An Overview of Japan’s Economy
Japan boasts the third-largest economy in the world, driven by a highly developed infrastructure, advanced technology, and a skilled workforce. With a GDP exceeding $4 trillion, it is home to some of the world’s most iconic corporations, including Toyota, Sony, Toshiba, and Panasonic. Japan’s diverse industrial landscape includes automotive, electronics, robotics, and healthcare sectors, contributing to its reputation as an economic powerhouse.
Japan has long been a global leader in technological innovation. The country’s commitment to research and development is exemplified by its numerous patents and breakthroughs in various fields. For businesses, this environment provides access to cutting-edge technology and collaboration opportunities with leading research institutions.
Japan is home to over 126 million people, and its wealthy and discerning consumers have significant purchasing power. For businesses, this presents a lucrative market to target, particularly for high-end and luxury goods.
Japan’s labor force is known for its discipline, diligence, and high level of education. The country’s strong work ethic is an asset to businesses looking for skilled professionals and a reliable workforce.
Japan is an integral part of global supply chains, making it an attractive destination for businesses looking to source components and collaborate with established suppliers.
Like all nations, Japan is undergoing dramatic social changes, including the rapid aging of its population. That, for example, offers good opportunities for companies that specialise in the elderly-care sector and related businesses. Another area with good potential is education, with more parents recognising the importance of giving their children a more globalised outlook, with particular emphasis on English language learning from an early age.
In June 2023, Prime Minister Fumio Kishida published a new capitalism initiative which outlined the economic plan for increased investment in people, start-ups, science, technology, innovation, and green and digital transformations. The increased investments are designed to create economic growth and solve issues such as climate change and the stagnation of workers’ wages.
Japan’s Cutting Edge Business Culture, the facts:
- 31 Fortune 500 companies are Japanese.
- Japan boasts the highest number of millionaires in Asia, and the 4th highest in the world: 2.8 million individuals with a net worth exceeding $1 million.
- Hunger for IP, especially in high-end electronics, biopharmaceuticals, and business services.
- IP is of high importance in Japan, with detailed policies implemented to protect it.
- Young entrepreneurs are challenging old ways
- Japan has the fourth highest R&D spend in the world at 3.39% of world GDP.
- It is also a stable place to do business: commitments are upheld and things happen on time.
- Doing business holds fewer surprises in Japan than elsewhere in the region – with IP well protected, and payment, deliveries and responses to queries arriving promptly.
- Entrepreneurship in Japan is being encouraged through regulatory changes such as; easing business creation, tax incentives, and support for foreign entrepreneurs.
- Japan has the 8th highest gross domestic spending on R&D in the World at 3.3% of GDP (2021)
- Japanese cultural values of hard work, discipline, attention to detail, and respect make Japan a stable place to do business.
- Doing business holds fewer surprises in Japan than elsewhere in the region – with IP particularly well protected and payment, deliveries and responses to queries arriving promptly.
Japanese Consumers with High Levels of Disposable Income
With 2.8 million Japanese millionaires who are fans of cutting-edge, high-quality technologies, services, and goods, there is a large target audience for international companies seeking to do business in Japan.
Consumers focus heavily on quality, style, reliability and a sense of tradition in a finished product. Many consumers today are those who made their money during Japan’s rapid economic ascent and have now retired and are looking to enjoy the fruits of their labours. The over-60s have high levels of disposable income and are not shy about spending it on themselves or their families.
The amount of personal wealth is high: $12.8 trillion in net financial assets is held by households (almost equivalent to the value of US GDP).
From fashion through to automotive, food and drink, design and the latest digital creations, Japanese consumers have an affection for foreign products. And that’s without all the corporations looking to access international know-how in the areas of chemicals, construction, engineering, transportation, communications, consulting, energy, biotechnology, pharmaceuticals and a myriad of others.
Contact one of our expert trade advisers to assess your market potential for doing business in Japan.
Last updated November 2023: Steve Crane OBE