Business Tips: Doing Business in Japan
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BUSINESS ENVIRONMENT

Japan is one of the world’s economic superpowers and its prosperity is based on its efficient industries (automobile, information and communication technology and consumer electronics).

Japan has accelerated high-level technology development in the environmental, medical care and biotechnology sectors. Japan has also promoted a culture-oriented industry referred to as ‘Cool Japan’.

ECONOMY

GROSS DOMESTIC PRODUCT (GDP)

In 2014, the nominal GDP was 487.6 trillion yen (USD 4.6 trillion), the third largest in the world after United States and China.

RECENT ECONOMIC HISTORY

Japan suffered a long-term economic recession during the 1990s after its assets price bubble in the late 1980s broke. The government adopted policies to promote exports and Japan’s economy experienced a gradual recovery trend from 2003–2007, with steady economic growth.

However, the global financial crisis dried up global demand for Japan’s exports and Japan went into recession in 2008. Government stimulus spending helped to bring the Japanese economy back on track in late 2009 and 2010.

Subsequently, the massive earthquake in March 2011 caused enormous damage in the northeastern coastal region and Japan is facing rebuilding struggles.

In order to achieve an early end to deflation and break free of economic stagnation, in January 2013, the Government of Japan set forth its “three-arrows” strategy (also known as “Abenomics” portmanteau of Mr. Abe, Prime Minister of Japan, and Economics). Based on this, economic circumstances have turned toward recovery, as exemplified by an exchange rate that shifted toward the depreciation of the yen, and significant increases in stock prices. Changes have also been observed in the prolonged situation of deflation. 

MAIN TRADING PARTNERS (2014)

Main export destinations

COUNTRIES % OF TOTAL EXPORTS

  • United States 18.6
  • People’s Republic of China 18.3
  • South Korea 7.5
  • Taiwan 5.8
  • Hong Kong 5.5
  • Thailand 4.6
  • Singapore 3.0
  • Germany 2.8
  • Indonesia 2.1
  • Australia 2.1

SETTING UP A BUSINESS

Foreign investors who intend to set up a business in Japan can choose from a wide range of legal entities.

The most common legal entities in Japan are:

– Representative offices

– Branch offices

– Companies (private and public).

It is possible to choose another entity type depending on the situation.

 

REPRESENTATIVE OFFICE

Before officially starting business in Japan, foreign investors can use representative offices as a temporary basis for preparation of their activities.

Direct business operations are not permitted for representative offices, only indirect business operations such as market surveys, collecting information and advertising. A representative office is not allowed to open bank accounts or lease real estate in its own name. For such activities, a headquarters’ manager or a representative office manager must use his/her name. The establishment of a representative office does not need to be registered with any administrative authorities.

However, representative offices established by foreign banks, insurance companies, security companies, or other financial institutions are exceptions; prior notification must be provided to the Financial Services Agency for such representative offices (as stipulated in the Banking Law, Securities Exchange Law and other laws).

RESIDENCY OF COMPANIES

For the purpose of applying the Corporation Tax Law of Japan, a company which is headquartered or has its main office in Japan is considered a domestic company.

A company is considered a foreign company if it is headquartered or has its main office outside of Japan.

Taxpayers subject to the Corporation Tax Law of Japan are corporations (including those established by special laws) under the company law or other corporation laws or under the civil code. This section focuses only on companies established under the company law of Japan or equivalent laws of foreign countries.

 

Manager’s Office
Financial Dept

 

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