Question

In this assignment, i have made survey on japan country in order to open Branch of
Australian based company in Japan. To open new branch in Japan, first of all we
have to analyse economy and have to make various analysis as i have made in this
paper including culture,FDI, people....

Japanese Economy:

Japan is the 2nd largest economy in the world with GDP valued at $4.367 trillion in 2006,
and a population of 127 million. The Japanese economy has highly developed industries
like banking, insurance, real estate, retail, transportation and telecommunications
industries. Its heart of technology in produce motor vehicles, electronics equipment,
machine tools, ships, chemicals.

Japan is the 4th largest exporter in the world behind Germany, the US, and China.
However, Japan needs to import most of its energy and food as it does not have much
agricultural land or oil reserves.

Japans currency is Yen.

http://www.cmsfx.com/en/forex-resources/market-analysis/country-
profile/japan/#economic-profile
Balance Of Payments:

The balance of payments measures the payments that flow between any individual
country and all other countries.

Japan's current account surplus increased to 25.0 trillion yen in 2007, up from 19.8
trillion in 2006, this is the second consecutive year. This was mainly due to the growth of
the surpluses in the trade and income balances.

Trading partners and key imports exports:

The most important trading partners in terms of imports and exports are USA, Taiwan,
Hong Kong, Singapore, China, Australia, Indonesia and South Korea. Among these
countries USA itself imports one quarter of all japans exports.

Key exports include Cars, Electronic devices and Computers and Imports include Raw
materials such as Oils, Food items and wood, Machinery and Equipments, Textiles.

The exports of Japanese for the financial year 2005 amounted to US Dollar $ 595 billions
and Japanese imports amounted to US Dollar $515 Billion for the year 2005.

http://internationaltrade.suite101.com/article.cfm/japan_s_trade_buddies and

http://www.japan-guide.com/e/e644.html

Economic Policy of Japan:

Japan’s foreign policy is administered by the Ministry of Foreign Affairs.

Japan being the largest creditor nation it supplies Overseas Development Assistance
which holds the key in great opportunities for Australian exporters.
Australia and Japan enjoy excellent trade relation in bilateral trade from almost 100 years
and Australia is the only country among few other countries which enjoys a trade surplus
with Japan.

Major Australian exports to Japan:

Coal, Iron Ore, Aluminium, Meat.

Major Australian Imports:

Passenger Motor Vehicle, Transport Vehicles, Civil Engineering equipment.

http://www.austrade.gov.au/default.aspx?ArticleID=4545#Country%20overview

GDP Growth:

Year Billion in Yen

2003 490544
2004 496058
2005 502457

Japan's economy grew at an annual rate of 1.9 percent in the first three months of 2006,
topping economists' expectations. Fourth quarter (October-December) 2006 GDP
estimates The figures showed a 1.3% increase from the previous quarter, an upward
revision from the previous 1.2%. In annualized terms, GDP estimates increased from
4.8% to 5.5%. Japan’s 2007 First Quarter GDP Growth at Annualized 2.4%

http://www.japaneconomynews.com/2007/03/12/cabinet-offices-revised-gdp-figures-
exports-and-the-current-account-surplus/
http://4.bp.blogspot.com/_ngczZkrw340/SKaZVQKeVbI/AAAAAAAAHao/SWrcXI
Ow3-s/s1600-h/japan+GDP+yoy.jpg

Trade Agreements:

In April 2005, Prime Minister Howard and Prime Minister Koizumi agreed to commence
a joint study on various policy options to enhance economic relations between Japan and
Australia, including the feasibility or pros and cons of a free trade agreement.
Japan is Australia’s largest trading partner
Australia is Japan’s twelfth largest export market and seventh largest trading partner
Australia is Japan’s fifth largest source of imports
58% of imported Passenger Vehicles, 37% of imported commercial vehicles,27% of
imported construction equipment are imported from Japan.
Japan is Australia’s third largest foreign investor.

http://www.dfat.gov.au/geo/japan/fta/study_group_report.pdf
Unemployment:

http://japanjapan.blogspot.com/2008/04/japan-employment-and-unemployment-
march.html

Physical Environment:

Japan has four distinct seasons with hot summers, cold and freezing winter. Japan is very
hot and humid, with the first six weeks being the rainy season. Spring months are March,
April, and May. Summer months are June, July, and August. Autumn months are
September, October, and November. Winter months are December, January, and
February. Summer is hot and humid in general. During the winter, it snows a lot on the
Sea of Japan side, and it is dry on the Pacific Ocean side.

Infrastructure:
Japan has a very extensive and modern road network. It consists of 1,152,207 kilometres
of highways, They include 6,114 kilometres (3,799 miles) of expressways. The number
of motor vehicles increased from 70,106,536 in 1995 to 73,688,389 in 1999.

Major development projects to expand the Japanese highway network include a $32-
billion project for the construction of a second Tomei-Meishin Expressway, connecting
Tokyo and Kobe via Nagoya. The length of Japan's railways is 23,670 kilometres more
than half of which is electrified. Japan is famous for its high-speed trains.

As it is surrounded by water, Japan has developed a modern sea transportation system.

Japan has a very large merchant-marine fleet, which is a necessity for its international
trade and for ensuring an uninterrupted arrival of raw material, fuel, foodstuffs, and other
necessary products. The fleet comprises 662 ships with a total capacity of 13,039,488
tons.

Japan benefits from a modern and extensive air transportation system. Airports in Tokyo,
Kagoshima, Osaka, and Kansai provide international services.

Japan's telecommunication system is very advanced. It consists of private and public

service providers, but a public company, Nippon Telephone and Telegraph (NTT), is the
largest provider, controlling about 95 percent of fixed telephone lines. Personal computer
ownership is high: 237 PCs per 1,000 populations.

Japan's electricity is derived from 4 major methods: thermal (using oil, liquefied natural
gas, and coal), nuclear, hydro (water power), and non-conventional (geothermal, solar,
and wind). In anticipation of large increases in consumption in the 21st century, Japan is
planning to increase its output to 1,280 billion kWh by 2020.

http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Japan-
INFRASTRUCTURE-POWER-AND-COMMUNICATIONS.html
Tariffs:

Tariffs are based on the Harmonised System - most duties are ad valorem (per cent)
based on the GATT valuation system approximately cost, insurance and freight (CIF)
value (‘Incoterms 1990’).

Japan has low or zero tariffs on most industrial products.

Japan maintains tariffs and restrictions on some agricultural items, which are relevant to
some Australian exporters.

http://www.austrade.gov.au/default.aspx?ArticleID=4545#Country%20overview

Political Factors
A company planning to extend their business on international basis needs to understand
the political environment of the particular country they are entering in.

