Doing Business with Japan

A brief overview of some key concepts

to consider when doing business
in Japan

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Written and produced by Keith Warburton +44 (0)1962 820100
2 Doing Business with Japan

Business Culture in Japan

This country profile has been produced Therefore this briefing note is broken into
to give a short overview of some of short, bite-sized sections on the following
the key concepts to bear in mind when topics:
doing business with contacts in Japan.
It is intended to be an aid to business • Background to business
people who have commercial dealings
• Business Structures
with counterparties in the country but
should not be seen as an exhaustive guide • Management style
to this topic or as a substitute for more
substantial research should there be a • Meetings
need. • Teamwork
With this in mind, we have covered • Communication
the areas which are key to a better
understanding of the cultural mindset • Women in business
underpinning business dealings in Japan • Entertaining
and which are, quite often, extremely
different from the approach and thought • Top tips
processes associated with business in
other parts of the world.

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 Doing Business with Japan 3

Background to Business in Japan

Despite the recent growth of China and
India as both regional and global economic
super-powers, Japan remains a major force
in world commerce with leading corporate
players in such diverse sectors as banking
and finance, computing, software,
automotive and pharmaceuticals. It would
be unwise to switch attention away from
this potentially lucrative market.
Many people find Japan both fascinating
and difficult as a business destination and
often leave the country more confused
than when they arrived. The Japanese
approach to business is determined
by history and as such is a reflection of
Japanese society as a whole. In order to
work and interact successfully with your
contacts in Japan, a basic understanding
of some of the underlying concepts
governing business life is essential.
This means that in order to achieve
success in Japan, it is important to put the
maximum amount of time and resource
into the early stages of relationship-
building - even when eventual results may
seem a long way off.
Business models in Japan have been
under enormous strain for more than two
decades and there is massive pressure
(both internal and external) for reform.
Yet change comes slowly to Japan and
old traditions and loyalties linger. Expect
changes to happen, but do not expect
an easy or quick transition - and do not
assume that any changes will result in
business models that will be immediately
or easily understood by outsiders.

Some of these underlying concepts are

so fundamentally different from western
models that adjustment can be difficult
and complete comprehension almost
impossible. The most important concept
to grasp is that of the overwhelming
importance of personal relationships
within the business cycle. Of all the
business cultures of the world, Japan is the
one most strongly rooted in the concept
that relationships should come before
business, rather than business being more
important than personal considerations.

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4 Doing Business with Japan
Japanese Business Structures
Up until World War Two, Japan was
dominated by a small number of very large
companies, the zaibatsu, that had massive
influence on the economy.
However, in recent years the Japanese
economy has become much more varied
in terms of the size and structure of its
companies, producing a complex web of
inter-locking relationships between large
and small firms. Competition amongst
these smaller firms is very strong which
results in a great number of bankruptcies
in every sector - therefore the concept of
life-time employment enjoyed by the total
workforce is, and has been for some time,
a myth.
Japanese companies, like Japanese
society, are hierarchically organised with
individuals knowing their position within a
group and with regard to each other. It is
this sense of belonging to the group that
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gives Japanese companies their strength
and purpose. Group orientation and team
working are not merely concepts and
phrases in Japan but a way of life which
permeates all aspects of corporate life at
all levels.
Japanese hierarchy is based on consensus
and co-operation rather than the top-
down decision making process which often
typifies western models of hierarchy. This
means that people feel actively involved
and committed. It can also mean that
decisions are slow and have to be based
on deep analysis or large amounts of
information. ‘How can we get the Japanese
to make their decisions more quickly’
is a question often asked by western
businessmen. The answer is probably that
you can’t!
 Doing Business with Japan 5

Japanese Management Style

Japanese management emphasises the Instructions from managers can seem

need for information to flow from the
bottom of the company to the top.
This results in senior management having
a largely supervisory rather than hands-
on approach. As a result, it has been
noted that policy is often originated at
the middle-levels of a company before
being passed upwards for ratification. The
strength of this approach is obviously that
those tasked with the implementation of
decisions have been actively involved in
the shaping of policy.
The higher a Japanese manager rises
within an organisation, the more important
it is that he appears unassuming and
lacking ambition. Individual personality
and forcefulness are not seen as the
prerequisites for effective leadership.
extremely vague to western ears and this
often causes confusion and frustration.
This difficulty is caused, in no short
measure, by problems around styles of
communication. As users of coded-speech
(where what one says does not necessarily
correspond to what one actually means),
direct, clear instructions are not needed.
The Japanese subordinate will second-
guess what the boss wishes to happen and
react accordingly. It is, therefore, often
necessary to ask for clarification if tasks
seem vague or unclear. It is better to seek
clear understanding at the outset that to
allow misunderstandings to produce poor
results or tensions in the relationship.

The key task for a Japanese manager is

to provide the environment in which the
group can flourish. In order to achieve
this he must be accessible at all times
and willing to share knowledge within the
group. In return for this open approach, he
expects team members to keep him fully
informed of developments. This reciprocity
of relationship forms the basis of good
management and teamwork.

