International
support

In more than 90 countries

The consumer

Consumer Profile
The Japanese population is the oldest in the world, with a median age of 48.4 years in 2020. According to the latest data by World Bank, some 12.6% of the population is under 14 years of age , 59.4% between 15 and 64 years old and 28% over 65 years old. The population is decreasing (-0.3% in 2019). The number of people per household is declining continuously and reaching 2.3 in 2019 while the number of households should continue to increase despite the decline in the population. About 60% of households are couples with or without children. One-person households are increasing and represent nearly 35%. The Japanese population is 51.2% women and 48.8% men. Japan is one of the most densely populated countries and 91.8% of its population is urban. Tokyo, followed by Kanagawa, Osaka, Aichi, and Saitama, account for 36.4% of the population. The level of education is high, almost all the population has secondary education. In 2019, 62% of 25-34 year-olds had a tertiary degree in Japan compared to 45% on average across OECD countries. About one-fifth of the workforce is made up of office workers, 17% of professionals and engineers, 13% of people working in manufacturing processes, 12% of sales people, 12% of people working in services, 7 % of people working in transportation, cleaning, packaging and related activities while 4% are construction and mining workers. Workers in administration, security, transport and agriculture, forestry and fisheries each account for less than 3%.
Purchasing Power
In Japan, GDP per capita reached about USD 43,235.718 in PPP in 2019. Japan is a high-income society, but looking at the average annual income of member countries in 2019 published by the OECD Japan ranked 19th, with 40,573 US dollars (approximately 4,479,259 yen), lower than the average of all OECD countries, which was 46,686 US dollars (approximately 5,154,134 yen). In Japan, the average household net-adjusted disposable income per capita is USD 29 798 a year, lower than the OECD average of USD 33 604  a year. There is a considerable gap between the richest and poorest – the top 20% of the population earn more than six times as much as the bottom 20%. The country suffers from inequalities, especially between the sexes. Although the gender wage gap in the country has decreased over the last 15 years, it remains large (24.5 per cent), and Japan is third to last in the ranking compiled by the OECD. People under 20 are the least paid. Half of consumers believe they are more environmentally conscious about shopping than they were a year ago, yet very few are willing to pay more for it.
Consumer Behaviour
Japanese consumers have long tended to prefer quality consumption over mass consumption. However, the economic slowdown has led some consumers to seek out lower prices and lower quality products. This is especially true of the Yutori (Millennial) generation. 43.8% of people under the age of 25 work part-time and earn around $100–500 a month. They are generally willing to visit malls and specialty stores if they offer entertaining shopping experiences. Discount stores and own-label products, which once struggled to break into the Japanese market have gained market share. Quality standards and service expectations (sales process, delivery, packaging, after-sales service, etc.) are high in Japan. The average basket in Japan, relatively high compared to Western countries, is down because of the change in consumption modes (cheaper products in particular). Due to the economic situation in Japan consumer confidence is eroding. Online shopping is attracting an increasing number of consumers though while the country is largely connected, e-commerce is less present than in Eastern Europe or the United States. Japanese consumers are very open to buying international brands for everyday consumer goods and are generally attracted by products imported from countries  perceived as "specialised" such as Swiss watches and French wines. However, Japan is still the largest luxury markets in the world. Bvlgari, Salvatore Ferragamo and Gucci earn 27% of their global revenue in this market alone. Louis Vuitton, meanwhile, earns half its global profits from its 60 stores on the island.

Consumers in Japan are generally very brand loyal, however, the older population is more so than the younger generation. There is a strong desire for new products and generally consumers adopt brand innovations though loyalty is declining. Half of the population uses social media regularly. The Japanese mainly watch videos and follow influencers for opinions on products. Also, nearly three quarters of consumers inquire with social networks before buying certain products, especially cosmetics and fashion. In general, the Japanese are not worried about big data, thanks to the legislation in force. However, most believe that the counterpart to the accumulation of personal data is to receive regular tailored and promotional offers.

