Japan - Market Entry & Business Opportunities

Japan, with its capital in Tokyo, is an island country located in East Asia. The primary language spoken is Japanese, but English is widely studied and spoken as a second language. The majority ethnic group is the Yamato, comprising about 98% of the population. Japan has a negative population growth rate, and its total land area is approximately 377,972 square kilometres. The country is surrounded by the Pacific Ocean and shares maritime borders with neighbouring countries. The official currency is the Japanese Yen (JPY).

Economic Overview

Japan's real GDP is projected to grow by 1.3% in 2023 and 1.1% in 2024, driven by domestic demand. Government support, including assistance to households coping with energy price shocks and increased defence spending, will boost consumption and investment. Core inflation is expected to increase towards 2% as wage growth extends to SMEs. The labour market will remain tight, with unemployment decreasing to 2.4% in 2024. Targeted energy subsidies, additional structural spending, and revenue measures are needed. The Bank of Japan should communicate its monetary stance clearly. Productivity-boosting policies and reducing the gender wage gap are crucial for well-being and fiscal sustainability. Despite inflation's impact on incomes, consumer confidence is rising, driving household consumption growth. With COVID-19 measures in place, the Japanese economy is expected to continue its recovery.

Market Overview

Japan, the world's third-largest economy, is a major player in global trade as the fourth largest importer and fifth largest exporter of goods. The country's affluent population presents a lucrative market, although high consumer standards and intense competition can pose challenges. Japan's aging population also creates opportunities in sectors like healthcare and life sciences. However, navigating Japan's bureaucratic import regulations and local competition requires adaptability and strategic planning. Key sectors of excellence include consumer electronics, engineering, technology, and automotive manufacturing. Success in the Japanese market requires understanding consumer demands, competition, and the potential for growth in industries influenced by demographic changes.

Bilateral Relations between India-Japan

• During Prime Minister Shri Narendra Modi's visit to Japan in October 2018, the "India-Japan Digital Partnership" (I-JDP) was inaugurated. The I-JDP aimed to expand and enhance existing areas of cooperation while also introducing new initiatives within the realm of science, technology, and information and communication technology (ICT).
• During the 13th Annual Summit, Prime Minister Shri Narendra Modi's visit to Japan on 28-29 October 2018 significantly bolstered the bilateral relations between the two countries. The visit witnessed the signing of 32 Memorandums of Understanding (MoUs) and agreements, covering various sectors and areas of cooperation. These included agreements on healthcare and wellness, postal services, environmental cooperation, and the food processing sector.
• The Cabinet, under the leadership of the Prime Minister, has given its approval for the signing of a memorandum of understanding (MoU) between the Textiles Committee of India and M/s Nissenken Quality Evaluation Centre of Japan.
• In January 2021, the Government of India and the Government of Japan entered into a Memorandum of Cooperation, establishing a Basic Framework for Partnership to ensure the proper operation of the system related to "Specified Skilled Worker." This agreement aimed to facilitate collaboration and effective management of the program pertaining to skilled workers from India in Japan.
• During the visit of Japan's Prime Minister Kishida to India in 2022, India and Japan successfully concluded the signing of six bilateral agreements. Additionally, three separate announcements were made, highlighting Japanese investments totalling $42 billion, projects focused on the development of Northeast India, and a partnership dedicated to clean energy initiatives.

Taxation in Japan

Japan has a comprehensive tax system that consists of various taxes levied at the national, prefectural, and municipal levels. Here are some key aspects of the tax system in Japan:

• Income tax rates for individuals range from 5% to 45% depending on income levels.
• Corporate income tax rate is 23.2% (national tax) plus a local corporate tax imposed by each prefecture.
• Consumption tax rate is 10% for most goods and services, with a reduced rate of 8% for certain items.
• Corporations may also be subject to enterprise tax and capital-based taxes, leading to varying effective corporate tax rates.
• Property tax rates are determined by local government authorities based on property type and location.
• Inheritance and gift taxes are imposed on asset transfers, with tax rates varying based on the relationship between donor and recipient.
• Social security contributions, including health insurance, pension, and unemployment insurance, are deducted from employee salaries.
• Withholding taxes apply to certain types of income and vary based on the nature of the income and tax treaty agreements.
• Capital gains tax is imposed on profits from the sale of assets, with rates based on factors such as holding period and asset type.

Subsidies and Incentives offered by Japan

Japan offers various subsidies and incentives to support businesses, promote investment, and foster economic growth. These subsidies and incentives aim to stimulate specific industries, encourage innovation, regional development, and address social and environmental challenges.

