2009_10ad

Japan External Trade Organization Invest Japan Division, Invest Japan Department Ark Mori Building, 6F, 12-32, Akasaka 1-chome, Minato-ku, Tokyo 107-6006, Japan Tel:+81-3-3582-5571 Fax:+81-3-3505-1990 March 2009 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 Advantages to Investing in Japan Japan is the center of new trends and creativity and is a coveted testing ground for new products. A survey of foreign-affiliated firms in Japan conducted by JETRO in early 2008 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. Explanatory Notes 1. Figures (As follows, unless otherwise indicated.) (1) In text, figures and tables, “year” indicates the period January-December, and “fiscal year” indicates the period April-March. (2) Figures for “rate of growth” are year-on-year figures. (3) Because figures are rounded, there may be discrepancies in total. 2. Country and region classifications (As follows, unless otherwise indicated.) (1) ASEAN 5: Indonesia, Thailand, Philippines, Malaysia, Vietnam (2) Hong Kong and Taiwan are treated as independent economies (3) NIEs: Hong Kong, Taiwan, Singapore, Korea (4) EU27: Austria, Belgium, Denmark, Germany, Greece, Finland, France, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, Netherlands, UK, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, Romania, Bulgaria (5) NAFTA (North American Free Trade Agreement): US, Canada, Mexico (6) BRICs: Brazil, Russia, India, China 4-5 6-7 8-11 12-13 14-15 16-17 18-19 20-21 22-23 24-25 26-27 Japan – A Market of Enormous Potential Sophisticated Consumers with High Purchasing Power and Discerning Tastes Promising Markets and Industries Home of the World’s Top Companies SMEs Possess Unique Technologies Innovation Ushering in the Future A Gateway to the Asian Market Foreign Companies Expanding Business in Japan Mature Investment Infrastructure A Secure, Comfortable Living Environment Contents 3 4 5 6 7 8 9 10 2 1 Critical node for global market success JETRO Support and Services 4 5 GDP comparison of Japan’s regions with some countries (US$ billion) Japan 4,384 NAFTA 16,169 US 13,844 Canada 1,432 EU27 16,830 East Asia 6,038 BRICs 6,954 UK 2,773 ASEAN5 1,079 NIEs 1,708 China 3,251 Russia 1,290 India 1,099 Brazil 1,314 France 2,560 Germany 3,322 Spain 1,439 Italy 2,105 Others 4,631 Mexico 893 GDP comparison of Japan with other major economic regions (US$ billion, 2007) Source: Prepared based on “World Economic Outlook Database” (April, 2008), IMF Hokkaido region Singapore 168 161 Tohoku region Austria 362 374 Kanto region Canada India 1,724 1,432 1,099 Chubu region Netherlands 681 769 Kinki region Netherlands 688 769 Chugoku region Thailand 254 246 Shikoku region New Zealand 115 128 Kyushu region Switzerland 410 424 Note: 2005 data is used for Japan; 2007 data is used for all other countries. Exchange rates based on IMF period-average rates. Source: “World Economic Outlook Database” (April, 2008), IMF; “Prefectural Economic Almanac” (February, 2008), Economic and Social Research Institute, Cabinet Office 1 Japan is an enormous market, one of the world’s largest in terms of economic scale. The scale of the economies of the country’s individual regions rivals that of some countries. Japan’s regions also offer an attractive market and extensive business opportunities. Japan - A Market of Enormous Potential For more detailed regional information, see http://www.investjapan.org/region/ 6 7 Per capita household consumption expenditure (US$) 0 10,000 20,000 30,000 US UK Japan France Germany Italy Canada 27,672 22,920 19,898 19,438 19,154 17,572 16,521 Note: 2004 data used for the US, Germany and Canada; 2005 data used for all other countries. Source: “World Statistics 2008,” Statistics Bureau, Ministry of Internal Affairs and Communications Comparison of personal financial assets by country (As of end of 2007) (trillion yen) 0 1,000 2,000 5,000 6,000 US Japan UK Germany France 5,136 1,544 919 761 595 Conversion rates: $1=¥113.12, £1=¥227.90, €1=¥166.66. Source: Prepared by Dai-ichi Life Research Institute Inc., based on Bank of Japan “Flow of Funds Accounts,” FRB “Flow of Funds Accounts,” ONS “National Statistics,” Deutsche Bundesbank “Germany Financial Flows,” Banque de France “National Financial Accounts” “Japanese customers are very well educated, so they understand the difference between a product that’s high-performance and low-cost rather than the opposite.” - Lars Petersson, President and CEO, IKEA Japan 2 In addition to possessing high purchasing