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U.S. Department of State
Japan Country Commercial Guide
Office of the Coordinator for Business Affairs
FY 1996 COUNTRY COMMERCIAL GUIDE
================================
U.S. EMBASSY JAPAN
July 5, 1995
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY
II. ECONOMIC TRENDS AND OUTLOOK
A. Major Trends and Outlook
B. Principal Growth Sectors
C. Government Role in the Economy
D. Balance of Payments Situation
E. Infrastructure Situation
III. POLITICAL ENVIRONMENT
A. Nature of Political Relationship with the United States
B. Major Political Issues Affecting the Business Climate
C. Brief Synopsis of Political System, Schedule for Elections, and
Orientation of Major Political Parties
IV. MARKETING U.S. PRODUCTS AND SERVICES
A. Distribution and Sales Channels
B. Use of Agents/Distributors; Finding a Partner
C. Franchising
D. Direct Marketing
E. Joint Ventures/Licensing
F. Steps to Establishing an Office
G. Selling Factors/Techniques
H. Advertising and Trade Promotion
I. Pricing Product
J. Sales Service/Customer Support
K. Selling to the Government
L. Protecting Your Product from Intellectual Property Rights
Infringement
M. Product Liability Law
N. Need for a Local Attorney
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
A. Best Prospects for Non-agricultural Goods and Services
B. Best Prospects for Agricultural Products
C. Significant Investment Opportunities
VI. TRADE REGULATIONS AND STANDARDS
A. Trade Barriers, Including Tariffs, Non-Tariff Barriers and Import
Taxes
B. Customs Valuation
C. Import Licenses
D. Export Controls
E. Import/Export Documentation
F. Temporary Entry
G. Labeling, Marking Requirements
H. Prohibited Imports
I. Standards
J. Free Trade Zones/Warehouses
K. Special Import Provisions
L. Membership in Free Trade Arrangements
VII. INVESTMENT CLIMATE
A. Government Attitude Toward Private Foreign Investment
B. Bilateral Investment Agreements
C. OPIC and Other Investment Insurance Programs
D. Labor
E. Foreign Trade Zones/Free Ports
F. Capital Outflow Policy
G. Investment Data
H. Major Foreign Investors
VIII. TRADE AND PROJECT FINANCING
A. Brief Description of Banking System
B. Foreign Exchange Controls Affecting Trading
C. General Financing Availability
D. How to Finance Exports/Methods of Payment
E. Types of Available Export Financing and Insurance
F. Project Financing Available
G. List of Banks with Correspondent U.S. Banking
Arrangement
IX. BUSINESS TRAVEL
A. Business Customs
B. Travel Advisory and Visas
C. Holidays
D. Business Infrastructure
APPENDICES
A. COUNTRY DATA
B. DOMESTIC ECONOMY
C. TRADE
D. INVESTMENT STATISTICS
E. U.S. AND COUNTRY CONTACTS
F. MARKET RESEARCH
G. TRADE EVENT SCHEDULE
This Country Commercial Guide (CCG) presents a comprehensive look
at Japan's commercial environment through economic, political and market
analyses.
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annually at U.S. Embassies
through the combined efforts of several U.S. government agencies.
I. EXECUTIVE SUMMARY
As the world's second largest market, Japan offers large-scale
opportunities and strategic benefits for U.S firms. As an expensive,
highly competitive, highly complex and not yet fully open market, Japan
remains, however, a challenging place to do business. To be successful
in Japan, a U.S. company must be committed to taking a long-term
approach to entering the market and building market presence. U.S.
companies with quality, competitive products, that are willing to
undertake the high cost of initial market entry in Japan, can achieve a
respectable market share with attractive profit-levels.
Reasons why U.S. companies should plan to establish a presence in
Japan include, at a minimum: (1) to gather information on Japanese
competition and technology; (2) to develop sales and distribution routes
for the large Japanese market; and (3) to compete with the Japanese on
their own turf, thereby enhancing competitiveness and market share
ultimately in the U.S. Also: (4) to gain access to the Asia-Pacific
market through, for instance, Japan's official development assistance
program, which is the world's largest; and (5) to gain experience
responding to the exacting standards of Japanese customers in order to
support a worldwide quality assurance program.
The U.S. Government has worked energetically to eliminate trade
barriers in Japan -- including barriers in the "Big Emerging Sectors"
and "Best Prospect" industry areas (discussed in Section II) -- through
trade negotiations and high visibility trade promotions. The Commercial
Service of the U.S. Department of Commerce has more than 60 commercial
officers and staff who serve U.S. exporters pursuing opportunities in
Japan. Commercial Service staff are available in the Embassy and in the
U.S. Trade Center in Tokyo as well as in the Osaka, Nagoya, Fukuoka and
Sapporo Consulates; the State Department also assists U.S. business
through the U.S. Consulate-General in Naha, Okinawa. The Agricultural
Trade Office serves U.S. agricultural and food exporters through offices
in Tokyo and at the Osaka Consulate-General. Other U.S. government
agencies including the State, Treasury, Energy and Defense Departments,
are also actively engaged in analyzing economic conditions, negotiating
trade-related agreements, and working with Commercial and Agricultural
Service colleagues.
While U.S. Government efforts are designed to help "open doors"
for U.S. firms, the rest is up to individual companies. To succeed,
companies must plan to develop: (1) financial and managerial
capabilities as well as Japanese speaking staff for Japan; (2)
modification of products to suit Japanese customers, including
translation/metrification of technical manuals and sales literature; (3)
a long term view towards maximizing market share at a reasonable profit;
and (4) careful monitoring of Japanese demand, distribution, competitors
and the government.
Japanese companies compete in a tough domestic market where
customers are still willing to pay a high price for quality. The
Japanese consumer has traditionally been conservative and brand
conscious; however, during the recessionary environment of the past five
years, opportunities are emerging for purveyors of "value." While
group-oriented, conformist buying habits in Japan are prominent, more
fragmented buying habits are emerging among a new generation of more
individualistic consumers, centering on the eight million Japanese
between ages 18 and 21 with disposable income in excess of $35 billion.
Reflecting this, Japan's complex distribution system is now changing
dramatically.
Although much is made of the slogan "internationalization" in
certain circles, Japan remains a highly homogeneous society and business
practice is characterized by longstanding, close-knit relations among
individuals and firms. Regulatory processes and local business
practices in Japan reflect systems designed for indigenous needs with
little or no consideration given to potential participation by foreign
companies. Even for Japanese business people, it takes time to develop
relationships and become an "insider." For a non-Japanese
businessperson, the task is formidable, but not impossible.
Despite these challenges, Japan is the second largest importer of
U.S. goods and services after Canada. Japan's imports of manufactured
goods from the United States increased by 1.2% in 1994 to $40.4 billion,
accounting for 64.4% of total imports from the United States. Although
Japan's overall economic outlook remains cloudy, the outlook for exports
to Japan remains positive. Accelerated by a series of recent economic
stimulus packages and massive undertakings such as the government
project to wire the nation with broadband ISDN, a huge public and
private infrastructure buildup is still underway in Japan as the country
prepares to step into the 21st century. The Japanese government has
committed to spend, between 1991 and 2000, 430 trillion yen (over $5
trillion) on public works, including airports, bridges, roads, port
development projects, and heliports. Large scale private investment is
expected in such areas as intelligent buildings, telecommunications
systems, resorts, retirement communities, marinas, conference centers,
medical cities, and science cities. In short, this is a large economy
that presents good opportunities for U.S. firms.
Underlying the "Best Prospects" in section V are societal trends
which U.S. suppliers can profit from. These include: the aging
population; changing leisure activity and consumerism; environment and
health care; deregulation and decentralization; new distribution
systems; increased information demands; internationalization and
regional integration. The Commercial Service's strategy to tap their
trends includes efforts to broaden outreach to: Japan's regional
markets, keying on Japan's ten regional power utilities which purchase
more than $40 billion annually in non-fuel goods and services;
Government of Japan procurement of goods and services; regional
opportunities from Japan's Official Development Assistance (ODA) program
which in 1994 exceeded $13 billion in mostly untied financing; and
government/industry "partnership initiatives" with the American Chamber
of Commerce in Japan (ACCJ), the American States Offices Association
(ASOA), American Electronic Association (AEA) and other U.S. industry
associations in Japan.
Country Commercial Guides are available on the National Trade Data
Bank on CD-ROM or through the Internet. Please contact STAT-USA at 1-
800-STAT-USA for more information. To locate Country Commercial Guides
via the Internet, please use the following World Wide Web address:
WWW.STAT-USA.GOV. CCG can also be ordered in hard copy or on diskette
from the National Technical Information Service (NTIS) at 1-800-553-
NTIS.
II. ECONOMIC TRENDS AND OUTLOOK
A. Major Trends and Outlook
1. Overview
The Japanese economy, the world's second largest at more than $4
trillion, in JFY 1994 (April 1, 1994 - March 31, 1995) recorded its
third straight fiscal year of sub-1% gross domestic product (GDP)
growth, 0.6% for the fiscal year. Forecasters project continued slow
growth in 1995, but also point to increasing downside risks to the
growth scenario.
Until 1992-1993, Japan had not experienced two consecutive years
of less than 3 percent real growth in the post war period. The late
1980's surge in asset prices and high rates of capital investment and
hiring gave way by 1991 to a period of sharply slower growth, corporate
restructuring, and balance-sheet adjustment by businesses and consumers.
Equities and real estate are still well below their respective peaks,
and continued stock adjustment suggests that private business investment
will be an uncertain factor in this recovery.
In JFY 1994, residential investment and public spending were among
the few bright spots in the economy, as private demand made a barely
positive contribution to overall domestic demand growth. The highly
destructive earthquake which devastated Kobe and the surrounding region
on January 17, 1995, is expected by many analysts to have only a
temporarily depressing effect on economic output, followed by an
economic boost from public and private earthquake reconstruction
spending. Four fiscal stimulus packages between August, 1992 and
February, 1994 injected a substantial amount of public works spending
into the economy; but the spending was exhausted by the end of 1994.
Regular budgets, aside from the four "emergency" stimulus packages and
the supplementals for earthquake reconstruction have been contractionary
in real terms. However, income tax cuts begun in 1994 will continue in
full at least through 1995.
In its external accounts, Japan's current account surplus declined
slightly to $129 billion in 1994 from a record $131 billion in 1993.
The modest decline reflects strong import growth last year, together
with a widening of Japan's deficits in travel and transportation
services, partially offset by continued growth in merchandise exports.
The current account continued to narrow during the first four months of
1995. The seasonally adjusted annualized surplus for the January-April
period totaled $113 billion.
2. The Commercial Environment
The high yen, and overinvestment and overhiring in the 1980's,
have led many Japanese companies to undertake major cost-cutting
efforts. For example, Matsushita Electric Industrial Co. assigned 4,000
middle managers and 1,000 new college graduate employees to work in some
of its 24,000 company-affiliated retail stores, and Hitachi and Hitachi
Household Electric Appliances temporarily transferred 1,500 of their
employees to some of their 8,600 "keiretsu" stores and service
subsidiaries. Since the implied social contract still effectively
prevents large Japanese companies from mass layoffs, many companies are
trying to reduce their payrolls through voluntary retirements, buyouts,
a near freeze on new hiring, or transfers to more profitable areas.
They are also utilizing a Ministry of Labor employment adjustment
subsidy fund for small and medium size companies that are downsizing,
which pays most of an unwanted worker's salary for staying home, going
to training, or for moving to other firms.
The strong yen has also resulted in more Japanese companies moving
production overseas to service export markets, resulting in increased
exports of parts and machinery from Japan, accounting for 40.9% of the
overseas subsidiaries' parts procurement, according to a MITI survey.
But this has not yet led to a large increase of reverse imports back
into Japan: in 1994, the MITI survey showed that reverse imports
actually fell 25%, due to sluggish demand.
As the need to cut costs becomes paramount, long-term keiretsu
supplier relationships are starting to fray. Especially in traditional
manufacturing sectors such as automotive and consumer electronics.
While this development can give overseas suppliers new opportunities in
some areas of the Japanese market, it can also create barriers to market
access as Japanese companies and their traditional suppliers "circle the
wagons" to protect domestic jobs.
