The Japanese bureaucracy is infamous for making business life complicated. It is said that there are more than 10,000 regulations in 20 categories. And virtually all of these regulations slow down business and make it more costly for start-up companies—whether Japanese or foreign.

To illustrate the impact of these regulations in a typical situation, we looked at the process required to register a new company to provide social benefits to employees in Japan—a process HTM has done many, many times. We then asked our Seattle law firm to do the same exercise for a new company in the state of Washington, and we made a comparison of the two. A summary of our findings is as follows.

In this instance, eight times more time was required in Tokyo than in the Seattle. And, this is not an isolated example. We have found that the bureaucratic paperwork required to set up a corporation results in a very similar ratio. Although a company can be formed in one day in Washington state, a more typical time is three days. In Japan the normal time to get a company registered is one month. Again a ratio of approximately eight to one. From a sample size of two we won’t categorically state that 8:1 is how much more time it takes to deal with regulations in Japan, but it is probably an accurate rule of thumb.

Things can get worse. The above times assume that all submitted documents and forms are accepted by the several bureaucrats that will examine them. If any "mistake" is found, or if any questions can be raised, the amount of time will increase. This process gives the bureaucracy great power over companies in Japan.

It is common for people from outside Japan to comment on how little gets done by their Japanese staff. Very often the truth is just the opposite; it’s just that little is understood about how much the Japanese staff needs to do for a seemingly simple task. Of course, the Japanese staff would never think to point out to the head office that their work in Japan takes eight times as long as the hours required back at the home office, because to the Japanese staff, doing things this way is perfectly normal.

There are two serious consequences to this. The first is the simple effect of greatly increased cost. And the other, more insidious, problem is the misunderstanding that develops over the time required to get something done. This misunderstanding often leads to a lack of respect, a breakdown in communications, and a "we-and-they attitude" developing. As a result, problems compound and profits tumble.