Government Structure

Government: Constitutional monarchy with emperor as symbol of state. With

Parliamentary form of government. Elected bicameral legislature called National Diet,
consisting of House of Councilors (upper house) and House of Representatives (lower
house). General elections every four years or upon dissolution of lower house; general
elections every three years for half of upper house. (Map Zones, 2008)
Government intervention

The Japanese government has made efforts to open the Japanese market to foreign
companies and official regulations on foreign investment are minimal. (Japan Business-
FAQ's. 2008)

International relation with other countries

Since the relationship between Japan and Australia has expanded to economic
activities, politics, culture and various other fields. Both countries have benefited from
our strong and complementary economic relationship. People in Australia and Japan have
successfully established a warm friendship and there is active interaction at many levels
between the two countries (Australian studies centre, 2007)
As trusted partners in the Asia Pacific region, Japan and Australia share a common
interest in regional stability and prosperity.
Japan and Australia have held a series of events, the "Japan-Australia Friendship
Anniversaries," to commemorate the significant milestones. In 1996 the two countries
marked the twentieth anniversary of the signing of the Basic Treaty of Friendship and
Co-operation between Japan and Australia, and in 1997 they observed the fortieth
anniversary of the signing of the Agreement on Commerce between Japan and the
Commonwealth of Australia, and the centenary of the opening of the Japanese Consulate-
General in Sydney. In this connection, commemorative activities were taking place in
Japan and Australia, including symposiums, sporting exchange events, and a variety of
cultural events.

Political stability

Risk of Political Instability in Japan is 8.30 in the year 2007 (1: 0 = very high, 10 = very
low)

(Source: The World Competitiveness Yearbook, 2007)

 According the table above, it is clear show that Japan’s instability is lower than
average so it means less political risk.
And there is no sign of an international terrorist presence in Japan, nor any likely
prospect of one emerging. (Sisbo, 2008)

Level of corruption
Japan is perceived to be more corrupted country than Australia. It stands at 17rd
rank in the chart of Corruption Perception Index 2007 with 7.5 CPI score among all other
countries. Against Australia, it ranks 11th with 8.6 score. The measurement is done on a
scale between 10 (highly clean) and 0 (highly corrupt) (Transparency international,
2007).

MapZones 2008, Japan -Government

http://www.mapzones.com/world/asia/japan/governmentindex.php

Japan Business-FAQ's. 2008, Foreign Investment

http://home.swipnet.se/~w-10652/Japan_business_FAQ_1.html

Australian studies centre, 2007, Australia-japan relationship

http://www.petra.ac.id/asc/int_relations/australia_asia/australia_japan/

Japan-Australia Relation, The ministry of foreign affairs of Japan, June 2008

http://www.mofa.go.jp/region/asia-paci/australia/index.html

The World Competitiveness Yearbook, 2007, IMD, Switzerland)

www.imd.ch/wcy.

Sisbo 2008, Business Security Information for JAPAN

http://www.sisbo.org.uk/japancrime.html

Transparency International 2007, Corruption Perception Index

http://www.transparency.org/policy_research/surveys_indices/cpi/2007

LEGAL SYSTEM IN JAPAN AND HOW IT WORKS:

The modern Japanese legal system is an eclectic one based largely on the Anglo-
American tradition. Japan operates under the so-called Six Codes (Roppo). These are:

• The Constitution (the primary document governing legal and political

relationships)

• The civil code

• The code of civil procedure

• The penal code

• The code of criminal procedure

• The commercial code

The whole judicial power is in the Supreme Court, 8 high courts, 50 district courts, 50
family courts and 575 summary courts. The Supreme Court, the highest court, is the final
court of appeal in civil and criminal cases. The constitution's Article 81 designates it "the
court of last resort with power to determine the constitutionality of any law, order,
regulation, or official act." The Supreme Court is also responsible for nominating judges
to lower courts, determining judicial procedures, overseeing the judicial system,
including the activities of public prosecutors, and disciplining judges and other judicial
personnel.

Below the Supreme Court, the Japanese system included eight high courts, fifty district
courts, and fifty family courts in the late 1980s. Four of each of the last two types of
courts was located in Hokkaido, and one of each in the remaining forty-six rural
prefectures, urban prefectures, and the Tokyo Metropolitan District.
http://countrystudies.us/japan/118.htm

http://www.nla.gov.au/asian/lang/japlegal.html

OWNERSHIP OF LAND/BUSINESS:

The real property system in Japan might be difficult for non-nationals to understand. So
the following are a few basic factors about the Japanese real property system which
should be highlighted at the outset:

1. In Japan, land is regarded as a separate asset from buildings. Therefore, the term
"Land Price" is normally used instead of "Property Price", not only for
agricultural land but also for developed land. Also, the term "Land Market" is
often used instead of "Real Property Market", and the "Land Market" refers to the
market which determines the "Land Prices".

2. Freehold is the only type of property ownership in Japan. There is no equivalent

system of leasehold property ownership but there is a property holding system
called "land lease": the ownership of a building only, excluding the land. A land
lease is only granted under a provision that the building is owned by a different
party from the actual landowner.

3. In most other countries, land price is a residual of property price, calculated by the
income approach: net income divided by yield, minus building cost. However, in
Japan, property price, including that for income producing properties, usually
comprises land price plus building price, which are calculated separately. Land
prices are normally determined by market comparisons utilising land price indices
prepared by the Government; such as those within the "Land Price Publication"
by Ministry of Land, Infrastructure and Transport, whilst building prices are
normally determined in the market through the cost approach.
 4. Currently, due to the continued land price declines and the spread of real property
securitisation, property prices are beginning to be determined by reflecting the
income from the subject properties, where real property assets are considered as a
whole, using the income approach.

http://tochi.mlit.go.jp/h14hakusho/setsu_1-0_eng.html

LABOUR LAW:

Working conditions
When hiring workers, companies enter into labor contracts with each worker. At that
time, the employer must notify the employees in writing of the following employment
conditions.

• The term of the agreement (or where there are no provisions pertaining to term,
the fact that there are no provisions pertaining to term).
• The workplace and the duties that the employee will have to perform.
• Matters pertaining to start and finish times, work in excess of regular working
hours, breaks, days off and leaves.
• Methods of determining, calculating and paying wages; the wage calculation
period and payment times.
• Matters pertaining to resignation and dismissal (including all grounds for
dismissal).

If the employer makes any rules pertaining to a predetermined set of matters including
retirement allowances, bonuses, safety or hygiene, these must also be included in the
work rules

* In the case of part-time employees, in addition to the above, the employer must notify
the employees in writing as to whether or not they are eligible for pay increases, benefits
upon termination of employment, and bonuses.

Any part of a labour contract that does not meet the standards laid down by law is invalid.
For example, a contract containing provisions such as "the company may dismiss the
worker at any time for any reason," "the basic wage shall include all overtime pay," and
"social insurance fees shall be borne entirely by the worker" (in the case of a business
establishment covered by social insurance) is invalid insofar as these provisions are
concerned.
It is also illegal to impose a penalty for non-fulfillment of a labor contract. For example,
it is illegal to include a clause such as the following: "If a worker retires within two years
of joining the company, he/she must pay to the company the sum of 500,000 yen."
However, this does not preclude an employer from claiming damages from a worker for
losses actually incurred.

