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TPP and new business opportunities in Japan

The broad agreement reached on Trans-Pacific Partnership offers unprecedented opportunities for business and property investment in Japan. A wave of new business startups from member countries will defy the pessimism claiming that Abenomics is losing steam and that the depreciation of the yen has stalled.

Indeed, the obvious beneficiary of the TPP is the United States as the top exporter of services in the world (30% of the country’s export). But it is only a matter of time before investors and entrepreneurs from Asia and Europe will find a new business frontier in Japan, as well.

As a matter of fact, the EU is now in a hurry to reach agreement on the Economic Partnership Agreement this year, lest it lose the Japanese market to TPP members that amount to 36% of global GDP. This strikes a contrast with the EU’s earlier indifference when the TPP negotiations were deadlocked.

If the negotiation on the Regional Comprehensive Economic Partnership can be concluded this year with China, India, and the ASEAN nations, the TPP will be followed by two mega free-trade agreements which respectively account for 30% of the world’s GDP.

The TPP abolishes tariffs on telecommunication, software, entertainment, and other digital contents. According to the TPP cross-border service obligations, online and other services will be guaranteed equal treatment with those provided by Japanese companies. E-commerce now can access the Japanese market even without placing computer infrastructure in Japan.

Subject to certain conditions, relaxed restrictions and a more open qualification system in Japan will enable foreign professionals to provide, e.g., legal, accounting, engineering, architecture, and research and development services. Full mutual recognition of qualification is yet to take place, but there is no doubt that professionals who know the systems of respective member countries will join forces to further open up the Japanese market to the world. Spouses of certain business persons will also benefit from the right to work in Japan and stay there for the same period.

Until recently, foreign investors have been scared away from the Japanese real estate market by unclear Japanese business practice and regulations, as well as insufficient information. These barriers are about to start disappearing. As a matter of fact, depopulation in Japan is translating into a surplus of properties. Unless owners welcome foreigners, their offices, hotels, and many other spaces will remain vacant. As such, matter have gone beyond lifting the ban on the use of private housing as guest houses;. Indeed, private lodging is being encouraged in the run up to the Tokyo Olympics as a way to effectively using vacant space.

Express delivery service will be encouraged by faster custom procedures, which in return will underpin both a more international supply chain and vibrant e-commerce. Efficient logistics will drive the advance of foreign retailers into Japan. Franchisers targeting the Japanese market are also under full sail thanks to protection of their concepts and trademarks.

How to set up a business in Japan?

The necessary steps involving foreign startups are, in sequence: 1) foreign resident registration, 2) seal registration, 3) office rental, 4) establishment of a Japanese branch or company, 5) filing tax documents, 6) visa application for the representative and employees, 7) recruitment of Japanese employees, 8) subscription to public insurance, 9) payroll calculation, 10) licensing, 11) account booking, and 12) tax filing . The entire procedure will take at least 30 days. When you enter Japan with a short-term stay visa (granted on arrival for most nationalities), make sure to act swiftly to complete all the steps within 90 days.

Some contents business can operate from a home country without renting an office in Japan. In other businesses, however, foreigners must secure a “place of business” in order to prove their continued business presence in Japan. This is necessary both for the application for an investor/business visa and establishment of a company.

Be careful to avoid rental agreements for properties designated for residential purpose, or you will need to go through additional paper work and hassles. Because of the visa application requirement, you may be surprised to rent an office first as a private person then later on your company name.

Therefore, the key is to find a flexible owner of a rental office. TSO perfectly understands the challenges encountered by foreign businesspersons. You can register your business at our rental office even with a short-term stay visa (equivalent of a tourist visa). Our group partner offers free accounting consultation and special discounts for you to have a head-start in Japan.

Based on our rich experience, the TSO team will be glad to help you with any questions related to rental offices and real estate in general.

(The article was first published on the TSO blog)

Why Bother to Invest in Japan Now? – A Nuanced Approach to the Asian Market

“We are in the Asian century, and the era of Africa is dawning. Why bother with hassles and the peculiar language and business practices in ageing Japan? Learn Mandarin or Swahili and don’t miss out on the next gold rush!”

Naturally, many business startups are racing to growing continental markets, with India and ASEAN being expected to overtake Japan in GDP. Some enthusiasts even foresee the emergence of an Asian market 20 to 30 times the size of Japan. But does jumping on the bandwagon and rushing off to Singapore or Hong Kong promise any success?

Please don’t take us wrong. It is indeed wonderful to see Asians and Africans escape poverty and strive toward prosperity through business. Entrepreneurs really should visit those countries and get a personal feel for the dynamic energy there. As a matter of fact, aspiring Japanese companies themselves are flocking into Asian markets and some have already begun M&A and investment in startups with deep local roots.

Following Confucius, in Asia they say: “If you are planning for a year, sow rice. If you are planning for a decade, plant trees. If you are planning for a lifetime, educate people”. So the question is whether you just want to sow rice or accomplish something greater.

Japan as a strategic base for eyeing the global market
Careful observers will notice the new business potential of Japan today in a very different way than back in the go-go 1980s during the run-up to the asset bubble. In fact, Japan is one of the best vantage points for global business operations in Asia’s emerging markets.

Surprisingly or not, Tokyo is home to the third largest number of companies listed on the Fortune Global 500, after the United States and China. Moreover, Japanese manufacturers like Panasonic, Honda, Toyota, and Nissan are accelerating the reshoring of their production back to Japan, convinced that this move actually reinforces their competitive advantage. In defiance of the protracted TPP negotiation, foreign manufacturers are also building up their manufacturing bases in Japan.

