          
          
                    Establishing an Office in Japan
          
          If your company can afford to do so and is serious about 
          doing well in the Japanese market, you should strongly 
          consider the establishment of a representative or branch 
          office in Japan.  This sort of presence will allow your 
          firm the most direct control of its operations in Japan and 
          will help ensure the quality of after-sales services.  This 
          office can gather information on the competition, emerging 
          new technologies, and developing market trends.
          
          Representative Office:  A foreign company that wishes to 
          collect information or to facilitate contacts in Japan 
          should consider establishment of a liaison or 
          representative office.  This liaison office may be 
          established to develop market data, provide information to 
          potential clients, and refer customers to distributors or 
          trading companies that can accept orders.  The office can 
          also work with distributors to develop the necessary 
          promotional and service mechanism.  It is not necessary to 
          obtain special approval from the Japanese Government to 
          establish a liaison office, but it must have no income and 
          is therefore not allowed to handle orders directly.  
          Moreover, this option is free from Japanese tax burdens.  
          The liaison office may function by providing guidance and 
          support to an agent, and managing all marketing activities 
          except for the formal sale.
          
          Branch Office:  To go a step beyond a representative or 
          liaison office, you can establish a sales or branch office.  
          A branch office can engage in trading, manufacturing, 
          retailing, services, or other business.  Until recently, to 
          set up a branch office, a company had to file a 
          notification with the Ministry of Finance through the Bank 
          of Japan between 3 months and 30 days before the office was 
          established and register with the Ministry of Justice 
          within 3 weeks of the opening of the office. However, as 
          part of SII, this prior notification requirement has been 
          replaced by ex post facto notification for investment in 
          unrestricted sectors.  A special license still must be 
          obtained from the appropriate Japanese ministry to engage 
          in business in certain sectors.  These include 
          broadcasting; telecommunications; electric power 
          generation; domestic, rail and air transportation; arms; 
          gun powder; atomic energy; aircraft; space development; 
          narcotic manufacturing; vaccine manufacturing; security 
          guard services; agriculture, forestry, and fisheries; 
          petroleum refining and marketing; leather and leather 
          product manufacturing; shipbuilding; banking; and mining.  
          A sales office may take and fill orders, and is liable for 
          payment of Japanese taxes.  A sales office may carry out a 
          full marketing program, including arranging for 
          advertising, recruiting a sales force, and carrying out all 
          necessary promotional activities.
          
          Other alternatives include incorporating your own 
          subsidiary company in Japan, joining with a Japanese 
          company in a joint venture arrangement, or acquiring stock 
          in a Japanese corporation. These options are likely to be 
          much more complicated and involve more time and expense, 
          but they can offer an effective means for a company to 
          manufacture locally, guarantee better protection for 
          proprietary information, and penetrate some markets which 
          have subtle but substantial barriers to imports.
          
          A major problem for smaller U.S. firms entering the 
          Japanese market is the high cost of establishing a 
          permanent presence which allows for the follow-up 
          capability necessary to achieve full market potential.  You 
          may wish to consider arranging for representation through 
          the use of the previously mentioned Agent/Distributor 
          Service, your contacts established at a trade show or 
          mission, your state's representative office in Japan, or 
          your industry's trade association.  Another approach is to 
          pool resources of several firms which have complementary 
          product lines and a desire to operate in Japan.  Such a 
          group might establish a marketing association, consortium, 
          or jointly owned export management company, and set up a 
          sales and service office in Japan.  This operation may take 
          the form of a liaison 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 which would be a 
          universally recognized and accepted identity for their 
          product line.  This approach is not widely used by U.S.  
          firms in Japan, but has been successfully employed by a 
          number a European groups.  Another alternative is to 
          piggyback your product with a complementary product line of 
          a firm which is successfully exporting to Japan.
          
          In evaluating the alternatives for market entry, you should 
          measure the projected sales and potential market share for 
          your products against costs of various distribution 
          options.  In Japan, the justification for working with an 
          intermediary is lower cost while sacrificing direct market 
          feedback and long-run profit potential.
          
          For additional information on establishing an office in 
          Japan, refer to the following publications:
          
          Setting Up a Business in Japan:  A Manual (1991), Japan 
          External Trade Organization (JETRO), New York Office -- 
          (212) 997-0400.
          
          Guide to Investment in Japan (1991), Industrial Bank of 
          Japan (IBJ), Washington, D.C. Office -- (202) 835-0455.
          
          Guide to Direct Investment in Japan (1991), Japan 
          Development Bank (JDB), Washington, D.C. Office -- (202) 
          331-8696.
          
          Establishment of a Representative Office in Japan (1990), 
          Japan External Trade Organization (JETRO), New York Office 
          -- (212) 997-0400.
          
          Direct Foreign Investment in Japan (1987), American Chamber 
          of Commerce in Japan (ACCJ).
          
          Setting Up & Operating a Business in Japan:  A Handbook for 
          the Foreign Businessman (1988), by Helene Thian, published 
          by the Charles E. Tuttle Company.
          
          Establishing a Business in Japan (1986), U.S. & Foreign 
          Commercial Service, U.S. Embassy Tokyo, Unit 45004, Box 
          271, APO AP 96337-0001.
          
          