Term of labour contracts

Labour contracts generally do not stipulate a term. Where a term is specified, however, it
must be no longer than three years except in a few special cases. However, a worker may
resign by notifying his/her employer at any time as long as at least one year has elapsed
since the date of the start of the contract term.

Probation period
Employers are allowed to set a limited period of probation prior to fully employing
somebody, so as to see whether or not the probationary employee is able and suitable for
the job. Probation periods generally last for about three months. However, it should be
noted that if the employer decides not to fully employ somebody during or after the
probation period, this refusal to employ is treated in the same manner as dismissal of an
employee; in order for such a refusal to be legally allowed, valid reasons for refusal
(which were not evident at the time of probationary employment) must have come to
light during the period of probation, and it must be objectively reasonable for the
employer to refuse to fully employ that person for the aforementioned valid reasons.

Re-assignment and external assignment

Japanese companies frequently redeploy their workers through internal re-assignment and
external assignment, and such redeployments may often require a worker to relocate.
Generally, employers have considerable discretion when it comes to changing a worker's
duties or temporarily assigning him or her to another company if this is reasonably
necessary to business.

Governing law

In the case of international contracts, the governing law may be determined by agreement
between the parties (see Article 7 of the Law on the General Rules on Application of
Laws), and labor contracts are no exception. However, legislation that is clearly intended
to protect workers as a matter of policy, such as the Labor Standards Law, will be
compulsorily enforced in the forum state regardless of any such agreement. If a labor
contract does not stipulate the governing law, it is assumed to be the law of the region in
which labor services are provided.

http://www.jetro.go.jp/en/invest/setting_up/laws/section4/page3.html

PROCESS FOR SETTING UP A COMPANY:

Registration of establishment of a branch office: A branch office may begin business

operations after registering its establishment with the Legal Affairs Bureau; branch
offices of foreign companies must register in accordance with the registration
requirements for Japanese corporations of most similar form to that of the foreign
company. In order to select the most similar form of Japanese corporations and to
determine the information to be registered, reference should be made to the foreign
company's articles of incorporation, establishment certificate, registration certificate, and
other such documentation. Once the details of the branch office to be registered—the
address of the branch office, the representative in Japan, the date of establishment of the
branch office and the disclosure method for balance sheets—is determined, the
information that must be registered can be ascertained.
Document(s) certifying the information to be registered must be submitted when applying
for registration of the establishment of a branch office, and the certified document(s)
must be issued by the competent authorities in the home country of the foreign company.
It is often convenient to use an "affidavit" on information for registration certified by that
country's embassy/consulate in Japan.
General flow of procedures for establishing a branch office
1. Determination of branch office information to be registered

2. Examination at the Legal Affairs Bureau of similar corporate names

3. Establishment of branch office (date of branch office establishment is at the branch

office's discretion)

4. Preparation of affidavit on establishment of branch office

5. Certification of affidavit by embassy/consulate in Japan

6. Application to the Legal Affairs Bureau for registration of branch office establishment;
registration of company seal with the Legal Affairs Bureau

7. Acquisition of certificate on registered information and company seal registration

certificate (approx. two weeks after application for registration)

8. Opening of bank account under branch office name

9. Notification of branch office establishment to the Bank of Japan

(notification prior to branch office establishment may be required in certain sectors)

(Note) Time required: about one month after determination of branch office information
to be registered

1.3.2 Registration of establishment of a subsidiary company

Subsidiary companies are established through registration with the Legal Affairs Bureau.
The application date for registration will also be the date of establishment, and the
company may carry out business operations from that date. Some of the documents
needed for the subsidiary establishment procedures should be prepared in the home
country of the foreign company: document(s) certifying the profile of the foreign
company, document(s) certifying the representative authority of the foreign company's
representative and document(s) certifying the authenticity of the signature of the foreign
company's representative.
The foreign company's articles of incorporation, establishment certificate, registration
certificate and other official documents as well as an affidavit notarized by a notary
public in the home country of the foreign company are ordinarily used. These documents
will be required in completing the procedures for certifying the subsidiary company's
articles of incorporation in Japan. These documents may also be needed when requesting
a financial institution in Japan to take custody of the subsidiary's capital and issue a
capital custody certificate. The capital custody certificate is a certificate issued by a
financial institution when the full amount of the subsidiary's capital has been remitted to
a special account specified by the financial institution asked to take custody. The certified
articles of incorporation and the capital custody certificate will both be needed when
applying for registration of company establishment.

General flow of procedures for establishing a Kabushiki-Kaisha (joint-stock Corporation)

1. Determination of profile of joint-stock corporation to be established 1)

2. Examination at the Legal Affairs Bureau of similar corporate names

3. Preparation of joint-stock corporation's articles of incorporation

4. Acquisition of registration certificates, etc. for parent company, and preparation of

affidavits regarding profile of parent company and affidavits regarding signatures of
representatives of parent company (affidavits must be attested by a public notary in
equity participants' own countries) 2)

5. Notarization of joint-stock corporation's articles of incorporation by Japanese notary

public
6. Application to bank for capital custody and issue of capital custody certificate 3)

7. Remittance of joint-stock corporation capital to special bank account

8. Appointment of directors and other officers, such as representative directors and

auditors

9. Examination by directors and auditors of legality of establishment procedures

10. Application to the Legal Affairs Bureau for registration of joint-stock corporation
establishment (joint-stock corporation establishment date); registration of company seal
with the Legal Affairs Bureau

11. Acquisition of certificate on registered information and company seal registration

certificate (approx. two weeks after application for registration)

12. Opening of bank account under company name

13. Notification of stock acquisition to the Bank of Japan

(notification prior to company establishment may be required in certain sectors)

(Note) Time required: about two months after determination of profile of company to be
established
1) This profile should contain information including the following: trade name, location
of head office, business objectives, business year, amount of capital, issue price of shares,
existence of provisions restricting transfer of shares, existence of board of directors,
names of directors and representative directors, terms of directors, names of equity
participants, and values of their investments.
2) If an individual or corporation with an address in Japan is the promoter of a joint-stock
corporation and a foreign enterprise is the underwriter of shares in that corporation when
it is established (such a situation is called a "formation with outside offering," or Boshû
Setsuritsu), affidavits regarding the parent companies may not be required.
While in this case shares issued when the joint-stock corporation is established are shared
by the promoter and foreign enterprise, the joint-stock corporation may be made a 100%
subsidiary of the foreign enterprise by subsequently transferring the shares held by the
promoter.
3) If a joint-stock corporation is incorporated with the joint equity participation of an
individual or corporation with a bank account in Japan, it may not be necessary to apply
to a bank for capital custody and issuance of a capital custody certificate. In this case, it is
sufficient for the capital to be paid into the joint equity participant’s bank account in
Japan, and for documentary evidence to be submitted by the representative director of the
joint-stock corporation in place of a bank-issued capital custody certificate in order to
certify that payment of the full amount of capital has been received.

