the country\'s 1,827 municipalities had
open bidding mechanisms in place.

With respect to corporate officers who accept bribes, Japanese law also
provides for company directors to be found personally liable for the
amount of the bribe, and some judgments have been rendered against
company directors. This may pose a significant deterrent to the payment
of bribes, as individuals are held personally liable without the shield
of the company to protect them, although there has been discussion at
various times within the ruling political party since 1993 when the law
was amended to facility the filing of shareholder derivative suits of
possible new rules to make it more difficult to file shareholder
derivative lawsuits, a position supported by the conservative Japan
Business Federation (Nippon Keidanren).

Japan has also ratified the OECD anti-bribery convention, which bans the
bribing of government officials in countries outside Japan. The OECD has
identified deficiencies in Japan\'s implementing legislation, some of
which the government of Japan has taken steps to rectify, but an OECD
follow-up examination in February 2006 concluded that \"Japanese law
enforcement authorities have still not made adequate efforts to
investigate and prosecute foreign bribery cases.\" In May 2004, Japan
amended the unfair competition prevention law (UCPL) to extend national
jurisdiction to cover the crime of bribery and, in April 2006, made
changes to the corporation tax law and the income tax law for the
purpose of expressly denying the tax deductibility of bribes to foreign
public officials. In addition, Japan extended the statute of limitations
for prosecuting natural persons and corporate bodies from three to five
years. Nevertheless, as of January 2007, Japan had yet to file any
foreign bribery cases.

## B. Bilateral Investment Agreements [**Return to top**](#ch6)

The 1952 U.S.-Japan Treaty of Friendship, Commerce, and Navigation gives
national treatment and most favored nation treatment to most U.S.
investments in Japan. In addition, Japan has bilateral investment
treaties with the following countries or customs territories: Egypt, Sri
Lanka, China, Hong Kong SAR, Turkey, Pakistan, Bangladesh, Russia,
Mongolia, Vietnam and the Republic of Korea. Japan also has Economic
Partnership Agreements (its term for a free trade agreement) that
contain investment chapters with the following countries: Singapore,
Mexico, Malaysia and the Philippines.

######## U.S.-Japan Investment Initiative

U.S. Government concerns regarding barriers to foreign investment in
Japan continue to be addressed through bilateral discussions under the
U.S.-Japan Economic Partnership for Growth, established by President
Bush and Prime Minister Koizumi in June 2001. The Investment Initiative
Working Group has held biannual session for the past five years to
discuss policy measures to improve the investment climate in both
countries and has pursued a vigorous program of public outreach. In
order to increase business awareness and receptiveness to FDI,
investment promotion seminars were held in the Japanese cities of Kobe,
Fukuoka, and Nagoya in 2002; Osaka and Sapporo in 2003; Kitakyushu and
Kyoto in 2004; Nagoya and Chiba in 2005; and Sendai and Yokohama in
2006. Similarly, investment symposia were held in New York and Chicago
in 2002; San Francisco and Chicago in 2003; Atlanta and Los Angeles in
2004; New York and San Jose, California, in 2005; and Santa Clara,
California in 2006.

## C. OPIC And Other Investment Insurance Programs: Not Available [**Return to top**](#ch6)

OPIC insurance and finance programs are not available in Japan. Japan
has been a member of the Multilateral Investment Guarantee Agency (MIGA)
since it was established in 1988. Japan\'s capital subscription to the
organization is the second largest among member countries, after the
United States.

## D. Labor: Toward More Flexibility [**Return to top**](#ch6)

The Japanese labor market today suffers from demographic,
macro-economic, and structural pressures, which are beginning to change
traditional Japanese employment practices. The regulatory philosophy
that has formed Japan\'s post-war labor laws is also changing. Foreign
investors seeking to hire highly qualified workers in Japan should
benefit from many of these changes.

Japanese employment practices have been said to rest on \"three
pillars:\" lifetime employment, seniority-based wages, and enterprise
unions. In fact, these three aspects of the Japanese labor market have
always applied only to the larger firms, and today all three are
undergoing rapid transformation. Demographic pressures --- fewer young
workers and a rapidly aging labor force --- as well as the need for
structural changes in the Japanese economy are forcing many firms to
abandon both lifetime employment guarantees and seniority-based wages in
favor of merit-based pay scales and limited-term contracts. Also,
although labor unions play a role in the annual determination of wage
scales throughout the economy, that role is shrinking. As of June 2006,
trade union membership as a portion of the labor force was 18.2 percent,
down 0.5 percent from the previous year. The figure has been declining
since 1976. However, the number of part-timer workers who are union
members rose a point to 4.3 percent as a result of strengthened
unionization efforts by some labor unions.

Investors should be aware of Japan\'s high wage structure. According to
a September 2006 MHLW survey, the average monthly wage for a salaried
worker in Japan was 276,818 yen. This was only 0.1 percent above a year
earlier. This slow growth in average wages in the midst of a return to
economic growth does not reflect slack demand for labor but rather
increased hiring of younger workers to replace the expected surge in
retirements of baby boomers over the next few years. Occupational wage
differentials are much smaller than in most countries. According to the
Ministry of Health, Labor and Welfare's (MHLW) statistics, base wages,
including basic benefits, are 74.3 percent of total wage costs. Annual
summer and year-end bonuses made up the rest. Relatively high statutory
welfare contributions are also required for basic government pensions,
health and accident insurance, and unemployment insurance. Most
companies also incur other employee welfare costs for family and/or
transportation allowances, company-provided pension schemes, and such
in-kind payments as housing for some employees. Off-setting these high
wage costs, of course, is the fact that the Japanese work force is
highly educated, disciplined, loyal to their employer, and motivated to
assure the economic well-being of the company.

Japanese workers have traditionally been classified as being either
\"regular\" or \"other\" employees and this system is, to a considerable
degree, still in place today. Regular employees are usually recruited
directly from schools or universities and given an employment contract
with no fixed duration. Other employees are given fixed duration
employment contracts, which generally cannot exceed one year but may be
renewed several times over. Still other employees include part-timers,
interns, and \"dispatched workers\" --- as workers from temporary work
agencies are called in Japan. Until very recently, only a few
occupations could be handled by dispatched worker agencies but this is
one area where Japanese labor law has in fact been deregulated, thus the
number and types of dispatched workers have increased substantially over
the past several years.

The regulation of private, fee-charging employment agencies ---
including executive search firms --- has also recently been liberalized.
Although a fairly time-consuming and bureaucratic licensing procedure is
still required, private employment agencies can now serve virtually the
entire range of occupations. On-line, Internet based, job seeking and
placement services are, however, still in their infancy in Japan ---
constrained at least partly by a MHLW requirement that every employment
agency must personally interview each of its clients.

Defined contribution pensions, introduced in October 2001, should
promote labor mobility, as workers will be able to carry their pension
funds to other jobs, but the ceiling on contributions needs to be raised
to realize the full potential of the move. The MHLW has begun a five
year review of the defined contribution pension scheme, as called for in
the 2001 law. The review will verify how companies are implementing
these programs and depending on the outcome of that review, the
government may consider raising current contribution ceilings.

## E. Foreign-Trade Zones / Free Ports / Special Zones for Structural Reform [**Return to top**](#ch6)

Japan no longer has any free-trade zones or free ports. Customs
authorities, however, do allow the bonding of some warehousing and
processing facilities in certain areas adjacent to ports on a
case-by-case basis.

In 2003, the government of Prime Minister Koizumi introduced the Special
Zones for Structural Reform initiative with the goal of helping
revitalize Japan\'s regional economies through locally led regulatory
and structural reforms. A small number of the Special Zones approved
under the initiative have helped to remove regulatory barriers that
limit U.S. business market entry and foreign investment into Japan; for
example, Japan reduced customs overtime charges within its International
Physical Distribution Zones by 50 percent in 2004. The majority of
Special Zones to date, however, have not offered significant
market-opening opportunities for foreign investors. (For more details,
*see also* the section on "Investment Incentives" under **[Openness To
Foreign Investment: Few Restrictions, but Unique
Challenges](#a.1-openness-to-foreign-investment-few-restrictions-but-unique-challenges-return-to-top),**
*supra*.)

## F. Investment Data [**Return to top**](#ch6)

FDI in Japan has soared since the mid 1990s with Japan's FDI stock
increasing (on a yen basis) from 3.0 trillion yen at the end of 1998 to
11.9 trillion yen at year end 2005. Flows have been equally strong over
the same period but net inflow dropped significantly in 2006 with a
number of high profile disinvestment cases. Much of this increase is due
to ongoing reforms in a number of sectors, including finance,
communication and distribution, which have encouraged foreign investment
in those sectors. At the same time, the GOJ has undertaken a concerted
campaign to build Japan's stock of FDI and has established a highly
professional interagency process to promote Japan as a destination for
FDI and to provide practical assistance to investors seeking to enter
the Japanese market. This policy initiative has shown some success but
still runs up the strong aversion of Japanese senior executives, many of
whom still view cross-border triangular merger as inherently "hostile"
and "abusive" and believe potential foreign acquirers as only interested
in short-term profits. These attitudes are only changing slowly. In CY
2005, Japan\'s overseas FDI soared to \$45.5 billion from the previous
year level of \$31.0 billion from the previous year\'s level of \$28.8
billion. The increase is largely due to strong flows to both North and
South America and to a lesser degree, East Asia, other than China. China
remains the number two destination for Japanese investment behind the
United States. All data in the tables below is from MOF and JETRO,
current as of January 2007, and converted into dollars using each
year\'s average exchange rate: CY00 data at 107.77 yen to the dollar, CY
01 data at 121.53 yen to the dollar, CY 02 data at 125.31 yen to the
dollar, CY03 data at 115.93 yen to the dollar, JFY03 data at 113.03 yen
to the dollar, CY 2004 data at 108.19 yen to the dollar, JFY 2004 data
at 107.49 yen to the dollar, CY 2005 data at 110.21 yen to the dollar
and JFY 2005 data at 113.26 yen to the dollar.

+-------------------+----------------------+--------------------------+
| **TABLE 1a**      |                      |                          |
+-------------------+----------------------+--------------------------+
| **Annual New FDI  |                      |                          |
| into Japan**      |                      |                          |
+-------------------+----------------------+--------------------------+
| *(Billions of     |                      |                          |
| Dollars,*         |                      |                          |
|                   |                      |                          |
| *Ba               |                      |                          |
| lance-of-Payments |                      |                          |
| Basis)*           |                      |                          |
+-------------------+----------------------+--------------------------+
| ###### JFY        | 1997                 | 3.20                     |
+-------------------+----------------------+--------------------------+
|                   | 1998                 | 3.27                     |
+-------------------+----------------------+--------------------------+
|                   | 1999                 | 12.31                    |
+-------------------+----------------------+--------------------------+
|                   | 2000                 | 8.23                     |
+-------------------+----------------------+--------------------------+
|                   | 2001                 | 6.19                     |
+-------------------+----------------------+--------------------------+
|                   | 2002                 | 9.09                     |
+-------------------+----------------------+--------------------------+
|                   | 2003                 | 6.24                     |
+-------------------+----------------------+--------------------------+
|                   | 2004                 | 7.81                     |
+-------------------+----------------------+--------------------------+
|                   | 2005                 | 3.22                     |
+-------------------+----------------------+--------------------------+
| Source:           |                      |                          |
| http:/            |                      |                          |
| /www.jetro.go.jp/ |                      |                          |
| en/stats/statisti |                      |                          |
| cs/bpfdi_01_e.xls |                      |                          |
+-------------------+----------------------+--------------------------+

+---------------------+---------------------+--------------------------+
| **TABLE 1b**        |                     |                          |
+---------------------+---------------------+--------------------------+
| **Ratio of Japan's  |                     |                          |
| Inward**            |                     |                          |
|                     |                     |                          |
| **to Outward FDI    |                     |                          |
| Flows**             |                     |                          |
+---------------------+---------------------+--------------------------+
| *(                  |                     |                          |
| Balance-of-Payments |                     |                          |
| Basis;*             |                     |                          |
|                     |                     |                          |
| *Net and Flow)*     |                     |                          |
+---------------------+---------------------+--------------------------+
| **JFY**             | 1997                | 1: 8.1                   |
+---------------------+---------------------+--------------------------+
|                     | 1998                | 1: 7.5                   |
+---------------------+---------------------+--------------------------+
|                     | 1999                | 1: 1.8                   |
+---------------------+---------------------+--------------------------+
|                     | 2000                | 1: 3.8                   |
+---------------------+---------------------+--------------------------+
|                     | 2001                | 1: 6.2                   |
+---------------------+---------------------+--------------------------+
|                     | 2002                | 1: 3.5                   |
+---------------------+---------------------+--------------------------+
|                     | 2003                | 1: 4.6                   |
+---------------------+---------------------+--------------------------+
|                     | 2004                | 1: 4.0                   |
+---------------------+---------------------+--------------------------+
|                     | 2005                | 1: 14.1                  |
+---------------------+---------------------+--------------------------+
| Source:             |                     |                          |
| http://www.jetro.go |                     |                          |
| .jp/en/stats/statis |                     |                          |
| tics/bpfdi_02_e.xls |                     |                          |
+---------------------+---------------------+--------------------------+

  ----------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
  **TABLE 2**                                                                                                     

  **Foreign Direct Investment in Japan, by Country**                                                              

  ***(Millions of dollars; net and flow; balance-of-payments                                                      
  basis)***                                                                                                       

                                                              **CY2001**   **CY2002**   **CY2003**   **CY2004**   **CY2005**

  **North America**                                           4,268        3,019        -617         2,294        -636

  U.S.A.                                                      3,492        2,451        -641         1,407        309

  Canada                                                      776          569          25           890          -944

  **Asia**                                                    127          7            371          994          1,564

  China                                                       2            1            -2           -9           12

