Starting and Doing Business in Japan

Starting and doing business in Japan

- Written by Yogi (Yogendra PURANIK), on 31-Mar-2022

- Proofread by Megha Wadhwa

Updated on 02-Jun-2026

Japan has offered business opportunities to Indians/foreigners since old times. The businesses are of three types: import to Japan, export from Japan, or a local business in Japan. In recent history, Indian people in business settled in Japan, in areas like Yokohama or Kobe, to trade in commodities such as Indian cotton, Indian clothes, tea, stone sculptures, gemstones, etc. In more recent history, Indians have also ventured into restaurants, grocery, information technology, education, human resources management, consulting, etc. Some also trade used machines, metal scrap, etc.

Common Mistakes Made by Foreign Entrepreneurs in Japan

Many foreign entrepreneurs enter the Japanese market with great enthusiasm but often underestimate the unique challenges of doing business in Japan. One of the most common mistakes is assuming that a successful business model from their home country will automatically succeed in Japan. Japanese customers tend to have different expectations regarding quality, service, packaging, communication, and after-sales support. Thorough market research and localization are therefore essential.

Another frequent mistake is underestimating the importance of the Japanese language and business culture. While many businesspeople may understand some English, negotiations, documentation, contracts, and day-to-day operations are predominantly conducted in Japanese. Building trust takes time, and aggressive sales tactics that may work elsewhere can be counterproductive in Japan. Foreign entrepreneurs often become frustrated by the long decision-making process, not realizing that Japanese organizations typically prioritize consensus, risk reduction, and long-term relationships over speed.

Many new business owners also underestimate the time and capital required to reach profitability. Sales cycles are often longer than expected, and the first customer can take months to secure. Some entrepreneurs invest heavily in office space, staffing, or inventory before establishing a stable customer base. Others fail to prepare sufficient documentation, resulting in delays when dealing with customers, banks, regulators, or immigration authorities.

Finally, many foreign businesses rely too heavily on a single customer, partner, or employee. Diversifying customers, building local networks, maintaining adequate cash reserves, and continuously investing in relationships are critical for long-term success. Entrepreneurs who approach Japan with patience, humility, adaptability, and a commitment to quality are far more likely to build a sustainable and respected business.

Understanding Japan as a market

Let us look into a few key aspects of Japan as a market.

Japan will constantly challenge you in terms of quality and time management. Also, the Japanese side has high expectations in terms of quality. Time management can also become a possible issue, as the Japanese counterpart will take a lot of time to decide on the business deal and then expect you to deliver efficiently in a short time. There will be an expectation to test the products several times to ensure high-quality standards, whether it is a physical product or software.

Japan has a typical set of business etiquette, right from bowing to holding the business card with both hands and going to alcohol parties. You might have to understand and inculcate a few of these when doing business with the Japanese people.

Language is the highest barrier in Japan. Either you learn Japanese (intermediate level), or you can use a language expert to support your work. Your business counterpart (corporate or retail), government offices, and ancillary service providers, all will expect you to explain things in the Japanese language..

Punctuality and staying committed are fundamental yet extremely important. Following basic hygiene and professional attire is appreciated during the meetings. In some cultures, the intense fragrance of perfumes is typical, whereas in Japan, one can avoid them. Suppose you produce something in India and are willing to export it to Japan, the Japanese counterpart will be interested in the cleanliness of your workplace, your employees' attire, employee satisfaction, and so on.

To Do List

Setting up a company in a foreign country requires working on multiple fronts, such as researching the market, registering the business, employing human resources, arranging visas, renting or buying properties, setting up an office or a unit, and so on. Please see a simple flow of activities below. 

Visa requirements

There are certain visa-related considerations when establishing a company in Japan. If you are a foreigner already residing in Japan, carefully check whether your current visa status permits business activities. Some visa categories may not allow you to actively manage or operate a business. For example, a holder of an Engineer/Specialist in Humanities/International Services visa may invest in a restaurant or another business, but generally cannot engage in its day-to-day management unless authorized under an appropriate visa status. A permanent residence (PR) gives you the flexibility to engage in various activities, including managing a business. 

