• The Importance of Wa When Doing Business in Japan
  • May 20, 2011
  • Law Firm: Parr Brown Gee Loveless A Professional Corporation - Salt Lake City Office
  • "The Master said, in hearing litigation, I am no different from any other man. But if you insist on a difference, it is, perhaps, that I try to get parties not to resort to litigation in the first place." 
    The Analects of Confucius, Book XII, Section 13.

    In that statement, and others in the Analects, Confucius demonstrates a distrust of law and litigation as a means of regulating society and promoting goodness that is still evident in many Asian cultures, including Japan. Subscribers to the tenants of Confucianism are generally suspicious of codified laws, contracts and formal judicial proceedings, which are seen as too inflexible to handle myriad circumstances and experiences that may arise in personal and business relationships. Confucius chose to trust people, not laws, to promote a well ordered and smoothly running society. Under such a view, litigation serves only to make society more confrontational, less harmonious and less orderly.

    Volumes have been written on the supposed nonlitigious nature of the Japanese, usually citing statistics showing there are hundreds-of-times fewer attorneys and lawsuits per capita in Japan as compared with the United States. These statistics are generally misleading because they fail to take into account the structure of the Japanese court system itself, which presents significant barriers for litigants.

    Blanket statements that the Japanese have a cultural aversion to litigation, then, must be qualified. That said, there is a lesser sense of majesty of the law in Japan than there is in the United States. In Japan, the law and the minutiae of a written contract are not the guiding principles of relationships but rather something to fall back on as a last resort.

    One must also be careful in attempting to define a "Japanese" culture and a "Japanese" approach to business relations. Japan is not a homogeneous society. Significant economic, philosophical, regional and even linguistic disparities remain. That said, an examination of the reactions of most Japanese in business settings can yield useful generalizations and suggestions.

    This article focuses on two aspects of Japanese culture that noticeably affect the Japanese approach to business relationships. First, the Japanese insistence on preserving harmony as evidenced by consensus decision-making, avoidance of confrontation and attention to formalities of rank and seniority. Second, the importance of mutual trust to the business relationship as evidenced by the emphasis on nonbusiness discussions.

    PRESERVATION OF 'WA'

    In the United States, harmony in a business relationship is generally seen as a means to an end -- that end being a profitable venture. For the Japanese, however, harmony -- or wa -- in business is an end in itself. The primary goal of contract negotiations for Japanese is often to preserve and enhance the wa in the relationship rather than extract the most favorable terms from the other party.

    Wa is translated variously as "harmony," "peace," "reconciliation" and "unity," and is generally seen by Japanese as the most essential attribute of a successful personal or business relationship. What this means for contract negotiations, for example, is that the Japanese are usually asking themselves not: "Can we get the other side to agree to this?" but rather: "What will the other side think of us if we make this proposal?" Similarly, proposals received by a Japanese company are often evaluated more on what they show of the prospective partner's attitude and sincerity than how they will affect the bottom line.

    The principle of wa also governs the Japanese view of conflict. Confrontation destroys wa and is to be avoided at all costs, while consensus is to be created and preserved. This is seen in the contrasting Japanese and U.S. approaches to a business meeting.

    In the United States, ideas are vetted, alternatives debated, criticisms raised, disagreement accepted and, finally, a vote taken, with a majority often sufficient to determine a course of action. In Japan, it is a given that before the meeting begins, alternatives will have been considered, objections raised and the final decision made. These things are done quietly, through the exchange of memos and e-mails and hallway conversations. At the meeting, everyone expresses agreement with, and support for, the decision already made, and the person in charge moves forward with implementation. The purpose of the Japanese business meeting is not to make a decision but to confirm the consensus of support for a decision already made.

