Illustration from Redd on Unsplash
Successful global businesses recognize Japan as a key market in the Asia Pacific (APAC) region. Entry or expansion into Japan requires considering a range of factors, including market size, Japanese company investments in technology, and Japan’s business culture.
A Promising Opportunity for US Technology
The Japanese economy is exceptional, and numerous businesses are eager to expand in Japan. According to Japan External Trade Organization (JETRO), Foreign Direct Investment (FDI) to Japan in 2020 (net flow) was almost 7.1 trillion yen, up 61.8 percent compared to the previous year. The most significant amount since 2014, comparable data is available, far exceeding the amount of 4.5 trillion yen in 2016.
FDI Flow to Japan chart in 100 million yen by JETRO
Source: “Balance of Payments” (Ministry of Finance, Bank of Japan)
According to Bloomberg’s most recent FDI survey, Japan’s advantage of business-friendly policies, strong talent, and high productivity—particularly in technology and advanced manufacturing—will drive inbound FDI flows over the next three years. Further, Japanese companies’ sustained underinvestment in IT has resulted in a well-known shortage of IT labor in Japan; digital transformation is still a long way off. As a result, there is an opportunity for global B2B technology companies because Japan’s shift to digital is still ongoing, implying fewer local competitors.
Digital technology expecting to advance further in the future. A recent pandemic has made Japanese companies shift to a mixed or full remote model. Thus, IT and digital technology products, services, and advertising are in high demand. Japan’s media spending on Internet advertising increased 5.9 percent yearly to 2.2 trillion yen in 2020, according to Dentsu’s Advertising Expenditures in Japan.
The currency rate between the US dollar and Japanese yen at a 20-year low of 135 yen per USD, compared to 110 yen last year, should also be factored into the equation. Currently, investing in marketing, media, or advertising is around 20 percent cheaper in 2022, making business expansion favorable in Japan.
A Quick Overview of Japan’s Business Economy
It is no surprise Japan is a desirable market for business expansion. According to the World Bank, Japan’s Purchasing Power Parity (PPP) GDP is $5.33 trillion in 2020. With one of the highest per capita incomes in the world, the Japanese economy is remarkable. Furthermore, the Tokyo Stock Exchange is the world’s fifth-largest stock exchange, the second-largest in Asia, and has evolved into one of the world’s foremost financial centers. The nation is politically stable and one of the world’s safest to visit concerning business. Highly-educated people, economic sophistication, and pro-business policies are helping Japan’s strong economy.
Illustration from Cory Schadt on Unsplash
Japan Business Culture
Japan, an island country known as The Land of the Rising Sun, has created a distinctive culture compared with its neighbors in the APAC region. Japanese people prefer to communicate in their native language daily, including in business contexts. Japanese is a distinct and complex language and uses three independent writing systems, Hiragana, Katakana, and Kanji, each with its own alphabet.
Successful multinationals will achieve the desired business results when expanding to Japan by localizing each touchpoint of their customer experience. Weak localization conveys a lack of seriousness about the Japanese market, and inadequate consideration of the local market is an important business and reputational risk, leading to lost opportunities, mistrust, misunderstandings, and a damaged business reputation.
There are a few considerations before expanding your business in Japan. Cultural differences, language barriers, and business protocols may differ from those experienced by foreign companies. As a result, we believe having a local partner in Japan will significantly help build a comprehensive strategy while saving money and time.
KKBC has a broad background in assisting B2B companies in delivering cost-effective results at the speed of global business in Japan. We believe relying on a Japan-focused marketing agency to assist in selecting a suitable digital advertising strategy and channels are critical to your business expansion success.