Japan is one of the economic superpowers of global trade. Japan's gross national product (GNP) is second only to the United States'. Indeed, at the time that Japan's economy began to stumble during the mid-1990s, its GNP per capita was at $28,470, well exceeding other G7 nations such as the United States at ($24,901), Germany ($24,762), France ($22,871), or Britain ($17,545).

Geographically, Japan is an isolated island nation, trailing along the northeast Asian coast. Japan has four major islands: Hokkaido (in the north), Honshu (the central and most populous island), Shikoku, and Kyushu (both in the south). Additionally, the nation controls Okinawa at its southernmost end and 6,847 minor islands in the overall archipelago.


Japan is among the world's most densely populated nations. It's population size and density is so extreme that it significantly affects business in a host of areas, from the comparatively large domestic market size in so geographically small a country to the high cost of real estate and limited agricultural capability.

Japan's population of over 125 million people is squeezed into an area smaller than Montana. Additionally, dozens of Japanese islands are sparsely inhabited, and several regions even on Honshu and Hokkaido are largely uninhabitable due to mountains or other treacherous terrain. Consequently, Japan's cities are home to some of the most crowded conditions in the world. Japan has 11 cities with populations of more than I million. By comparison, the United States has only 8 cities of that size and Germany only 1.

Moreover, these numbers correspond only to the populations within the official city limits. Several additional cities have greater metropolitan areas exceeding I million, while the greater metropolitan areas of the largest 11 cities are among the most populous anywhere. In fact, Tokyo's greater metropolitan population (including Japan's second largest city, Yokohama) ties with Mexico City as the largest in the world with a population of roughly 29 million people, or nearly the population of Canada.

The Japanese home has an average of under 30 square meters per person (compared to 64 square meters per person in the United States), making Japan the most crowded among the G7 nations.


Japan is one of world's most homogeneous nations. Limited immigration and centuries of nearly total isolation have resulted in a population that is over 97 percent Japanese in ethnicity. From this extreme homogeneity, Japan has evolved into a society with an unusual degree of cultural and behavioral uniformity.


Japan is an ancient civilization, dating back at least to 660 BC when the first Japanese emperor was enthroned. By the 11th century, Japan had perfected its famous samurai tradition based on powerful military classes. In 1192, Japan's first military government or shogunate came to power. Under the shogunate, shoguns were stronger than the emperor. The rule of the shogunates went on for hundreds of years, reaching its most powerful manifestation under the Tokugawa shogunate, which dominated Japan from 1603 to 1867. It was the Tokugawa shogunate that intentionally sent Japan off into isolation, severing Japan from foreign trade. Not until the latter half of the 19th century, with the accession of Emperor Meiji, did the shogunate system finally end. The replacement of the shogunate system with direct Imperial rule is called the Meiji Restoration, named so since Emperor Meiji restored Imperial power. During the Meiji Restoration, Japan broke from its isolation and plunged itself into world affairs. The result was an era at the close of the 19th century in which Japan introduced new ideas and practices in all walks of life. In economic terms, the Meiji Restoration brought Japan into a period of swift industrialization, the introduction of previously unknown technology, and governmental encouragement of global trade.

Following the Meiji Restoration, Japan began to expand in other areas besides economics. Japan adopted European imperialism with the same vigor it had adopted European business and manufacturing practices. Following the European model of militarily conquering other cultures and converting them into colonies, Japan rapidly extended its empire at the close of the 19th century. The Japanese invaded China in 1894 and established territories there. Next, in the first major defeat of a European nation by an Asian power in modem times, Japan decisively defeated Russia in the Russo-Japanese War of 1905. In a peace brokered by U.S. President Theodore Roosevelt, Japan was forced to return to Russia the territory the Russians had lost. While the reasons why Japan had to give back the Russian territory are debatable (and subject to accusations of European and American racism), the Russo-Japanese War clearly placed Japan on par with its European and North American counterparts in virtually all regards from military power to manufacturing ability. By 1909, Japan occupied Korea. In 1931, Japan overran much of northern China. Finally, in the final stage of its expansionism, Japan conquered most of Southeast Asia and the Pacific islands. These conquests included most of the British, French, and Dutch colonies in Asia, as well as the Japanese attack on Pearl Harbor in 1941 (which brought the United States into World War II).

