Doing Business in Japan

Steps for agreement & contract with Japanese companys

Are you planning to make a contract with a Japanese company? Then just take 5 minutes and go through the check list before starting making the contract and come to agreement.

The key word for successful agreement will be to understand the high context culture. In other words, Japanese culture is one of the most relationship-oriented. So it will make big difference between knowing it and not knowing it.

These are key basics understanding of Japanese business style

  • Japanese business is reslationship-oriented
  • Still many Japanese SMEs have little exposure to written contracts
  • Trust is the core of business partnership

Now let’s go through the steps.

Secure time and opportunity to build a relationship

As mentioned above, Japan is really relationship-oriented country. It is often said in business situation that “Get your customer to buy FROM YOU”. It means much more important is your relationship than product itself. Same as contract. Don’t skip ice-break, get closer and build a relationship with someone you’d like to sign a contract.

Please be aware: try to build a personal contact rather than a legal one. Get some beers with them after five by using your private time. You’ll find some advice in this article “Good and bad topics while talking with Japanese businessman at dinner“.

More information about negotiation skill with Japanese clients:
5 common mistakes that European manager make during negotiation
3 impliedly signs if the Japanese client is interested in doing business with you

Prepare different attitudes towards SMEs and large enterprises

First of all, trust is the central base of business partnerships. We tend to seek harmony with partners. “To avoid conflict”, harmony is the way to build trust. For example, Japanese contracts have only 4 pages while American company has 7. So let’s say, our contracts are “vague” for American or European. This is again, because “trust” is the basic for Japanese.

However, it is none of your business. You need to sign a contract. So I’m gonna show you the way how to do it.

Large enterprises usually have experience to have contract with international partners. So it is rather important to go carefully when you deal with SMEs in Japan. Before handing over your draft of contract, just tell them that you need it for international transactions. Underline that you must do it with every partner, not because of lacking trust. These sentence will reassure them. You can tell them at early stage rather than last minutes.

choice-2692575_640Pic: Gerd Altmann from Pixabay

Make sure all contract terms are also prepared in Japanese

Be prepared to issue the contract in Japanese, too. The smaller the company you are dealing with is, the better to prepare an Japanese one. So it means you need probably two contracts, one in English, one in Japanese.

This seems costly and waste of time but it will be much quicker at the end, because your Japanese partner will definitely need longtime to check the English contract, or wouldn’t even sign at all.

Weird that you do this for the client? Well, it depends how important the contract is for you. But instead of saving cost for translation, it is maybe worthier to make a borrow.

Take care that the sentences in the contract are as succinct as possible

Please be aware that English skills of Japanese people are basically low. Better to make it readily understood by non-native English speakers. Probably you might already have one template of contract. Just give a little more effort to adjust it. This will absolutely shorten the time of processing the agreement.

Below you see the data from EF EPI 2019 about Japanese English skill.

EF EPI 2019 analyzed the shift of English skill reported by EF EPI. Japan is dropping the rank every year.

nippon data

So these are the main checklist which will speed up your agreement process. Also if you show your understanding of Japanese culture, it will be appreciated as well.

Yuki Nagahori
BA in German / Japan Country Manager at editorial company → Sales → currently sales planner based in Hamburg, Germany