(Last updated: 2 Dec 2011)

Business opportunities

Japan, a key strategic international business partner for Australia

This section is aimed at giving Australian businesses comprehensive insights into trade and investment opportunities in Japan, and how to make the most of them.

It’s almost impossible to overstate the importance of Japan for Australia, in so many ways. Japan is one of Australia’s most important and strategic international business partners with an ever-evolving partnership that extends over 50 years.

With a population of 127 million, the Japanese market is characterised by consumers with high levels of disposable income, and companies with a strong global orientation and willingness to invest in sustainable, long-term products and services. Japan is an active investor in an increasingly diverse range of Australian industries. These days the Japanese economy is no longer confined to Japan alone, as their business interests and activities expand globally, especially throughout the Asia-Pacific region, Japan offers a multitude of partnering opportunities for savvy Australian companies.

Austrade covers Japan with a network of four offices extending from Sapporo in the north through to Tokyo, and Osaka and Fukuoka in the south. Staffed by a total of 47 Australian and Japanese professionals, they deliver a comprehensive range of in-market services, tailored carefully to your needs.

Whether you’d like to tackle Japan for the first time, or take a fresh look at revitalising your existing business plans, Austrade’s complete coverage of the archipelago and inside access to key decision-makers puts you well ahead of the pack.

Japan has made a name for itself as a nation of quality and innovation, and has staked its future on this value proposition. With a free trade agreement on the cards, and with Japan’s determination to emerge strongly from the economic downturn, I invite you to take another look at the rapidly changing Japanese market - you may be pleasantly surprised...

Austrade’s business development specialists have prepared a range of market profiles that offer potential to assist in your exporting investigations. Austrade’s in-market teams have identified opportunities for Australian exporters in various industries (see 'Profiled industries in this market' on the left side of this page).

Business etiquette

Business tips

Business etiquette and practices are important in Japan. The Japanese are extremely polite and place importance on respect and social rank. You will be showered with elaborate compliments while your host remains humble and plays down their achievements. Australians who show modesty will be well regarded by Japanese people.

While business meetings during the day can seem to be slow and often skirting key issues, night time drinking and dinners are often the time when more useful information is fed back to you. The Japanese equate being indirect with being polite. Thus being indirect, such as starting a business meeting with ‘small talk’ will help to get the meeting off to a good start. Australians can misunderstand this indirectness and interpret it as indecisiveness or non-commitment from the Japanese side. In these situations, it pays to be patient.

English is not widely spoken in business and government, with some exceptions, such as in trading companies. If a meeting is conducted in English, be sure to speak slowly and clearly, and do not use Australian idiomatic expressions or humour. Meetings in English are rare and an interpreter is generally required.

Punctuality is a must in Japan. It is usual to arrive at a meeting at least five minutes before the appointed time. In the event that you are running late, it is polite to call ahead to advise of when approximately you will be arriving. All appointments should be arranged with companies prior to your arrival in Japan.

Partners - it is inappropriate to take friends, spouses, or children to business meetings in Japan. It is also not common for spouses to be invited out for business dinners.

Product brochures and a company profile should be taken with you when you visit a Japanese company for the first time.

Business cards are handled in both hands and laid carefully on the table. You will need to bring at least 100 business cards with you to Japan. Business meetings invariably begin with the exchange of business cards. Don't place the card in your pocket or write on it. If time allows, have your business cards printed with your company name and name in Japanese. Don't have your business address translated to Japanese as this renders it meaningless.

Seating arrangements are used in formal business meetings. The most important guest sits furthest from the door and the host sits closest to the door. If in doubt, wait to be seated or ask where you should sit.

Gifts are not necessary and it is inappropriate to offer expensive gifts, particularly on first meetings. Small gifts, such as company pens or ties, etc. can be presented, once business is ready to commence or has commenced. It is generally considered impolite to open gifts in front of the giver.

Resolving conflict – Japanese people also try hard to avoid open conflict and so may answer ambiguously or even agree to an offer that they have no intention of accepting. One productive way of solving this problem is to prepare a brief but clear memo describing the situation and obligations of both parties and present it to the Japanese side as a record of the meeting. This will test the Japanese side’s position on the issue as they will be forced to respond.

Please also note: Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariff

Tariffs are based on the Harmonised System - most duties are ad valorem (per cent) based on the GATT valuation system approximately cost, insurance and freight (CIF) value (‘Incoterms 1990’).

