Episode #176: Running A Foreign Business In Japan

Why is running a profitable business in Japan so difficult?

Japan is one of the toughest places to run a business profitably. Government statistics show that around 70% of Japanese companies operate at a loss. The formula for success may seem simple—grow revenue and control costs—but Japan’s unique market dynamics make this difficult. Price sensitivity, high competition, and decades of deflation create an environment where raising prices is nearly impossible without delivering exceptional value.

Summary: The Japanese market rewards long-term commitment and differentiation, not short-term gains.

Many overseas managers misunderstand Japan’s cost base. Tokyo rents and wages are among the highest in Asia, with office space costing JPY 9,000–14,000 per m² (USD $90–$140). Add to that social insurance and pension contributions (about +15%), and your wage bill grows fast. Foreign firms often pay above-market salaries to attract bilingual talent, with an English-speaking Executive Assistant earning JPY 7–8 million annually.

Summary: High fixed costs and limited flexibility in wage structures make pricing and profitability difficult for SMEs.

Unlike in the West, few Japanese salespeople are open to 100% commission-based work. A stable base salary is culturally expected, especially in international companies. SMEs must pay more to attract staff, particularly those who can work cross-culturally or in English. Meanwhile, the younger generation is becoming less globalized, making talent acquisition even harder.

Summary: Recruiting and retaining sales talent in Japan requires competitive compensation and strong employer branding.

Yes — marketing in Tokyo can feel like throwing money into a bottomless pit. Print and media advertising costs are high, while digital channels such as PPC and social ads burn budgets quickly. Japanese websites often prefer busy, colorful designs over Western minimalism, and professional Japanese-language copywriting and SEO expertise come at a premium. Even networking is costly, with events charging USD $50–$80 per entry, and cultural norms make “working the room” less effective than in Western contexts.

Summary: Marketing requires local adaptation, significant budgets, and cultural sensitivity.

Global playbooks rarely translate directly. Japanese clients value local proof, not foreign testimonials, and global surveys without Japanese data are dismissed. Success stories must include local relevance, Japanese-language credibility, and consistent value delivery.

Natural disasters and social stability also shape the business climate — while earthquakes pose real risks, Japan remains a safe, law-abiding, and dependable market with strong infrastructure and a predictable legal system.

Summary: Local adaptation and patience are the real competitive advantages in Japan.

Despite the challenges, Japan remains the world’s third-largest economy. Foreign companies that commit long-term often thrive. There is strong repeat business loyalty, high service standards, and many networking channels via chambers of commerce and international business groups. With strategic positioning, resilience, and local relationship-building, foreign entrepreneurs can find lasting success here.

Summary: Japan rewards perseverance, local insight, and relationship-driven business.

• 70% of companies in Japan are unprofitable, mainly due to high fixed costs and deflationary pressures.

• Talent acquisition and bilingual recruitment are major hurdles for foreign SMEs.

• Marketing and networking require deep cultural adaptation and substantial budgets.

• Success in Japan comes slowly but sustainably with patience, trust, and long-term strategy.

Founded in the U.S. in 1912, Dale Carnegie Training has supported individuals and organizations around the world for over a century in leadership, sales, presentation, executive coaching, and DEI training. Our Tokyo office, established in 1963, continues to empower Japanese companies and multinational corporations to succeed through world-class leadership training, sales training, and executive coaching.