    This desire to avoid conflict and for consensus decision-making is frequently frustrating to those from the United States attempting to conclude an agreement with the Japanese. The U.S. party will likely wish to schedule a meeting with a Japanese company for the purpose of negotiating the details of a contract. Conversely, the Japanese party will see no need to meet and, in fact, will resist suggestions to meet until the general terms of the agreement have been decided upon through informal communications. The Japanese will view the meeting as a time to strengthen both personal and business relationships and as a ceremony where the parties demonstrate their mutual commitment to each other and to the success of the venture by formally signing the agreement.

    Additionally, the time required to reach an agreement is often significantly lengthened by the Japanese need for consensus. Any proposal, including those of a seemingly insignificant nature, must be communicated and agreed to by all those within the Japanese company with an interest in, responsibility for or involvement with the proposed business venture. The contact person in the Japanese company will need to present any proposal to all those above and below him in the relevant corporate hierarchy and obtain their unanimous consent before giving a reply to the prospective business partner. U.S companies often incorrectly take this as sign of Japanese evasiveness, foot-dragging and insincerity.

    If the U.S. side does attempt to raise substantive issues at a business meeting with the Japanese, they will often be frustrated and confused by the Japanese side's aversion to confrontation and strong desire to not cause the U.S. side to "lose face." Losing face is a very powerful concept in Japanese society and is directly related to the desire to maintain wa.

    One causes another to lose face not only through direct criticism but also by directly rejecting their proposal or suggestion. When put on the spot, the Japanese will frequently give what seems to be an evasive or insincere answer. Translated into English, the reply may typically go something like this: "That is a very interesting proposal, but ... [silence]." To a Japanese listener, the meaning is clear: "There is no way in the world that we can agree to that, but, I will spare you the embarrassment of saying, 'No,' to your face. Please do not ask me that again."

    Efforts to enhance harmony and unity in a Japanese business relationship require that people act in accordance with and maintain each other's proper standing and status. This process begins at the opening moments of the relationship: the exchange of the business card. Japan continues, as it has for over 17 centuries, to be a very hierarchical and status-based society. In many companies, directors' titles are stated as "Number 2 person," "Number 3 person," and so on.

    Maintaining one's proper place in a relationship is important to the preservation of wa. The first thing that one does in Japan upon meeting someone in a business setting is to exchange business cards, followed by a bow. Business cards are exchanged in large part so that each individual will immediately know the status of the other person. Once that status is ascertained, the junior person will bow, not with his face to the ground but with his head up and looking at the other so that he will be certain to bow deeper and longer. Seating around a conference table is also according to status, with the senior person in the middle of the table facing the door.

    IMPORTANCE OF MUTUAL TRUST

    From the Japanese perspective, mutual trust is imperative to the success of a business venture. Japanese typically are much more careful than Westerners in building trust that transcends contractual obligations. They view conduct as being regulated primarily by the overall relationship, not by the wording of a contract. Consequently, the Japanese generally prefer loosely worded, open-ended contracts that allow for maximum flexibility. Comprehensive, detailed contracts proposed by a Western party will usually be taken as an indication of bad faith and distrust from the outset.

    When Japanese negotiate a contract, they are negotiating an entire social and moral relationship that transcends the terms of the contract. Consequently, they have not traditionally viewed contract negotiation in the same light as Americans. The American goal for contract negotiation is to usually ensure the best possible terms for themselves, while the Japanese goal is to establish the trustworthiness of the partner.

    Americans often engage in a long, deliberate process of contract negotiation so every conceivable potential conflict can be explored. The Japanese prefer flexibility in responding to unfolding problems that cannot be foreseen. Japanese contractual relations are often based on the personal relationship of those involved and left intentionally ambiguous to allow for adaptations to changing conditions. Eventualities are best dealt with by a mutual commitment to discussion and conferral.

    The importance of strengthening the relationship and building mutual trust is readily evident in the Japanese business meeting. A meeting between two Japanese companies, ostensibly to conclude or modify an agreement or resolve some unexpected issue, may last for the better part of a day with neither side directly raising the issue at hand. Rather, the parties will discuss the weather, a recent sightseeing trip to the Japanese Alps and family health and inquire at length as to how each other's business was going.

