Journal of Services Marketing

The Influence of Japanese Culture on Business Relationships and Negotiations

Naoko Oikawa John F. Tanner Jr.

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Naoko Oikawa John F. Tanner Jr., (1992),"The Influence of Japanese Culture on Business Relationships and Negotiations",
Journal of Services Marketing, Vol. 6 Iss 3 pp. 67 - 74
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THE INFLUENCE OF JAPANESE

CULTURE ON BUSINESS RELATIONSHIPS
AND NEGOTIATIONS
Naoko Oikawa
JohnF.Tanner Jr.

Introduction
Negotiating with the Japanese often irritates
American managers because it is an extremely
time-consuming, frustrating, and often losing
proposition. 1 Since the Japanese have learned
the American culture and language, they have
a clear advantage in negotiating with American
businesses. If Americans are to negotiate successfully, it is essential that they learn the
Japanese negotiation style.

Buyer/Seller Relationship in
the Japanese Social System
The Japanese negotiation style is deeply
rooted in the social system and cultural values.
Much of the negotiation process can be
attributed to Japan's vertical society, or the status differences between buyer and seller.
There are two basic types of relationships
that must be established for successful business negotiations: a "rank" relationship and a
personal relationship.

Naoko Oikawa recently completed her M.B.A. at Baylor University. Prior to her graduate work, she was employed for
several years in-retailing in Japan. She is returning to Japan as a marketing manager for an industrial marketing organization.
John F. Tanner Jr. earned his Ph.D. from the University of Georgia. His research has been published in the Journal of
Marketing, Journal of Business Research, and Journal of Personal Selling and Sales Management. Dr. Tanner began his
career with Rockwell International and also worked for Xerox Corporation in sales and marketing management. He has
consulted in the area of sales with the U.S. Army Recruiting Command, S.C. Johnson Wax, and others.

Vol. 6 No. 3 Summer 1992

67

THE JOURNAL OF SERVICES MARKETING

Rank Relationships
In Japan, on all occasions, people first try to
ascertain their position, or "rank," in relation
to others present, and then they behave according to their position. Japanese feel very uncomfortable if rank is not apparent because they do
not know how to act without it. The power
position in Japanese business relationships
depends on the size and prestige of the company, industry structure, and often, which company is the buyer. Most often, Japanese buyers
expect and receive deferential treatment from
the sellers. There are a few cases when the sellers are more powerful, such as when there is
no competition or when the product has a
strong price or quality advantage. The following excerpt explains the very different roles of
the buyer and seller in Japan:

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Japanese buyers avoid saying "no."

In Japan, as in other countries, the "buyer is
king," only here he or she is "kinger." Here, the
seller, beyond meeting pricing, delivery, special specifications, and the other usual conditions, must do as much as possible to meet a
buyer's wishes....Many companies doing business in Japan make it a practice to deliver more
than what is called for under the terms of their
contracts.3
Because the buyer and seller have different
status positions, their roles are different and
they must behave differently during the entire
business relationship. The seller, being in the
lower position, uses honorific language, and
the buyer, being in the higher position, may
speak in less polite terms.
The vertical structure in Japan can sometimes lock Americans out because the structure
is dominated by large banks and their reciprocal relationships with large corporations.5 Not
all Japanese businesses are part of that vertical
structure, however. Small Japanese businesses
are outside that structure, and American firms
have gained market share in Japan with those
smaller businesses. Other Americans have
taken advantage of the structure by partnering
with Japanese companies in key areas. This

68

strategy requires identifying a company

already in the keiretsu (family of companies)
and partnering with it in the development of
products or services, a strategy that will be discussed later.6

Keiretsu
In many instances, the vertical structure is
formalized in keiretsu, or family of companies.
Executives may sit on the boards of their customers or suppliers; companies form strong
alliances for product development, marketing,
or finance; and there is much dealing among
the group of companies within the keiretsu.
The basis of keiretsu, however, is strong personal relationships.

