Investing in Japan

Why Japan?

10 Advantages to Investing in Japan

7. Favorable business climate

Japan's attractiveness as an investment destination is increasing, as the government works to improve the business environment.

Trends of Japan's Inward Foreign Direct Investment (Stock)

Source: "International Investment Position of Japan," Ministry of Finance and Bank of Japan

Changes in the percentage of shares of listed companies held by foreign investors (companies and individuals)

Source: "2005 Share ownership Survey," All domestic stock exchanges (Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo) in Japan

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.

Impediments to foreign direct investment in Japan (multiple answers accepted, comparison of answers in 1995 and 2005)

Source: "Survey on Foreign Direct Investment in Japan" (March 2006), JETRO

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 rules
3. 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).

Number of M&As in Japan

Source: RECOF

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.

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