Excluding Japan Graphic Aug 2017 V2

The Case for Excluding Japan from Your Asian Market Strategy

With Japan currently in its longest economic expansion in more than a decade, there is renewed interest by multinationals in doing business here and now is a good time for each to review their Japan specific strategy — if they have one at all.

Statistics on the size of the Asian market in certain industries noticeably exclude Japan, for reasons ranging from the challenge of conducting accurate research in Japan (due to a limited number of bilingual researchers in that particular field) to a greater interest in non‐Japan Asia.

Whatever the reason, industries including banking, financial services and IT‐related businesses with parent companies headquartered in the West have long tended to separate out the management of the Japan business from the rest of Asia. In fact, some companies even choose to ignore geography and treat Japan as if it were an isolated continent. Paradoxically, that’s a reasonable decision, since excluding Japan from your Asian strategy — and instead focusing on it as a single market — may be the fastest way to grow your Japanese business.

Of course, that depends on the industry. However, since 2009, telling acronyms like AxJ (Asia excluding Japan), APxJ (Asia Pacific excluding Japan) and APEJ (Asia Pacific Excluding Japan) have been in vogue, signaling that Japan is often treated as a discrete entity, because the market growth there lags behind — or dwarfs — market growth in other countries in the region (refer to Table 1, below).


As a result, conventional wisdom holds that including Japan’s data in pan‐Asian market reports could skew results for total Asia and make the data less meaningful. At the same time, use of the xJ terminology may even denote an inability to survey the Japanese market accurately.

Table 1
Source: International Data Corporation
Data as of May 2017

A given industry’s inclination to exclude Japan can be easily discovered through a professional networking database such as LinkedIn. A keyword search of the site reveals, for example, that not only do 90 LinkedIn members use the phrase “Non‐Japan Asia” in their job title (present or past), but that all of them have worked for investment banks such as Credit Suisse and Morgan Stanley, which started using such titles in the mid‐1990s.

Other financial employers in this database, such as Deutsche Bank and Fidelity, prefer the “Ex Japan” nomenclature, as evidenced by the 1,177 registered professionals with titles such as “Managing Director ‐ Asia (ex Japan)” or “Vice President, Asia ex‐Japan” (refer to Figure 1, below). Given these titles, we can infer that the financial services industry segregates Japan from the rest of Asia Pacific as a strategic way to manage the business in Japan.

Figure 1

Source: LinkedIn Corporation

Data as of February 2017

The IT industry shows similar trends. Computer‐related industries employ talent for such roles as “General Manager, Asia Pacific and Japan” and “Vice President – Asia Pacific and Japan” for hardware and/or software businesses (refer to Figure 2, below). These Japan‐specific titles, used by industry giants including Hewlett Packard and SAP, seem to defy geography, but their deployment further suggests that business practices in Japan are different from those elsewhere in the region, and so require distinction. On the increased adoption of Western technologies, including cloud and IoT for fintech and database management applications, Japan has become a lucrative market for IT‐related companies. As a result, the P&L for Japan is often separated out, while the financial results for the other Asian countries gets aggregated into one monthly statement.

Figure 2

Source: LinkedIn Corporation

Data as of February 2017

If a few industries, including financial services and information technology, have chosen to separate out Japan from the rest of Asia — and done well with the strategy — most industries seem to lump Japan in with the rest of the region in order to simplify the management of business across a large geographic terrain. As a hybrid approach, select multinationals, including Avery Dennison, Louis Vuitton, Schlumberger, Siemens and Tesla, have been managing Japan as part of a “North Asia” organization with promising results. However the separating out of Japan occurs, several multinationals are choosing to exclude Japan, either partly or entirely, from their Asian market strategy and more analysis needs to be done on how to make this is a best practice.

Julian Bashore manages the Japan operations of a NYSE-listed manufacturer of industrial products. Originally from the U.S., Julian is a graduate of the Wharton School of the University of Pennsylvania and has lived in Japan on-and-off since 1993, when he was an exchange student for 1 year at the Stanford Japan Center.   His op-ed pieces about the joys of doing business in Japan can be found at his regular guest column at Protechnology Japan magazine.   Julian will be a keynote speaker at the upcoming Japan Supply Chain Summit, which will be held at the Tokyo American Club on November 30, 2017.