Personal Relationships
Face-to-face contact is required with
Japanese buyers. Letters are useful for followup communication, but personal relationships,
the key to business relationships in Japan, can
be established only through extended periods
of face-to-face contact. For this reason, When a
buyer and the seller have not established a personal relationship, a Japanese buyer will often
express skepticism about the seller's propositions, fearing that claims for the products are
inflated. The buyer may become unfriendly
and aggressively direct. The expression of
skepticism also serves as a conscious tactic for
gathering useful product knowledge and market information to guide the final decision.
Therefore, the seller should prepare answers
for all questions about market prospects, competition, product manufacture, and performance. At the same time, however, the seller
should also recognize the importance of personal relationships. These personal relationships work within the vertical status
differences because of two aspects of Japanese
culture, amae and wa.

Amae (Indulgent Dependency)

Indulgent dependency is called amae, and it
is woven into every aspect of Japanese society.
Amae is the feeling of nurturing concern for,
and dependence upon, another and with Amae
one looks to others for support and affection.

THE INFLUENCE OF JAPANESE CULTURE ON BUSINESS RELATIONSHIPS AND NEGOTIATIONS

But it is not simply one person's dependence
on another; there is reciprocity in the relationship. While the lower-ranking person depends
on the higher-ranking person, the higher-ranking person can expect the lower-ranking person to remain loyal. Because of the existence of
indulgent dependency, lower-status sellers can
trust buyers to not take advantage of them, and
the Japanese hierarchical relationship is appreciated by both sides. In Japan, the sellers
expect buyers to take care of them and to consider their needs before making demands.

Wa (Maintaining Harmony)

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Maintaining harmony, or wa, is also a central

point of Japanese culture. Wa refers to the
quality of human relationships and involves
cooperation, trust, sharing, and warmth, based
on a caring attitude toward others.2
Japanese believe that harmony results in efficient teamwork and high morale. The success
of any organization depends on harmony,
beginning with the smallest units through all
levels of the organization. Organizations also
strive to maintain harmony in outside business
relationships, such as those with business partners, clients, and suppliers.

If Americans try to negotiate using

A m e r i c a n negotiation p r a c t i c e s ,
Japanese will feel rushed and pressured.
During negotiations, this attempt to maintain
harmony can be viewed by Westerners as an
inscrutable nature. Japanese do not want to
reveal their true feelings because doing so
might hurt the harmony between the executive
levels of the buyer and seller organizations.
High-level buyer negotiators present the official position (which may not be their true feelings), stated so that it is not helpful
information for the seller. True feelings can be
acquired through the informal channels of
communication with the lowest-level negotiators of the two parties. Japanese also use
ambiguous responses and nonverbal communication instead of direct expression in order to

avoid damaging the harmony. Japanese negotiators may appear to say "yes" because saying
"no" would disturb the harmony between the
organizations. A recent example is the Bush
trade trip to Japan. American executives
thought they had reached an agreement, but
after they arrived home they learned that the
agreement was only a "target."
In addition to amae and wa, Japanese culture provides two roles in the negotiation process besides buyer and seller. These are the
Shokaisha (introducer) and Chukaisha (mediator).

ShokaiSha (Introducer) and

Chukai Sha (Mediator)
In Japan, business relationships are initially
established through the proper connections
and associated introductions. If the seller does
not have a connection with a potential buyer,
the seller can ask a third party, such as a
banker or another company's executive, to
arrange the initial meeting. This third party is
called the Shokaisha, or introducer. When the
Shokaisha has a strong relationship with the
buyer, the influence of the Shokaisha is significant because the buyer does not want to damage the harmony and relationship with the
Shokaisha by rejecting the proposal. The existence of the Shokaisha makes things move
faster.
The Shokaisha usually attends the first one
or two meetings, as well as the last meeting for
the signing ceremony. There are two types of
Shokaisha: One introduces the low, operational level personnel of the seller to the corresponding personnel of the buyer; the other
introduces the top executives of the seller to
the corresponding executives of the buyer. The
former type is not involved in the ceremonial
aspect of the negotiations, and the latter type
are not involved in the lower channel of communication. The use of one or both types of
Shokai sha is usually dependent on the size of
the deal being negotiated.
Before the initial meeting, the Shokaisha is
also a valuable source of information, for both

69

THE JOURNAL OF SERVICES MARKETING

parties, b e y o n d what is available as p u b l i c

information. Americans looking for Shokaisha
should first develop a relationship with one of
the large Japanese banks. Then their banker
can serve as the Shokaisha, or Americans, with
Japanese partners, can allow their partners to
begin the negotiation process.

