Setting Up a Business in Japan: Your Complete Guide

Japan is a global hub of opportunity for ambitious entrepreneurs. As the world’s third-largest economy and a gateway to Asia, Japan offers unmatched potential for growth and innovation. Whether you’re launching a tech startup in Tokyo, tapping into the thriving tourism market, or building a sustainable brand, starting a business in Japan is your path to success. At Smartstart Japan, we make the process seamless, guiding you with expertise every step of the way.

What Does It Mean to Set Up a Business in Japan?

Setting up a Business in Japan means establishing a legally recognized entity, such as a Kabushiki Kaisha (KK) or Godo Kaisha (GK).
This involves:

• Registering with Japanese authorities
• Securing necessary permits and visas
• Building trust within Japan’s relationship-focused business culture

Beyond paperwork, it’s about joining an ecosystem that values excellence and long-term partnerships. With Smartstart Japan’s support, you’ll navigate regulations confidently and position your business for success.

Why Should You Consider Starting a Business in Japan?

Japan offers compelling advantages that make it an attractive destination for entrepreneurs and established companies alike:

Economic Powerhouse

• Japan boasts the world’s third-largest economy with a GDP exceeding $4 trillion
• Access to 125 million consumers with high purchasing power and quality expectations
• Strategic gateway to the broader Asian market, with established trade relationships throughout the region

Innovation Hub

• Global leader in technology, robotics, and artificial intelligence
• Strong government support for startups and innovation, with investment in Japanese startups reaching ¥850 billion (approximately $6 billion) in 2023
• World-class infrastructure supporting advanced manufacturing and digital services

Market Opportunities

• Growing demand in sectors like e-commerce, health and wellness, sustainable products, and tourism
• Aging population creating opportunities in healthcare, elder care, and senior services
• Strong consumer preference for quality products and services, supporting premium positioning

Business Environment

• Stable political and economic system providing predictable business conditions
• Sophisticated financial markets and banking system
• Strong intellectual property protections and rule of law

Who Can Start a Business in Japan?

One of the most common misconceptions about starting a business in Japan is that it requires Japanese citizenship or permanent residency. In reality, Japan welcomes foreign entrepreneurs and has established clear pathways for international business establishment.

Can a foreigner start a business in Japan?

• Any foreign national can establish a business in Japan, regardless of residency status
• Business Manager Visa (経営・管理ビザ) specifically designed for foreign entrepreneurs
• No requirement for Japanese citizenship or permanent residency to own or operate a business

Foreign Companies

• International corporations can establish subsidiaries, branches, or representative offices in Japan
• Foreign investment is encouraged in most sectors, with specific incentives for innovative businesses. Our Guide to Startup Subsidies in Japan provides useful insights on available financial support.
• Many global companies have successfully established operations in Japan across various industries. If you are considering expansion, read more on American Companies in Japan and European Companies in Japan for examples and advice.

Residency Considerations 

While you don’t need to be a Japanese resident to start a business, obtaining appropriate visa status is crucial if you plan to live and work in Japan. The Business Manager Visa requires:

• Minimum capital investment of ¥5 million (approximately $35,000)
• Physical office space in Japan
• Comprehensive business plan demonstrating viability

Dive deeper into how to start your business as a non-resident with our guide: Starting a Company in Japan with No Residency (2025 Guide)

What Are the Basic Steps to Get Started?

Setting up a business in Japan follows a structured process that, while detailed, is straightforward when approached systematically:

1. Choose Your Business Structure

• Godo Kaisha (GK): Limited liability company, simpler setup, costs around ¥137,000–¥410,000
• Kabushiki Kaisha (KK): Joint-stock company, higher credibility, costs around ¥332,000–¥550,000
• Sole Proprietorship: Simplest option for individual entrepreneurs, costs ¥55,000–¥110,000

2. Develop Your Business Plan

• Essential for visa applications and securing financing
• Must include market analysis, financial projections, and operational details
• Required documentation for Business Manager Visa applications

3. Secure Initial Capital and Office Space

• Deposit required capital into a Japanese bank account
• Establish physical office address (required for Business Manager Visa holders)
• Virtual offices are acceptable for some business types and visa categories

4. Register Your Company

• Submit incorporation documents to the Legal Affairs Bureau
• Obtain necessary licenses and permits for your industry
• Register for corporate taxes and social insurance

5. Establish Operations

• Open a corporate bank account
• Set up accounting and payroll systems
• Hire employees if needed, following Japanese labor laws

Timeline and Investment 

The complete setup process typically takes 4-8 weeks and requires an initial investment ranging from ¥200,000 to ¥1,000,000+, depending on your chosen structure and professional service requirements. While this may seem substantial, it represents an investment in accessing one of the world’s most sophisticated and profitable markets.

The journey of setting up a business in Japan rewards those who approach it with proper preparation, cultural sensitivity, and professional guidance. With the right foundation, your business can thrive in Japan’s environment.

What are the different types of business entities available in Japan?

Japan offers several legal structures for businesses, each with distinct characteristics regarding liability, governance, and suitability for different types of ventures:

• Sole Proprietorship (Kojin Jigyo): This is the simplest form, where an individual manages and operates the business alone. It offers simplified registration, lower running costs, and fewer taxes. It’s highly flexible and suitable for freelancers, consultants, or small businesses.
• Kabushiki Kaisha (K.K.) – Joint-Stock Company: Often equated to a corporation, the K.K. is a popular choice for established businesses seeking credibility and the ability to raise capital through share issuance. It provides limited liability, protecting personal assets.
• Godo Kaisha (G.K.) – Limited Liability Company (LLC): Introduced in 2006, the G.K. offers a middle ground, providing limited liability to its members similar to a K.K.. It features a simpler setup process, lower registration costs, and greater flexibility in internal management. Many large foreign companies, including Apple and Google, have opted for G.K.s in Japan.
• Partnerships (Gomei Kaisha and Goshi Kaisha): While recognized by the Companies Act, Gomei Kaisha (unlimited partnerships) and Goshi Kaisha (limited partnerships) are rarely used for new incorporations due to higher liability or complexity compared to K.K.s and G.K.s. A Limited Liability Partnership (LLP) (Yugen Sekinin Jigyo Kumiai) is also an option, notably offering pass-through tax treatment where only company profits are taxed.
• Branch Offices for Foreign Firms: A foreign company can establish a branch office in Japan to conduct commercial activities. Unlike a K.K. or G.K. subsidiary, a branch office is not a separate legal entity from its foreign head office, meaning the parent company bears full liability for its operations in Japan. It can engage in sales, contracts, and revenue-generating activities, but its scope must align with the parent company’s objectives.