  Hong Kong                                                   94           -17          38           295          960

  Taiwan                                                      164          -24          80           74           -26

  Korea                                                       38           63           -101         251          32

  Singapore                                                   22           115          329          389          598

  Thailand                                                    -197         -125         28           -1           -6

  **Europe**                                                  2,863        6,261        5,103        5,623        1,122

  Germany                                                     241          551          1,764        1,170        237

  United Kingdom                                              -1,246       540          -442         -310         131

  France                                                      423          2,213        651          1,049        -77

  Netherlands                                                 2,530        1,732        3,200        3,611        2,541

  Switzerland                                                 126          1,043        -286         108          -749

  **Latin America**                                           -1,013       -176         1,376        -1,114       1,276

  Mexico                                                      0            2            2            0            \-

  Brazil                                                      0            0            0            20           2

  Cayman Isles                                                -1,051       -98          1,347        752          1,069

  **TOTAL**                                                   6,191        9,089        6,238        7,808        3,223

  *Note: Negative figures indicate net outflow.*                                                                  

  Source:                                                                                                         
  http://www.jetro.go.jp/en/stats/statistics/bpfdi_02_e.xls                                                       
  ----------------------------------------------------------- ------------ ------------ ------------ ------------ ------------

  ------------------------------------------------------------ ---------- ---------- ------------ ---------- -----------
  **TABLE 3**                                                                                                

  **Japan's FDI Inward Stock by Country/Region**                                                             

  **(Millions of dollars; International Investment Position)**                                               

                                                               **End of   **End of   **End of     **End of   **End of
                                                               2001**     2002**     2003**       2004**     2005**

  **North America**                                            20,050     28,289     40,222       45,919     47,262

  U.S.A                                                        18,465     35,743     36,612       40,872     43,459

  Canada                                                       1,586      2,647      3,610        5,049      3,803

  **Asia**                                                     3,368      3,705      4,904        5,889      6,636

  China                                                        73         80         90           90         101

  Hong Kong                                                    1,414      1,460      1,793        2,136      2,586

  Taiwan                                                       1,399      1,379      1,591        1,605      1,378

  Korea                                                        190        210        244          537        310

  Singapore                                                    303        480        1,039        1,380      2,138

  Thailand                                                     -91        17         49           48         42

  **Europe**                                                   24,709     33,350     39,273       41,779     97,728

  Germany                                                      3,896      4,142      4,978        3,915      5,847

  United Kingdom                                               2,422      2,695      1,692        2,310      3,004

  France                                                       7,021      10,348     12,321       13,693     10,672

  Netherlands                                                  7,331      9,868      13,541       14,210     11,540

  Switzerland                                                  1,958      2,778      2,646        3,172      2,241

  **Latin America**                                            1,733      2,408      4,764        3,004      8,138

  Mexico                                                       1          3          5            5          4

  Brazil                                                       11         12         14           33         30

  Cayman Isles                                                 1,625      1,749      4,186        2,666      5,544

  **TOTAL**                                                    50,446     78,490     89,838       97,305     100,331

  *Note: Negative figures indicate net outflow.*                                                             

  Source:                                                                                                    
  http://www.jetro.go.jp/en/stats/statistics/iipfdi_02_e.xls                                                 
  ------------------------------------------------------------ ---------- ---------- ------------ ---------- -----------

+----------------------+--------+--------+--------+--------+--------+
| **TABLE 4**          |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| **Foreign Direct     |        |        |        |        |        |
| Investment in Japan, |        |        |        |        |        |
| by industry**        |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| ***(Millions of      |        |        |        |        |        |
| dollars; net and     |        |        |        |        |        |
| flow;***             |        |        |        |        |        |
|                      |        |        |        |        |        |
| ***reporting basis   |        |        |        |        |        |
| for JFY2001-- 04,    |        |        |        |        |        |
| balance-and-payment  |        |        |        |        |        |
| basis for CY         |        |        |        |        |        |
| 2005)***             |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
|                      | **JFY  | **JFY  | **JFY  | **JFY  | **CY   |
|                      | 2001** | 2002** | 2003** | 2004** | 2005** |
+----------------------+--------+--------+--------+--------+--------+
| **Manufacturing**    | 2,621  | 6,749  | 4,310  | 952    | -2,191 |
+----------------------+--------+--------+--------+--------+--------+
| Machinery            | 1,107  | 2,220  | 2,489  | 402    | ---    |
+----------------------+--------+--------+--------+--------+--------+
| General machinery    | ---    | ---    | ---    | ---    | 164    |
+----------------------+--------+--------+--------+--------+--------+
| Electric machinery   | ---    | ---    | ---    | ---    | -1,195 |
+----------------------+--------+--------+--------+--------+--------+
| Transportation       | ---    | ---    | ---    | ---    | 32     |
| equipment            |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Precision machinery  | ---    | ---    | ---    | ---    | -59    |
+----------------------+--------+--------+--------+--------+--------+
| Chemicals            | 924    | 3,416  | 970    | 199    | ---    |
+----------------------+--------+--------+--------+--------+--------+
| Chemicals and        | ---    | ---    | ---    | ---    | -1,168 |
| pharmaceuticals      |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Metals               | 1      | 136    | 25     | 7      | ---    |
+----------------------+--------+--------+--------+--------+--------+
| Iron, non-ferrous &  | ---    | ---    | ---    | ---    | -34    |
| metals               |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Rubber & leather     | ---    | ---    | ---    | ---    | 1      |
+----------------------+--------+--------+--------+--------+--------+
| Petroleum            | 70     | 508    | 114    | 166    | -44    |
+----------------------+--------+--------+--------+--------+--------+
| Textiles             | 23     | 33     | 10     | 83     | 188    |
+----------------------+--------+--------+--------+--------+--------+
| Foods                | 281    | 68     | 448    | 32     | -211   |
+----------------------+--------+--------+--------+--------+--------+
| Glass & ceramics     | 75     | 3      | 7      | ---    | 103    |
+----------------------+--------+--------+--------+--------+--------+
| Others               | 84     | 365    | 248    | 63     | ---    |
+----------------------+--------+--------+--------+--------+--------+
| *                    | 14,784 | 11,186 | 14,412 | 36,507 | 5,414  |
| *Non-Manufacturing** |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Farming & forestry   | ---    | ---    | ---    | ---    | -1     |
+----------------------+--------+--------+--------+--------+--------+
| Fishery & marine     | ---    | ---    | ---    | ---    | 0      |
| products             |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Mining               | ---    | ---    | ---    | ---    | 0      |
+----------------------+--------+--------+--------+--------+--------+
| Finance & insurance  | 5,281  | 5,306  | 9,005  | 27,693 | 645    |
+----------------------+--------+--------+--------+--------+--------+
| Trading              | 871    | 2,118  | 3,265  | 999    | ---    |
+----------------------+--------+--------+--------+--------+--------+
| Wholesale & retail   | ---    | ---    | ---    | ---    | 1,157  |
+----------------------+--------+--------+--------+--------+--------+
| Services             | 1,330  | 2,025  | 955    | 1,263  | 178    |
+----------------------+--------+--------+--------+--------+--------+
| Real estate          | 588    | 239    | 609    | 213    | 15     |
+----------------------+--------+--------+--------+--------+--------+
| Telecommunication    | 6,622  | 1,412  | 535    | 4,338  | ---    |
+----------------------+--------+--------+--------+--------+--------+
| Communication        | ---    | ---    | ---    | ---    | 912    |
+----------------------+--------+--------+--------+--------+--------+
| Transportation       | 18     | 22     | 15     | 1,947  | 2,108  |
+----------------------+--------+--------+--------+--------+--------+
| Construction         | 69     | 19     | 10     | 31     | 41     |
+----------------------+--------+--------+--------+--------+--------+
| Others               | 6      | 45     | 18     | 24     | ---    |
+----------------------+--------+--------+--------+--------+--------+
| **TOTAL**            | 17,340 | 17,935 | 18,722 | 36,507 | 3,223  |
+----------------------+--------+--------+--------+--------+--------+
| *Note: Negative      |        |        |        |        |        |
| figures indicate net |        |        |        |        |        |
| outflow.*            |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Sources:             |        |        |        |        |        |
| http://www.jetro.    |        |        |        |        |        |
| go.jp/en/stats/stati |        |        |        |        |        |
| stics/rnfdi_04_e.xls |        |        |        |        |        |
|                      |        |        |        |        |        |
| http://www.jetro.    |        |        |        |        |        |
| go.jp/en/stats/stati |        |        |        |        |        |
| stics/bpfdi_06_e.xls |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+

  ----------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
  **TABLE 5**                                                                                                     

  **Japanese Direct Investment Overseas, by Country**                                                             

  ***(Millions of dollars; net and flow; balance-of-payments                                                      
  basis)***                                                                                                       

                                                              **CY2001**   **CY2002**   **CY2003**   **CY2004**   **CY2005**

  **North America**                                           7,631        8,509        11,003       7,601        13,168

  U.S.A.                                                      7,031        7,441        10,691       7,559        12,126

  Canada                                                      599          1,068        313          42           1,041

  **Asia**                                                    7,797        8,177        5,028        10,531       16,188

  China                                                       2,158        2,622        3,980        5,863        6,575

  Hong Kong                                                   496          229          -62          491          1,782

  Taiwan                                                      361          451          217          473          828

  R. Korea                                                    650          437          333          771          1,736

  Singapore                                                   951          1,884        -457         138          556

  Thailand                                                    1,594        528          678          1,867        2,126

  Indonesia                                                   481          307          484          498          1,185

  Malaysia                                                    570          257          -504         163          525

  Philippines                                                 275          1,074        114          6            441

  India                                                       150          146          124          139          265

  **Europe**                                                  18,206       9,721        7,943        7,097        7,509

  Germany                                                     687          571          714          645          269

  U.K                                                         13,142       2,033        2,468        1,649        2,903

  France                                                      222          3,987        1,153        25           540

  Netherlands.                                                3,094        1,447        3,454        3,337        3,314

  Sweden                                                      -108         -327         119          -70          82

  Spain                                                       -70          87           -145         183          363

  **Latin America**                                           4,271        3,965        3,150        3,120        6,402

  Mexico                                                      1            225          372          191          630

  Brazil                                                      864          743          1,068        -65          953

  Cayman Isles                                                1,474        3,316        1,636        2,726        3,915

  **Oceania**                                                 670          1,440        1,139        1,856        944

  Australia                                                   554          1,151        964          1,651        639

  **Middle East**                                             -1           89           -38          -63          543

  UAE                                                         -38          25           -47          -19          19

  Saudi Arabia                                                35           81           20           -38          495

  **Africa**                                                  -184         223          430          378          26

  **TOTAL**                                                   38,495       92,039       28,767       30,962       45,461

  *Note: Negative figures indicate net outflow.*                                                                  

  Source:                                                                                                         
  http://www.jetro.go.jp/en/stats/statistics/bpfdi_01_e.xls                                                       
  ----------------------------------------------------------- ------------ ------------ ------------ ------------ ------------