Much of the negotiation process can

be attributed to the Japanese status
differences between buyer and seller.

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During the negotiation process, if things go

w r o n g , the seller m a y ask a Chukaisha,
or
mediator, to help correct the problem. Usually,
t h e Shokaisha
a l s o p l a y s t h e r o l e of
Chukaisha, unless he feels it necessary to call
in another person for this purpose.
A Chukaisha is u s u a l l y asked to b e c o m e
involved in the negotiations to settle disputes
w h e n the two sides reach an i m p a s s e . T h e
Chukaisha will attempt to resolve the dispute
w i t h b e n e f i t s for b o t h s i d e s . T h e u s e of a
Chukaisha is a last resort, and ordinarily is
necessary only once. If renegotiation of the
contract is necessary later due to a change in
circumstances, the Shokaisha or Chukaisha
may be used again to mediate a new understanding.
The Shokaisha and Chukaisha play important roles in the creation of harmony. Once
introductions are made by the Shokaisha, the
negotiation process begins. This process has
four stages: building trust, exchanging taskrelated information, persuasion, and concessions and agreement.

Four Stages of Japanese

Negotiation
1. Building Trust
The negotiation process usually begins with
meetings that are social in nature. Japanese
attempt to have trust building communication
before bringing up b u s i n e s s , w h e r e a s
Americans expect a quicker opening that leads
directly into the b u s i n e s s transaction.
A m e r i c a n negotiators s h o u l d n o t d e n y t h e

70

opportunity for communication when Japanese

start asking about families or the latest vacat i o n . A v o i d i n g t h i s k i n d of talk w i t h t h e
Japanese can substantially reduce the chances
of building a strong trust, and the Japanese will
begin to see them as the stereotypical moneygrubbing, highly profit-conscious "ugly
Americans" w h o are too self centered to see
the needs of the negotiators sitting across the
table.
In Japan, if this part of the negotiation process is not m a n a g e d properly, the Japanese
simply will not get down to business, because
they will feel that their relationship is not yet
anchored and may drift. When two Japanese
c o m p a n i e s are creating a n e w r e l a t i o n s h i p ,
t h e y are a c c e p t i n g each other i n s i d e t h e i r
respective groups. W h e n they are no longer
outside, they are ready to go to the next step.
From the American point of view, the persuasion stage is the heart of the business process. It is different in Japan. The Japanese, in
contrast, spend a considerable amount of time
on trust-building activities. They view the time
and money spent during this initial stage as an
important investment.
Top executives may be included in this stage
as ceremonial figures, although they are ordinarily brought into negotiations only to sign
the final agreement after all issues have been
settled by lower-level managers. A few beginning meetings are held between executives in a
relaxed and comfortable atmosphere such as at
restaurants and hotels. These meetings are ceremonial; business cards are exchanged, and
the seller gives the buyer a gift.
Gathering of biographical information is
critical at this stage. Such information can be
found in Who's Who of Japanese
Executives,
p u b l i s h e d in Japan. More detailed personal
information beyond the public record can be
provided by the Shokaisa.
During the meeting, what is said is not as
important as how it is said. The Japanese executives are making judgments about the others'
integrity, reliability, commitment, and humili-

THE INFLUENCE OF JAPANESE CULTURE ON BUSINESS RELATIONSHIPS AND NEGOTIATIONS

ty. The conversation is indirect and vague, and
task related matters are not discussed but are
left to lower level managers.