What are the pros and cons of each business entity type?

Entity Type	Liability	Setup Costs	Taxation	Governance & Suitability
Sole Proprietorship (Kojin Jigyo)	Full Responsibility. Personal assets are at high risk.	No registration fee. Smaller running costs.	Fewer taxes.	Simple to manage and operate; good for freelancers, consultants, and small businesses; flexible for foreign entrepreneurs.
Kabushiki Kaisha (K.K.)	Limited liability, protecting personal assets.	Higher initial setup costs (¥332K-¥550K). Minimum registration tax of ¥150,000.	Taxed as a corporation; profits are taxed at corporate rates, dividends at individual rates. No tax advantages over G.K. for corporate income tax.	Considered more prestigious and credible. Stricter regulations. Allows raising capital through share sales. Suitable for larger businesses, scaling, and attracting investment. Requires annual shareholders meetings, publishing financials, and other reports.
Godo Kaisha (G.K.)	Limited liability, protecting personal assets.	Smaller registration costs (¥137K-¥410K). Minimum registration tax of ¥60,000.	Taxed as a corporation; profits are taxed at corporate rates, dividends at individual rates. No tax advantages over K.K. for corporate income tax. Can be elected as a “disregarded entity” for US tax purposes if wholly owned by an American corporation.	Simpler setup process. More flexibility in internal management, not requiring shareholder meetings. Popular for startups and businesses with fewer regulations. Easier and cheaper to run than K.K.. Ideal for small to medium-sized businesses or solo entrepreneurs seeking full control. Members’ consent is generally required for transfer of ownership interest.
Partnerships (Gomei Kaisha, Goshi Kaisha, LLP)	Varies: Unlimited liability for partners in Gomei Kaisha; limited liability for some in Goshi Kaisha. Limited liability for all investors in LLP.	Varies, generally simpler than KK/GK.	LLP offers pass-through taxation, where only company profits are taxed.	Gomei Kaisha and Goshi Kaisha are rarely used for new incorporations. LLPs provide flexibility and can be suitable for collaborative ventures.
Branch Office	Full liability for the foreign parent company. Not an independent legal entity in Japan.	Registration fee around ¥90,000. Generally simpler and more cost-effective to set up compared to a subsidiary.	Taxed only on income generated in Japan. Must file annual corporate tax returns and comply with Japanese accounting standards. Subject to consumption tax (VAT) if revenue exceeds ¥10 million.	Functions as an extension of the parent company. Can engage in commercial activities. Requires at least one resident representative in Japan. Cannot be directly converted to a Japanese company (K.K. or G.K.).

How can I conduct market research in Japan?

Thorough market research is indispensable for identifying opportunities and understanding the competitive landscape. There are several resources and services that one can consult to understand the market they are breaking into:

Listen to our podcast on: Japan Market Research with Andrew Edsall

• JETRO Reports: The Japan External Trade Organization (JETRO) provides a wealth of free resources, including comprehensive market reports, industry analyses, and surveys on foreign companies operating in Japan. These reports offer valuable insights into market trends, challenges, and opportunities.
• Consumer Surveys: Conduct consumer surveys to gather direct feedback on preferences, purchasing habits, and perceptions. Online platforms like LINE Research or general tools like Google Forms can be effective for quantitative data, while focus groups and in-depth interviews provide qualitative insights.
• Working with Local Consultants: Partnering with local market research firms or consultants is highly recommended. They possess invaluable expertise in the Japanese market, understanding nuances in consumer behavior and access to local data sources that might be difficult for outsiders to obtain. They can help define research objectives, choose appropriate methods, and analyze data effectively.

Cost Breakdown for Setting up a Business in Japan

Setting up a business in Japan involves various costs, primarily related to registration and administrative necessities. While online registration offers cost efficiencies, certain fees are unavoidable.
For more detailed information on setup costs, check out: A Complete Guide to the Cost of Setting Up a Company in Japan.

• Registration Fees (Registration Tax):
  • Kabushiki Kaisha (K.K.): A minimum registration tax of ¥150,000 is required if the capital is under ¥21 million.
  • Godo Kaisha (G.K.): A minimum registration tax of ¥60,000 is required if the capital is under ¥21 million.
  • Sole Proprietorship: Generally, there is no registration fee.
• Notary Fees: For a K.K., attestation of the Articles of Incorporation by a notary public costs approximately ¥52,000. G.K.s do not require this notarization, contributing to their lower setup cost.
• Company Seal Costs: Fees for creating your company seal (hanko) can vary, but are a necessary expense.
• Certification Fees: Costs for obtaining certificates of seal impressions and registered matters (approximately ¥400-¥600 per document).
• Professional Fees: Many entrepreneurs opt for professional assistance from lawyers, accountants, or incorporation specialists, which can add to the overall cost but significantly streamline the process and ensure compliance. For a K.K., the total setup cost can range from ¥332,000 to ¥550,000, while a G.K. can range from ¥137,000 to ¥410,000.

Do I need a Japanese bank account for my business?

Yes, a Japanese bank account is essential for your business operations in Japan. It is crucial for managing daily transactions, receiving payments, making tax payments, and is often a prerequisite for visa applications, particularly for the Business Manager Visa.