World War II devastated Japan. Virtually every major city was attacked and several (including Tokyo) were almost entirely destroyed. Most significantly, Japan remains today the only nation to have ever suffered the effects of nuclear weapons. In 1945, the United States dropped atomic bombs on Hiroshima and Nagasaki.


U.S. occupation of Japan had profound consequences on Japan's current business system. This is because the U.S. occupation led directly to the dominant business structure, the keiretsu.

Following World War II, the United States formally occupied Japan, ruling the nation under a military government from 1945 until 1952. Before the United States left, it made Japan adopt a new constitution based on the U.S. Constitution. The United States also made Japan dismember all remaining offensive military forces and had Japan place in its new constitution a prohibition to remilitarizing. The United States also outlawed Japan's great business concerns, the zaibatsu.

This last measure was meant to harm Japan economically and punish its major business enterprises. Ironically, the scheme backfired, as it freed up Japanese businesses from many long-standing but unprofitable alliances. The now illegal zaibatsu simply reformed as Japan's keiretsu, and having shed their ties to these unproductive firms began one of the most dramatic economic recoveries in history. Japan transformed itself in less than 30 years from almost complete economic ruin into the world's second largest economy (after the United States) by the 1970s. While other factors contributed to Japan's success, much of it rise to economic prominence, as well as some of Japan's struggles with corporate-government corruption in the late 1990s can be attributed to the keiretsu and their domination of postwar Japanese business.

The keiretsu are not single entities. All keiretsu are made up of an interdependent group of nominally independent member firms composing a sort of mosaic from which emerges a joint enterprise.

The keiretsu can be viewed as a family of member firms, each tied to one another through cross-shareholdership. Thus, every member firm within a keiretsu possesses a sizable amount of stock shares within many (and in some cases every) of the other keiretsu members. Individual member firms, in turn, are at least nominally independent even if joined together by cross-shareholdership. Keiretsumembers are not subsidiaries of holding companies, as the United States forced Japan to outlaw holding companies during its postwar occupation. Consequently, while cross-corporate shareholder control is coordinated, technically, the stock of every member company belonging to an individual keiretsu is traded independently.

The outlawing of the prewar holding company structure, or zaibatsu, freed Japanese prewar corporate families from propping up the less profitable member companies. This did not, however, limit the size of the interwoven collection of companies that were resurrected after the war as the new keiretsu. At the close of the 20th century, most keiretsu averaged well over 100 member firms, and many of the most significant keiretsu are composed of many more than that. For example, by the mid-1990s the giant keiretsu Hitachi was comprised of more than 680 member companies and their subsidiaries.


The official language of Japan is Japanese. Despite the importance of Japan within the global economy, comparatively few non-Japanese speak the language. Arguably three reasons have led to this linguistic isolation. First, unlike such multinational languages as English, Spanish, French, or Arabic, Japanese as a language is limited to only one country. Additionally, Japanese is one of only three orphan languages (the others being Korean and Basque). In other words, Japanese has no true ties to any other linguistic family. As a result, Japanese is equally difficult to learn regardless of one's native language, since no language shares cognates with Japanese that the Japanese have not themselves borrowed first.

Finally, Japanese writing is significantly more complex than most other languages. Traditional Japanese is written in vertical columns that read from right to left. Today, however, many books and especially signs are written horizontally from left to right.

Another point that complicates Japanese writing for many non-Japanese is the fact that the language employs three independent systems of writing. The first system, known as kanji, uses thousands of characters adapted from Chinese. The Japanese did not have a common writing system of their own at the time that large scale missionary Buddhist missionary efforts came to Japan, bringing with them Chinese writing, which was then applied to Japanese.

Normally, this would have posed a problem for translating the books and sacred texts in cases using an alphabetic system. Chinese, however, is not an alphabetic system, and the Chinese monks introduced the Japanese to Chinese characters. Since Chinese characters are non-phonetic (that is, they represent pictures or ideograms rather than an alphabet), the fact that Chinese and Japanese have nothing in common linguistically did not impose a barrier. It is much the same way that a picture of boiled fish on a restaurant menu conveys the concept of boiled fish to an English speaker or a Japanese speaker. Pointing to the picture, the English-speaking customer perfectly communicates what is wanted. The difference comes when the customer says "boiled fish" and the server responds "nizakana."

