Japan

Country overview

Learn about the Japan economy

Overview

Japan is characterised by consumers with high levels of disposable income and an appetite for premium, high-end goods and services, and companies with a strong global orientation and willingness to invest in sustainable, long-term products and services.

Japan’s GDP is ranked third in the world, and its economy is back on the road to recovery thanks to large-scale monetary easing, tax reform and deregulation.

Business is underpinned by world-class social and transportation infrastructure, political stability, strong logistics performance, transparency and IP protection.

There are certainly challenges to doing business in Japan, including cultural and language barriers, relatively high corporate tax rates and stringent packaging, labelling and documentary requirements, but there are real opportunities for Australian businesses willing to make the effort.


ANZ has engaged Export Council of Australia (“ECA”) as a primary contributor to this website. The views and opinions expressed in the following content are those of ECA and may not necessarily state or reflect those of ANZ.

Country critique

Learn about how Japan rates on various economic and ease of doing business measures

Country critique

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Up to PJY4 million - 21.42% (effective tax rate)

JPY4 million to JPY8 million – 23,20% effective tax rate

Over JPY8 million – 36.05% effective tax rate

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Ranked 34th (out of 189 countries)

(World Bank ranking 2016)

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0.6% (2015 actual)

0.5% (2016 & 2017 forecast)

0.7% (2018 forecast)

From the World Bank Global Economic Prospects report
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USD32,480.7

(The World Bank - www.worldbank.org)

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-0.02% (average for 2016)

(Trading Economics - www.tradingeconomics.com)

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Rated 3.91 out of 5 (2011 to 2015)

(World Bank Logistics Performance Index)

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1.01 (World Bank Ranking 2014)

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18th on Transparency International ranking (2016)

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Corporate tax rate

The taxes levied in Japan on income generated by the activities of a corporation include corporate tax (national tax), local corporate tax (national tax), corporate inhabitant tax (local tax), enterprise tax (local tax), and special local corporate tax (a national tax, although filings and payments are made to local governments along with those for enterprise tax) (hereinafter collectively referred to as "corporate taxes"). Except in instances requiring exceptional treatment, the scope of income subject to corporate inhabitant tax and enterprise tax is (including special local corporate tax; the same applies below) determined, and the taxable income calculated, in accordance with the provisions for corporate tax. Corporate inhabitant taxes are levied not only on income but also on a per capita basis using the corporation's capital and the number of its employees as the tax base. Corporations having paid-in capital of more than 100 million yen are subject to enterprise tax on a pro forma basis (see 3.3.11).

The income calculated for each business year is used as the tax base for determining these corporate taxes to be levied on a corporation's income. Other corporate taxes include corporate taxes on reserves for retirement pensions, etc. (suspended in the case of business years commencing by March 31, 2017).

The tax rates for corporate tax, corporate inhabitant tax and enterprise tax on income (tax burden on corporate income) and per capita levy on corporate inhabitant tax for each taxable year are shown below (a small company in Tokyo is used as an example). The rates for local taxes may vary somewhat depending on the scale of the business and the local government under whose jurisdiction it is located.

Please note that applicable tax rates will vary according to the timing.

Tax burden on corporate income
Brackets of taxable incomeUp to 4 million yen4 million yen to 8 million yenOver 8 million yen
Corporate tax15.00%15.00%25.50%
Local corporate tax0.66%0.66%1.12%
Corporate inhabitant taxes
1. Prefectural0.48%0.48%0.81%
2. Municipal1.45%1.45%2.47%
Enterprise tax3.40%5.10%6.70%
Special local corporate tax1.46%2.20%2.89%
Total tax rate22.45%24.89%39.49%
Effective tax rate21.42%23.20%36.05%

Source: Japan External Trade Organisation (JETRO)

(Note) The above corporate income tax rate will apply for three business years from the business year beginning between October 1, 2014, and March 31, 2015

The rates for corporate inhabitant tax and corporate enterprise tax are shown using Tokyo as an example. The following conditions apply:

  • The capital of the corporation is 100 million yen or less. (This table does not apply to wholly-owned subsidiaries of large corporations with capital of 500 million yen or more.)
  • Corporate tax amount is 10,000,000 yen or less and taxable income is 25,000,000 yen or less.
  • Offices or factories located in up to two prefectures.