Process for Opening a Corporate Bank Account for Foreigners:

Opening a corporate bank account in Japan, especially for foreign-owned entities, can be a stringent and often lengthy process, taking several weeks to a few months (potentially 2 to 5 months) due to strict anti-money laundering (AML) regulations and thorough due diligence. Here’s a general overview:

1. Legal Incorporation: Your company must be fully registered in Japan with all legal documentation in place before you can apply for a corporate bank account.
2. Company Seal (Hanko): Japan’s banking system relies heavily on registered company seals (hanko) rather than signatures for official transactions. You will need a registered corporate seal (kaisha jitsuin) and its seal registration certificate from the Legal Affairs Bureau.
3. Required Documents: Be prepared to submit a comprehensive set of documents, including:
   • Corporate registry document (Tōkibo Tōhon)
   • Articles of Incorporation
   • Seal registration certificate
   • Identification documents for all directors and ultimate beneficial owners (UBOs)
   • Know Your Customer (KYC) compliance documents
   • Proof of business location (e.g., office lease agreement)
   • A clear and verifiable business plan.
4. Bank Selection: Major Japanese banks like Mizuho, MUFG, and SMBC are common choices, though some are more accustomed to dealing with foreign-owned entities. An introduction from a trusted client or partner can significantly improve your chances.
5. Application and Review: The application typically needs to be filled out in Japanese. The bank will conduct an extensive review of your application, often requiring in-person meetings with a registered director. Transparency is key; be prepared to disclose the full ownership chain to the UBOs.
6. Timeline: Expect an initial review time of two to three weeks, with potential delays if further clarification or documentation is requested. Once approved, banking documents (cash card, passbook) are sent to your registered business address.

Patience, meticulous organization of documents, and potentially seeking assistance from local experts are highly recommended to navigate this process efficiently.

Visa and Residency for Starting a Business in Japan

For foreign entrepreneurs eager to launch a business in Japan, navigating visa and residency requirements is a critical first step. Japan’s strict immigration policies and unique business environment demand careful planning. This guide outlines the key visa options, residency pathways, and practical considerations to help you establish your venture successfully.

Visa Options for Foreign Entrepreneurs

Two primary visa pathways are available for entrepreneurs setting up a business in Japan:

1. Business Manager Visa
   The most common visa for foreign business owners, the Business Manager Visa is designed for those actively managing a company in Japan. It is typically granted for 1, 3, or 5 years, depending on the business’s viability and the applicant’s profile.
   Key Requirements:
   • Capital Investment: A minimum of 5 million yen (approximately $35,000 USD) must be deposited into a Japanese bank account before company registration.
   • Physical Office: A legitimate office space in Japan is required; virtual offices alone are insufficient for visa approval.
   • Comprehensive Business Plan: A detailed plan outlining business activities, market analysis, financial projections, and contributions to the Japanese economy is essential.
   • Company Incorporation: The business must be legally registered as a Kabushiki Kaisha (K.K.) or Godo Kaisha (G.K.) before applying.
   • Management Experience: While not mandatory, prior business or management experience strengthens the application.
   • Stability and Continuity: Evidence of financial stability and a sustainable business model is crucial for approval.

Suppose you are struggling to get your business manager visa approved. In that case, we have a video detailing the possible issues an application might have here: Why is My Business Manager Visa Getting Rejected?

2. Startup Visa
   Available in select cities like Tokyo and Fukuoka, the Startup Visa is a temporary residency option (6–12 months) for entrepreneurs preparing to launch an innovative business, typically in tech or sustainability. It allows time for market research, securing funding, and setting up an office before transitioning to a Business Manager Visa.
   Key Details:
   • Eligibility varies by municipality and requires a robust business plan reviewed by local authorities.
   • The visa is extendable once for an additional 6 months in most cases.
   • Fukuoka, a National Strategic Special Zone, offers dedicated support for Startup Visa applicants, making it an attractive option.
3. Investor Visa
   To clear the air of any confusion, if you’ve ever heard of the investor visa as a separate option to start your own business in Japan, it is not. The investor visa is another name that the business manager visa might go by, so in reality, to get your business up and running, there are only the two options above. 

Note: Short-term visas, such as tourist visas, do not permit business registration or entrepreneurial activities. Always consult a visa specialist to ensure compliance.

Bringing Family to Japan

Entrepreneurs holding a Business Manager Visa can sponsor Dependent Visas for their spouse and unmarried children.

• Eligibility: Dependents must be financially supported by the primary visa holder.
• Application Process: Submit proof of relationship (e.g., marriage or birth certificates), evidence of financial stability, and copies of the primary visa holder’s passport and visa.
• Work Restrictions: Dependents can engage in part-time work (up to 28 hours per week) with prior approval from immigration authorities.
• Costs: Application fees are modest, but you must demonstrate sufficient income to support your family without reliance on public funds.

What documents are required for business registration?

To successfully register your business in Japan, you will need to prepare a set of essential documents:

• Articles of Incorporation (Teikan): The foundational document detailing your company’s structure and rules.
• Founder/Director Identification: Copies of passports, resident cards, and personal seal certificates (inkan shomeisho) for all founders and directors.
• Proof of Capital: Bank statements or certificates demonstrating the initial capital deposit.
• Office Lease Agreement: Documentation proving a physical office address for the company.
• Company Seal (Hanko): The official company seal and personal seals of key individuals.
• Other Supporting Documents: Depending on the business structure and specific circumstances, additional forms, affidavits, or translations may be required.

For online registration, these documents are prepared digitally, and e-signatures are often used.

Finding a Suitable Office or Commercial Space

A physical office is often required for visa and registration purposes. Here’s how to secure one:

1. Assess Needs: Consider space, budget, and operational requirements (e.g., client-facing vs. administrative).
2. Choose a Location:
   • Tokyo: Ideal for market access but costly (e.g., Marunouchi, Shibuya).
   • Osaka/Nagoya: Cost-effective with strong business ecosystems.
   • Fukuoka/Sapporo: Emerging hubs with lower costs and startup support.
3. Navigate Leases:
   • Key Money (Reikin) and Deposit (Shikikin): Expect upfront costs equivalent to several months’ rent.
   • Lease Terms: Typically 2–3 years with renewal options.
   • Guarantors: Landlords may require a Japanese guarantor or guarantee company.
4. Use Real Estate Agents: Engage agents experienced with foreign businesses to negotiate terms and handle documentation.

