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Japan External Trade OrganizationInvest Japan Division, Invest Japan DepartmentArk Mori Building, 6F, 12-32, Akasaka 1-chome,Minato-ku, Tokyo 107-6006, JapanTel:+81-3-3582-5571 Fax:+81-3-3505-1990
September 2006
Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of JETRO. All information in this publication is verified to the best of the writers' and the publisher's ability. However, JETRO does not accept responsibilities for any loss arising from reliance on it.
(Notice for U.S. Users Only) This material is disseminated by the JETRO offices (New York, San Francisco, Los Angeles, Chicago, Houston and Atlanta), which are all registered under the Foreign Agents Registration Act as agents of the Japan External Trade Organization, Tokyo, Japan. This material is filed with the U.S. Department of Justice where the required registration statement is available for public inspection.Registration does not indicate approval of the contents of the material by the United States Government.
10 Advantagesto Investing in Japan
Japan is the center of new trends and
creativity and is a preferred testing ground for
new products.
A survey of overseas companies in Japan
conducted by JETRO in early 2006 indicated that
one in five of these companies sees Japan as a
center for research and development and as a
base for business activities in Asia. Today,
increasing numbers of companies around the
world are partnering with Japanese companies to
develop products and services, create innovative
technologies, and conduct R&D projects.
What foreign-affiliated companies are saying
about their business in Japan.
“Products developed in Japan are often successful
in other markets... (The) Japan subsidiary acts as a
production center for several of the company's
global product lines.” (Health care products
manufacturer)
“Our support for the high quality expectations of
Japanese customers will also be valuable to the
other markets we serve around the globe.”
(Semiconductor manufacturer)
“As one of the ultimate testing grounds for new
developments, Japan is increasingly prominent.“
(Industrial materials supplier)
“Our presence there (in Japan) is crucial, not only
to be able to sell there directly, but also for the
fallback business in Europe or in North America.”
(Automotive parts supplier)
“Japan’s importance as a creative center is
increasing.” (Cosmetics firm)
“If we can do it right here, if we can get quality
issues solved here, we can succeed anywhere.”
(ICT network solutions provider)
P4-5
P6-7
P8-9
P10-11
P12-13
P14-15
P16-17
P18-19
P20-21
P22-23
The world's second-largest market
Sophisticated consumers with high purchasing power
World-class companies and SMEs with unique technologies
Loyalty and commitment to long-term partnerships
World's center for technological innovation and product development
Access to new Asian markets
Favorable business climate
Rapidly growing broadband society
Expanding environmental market
Booming business in silver care and retirees
Contents
1
2
3
4
5
6
7
8
9
10
Launch pad for global market success
The world's second-largest market10 Advantages
1Japan is a promising market, with a market scale ranking near the top of developed nations. Each of Japan's regions has an economic scale similar to or even larger than some countries.
US EU15 Singapore Korea (Shanghai) ASEAN4Japan
Others
34%(15,178)
Germany
6%(2,797)
Japan
10%(4,571)
US
28%(12,486)
China
5%(2,225)
Canada
3%(1,130)
Italy
4%(1,766)
France
5%(2,106) UK
5%(2,201)
GDP by country (%, US$ billion, 2005)
Source: ”World Economic Outlook Database“ (April, 2006), IMF; ”China Statistical Abstract 2006,“ National Bureau of Statistics of China
Note: Exchange rates based on IMF period-average ratesSource: ”World Economic Outlook Database“ (April, 2006), IMF; ”China Statistical Abstract 2006,“ National Bureau of Statistics of China
Per capita GDP (2005)
0
10,000
20,000
30,000
40,000
50,000
42,101
35,78733,109
26,835
16,422
6,295
1,705
GDP comparison of Japan with other major economic blocks (US$ billion, 2005)
Source: Formulated by JETRO based on data from ”World Economic Outlook Database“ (April, 2006), IMF
UK2,201
Italy1,766
Spain1,127
Others2,757
Germany2,797
France2,106
EU15: 12,754
Japan4,571
Canada1,130
US12,486
Mexico768
NAFTA: 14,384
BRICs: 4,559
East Asia: 4,333
China2,225
Russia766
Brazil793
India775
ASEAN4673
NIEs1,435
(US$)
Note: Exchange rates based on IMF period-average ratesSource: ”Prefectural Economic Almanac“ (March 2006), Economic and Social Research Institute, Cabinet Office; ”World Economic Outlook Database“ (April, 2006), IMF; ”China Statistical Abstract 2006,“ National Bureau of Statistics of China
* Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Guangdong and Hongkong
GDP comparison of Japan's regions with some countries (US$ billion)*GDP data for Japan’s regions from 2003; for other countries, 2005
Kantoregion
Italy
1,6501,766
Majoreconomicblock inChina*
1,192
Hokkaidoregion
Thailand
168 169
Chubu region
Netherlands
656 625
Shikokuregion
Singapore
116 118
Tohokuregion
Switzerland
357 368
Kinkiregion
Australia
681 708
Chugokuregion
Denmark
243 260
Kyushuregion
Belgium
406 372
4 5
Sophisticated consumers with high purchasing power2Japanese consumers are early adopters and move fast to stay on the cutting edge of the latest technologies. Most companies in Japan listen carefully to consumer demands when developing new products, as many products in common use around the world have originated in Japan. Japan thus makes an ideal test market for new products and services.
