JCSM Shareware Collection 1993 November

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BEST U.S. EXPORT PROSPECTS Many areas in the Japanese market have substantial opportunities for U.S. exporters to Japan. Today, exporting American goods and services, as well as investment in Japan, is a wise course for many businesses planning expansion. The competition is intense, but when an American firm correctly identifies a competitive window in a Japanese product sector and has the capability to effectively export a quality product to Japan, it will likely find an opportunity for successful sales. A great effort must be made to gain initial market share. However, a firm with long-range goals is well-positioned to find eventual profitability. The following ten product areas are considered to offer significant export opportunities to American firms. They were chosen because they offer (1) short-term growth potential or (2) a large market receptive to additional U.S. suppliers. The list highlights product areas where Japanese demand is strong, and American suppliers are competitive and have the greatest likelihood of expanding exports to Japan. For many of these sectors, a brief Industry Subsector Analysis (ISA), which provides more information, is available. For a list of ISAs, contact the Japan Export Information Center (JEIC) at (202) 377-2425. Note, however, that the term "promising export areas" does not necessarily mean that U.S. companies in these sectors can successfully enter the market or that they are better-positioned to satisfy market demand and to take a market share over other competitors. Rather, it more specifically means that various commercial environmental factors indicate that there is increasing demand in such sectors and that after having identified the opportunities for growth, domestic companies are aggressively entering the market, as well as other Asian and European firms. Therefore, competition in promising export product areas is very intense, with domestic companies especially inclined to rush into these market sectors irrespective of the effect on short-term profitability. The name of each product sector is followed in parentheses by: (1) estimated market size in 1991, (2) estimated market growth rate from 1991 to 1993, (3) estimated U.S. imports in 1991, and (4) estimated average growth rate of U.S. imports in 1991. Pharmaceuticals ($50 billion, 3 percent, $900 million, 5 percent) Japanese physicians and other medical specialists look to the United States for the most advanced products. However, in the over-the-counter market, U.S. brands are not very well known. Japanese drug manufacturers have stepped up their R&D activities, and European suppliers are consolidating their distribution networks. Importation and sales, as well as local production, of pharmaceuticals is one of the most tightly regulated areas. There are two interrelated Japanese governmental approvals necessary: a "shonin" for a product based on its efficacy and safety and a "kyoka" for the business of manufacturing or importing, which requires a minimum level of personnel and facilities. Pharmaceuticals account for approximately 30 percent of Japan's total medical expenditures. Products for an aging society, including diagnostic and therapeutic drugs for elderly diseases, have high growth potential. The most promising subsectors are in-vitro diagnostic test reagents and home tests, with an estimated market size of approximately $2 billion and $35 million, respectively. Telecommunication Services ($60 billion, 8 percent, $2.7 billion, 10 percent) The Japanese Telecommunications Law (TBL) was liberalized to allow competition with the traditional common carriers, Nippon Telegraph and Telephone (NTT) and Kokusai Denshin Denwa (KDD). As a result, there are some 40 Type I (common) carriers competing with them. The TBL also allows one-third foreign equity participation in the common carrier business. In particular, Regional Bell Operating Companies (RBOC) should have an excellent opportunity to participate in Type I business. The market for land mobile communications services will grow rapidly in the future, which should present further opportunities in the next generation of services for cordless telephones. A most promising subsector is cordless telephone licensing/Japan-wide services with an estimated market size of approximately $800 million. Marine Fishery Products ($30 billion, 1.5 percent, $2.5 billion, 12 percent) Demand in this sector remains basically strong. The total Japanese domestic catch in 1990 decreased from 1989 by 9 percent to approximately 11 million metric tons. Notable decreases are seen in sardines, 12 percent to 3.6 million tons; Pacific mackerel, 47 percent to 248,000 tons; Alaskan pollock, 23 percent to 883,000 tons; squid, 28 percent to 532,000 tons; bonito, 12 percent to 299,000 tons; and tuna, 7 percent to 278,000 tons. Total imports in 1990 improved by 