• Regional Revitalization Support: Subsidies and programs to promote economic development in less developed areas.
• Research and Development (R&D) Grants: Funding for research and technological advancements.
• Renewable Energy Subsidies: Support for investments in renewable energy projects.
• Small and Medium-sized Enterprise (SME) Support: Assistance for growth and development of SMEs.
• Export Promotion: Incentives to enhance export competitiveness.
• Job Creation Incentives: Support for businesses generating employment opportunities.
• Green Initiatives: Subsidies and incentives for environmentally friendly practices.
• Start-up Support: Funding, mentorship, and resources for start-up businesses.
• Manufacturing Modernization Support: Assistance for technological advancements in the manufacturing sector.
• Foreign Direct Investment (FDI) Incentives: Measures to attract foreign investment.
• Regional Development Grants: Grants for stimulating economic growth in regional areas.
• Training and Skills Development Support: Subsidies for workforce training and skill enhancement.

Financing Business in Japan

Financing a business in Japan can be achieved through various means, including traditional bank loans, government support programs, venture capital, and crowdfunding. Here are some common financing options available in Japan:

• Bank Loans: Major banks like MUFG, SMBC, and Mizuho offer business loans tailored to specific needs.
• Government Support Programs: Japan Finance Corporation and SMEA provide low-interest loans, subsidies, and grants for SMEs.
• Venture Capital: Firms like Global Brain and JAFCO invest in start-ups and high-growth companies.
• Crowdfunding: Platforms like Campfire and Readyfor allow businesses to raise funds from individual investors.
• Business Incubation Programs: Tokyo Start-up Gateway, Osaka Innovation Hub, and Fukuoka Growth Next provide support, mentoring, and infrastructure for start-ups.
• Export-Import Bank of Japan: JEXIM offers financial products and services to support international trade.

Top 10 Companies in Japan - 2022

Rank	Company	Industry	Revenue in 2022 (USD)
1	Toyota	Automobile Manufacturing	$ 273.29 B
2	Mitsubishi Corporation	Conglomerate	$ 159.01 B
3	Honda	Automobile Manufacturing	$ 124.33 B
4	ENEOS Holdings	Oil and Gas	$ 109.69 B
5	Mitsui Busan	Conglomerate	$ 106.45 B
6	It?ch? Sh?ji	Conglomerate	$ 103.12 B
7	Nippon Telegraph and Telephone	Telecommunication	$ 96.35 B
8	7-Eleven	Retail	$ 87.60 B
9	Sony	Technology	$ 85.05 B
10	Hitachi	Conglomerate	$ 83.01 B

Most Popular e-Commerce Companies in Japan - 2022

RANK	COMPANY	Headquarter
1	Amazon	USA
2	Rakuten	Japan
3	Yahoo! Auctions	Japan
4	Yahoo	Japan
5	Mercari	Japan
6	DMN.com	Japan
7	Zozo Town	Japan
8	Wowma	Japan
9	Rakuma	Japan
10	Qoo10	Singapore

Top 5 Start-Ups in Japan - 2022

RANK	COMPANY	INDUSTRY	FOUNDED IN
1	Izumi Finance	Financial Services	2020
2	I’mbesideyou	Artificial Intelligence	2020
3	primeNumber	Software	2015
4	Finatext	Financial Services	2014
5	Aidemy	Ed-Tech	2014

Business Clusters in Japan

Japan is known for its vibrant and diverse business clusters that bring together companies, industries, and research institutions to foster innovation, collaboration, and economic growth. Here are some notable business clusters in Japan:

• Silicon Valley of Japan (Kanagawa Prefecture): High-tech industries, research institutions, and start-ups.
• Medical Cluster (Kobe): Concentration of medical research, hospitals, and pharmaceutical companies.
• Kyoto Animation Cluster (Kyoto): Hub for animation studios, game developers, and digital media.
• Automotive Cluster (Aichi Prefecture): Major automobile manufacturers and automotive suppliers.
• Osaka Fashion Cluster (Osaka): Textile manufacturing, apparel design, and fashion retail.
• Biotech Cluster (Kobe): Focus on biotech research, development, and commercialization.
• Robotics and AI Cluster (Tokyo): Development of robotics, automation, and AI applications.
• Gaming and Entertainment Cluster (Tokyo): Hub for game developers, publishers, and esports.
• Renewable Energy Cluster (Fukushima): Development of clean energy through wind, solar, and biomass.
• Food and Agriculture Cluster (Hokkaido): Agricultural production, dairy farming, and food processing.
• Advanced Materials Cluster (Kanagawa Prefecture): Development and application of advanced materials.
• Space and Aerospace Cluster (Tsukuba): Focus on space exploration, satellite development, and aerospace engineering.
• Financial Technology (Fintech) Cluster (Tokyo): Innovation in digital banking, payment systems, and financial services.
• Marine and Offshore Engineering Cluster (Yokohama): Shipbuilding, maritime technology, and offshore energy.
• Healthcare and Medical Technology Cluster (Osaka): Innovation in healthcare delivery and medical technologies.