“Everything is always changing in Japan. The customer wants new things all the time.” (Fashion accessories retailer)
“The Japanese consumer has an understanding of products, and a very clear view about what he or she wants in a product.” (Consumer electronics maker)
“Japan is a consumer society where quality is highly valued. Companies that deliver strong quality and have a clear vision of their purpose can succeed and earn a fair price for their products.” (Real estate provider)
“Japanese customers will, I think, pay money to try using a new technology. Cell phones with built-in digital cameras are the classic example.” (Software developer)
Visit the below sites to learn what other foreign-
affiliated companies are saying about their
business in Japan:
http://www.jetro.go.jp/en/invest/newsroom/
http://www.jetro.go.jp/en/invest/success_stories/
10 Advantages
What foreign-affiliated companies are saying about their business in Japan.
Source: ”The Global Competitiveness Report 2004-2005,“ World Economic Forum
Note: Exchange rates based on IMF period-average rates.Source: ”International Financial Statistics“ (June, 2006), IMF; ”China Statistical Yearbook 2005,“ National Bureau of Statistics of China
Sophistication of consumers
Per capita household consumption expenditure (2004)
Canada
Italy
France
UK
Germany
US
Japan
Buyers are (1=slow to adopt new products and processes,7=actively seeking the latest products, technology, and processes)
0 1 2 3 4 5 6 7
6.2
6.1
5.7
5.7
5.6
5.5
4.7
0
5,000
10,000
15,000
20,000
25,000
30,00027,806
(US$)
US UKJap
an
Germ
any
Franc
eEU
15 Italy
Canad
a
Singa
pore
Korea
(Shan
ghai)
ASEAN4
23,430
20,587 19,71719,045 18,685
17,425 17,346
10,969
7,358
2,221957
6 7
10 Advantages3
Japanese companies of all sizes (from small ventures to major multinationals) produce unique and innovativeproducts and services. Japan's strong technology-based industries offer a multitude of opportunities for foreign companies looking to partner with Japanese firms at all stages.
Many small and medium-sized enterprises (SMEs) are the major suppliers of the equipment, parts and materials requiring high precision and microfabrication that are vital to the international competitiveness of major corporations. Some SMEs own niche technologies in areas in which larger corporations are not involved.
Many Japanese companies have established subsidiaries, branches and production bases throughout the world, and are continuing to expand their networks in all areas, from procurement of materials to production and marketing.
Tamagawa Seiki Co., Ltd.: Manufacturer of Parts for Hybrid Vehicle Motors (Nagano Prefecture)Hybrid vehicles are more fuel-efficient and environmentally friendly than gasoline vehicles, and their popularity is therefore growing. However, it is necessary to monitor the rotational position of the motor and apply precise control to increase fuel efficiency in these vehicles.This company produces a sensor that is able to accurately detect the angle of rotation of the motor in the oily, high-temperature and high-vibration environment of the engine housing, and holds a 100% share of the world market. The sensors fitted in the engine
housing of a hybrid vehicle
Tohoku Electronic Industrial Co., Ltd.: Manufacturer of High-sensitivity Light Detection Equipment (Miyagi Prefecture)To open up the future of photonic and electronic technology, this manufacturer has developed, and is manufacturing and marketing, an ultra-sensitive light detecting chemiluminescence analyzer.This is one of the most sensitive light detectors in the world, able to detect the luminescence produced by changes in chemical substances, reactions to test reagents and thermal decomposition, and the fluorescence produced by light irradiation. The high-sensitivity measurement of luminescence and spectroanalysis made possible by the device enables evaluation of oxidation degradation, anti-oxidation and levels of active oxygen and fluorescent substances, and has applications in medical research. The device is being used in the food industry and in a variety of other fields, including biochemistry, medicine, and chemical and high-molecular products.
Vstone Co., Ltd.: Manufacturer of Bipedal Walking Robots (Osaka Prefecture)Using omnidirectional sensors and image processing technology, this company manufactures small, high-performance, bipedal walking robots. Robots developed by this company won three straight victories in RoboCup, a robot soccer competition, in 2004, 2005 and 2006.The strength of this company is the fact that every component is manufactured in-house, and every aspect of the robots, from sensors and software to electrical systems, is overseen by the company.
ELM, Inc.: Commissioned Development of Electronic Equipment, and Design and Manufacturer of Laborsaving Devices for Industry (Kagoshima Prefecture)This company developed and markets the world's first automatic optical disk recovery system, which polishes the surfaces of scratched and dirty CDs and DVDs that have become unreadable to enable them to be reused.The system can correct 0.01 mm deep scratches, which require more than 30 minutes using conventional systems, in only 4-5 minutes.Through global alliances, the company now sells this system in 23 countries worldwide, and holds more than 85% of the world market share in automatic optical disk polishing equipment.
Star Engineering Co., Ltd.: Manufacturer of Non-contact Type (RFID) IC Cards and Tags (Ibaraki Prefecture)IC tags have potential uses in every area of daily life, from commuter passes and electronic money to distribution management and security functions.This company has been successful in developing small, high-accuracy and low-cost IC cards, which are planned for future use in tagging small items, which have been difficult to tag with conventional-use IC tags (medicine vials, jewelry, cosmetics, etc.), and to tag products with complex shapes.
