Japan is one of the biggest markets in the world. Tokyo is rapidly growing as a financial centre, while the rest of the country also contributes to a massive manufacturing industry. Businesses keen to build strong links with Asia should look to the opportunities available to them in Japan.
Foreign direct investment in Japan has been growing year on year. The Japanese Ministry of Foreign Affairs has established a target balance of 100 trillion yen (about 520 billion British pounds) in direct foreign investment in Japan for 2025. With major car manufacturing, machinery, and electronics industries, Japan will only look to expand further in the future.
Though there are many cultural and economic similarities between the UK and Japan, both being island nations, negotiators still need to be prepared for the differences that arise.
Japan — Steady growth to economic superpower
Japan has the 4th largest GDP in the world in 2025 and has a highly homogenous population of nearly 124 million people, 120 million of whom are Japanese nationals. The vast majority of the population lives in cities, with the capital of Tokyo being the most populated in the country and the biggest metropolitan area in the world.
This gathering of people has collected into businesses across a wide range of industries. Though the biggest are automotive and electronics manufacturing, there are plenty of opportunities for foreign companies to invest and broker deals.
What are Japanese negotiators like?
Much of the difficulty in negotiating with the Japanese comes from Japanese business etiquette. In some Western countries like the USA or UK, things may start as formal affairs and move into a more relaxed setting as the deal progresses and the parties involved get to know one another. Relationship building is done through jokes and finding common ground that both parties can relate to.
The Japanese business culture is much more conservative and formal. The average office worker is known as a "salaryman" – dressed in a dark suit, working hard to support their families, and working long hours at the same company for their entire career. This working environment is reflected in the negotiation process of the country. Body language and word choice can have more of an impact than you might imagine—the wrong move or misspoken words could set you back further than you think.
Returning to our old friend, the Lewis model, we can see that Japan is a reactive culture like China. As we said in our previous article, that does not mean that your Japanese partners will be prone to shouting or abruptly reacting to what you said. Instead, they want to have the opportunity to see all possible information and outcomes presented to them so they can then move forward and react to it.
The Japanese negotiation style leans more towards a collaborative problem-solving effort than a back-and-forth opposition. They will ultimately be aiming to reach a decision that benefits all, and if this requires long-term plans with short-term burdens, so be it. Compromises, flexibility, and patience are all needed when facing a Japanese business.
5 tips for negotiating with the Japanese
Negotiation with Japanese counterparts needs to follow certain rules and expectations. With business being such a formal affair compared to other countries, you can't expect a loosening of the rules just because your party is not from Japan. Here are five tips to help you negotiate more effectively.
1. Introductions
Introductions can set your whole meeting off on the wrong or right foot. The most important rule to consider is that it is rude to introduce yourself. Many Western cultures invite you to stride into a room with confidence and offer your hand for a firm handshake. This will likely be seen as rude and overly familiar in a Japanese boardroom.
Instead, someone of equal rank to the other party will make the formal introduction between you. You may or may not shake hands, but you can expect your Japanese counterparts to politely bow to you. Keep your back straight and your body below your hips vertical as you return the gesture.
You may find that your Japanese counterparts stick to using just surnames and titles during your talks. They may also add Japanese honorifics, such as the formal -san to the end of family names. If in doubt, follow their lead and address your colleagues and the other party in the same manner.
2. Business cards
The exchange of business cards is incredibly important in Japanese companies and business relationships. When attending a meeting in Japan or with the Japanese, make sure you take a stack of business cards with you. You truly can't have too many!
Make sure they are well-designed and have all the relevant information on them. A nice touch is to have one side with your English contact details, and the other translated into Japanese. Offer your business card to the most senior member of the Japanese team at the start of the meeting by bowing slightly and holding out the card with both hands. If they offer a card in return, accept it with both hands and voice your thanks in either English or Japanese.
Do not absent-mindedly put the business card in your pocket or scribble a note on it. This is considered rude. Your counterparts will carefully treat any cards you give them; you should look to do the same.
3. Get gift-giving right
It can be customary to exchange gifts as part of the negotiating process. This can be full of pitfalls, so you need to make sure that you approach the matter with careful consideration. Ideally, you should choose something representative of your home country or local area. Make sure that it is beautifully gift-wrapped, too. If you buy something in Japan to present to the other party, you should be able to get it gift-wrapped in the store where you make your purchase.
When receiving a gift, again, make sure to receive it with both hands. Don't open it in front of the Japanese party. Just express your gratitude and open it privately later; the other party will do exactly the same.
4. Beyond the boardroom
You will most likely be offered the chance to experience a little more of Japanese culture than just the boardroom. Your hosts may ask you to come to dinner and drinks with them, and you could even end up singing the night away in a karaoke booth together.
Though this is not necessarily how business is discussed in the West, it is a key part of doing business in Japan. Relationship building is key; your contacts will want to ensure that they are headed into business with someone trustworthy and committed.
5. Anticipate a detail-orientated approach
Since Japan is a reactive country, you need to anticipate the Japanese decision-making process taking time. They will want to see every detail and have time to consider outcomes before presenting you with a final answer. Ultimately, this can be frustrating if you are expecting a quick answer.
What you have to remember is that they are looking for a long-term partnership. This is not a battle of You vs Them but a chance to come together and collaborate. In this crucial time, don't try to conceal anything or try to hurry things along. One of the worst things you can do is lose face or react negatively in a way likely to cause embarrassment. Expect to go through everything with a fine-toothed comb.
Scotwork is here to guide you through any negotiation
Japan emphasises tradition and protocol to ensure lasting business relationships can be built from the first meeting. Some cultures may find their slow and thorough approach to be very different from the fast and hard negotiation styles they typically find at home. Staying formal and respecting the Japanese way of business will hopefully help you to strategise a winning approach that honours the wishes of all parties.
Scotwork has been helping workers hone their negotiation skills for decades, and we are here to help you, too. Whether you have a meeting in Tokyo on the books or you simply want to learn a little more about how to manage your own strengths and weaknesses when it comes to negotiation, our experts can advise you on the best path forward. Contact us today to find out more.
