Thailand is well-known for being a popular destination for Japanese companies and individual investors to expand their market overseas. By 2022, Thailand is ranked 3rd place in the total number of Japanese business locations, after such economic superpowers; China and the United States. Regardless to Thailand’s low GDP in comparison with other countries on the ranking (approximately 1/36 of China’s, 1/56 of U.S’s, and 1/7 of India’s GDP) and low population, Thailand is still undebatably one of Japan’s admired locations for business expansion, and is continuously growing its recognition.
What makes Thailand so attractive for Japan?
Firstly, Japan and Thailand are geographically close; approximately 6.5 hours by direct flight. This encourages ease transportation of employees between offices in both countries and the transportation of goods if required. Furthermore, the time difference between the 2 countries is only 2 hours, making it easier to schedule online meetings between employees in both countries, unlike countries in Europe or the United States where the time zone could differ by over 10 hours, making life harder. Not only geographic differences, but language barriers as well – although English is not considered as the first language in both Japan and Thailand, they are still spoken commonly in businesses, allowing smooth communication between the 2 countries.
Another reason why Thailand is chosen often by Japanese firms is due to the convenient transportation on ground inside Thailand. Businesses are highly concentrated in Bangkok, the capital of Thailand. This reduces inconvenience of transportation within the country for business matters, unlike countries such as the United States, where business locations are spread to a range of cities such as New York, Texas, or California, which could take hours to move from one city to another. Therefore, Thailand provides an extremely convenient environment to access business locations within the country, as most are located in Bangkok, and Thailand itself is a relatively small country.
Also, Thailand as a country shows extremely high demand for Japanese products and services for long. Common examples are Japanese restaurants, toy shops, and beauty products, which raise stable revenues operating in Thailand.
Thailand as a Business Hub – Access to ASEAN
Not only the domestic market, however Thailand is also recognized as a business hub for foreign businesses including Japanese firms, which could be operated with relatively low costs due to low costs for salary, rent, and more. However, Thailand possesses extremely strong international relationships and access to ASEAN countries, such as Singapore and Indonesia, which also is a growing business hub where the finance industry and business world is rapidly evolving.
Despite the ease of air and on-ground transportation to overseas from Thailand through the two Asian hub airports in Bangkok, Thailand import and export taxes also remain relatively low to moderate in comparison with other ASEAN countries. Cheaper than Vietnam or Indonesia but slightly pricey than Singapore, Thailand’s customs duty and VAT (Value-Added Tax) for exports are generally 0%, with customs duty for imports ranging 0-80% depending on the product and VAT’s generally fixed with 7%. This empowers Thailand’s access to foreign markets especially for ASEAN, far more than China, the U.S or India, which usually are the alternative options for Thailand from the perspective of a Japanese.
Additionally, a business base in Thailand could also be used for advanced and modern manufacturing, such as a halfway or collection point from automotive parts around Asia, for example AI systems from China, an engine from Korea, a car body from Vietnam, and the brand from Singapore.
Thailand’s Supportive Environment for Foreign Investors
In order to influence the Thai economy and attract foreign investments, the BOI (Board of Investment), Thailand’s government-run association, is introducing a variety of business privileges for foreign investors. These include tax-incentives and 100% business ownership depending on the business structure in Thailand, benefiting foreign businesses and allowing beneficial start-ups.
In particular, the business and economics relationship between Thailand and Japan remains close, with the BOI co-hosting a Thailand – Japan Investment Forum on the 28th of November 2025, with Japan’s top companies such as the JETRO and SMBC. The BOI emphasized Japan’s crucial role as Thailand’s “long-standing investor”, as well as 450 participants from Japanese companies showing interest in the Forum.
Popular sectors for Japanese firms #1 – Automotive Industry
One popular sector of Japanese firms that have high interest to operate in Thailand is the Automotive Industry, such as EV, Car, and Machinery Parts. Due to high demand for automotive parts (cars, bikes, etc.) in Thailand, a wide range of well-known Japanese companies invest in Thailand to explore international relationships and markets. The automotive investment by Japanese firms in 2025 hit 28.3 billion baht, underscoring that an immense number of firms are entering the market recently.
In October 2023, 2,348 Japanese companies (approximately 50% of the total Japanese companies in Thailand) were involved in the automotive supply chain, highlighting the importance of the automotive market in Thailand for Japanese firms.
Popular sectors for Japanese firms #2 – Electronics Industry (AI / software)
Another popular sector of Japanese firms with high interest to operate in Thailand is the electronics (AI & software) industry. In 2025, the total investment from Japanese firms in the electronics industry increased significantly in comparison with the previous year, reaching 24.3 billion bahts, almost catching up with the automotive industry.
Again in 2025, the market value for the electronics industry has reached 2,335.8 billion Thai bahts, and the continuous growth in interest of Japanese firms to expand their business, as well as more investment coming in Thailand, is expected.
Popular sectors for Japanese firms #3 – Chemical & Petrochemical Industry
After the automotive and electronics industry, the Chemical & Petrochemical industry is known to have a high value of FDI (Foreign Direct Investment) to Thailand.
As of 2023, Japanese firms have invested a total of 21,548 million Thai bahts, whereas the total investment value worldwide for this industry was 36,312 million Thai bahts. This reveals the significance of Japanese firms in the chemical industry in Thailand, as well as their high possibility of continuous investment for long.
Below is a comparison table between China, Thailand’s one of the largest investors and Japan regarding their FDI value (in Thai Million Bahts Unit) per different sectors for 2023.
Major Concerns for Small and Medium sized Enterprises
Regardless of Thailand’s suitable environment for business, certain concerns still arise for foreign investors, especially with small and medium enterprises. One major concern is the long-term operation costs when locating a business in Thailand. Rent, personnel costs (salary to be paid), taxes, all cheaper than Japan, however could be a somewhat pricey expense for relatively smaller businesses. Especially considering that businesses will initially struggle in the new environment of the Thai market and could take time to stabilize the enterprise in Thailand, expanding a business in Thailand could require a somewhat large amount of budget to fully cover-up any possible costs for the first few years.
Another possible concern for a growing business could be language barriers and regulatory complexity, such as legal restrictions. Although slightly larger-scaled businesses are likely to have interpreters or staff who could work in Thai or English or sometimes even exclusive lawyers, a Japanese business or individual who cannot communicate in Thai or English may struggle with language barriers and legal matters. As importantly, local businesses or lawyers in Thailand may not be able to speak English or Japanese. These are possible struggles small and medium sized enterprises may face.
Possible solutions for Major concerns – Small and Medium sized Enterprises
As the business operates long-term in Thailand, personnel costs may be one of the largest issues over rent and taxes as mentioned in the previous chapter for developing firms. Therefore as a solution, businesses may want to focus on automation and the use of AI systems, which could possibly replace human employees, as well as improving efficiency, and avoid employment regulations, making it simpler to manage workers. Due to Thailand’s geographical location to China and their one of the world’s largest AI factories (such as Shenzhen and HongKong), purchasing Chinese-manufactured AI systems is one popular method businesses in Thailand do, which are relatively budget-friendly than AI systems by other countries. If a business finds it easier to promote an employee from the home country to Thailand, that could be also done by obtaining relevant working permits and VISAs, as well as obtaining certain requirements for the business and employee.
Furthermore, both language barriers and legal concerns could be easily resolved through lawyers in Thailand fluent in both English, Thai, and if required, Japanese. Understanding the language and communicating without any issues are the basic fundamentals when having a business abroad, and reduces the risk of misconception which are highly risky when working with laws and restrictions which are unfamiliar.
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