Watec Co., Ltd.: Manufacturer of Ultra-small CCD Camera (Yamagata Prefecture)Combining proprietary electrical circuit designs and sensitivity-boosting circuit technology, this company has been successful in reducing the size of charge-coupled device (CCD) cameras to one-quarter that of conventional models.The new cameras are also 1/8 the weight and 1/20 the cost of previous models. The reliability of this unique technology is attested by its use in 60 countries worldwide, in applications including the Space Shuttle, the Louvre, FINA World Championships and the National Astronomical Observatory of Japan. The company is a global brand that has high world market share of mini surveillance cameras.
Source: ”300 Creative SMEs in Japan,“ Ministry of Economy, Trade and Industry
Ultraweak Light Detection System
Champion in RoboCup 2006
Optical disk recovery equipment
Left: Ultra-small IC tag (5 mm diameter) Right: Rice grain
IC chip alloying direct interaction of copper wire and end terminal
Ultra-small CCD camera(WAT-240 VIVID)
Ultra-small CCD camera(WAT-230 VIVID)
World-class companies and SMEs with unique technologies
2000 2001 2002 2003 200426
27
28
29
30
31
Number of vehicles sold by Japanese automotive manufacturers (total worldwide) and share of world market
Note: Japanese automotive manufacturers include Toyota, Daihatsu, Hino, Nissan, Nissan Diesel, Honda, Suzuki, Subaru, Isuzu, Mazda, MitsubishiSource: Formulated by JETRO based on data from FOURIN's Global Automobile Manufacturers Yearbook 2005
(1,000 Vehicles) (%)
(Year)0
4,000
8,000
12,000
16,000
20,000
15,702 15,76916,323
17,613
19,029
Sales volume
(Share %)
Ricoh
Canon*
Fuji Photo Film
NEC
Sony
Fujitsu
Sharp
Matsushita
Mitsubishi Electric
Toshiba
Hitachi
Total
972 943 49%
856 2,898 77%
1,329 1,338 50%
3,481 1,344 28%
2,169 5,307 71%
3,200 1,592 33%
1,397 1,400 50%
4,611 4,283 48%
2,556 1,049 29%
3,260 2,576 44%
5,825 3,640 38%
29,657 26,368 47%
Note: Canon: Fiscal year ending at the end of December; All other companies: Fiscal year ending at the end of MarchSource: Corporate accounting documents
Ratio of overseas sales for major Japanese manufacturers of electronic and precision high-tech equipment (2005)
Ratio ofoverseas sales
Overseas(billion yen)
Domestic(billion yen)
Company
Trends of Japan's outward foreign direct investment
(US$ billion)
(Year)
Source: ”International Investment Position of Japan,“ Ministry of Finance and Bank of Japan; JETRO
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004
Others
Oceania
Latin America
Asia
North America
Western Europe
278301 306
336
372
8 9
Loyalty and commitment to long-term partnerships10 Advantages
4Foreign-affiliated companies have long found their partnerships with Japanese companies to be ones of loyalty and commitment. Such relationships not only provide companies stability in the long-term but also offer cost reduction and quality improvement that often result from combining operational capabilities.
“Japanese firms are not concerned about the fame of a company or its brands. They are genuinely interested in seeing a sample, making it easy to get right down to business.“ (Software developer)
“Japanese companies are open to non-Japanese companies, and as long as you can provide good products it does not matter where you are from. But, on the other hand, Japan is home to a high concentration of manufacturers of all sorts with highly advanced technical capabilities, and it is difficult to compete with such rivals in this market with a ”normal“ level of technical prowess. If, however, a company possesses creative and highly advanced technologies, it has the same opportunities as anyone else to do business successfully in Japan.” (Industrial machinery maker)
“One of the advantages of doing business in Japan is that, while it takes quite a bit of time to enter into a contract, once you do, those relationships are for the long-term. Because there is little switching between vendors, unlike in the West, a company can look forward to stable and long-lasting revenue from its Japanese partners.” (Security middleware provider)
Visit the below sites to learn what other foreign-affiliated
companies are saying about their business in Japan:
http://www.jetro.go.jp/en/invest/newsroom/
http://www.jetro.go.jp/en/invest/success_stories/
What foreign-affiliated companies are saying about their business in Japan.
Some examples of recent business alliances between Japanese and overseas companies
Source: Compiled by JETRO from press releases
Details of cooperation
Establishment of joint venture for development, production and marketing of polymer organic Electro Luminescence (EL) materials.
Establishment of joint venture. Joint participation from the initial stage of vehicle development in the area of automotive steel sheet technologies.
Establishment of company to expand music distribution business.
Joint development of protein chips for medical diagnostic use.
Cooperation in seeking and analyzing potential medical compounds.
Technical cooperation in the development of substitutes for antibacterial substances for use with livestock and animal foodstuffs with reduced environmental impact.
Technical cooperation in development of technologies for attaching surface layers to automobile seats, fitting soundproofing materials to door panels and running flat cables inside ceiling materials.
