Labor cost and cost of living

You would like to open office in Tokyo if you decided to do business in Japan. Tokyo, the center of Japanese business activities, is known as the one of the most expensive living cost cities in the world. According to American consulting company, Mercer1, it is ranked as 2nd in 2013 survey and UBS, Swiss bank, report2 shows it is 2nd in 2012. ECA3 and EIU4 are ranked Tokyo within top-ten in their most recent reports. It is indeed that average wage in Tokyo is high among other Japanese cites but it does not mean that you have to pay most to hire workers there, compared with other foreign cities.

location of Toyohashi and Kyushu

You may have other choice to open your Japanese branch office in country side. For example, Volkswagen's Japanese headquarter is located in Toyohashi city, more than 100 km away from Nagoya, the 3rd largest city in Japan. They chose the site because of near by harbor facilities and highways as a distribution center of their product, automobile. Workers can afford to spend relatively high level of life if the company pays the same as other locations, like Tokyo and Osaka. If you build a logistic center or stock yard, there are many good location other than Tokyo. Since Tokyo is also known with heavy traffic jam, it is wise to set the facility suburban area.
The other example is mail-order dietary supplement business. Many and major Japanese companies of the kind are based in Kyushu Island, the 3rd largest island of Japan and most southwesterly of its 4 main islands and about 900 km away from Tokyo. They advertise via TV network, magazines and internet, get order with call and email and deliver products directly to customers. They can set head quarter anywhere in theory.

Then, why dose people choose Tokyo? It is because everything is there. Your potential customers, highly competitive business persons you might want to hire, information you would be inspired of new business, government offices and so on. Volkswagen Japan and Japanet, one of the largest appliance mail-order company, have Tokyo sales office, too.

Labor cost is not necessary to link with cost of living. There may be other factors and expense. In this section, we introduce topics related with labor cost and cost of living in Japan.


1. Mercer's Cost of Living Cities Rankings
2. UBS CIO WM Research's Prices and earnings report
3. ECA International Cost of Living survey Sepetember 2013
4. Worldwide cost of living index 2013, The Economist Intelligence Unit

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