Since the economic crisis, the Japanese are moving towards lower priced consumption. According to a McKinsey study, while they were willing to spend more to save time, the trend is reversed for some Japanese consumers who prefer to take time to spend less. This is reflected in particular with diets. Part of the population now prefers to cook at home rather than eat out at a restaurant. Also, while the population spends most of the time outside the home even with small houses and long working hours there is an increase in the time spent at home. Regarding the environment, more than half of the population is more interested in it than the previous year. However, very few are willing to pay more for consuming environmentally responsible products. The collaborative economy, such as Airbnb, is struggling to attract more clients.
Consumer Recourse to Credit
Credit and debit cards are increasingly used and this has doubled in 10 years. Debit cards are more widely used and accepted than credit cards (found mainly in large hotels and big-city stores). After stagnating since 2010, household credit is rising again. Outstanding loans are estimated at Y4,744,864 according to the Bank of Japan. Consumer credit is largely granted by banks, rather than by businesses. The majority of consumer credits are for housing. With an accommodating monetary policy pursued by the Central Bank, consumer loans should continue to grow.
Growing Sectors
Games consoles, watches, mobile phones, household appliances (washing machines, etc.), electric personal care appliances, dining room furniture (tables, chairs, etc.), ready meals, Japanese clothes, amusement parks , sports services, veterinary services, personal care services, hygiene products, services for the elderly, educational goods and services.
Consumers Associations
JCCU , Japanese Consumer Association
CUJ , Union of Japanese Consumers
JCA , Liste des associations consommateurs
 

+

Importing & Distributing

Import Procedures
Any person wishing to import goods must declare them to the Director-General of Customs and obtain an import permit after examination (if necessary) of the goods concerned. The formalities start with the lodging of an import declaration and end with issuance of an import permit after the necessary examination and payment of Customs duty and excise tax. In this way, measures are taken to ensure the fulfillment of the requirements for the control of foreign exchange and other regulations concerning the importation of goods. More than 90 percent of import procedures is currently computerised.

All steps and required documents are available on the website of Japan Customs.

The Customs Counsellor System assists companies with import procedures.

Specific Import Procedures
Under the "immediate import permission system upon arrival", import permission may be granted as soon as cargo entry is confirmed. To be eligible for this system, importers must file a preliminary declaration online.
For goods whose value is less than or equal to JPY 100,000, a simplified declaration system applies.
Distribution channels
According to the latest USDA Foreign Agricultural Service report, in 2018, the total value of all retail food and beverage sales in Japan was $479.29 billion (¥53,339 billion) an overall increase of 2.3 percent from the previous year.  The food processing industry produced $217 billion in food and beverage products in 2018. Supermarkets account for the majority of food retail sales, at 70%, but the fast growing grocery shop sector now accounts for 14% of sales. Ready-to-eat (REM) or take-away food products represent a growing area. Although Japan is a huge market, it is highly fragmented. The Japanese Food and Beverage (F&B) retail industry includes supermarkets, general merchandise stores, department stores, convenience stores, drugstores, and the internet.

Japan's general merchandise stores (GMS), offer shoppers the convenience of one-stop shopping for groceries, perishables, clothing, household goods, furniture, and electrical goods. GMS's are operated by major national chains that have nationwide networks with hundreds of outlets and typically rely on centralised purchasing. They often purchase foreign products via trading companies.

Supermarkets (SM) stores are smaller in size than GMS's and are more specialised in food and household goods. Supermarkets are facing higher purchasing costs than GMSs. They are seeking ways to stay competitive through product/service differentiation, private brand development, and global sourcing. To gain economies of scale, regional supermarkets are forming alliances through joint merchandising companies with non-competing retailers.

Department store sales have been slowly declining in recent years due to increasing competition with other retailers.

Convenience stores (CVS) are an extremely important sales channel in Japan. They have limited floor space, about 100 m² on average, and typically stock about 3,000 products. Convenience stores derive their competitive advantage from high turnover and efficient supply chains. Convenience stores are notably competing strongly by offering attractive consumer food service options, particularly as fast food offers high potential profits.
Distribution market players
Retailers with the highest food retail sales in 2018 (latest data available):

