Entrepreneurs succeed by making things smaller, cheaper, faster and sometimes simply by being able to define what’s hot, even if it is an old idea (paisley ties were “in” in the 60’s and are back in niche fashion). Alternatively, you can succeed by spotting what will be a trend before it takes off and being near the head of the line to meet demand. To do this entrepreneurs keep an eyeball trained on the market so they can spot emerging trends firsthand.

So, which trends in Japan will turn into hot opportunities for those outside the country? I gave this some thought while sliding down Japan’s best powder ski slopes as Australia was sweltering over summer. Here are the first two of four “hot” sectors at the top of my list. The second two will follow tomorrow.

The Environment, Health or Tourism?

As 2009 came to a close, the Japanese government announced a 10-year plan to achieve three percent annual GDP growth based on creating 4.76 million jobs across the environment, health and tourism sectors. So what’s the value of these sectors to non-Japanese businesses?

The environmental sector in Japan generally means large, government-funded projects. This will inevitably result in great opportunities for domestic companies who will largely close out foreign firms.

In the Health sector, equipment R&D and supply opportunities are numerous. Further, the needs of a rapidly greying society open up all sorts of possibilities for new services. While this looks rosy, the reality of operating a company that provides medical or related care will for most practical purposes be unavailable for the next decade or so to non-Japanese firms.

So that leaves inbound tourism — a sector in which the cosiness of relationships and tightness of regulatory control are greatly reducing, making it an interesting playing field for those with an entrepreneurial eye. Further, Japan is becoming more interesting to Asians, particularly those who see their own or neighbouring countries as too hot, too crowded, too dangerous or just too dull. Timing is good, too, for as Asia is starting to recover financially and the Yen remains weak, this will accelerate inbound travel. These people are not your Europe-on-$30-a-day backpackers. They expect to spend money and have a good time. What better customers could you want?

Opportunity #1

Japanese companies are great at servicing tourists in Japan, but they lack the skills to source customers abroad. While this part of the value chain was the province of travel agencies, these agencies are being disenfranchised by the internet. The time is ripe to package groups in your country. Can you assemble groups of birdwatchers? Surfers? How about train spotters? Then collaborate with Japanese tour companies for service delivery in Japan.

Water in your backyard

At the end of 2009 the Japan Economic Times estimated there were 38 major Japanese companies involved in the water purification and supply industry. Japanese companies have a great deal of expertise in filtration technologies, activated materials and even nano fibers, but they are unable to compete on price for major projects.

This was recently driven home when a French company beat out an embarrassed major Japanese corporation to win a Japanese sewerage plant refurbishment contract. To rectify this, the Ministry of Economy, Trade and Industry set up a study group to accelerate the competitiveness of Japanese firms in the water sector. In essence, the Japanese have decided at a national level to succeed in this area so the supply side is about to get interesting.

Now jump to the demand side. Droughts, floods, heat waves and extreme dust storms such as the one that shut down the east coast of Japan last September are increasing in frequency. Just as fuel cell systems are now household sized and priced, demand for small-scale water desalination and purification mini systems will not be far away. At the other end of the scale, desalination and purification systems should find ready buyers among the drier first-world countries, particularly those with cities close to the sea or to bodies of otherwise unpotable water. Australia comes to mind.

Opportunity #2

If you are in the water supply, water equipment or equipment distribution business, now is a great time to start making relationships with Japanese companies in this space.

The second part of this post will be published tomorrow.

Jon Sparks is an Aussie entrepreneur and long-term resident of Japan, where he has founded, grown and sold two businesses. He also helps Australian entrepreneurial businesses build relationships and enter the Japanese market, ensuring that they don’t make the same mistakes he made. http://sawayaka.biz