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Legal Issues When Performing Services Abroad Japan Is Back! After more than a decade of recession and stagnant growth Japan's economy is showing signs of recovery in consumer spending and industrial production. Japan's retail market is the second largest in the world with an annual GDP growth rate of 5.5% as shown in Q4 2005 statistics. Japan is quickly reaffirming its reputation as the world's most sophisticated consumer base and leader in consumer electronics, technology, and manufacturing since its economic problems of the early 1990's. According to the Wall Street Journal, the Japanese corporate profit growth has led to higher household incomes and increased consumer spending in 2005 (Moffett, "Stronger Japan Economy May Benefit Rest of Asia", 2/17/06). Industrial production was up 1.3% from the previous year, the third consecutive year over year increase. In fact the economic growth rate in 2005 was the best it's been since 2000. Company investment in factories and equipment also increased in the last quarter of 2005, particularly in the areas of vehicle and other machinery production ("Industrial Production up Third Year", The Japan Times, 1/31/06). As exemplified by growth in industrial and consumer spending, the Japanese government's struggle with falling consumer prices appears to be ending. Government encouragement of lending, artificially low interest rates, and public works and deficit spending have greatly slowed deflation. As a result, the nationwide core consumer price index grew by 0.5% in January of 2005 (Greimel, Hans, "Japanese CPI Rises for Third Straight Month", The Washington Post, 3/3/06). Reminiscent of its bubble economy of the 80's and 90's, Japan's consumers are again global examples for home furnishing, technology, and luxury good trends. Importing 40% of luxury goods worldwide, Japan with its increasingly household income is a prime candidate for testing product success for the international stage. Many companies are partnering with Japanese firms in order to develop, refine, and test new products on the Japanese market for future worldwide distribution. So why is the Japanese market a hot spot of innovation? While Japan is not a country eager for change it represents a sophisticated consumer base that is very brand aware and willing to spend on quality products. The Japanese market for home furnishing, for example, has experienced large amounts of growth in the past decade to $33.52 billion in sales for 2003. A whopping 94% of Tokyo women in their 20s own a Louis Vuitton product, 92% a Gucci, and 58% a Prada ("Retail", Industry Profiles, Japanese External Trade Organization, February 2006). In order to stay ahead of technology and trends international companies are testing their products on the Japanese to prove consumer interest and fine-tune products for global sales. Japanese consumers tend to adopt new technologies earlier than those in other countries and serve as a proof of concept market for many companies ("Consumer Electronics", Industry Profiles, Japanese External Trade Organization, February 2006). Virginia companies are among those taking advantage of Japan's growing consumer market and industrial growth. Japan is the third largest export destination for Virginia products, buying $772.95 million of product in 2005. Among the highest dollar amounts gained through Virginia exports to Japan are tobacco, plastics, and electrical machinery (World Trade Atlas. Global Trade Information Services, Inc. March 2006.) Already a leader in trend-setting for consumer products, Japan is regaining its reputation as a leader in industrial growth and technological advancement after its long economic decline. Overall GDP and industrial growth coupled with lower deflationary price trends will make Japan an important market for international trade. If Japan continues to show consistent industrial growth and technological advancement, more and more companies will make Japan the birthplace of innovative products for global distribution. Japan will play an increasingly important role for companies wishing to expand to Asian markets.