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6 Doing Business with Japan
Japanese Meetings
Punctuality is important - it shows respect
for the attendees. However, due to the
consensus nature of decision making
in Japan, it can very often be difficult to
determine a finish time.
Always allow slightly more time than you
think might be necessary to achieve your
goals.
Meetings are often preceded by long,
non-business polite conversation which
could cover such topics as mutual contacts,
the merits of your company, Japanese
food etc. Do not become exasperated by
this use of your time, as it is an essential
element of the relationship-building
process. Show your impatience at your
peril.
The concept of wa, which is probably best
described by the English word harmony,
lies at the heart of the Japanese approach
to meetings. Although it is important to
search for a solution, this must not be
achieved at the expense of disturbing the
peace. No individual will wish to proffer a
strong opinion, which might cause some
form of confrontation and therefore affect
wa.
Japanese decisions are reached through a
process of consensus-building meetings,
each of which is concerned with the
preservation of wa. This means that the
decision-making process can seem very
long and drawn out. Patience is essential
in these situations, as to show impatience
could have an adverse effect on the
all-important wa.
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Business Cards
It is important, when doing business
in Japan, to have a plentiful supply of
business cards - with information printed
on the back in Japanese.
Cards are presented at an early stage in a
formal manner. Present and receive the
card with two hands. (Present your card
Japanese side up.)
Treat your Japanese contacts card with
respect - the card is the man. Don’t write
on it or leave it behind, as this would show
disrespect. During the meeting, place the
cards carefully on the table in front of you
with the senior persons’ card on the top.
Gift Giving
Gift giving is an endemic part of Japanese
business life and should not be confused
with notions of bribery and corruption.
Gifts should not be too lavish but should
always be of good quality. It is important
to take a number of small gifts to Japan to
distribute to new and existing contacts.
Gifts should always be wrapped. Avoid
giving gifts in quantities of four or nine
as these are unlucky numbers. Anything
sharp could signify the desire to end a
relationship.
Alcohol, especially good single malt
whiskey, is always an appreciated gift.

Japanese Communication Styles
Of all the aspects of dealing with the
Japanese, the ones which probably
cause the biggest dilemmas concern
communication difficulties.
Japanese communications are epitomised
by subtlety and nuance, where how one
appears and what one publicly states
(tatemae) and what one really thinks
(honne) are often poles apart. There
is often a huge distance between the
expressed tatemae and the felt honne -
they can often even be contradictory.
The development of relationships in Japan
is often dependent on people’s ability
to read the underlying truth which may
underpin the spoken rhetoric. It can,
of course, be very difficult for the non-
Japanese to navigate these very confusing
paradoxes. It is probably best to say that
everything should be questioned in order
to ensure that clear understanding has
been achieved. Check back several times
for clarification of anything that remains
unclear.
Communication difficulties are further
compounded by the fact that few
foreigners speak good Japanese and that
Doing Business with Japan 7
levels of English in Japan are at best very
patchy. Much of what is said by English
speaking businessmen in cross-national
meetings is simply not understood - or
more worryingly misunderstood. The need
for the clear and precise use of language is
never greater than in such situations. The
combination of Japanese vagueness and
lack of comprehension leads to enormous
problems which make problem-solving
and decision-making very tortuous.
In times of stress or difficulty during a
meeting, the Japanese will often resort to
silence in order to release the tension in
the room and allow people to move away
from the area of difficulty (to preserve
the harmony or wa which is tantamount).
Unfortunately many westerners are
extremely uncomfortable with silence
in meetings and feel the need to fill the
silence with more discussion over the issue
the Japanese would rather avoid.
In addition, Japanese body language is
very minimal, making it difficult for the
untrained observer to read. The Japanese
seem to be very still in meetings, sitting in
a formal upright posture. It is rare for any
reaction or emotion to be visible.
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8 Doing Business with Japan

Japanese Teams

The Japanese do not really undertake

training sessions on teambuilding - they
are naturally group-oriented which
underlies the need for a truly consensus
approach to issues.

The consensus-building process or

nemawashi (literally root binding)
determines that agreement is sought
before a formal meeting in order to avoid
any direct confrontation. Thus arriving at
a meeting expecting issues to be thrashed
out in a direct and forthright manner will
almost always lead to disappointment.

It is also important that group members

maintain face in front of other group
members, which amongst other things
means that people must be seen to be
modest and humble. Self-promotion in
the western sense is seen as childish and
embarrassing behaviour.

The group or groups to which a person

belongs are a life-defining set of
relationships and the importance of
these group relationships should never
be underestimated. Therefore, Japanese
businessmen (and women) will often
socialise in teams after work. Dinner and
drinks are an important work and social
function and should be encouraged.

