(Re)Open for Business
Japan’s long journey to open borders and what lies ahead for business and education
It isn’t easy to do business when you’re standing outside staring through the window. But that’s the situation so many found themselves in during much of the pandemic, thanks to some of the world’s most stringent border restrictions. Japan’s reluctance to allow non-citizens to enter the country, slowness in loosening the reins, and insistence on complicated and costly requirements once the trickle was allowed to start put both domestic and non-Japanese companies in a tough spot.
Getting these policies eased became a centerpiece of advocacy for the American Chamber of Commerce in Japan (ACCJ) and other foreign chambers in 2021, and the efforts continued in 2022. It took most of the year to get the desired results, but Japan finally reopened its borders to mostly normal travel, including visa-free entry, just months ago, on October 11. And now we look ahead to 2023.
Long Road
When Japan placed visa restrictions on travelers from 38 countries at midnight on March 21, 2020, no one imagined the journey back to normality would take so long. There was still the feeling that this would be a short-term measure to minimize the duration of the pandemic, which itself was expected to pass within months if strict steps were taken. But by May 27, the list had grown to 111 countries, including the United States, and it had become clear that Covid-19 wasn’t going away anytime soon.
The ACCJ, other foreign chambers, and the European Business Council in Japan set out on a long advocacy journey calling for fair and equal treatment of foreign residents. Eventually, two of the most influential domestic lobbies—the Japan Business Federation (Keidanren) and the Japan Association of Corporate Executives (Keizai Doyukai)—added their voices, and on November 8, 2021, the Japanese government temporarily loosened restrictions on business travelers and students.
The move was welcome, but many agreed more was needed. The ACCJ continued to push for change in 2022, and the chamber’s advocacy received broad exposure in media, with coverage by Bloomberg, Kyodo News, and Nikkei Asia, and in Japanese through the Mainichi Shimbun and NHK.
On March 3, Japanese Prime Minister Fumio Kishida announced that the daily cap on entrants would be raised from 5,000 to 7,000 on March 14. More phases played out as small-scale tours were allowed and the daily arrival cap raised to 20,000 in June. Another rise to 50,000 came in September, and the country fully reopened in October.
“Our experience during the pandemic demonstrated that the ACCJ remains the single most important vehicle in Japan for its members to address shared concerns with Japanese and US leaders and with the media,” Christopher J. LaFleur told The ACCJ Journal. LaFleur, who was ACCJ chair when the pandemic began and later served as a special advisor, often spoke to media on behalf of the chamber about the border issue and advocacy positions.
“We also demonstrated our unique capacity to bring together like-minded organizations to amplify our impact. Moving forward, the chamber should continue to monitor travel policies as it focuses on other high priority issues, such as economic security and digital transformation.”
Then and Now
Just before the November 2021 announcement, ACCJ members shared with The ACCJ Journal how the strung-out restrictions had impacted their businesses.
Kenneth Lebrun, a partner with the law firm Davis Polk & Wardwell LLP in Tokyo and co-chair of the ACCJ FDI and Global Economic Cooperation Committee, said his business had been impacted in two ways. “First, we have been unable to bring new employees to Japan, whether internal rotations from our US offices or external hires, because the government is not issuing new long-term work visas. This has impacted the ability of professional service firms to provide services to Japanese clients concerning their overseas operations,” he explained.
“In addition, the blanket ban on foreign business travelers coming to Japan—and the quarantine requirements for Japanese residents traveling abroad, and then returning to Japan—has negatively affected the level of cross-border investment and M&A activity, which is a significant portion of our business.”
Revisiting these issues now, Lebrun said that the Japanese government’s resumption of issuing business visas in 2022 allowed the firm to bring new hires and rotations from its US offices to work in Tokyo and thus return normality to its services.
He also feels optimistic about M&A recovery. “As Japanese companies typically desire to conduct site visits and meet face-to-face with the management of potential acquisition targets, the easing of border restrictions has encouraged many Japanese companies to resume their overseas acquisition activities,” he said while noting a caveat.
“The rebound of outbound M&A has been tempered by the strong yen, which makes foreign assets more expensive, but I am optimistic that cross-border M&A will return to pre-Covid levels during 2023 as the macroeconomic and demographic trends underpinning Japanese companies’ desire for overseas growth remain unchanged.”
Catherine O’Connell expects that increased business activities involving non-Japanese companies and entrepreneurs will boost her own law practice, Catherine O’Connell Law. Co-chair of the ACCJ Legal Services and IP Committee, O’Connell believes that demand for fractional general counsel support for businesses will expand.
“As borders open, people need experienced, bilingual lawyers to ensure full compliance across all their business activities,” she said.
“Long before the pandemic, I was well placed to service corporate clients who need efficient, competent, and practical legal advice, tapping into a network of specialist Japanese lawyers to cover all aspects of the law. This has only gotten better during the pandemic for me, so I have full confidence the work will be consistent and rewarding.”
O’Connell, who serves as independent audit and supervisory board member for Fujitsu Limited—the first foreign woman to hold the position—also sees benefits in other areas as a result of the pandemic.
“Performing my outside board roles has also become far easier and acceptable to do remotely outside Japan when necessary—yet another pandemic silver lining,” she explained. “In my view, the border closure has not impeded the advancement in board governance as companies continue to hire directors and statutory auditors who are based overseas for part of the year.”