General flow of procedures for establishing a Godo-Kaisha (LLC)

1. Determination of profile of Godo Kaisha to be established 1)

2. Examination at the Legal Affairs Bureau of similar corporate names

3. Acquisition of certification regarding equity participants (in equity participants' own

countries):
Acquisition of registration certificates, etc. for companies that will become equity
participants, and preparation of affidavits regarding profiles of companies that will
become equity participants and affidavits regarding signatures of representatives of
companies that will become equity participants (affidavits must be attested by a public
notary in equity participants' own countries)

4. Acquisition of certification regarding equity participants (in Japan):

Acquisition of registration certificates for companies that will become equity participants
Acquisition of seal certificates for individuals/companies that will become equity
participants

5. Preparation of Godo Kaisha's articles of incorporation

6. Payment by members of investment stipulated in articles of incorporation

7. Application to the Legal Affairs Bureau for registration of establishment of Godo
Kaisha (Godo Kaisha establishment date), registration of company seal with the Legal
Affairs Bureau

8. Acquisition of certificate of registered information and company seal registration

certificate (approx. two weeks after application for registration)

9. Opening of bank account under company name

10. Notification of stock acquisition to the Bank of Japan (notification prior to company
establishment may be required in certain sectors)

(Note) Time required: about one month after determination of profile of company to be
established
1) This profile should contain information including the following: trade name, location
of head office, business objectives, business year, amount of capital, names of members
(equity participants) and values of their subscriptions, names of representative members,
and names of executive officers (representative members in the case of a corporation).

1.3.3 Registration of establishment of limited liability partnership

A limited liability partnership is formed when two or more individuals or corporations
conclude a limited liability partnership agreement, pay the investment specified in the
agreement, and register the entity thus established. As the law does not describe in detail
how LLPs should operate, unlike in the case of joint-stock corporations, details are laid
down in LLP agreements. Accordingly, finalizing the content of the LLP agreement is the
most important stage in the process of establishment of an LLP. Furthermore, as a
partnership must be established in partnership with an individual resident in Japan or a
Japanese corporation, several documents need to be prepared in both Japan and the
country of the foreign party.

General flow of procedures for establishing a limited liability partnership

1. Determination of profile of LLP 1)
2. Examination at the Legal Affairs Bureau of similar corporate names

3. Acquisition of certification regarding partners (in partners' own countries):

Acquisition of registration certificates, etc. of companies that will become partners, and
preparation of affidavits regarding profiles of companies that will become partners and
affidavits regarding signatures of representatives of companies that will become partners
(affidavits must be attested by a public notary in partners' own countries)

4. Acquisition of certification regarding partners (in Japan):

Acquisition of registration certificates of companies that will become partners
Acquisition of seal certificates of individuals/companies that will become partners

5. Conclusion of limited liability partnership agreement

6. Payment by partners of investments specified in agreement

7. Application to the Legal Affairs Bureau for registration of LLP, registration of

partnership seal with the Legal Affairs Bureau

8. Acquisition of certificate of registered information and partnership seal registration

certificate (about two weeks after application for registration)

9. Opening of bank account under partnership name

(Note) Time required: about one month after determination of profile of partnership to be
established
1) This profile should contain information including the following: name of partnership,
location of business establishment, business objectives, business year, names of members
and their investments, date of entry into effect of the LLP agreement, and period of
existence.

http://www.jetro.go.jp/en/invest/setting_up/laws/section1/page3.html
Product Liability:

Product Liability shall be defined as liability for damages in such case as follows:
In the case where due to a defect in the delivered product, a life, a body or property of
another person (including a third party not using or consuming the product directly, and a
legal person as well as a natural person) is injured, the person who manufactured,
processed, imported or put his name, etc. on the product as business is liable for damages
of the injured person.

Previously in Japan, claims for damages have usually been made based on the Civil Code
Article No.709 in case the injury is caused by a defect in the product. The Civil Code
Article No.709 employs the "fault-based liability (negligence) principle", and requires the
"intention or fault" of the manufacturer, etc. as a condition for liability.

The Product Liability Law takes the "defect in the product" as a condition for liability
instead of the "intention or fault" of the manufacturer, etc. Therefore, after introduction of
the Product Liability Law, the injured has only to verify the "defect in the product" for
claiming damages

http://www.tabunka.org/special/product.html

FDI In Japan :

FDI brings in new products and services and introduces new technologies and
management know-how. It also creates employment opportunities and is a stable source
of financing from overseas. For Japan, which is facing a declining birth-rate and ageing
population, FDI is taking on increasing importance.

Japan, as the world’s second-largest economy and the United States’ fourth-largest
trading partner, is an important potential destination for U.S. foreign direct investment
(FDI).
Over much of the post-war period, and through the 1970s and 1980s in particular, inward
investment was not a priority for Japan. Japan’s export-led economy had high growth
rates and this suggested that large inflows of capital were not required. However, the
prolonged and severe economic crisis that began in the early 1990s has led to Japan
reconsidering the potential benefits of inward FDI, and there is an extensive literature
highlighting the plight of the Japanese economy.
(By: Kimino, Satomi; Saal, David S.; Driffield, Nigel. World Economy, Mar2007, Vol.
30 Issue 3, p446-469, 24p, 5 charts, 1 graph; DOI: 10.1111/j.1467-9701.2007.01001.x;
(AN 25317368))
(http://search.ebscohost.com.ezproxy-m.deakin.edu.au/login.aspx?
direct=true&db=buh&AN=25317368&site=ehost-live)
Japan's FDI stock balance

Source: Bank of Japan, Balance of Payments

TABLE 1a
Annual New FDI into Japan
(Billions of Dollars,
Balance-of-Payments Basis)
1997 3.20
 1998 3.27
1999 12.31
2000 8.23
2001 6.19
JFY 2002 9.09
2003 6.24
2004 7.81
2005 3.22
Source: http://www.jetro.go.jp/en/stats/statistics/bpfdi_01_e.xls

On a yen basis, FDI stock in Japan raised from 3.0 trillion yen at the end of 1998 to 11.9
trillion yen at the end of 2005. According to OECD figures, Japan’s inward FDI fell
sharply in 2005 to $2.8 billion after several years of solid growth. In addition, there were
several large disinvestments by foreign companies facing difficulties in home markets,
most notably, General Motors’ sale of 17 percent of Suzuki Motor Corporation for $2
billion in April 2006 and Vodafone’s $15.5 billion sale of its Japanese cellular telephone
business to the Japanese firm Softbank in March 2006.

Meanwhile, Japan continues to run a significant imbalance between inward and outward
FDI (see Table 1b). Japan’s outward flow of foreign direct investment rose almost 47
percent in CY 2005 to $45.8 billion, up from $28.8 billion in CY 2003.

