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Conducting Business in Japan:An Overview of Export Opportunities

“How to Take Advantage of Japan’s Rebounding Economy”

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Introduction

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Country OverviewPopulation

127,103,388 (July 2014 est.)

Ohio population11,536,504 (2010 est.)

AreaTotal: 145,902 sq mi

Ohio areaTotal: 44,825 sq mi

CapitalTokyo

TerrainMostly rugged and mountainous

Official languageJapanese

National holidayBirthday of Emperor Akihito, 23 December (1933)

Chief of StateEmperor Akihito (since 7 January 1989)

Prime MinisterShinzo Abe (since 26 December 2012)

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Economy OverviewCurrency yen

GDP (PPP) $4.729 trillion (2013 est.) 　 *data are in 2013 US dollars

GDP - real growth rate 2% (2013 est.)

Inflation rate 0.36% (2013 est.)

Unemployment rate 4.1% (2013 est.)

Exports$697 billion (2013 est.)Sectors: transport equipment, motor vehicles, semiconductors, electrical machinery, chemicalsPartners: China 18.1%, US 17.8%, South Korea 7.7%, Thailand 5.5%, Hong Kong 5.1% (2012)

Imports$766.6 billion (2013 est.)Sectors: machinery and equipment, fuels, foodstuffs, chemicals, textiles, raw materialsPartners: China 21.3%, US 8.8%, Australia 6.4%, Saudi Arabia 6.2%, UAE 5% (2012)

Exchange rate 1USD yen (JPY) per US dollar – 101.38 (23 July 2014)

Time difference UTC+9 (14 hours ahead of Washington, DC during Standard Time)

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• Population: 127.1 million- 75% in the 0-65 age group- Population growth rate: -0.13%

• Gender ratio: Total population　　　 - 0.95 male/female

DEMOGRAPHIC PROFILE

• Literacy rate: 99%

• Languages: - Japanese

• Religions: - Shintoism 83.9%, Buddhism

71.4%, Christianity 2%, Other 7.8%*Total adherents exceeds 100% because many people belong to both Shintoism and Buddhism.

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• Government type: A parliamentary governmentwith a constitutional monarchy

• Cabinet: Cabinet is appointed by the prime minister• Elections: The Diet, bicameral legislature

POLITICAL PROFILE

Chief of state: Emperor AkihitoPrime Minister: Shinzo AbeGovernment: Led by the Liberal Democratic Party (LDP)

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ECONOMIC PROFILE

Gross Domestic Product (2013 est)•PPP (Purchasing Power Parity) terms: US$ 4.729 trillion, 5th largest in the world•GDP growth rate: 2 % •The services sector continues to be a star performer with a 73% share in GDP

Per Capita GDP (2013 est) •PPP terms: US$ 37,100*data are in 2013 US dollars Services,

73%

Industry,26% Agriculture

, 1%

Sectoral composition of GDP (2013 est)

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ECONOMIC PROFILE

• Labor force: 65.62 million (2013 est)9th largest in the world

• Labor force by occupation- Services: 69.8%- Industry: 26.2%- Agriculture: 3.9%

• Unemployment rate: 4.1% (2013 est)

• Budget (2013 est):- Revenues: US$1.739 trillion- Expenditures: US$2.149 trillion

Services,70%

Industry,26%

Agriculture, 4%

Labor force by occupation (2013 est)

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EXPORTS PROFILE• US$697 billion (2013 est)

6th largest in the world

• Exports - commodities- Motor vehicles: 13.6%- Semiconductors: 6.2%- Iron and steel products: 5.5%- Auto parts: 4.6%- Plastic materials: 3.5%- Power generating machinery: 3.5%

• Exports – partners- China: 18.1%- US: 17.8%- South Korea: 7.7% - Thailand 5.5%- Hong Kong 5.1%

China 18.1%US 17.8%South Korea 7.7%Thailand 5.5%Hong Kong 5.1%Others 45.8%

Exports - partners

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IMPORTS PROFILE• US$766.6 billion (2013 est)

6th largest in the world

• Imports - commodities- Petroleum: 15.5%- Liquid natural gas: 5.7%- Clothing: 3.9%- Semiconductors: 3.5%- Coal: 3.5%- Audio and visual apparatus: 2.7%

• Imports – partners- China: 21.3%- US: 8.8%- Australia: 6.4% - Saudi Arabia 6.2%- UAE 5%

China 21.3%US 8.8%Australia 6.4%Saudi Arabia 6.2%UAE 5%Others 52.3%

Imports - partners

About usMarket Entry and Operations Support

in Japan

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Japan Inc Holdings

Corporate Overview

Japan Inc Holdings Co.,Ltd. (JIH)

