13/07/2021

Start a Business in Japan: A Brief Guide

As Japan embraces diversity and welcomes foreigners into their midst, foreigners gain the opportunity to start business in Japan. For a successful venture, it is imperative that one be equipped with the knowledge and background, such as latest market trends, understanding the legal requirements, and more.


Table of Contents

  1. Before Getting Started
  2. Starting Up Your Business
  3. Other Essential Matters & Resources
  4. Summary

Before Getting Started

The first step in starting any business venture is deciding on the heart of the business, aka the business core. Consider the following:

  • What industry will you be joining?

  • Who is the target market or target audience?

  • What are the spending habits, culture and mannerisms of your target?

  • Is it a profitable or worthwhile business venture?

  • Are you knowledgeable, experienced or an expert in the particular field?

  • Is there a future for market growth?

  • Who are your competitors? Do they have a monopoly in the market?

  • Is it a unique or captivating business?

Take your time to consider your answers to the above. Perhaps you have a few more questions to add on. Invest some time and perhaps money to better understand the Japan market, and keep in mind that the more information you have, the better you can sail your ship. Do some market research (or pay someone to do it for you), keep up with existing trends, check-up on popular business ventures for foreigners, and perhaps visit Japan (there’s no better way to understand the market than being part of it).

Understanding Your Target Audience: Japanese business culture

Understanding Japan’s business environment and culture will help you formulate a sound plan which will work as your business’s foundation. It is important to stick to your foundations but it is just as equally or perhaps more important to exercise discretion and flexibility to accommodate changes whether it is caused by a change of generations, trend, or economic conditions. Stubbornness to stick to an old outdated plan or foundation can be the death of a business. 

Japan has very strict business mannerisms including how to address a client, potential partner, or a senior. If you are planning to do business with Japanese people, make sure you educate yourself well on how to carry yourself. 

Exchanging of Name or Business Cards

For example, the exchanging of business cards during a first meeting. In Japan, this is still an important part of the first meeting and there is a perfected method to it. Whilst standing, present your name card to the other person with 2 hands. If the other person offers a name card in return, use one hand to receive the card and the other hand to pass your card. When you receive the other side’s name card, do not put it away immediately, but instead take a few seconds to look through the card. If it is a seated meeting, place the card on the table in front of you as if it is an extension of the other party. Do not put away the card until the meeting ends.

Read more specifics in our article: How to Professionally Exchange Business Cards in Japan

The Bow

Another important aspect of Japanese business culture is bowing in lieu of handshaking. The different angles of bowing carry different levels of respect. Basically, the more junior person needs to bow lower than a senior person whose bow is more of a sign of acknowledgement. Although rare, handshaking does happen so just take it in stride.

Caution: Do not bow and shake hands at the same time.

Punctuality

It is common knowledge that the Japanese are strict with punctuality so try to arrive at least 10 minutes early whilst taking into consideration traffic delays. Being late can be taken as a sign of disrespect. For more insight into this and if you need to apologize for being late, check out our article about it here: Sorry I'm late: The Japanese attention to punctuality

Building relationships

Relationship building is very important when it comes to business in Japan. One way to secure business and improve relations is attending a drinking session, usually after work or after a meeting. This is a great opportunity to connect not just as businessmen but as people. You don’t have to drink a lot; in fact don’t overdrink as being a drunkard is not a flattering opinion you want your future business partner to have about you.

Read more about Nomikai culture here: Deconstructing the Japanese after-work culture: Nomikai

If you find all of these too much to handle figuring out on your own, this is where a Japanese business partner will come in handy to cover you. 

Keep Up with Existing Trends

Research, research, and more research!

There are no shortcuts to this. Even when your business is flourishing, to remain at the top of the business world you will have to keep on working hard to keep up with the trend. So where to start?

One of the biggest ways, of course anywhere but especially in Japan, is to be on top of social media.

According to Market Data Specialist Statista, the most used social networks globally as of January 2021 are Facebook, Youtube, and WhatsApp.

In contrast, the most used social networks in Japan as of the end of 2020 are Youtube, Line, and Twitter. 

Information like this is invaluable when marketing business to your target audience. Also note that a few years ago, TikTok didn’t even exist, whereas Tumblr’s time of glory has long since passed. 

Popular Business Ventures for Foreigners

These are the most common industries that foreigners have successfully penetrated:

1. Restaurants

Whether it is Italian, French, Indian, Nepal, Vietnamese cuisine, there are plenty of authentic foreigner-run restaurants, pubs, cafes in Japan, and there will be more to come.

2. Advanced Technology

Japan always welcomes talented people to improve their technology and engineering prowess. In fact, the government offers incentive programmes to companies that do R&D in an effort to support development of new technology.

3. Language Schools

Starting a language school is one of the most popular ways to start a business in Japan. Though commonly one would start with teaching first to build connections and gauge the market before attempting a venture.

Other popular business ideas and areas are import and export services, travel agencies, health care, and the music industry.