Joint development of production technology for next-generation semiconductors.
Extension of cooperative relationship to develop masks for use in next-generation semiconductor production processes.
Joint development of next-generation external memory (storage) devices.
Expansion of related businesses including recycling of building materials,commercialization of new products and joint procurement of materials in Asia.
Cooperation in field of configurable processors. Development of next-generation systems-on-chip using ARC processor design system.
Conclusion of patent cross-licensing agreement; joint development of next-generation server.
Joint development of catalytic system for production of new functional polymers.
Joint development in field of semiconductor manufacturing equipment. Improvement of patents held by NanoInk.
Establishment of joint venture in field of management of corporate communications networks.
R&D in next-generation educational environments using IT.
Development of distribution services for dynamic content produced by IT, online commerce and entertainment companies.
Joint enterprise in field of data migration for system optimization (main frames, etc.).
Joint research on ultra-heat-resistant alloys for use in gas turbine engines.
Japanese company Sumitomo Chemical
JFE Steel
Tower Records
Kitakyushu National College of Technology
NEC
Nosan
Kuraray Fastening
Sony, Toshiba
Dai Nippon Printing
NEC
Chiyoda Ute
Toshiba
NEC
Mitsui Chemicals
SII NanoTechnology
KDDI
National Institute ofMultimedia Education
NEC, J-Stream, etc.
NTT Data
National Institute forMaterials Science
Overseas company (country)
Cambridge Display Technology (UK)
Thyssen Krupp Steel (Germany)
Napster (US)
Orla Protein Technology (UK)
Cerep (France)
Evialis (France)
Aplix (France)
IBM (US)
Intel (US)
EMC (US)
Knauf Gips (Germany)
ARC International (UK)
Microsoft (US)
Dow Chemical (US)
NanoInk (US)
British Telecommunications(UK)
Microsoft (US)
Akamai Technologies (US)
Sun Microsystems (US)
Rolls-Royce (UK)
Date ofannouncement
2005/5/25
2005/6/16
2005/10/25
2005/11/16
2005/11/24
2005/12/16
2005/12/26
2006/1/12
2006/1/19
2006/4/5
2006/5/8
2006/5/25
2006/5/25
2006/6/21
2006/6/22
2006/6/26
2006/6/28
2006/6/28
2006/6/29
2006/6/30
10 11
10 Advantages5
Partnerships with Japanese companies enable foreign-affiliated companies to leverage their respective talents, which is vital to remaining globally competitive. Furthermore, Japanese companies emphasize enhancing product development and manufacturing efficiency, making Japan the ideal arena for innovation.
Protection of intellectual property rightsJapan has established several laws to strengthen intellectual property protection, including the creation of the “Intellectual Property High Court” in April 2005 to improve the intellectual property claims process.
In May 2005, the National Institute of Science and Technology Policy (NISTEP) published a predictive account of the long-term outlook for science and technology in Japan based on the results of a questionnaire survey of specialists in a variety of fields. According to NISTEP's predictions, technologies like the following will be in use in Japan by around 2030:
Crisis management systems using disaster surveillance satellites, communications satellites, GPS and unmanned flights to enable disaster monitoring and judgment of status and rapid response after a disaster occurs.
A "helper robot" in every house to assist with cleaning, laundry, etc.
Automotive systems using onboard sensors to predict and judge the status of breakdowns and accidents.
Robots enabling families living apart to check on each other's health and safety.
Automotive recycling technologies enabling the near-complete elimination of the problem of scrapped vehicles.
Control of prosthetics using computers to transmit motion signals from the brain.
Artificial organs incorporatinghuman cells and tissues.
A permanent cure for Alzheimer's disease.
Genetic treatmentsfor cancer.
Source: ”White Paper on Science and Technology 2006,“ Ministry of Education, Culture, Sports, Science and Technology
World’s center for technological innovation and product development
Source: European Innovation Scoreboard 2005
Source: ”White Paper on Science and Technology 2006,“ Ministry of Education, Culture, Sports, Science and Technology
Summary Innovation Index (SII)*
R&D spending to GDP ratio for major countrieswith total R&D expenditure (in brackets)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
EU15 Germany France Italy UK US Japan
0.65
0.46
0.58
0.46
0.36
0.48
0.60
1.0
1.5
2.0
2.5
3.0
3.5
1995 1996 1997 1998 1999 2000 2001 2002 2003 (Year)
(%)
3.4
2.62.5
2.2
1.9
1.3
US (32.9 trillion yen)
Japan (16.8 trillion yen)
Germany (7.1 trillion yen)
France (4.5 trillion yen)
UK (3.9 trillion yen)
China (2.2 trillion yen)
Note: * The relevant elements of innovation input are captured by three sub-groups of indicators:1. Innovation drivers, to measure the structural conditions required for innovation potential.2. Knowledge creation, to measure the investments on human factors and on R&D3. Innovation & entrepreneurship, to measure the efforts towards innovation at the
microeconomic level.
The relevant elements of innovation output are captured by two sub-groups of indicators:1. Application, to measure the performance, expressed in terms of labour and business
activities, and their value added in innovative sectors.2. Intellectual property, to measure the achieved results in terms of successful know how,
especially referred to high-tech sectors.