Virtual offices can supplement operations, but are not sufficient for visa purposes.
Here is a video guide on: How to Lease Office Space in Japan as a Foreigner | SmartStart Japan

What is the step-by-step process for registering a business in Japan?

The process of registering a business in Japan, particularly for companies like Kabushiki Kaisha (K.K.) or Godo Kaisha (G.K.), generally involves several key stages:

1. Choosing a Business Structure: As discussed, selecting between a K.K., G.K., or other entities is the foundational decision that impacts subsequent steps and requirements.
2. Determining Company Details: This includes choosing a company name (checking for availability), defining the business objectives, and deciding on the capital requirements. While there’s generally no minimum capital for company registration, a capital of at least 5 million yen is often required for foreign entrepreneurs seeking a Business Manager Visa.
3. Drafting Articles of Incorporation (Teikan): This foundational legal document outlines the company’s purpose, structure, share capital, and other essential rules. For a K.K., these articles typically require notarization.
4. Obtaining a Company Seal (Hanko): A registered company seal (representative seal or hanko) is legally required for official company documents and transactions in Japan. Personal seals (jitsuin) are also essential for founders and directors.
5. Capital Contribution: The initial capital must be deposited into a bank account. For foreign individuals without a Japanese bank account, this might involve temporary use of a Japanese partner’s account or working with a legal representative.
6. Registration with the Legal Affairs Bureau (Homu-Kyoku): This is the core registration step where all prepared documents, including the Articles of Incorporation, proof of capital, and details of founders and directors, are submitted. Single-member K.K. and G.K. can be fully registered online through this system.
7. Notifying Tax Authorities: After legal registration, the company must notify the national tax office (e.g., for corporate tax, consumption tax) and local tax offices (for local corporate taxes).
8. Other Post-Registration Actions: These include opening a corporate bank account, obtaining necessary business licenses and permits, and handling payroll and social insurance registrations if employees are hired.

You can find more step-by-step guides with: How to start a business in Japan in 12 steps

What are Hanko Seals?

Hanko Seals are how the Japanese sign off on contracts. Companies don’t rely on signatures but instead use these personal stamps. To differentiate, there are personal and business Hankos. 

Personal: 

• Jitsu-in (実印) – It is the most important and official seal, as each Jitsu-in Hanko is unique to its owner and has to be registered with the government. It is required to start a company as it serves as your stamp to sign off contracts. 

Business:

• Kaisha Jitsu-in (会社実印) – In terms of importance, this is the business equivalent of the Jitsu-in. You must register this seal with the Legal Affairs Bureau. 
• Kaku-in (角印)– A company would use it to sign the typical documents of least importance. 
• Ginko-in (銀行印) – This seal is required for businesses to conduct their financial transactions and manage their bank accounts. Instead of carving an individual’s name onto the seal, it is replaced with “Corporate Seal for Banking.”

How long does it take to set up a business in Japan?

The timeline for setting up a business in Japan can vary, influenced by the chosen business structure, the efficiency of document preparation, and whether visa processing is involved:

• Incorporation: For single-member K.K. and G.K.s, especially with online registration and all documents in order, the company registration process itself can be remarkably fast, with some businesses being approved within 24 hours. Generally, the incorporation process can take 2 to 4 weeks.
• Factors Affecting Duration:
  • Document Accuracy: Any errors or missing information can cause significant delays.
  • Visa Processing: For foreign entrepreneurs requiring a Business Manager Visa, the visa application process runs concurrently or after incorporation and can add several weeks to months to the overall timeline.
  • Bank Account Opening: Opening a corporate bank account in Japan, especially for foreign entities, can sometimes be a time-consuming step.
  • Professional Assistance: Engaging an experienced incorporation service can significantly expedite the process by ensuring all documentation is correct and submitted efficiently.

What licenses or permits might my business need?

The specific licenses and permits required depend heavily on your industry and business activities. Beyond general business registration, many sectors have additional requirements:

• General Business License: This is the initial authorization to operate, typically granted after company registration.
• Industry-Specific Licenses:
  • Food Service: Required for businesses handling and serving food.
    • Learn all about starting up a restaurant business: Starting a Restaurant in Japan 
  • Construction: Necessary for construction work exceeding a certain limit.
  • Real Estate: Required for acting as a real estate broker.
    • We have a video guide on real estate: Starting A Real Estate Business in Japan
  • Medical Services: Specific licenses are needed for medical practices.
  • Financial Services: Licenses are mandated for banking, securities, or insurance activities.
  • Tourism/Guesthouses: While “minpaku” (private lodging) is not explicitly detailed in the provided documents, it falls under the tourism and hospitality sector, which often requires specific permits due to strict regulations.
• Processing Time: Obtaining industry-specific licenses can take 2-3 months, and it’s advisable to apply for them in advance.

If you want to know more about licenses and permits, check out our video: Business Licenses and Permits for Your Japanese Business.

How do trademarks work in Japan?

With regards to trademarks, Japan has similar, if not identical, laws and regulations regarding them. While not required, if you wish to claim ownership of your company, a trademark needs to be registered. You will be seen as the person in control of your business when the trademark is officially recognized by the proper authorities. 

The following are things that can be registered as a trademark:

• Words
• Diagrams
• Symbols
• 3D figure
• Color
• Motion
• Hologram
• Position
• Sound

When filing a trademark application, it is sent to the Japan Patent Office, and depending on your current status, this could be filed on your own or with a patent attorney. If you have a permanent office or residence, then you can file on your own. Otherwise, you would need an attorney. You can consult our guide on trademark registration to understand the registration process, fees, and more here: Register a Trademark in Japan: The Ultimate Guide.

Are there any specific legal requirements for foreign entrepreneurs?

