Due Diligence in Japan: Unlocking the Complex Business Culture and Inaccessibility of Information
Japan is a country with a significant business opportunity for savvy international investors. However, its complex business culture and inaccessibility of information can be challenging for even the most experienced investors.
The Pervasive Problem of Organized Crime Groups
One of the critical issues facing international investors is the pervasive problem with organized crime groups and other anti-social forces. Despite the Japanese government’s efforts to combat organized crime, these groups have adapted by adopting “normal” business activities and expanding their operations internationally. Many companies have unwittingly become involved with organized crime through blackmail and extortion.
- A thorough due diligence investigation can help mitigate the risks associated with organized crime ties by identifying rumors and evidence of possible criminal connections.
- A comprehensive review of a company’s shareholders, investors, and business associates can reveal hidden links to yakuza or other anti-social groups.
Language Barriers and Information Access
Language barriers also present significant challenges for international investors. Unlike many countries, information from Japanese media sources is not readily available in English. Therefore, conducting Japanese language searches of media and regulatory sites is essential to develop a complete picture of a subject’s reputation and profile.
- Conducting Japanese language searches of media and regulatory sites can help identify potential issues with a company’s reputation or profile.
- Obtaining information regarding a company’s directorship and shareholding structure is vital, but this information is not typically readily available to the public.
Regulatory and Corporate Registration Checks
Regulatory and corporate registration checks are crucial to ensure the legitimacy of a Japanese company. These basic searches can identify fake corporate registration numbers, which are frequently used by illegal financial firms.
- Checks of regulatory databases, including the Financial Services Agency, can uncover violations of financial regulations and norms.
- These checks must be conducted in Japanese as the information is typically not translated into English.
Overcoming Obstacles with Due Diligence
Due to strict privacy laws in Japan, there is no public database for civil and bankruptcy litigation searches. These records can only be accessed by authorized personnel and licensed investigative firms, emphasizing the need for enlisting the assistance of a trusted due diligence firm.
- A detailed due diligence investigation can help unlock the complex Japanese business culture and overcome obstacles such as tough privacy laws, inaccessibility of regulatory and corporate information, and far-reaching organized crime networks.
- By conducting comprehensive Japanese language media and Internet checks, regulatory searches, and local source inquiries, international investors can ensure that they make informed decisions about potential business transactions in Japan.
By understanding the challenges posed by Japan’s complex business culture and inaccessibility of information, international investors can take steps to mitigate risks and make informed decisions when considering investment opportunities in Japan.