<table style="width:100%;">
<colgroup>
<col style="width: 29%" />
<col style="width: 1%" />
<col style="width: 12%" />
<col style="width: 2%" />
<col style="width: 12%" />
<col style="width: 0%" />
<col style="width: 13%" />
<col style="width: 0%" />
<col style="width: 12%" />
<col style="width: 0%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><strong>TABLE 6</strong></td>
</tr>
<tr class="even">
<td colspan="11"><strong>Japanese Direct Investment Overseas, by
Industry</strong></td>
</tr>
<tr class="odd">
<td colspan="11"><p><strong><em>(Millions of dollars;</em> <em>net and
flow;</em></strong></p>
<p><em><strong>reporting basis for JFY2001–04, balance-and-payment basis
for CY 2005)</strong></em></p></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"><strong>JFY2001</strong></td>
<td colspan="2"><strong>JFY2002</strong></td>
<td colspan="3"><strong>JFY2003</strong></td>
<td colspan="2"><strong>JFY2004</strong></td>
<td><strong>CY2005</strong></td>
</tr>
<tr class="odd">
<td><strong>Manufacturing</strong></td>
<td colspan="2">14,218</td>
<td colspan="2">14,689</td>
<td colspan="3">16,246</td>
<td colspan="2">13,750</td>
<td>26,146</td>
</tr>
<tr class="even">
<td>Electrical</td>
<td colspan="2">3,865</td>
<td colspan="2">3920</td>
<td colspan="3">5,005</td>
<td colspan="2">2,039</td>
<td>—</td>
</tr>
<tr class="odd">
<td>Chemicals</td>
<td colspan="2">1,511</td>
<td colspan="2">1,916</td>
<td colspan="3">4,749</td>
<td colspan="2">3,530</td>
<td>—</td>
</tr>
<tr class="even">
<td>Chemicals and Pharmaceuticals</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>3,363</td>
</tr>
<tr class="odd">
<td>Transport</td>
<td colspan="2">4,342</td>
<td colspan="2">4,916</td>
<td colspan="3">3,013</td>
<td colspan="2">3,601</td>
<td>—</td>
</tr>
<tr class="even">
<td>Food</td>
<td colspan="2">824</td>
<td colspan="2">222</td>
<td colspan="3">428</td>
<td colspan="2">1,088</td>
<td>1,685</td>
</tr>
<tr class="odd">
<td>Metals</td>
<td colspan="2">658</td>
<td colspan="2">633</td>
<td colspan="3">1,078</td>
<td colspan="2">1,391</td>
<td>—</td>
</tr>
<tr class="even">
<td>Iron, Non-Ferrous &amp; Metals</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td>Machinery</td>
<td colspan="2">1,219</td>
<td colspan="2">1,288</td>
<td colspan="3">956</td>
<td colspan="2">1,108</td>
<td>—</td>
</tr>
<tr class="even">
<td>General Machinery</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>1,296</td>
</tr>
<tr class="odd">
<td>Electric Machinery</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>4,377</td>
</tr>
<tr class="even">
<td>Transportation Equip.</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>8,611</td>
</tr>
<tr class="odd">
<td>Precision Machinery</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>1,419</td>
</tr>
<tr class="even">
<td>Rubber and Leather</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>831</td>
</tr>
<tr class="odd">
<td>Lumber &amp; Pulp</td>
<td colspan="2">7232</td>
<td colspan="2">240</td>
<td colspan="3">28</td>
<td colspan="2">119</td>
<td>826</td>
</tr>
<tr class="even">
<td>Textiles</td>
<td colspan="2">216</td>
<td colspan="2">199</td>
<td colspan="3">178</td>
<td colspan="2">172</td>
<td>416</td>
</tr>
<tr class="odd">
<td>Petroleum</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>531</td>
</tr>
<tr class="even">
<td>Glass &amp; Ceramics</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td colspan="2">—</td>
<td>258</td>
</tr>
<tr class="odd">
<td>Other</td>
<td colspan="2">850</td>
<td colspan="2">1,354</td>
<td colspan="3">810</td>
<td colspan="2">702</td>
<td>—</td>
</tr>
<tr class="even">
<td><strong>Non-Manufacturing</strong></td>
<td colspan="2">17,796</td>
<td colspan="2">21,860</td>
<td colspan="3">19,599</td>
<td colspan="2">21,010</td>
<td>19,315</td>
</tr>
<tr class="odd">
<td>Finance/Insurance</td>
<td colspan="2">10,753</td>
<td colspan="2">12,801</td>
<td colspan="3">7,639</td>
<td>11,613</td>
<td colspan="2">9,227</td>
</tr>
<tr class="even">
<td>Trade</td>
<td colspan="2">2,700</td>
<td colspan="2">3,694</td>
<td colspan="3">4,315</td>
<td>1,884</td>
<td colspan="2">1,086</td>
</tr>
<tr class="odd">
<td>Wholesale &amp; Retail</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td>—</td>
<td colspan="2">4,623</td>
</tr>
<tr class="even">
<td>Real Estate</td>
<td colspan="2">692</td>
<td colspan="2">1,449</td>
<td colspan="3">1,494</td>
<td>370</td>
<td colspan="2">-851</td>
</tr>
<tr class="odd">
<td>Services</td>
<td colspan="2">1,612</td>
<td colspan="2">1,836</td>
<td colspan="3">1,940</td>
<td>2,360</td>
<td colspan="2">—</td>
</tr>
<tr class="even">
<td>Transportation</td>
<td colspan="2">1,387</td>
<td colspan="2">1,503</td>
<td colspan="3">1,876</td>
<td>1,286</td>
<td colspan="2">824</td>
</tr>
<tr class="odd">
<td>Mining</td>
<td colspan="2">495</td>
<td colspan="2">367</td>
<td colspan="3">1,915</td>
<td>2,054</td>
<td colspan="2">1,372</td>
</tr>
<tr class="even">
<td>Construction</td>
<td colspan="2">65</td>
<td colspan="2">121</td>
<td colspan="3">258</td>
<td>280</td>
<td colspan="2">148</td>
</tr>
<tr class="odd">
<td>Farming / Forestry</td>
<td colspan="2">36</td>
<td colspan="2">7</td>
<td colspan="3">158</td>
<td>38</td>
<td colspan="2">23</td>
</tr>
<tr class="even">
<td>Fisheries</td>
<td colspan="2">27</td>
<td colspan="2">56</td>
<td colspan="3">4</td>
<td>24</td>
<td colspan="2">-44</td>
</tr>
<tr class="odd">
<td>Communications</td>
<td colspan="2">—</td>
<td colspan="2">—</td>
<td colspan="3">—</td>
<td>—</td>
<td colspan="2">1,712</td>
</tr>
<tr class="even">
<td>Other</td>
<td colspan="2">26</td>
<td colspan="2">27</td>
<td colspan="3">—</td>
<td>—</td>
<td colspan="2">—</td>
</tr>
<tr class="odd">
<td colspan="2"><strong>TOTAL</strong></td>
<td colspan="2">32,297</td>
<td colspan="2">36,858</td>
<td>36,092</td>
<td colspan="3">34,548</td>
<td>45,461</td>
</tr>
<tr class="even">
<td colspan="11"><em>Note: Negative figures indicate net
outflow.</em></td>
</tr>
<tr class="odd">
<td colspan="11"><p>Sources:
http://www.jetro.go.jp/en/stats/statistics/rnfdi_02_e.xls</p>
<p>http://www.jetro.go.jp/en/stats/statistics/bpfdi_05_e.xls</p></td>
</tr>
</tbody>
</table>

+----------------+--------+--------+-------+-------+--------+--------+
| **TABLE 7**    |        |        |       |       |        |        |
+----------------+--------+--------+-------+-------+--------+--------+
| **Foreign      |        |        |       |       |        |        |
| Direct         |        |        |       |       |        |        |
| Investment in  |        |        |       |       |        |        |
| Japan Relative |        |        |       |       |        |        |
| to GDP**       |        |        |       |       |        |        |
+----------------+--------+--------+-------+-------+--------+--------+
| ***(Balan      |        |        |       |       |        |        |
| ce-of-payments |        |        |       |       |        |        |
| basis for      |        |        |       |       |        |        |
| CY2000         |        |        |       |       |        |        |
| onward;***     |        |        |       |       |        |        |
|                |        |        |       |       |        |        |
| ***in          |        |        |       |       |        |        |
| Trillions of   |        |        |       |       |        |        |
| Yen, Except    |        |        |       |       |        |        |
| Where          |        |        |       |       |        |        |
| Noted)***      |        |        |       |       |        |        |
+----------------+--------+--------+-------+-------+--------+--------+
|                | **CY   | **CY   | **CY2 | **CY2 | **CY   | **CY   |
|                | 2000** | 2001** | 002** | 003** | 2004** | 2005** |
+----------------+--------+--------+-------+-------+--------+--------+
| Nominal GDP    | 501.1  | 469.8  | 489.6 | 490.5 | 496.19 | 502.9  |
| (a)            |        |        |       |       |        |        |
+----------------+--------+--------+-------+-------+--------+--------+
| FDI Inflow (b) | 0.90   | 0.76   | 1.16  | 0.73  | 0.85   | 0.31   |
+----------------+--------+--------+-------+-------+--------+--------+
| b / a (%)      | 0.18   | 0.16   | 0.24  | 0.15  | 0.17   | 0.06   |
+----------------+--------+--------+-------+-------+--------+--------+
| Source:        |        |        |       |       |        |        |
| http://www     |        |        |       |       |        |        |
| .mof.go.jp/bpo |        |        |       |       |        |        |
| ffice/bpdata/f |        |        |       |       |        |        |
| di/fdi2bop.htm |        |        |       |       |        |        |
+----------------+--------+--------+-------+-------+--------+--------+