12 13
Access to new Asian markets10 Advantages
6East Asia continues to grow at an astonishing pace and economic integration in the region continues to increase. In 1980, East Asia‘ s share of global GDP stood at 17%. In 2005, the figure stands at 29%, due to the robust economic growth of East Asia, where Japan continues to have a strong presence.
As East Asia grows, economies are becoming more service-oriented. Common tastes are developing and lifestyles are converging, in particular in urban areas. Many consumer products that gain popularity in Japan, including movies, anime, game software, clothing and cosmetics, go on to become popular in East Asia in general. Success in Japan is a litmus test for success in East Asia.
Cooperation in the mutual supply of components is increasing in the Asian region, in particular in the field of electrical machinery. Horizontal intra-industry trade involving components between Japan and the rest of the Asian region is also progressing. And Japan is playing an important role as a supplier of core components.East Asia is moving closer towards the establishment of an East Asian free business zone, as governments in the region work to conclude free trade and economic partnership agreements. This will help further trade in the region.
Japanese companies continue to expand their market reach throughout the East Asia region. Their established networks provide foreign-affiliated business partners smooth access to these growth markets.
0
20
40
60
80
100
17
23
29
30
22
23
26
28
26
21
23
30
29
20
20
31
(%)
1980 1990 2000 2005 (Year)
Others
EU
US
East Asia
ASEAN4 NIES China JapanNote: GDP based on purchasing-power-parity (PPP) valuation of country GDPSource: ”World Economic Outlook Database“ (April, 2006), IMF
Source: ”World Economic Outlook Database“ (April, 2006), IMF
Share of global GDP (PPP*) by region
1980 1990 2000 2005 (Year)
Comparative GDP trends in East Asian region
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
(US$ billion)
Total
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Japan
Singapore
Korea
Philippines
Thailand
Indonesia
China
Malaysia
Source: ”White Paper on International Economy and Trade 2006,“ Ministry of Economy, Trade and Industry
(Year)
Changes in the percentage of GDP represented by service industries in Asian countries
20
30
40
50
60
70
(%)
Source: ”White Paper on International Economy and Trade 2006,“ Ministry of Economy, Trade and Industry
Changes in volume of sales by overseas subsidiaries of Japanese manufacturers
0
1
2
3
4
5
6
7
8
0.71.2
1.92.51.2
1.5
2.3
2.8
0.5
0.7
1.0
1.4
0.2
0.3
0.4
0.5
7.1
5.6
3.7
2.6
1990 1995 2000 2003
Others
Europe
North America
East Asia
(Year)
(trillion yen)
Source: World Trade Matrix, JETRO website
Japan
EU25
U.S.
US$ 54US$ 89
US$ 129
US$ 54
China
ASEAN4 NIEs
US$ 724
Core components, high value-addedintermediate goods, etc.
Assembly of intermediate goods, manufacture of finished consumer goods
Note: NIEs (East Asia comprises the Newly Industrialized Economies): Korea, Taiwan, Hong Kong and Singapore ASEAN4: Malaysia, Thailand, Philippines and Indonesia
US$ 319
Finished consumergoods
Trade relationships between Japan, East Asia, Europe and the U.S. * Figures show trade value (US$ billion, 2004)
US$ 262
US$ 184
Finished consumergoods
Finished consumergoods US$ 276
14 15
Favorable business climate10 Advantages
7Japan’s attractiveness as an investment destination is increasing, as the government works to improve the business environment.
Since the 1990s, Japan has worked to internationalize its accounting standards and reform its legal framework and, in June 2005, established a revised corporate legal system reflecting the internationalization of business activities and changes in Japan's socioeconomic conditions.
Points of revision in Japan’s Corporate Law (June 2005) 1. Easier to establish new companies (abolition of minimum capital requirements)2. Flexible corporate management rules3. Flexible merger compensation (introduction of cash-out merger, triangular merger in cashless transactions, etc.)
M&A activity has been increasing in Japan in recent years. Acquisitions of Japanese companies by foreign companies are expected to continue to increase following the expected enactment in May 2007 of new rules to give greater flexibility in merger compensation schemes (enabling cash-out mergers and triangular mergers).
Changes will also occur in areas that are not directly affected by the new Corporate Law. For example, public services such as water supply businesses, nursing care centers, home-based welfare services and schools will be privatized.Foreign companies will also be able to participate in the provision of these services. In addition, there have been improvements to the system for entry to and residence in Japan; for example, the period of residence permission for technical workers has increased from three to five years, and the scope of mutually recognized domestic and overseas qualifications in the field of information processing has also increased. The government is also progressing with the introduction of systems enabling administrative procedures to be conducted electronically, the translation of laws and regulations into foreign languages, and the provision of services in foreign languages.
Surveys of foreign companies in Japan conducted by JETRO have shown that impediments to investing in Japan high business costs, the exclusiveness and tradition-bound nature of commercial transactions, complexity of administrative procedures have been significantly reduced compared to 10 years ago, and the environment for expansion of foreign companies into Japan is steadily improving.
