Economic Data
Total GDP: Purchasing power parity = $2.903 trillion (1998)
GDP Growth: -2.6%
Per Capita GDP: $23,100
Inflation rate: 0.9%
Trade Balance: $121 billion surplus.
Trade with RI: Japan is Rhode Island’s 2nd largest trading partner, with $114.9 million in exports in 1998.
Exports: $440 billion; manufactured goods, including machinery, motor vehicles and consumer electronics. Export trading partners: U.S. 30%, EU 18%, Southeast Asia 12%, China 5%
Imports: $319 billion; manufactured goods, foodstuffs, raw materials and fossil fuels.
Import trading partners: U.S. 24%, Southeast Asia 14%, EU 14%, China 13%
Best Prospects for Exports: Computers and peripherals, electronic components, computer software, medical equipment and devices, telecommunications equipment, travel and tourism, marine products, building products, electrical power equipment, automobiles, auto parts, pharmaceuticals, apparel, health foods, dietary supplements, cosmetics, sporting goods, alternative energy sources, architectural/construction/engineering services, pollution control equipment and service, furniture, plumbing products, laboratory and scientific instrumentation, high technology home health care equipment, textiles.
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Tariffs, Trade, taxes, trademarks
Trade Regulations and Tariffs: According to the Japan Tariff Association, the average applied tariff in Japan is one of the lowest in the world. There are notable exceptions, including leather goods and many agricultural products. Also, import duties on certain processed foods and manufactured goods remain high. Following completion of the Uruguay Round of the GATT, the predecessor to the WTO, however, import duties on many agricultural items continued to decrease, and tariffs in many major sectors, such as autos and auto parts, software, computers, and industrial machinery are zero.
Japan is well known for having a large arsenal of methods by which non- Japanese products are either effectively kept out of or delayed entry into the domestic market. These tactics may be highly overt political or economic tactics with no basis in culture and/or tradition, rooted in very deep Japanese values in ways that defy easy remedy, or anywhere in between.
Foreign Investment: Japan, the world’s second-largest economy, is an immense potential market for U.S. foreign direct investment (FDI). The Government of Japan (GOJ) imposes few formal restrictions on FDI in Japan, and has worked to remove or liberalize most of the legal restrictions that apply to specific economic sectors. The government does not impose export-balancing requirements or other trade-related FDI measures on firms seeking to invest in Japan. Moreover, risks associated with investment in many other countries, such as expropriation and nationalization, are not an issue in Japan.
Free Trade Zones: Japan no longer has any free-trade zones or free ports. Customs authorities, however, do allow the bonding of some warehousing and processing facilities in certain areas adjacent to ports on a case-by-case basis. The Japanese government established a law in 1992 entitled the “Law on Extraordinary Measures for the Facilitation of Imports and Foreign Direct Investment in Japan” (effective July 1992 and valid until May 2006). Under the law, the government helps increase access to the Japanese market for foreign goods and capital at government-designated “foreign access zones” near harbors and airports.
There are five kinds of bonded areas: (a) designated bonded areas, (b) bonded sheds, (c) bonded warehouses, (d) bonded factories and (e) bonded exhibition sites. Designated Bonded Areas are public space authorized by Ministry of Finance. In these areas, located near ports of entry, foreign cargo (shipments to be exported, to be imported, and in transit) can be unloaded, transported, and stored for up to one month. This temporary space is used for customs declaration and handling and can be used by anyone for a fee.
Trade Finance and Methods of Payment: There are a number of methods used to settle payment in Japan: cash in advance, letter of credit used in conjunction with a documentary draft (time or sight), promissory note, documentary collection or draft, open account and consignment sales. As with U.S. domestic transactions, a major factor in determining the method of payment is the degree of trust in the buyer’s ability and willingness to pay.
Because of the protection it offers to the American exporter and the Japanese importer, an irrevocable letter of credit (L/C) payable at sight is commonly used for settlement of international transactions. As large Japanese general trading companies often serve as intermediaries to small and medium-sized companies, L/Cs are often issued in their name rather than in the name of the end user of the product. With the trading company taking on the risk of the transaction, the U.S. firm is protected from the possible bankruptcy of the smaller company.
Another payment option is the use of documentary collection or open account with international credit insurance that, unlike the letter of credit, allows the importer’s line of credit to remain open. At the same time, this option protects the exporter if the buyer goes bankrupt or cannot pay.
Marketing and Selling Factors: Personal contact with customers is very important. A visiting U.S. representative or resident agent in Japan should accompany a Japanese agent or distributor on visits to existing — or potential — Japanese customers. Making sales calls demonstrates commitment to the market and is also an excellent way to obtain market feedback.
Too many Japanese-American business relationships sour after a successful honeymoon period. A common mistake made by U.S. companies in Japan is failure to provide adequate support for their Japanese business partner after initial successes. It is generally important to prevent a distributor from implementing a conservative, low-volume, high-markup marketing strategy that will protect their own interests while leaving the U.S. product’s full sales potential badly undeveloped.