Customs ease

The World Bank describes lead time to import is the median time (the value for 50 percent of shipments) from port of discharge to arrival at the consignee. Data are from the Logistics Performance Index survey. Respondents provided separate values for the best case (10 percent of shipments) and the median case (50 percent of shipments). The data are exponentiated averages of the logarithm of single value responses and of midpoint values of range responses for the median case.

The time for goods to clear Customs in Japan was 2 days in 2015.

Documentary requirements

Fax signatures are not permitted on any documents. Minor typing and other errors in documentation often result in serious delays and complications at point of entry.

Pro-forma invoice

No special requirements.

Commercial invoice

A minimum of three copies are required and must be signed by the supplier and include the following details:

  • marks and serial numbers of packages
  • description and quantity of goods
  • CIF value (Incoterms 2010)
  • place and date of preparation
  • destination and consignee
  • name of vessel
  • import licence number
  • conditions of contract relating to determination of the value

It is strongly recommended, whenever possible, to include the HS Commodity Classification of the goods to be imported. Complete invoices and packing lists should be forwarded promptly to the importer by airmail.

Insurance

Normal commercial practice. A certificate may be required if customs clearance without invoice is requested (to assist in appraisal of taxable value/quantity). In such circumstances other documents covering transportation cost, premium specifications and price list etc. may be required.

Bill of lading / Air Waybill

For goods dispatched by sea, minimum of three signed originals Bills of Lading and two unsigned copies are required. If made out To Order, it should indicate the name and address of the person to be notified.

For goods sent by air, standard sets of 10 Air Waybills (AWB) are available (original plus nine copies) but no strict rules apply. The distribution of printed version of AWB is the control of airlines. The consignee automatically receives an original (No. 2) and the shipper (exporter) received another original (No. 3), the balance is distributed at specific points along the journey. As IATA’s e-freight (similar to e-ticket) project expands, paper based document are being replaced with e-AWB, typically available as .pdf files. Their distribution will obviously become less controlled and more flexible. Information required is usually specified in importer's letter of credit, but should include name of shipper, ultimate and intermediate consignees, marking and number of packages and description of goods with gross weights and measurements in metric terms.

Packing list

Two copies recommended, indicating details of goods, including the weight and measurement of each package.

Weights and measures

The metric system is the legal system for weight and measures. The Japanese Measurement Law requires that all imported products and shipping documents show metric weights and measures.

Public health requirements

Strict controls govern the manufacture and sale of both fresh and preserved foodstuffs.

All imports of food must be accompanied by an import permit, issued by the Food Sanitary Inspection Service of the Ministry of Health and Welfare and may also be subject to inspection on arrival.

When imported for the first time, a description of all ingredients and the manufacturing processes involved will be required for application, along with any other requested documents, e.g. health certificates from the country of origin.

The use of certain substances such as food additives are either strictly controlled or prohibited.

The use of chemicals whose residue remains in crops, soil or pollutes water is strictly controlled.

Imports of animals and plants and their products require health certification issued by an approved authority in the country of origin. In Australia, this is usually the Australian Quarantine and Inspection Service (AQIS), Agriculture, Fisheries and Forestry-Australia (AFFA) or the relevant state department of agriculture.

Under Japanese quarantine regulations Australia can supply:

  • green bananas
  • mangoes
  • lemons
  • pineapples and certain oranges
  • range of vegetables, which do not contain seeds.

A larger range of fruits and vegetables from Tasmania can now be imported into Japan, as it is recognised that they are fruit fly free.

The official reference for importing and distributing drugs in Japan is the Pharmaceutical Affairs law. Manufacturers or importers intending to manufacture or import drugs, medical equipment, cosmetics and toiletries need to obtain approval in accordance with the Pharmaceutical Affairs law.

If cosmetic products contain ingredients outside the Comprehensive Licensing Standards, the approval of Minister of Health and Welfare will be required to import those products.

Foreign direct investment

Japan officially welcomes foreign investment and has eliminated most formal restrictions governing FDI. The Ministry of Economy Trade and Industry (METI) and the Japan External Trade Organization (JETRO) assist foreign firms wishing to invest in Japan, and many prefectural and city governments have active programs to attract foreign investors. A number of factors make Japan a potentially attractive investment destination. Japan remains a large, wealthy, and sophisticated market. Risks associated with investment in many other countries, such as expropriation and nationalization, are not of concern in Japan. Japan has an independent judiciary, consistently applied commercial law, and strong Intellectual Property (IP) protections.

