Doing business in Japan
Japan has a unique business culture which places an emphasis on values such as punctuality, responsiveness and hospitality, Daisuke explains. “This aspect of the Japanese culture is often misunderstood by foreigners but once they get a good grasp of it, doing business in Japan will greatly contribute to their company’s market share,” he says. “Trust and loyalty are considered as core business virtues in Japan. But this may be considered as a double-edged sword: if one does not earn the trust and loyalty of one’s partners, it would be very difficult to penetrate the Japanese market.”
The country ranks 24th overall on the 2021 International Tax Competitiveness Index. “There are some weaknesses in the tax system,” Daisuke says. “For example, there are poor cost recovery provisions for business investments in machinery and buildings. And it has a hybrid international tax system with a 95% exemption for foreign dividends and no exemption for foreign capital gains, while many OECD countries have moved to a fully territorial system.
“Furthermore, companies are severely limited in the amount of net operating losses they can use to offset future profits.”
Setting up an entity in Japan can also be a drawn-out process: “Organisations are required to communicate with a lot of government offices,” Daisuke says. However, some initiatives are being developed to address this issue. In Tokyo, for example, the One-stop Business Establishment Centre unifies the procedures for foreign companies and start-ups.
Japan meanwhile rates favourably in terms of corruption: the 2019 Corruption Perceptions Index published by Transparency International found it to be the 20th least corrupt nation out of 180 countries.
Masato Ohsugi