Foreign entrepreneurs face specific legal considerations when setting up a business in Japan:

• Visa Requirements: A Business Manager Visa is crucial for foreigners intending to establish or manage a business in Japan. To qualify, the business typically needs at least 5 million yen (approximately $35,000 USD) in company capital deposited into a Japanese bank account before business registration. A physical office is also required for this visa.
• Foreign Ownership Restrictions: While Japan generally encourages foreign investment, certain strategic sectors have restrictions on foreign ownership to protect national interests:
  • Telecommunications: Foreign ownership is capped at 33.3% for major telecommunications companies like Nippon Telegraph and Telephone Corporation (NTT).
  • Broadcasting: Foreign ownership in broadcasting companies is restricted to 20% to safeguard domestic media from external influence.
  • Other restricted sectors include defense, energy (e.g., nuclear power), aviation, agriculture, forestry, mining, and water supply.
• No Minimum Capital (General): It’s important to note that while a 5 million yen capital is required for the Business Manager Visa, Japan generally has no minimum capital requirement for company registration itself, making it accessible for startups.

Do I need a local partner or representative to set up a business in Japan?

The requirement for a local partner or representative depends on the chosen business structure and specific circumstances:

• Resident Director: For a Kabushiki Kaisha (K.K.), while the requirement for at least one representative director to have a residential address in Japan was removed in 2015, practicalities may still necessitate a resident contact for banking and other administrative procedures.
• Branch Offices: A branch office in Japan must appoint at least one representative who is a resident of Japan. This individual does not have to be a Japanese citizen but must have a valid visa and residence status that allows them to oversee the branch’s operations.
• Bank Accounts: Opening a corporate bank account in Japan can be challenging for foreign companies without a Japanese resident. Sometimes, using a Japanese partner’s bank account to hold funds temporarily or working with a legal representative can provide workarounds.

Notifications to be submitted

After incorporation, there are several procedures that are required. In the case of notifications, there are six main ones that must be submitted. However, two of the six are only required if your company has employees at the time of establishment. In this list, labor insurance and employment insurance are the conditional notifications. 

1. Corporate tax and Consumption tax report
2. Corporate inhabitant tax and corporate business tax to the local tax office
3. Enrollment procedures for health insurance and employee pension insurance
4. Labor Insurance 
5. Employment insurance 
6. Open a corporate account 

Office of submission	Required for this document	Is it required?	Documentation	Deadline
Tax Office	Notification of Incorporation	Yes	Articles of incorporation	Within 2 months of establishment
	Blue Return Filing	If applicable	None	Within 3 months of establishment or end of the first business year (whichever is first).
	Opening of a salary payment office	If applicable	None	Within 1 month of establishment for the payroll office
	Special Provisions for payment of withholding tax	If applicable	None	None
	Application for registration of qualified invoice issuer	If applicable	None	None
Local Tax Office	Notification of Incorporation	Yes	Articles of Incorporation	Varies by city
Municipal Office	Notification of Incorporation	Yes	Articles of Incorporation	Varies depending on location
Pension Office	Notification of health insurance and employee pension insurance	Yes	– Registered Company Status – Corporate number designation	Within 5 Days of Establishment
	Continued enrollment of health insurance and employee pension insurance	If applicable	None	Within 5 days of becoming insured.
	Change in health insurance dependent	If applicable	– Family registry – Proof of Income (Annual income must be less than 1.3 million yen)	Within 5 days of the day the dependent was insured.
Labor Standards Office	Labor Insurance	If applicable	Registered Company Status	Within 10 days of when the employee was hired.
	Labor Insurance Premium Estimation Form	If applicable	None	Within 50 days of when the employee was hired.
	Changes to Work Regulation	If applicable	– Letter from company representative regarding the modification  – Current work regulations	If employing more than 10 full-time employees, notify immediately
	Applicable business report	If applicable	None	Immediately when hiring employees (Except for when employees are family members living together)
Hello Work	Establishment of employment insurance	If applicable	– Registered Company Status – Employment Contract – Copy of the Employer’s Record of the Labor Insurance Enrollment Notification Accepted by the Labor Standards Inspection Office	If applicable within 10 days
	Employment insurance, insured person qualification	If applicable	Same as above	Within 10 days of when the employee was hired
Financial Institutions	New corporate account opening notification	If applicable	– Certificate of the company’s history – Articles of Incorporation  – Company Seal – Seal Certificate  – Representative’s Seal  – Representative’s Seal Certificate – Representative’s ID – Relevant documentation to show the operation of the company	When opening a corporate bank account.

How can I fund my business in Japan?

Funding your business in Japan can be achieved through various avenues, though foreign entrepreneurs may face specific challenges.

• Personal Savings: Many entrepreneurs start by utilizing their own savings, especially in the initial stages.
• Bank Loans: Loans are available from Japanese financial institutions, including the Japan Finance Corporation (JFC), which offers specific startup loans for foreign entrepreneurs. Banks emphasize creditworthiness, a sound business plan, and sometimes collateral. However, Japanese banks may be more risk-averse towards innovative startups or those without a traditional business model, potentially imposing stricter criteria.
• Investment (Venture Capital & Private Equity): Investment from venture capital (VC) and private equity (PE) funds is increasingly common in Japan, particularly for startups with high-growth potential and innovative business models. Equity financing involves selling shares, which reduces direct debt burden but dilutes ownership. While investment in Japanese startups has grown, the scale of funding is still smaller compared to markets like the US and Europe, and securing investment often requires a well-structured business plan. Learn more about venture capital with: Guide to Venture Capital
• Government Grants and Subsidies: The Japanese government and various agencies offer incentives and support programs. Understanding what subsidies are available is a crucial point in starting your business. Read more about it in Guide to Startup Subsidies in Japan for 2025.
  • JETRO (Japan External Trade Organization) provides assistance for fundraising, especially for small and medium-sized enterprises (SMEs).
  • The Financial Services Agency (FSA) has a “Financial Start-Up Support Program” offering one-stop services for overseas financial companies establishing a presence in Japan.
  • Various R&D tax credits and regional incentives are available.
  • Programs like J-Startup aim to support selected companies with global potential through public-private partnerships.
• Funding from Parent Company: For foreign companies establishing a subsidiary in Japan, investment from the parent company is a popular and straightforward method of capital procurement, aligning with overall corporate strategy.