Japan’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. The government has recently lowered capital gains, registration, and license taxes on real estate with an aim to increase the liquidity of Japanese real estate markets, and has reduced inheritance and gift taxes to promote intergenerational transfer of land and other real assets. Nearly all foreign exchange transactions—including transfers of profits, dividends, royalties, repatriation of capital, and repayment of principal—are freely permitted.

Foreign investors in the Japanese market still face numerous challenges, many of which relate more to prevailing social practice rather than government regulations. These include high tax rates; an insular and consensual business culture traditionally resistant to mergers and acquisitions (M&A); a lack of independent directors on many company boards; and cultural and linguistic barriers. However, the Abe Government hopes that its initiatives will contribute to an increasingly open and investor-friendly business environment.

Limits on Foreign Control

Japan has gradually eliminated most formal restrictions governing FDI. One remaining legal restriction limits foreign ownership in Japan's former land-line monopoly telephone operator, Nippon Telegraph and Telephone (NTT), to 33%. Japan's Radio Law and separate Broadcasting Law also limit foreign investment in broadcasters to 20%, or 33% for broadcasters categorized as “facility-supplying.” Foreign ownership of Japanese companies invested in terrestrial broadcasters will be counted against these limits. These limits do not apply to communication satellite facility owners, program suppliers or cable television operators. While not a limit on foreign control per se, Japan does continue to restrict development of retail and commercial facilities to prevent excessive concentration of development in the environs of Tokyo, Osaka, and Nagoya, and to preserve agricultural land. Conversely, many prefectural governments outside the largest urban areas make property available for development in public industrial parks. Japan's zoning laws give local officials and residents considerable discretion to screen almost all aspects of a proposed building. In some areas, these factors have hindered real estate development projects and led to construction delays and higher building costs, particularly in cases where proposed new retail development would affect existing businesses.

IP protection

Under JAEPA, Australian innovators will enjoy levels of protection for their intellectual property in Japan broadly equivalent to protections provided in Australia.

As in Australia, there is the need to protect intellectual property rights and be covered by patent, design and trademark protection. Japanese companies are experienced international business players and understand the need for confidentially and non-disclosure agreements when beginning business discussions. Act in the same manner as in Australia to protect your business intellectual property and confidential information. As discussions progress, consulting Australian and Japanese lawyers, with specific expertise is recommended, particularly in hi-tech and services industries.

Logistics performance index

Japan scores 3.91 on the World Bank Logistics Performance Index. The index ranges from 1 to 5, with a higher score representing better performance.

The score reflects perceptions of a country's logistics based on efficiency of customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, ability to track and trace consignments, and frequency with which shipments reach the consignee within the scheduled time.

Packaging and labelling requirements

Foodstuffs must have a sticker attached to each package showing a detailed description of contents, including artificial colorings or preservatives, name and address of importer and date of import or manufacture in Japanese.

Many food and consumer products are subject to very specific labelling requirements and importers should always be consulted on proposed labelling.

Containers of canned and bottled goods, soft drinks, small goods, frozen foods and pre-packed foods must be marked and labelled solely in metric measurement by the Australian exporter, even though responsibility for metric measuring rests with the Japanese distributor.

Drug usage directions should be printed in Japanese. Special labelling regulations apply to:

  • electrical appliances
  • soap
  • aluminium foil and plastic film
  • some kitchen utensils
  • cleaning materials
  • toilet and bath fittings
  • certain furniture
  • hot water bottles

Packaging

Use of straw packing materials is prohibited. Proposed packaging should be cleared with importers as they have definite preferences. Goods should be marked according to normal commercial practice.

Special certificates

Animals, plants and their products require health certificates issued by an approved authority in the country of origin.

Frozen vegetables and fruit must be accompanied by a certificate of condition (Form E46) instead of a phytosanitary certificate.

Meat for human consumption requires an additional certificate, issued by an approved authority in the country of origin, stating that the animals were free from designated infectious diseases prior to slaughtering and that subsequent processing was under hygienic conditions.

Imports of food require a food import permit issued by the Ministry of Health and Welfare.

Alcoholic beverages may require a certificate of age.

Electrical appliances must conform to the Electric Appliance Control Law, with certain goods requiring type approval before being permitted to be sold in Japan.

Machine tools under a year old must be accompanied by a certificate of date of manufacture.

Political stability

On a scale of -2.5 (weakest) to 2.5 (strongest), the Political Stability Index value for Japan is 1.01 (2014).

The index of Political Stability and Absence of Violence/Terrorism measures perceptions of the likelihood that the government of Japan will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism.