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Japanese buyers expect and receive

deferential treatment from the sellers.
With the lower managers, the trust-building
stage takes longer, but what the buyers are
looking for is the same integrity, sincerity, a
cooperative attitude, and harmony. Typically,
the initial appointment is set up by the seller
for a late afternoon meeting at the buyer's
office. A Shokaisha may also attend. The topic
of the meeting and the format are the same as
for the executives. At the end of the meeting
the seller will invite the buyer to dinner. After
the meal, the seller will suggest a few drinks at
a bar. These sessions will ordinarily go on past
11:00 P.M., and then future meetings are
scheduled. Throughout this long meeting, only
vague and indirect references to a future relationship may be made.
This lower-level relationship, however, is
vital to a successful negotiation. Japanese buyers avoid saying "no." Americans expecting
direct answers may be confused by this form of
communication. The buyer seems to be saying
yes, but action does not occur. Lower level
communications are established to learn the
buyer's true feelings.

2. Task-Related Information Exchange

Only after the buyers feel that they have
established a trustworthy relationship will
they bring up business. The seller should wait
until the buyer sends a signal, which will
include a statement such as, "Can you tell me
more about your company?"
In America a task-related exchange of information is a two way communication process,
but in Japan it is generally unidirectional.
First, sellers describe in detail all of the background, and only toward the end do they make
the actual request or proposal. The Japanese
way takes much longer than the American
way, but this is the kind of behavior that the
higher-status buyers expect from lower status

sellers. Thus the information flows mainly

from seller to buyer.
In the American style of information
exchange, the seller starts by saying what is
wanted and needed, and the reasons behind
the request are explained only if necessary.
That is why the task-related information
exchange goes so quickly.
Getting feedback regarding the proposal is a
complicated task in Japan. Because the
Japanese try to avoid saying "no" and possibly
disturbing the harmony, in order to get the true
feelings (honne) of the buyer, the seller must
have established an informal lower-level channel of communication. Using this under-thetable channel may appear sneaky and even
unethical to the American, but it makes perfect
sense from the Japanese perspective.
Management of this informal channel is critical for efficient and successful negotiations.
The lowest-level seller is assigned the task of
establishing a trust relationship with an operational-level manager on the buyer's side. This
relationship is so important that much time is
spent after hours nurturing it throughout the
negotiation process. Once this informal channel of communication has been opened, it is
used for assessing how each side really feels
about the proposal and for aggressive, persuasive tactics by the seller after hours over
drinks. This information is transmitted to all
members of the negotiation teams and is used
for persuasive tactics. However, even though
everyone knows about it, this channel of communication, any reference to it has to be avoided during negotiations.

3. Persuasion
The task-related exchange of information
and persuasion stages are blended together so
that there is no clear separation of the two.
After task-related information is exchanged,
there is little left to argue about during the persuasion stage.
Americans perceive the persuasion stage as
the heart of the negotiation process, so they
have a wide range of persuasive tactics, includ-

71

THE JOURNAL OF SERVICES MARKETING

Table 1
Persuasive Tactics Appropriate for
Japanese Negotiation
At the Negotiation Table
1. Questions
2. Selfdisclosures
3. Positive influence tactics
4. Silence
5. Change of subject
6. Recesses and delays
7. Concessions and commitments
Informal Channels and Buyers Only
1. Aggressive influence tactics

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(Source: Graham and Sano)

ing threats. Japanese use fewer persuasive tactics (see Table 1); sellers are limited to the use
of questions, self-disclosures, and other positive influence behaviors. 1 At the negotiation
table, aggressive influence tactics can be used
only by those sellers who are in the rare higher-power position. Otherwise they may be used
only through the low-level informal communication channel. Even there, only indirect and
subtle threats and commands are used; even a
veiled threat can cause an immediate end to
the negotiations. Threats and the like do not fit
the Japanese culture of wa, since the Japanese
are looking to establish a trustworthy, longterm mutually beneficial business relationship.