JAPAN’S FDI AND ITS RATIO WITH GDP :

Despite the increase in FDI since the mid-1990s, Japan continues to have the smallest
amount of inward foreign investment as a proportion of GDP of any major OECD nation.
According to the 2006 World Investment Report issued by the United Nations
Conference on Trade and Development (UNCTAD), the current ratio of FDI to GDP in
Japan is 2.2 percent, compared to 13.0 percent in the United States, 37.1 percent in the
United Kingdom, 18.0 percent in Germany, and 28.5 percent in France. UNCTAD’s
report ranks Japan as 131 among 141 countries in terms of the ratio of FDI to GDP,
although Japan’s Inward FDI Potential Index is ranked 22 in terms of the amount of FDI
money received. Foreign participation in mergers and acquisitions also lags in Japan.
According to Recof, a Tokyo-based M&A consultancy, the total number of M&A
transactions in Japan 2006 was 2,764, up 1 percent from the previous year, but only 148
of those deals involved foreign buyers.

 GOVERNMENT ATTITUDE TO INTERNATIONAL INVESTMENT

The Government of Japan (GOJ) imposes few formal restrictions on inward FDI, and has
removed or liberalized most legal restrictions that previously applied to specific business
sectors. In addition, since 2001, the government has made increasing Japan’s stock of
FDI an economic policy priority recognizing its potential for enhancing Japan’s
competitiveness and contributing to sustainable economic growth.
1) Then-Prime Minister Junichiro Koizumi in February 2001 announced a national
goal of doubling Japan’s stock of FDI, as a percentage of GDP, within five years.
2) In June 2006, the government set a further goal of increasing the nation’s stock of
FDI to 5 percent of GDP by 2010.

3) The GOJ does not impose export balancing requirements or other trade-related FDI
measures on firms seeking to invest in Japan. Risks associated with investment in many
other countries, such as expropriation and nationalization, are also not of concern in
Japan.

GOVERNMENT TOOK INITIATIVE:

In recent years, the GOJ has taken welcome steps to address investment-related problems.
1) Reforms in the financial, communications and distribution industries have encouraged
foreign investment into these sectors.
2) Reform of Japan’s corporate code, bankruptcy laws and accounting principles are
also helping to attract foreign investment into Japan.
3) The Japan External Trade Organization (JETRO), a quasi-governmental entity, and
the Ministry of Economy, Trade and Industry (METI) have the lead in implementing
programs to attract greater foreign investment to Japan.
4) At the regional level, a number of prefectural and city governments are intensifying
efforts to attract foreign investors.
5) By providing foreign investors with abundant information on all aspects of doing
business in Japan—and also offering expert consultation and even free temporary
office space throughout the country.
6) With more than 70 overseas offices in over 50 countries, JETRO provides companies
 around the world with a direct link to business in Japan. And JETRO offices located
throughout Japan make it easy for foreign firms to get timely and accurate
information about specific regions, markets and prefectural incentive programs.
7) JETRO operates one-stop business support centers in major business areas across the
country. These centers, called Invest Japan Business Support Centers (IBSCs), offer
foreign businesses everything they need to begin investing in Japan, and all under one
roof.

8) Helping foreign firms make use of regional resources to expand their business or
make initial entry.

9) Maintaining sustainable and aggressive public relations in Japan and overseas Ex.
Holding large-scale seminars overseas and Japan Investment Councils in Japan's regions.

10) Provide an access to industry experts, legal scriveners, accountants, ICT specialists
and certified social insurance consultants.

11) The centers also provide free temporary office space (for up to 50 business days) and
access to meeting and conference rooms.

13)FAZ - (FOREIGN ACCESS ZONES)

The Japanese Government has set up 22 zones, mainly in areas around ports or airports,
areas that are defined as FAZ (foreign access zones) with the aim of promoting import
businesses in order to attract foreign capital into Japan. Japanese and foreign companies
in these areas are eligible for tax and financing benefits, while foreign companies are
eligible, in addition, for advisory services and rented premises.
The companies are eligible for benefits that include, among others, the following:
• Loans at reduced interest.
• Exemption from local taxes - real estate purchase tax and property taxes.
• Increased rates of depreciation.
• Guarantees from Government

14) Providing Tax incentives, credit guarantees to incoming foreign firms. Moreover, the
government is now actively seeking to promote and stimulate FDI into Japan, by giving
incoming foreign firms tax incentives, providing credit guarantees and facilitating more
takeover activities by allowing equity swaps or share exchanges.

In June 2006, the Japanese government announced plans to accelerate efforts to achieve
its goal of doubling the country's total FDI stock to the level of 5% of GDP by 2010.
  RULES AND REGULATIONS FOR FDI :

Japan has gradually eliminated most of the formal restrictions governing its FDI
regime.
1) In 1991, the GOJ amended the Foreign Exchange and Foreign Trade Control
Law (which also controls foreign investment) to replace the long-standing "prior
notification" requirement for all FDI with an "ex post facto notification"
requirement for investment in non-restricted industries.
2) "Prior notification" (and thus case-by-case approval) is now required only for
investment in certain restricted sectors, including agriculture, forestry, petroleum,
electrical/gas/water utilities, aerospace, telecommunications, and leather
manufacturing.
3) Administrative approval for foreign investment in some of these sectors is
quite certain, while in other sectors it is likely to be subject to greater scrutiny
based on "national sovereignty" or national security concerns.
4) The only legal restriction on foreign ownership in Japan's telecommunications
sector applies to Nippon Telegraph and Telephone (NTT): foreign investment in
NTT is limited by law to one third.

 REGULATIONS FOR ESTABLISHMENT OF FOREIGN

COMPNIES :

Company Law:
1) The most significant FDI-related legislative change in recent years has been the
revision of Japan’s Company Law. This new law, approved June 29, 2005, entered
into force on May 1, 2006.
2) The most significant provision in regard to FDI is the easing of rules on the use of
foreign stock as consideration in cross-border mergers. Previously, consideration
given to shareholders of merged companies was generally limited to cash or stock of
the surviving company. This restriction served as a disincentive to otherwise
advantageous mergers.
3) Under the new Company Law, the surviving company can provide cash or shares
of its foreign parent company instead of, or in addition to, its own stock in a
procedure known as a triangular merger. However, under pressure from business
interests, the GOJ delayed implementation of the law’s triangular merger provision
until May 2007 in order to allow firms time to determine whether to adopt defensive
measures against hostile takeovers.