Proximity to Australia

The air travel (bird fly) shortest distance between Australia and Japan is 6,821 km.  By comparison, the air travel (bird fly) shortest distance between Australia and China is 7,448 km, and the air travel (bird fly) shortest distance between Australia and Indonesia is 3,449 km.

Transparency index

Japan is the 18th least corrupt nation out of 175 countries, according to the 2015 Corruption Perceptions Index reported by Transparency International.

Alcohol to Japan

Learn about the Alcohol industry in Japan

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On par or a little better than most

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Wine

Customs duty:

  • 56.70yen/l
  • 136.5yen/lt
  • 11.3% - 19%

· 15.33yen/kg

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None

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Duty free by 2024

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896,000 cases (2012)

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243,333 kilolitres (2013 - Japan Wineries Association)

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Ease of distribution/logistics

The Japanese distribution system is becoming more efficient, but wholesalers still play an important role in making frequent small-lot deliveries to retail shops with limited storage space.

Sales volume objectives, together with the positioning of product, will be key factors when considering suitable distribution channels. Some major retail chain stores source wine directly from overseas or domestic wine suppliers to increase efficiency in distribution. In recent years, retailers with a large number of stores are considering importing wine directly to reduce distribution costs, but will only sell these wines at their stores.

Common distribution structures are:

  • Importers to wholesalers to retailers or the food service industry
  • Specialist wholesalers with strength in particular channels and regions
  • Major national wholesalers covering various channels and regions

 

 

Ease of market entry

To successfully market wine into Japan, the following points must be considered:

  • Define the target market segment(s) for your wine, and research that market and associated price points.
  • Appoint a partner in Japan. Select a local partner, either an importer or distributor, with a competitive advantage in the distribution channel which suits your product segment. Please note that the importer must hold an import license approved by the Japanese government.
  • Be creative, unique and have a long-term commitment to the market.
  • Market strategies need to differentiate your product against other Australian, local and international wine brands, which are being introduced in growing numbers. Other popular alcoholic beverages, such as beer, also compete with wine.
  • Keep in mind Japanese consumers are increasingly price and quality conscious so it is important to support your locally based partner and maintain constant communication.
  • Participate in targeted wine promotions in department stores and retail outlets and/or attend wine tasting events with your distributor. Credentials such as awards and stories about your wines, including pictures of vineyards and wineries are also powerful promotional tools in Japan.

 

 

Grants/subsidies available

There are no specific grants/subsidies available to the wine industry, however, Australian exporters who meet the criteria can apply for the Export Market Development Grant (EMDG).  The EMDG scheme is a key Australian Government financial assistance program for aspiring and current exporters. Administered by Austrade, the scheme supports a wide range of industry sectors and products, including inbound tourism and the export of intellectual property and know-how outside Australia.

The EMDG scheme:

  • encourages small and medium sized Australian businesses to develop export markets
  • reimburses up to 50% of eligible export promotion expenses above $5,000 provided that the total expenses are at least $15,000
  • provides up to eight (8) grants to each eligible applicant.

For further information on how to apply, visit http://www.austrade.gov.au/Australian/Export/Export-Grants/EMDG-how-to-apply

 

 

Local supplier quality

According to the Japanese Wineries Association, approximately two thirds of all wine consumed in Japan is imported, with the imported product strongly favoured over the local product.  Although Japan has a history of producing grapes for consumption, wine making from grapes only started in the second half of the 19th Century and only a quarter of all locally produced wine is made from locally grown and harvested grapes.  The local industry is dominated by large conglomerates like Suntory.

There is far more competition for Australian exporters from other imported product than the locally-produced one.

Regulatory ease

Wine imports must adhere to the Food Sanitation Law. Customs duties and liquor tax apply, depending on volume, product category, type of container and place of origin. Customs counsellors can answer questions and offer advice via email.

Customs duty and liquor tax on general Australian wine are as follows. (These should be confirmed with Customs and the National Taxation Agency through a Japanese importer).

  • Customs duty:
    • Still wine – ¥125 per litre or CIF 15 per cent, whichever is less
    • Sparkling wine – ¥182 per litre
  • Liquor tax:
    • Wine – ¥80,000 per kilolitre

 

Alcoholic beverages may require a certificate of age.