At first, the Japanese limited kanji to Chinese classical works and religious writings. Soon, however, the Japanese started adapting kanji to Japanese words as well. Because Chinese grammar has nothing in common with Japanese, however, the Japanese had to add things—such as word suffixes and so forth—to the characters. To do this, the Japanese invented a series of symbols that they appended to the kanji that added syllables. This syllabary (not an alphabet, but a system of common syllables) grew into the remaining two systems (together known as kana).

Japanese has two sets of kana: hiragana (a stylized form roughly equivalent to cursive) and katakana (a block form roughly equivalent to printing). Yet the comparison to block printing and cursive in Latin-based letters is misleading, since the two systems serve differing functions. This is complicated even further by the fact that some words are a combination of both kanji and phonetic symbols.

Finally, the Japanese have adopted a fourth system of writing, using an alphabet. This is Romaji (that is, Roman lettering). This is a phonetic transcription of Japanese into English letters. Romaji is particularly easy for Americans to pronounce, as it was developed by an American, the missionary James Curtis Hepburn. While Japanese runs kanji and kana together, Romaji is careful to separate words, as well as the divisions between parts of words that are kanji and kana. Romaji, however, serves an additional function in Japan beyond making Japanese pronounceable to foreigners. Because most computer programs require an alphabetic keyboard, Romaji provides a means for using computers employing Japanese with relatively little modification.


The most significant factor affecting the business environment in Japan is the immense population occupying a very limited space, as discussed above. One result of this crowding has been the rise of the so-called open-system office. In most Japanese offices, space is not subdivided into cubicles or individual rooms as is commonly practiced in Europe and the Americas. While generally each person sits at an assigned spot, space is shared, often at long joint tables, with shared telephones and computers and with no individual walls.

Crowding has also influenced Japanese commuting time, which is among the longest in time worldwide. This has also contributed to Japan's highly efficient mass transportation system, including the famous bullet trains.

Other factors are also at play in the business environment besides crowding. To a large extent, Japan is devoid of most natural resources. It must import virtually all of its oil, gas, and other energy resources, driving the cost of energy to a level much higher than in most other industrialized nations. It is possible to argue that to some extent Japan's emphasis on quality control and human resource management directly result from the need to compensate in other areas for this lack of natural resources.


Japanese religion is not directly involved in business aside from annual holidays and corporate gift-giving. Yet indirectly, religion plays a major role in business in a number of aspects.

Japanese religion is unique in that many Japanese hold to more than one religion simultaneously. This differs from the approach most others take toward religions as being absolute. Thus in the United States, for example, it is not customary that a person could at the same time be a Jew, a Roman Catholic and a Moslem; in Japan, such a combination would be more conceivable. At the very least, Japanese religion is mixture of multiple theological influences. To some extent, one can argue that this has helped create the Japanese business tendency to be at least temporarily comfortable with multiple interpretations of a situation (as opposed to the European and American tendencies to demand resolution of conflicting views as they occur).

Japan's indigenous religion, Shintoism, is limited to Japan and focuses on the spiritual forces of nature and of specific mountains, trees, bodies of water, streams, and other geographic spots imbued with religious significance. This has led to, among other practices, sangaku shinko (worship of mountains), and chinju no kami (local tutelary deities). Perhaps more significantly for business, Shintoism leads most Japanese to respect for nature in its own right, where both humans and kami (spirits) coexist and must find their proper place. This contrasts with the North American and north European view that people control nature to their own profit. Finally, the Shinto belief that stating negative outcomes may encourage their realization has limited the "what if problem-solving technique so widespread in American and European brainstorming strategies.

Missionaries from the Asian mainland brought Mahayana Buddhism to Japan in the Middle Ages. The religion evolved during the centuries of Japanese isolation into peculiarly Japanese formulations, such as Zen, with its belief in sudden enlightenment and Shingon Buddhism, with its belief in sokushin jobutsu (literally "Buddhahood in this very body"), a sort of organic pantheism stressing enlightenment as both a bodily and spiritual process. This philosophy may influence the way business is conducted in Japan, as expressed through a greater acceptance of intuitive decision-making as one legitimate criterion for action.