Starting Up Your Business

Determine Your Business Plan

Done with your market research. Done deciding on the business you’re going to set-up. What’s next?

Now, it’s time to deal with the logistics of your business operation, i.e. drafting your business plan. Your business plan should include at the very least the following details:

1. Type of Business

What type of company are you going to start up? Is it a stock company (Kabushiki Kaisha) or a limited liability company (Godo Kaisha)? This is important for preparing articles of incorporation (more on that below).

2. Business Concept and Analysis

Present your whole business. Identify your to-do list, milestones, business target and goals, potential mishaps, target audience, and marketing strategy. 

3. Capital

To start a company in Japan, you’ll need to secure at least 5 million yen. Depending on the size of your business, you may need more. Consider your initial capital will need to cover the following expenses:

  • Office Rental - including utilities like electricity, water, internet, etc.

  • Manpower

  • Equipment - Office and work use

  • Stock or Supplies

  • Personal Salary

  • Business Start-up Costs - Filing paperwork, registering business expenses, etc.

4. Schedule

Prepare a schedule that includes planning start date, company registration date, estimate business commencement date. Don’t forget to note down important accounting and taxation timelines to avoid penalties. 

5. Location

A good location, such as close to a station or at the heart of a big city, can also mean an expensive location. Balance the higher cost of rental with higher estimated profits, is it worth the risk? What does your market research of the area tell you? Consulting with an expert would save you a great deal of trouble (and money). 

6. Financial Plan

This should be considered alongside the capital. Here are three things to add to financial planning:

  • Expenses Budget

  • Estimated Profit

  • Estimated Loss

Also consider the following:

  • Whether you will be moving to Japan or have a business partner to act on your behalf. 

  • If you are moving to Japan, the moving costs.

  • Taxation and accounting matters.

  • An emergency pullout plan in case the business does not do well. It’s a huge risk to go all in when it comes to business.

  • And more.

Preparing Articles of Incorporation

According to Japan External Trade Organization (JETRO), the information that should be included in a company’s articles of incorporation depends on the type of company to be established.

Information Included in the Articles of Incorporation

Generally, required information includes:

  • Company name, address, purpose

  • Capital Amount

  • Accounting Period

Check the link below for specific information about the company type: Kabushiki Kaisha or Godou Kaisha.

※ JETRO, “1.4 Information listed in articles of incorporation of a company

Documents to Submit for Company Registration

To register a company, you will need to submit the following documents to the Legal Affairs Bureau:

  • Articles of Incorporation 

  • Shares/Equity Report

  • Affidavit

  • Application Form for Company Registration

  • Certificate of Company’s Seal 

  • Registered Company Seal

For Foreigners

  • Certificate of Personal Seal or Signature Attestation

  • Proof of bank account ownership - Passbook (通帳) or bank statement

For Foreign Companies

  • Foreign Company’s Certificate of Registration 

  • Foreign Company’s Certificate of Seal or Signature Attestation

  • Certificate of Seal or Signature Attestation of foreign company’s company directors

  • Seal or signature of foreign company’s representative as well as every company director on the articles of incorporation

  • Representative director’s proof of bank account ownership - Passbook (通帳) or bank statement

  • Registered company seal

Visa Acquisition

If you don’t already have a resident status in Japan, you will need to apply for a Business Manager or Startup Visa.

For more about these 2 visas, read this article:

Ministry of Economy, Trade and Industry (METI), “Startup Visa

Other Essential Matters & Resources

Human Resource

If you are starting a business in Japan, chances are you will definitely need manpower. Educate yourself on the various laws and regulations that come with your duty as an employer.

Minimum Wage

As of 1 October 2019, minimum wage has been increased. Tokyo’s minimum hourly wage is now 1,013 yen. Note that each prefecture has its own minimum wage.

Social Security System

Company insurance consists of the following:

  • Labour Insurance 労働保険 - Unemployment Insurance plus Workers Accident Compensation Insurance

  • Social Insurance  社会保険 - Pension Insurance plus Health Insurance (Nursing Insurance and Medical Insurance)

Note that upon your company’s incorporation, you must submit notifications to the relevant authorities: Pension Office and Hello Work. 

※JETRO, “4.9 Japan's social security system

Company’s Bank Account

At least one of the company’s directors must have a Japanese bank account where the capital account will be transferred into. A company bank account can only be set-up after incorporation of a company as required documents include the company’s registered information. 

Where to Get Help

Setting up a business in Japan can be complex as you can see from this article, and we haven’t even touched on taxation matters. Luckily for you, there are specialized company set-up services in Japan that you can consult with or just entrust the entire matter to. If you are not keen to spend more money just to hire a consultant, the Tokyo Metropolitan Government’s Tokyo One-Stop Business Establishment Centre will be your saving grace.

Summary

Starting a business, especially one overseas, can be a daunting task. But when your business starts booming, it will be a worthwhile investment and a great life achievement. Don’t set limits to yourself, and always aim to do the difficult or impossible. Live out your dreams, and be rewarded for your efforts. We hope this article will assist you on your journey to success.

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