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Israeli Companies Just Can’t Make It in the Japanese Market

Israel's share of Japanese imports is a mere 0.11%, compared to 0.27% of the rest of the world's imports.
Japanese visitors in Jerusalem's streets show their love for Israel, but they don't buy Israeli goods.

Japanese visitors in Jerusalem's streets show their love for Israel, but they don't buy Israeli goods.
Photo Credit: Yossi Zamir/Flash90

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Israel and Japan are celebrating sixty years of diplomatic relations, and so, a week ago, the Israel-Japan Chamber of Commerce marked the occasion with a festive event. But the current commercial ties between the two countries gives less cause for celebration. Israeli businesses find it difficult to understand the Japanese market and Japanese companies are not in a hurry to reach Israel, The Marker reported.

“I have been exporting diamonds to Japan since the sixties,” said Shmuel Schnitzer, Vice Chairman of the Israel-Japan Chamber of Commerce. “Japan is a nation with whom it is a pleasure to do business. When you play according to their rules, the Japanese client will be more loyal to you than any other client in the world. He will remain loyal to you even when a competitor offers merchandise at a lower price, and he won’t switch suppliers.”

Another exporter, selling water infrastructure, has been experiencing difficulties breaking into the Japanese market. “We joined up with a trading company, which, by and large, is how you do business in Japan,” he said. “We approached our targeted clients – beverage and bottling companies. We also tried to connect with engineering companies in the water business. Procedures in Japan are very lengthy, costly and difficult. The culture gaps are enormous. I’ve been to Japan twenty times. I’ve learned that not only do I not understand the Japanese, but I have no chance of ever understanding them.”

Israeli exports to Japan are still modest, and according to that exporter, the main obstacle is the Japanese perception of technology and marketing. “We haven’t succeeded in explaining to the Japanese concepts that are practiced in other parts of the world. One of the central issues there is the concept of time. Procedures are conducted from the bottom up, and nothing happens without consensus. Reaching a consensus depends on every single employee understanding the product or proposal. There is only a technological approval after this entire process is completed.”

The same exporter added that there are definitely language comprehension difficulties. “In one of the rounds of talks, they said ‘yes,’ but meant ‘no.’ Plus, they prefer locally-produced good. If there is a comparable Japanese product or technology, they will prefer it.”

Another obstacle preventing penetration into the Japanese market, according to the exporter, are the high prices. From his experience working in another company, he said, but “the potential is tremendous and the minute you penetrate the market, it’s a real success.”

Trade between Israel and Japan is volatile and varies between $2.5 – $3 billion annually. About 25% of this is Israeli export and the rest import. Cars (mainly Toyota and Subaru) make up a significant part of the imports. Last year, this included machinery and equipment. According to informed sources, the increase in car imports is a result of car imports by Intel as part of their investment in their Kiryat Gat, Israel, plant.

There was a marked decrease of 13% in trade with Japan (down to $1.4 billion) in the first half of 2012 in comparison with the first half of 2011. Exports dropped 8% to $341 million; imports dropped 15% to $1.1 billion. A 38% drop in automobile imports is predicted.

“We haven’t managed to crack Japan,” said Shauli Katzenelson, chief economist for the Export Institute. “Our rate of penetration into Japan stands out negatively compared to the rest of the world. Our share there is a mere 0.11% of their import, compared with our overall percentage of the world imports, which stands at 0.27%. Even when allowing for Japan’s huge oil imports, our situation there is not good.”

Roni Burstein, chairman of the Israel-Japan chamber of commerce and a Kikoman importer for more than 20 years, said “the problem at the moment is not with the Japanese but with us. If Israeli companies give Japan a high priority, which means investing in entering the market, in the end it will pay off, even if it takes a long time. It’s a market of 130 million homogeneous consumers. Once we get in, we won’t be easily kicked out.”

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