Other major influences on Japanese society from the Asian mainland were Confucianism and Taoism, which like Buddhism, took on uniquely Japanese characteristics. Thus, Confucianism was transformed during the late Middle Ages into the Japanese warrior code (and in modem times arguably transferred to the code of the Japanese business executive) with its emphasis on self-control and akirame (or resignation to one's place in a strictly hierarchical society). Taoism, in turn, took root in Japan as ommyoryo (the balance of the yin and yang blended with the five Chinese elements), which by the 7th century was even regulated by an official government bureau. Its influence is still evident in Japanese beliefs in lucky and unlucky days, numerology, and the auspiciousness of particular directions in combination with certain physical elements or shapes.


The differentiation between the sexes in the Japanese work place has remained among the most sharply contrasted in the industrialized world. While significant numbers of women have entered the work force since the late 1980s, this has not traditionally been an option for them.

Japan passed its first law dealing with equal opportunity for women only in 1986. That law, however, held virtually no actual protection for women who felt that employers had discriminated against them, but rather allowed only for the opportunity to engage in arbitration provided that both sides agreed that the situation merited attention.

The first substantial change in Japanese law to protect women in employment situations was put into effect only in April 1999 when Japan revised the law to allow mediation at either party's request. The new law also institutes revisions that require employers to prevent overt sexual harassment and eliminates formal bans on women working in formally prohibited professions. Special restrictions on the amount of holiday and overtime allowances made for women were also eliminated.

While these changes in the employment status of women are likely to change substantially the legal recourse women can pursue in the face of overt discrimination, women and men remain far from equal in the work place.


Japan is considered a "high context" culture. Edward Hall has observed that the Japanese are the most highly contexted of all industrialized cultures. In practical terms, this means that the Japanese are as likely to read the context surrounding what is said as they are to rely on the words spoken. As a result, for many Japanese, what is actually spoken is not necessarily the entire message.

This indirect communication style contrasts sharply with business communication in the United States and other lower contexted nations, where what is said represents on the whole what is meant. To some extent, low context cultures also have occasions where so-called "white lies" are used to protect someone's feelings. The difference comes in the degree to which people use such "white lies;" in Japan, such white lies are much more common than in most other cultures. Business people from more literal low context cultures such as the United States, however, may misunderstand such rhetorical flourishes as dishonesty. Yet even though the Japanese may appear to be saying one thing when meaning another, they are not necessarily dishonest, since the context of the situation clearly indicates (at least to other Japanese and those accustomed to high context communication) the actual meaning. Thus, where an individual from a lower contexted culture might flatly decline to do something by clearly saying "no," many Japanese might be likely to say that the request posed some difficulty or even seemingly agree to do something with a "yes" when his or her behavior conveyed the actual message of "no."

The process of determining what message is actually being conveyed becomes clear only when simultaneously analyzing both the words spoken and the stored information that one has collected regarding an individual's behavior and goals. This process, in turn, is further complicated by face-saving concerns.

Face or kao is a central component in the Japanese work place, and indeed in virtually all Japanese interpersonal relationships. The very word kao is used in many expressions that give an idea of its importance. Thus, one says that a person's face is "broad" (kao ga hiroi) if he or she has a far-reaching web of acquaintances. Most Japanese try very hard to avoid "smearing dirt" on one another's face (kao oyogosu) or even strong having one's face "crushed" (kao o tubusareru), as it is very difficult to recover from such a humiliation. On the other hand, much of Japanese interaction centers on face-saving (kao o tateru or having one's face "made to stand"). While people from many other cultures place importance on maintaining their good name or on doing the honorable thing, in Japan the maintenance of face and protection from public shaming or humiliation have arguably reached a level more central to their culture than evident elsewhere.

For reasons of saving face, many Japanese may find that a conflict exists between their real intentions (or honne) and the official position (or tatemae) that they feel obligated to hold publicly. While often a person's honne and tatemae are identical, the situation becomes complicated when the two conflict. In such cases, the negotiator must be sensitive to the actual needs of the individual (his or her honne) without sacrificing (at least overtly) the tatemae he or she feels obligated to uphold (such as an official company policy or a previous commitment).

