Japan may be small in size but it is enormous in terms of world trade. It is home to the world’s third-largest economy after the United States and China and is responsible for 6% of global GDP. Yet there isn’t another advanced industrial nation that has so little foreign direct investment. For too long the nation has kept foreign investors at bay, but recent changes in policy have seen rapid expansion in the amount of foreign investment flowing into the country.
In recent years, the economy has bounced back from years of stagnation to real sustained growth, average corporate profits are rising and the effective corporate tax rates are declining. Foreign direct investment has grown every year since 2010 when it was 18.7%. The government has set a target of 35% by 2020.
Japan’s economy has much to offer the foreign investor, it is ranked 34th of 190 countries on the World Bank’s Ease of Doing Business List. This list does not factor in cultural or language barriers, but even these are softening as Japanese businessmen seek to expand into global markets.
Growth Industries in Japan
Growth industries offer many excellent opportunities for businessmen wanting to invest:
- Technology and Engineering – to survive in an economy with low unemployment and a falling population Japanese companies will have to automate their processes. 11% of the world’s largest brands originate in Japan, but Japanese industry has, over the last few decades, lost the leading edge that they held after building up their production capabilities following World War Two. Companies are now looking to modernise and reclaim their place at the leading edge of technology. Japan is ranked number one in the world for the number of industrial robots in operation. In the area of service robots, demand is expected to grow at a compound annual growth rate of 13.9% until 2035.
- Healthcare and Pharmaceuticals – Japan has a rapidly ageing population and the demand for healthcare and medicines is set to rise quickly over the next few years. The pharmaceutical industry in Japan is already the second largest on earth with a market value of $60 Billion.
- Quality Consumer Products – Unemployment in Japan is a little over 3% and with a large middle-class base of consumers who embrace new technologies, there is plenty of scope for businesses in this sector.
- Music and gaming – The music industry in Japan is second only to the United States. The fast-growing gaming industry also finds many devotees in Japan.
- Clean energy – Japan plans to reduce its reliance on nuclear energy and is committed to slashing greenhouse gas emissions. Renewable energy will take its place.
- E-Commerce – With Internet penetration of over 90%, Japan’s e-commerce market segment is one of the largest on earth.
- Tourism – visa requirements for visitors to Japan were relaxed in 2013. The rate of tourist entries into the country has more than doubled in response. It will almost have quadrupled by 2020.
With the 2020 Olympic and Paralympic Games taking place in Tokyo, and the 2019 Rugby World Cup also in Japan, market growth opportunities will continue to increase.
For too long the nation has kept foreign investors at bay, but recent changes in policy have seen rapid expansion in the amount of foreign investment flowing into the country
Quality of Life
For the businessman looking to invest in foreign markets, Japan is an attractive destination. According to the Economist’s Safe Cities Index, Tokyo is the safest city in the world, and Osaka the third safest. It is easy to get around Japan as public transport is safe, plentiful and relatively inexpensive, and the trains and buses are always on time with average delays of around eighteen seconds. There are more than 800 train stations in Tokyo alone.
Japanese people have a strong work ethic and every child, including the children of foreign residents, receives a free quality education. From kindergarten to High School there are many excellent schools that cater to various language groups. The exemplary healthcare system is inexpensive. Tokyo was ranked number one for quality of life in the Monocle’s 2017 survey.
Help for Foreign Investors
Foreign language assistance and free job support are available in most of Japan’s major cities. In 2015 the “Tokyo One-Stop Business Establishment Centre” was opened. Foreign businessmen wanting to start a business in Japan need look no further than this establishment for all their business needs. The expert consultants that work here are well versed in the requirements of setting up a legal entity and starting your business in Japan. They can help with registration, taxation, pension funds and social insurance amongst other services. They can also assist with interpreters. They will ensure that the business owner is carefully briefed on the employment laws of the country.
The government offers various investment and tax incentives for foreign direct investment and for setting up businesses in Special Investment Zones. Businessmen looking to invest will find information regarding these incentives easy to access.
As a further incentive for foreign investors, the business and commercial environment is becoming more welcoming. Language barriers are being removed through the display of foreign language notifications in all public places. Free public Wi-Fi has been installed and private jets are welcome at local airports. Qualifying foreign nationals can obtain permanent residence in Japan after just one year of working there.
No Better Time than Now
The Japanese business community offers a hand of welcome to the keen investor, the Japanese quality of life is outstanding, and with so much happening in the next few years there could be no better time to invest in the Japanese economy than now.