While Japan exported $15 billion worth of telephone and radio
equipment to the United States last year, Japanese companies are being
very cautious in investing in multimedia and information delivery. They
have fewer resources to invest than in the heyday of the late 1980's,
directing much of their capital to developing production capability and
markets for their "bread and butter" electronics products in Asia, and
they lack knowledge and have been unable to gain experience in the
Japanese markets in these cutting-edge fields. Ministry of Posts and
Telecommunications regulations have stymied the proliferation of
computer networks, limited cable TV penetration to 5 percent of Japanese
homes and direct satellite broadcasting to 5 channels, and until
recently prohibited sales of cellular phones (Japan has only 2 million
users, compared to 11 million in the United States); and investment in a
nationwide optical fiber network has been delayed. The "mold breaking"
thinking that is required to move into the digital, multimedia future
may not be well served by Japan's educational system, with its emphasis
on conformity and rote memorization. Rather than taking the lead,
Japanese companies seem to be more interested in joint ventures and
investing in minority stakes with U.S. multimedia companies, and may
take a back-seat manufacturing role for some time to come.
New direct investment in Japan by foreign firms totaled just $4
billion during calendar year 1992, according to the Japanese Ministry of
Finance, while outward Japanese foreign investment was $34 billion,
about 8 1/2 times that figure. Increased direct investment in Japan is
crucial to increasing U.S. exports to Japan, as U.S. subsidiaries in
Japan tend to procure parts and finished products from the parent or
other traditional suppliers in the United States. Keidanren, Japan's
Federation of Economic Organizations, believes that foreign direct
investment in Japan will boost Japan's imports, and has stated that
increasing such investment will be the most effective way to dispel
criticism of Japan's closed market.
Many private analysts foresee improved profit and growth prospects
for large Japanese manufacturers in JFY 1995; but prospects are not as
bright for non manufacturers and small-medium firms according to
business surveys. In addition, many analysts note that no one knows
when Japanese commercial real estate prices will recover, nor how long
it will take Japanese financial institutions to dispose of several
hundred billion dollars worth of non-performing loans. Many analysts
see consumption being barely supported by employee income growth.
Spring wage negotiations in 1995 yielded a minuscule average increase of
2.83%. This followed a puny 2.2% increase in nominal, and real (zero
deflator) compensation in FY 1994.
Housing starts have been booming due to a decline in land prices,
construction expenses, and interest rates. Housing starts totaled 1.56
million units in FY 1994, compared with 1.51 million in FY 1993.
Quarterly data showed residential investment slowing in the second half
of CY 1994; but many analysts expect earthquake reconstruction to
support continued housing investment growth in FY 1995. Recommendations
by government advisory groups for deregulation to facilitate import of
inexpensive foreign construction materials in order to lower housing
construction cost, could also support housing investment if the
recommendations are implemented. Housing investment has supported sales
of furniture, electric appliances, and other consumer durables.
The May 1995 Bank of Japan "Tankan" business survey, which covers
almost 10,000 firms throughout Japan, found major manufacturing firms
projecting a 17.5% increase in profit and a 3.2% increase in investment
in FY 1995 (April 1, 1995 - March 31, 1996). Major non-manufacturing
firms, on the other hand, were projecting a 0.1% decline in profits and
only a 1.0% increase in investment. The investment outlook for small-
medium firms in FY 1995 was much darker, with a projected 18% decrease -
in spite of projected 40% profit growth for manufacturers and 5% for
non-manufacturers. Japan's private nonresidential investment/GDP ratio
remains high relative to that of other developed countries, accounting
for 17% of real GDP in Fy 1994.
Japanese companies have in the past been able to slash costs to
remain competitive even as the yen appreciated. And this time as well,
many Japanese businesses have slimmed down by repaying debts, shedding
personnel, and adjusting production. Successful implementation of the
Japanese Government's 1994 deregulation program referred to in this
report will also strengthen Japanese companies' competitiveness. The
Japanese economy, therefore, may emerge from the current slowdown with
many of its traditional strengths intact, however, as of the time of
drafting this report (June 1995), many analysts cite the possibility of
a 'triple-dip' recession.
3. Removing Barriers to Domestic Demand Growth
a. The Role of Consumer Demand
As recognized in the Structural Impediments Initiative and the
Framework Talks, Japan needs to effect fundamental reforms in its
present economy, business practices, financial markets and regulatory
structure, including land reform, in order to unleash consumer demand.
Japan's people are not fully benefiting from their hard work.
Satisfying the latent demand for better housing and social
infrastructure would also create a huge demand for new high-tech
consumer products including home electronics, entertainment and
information as would implementation of a broad and meaningful
deregulation effort.
Unleashing Japanese consumer demand would suck in imports. U.S.
exporters should prepare to take advantage of future deregulatory and
consumer-led growth trends by carefully monitoring Japanese regulatory
and consumer demand changes.
b. Land Reform
Japan has for years portrayed itself as a small island nation with
no natural resources. In fact, Japan has a great deal of land that is
not being allocated well, as was recognized in the 1989 - 1992 bilateral
Structural Impediments Initiative (SII) talks. Much land is kept off
the market by antiquated zoning and tax regulation and even land that
does change hands has been subject, since 1987, to the Land Price
Surveillance System, under which the prefectural governor can "recommend
a suspension or modification of" (in Japan, that means veto) a land
sale. Vast tracts of land suitable for housing and amenities are also
held by the Japanese government, by big business and by urban "farmers"
with their cabbage patches and rice paddies even as close as 30 minutes
from downtown Tokyo, the center of a metropolitan area with a 30 million
population. Japan also has a high rate of capital gains tax for land,
and most residential mortgage interest is not tax-deductible.
While land transactions are constrained by these and other
factors, taxes for holding land are light, the national fixed asset tax
averaging 0.19%. As a result, landowners tend to regard real property
as an asset to be held long-term rather than to be sold for development.
Part of the problem in freeing up land for development is that in the
Japanese economy, land is considered to be the ultimate measure of
wealth. Business loans traditionally are secured by real estate
mortgages, and this practice became highly leveraged in the late 1980's.
In the wake of late 1980's land price inflation and the current stagnant
for land (with prices in a downward spiral), measures are being taken to
increase the availability of land for sale. This should contribute to
increased consumer demand, which is a key to a domestic-led recovery.
In the words of economist Kenneth Courtis, "Releasing the supply of land
onto the market would provide Japan with the basis for a long-term, non-
inflationary, consumer-driven cycle of expansion in the domestic
economy."
Recent deregulation measures have included steps to enhance the
transferability of land. Such deregulation, if followed through, could
create significant opportunities for U.S. exporters.
4. Japanese Consumers' Discovery of "Value" streamlines
Distribution
A priority of the Japanese government is to reduce the consumer
price levels in Japan compared to other OECD countries. Prices are high
because costs are high in part due to government regulations protecting
employment in Japan's inefficient sectors.
Consumers, while still desirous of luxury brand-name goods, now
increasingly demand good value, too. In surveys, housewives in their
20's state that they shop at stores which offer the greatest discounts.
Changes are now starting to appear in Japan's distribution system to
give consumers a wider choice of products, including imports, and lower
prices, too.
Discount stores have been increasing in number and sales volume.
The total sales volume of discount stores has reached 5 trillion yen,
about half that of department stores. Under new regulations any store
with more than 500 but less than 1,000 square meters may be opened by
notification to the government only. Large-scale stores may freely stay
open until 8:00 p.m. Such stores may stay open until 9:00 p.m. up to 60
days per year, and need stay closed only 24 days per year, without
reporting to the government.
Major discount chains such as Daiei have introduced their own
private brands of film, orange juice, detergent and other products,
using imports, at substantial discounts from Japanese name brands. The
system of manufacturer-set prices for beer, recorded music and books
collapsed or was in the process of collapse in 1995. These and other
trends have served to bring down prices of some of these products across
the board. Japanese consumers are increasingly seeking value for their
yen.
More and more stores are defying manufacturers' suggested retail
prices and are setting their own prices. Manufacturers of home
appliances and other goods are also starting to deliver products to
stores without suggested list prices.
5. Travel and Tourism Outlook
The two-country effort initiated in June 1994 to double the number
of tourists between the U.S. and Japan to 8 million persons by the year
2000 has already begun to show positive results. Japanese arrivals in
the U.S. in 1994 increased by 13.4% over 1993 to over 4 million persons,
generating tourism export earnings exceeding an estimated $20 billion
for our country. A $3 million fully-integrated promotional campaign,
funded cooperatively by public and private sector tourism interests of
both countries, is being launched in 1995, which, coupled with the
vastly increased purchasing power of the yen, is certain to generate
substantial increases in the U.S. travel trade surplus with Japan which
in 1994 is estimated to have amounted to well over $13 billion.
6. Agricultural Trade Outlook
Japanese agricultural production is steadily contracting on a
year-by-year basis, with key sectors seeing decreasing production in
most years. Cereals, rice, dairy, beef and pork, and fruits and
vegetables are all sharing this decline to greater or lesser degrees.
Although agricultural liberalization is often used as a scapegoat
for the problems facing Japanese farmers today, there are other
structural factors which threaten the future of Japanese agriculture.
Without major reforms, the agricultural sector cannot offer the
opportunities that Japanese youth can find in the still-growing
industrial sector. Efficiency is hampered by the small and scattered
nature of farm lands, and by inordinately high input costs. Farmers are
limited, by the government and the cooperative system, in their ability
to make decisions regarding production, pricing and marketing. As a
result, young people continue to leave the family farm--only about 2,000
agricultural school graduates born to farm families continue the family
occupation in a typical recent year. On the other hand, of Japanese who
identify themselves as being "mainly" farmers, 63 percent are over age
60, while another 16 percent are over age 50. As these older farmers
begin to retire in the coming decade, they will by and large not be
replaced. The land these retirees have tilled will likely not be
consolidated into larger plots, however, due to Japan's archaic land use
laws that make it virtually impossible to sell or rent out farm land.
The result is that Japan may loose up to half of its current core
farmers and, with them, a large share of current planted acreage. This
implies tremendous shortfalls in local supply in the next decade, which
will need to be answered with increased imports. This spells
outstanding opportunity for U.S. exports of both primary and processed
agricultural products.
At the same time that local production is posed for a precipitous
decline, access for imported agricultural products has never been
better. Due to persistent negotiation by the United States and others
throughout much of the 1980's and 1990's, Japan has eliminated many, if
not most, of the agricultural market access barriers for which it was
once famous. Where previously, quotas and outright bans restricted the
market for U.S. beef, citrus, fruit juice, cherries, apples, and ice
cream, all of these markets have now been opened. While some problems
remain, especially technical issues concerning food additives and phyto-
sanitary barriers on fruits and vegetables, the Japanese market,
contrary to popular belief, is substantially open to U.S. food and
agricultural products.
The combination of this radically improved market access and
declining domestic production has resulted in phenomenal export growth
for American agriculture. Already the largest importer of U.S.
agricultural products, Japan may increase its agricultural imports from
the U.S. by $1 billion per year each year until the turn of the century.
1994 imports of U.S. agricultural products (not including forest
products) reached $11.8 billion, up from $10.8 in 1993. Export stars
include beef, pork, ice cream, broccoli, asparagus, frozen vegetables,
cherries, and processed snack foods.
7. Regional Outlook
a. Tokyo and the Kanto Region
Tokyo, Japan's sophisticated capital and the surrounding
prefectures of Kanagawa, Saitama, and Chiba, occupy the largest flat
area in Japan called the Kanto Plain. Together, these four prefectures
have a population of over 31 million, equivalent to the New York and Los
Angeles metropolitan areas combined. Tokyo is the governmental,
business, higher education, information, media, fashion and cultural
center of Japan, corresponding to Paris or London. Most major Japanese
companies, trade associations, and U.S. companies have their
headquarters or major branches in Tokyo. Kanagawa, which includes the
cities of Yokohama and Kawasaki, is by far the richest prefecture in
Japan, with a per-capita income of over 4.5 million yen (about $43,000),
almost 50 percent above the Japanese average.
A presence in Japan usually means a presence in Tokyo. Despite
high rental costs, most U.S. companies locate in Tokyo because of the
need to interface with their Japanese customers, to obtain market
information, and in many cases, to handle relations with Japanese
Government ministries. Consumers in Tokyo are more likely to come into
contact with foreign products, food and styles than elsewhere in Japan.
Also, consumer styles and fashions emanate from Tokyo in avidly read
magazines as well as the television networks.
In addition to programming, consumer goods, value-added food
products, apparel, furniture and automobiles, good export prospects to
the Tokyo area include medical products, computers and
telecommunications hardware and software, and business services.
The U.S. Embassy works closely with the 700 member companies,
2,400 individual members, and 40 committees and sub-committees of the
American Chamber of Commerce in Japan in promoting U.S. business
interests in Tokyo and throughout Japan.
b. Osaka and the Kansai, Chugoku and Shikoku Regions
"Kansai" is the seven-prefecture region of west central Japan
centering around the cities of Osaka, Kobe, Kyoto and Nara, with a
combined population of some 22 million people. The traditional merchant
center of Japan, the Kansai is an economic giant with a GRP (gross
regional product) of nearly $1 trillion in 1994, larger than Korea,
Taiwan, Hong Kong, and Thailand combined, accounting for over 3 percent
of the entire world's GNP.
