Starting A Business in Japan — A Guide for 2022

Posted By Jim Kersey

Expanding into the Japanese market is a dream for many brands. However, many are put off by the perceived difficulty of officially setting up a business here — especially those with limited experience of the nation’s laws and regulations.

Yet, as we’ve seen first-hand many times over, there’s no reason why companies who approach the process diligently can’t successfully incorporate with minimal hassle.

In this post, we’ll outline how exactly to go about starting a business in Japan, including the kind of forms and applications you need to complete, as well as a brief look at what the landscape looks like for new businesses in 2022.

If you’re still learning about what the country has to offer, you might want to first take a look at our guide: Japanese Market Entry in 2022 – A Crash Course for Inbound Businesses

Table of Contents

  • Is Japan Open for Business in 2022?
  • Visa Types For Starting a Business in Japan
  • Requirements for Establishing Your Business in Japan
  • Notes On Securing Funding
  • Choosing Your Business Structure in Japan
  • What Does the Incorporation Process Look Like in 2022

Is Japan Open for Business in 2022?

Local employees starting a business in Japan in 2022

Japan prides itself on being welcoming to international companies and investors. Several government policies have been specifically designed over the years to attract foreign business and several administrative processes have been intentionally streamlined to make it easier for non-Japanese speakers.

That said, this doesn’t fully take into account the extent of the language barrier for Western brands, as well as the cultural and social differences that exist here. For instance, consumer characteristics can differ significantly from what you may be used to in your home market, with audiences leaning more towards conformity and consensus than the desire to stand out from the crowd or be original — meaning there is always some level of marketing and brand localization that must take place.

It’s also true that Japan has been slow to fully open its borders to the world since the pandemic started. While foreign business travelers and students can enter Japan as long as they have the proper visa, this must be gained far in advance and typically with the support of a sponsor.

For company owners hoping to do some reconnaissance before committing to Japan market entry, this can be an added barrier to factor in. Equally, it’s a consideration for companies hiring employees from abroad. Work visas can be a complicated thing to process at the best of times.

Equally, tourists visiting Japan must be on the ‘blue list’ of countries and be sponsored by an approved Japanese travel agency. This has made it harder for businesses who would somehow rely on or facilitate tourism in the country with levels far lower than pre-Covid-19 when Japan was one of the most visited tourist destinations worldwide.

Like many other nations, Japan has suffered economically as a result of the pandemic. Restrictions and lockdowns caused a contraction in real GDP at the start of the year and various knock-on effects of the virus have also slowed recovery, such as weaker demand from China impacting export growth despite growth in imports in 2022.

Even in light of Covid-19, the Japanese government has been supportive of startups and in 2021 invested over US$8 billion in new businesses, which is the largest amount in Japan’s history. New programs, incubators and an entire division of the Ministry of Economy, Trade and Industry (METI) have also been introduced to support the startup ecosystem in Japan.

Attractive Growth Sectors In Japan

Renewable Energy & Climate Tech Japan has set ambitious sustainability targets, such as achieving a net-zero society by 2050 and doubling the proportion of renewable energy by 2030. This has resulted in significant investments in the Environment, Social and Governance (ESG) sector as well as Green Tech.
Healthcare & Life Sciences Japan’s pharmaceuticals, medical equipment, preventative healthcare, regenerative medicine, and nursing care services sectors are very well established. And growth is expected over the next decade to service the nation’s aging population
Advanced Manufacturing & Robotics Japan has long been a strong global player in robotics and advanced manufacturing. In 2019-2020, manufacturing accounted for about 20% of Japan’s total GDP. A trend that is set to contone in 2022.
Fintech The government has invested heavily in promoting Tokyo as a fintech hub worldwide and the fintech sector is set to grow 51% annually to US$11 billion through the end of 2022, according to FinCity.Tokyo.

Forecasted Ecommerce Growth in Japan

Ecommerce shipping company supporting companies starting a business in Japan in 2022

The nation’s thriving ecommerce market is why many brands are eager to set up shop in Japan. Revenue in the ecommerce market is expected to show an annual growth rate of 6.5% between 2020 and 2025, resulting in a projected market volume of US$143,279m by 2025.

This will also be supported by a user penetration rate of 76.7%, expected to hit 91.2% by 2025, and a steady appetite for foreign brands and technologies among Japanese households.

Year Revenue in million US$
2017 72,647
2018 80,729
2019 88,110
2020 104,639
2021 112,465
2022 120,292
2023 128,054
2024 135,666
2025 143,279

Source: Statista

Visa Types For Starting a Business in Japan

Business owners research visa requirements for starting a business in Japan in 2022

As you’ll need a visa before you’re allowed to enter Japan, this is one of the most important parts of the market entry process. Below is a list of the primary visa options available to business owners and foreign investors.