The reasons are not simply the rising labor costs in China or the weakening of the yen that had lasted until the recent reversal. Until recently, attention had been confined to the limitations of the Japanese economy. Fortunately, deregulation of retail markets, corporate tax cuts, and other genuine reforms are making a lasting impact in rising real wages and the steady recovery of the Japanese economy from its deflationary spiral.

Refined markets for bolstering your brand
Top brands in the world acknowledge the fact that they cannot lead the global market without succeeding in Japan. To put it bluntly, a blessing from the demanding and refined consumers in Japan promises acceptance from most consumers in the world. Naturally, international brands compete to open shops along the streets of Omotesando, Aoyama-dori, and Meiji-dori. The wealthy individuals and investors around the world are on a buying spree with real estate in Ginza as a home for leading Japanese brands and Roppongi as a favorite district of foreigners. Considering the low return of some of these properties, they are clearly investing in Japan as the launch-pad for their brands.

Many foreign companies are also striving to incorporate the fashion and taste of Japanese into their products, because they become also popular in Thailand, Indonesia, and so forth. The power of Japanese taste is not limited to fashion. Dollar-shops called hyakuen-shops are all-time favorite spots for Asians, Westerners, and other foreign guests alike. In barely restrained excitement, they say: “How wonderful to be able to enjoy that quality and practicality for that price!”

The attractiveness of Japanese quality often causes surprising trouble. Chinese tourists are snapping up so many nappies and rice cookers that shops end up limiting the purchase by each client and flights are delayed because of the trouble loading all the items purchased. With their newly acquired wealth, Asians head straight to Japan, the world’s shopping mall, where they can safely enjoy shopping without worrying about dishonest sellers or a foreigner price.

Despite the weakness in the overprotected agriculture sector in general, some aspiring agribusinesses are actually targeting the international market by exploiting the Japanese brand of safe and tasty food. The trend will accelerate as companies from different sectors freely compete to exploit consolidated and larger pieces of land.

Exploiting Japan’s innovation potential
China is expected to move up the supply chain in Asia from simple assembly to design and other advanced processes. But this tide is not necessarily pushing Japan to the margin of Asia. In absolute terms, Japan’s innovative capacity is intact. In fact, Lamborghini, L’Oreal, Bosch, 3M and other leading companies chose to establish their research centers in Japan, perhaps considering that the country maintains the top rank in the R&D budget per GDP, the highest ratio of researchers among the population, and in the number of Triadic patent applications (i.e., US, EU, and Japan). Japan is likely to underpin global strategies as a mature and reliable innovation base.

Staying a step ahead of market needs based in the leading ageing society
Japan faces an unprecedented challenge as the world’s fastest ageing country. But business is thriving in its efforts to provide solutions to the relevant problems. Many useful medical and health products that are unknown to the world can be found here in Japan where over a quarter of the population is aged 65 or more and more diapers are sold for adults than those for infants. Perhaps the ageing of the African continent may be long years ahead, but the rest of the world is bound to gray. Traditional business models that used to cater to young customers will become obsolete. Friendly competition with products and services enjoyed by Japan’s elderly will hone your leadership in the ageing global market.

Attractive business hub
The United Nations predicts that Tokyo will remain the world’s largest megalopolis, followed by Delhi and Shanghai. Information technologies have supposedly freed humans from the restraints of distance. On second look, however, clusters of creative people are proving ever more important. Perhaps that is why many world-class creators and artists have their bases in Tokyo.

Contrary to the stereotype as an expensive place, Tokyo offers office space for a third the price in Hong Kong and half that found in Singapore. Renting in Tokyo stands at 2/3 that of Shanghai and Seoul. In popular residential areas for foreigners, a rent is lower than in Hong Kong and Singapore and on a par with Shanghai.

The Japanese logistic system is more cost-efficient than that of Germany, France, the UK, and any other major countries of similar size. Likewise, the cost of the Internet is the least per unit of data. The Shinkansen bullet-trains that connect all corners of Japan have an average delay as little as 36 seconds per day in total. Foreign guests are impressed when there is an announcement to apologize for a minute of delay. Over the past 50 years, the Shinkansen never caused a fatal accident – although there has been an unfortunate suicide on the train.

In defiance of Japan’s stereotype as a reclusive nation, the inward FDI ratio is rising sharply and about to take over China’s top position – a clear proof of the incentives and investment environment that go beyond empty slogans.

Deep-rooted business investment as an important part of your life
Business investment is an important part of your life. And so it is only natural to decide your destination by taking the environment into account, as well. Investors in other destinations must ever breath contaminated air, hire chauffeurs or catch taxis to go anywhere, and must ever worry about kidnapping. These Asian cities are often flooded because of the underdeveloped drainage system. Many families dare not walk on the street alone and lead a stressful and confined life with fellow expats. Both foreigners and Japanese appreciate the safe, comfortable, and enjoyable environment that Japan provides for both the elderly and children. In 2015, Tokyo topped the MONOCLE’s most livable city ranking. For instance, you can simply walk to enjoy a tasty meal just around the corner. Tap water is potable. Roads are clean. There are wide choices of international schools and art galleries. If you want to enjoy your life with a long-standing business, rather than chasing after quick profits, Tokyo is a highly recommended destination.

A strategic hub that stands out in the era of Asia and Africa
Asia and Africa no doubt have great potential. As a matter of course, the growing market is so huge and diverse that the various regions warmly welcome entrepreneurs seeking success in Myanmar, Nigeria, China, India, Singapore, and Japan alike. At the same time, those who blindly follow the herd in deciding their destinations are doomed to fail. Only a few companies can cover the entire regions and they still need strategic focuses.

Japan, in particular Tokyo, is one of the promising strategic hubs for many business operations eyeing the extensive markets in Asia. Far from disappearing in a booming Asia, Japan will continue to play an important role as your reliable business partner.