power, Japanese consumers are early adapters and move quickly to stay on the cutting edge of the latest technologies. Many global products have originated in Japan or have gained a competitive edge by being developed in Japan. Japan is often seen as a superb test market for the introduction of new global products and services. Japan’s figures for final household consumption expenditure are among the highest for the major developed nations. The level of discretionary expenditure is high and consumer demand is substantial, with a signifi- cant share of expenditure occurring in the areas of education and enter- tainment, transport, and communications. Japan’s 120 million citizens hold personal financial assets of approxi- mately 1,500 trillion yen, adding up to considerable potential buying power. The coming retirement of Japan’s baby boom generation will boost the ranks of the nation’s active senior citizens seeking to make the most of their new lives and is expected to result in the creation of new leisure in- dustries targeting seniors and the formation of a big market for high- quality goods and services. Ginza is a prestigious shopping district even by Tokyo standards, and recent years have seen a succession of overseas luxury brands opening major stores in the area. Conspicuous among these are brands establishing flagship stores that provide services such as spas, restaurants and bars in addition to offering their core products – clothing, handbags, and jewelry. Seeking to increase their brand value and boost profits, they are adopting a new approach in order to stimulate demand among Japan’s discriminating consumers. Japan is one of the world’s largest markets for luxury goods. It represents an enormously important market for European and US luxury brands, one in which the level of sales can rival sales in the brand’s home country. In addition, the number of holiday travelers from other Asian countries making shopping trips to Japan has increased rapidly in recent years, and many luxury brands have high expectations that Japan will serve as a showroom for Asia. Sophisticated Consumers with High Purchasing Power and Discerning Tastes Brands that have recently established major stores in Ginza Japan as Asia’s Showroom Jewelry, Watches, Fragrances BVLGARI Cartier CHANEL Swarovski Bags, Accessories GUCCI HERMÈS PRADA Men’s Fashion ARMANI dunhill Opened its large-scale store, featuring a bridal salon and the first BVLGARI restaurant and bar in Japan Opened its renewed Ginza store Opened its first in-store restaurant in the world Opened its first flagship store in the world Opened the world’s first “Gucci Building”, occupied entirely by Gucci, including a cafe and gallery Opened its renewed “Maison HERMÈS” Opened one of the largest Prada boutiques in Japan Opened its flagship “Armani/Ginza Tower,” housing its head office function Opened its new concept store “HOME” in Ginza in 2007, prior to launching the stores in its base market in London 8 9 High rate of growth in ICT industry (change in real GDP) (trillion yen) 0 20 40 60 80 2000 2002 2004 2006 46.4 52.9 60.5 69.7 Source: “White Paper Information and Communications in Japan 2008,” Ministry of Internal Affairs and Communications 1,256.2 581.6 6,225.5 575.2 222.0 369.2 13.1 Projected market scale of main ICT fields FY2008 1,472.9 922.8 11,715.3 841.3 456.2 548.7 382.6 FY2013 (billion yen) 3.2 9.7 13.5 7.9 15.5 8.2 96.4 CAGR (%)*2 Field Note: *1: The forecast for Internet advertising is based on calendar years, rather than on fiscal years. *2: CAGR (Compounded Annual Growth Rate) refers to the average annual growth rate during the period between fiscal 2008 and fiscal 2013. Source: “Japan’s Major IT Markets: Scale and Trends through 2013” (December, 2008), Nomura Research Institute, Ltd. Broadband lines Of the above, only optical fiber lines BtoC EC Internet advertising*1 Online billing/payments Information security Wireless broadband Projected change of IT outsourcing services market (100 million yen) Source: “IT Outsourcing Market 2008” (April, 2008), MIC Research Institute Ltd. 0 10,000 20,000 30,000 40,000 2006 26,731 2008 29,512 1,620 6,745 4,130 12,467 4,550 2010 32,623 1,993 6,650 4,470 14,305 5,205 5,850 16,340 4,800 6,570 2,400 2012 (FY) 35,960 1,236 6,938 3,800 10,813 3,944 Business process outsourcing Processing service Application outsourcing Data center outsourcing Network and desktop services 3 Japan’s industries are globally competitive, and, as can be seen in the automo- tive sector, the