New Financial Instruments and Exchange Law :

1) Passed by the Diet in June 2006. The bulk of its provisions will come into
effect in 2007.
2) By amending or abolishing 93 previous laws regulating banking, securities,
investment and real estate trusts, the law establishes a broad new framework for
the regulation of financial instruments and services.
3) The government's stated purpose in amending the law is to establish a flexible
regulatory system with a uniform set of rules for similar financial instruments
while enhancing protections for investors and promoting financial innovation.
4) The law, inter alia, establishes rules for tender offers (TOBs) that clarify the
shareholding limits which trigger a mandatory TOB, extend the minimum time
period for TOBs, and require greater disclosure of the size and price of share
purchases by large-scale investors in order to protect the interests of smaller
shareholders.
TABLE 3
Japan’s FDI Inward Stock by Country/Region
(Millions of dollars; International Investment Position)
End of End of End of
2001 2002 End of 2003 2004 End of 2005
North America 20,050 28,289 40,222 45,919 47,262
U.S.A 18,465 35,743 36,612 40,872 43,459
Canada 1,586 2,647 3,610 5,049 3,803
Asia 3,368 3,705 4,904 5,889 6,636
China 73 80 90 90 101
Hong Kong 1,414 1,460 1,793 2,136 2,586
Taiwan 1,399 1,379 1,591 1,605 1,378
Korea 190 210 244 537 310
Singapore 303 480 1,039 1,380 2,138
Thailand -91 17 49 48 42
Europe 24,709 33,350 39,273 41,779 97,728
Germany 3,896 4,142 4,978 3,915 5,847
United 2,422 2,695 1,692 2,310 3,004
Kingdom
France 7,021 10,348 12,321 13,693 10,672
Netherlands 7,331 9,868 13,541 14,210 11,540
Switzerland 1,958 2,778 2,646 3,172 2,241
Latin America 1,733 2,408 4,764 3,004 8,138
Mexico 1 3 5 5 4
Brazil 11 12 14 33 30
Cayman Isles 1,625 1,749 4,186 2,666 5,544
TOTAL 50,446 78,490 89,838 97,305 100,331
Note: Negative figures indicate net outflow.
Source: http://www.jetro.go.jp/en/stats/statistics/iipfdi_02_e.xls
TABLE 4
Foreign Direct Investment in Japan, by industry
(Millions of dollars; net and flow;
reporting basis for JFY2001— 04, balance-and-payment basis for CY 2005)
JFY2001 JFY2002 JFY2003 JFY2004 CY2005
Manufacturing 2,621 6,749 4,310 952 -2,191
Machinery 1,107 2,220 2,489 402 —
General machinery — — — — 164
Electric machinery — — — — -1,195
Transportation equipment — — — — 32
Precision machinery — — — — -59
Chemicals 924 3,416 970 199 —
Chemicals and
— — — — -1,168
pharmaceuticals
Metals 1 136 25 7 —
Iron, non-ferrous & metals — — — — -34
Rubber & leather — — — — 1
Petroleum 70 508 114 166 -44
Textiles 23 33 10 83 188
Foods 281 68 448 32 -211
Glass & ceramics 75 3 7 — 103
Others 84 365 248 63 —
Non-Manufacturing 14,784 11,186 14,412 36,507 5,414
Farming & forestry — — — — -1
Fishery & marine products — — — — 0
Mining — — — — 0
Finance & insurance 5,281 5,306 9,005 27,693 645
Trading 871 2,118 3,265 999 —
Wholesale & retail — — — — 1,157
Services 1,330 2,025 955 1,263 178
Real estate 588 239 609 213 15
Telecommunication 6,622 1,412 535 4,338 —
Communication — — — — 912
Transportation 18 22 15 1,947 2,108
Construction 69 19 10 31 41
Others 6 45 18 24 —
TOTAL 17,340 17,935 18,722 36,507 3,223
Note: Negative figures indicate net outflow.
Sources: http://www.jetro.go.jp/en/stats/statistics/rnfdi_04_e.xls
http://www.jetro.go.jp/en/stats/statistics/bpfdi_06_e.xls
TABLE 6
Japanese Direct Investment Overseas, by Industry
(Millions of dollars; net and flow;
reporting basis for JFY2001—04, balance-and-payment basis for CY 2005)
JFY2001 JFY2002 JFY2003 JFY200 CY2005
4
Manufacturing 14,218 14,689 16,246 13,750 26,146
Electrical 3,865 3920 5,005 2,039 —
Chemicals 1,511 1,916 4,749 3,530 —
Chemicals and
— — — — 3,363
Pharmaceuticals
Transport 4,342 4,916 3,013 3,601 —
Food 824 222 428 1,088 1,685
Metals 658 633 1,078 1,391 —
Iron, Non-Ferrous &
— — — — 1,331
Metals
Machinery 1,219 1,288 956 1,108 —
General Machinery — — — — 1,296
Electric Machinery — — — — 4,377
Transportation Equip. — — — — 8,611
Precision Machinery — — — — 1,419
Rubber and Leather — — — — 831
Lumber & Pulp 7232 240 28 119 826
Textiles 216 199 178 172 416
Petroleum — — — — 531
Glass & Ceramics — — — — 258
Other 850 1,354 810 702 —
Non-Manufacturing 17,796 21,860 19,599 21,010 19,315
Finance/Insurance 10,753 12,801 7,639 11,613 9,227
Trade 2,700 3,694 4,315 1,884 1,086
Wholesale & Retail — — — — 4,623
Real Estate 692 1,449 1,494 370 -851
Services 1,612 1,836 1,940 2,360 —
Transportation 1,387 1,503 1,876 1,286 824
Mining 495 367 1,915 2,054 1,372
Construction 65 121 258 280 148
Farming / Forestry 36 7 158 38 23
Fisheries 27 56 4 24 -44
Communications — — — — 1,712
Other 26 27 — — —
TOTAL 32,297 36,858 36,092 34,548 45,461
Note: Negative figures indicate net outflow.
Sources: http://www.jetro.go.jp/en/stats/statistics/rnfdi_02_e.xls
http://www.jetro.go.jp/en/stats/statistics/bpfdi_05_e.xls

TABLE 7
Foreign Direct Investment in Japan Relative to GDP
(Balance-of-payments basis for CY2000 onward;
in Trillions of Yen, Except Where Noted)
CY2000 CY2001 CY2002 CY2003 CY2004 CY2005
Nominal GDP (a) 501.1 469.8 489.6 490.5 496.19 502.9
FDI Inflow (b) 0.90 0.76 1.16 0.73 0.85 0.31
b / a (%) 0.18 0.16 0.24 0.15 0.17 0.06
Source: http://www.mof.go.jp/bpoffice/bpdata/fdi/fdi2bop.htm