+-----------------+---------------------------------------+-----------+
| **TABLE 8**     |                                       |           |
+-----------------+---------------------------------------+-----------+
| **Examples of   |                                       |           |
| Major Foreign   |                                       |           |
| Direct          |                                       |           |
| Investments     |                                       |           |
| into Japan**    |                                       |           |
|                 |                                       |           |
| **by U.S. and   |                                       |           |
| Other Foreign   |                                       |           |
| Companies**     |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | **Company**                           | **        |
|                 |                                       | Country** |
+-----------------+---------------------------------------+-----------+
| **              | Promega K.K. Japan                    | US        |
| Biotechnology** |                                       |           |
|                 |                                       |           |
| **/ Chemicals** |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | DuPont K.K.                           | US        |
+-----------------+---------------------------------------+-----------+
|                 | Nihon L\'Oréal K.K.                   | France    |
+-----------------+---------------------------------------+-----------+
|                 | Stem Cell Sciences KK                 | Australia |
+-----------------+---------------------------------------+-----------+
|                 | Johnson & Johnson                     | US        |
+-----------------+---------------------------------------+-----------+
|                 | Dendrite International                | US        |
+-----------------+---------------------------------------+-----------+
|                 | Genzyme Japan K.K.                    | US        |
+-----------------+---------------------------------------+-----------+
|                 | Novon Japan, Inc.                     | US        |
+-----------------+---------------------------------------+-----------+
| **ICT /         | China TechFaith Wireless              | China     |
| Software**      | Communication Technology Ltd.         |           |
+-----------------+---------------------------------------+-----------+
|                 | Ellacoya Networks                     | US        |
+-----------------+---------------------------------------+-----------+
|                 | GeoVector                             | US        |
+-----------------+---------------------------------------+-----------+
|                 | Impact Investing Pty Ltd              | Australia |
+-----------------+---------------------------------------+-----------+
|                 | InterAct Technologies Japan Co., Ltd. | China     |
+-----------------+---------------------------------------+-----------+
|                 | Proofpoint                            | US        |
+-----------------+---------------------------------------+-----------+
|                 | UFIDA Software Engineering Japan Co., | China     |
|                 | Ltd.                                  |           |
+-----------------+---------------------------------------+-----------+
|                 | Genesys Conferencing KK               | France    |
+-----------------+---------------------------------------+-----------+
|                 | SIGMA-C KK                            | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Pixology Japan Ltd.                   | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Cisco Systems, K.K.                   | US        |
+-----------------+---------------------------------------+-----------+
|                 | Founder International, Inc.           | China     |
+-----------------+---------------------------------------+-----------+
|                 | Ulead Systems                         | Taiwan    |
+-----------------+---------------------------------------+-----------+
|                 | IBM Japan, Ltd.                       | UK        |
+-----------------+---------------------------------------+-----------+
|                 | ARM K.K.                              | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Celoxica Japan K.K.                   | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Viewlocity Japan Co., Ltd.            | US        |
+-----------------+---------------------------------------+-----------+
|                 | Descartes Systems Group               | Canada    |
+-----------------+---------------------------------------+-----------+
|                 | Raxco Software                        | US        |
+-----------------+---------------------------------------+-----------+
|                 | Roxio Japan, Inc.                     | US        |
+-----------------+---------------------------------------+-----------+
|                 | Interwise Japan K.K.                  | US        |
+-----------------+---------------------------------------+-----------+
|                 | SSH Communications Security K.K.      | Finland   |
+-----------------+---------------------------------------+-----------+
|                 | Nihon Synopsys Co., Ltd.              | US        |
+-----------------+---------------------------------------+-----------+
|                 | Aspect Communications Japan Ltd.      | US        |
+-----------------+---------------------------------------+-----------+
|                 | Overture K.K.                         | US        |
+-----------------+---------------------------------------+-----------+
|                 | Juniper Networks, KK.                 | US        |
+-----------------+---------------------------------------+-----------+
|                 | Clearswift K.K.                       | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Sterling Commerce K.K.                | US        |
+-----------------+---------------------------------------+-----------+
|                 | Computer Associates Japan, Ltd.       | US        |
+-----------------+---------------------------------------+-----------+
|                 | Extreme Networks K.K.                 | US        |
+-----------------+---------------------------------------+-----------+
|                 | Global Knowledge Network Japan, Ltd.  | US        |
+-----------------+---------------------------------------+-----------+
|                 | IFS Japan, Inc.                       | Sweden    |
+-----------------+---------------------------------------+-----------+
|                 | iNAGO KK                              | Canada    |
+-----------------+---------------------------------------+-----------+
|                 | Everypath, Inc.                       | US        |
+-----------------+---------------------------------------+-----------+
|                 | APC Japan, Inc.                       | US        |
+-----------------+---------------------------------------+-----------+
|                 | AdventNet, Inc.                       | US        |
+-----------------+---------------------------------------+-----------+
|                 | Polaris Software Lab Limited          | India     |
+-----------------+---------------------------------------+-----------+
|                 | Graphisoft Japan Co., Ltd.            | Hungary   |
+-----------------+---------------------------------------+-----------+
|                 | Atotech Japan                         | France    |
+-----------------+---------------------------------------+-----------+
|                 | Tera Systems                          | US        |
+-----------------+---------------------------------------+-----------+
|                 | VeriSign                              | US        |
+-----------------+---------------------------------------+-----------+
|                 | Speech Works                          | US        |
+-----------------+---------------------------------------+-----------+
|                 | Red Hat                               | US        |
+-----------------+---------------------------------------+-----------+
| **              | ANCA Pty Ltd                          | Australia |
| Manufacturing** |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | Balco Australia Pty. Ltd.             | Australia |
+-----------------+---------------------------------------+-----------+
|                 | Pelican Products                      | US        |
+-----------------+---------------------------------------+-----------+
|                 | Bosch                                 | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Lactalis Japon                        | France    |
+-----------------+---------------------------------------+-----------+
|                 | Demarle Japon Co., Ltd.               | France    |
+-----------------+---------------------------------------+-----------+
|                 | TMD Friction Japan KK                 | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | dSPACE Japan K.K.                     | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | ROHDE & SCHWARZ Japan K.K.            | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Campagnolo Japan Ltd.                 | Italy     |
+-----------------+---------------------------------------+-----------+
|                 | A. Proctor Group Ltd., Japan          | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Rotex Japan Ltd.                      | UK        |
+-----------------+---------------------------------------+-----------+
|                 | SAINT-GOBAIN Group in Japan           | France    |
+-----------------+---------------------------------------+-----------+
|                 | Magna International, Inc.             | Canada    |
+-----------------+---------------------------------------+-----------+
|                 | MeadWestvaco K.K.                     | US        |
+-----------------+---------------------------------------+-----------+
|                 | Bolthouse Farms Japan Y.K.            | US        |
+-----------------+---------------------------------------+-----------+
|                 | Concurrent Nippon Corp.               | US        |
+-----------------+---------------------------------------+-----------+
|                 | Voith Paper Automation Japan Ltd.     | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Color Kinetics and Color Kinetics     | US        |
|                 | Japan                                 |           |
+-----------------+---------------------------------------+-----------+
|                 | Carpigiani Japan Co., Ltd.            | Italy     |
+-----------------+---------------------------------------+-----------+
|                 | Galbani Japan Company, Ltd.           | Italy     |
+-----------------+---------------------------------------+-----------+
|                 | G.D. Jidokikai K.K.                   | Italy     |
+-----------------+---------------------------------------+-----------+
|                 | Nippon RFI Shielding KK               | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Lutron Electronics Company            | US        |
+-----------------+---------------------------------------+-----------+
|                 | Federal-Mogul K.K.                    | US        |
+-----------------+---------------------------------------+-----------+
|                 | Inergy Automotive Systems             | France    |
+-----------------+---------------------------------------+-----------+
|                 | Velux Japan Ltd.                      | Denmark   |
+-----------------+---------------------------------------+-----------+
|                 | Applied Materials Japan, Inc.         | US        |
+-----------------+---------------------------------------+-----------+
|                 | Continental Teves Corporation         | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Geislinger K.K.                       | Austria   |
+-----------------+---------------------------------------+-----------+
|                 | Grohe Japan Ltd.                      | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Air Products Japan, Inc.              | US        |
+-----------------+---------------------------------------+-----------+
|                 | Snap-on Tools                         | US        |
+-----------------+---------------------------------------+-----------+
|                 | Testo K.K.                            | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Trespa Japan Limited                  | Ne        |
|                 |                                       | therlands |
+-----------------+---------------------------------------+-----------+
|                 | Bodum Japan Co., Ltd.                 | Denmark   |
+-----------------+---------------------------------------+-----------+
|                 | Kennametal Hertel Japan               | US        |
+-----------------+---------------------------------------+-----------+
|                 | Dyson Japan                           | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Vaisala KK                            | Finland   |
+-----------------+---------------------------------------+-----------+
|                 | A Color Kinetics Installation         | US        |
+-----------------+---------------------------------------+-----------+
| **Medical       | Pfizer Japan Inc.                     | US        |
| Care**          |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | Alcon Japan Ltd.                      | Sw        |
|                 |                                       | itzerland |
+-----------------+---------------------------------------+-----------+
|                 | Fresenius Medical Care Japan K.K.     | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Nippon Hexal Corporation              | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Widex Co., Ltd.                       | Denmark   |
+-----------------+---------------------------------------+-----------+
|                 | PAREXEL International                 | US        |
+-----------------+---------------------------------------+-----------+
|                 | KARL STORZ Endoscopy Japan K.K.       | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Draeger Medical Japan                 | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | ELA Medical Inc.                      | France    |
+-----------------+---------------------------------------+-----------+
|                 | Nobel Biocare Japan                   | Sweden    |
+-----------------+---------------------------------------+-----------+
|                 | Haemonetics Corporation               | US        |
+-----------------+---------------------------------------+-----------+
|                 | Peter Brehm Japan                     | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Becton Dickinson                      | US        |
+-----------------+---------------------------------------+-----------+
| **Real Estate** | ProLogis                              | US        |
+-----------------+---------------------------------------+-----------+
|                 | Oakwood Corporate Housing             | US        |
+-----------------+---------------------------------------+-----------+
| **Servic        | Edelman                               | US        |
| es/Consulting** |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | Elanex                                | US        |
+-----------------+---------------------------------------+-----------+
|                 | HRnet One K.K.                        | Singapore |
+-----------------+---------------------------------------+-----------+
|                 | F.H. Bertling Logistics Japan KK      | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | CNC Japan K.K.                        | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Datamonitor Japan                     | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Christie\'s Japan                     | UK        |
+-----------------+---------------------------------------+-----------+
| **Servi         | Wall Street Institute, Japan, KK      | China     |
| ces/Education** |                                       |           |
+-----------------+---------------------------------------+-----------+
| **Ser           | Nihon Harmony Resorts KK              | Australia |
| vices/Leisure** |                                       |           |
+-----------------+---------------------------------------+-----------+
| **S             | KBS Japan KK                          | Korea     |
| ervices/Media** |                                       |           |
+-----------------+---------------------------------------+-----------+
| **Who           | Rucoline Japan Co., Ltd.              | Italy     |
| lesale/Retail** |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | Nihon Hallmark                        | US        |
+-----------------+---------------------------------------+-----------+
|                 | Puratos Japan                         | Belgium   |
+-----------------+---------------------------------------+-----------+
|                 | Chocolates El Rey Japan Co.,Ltd.      | Italy     |
+-----------------+---------------------------------------+-----------+
|                 | Loro Piana Japan Co.,Ltd              | Italy     |
+-----------------+---------------------------------------+-----------+
|                 | Freixenet Japan Inc.                  | Spain     |
+-----------------+---------------------------------------+-----------+
|                 | Chelsea Japan Co., Ltd.               | US        |
+-----------------+---------------------------------------+-----------+
|                 | Miele Japan Corporation               | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | Pieroth Japan K.K.                    | Germany   |
+-----------------+---------------------------------------+-----------+
|                 | ZARA JAPAN CORPORATION                | Spain     |
+-----------------+---------------------------------------+-----------+
|                 | Warner Mycal                          | US        |
+-----------------+---------------------------------------+-----------+
|                 | Lands\' End                           | US        |
+-----------------+---------------------------------------+-----------+
|                 | Catalina Marketing                    | US        |
+-----------------+---------------------------------------+-----------+
|                 | Costco                                | US        |
+-----------------+---------------------------------------+-----------+
|                 | L.L.Bean                              | US        |
+-----------------+---------------------------------------+-----------+
|                 | Coach                                 | US        |
+-----------------+---------------------------------------+-----------+
|                 | Tully\'s                              | US        |
+-----------------+---------------------------------------+-----------+
| **Business      | Shopper Trak RCT Co.                  | US        |
| Consulting**    |                                       |           |
|                 |                                       |           |
| **Market        |                                       |           |
| Research**      |                                       |           |
+-----------------+---------------------------------------+-----------+
|                 | Oyo RMS Corp.                         | US        |
+-----------------+---------------------------------------+-----------+
|                 | Resource Connection Japan K.K.        | US        |
+-----------------+---------------------------------------+-----------+
|                 | Telekurs(Japan) Ltd.                  | Sw        |
|                 |                                       | itzerland |
+-----------------+---------------------------------------+-----------+
|                 | Sports Marketing Surveys Japan, Inc.  | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Altair Engineering, Inc.              | US        |
+-----------------+---------------------------------------+-----------+
|                 | Harris Interactive                    | US        |
+-----------------+---------------------------------------+-----------+
|                 | ERM Japan Ltd.                        | UK        |
+-----------------+---------------------------------------+-----------+
|                 | Dorsey & Whitney LLP                  | US        |
+-----------------+---------------------------------------+-----------+
|                 | Pacifica Corporation                  | US        |
+-----------------+---------------------------------------+-----------+
|                 | WL Ross & Co.                         | US        |
+-----------------+---------------------------------------+-----------+
|                 | Sinomonitor                           | China     |
+-----------------+---------------------------------------+-----------+
|                 | Bowne & Company                       | US        |
+-----------------+---------------------------------------+-----------+
|                 | Basis Technology                      | US        |
+-----------------+---------------------------------------+-----------+
| **Insurance**   | Mondial Assistance                    | France    |
+-----------------+---------------------------------------+-----------+
|                 | AXA Non-Life Insurance Co., Ltd.      | France    |
+-----------------+---------------------------------------+-----------+
| Source:         |                                       |           |
| http            |                                       |           |
| ://www.jetro.go |                                       |           |
| .jp/en/invest/s |                                       |           |
| uccess_stories/ |                                       |           |
+-----------------+---------------------------------------+-----------+

## G. Web Resources [**Return to top**](#ch6)

Promotion of foreign direct investment (FDI) in Japan:

[www.investment-japan.net/index.htm](http://www.investment-japan.net/index.htm)

Invest Japan Business Support Center

Japan External Trade Organization (JETRO)

[www.jetro.go.jp/investjapan/](http://www.jetro.go.jp/investjapan/)

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[[]{#ch7 .anchor}Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 7: Trade and Project Financing

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [How Do I Get Paid (Methods of
    Payment)](#how-do-i-get-paid-methods-of-payment-return-to-top)

-   [How Does the Banking System
    Operate](#how-does-the-banking-system-operate-return-to-top)

-   [General Availability of
    Financing](#general-availability-of-financing-return-to-top)

-   [Types of Available Export Financing and
    Insurance](#types-of-available-export-financing-and-insurance-return-to-top)

-   [Foreign-Exchange
    Controls](#foreign-exchange-controls-return-to-top)

-   [U.S. Banks and Local Correspondent
    Banks](#u.s.-banks-and-local-correspondent-banks-return-to-top)

-   [Project Financing](#project-financing-return-to-top)

-   [Web Resources](#web-resources-return-to-top-4)

## How Do I Get Paid (Methods of Payment) [**Return to top**](#ch7)

There are a number of methods used to settle payment in Japan: cash in
advance, letter of credit used in conjunction with a documentary draft
(time or sight), promissory note, documentary collection or draft, open
account and consignment sales. As with U.S. domestic transactions, a
major factor in determining the method of payment is the degree of trust
in the buyer\'s ability and willingness to pay.

Because of the protection it offers to the American exporter and the
Japanese importer, an irrevocable letter of credit (L/C) payable at
sight is commonly used for settlement of international transactions. As
large Japanese general trading companies often serve as intermediaries
to small and medium-sized companies, L/Cs are often issued in their name
rather than in the name of the end user of the product. With the trading
company taking on the risk of the transaction, the U.S. firm is
protected from the possible bankruptcy of the smaller company.

Another payment option is the use of documentary collection or open
account with international credit insurance that, unlike the letter of
credit, allows the importer\'s line of credit to remain open. At the
same time, this option protects the exporter if the buyer goes bankrupt
or cannot pay. International credit insurance can be obtained from the
Export-Import Bank of the United States or private insurers.

A payment method widely used in Japan but sometimes unfamiliar to U.S.
companies is the promissory note *(yakusoku tegata).* Promissory notes
are IOUs with a promise to pay at a later date, typically 90 to 120
days. Banks will often provide short-term financing through discounting
and rollover of notes. Factoring and other forms of receivables
financing (whether with or without recourse) are not common in Japan,
and more conservative businesspeople find such arrangements a violation
of the "relationship" between buyer and seller. It should be noted that,
domestically, it is not uncommon for the buyer to request, and be
granted an extension of the term of the *tegata* if there are cash-flow
problems.

## How Does the Banking System Operate [**Return to top**](#ch7)

While financial system deregulation and international competitive
pressure has drastically changed the face of Japanese banking (the
consolidation of 19 banks into 4 super banks), the connection between
corporate finance and banking institutions and non-financial
corporations remains much tighter in Japan than in the United States;
and extends far beyond simple lender/borrower relationships. Much
corporate banking business is rooted in either *keiretsu* or regional
relationships, and Japanese banks are frequently shareholders in
companies that conduct banking business with them, although there are
signs of changes. Japanese companies are traditionally highly leveraged
in comparison with their U.S. counterparts, as banks take an active role
in maintaining the financial health of their clients.

This unique relationship between a company and its bank has been
long-standing; until recently, a Japanese company rarely changed its
primary lender, although it would occasionally \"shop around\" for
better credit arrangements. Even when credit is loose, companies
sometimes borrow in excess of their need in order to maintain good
relations with their bank and to ensure that funds will be available in
leaner years. Banks are often large shareholders in publicly traded
corporations, have close relationships with both local governments and
national regulatory agencies, and often play a coordinating role among
their clients. The collapse of the asset price \"bubble\" and the
consequent worsening of bank balance sheets since the early 1990s, as
well as corporate borrowing outside of traditional channels, has
increasingly caused borrowers to tap international capital markets, and
placed traditional banking systems under considerable strain. However,
it remains safe to say that the Japanese commercial bank system is much
more relationship oriented than the transaction-based U.S. system.

While large corporations with suitable credit ratings (especially
export-oriented firms) can rely on corporate bond issues rather than
banks for financing, bank lending continues to be the primary financing
method for small and medium sized companies. However, after the
\"bubble\" economy of the late 1980s and early 1990s, Japanese banks
have had a harder time maintaining strong capital positions, and
consequently have become more restrictive, leading to a credit crunch.
In November 1996, the Japanese government embarked on a \"Big Bang\"
financial reform initiative and has taken a number of helpful measures
since then. While the actual long-term market impact of this
liberalization still remains to be seen, the psychological impact in
raising awareness of the potential effects of deregulation is now
apparent.

Japanese banks offer regular and time deposits and checking accounts for
businesses. Checks are negotiable instruments that are in effect payable
to the bearer (rather than to the order of the payee, as in the United
States). This limits the usefulness of checks, and in fact, most
payments are made by electronic bank transfer (which costs a few hundred
yen on average), or by sending cash through the postal system. The banks
(and now investment/securities firms) continue to wage an uphill battle
against the postal savings system for consumer deposits, a fight that
has become more difficult recently due to the perceived superior safety
of the postal deposit system. The postal system enjoys regulatory
permission to pay higher rates than commercial banks (and is in turn an
important source of working capital for the government).

Personal checking accounts are almost unknown in Japan. Most individuals
use electronic bank transfers to settle accounts. Cash settlement is
also very common and the Post Office has a mechanism for payment by
\"cash envelope\" which is widely used in direct marketing and other
applications. Many Japanese banks now operate 24-hour cash machines (as
do some credit card companies). Bank and other credit cards are easy to
obtain and are widely accepted. The consumer credit card market reached
nearly 15 trillion yen in 2004, equivalent to 5.3 percent of personal
consumption. Some bank credit cards offer revolving credit, but in most
cases balances are paid in full monthly via automatic debiting from bank
accounts.