Kansai local governments (Hyogo and Osaka Prefectures, and Kobe
and Osaka Cities, in particular) have aggressive major development plans
of over $400 billion alone in the 614 projects (out of a total of 881)
for which cost estimates are available. Future projects such as
Technoport Osaka and Osaka International Culture Park City, will include
continued massive land reclamation and building complexes for
commercial, industrial, and research facilities, as well as bridge
construction, expected expansion of the new offshore Kansai
International Airport, and construction of a new regional airport
offshore Kobe. The private sector will be investing heavily in the Kobe
region to replace homes and commercial buildings destroyed or damaged in
the January, 1995 Great Hanshin Earthquake. U.S. companies should have
growing opportunities to participate in these projects in coming years.
The Kansai offers many advantages to American companies looking to
enter the Japanese market: labor and housing costs much lower than
Tokyo; superb transportation, communication, and other infrastructural
support; average office rental prices approximately 50% of Tokyo's; a
business orientation (as the home of tens of thousands of companies, and
the center of Japan's textiles and apparel, chemicals, pharmaceuticals,
and sporting goods industries); and a long history of a willingness to
innovate.
The Osaka-Kobe Consulate General, including CS Osaka and the
Foreign Agriculture Service, works closely with Japanese and U.S.
business organizations such as the Kansai Chapter of the American
Chamber of Commerce to promote American exports to the Kansai.
The Consulate General also promotes U.S. business in the Chugoku
region, centering on the growing industrial cities of Hiroshima and
Okayama; Shikoku, which is seeing renewed growth due to three bridge
construction projects linking Shikoku island to Japan's main island of
Honshu; and Hokuriku, on the Japan Sea.
c. Nagoya and the Chubu Region
Nagoya, capital of Aichi Prefecture and hub of the
8-prefecture, 20-million population Chubu region of central Japan, is
Japan's third largest metropolitan area, after Tokyo (225 miles to the
east) and Osaka (125 miles to the west). Aichi, with neighboring Mie
and Gifu Prefectures, comprises the Nagoya Consular District. The Chubu
is the core of Japan's automotive, aerospace, machine tools, and
ceramics industries. Along with neighboring Shizuoka Prefecture, the
region has a GDP as large as Canada's and accounts for almost half of
Japan's trade surplus with the U.S.; Aichi Prefecture alone accounts for
over 80% of that trade.
Top U.S. aerospace/defense firms are active in technical tie-ups
and production arrangements. Over ten U.S. auto parts firms have set up
Nagoya operations to serve Japanese makers. The Chubu features several
major projects, public and private, attractive to U.S. firms: the Aichi
Health Forest, the Japan Railways (JR) Tokai Central Towers, the Nagoya
Dome, the Nagoya International Design Center, and the proposed $10
billion Chubu New International Airport. CS Nagoya has worked closely
with American business to develop the 80-member American Business
Community of Nagoya (ABCN) into the recognized "Voice of American
Business in the Chubu." And US&FCS Nagoya's joint Made-in-the-USA
initiative with ABCN has significantly boosted sales of a wide range of
consumer goods -- cars and cookware to fashion and furniture, even
housing -- in the Chubu.
d. Fukuoka and the Kyushu-Yamaguchi Region
The Kyushu-Yamaguchi region, lying 700 miles west of Tokyo is one
of the most rapidly developing areas of Japan and is quickly turning
into a third economic center, following the Tokyo and Osaka districts.
More important, with its close proximity to Asian countries, the region
is positioning itself as Japan's gateway to Asia, setting the pace for
economic, political and cultural ties with Japan's Asian neighbors.
Kyushu-Yamaguchi, with a land area the size of Switzerland or Holland
and a population of 15 million, has an annual economic output of over
Yen 45.88 trillion (FY92, $540 billion at current rate of 85 Yen/USD).
Its economy is larger than that of Korea and Taiwan combined, and
roughly equal to that of Australia. The region, known as Japan's
"Silicon Island" because it accounts for 42 percent of Japan's total
semiconductor chip output, also represents about 10 percent of Japan's
motor vehicle production.
Particularly good business prospects in the Kyushu-Yamaguchi
region may be found in the areas of electronics and computers,
architecture, design and construction, medical equipment and
agricultural products. In addition to Fukuoka city's multi-billion
dollar man-made island project due to be completed in 2003, plans have
been made to obtain funding from the Government of Japan to start
construction of a new Fukuoka International Airport within the next ten
years. A separate plan to construct a Kyushu International Airport is
also being discussed to serve as a full-fledged hub for western Japan
and nearby Asian countries.
The Fukuoka Consulate works closely with the Fukuoka American
Business Club, an organization of 32 companies which promotes the
interests of U.S. firms in the region.
e. Sapporo and the Hokkaido and Tohoku Regions
Northern Japan, consisting of six prefectures in the Tohoku region
centering on Sendai, 250 miles north of Tokyo, and the island of
Hokkaido, whose largest city is Sapporo, 700 miles from Tokyo, has a
gross regional product (GRP) of $435 billion. Northern Japan's direct
imports from the U.S. totaled about $2 billion in 1993, but indirect
imports via Tokyo and Kansai double this figure, to over $4 billion.
Sapporo, Hokkaido's capital of 1.8 million people, and Sendai, with a
population of almost 1 million people, are responsible for more than
one-third of total sales in the region.
The home building products, processed foods, personal computer
products and outdoor leisure goods (including RV's) are particularly
promising import sectors in Northern Japan. The region's two major
international airports, in Sapporo and Sendai, continue with expansion
plans. In recognition of the growing economic ties with Russia's far
east, another airport in Hakodate (Hokkaido) has added regular flights
to Sakhalin. In Tohoku, a dynamic high technology sector increasingly
takes center stage, with growth rates well above the national average.
Direct import container traffic is increasing in ports of Tomakomai
(Hokkaido), Hachinohe, and Sendai.
U.S. Consulate-General Sapporo welcomes U.S. companies to explore
there and other export opportunities in Northern Japan.
f. Okinawa
Okinawa prefecture, population 1.2 million, consists of the sub-
tropical Ryukyu Islands 2 1/2 hours south of Tokyo by air. Okinawa's
economy depends heavily on tourism, government public investment,
services and construction. The prefectural government has invested
heavily in strengthening the tourism infrastructure, and a number of
additional high-quality resort hotels are in the planning and
construction stage. Okinawa offers U.S. suppliers in potential business
opportunities in architecture and interior furnishings for resort
hotels, and in related fields. Companies specializing in
outdoor/leisure activities, including sporting goods, marinas, boating
and fishing equipment, and related services may also find attractive
business opportunities in Okinawa. In addition, the southern islands of
Miyako and Ishigaki are the sites of large tourism development projects.
Okinawans are particularly receptive to the introduction of American
products, due in large part to the influence of the long U.S.
administration of Okinawa which ended in 1972 and the still-continuing
large U.S. military presence. A major infrastructure project, the new
Naha Airport terminal, is scheduled to begin construction in 1995. U.S.
companies are served by the U.S. Consulate-General in Urasoe City, on
the main Okinawa Island.
8. Special U.S. Department of Commerce Programs for Japan
a. USDOC-MITI Trade Promotion Cooperation Program
The U.S. Department of Commerce-Ministry of International Trade
and Industry Trade Promotion Cooperation Program (TPCP) was established
in April, 1993 as an expansion of an earlier joint program to increase
the level of U.S. exports in the Japanese market. The TPCP enhances the
independent trade promotion activities of the two governments and
encourages the business communities of both nations to pursue trade
opportunities aggressively. The program, administered by CS Japan,
MITI, JETRO and MIPRO, encompasses the following areas:
Data and Information Exchange
Market Research
Trade Events
Cooperation on Specific Trade Expansion Initiatives
Trade Facilitation Services
In addition, representatives of both governments work together to
promote and enhance the operation of the Japan Corporate Program.
b. Japan Corporate Program
The Japan Corporate Program is a major initiative started by the
U.S. Department of Commerce in 1991, to increase the number of American
firms competing effectively in Japan. Twenty companies, reflecting a
cross-section of small, medium and large firms in a variety of
manufacturing sectors across the United States, agreed to participate in
the program.
Each company entered into a significant five-year commitment to
develop its export market in Japan which included: (a) making four or
more visits to Japan, including at least two by the chief executive
officer, each year; (b) producing product literature in Japanese; (c)
participating in at least one trade event in Japan each year; (d)
establishing the necessary after sales service facilities for customers;
and (e) modifying or developing products to meet the needs of Japanese
end users. The Department of Commerce likewise dedicated significant
resources to assist the companies in their marketing efforts. Under the
joint USDOC-MITI Trade Expansion Cooperation Program, Japanese
Government agencies involved in import expansion pledged to assist the
market development efforts of these companies.
The commitments represent standards that other companies seeking
to enter the Japanese market should strive to meet as essential to
successfully entering the Japanese market. In the final year of the
program, with funding furnished by Senator Kerry's amendment to provide
greater assistance to U.S. exporters to Japan, professional case studies
of each JCP firm will be prepared. These case-study 'wrap-ups' will be
used to assess the program and, more importantly, to disseminate the
lessons learned by these companies and give a road map for success in
Japan to all interested U.S. companies.
B. Principal Growth Sectors
The Japanese economy remains slow. At the same time, housing
starts have been booming thanks to an extremely easy money policy and
falling land prices; and the hot housing market has fueled sales of
furniture, appliances, and amenities. The influx of foreign made
products, that are real bargains because of the strong yen, has sparked
price wars in the retail market. Japanese businesses have slimmed down
by repaying debts, shedding personnel, and adjusting production.
Over the next several years, a multitude of new opportunities will
be seen in regional markets outside Tokyo as price-pressured key buyers
show increased receptivity to foreign-supplied goods: in infrastructure
buildup, as the tremendous economic growth of the late eighties brought
a need for airports, information technology infrastructure, and housing;
in leisure, as the Japanese worker finds more time and money to spend
off the job; in retirement communities and health care with the
"graying" of Japanese society (by 2025, Japan will have the highest
percentage of the elderly in the world) as well as in meeting the needs
of the handicapped; and in changing and broadening consumer tastes, as
the Japanese consumer has become more cosmopolitan with greater exposure
to foreign products. Major opportunities are described below in greater
detail.
1. Big Spending By Japanese Power Firms
Japan's ten regional power companies and their telecommunications
subsidiaries, all New Common Carriers (NCC's), collectively represent a
regional market of over $36 billion annually over the next few years in
purchases of non-fuel materials and equipment. Under pressure to reduce
electricity charges to customers, the power companies and their NCC's
are actively expanding international procurement, seeking products and
equipment that will help them streamline operations and provide cost-
effective, competitive services. Fueling this movement is the recently
revised Electric Utilities Industry Law, to be implemented starting
April 1, 1996, which will introduce competition into the Japanese
regional power industry. The power companies are actively procuring
generating, transmission and distribution equipment, and the NCC's are
considering procurement of advanced information communications
technologies, including frame relay, ATM switches, LAN's, and digital
multiple channel access technologies. Collectively, the power companies
and their NCC's are engines of regional economic growth, investing in
regional development projects.
2. Japanese Government Procurement
Following recent Framework Agreement, there are potentially
excellent opportunities for U.S. companies to sell to Japanese
Government entities, especially in the fields of computers,
telecommunications, medical equipment, and construction services.
In recent years, the Government of Japan has taken several
measures to increase access for foreign suppliers to the government
procurement market. They have voluntarily expanded the number of
agencies and lowered the threshold procurement amount covered under GATT
rules. In addition they have revised the following procurement
activities so that they now: 1) hold annual seminars to provide
anticipated procurement information; 2) provide more transparency
through public announcements; 3) provide advance notice of single
tendering procedures; 4) provide separate Kampo announcements for
procurements under GATT; 5) provide an on-line system for INTERNET
access to all GOJ procurement announcements at
"http://www.jetro.go.jp/."; 6) use the overall-greatest-value evaluation
method for telecommunications and medical technology products over
800,000 SDRs; and 7) use complaint review procedures.
The new Action Program has opened a wide range of construction
projects to open competitive bidding and now construction tenders are
regularly announced in the "Kensetsu Kogyo Shimbun/Kensetsu Tsushin
Shimbun". Under the "WTO" Agreement which will go into effect, January,
1995, 47 prefectures and 12 government ordinance-designated cities will
improve opportunities for motivated U.S. companies to sell to the
Japanese Local Governments.