Challenges for foreigners often include navigating the Japanese banking system, which can be less flexible for non-traditional business models, and the relatively smaller investor base compared to other major economies. A robust business plan is crucial to address these challenges and attract financing.

Japanese Labor Laws and Their Impact

Japan’s labor laws prioritize employee rights and workplace fairness, and compliance is non-negotiable for businesses. Key regulations include:

• Working Hours: The standard workweek is 40 hours (8 hours/day, 5 days/week).
• Overtime: Overtime requires premium pay:
  • 25% above regular rates for standard overtime.
  • 35% for late-night work (10 PM–5 AM) or holidays.
  • 50% for overtime exceeding 60 hours/month (applicable to SMEs since April 2023).
• Paid Leave (Nenkyu): Employees earn 10 days of paid leave after 6 months, increasing with seniority. Employers must ensure that at least 5 days are taken annually.
• Mandatory Social Insurance: Employers must enroll employees in:
  • Health Insurance (Kenko Hoken): Covers medical expenses.
  • Employees’ Pension Insurance (Kosei Nenkin): Public pension contributions.
  • Employment Insurance (Koyo Hoken): Unemployment and training benefits.
  • Workers’ Accident Compensation Insurance (Rosai Hoken): Covers work-related injuries (fully employer-funded).

Non-compliance can lead to penalties, so consult a labor expert to ensure adherence.

Hiring Employees in Japan

Hiring in Japan requires careful planning and adherence to legal and cultural norms:

1. Define Roles: Clearly outline job responsibilities and team structure in your business plan.
2. Recruitment Channels: Use platforms like Indeed, LinkedIn, or local job boards (e.g., Hello Work), or engage industry-specific recruitment agencies.
3. Labor Contracts: Provide detailed contracts specifying wages, hours, duties, and termination conditions. Contracts can be indefinite or fixed-term.
4. Minimum Wage: Comply with regional minimum wages (e.g., ¥1,163/hour in Tokyo, ¥1,107/hour in Osaka, as of October 2024).
5. Registrations: Notify the Labor Standards Inspection Office, Public Employment Security Office (Hello Work), and Japan Pension Service for social insurance and employment records.
6. Payroll: Implement accurate payroll systems, including tax and social insurance withholding.

Fostering a supportive workplace aligned with Japanese cultural expectations, such as respect for hierarchy and teamwork, enhances retention. You can also consider consulting with the Employer of Record for their services. They are an organization that helps foreign entities recruit professionals without opening an entity in Japan. Learn more about this organization and their services with: Employer of Record in Japan.

Costs of Running a Business in Japan

Ongoing operational costs vary by location, industry, and scale. But an approximate estimate looks like this: 

• Office Rent:
  • Tokyo: ¥150,000–¥500,000+/month for small offices; higher in prime areas like Shibuya or Marunouchi.
  • Regional Cities (e.g., Fukuoka, Osaka): ¥50,000–¥200,000/month.
  • Virtual Offices: ¥5,000–¥30,000/month (note: insufficient for Business Manager Visa).
• Salaries: Entry-level salaries start at ¥200,000–¥250,000/month; skilled roles command higher pay. Employer social insurance contributions add ~15–16% to labor costs.
• Utilities: ¥15,000–¥50,000/month for small offices.
• Marketing: Digital campaigns start at ¥50,000/month; comprehensive strategies (e.g., traditional media, events) can cost millions of yen.
• Other Costs: Include accounting/legal fees, supplies, and travel.

Engaging professionals like SmartStart Japan can streamline cost management and compliance.

What are the tax implications of setting up a business in Japan?

Operating a business in Japan involves several layers of taxation. There are intricate and meticulous rules that you must follow. Japanese Tax Laws: A Guide for Startups can provide valuable information to prepare you for taxes. 

• Corporate Tax: The standard national corporate tax rate is 23.2%. However, small and medium-sized enterprises (SMEs) with paid-in capital of ¥100 million or less benefit from a reduced rate of 15% on annual income up to ¥8 million.
• Consumption Tax (Japan Consumption Tax – JCT): Japan’s equivalent of a Value-Added Tax (VAT) is generally 10%, with some reduced rates at 8%. Businesses collect this from customers and remit it to the government. Certain companies with taxable sales of ¥10 million or less in the base period (two years prior) may qualify as “tax-exempt businesses” for consumption tax purposes, though this means they cannot claim consumption tax refunds.
• Local Taxes: In addition to national taxes, businesses are subject to local taxes levied by prefectures and municipalities. These include:
  • Corporate Inhabitant Tax: Composed of a “per capita levy” (a fixed amount based on capital and number of employees, regardless of profit) and a “corporate tax levy” (based on your national corporate tax amount). Rates vary by location and company size.
  • Corporate Enterprise Tax: Imposed on a company’s taxable income, with progressive rates. This tax can be deducted as an expense in the following fiscal year.
  • The combined effective corporate income tax rate, including national and local taxes, typically ranges from 30% to 35%.
• Potential Exemptions and Incentives:
  • As mentioned, SMEs receive a preferential corporate tax rate.
  • Companies that file a “blue form tax return” can benefit from loss carry-forward provisions.
  • Japan offers various tax credits, such as Research and Development (R&D) tax credits, to encourage innovation.
  • Certain regions may provide corporate tax reductions or exemptions to attract new businesses.

Learn how to cut business expenses and reduce your taxes with: Tax Reduction in Japan: 6 Smart Strategies to Legally Cut Your Business Costs.

Receipt keeping is also of equal importance to properly filing taxes for your business. Get insight into that process here: How to File Your Japanese Receipts 

Understanding Japanese Business Culture

Success in Japan hinges on respecting its unique business culture and etiquette: 

• Etiquette and Meishi (名刺): Exchange business cards (meishi) with formality, presenting and receiving with both hands and reviewing carefully.
• Hierarchy (Senpai-Kohai): Respect senior colleagues and follow consensus-driven decision-making processes.
• Long-Term Relationships: Build trust through sustained engagement; avoid rushing deals. Indirect communication is common, with subtle cues replacing direct refusals.