The relationship among trading company, end user and exporter is an
important feature of the financing environment in Japan. The Japanese
general trading company *(sogo shosha)* is an integrated, comprehensive
organization that embraces a range of functions including marketing and
distribution, financing and shipping and the gathering of commercial
information. It performs functions that in the United States would be
carried out by import/export companies, freight forwarders, banks, law
firms, accounting firms and business consultants. Thus, U.S. firms
dealing with trading companies should familiarize themselves with the
financing capabilities of such firms.

## General Availability of Financing [**Return to top**](#ch7)

While some large U.S. companies in Japan enjoy strong relationships with
the larger Japanese \"city banks,\" most medium and small-sized U.S.
firms have stated that it is difficult to secure the specific type of
trade financing services needed for importing and distribution. In
Japan, credit evaluation is heavily asset-based, and real estate is
still favored as collateral despite the collapse of \"bubble\" era
valuations. Moreover, a firm\'s ability to borrow may also be based on
its personal relationships and rapport with bank officials rather than
on typical U.S. standards of credit-worthiness. Some smaller firms
report that they have been forced to secure needed financing from
offshore sources. For U.S. companies with operations in Japan, teaming
up with Japanese partners in a joint venture has been effective as a way
to receive better treatment from Japanese banks.

While most American banks operating in Japan do engage in lending to
subsidiaries of U.S. companies (especially their home market clients),
many of them focus on higher value-added lines of business than
conventional credit products.

When a Japanese bank extends credit to a foreign-owned company in Japan,
it generally evaluates the financial status of both the borrower and its
parent company. Even in cases where the Japanese subsidiary is
financially strong, the parent company is often requested to guarantee
the obligation (although a "Letter of Awareness" may be accepted in lieu
of a guarantee).

## Types of Available Export Financing and Insurance [**Return to top**](#ch7)

The Government of Japan\'s programs to promote imports and foreign
investment in Japan include tax incentives, loan guarantees, low-cost
loans to Japanese and foreign investors for import infrastructure
through the Development Bank of Japan and other loan programs.
Underscoring the Government\'s emphasis on import promotion, both the
Ministry of Economy, Trade and Industry (METI) and the Japan External
Trade Organization (JETRO) have established import divisions.

Four major public financing corporations, the Japan Bank for
International Cooperation, the Development Bank of Japan, the Japan
Finance Corporation for Small Business and the National Life Finance
Corporation, now make low-interest loans to encourage imports to and
investment in Japan. In addition, the services of the Japan Regional
Development Corporation, a government-affiliated institution that
develops business parks and provides long-term loans at low interest
rates, are available to foreign companies.

The Japan Bank for International Cooperation\'s import credit program
for manufactured goods aims to provide support for the import of
manufactured goods from developed countries to Japan. Five-year secured
or guaranteed loans up to 70 percent loan-to-value and credit lines at
preferential interest rates are available to importers, distributors and
retailers incorporated in Japan who plan to increase their imports of
manufactured goods excluding food products 10 percent or more over the
previous year. Direct 70 percent loan-to-value long-term loans are also
available to foreign exporters for the purchase of manufactured goods to
be exported to Japan under deferred-payment terms, as well as to foreign
manufacturers and intermediary financial institutions for investment in
production facilities and equipment to be used to produce goods for the
Japanese market.

The Development Bank of Japan (DBJ) offers loans designed to increase
imports into Japan. These loans are available to Japanese companies with
at least 33 percent foreign capital or registered branches in Japan of
non-Japanese companies for 40 to 50 percent of project costs for the
expansion of business operations in Japan.

The Japan Finance Corporation for Small Business and National Life
Finance Corporation has expanded their program to facilitate import
sales. The program aims to provide support to small-scale retailers,
wholesalers and importers in Japan for investments to increase imports
to Japan.

A program between U.S. Eximbank and the Export-Import Insurance Division
of METI (EID/METI) provides for co-financing insurance for U.S. exports
to developing countries. EID/METI will also be providing advance payment
insurance for U.S. exports to Japan. For additional details on these and
other cooperative financing programs, U.S. companies should contact U.S.
Eximbank.

No insurance for U.S. exporters is available from the Japanese
Government.

## Foreign-Exchange Controls [**Return to top**](#ch7)

Foreign exchange regulations have almost no impact on normal business
transactions. One deregulatory action likely to lower foreign exchange
transaction costs is the revision of Japan\'s Foreign Exchange Law,
which went into force in April 1998, and enabled a broad variety of
institutions to conduct foreign exchange transactions. Prior to that
action, only \"authorized foreign exchange banks\" could undertake such
transactions, a system that dated back to Japan's opening to the West in
the late 19th century.

## U.S. Banks and Local Correspondent Banks [**Return to top**](#ch7)

Besides 7U.S. banks with branches in Japan, many U.S. banks have
correspondent relationships with Japanese banks, which themselves have
many branches and subsidiaries in the United States.

**Commercial Banks in Japan**

Resona Bank

2-1 Bingomachi 2-chome, Chuo-ku

Osaka 540-8610

Japan

Phone: +81/6/6271-1221

Fax: +81/6/6268-1337

[www.resona-hd.co.jp/index-e.htm](http://www.resona-hd.co.jp/index-e.htm)

Bank of Tokyo-Mitsubishi UFJ

2-7-1 Marunouchi, Chiyoda-ku,

Tokyo 100-8388

Japan

Phone: +81/3/3240-1111

Fax: +81/3/3240-4764

[www.bk.mufg.jp/english/](http://www.bk.mufg.jp/english/)

Development Bank of Japan

1-9-1 Ohtemachi, Chiyoda-ku

Tokyo 100-0004

Japan

Phone: +81/3/3244-1770

Fax: +81/3/3245-1938

[www.dbj.go.jp/english/](http://www.dbj.go.jp/english/)

Japan Bank for International Cooperation

1-4-1 Ohtemachi, Chiyoda-ku

Tokyo 100-8144

Japan

Phone: +81/3/5218-3579

Fax: +81/3/5218-3968

[www.jbic.go.jp/english/index.php](http://www.jbic.go.jp/english/index.php)

Mizuho Corporate Bank

1-3-3 Marunouchi, Chiyoda-ku

Tokyo 100-8210

Japan

Phone: +81/3/3214-1111

[www.mizuhocbk.co.jp/english/](http://www.mizuhocbk.co.jp/english/)

Sumitomo Mitsui Banking Corporation

1-1-2 Yurakucho, Chiyoda-ku

Tokyo 100-0006

Japan

Phone: +81/3/5512-3411

Fax: +81/3/5512-4429

[www.smbc.co.jp/global/index.html](http://www.smbc.co.jp/global/index.html)

On January 1, 2006, the former United Financial Bank of Japan (UFJ) was
merged with The Bank of Tokyo-Mitsubishi into a new entity known as The
Bank of Tokyo-Mitsubishi UFJ (see above).

**Multilateral Development Bank Offices in Country**

Asian Development Bank

Second floor, Yamoto Seimei Building

1-1-7 Uchisaiwai-cho, Chiyoda-ku

Tokyo 100-0011

Japan

Phone: +81/3/-3504-3160

Fax: +81/3/3504-3165

E-mail: [adbjro@adb.org](../adbjro@adb.org)

[www.adb.org/](http://www.adb.org/)

## Project Financing [**Return to top**](#ch7)

#### Availability (OPIC, Eximbank, and Multinational Institutions)

As mentioned above under [General Availability of
Financing](#general-availability-of-financing-return-to-top), OPIC
insurance and finance programs are not available in Japan. Japan has
been a member of the Multilateral Investment Guarantee Agency (MIGA)
since it was established in 1988.

In addition to the investment loan programs from Japanese
Government-affiliated lenders described above, prefectures and
municipalities offer various incentives, including construction, land
acquisition and labor hiring subsidies, special depreciation of business
assets, tax deferments for replacement of specific assets, exemption
from special land-owning taxes assessed by municipalities and
prefectural and municipal real estate acquisition, enterprise and
municipal property tax reductions. In addition, most prefectures offer
loan programs to encourage companies to establish local operations.

Japan\'s venture capital specialist funds are only half the size of
those in the United States. Traditionally the top Japanese venture
capital companies have acted more like quasi-banks than venture capital
firms. Also, Financial Services Agency guidance to brokers to set tough
standards for companies seeking to go public results in even the best
companies taking up to a decade to get a listing on the over-the-counter
stock market --- less than 1000 over-the-counter stocks are listed on
the nine-year-old JASDAQ, Japan\'s electronic OTC market.

**Types of Projects Receiving Financing Support**

In line with the Cabinet Decision in March 1995, the Export-Import Bank
of Japan (JEXIM) and the Overseas Economic Cooperation Fund (OECF)
merged on October 1, 1999, creating a new institution, the Japan Bank
for International Cooperation (JBIC).

JBIC is a governmental institution that deals with external economic
policy issues such as encouraging exports, securing access to energy
resources, promoting direct overseas investments and improving Japan\'s
external imbalances through financial assistance to the trade and
investment activities of Japanese companies.

The financial facilities offered by JBIC include export loans, import
loans, overseas investment loans and untied loans. JBIC also provides
loan guarantees to private financial institutions, short-term loans
designed to finance the external transactions of the governments of
developing nations (bridge loans), and equity participation in the
overseas projects of Japanese companies.

JBIC\'s international financial operations focus on projects in
developing countries where local financial institutions cannot provide
financing on their own. As JBIC\'s mandate is the support of
internationalization for Japanese companies, its loans can be
distinguished from Overseas Economic Cooperation operations, which
targets the economic development of developing countries.

#### Overseas Investment Loans and Overseas Project Loans

These loans are typically granted via JBIC and extended to Japanese
corporations for overseas investment activities and overseas projects.
Overseas investment loans can also be made to overseas joint ventures
involving Japanese capital and to foreign governments for capital
investments or loans to joint ventures involving Japanese capital.

**Un-Tied Loans**

Extended to foreign governments, foreign governmental institutions,
foreign financial institutions (including multilateral development
banks), foreign corporations, and so forth for high-priority projects
and economic restructuring programs in developing countries. These loans
are not tied to the procurement of goods and services from Japan but are
restricted to the specific purposes designated for each loan. These
loans are managed by JBIC.

## Web Resources [**Return to top**](#ch7)

Export-Import Bank of the United States:
[www.exim.gov/](http://www.exim.gov/)

Country Limitation Schedule:
[www.exim.gov/tools/country/country_limits.html](http://www.exim.gov/tools/country/country_limits.html)

OPIC: [www.opic.gov/](http://www.opic.gov/)

Trade and Development Agency: [www.tda.gov/](http://www.tda.gov/)

SBA Office of International Trade:
[www.sba.gov/oit/](http://www.sba.gov/oit/)

(Small Business Administration)

USDA Commodity Credit Corporation:
[www.fsa.usda.gov/ccc/default.htm](http://www.fsa.usda.gov/ccc/default.htm)

U.S. Agency for International Development:
[www.usaid.gov/](http://www.usaid.gov/)

Asian Development Bank (ADB): [www.adb.org/](http://www.adb.org/)

ADB Japan Representative Office:
[www.adb.org/JRO/default.asp](http://www.adb.org/JRO/default.asp)

Japan Ministry of Economy, Trade and Industry (METI)
[www.meti.go.jp/english/](http://www.meti.go.jp/english/)

Japan External Trade Organization (JETRO):
[www.jetro.go.jp/](http://www.jetro.go.jp/)

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[[]{#ch8 .anchor}Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 8: Business Travel

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Business Customs](#business-customs-return-to-top)

-   [Travel Advisory](#travel-advisory-return-to-top)

-   [Visa Requirements](#visa-requirements-return-to-top)

-   [Telecommunications](#telecommunications-return-to-top)

-   [Transportation](#transportation-return-to-top)

-   [Japanese Customs, Etiquette, and
    Culture](#japanese-customs-etiquette-and-culture-return-to-top)

-   [Language](#language-return-to-top)

-   [Health](#health-return-to-top)

-   [Local Time, Business Hours, and
    Holidays](#local-time-business-hours-and-holidays-return-to-top)

-   [Business Infrastructure](#business-infrastructure-return-to-top)

-   [Temporary Entry of Materials and Personal
    Belongings](#temporary-entry-of-materials-and-personal-belongings-return-to-top)

-   [Web Resources](#web-resources-return-to-top-5)

## Business Customs [**Return to top**](#ch8)

An understanding of Japanese business and social practices is useful in
establishing and maintaining successful business relationships in Japan.
Indifference to local business practices may indicate a lack of
commitment on the part of the exporter, and may lead to
misunderstandings and bad feelings, which could result in the loss of
business opportunities. One should not assume that because meetings and
correspondence are carried out in English that Western social and
business norms apply.

Japanese society is complex, structured, hierarchical and group-oriented
with strong emphasis on maintaining harmony and avoiding direct
confrontation. Japanese religious practice tends to be socially oriented
and selective rather than a matter of deep personal commitment; ethics
tend to be situational. In building relationships (which often precede a
first-time sale or an agreement) one should emphasize trust, confidence,
loyalty and commitment for the long term.

Group decision-making is important in Japan and has been generally
described as a bottom up exercise rather than top down. Family
businesses founded since WWII and smaller second-tier firms are
exceptions to this rule. However, 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. This type of group
decision‑making tends to be slower. Recognizing that it takes a longer
time to cultivate business relationships in Japan than in the United
States, American business executives should not expect to make a deal in
just a few days. Consistent follow-up is vital. Likewise, American
business people should recognize the importance of working with the
staff level of their Japanese counterparts and not exclusively with the
executive level.