1. Business Manager Visa

The Business Manager visa is an employment eligibility status (work visa) for foreigners looking to either engage in the management and operation of an already-existing business, manage a business on behalf of others, or set up a new business. This is needed before a Japanese company can be incorporated in Japan.

This is a 4-month visa that will give the recipient a residence card that will allow them to start setting up a business officially, which can be extended to a 1-year visa after a successful application has been processed.

Holders of other types of Japanese visas who would like to set up a business in Japan can also change their visa type to a Business Manager visa.
In some cases, applying for this visa requires having registered a company with at least 5 million yen in capital before the initial application. Also, you must meet other requirements such as securing an office in Japan before your visa is granted. Applicants should therefore make sure they are eligible for the Business Manager visa requirements before applying.

2. Start-Up Visa

The startup visa program is an increasingly popular way for entrepreneurs who want to start a business in Japan. There are some limitations to what this visa will allow you to do, but it’s generally much easier to get than a Business Manager Visa.

The visa is valid for 6-months to 1 year and is only available in specific cities or prefectures that support the scheme, such as Fukuoka City.
To receive this visa, you must submit a business plan in Japanese to the local government office of a city that supports the program.

3. Investor Visa

The Investor Visa can be granted for 1, 3, or 5 years, however, this can be subject to the profitability and performance of your business in Japan. The required documents for an investor visa also depend on the type of business you are planning to start and your financial situation. This might include the following documents.

  • Business Plan in Japan
  • Investment Information
  • Company Registration Documents
  • Business license
  • Office Rental Agreement Document
  • Proof Of Professional Background
  • Employee Documents

Obtaining a visa is sometimes contingent upon completing other requirements first. And as visiting Japan can be harder as a tourist these days, many companies rely on local partners or intermediaries to support them during the initial stages of incorporation.

In the case of an investor visa, it is common for entrepreneurs and investors to opt for a 4-month visa and then submit an application for an investor visa after they have successfully started their business in Japan.

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Requirements for Establishing Your Business in Japan

Japanese banks for companies starting a business in Japan 2022

There are several requirements you must adhere to before you can complete the establishment of a company in Japan. Below are the most significant:

1. Office Space

You will need office space when starting a business in Japan, even if you plan to run many of your operations virtually. Your company will be required to have an office address in order to complete many of the tasks needed to set up a company, which includes company registration, opening a bank account, and hiring employees.

Generally, temporary structures or home offices are not sufficient and new businesses must choose from short-term office space or long-term rentals.

Short-Term Office Rentals Fortunately, there are many options available to businesses for short-term flexible leases of office space. These range from offices within coworking spaces and standalone office units, both in the center of major cities and within dedicated business parks.
Long-term Office Rentals If you are able to find somewhere that meets all your needs, a long-term rental is sometimes a more convenient option and could allow you to save costs in the future. For long-term growth, an established office can help to support your reputation in the country and the way people view your brand.

2. Business Content

In Japan, it’s required to produce a document that outlines the structure and purpose of your business as well as what you hope to achieve with it. Almost like an advanced business plan, this content must include an array of details, such as profit projections, growth strategies and investment needs. Local authorities will be especially attuned to whether your practices are likely to adhere to Japanese law.

3. Investment and Loans

It is believed that companies must have a significant amount of funding before they are able to start operating in Japan. However, the amount is often much lower than some businesses realize. For instance, to obtain the business manager/ investor visa, you’ll need to have a capital or overall investment of 5,000,000 yen (approximately USD 36K).

This is an amount you will need to show as present in your corporate bank alongside, however, in some cases the submission of a loan contract can be used as evidence of capital. Business owners who already have long-term residency are not required to provide this level of capital investment.

4. Bank account

When starting a business in Japan, you will need to open an individual bank account before establishing your company officially, which can be slightly challenging for foreigners as many banks don’t offer much English language support. Fortunately, this is changing with many institutions offering dual language services and an easier set-up process such as Mizuho, which tends to offer a slightly more foreigner-friendly approach to banking

To open an individual Japanese bank account you will need:

  • Proof of residency rights/visa
  • Contact information (phone number and address)
  • A residence card
  • Initial deposit amount
  • After this, you will then be able to establish a corporate bank account for your company. To do this, you’ll need the following:
  • Application form (completed in Japanese with no errors)
  • Photocopy of the representative’s ID; *if someone is assisting with the application process, then that individual’s ID will also be requested
  • Personal seal (hanko) of the representative
  • Certificate of company’s seal
  • Articles of company incorporation (tohon)
  • Business plan of the corporation to prove the company is operating

Some financial institutions have different requirements, so be sure to check with your bank exactly what you need before you start the process.