  • Supermarket: 37,411 billions of Yen ($ 336.2 billion) – 70.1 % share of sales
  • Convenience Store: 7,769 billions of Yen (69.8 billion dollars) - 14.6% share of sales
  • General Merchandise Store: 2,849 billions of Yen (25.6 billion dollars) - 5.3% share of sales
  • Department Store: 1,812 billions of Yen (16.3 billion dollars) - 3.4% share of sales
  • Drugstore: 1,806 billions of Yen (16.2 billion dollars) - 3.4% share of sales
  • Internet: 1,692 billions of Yen (15.2 billion dollars) - 3.2% share of sales

The largest retail outlet is Aeon Co. Ltd, leading player in supermarkets. The second largest retailer in terms of overall sales value is Ito-Yokado, which is a convenience store business. The well-known U.S. brand retailers Costco and Walmart are also successful in Japan.

Retail Sector Organisations
Japan Retailers Association
Japan Department Store Association
Japan Council of Shopping Centres
Japanese Trade Union Confederation (JTUC - RENGO)

+

Operating a Business

Type of companies

Kabushiki Kaisha (KK): Public Limited Company
Number of partners: Minimum of one; or 400 if the company is listed on the Tokyo Stock Exchange. The minimum number of directors is three in a KK with a board of directors, or one for a KK without a board of directors; with no limitation on the number of shareholders.
Capital (max/min): Minimum JPY 1
Shareholders and liability: Limited to the amount of capital contributed
Godo Kaisha (GK): Limited Liability Company
Number of partners: Minimum one partner
Capital (max/min): Minimum JPY 1
Shareholders and liability: Limited to the amount of capital contributed
Goshi Kaisha (GK): Limited Partnership
Number of partners: Minimum of two partners

Two types of partners: active partners and sleeping partners
Capital (max/min): Minimum JPY 1
Shareholders and liability: Unlimited for the active partners; limited to the amount of capital contributed for the sleeping partners.

Gomei Kaisha (GK): General Partnership
Number of partners: Minimum of two partners
Capital (max/min): No minimum capital
Shareholders and liability: Unlimited
 
Setting Up a Company Japan OECD
Procedures (number) 8.0 5.2
Time (days) 11.1 9.5

Source: Doing Business - Latest available data.

 

Cost of Labour

Minimum Wage
According to the Japanese government data, the minimum wage is 7.4 USD, approximately 805 yen per hour in 2020.
Average Wage
Average annual income of employees: 40,573 USD, approximately 4,479,259 yen.
Social Contributions
Social Security Contributions Paid By Employers: Japan has four different kinds of insurance system which companies are legally obliged to take part in:

  • Workers' Accident Compensation Insurance: the maximum premium rate is 8.8% and the minimum is 0.25%. The employer bears the whole cost of premiums. 0.35% in cases of import and trade, and sales industries.
  • Employment Insurance: The insurance premium rate is 0.9%, the employer paying 0.6%.
  • Health Insurance and Nursing Care Insurance: general insurance premiums are 9.90%, the employer paying 4.950% (5.735% if aged 40 or over).
  • Employees' Pension Insurance: Insurance Contributions are 18.3%, the employer paying 9.15%.

For more information, visit the Japan External Trade Organization JETRO site.
Social Security Contributions Paid By Employees:

  • Employment Insurance: The insurance premium rate is 0.9%, the employee paying 0.3%.
  • Health Insurance and Nursing Care Insurance: general insurance premiums are 9.90%, the employee paying 4.950% (5.735% if aged 40 or over).
  • Employees' Pension Insurance: Insurance Contributions are 18.3%, the employee paying 9.15%.
 

Intellectual Property

National Organisations
Japan Patent Organisation (JPO)
Japan Patent Information Organisation (JAPIO).
Regional Organisations
Intellectual Property Rights Experts Group (IPEG), intellectual property resource of each member economy of the APEC community
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

+

Tax Rates

Consumption Taxes

Nature of the Tax
Shouhizei (Consumption Tax)
Tax Rate
10% (7.8% national tax and 2.2% local tax)
Reduced Tax Rate
A reduced rate of 8% applies to supplies of food and drinks (excluding alcoholic beverages and dining out) and subscriptions to newspapers (limited to newspapers that are issued at least twice a week and feature information on general topics such as politics, economics, society and culture).
Other Consumption Taxes
Excise taxes are levied on gasoline, aviation fuel, liquor, and tobacco.
Customs duties are levied on imported goods.
Stamp duties of JPY 200 to JPY 600,000 are imposed on the execution of taxable documents.
Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis or at a fixed amount. A share registration tax is assessed at 0.7% on the registration of new or additional share capital.
 