Japan has low or zero tariffs on most industrial products.

Japan maintains tariffs and restrictions on some agricultural items, which are relevant to some Australian exporters.

Australian products are entered at the lowest rate notified (preferential rates excepted).

Generalised preferences are granted to developing countries.

A ‘self assessment’ system designed to expedite customs clearance allows prior calculation of duty by importers.

Customs authority contact details:

Director General
Customs and Tariff Bureau
Ministry of Finance
3-1-1 Kasumigaseki
Chiyoda-ku
Tokyo 100
Tel: +81 3 3581 4111
Fax: +81 3 5251 2122

Non-tariff barriers

Potential exporters to Japan should not be deterred by a widely perceived view that the Japanese market is closed and heavily regulated.  Barriers to market access for merchandised and value added goods are mainly informal.  Examples of informal barriers include, successful entrance into business networks, maintenance of market presence and product quality assurance.

Formal restrictions - mostly on agricultural produce - do exist, and the Australian Government has a range of market access issues, which it continues to work on with the Japanese Government on behalf of Australian industry. Like Australia, customs laws and regulations, and import processes are strict and need to be clearly understood by exporters.

Import licensing may be required for some imports. Two categories exist:

1. Import Quota (IQ): Quotas set by Ministry of Economy, Trade and Industry (METI), range from moderately to severely restrictive. Quotas are imposed on a variety of foods including some dairy products, seafood, cereals and grains. Importers must obtain an import quota allocation certificate from METI, which entitles the importer to receive an import licence on application to a foreign exchange bank.
2. Import Declaration (ID): a wide range of raw materials, semi-finished products and manufactured goods can be imported without prior approval from METI. Completed ID forms are freely verified by authorised foreign exchange banks on application, prior to import.

Goods must be cleared through customs within the validity period of the licence (usually six months).

Imports from Australia, which includes most fresh fruits (excluding certain oranges, mangoes, blueberries, Fuji apples, pineapples and green bananas) are subject to restrictions (see also 'Public health requirements).

Product certification, labelling and packaging

Labelling

Foodstuffs must have a sticker attached to each package after importation showing a detailed description of contents, including artificial colourings or preservatives, name and address of importer and date of import or manufacture in Japanese.

Many food products and consumer products are subject to very specific labelling requirements and importers should always be consulted on proposed labelling.

Containers of canned and bottled goods, soft drinks, small goods, frozen foods and prepacked foods must be marked and labelled solely in metric measurement by the Australian exporter, even though responsibility for metric measuring rests with the Japanese distributor.

Drug usage directions should be printed in Japanese.

Special labelling regulations apply to electrical appliances, soap, aluminium foil, some kitchen utensils, cleaning materials, toilet and bath fittings, plastic film, certain furniture, hot water bottles and cosmetics.

Packaging

Use of straw packing materials is prohibited.

Proposed packaging should be cleared with importers as they have definite preferences.

Goods should be marked according to normal commercial practice.

Special certificates

Animals, plants and their products require health certificates issued by an approved authority in the country of origin.

Frozen vegetables and fruit must be accompanied by a certificate of condition (Form E46) instead of a phytosanitary certificate.

Meat for human consumption require an additional certificate, issued by an approved authority in the country of origin, stating that the animals were free from designated infectious diseases prior to slaughtering and that subsequent processing was under hygienic conditions.

Imports of food require a food import permit issued by the Ministry of Health and Welfare.

Spirituous beverages may require a certificate of age.

Electrical appliances must conform with the Electric Appliance Control Law, with certain goods requiring type approval before being permitted to be offered for sale in Japan.

Machine tools under a year old must be accompanied by a certificate of date of manufacture.

Methods of quoting and payment

No legislative requirements.

Quotations in Australian dollars are common.

Methods of quoting and payment depend on type of product, quantity and relationship established between exporter and importer.

Advance payments may be made for some imports.

Documentary requirements

Fax signatures are not permitted. Note: Even minor typing and other errors in documentation often result in serious delays and complications at point of entry.

Pro-forma invoice

No special requirements.

Commercial invoice

A minimum of three copies are required. Invoices must be signed by the supplier and should include the following details:

• marks and serial numbers of packages
• description and quantity of goods
• CIF value (Incoterms 1990)
• place and date of preparation
• destination and consignee
• name of vessel
• import licence number
• conditions of contract relating to determination of the value

It is strongly recommended, whenever possible, to include the HS Commodity Classification of the goods to be imported. Complete invoices and packing lists should be forwarded promptly to the importer by airmail, (see also 'Tariff' - self assessment system, above).