Address: 4F Roppongi OG Bldg, 1-3-4 Nishi-Azabu, Minato-ku, Tokyo 106-0031

Phone: 03-4588-2674, Fax: 03-3404-5015, HP: http://www.japaninc.com Established 1st August, 2007 Mission

– To help open up Japan to foreign governments, businesses, capital, ideas, and know-how– We will do this by using our intrinsic foreign viewpoint, brand and image, extensive networks, experience, and

bilingual/bicultural skills to create and execute business opportunities between Japan and the rest of the world– We are primarily interested in media, human communication, and the application of technology – We will execute our plan with guts, integrity, and a commitment to get results

Areas of business– Investment in wholly owned subsidiaries – achieved by start-ups and turn-arounds– Partial investments in foreign start-ups in Japan, typically for cash or sweat equity– Market entry, company operations, and fund-raising consulting– Buy and sell side M&A consulting for foreign and Japanese companies – Acquiring IP rights for Japan of new foreign technologies– Promoting entrepreneurship (especially foreign entrepreneurship) in Japan

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JIH Consulting Business

“Helping Japan to Innovate and Communicate”

As well as functioning as a holding company for various assets and investments, JIH also maintains a consulting team. The functions of this team are:– Perform a portfolio management, business development, and incubation function for its subsidiaries.– Market entry consulting

Market entry consulting provides a tailored solution for each client, and ranges from searching for business partners, distribution partners, Japan joint-venture partners, and/or acquisition targets. Client companies range from small start-ups, to large multinationals.– Well-known clients include:

JIH is also the trusted partner, and official Japanese office for the US’s Ohio State Department of Development– Both parties have committed to attract over 30 Ohio State companies to Japan over the next 2 years– JIH also has superb relationships with the trade departments of Australia and New Zealand

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3 Business Styles

Distributor (abdication of control)– Little effort, little control, little brand development– Distributors trust-worthy but busy– Recommend sending company rep to push things along

Rep Office– No registration required – very free format– Only business promotion– Can’t offer staff benefits, so hard to recruit

Branch Office– Simplest form of registered operation– But denotes lack of commitment to market– Opens HQ up to Japan law

Full Independent Operation– High risk, but full control, may still use sub-distributors/sales channels– Entity allows outside co-investment, IPO opportunities– Need to learn regulatory and procedural issues in Japan– Commits company to Japan, strengthens relationships– Recommend fully funded co., to hire locally and work CEO’s contacts hard – proper

funding will speed up returns to 12-18 months for profits

Revenue focus only

Business develop-ment

Brand and revenue control

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Market Entry: Preselling

My company helps 5-10 companies enter Japan market every year I believe in pre-selling

– Pre-selling provides a much better impression to a potential partner/customer than does standard market research

– A company with hot technology and that is already on its way to Japan puts pressure on a prospect to actively engage the company before a competitor does

– Ideally you get sales even before setting up in Japan Method

– Informal, responsive approach – lets the market define the product positioning– Requires an empowered local (in-Japan) consultant to learn, respond to client, feedback to HQ, re-cast

value proposition– Takes about 150-200 hours to approach 15-20 potential distributors– It’s a numbers game, more approaches equals more candidates– Winnowing 20->5 will produce some viable candidates

Post Tie-up– May have to do early seeding of sales to addict distributor to your product/service– Selling for distributor allows you to structure your support and refine pricing

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Market Entry: How to Get Results

International inbound trade conduits are few– You need to get their attention– Once you get it, you need to impress them by your follow-up– Play the role as a foreigner and get out there to open doors– You don’t have to speak Japanese, but you need an assistant/salesperson who does

You need to have earthshaking technology, patents, and/or global brand– Major Japanese companies receive proposals from all over the world, every hour– So you products/know-how have to stand out – just highlight key features– Best chance is those products embeddable in another brand– Can be sold by someone who is not Japanese – if value is there

If you don’t– You need connections, self-start will add 3-5 years– If no connections, buy them (consultants or investors)– Show commitment, send a single 30+ year old manager for 3 years– Seed sales force – consider bringing in your country manager from start– Create a story and make it interesting, concepts can really work in noise-filled Japan

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Market Entry: Engaging Distributor

The Japanese approach is one of trust and familiarity– Painful initially, BUT very rewarding once relationship established (HF)

Engaging a distributor candidate requires a local representative– This inevitably means repeat visits and contacts– 1-3 visits by local person before your visit– Your visit– 3-5 visits and multiple requests filled for information– Another 1-2 visits by you– Contract– Process will take about 3-6 months

Proactive business development by your rep/consultant– Idea is to create an impression of commitment early on– Japanese firms value repeated communications – 10 visits for hard core firms– Local rep/consultant’s personality and credibility very important

• Should be Japanese, save yourself, other foreigners for shock value• Good if the person can go drinking

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Vitamix Story

Vitamix have two channels in Japan: Commercial and Consumer Commercial has always done well When asked to support Vitamix, Consumer business was languishing

– Only 300 units sold a year Vitamix challenge was that distributor was convinced brand was unsellable

– Too big, too noisy, and too expensive– Raw foods to blend also expensive

Vitamix had us survey market and report back on competition– We found there was no competition and there was a major opportunity

Vitamix changed distributors, and new company completely understood the need for market endorsement– Bloggers, celebrities, natural health players, etc.