Learning Again
Another sector significantly affected was education. Matt Wilson, president and dean of Temple University, Japan Campus (TUJ), expressed concerns to The ACCJ Journal in November 2021 over the impact on TUJ’s students and Japan’s reputation.
“Because of the borders being closed, we have had some long-term, degree-seeking students who decided they were going to attend other institutions, take an indefinite leave of absence, or simply abandon their plans to study here in Japan,” he said. “Our concern is that the patience of our current students who are unable to enter Japan will run thin, and they will burn out on online education at strange hours in their home countries. They could decide to take a leave of absence or pursue other opportunities.”
Fortunately, the situation has improved greatly, he said when asked how things have progressed. “The reopening of the country to educators and students in March 2022 has turned the tide, and students seeking an international experience in Japan have flocked to our campus since the reopening while expert faculty from our main campus in Philadelphia have started asking about short-term teaching opportunities on our campus,” he explained.
“And due to a major influx of overseas students and increased interest among domestically based students, TUJ’s undergraduate program has soared to new heights, reaching a record 1,841 students. In 2020, TUJ’s undergraduate enrollment was about 1,250.”
Mark Davidson, a board member of TUJ as well as the U.S.-Japan Bridging Foundation, which awards scholarships to US undergraduate students to study in Japan for one semester or an academic year, said, “I’m delighted to say that inbound student mobility is back to pre-pandemic levels.”
Davidson, who also serves as vice-chair of the ACCJ Education Committee, is a strong advocate of internships and helped the ACCJ—together with the Embassy of the United States, Tokyo, and the US–Japan Conference on Cultural and Educational Interchange (CULCON)—to launch an online portal in 2019 where ACCJ member companies can post internship openings. He hopes the progress made on reopening entry into the country for students will spur development of more internship opportunities.
“In the post-pandemic world, I hope that both foreign-based and Japanese companies will redouble efforts to offer substantive, US-style internship programs to Japanese and foreign students alike,” he said. We need to get beyond the one-size-fits-all, lockstep shukatsu system and promote more flexible, practical, and innovative approaches to hiring. A serious internship program will help companies to win the war for talent and also contribute to cultivating the kind of globally talented young people that every company—and Japan as a whole—needs to succeed and prosper in the 21st century.”
TUJ’s remarkable recovery certainly points in a positive direction for young talent in Japan’s future. “With the borders open, TUJ is seeing strong demand for 10 undergraduate degrees and short-term study abroad programs from the United States and around the world,” Wilson explained. “In 2023, we anticipate that this will continue so long as Japan continues to prioritize entry for students and educators. Based on a weaker yen and issues with China’s approach to the pandemic, now is a prime time for Japan to attract students seeking higher education.”
MGM Resorts’ Osaka integrated resort concept. Image: MGM Resorts International
Have Ticket, Will Travel
Perhaps the most noticeable impact of the border closures was the end of tourism. Some 32.5 million tourists visited Japan in 2019, and the government had set a target of 40 million for 2020. But just 2,900 foreign nationals arrived in April 2020, down 99.9 percent from the same month a year before. It was the first time since 1964 that the monthly arrivals figure had slumped below 10,000. And it’s been a slow climb out of that hole.
Now that tourists can once again enter the country, ACCJ Vice President-Kansai Jiro Kawakami, who is vice president and chief of staff at MGM Resorts LLC, is positive about Japan’s prospects for a robust tourism recovery.
“The signs are starting to emerge in the form of high occupancy and rates at hotels, large crowds at tourist sites in Tokyo and Kyoto, as well as popular attractions such as Tokyo Disneyland and Universal Studios Japan,” he said. “China was the largest source of inbound tourism before the pandemic, and we should see some of that segment return as their government eases outbound travel restrictions.”
Prior to the pandemic, there was much talk of building Japan’s first integrated resort (IR), and a number of companies were competing for the license to do so. While tourism came to a stop due to Covid-19, the IR process did not. MGM Resorts and Orix Corporation were awarded rights in September 2021 and Kawakami said they are now in the process of applying for a license to develop Japan’s first IR in Yumeshima, Osaka.
“Osaka’s IR candidate site is the same location as the 2025 Osaka Kansai Expo,” he explained. “We look forward to hearing back from the Government of Japan in the near future. In the meantime, we continue to work closely with tourism and hospitality stakeholders in Kansai to develop Osaka into a global tourism hub leading up to the 2025 Expo and projected 2029 opening of the IR in Osaka.”
O’Connell is also confident tourism will rebound, and events such as the 2025 Expo may be well timed for what she expects to be a gradual recovery.
“Any tourist who traveled here for the Rugby World Cup in 2019 has Japan as their last fantastic, vivid travel memory,” she said. “So I believe Japan is a very hot travel destination and people will be desperate to return. That said, I’m happy if tourism is slower and more controlled than before to prevent overtourism of Japan’s scenic spots.”
Resolution
LaFleur said that, through its advocacy on travel restrictions over the past three years, the ACCJ helped its members and the broader foreign community in Japan secure fair treatment and a reopening of borders that sustains both public health and the economy.
“Covid and its aftereffects remain global challenges,” he added. “However, the ACCJ can and should continue urging Japan and its global partners to ensure their heath policies enable the fullest possible economic recovery, not least because stronger economies are crucial to ensuring our countries have the resources to maintain global peace and security.”
