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Why Invest in Japan?
Japan is a leading innovation center and is widely considered to be one of the safest, most affluent countries in the world. Japan is also a world hub for food, fashion and pop culture. All of these combine to make Japan an extremely attractive choice for investment.
In fact, according to a 2010 Ministry of Economy, Trade and Industry survey, 40% of foreign-affiliated companies had plans to expand their business operations in Japan.
Additionally, although foreign entities operating in Japan are expected to pay Japanese corporate taxes, Japan has implemented a number of safeguards to protect against international double taxation.
Cultural Barriers to Doing Business in Japan?
Throughout the decades following Japan’s post-WWII rebuilding, much has been made of the many rigid formalities and idiosyncrasies of the Japanese business world. Most have heard that there is a proper and ceremonial way to exchange business cards or bow to others, but Japan’s business customs go far beyond that and may prove a significant hurtle to business success in the region:
The Japanese are extremely group oriented, and it can take a long time for “outsiders” to gain acceptance from an individual Japanese social group. This extends to Japanese businesses, where it may take years of trust-building to reach an agreement between two entities; often doubly so when one entity is non-Japanese.
Japanese businesses run on stacks and stacks of paperwork. Nearly any decision made by anyone within an entity must be formally submitted for approval via a ringisho approval inquiry. The ringisho will make its way up the company ranks one person at a time and it may take some months until final approval is reached.
In both private and business settings, the Japanese are loath to offer strongly worded opinions, and may refrain from giving an opinion at all if they feel doing so could disturb a harmonious relationship. Japanese business entities may behave in seemingly perplexing ways because of this; inexplicably backing out of a business deal they appeared to show interest in, for example.
Business relationships between companies in Japan can be complex and may feature numerous tiers and networks of many companies working together. Any given business may employ a number of sub-contractors, who may themselves be sub-contracting to other companies. Production committees, called “seisaku inkai” may include up to a dozen different businesses all taking a pre-determined percentage of profits based on investment.
The complexities of doing business in Japan can be a considerable turnoff to entities looking to expand operations into the territory, but those that persevere often find the rewards to be great. If you’re considering expanding your business into Japan, find out how Mannet can help you navigate the Japanese business landscape and achieve success.
Important Considerations When Employing Staff in Japan
In many ways, Japanese labor laws heavily favor the employee. This means foreign employers must be very careful and pay close attention to Japanese labor laws to avoid incurring heavy fines, losing the right to conduct business in Japan, or even being taken to court:
Type of employment – Japan’s “lifetime employment” system means most career professionals become permanent “seishain” employees, but there are many other types of employment (contract, dispatch, etc.), each with their own rules and regulations.
Labor contracts – Each worker’s labor contract must include the following information: term of contract, location of workplace and required duties, start/finish times, expected overtime, breaks, days off and leave, the method to be used in calculating and paying the employee’s wage, payment period, and grounds for dismissal.
Wages – wages must be paid at least once per month on a specified date, to be remitted into an employee’s bank account. Guaranteed minimum wage must be met, and the employee may also be eligible for a number of allowances, such as accommodation and transportation. Summer and winter bonuses are customary and are usually very large sums. Note that the large majority of entities reimburse employees for their train commute and so this is an expected employment benefit.
Working hours – Employees are guaranteed one hour-long break per eight hour working day. Employees are entitled to a minimum of four days off per four-week working period. Employers are obligated to submit notification to the Labor Standards Inspection Office whenever requiring an employee to work overtime hours.
Working conditions – Employers must determine, and clearly notify employees of, the following policies: Retirement allowances, extraordinary wages, meal and other expenses, safety and hygiene, job training, accident compensation, awards and disciplinary measures, etc. All policies must comply with government-instituted labor laws. Also note that new employees must undergo a health checkup, and existing employees are to receive a check-up annually.
Resignation and dismissal – Employees must give two weeks’ notice when choosing to resign. Note that if an employer wishes to dismiss an employee, in addition to giving appropriate notice of termination, several government-stipulated conditions for termination must be met.
Insurance and social security – In Japan, both the employee and employer are obligated to contribute to a worker’s insurance. Employers must provide worker’s compensation insurance, employment insurance, health insurance and employee pension, and the employer will generally split the cost of premiums with the employee.
Mannet offers comprehensive support and consultation for businesses looking to establish themselves in the Japanese market. Our professional staff will help you ensure your company follows Japanese labor laws to reduce risk to your business and keep your employees happy. Find out more in our ＜Setting up in Japan＞ section.