3. Recent Changes in Japanese Business Practices
Between 1952 and 1990, Japan's gross national product increased at
a rate of almost 7 percent per year in constant 1985 dollars. But
following the overheated years of the late 1980's, the strong yen and
the retrenchment in Japan's economy are now bringing major changes in
some Japanese business practices. These changes--in both the
manufacturing and distribution sectors--will open new opportunities for
aggressive U.S. companies. These are some of these changes:
a. Japanese Production Moves Offshore, Creating New
Opportunities in Japan
An increasingly super-charged yen in 1995 has exacerbated the
difficulties faced by Japanese exporters. Everyone is looking for ways
to reduce costs, in many cases just to survive. Faced with the world's
highest operating costs domestically, more and more firms are
establishing factories in countries with far lower labor and material
costs such as China, Thailand and Indonesia. They are also looking for
lower-cost sub-component supply sources to lower their bottom line:
Japanese manufactures are finding it harder to restrict their parts
purchases to traditional keiretsu-family suppliers and are looking for
ways to bring in high-quality, low cost components and materials from
foreign suppliers.
This trend is creating many opportunities for the U.S. exporter.
New industries are appearing in Japan as foreign goods become affordable
-- and trendy among consumers. Imported housing was for years
considered an eccentric luxury for the wealthy. Now, U.S.-style housing
is recognized as a great value -- offering superior earthquake
resistance, high quality, and plenty of room at an affordable price.
Foreign direct marketing and catalog sales are yet other examples of
industries that were all but unknown a few short years ago.
Foreign direct investment into Japan, still a paltry one-sixteenth
of what Japan invests abroad, may be facing a brighter future as Japan's
manufacturing center "hollows out." Also, as older, more labor-
intensive manufacturing facilities close, scarce land becomes available
for new uses. For example, Sanyo Electric Ltd. recently completed an
imported housing project on the site of one of its shuttered consumer
electronics factories. Unemployment, now at record highs in Japan,
means that increasing numbers of highly skilled workers are available at
competitive salaries. On the public side, the government of Japan is
also expected to further its efforts to grant tax breaks and other
incentives to attract more overseas investors. (see V.C. and VII.)
b. Consumers Look for Value as Pricing and
Distribution Systems Change
In the early 1990's, Japan expressed its intent to reduce consumer
prices to levels comparable to other OECD countries. There has been
little progress in reaching this goal. Prices in Japan reflect very
high costs of land, distribution, labor, and government regulations
protecting employment in inefficient sectors. US&FCS Japan estimates
that Japanese consumer prices are on average 40% higher and prices of
U.S. goods in Japan are typically 70% higher than in the U.S.
Japanese consumers remain remarkably uncomplaining of the high
cost of consumers goods. This is partly due to limited opportunities to
compare domestic with overseas prices. However, pinched by high costs
they are leaning more towards discount stores, low-cost private brands,
and imports. The total sales volume of discount stores is now over 5
trillion yen annually. Major discount chains are introducing their own
private brands usually sourced overseas.
Japan's high-priced department stores, which have suffered month-
on-month declines in sales for 39 consecutive months as of June 1995,
are starting to change their traditional consignment sales practices.
Although Japanese consumers want later store hours and more days open
per year, these are still controlled by Japan's Large Scale Retail Store
Law.
The distribution strangle hold by Japanese manufacturers is
dissipating. In the past, manufacturers and wholesalers agreed to
rebate schemes, strategies and prices. Manufacturers who perfected
this system during an era of rapid economic growth are now finding it
hard to show profits in an age of slower growth.
Japanese manufacturers of home electric equipment, toys, and food
products are starting to abandon manufacturer-set pricing in favor of
open pricing. Price-cutting discounters and retailers armed with point-
of-sale computers do not demand the right to return unsold goods, but in
return demand far lower prices from suppliers and are bypassing Japan's
huge number of wholesalers, going directly to manufacturers for supply -
- including manufacturers outside Japan. Department stores are also
starting to procure from overseas suppliers, using their own buyers.
4. Marketing in Synch with Changing Consumer Attitudes
Market surveys show that good marketing, not necessarily
practicality, moves products. U.S. companies should pay particular
attention to the high-spending generation of Japanese consumers aged
roughly in their 20's. They tend to be single, live at home, own credit
cards, have an extremely high percentage of disposable income (often
100%), and have affinities for U.S. music, food, and clothing.
5. The Numbers of Elderly and Handicapped are Growing
DSR (Disabled, Senior citizen, Rehabilitation) products and
services will explode in the next thirty years. By the year 2020, one
Japanese in four is expected to be 65 or older. Demand for medical
products, home health care, home living aids for the elderly,
wheelchairs, etc. is a certainty. Demands are increasing for U.S.-led,
high-tech systems such as Electronic Data Interchange (EDI) and home
oxygen and home infusion therapy. DSR-related public infrastructure
will increase -- Japan is thirty years or more behind the U.S. and
Europe. A Japanese law requiring public access for persons with
disabilities could be a reality in a few years; and a Japanese version
of the Americans With Disabilities Act could result in mega-
opportunities for competitive U.S. firms.
6. Catalog Sales Will Do Well
Annual sales of Japanese mail order alone are now estimated to be
in the $20 billion range. Direct marketing, which grew at double-digit
rates during the early 1990's, is expected to keep booming due to a
supercharged yen and increased efforts on the part of U.S. catalog
firms. A U.S. Embassy-sponsored "American Catalog House," showcasing
U.S. catalogs in Tokyo and Osaka in the second half of 1995, was so
successful that an expanded six-month event is taking place in Tokyo and
Osaka and plans call for roughly a dozen permanent ACH sites throughout
Japan on a fully privatized bases. The receptivity is a reflection of
the fact that catalog sales, especially of imported products, are cost
effective and convenient for the consumer: the numbers of double-income
families and working single women are large and increasing.
7. Japan's Consumers Demand High Quality and Affordable
Housing
Surveys have shown that Japanese houses are two to three times
more expensive than equivalent American houses, and many Japanese people
are not satisfied with either the quality or price of their current
housing stock. In contrast, imported American-style homes are regarded
as offering high quality, low cost, and earthquake resistance. The
Japanese Ministry of International Trade and Industry (MITI) and the
MITI-affiliated Japan External Trade Organization (JETRO) are now
actively promoting the import of high quality, affordable houses from
North America and Europe. The Ministry of Construction (MOC) also has a
goal of trying to cut the cost of housing 33% by 2000, and is
encouraging imported houses and building materials. The Hyogo
Prefectural Government has announced a three-year plan to rebuild
125,000 housing units destroyed in the Great Hanshin Earthquake of
January 17, 1995. Hundreds of U.S. companies in the building materials,
manufactured housing, and home building industries are already starting
to work with Japanese companies to build American-style 2x4 platform
frame construction homes in Japan, despite the problem of regulatory
barriers affecting some materials that will take several years to
resolve.
8. Value Added Foods
Access for imported agricultural products has never been better.
Japan has eliminated many, if not most, of the agricultural market
access barriers for which it was once famous. Where previously, quotas
and outright bans restricted the market for U.S. beef, citrus, fruit
juice, cherries, apples, and ice cream, all of these markets have now
been opened. The Japanese market, contrary to popular belief, is
substantially open to U.S. food products. Already the largest importer
of U.S. food products, Japan may increase its food imports from the U.S.
by $1 billion per year each year until the turn of the century. Export
stars include processed beef, pork, ice cream, broccoli, asparagus,
frozen vegetables, cherries, snack foods, fishery products and beer.
C. Government Role in the Economy
Japan's bureaucracy, created in 1868, predates Japan's first
constitution. Power is concentrated in 12 ministries and 10
ministerial-sized agencies located within a 300 meter radius circle in
downtown Tokyo. All major policies are decided by the ministries in
Tokyo, while prefectures and municipal governments merely implement
them. Their power over the Japanese economy comes from the thousands of
required licenses, permits and approvals that tightly regulate business
activity in Japan, and by informal, but in practice virtually
compulsory, edicts called "administrative guidance."
Business in Japan traditionally has maintained very close
relations with the bureaucracy and politicians. Japanese politicians
have depended on contributions by big business. Big business also
provides lucrative employment for high-level bureaucrats who leave
government service. Bureaucratic paternalism blocks new companies from
entering the market and pushes up prices. Politicians depend on
bureaucrats to draft policies and are more akin to lobbyists to the
bureaucracy than legislators or policy makers.
Until 1980, the Japanese Government controlled access to the
market by allocating foreign exchange and by allowing foreign
investments depending on the amount of technology transfer to Japanese
companies. Now the Japanese Government, in addition to enforcing
regulations, is setting "industrial policy." The popular view is that
the proper role of a national government is to lead industry into higher
value-added manufacturing. The idea that the "market" should lead the
people to a higher standard of living through its "invisible hand" is
notably lacking. Rather, the view is that the government's role is to
remedy the defects of the market which may translate into a "protective
attitude" when it comes to foreign competition and the potential
introduction of new products from the outside. Although Japanese
businesses have prospered for many years in a tightly regulated
environment, in Japan's current recession, they are now calling for
deregulation because they can deal with foreign competition and that the
government's over-regulation is only protecting inefficient small
companies while forcing manufacturing to move off shore. Japanese
bureaucrats are now being criticized by the public for being arrogant,
obstinate, and against deregulation because they want to protect their
own interests.
While American companies do start at a serious disadvantage, it is
increasingly possible to participate in the market after establishing a
presence in Japan. The Japanese Government has removed most of the
legal restrictions on exports to and foreign investment in Japan, and is
actively seeking ways to increase both. The U.S. and Japanese
governments continue to work on removing anti-competitive and
exclusionary business practices through bilateral dialogue.
While the Japanese system is very different from the U.S. system,
U.S. companies can be successful in adapting to it and make it work for
them. Roughly 220 of the U.S. Fortune 500 companies have a direct
commercial presence in Japan, and 45 of the 50 leading U.S. exporters do
so, as well. The 700-company, 2400-member American Chamber of Commerce
in Japan (ACCJ) is the largest overseas AmCham in the world, and its 40-
plus committees and sub-committees are highly visible as lobbyists for
U.S. business interests. U.S. Embassy officers are liaison to over 20
of these committees, and work closely with the ACCJ on market access
issues. Some knotty regulatory barriers and discrimination do still
exist and when a company cannot solve such problems by itself or through
its legal advisers in Japan, the U.S. Government stands ready to help.
D. Balance of Payments Situation
Japan's chronic trade surplus with the United States grew to $66
billion in 1994 from $58 billion in 1993, while Japan's global current
account surplus shrank modestly, from a record $131 billion in 1993 to
$129 billion last year. The stable global surplus when measured in
dollar terms disguises a significant decline when measured in yen or
volume terms. The so-called "J-curve" effect resulting from the yen's
24 percent appreciation during 1993 and 1994 disguised a 9 percent
decline in the 1994 current account surplus when measured in yen.
The underlying real decline in Japan's current account surplus has
begun to be reflected in the dollar totals as well. For the first four
months of 1995, the seasonally adjusted annualized surplus came to $113
billion, 12 percent below the 1994 total, as imports grew more rapidly
than exports.
Many private economists expect the downward correction in the
current account to slow later in 1995, as the yen's renewed rise brings
another round of "J-curve" effects. Most economists expect the real
correction in the underlying balance to continue, or perhaps even to
accelerate as a result of the yen's recent rise. The consensus of
private forecasts is therefore of a continued decline in the dollar
value of the surplus during 1996.
E. Infrastructure Situation
Japan has a fully developed physical infrastructure of roads,
highways, railroads, airports, harbors, warehouses and
telecommunications for distribution of all types of goods and services.
Japan is also engaged in a large expansion of public works projects both
to enhance the business infrastructure and to help stimulate the
economy.
However, there remain major problems with Japan's physical
infrastructure which impedes distribution of imports. In part due to
over-centralization in the major cities, high land prices, and
regulations restricting large stores, Japan's retail stores are small,
lacking adequate shelf space. As a result, they require frequent
stocking by wholesalers using small trucks that can navigate the narrow
streets. Together with the demand by manufacturers of just-in-time
parts and components delivery from subcontractors, this results in huge
numbers of trucks on inadequate urban roads and highways during daytime
business hours, slowing traffic to a crawl in major urban centers. In
effect, a substantial portion of Japan's warehouses are the four-wheeled
variety, using public land (the roads).
The great Hanshin earthquake devastated the busy cargo facilities
in Kobe. This has placed greater pressure on ports such as Yokohama to
the north and pushed up inland freight costs. This congestion and
diversion of cargo may continue for through 1996.