1996 1997 1998 1999 2000 2001 20032002 2004 2005 1996 1997 1998 1999 2000 2001 20032002 2004 2005(Year) (Year)
(Year)
Trends of Japan's Inward Foreign Direct Investment (Stock) Changes in the percentage of shares of listed companiesheld by foreign investors (companies and individuals)
Source: ”International Investment Position of Japan,“ Ministry of Finance and Bank of Japan
0
2
4
6
8
10
12
3.5 3.53.0
4.7
5.86.6
9.4 9.610.1
11.9
Source: ”2005 Share ownership Survey,“ All domestic stock exchanges (Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo) in Japan
0
5
10
15
20
25
30(trillion yen) (%)
11.913.4 14.1
18.6 18.8 18.3 17.7
21.823.7
26.7
Source: ”Survey on Foreign Direct Investment in Japan“ (March 2006), JETRO
Impediments to foreign direct investment in Japan (multiple answers accepted, comparison of answers in 1995 and 2005)
0
5
10
15
20
25
30
35
40
45
50
(%)
0
500
1,000
1,500
2,000
2,500
3,000
260
418 382 523645
754638
483397
505 531 621753
834
1,169
1,635 1,6531,752 1,728
2,211
2,725
Number of M&As in Japan
Source: RECOF
45.3
30.0
14.0
22.2
33.330.6
24.3
13.014.7
41.7
23.3
11.6
18.4
23.3 23.2
14.7
7.2
12.9
20051995
High real estate prices
High distribution costs
High cost of procuring raw materials and parts
High taxes
Existence of closed transaction networks
Complex distribution channels
Complex administrative procedures
Slow administrative procedures
Dissatisfaction with infrastructure
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
16 17
Rapidly growing broadband society8Japan has the world's fastest and most cost-effective broadband environment and is rapidly moving towards becoming a true ubiquitous society. ·Demand in broadband has shifted from ADSL to FTTH ·The markets for a number of service fields, such as IP telephony and content distribution, have suddenly expanded ·The explosion of the amount of information handled by the increasing demand for business networks has propelled the development of new Wide Area Network (WAN) services.
Further expansion can be anticipated in the future with rapid growth in intra-company teleconferencing and inter-company networks (e.g., in supply chain management), as well as increasing introductions of systems that enable administrative procedures to be conducted electronically.
Note: ADSL Asymmetric Digital Subscriber Line. Allows high-speed, always-on Internet access through ordinary telephone lines.
FTTH Fiber To The Home. Enables ultra-high-speed telecommunications environment through direct home connection to optical-fiber lines.
Mega Data Nets Mega Data Nets is a broadband network service provided by NTT East Japan using leading-edge Asynchronous Transfer Mode (ATM) technology.
Wide Area Ethernet Wide Area Ethernet is an electronic communications service that uses a technology enabling the connection of geographically separated LANs, etc. using an Ethernet interface. Wide Area Ethernet has the following advantages over IP-VPN: Fast communications, with limited delays. The user can use communication protocols other than IP, simply by converting to Ethernet. L2 and L3 switching for low-cost VLAN can be used. High degree of freedom in constructing networks, and flexibility in adding bases, changing protocols, etc.
IP-VPN IP-VPN is Virtual Private Networks created using the IP networks established by communications companies. Using IP-VPN, networks in distant areas can be operated as if they were connected by a LAN.
The integration of mobile devices continues to grow, with handheld electronics including features such as music playback, electronic transactions, TV reception and GPS/navigation functions. In addition, electronic transactions are clearly becoming more integral to the retail sector. As we move towards a more networked society, demand for stable communication speeds and technologies to improve security can be expected to grow.
Technologies, products and services that Japanese companies would like to bring to the market in themedium to long-term (3-5 years) through collaboration with foreign companies: Top 10 fields (as of the end of June 2006).
Source: ”White Paper on Information and Communications Japan 2006,“ Ministry of Internal Affairs and Communications
Breakdown of Consumer-oriented Electronic Transactions and Mobile Commerce (*1)
(*2)
(*3)
(*4)
(*5)
10 Advantages
(*1) (*2)
0
10
20
30
40
50
60
70
80
2002/3 2003/3 2004/3 2005/3 2005/90
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2000 2001 2002 2003 2004 2005 2010
CATV
ADSL
FTTH
(in 1,000s of subscribers)
855
3,861
9,397
14,917
19,536
23,290
4 2,200
(Est.)
Broadband penetration
Source: ”White Paper on Information and Communications Japan 2006,“ Ministry of Internal Affairs and Communications; 2010 estimates are by Fuji Chimera Research Institute
Changes in the number of connections in use in intra-company networks by new WAN service
Source: ”Survey on Supply-side and Demand-side Trends for Telecommunications Services“ (April. 2006), Ministry of Internal Affairs and Communications
(1,000 lines)
(Year/month)0
100
200
300
400
500
600
Mega Data Nets, etc.
(*5)
Wide Area Ethernet (*4)
IP-VPN
(*3)
224
548
2000 2001 2002 2003 2004 2005
Changes in Internet-using population by device
Personal computer
(End of the year)
(million people)
Mobile-phone,PHS and PDA
Game machine, TV, etc.