Gift giving is expected on many business occasions in Japan. Regional
U.S. gifts or company-logo gifts 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. In
Japan, sets of four are considered unlucky (the number four is
pronounced the same as the word for death). Gifts that can be shared
among a group are appropriate.

Business travelers to Japan should make sure to bring a large supply of
business cards (with their title) when they come to Japan; printing
bilingual cards is a nice touch. Business cards are exchanged to
formalize the introduction process and establish the status of the
parties relative to each other. Japanese bow when greeting each other
but will expect to shake hands with foreign executives. A slight bow in
acknowledgment of a Japanese bow is appreciated. Japanese executives
deal on a last name basis in business relationships, and initial
business and social contacts are characterized by politeness and
formality.

Business travelers visiting a Japanese firm for the first time should be
accompanied by an interpreter. Many Japanese executives and
decision-makers do not speak English, although many of them can greet
visitors in English and read English product literature relevant to
their business or industry expertise. Generally speaking, Japanese are
weaker at hearing and speaking English, and more adept at reading and
writing. Thus the Japanese side in a business meeting generally expects
a visitor to bring an interpreter if they are serious about doing
business. Although the cost for hiring an interpreter is high (\$400 to
\$900 per day depending on class), bringing along an interpreter shows
that a visiting firm is serious about seeking to market their
products/services in Japan.

The first visit to a Japanese firm generally serves as a courtesy call
to introduce American executives and their company, and also allows the
U.S. side to begin to evaluate a target company and its executives as
potential business partners. A request to meet only with English
speaking staff can mean missing the opportunity to become acquainted
with higher-ranking executives.

A written contract, even if less detailed than a contract between two
U.S. companies, is essential to meet legal, tax, customs and accounting
requirements. Contractual commitments are perceived as representing
long-term relationships so the terms and conditions, for example whether
to grant exclusive rights, should be considered carefully.

U.S. business travelers to Japan seeking appointments with U.S. Embassy
Tokyo officials should contact the Commercial Section in advance. The
Commercial Section can be reached by fax at 81/3/3589-4235 or by e-mail
<tokyo.office.box@mail.doc.gov>.

## Travel Advisory [**Return to top**](#ch8)

There are no State Department travel advisories for Japan. Japan is
noted for its low crime and safe streets.

Crimes against U.S. citizens in Japan are rare and usually only involve
personal disputes, theft or vandalism. Crime is at levels well below the
U.S. national average. Violent crime is rare, but does exist. Incidents
of pick-pocketing of foreigners in crowded shopping areas, on trains and
at airports have been a sporadic concern. Some Americans believe that
Japanese police procedures appear to be less sensitive and responsive to
a victim\'s concerns than would be the case in the United States,
particularly in cases involving domestic violence and sexual assault.
Few victim's assistance resources or battered women's shelters exist in
major urban areas, and are generally unavailable in rural areas.
Investigations of sexual assault crimes are often conducted without
women police officers present and typically involve inquiries into the
victim's sexual history and previous relationships. Quality of
translations can vary significantly, and has proven unsettling to some
American victims.

For additional information, please refer to the State Department's
"Consular Information Sheet" for Japan at
[travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html](http://travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html).

## Visa Requirements [**Return to top**](#ch8)

A valid U.S. passport is necessary to enter and travel in Japan, and by
Japanese law, non-residents are required to carry their passports at all
times. A visa is not required for short-term business visits (up to 90
days). It is not required to have a round-trip ticket, although it is
recommended. A work or investor visa may take up to two months to
obtain. Immunization and health certificates are not required.
Foreigners remaining in Japan longer than 90 days must obtain an Alien
Registration Card, available free of charge from the municipal office of
the city or ward of residence in Japan.

Upon arrival, going through both immigration and customs checks are
essentially a formality for U.S. business travelers as long as passport
and air ticket are in order. Passengers should exchange some U.S.
dollars for yen before leaving the airport.

U.S. Companies that require travel of foreign businesspersons to the
United States should allow sufficient time for visa issuance if
required. Visa applicants should go to the following links:

State Department Visa Website:
[travel.state.gov/visa/index.html](http://travel.state.gov/visa/index.html)

United States Visas.gov:
[www.unitedstatesvisas.gov/](http://www.unitedstatesvisas.gov/)

The web address for the Consular Section of the U.S. Embassy in Tokyo
is:

[tokyo.usembassy.gov/e/tvisa-main.html](http://tokyo.usembassy.gov/e/tvisa-main.html)

## Telecommunications [**Return to top**](#ch8)

Japan boasts one of the world's most advanced, state-of-the-art
telecommunications systems. Almost all Japanese own a cell phone and use
them constantly for text messaging, e-mail, and downloading information
from the Internet in addition to making phone calls. Cable Internet
services and dedicated Internet T-1 lines are not quite as common as
they are in the United States, however. Public phones, most often
card-operated, are available everywhere. To call the United States and
Canada from Japan, dial 0101 before the ten-digit U.S. telephone number.

## Transportation [**Return to top**](#ch8)

Japan has excellent, modern highways and roads linking all parts of
country. Traffic conditions are often very congested, however. Most
major intercity highways operate on a toll basis, and tolls are very
expensive, making passenger railroad service very competitive,
especially for the foreign visitor. Japan boasts the world's densest and
most modern passenger railroad system, with fast, frequent services to
all parts of the country. Japan's famous *shinkansen* high-speed rails
lines link Tokyo with Japan's major business centers at speeds of up to
185 mph. All of Japan's large cities have highly developed subway and
commuter train service. Taxi service is available everywhere.

Foreign visitors should not entertain the notion of renting a car in
Japan unless they have excellent Japanese-language skills, as streets
typically have no name and many road signs are written in Japanese only.
Combined with very high car rental fees and highway tolls, these
conditions make it far cheaper and more convenient for the majority of
visitors from overseas to use taxis and trains.

## Japanese Customs, Etiquette, and Culture [**Return to top**](#_Chapter_8:_)

The web sites listed below are recommended reading for business visitors
to Japan, especially first-time business visitors. They present an
overview of Japanese culture, customs, and etiquette. Japanese culture
is very different from the American. All aspects of Japanese life,
especially business relations, are governed by strict rules of
etiquette. A foreign business person who is either ignorant of, or
insensitive to, Japanese customs and etiquette needlessly jeopardizes
his company\'s prospects in this country. An elementary knowledge of the
language is also useful, although not required. We hope that CS clients
will find the contents of these web sites useful as they prepare for a
business trip to Japan or get ready to deal with visiting Japanese
business people in the United States.

**japan-guide.com** a very good basic guide to Japanese culture

Japanese culture [www.japan-guide.com/](http://www.japan-guide.com/)

Japanese etiquette
[www.japan-guide.com/e/e622.html](http://www.japan-guide.com/e/e622.html)

Japanese customs
[www.japan-guide.com/e/e638.html](http://www.japan-guide.com/e/e638.html)

**Japan Web Guide FAQ**

\"Japanese Culture: A Primer for Newcomers\"

[www.thejapanfaq.com/FAQ-Primer.html](http://www.thejapanfaq.com/FAQ-Primer.html)

\"Japanese Manners & Etiquette\"

[www.thejapanfaq.com/FAQ-Manners.html](http://www.thejapanfaq.com/FAQ-Manners.html)

**Planet Tokyo** [www.planettokyo.com/](http://www.planettokyo.com/)

Excellent general-purpose web site hespecially helpful for first-time
travelers to Japan, with features on "Arriving" (planes, trains, buses ,
and taxis), "Culture Notes," "Travel Basics," "Language & Culture,"
"Getting Around," and "Travel Planning Links."

## Language [**Return to top**](#ch8)

The national language of Japan is Japanese (*nihongo*) and is spoken and
understood all over the country. English is a required subject in
Japanese high schools, and it is by far the most widely known foreign
language in Japan. International business correspondence and
negotiations in Japan are almost always conducted in English. This being
said, however, most Japanese, including business executives, have only a
very imperfect understanding and command of English, although there are
of course exceptions. Japanese business executives often read English
much better than they can speak it or understand it when spoken. It is
advisable, therefore, to be accompanied by a competent professional
interpreter to all business meetings, especially an initial contact
where you might be unsure of your counterparts' mastery of English.

Overseas visitors interested in the Japanese language can visit the
following web sites:

\"Some Notes on Japanese Grammar\"
[www.csse.monash.edu.au/\~jwb/jgrammar.html](http://www.csse.monash.edu.au/~jwb/jgrammar.html)

\"Japanese for the Western Brain\"
[kimallen.sheepdogdesign.net/Japanese/index.html](http://kimallen.sheepdogdesign.net/Japanese/index.html)

Jim Breen\'s Japanese Page
[www.csse.monash.edu.au/\~jwb/japanese.html](http://www.csse.monash.edu.au/~jwb/japanese.html)

## Health [**Return to top**](#ch8)

While medical care in Japan is good, English-speaking physicians and
medical facilities that cater to Americans\' expectations are expensive
and not very widespread. Japan has a national health insurance system,
which is only available to foreigners with long-term visas for Japan.
National health insurance does not pay for medical evacuation or medical
care outside of Japan. Medical caregivers in Japan require payment in
full at the time of treatment or concrete proof of ability to pay before
treating a foreigner who is not a member of the national health
insurance plan.

For additional information, please refer to the State Department's
"Consular Information Sheet" for Japan at
[travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html](http://travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html).

## Local Time, Business Hours, and Holidays [**Return to top**](#ch8)

#### Local Time

Japan is 14 hours ahead of U.S. Eastern Standard Time (EST) and 13 hours
ahead of Eastern Daylight Time (EDT) from April to October.
Consequently, 8:00 a.m. EST in New York City corresponds to 10:00 p.m.
the same day in Tokyo. 8:00 p.m. EST in New York City corresponds to
10:00 a.m. *the next day* in Tokyo.

#### Business Hours

The typical Japanese workweek is Monday through Friday, 9:00 a.m. to
5:00 p.m., although many Japanese office workers put in long hours of
overtime. Flex work hours have become popular at large companies.

**Holidays**

When a national holiday falls on a Sunday, the following Monday is a
compensatory day. In addition, many Japanese companies and government
offices traditionally close during the New Year\'s holiday season
(December 28-January 3), \"Golden Week\" (April 29-May 5) and the
traditional "O-Bon" Festival (usually August 12-15).

**National Holidays in 2007**

In 2007, Japan will observe the following official holidays:

New Year\'s Day January 1 (Monday)

Adult\'s Day January 8 (Monday)

National Foundation Day February 11 (Sunday, to be observed on Monday,
Feb. 12)

Vernal Equinox Day March 21 (Wednesday)

Showa Day April 29 (Sunday, to be observed on Monday, April 30)

Constitution Memorial Day May 3 (Thursday)

Greenery Day May 4 (Friday)

Children\'s Day May 5 (Saturday)

Marine Day July 16 (Monday)

Respect for the Aged Day September 17 (Monday)

Autumnal Equinox Day September 23 (Sunday, to be observed Monday, Sep.
24)

Health & Sports Day October 8 (Monday)

National Culture Day November 3 (Saturday)

Labor Thanksgiving Day November 23 (Friday)

Emperor\'s Birthday December 23 (Sunday, to be observed Monday, Dec. 24)

## Business Infrastructure [**Return to top**](#ch8)

Japan\'s business infrastructure is on a par with that of the United
States. All business traveler services are available. For additional
information on traveling to Japan, contact the Japan National Tourist
Organization (JNTO) in New York at: phone 212-757-5640, fax
212-307-6754, or visit JNTO's website at
[www.jnto.go.jp/](http://www.jnto.go.jp/).

## Temporary Entry of Materials and Personal Belongings [**Return to top**](#ch8)

There is no restriction for temporary entry of laptop computers and
software for personal use. Regarding materials for exhibits, Japan is a
member of the International Convention to Facilitate the Importation of
Commercial Samples and Advertising Materials under the ATA *carnet*
System ([www.atacarnet.com/](http://www.atacarnet.com/)). Use of a
*carnet* allows goods such as commercial and exhibition samples,
professional equipment, musical instruments and television cameras to be
carried or sent temporarily into a foreign country without paying duties
or posting bonds. These goods cannot be sold. A *carnet* should be
arranged for in advance by contacting a local office of the United
States Council for International Business or its helpline at
800-ATA-2900.

