# ![](media/image1.jpeg){width="0.7395833333333334in" height="0.78125in"} 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](#executive-summary-return-to-top)

-   [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**](#ch3)

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**](#ch3)

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 [[]{#ch4 .anchor}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**](#ch3)

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**](#ch3)

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**](#ch3)

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**](#ch3)

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**](#ch3)

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**](#ch3)

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**](#ch3)

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**](#ch3)

##### 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>

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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.