Navigating the US market: Opportunities and strategies for Japanese businesses

In 2023, bilateral trade between the US and Japan totaled over USD 222 billion. Exports and imports are up in recent years following the decline caused by COVID-19 pandemic restrictions in 2020 and 2021.

US-Japan economic relations have never been better, which means Japanese businesses looking for US investment opportunities have a wealth of options available.

Market entry strategies

As regulatory and legal differences exist between the US and Japan, it's critical to partner with experienced accounting and tax strategists with local expertise. A local advisory service can explain the options for US market entry, which may include forming subsidiaries, joint ventures, or acquisitions.

Taxation is a major consideration for Japanese businesses entering the US market. The tax laws in the US are notoriously complex, particularly regarding foreign investment. Companies must understand how the US defines economically sourced income and how it applies to foreign business transactions. As a general rule, all US-sourced income is taxable, but certain strategies may help mitigate your tax liability.

The US has various federal, state, and local tax credits and deductions that encourage economic development. Many of these significantly benefit Japanese businesses in America. In addition, states or local governments may provide various discretionary international tax incentives for companies that make substantial capital investments or create new US jobs. Having an experienced advisory service at your fingertips can help your Japanese enterprise take advantage of these opportunities.

Financial considerations and regulatory compliance

Many Japanese organisations that enter the US market find opening a new bank account to be essential to their operations. A US-based banking account facilitates regular transactional activities, including sales, payments, and asset management. Having a US bank account will make things easier if you need financing for your US business activities in the future.

However, not all Japanese businesses require a US bank account. If you're solely using the bank account to collect customer sales, you may be better off utilising an alternative payment method. Keep in mind that opening a US bank account requires obtaining a federal employer identification number (FEIN), and some banks may require you to open the account in person.

US banks perform due diligence on all new customers to comply with federal regulations concerning money laundering and terrorism. One example is the Customer Due Diligence Requirements for Financial Institutions (CDD Rule), requiring banks to collect specific customer information.

Some examples of the documentation you may need to provide when opening a bank account include company ownership details, corporate entity documents such as articles of incorporation or operating agreements, and photo identification.

Other considerations include currency risk management and financial reporting. Depending on your business structure, you may need to file your financial statements according to local US reporting standards, known as US generally accepted accounting principles (US GAAP). Working with a local advisory team can ensure your financial statements are correctly reported according to US standards.

To ensure your organisation adheres to US regulatory compliance for Japanese firms, it's vital to partner with an advisory service that can walk you through the appropriate steps.

Cultural and business practices

It's no secret that Japanese and US cultures differ, sometimes quite significantly. The differences are particularly pronounced when it comes to cross-cultural business strategies and practices.

Americans take a practical and efficiency-minded approach to business matters. In general, Americans dislike spending unnecessary amounts of time on meetings or other forms of contact.

While Japanese business culture tends to prioritize long-lasting business relationships, that's not necessary in the US Americans want to learn more about your products or services and the expected return from a potential collaboration. They put less weight into developing or cultivating personal relationships with business contacts.

It's not unusual for much of your business-related communication with Americans to occur via email or conference calls, not in-person meetings.

If your business warrants a meeting, make sure you know exactly what topics you want to address during the discussion. It helps to come prepared with evidence, facts, statistics, or a slideshow that can lend credence to your discussion.

As you identify potential American business partners, you can further the relationship by engaging in open communication. Feel free to check in with vendors and clients regularly via email or phone. Showing Americans how your partnership can benefit you both simultaneously may go a long way toward strengthening the relationship.

Advisory services and support

Working with an accounting, tax, and business advisory service is highly recommended, as local consultants have the expertise to navigate the ins and outs of US laws and regulations. Their knowledge can help you avoid expensive compliance mistakes that can harm your profit margin and damage your reputation.

With the assistance of knowledgeable professionals, you can mitigate your risks when entering the US market. Your advisory team can provide customized guidance that aligns with your business objectives. You'll also receive key insights that will help you make informed decisions as you adapt to doing business in the US.

While working with an advisory team does come at a cost, it's well worth the expense, helping to streamline the entry process and avoid unnecessary hiccups.

Get advisory assistance from knowledgeable professionals

Entering the US market is an exciting time for Japanese businesses. While it may seem overwhelming, working with skilled business advisors and consultants can ease the burden, making the process much less complicated. Your team can advise you in multiple areas, including tax planning, regulatory compliance, and accounting for foreign businesses.

By working with a seasoned advisory service, you can avoid making unnecessary mistakes during the market entry process.