On Business in Japan

 

Japan is by far the most business un-friendly country I have seen in terms of business regulation. Costs for starting and keeping business in operation are high, regulation is very strict, and there are many unusual laws that appear to be made for no other reason than to cause inconvenience to the business operator (more on that later). Furthermore, competition is stiff and customers are demanding.

Within a company, there is a certain hierarchy that must be understood and respected, and is often times structured based on seniority and age rather than talent and intelligence. In many cases, the decisions made by senior management good or bad will go unchallenged so befriending those higher up the pecking order works particularly well in Japan.

 

Cultural & Societal Challenges

 

People are faced with great societal pressures to perform a certain way from a young age. Schools are trained to educate a certain way, causing society to create a predisposed opinion regarding many subjects, which in turn affects business in a subtle but negative way.

On the surface, one will be taught that the Japanese culture generally frowns upon risk taking. A position at a large, stable company is seen by society as much more preferable and respectable than entrepreneurship, and those that follow the path of entrepreneur-ism are often times considered outcasts (albeit not always in a bad way).

After some time of being completely immersed in the culture, many different, unusual business practices begin to come to light and present new questions. The example of valuing a company immediately comes to mind. As new grads enter the work environment, they are taught to look for companies with the largest starting capital. The assumption is made that a larger initial investment means a more stable company, but to anyone that understands business, that is a ridiculous assessment. Unlike other countries, where the initial investment is irrelevant to those outside of the company, this number becomes one of the most common metrics of evaluating the size of a company for job-seekers and others alike. In other words, if one started a company with a dollar and is now making a million, people would still only see the dollar registered in the beginning.

This creates a problem as new grads dismiss well performing startups as a legitimate place to work. To combat this, many small companies began borrowing money, registering their business with a much higher (and unneeded) amount, and returning it just to have their company viewed as credible. The government responded by requiring all companies to have the amount equal to their initial investment or greater sitting in their bank account at the end of every fiscal year. The result was a lot of confusion and pressure for business owners who in practice need cash for operations and will not have that amount liquid, along with layers of regulation that are difficult for many to understand.

The above is just one example of the many societal challenges businessmen face while operating in Japan. Unfortunately, said complications discourage many companies from ever being started. Naturally, I’d blame the government for their anti-capitalist ways, but it is never that easy, and I do so only in jest. Fortunately, aside from regulatory obstacles, Japan is a country brimming with potential for international trade and there are traditional companies dying to expand and get out.

For me, I’ve been stung one too many times in Japan and if I were to start another company there, I wouldn’t have learned my lesson. I’ll be back when the environment is a little more business friendly. For now, the opportunity I see in Japan is in helping smaller, local businesses expand to markets elsewhere.