nation’s industrial structure is extremely broad-based, with a large number of smaller companies functioning to support the world heavy- weights. For foreign companies, Japan is not just an attractive sales market; in all of its sectors, Japan offers foreign companies extensive opportunities. The following is a brief introduction to four sectors which are seen to have signifi- cant potential for future growth, and which have attracted considerable inter- est from companies in Japan and overseas. ICT Information and communication technology (ICT) is an area in which Japan, backed by its world leading technological capability, is strong in all stages of the product development process, from R&D to design and production. The scale of the market is enormous, and it is growing steadily. The scale of Japan’s ICT market is expected to grow in a variety of areas in the future. In particular, a steady growth in e-transactions is predicted for the retail sector. In mobile ICT devices, the concentration and integration of a variety of functions, including music playback, electronic payment, television and GPS/navigation continue to progress ahead of many world markets. And companies in Japan and from overseas are picking up the pace in developing products and services related to ‘next-generation’ commu- nications networks. In addition, there is a growing demand for technologies that increase system stability and security of communications. The market for outsourced services is also expected to expand in the future in response to an increasing corporate need for infrastructure management as network infrastructure advances. Promising Markets and Industries 10 11 Note: Actual figures used until 2005; figures for 2010 and after are projections. The rate of aging of the population and the percentage of the population 75 years and older are calculated as percentages of the total population. Source: “White Paper on the Aging of Society 2008,” Cabinet Office 1995 2000 2005 2010 2015 2020 2025 2030 2035 5.7 14.5 7.1 17.3 9.1 20.1 11.2 23.1 15.3 29.2 18.2 30.5 19.7 31.8 20.2 (%) 33.7 (%) 13.1 26.9 Domestic sales Overseas sales 16% 84% Japan’s automotive parts market: 20.4 trillion yen/year Top 5 automobile producing countries (2007) (1,000 vehicles) Number of low-emission vehicles in use in Japan (1,000 vehicles) Japan’s automotive parts market (FY2007) Note: Figures for Germany include Belgian GM assembly. All figures are estimates. Source: Japan Automobile Manufacturers Association, Inc. (JAMA), Organisation Internationale des Constructeurs d'Automobiles (OICA) Notes: Certified high-fuel-efficiency and low-emission vehicles are excluded. For FY2006, fuel cell vehicles include vehicles using hydrogen as fuel. Source: Japan Automobile Research Institute, The Japan Gas Association, Organization for the Promotion of Low-emission Vehicles Source: Japan Auto Parts Industries Association (JAPIA) 0 5,000 10,000 15,000 Japan US China Germany France 2001 2002 2003 2004 2005 2006 91 113 161 230 292 387 (FY) 11,596 10,781 8,882 6,213 3,019 0 100 200 300 400 Changes in the scale of the environmental business market Source: Ministry of the Environment Environmental load reduction technology and products Prevention of environmental pollution Effective use of resources 769 1,119 1,236 (Number of employees : 1,000 people) 30 47 2000 2010 58 (Market scale : trillion yen) 2020 Number of environment-related published patents Source: Japan Patent Office Japan US Europe 2001 2003 2005 2007 0 2,000 4,000 6,000 8,000 10,000 12,000 8,661 490 1,885 9,588 2,099 1,904 10,136 2,433 1,937 9,424 2,684 2,227 65-74 years (“Early-stage elderly”) 75 years and older (“Latter-stage elderly”) Number of users of nursing care facilities and services (1,000 people) Source: “Survey of Nursing Care Facilities and Businesses” (May, 2006), Ministry of Health, Labor and Welfare Elderly care welfare and nursing facilities Daycare services Visiting services 0 1,000 2,000 3,000 2001 2002 2003 2004 2005 600 690 534 729 790 560 899 921 587 972 996 615 1,098 1,121 668 1,824 2,079 2,407 2,583 2,887 Percentage of population 75 years and older Rate of aging of the population Changes in the elderly population and future projections Electric vehicles Natural-gas vehicles Hybrid vehicles Fuel-cell vehicles Methanol vehicles AUTOMOTIVE PARTS Japan’s automotive industry is a global leader in terms of number of units manufactured and marketed, percentage of the world market, technology implemented, etc. Japan is home