Adapting to these norms fosters credibility and strong partnerships.

Are there any cultural considerations for marketing my business in Japan?

Marketing in Japan requires a tailored approach that resonates with local consumer preferences and cultural sensibilities:

• Localizing Products/Services: Generic marketing strategies often fall flat. Successful foreign brands adapt their products or services to Japanese tastes and needs, whether through unique flavors (e.g., KitKat’s regional varieties), specific features, or service levels that meet high Japanese standards for detail and functionality.
  • Listen to our podcast for information on: How to Localize to the Japanese Market.
• Understanding Consumer Preferences (Quality Over Price): Japanese consumers are highly discerning and often prioritize quality, reliability, and brand reputation over the lowest price. They are generally willing to pay a premium for products and services that demonstrate superior craftsmanship, durability, and exceptional customer service. While price sensitivity exists in certain categories (especially amidst rising living costs), value for money often translates to long-term reliability and quality.
• Effective Advertising Strategies: Japan has a diverse media landscape. While digital advertising is growing rapidly, traditional media (TV, newspapers, magazines) still hold significant influence, particularly for older demographics. Influencer marketing and relying on peer reviews are also effective. Marketing messages should focus on highlighting product benefits, craftsmanship, and how the product integrates into the consumer’s lifestyle. Participating in local events and trade shows can also be an effective way to build brand awareness and connect directly with potential customers.

What are common challenges faced by foreign entrepreneurs in Japan?

• Language Barriers: While English proficiency is increasing, especially in major business hubs, daily operations and official procedures often require Japanese language skills. This can complicate communication with local staff, suppliers, clients, and government agencies.
• Bureaucratic Complexity: Japan’s administrative processes, particularly for company registration, visa applications, and tax compliance, can be intricate and time-consuming, requiring meticulous documentation and adherence to specific procedures.
• High Setup and Operational Costs: As noted in previous sections, initial incorporation costs, office rent (especially in major cities like Tokyo), and salaries can be substantial, requiring significant upfront capital.
• Adapting to Local Tastes and Preferences: Beyond general business practices, foreign businesses must truly understand and adapt to the nuanced preferences of Japanese consumers and the specific dynamics of the local market. What works in other countries may not resonate in Japan without significant localization.
• Building Trust and Relationships: While critical for success, establishing long-term relationships and trust with Japanese partners and clients can be a slow process for newcomers.

How can I overcome these challenges?

• Hiring Bilingual Staff: Employing local staff who are proficient in both Japanese and your native language can bridge communication gaps, provide cultural insights, and facilitate smoother operations.
• Partnering with Local Experts: Collaborating with Japanese legal advisors, accountants, and business consultants is invaluable. Their expertise in local laws, regulations, and business practices can help you avoid pitfalls and navigate complexities efficiently. SmartStart Japan, for instance, offers services to assist with company setup and compliance.
• Leveraging Startup Support Programs: Actively seek out and participate in government and private sector startup support programs. These initiatives often provide mentorship, networking opportunities, and sometimes even financial aid.

Are there any government programs or incentives for foreign businesses in Japan?

Japan’s government actively promotes foreign direct investment and supports startups through various programs and incentives:

• JETRO’s Services: The Japan External Trade Organization (JETRO) is a primary resource, offering comprehensive support for foreign businesses. This includes free consultations, market entry advice, investment seminars, and assistance with finding local partners and navigating regulatory procedures. JETRO also publishes extensive research reports.
• Subsidies for Startups in Designated Zones: Certain cities and regions, notably Fukuoka City, have been designated as “National Strategic Special Zones” for global startups. These zones offer unique incentives, including:
  • Startup Visa Programs: Relaxed requirements for the Business Manager Visa, often allowing for a longer preparatory period.
  • Corporate Tax Reduction: In Fukuoka, companies pursuing innovative businesses may be eligible for exemptions from corporate tax (national tax) and corporate municipal tax (city tax) for up to five years.
  • Subsidies: Financial support for office rent, private residential rentals, and even employment expenses in some cases.
  • Support Facilities: Access to incubation facilities like Fukuoka Growth Next, offering shared office spaces, consultation, and networking.

Each city can provide different incentives to different businesses. Find out which city is right for you here: A Comprehensive Guide to Japan Startup Cities

• Tax Breaks and Incentives: The Japanese government offers various tax incentives, such as R&D tax credits and special depreciation allowances for new investments, particularly for companies engaged in innovation or operating in specific strategic sectors.
• Financial Support Programs: Programs like those from the Japan Finance Corporation (JFC) offer loans specifically designed for new businesses, sometimes with favorable terms.

What resources are available for foreign businesses setting up in Japan?

A variety of resources can provide crucial support throughout your business journey:

• JETRO (Japan External Trade Organization): As mentioned, this government-backed organization is a comprehensive first stop for foreign investors and entrepreneurs, offering extensive information, support, and networking opportunities.
• Local Chambers of Commerce: Organizations like the American Chamber of Commerce in Japan (ACCJ), British Chamber of Commerce in Japan (BCCJ), and other national chambers provide valuable networking events, advocacy, and business information for their respective communities.
• Expat Networks and Online Communities: Online forums, social media groups, and local expat communities offer peer-to-peer advice, insights into daily life, and recommendations for services.
• SmartStart Japan’s Services: As highlighted throughout this article, services like SmartStart Japan specialize in assisting foreign entrepreneurs with company registration, legal requirements, financial planning, and navigating the complexities of setting up a business in Japan.
• Startup Hubs and Accelerators: Cities across Japan, particularly Tokyo, Fukuoka, and Osaka, host numerous startup hubs, co-working spaces, and accelerator programs that provide mentorship, resources, and connections to the local startup ecosystem.

Practical Tips for Setting Up a Business in Japan

Launching a business in Japan requires more than just navigating legal requirements—it demands a strategic approach and an understanding of the market’s unique dynamics. Below are actionable tips to set your venture up for success, along with common pitfalls to avoid.