Source: ”White Paper on Information and Communications Japan 2006,“ Ministry of Internal Affairs and Communications
Market scale (100 million yen) Market scale (100 million yen)
PCs and related products 2,620 50
Home electronics 1,190 20
Travel 6,610 630
Entertainment 4,210 2,080
Books and music 2,070 720
Clothing and accessories 1,830 340
Foods and beverages 2,990 230
Pharmaceuticals, cosmetics and health foods 2,220 360
Hobby items, general goods, furniture, other 3,420 550
Automobiles 6,560 220
Real estate 10,490 200
Finance 3,210 210
Finance (Banks, securities companies, etc.) 2,110 -Finance (Insurance companies) 1,100 -
Services 9,010 4,100
Total 56,430 9,710
Product/service segment
Source: JETRO Online Survey (as of June, 2006)
Home Network is a residential local area network. With the increasing availability of broadband Internetservice and affordable PCs, more people are networking their multiple PCs and network-capable devices touse a single broadband outlet, usually through a cable or DSL provider.
Next Generation Mobile Devices includes PDAs, mobile phones, and smart computers that are mobile and contain new technologies such as authentication systems, broadband content, mp3 players and so on.
Web 2.0 generally refers to a second generation of services available on the Internet that lets people collaborate and share information online. In contrast to the first generation, Web 2.0 gives users an experience closer to desktop applications than the traditional static Web pages.Social Networking Service (SNS) is social software specifically focused on the building and verifying of socialnetworks for whatever purpose. Many social networking services are also blog hosting services.
Technologies demanded are anti-fishing systems and information leakage security systems. Also withincreasing demand on online shopping, security of personal data on shopping sites are interests as well.
The upcoming focus of broadband content in Japan are the following: on-demand movie/animation/musicdistribution and VOIP (Voice over Internet Protocol) uses.
Internet Protocol Version 6 (IPv6) is a network layer standard used by electronic devices to exchange dataacross a packet-switched internetwork. IPv6 is intended to provide more addresses for networked devices,allowing, for example, each cell phone and mobile electronic device to have its own address.
Distributed Computing is designated and parallel computing, using two or more computers communicatingover a network to accomplish a common objective or task. The type of hardware, programming languages,operating systems and other resources may vary drastically. It is similar to computer clustering with the maindifference being a wide geographic dispersion of the resources.
Biometrics technology enables identification of a person by unique human characteristics such as hand geometry, retina, iris, face, etc. With this technology, high security and easy recognition of users can be obtained.
Image Recognition: The identification of objects in an image. This technology can be used to inspect defects or identify products, which can lead to production efficiency and increase in safety. Speech Recognition is a computerized analysis of spoken words in order to identify the speaker, as in security systems, or to respond to voiced commands. The analysis is performed by finding patterns in the spectrum of the incoming sound and comparing them with stored patterns of elements of sound, as phones, or of complete words.
License/Contents Management is a computer software system for organizing and facilitating collaborative creation of documents and other content. A content management system is frequently a web application used for managing websites and web content, though in many cases, content management systems require special client software for editing and constructing articles. The market for content management systems remains fragmented, with many open-source and proprietary solutions available.
Home Network
Next Generation Mobile Devices
Web 2.0 (Including SNS)
Online Security
Broadband Content
IPv6
Distributed Computing
Biometrics Identification System
Image/Speech Recognition
License/Contents Management
1.4
24.4
37.2
48.9
3.1 3.6
27.9
57.261.6
3.4 1.3
58.2
69.2
1.6
66.0
25.0
44.8
64.2
385
87
492
Consumer-oriented electronictransactions (2004)
Consumer-orientedmobile commerce
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Expanding environmental market10 Advantages
9Japan‘s environmental market has rapidly expanded since the second half of the 1990s due to the government‘s advancement of environmental laws.
In addition to creating new markets and opportunities to add value to existing markets, environment-oriented consumption the choice by consumers of environmentally friendly products and services is increasing the number of companies that practice environmental management.
An increasing number of environmentally-friendly products and services are being sold in response to the growing awareness of environmental issues including global warming and ozone layer depletion.
Changes in the market scale of environmental business in Japan
(Year)
(%)
Source: “Current Status and Future Projections on Market and Employment Scale of Environmental Business in Japan” (May 2003), Ministry of the Environment
2000 2010 2020
Others
Renovations and home improvements
Energy conservation / Energy management
Reusable materials
Production of air pollution prevention equipment and materials
Waste disposal services
29.9
47.2
58.4(trillion yen)
0
10
20
30
40
50
60
Source: “JETRO Japanese Market Report No.78” (March, 2006), JETRO
Source: ”The Motor Industry of Japan 2006,“ JAMA
Japanese consumer loyalty to domestic andforeign-made environment and health-friendlyproducts and service.