## Web Resources [**Return to top**](#ch8)

Doing business in Japan:

U.S. Commercial Service Japan

[www.buyusa.gov/japan/en/doing.html](http://www.buyusa.gov/japan/en/doing.html)

> Venture Japan: Doing Business in Japan
>
> How to Succeed in the Japanese Market

[www.venturejapan.com/index.htm](http://www.venturejapan.com/index.htm)

Consular information & official travel advisories for Japan:

U.S. Department of State

[travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html](http://travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html)

U.S. visas:

U.S. Department of State

[travel.state.gov/visa/index.html](http://travel.state.gov/visa/index.html)

[www.unitedstatesvisas.gov/](http://www.unitedstatesvisas.gov/)

U.S. Embassy in Tokyo Consular Section

[tokyo.usembassy.gov/e/tvisa-main.html](http://tokyo.usembassy.gov/e/tvisa-main.html)

Japanese customs, etiquette, and culture:

[www.japan-guide.com/](http://www.japan-guide.com/)

[www.thejapanfaq.com/](http://www.thejapanfaq.com/)

[www.planettokyo.com/](http://www.planettokyo.com/)

Japanese language:

\"Some Notes on Japanese Grammar\"

[www.csse.monash.edu.au/\~jwb/jgrammar.html](http://www.csse.monash.edu.au/~jwb/jgrammar.html)

> \"Japanese for the Western Brain\"
> [kimallen.sheepdogdesign.net/Japanese/index.html](http://kimallen.sheepdogdesign.net/Japanese/index.html)

Jim Breen\'s Japanese Page

[www.csse.monash.edu.au/\~jwb/japanese.html](http://www.csse.monash.edu.au/~jwb/japanese.html)

Business infrastructure:

Japan National Tourist Organization (JNTO)

[www.jnto.go.jp/](http://www.jnto.go.jp/)

Health:

U.S. Department of State

Consular Information Sheet for Japan

[travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html](http://travel.state.gov/travel/cis_pa_tw/cis/cis_1148.html)

Temporary entry of materials under the *carnet* system:

[www.atacarnet.com/](http://www.atacarnet.com/)

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 9: Contacts, Market Research, and Trade Events

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Contacts](#contacts-return-to-top)

-   [Market Research](#market-research-return-to-top)

-   [Trade Events](#trade-events-return-to-top)

## Contacts [**Return to top**](#chapter-9-contacts-market-research-and-trade-events)

**U.S. EMBASSY TRADE PERSONNEL**

**[Commercial Service Tokyo]{.underline}**

John Peters, Minister-Counselor for Commercial Affairs

U.S. Embassy

1-10-5 Akasaka, Minato-ku

Tokyo 107-8420

Japan

(U.S. Address: Unit 45004, Box 204, APO AP 96337-5004)

Phone: +81/3/3224-5060

Fax: +81/3/3589-4235

Web: [www.buyusa.gov/japan](http://www.buyusa.gov/japan)

Patrick Santillo, Counselor for Commercial Affairs

John Fleming, Attaché (Healthcare, IT & Fisheries Unit)

Jason Hancock, Attaché (Major Projects, Environment & Transportation
Unit)

Alain Letort, Attaché (Outreach, Publications, Administration & Support
Services Unit) Catherine Spillman, Attaché (Consumer Goods & Services
Unit)

Dean Matlack, Attaché (Market Access and Compliance Unit)

**[Commercial Service Osaka]{.underline}**

Bradley Harker, Principal Commercial Consul

American Consulate General

2-11-5 Nishitenma, Kita-ku

Osaka 530-8543

Japan

(U.S. Address: Unit 45004, Box 239, APO AP 96337-5004)

Phone: +81/6/6315-5957

Fax: +81/6/6315-5963

E-mail:
[osaka-kobe.office.box@mail.doc.gov](../osaka-kobe.office.box@mail.doc.gov)

**[Commercial Service Nagoya]{.underline}**

(Vacant), Principal Commercial Consul

American Consulate

Nagoya International Center Building, 6F

47-1 Nagono 1-chome, Nakamura-ku

Nagoya 450-0001

Japan

(U.S. Address: Unit 45004, Box 280, APO AP 96337-5004)

Phone: +81/52/581-8684

Fax: +81/52/581-3190

E-mail:
[nagoya.office.box@mail.doc.gov](../nagoya.office.box@mail.doc.gov)

**[Commercial Service Sapporo]{.underline}**

Marrie Schaefer, Consul General

Misa Shimizu, Commercial Specialist

American Consulate General

Nishi 28, Kita 1, Chuo-ku

Sapporo 064-0821

Japan

(U.S. Address: Unit 45004, Box 276, APO AP 96337-5004)

Phone: +81/11/641-1115

Fax: +81/11/643-1283

E-mail: [misa.shimizu@mail.doc.gov](../misa.shimizu@mail.doc.gov)

**[Commercial Service Fukuoka]{.underline}**

James Crow, Economic/Commercial Officer

American Consulate

2-5-26 Ohori, Chuo-ku

Fukuoka 810-0052

Japan

(U.S. Address: Unit 45004, Box 242, APO AP 96337-5004)

Phone: +81/92/751-9331

Fax: +81/92/725-3772

E-mail: <james.crow@mail.doc.gov>

**[Consulate Naha (Okinawa)]{.underline}**

Kevin Maeher, Consul General

Akinori Hayashi, Commercial Specialist

American Consulate General

No. 2564 Nishihara, Urasoe City

Okinawa 901-2101

Japan

(U.S. Address: PSC 556, Box 840, FPO AP 96372-0840)

Phone: +81/98/876-4211

Fax: +81/98/876-4243

E-mail: [HayashiAX@state.gov](../HayashiAX@state.gov)

**[Foreign Agricultural Service]{.underline}**

Daniel Berman, Minister-Counselor for Agricultural Affairs

Paul Spencer, Senior Agricultural Attaché

Deanna Ayala, Agricultural Attaché

Rachael Nelson, Agricultural Attaché

U.S. Embassy

1-10-5, Akasaka, Minato-ku

Tokyo 107-8420

Japan

(U.S. Address: Unit 45004, Box 226, APO AP 96337-5004)

Phone: +81/3/3224-5105

Fax: +81/3/3589-0793

Web: [www.usdajapan.org/](http://www.usdajapan.org/)

E-mail: [agtokyo@usda.gov](../agtokyo@usda.gov)

**[Agricultural Trade Office (Tokyo)]{.underline}**

Michael Conlon, Director

U.S. Embassy

1-10-5, Akasaka, Minato-ku

Tokyo 107-8420

Japan

(U.S. Address: Unit 45004, Box 241, APO AP 96337-5004)

Phone: +81/3/3505-6050

Fax: +81/3/3582-6429

Web: [www.usdajapan.org/](http://www.usdajapan.org/)

E-mail: [atotokyo@usda.gov](../atotokyo@usda.gov)

**[Agricultural Trade Office (Osaka)]{.underline}**

Masahiro Matsumoto, Senior Marketing Specialist

American Consulate General

2-11-5 Nishitenma, Kita-ku

Osaka 530-8543

Japan

(U.S. Address: Unit 45004, Box 239, APO AP 96337-5004)

Phone: +81/6/6315-5904

Fax: +81/6/6315-5906

Web: [www.usdajapan.org/](http://www.usdajapan.org/)

E-mail: <atoosaka@usda.gov>

**[Economic Section (State Department)]{.underline}**

Hans Klemm, Minister-Counselor for Economic Affairs

U.S. Embassy

1-10-5 Akasaka, Minato-ku

Tokyo 107-8420

Japan

(U.S. Address: Unit 45004, Box 203, APO AP 96337-5004)

Phone: +81/3/3224-5022

Fax: +81/3/3224-5010

**[Energy Department]{.underline}**

(Vacant), Energy Attaché

U.S. Embassy

1-10-5 Akasaka, Minato-ku

Tokyo 107-8420

Japan

(U.S. Address: Unit 45004, Box 219, APO AP 96337-5004)

Phone: +81/3/3224-5444

Fax: +81/3/3224-5769

**[Treasury Department]{.underline}**

Maureen Grewe, Financial Attaché

U.S. Embassy

1-10-5 Akasaka, Minato-ku

Tokyo 107-8420

Japan

(U.S. Address: Unit 45004, Box 216, APO AP 96337-5004)

Phone: +81/3/3224-5486

Fax: +81/3/3224-5490

**CHAMBERS OF COMMERCE/TRADE ASSOCIATIONS**

**[American Chamber of Commerce in Japan (ACCJ)]{.underline}**

Masonic 39 MT Bldg. 10F

2-4-5 Azabudai, Minato-ku

Tokyo 106-0041

Japan

Phone: +81/3/3433-5381

Fax: +81/3/3433-8454

Web: [www.accj.or.jp/](http://www.accj.or.jp/)

**[American Chamber of Commerce in Japan (ACCJ) Kansai
Chapter]{.underline}**

OCCI Bldg. 5F

2-8 Honmachibashi, Chuo-ku

Osaka 540-0029

Japan

Phone: +81/6/6944-5991

Fax: +81/6/6944-5992

Web:
[www.accj.or.jp/content/01_home/kansai](http://www.accj.or.jp/content/01_home/kansai)

**[American Chamber of Commerce in Japan (ACCJ) Chubu
Chapter]{.underline}**

Marunouchi Fukao Bldg. 5F

2-11-24 Marunouchi, Naka-ku

Nagoya 460-0002

Japan

Phone: +81/52/229-1525

Fax: +81/52/222-8272

Web:
[www.accj.or.jp/content/01_home/chubu](http://www.accj.or.jp/content/01_home/chubu)

**[Japan Business Federation (Nippon Keidanren)]{.underline}**

Kazuyuki Kinbara, Director

International Economic Affairs Bureau

1-9-4 Otemachi, Chiyoda-ku

Tokyo 100-8188

Japan

Phone: +81/3/5204-1550

Fax: +81/3/5255-6231

Web: [www.keidanren.or.jp/](http://www.keidanren.or.jp/)

**[Japan Association of Corporate Executives (Keizai
Doyukai)]{.underline}**

Nihon Kogyo Club Bldg. Annex 5F

1-4-6 Marunouchi, Chiyoda-ku

Tokyo 100-0005

Japan

Phone: +81/3/3284-0220

Fax: +81/3/3212-3774

Web: [www.doyukai.or.jp/](http://www.doyukai.or.jp/)

**[Japan Foreign Trade Council, Inc.]{.underline}**

Shunji Sasaki, General Manager

International Affairs and Research Group

World Trade Center Bldg. 6F

2-4-1 Hamamatsu-cho, Minato-ku

Tokyo 105-6106

Japan

Phone: +81/3/3435-5950

Fax: +81/3/3435-5979

Web:
[www.jftc.or.jp/english/home_e.htm](http://www.jftc.or.jp/english/home_e.htm)

**[Japan-U.S. Business Council]{.underline}**

Yasuo Horibe, Deputy Director-General

Otemachi Bldg., Room 439

1-6-1 Otemachi, Chiyoda-ku

Tokyo 100-0004

Japan

Phone: +81/3/3216-5823

Fax: +81/3/3284-1576

Web:
[www.jubc.gr.jp/eng/index.html](http://www.jubc.gr.jp/eng/index.html)

**[Japan Chamber of Commerce and Industry]{.underline}**

Kiyoshi Yamada, General Manager

International Division

Tosho Bldg.

3-2-2 Marunouchi, Chiyoda-ku

Tokyo 100-0005

Japan

Phone: +81/3/3283-7601

Fax: +81/3/3216-6497

Web: [www.jcci.or.jp/home-e.html](http://www.jcci.or.jp/home-e.html)

**[Tokyo Chamber of Commerce and Industry]{.underline}**

Kiyoshi Yamada, General Manager

International Division

Tosho Bldg.

3-2-2 Marunouchi, Chiyoda-ku

Tokyo 100-0005

Japan

Phone: +81/3/3283-7601

Fax: +81/3/3216-6497

Web:
[www.tokyo-cci.or.jp/english/index.html](http://www.tokyo-cci.or.jp/english/index.html)

**[Osaka Chamber of Commerce and Industry]{.underline}**

Yasutsugu Kohzuki, Director, International Division

2‑8 Honmachi‑bashi, Chuo‑ku

Osaka 540-0029

Japan

Phone: +81/6/6944‑6404

Fax: +81/6/6944-6409

Web: [www.osaka.cci.or.jp/e/](http://www.osaka.cci.or.jp/e/)

**[Kansai Economic Federation (Kankeiren)]{.underline}**

Teruo Aoyagi, General Manager

International Affairs Bureau

Nakanoshima Center Bldg. 30F

6‑2‑27, Nakanoshima, Kita‑ku

Osaka 530-6691

Japan

Phone: +81/6/6441‑0104

Fax: +81/6/6441-0443

Web: <http://www.kankeiren.or.jp/English/>

**[Kansai Association of Corporate Executives (Kansai Keizai
Doyukai)]{.underline}**

Shuichi Kaneko, Deputy General Manager, Executive & Administrative
Dept./

Deputy General Manager, Planning & Research Dept.

Nakanoshima Center Bldg. 28F

6‑2‑27, Nakanoshima, Kita‑ku

Osaka 530-6691

Japan

Phone: +81/6/6441‑1031

Fax: +81/6/6441-1030

Web: [www.kansaidoyukai.or.jp/](http://www.kansaidoyukai.or.jp/)

**[Nagoya Chamber of Commerce & Industry (NCCI)]{.underline}**

Hitoshi Nishiwaki, General Manager, International Group

2-10-19 Sakae, Naka-ku

Nagoya 460-8422

Japan

Phone: +81/52/223-5729

Fax: +81/52/232-5751

Web: [www.nagoya-cci.or.jp/eng/](http://www.nagoya-cci.or.jp/eng/)

**[Kyushu Economic Federation (Kyukeiren)]{.underline}**

Mr. Takeshi Koga, Senior Managing Director

c/o Fukuoka Sanwa Bldg.

1-10-24 Tenjin, Chuo-ku

Fukuoka 810-0001

Japan

Phone: +81/92/761-4261

Fax: +81/92/724-2102

Web:
[www.kyukeiren.or.jp/english/index.html](http://www.kyukeiren.or.jp/english/index.html)

#### [Fukuoka Chamber of Commerce and Industry]{.underline}

Mr. Shuji Hashimoto, Director, International Center

9-28 Hakata Ekimae 2-chome, Hakata-ku

Fukuoka 812-8505

Japan

Phone: +81/92/441-1117

Fax: +81/92/411-1600

Web: <http://www.fukunet.or.jp/english/index.html>

######## [Fukuoka Foreign Trade Association]{.underline}

Mr. Shimeno Tadao, Secretary General

c/o Elgala Bldg., 7F

4-2 Tenjin 1-chome, Chuo-ku

Fukuoka 810-0001

Phone: +81/92/724-7131

Fax: +81/92/735-4205

Web: [www.fukuoka-fta.or.jp/](http://www.fukuoka-fta.or.jp/)

######## AGRICULTURAL TRADE ASSOCIATIONS

**[Japan Chain Stores Association]{.underline}**

Toranomon NN Bldg., 11F.