6 percent to about $11 billion from 1989. Imported seafood comprised approximately 30 percent of total seafood consumption. Notable increases were seen in fresh and live seafood such as shrimp, salmon, and tuna. Processed seafoods, such as eel and pollock roe, also increased. The top seafoods imported from the United States include frozen Pacific salmon ($650 million), frozen snow crab ($260 million), frozen surimi ($240 million), frozen sablefish ($110 million), frozen king crab ($100 million), frozen salmon roe ($93 million), frozen cod/pollock roe ($90 million), frozen herring ($75 million), frozen cod ($70 million), and live or fresh sea urchin ($67 million). The most promising subsectors include fresh and frozen salmon (an estimated market size of approximately $2 billion), frozen crab ($850 million), and frozen mackerel ($100 million). Biotechnology Products ($700 million, 15 percent, $10 million, 10 percent) Japanese look to the United States for innovative technologies and products in this field. Historically, Japan has had good fermentation technology. Large nontraditional biotechnology companies which have abundant financial resources are also making inroads. It is widely believed in Japan that biotechnology could trigger a second technological revolution, following in the wake of the electronic revolution. According to the Bioindustry Association, the market by the year 2000 will be approximately 15 trillion yen (roughly $107 billion at 140 yen/US$). Both the Japanese Government and private sector are accelerating their R&D in biotechnology. The most promising subsectors include pharmaceuticals and chemicals, with market sizes of approximately $460 million and $100 million, respectively. Medical Equipment and Supplies ($10 billion, 5 percent, $1.5 billion, 10 percent) Japanese medical professionals generally look to the United States for innovative and advanced products, but some criticize the lack of good after-sales service from U.S. suppliers. Competition from local manufacturers, followed by German and Swedish suppliers, is strong. Japanese technology is said to be superior to other countries in areas such as ultrasonic equipment and fiberscopes. The United States dominates markets for implantable devices including pacemakers, artificial heart valves, and artificial joints. Importation and sales, as well as local production of medical equipment, are tightly regulated. There are two interrelated Japanese governmental approvals necessary: a "shonin" for a product based on its efficacy and safety and a "kyoka" for the business of manufacturing and importing, which requires a minimum level of personnel and facilities. The Japanese market for products in this sector is steadily expanding. Products for the elderly and, in particular, cost-effective diagnostic and therapeutic products have high growth potential. The most promising subsectors include diagnostic imaging equipment and implantable devices. Industrial Chemicals ($160 billion, 3.5 percent, $6.5 billion, 10 percent) Imports from the United States constitute approximately one-third of Japanese chemical imports. Many Japanese trading companies are aggressively seeking opportunities to develop new businesses with U.S. chemical companies, even for very small market niches. Innovation is the key factor which they want to see in these types of products. Even large trading companies, which need at least $15 million in annual sales to sustain one employee, look for new business with as little as $300,000 in annual sales potential. For small to medium-sized Japanese trading companies, the prospective sales figure can be as low as $150,000. Small to medium-sized U.S. chemical companies with unique technology should have good opportunities. The most promising subsector is specialty chemicals, with a market size of approximately $100 million. Aircraft and Parts ($8.9 billion, 8 percent, $4 billion, 10 percent) The number of U.S. manufacturing firms in the aircraft sector is limited and virtually all have offices in Japan. These companies are constantly evaluating the balance between competition and cooperation with Japanese manufacturers involved in aerospace. The number of cooperative efforts among American, European, and Japanese firms has increased markedly in recent years. While the United States still maintains a commanding lead in aircraft and components, demonstrated by the U.S. bilateral trade surplus, Japanese aircraft exports have been expanding in recent years. Another important competitive factor is the entry of European manufacturers into the Japanese market. Their aggressive marketing efforts pose a possible threat to the long-standing dominance of U.S. products in the Japanese market. The most promising subsectors are military and civil aviation aircraft with market sizes of approximately $2.9 billion and $3.4 billion, respectively. Architectural/Engineering/Construction Services ($620 billion, 5-12 percent, N/A, N/A) On May 25, 1988, the U.S.