    At some point in the discussions, usually after a significant amount of time had been spent on what Americans might consider the nonessential niceties, one party will voice a proposed resolution to the issue or present a draft agreement. The other party will graciously thank the first party for its efforts, kindness and consideration and agree to the proposal, and the discussion then returns to nonbusiness matters.

    For Westerners accustomed to "getting down to brass tacks," such an elaborate social minuet can be frustrating and may seem to be a pointless waste of time. U.S. lawyers and business people generally work quickly to dispense with formalities and get down to the business at hand. They are there to negotiate a contract, while the Japanese are there to negotiate a relationship. More often than not, it is the relationship, and not the sanctity of the contract, that is valued by the Japanese.

    American companies would be well advised to follow the Japanese lead in focusing on maintaining healthy business relationships to avoid disputes. Litigation with a Japanese company is significantly more expensive and difficult than with another U.S. company, whether the lawsuit is in the United States or Japan. Only companies with significant legal budgets would willingly initiate a lawsuit in Japan.

    Even in the United States, however, litigation with a Japanese company presents its own unique set of challenges. In addition to language issues, the Japanese government allows only very limited discovery from its citizens. For example, a Japanese citizen cannot be compelled to give deposition testimony. Even if they do so voluntarily, the deposition must be conducted under the direction of a U.S. consular officer in one of only four rooms available for this purpose in the entire country. Understandably, these rooms are generally scheduled many months in advance.

    FINAL THOUGHTS

    So what does this mean for those doing business with Japanese?

    First, one need not be Japanese to have a successful business relationship with the Japanese. They are aware of the unique aspects of their culture. When a Japanese person meets a Westerner for the first time, he will likely extend a hand to shake rather than expect the non-Japanese person to bow. Further, the Japanese understand that, generally speaking, Westerners are more direct, less circumspect and more tolerant of confrontation.

    That being said, however, a basic understanding and appreciation of some of the cultural differences can prove invaluable in initiating, enhancing and continuing the business relationship and in minimizing misunderstandings. The Japanese will notice and appreciate efforts to understand them.

    Second, be patient. Be willing to spend extra time in nonbusiness discussions, getting to know each other and more about each other's company. Don't rush to get down to business. Make an effort to strengthen the relationship for the sake of the relationship, not simply with an eye toward securing more favorable terms of an agreement. Someone who invests extra effort in strengthening the relationship with a Japanese business partner will likely be able to secure more advantageous terms from the Japanese partner who feels a greater level of trust and confidence, and can reasonably expect greater understanding and flexibility from that partner if unexpected business circumstances arise.

    When discussions do become more substantive, pay close attention to nonverbal communications and make a concerted effort to avoid putting the Japanese partner in what is to them the awkward position of being presented with a request to which they cannot agree. If circumstances permit, offer proposals in such a way that the Japanese side is able to be graciously noncommittal as they take the proposal back to their colleagues.

    Even better would be to raise issues on which there may be disagreement through informal means, such as e-mail, and allow time for the proposal to percolate up and down the Japanese company's organizational chart while the crucial consensus is being created. Do not take the Japanese party's delay in responding to a proposal as a sign of bad faith or foot-dragging.

    In summary:

    "Do not be impatient. Do not see only petty gains. If you are impatient, you will not reach your goal. If you see only petty gains, the great tasks will not be accomplished." (The Analects, Book XII, Section 17.)

     

    Craig Parry, a shareholder with Parr Waddoups Brown Gee & Loveless in Salt Lake City, Utah, practices commercial litigation with an emphasis on intellectual property and agreements to license or sell IP interests. He represents numerous Japanese companies doing business in the United States and U.S. companies doing business in Japan. He can be reached at (801) 532-7840 or http://www.parrbrown.com/attorneys/view/d-craig-parry.