We continued to supply market research and content support– Controlled focus group, web surveys, recipes development and recipe book, other market intelligence

support Vitamix in 2012 sold 15,000 blenders, for a retail value of approximately US$12MM

– Still going strong today

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Contacts

Japan Inc Holdings Co.,Ltd.

CEO: Terrie Lloyd 　 terrie@japaninc.comConsultant: Makoto Kagawa 　 makoto.kagawa@japaninc.com

Address: 4F Roppongi OG Bldg, 1-3-4 Nishi-Azabu, Minato-ku, Tokyo 106-0031

Phone: 03-4588-2674, Fax: 03-3404-5015HP: http://www.japaninc.com

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presented by Vinita Bahri-MehraJuly 31, 2014

Legal Issues to Consider in Exporting + Doing Business in

Japan

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Introduction to Japan

3.5%Unemployment rate (as of May 2014)

4th

Largest export market for U.S. goods + servicesU.S. exported $70 million in goods to Japan (in 2012)

World’s largest economy: GDP of $5.8 trillion

3rd2n

dLargest foreign investor in the U.S.More than $257 billion invested

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Importing + Exporting

+Imports: mineral fuels (34%); machinery (21%); food (8%); manufactured goods (8%); chemicals (8%) and raw materials (7%)

+Top importers: China, the U.S., South Korea, Taiwan, and Hong Kong

+Exports: cars, electronic devices and computers

+Top exporters: China, the U.S., Australia, Saudi Arabia, the UAE, South Korea, and Indonesia

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Japan’s Strategy >

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“Abenomics”

+A three-pronged strategy of bold monetary loosening, fiscal stimulus centered on infrastructure spending, and growth-oriented structural reform

+Participation in the Trans-Pacific Partnership (TPP)

+With Japan’s participation in the TPP, its members account for nearly 40% of World GDP

+Japan and ASEAN entered into an agreement on a Comprehensive Economic Partnership

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+Visa requirements generally: valid passport containing a visa corresponding to his/her purpose of entry into Japan

+A visa is not required for US passport holders visiting Japan for a short-term stay of less than 90 days with the purpose of tourism and business

+ “Intracompany transferee” or “investor/business manager”

+Other temporary visas available for: +short courses + briefings organized by companies+conferences + other meetings+negotiations + contract signing

Getting Started in Japan

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+Use of Agents or Distributors +Consider establishing an exclusive relationship

+Establishing an Office

+Direct Marketing

+Joint Ventures/Licensing +Most U.S. commercial exports to Japan do not require export licenses

Selling U.S. Products + Services

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Japanese Entities

+Joint stock corporation (Kabushiki-Kaisha (K.K.))

+Limited liability company (Godo-Kaisha (LLC))

+Limited liability partnership (Yugen Sekinin Jigyo Kumiai (LLP))

+Unlimited partnership (Gomei-Kaisha)

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+Face-to-face contact

+Contract Negotiations

+Electronic Commerce+Leading e-commerce sites are (1) Rakuten, (2) Amazon Japan and (3) Yahoo! Japan

+Trade Promotion + Advertising+Very expensive in Japan

Selling Techniques

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+Japan provides generally strong IP protection and enforcement

+But U.S. companies must register their intellectual property

+First-in-time, first-in-right

+Protection is available for:+Patents

+Expires after 20 yrs.+Member of Paris Convention

and World Trade Organizations

+Trademarks+Copyrights+Trade secrets

Intellectual Property

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+The export of goods, technology, and software are controlled and require licenses from the Minister of Economy, Trade, and Industry.

+Leading sectors for U.S. Export and Investment:+Aerospace+Education/corporate training+Medical equipment+Pharmaceuticals+Renewable energy+Telecommunication equipment

Exports to Japan

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+Low applied tariff rates

+Most favored nations tariff rate: 4.6%

+Zero duties on autos, aircrafts, software, computers, industrial machinery and works of fine art

+Member of the Harmonized System Convention

+Goods from the U.S. are charged WTO rates (unless a lesser “temporary rate” exists)

+No bilateral free-trade agreement with the U.S.