 

Specific details regarding regulations, duties, etc can be confirmed with the following authorities:

 

 

Strength of the opportunity

The consumption of wine in Japan is steadily increasing, with sales of wines expanding predominately from small retail and mass merchandise stores to specialty wine shops.  In 2012, 32 million cases of wine were sold (Source: Jozosangyo Shinbun) and indications are that this figure will continue to grow.

 

There are strong growth opportunities in:

  • Still wines with a retail price of JPY500-JPY1000 for a 750ml bottle
  • Still wines in the JPY1000-1500 retail price range
  • Sparkling wines across all price points
  • Premium & super premium wines with outstanding and unique reputations & highly regarded international awards

 

Australia faces stiff competition from France, Italy, Spain, Chile and the US who maintain the lion’s share of imported wines.

Competitive landscape

Learn about Japan's FTAs with other countries and see how Australia’s agreement compares

Competitive landscape

Related tariffs by country
Product Tariff classification Current tariff
ASEAN Malt Beer 2203 Free
Australia Malt Beer 2203 Free
Brunei Malt Beer 2203 Free
Chile Malt Beer 2203 Free
Indonesia Malt Beer 2203 Free
Malaysia Malt Beer 2203 Free
Mexico Malt Beer 2203 Free
Peru Malt Beer 2203 Free
Philippines Malt Beer 2203 Free
Singapore Malt Beer 2203 Free
Switzerland Malt Beer 2203 Free
Thailand Malt Beer 2203 Free
Vietnam Malt Beer 2203 Free
ASEAN Wine 2204-2205 8.4%-13% or 10.06 yen/kg, whichever is the greater, subject to a maximum customs duty of 50%
Australia Wine 2204-2205 Free-14.9% or 11.50 yen/kg, whichever is the greater
Brunei Wine 2204-2205 8.4%-13% or 10.06 yen/kg, whichever is the greater
Chile Wine 2204-2205 Free- 4.58 yen/l, 11.2% or 8.63 yen/kg, whichever is the greater
Indonesia Wine 2204-2205 8.4%-13% or 10.06 yen/kg, whichever is the greater
Malaysia Wine 2204-2205 Free -9.3% or 7.19 yen/kg, whichever is the greater
Mexico Wine 2204-2205 Free
Peru Wine 2204-2205 Free-18.6% or 14.38 yen/kg, whichever is the greater
Philippines Wine 2204-2205 Free-13% or 10.06 yen/kg, whichever is the greater
Singapore Wine 2204-2205 7.2% - 11.2% or 8.63 yen/kg, whichever is the greater
Switzerland Wine 2204-2205 Free-14.9% or 11.50 yen/kg, whichever is the greater
Thailand Wine 2204-2205 Free- 9.6%, 11.2% or 8.63 yen/kg, whichever is the greater
Vietnam Wine 2204-2205 9.6%-14.9% or 11.5 yen/kg, whichever is the greater

Download full FTA guide

Access detailed information about the Japan-Australia Economic Partnership Agreement

Download full FTA guide

This guide contains comprehensive information on the Japan-Australia Economic Partnership Agreement (JAEPA). It also compares agreements that Japan has with other countries to highlight strategic advantages for Australia.

Disclaimer

1. This content is issued and distributed in Australia by Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) (“ANZ”), on the basis that it is only for the information of the permitted user of this website (“recipient”). This publication may not be reproduced, distributed or published by any recipient for any purpose. It is general information and has been prepared without taking into account the objectives, financial situation or needs of any person. Before making an investment decision, recipients should seek independent financial, legal, tax and other relevant advice having regard to their particular circumstances. The views and recommendations expressed are the author’s. They are based on information known by the author and on sources which the author believes to be reliable, but may involve material elements of subjective judgement and analysis. Unless specifically stated otherwise: they are current on the date of this publication and are subject to change without notice; and, all price information is indicative only.

Any of the views and recommendations which comprise estimates, forecasts or other projections, are subject to significant uncertainties and contingencies that cannot reasonably be anticipated. On this basis, such views and recommendations may not always be achieved or prove to be correct. Indications of past performance in this publication will not necessarily be repeated in the future. Neither ANZ nor its Affiliates accept any responsibility to inform you of any matter that subsequently comes to their notice, which may affect the accuracy, completeness or currency of the information in this publication. ANZ and its Affiliates expressly disclaim any responsibility and shall not be liable for any loss, damage, claim, liability, proceedings, cost or expense (“Liability”) arising directly or indirectly and whether in tort (including negligence), contract, equity or otherwise out of or in connection with this publication.

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