1. The Japanese financial system has been undergoing a process of liberalization, or deregulation, which began in the mid-1980s. These changes are making it easier for foreign companies, especially financial services firms, to do business in Japan. By staying informed of these changes, Western businesses will be better able to perceive new opportunities as they arise.
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2. Be sure to consider currency rates and risk when entering into business with Japan. Establishing business in Japan can be very expensive for foreign companies due to the high value of its currency. On the other hand, however, companies selling to Japan have seen the value of their sales go up dramatically and the price competitiveness of their products has also improved.
3. In personal interactions with bankers, it is useful to know whether or not their bank was the result of a merger, even if the merger happened several years ago. Bank mergers are not as final as Westerners might expect. Often the banks are divided into long-running factions consisting of personnel from the former banks.
4. The Bank of Japan (BOJ), the nation's central bank, is often cited in the financial news because of its influence on interest rates. Japanese businessmen closely follow the activities of the BOJ, as do astute foreign bankers and businessmen. Like the Federal Reserve of the United States or the Bundesbank of Germany, the BOJ has tremendous influence over the world economy.
5. Over 80 percent of Japan's stock market trading volume is on the Tokyo Stock Exchange (TSE). The two indices that measure TSE performance are the Nikkei Stock Average (Nikkei 225) and the Tokyo Stock Price Index (TOPIX). The Nikkei is the arithmetic mean of 225 selected stocks and is similar to the Dow Jones Industrial Average. The TOPIX index better represents the market, for the influence of each share is weighed proportionately.
6. In addition to direct lending, both the Japan Development Bank (JDB) and the Ex-Im Bank work with commercial banks to finance projects through guaranty programs. Foreign businessmen may want to consider making contacts at these banks because they are interested in promoting foreign imports. Both the JDB and the Ex-Im Bank have offices in the United States and will supply information to interested parties. Be forewarned that these are government-sponsored organizations and their decision-making processes can take time.
7. Because Japan has a very large GDP (Gross Domestic Product), Japanese securities will continue to be of interest to foreign investors. It can be expected that a portion of any global portfolio will be invested in Japan, just as it will be invested in the US or Europe. This fact alone will ensure at least a minimum level of investment by foreigners in Japanese securities. However, Japanese securities are still not very attractive to international investors because of their low returns.