Notes On Securing Funding

Venture capitalists and investors have been a popular source of funding and support for foreigners starting a business in Japan. Major sectors receiving this investment include HealthcareTech, AI, and FinTech, with Tokyo remaining a hotspot for businesses benefiting from this kind of support.

Government incentives and schemes supporting startups are also prevalent in places like Fukuoka, Osaka and Kyoto, each with a burgeoning start-up ecosystem.
For businesses looking for financial support to help them during their market entry process, it’s worth talking to professionals on the ground for contacts and information about current funding programs.

Choosing Your Business Structure in Japan

Startup owners discussing starting a business in Japan in 2022

There are four types of business structures used in Japan but the most common types for new foreign companies looking to establish a long-term presence here are Kabushiki Kaisha (Corporation) and Goudou Gaisha (LLC).

You can also set up a branch office initially, however, this is considered to legally operate under the corporate status of a foreign company, rather than having its own. This means the activities you are able to run out of a branch office are limited.

Kabushiki Kaisha (Corporation)

Kabushiki Kaisha, or KK, is a company whose stocks can be publicly traded on the open market. This is the most common form of business structure used by Japanese companies. Many also refer to these as stock companies and are viewed as generally more established and trustworthy entities within Japanese society.

Goudou Kaisha (Limited Liability Companies)

A Goudou Kaisha, abbreviated GK, is a type of business structure modeled after the American Limited Liability Company. The liability is limited for this business structure and the costs of registering them can be more affordable. Unlike the KK, this type of business doesn’t have the option to publicly trade its stocks.

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What Does the Incorporation Process Look Like in 2022

CEO planning starting a business in Japan in 2022

Preparing the articles of incorporation The articles of incorporation determine how the company will be managed and what its objectives are. Companies are not allowed to carry out business activities that are not stated in the “objectives” section of the “articles of incorporation”.
Notarization of the articles of incorporation To notarize your articles of incorporation, you must visit the Notary Office (Koshonin yakuba). If your company is a Goudou Kaisha, you only need to notarize revenue stamps which cost around 40,000 yen. If, however, you’re setting up a Kabushiki Kaisha, you will need to notarize all of your articles of incorporation which will cost 50,000 yen on top of the notarization fee for the revenue stamps which makes a total of 90,000 yen.
Deposit of capital The company must obtain a certificate of deposit issued by a bank and then submit this to the legal affairs bureau when applying for registration. If you’re setting up a subsidiary company in Japan, the process is simple where all you have to do is make a deposit in the Representative Director’s personal bank account.  

For other companies, you can use your personal bank account until you finish your registration process, or use one of the investor’s personal bank accounts in Japan to deposit the initial capital. 

The government will check your bank book and will be looking for the exact line item of capital to register. This means that simply having at least that much money in the account is usually not enough. You’ll need to create a line item for that amount.

Preparing documents for the company’s registration In addition to the application form, it is necessary to prepare various documents such as permits and the notification of the company’s seal.
Filing the application for the company registration After preparing all the documents, you can file the application for business registration at the Registry office (Homukyoku). The registration fee minimum is 150,000 yen for Kabushiki Kaisha and 60,000 for Goukou Kaisha.

What About Trademark Registration?

Registering a Trademark means that the Japanese authorities will officially recognize it and see you as the person with full control and proprietorship over your company.

Before registering Intellectual Properties like Diagrams, Pictures, Colors, 3D Objects, Position Marks, Moving Marks, Holograms and Pictures in Japan you will first need to make sure that identical or similar trademarks have not been registered by other applicants before you make any request. You can find all the details for registration on the Japan Patent office site, on the page dedicated to Trademarks.

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Conclusion

As you might have expected already, there is a heavy administrative burden for anyone starting a business in Japan in 2022 — with things made slightly more challenging due to language barriers. Many of these processes can be streamlined with the support of local market entry partners who have services specifically designed to handle the incorporation process on behalf of foreign businesses.

Equally, some early-stage insights and advice from marketing agencies or research companies who regularly support Western businesses as they expand their operations to Japan can help steer you in the right direction before you take the plunge. And in some cases, businesses can operate from abroad and still sell their products in Japan through cross-border ecommerce without the hassle of fully incorporating.

Either way, we would recommend taking your time to plan your entry strategy carefully and getting some support from people on the ground who can advise you on best practices for starting your business in Japan!

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