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 Doing Business with Japan 9

Women in Business in Japan

The average annual income for women in Western women working in Japan will
Japan stands at around 30% below their probably only encounter difficulties when
male equivalents - which is a powerful trying to manage Japanese male colleagues
statistic. - especially if they are older. Otherwise
they will be accepted as an honorary man.
Although women have reached a largely
equal footing with men in terms of legal
rights, there remains a strong unspoken
discrimination towards women in the
workplace.

Women are largely expected to

perform lower grade tasks and to leave
employment upon marriage or the birth of
children. Although there has been a slight
shift in this trend over recent years, the
changes are negligible. This issue is hotly
debated within Japan with more pressure
being brought to bear on employers to
improve the situation but change has been
slow.

Japanese Dress Code

Appearance is vitally important in Japan Bear in mind that the climate in Japan is
and people are often judged on the way very varied through the seasons, so take
they are dressed. appropriate wear for the season
- overcoats/raincoats may be needed
The business convention of dark suit, shirt in the winter.
and tie is very much the norm in Japanese
mainstream business and although other
colours are seen more often nowadays
than in the past, it is probably safest to
maintain a conservative approach.

For women, business dress should be

restrained and formal – women do not
commonly wear trousers in business in
Japan. Accessories should be upmarket
but not ostentatious.

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10 Doing Business with Japan
Successful Entertaining in Japan
Business meals form an integral part of
commercial life in Japan and should be
seen as an important facet of the
all-important relationship building process.
Therefore, if you are invited out for lunch
or dinner (rarely breakfast), it is important
to accept. The person who invites will
invariably pick up the bill. Do not offend by
offering to pay if you have been invited by
them.
When using chop-sticks, never point them
at anybody and do not leave them sticking
into your rice. When not in use, rest your
chop-sticks on the holder which will be
provided on the table.
It is considered polite to leave some food
on your plate (or in the bowl) at the end
of the meal to show that you have eaten a
sufficiency.
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When taken to a traditional Japanese
restaurant, it is customary to remove your
shoes when entering. (This is not, however,
the case in other types of restaurants.)
A Japanese host will take great delight in
choosing the food and explaining to you
the different types of dishes on offer.
Japan has a rich and varied cuisine - it is
not all raw fish and pickles.
If you invite a Japanese guest for dinner,
take them to a restaurant which reflects
your own culinary heritage and you
can then explain your own culture and
customs to them.
Tipping is not customary in Japan, as this
cost is usually included in the bill.

Top Tips 1 - 20 on Japan
1. Relationships drive business in
Japan. Without the right depth of
relationships with the right people,
it can be very difficult to achieve
anything.
2. It is important to show respect
appropriately. Age brings dignity and
should be respected. It is probable,
therefore, that more will be achieved
with a delegation that contains some
older members.
3. Try to be polite and diplomatic at
all times. Avoid showing irritation,
annoyance or impatience. These
negative emotions could put a
strain on the development of the
relationship.
4. Avoid putting the Japanese in
situations where they might be forced
to lose face. Do not try to push for
decisions or deadlines.
5. Decisions are arrived at through a
lengthy consensus-building process.
As it is almost impossible to speed up
this process, patience is needed.
6. Perform as many favours for people
as possible. Favours must always be
repaid.
7. Be humble and apologetic rather than
arrogant and brash. Modesty is a
characteristic much admired whereas
forwardness and being overly self-
confident can be seen as childish
behaviour.
8. As the Japanese are loath to say no or
disagree, it can be very difficult to be
completely confident that a decision
or agreement has been reached.
Doing Business with Japan 11
9. Do not overestimate the levels of
comprehension when speaking
English in Japan. There are many
fluent speakers of English but many
people do not understand even when
they indicate that they have.
10. Go over the same point several times
from different angles to check the
situation. Ask lots of open questions
to test for understanding.
11. Oral agreements carry as much
weight as written contracts. In a
relationship-driven society, it is the
quality of relationships which will
determine events rather than legal
niceties.
12. Do not speak well of yourself but be
very positive about your organisation
and the department or team to which
you belong. Never make disparaging
comments about your own company
– even in jest.
13. Humour should be avoided during
serious business meetings where
it will be viewed as out of place.
Humour will, in any case, probably
not be comprehensible.
14. Avoid strong eye contact which can
be seen as threatening or hostile
behaviour.
15. Body language is minimal and it can
be very difficult to gauge progress
made or the general sentiment of a
meeting.
16. Show an interest in your contact as a
person. An interest in family, hobbies,
health etc. can help to cement a
relationship.
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12 Doing Business with Japan

17. Always take gifts to give to key

contacts. Gifts need not be too
expensive but should always be
wrapped.

18. Dress well, but conservatively.

Appearance is very important and
you are likely to be judged on how
you look.

19. If entertaining, entertain as well as

possible. Remember that a good deal
of the relationship-building process
takes place over meals.

20. If confused or in doubt when working

in Japan, try not to react immediately.
Try to buy some time and reflect on
the situation overnight or seek advice
from colleagues or other Japanese
contacts.

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 Doing Business with Japan 13

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