+Japanese firms engage in business activities with countries against which the U.S. currently has embargoes 

Trade Regulations, Customs + Standards

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+Narcotics, firearms (and parts), materials for chemical weapons, goods that violate IP rights

+Restrictions on: medical products, pharmaceuticals, chemicals

+Japanese Customs reviews and evaluates for import suitability before shipment to Japan (“positive list” approach)

Prohibited + Restricted Imports

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+Declaration to the Director-General of Customs

+Obtain import permit

+Imports are valued according to their c.i.f. value

+Difficulties result from first time applications

+Employ import agent or customs broker to facilitate customs entry

+Timeline: +2-3 days for sea cargo+1 day for air cargo +Possible to file preliminary declaration online

Export Procedure

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+Revisions to Japan’s legal code encourage inbound FDI through M+A activity

+No discrimination against foreign investors

+National Strategic Special Zones +Tokyo, Osaka, Fukuoka and three other Zones (since March 2014)

Foreign Direct Investments

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+Prior notification of intended transaction: If a foreign investor wants to acquire over 10% of the shares of a listed company in certain sectors

+Agriculture, aerospace, petroleum, electric/gas/water utilities, telecommunications and leather manufacturing

+Most common M+A form: friendly transfer of wholly-owned or majority-owned subsidiaries

+Hostile takeovers are relatively uncommon

Screening of FDI

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+Income of corporations in Japan is subject to taxation, regardless of where it was generated

+Income tax treaty: “United States- Japan Income Tax Convention”, amended in November 6, 2003, established the avoidance of double taxation procedures

+National consumption tax rate: 8%

+Standard tax rate for individual capital gains: 20%

+Current tax rate for corporate income: about 35%

+Foreign Account Tax Compliance Act (FATCA)

Taxation

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Conclusion

+Due Diligence is the Key

+Strategic Analysis

+Avoid Cultural Misunderstandings

+Relationship Building

“Think like a man, act like a lady, and work

like a dog.” (Otoko-no youni kangaete redi-no youni furumai inu-no gotoku hatarake. 男のように考えてレディのようにふるまい犬のごと

く働け。 )  

» Ishihara Ichiko, first Japanese woman to hold executive post, former director of

Takashimaya department store.

“Early bird gets the worm.”

(Literally: To wake up early gets you three coins.)(Jp: Hayaoki-wa san mon-no

toku. 早起きは三文の徳。 ) 

» Japanese proverb

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Thank You!

Vinita Bahri-MehraAsia-Pacific Team Leadervmehra@keglerbrown.com614.255.5508

Katja GarveyAssociatekgarvey@keglerbrown.com614.462.5490

Relationships are Everything:Doing Business with the Japanese

July 30, 2014

Mindy McLaughlin

Manager of Foreign Direct Investment

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Overview of JobsOhioJobsOhio is a private, non-profit corporation created in July 2011 by Governor John Kasich and the Ohio legislature to lead the state’s economic development efforts. It is significantly different from the state’s previous approach and unique in the country. Objectives• Create, retain & expand jobs

• Attract new capital investments

• Client-focused and metrics-driven

Making it Work• JobsOhio’s nine industries and four business functions are led by

general managers who are experts in their respective industries.

• Nine-member board, made up of dynamic business leaders who operate on a global scale.

• Six regional network partners with deep ties to local businesses, enhancing economic development opportunities.

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Ohio and Japan: A Framework to Build From

• Ohio’s Traditional Relationship with Japan

• Japanese Investment in Ohio

• The Art of Relationship Building

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Ohio’s Traditional Relationship with Japan

William Howard TaftPresident of the United States, 1909-1913

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Ohio’s Traditional Relationship with Japan

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Ohio’s Traditional Relationship with Japan

James A. RhodesGovernor of Ohio, 1963-1971 and 1975-1983

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Ohio’s Traditional Relationship with Japan

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Japanese Investment In Ohio

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The Art of Relationship Building

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The Art of Relationship Building

尊敬

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SummaryOhio has a powerful story for the Japanese market – both for inbound investment into Ohio and outbound exports from Ohio – that is based on strong relationships

ASSET BENEFIT

Strong historical ties to Japan Strong "Name ID" and knowledge of the value proposition

Home to 230 Japan-based businesses Familiarity and comfort level with our state

Engagement in economic diplomacy Trust has been built that will yield dividends on multiple fronts

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41 S. High Street, Ste. 1500 | Columbus, OH 43215(614) 224-6446 | jobs-ohio.com

Mindy McLaughlinManager of Foreign Direct Investment

McLaughlin@jobs-ohio.com