Following the collapse of the bubble economy in the early 1990s, Japan has emerged from a decade of sluggish performance. In recent years, its economy has continued to recover and has extended the growth phase of the postwar period, according to a report of The Japan Research Institute in March 2007.

Since the 1990s, Japan has concentrated on internationalizing its accounting standards and reforming its legal framework. In June 2005, lawmakers revised Japan’s corporate laws to ease the establishment of new companies, make corporate management rules more flexible, etc., reflecting the internationalization of the country’s business activities. According to surveys of foreign companies in Japan conducted by JETRO (Japan External Trade Organization) in 2006, the obstacles to investing in Japan such as high business costs, the exclusiveness and tradition-bound nature of commercial transactions and the complexity of administrative procedures, have significantly decreased compared to 10 years ago, and the environment for expansion of foreign companies into Japan is steadily improving.

IT companies using an approach based on cultural understanding will be the most successful in this unique market. For example, slandering rival products or aggressive side-by-side comparison, will be considered ill-mannered because Japan has a culture of modesty. The key to success for any company wanting to enter the market in Japan is to understand the differences and to localize, localize, localize. Wherever possible, it is important to provide Japanese language communication tools such as the company Web site, have suitable localized contents and feature a Japanese spokesperson.

Individual Market Situation

The forecast of JEITA (Japan Electronics and Information Technology Industries Association) shows that domestic production by Japan's electronics and IT industries in 2007 is estimated to increase 3.6 percent, to ¥21.2 trillion. Domestic production of consumer electronics equipment is expected to rise 4.5 percent, to ¥2.8 trillion. Demand for market-driving products such as FPD televisions, PDP, LCD and digital cameras is seen increasing steadily. Demand for new products is also seen expanding with the launch of a new PC OS. Mobile telephone production is expected to remain strong.

According IDC Japan December 2006 research, the growth rate of IT investment in large-scale enterprises will be moderate because of ROI-focused management, the shift toward open systems, the end of PC replacement demand and decline in hardware costs. However, IT investment in SMB enterprises, especially in the manufacturing and the financial sectors, is expected to grow because those areas are aggressively investing in IT to increase their profits. In order to deal with Japanese SOX legislation and new corporate laws, IT investment in effective systems for internal control and compliance are expected to increase.

Telecommunication Industry

According to the report announced by The Ministry of Internal Affairs and Communications (MIT) in December 2006, NTT East and West held a 90.9 percent share of fixed-line telephone contracts. Of the total number of IP telephone numbers in use, Softbank BB owned 37.2 percent, NTT Communications owned 24.8 percent and NTT East and West owned 15.2 percent. For mobile phone and PHS contracts, the NTT DoCoMo Group held a 53.4 percent share, the KKDI held a 26.8 percent share and Softbank Mobile held a 15.5 percent share. PHS made up a 4.3 percent share. For DSL contracts (nationwide), 38.8 percent were with NTT East and West while 35.7 percent were with BB Technology. For FTTH (optical fiber) contracts, NTT East and West had a 66.0 percent share, power company-related providers had a 15.0 percent share and USEN had a 7.3 percent share. In order to realize a ubiquitous network society, NTT Group is now building a next-generation network (NGN) to shift all fixed-line telephones in the country to IP telephones by the end of 2007.

Semiconductor Industry

The semiconductor industry in Japan is expected to maintain a high standard of investment in 2007. For example, Toshiba is making a large investment in NAND flash memory, and Elpida Memory is strengthening investment for DRAM. Key drivers of the semiconductor market are consumer electronics, such as PC, mobile phone, DVD recorder, LCD, PDP, digital camera, MP3 music player, automotive electronics and gaming consoles. The market is expanding not only to BRICs, but also to Africa and Eastern Europe. With these factors, the semiconductor industry growth is expected to remain stable. Key issues in terms of technical development include wafer processing, lithography, yield management, inspection and test, and packaging.

#          #          #

Back to top