-Japan Major Projects Arrangement (MPA of 1988) became effective. The MPA designated 17 major projects as special-measure projects offering opportunities for U.S. firms in architectural design, engineering consulting, construction, and goods procurement. The estimated value of these projects is $17 billion. In June 1991, the U.S. and Japanese Governments completed a two-year review of the MPA and reached an agreement to renew and revise the MPA of 1988. The new arrangement expanded coverage to 17 additional projects, as well as 6 pending projects. These 23 additional projects are worth an estimated $26.7 billion. The most promising subsectors, along with an estimate of their market size in millions of U.S. dollars, are architectural services for private projects ($7,800), resorts in western Japan ($28,000), Sports Island ($850), Kyoto Station Building ($700), and Synchrotron Projects ($300). Sporting Goods ($14.1 billion, 4 percent, $365 million, 5 percent) The import market for sporting goods has grown by 6 percent per year for the last several years, and this upward trend is expected to continue until the end of this century. Several factors are driving this growth, including resort development, an increase in leisure time, the development of new lightweight materials, and international competition such as the Olympics which are to be held in Nagano in the winter of 1998. As a result of an increased interest in nature, outdoor activities have become very popular, and the market for outdoor equipment should continue to grow. The most promising subsectors, along with an estimated market size in millions of U.S. dollars, include golf equipment ($2,700), outdoor equipment ($1,400), pleasure boats ($600), and fitness equipment ($500). Computer Software and Services ($19 billion, 25 percent, $280 million, 30 percent) A shortage of computer software engineers forces computer end-users to use packaged software more, and to seek systems software to increase productivity of software development. To enter the Japanese market, "Japanization" is a must, including localization, and translation of computer software. The software to be introduced to the Japanese market should have a good sales record in the U.S. market. The most promising subsectors include personal computer software and baseline software for mainframes, with an estimated market size of $1.2 billion and $1.1 billion, respectively. Other promising export areas include the following sectors: (1) Building Products ($6.7 billion, 3 percent, $1.1 billion, 2 percent) (2) Laboratory Scientific Equipment ($4.1 billion, 7 percent, $720 million, 9 percent) (3) Computers and Peripherals ($38 billion, 10 percent, $2.7 billion, 10 percent) (4) Plastic Materials and Resins ($49 billion, 5 percent, $900 million, 17 percent) (5) Automotive Parts ($92 billion, 5-10 percent, $680 million, 15 percent) (6) Films and Videos ($1.5 billion, 3 percent, $425 million, 10 percent) (7) Jewelry ($18.2 billion, 3 percent, $340 million, 4 percent) (8) Telecommunications Equipment ($15.8 billion, 5 percent, $750 million, 35 percent) (9) Apparel ($67 billion, 3 percent, $185 million, 6.5 percent) (10) Household Consumer Goods -- Interior Industry ($56 billion, 7 percent, $250 million, 20 percent) (11) Machine Tools and Metalworking Equipment ($7.9 billion, 20 percent, $195 million, 30 percent) (12) Industrial Process Controls ($3.5 billion, 5 percent, $120 million, 8 percent) (13) CAD/CAM/CAE Systems ($2.5 billion, 15 percent, $1.1 billion, 20 percent) (14) Processed Foods ($185 billion, 5 percent, $2 billion, 7 percent) (15) Paper and Paperboard ($56 billion, 3 percent, $600 million, (-)1-(+)2 percent) (16) Electronic Components ($33.8 billion, 13 percent, $6.2 billion, 20 percent) (17) Electronics Industry Production and Test Equipment ($17 billion, 7.6 percent, $1.5 billion, 6 percent) (18) Giftware ($25 billion, 5 percent, $125 million, 15 percent) (19) Veterinary Equipment and Supplies ($3.2 billion, 25 percent, $200 million, 30 percent) (20) Automobiles and Light Trucks/Vans ($90 billion, 5-10 percent, $510 million, 10 percent) (21) Advanced Ceramics ($7.3 billion, 9.6 percent, $65 million, 15 percent) (22) Pollution Control Equipment ($5 billion, 8 percent, $10 million, 9 percent) (23) Cosmetics ($14 billion, 5 percent, $64 million, 50 percent) (24) Health Care Services ($155 billion, 5 percent, $10 million, 10 percent) (25) Wooden Furniture ($19.2 billion, 10 percent, $86 million, 30 percent) (26) Air Conditioning and Refrigeration Equipment ($16.7 billion, 5 percent, $115 million, 10 percent) (27) Made-Up Textile Products ($9 billion, 4 percent, $90 million, 5 percent) (28) Security Equipment ($1.5 billion, 12 percent, $5 million, 23 percent) (29) Printing and Graphic Arts Equipment ($3 billion, 12 percent, $65 million, 15 percent) (30) Coal ($7.4 billion, 2 percent, $755 million, (-)5-(+)2 percent)