TABLE 8
Examples of Major Foreign Direct Investments into Japan
by U.S. and Other Foreign Companies
Company Country
Promega K.K. Japan US
DuPont K.K. US
Nihon L'Oréal K.K. France
Biotechnology Stem Cell Sciences KK Australia
/ Chemicals Johnson & Johnson US
Dendrite International US
Genzyme Japan K.K. US
Novon Japan, Inc. US
ICT / Software China TechFaith Wireless Communication
China
Technology Ltd.
Ellacoya Networks US
GeoVector US
Impact Investing Pty Ltd Australia
InterAct Technologies Japan Co., Ltd. China
Proofpoint US
UFIDA Software Engineering Japan Co., Ltd. China
Genesys Conferencing KK France
SIGMA-C KK Germany
Pixology Japan Ltd. UK
Cisco Systems, K.K. US
Founder International, Inc. China
Ulead Systems Taiwan
IBM Japan, Ltd. UK
ARM K.K. UK
Celoxica Japan K.K. UK
 Viewlocity Japan Co., Ltd. US
Descartes Systems Group Canada
Raxco Software US
Roxio Japan, Inc. US
Interwise Japan K.K. US
SSH Communications Security K.K. Finland
Nihon Synopsys Co., Ltd. US
Aspect Communications Japan Ltd. US
Overture K.K. US
Juniper Networks, KK. US
Clearswift K.K. UK
Sterling Commerce K.K. US
Computer Associates Japan, Ltd. US
Extreme Networks K.K. US
Global Knowledge Network Japan, Ltd. US
IFS Japan, Inc. Sweden
iNAGO KK Canada
Everypath, Inc. US
APC Japan, Inc. US
AdventNet, Inc. US
Polaris Software Lab Limited India
Graphisoft Japan Co., Ltd. Hungary
Atotech Japan France
Tera Systems US
VeriSign US
Speech Works US
Red Hat US
Manufacturing ANCA Pty Ltd Australia
Balco Australia Pty. Ltd. Australia
Pelican Products US
Bosch Germany
Lactalis Japon France
Demarle Japon Co., Ltd. France
TMD Friction Japan KK Germany
dSPACE Japan K.K. Germany
ROHDE & SCHWARZ Japan K.K. Germany
Campagnolo Japan Ltd. Italy
A. Proctor Group Ltd., Japan UK
Rotex Japan Ltd. UK
SAINT-GOBAIN Group in Japan France
Magna International, Inc. Canada
MeadWestvaco K.K. US
Bolthouse Farms Japan Y.K. US
Concurrent Nippon Corp. US
Voith Paper Automation Japan Ltd. Germany
Color Kinetics and Color Kinetics Japan US
Carpigiani Japan Co., Ltd. Italy
Galbani Japan Company, Ltd. Italy
 G.D. Jidokikai K.K. Italy
Nippon RFI Shielding KK UK
Lutron Electronics Company US
Federal-Mogul K.K. US
Inergy Automotive Systems France
Velux Japan Ltd. Denmark
Applied Materials Japan, Inc. US
Continental Teves Corporation Germany
Geislinger K.K. Austria
Grohe Japan Ltd. Germany
Air Products Japan, Inc. US
Snap-on Tools US
Testo K.K. Germany
Trespa Japan Limited Netherlands
Bodum Japan Co., Ltd. Denmark
Kennametal Hertel Japan US
Dyson Japan UK
Vaisala KK Finland
A Color Kinetics Installation US
Pfizer Japan Inc. US
Alcon Japan Ltd. Switzerland
Fresenius Medical Care Japan K.K. Germany
Nippon Hexal Corporation Germany
Widex Co., Ltd. Denmark
PAREXEL International US
Medical Care KARL STORZ Endoscopy Japan K.K. Germany
Draeger Medical Japan Germany
ELA Medical Inc. France
Nobel Biocare Japan Sweden
Haemonetics Corporation US
Peter Brehm Japan Germany
Becton Dickinson US
ProLogis US
Real Estate
Oakwood Corporate Housing US
Edelman US
Elanex US
HRnet One K.K. Singapore
Services/Consulting F.H. Bertling Logistics Japan KK Germany
CNC Japan K.K. Germany
Datamonitor Japan UK
Christie's Japan UK
Services/Education Wall Street Institute, Japan, KK China
Services/Leisure Nihon Harmony Resorts KK Australia
Services/Media KBS Japan KK Korea
Wholesale/Retail Rucoline Japan Co., Ltd. Italy
Nihon Hallmark US
Puratos Japan Belgium
Chocolates El Rey Japan Co.,Ltd. Italy
 Loro Piana Japan Co.,Ltd Italy
Freixenet Japan Inc. Spain
Chelsea Japan Co., Ltd. US
Miele Japan Corporation Germany
Pieroth Japan K.K. Germany
ZARA JAPAN CORPORATION Spain
Warner Mycal US
Lands' End US
Catalina Marketing US
Costco US
L.L.Bean US
Coach US
Tully's US
Shopper Trak RCT Co. US
Oyo RMS Corp. US
Resource Connection Japan K.K. US
Telekurs(Japan) Ltd. Switzerland
Sports Marketing Surveys Japan, Inc. UK
Altair Engineering, Inc. US
Business Consulting Harris Interactive US
Market Research ERM Japan Ltd. UK
Dorsey & Whitney LLP US
Pacifica Corporation US
WL Ross & Co. US
Sinomonitor China
Bowne & Company US
Basis Technology US
Mondial Assistance France
Insurance
AXA Non-Life Insurance Co., Ltd. France
Source: http://www.jetro.go.jp/en/invest/success_stories/

Restrictive market practices such as a closed distribution system, cartel-like behaviour

and entrenched arrangements that make it difficult for new entrants to compete in
terms of product, service and price, are frequently cited structural impediments that
are peculiar to Japan.

Nevertheless, foreign investors who want to establish or enhance their presence in

Japan face a number of unique challenges, many which are matters of private business
practice rather than of government regulation. The most notable of these include:

• A high overall cost structure that makes market entry, exit, and expansion
expensive;
 • Cultural and linguistic challenges to doing business;
• Corporate practices and market rules that inhibit foreign acquisition of
Japanese firms, such as insufficient financial disclosure practices, cross-
holding of shares among companies belonging to the same business grouping,
and a low proportion of publicly traded common stock relative to total capital
in many companies;
• Exclusive buyer-supplier networks and alliances maintained by some business
groups that limit competition from foreign firms and domestic newcomers;
• Labor practices which inhibit labor mobility, repress productivity, and
negatively impact development of skills;
• Public wariness about “hostile” foreign takeovers.
All of these issues continue to be addressed in government-to-government talks and progress has
been made in some areas.

Finance
Banking System:
The Bank of Japan is the central bank of Japan. It is a juridical person established
based on the Bank of Japan Act (hereafter the Act), and is not a government agency or
a private corporation. ( Bank of Japan, 2008)

Currency and foreign exchange

The yen is the currency of Japan. An exchange rate to us dollar changes frequently
in last one year. According to the image below , it is show that exchange rate is about
110 Yen =1 US dollar.

U.S. Dollar to Japanese Yen Exchange Rate

(Source: Yahoo finance, 2008)
And the image below is showing the forecast about exchange rate changes in next

(Source: Financial Forecast Center, 2008)

Repatriation of profit
 A liberal system that allows full earnings repatriation still exists in Japan. There
are no limitations imposed in case of capital or foreign exchange. Foreign investors
are entitled to repatriate profits and capital at the prevailing exchange rate. There are
no maximum or minimum total investment requirements

Taxation

The Japanese tax system is rather complex. In general, the corporate tax rate in
Japan is 37.5 percent. Under most tax treaties, branches of foreign firms are taxed
only on the income accrued in Japan. A 20 percent withholding tax is also applied to
dividends, interest, and royalties that are distributed by a Japanese firm. (Japan
Business-FAQ's, 2008)

Interest rates

Japan's monetary policy of zero interest rates was introduced in March 2001 in an
attempt to revive the economy, which had been in long-term recession since the early
1990s. The Bank of Japan has abandoned the country's zero interest rate policy after
more than five years. (Q&A: Japanese interest rates, 2008)
The following graph is showing last year Japanese interest rate. Japan's central
bank decided Tuesday to keep its key interest rate unchanged at 0.5 percent. (China
view, 2008) And recently rate is about 0.5% and the highest in this period is round
0.67%

