Japan: A reinvigorated powerhouse?

Japan has been enjoying a turn in fortune of late, including its successful bid to host the 2020 Olympic Games. Foreign investors are taking a second look at Japan with fresh enthusiasm. So what’s changed?

First of all, economic growth. The land of the rising sun is again enjoying some lime light after two decades of low growth. Japan suffered two significant blows in recent years. The 2007-08 financial crisis and the 2011 Tohoku earthquake and ensuing tsunami. But resilient Japan is bouncing back and looking to re-emerge as the economic powerhouse it once was.

What’s helping are the economic policies that new Prime Minister Shinzo Abe has put in place. These are designed to help foreign exporters and investors get their foot in the door to what has historically been a hard market to crack. This has injected some much needed optimism in the Japanese economy. Add to this the growth in the domestic market, a weaker yen and the potential opening of long-protected industries such as energy, healthcare and agriculture and Japan is starting to look like a much more attractive place for foreign investors again.

The statistics speak for themselves: the growth across all sectors in Japan were reflected in the Nikkei 225 index which increased by roughly 40% in 2013.

The second attraction is the proximity of Japan to other Asian markets. Many of the surrounding Asian countries are developing at astounding rates and the closeness of Japan is an added attraction as a hub for their expansion plans into Asia.

Japan is already a sophisticated and mature economy which is renowned for efficiency and high standards. Add to this Japan’s high regard as the trend setter of Asia and we have a recipe for success. If companies can produce top selling products which pass Japan’s quality controls, they can be assured that those products will pass quality standards elsewhere. And already European companies like L’Oreal have successfully used Japan as a center for research and development and expanded their business more broadly in Asia.

And last but not least, the people. The Japanese are good workers as I know from having worked in Japan over the last 6 months. They are typically earnest, diligent and highly motivated people who take great pride in their work.

They are highly educated and, though admittedly there was a period of decline in the 90’s-00’s when “Yutori Kyoiku” (which loosely translates to relaxed or child-centered education) was introduced, we are now seeing improvement in the education system. Last year, Japanese 15 year olds for the first time topped the list in reading and science performance in an international academic survey covering 34 developed countries.

Of course one well known trait about the people of Japan is that they love brands. There are many UK brands that have done well in Japan, some better than in their domestic market. And Japanese people have money to spend. Whilst GDP growth in Japan has been low since the early 1990s, it is often overlooked that GDP per capita remains high and has been growing. Japanese consumers are wealthier than counterparts in neighboring Asian countries, and this has led to successes for British luxury goods exporters. Some high profile examples include Paul Smith, Dyson, Cath Kidston, Hunters and Dr. Martens.

So whilst there are challenges to doing business in Japan, there are enduring positive characteristics to business in Japan and with Japanese people which I feel are often overlooked. The current economic and political progress and the position of Japan within a developing Asian marketplace, aligned with the strength of the Japanese workforce, make Japan an increasingly attractive place to do business. So why wait?

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Nick Frendo | Director, Transaction Services
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