III. POLITICAL ENVIRONMENT
A. Nature of Bilateral Relationship with the US
Japan's political relations with the United States are anchored in
the U.S. - Japan Security Treaty, and characterized by close cooperation
on many important bilateral and multilateral issues. The U.S. - Japan
security relationship is widely perceived as contributing to the peace
and prosperity of both Japan and the Asia/Pacific region. On many
important foreign policy issues, Japan's policies complement those of
the United States. For example, Japan and the United States are
cooperating closely through the so-called Common Agenda to tackle such
global problems as AIDS, population growth, and protection of the
environment.
It is the U.S. Government's intention not to allow tensions over
the bilateral trade imbalance to erode the security and political
dimensions of this vital relationship.
B. Major Political Issues Affecting the Business Environment
The realignment of the Japanese political system, which began in
1992, is continuing. It will probably take several years before all the
consequences of the new electoral system for the Lower House of the
National Diet, which was adopted in 1994, make themselves felt. In the
meantime, most observers believe that Japan could continue to be
governed by coalitions as the political landscape continues to evolve.
As a result, difficulties in coalition management could complicate
passage and implementation of deregulation initiatives and
administrative reform.
C. Brief Synopsis of Political System, Schedule for Elections,
and Orientation of Major Political Parties
Japan is a strong democracy in which basic human rights are well
respected. Under the constitution and in practice, the Emperor's role
is essentially symbolic. Japan has a parliamentary form of government.
The head of government, the prime minister, is elected by Japan's
parliament, the National Diet. Elections to the Lower House, the more
powerful of the Diet's two chambers, are held at least once very four
years.
Upper House elections are held every three years, at which time
half of the membership is up for election. Most of Japan's political
parties espouse moderate or conservative domestic and foreign policies.
IV. MARKETING U.S. PRODUCTS AND SERVICES
Marketing U.S. products and services is discussed in detail in the
Japan Export Guide "Destination Japan: A Business Guide for the 90's
(Second Edition)" prepared by the U.S. Department of Commerce and
contained in the National Trade Data Bank. The following section (items
A-N) is adapted and abridged from "Destination Japan."
A. Distribution and Sales Channels
1. Consumer Goods
Difficulties with Japanese distribution are partly socio-cultural
in nature. Many Japanese are hesitant to disrupt longstanding
relationships with suppliers -- even when a U.S. supplier can offer a
vastly superior product at a far lower price. While a retailer or
wholesaler may fear retaliation from existing Japanese suppliers, they
may also fear that a U.S. supplier will not make timely shipments or may
lack after-sales service ability. These doubts stem in part from a
traditional lack of willingness to do business with strangers. A
presence in Japan and a commitment to develop relationships with
Japanese business people is crucial to overcome this hesitancy.
About half of all consumer purchases are made at neighborhood "mom
and pop" stores (with five or fewer employees) and these stores rarely
carry imported goods: they often have financial, ownership, or
exclusive arrangements with major Japanese manufacturers, industrial
groupings (keiretsu), or trading companies. They also have insufficient
space to maintain large inventories. The number of smaller retailers is
declining, however, and the emergence and growth of self-service
discount stores and "superstores" is also helping to reduce the layers
in the distribution system and make imported goods more price
competitive.
Imported consumer goods have been traditionally sold at larger
outlets such as department stores and discount houses. Distribution is
characterized by close relationships between importers and multiple
layers of wholesalers and retailers. Recently, direct importing --
bypassing trading houses and as many other intermediaries as possible --
is increasingly popular as a method of reducing costs.
2. Capital Goods
Direct sales are more common for expensive, high-tech equipment.
In some capital goods sectors, Japan has a number of small firms which
function as subcontractors for larger manufacturers. For example, in
the auto sector most parts are supplied through a tight network of small
and medium-sized keiretsu companies that have a long and close 'design
in' working relationship with the manufacturer. Small and medium-sized
firms supply the majority of manufacturing industries with most of their
products. To sell to these firms, it is often necessary to work through
several layers of wholesalers and develop relationships with product
engineers and designers.
B. Use of Agents/Distributors; Finding a Partner
1. Use of Agents
Establishing a presence in Japan is the best way to penetrate the
Japanese market, but can be a prohibitively expensive strategy to
launch. The use of agents/distributors is a more realistic marketing
strategy for the small/medium U.S. firm but requires extra care in the
beginning.
Distributors in Japan usually cover a specific territory or
industry. Import agents are usually appointed as sole agents for the
entire country. While exclusivity may be necessary to ensure a strong
commitment by the Japanese agent towards expanding sales, a U.S. company
should not be pressured into giving up control of the market if there is
doubt as to the ability or willingness of the Japanese company to expand
sales of the product. A limited term of representation, minimum sales,
or qualitative indicators of sales efforts, may be recommended in
exclusive agency contracts.
While the Japanese Fair Trade Commission has guidelines applicable
to exclusive agency contracts, there are no statutory damages required
upon termination of an agency contract. However, replacing a Japanese
agent or distributor is difficult in Japan if not handled extremely
sensitively given the close-knit nature of business circles and the
traditional distrust of foreign suppliers.
2. Finding a Partner
A common mistake made by many U.S. firms is to try to use a list
of importers as a means of first contact. The Japanese prefer to do
business with someone only when they have been properly introduced and
meet face-to-face. Instead, introduction by a "go-between" serves to
vouch for the reliability of both parties. This will help dispel
reluctance on the Japanese side. Appropriate third parties can be other
Japanese firms, U.S. companies that have successfully done business in
Japan, banks, trade associations, chambers of commerce, the U.S.
Department of Commerce and the U.S. Embassy Tokyo (through Commercial
Service Tokyo's Agent/Distributor Service), U.S. state representative
offices in Japan, JETRO, or even Japanese government ministries.
A U.S. company should be selective in choosing a Japanese business
partner. This takes time for credit checks, study of the Japanese
company's industry standing and existing relations with Japanese
competitors, and building trust. The Japanese party's willingness and
ability to abide by contract terms is crucial.
Part of the difficulty in choosing a Japanese agent is assuring
that they will devote serious attention to expanding the market share of
the U.S. product. A U.S. company should avoid a distributor that
targets limited, high-price niches; is compromised by strong ties to an
industry group ("keiretsu"); fails to compete directly with established
Japanese products; or is not prepared to give the U.S. exporter volume
sales.
To attract a Japanese business partner, a U.S. exporter must
present an image of company dependability, innovation, superior quality,
competitiveness, commitment, and be prepared to build personal
relationships. A U.S. company should show that it is well regarded in
its industry; that it has researched the market; that it is prepared to
respond to cultural requirements (e.g. by preparing high quality
brochure in Japanese on the company and its products); and that it
promptly responds to all inquiries from Japan in a professional and
timely fashion. This will help overcome reluctance to do business with
a new foreign supplier. Frequent, even daily, communication by fax or
phone is crucial and regular visits to Japan are a must.
C. Franchising
The franchising industry is a fast-growing, multi-billion dollar
business in Japan. Originally developed in the fast food area, it has
expanded into a variety of new sectors. U.S. participation in the
Japanese franchising industry is highly visible under familiar names
such as McDonald's, Kentucky Fried Chicken, Mr. Donuts, Denny's, etc.
Because successful franchises tend to depend heavily on the long-
term investment capability and marketing expertise of a Japanese
partner, most U.S. franchisors usually do not try to recruit actual shop
operators in Japan directly from the United States. Instead, U.S. firms
concentrate efforts on finding a master franchisee, usually either a
Japanese company, a joint venture between the U.S. franchisor and a
Japanese company, or even a wholly-owned subsidiary of the U.S. company.
The master franchise holder is then responsible for the actual
recruitment of Japanese franchisees.
Special attention should be paid to expectation levels of both
parties to avert future problems: terms should be formalized for
contractual rights and responsibilities, trade mark protection, and
marketing methods.
D. Direct Marketing
Direct marketing (door-to-door sales, multi-level marketing, mail
order, telemarketing, etc.), is an attractive sales channel for
suppliers attempting to reach the increasingly affluent Japanese
consumer while bypassing traditional distribution channels. U.S.-based
companies such as Amway, Avon, and Tupperware enjoy substantial sales of
cosmetics, detergents, cleaning supplies, and other home and kitchen
items. With more women in the workforce and increasing demands on
everyone's time, demand for shopping through the mail or by telephone
has grown tremendously in Japan in recent years.
Direct marketing should not be considered an escape from Japanese
expectations of customer service. The Japanese customer demands top
quality for every product and is meticulous about packaging and the
condition of contents on arrival. Returns and complaints can be common.
Mailing lists are relatively scarce and primitive, and
organizations that have them are loathe to share. Language and shipping
times are also crucial issues to overcome. U.S. companies aiming to
enter this market should be prepared to make an investment in service
functions -- a representative in Japan can act as a liaison with the
U.S. supplier to handle receipt of claims, customs clearance, public
relations, and the preparation of a Japanese-language catalog.
Warehousing and delivery can also be managed by a local representative.
E. Joint Ventures/Licensing
1. Licensing
Licensing product technology is an alternative with considerable
appeal. A firm can immediately contribute to its bottom line with
little investment or direct cost. What is often overlooked, however,
are the missed opportunities and the indirect costs of licensing.
Licensing is a very limited form of market participation. High
potential returns from marketing and manufacturing efficiencies are
lost, and very little market information is gained. Often licensing
agreements prove to be short-lived as the Japanese licensee improves
upon the American product or technology and then exports the improved
product back to the United States -- thereby becoming a major
competitor. Indirect costs of managing and policing the licensing
agreement are also often overlooked. There are many cases of licensees
under-reporting sales and under-remitting royalty payments. The wisdom
of licensing technology depends on the status of a company's patents in
Japan, together with the degree to which the company must disclose trade
secrets to its licensee. Licensing as a route of market entry into
Japan has become increasingly unpopular with American companies in
certain industries. However, after considering the aforementioned
risks, it may prove a desirable avenue for income generation.
The key to success in a licensing agreement is to have a partner
whose goals coincide with those of the U.S. company. The contract
should provide for a cross-technology exchange between licensor and
licensee. The U.S. company should maintain close contact with the
licensee and keep current on the Japanese market by visiting Japan
regularly.
Royalties paid by the Japanese licensee to the U.S. licensor are
subject to a 20 percent withholding tax which may be reduced to 10
percent if the necessary documentation is filed under the U.S.-Japan Tax
Treaty.
According to the Foreign Exchange and Foreign Trade Control Law,
foreign companies wishing to grant a license to an independent Japanese
corporation, its own wholly-owned subsidiary, or joint venture
corporation, in order to manufacture in Japan must notify the Ministry
of Finance through the Bank of Japan within 15 days of the execution of
the licensing agreement. However, notification must be made in advance
of the execution of the licensing agreement in those cases involving the
transfer of specially regulated and/or designated technologies, in which
case a report must be filed with the Ministry of Finance and other
appropriate Japanese ministries.
Special restrictions apply to designated technologies. In
addition, if the license agreement is exclusive, extends beyond one
year, and the licensee is a competitor with a 10 percent or greater
market share and/or is ranked third or higher in the respective Japanese
industry, notification must also be given to the Japanese Fair Trade
Commission (JFTC). Additionally, the export of any form of technical
data from the U.S. abroad is subject to U.S. export control law, so a
thorough investigation of the Export Administration Regulations should
proceed the signing of any licensing agreement. (also see section VI.D.
below)
2. Joint Ventures
The advantages of establishing a joint venture in Japan are
greater ease in identifying and hiring local personnel and securing
immediate access to a distribution system and customers. This entry
vehicle will however require a U.S. company to share profits and control
with its Japanese partner. As with selecting agents, distributors or
licensees in Japan, trust, communication and common interests with the
Japanese partner are crucial.
Joint venture partnerships involving technology transfer or
license agreements with a Japanese joint venture partner have the same
pitfalls as a straight license. The value of a joint venture
arrangement may diminish as the Japanese partner improves on or becomes
less dependent on the technological innovations the U.S. company
developed. Exporting American-made products, as opposed to joint
ventures that manufacture in Japan, helps reduce the risk of releasing
proprietary know-how which gives the U.S. company a competitive edge.
It is possible to set up a joint venture in Japan through an
unincorporated, contractual joint venture; acquiring stock by consent of
an existing corporation; or through the incorporation either in the
United States, or more commonly in Japan, of a new company in which the
Japanese and U.S. corporations mutually decide upon management control
and the roles and responsibilities of each party. The Ministry of
Finance (through the Bank of Japan) must be notified. If the joint
venture is intended to last more than one year, the joint venture
agreement must be submitted to the Japanese Fair Trade Commission for
review within 30 days after its execution.