negotiation involves concessions, building

toward agreement. For this stage, Americans
tend to use a sequential approach of settling
one issue at a time, so that progress is easily
measured (some negotiation tacticians recommend taking advantage of this strategy by
changing topics frequently). In Japan, however,
all issues are examined simultaneously in a
more holistic approach. Concessions are made
only near the end of the talks and usually all at
once. Japanese do not make any concessions
until all issues and interests have been
exposed and fully discussed. This is so
because to Japanese, negotiations are a time to
develop a business relationship with the goal
of long-term m u t u a l benefit, while to
Americans, negotiation is a problem-solving
activity designed to get the best deal for both
sides. Therefore, with Japanese, once the relationship is established, the other details tend
to be settled quickly.

The success of any organization

d e p e n d s on h a r m o n y , beginning
with the smallest units through all
levels of the organization.
Usually concessions are not decided upon at
the negotiation table because of the nature of
consensus decision making of the Japanese.
Negotiators check with the home office before
making any concessions to be sure that everyone agrees on the concessions. This delay can
frustrate Americans and work against successful negotiations.

In Japan, any bargaining on the cost of an

item is generally defensive rather than aggressive. Americans tend to start out focusing on
high prices and then aggressively defend the
cost. Japanese, on the other hand, tend not to
ask for much more than they expect to get. If
the initial trust-building was carried out successfully, cost may not be bargained on at all.
A seller asking for a high price may destroy the
trust built.

Once the negotiation process is complete

and an agreement has been reached, differences still exist in the way Americans and
Japanese manage the relationship. These differences begin with the contract and continue
through the follow-up associated with executing the contract.

4. Concessions and Agreement

Contracts

Negotiation requires both sides to give up

something to get even more. The final stage of

After the verbal agreements have been

reached, Japanese executives' main concern is

72

After Negotiation

THE INFLUENCE OF JAPANESE CULTURE ON BUSINESS RELATIONSHIPS AND NEGOTIATIONS

the business relationship. Therefore, each side
considers the interests of, and the benefits for,
the other. In Japan, a written contract may not
be used, and if there is a contract, it is usually
only two or three pages long, and purposely
loosely w r i t t e n . The f u n d a m e n t a l Japanese
approach to contracts is to emphasize the relationship being created. The contract is only a
tangible acknowledgment of the existence of
such a relationship, not a precise instrument
that establishes and defines the relationship.
Even today, written agreements are not used in
many domestic Japanese business relationships.

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T h e J a p a n e s e p o i n t of v i e w h a s b e e n
explained as follows:
T h e J a p a n e s e feel t h a t a g r e e m e n t s
require seasoning and maturity; as people
w o r k together, u n d e r s t a n d i n g s b e c o m e
clearer and increasingly advantageous to
b o t h p a r t n e r s . As t h e r e l a t i o n s h i p a n d
conditions change, the assumption is that
p e r f o r m a n c e e x p e c t a t i o n s o u g h t to
change. Flexibility, adjustment, and pragmatism, then, dominate the execution of
long-term contracts. 4

Signing Ceremonies
When a major agreement is reached, a ceremonial meeting is held for the signing of the
contract. A typical ceremony starts with
speeches from top executives on both sides,
expressing satisfaction with the reaching of an
agreement and hope for a long-term business
relationship. Both sides thank negotiators for
their hard work. Following the actual signing,
gifts are exchanged. The ceremony is concluded with a toast and then a reception party is
held, usually at a hotel, attended by top executives a n d their staffs, as w e l l as s u p p l i e r s ,
advertising agency personnel, and bankers.

Follow-Up Communication
A formal letter is sent from the seller's top
executive to the buyer's top executive expressing his happiness on the successful negotiations and his confidence that the new
relationship will be beneficial for both sides
and long lasting. At the same time, more per-

sonal notes are sent to each negotiation participant. While the Japanese buyers keep in touch
with the sellers regarding the business relationship, it is equally, or even more important
for them to maintain a warm personal relationship through frequent face-to-face meetings
and personal letters. T h e telephone and the
Telex can be used only for the formal business
relationship. Because the Japanese cherish the
long-term personal relationship, most executives stay with the same company permanently
in order to maintain such relationships outside
the company as well as inside. It was this personal relationship, more than anything, that
smoothed the business transaction.

