Episode #159: Running A Foreign Business In Japan

Why Is Running a Business in Japan So Difficult?

Running a business is demanding anywhere, but Japan adds unique complexities. According to official data, over 70% of Japanese companies are unprofitable. Success requires mastering a delicate balance — increasing revenue while managing high fixed costs.
Yet, raising prices in Japan is extremely difficult. After decades of deflation, consumers are highly price-sensitive. Even a small tax hike has pushed the economy into recession, revealing how cautious Japanese buyers are.

Mini-summary: Japan’s deflationary mindset and competitive landscape make profitability a constant challenge for both domestic and foreign firms.

Japanese customers expect exceptional value for every yen spent. When companies try to increase prices, they must justify it through added value, superior service, or exclusive offerings. However, marketing and sales efforts in Japan are costly. Advertising, public relations, and brand awareness all come with high price tags — especially in Tokyo.

Mini-summary: To raise prices, companies must prove value through strong branding and marketing — both of which cost significantly more in Japan.

Tokyo’s wage and rent costs are among the highest in the world. Office space in central areas can range from JPY 9,000–14,000 per square meter (USD $90–140). Foreign headquarters often assume uniform pricing across markets, but Japan’s fixed costs and regulatory burdens make this impossible.

Mini-summary: High operational costs, not inefficiency, drive Japan’s premium pricing — especially for SMEs and global subsidiaries.

In Japan, few employees accept 100% commission-based roles. Most require a stable base salary plus performance bonuses. For foreign companies, attracting bilingual talent is even harder — English-speaking professionals command higher wages. A competent English-speaking assistant in Tokyo earns around JPY 7–8 million per year (USD $70–80k).

Moreover, fewer young Japanese study or work abroad. This shrinking pool of globally minded professionals makes hiring for international roles increasingly competitive.

Mini-summary: Talent acquisition in Japan requires patience, higher budgets, and strong employer branding — especially for international SMEs.

Marketing in Japan, particularly in Tokyo, is notoriously expensive. From print and online ads to event networking, everything costs more. Digital marketing channels like Google Ads, Facebook, and banner ads are expensive and highly competitive. Japanese websites tend to favor dense, colorful designs over minimalist “Zen” layouts, creating a cultural design challenge for foreign brands.

Mini-summary: Success in Japanese marketing requires adapting to local preferences and investing strategically in high-quality content and relationships.

Yes — networking culture in Japan is reserved and relationship-based. Cold outreach rarely succeeds. Introductions through mutual connections are the norm. Event participation can be costly (USD $50–80 per session), and even then, “working the room” is uncommon. Building trust and reputation takes time.

Mini-summary: Networking in Japan relies on introductions and long-term trust, not quick wins.

Not always. Japanese clients often reject global data or testimonials unless they include local proof. Foreign success stories are considered irrelevant unless supported by Japanese case studies or local surveys. Building credibility requires localized evidence, patience, and persistent effort.

Mini-summary: To succeed, companies must localize proof, adapt messaging, and build credibility from the ground up.

Japan’s exposure to earthquakes and natural disasters makes cash flow management critical. During the 2011 Fukushima disaster, many businesses — including training companies — faced months without income. Financial resilience and long-term planning are essential for survival.

Mini-summary: In Japan, long-term sustainability and strong cash reserves are vital business priorities.

Despite challenges, Japan offers exceptional advantages:

• Reliable payments and repeat business from loyal customers

• Diligent, honest, and detail-oriented employees

• Advanced infrastructure and strong rule of law

• A large, stable economy with global influence

Foreign companies also benefit from a strong expatriate market, numerous foreign Chambers of Commerce, and English-language business publications. These provide accessible channels to reach decision-makers.

Mini-summary: Japan rewards consistent quality, trust, and patience — values that align with sustainable business growth.

• Japan’s business environment demands patience, high standards, and localization.

• Profitability is hindered by high costs and cultural barriers but strengthened by loyalty and long-term relationships.

• Success depends on credibility, adaptation, and long-term vision.

• Tokyo remains a global hub offering both stability and opportunity for well-prepared firms.

Founded in the U.S. in 1912, Dale Carnegie Training has supported leaders and companies worldwide for over a century in leadership, sales, presentation, executive coaching, and DEI training. Our Tokyo office, established in 1963, continues to empower both Japanese and multinational companies to thrive in Japan’s demanding business environment.