Opportunity in a declining Japan?
Mr. Alan Turley, United States Embassy, Tokyo

The Japanese bubble burst over 10 years ago and yet the economy still hasn’t recovered. Does this mean Japan is not an attractive market? According to Alan Turly, the Minister-Counselor for Commercial Affairs at the US Embassy in Tokyo, there’s still plenty to be excited about. Alan recently gave a presentation hosted by Amdahl, JACCSV, the US DOC, and JETRO where he outlined the positive points of Japan’s economy focusing specifically on places where competitive foreign firms can succeed. This month’s Bridge Builder features some key data and highlights from Alan’s enlightening presentation.

Japan’s economic problems are well known. The economy is in its second recession in four years. The all-important measurement of Japan’s global economic health, the dollar/yen exchange rate, is falling. Consumer spending and business investment are both down. To make matters worse- retail sales have dropped significantly in recent years (2.2% in 2001 -- the fifth straight year of decline). Japan now faces a healthcare crisis as expenditures continue to rise with the aging population while 90% of health insurance unions are expected to run up a deficit for 2001.

Yet despite all this bad news, one important statistic about Japan remains in tact: Japan is the second largest economy in the world. Japan’s economy is larger in size than even the number three and four economies (Germany and France respectively) combined. Japan’s economy represents over 60% of Asia’s total GDP and is almost four times larger than the GDP of China- Asia’s #2 economy.

The good news for US firms is that Japan’s enormous wealth is increasingly being spent on foreign imports- the US being Japan’s # 1 supplier. Japanese consumers continue to retain enormous household savings that can be targeted- $112,000 on average. Specific areas of opportunity include healthcare, services, the environment and IT.

Healthcare is currently a hot topic because Japan’s aging society is expected to cause numerous budgetary and labor supply issues. But it will also create opportunities. Foreign firms have the potential to enter the market where local firms are weak. Firms that address Japan’s inefficient hospital system and lack of long-term care facilities stand a good chance of success.

Services is another key area. Japan’s service industry is relatively underdeveloped. With the current drive for efficiency in Japanese industry, more and more companies are expected to outsource services traditionally performed in-house. Deregulation in many service industries will also help such companies to flourish.

As in the US, taking care of the environment is an important challenge for corporations. New recycling and soil contamination laws will have a deep impact on corporate Japan. However, Japanese environmental firms emphasize products, not know-how and services- a strong point for many US environmental firms. Finally,

Information Technology, Japan’s traditional stronghold, continues to be attractive. The large installed mobile phone base gives foreign vendors a chance to sell both communications hardware and software. Massive government spending on the country’s new “e-Japan” and “e-education” initiatives represents another appealing sales target.

For more information on opportunities in the Japanese market for US companies, please Mari Felton-Beal at mari.felton@mail.doc.gov or 408-271-7300 x 104 for more information or visit the website of the US Commercial Service.

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