Best Practices for Success

To thrive in Japan’s competitive market, consider these proven strategies:

• Localize Your Offerings: Go beyond translation—adapt your products, services, and marketing to align with Japanese consumer expectations. Prioritize quality, precision, and a customer-centric approach to resonate with local preferences.
• Build Strong Networks: Relationships drive success in Japan. Attend industry events, join chambers of commerce (e.g., Tokyo Chamber of Commerce), and seek introductions to local professionals. Connecting with Japanese partners and fellow entrepreneurs can unlock opportunities and insights.
• Practice Financial Discipline: Japan’s high operational costs demand careful budgeting. Plan for setup fees, office rent, salaries, and unexpected expenses. Maintain robust cash flow reserves to ensure stability.
• Focus on Quality and Service: Japanese consumers value reliability and exceptional service. Invest in high-quality products and seamless customer experiences to build trust and a strong reputation.
• Adopt a Long-Term Vision: Success in Japan takes time. Focus on sustainable growth and relationship-building rather than short-term gains.

Ensuring Compliance with Japanese Regulations

Japan’s regulatory landscape is meticulous, but compliance is achievable with the right approach:

• Engage Local Experts: Work with professionals to navigate legal complexities:
  • Lawyers: Advise on corporate law, contracts, and compliance.
  • Accountants (Zeirishi): Handle tax planning, payroll, and financial reporting to meet Japanese standards.
  • Administrative Scriveners (Gyoseishoshi): Streamline company registration, visa applications, and permit processes.
• Conduct Regular Compliance Checks: Stay updated on evolving labor, tax, and industry-specific regulations. Subscribe to legal updates or consult advisors periodically to avoid penalties.
• Understand Business Structure Obligations: Know the ongoing requirements for your chosen structure (e.g., Kabushiki Kaisha or Godo Kaisha), such as annual reporting and shareholder meeting documentation.

Common Mistakes to Avoid

Steer clear of these pitfalls to ensure a smooth start:

• Underestimating Costs: High setup fees, rent, and salaries can strain finances. Always include a buffer in your budget for unforeseen expenses.
• Ignoring Cultural Norms: Missteps in business etiquette, such as improper meishi (business card) exchange or overlooking hierarchical respect, can harm relationships. Invest in cultural training to align with local expectations.
• Submitting Incomplete Documents: Japan’s bureaucracy is strict. Errors or missing documents can delay registration or visa approvals. Double-check submissions with professional help.
• Lacking a Robust Business Plan: A vague or generic plan can jeopardize visa applications, funding, and market entry. Tailor your plan to Japan’s market with detailed market analysis and financial projections.
• Expecting Quick Results: Building trust and market share takes time. Patience and persistence are key to long-term success.

FAQ for Setting Up a Business in Japan

Can I Start a Business Without Living in Japan?

Yes, but active management requires residency:

• Branch Office: Operates as an extension of an overseas company without creating a separate legal entity.
• Representative Office: Limited to non-profit activities like market research.
• Subsidiary (K.K. or G.K.): Requires a Japanese resident as a representative director if the founder is non-resident. To actively manage, a Business Manager Visa is needed, which typically requires residency.

Is Japanese Language Proficiency Required?

While not mandatory for registration, Japanese proficiency is highly beneficial for:

• Operations: Communicating with staff, suppliers, and clients.
• Bureaucracy: Navigating government offices and official documents.
• Relationships: Building trust with local partners.
  If you don’t speak Japanese, hire bilingual staff or translation services. Some Japanese language ability can strengthen visa applications but isn’t a strict requirement.

What Are the Most Promising Industries?

Japan offers opportunities in high-growth sectors:

• Technology: AI, robotics, fintech, and IoT, fueled by demand for digital transformation (as noted in the original article).
• Healthcare: Elder care, medical technology, and wellness solutions due to an aging population.
• Tourism: Specialty tours, hospitality, and eco-tourism, driven by Japan’s tourism boom.
• Sustainability: Eco-friendly products and renewable energy, supported by government initiatives.
• E-commerce: Niche online retail and digital services, reflecting Japan’s growing digital economy.

Can I Convert My Business Entity Type Later?

Yes, conversions (e.g., G.K. to K.K.) are possible but involve:

• Amending Articles of Incorporation and securing shareholder approval.
• Legal registration with the Legal Affairs Bureau.
• Fees, including a registration tax (¥30,000 or 0.7% of increased capital, whichever is higher) and notary/legal costs.
  Converting from a sole proprietorship to a K.K. or G.K. is also common for scaling businesses, offering limited liability and credibility.

The Ultimate Guide on Changing Your Business Structure in Japan helps answer this very question. 

How Do I Close a Business in Japan?

Dissolving a business involves a formal process:

1. Shareholder Resolution: Approve dissolution via a shareholder or member vote.
2. Appoint a Liquidator: Manage asset collection and debt settlement.
3. Notify Authorities: Register dissolution with the Legal Affairs Bureau and inform tax and labor offices.
4. Settle Debts and Assets: Clear all liabilities and distribute remaining assets.
5. Final Tax Filings: Submit final tax returns to national and local authorities.
6. Complete Liquidation: Close the company’s registration.
   This process is complex and typically requires legal and accounting support.

Next Steps to Launch Your Business

Ready to bring your entrepreneurial vision to life in Japan? Follow these steps:

1. Conduct Thorough Research: Analyze your industry, market trends, and competitors in Japan.
2. Craft a Robust Business Plan: Develop a detailed plan tailored to the Japanese market, including market analysis, financial projections, and operational strategies.
3. Engage Expert Support: Partner with lawyers, accountants, and administrative scriveners to ensure compliance and streamline setup.

SmartStart Japan can simplify your journey. Our comprehensive services—company incorporation, visa support, compliance guidance, and subsidy applications—help you launch efficiently, often cutting the process from 6 weeks to just 3 weeks. Visit SmartStart Japan to start your business with confidence.