to top global auto- makers as well as a large number of smaller parts manufacturers, who support the activities of these larger companies with their techno- logical prowess. In addition to representing an enormous market for their products, Japan also offers foreign companies the chance to collaborate with these Japanese companies, which can lead to further expansion of their business overseas and provide considerable opportunities for in- novation. MEDICAL & HEALTH CARE The people of Japan have some of the longest life spans in the world. In addition to this fact, the nation’s elderly population is growing; health consciousness is increasing; and the medical and health care markets are displaying steady and continuous growth against a back- drop of technological development in relevant fields including biotech- nology. Recently there has been a rapid increase in concern about lifestyle diseases and the metabolic syndrome, and demand for prod- ucts and services that help to maintain and to boost health has grown significantly. In addition, the market for care, nursing and welfare-re- lated services is also expected to grow steadily. ENVIRONMENT Japan’s environment-related market has been expanding rapidly since the mid-1990s. There has been considerable growth in environmen- tally friendly products and services in response both to the establish- ment of environmental laws and to an increasing concern towards global warming and other environmental problems. The trend of consumers becoming more environmentally conscious in their consumption is generating new markets and adding value to ex- isting markets. Companies that practice environmentally conscious man- agement are on the rise in Japan, and the country is number one in the world in terms of the number of ISO 14001 certifications acquired. Japan has contributed numerous innovations to the environment-related market, energy-saving technologies for instance, and the number of patent applications in this field originating in Japan is among the high- est in the world. For more detailed sectors information, see http://www.investjapan.org/attract/ 18,261 22,005 25,672 29,412 33,781 35,88936,354 36,670 37,249 (1,000 people) 12 13 4 Japan is home to many of the world’s top companies. These companies have es- tablished bases throughout the world and continue to expand their procure- ment, production and sales networks. And they are continuing to offer unique and innovative products and services as a result of active investment in R&D, conducted to enable them to enhance their international competitiveness and maintain growth. Backed by the nation’s high level of technological advance- ment, Japan’s industries offer extensive business opportunities for foreign com- panies that seek to establish partnerships with Japanese firms. Advanced technologies originating in Japan have spread around the globe, and Japan’s technological sophistication and innovativeness are admired throughout the world. In 2007, Japan’s internationally competitive technologies and products made it second only to the US in terms of the surplus of patent royalties received over royalties paid. As their volume of overseas sales increases, Japanese companies are ac- tively investing resources in research and development. The process of development of advanced products necessitates extremely close in- volvement between companies and parts and materials makers, a greater degree of connection between technological development and the sites of production, and the formulation of strategies for the place- ment of products in the market. For these reasons, companies are locat- ing their production bases for high value-added products in Japan, and the superior technological capacity that has emerged as a result has become the wellspring of the nation’s international competitiveness. Home of the World’s Top Companies Top 5 patent royalty surplus holders (2007) US Japan UK France Surplus (US$ 100 million) 434 66 51 43 Production value of AV equipment 47% Production value of office equipment 65% Production value of electronic components 50% Global shares of Japanese companies (2006) The majority of products manufactured in Japan are high-added-value products (%) Manufactured in Japanese bases Manufactured in Overseas bases Intermediate-grade products General purpose products, Lower-grade products High value-added products, High-grade products 57.0 45.2 22.7 11.6 25.2 14.8 Source: “White Paper on Monodzukuri 2007,” Ministry of Economy, Trade