Corporate Taxes

Company Tax
23.2%
Tax Rate For Foreign Companies
A company that has its head office in Japan is considered as a domestic corporation, regardless of the place of central management or the nationality of its shareholders.
Capital Gains Taxation
Capital gains are taxed as ordinary income at the standard corporate tax rate, with capital losses generally available as a full tax deduction. Capital duty is included in the local inhabitants tax and local enterprise tax.

The recognition of capital gains or losses from the transfer of certain assets between group companies are to be deferred until the asset is transferred to another group company or a non-group company.
Main Allowable Deductions and Tax Credits
In order to file for tax privileges - including deductions for business expenditure, tax loss carryforwards and accelerated depreciation - companies must apply for a "blue form" tax return at the beginning of a fiscal year.
Reserves for doubtful receivables and return of goods not sold are deductible for corporate tax purposes. Deductions are also available for charitable contributions (up to certain limits). Corporations can deduct 50% of the entertainment expenses for food and drink; while expenses for entertainment are only deductible for SMEs (paid-in capital of up to JPY 100 million), up to the smaller of JPY 8 million or the actual disbursement for the entertainment expense. Start-up expenses are allowed to be amortised on a voluntary basis. Interest expenses are generally deductible in the calculation of taxable income.
The remuneration paid to directors is deductible only in specific cases. Enterprise tax and business premises tax are deductible in the calculation of the taxable income.
SMEs may carry back losses for one year. Following the COVID-19 crisis, the NTA announced that corporations with stated capital up to JPY 1 billion may also carry back losses generated between 1 February 2020 and 31 January 2022 from COVID-19 and claim refunds.
95% of dividends received by a company from a foreign company in which it has held at least one-fourth of the outstanding shares for an uninterrupted period of at least six months can be excluded from the company’s taxable income.

Various tax incentives are available for certain business activities including: investment in productivity-improving assets (PIAs, or depreciable assets used for any revenue-producing activities), increasing wages and salaries (giving rise to a tax credit of up to 20% of the corporate tax liability for tax years starting on 1 April 2018 or later and ending on 31 March 2021). Other tax incentives are available for companies investing in R&D activities.
For further information on tax incentives, consult the website of JETRO (Japanese External Trade Organization).
Other Corporate Taxes
Other taxes include: stamp duty (JPY 200 to 600,000), municipal fixed assets tax (levied at 1.4%), a real estate acquisitions tax levied at 3%-4% (reduced temporarily to 1.5%-2%) and inheritance tax (progressive rates from 10% to 55%).

Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis or at a fixed amount. A share registration tax is assessed at 0.7% on the registration of new or additional share capital.

A business premises tax is levied in some cities, including Tokyo, Osaka, Nagoya, Fukuoka, etc. Companies with more than 100 employees in a designated city and/or with business premises in excess of 1,000 square metres are subject to the tax based on the usage of the business (JPY 600 per square metre) and gross payroll (0.25% of gross payroll).

Social security contributions paid by the employer amount to maximum 16.242%.

Family corporations are liable for an additional tax on their undistributed current earnings in excess of specified limits, with rates as follow: first JPY 30 million 10%; next JPY 70 million 15%; over JPY 100 million 20%.

Other Domestic Resources
National Tax Agency
Doing Business: Japan, to obtain a summary of taxes and mandatory contributions.
 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Ministry of Finance: Japan's Tax Convention Network
Withholding Taxes
Dividends: 15.315% (if paid by a listed company to a non-resident)/20.42% (paid to a resident or non-resident), interest: 0% (paid to a resident company)/15.315% (on deposits and bonds)/20.42% (paid to an individual or to a non-resident company), royalties: 0% (paid to a resident company)/10.21% (paid to a resident individual for amounts up to JPY 1 million; 20% for the part in excess)/20.42% (paid to a non-resident individual or corporation).
All of the above rates include a 2.1% surtax.
Rates may be lowered under a tax treaty.

+