The Value of Business and Personal Relationships in Japan

The Japanese business culture attaches a high degree of importance to personal relationships and these take time to establish and nurture.

A strong network of personal contacts is vital in the Japanese market. It is also advisable to understand the network of relationships which your partners and competitors work within.

It can be difficult for UK firms to gauge the real thoughts and intentions behind the politeness of Japanese people. It is a common mistake for Western companies to return from negotiations with Japanese businesses to celebrate success while in time, it becomes apparent that the Japanese are in fact, not interested in doing business with your company.

This is where a local representative who has experience of doing business in Japan can be invaluable as they will be able to read between the lines of the behaviour and language used by your Japanese counterparts and interpret them for you to minimise your chances of misunderstanding and miscommunication.

The pace of decision-making in Japan is generally much slower than in the UK. Patience and repeated follow-up are typically required to successfully close a deal. However, once the Japanese have decided to do business with you, things can then move very quickly.

Keiretsu: a corporate structure in Japan

Japanese companies have traditionally operated within informal business groups known as Keiretsu.

A Keiretsu is a group of companies with interlocking business relationships and shareholdings.

The member companies own small portions of the shares in each other's companies, centred on a core bank; this system helps insulate each company from stock market fluctuations and takeover attempts, thus enabling long-term planning in innovative projects

The Keiretsu structure has conditioned Japanese companies to only do business with member companies. However, high levels of merger and acquisition activity in Japan in recent years brought about by challenging economic conditions caused a slight decrease in the influence of the Keiretsu.

In today’s Japan, you will find both competitive bidding and cases where traditional business relationships take priority over achieving the best price. Therefore, we advise UK companies to research and understand the Keiretsu structure in their targeted business sector or industry and construct their business plan accordingly.