F. Steps to Establishing an Office
Establishing an office in Japan can prove to be an expensive
proposition primarily because office space is very costly (Tokyo is 3.4
times as high in New York) and salaries for Japanese nationals are high.
Detailed information on the mechanics of setting up and maintaining an
office in Japan can be found in the publication "Setting Up an Office in
Japan" of the American Chamber of Commerce in Japan (Phone: +81/3/3433-
5381, Fax: +81/3/3436-1446) and other sources listed in "Destination
Japan." This section summarizes the formalities for setting up four
types of offices.
1. Representative Office
A U.S. company that wishes to collect information and/or
facilitate contacts in Japan should establish a representative office.
This liaison office can obtain market data, provide information, and
provide necessary promotional and service support. A representative
office is not subject to Japanese taxes and it is not necessary to
obtain special approval. However, a representative office must not
involve itself in commercial transactions or generate income, therefore
it can not handle orders directly. The liaison office may provide
guidance and support to an agent, and manage all marketing activities
except for the actual sale.
2. Branch Office
A branch office of a U.S. company can engage in trading,
manufacturing, retailing, services, or other business. A branch office
may take and fill orders and carry out a full marketing program,
including arranging for advertising, recruiting a sales force, and
performing all necessary promotional activities. A branch is liable
for payment of Japanese taxes. The branch must appoint a resident
representative in Japan and must register with the Legal Affairs Bureau
of the Ministry of Justice. In addition, the establishment of a branch
office is considered a direct investment under the Foreign Exchange and
Foreign Trade Control Law requiring notification to the Ministry of
Finance through the Bank of Japan within 15 days after the establishment
of the branch office. As with joint ventures, for certain designated
sectors, Ministry of Finance notification must be made prior to the
establishment of the branch office; investment in other designated
sectors such as broadcasting or telecommunications services may be
restricted or prohibited.
3. Incorporation in Japan (Subsidiary)
An alternative to a branch office is a wholly-owned corporation.
As in the above options, certain sectors are restricted. Setting up a
wholly-owned subsidiary will involve more time and expense, but it can
offer an effective means to guarantee better protection for proprietary
information, obtain credit, and penetrate markets which have subtle but
substantial barriers to imports. Moreover, there is a perception in
Japan that a company with subsidiaries is both more committed and more
substantial and this perception can serve as a powerful selling-point
for that firm.
4. Jointly Owned Office
A fourth approach is to pool resources of several firms which have
complementary product lines. Such a group might establish a marketing
association, consortium, or jointly owned export management company, and
set up a sales and service branch or subsidiary office in Japan. This
operation may take the form of a representative office which handles
contacts with agents, distributors, and customers. Considering the
importance of brand image in Japan, group members may wish to consider
adopting a group logo which would be a universally recognized and
accepted identity for their product line.
5. Guidance for Investing in Japan
Foreign takeovers (mergers and acquisitions) of Japanese companies
remain few. The number of takeovers and average value of each case
(officially announced cases only) have increased from 18 averaging ¥549
million per case in 1990 to 43 cases averaging ¥13,276 million per case
in 1994. During the past five years, takeovers by U.S. firms have
represented the majority of all acquisitions, and the targets are
becoming larger.
Land costs fell in 1994 for the fourth consecutive year declining
an average of 9.3 percent for residential property and 15.4 percent for
commercial property in the Tokyo-Osaka-Nagoya metropolitan areas.
There is a significant over supply of office space in the Tokyo
and other metropolitan areas and such a trend will, most likely continue
through 1996. The vacancy rate for office buildings in the 23 wards of
Tokyo, which was 2.9 percent in 1992 increased to 9.3 percent in March,
1994. This trend has fostered a tenant's market where larger spaces,
and lower costs are a refreshing change for the investor in Japan. As a
consequence of this trend, rental rates are falling to levels that are
more reasonable, and more companies are expected to consolidate their
operations, seek more convenient locations or choose higher grade
buildings.
Average condominium prices in Tokyo and its vicinity fell from
¥44.9 million in 1993 (annual average) to ¥40.8 million in May, 1995.
The average size of a standard condominium home has increased from 63.8
square meters in 1993 to 66.2 in 1995. The average condominium price is
roughly 5.5 times the average annual income in 1995, as compared with
6.5 times in 1993.
Despite the rise of the Yen against the dollar, lower priced land,
lower commercial rents and the severe financial crunch affecting many
Japanese companies now provide U.S. companies with excellent
opportunities to set up, expand or purchase businesses in Japan. Also,
the tightening of credit available to small and medium sized businesses
in Japan offers new opportunities for mergers and acquisitions
especially of wholesalers which can be the key to product distribution
in Japan.
U.S. companies should also carefully examine the Japanese Ministry
of International Trade & Industry's new programs
for promoting imports and foreign investment into Japan including: loan
programs through the Export-Import Bank of Japan and the Japan
Development Bank, the entry-level business support programs being
provided by JETRO and the Foreign Investment in Japan Development
Corporation (FIND). It should be noted that JETRO set up five Business
Support Centers in the last two years to offer various assistance to
new-to-market foreign firms in their initial market development
activities: The Centers are located in Tokyo, Yokohama, Nagoya, Osaka,
and Kobe. A total of 67 fully-equipped mini offices are available free
of charge on a temporary basis. They provide not only free office
space, but counseling, business library, data base terminals, conference
halls, etc.
G. Selling Factors/Techniques
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 selling in Japan is knowing how to negotiate and maintain
relationships with 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.
Initial contacts between Japanese firms are usually formal and
made at the executive level, while more detailed negotiations are often
carried out at the working level. Typically, the first meeting is to
get acquainted, establish the broad interest of the calling party, and
allow both sides an opportunity to "size each other up." A series of
meetings with a large number of Japanese company representatives is
common. Business negotiations may proceed slowly, as the Japanese side
may prefer no agreement over being criticized later for making a
mistake.
While many Japanese business executives speak some English, a
skilled and well-briefed interpreter, while expensive, often prevents
communication problems. Though some U.S. firms do business in Japan
without a signed contract, written contracts between U.S. and Japanese
firms have become a universally accepted practice in Japan: they
satisfy tax, customs, and other legal requirements. Japanese companies
prefer short, general contracts, while U.S. companies prefer to spell
out the rights and obligations in detail. A contract should be viewed
as part of a greater effort to create an understanding of mutual
obligations and expectations, rather than a tool in case of a lawsuit.
H. Advertising and Trade Promotion
1. Advertising
Because many products from the United States fit a cultural or
industrial environment which may not yet exist in Japan, consumer
education of the product's purpose, use, and quality may be necessary.
The most cost effective method of advertising by small to medium size
new-to-market U.S. companies in Japan is often to advertise in one of
Japan's 2,250 weekly or monthly popular magazines, or in one of Japan's
many industrial daily, weekly or monthly newspapers and trade journals.
Only large multinational U.S. companies can afford to place ads in
Japan's five major national daily newspapers or place commercials on
Japanese television (all of which accept advertisements or commercials
for either national or regional coverage). Regional and local
newspapers and television stations, based in prefectural capitals, and
sports daily newspapers, are less expensive. While Japan has relatively
few radio stations (Tokyo, for example, has only four AM and six FM
commercial stations), radio advertising potential may be worth
investigating.
Much of Japan's broadcast and print media do not deal with
advertisers directly but go through Japan's top five advertising
agencies: Dentsu Inc., Hakuhodo Inc., Tokyu Agency International Inc.,
Daiko Advertising Inc., and Asatsu Inc. In general, "mood" or "image"
advertising are generally thought to sell better in Japan; hard-sell,
"wordy" messages and comparative or combative advertising may be
considered bad taste.
Another mass advertising option is transit advertising. Railroads
are the primary means of transportation for commuters in major cities
and carry over 21 billion passengers annually. Transit advertisements
are located either inside commuter railcars or buses or in stations.
Ads inside trains and buses include hanging flyers, framed posters, and
stickers. The major ad companies control space, as with the other
media.
2. Trade Promotion
It is key for US exporters of all kinds of good and services to
get into the Japanese trade event circuit -- not only in Tokyo -- but in
the huge regional economies and industrial centers, where 65 percent of
Japan's over 1,000 international conferences, seminars and trade shows
take place. These events are being attended more and more by regulatory
officials and decision makers from all throughout the Asian region.
U.S. companies should also consider U.S. Department of Commerce or
state- or industry organization-sponsored trade shows and trade
missions, as well as use of the U.S. Trade Center in Tokyo and other
available U.S. Government facilities such as the U.S. Information
Services' American Centers in Osaka, Nagoya, Fukuoka and Sapporo for
their individual demonstrations, seminars, meetings and receptions.
I. Pricing Product
Until recently, the acceptance of any product in Japan was based
on attributes, quality, and related service, price. Japanese consumers
remain willing to pay more for superior quality, but today are starting
to look for better value.
Distribution mark-ups often cause imported items to be priced at
levels uncompetitive with Japanese domestic products, even though the
landed price of the imported product was comparable or lower. However,
products that compete on the basis of image may be negatively impacted
by bargain prices, as this tends to cheapen the image of these products
in the minds of Japanese consumers. In setting an export price, it is
also important to take into account any costs the exporter will be
assuming in the Japanese market.
Japanese manufacturers of consumer goods traditionally set prices
for each level of the distribution channel and enforced compliance using
complicated rebate systems. Such price maintenance is now under heavy
pressure from consumers (wanting lower prices), the Japan Fair Trade
Commission (investigating unfair trade practices), and manufacturers
themselves (for whom massive rebates are increasingly burdensome).
Under a fully open price system, wholesalers and retailers will be able
to decide prices independently. The return of unsold goods will tend to
reduced in order to offset lower margins by manufacturers. The
distributor's role in selecting and purchasing items will become more
important, and methods of discounting and advertising are bound to
change as well.
J. Sales Service/Customer Support
All service (before, during, and after the sale) and customer
support are critical in Japan and should be considered part of the
"product package." Every effort should be made to answer technical
questions and make sure that shipments are made on time and handled with
the greatest of care. Strict arrangements for quality control (both
before and after shipment) should be made by the exporter. If goods are
damaged in transit it does not matter who is at "fault:" Japanese
importers will simply take their business elsewhere next time. The best
way to ensure quality control is for a U.S. exporter to establish an
office in Japan. If this is not possible, arrangements for customer
support should be made either with a Japanese distributor or an
acceptable third party.
K. Selling to the Government
Japanese government entities purchase a wide range of goods from
telecommunications equipment to other, less sophisticated products and
supplies. Recent changes in Japanese government procurement as a result
of the Framework Negotiations and the GATT Uruguay Round have greatly
expanded the scope of contracts that U.S. suppliers can bid on.
In most cases, Japanese government tender solicitation documents
are in Japanese only with only brief English-language summaries. Tender
documents must be submitted in Japanese only (Nippon Telegraph and
Telephone (NTT) tenders may be submitted in English). To facilitate
information gathering and applications for tender documents, it is
strongly recommended, although not mandatory, that the U.S. supplier
appoint an agent or representative in Japan.
To become a qualified supplier, firms and/or their agents must
apply for qualification screening. Each Japanese government agency
specifies in the Kampo (the Japanese Government's Official Gazette) an
open application period prior to the beginning of the Japanese fiscal
year which starts April 1.
Specific tender notices are published in the Kampo generally fifty
days prior to the time of bid. Under the provisions of the GATT
Procurement Code, foreign companies are permitted to bid on specific
invitations prior to qualification provided there is sufficient time to
complete the qualification procedures.
U.S. Suppliers can find summaries of translated tender
announcements on the Economic Bulletin Board (EBB), the Commerce
Business Daily, the National Trade Data Bank, and a new JETRO Database
which is available on the Internet at "http:/www.jetro.go.jp/". U.S.
Department of Commerce district offices can also assist potential U.S.
bidders by identifying firms that provide translation services.
L. Protecting Your Product from Intellectual Property Rights
Infringement
Please see below Section VII, A, 7 in this document.
M. Product Liability Law
The Product Liability Law (PL Law), originally passed in June
1994, will take effect in Japan on July 1, 1995. All manufactured or
processed goods are covered by the PL Law. The Law stipulates that
lawsuits must be filed within 3 years after an injury or up to 10 years
after the product was delivered to the purchaser. The PL Law applies
not only to Japanese manufacturers and importers but also foreign
manufacturers if contracts with Japanese importers/agents define
responsibilities in case of product liability problems.