1-21-17 Toranomon, Minato-ku

Tokyo 105-0001

Japan

Phone: +81/3/5251-4600

Fax: +81/3/5251-4601

Web: [www.jcsa.gr.jp/](http://www.jcsa.gr.jp/)

**[Japan Confectionery Association]{.underline}**

6-9-5 Shimbashi, Minato-ku

Tokyo 105-0004

Japan

Phone: +81/3/3431-3115

Fax: +81/3/3432-1660

E-mail: [anka-0@nifty.com](../anka-0@nifty.com)

**[Japan Convenience Foods Industry Association]{.underline}**

Kimura Bldg. 3F

5-5-5 Asakusabashi, Taito-ku

Tokyo 111-0053

Japan

Phone: +81/3/3865-0811

Fax: +81/3/3865-0815

E-mail: [daihyo@sokuseki-kyokai.com](../daihyo@sokuseki-kyokai.com)

Web:
[www.instantramen.or.jp/english/index.html](http://www.instantramen.or.jp/)

**[Japan Dairy Industry Association]{.underline}**

Nyugyo Kaikan 4F

1-14-19 Kudan Kita, Chiyoda-ku

Tokyo 102-0073

Japan

Phone: +81/3/3261-9161

Fax: +81/3/3261-9175

Web: [www.jdia.or.jp/](http://www.jdia.or.jp/)

**[Japan Dehydrated Vegetable Association]{.underline}**

1-9-12 Irifune, Chuo-ku

Tokyo 104-0042

Japan

Phone: +81/3/5117-2661

Fax: +81/3/3552-2820

E-mail: [kaz@primero.jp](../kaz@primero.jp%0D)

#### 

#### Japan Food Service Association

1-29-6, Hamamatsucho, Minato-ku

Tokyo 105-0013

Japan

Phone: +81/3/5403-1060

Fax: +81/3/5403-1070

E-mail: [info-jf@jfnet.or.jp](../info-jf@jfnet.or.jp)

Web: [www.jfnet.or.jp/](http://www.jfnet.or.jp/)

#### Japan Frozen Food Association

Katsuraya Dai 2 Bldg. 6F

10-6 Nihonbashi Kobunacho, Chuo-ku

Tokyo 103-0024

Japan

Phone: +81/3/3667-6671

Fax: +81/3/3669-2117

E-mail: [info@reishokukyo.or.jp](../info@reishokukyo.or.jp)

Web: [www.reishokukyo.or.jp/](http://www.reishokukyo.or.jp/)

#### Japan Fruit Juice Association

Zenkoku Tabacco Bldg., 3F.

1-10-1 Shibadaimon, Minato-ku

Tokyo 105-0012

Japan

Phone: +81/3/3435-0731

Fax: +81/3/3435-0737

E-mail: <kaju-kyo@cello.ocn.ne.jp>

Web: [www.kaju-kyo.ecnet.jp/](http://www.kaju-kyo.ecnet.jp/)

#### Japan Health Food & Nutrition Food Association

2-7-27 Ichigaya Sadohara-cho, Shinjuku-ku

Tokyo 162-0842

Japan

Phone: +81/3/3268-3134

Fax: +81/3/3268-3136

E-mail: [jhnfa@jhnfa.org](../jhnfa@jhnfa.org)

Web: [www.jhnfa.org/](http://www.jhnfa.org/)

##### [Japan Nut Association]{.underline}

Nihonbashi Izumi Bldg., 5F.

2-17-9 Nihonbashi Kayabacho, Chuo-ku

Tokyo 103-002

Japan

Phone: +81/3/5649-8572

Fax: +81/3/5649-8573

E-mail: [jna@jt5.so-net.ne.jp](../jna@jt5.so-net.ne.jp)

Web: [www.jna-nut.com/index.htm](http://www.jna-nut.com/index.htm)

**[Japan Self-Service Association]{.underline}**

Sakurai Bldg. 6F

3-19-8 Uchi-kanda, Chiyoda-ku

Tokyo 101-0047

Japan

Phone: +81/3/3255/4825

Fax: +81/3255-4826

E-mail: [selkyo@jssa.or.jp](../selkyo@jssa.or.jp)

Web: [www.jssa.or.jp/](http://www.jssa.or.jp/)

#### Japan Restaurant Association

Kyodo Bldg.

11-7 Nihonbashi Kabutocho, Chuo-ku

Tokyo 103-0026

Japan

Phone: +81/3/5651-5601

Fax: +81/3/5651-5602

E-mail: <info@jpnrestaurant.org>

Web: [www.joy.ne.jp/restaurant/](http://www.joy.ne.jp/restaurant/)

#### Japan Wine And Spirits Importers\' Association

Daiichi Tentoku Bldg.

1-13-5 Toranomon, Minato-ku

Tokyo 105-0001

Japan

Phone: +81/3/3503-6505/6506

Fax: +81/3/3503-6504

Web:
[www.youshu-yunyu.org/english/index.html](http://www.youshu-yunyu.org/english/index.html)

##### JAPANESE GOVERNMENT AGENCIES

**[Ministry of Economy, Trade and Industry (METI)]{.underline}**

Keiichi Kawakami, Director, Trade & Investment Facilitation Division

1-3-1 Kasumigaseki, Chiyoda-ku

Tokyo 100-8901

Japan

Phone: +81/3/3501-1662

Fax: +81/3/3501-2082

Web:
[www.meti.go.jp/english/index.html](http://www.meti.go.jp/english/index.html)

**[Japan External Trade Organization (JETRO)]{.underline}**

Invest Japan Dept., Market Entry Division

Ark Mori Bldg., 6F

1-12-32, Akasaka, Minato-ku

Tokyo107-6006

Japan

Phone: +81/3/3582-5410

Fax: +81/3/3505-1990

Web: [www.jetro.go.jp/](http://www.jetro.go.jp/)

**[JETRO "Invest Japan" Business Support Center]{.underline}**

Noboru Inamoto, Chief Administrator

Ark Mori Bldg., 7F

1-12-32, Akasaka, Minato-ku

Tokyo107-6006

Japan

Phone: +81/3/3582-4685

Fax: +81/3/3584-6024

Web:
[www.jetro.go.jp/en/invest/investmentservices/ibsc/](http://www.jetro.go.jp/en/invest/investmentservices/ibsc/)

**[Manufactured Imports and Investment Promotion Organization
(MIPRO)]{.underline}**

Mr. Shuji Miyazaki, President

World Import Mart 6F

3-1-3 Higashi-Ikebukuro, Toshima-ku

Tokyo 170-8630

Japan

Phone: +81/3/3988-2791

Fax: +81/3/3988-1629

Web: [www.mipro.or.jp/index.shtml](http://www.mipro.or.jp/index.shtml)

For further contact information of Japanese government agencies and
quasi-governmental organizations, please contact Commercial Service
Japan offices.

##### MARKET RESEARCH FIRMS IN JAPAN

**[A.T. Kearney K.K.]{.underline}**

ARK Mori Bldg. East 32F

1-12-32 Akasaka, Minato-ku

Tokyo 107-6032

Japan

Phone: +81/3/5561-9155

Fax: +81/3/5561-9190

Web: [www.atkearney.com/](http://www.atkearney.com/)

**[Boston Consulting Group K.K.]{.underline}**

New Otani Garden Court

4-1 Kioi-cho, Chiyoda-ku

Tokyo 102-0094

Japan

Phone: +81/3/5211-0300

Fax: +81/3/5211-0333

Web: [www.bcg.com/](http://www.bcg.com/)

###### [Deloitte Touche Tohmatsu]{.underline}

MS Shibaura Bldg.

4-13-23, Shibaura, Minato-ku

Tokyo 108-8530

Japan

Phone: +81/3/3457-7321

Fax: +81/3/3457-7426

Web: [www.deloitte.com/](http://www.deloitte.com/)

**[Fuji Chimera Research Institute, Inc.]{.underline}**

F.K Bldg.

2-5 Nihonbashi-Kodenma-cho, Chuo-ku

Tokyo 103-0001

Japan

Phone: +81/3/3664-5841

Fax: +81/3/3661-6920

Web: [www.fcr.co.jp/en/index.html](http://www.fcr.co.jp/en/index.html)

**[Japan Research Institute, Ltd.]{.underline}**

16 Ichibancho, Chiyoda-ku

Tokyo 102-0082

Japan

Phone: +81/3/3288-4700

Fax: +81/3/3288-4750

Web: <http://www.jri.co.jp/english/index.html>

**[Nikkei Research Inc.]{.underline}**

Park Side 1 Bldg.

2-2-7 Kanda Tsukasa-cho, Chiyoda-ku

Tokyo 101-0048

Japan

Phone: +81/3/5296-5103

Fax: +81/3/5296-5107

Web: [www.nikkeiresearch.com/](http://www.nikkeiresearch.com/)

**[UFJ Institute Ltd.]{.underline}**

Shimbashi Sanwa Toyo Bldg.

1-11-7 Shimbashi, Minato-ku

Tokyo 105-8631

Japan

Phone: +81/3/3572-9030

Fax: +81/3/3572-6230

Web: <http://www.murc.jp/english/index.html>

**[Yano Research Institute Ltd.]{.underline}**

Nakanosakaue Central Bldg.

2-46-2 Honcho, Nakano-ku

Tokyo 164-8620

Japan

Phone: +81/3/5371-6907

Fax: +81/3/5371-6965

Web: [www.yanoresearch.com/](http://www.yanoresearch.com/)

##### U.S. FEDERAL GOVERNMENT

###### [U.S. Commerce Dept. Trade Information Center, Washington DC]{.underline}

Phone: 1-800-USA-TRADE

Fax: 202-482-4473

Email: [tic@ita.doc.gov](../tic@ita.doc.gov)

Web: [www.trade.gov/td/tic/](http://www.trade.gov/td/tic/)

####### **U.S. Department of Commerce**

Israel Hernandez, Assistant Secretary

Director General of the U.S. Commercial Service

International Trade Administration

1401 Constitution Avenue, N.W.

Washington, DC 20230

Web: [www.export.gov/](http://www.export.gov/)

**[U.S. Commerce Dept. Market Access and Compliance Country
Desk]{.underline}**

Office of Japan

International Trade Administration

Room 2320, 14th Street and Constitution Avenue, N.W.

Washington, DC 20230

Phone: 202-482-2515

Fax: 202-482-0469

Email: <Nicole.Melcher@mail.doc.gov>

Web: [www.mac.doc.gov/japan](http://www.mac.doc.gov/japan)

###### [U.S. Department of Agriculture]{.underline}

Foreign Agricultural Service

1400 Independence Ave., S.W.

Washington, DC 20250

E-mail: [info@fas.usda.gov](../info@fas.usda.gov)

Web: [www.fas.usda.gov/](http://www.fas.usda.gov/)

###### [U.S. Department of State]{.underline}

Commercial and Business Affairs Office

2201 C Street, N.W., Room 2318

Washington, DC 20520

Phone: 202-647-1625

Fax: 202-647-3953

E-mail: [cbaweb@state.gov](../cbaweb@state.gov)

Web: [www.state.gov/business](http://www.state.gov/business)

**[Export-Import Bank of the United States (Ex-Im Bank)]{.underline}**

811 Vermont Avenue, N.W.

Washington, DC 20571

Phone: (202) 565-3946 (EXIM)

\(800\) 565-3946 (EXIM)

E-mail: [info@exim.gov](../info@exim.gov)

Web: [www.exim.gov/](http://www.exim.gov/)

###### [Overseas Private Investment Corporation (OPIC)]{.underline}

1100 New York Avenue, N.W.

Washington, D.C. 20527

Phone: 202-336-8400

Fax: 202-336-7949

E-mail: [info@opic.gov](../info@opic.gov)

Web: [www.opic.gov/](http://www.opic.gov/)

## Market Research [**Return to top**](#chapter-9-contacts-market-research-and-trade-events)

######## [Foreign Commercial Service, U.S. Dept. of Commerce]{.underline}

To view market research reports produced by the U.S. Commercial Service,
please visit
[www.export.gov/mrktresearch/index.asp](http://www.export.gov/mrktresearch/index.asp)
and click on Country and Industry Market Reports.

######## [Foreign Agricultural Service, U.S. Dept. of Agriculture]{.underline}

Each year, the Foreign Agricultural Service offices in Tokyo and Osaka
prepare more than 100 reports on food market developments in Japan.
These include sector studies, product-specific market briefs and reports
on market-opening and other trade policy developments. All reports are
available on-line by accessing the Foreign Agricultural Service web site
at
[**www.fas.usda.gov/scriptsw/attacherep/default.asp**](http://www.fas.usda.gov/scriptsw/attacherep/default.asp).

Please note that these reports are only available to U.S. citizens and
U.S. companies. Registration to these sites is required, but free of
charge.

## Trade Events [**Return to top**](#chapter-9-contacts-market-research-and-trade-events)

Please click on the links below for more information regarding upcoming
trade events.

[www.export.gov/tradeevents/index.asp.html](http://www.export.gov/tradeevents/index.asp)

[www.buyusa.gov/japan/en/event.html](http://www.buyusa.gov/japan/en/event.html)

**\* \* \* \* \* \* \* \* \* \***

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

[[]{#ch10 .anchor}Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

# Chapter 10: Guide to Our Services

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

The U.S. Commercial Service offers customized solutions to help your
business enter and succeed in markets worldwide. Our global network of
trade specialists will work one-on-one with you through every step of
the exporting process, helping you to:

-   Target the best markets with our world-class research

-   Promote your products and services to qualified buyers

-   Meet the best distributors and agents for your products and services

-   Overcome potential challenges or trade barriers

For more information on the services that the U.S. Commercial Service in
Japan offers U.S. businesses, please click on
[www.buyusa.gov/japan/en/partner.html](http://www.buyusa.gov/japan/en/partner.html).

[Return to table of
contents](#doing-business-in-japan-a-country-commercial-guide-for-u.s.-companies)

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]().

To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, t**he Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.

#