Japan is the third largest economy in the world, after the United States and China.
The exceptional growth of its economy in the years following World War II became a global economic success story, making it a role model for other nations that attempted to duplicate its accomplishments. Although government policies, an overheated Japanese economy and other factors have hindered its economy since the 1990s, Japan continues to be a powerful global economic force.
The size and strength of the Japanese economy is appealing to U.S. exporters. Over the years, the Japanese have developed a taste for many American products and are more than willing to part with yen for high quality versions of certain U.S. products.
However, Japan also has a reputation as being a notoriously difficult environment for U.S.-based exporters. Penetrating Japanese exports is costly, and U.S. exporters receive little promotional support from Japanese trading partners. Combined with the high markups charged by Japanese importers, these factors complicate the process of exporting goods to Japan.
Commitment is the key ingredient for exporters. If you're interested in pursuing a short-term export relationship, other global markets are better suited to your business model. Here are some of the other things you need to know about exporting to Japan.
- Export product categories. Japan is a market that is primed for niche exporters, while exporters with undifferentiated goods struggle to penetrate the market. Based on the affluence of the Japanese markets, products that thrive are often style-based products that leverage trends in western culture. Exporters are advised to tailor their products toward niches (or niche categories) that have proven success in the Japanese marketplace.
- Cost barriers. The decision to export to Japan should never be a Plan B option. If you aren't successful in the U.S., don't entertain the idea of exporting to Japan unless you're sure you have a legitimate reason for doing so. Japanese consumers are picky and to be successful, exporters need to invest significant resources to develop the market for their products.
- Marketing challenges. U.S. exporters need to be prepared to offer promotional support for their products if they have any chance of penetrating Japanese markets. Many Japanese buyers offload their purchases as conveniently as possible and don't market them to a broad consumer base.
- Pricing. Products that have been exported to Japan from the U.S. have radical markups, mostly because Japanese importers and distributors carry the entire financial risk of importing the goods. Consequently, retail prices can be three times the amount they are on American store shelves.