Mistakes to Avoid When Starting a Business in Japan

Published on October 30, 2025 and written by Cyril Jarnias

Japan fascinates many foreign entrepreneurs with its sophisticated market and advanced economy. However, establishing a presence in the Japanese archipelago comes with its share of challenges. To maximize your chances of success, it’s crucial to avoid certain common mistakes that could jeopardize your project. Here is a guide to the main pitfalls to avoid and strategies for successfully establishing your business in the Land of the Rising Sun.

Sloppy Preparation: The Pitfall of Improvisation

One of the most frequent mistakes is underestimating the importance of meticulous planning before entering the Japanese market. Many foreign companies fail because they haven’t sufficiently studied local specifics and prepared their market entry strategy. Japan is a complex market with its own cultural and business codes that require a tailored approach.

To avoid this trap, it’s essential to conduct thorough market research. This involves analyzing local demand, competition, sector-specific regulations, and Japanese consumer habits in detail. For example, Carrefour had to withdraw from Japan in 2005 after only 4 years of presence, having failed to adapt its offerings to local consumer expectations[1].

It’s also crucial to develop a solid business plan that accounts for the high costs of establishing in Japan and the often longer timelines to reach profitability. Plan for sufficient financial resources to sustain long-term operations, as conquering the Japanese market is typically a marathon rather than a sprint.

Neglecting Financial Aspects: A Fatal Danger

Another fatal mistake is mismanaging the financial aspects of your establishment. Japan is known for its high costs, whether in terms of rent, labor, or regulatory compliance. Underestimating these costs or failing to plan for sufficient cash reserves can quickly lead your company to ruin.

To avoid this trap, it’s imperative to establish realistic financial forecasts that account for Japanese market specifics. For example, executive salaries in Tokyo are among the highest in the world. According to a Robert Walters study, a sales director in the IT sector can earn between 15 and 25 million yen per year (approximately $100,000 to $170,000)[2].

It’s also crucial to understand the Japanese tax system, which can be complex for foreign companies. Work with local accounting and tax experts to optimize your structure and avoid unpleasant surprises. Don’t forget to account for regulatory compliance costs, which can be significant in certain sectors.

The Regulatory Maze: Don’t Get Lost

Japan is known for its complex and constantly evolving regulatory environment. Neglecting this aspect or thinking you can adapt as you go is a mistake that can prove costly. Many foreign companies have encountered unexpected regulatory obstacles, resulting in expensive delays or even project abandonment.

To navigate this maze effectively, it’s essential to thoroughly research regulations specific to your industry. For example, in healthcare, the Pharmaceuticals and Medical Devices Agency (PMDA) imposes strict approval procedures that can take several years[3].

Don’t hesitate to engage legal consultants specializing in foreign business establishment in Japan. They can guide you through administrative procedures and help obtain necessary permits. Also anticipate upcoming regulatory changes by staying informed about legislative proposals and market trends.

Local Competition: An Opponent Not to Underestimate

A common mistake foreign companies make is underestimating the strength and responsiveness of local competition. The Japanese market is mature and highly competitive, with local players often well-established and benefiting from strong consumer loyalty.

To avoid this trap, it’s crucial to conduct thorough competitive analysis before launching. Identify your direct and indirect competitors, study their strengths and weaknesses, and seek to understand what makes them successful with Japanese consumers. For example, in the retail sector, local giants like Seven & I Holdings or Aeon dominate the market with strategies well-adapted to local consumption habits[4].

Rather than trying to compete head-on with established players, think about ways to differentiate yourself and bring real added value to the market. Leverage your unique strengths and adapt your offerings to local specifics to find your place. Also consider strategic partnerships with Japanese companies to benefit from their market knowledge and networks.

Winning Strategies for Conquering the Japanese Market

To maximize your chances of success in Japan, here are some key strategies to implement:

1. Invest in Localization

Simply translating your marketing and sales materials won’t be enough. It’s essential to deeply adapt your communication and offerings to Japanese expectations and cultural codes. This may involve revising your product design, adjusting your positioning, or even creating specific offerings for the Japanese market.

For example, Starbucks successfully established itself in Japan by offering drinks and pastries adapted to local tastes, such as Matcha Green Tea Frappuccino or seasonal cakes[5].

2. Focus on Quality and Innovation

Japanese consumers are known for their demanding standards regarding quality and their appetite for innovation. To stand out, invest in R&D and ensure your products or services meet the high standards of the Japanese market.

The French company L’Occitane, for example, developed specific product lines for Japan incorporating locally prized ingredients like yuzu or sakura[6].

3. Build Trust-Based Relationships

In Japan, business relationships are built long-term and based on mutual trust. Invest time and resources to develop your network and cultivate strong relationships with your Japanese partners, clients, and suppliers.

Actively participate in professional events in your industry, join relevant business associations, and don’t hesitate to organize informal meetings to strengthen your connections.

4. Adopt a Gradual Approach

Rather than aiming for rapid expansion, prioritize a gradual and methodical approach. Start by testing your offering in a limited local market before considering national deployment. This will allow you to adjust your strategy based on market feedback and limit financial risks.

For example, the fashion brand Uniqlo first tested its concept in smaller stores before launching flagship stores in the most sought-after shopping districts[7].

Conclusion: The Importance of a Tailored Approach

Establishing in Japan represents a significant challenge, but also a unique opportunity for foreign companies. By avoiding common pitfalls and adopting a strategic approach adapted to Japanese market specifics, you’ll maximize your chances of success.

The key lies in meticulous preparation, deep understanding of local business culture, and constant adaptability. Don’t hesitate to surround yourself with experts and seek help from organizations dedicated to supporting foreign companies in Japan.

With patience, perseverance, and a well-thought-out strategy, your company can find its place in this demanding but promising market.