Obstacles To Doing Business In Japan

Any discussion on business obstacles in Japan must be entrenched in the basic understanding of the country’s corporate governance system, the culture, and the language. If you are looking to do business in Japan, here are some of the challenges and obstacles of doing business in Japan.

Language and Culture

Most global organizations face real challenges in reaching their business goals in Japan due to the lack of understanding of the Japanese language and culture. Japan is undoubtedly seen from abroad as a country with safe and clean cities, where dynamic global companies can emerge and thrive.

However, Japan is a country with unique formal and informal communication rules. Establishing a trusting work relationship is very important in their business culture. There is strong expectations on product quality and corporate integrity which, when broken, may hurt beyond recovery trust and business prospects. Additionally, patience is essential when doing business in Japan. The Japanese like to thoroughly analyze their decisions with fellow colleagues in order to make the best choice. 

Although there is the significant improvement in English language capabilities, the average proficiency level among Japanese professionals still lags far behind some other Asian countries such as Singapore, India, and the Philippines. Apart from the difficulties with business communication in English, multinational organizations may also struggle with Japanese regarding official documents and information systems that may require the help of a translator.

Even when language is not an obstacle, cultural differences may also hinder effective business communications. 

Difficulty In Finding Human Resources

In a survey conducted by JETRO in 2016 on “Survey on Japan’s Investment Climate” in which they analyzed the attractiveness, challenges, and obstacles of doing business in Japan, the report showed that majority of the foreign affiliated companies who participated in the survey chose ‘difficulty in finding human resources” as the number one obstacle to doing business in Japan. 

Companies also identified that the difficulty in finding human resources with proficient English speaking skills. It makes it harder for foreign companies to adopt to Japanese labor force practices. This can lead to high human resource costs, labor shortages, etc. They highlighted that though workers prefer big corporations they do not want to work in a foreign company.

Organized Crime

Japan is known to be a society with less crime, terrorists, and violent group attacks. Japanese soil have been historically very rare. Nevertheless, international corporations should be aware of the fact that Japan is home to the largest organized crime group in the world with total members estimated to be about 30,500 members as of 2018 (a new low). They are commonly known as the Yakuza and they are notorious for being involved in nightclubs, pachinko bars, human trafficking, illegal drugs, and more. They are involved in many legitimate businesses (i.e. real estate, construction, financial sectors) that they used as a cover up for their illegal activities. 

Information Security

Managing information security challenges has become a widespread concern among top decision makers all over the world. Going forward in doing business in Japan requires adapting to strengthening regulatory conditions and addressing stakeholders’ increasing expectations pertaining to the prevention of the following three main issues: Cybercrime (hacking), Privacy Protection and Third Party Providers.

Natural Disasters

Japan is highly prone to and has experienced numerous natural disasters such as:

• Earthquakes
• Tsunamis
• Typhoons
• Volcanic eruptions

Natural disasters are a common occurrence in Japan and Japanese people are taught from a young age how to prepare for these natural disasters as much as possible. However, no amount of preparation can avert dire consequences when these occurrences take terrible proportions such as the 1995 earthquake in Kobe, the earthquake and tsunami in Fukushima and the Tohoku region in 2011.

Natural disasters can affect business in ways such as:

• Loss of equipment
• Supply chain disruptions
• Communication barriers
• Building/infrastructure damage
• Loss of personnel/clientele

If they don’t effectively prepare for natural disaster consequences, it can disrupt a business’ future plans