Insurance

Normal commercial practice.

A certificate may be required if customs clearance without invoice is requested (to assist in appraisal of taxable value/quantity). In such circumstances other documents covering transportation cost, premium specifications and price list etc., may be required.

Bill of lading

For goods dispatched by sea, minimum of three signed originals and two unsigned copies are required.

For goods sent by air, standard sets of 10 are available (original plus nine copies) but no strict rules apply.

If made out To Order, it should indicate the name and address of the person to be notified.

Information required is usually specified in importer's letter of credit but should include name of shipper, ultimate and intermediate consignees, marking and number of packages, and description of goods with gross weights and measurements in metric terms.

Packing list

Two copies recommended, indicating details of goods, including the weight and measurement of each package.

Certificate of origin

Required for goods eligible for concessions granted under GATT.

Normally issued by Japanese consular or diplomatic officer at place of production, purchase or shipment. Certificates issued by Customs, other government agencies or an approved authority (see 'Guidelines', section 2.3) are acceptable. These must also be signed by the exporter.

Certificate must show origin, marks and/or numbers of commodities, description and number of packages and must certify that commodities were produced in stated country of origin.

Public health requirements

Strict controls govern the manufacture and sale of both fresh and preserved foodstuffs.

All imports of food must be accompanied by a food import permit, issued by the Food Sanitary Inspection Service of the Ministry of Health and Welfare. Foods may also be subject to inspection on arrival.

When imported for the first time, a description of all ingredients and the manufacturing processes involved will be required for application, along with any other requested documents, eg. health certificates from the country of origin.

The use of certain substances such as food additives are either strictly controlled or prohibited.

The use of other food additives is strictly controlled.

The use of chemicals whose residue remains in crops or soil or pollutes water is strictly controlled.

Imports of animals and plants and their products require health certification issued by an approved authority in the country of origin. In Australia, this is usually the Australian Quarantine and Inspection Service (AQIS), Agriculture, Fisheries and Forestry-Australia (AFFA) or the relevant state department of agriculture.

Under Japanese quarantine regulations Australia can supply green bananas, mangoes, lemons, pineapples and certain oranges and many vegetables (basically those which do not contain seeds). Recently, blueberries and Fuji apples from Tasmania have been approved for export to Japan.

A larger range of fruits and vegetables from Tasmania can now be imported into Japan, as it is now recognised that Tasmania is free from fruit fly.

The official reference for importing and distributing drugs in Japan is the Pharmaceutical Affairs law. Manufacturers or importers intending to manufacture or import drugs, medical equipment, cosmetics and toiletries need to obtain approval in accordance with the Pharmaceutical Affairs law.

If cosmetic products contain ingredients outside the Comprehensive Licensing Standards, the approval of Minister of Health and Welfare will be required to import those products.

Taxation

You should seek professional advice on taxation is it applies to foreign companies and operations in Japan. The major international accounting companies operate in Japan and have English-speaking staff. A five per cent consumption tax is levied on all purchases in Japan including food. Some hotels charge 8-10 per cent service tax on accommodation. Businesses operating in Japan will be subject to a range of taxes including:

• corporate tax
• income tax
• withholding tax
• local tax
• residents tax

Liquor taxes, expressed in specific terms per quantity, are levied on beverages, whether imported or domestically produced.

Excise tax is levied on tobacco imports.

Intellectual property protection

As in Australia, there is the need to protect intellectual property rights and be covered by patent, design and trademark protection. Japanese companies are experienced international business players and understand the need for confidentially and non-disclosure agreements when beginning business discussions. You should act in the same manner as you would in Australia to protect your business security interests. As discussions progresses, consulting Australian and Japanese lawyers, with specific expertise is recommended, particularly in hi-tech and services industries.

Generally, while the paper contract agreement for business is important, developing and committing to a relationship is more crucial to potential Japanese business partners. Long legal documentation can often dull the enthusiasm of potential partners so a balance needs to be reached. Japan’s recent spate of bankruptcies means that exporters should exercise due diligence on their business partners before sending shipments to Japan. Credit service checks of Japanese companies are available.

For further information please visit IP Australia.