Part of the selling technique in Japan is knowing how to negotiate and maintain relationships with the Japanese. Japanese language skills can be invaluable, as can a thorough background in Japanese culture and etiquette. It is important to be honest and direct, while avoiding appearing overbearing.
Product Labeling: Correct packing, marking, and labeling are critical to smooth customs clearance in Japan. Straw packing materials are prohibited. The Japanese Measurement Law requires that all imported products and shipping documents show metric weights and measures. For most products other than beverages and foods, there is no requirement for country of origin labeling. However, if labels indicating origin are determined to be false or misleading, the labels must be removed or corrected.
Electronic Commerce: There are currently no customs duties on electronic transmissions. Trademarks/Patents: Protection of intellectual property rights should be an integral part of every U.S. exporter’s basic market strategy in Japan. Exporters must file separate applications to register patents and trademarks in Japan to obtain protection, but prior patent filing in the United States can provide certain advantages if applications are then filed promptly in Japan. A U.S. patent or trademark attorney can provide advice, but it will be necessary to hire a Japanese attorney (bengoshi) or patent practitioner (benrishi), preferably one with an established relationship with the U.S. exporter’s U.S. attorney, to prosecute the patent or trademark application.
Japan
Location: Eastern Asia, island chain between the North Pacific Ocean and the Sea of Japan, east of the Korean Peninsula.
Geographic Area: 377,835 sq. km, slightly smaller than California.
Climate: Varies from tropical in south to cool temperate in north.
Major Cities: Tokyo (Capital), Yokohama, Osaka, Nagoya, Sapporo, Kobe, Kyoto, and Fukuoka.
Population: 126 million (1999)
Ethnic groups: Japanese 99.4%, other 0.6% (mostly Korean).
Languages: Japanese
Workweek: Monday -Saturday, 9 a.m. to 5 p.m.
Government type: Constitutional monarchy.
Chief of state: Emperor Akihito (since January 7, 1989), Prime Minister Yoshiro Mori.
Currency: Yen
Exchange Rate: 108.33 yen per U.S.$1 (August 2000).
Current Economic and Political Conditions: Japan is the second-largest economy in the world after the United States. Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense budget (1% of GDP) have helped Japan advance with extraordinary speed to its current rank in the world. Its industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade have produced a mature industrial economy. Along with North America and Western Europe, Japan is one of the three major industrial regions among the market economies. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy. In 1997, the country’s exports amounted to about 12% of its GDP.
While Japan’s long-term economic prospects are considered good, Japan is trying to escape its worst recession since World War II. Plummeting stock and real estate prices marked the end of the “bubble economy” of the late 1980s. The effect of the Asian financial crisis also has been substantial, exacerbated by rigidities in corporate structures and labor markets, as well as the financial difficulties in the banking system and real estate markets. Real GDP in Japan grew at an average of roughly 1.25 percent yearly between 1991-98, compared to growth in the 1980s of about 4 percent per year. Growth in Japan in this decade has been slower than that in other major industrial nations. The Government of Japan has forecast growth in Japan fiscal year 1999 at 0.5 percent.
The United States’ close and cooperative relationship with Japan is the cornerstone of U.S. policy in Asia and the basis of a strong, productive partnership in addressing global issues.
Bilateral trade has increased dramatically in the last decade. U.S. exports to Japan reached $57.8 billion in 1998, down, due to Japan’s recession, from $67.6 billion in 1996 but up from $47.9 billion in 1993.
Key Contacts
John H. Chafee Center for International Business and World Trade Center, Bryant College
Raymond W. Fogarty, Director
Edward Barr, World Trade Center Manager
Telephone: (401) 232-6407 or (401) 232-6408
Fax: (401) 232-6416
E-Mail: postoffice@itdn.net
Website: http://www.rieac.org
Rhode Island Economic Development Corporation (RIEDC)
Maureen Mezei, Intr’l Trade Director
Telephone: 222-2601, ext. 123
E-Mail: mmezei@riedc.com
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsuhashi, International Trade Specialist
Telephone: (401) 528-5104
E-Mail: kyatsuha@mail.doc.gov
U.S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: 528-4585
E-Mail: marilyn.bogue@sba.gov
Embassy of Japan
2520 Massachusetts Avenue
NW, Washington D.C. 20008
Telephone: 202.238.6700
Fax: 202.328.2187
Web site: http://www.embjapan.org/
United States Embassy in Japan
10-5 Akasaka 1-Chome, Minato-ku,
Tokyo 107-8420 Japan
Telephone: (81) (3) 3244-5000
Fax: (81) (3) 3505-1862
Web site: http://usembassy.state.gov/japan/
U.S. Chamber of Commerce
Bridgestone Bldg. 5F
3-25-2 Toranomon, Minato-Ku
Tokyo 105-0001 Japan
Phone: (81) (3) 433-5381
Fax: (81) (3) 436-1446
Email: info@accj.or.jp
English Language Publications
The Japan Times
Telephone: (03) 3453-5312
Country Profile
Compiled by Providence Business News,
in collaboration with Bryant College Export Assistance Center.
