Download 2010.05.10 Other Nations May be Hotter, but

May 10, 2010
Other Nations May be Hotter, but Japan Still Offers
Big Opportunity
By Debbie Howard
After years of being billed as "the world’s second-largest economy," it
appears that 2010 may be the year in which Japan’s economy is
officially surpassed by China’s. Since gross domestic product
comparisons are made in dollar terms, foreign exchange movements
may impact the exact timing. But it will be soon. Japan’s GDP for
2009 stood at $5.1 trillion, only slightly higher than China’s $4.9
trillion, according to Cabinet Office and International Monetary
Fund calculations.
Excitement about business opportunities in China and other highgrowth Asian nations has been palpable for a while now; after all,
Asia is an important key to the global economic recovery. However,
in addition to examining the merits of individual countries, it is
also important for foreign multinationals to think about their Asia
strategies overall, as well as considering the spending power of
individual consumers. This is particularly true for high valueadded products and services (advanced pharmaceuticals, medical
devices and high-tech equipment, to name a few examples).
Many sources point out, for example, that despite overall GDP
statistics, Japan is much more affluent than China in terms of per
capita GDP. China’s per capita GDP in 2009 was only $3,566, less
than one-tenth that of Japan at $39,573. For reference, per capita
GDP in the U.S. stood at $46,443 for the same period.
It has long been said that Japanese consumers are among the most
well-heeled and sophisticated in the world, with consumer spending
in Japan reportedly accounting for approximately 11% of the global
economy. That is not likely to change anytime soon.
Estimates of the number of high-income households (i.e., $1 million
or more, not including real estate) vary widely, but there are
probably around 1-3 million of them. At the same time, wealth is
both more widespread and more prevalent in Japan compared to its
Asian neighbours. Specifically, Japan’s well-to-do hold combines
financial assets of $3.5 trillion (46% of the total assets owned by
Asia’s wealthy individuals). In addition, Japan’s rich individuals
represent 59% of those in the Asia region with over $1 million in
financial assets.
Another perspective on the value of the Japanese market pertains to
the scale it represents for a variety of key sectors, such as medical
devices ($21 billion in 2008, and the world’s No. 2 market),
pharmaceuticals ($77 billion in 2008, again the world’s No. 2
market) and environmental services (projected to reach $1.2 trillion
by 2020).
To look through yet another prism, it is also interesting to compare
GDP values of key geographic areas in Japan. For example, the GDP
of the Kanto region around Tokyo is approximately equivalent to
that of South Korea and the Philippines, combines. Meanwhile, the
GDP of the Kansai region around Osaka is equivalent to that of
Taiwan, as is that of the Chubu region, which includes Aichi
Prefecture. And I can continue. Hokkaido’s GDP is comparable to
half that of Hong Kong, the Shikoku region’s is half that of
Singapore, and the Kyushu region’s is comparable to Thailand’s.
It stands to reason that any company marketing relatively
sophisticated products and services would want to consider Japan a
critical part of its Asia strategy. This has grown even truer as Japan’s
economy has become increasingly integrated with that of Asia.
In fact, some large multinationals have come to view Japan as a good
"jumping off point" for approaching other Asian markets. In short,
companies are literally using Japan as a proving ground, developing
their business propositions within the context of Japan’s notoriously
competitive market and demanding consumers. This applies not only
to product development, but also customer service and aftercare.