International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Establishing an Office in Japan Provided by the Japan External Trading Organization Establishing an office in Japan, despite high office rents and personnel costs, has become a less expensive undertaking, given a drop in office rents and a more recent devaluation of the yen in dollar foreign currency exchange. According to recent office surveys, however, the new supply of office space in central Tokyo has decreased since 1994, leading to firmer rent prices. And the new office supply in other large cities in Japan has also dropped, except in Osaka and Kobe, where reconstruction works of the post 1995 Hanshin earthquake have continued. Without a doubt, the least cost option for establishing a presence in Japan is through the Internet. The U.S. Commercial Service in Japan provides an "Online Trade Center" where a U.S. company can market its products and services visually and benefit from recruitment and advertising by the U.S. Trade Center in Tokyo. A U.S. company collecting information and/or facilitating contacts in Japan may wish to establish a representative office. This liaison office can obtain market data and other information and provide necessary promotional and service support. A representative office is not subject to Japanese taxes and obtaining special approval is not necessary. A representative office, however, must not involve itself in commercial transactions or generate income, therefore it can not handle orders directly. The liaison office may provide guidance and support to an agent and manage all marketing activities except for the actual sale. A branch office of a U.S. company can engage in trading, manufacturing, retailing, services or other business. A branch office may take and fill orders and carry out a full marketing program, including arranging for advertising, recruiting a sales force and performing all necessary promotional activities. A branch is liable for payment of Japanese taxes. The branch must appoint a resident representative in Japan and must register with the Legal Affairs Bureau of the Ministry of Justice. In addition, the establishment of a branch office is considered a direct investment under the Foreign Exchange and Foreign Trade Control Law, requiring reporting to the Ministry of Finance through the Bank of Japan within 15 days after the establishment of the branch office. As with joint ventures, for certain designated sectors, Ministry of Finance notification must be made prior to the establishment of the branch office; and investment in designated sectors such as broadcasting or telecommunications may be restricted or prohibited. An alternative to a branch office is a wholly owned corporation. As in the above options, certain sectors are restricted. Setting up a wholly owned subsidiary will involve more time and expense, but it can offer an effective means to guarantee better protection for proprietary information, obtain credit and penetrate markets that have subtle but substantial barriers to imports. Moreover, there is a perception in Japan that a company with subsidiaries is both more committed and more substantial. This perception can serve as a powerful selling point for that firm. A fourth approach is to pool resources of several firms with complementary product lines. Such a group might establish a marketing association, consortium or jointly owned export management company, and set up a sales and service branch or subsidiary office in Japan. This operation may take the form of a representative office, which handles contacts with agents, distributors and customers. Considering the importance of brand image in Japan, group members may wish to consider adopting a group logo as a universally recognized and accepted identity for their product line. Lower-priced land, lower commercial rents and the severe financial crunch affecting many Japanese companies now provide U.S. companies with excellent opportunities to set up, expand or purchase businesses in Japan. Also, the tightening of credit available to small and medium-sized businesses in Japan offers new opportunities for mergers and acquisitions, especially of wholesalers, which can be the key to product distribution in Japan. U.S. companies also should carefully examine the Japanese Ministry of International Trade & Industry's new programs for promoting imports and foreign investment into Japan, including: loan programs through the Export-Import Bank of Japan and the Japan Development Bank, the entry-level business support programs being provided by the Japen External Trade Organization (JETRO) and the Foreign Investment in Japan Development Corp. (FIND). JETRO has set up six business support centers to offer various assistance to new-to-market foreign firms in their initial market development activities: The centers are located in Tokyo, Yokohama, Nagoya, Osaka, Kobe and Fukuoka. Fully equipped mini-offices are available free of charge on a temporary basis. They provide not only free office space, but counseling, business library, data base terminals, conference halls, etc. Company Registration. There are two forms of corporations under Japanese law in common use - the joint stock company (kabushiki kaisha or K.K.) and the limited liability company (yugen kaisha or Y.K.). U.S. companies can also register a branch in Japan. A representative office of a U.S. company does not need to be registered. At least one company representative must be a resident of Japan. To incorporate a joint stock company requires minimum capital of 10 million yen. To incorporate a limited liability company requires minimum capital of 3 million yen. Procedures and legal fees for each type of corporation are different. Professionals who can handle the procedures include lawyers (bengoshi) and judicial scriveners (shiho shoshi). Registration fees: Revenue stamp: 40,000 yen Notarization fee: 40,000 yen Per page for copies of the articles of incorporation: 200 yen Registration tax: 7/1000 of the paid-in capital, with a minimum amount of 150,000 yen. Minimum registration tax imposed on a limited liability company is 60,000 yen. Taxation. Representative offices of foreign companies not engaged in sales activities are not subject to corporate taxes, but branch offices and subsidiaries must pay corporate income tax on income earned within Japan. A real estate acquisition tax is imposed for purchase of real estate and a municipal property tax is imposed annually. A U.S.-Japan tax treaty affects taxation of U.S. corporations and individuals. Corporate income tax. Companies with more than 100 million yen capital: 37.5%. Companies with not more than 100 million yen capital: 28% tax on income not more than 8 million yen, and 37.5% on the portion of income exceeding 8 million yen. Income tax on individuals. Japanese income tax rates on individual income range from 10% to 50% of taxable income. Prefectural and local inhabitants taxes are imposed on the previous year's income. Although the rates vary according to the locality, the sum of the two inhabitants' taxes average about 5% of income. After five years residence in Japan, income tax is calculated on worldwide income, before that only on income earned or remitted to Japan. Consumption tax. Assessed on purchases of all goods and services: 5%. Japan Facts Nominal GDP 1997: $ 4,190.2 billion Per capita nominal GDP 1997: $33,319 Imports 1997: $338 billion Exports 1997: $420 billion Leading trade partner: United States, accounting for 22.3% of Japanese imports and 27.8% of Japanese exports Japan's average tariff rate on industrial products is the lowest among the major developed countries. German cars have a larger share in the Japanese market than in the U.S. market. Glossary of Terms In order of importance, corporation rankings include: English/Japanese, chairperson/Kaicho, adviser/Sodan-yaku, counselor/Komon, president/Shacho, auditor/Kansa-Yaku, director/Torishimari-yaku Advertise on this site Put your company on this site!