N. Need for a Local Attorney
A U.S. company resident in Japan is not legally required to use a
Japanese attorney for filings, registrations, contracts or other legal
documents, which can be prepared by in-house staff, but retaining a
competent Japanese attorney (bengoshi), patent practitioner (benrishi)
or other legal professional is a practical necessity. A U.S. company
not resident in Japan should also retain competent Japanese counsel.
Patents and trademarks must be filed through a Japanese agent, which
should be a licensed attorney or patent
practitioner.
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
The best prospects for U.S. exporters of U.S. products and
services including agricultural products are listed below. Best
prospects in industry sectors are ranked according to the estimated two-
year growth in U.S exports (1994 - 1996). Best prospects in
agricultural sectors are not ranked.
The exchange rates used in the tables throughout this section are as
follows:
1994: 102 Yen per Dollar
1995: 90 Yen per Dollar
1996: 90 Yen per Dollar
Industrial Best Prospects (described in detail in Section A. below)
(Millions of U.S. Dollars)
Rank Sector Title Market Size U.S Imports
Code
1 CPT Computers and Peripherals 41,100 4,400
2 ELC Electronic Component 40,400 7,900
3 AUT Automobiles/Light Trucks/Vans 122,242 6,555
4 MED Medical Equipment 15,989 3,300
5 CSF Computer Software 6,300 650
6 ACE Arch./Eng./Constr. Services 910,800 200
7 APP Apparel 91,220 3,500
8 PAP Paper and Paperboard 50,250 933
9 TEL Telecommunications Equipment 22,118 1,089
10 PET Pet Foods and Supplies 2,497 460
11 APS Automotive Parts & Accessories 142,949 1,174
12 LAB Laboratory and Scientific Instr. 4,000 760
13 PVC Pumps, Valves/Compressors 5,341 453
14 HCG Household Consumer Goods 18,316 216
15 BLD Building Products 49,578 877
16 ACR Air Cond/Refrigeration Eq. 23,585 182
17 FUR Furniture 30,779 323
18 POL Pollution Control Eq. 16,670 70
19 ELP Electrical Power Systems 29,900 1,093
Agricultural Best Prospects (described in detail in Section B. below)
(Millions of U.S. Dollars)
Rank Sector Title Market Size U.S Imports
Code
N/A FOD Fresh Vegetables 17,819 500
N/A FOD Beef 1,600 464
N/A FOD Frozen Vegetables 595 232
N/A FOD Pork 1,855 90
A. Industry Sectors
PART 1. TITLE
1 - Computers and Peripherals (CPT)
PART 2. NARRATIVE
Market access for U.S. mainframe computers remains a problem --
particularly in the government procurement market. The market for large
mainframe computers and peripheral systems is expected to grow 3-4% in
1995. Market access for U.S.-made PC's has improved drastically in
recent years. PC's and workstation sales in Japan continued to grow in
1994, while sales of mainframes and mini-computers were down. This
trend is expected to continue through 2000. The Multimedia
PC's/Workstation subsector will grow 15-20% annually until 1997.
Japanese competitors are expected to increase their focus on
client/server and parallel processing systems -- an area in which U.S.
suppliers currently lead the market. The most promising subsectors are
Workstations, Personal Computers, and Computer Peripherals. Major local
competitors are NEC, Fujitsu, Toshiba, Hitachi, Mitsubishi, and Sharp.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 39,060 41,100 43,300
B. Total local production 49,600 51,100 52,600
C. Total exports 16,030 16,800 17,600
D. Total imports 5,490 6,800 8,300
E. Imports from the U.S. 3,600 4,400 5,300
The above statistics are unofficial estimates
PART 1. TITLE
2 - Electronic Components (ELC)
PART 2. NARRATIVE
The electronic components market in Japan is expected to grow
approximately 10.4% in 1995. Major market segments such as
semiconductors and flat panel display devices will continue to show
strong demand. The market for other passive components will remain flat
due to the overall slump in the consumer market. There is a potentially
fast-growing market for U.S. semiconductors in the multimedia subsector,
although continued market access efforts by both U.S. suppliers and
Japanese semiconductor users are essential. The Japanese semiconductor
market is expected to grow 13-15% annually, and the liquid crystal
display (LCD) panel market is expected to grow 25-30% annually through
1997. Despite tough competition in the Japanese market, electronic
components is one of the world's largest and most attractive markets for
U.S. suppliers. The most promising subsectors are semiconductors and
Liquid Crystal Display Devices/Panels with predicted 1996 sales of
$31,500 million and $8,500 million, respectively. Major local
competitors are NEC, Hitachi, Fujitsu, Toshiba, Matsushita, and
Mitsubishi.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 36,580 40,400 44,500
B. Total local production 83,900 89,500 93,000
C. Total exports 62,900 68,000 71,000
D. Total imports 15,580 18,900 22,500
E. Imports from the U.S. 6,300 7,900 8,900
The above statistics are unofficial estimates
PART 1. TITLE
3 - Automobiles (AUT)
PART 2. NARRATIVE
Japan is the second largest motor vehicle market in the world. Eleven
domestic manufacturers and over thirty foreign auto makers compete to
sell more than 6.5 million cars and trucks each year. No tariffs or
quotas exist although, some regulatory restrictions on imports exist.
In addition, language, culture, laws and the high price of land, does
present special challenges for importers. In 1994 imported car sales,
despite an overall downturn in the Japanese market, rose dramatically.
Growth of sales of imported cars has been brisk over the past five years
(albeit from an extremely low base). U.S. automakers have substantially
increased their commitment, marketing and investment efforts in Japan,
which are beginning to show positive results. More and more
manufacturers are stepping up their investments and marketing activities
in an effort to tap the vast potential of the Japanese market.
The automobile industry is the largest and most complex element of the
U.S. trade relationship with Japan. The U.S./Japan bilateral trade
deficit in the automobile sector is $36.1 billion and is expected to
reach $39.4 billion in 1995.
High-level U.S. Government interest in this sector ensures windows of
opportunities for U.S. firms as market-opening efforts are negotiated.
Throughout 1994 the U.S. and Japanese governments have been negotiating
under the Framework Talks to eliminate non-tariff trade barriers related
to automobiles and auto parts. As of June 1995 the results of these
talks have not been conclusive.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 97,599 122,242 124,986
B. Total local production 140,282 158,986 158,986
C. Total exports 57,900 55,005 54,000
D. Total imports 15,217 18,261 20,000
E. Imports from the U.S. 4,627 6,555 70,000
The above statistics are unofficial estimates
PART 1. TITLE
4 - Medical Equipment (MED)
PART 2. NARRATIVE
This is one of the few sectors where the U.S. still enjoys a trade
surplus with Japan. U.S.-Japan MOSS (market-oriented sector-selective)
Talks on Medical Equipment and Pharmaceutical Sectors 1985, have helped
simplify import procedures and accelerate introduction of new products
into the national health insurance reimbursement system. The U.S.-Japan
Framework Agreement on Government Procurement of Medical Technologies of
November 1, 1994, should provide increased access to the important
government-owned hospitals market for U.S. suppliers, as well as other
foreign suppliers. As a result, imports, which currently account for
about 30 percent of the total market, should expand 5-10 percent
annually in the foreseeable future; higher than the estimated growth of
the total market by 3-5 percent a year. U.S. companies currently supply
approximately two thirds of the import market. U.S. suppliers are
especially competitive in the areas of implants including pacemakers,
artificial heart valves and artificial joints; other therapeutic devices
including anesthesia equipment and laparascopic surgery devices;
catheters; diagnostic imaging devices including high quality ultrasound,
CT and MRI equipment. While there is no local producer of pacemakers
and artificial heart valves, there are strong domestic and third-country
competitors in the area of diagnostic devices. These competitors
include Toshiba, Hitachi and Shimazu of Japan and Siemens and Philips
from Europe. Olympus Optical Co. of Tokyo, one of the largest camera
manufacturers in Japan, dominates the market of flexible endoscopes, and
Sakura Finetechnical of Tokyo enjoys a lion's share in the sterilizer
market.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 13,529 15,989 16,589
B. Total local production 12,255 14,300 14,733
C. Total exports 3,137 3,667 3,767
D. Total imports 4,412 5,356 5,622
E. Imports from the U.S. 2,647 3,300 3,533
The above statistics are unofficial estimates.
PART 1. TITLE
5 - Computer Software (CSF)
PART 2. NARRATIVE
The Japanese computer software market -- in which U.S. suppliers are
extremely competitive -- could double by 1997. Computer software
products include ready-made software such as application software
packages, and custom made software. Strong growth for PC software
products, including CD-ROM, is expected to continue for the next five
years. PC software now accounts for 45% of the entire software market,
and retain its leading position. The custom software market for large
and mid-range computers and workstations are expected to grow annually
at 5-7% from 1995 to 1998. Packaged software will show annual growth of
20% during this same period. As open network systems begin to spread
throughout Japan, the software market will expand correspondingly.
Demand for software for computer aided design (CAD) systems and
accompanying workstations will grow steadily in conjunction with growth
of the electronics market. Most promising subsectors are PC packaged
software, CD-ROM Software, and CAD software. Major local competitors
are NEC, Fujitsu, Just System, and ASCII.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 5,400 6,300 7,200
B. Total local production 4,870 5,600 6,290
C. Total exports * n/a n/a n/a
D. Total imports 530 700 910
E. Imports from the U.S. 480 650 850
The above statistics are unofficial estimates.
Software market here excludes service market.
* = negligible/low.
PART 1. TITLE
6 - Architectural/Construction/Engineering Services (ACE)
PART 2. NARRATIVE
Japan's construction investment is currently the largest in the world.
This sector creates diverse opportunities for a variety of firms, such
as design/consulting, general contractors, and construction material
suppliers. The latter may be understood to include furniture, air-
conditioning, telecommunication equipment, and even medical equipment
for hospital projects. It is vital that US firms segment construction
projects in promoting their goods or services. In January 1994 the
Government of Japan initiated the Action Plan, through which
approximately $22 billion of construction projects per annum are
publicized. The Action Plan is a system designed to open Japan's
construction market through fair and transparent procedures. Commercial
Section Tokyo estimates over 1,000 procurements will be placed through
Action Plan procedures in calendar year 1995. Action Plan projects may
offer the best prospect for U.S. firms, but competition among local and
foreign competitors is severe. Increasing competition from Korean
general contractors, European design firms, and ASEAN construction
materials suppliers is expected. In general, high-productivity
construction and engineering methods, creative design work, including
airport design, resort/theme park development, landscaping, interior
design, and price-competitive construction materials are expected be of
particular interests in the Japanese market. Anticipated deregulation
of construction materials and methods opportunities should accelerate
accordingly. In addition, Commercial Section Tokyo tracks major
overseas ACE opportunities financed by Japan's $13 billion yearly
Official Development Assistance (ODA) fund for third world countries.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total sales 797,800 910,800 937,100
B. Local sales by local firms 798,100 920,000 937,300
C. Overseas sales by local firms 500 500 700
D. Sales by foreign owned firms 200 300 500
E. Sales by U.S.-owned firms 150 200 300
The above statistics are unofficial estimates.
PART 1. TITLE
7 - Building Materials (BLD)
PART 2. NARRATIVE
Because of current economic conditions, the total Japanese building
products market is expected to follow the 1994 trend of a decline in
construction of commercial and office buildings. However, housing
starts have continued at a high rate of 1.5 million annually, almost
half of which are single-family wooden homes. U.S. imports are expected
at a minimum to hold steady with a potential for growth thanks to
increased price competition for building materials, as contractors
attempt to benefit from the sharp appreciation of the Japanese yen
against the U.S. dollar by importing. U.S. 2x4 housing packages are
also attracting a lot of attention among both Japanese home builders and
potential home owners for offering high quality, affordability, and wide
variety. In addition, the Ministry of International Trade and Industry
(MITI) is actively promoting imported housing in an effort to increase
Japan's imports. Therefore, imports of U.S. residential building
products such as windows, doors, flooring materials, kitchen cabinets
are expected to increase. Major competitors for U.S. products are
Canada, Scandinavia, and Asia. Major barriers to U.S. products are
regulations e.g. the Building Standards Law, JIS and JAS standards, and
fire regulations. The Government of Japan (GOJ) is now considering
deregulation in these areas, although it may take several years. Also,
due to the low productivity of Japanese carpenters, U.S. companies will
be expected to bring experienced specialists from the United States to
provide training, requiring the GOJ to rethink its current restrictive
visa policy.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 91,430 91,220 91,810
B. Total local production 78,430 78,220 78,610
C. Total exports 1,060 1,020 1,020
D. Total imports 14,060 14,020 14,220
E. Imports from the U.S. 3,500 3,500 3,550
The above statistics are unofficial estimates.