As in other high context cultures, most Japanese rely on the full context of the communicators' relationship with one another to ascertain fully the meaning of their business communication. This particularly affects the importance for social etiquette, ranging from the simple exchange of business cards to the complex inter-relationship of duty and obligations. The importance of reading the context also affects Japanese formality in official situations (including business meetings) with a particular emphasis on face-saving.


The general perception of the work place differs fundamentally between Japan and the West. In the Americas and Europe, considerably more emphasis is placed on one's occupation and individual role in an organization than in Japan. Thus, most Americans and Europeans view themselves as individuals with a particular set of job skills, who secondarily happens to work for a particular company. This is diametrically opposed to the view held by most Japanese. As Katsuyuki Hasegawa (1995) has observed, "Ask most Japanese about what they do and they will answer, 'I am a company employee' and add, 'I work for Toshiba.' They give their company's name. Few people answer with a job title such as accountant or salesman."

Hasegawa goes on to explain that, "For Japanese, the company name is more important than the job title … For Japanese people, the community they belong to is much more important than what they do."


The traditional Japanese work place is highly structured and hierarchical. While Japan itself is a remarkably uniform nation economically and with regard to social classes and offers considerable latitude for social advancement based on merit, the nation is not egalitarian in the same way that, for example, one finds in Canada or the United States. By contrast, most Japanese are highly conscious of relative rank and status within their organizations. This rank-consciousness has deep roots in Japan; as Boye DeMente (1997) has noted, "Japanese concern with rank evolved from their vertically structured feudal society." Because seniority is closely tied to rank in Japan, age and rank are also positively correlated. Rank is reflected in the formalized etiquette used by most Japanese in the work place. Rank is especially apparent in the nature of the type of language used since Japanese changes form to differentiate between superiors and subordinates. In a related manner, people of higher rank are customarily addressed using their rank and name, or even at times by rank alone, not only when discussing them in the third person, but even when addressing them personally.


Japanese nonverbal behavior is generally fairly reserved. Rapid or frequent hand movements common among business people in the Americas, the Middle East, and southern Europe may appear to be extreme by Japanese standards, and thus may prove distracting.

The Japanese greet each other by bowing rather than the handshake. The depth of bow reflects rank, with the lower ranking individual bowing lower than the higher ranking person.

Because the handshake is a foreign custom used only with foreigners, many Japanese shake hands with little firmness. This has led to some misunderstanding among some non-Japanese who have misinterpreted this inadvertently weak handshake as communicating a lack of sincerity.

Eye contact in Japan also differs from that practiced widely elsewhere. Traditionally, Japanese lower their eyes to show respect. Younger people lower their eyes to people older than themselves, women lower their eyes to men, and subordinates lower their eyes to superiors. The lowering of eyes as a sign of respect, however, is often misunderstood in countries such as the United States, where lowering the eyes is a sign of dishonesty or insincerity and direct eye contact is a means for showing respect, regardless of rank.

[ David A Victor ]


Beasley, W.G. The Rise of Modern Japan: Political, Economic and Social Change Since 1850. 2nd ed. New York: St. Martin's Press, 1995.

De Mente, Boye Lafayette. The Japanese Have a Word for It: The Complete Guide to Japanese Thought and Culture. Lincolnwood, IL: Passport Books/NTC, 1997.

Gerlach, Michael L. Alliance Capitalism: The Social Organization of Japanese Business. Berkeley: University of California Press, 1997.

Hasegawa, Katsuyuki. Secrets of the Japanese. Tokyo: Hira-Tai Books, 1995.

"Japan in Figures 1999." Management and Coordination Agency of Japan, 1999. Available at: www.stat.gojp/16.htm .

Keys to the Japanese Heart and Soul. Tokyo: Kodansha Bilingual Books, 1996.

McAlinn, Gerald Paul. The Business Guide to Japan. Butterworth-Heinemann, 1997.

Michihiro, Matsumoto. Discover Japan: Words, Customs and Concepts. Tokyo: Kodansha International, 1997.

Nakamura, Akemi. "New Equal Opportunity Law Called A Start." Japan Times, 16-30 April 1999.

Victor, David A. International Business Communication. New York: Harper Collins, 1992.

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