Trends in clean-energy vehicle use in Japan
(%)
20 2010 0 10
14.16.2
18.5
3.1
6.6
2.8
1.5
4.6
1.1
9.9
3.5
2.1
1.4
13.9
13.8
13.3
13.2
13
12.7
11.8
10.5
10.5
8.7
6.9
0
50,000
100,000
150,000
200,000
250,000
300,000
96 97 98 99 00 01 02 03 04
(In vehicle units)
Diesel-alternative LPG
Natural gas
Electric
Hybrid
0
20
40
60
80
100
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: ”Survey of Trends in Environmentally Friendly Companies“ (September, 2005), Ministry of the Environment
Percentage of companies that have established specific environmental management targets
(%)
30 32
40 3942
38 39
55 5561
68 7074
84
Source: ”Survey of Trends in Environmentally Friendly Companies“ (September, 2005), Ministry of the Environment
Environmental goals established by Japanese companies (Top 10 responses; multiple answers accepted)
Progress in energy conservation
Progress in control of industrial waste and recycling
Progress in control of household waste and recycling
Reduction in volume of printing andcopying and amount of office equipment
Reduction in emissions of carbon dioxide
Progress in green purchasing
Environmental education for employees
Reduction in the use of chemical substances in the workplace and emissions from the workplace
Control of air and resource pollutants
Establishment of company environment management systems
0 10 20 30 40 50 60 70 80
FY2004 (N=2,457)
68.3
60.5
57.6
48.8
34.1
33.5
33.3
52.7
43.4
41
Clothes
Automobiles
Cooking appliances
Chinese medicine and herbs
Tableware
Sundry goods for relaxation
Bedding and sleep - related goods
Antique furniture, recycled andsecond hand furniture
Cleaner for the kitchen, laundry,and house
Furniture
Used or recycled clothes
Handicrafts and small objects
Domestic
Foreign-made
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Booming business in silver care and retirees10 Advantages
10As Japan‘s population over 65 grows in the coming decades, these consumers will create demand in varioussectors, such as biopharmaceutical foods, senior care services and others.
From 2007, approximately 6.9 million members of Japan's first baby boom generation (those born between 1947 and 1949) will begin to reach retirement age. Current estimates indicate that they will be paid more than 15 trillion yen in severance pay per year, amounting to a total of 50 trillion yen. The baby boom generation forms a fixed stratum of consumers, possessing personal financial assets totaling approximately 130 trillion yen, or ten percent of the total personal assets of the population. The members of this generation have a high level of interest in hobbies, education and travel, and are expected to become a key pillar of domestic consumption in Japan.
The growth of senior consumers is generating new needs in the medical, health and nursing care fields. The market scale of these fields is expected to increase to 75 trillion yen by 2010.
Concerns over rising health care expenses has led to increasing attention towards pharmaceuticals and biotechnology products and foods for improving health and therefore reducing medical expenses.
(*1) (*2)
Others
Medical, health, and care equipment
Pharmaceuticals, health foods
Nursing care services
Sports / Health maintenanceand promotion services
Medical care services
0
10
20
30
40
50
60
70
80
Market scale of welfare and health care
33
3
5
9
32
2002 2010
75
56
(trillion yen)
Source: ”New Industry Promotion Strategy“ (May 2004), Ministry of Economy, Trade and Industry
Source: ”Survey of Nursing Care Facilities and Businesses“(May 2006), Ministry of Health, Labor and Welfare
2001 2002 2003 2004 20050
500
1,000
1,500
2,000
2,500
3,000
3,500
600 729899 972 1,098
690
790
921996
1,121534
560
587
615
668
1,8242,079
2,4072,583
2,887
Elderly care welfare and nursing facilities
Daycare services
Visiting services
Changes in the market scale of biopharmaceuticals and foods for specified health use
Source: ”Market Surveys for Investment in Japan: Bio Technology“(May 2005), JETRO
2,967
4,121
3,461
5,669
0
1,000
2,000
3,000
4,000
5,000
6,000
biopharmaceuticals foods for specified health use
(100 million yen)
(*1)
(*2)
20032001
Changes in Japan's total population
30 30 28 26 25 27 28 26 22 20 18 17 17 16 15 14 13 12 11
5055 60 67 72
76 79 83 86 87 8684 82
77 74 72 7061
54
45
56
79
1112 15 18 22 27 29
3335
3535
36
36
8490
9499
105
112117
121 124 126 127 128 127 126 124121
118
109
101
0
20
40
60
80
100
120
140
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2040 2050
Number of users of nursing care facilities and services
Japan's population pyramid
Source: ”Annual Report of Population Estimates“ (2004), Ministry of Internal Affairs and Communications
Source: “Japan in Figures 2006,” “Population Census 2005,” Ministry of Internal Affairs and Communications
0
500
1,000
1,500
2,000
2,500
(million people)
(Year of birth)
(1,000 people)
(1,000 people)
First baby-boomgeneration
Over 65 years old
15-64 years old
0-14 years old
2004 1999 1994 1989 1984 1979 1974 1969 1964 1959 1954 1949 1944 1939 1934 1929 1924 1919
Note: Pharmaceuticals manufactured using biotechnologies, such as genetic recombination, cell fusion and cell culture technologies. Foods that have been modified to reduce or eliminate the health risks associated with conditions such as high blood pressure, high blood sugar and obesity, and have received approval from the Ministry of Health, Labor and Welfare. Unlike ordinary foodstuffs, the health benefits of foods for specified health use have been verified in tests on human subjects, and figures for appropriate daily intake have been established. A wide variety of foodstuffs, including powders, yogurts and cooling drinks, are available as foods for specified health use, and can be purchased at ordinary supermarkets. As of February 21, 2006, 579 products were registered as foods for specified health use.
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