PART 1. TITLE
8 - Paper and Paperboard (PAP)
PART 2. NARRATIVE
Due to recent and anticipated currency swings, as well as rapidly
fluctuating (dollar denominated) raw material costs, U.S. dollar-based
figures for the Japanese paper market may be misleading. Therefore,
volume figures are given in the table below to clarify trends in the
actual flow of goods. Economic recovery in Japan over the next few
years is expected to be slow. This will have major consequences for the
paper/paperboard market, which is critically tied to the health of other
sectors through the demand for packaging, literature, etc. Thus, only
small increase in total (volume) market size is expected over the next
few years, although due to the dramatic appreciation of the yen, the
dollar value of the market is expected to increase quite noticeably. In
that sense, the profit opportunities for efficient, high-quality U.S.
producers remain bright. One other factor critically affecting the
picture is the place of Japan's market in the context of world supply
and demand. For the past few years Japan's slack economic performance
has led to considerable idle capacity in the Japanese paper industry.
While many economies in the region (particularly Southeast Asia) are
expected to grow briskly, the high yen makes it extremely difficult for
Japanese manufactures to increase plant usage by exporting. Thus, the
industry's domestic production seems largely tied to the domestic
market. In such a scenario, competition for business just to keep paper
plant operating is putting severe pressure on margins. But conversely,
the strength of the yen and gradual recovery of Japanese market prices
will certainly help to increase Japanese imports, especially as an
anticipated cooling off of the U.S. economy frees up more U.S. capacity
for export production.
PART 3. DATA TABLE
Millions of US Dollars
(1,000 metric tons)
1994 1995 1996
A. Total market size 39,005 50,250 51,350
(29,040) (30,150) (30,810)
B. Total local production 38,316 49,167 50,000
(28,527) (29,500) (30,000)
C. Total exports 1,167 1,333 1,200
(869) (800) (720)
D. Total imports 1,856 2,417 2,550
(1,382) (1,450) (1,530)
E. Imports from the U.S. 939 933 1,283
(699) (560) (770)
The above statistics are unofficial estimates.
PART 1. TITLE
9 - Telecommunications Equipment (TEL)
PART 2. NARRATIVE
Japan's proposed National Information Infrastructure (NII) is expected
to develop into a $1.4 trillion market by the year 2010 when the
nationwide fiber-to-the-home (FTTH) network is completed. The major
player in the NII is Nippon Telegraph and Telephone Corporation (NTT),
which is responsible for approximately half of all the
telecommunications equipment procurements in the Japanese market and,
has an over 80 percent share of the overall telecom market in Japan.
NTT has committed to increasing its procurement from foreign companies
over the medium term under the bilateral NTT procurement agreements
signed in November 1994, and over the last fiscal year NTT's foreign
procurements are estimated to have exceeded $1 billion. U.S. companies
can also take advantage of the Framework Agreement on Government
Procurement of telecom equipment, which commits Japanese government
entities to procure increasing amounts of foreign telecom equipment.
Besides NTT, new common carriers (NCC's) and public utility sector's
electric power companies are good potential customers. The BEST
PROSPECTS for U.S. suppliers include: (1) inter-networking equipment
e.g. routers, frame relay switches, and ATM switches; (2) multi-media
software and hardware, including CATV; and (3) communications satellites
and related equipment. (Note: Satellites are not included in Japan's
import statistics because they are delivered in orbit and do not clear
customs.) The major local and third-country competitors are NEC,
Hitachi, Fujitsu, Ericsson (Sweden), British Aerospace (U.K.), NOKIA
(Finland), Newbridge (Canada), Aerospatiale (France), Alcatel (France),
and Siemens (Germany).
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 17,698 22,118 25,936
B. Total local production 24,816 28,744 33,343
C. Total exports 8,033 8,812 9,693
D. Total imports 1,848 2,178 2,286
E. Imports from the U.S. 915 1,089 1,143
The above statistics are unofficial estimates.
PART 1. TITLE
10 - Pet Foods and Supplies (PET)
PART 2. NARRATIVE
According to Japanese Ministry of Agriculture, Forestry, and Fisheries
(MAFF) statistics, domestic production of pet food in Japan totalled
203,161 tons in 1988; by 1993 this figure had grown to 315,318 tons: an
annual growth rate of over 9%. In comparison, imports of pet food grew
nearly 45% annually over the same period (35,870 tons to 229,082 tons).
The penetration of pet food imports in the Japanese market is very high:
45% of total consumption by sales and 42% by volume, and these figures
are expected to continue to increase. According to the Japanese
Ministry of Finance (MOF), the U.S. currently has a commanding 40% of
import market share (followed by Thailand with 26% and Australia with
24%). The pet supplies (accessories) market is estimated at 55 billion
yen or $611 million (shipment basis), and twice that amount on a retail
price basis.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 1,950 2,497 2,822
B. Total local production 1,054 1,349 1,524
C. Total exports 2 2 2
D. Total imports 898 1,150 1,300
E. Imports from the U.S. 359 460 520
The above statistics are unofficial estimates
PART 1. TITLE
11 - Automotive Parts and Accessories (APS)
PART 2. NARRATIVE
Reflecting the decrease of domestic auto production and exports in 1993
and 1994, auto parts production figures in JFY 1993 released by Japan
Auto Parts Industries Association (JAPIA), were 13,252 billion Yen down
6.9 percent from JFY 1992. JFY 1993 auto parts production are expected
to decrease at the same pace as the previous year. The Japan auto parts
industry is now a major industry with a market of approximately $140
billion. Currently the U.S. has the largest share of the Japanese
imported auto parts market (about 41 percent in 1993), but total imports
represented only 1.6 percent of the value of locally produced auto
parts. New opportunities for auto parts exports to Japan, generated in
the wake of former President Bush's 1992 visit and the U.S. & Japan
automotive framework negotiations present U.S. suppliers with a
substantial opportunity to penetrate this difficult market sector.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 141,436 142,949 145,294
B. Total local production 173,227 182,581 188,889
C. Total exports 33,979 42,360 46,596
D. Total imports 2,188 2,728 3,001
E. Imports from the U.S. 900 1,174 1,350
The above statistics are unofficial estimates.
PART 1. TITLE
12 - Laboratory and Scientific Instruments (LAB)
PART 2. NARRATIVE
To maintain its position as a leader of high quality control
manufacturing, a high level of research and development (R&D)
expenditures and capital investments by private firms will continue in
Japan. Additionally, the Japanese Government is exerting increasing
efforts with new programs and subsidies to promote Japan's basic
research which is lagging behind the United States in many fields.
Thus, the Japanese market for laboratory and scientific instruments is
expected to resume a 17% growth rate when the domestic economy rebounds.
The overall technology level of Japanese manufacturers of related
instruments is now world class. Nevertheless, U.S. suppliers are still
regarded as the leader of innovative technology in the Japanese market.
State of-the-art U.S. instruments for specialized applications continue
to enjoy strong sales prospects in this $3.7 billion market. The U.S.
maintains a particularly strong competitive position in the subsectors
of analytical instruments and electric test and measuring instruments.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 3,750 4,000 4,400
B. Total local production 4,600 4,800 5,000
C. Total exports 1,800 1,800 1,700
D. Total imports 950 1,000 1,100
E. Imports from the U.S. 690 760 820
The above statistics are unofficial estimates
PART 1. TITLE
13 - Pumps, Valves and Compressors (PVC)
PART 2. NARRATIVE
Demand for pumps, valves and compressors (PVC) is reflected by the
business trends of user industries and public investment. As basic
equipment for machinery and industrial facilities from households to
nuclear power plants, the future PVC market is bright as the Japanese
economy gradually improves. In October 1994, the Japanese government
decided on a basic plan for public investment which amounted to $6.2
trillion from JFY 1995 (4/95 - 3/96) to JFY 2004. Demand for PVC's,
particularly from public sectors, e.g., levee works, is expected to
increase. Demand for high-quality and high-performance PVC's is strong.
The high yen and the removal of custom tariffs on PVC's in 1990 have
improved the opportunities for imports. No import barriers exist in
this product category. Demand for foreign made PVC's is expected to
increase with the recovery of the economy. The import climate is
favorable for American made PVCs as U.S. suppliers held 45% share of
imports in this category in 1994. Pumps accounted for 46% of the total
import of PVC's, valves 45%, and compressors 47%. The major competitive
factor is the aggressive competition by domestic manufacturers who offer
attentive services to users, including modification of products to suit
the customer's needs, attractive payment terms, and prompt post-sales
service including all-hour emergency maintenance service. Asian
manufacturers are aggressively entering the Japanese market for low
grade level products, but their current share is negligible.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 4,524 5,341 5,771
B. Total local production 8,105 9,462 9,935
C. Total exports 4,425 5,115 5,217
D. Total imports 844 994 1,054
E. Imports from the U.S. 384 453 489
The above statistics are unofficial estimates
PART 1. TITLE
14 - Household Consumer Goods (HCG)
PART 2. NARRATIVE
Western influences are increasingly apparent in Japanese lifestyles.
Over 10 million Japanese go abroad each year and are directly exposed to
products used in other countries. Imported household consumer goods,
particularly housewares such as tableware and kitchenware, have bright
prospects in Japan not only due to the strong yen but also the
consumers' growing desire for higher standards of living. In general,
Japanese consumers look for high-grade products and consider good
design, colors, and quality materials, as well as function. While
famous European chinaware brands are popular, the current recession-
related slump in consumption has led many prestigious European
manufacturers to introduce more mid-range products. The Japanese market
of tableware and kitchenware alone, estimated at $2,300 million in 1994,
also has excellent gift prospects. Gift-giving is an important part of
private and public life in Japan: the Japanese gift market is estimated
at approximately $108 billion.
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 15,655 18,316 18,793
B. Total local production 14,706 16,833 17,000
C. Total exports 1,210 1,330 1,303
D. Total imports 2,159 2,813 3,096
E. Imports from the U.S. 177 216 237
The above statistics are unofficial estimates
PART 1. TITLE
15 - Apparel (APP)
PART 2. NARRATIVE
Although the apparel market in Japan is currently very slow, imports
from the United States have been increasing steadily over the past
several years. However, after 1995 the import growth rate from the
United States is expected to decline due to the lingering recession and
an expected inventory overstock. The United States, with a 6.0% import
market share, is the fourth leading exporting country following China
(58.5%), Korea (11.2%), and Italy (7.3%). Thailand (2.5%) and Indonesia
(2.4%) follow the United States. The breakdown of the total apparel
market in Japan is men's- 24%, women's- 45%, children's- 10%, other
kinds of apparel- 14%, and fashion-related items- 7%. Major local and
third country competitors include Renown Co., Ltd. and Kashiyama Co.,
Ltd. (Japan) and Celine S.A, Christian Dior and Givenchy (France).
Japanese regulations for baby clothing have a formaldehyde tolerance
level of "undetectable."
PART 3. DATA TABLE
Millions of U.S. Dollars
1994 1995 1996
A. Total market size 43,878 49,578 48,514
B. Total local production 32,900 35,423 33,652
C. Total exports 483 532 559
D. Total imports 11,461 14,687 15,421
E. Imports from the U.S. 791 877 920
The above statistics are unofficial estimates.
PART 1. TITLE
16 - Air Conditioning and Refrigeration Equipment (ACR)
PART 2. NARRATIVE
Demand for air conditioning and refrigeration (ACR) equipment is
improving. Sales of major ACR equipment on a unit basis between 10/94 -
3/95 increased significantly. Car air conditioners increased 10.4% over
the same period last year, room air conditioners were up 26.9%, package
type air conditioners were up 9.2%, and commercial refrigerated cabinets
were up 8.8%. Demand for consumer air conditioners is steadily growing
due to the construction of 1,570,252 homes, an increase of 5.7%, in 1994
from the previous year. Commercial demand for ACR equipment is
influenced by the equipment funds of user industries. MITI's Industrial
Structure Council reported that the equipment investment by all Japanese
industries in fiscal 1995 (4/95 - 3/96) is anticipated at $182,787
million, up 6.6% over last fiscal year.
The high yen and the removal of custom tariffs on ACR products in 1990
have improved the opportunities for imports. American made ACR's are
favorably accepted in the Japanese market. U.S. suppliers held a 35%
share in the total imports of this category in 1994. Refrigeration
equipment accounted for 65% of the total import of ACR's, compressors
23%, and air conditioning equipment 22%. Imports from Asian countries,
Thailand and Malaysia, are increasing, but most imports originated from
Japanese transplants in those countries. The High P