Entry Market: Japan

| Japan has made concerted efforts to open its markets through deregulation and other measures to contribute to the |
|well-balanced development of the global economy and enhance the quality of life of Japanese citizens. It has also sought to increase |
|imports through the adoption of several promotional policies. Nevertheless, there is continued criticism abroad that Japanese official |
|regulations and business practices are obstructing the entry of foreign companies into the Japanese market. On the other hand, there are |
|also assertions being made inside Japan that the Japanese market is open and very competitive. It is important to compare the actual |
|conditions of official regulations, business practices and other factors in Japan to those of major European countries and the United |
|States. It is also important to objectively identify the impact these factors have on market entry. |
|First of all, globalization, the increasing use of information technologies, and other advances in technology are making disputes more |
|varied, complex, and specialized. ADR is the primary means of settling disputes that the conventional legal system cannot adequately |
|handle. A survey on "Direct Inward Foreign Investment" carried out in FY 1999, documented factors that would be obstacles or |
|increase costs for foreign companies planning to begin operations in Japan, from the planning phase to the launch of operations. The Japan|
|External Trade Organization (JETRO) is new survey built on that survey to take as its main subject foreign companies that have begun |
|operations in Japan and focused on problems they encountered after startup and the support services they need to facilitate operating in |
|Japan. |
|Foreign companies that have begun operations in Japan, for example, are making a definite contribution to vitalizing the Japanese economy.|
|JETRO survey carried out in October 2000 found that 80% of foreign companies operating in Japan have added to their workforce since they |
|were founded, and that over half are expecting an increase in sales in FY 2000. A Ministry of Economy, Trade, and Industry survey has |
|revealed, however, that while 73 foreign companies set up operations in Japan in fiscal 1998, 86 pulled out. |
|Hiring personnel and procuring funds are pointed out as problems for foreign companies doing business in Japan. While it is said that the |
|environment for hiring personnel for foreign companies has improved, according to the JETRO survey, as factors in the worsening of the |
|business environment, the most companies stated the difficulty in securing capable personnel. Second was the difficulty in procuring |
|funds. On the other hand, in the Ministry of Economy, Trade, and Industry survey, the high cost of business, difficulty in hiring |
|personnel and difficulty in procuring funds were given as problems faced when conducting business. Thus, this primarily addressed |
|employment and fund procurement as problems directly related to companies’ activities. |
|Also, the standards for investigating creditworthiness in Japan stress the collateral the potential borrower can offer and the borrower’s |
|credit record; and it is said that companies’ management plans and technologies are not always evaluated. Loan agreements by custom favor |
|the banks, and restrictions apply to the size of company that can make use of a committed line of credit. In the US and the UK, collateral|
|and guarantees are not the only factors given weight in assessing creditworthiness; a full credit evaluation includes the potential |
|borrower’s financial status and growth prospects. The Western countries studies also do not have business customs that place banks in a |
|privileged position, as loan contracts with Japanese banks do, or similar restrictions on lines of credit. |
|Foreign companies in Japan mainly raise funds by having the parent company provide funds or borrowing from a bank in Japan. Listing on the|
|stock exchange is also not a popular choice among foreign companies. Their parent companies, typically stressing consolidated financial |
|statements and corporate governance, often will not wish their Japanese subsidiaries to make public offerings of their shares because they|
|wish to retain a controlling interest in their Japanese subsidiaries. Recently, some foreign companies have sought listing on the stock |
|exchanges in Japan. Cases where the Japanese entity was highly independent or when ensuring a stable labor supply. Cases where winning |
|market recognition as a Japanese company, or upgrading the company's credibility has been a greater priority. Therefore, JETRO study has |
|addressed securing bank loans and listing on the stock exchange in focusing on foreign companies’ fund procurement issues. |
|As economies become global and corporate activity expands internationally, both trading partners and transaction formats are changing at |
|an increasingly brisk pace. In this context, the risk of a dispute arising in connection with corporate activities is growing in Japan as |
|in other advanced industrialized economies. The US government, for example, has noted, in a document stating its requests for regulatory |
|reform, "The business community is most likely to commit capital and technology to markets with legal systems that are easily accessible |
|and have sufficient and comprehensive legal services and reliable dispute resolution mechanisms. Japan is thus conducting a |
|broad review of its legal system and legal services, in the course of which many have asserted that it needs fuller and more vigorous use |
|of ADR as a system for resolving civil disputes. . |
|Furthermore, Japan has no system for mutual recognition of physicians' licenses with other countries. Graduates of medical schools in |
|other countries or people who have been licensed to practice medicine in other countries are not permitted to provide medical care in |
|Japan. The advanced Western countries, by contrast, allow foreign physicians who have not acquired local medical licenses to practice if |
|they meet certain conditions. Germany stands out among them in that it allows not only physicians from EU and EEA countries but also |
|physicians from other countries, including developing countries, to practice, for limited periods of time. |
|http://www.jetro.go.jp/ip/e/access/business_activity_support_services.html |