(Source: Bloomberg, 2008)

Bank of Japan 2008, Outline of Bank of Japan
http://www.boj.or.jp/en/type/exp/about/expboj.htm

Yahoo Finance, 2008

http://finance.yahoo.com

Financial Forecast Center, 2008, Japanese Yen Currency Exchange Forecast

http://www.forecasts.org/yen.htm)

Japan Business-FAQ's.
http://home.swipnet.se/~w-10652/Japan_business_FAQ_1.html

Q&A: Japanese interest rates, 2006

http://news.bbc.co.uk/1/hi/business/5178610.stm

China View, 2008, Japan’s Central bank remains interest rate at 0.5%
http://news.xinhuanet.com/english/2008-08/19/content_9498607.htm

Bloomberg, 2008, Bank of Japan interest rate

http://www.bloomberg.com/markets/rates/japan.html

SOCIO CULTURAL FACTORS:

1) Japan’s Business Etiquette :

  Politeness, sensitivity and good manners are the pillars of Japanese business
etiquette.
 In Japanese business etiquette, Japanese business cards are a 'must have'.
Never flick, throw, slide, lob or otherwise push your Japanese business card.
 Always telephone 1 - 2 hours prior to a scheduled meeting to confirm that
you are on your way.
 If you will be late arriving for a meeting then call at least 1 hour in advance
to allow the customer to reschedule.
 Always arrive 10 minutes early for a meeting, more if the meeting will be
with senior executives.
 Plan an exact agenda for the meeting : if the Japanese side say the meeting
will finish at 4pm then it probably will not be extended.
 It is good Japanese business etiquette to take lots of notes when coming in
meeting.

2) Business Attire :

 Men: Wear dark suits (navy or black) with white shirt and subdued tie
from October - April and gray suit from May - September.
 Woman: wear shorter (or tied back) hair, trouser suits or longer skirt
suits with seasonal colors as for men. Japanese women are very fashion
conscious and many wear Gucci, Chanel, and Prada etc. Most Japanese
companies do not allow female employees to wear jewellery, very short
skirts or high-heeled shoes. Women too are not properly attired without
Japanese business cards!

(http://www.venturejapan.com/japanese-business-etiquette.htm) Venture Japan.

3) Japan’s Culture :

Japan has a fascinating and multifaceted culture; on the one hand it is steeped
in the deepest of traditions dating back thousands of years; on the other it is a
society in a continual state of rapid flux, with continually shifting fads and
 fashions and technological development that constantly pushes back the
boundaries of the possible. It could therefore be said that Japan is a country of
stark contradictions and is in part this that makes it such a fascinating country
to visit and unique tourist destination.

4) People :

 Japan has a population of about 126 million (the eighth largest in the world),
75% of whom live in urban areas where population density is very high.
 Much of Japan however is very sparsely populated; there are large national
parks and vast mountainous regions where the people's way of life is
unrecognisable from urban Japan.
 Inhabitants of non-Japanese origin make up only just over 1% of the overall
population. The vast majority of these are Koreans.
 The ancestry of the Japanese is a matter of much debate. The indigenous
population of Hokkaido originally included a variety of ethnic groups, now
collectively known as the Ainu. Many place names in Japan can be traced
back to the Ainu language.

5) Religion :
 State Shinto, were varied assortments of different Shinto and Buddhist
sects, all combining to form a spiritual framework for the Japanese. Shinto
was the religion of life, of living spirits (kami), who affected everyday
living; Buddhism, on the other hand, was a religion of death, focusing on
one's ancestors and the life to come. These beliefs were supported through a
calendar of ritual and an intricate web of social custom.
 Some of the new religions such as PL Kyoden (Public Liberty Kyoden)
and Soka Gakkai have, however, become very much a part of the
establishment in Japan, and it seems their role in politics and business is not
to be underestimated.

6) Social Convention :
 Manners and custom are an important part of many facets of Japanese life. The
language, although basically quite simple to pronounce and speak, is made
very difficult to master because of the codified layers of respect and humility
that are used depending on to whom you are talking.
 It is customary to take off your shoes in the reception area when entering a
Japanese house, some restaurants and hotels will also require you to do this -
there is normally clearly a place to put your shoes.

 When meeting people you can bow, although shaking hands is quite common
these days. You may well be given a business card, these meishi are used by
businessmen and high school students alike.

 When you address someone you should use the suffix "-san", so Mr. Suzuki
becomes Suzuki-san. Never use "-san" to speak about yourself however.

 Before eating it is customary to put your hands together and say 'ita-daki-
masu' (I will partake) and afterwards 'gochi-so-sama-deshita' (that was
delicious).

 Gifts, known as "omiyage" in Japanese, are very important in Japanese society

and if you meet any Japanese you may well be given something.

7) Food:

 Many Japanese restaurants specialise in one particular type of food. The best
place to try Sushi (slices of raw seafood placed on lightly vinegared rice balls)
and sashimi (slices of raw seafood dipped in soy sauce), is a kaiten-zushi bar.
 Japanese food does not stop with raw fish; other specialities include teriyaki,
marinated beef/chicken/fish seared on a hot plate), sukiyaki (thin slices of
beef, bean curd and vegetables cooked in soy sauce and then dipped in egg),
and tempura (deep fried sea-food and vegetables).
 There are vegetarian options in Japan. Try the wonderful zaru soba (buck-
wheat noodles served cold), a bowl of Udon (thicker noodles) in a mountain
vegetable soup, tofu steak or a vegetable okonomiyaki (savoury pancake).
 If you are feeling adventurous you could try Natto, this is a sticky and slightly
smelly concoction made of fermented soya beans
8) Drink :

 Japan is a country of drinkers - and a few rituals should be considered

before taking a tipple.
 Whilst Sake (rice wine) is the national drink of Japan, lager-beer
(pronounced beer-ru in Japanese) is the most popular. Widely available brands
include Kirin, Sapporo, Suntory, and Asahi. They are all worth a taste and
average about 5% abv.
 Happoshu, not actually beer but a malt flavoured beverage.
 A wide variety of alco-pops called Chu-hai are available.
 Whisky is very popular amongst Japanese men - Scotch is considered
the best and is highly sought after.

9) Sports:

 Sports are a big deal in Japan. Indeed, it is said that the very origin of the
Japanese race depended on the outcome of a Sumo match. Sumo is the most
popular and the wrestlers still command high celebrity status. In Sumo the
basic idea is for the higashi rikishi (east wrestler) to force his nishi (west) foe
out of the ring or onto the floor of the dohyo (ring). It's generally all over in a
few seconds but watch carefully and there is immense skill and artistry in the
wrestlers' moves. There are six tournaments (basho) a year and it is well worth
a visit.
  Football, known as soccer in Japan, has always struggled to find a place in the
nation's heart.

(http://www.insidejapantours.com/index.php?content=Japan%20Links&include=no)