How to Set Up a Business in Japan?

Below are the steps that you need to follow for setting up business in Japan:

• Open a Bank Account
• Secure an Office Space
• Get Articles of Incorporation ready & Notarized
• Deposit the Initial Capital
• Prepare all the relevant Documents
• File Application for Business Registration
• Obtain Registry Certificate, Seal Certificate and Corporate Number

Best Locations to Set Up Business in Japan

Japan offers several prime locations that are favourable for setting up a business. Some of the best locations to consider are:

• Tokyo: Capital and economic centre with access to a vast consumer market and advanced infrastructure.
• Osaka: Strong focus on commerce and manufacturing, favourable business regulations, and good transportation links.
• Yokohama: Major international trading port, business-friendly environment, and proximity to Tokyo.
• Fukuoka: Rising start-up ecosystem, strong IT industry, and supportive business environment.
• Nagoya: Major industrial and manufacturing centre, particularly in automotive, aerospace, and machinery industries.
• Kyoto: Focus on technology, research, and innovation, with strengths in robotics and electronics.
• Sapporo: Well-developed food and agriculture industry, tourism, and technological advancements.
• Kobe: Thriving port and international trade, opportunities in logistics, healthcare, and biotechnology.
• Hiroshima: Growing economy, strong focus on advanced manufacturing, renewable energy, and R&D.
• Sendai: Emerging business centre with strengths in technology, research, and education.
• Nagasaki: Key business and industrial centre, particularly in shipbuilding, tourism, and renewable energy.
• Okinawa: Favourable tax system, strong tourism industry, and potential in renewable energy, IT, and healthcare.
• Kanazawa: Known for traditional arts and crafts, growing reputation as a creative hub in design and tourism.
• Nagoya: Major manufacturing and automotive centre, robust supply chain network, and opportunities in automotive, aerospace, and robotics industries.

To know more about our services and how we can help you in Japan– CLICK HERE

Visa and Immigration

Japan offers different types of visas for foreign nationals who want to set up or expand their business in the country. Following are some of the common visa types for Japan:

• Business Manager Visa (Investor/Business Manager): This visa category is suitable for individuals who intend to start their own business or invest in an existing business in Japan. To qualify for this visa, applicants must demonstrate a substantial investment and possess the necessary business management skills.
• Highly Skilled Professional Visa: The Highly Skilled Professional Visa is designed for individuals with advanced expertise and skills in their field, such as researchers, engineers, executives, and professionals in specialized industries. The visa is divided into three categories: advanced academic research, advanced specialized/technical activities, and advanced business management. Applicants earn points based on various criteria, including their academic background, work experience, salary, publications, and awards.
• Engineer/Specialist in Humanities/International Services Visa: This visa category covers a wide range of business activities in fields like engineering, information technology, finance, legal services, consulting, and more. To obtain this visa, applicants typically need a job offer from a Japanese company or sponsorship by a business entity.
• Intra-Company Transferee Visa: The Intra-Company Transferee Visa is specifically for employees of multinational companies who are being transferred to work at their company's branch or subsidiary in Japan. This visa requires a job offer from the parent company or a related entity in Japan.
• Investor/Business Manager Visa for Small and Medium Enterprises: This visa is specifically tailored for individuals planning to establish or manage small or medium-sized enterprises (SMEs) in Japan.

While entering into the Japanese market may seem a bit daunting but with diligent planning, guidance from market experts and targeted industry analysis can often help with overcoming even the greatest barriers. Additionally, building strong partnerships, conducting market research, and tailoring strategies to meet local preferences are quite essential for success.

India Law Offices LLP has a strong international presence and has forged strategic alliances with some of the largest law firms that enable us to cater to our clients from around the world. In Japan, we work closely with our partners Kojima Law Offices, a reputable law firm based in Tokyo, Japan that specializes in Corporate Law, International Commercial Arbitration, Tax Law, Labour Law, Employment Law, Intellectual Property, Joint Ventures, Dispute Resolution and Mergers & Acquisitions.

If you are a Japanese national or a company seeking legal assistance in India or an Indian planning to expand to the Japan market, our firm can provide the necessary guidance and support you require.


To know more about the Japan market, request a Free Detailed France Market Entry Report.