Modification to Agreements
Circumstances are likely to change during
the course of a business relationship. Japanese
resolve most of the conflicts that result from
change through conferral. They assume that
rights and duties under the contract are conditional or tentative rather than absolute. Often
Japanese contracts include such statements as,
"All items not found in this contract will be
deliberated and d e c i d e d u p o n in a spirit of
honesty and trust." Instead of trying to write
down all possible contingencies and condit i o n s for e n f o r c e m e n t in inflexible t e r m s ,
Japanese prefer to h a n d l e problems as they
occur.

American businesses entering Japan

should invest in a local office.
Even a r b i t r a t i o n is v i e w e d as a n e g a t i v e
action w h i c h damages the business relationship. Therefore, confrontation a n d legal
approaches are rarely used. Those approaches
would destroy the harmony and trust required
for continued business dealing, and it is almost
i m p o s s i b l e to r e g a i n o n c e it is l o s t . T h e
Japanese want to maintain the relationship for
mutual benefit rather than seek a one-time gain.

Service After the Agreement

Because of the nature of the agreement and
the nature of the vertical relationship between

73

THE JOURNAL OF SERVICES MARKETING

buyer a n d seller, the b u y e r expects service

beyond the specified level. Americans tend to
consider the contract as specifying the exact
amount of service required, whereas Japanese
consider it as specifying the minimum amount
of service. Because of keiretsu, Americans that
violate Japanese expectations can be excluded
from the market. American c o m p a n i e s that
exceed Japanese expectations, however, such
as DEC, can capture significant market share. 6

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Americans in the System

Two paths of opportunity exist for American
businesses that want to operate in Japan. The
first is to break into the market with smaller
businesses that are not part of the keiretsu of
big companies and their banks. The other path
is to develop partnerships with large companies and use their expertise and negotiating
skills to enter their keiretsu.
Which path is chosen may depend on the
nature of the product or service and the type of
c u s t o m e r . CATS (a software c o m p a n y ) , for
example, had to choose the path of keiretsu
because its market was the large companies
and banks. CATS' success in Japan has been
due largely to its ability to develop a partner-

ship with Mitsubishi, using strategies such as

placing engineers on joint development teams
at the customers' location. 5
Irrespective of t h e p a t h that a c o m p a n y
chooses, however, sound basic marketing principles must still be used. American companies
that want to do business in Japan must still
assess Japanese customers' wants and needs
and adapt to the Japanese style of negotiation.
T h e p o i n t is not t h a t t h e J a p a n e s e h a v e a
monopoly on human relations, but rather that
Americans have to a d a p t the strengths they
already have to the Japanese process.

Conclusion
U n d e r s t a n d i n g t h e J a p a n e s e c u l t u r e is
important for Americans preparing to negotiate
with Japanese. At this point in history, the
Japanese have a d e c i d e d advantage because
they have made the effort to learn about the
American culture. But the mere fact that they
speak English and understand American ways
does not mean that they will do business "the
American way." Americans must learn to operate within the Japanese culture to succeed in
negotiating with the Japanese.

End Notes
1. Graham, John L., and Yoshihara Sano, Smart Bargaining. New York: Harper and Row, 1989.
2. Hall, Edward T., and Mildred Reed Hall, Hidden Differences. New York: Anchor Press, 1987.
3. Manufactured Imports Promotion Organization, Penetrating
Manufactured Imports Promotion Organization, 1980.
4. Schmidt, Klaus D., Doing Business
International, 1978.

the Japanese

Market.

Tokyo:

In Japan. Palo Alto, CA: Stanford Research Institute

5. Shale, Tony, "Tug of War for Tokyo's Glittering Prizes," Economy, August 1989, pp. 9194.
6. Wilder, Clinton, "Finding a Place in the Rising Sun," ComputerWorld,
116.

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May 20, 1991, pp. 115-

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