If you are outside Japan and do not currently hold a visa that allows you to reside in the country, it is advisable to seek assistance from someone in Japan, such as a trusted friend, administrative scrivener (gyosei-shoshi), judicial scrivener, lawyer, or accountant. They can help with company registration, documentation, and communication with the relevant authorities. If you intend to relocate to Japan to manage your business, you may need to obtain a Business Manager Visa. Among other requirements, immigration authorities will typically expect the business to have a dedicated office, sufficient capital, and a viable business plan demonstrating its ability to operate continuously.

Type of companies/organizations

There are multiple choices when you wish to set up a company/organization in Japan, depending on various factors like your activity, business size, and so on.

1. Kabushiki Kaisha (KK or LTD)

This is a joint stock or limited company. You may need around 300,000 yen to set up a KK entity. This is the most common type of entity in Japan with a higher credibility, which can be helpful when dealing with local customers, employees, and business partners.

KK allows for a scalable organization, with the ability to have a Board of Directors, listing on the stock exchange, and raise additional funding through the sale of shares, etc. In contrast, in a GK, the next option, you cannot do any of these things.

In a KK, there is a clear organizational distinction between ownership (shareholders) and management (directors). In contrast, GK investors are legally considered partners who help run the company, and the investment amount is not automatically proportionate to authority over the company or voting rights.

2. Goudou Kaisha (GK or LLC)

This is a limited liability company. You may need around 150,000 yen to set up a GK entity. The registration process and ongoing corporate compliance for GKs are simpler and less expensive compared to KK.

While both KK and GK are required to submit Articles of Incorporation and submit annual accounts to the tax office, KK is also required to hold annual shareholders' meetings, submit reports, and publish its financials every year. Both GK and KK can be fully owned by a company overseas. GK can be considered a branch. GK cannot be listed on the stock market.

The GK, while still very credible, is a newer type of entity established in 2006, and therefore still has a weaker image in Japan. That being said, many businesses opt to set up a GK over a KK because of ease in management.

3. Representative office

This type of entity can indulge only in market research, information collection, or PR. It cannot indulge in full-scale operations or sales. A representative office does not require setting up a local entity or investment of capital.

4. Branch office

It is the most accessible type of entity to establish. With a branch office, you can operate your business after securing a business office, designating a representative person in Japan, and registering these matters with the legal affairs bureau in Japan. A branch office can be established in around a month for a cost of less than 150,000 yen.

A branch office is not an independent entity. The credits and debts arising from branch office activities are directly attributed to the foreign company. A branch office cannot be converted to a KK or GK.

5. NGO or NPO

There is no legal entity called an NGO in Japan. Under Japanese law, one can establish an NPO, Association (shadan houjin), or Foundation (zaidan houjin). NPO has two types: the regular NPO and the “Approved” NPO. After one year of launching the regular NPO, one can apply to the government to approve it. You can also set up an Informal Association (nin’i dantai), usually established for housing societies, sports groups, etc. You are allowed to open bank accounts for any of these establishments.

6. Religious organization

The Constitution guarantees Freedom of religion to all. Religious organization means any organization whose primary purposes consist of disseminating religious teachings, conducting ceremonies and functions, and educating and nurturing believers. A religious juridical person means a religious organization that obtains juridical status through certification by a prefectural governor or the Minister of Education, Culture, Sports, Science and Technology (MEXT).

Religious juridical persons have two categories. One is a single religious juridical person with establishments for worship, such as a shrine, a temple, or a church. The other is a comprehensive religious juridical person that affiliates shrines, temples, or churches under its umbrella, such as a denomination, sect, or religious community. Among the single religious juridical persons, those under the umbrella of a comprehensive religious juridical person are called affiliated religious juridical persons. Those that are independent are called individual religious juridical persons.

Establishing a Business in Japan

The process of establishing a company in Japan is relatively straightforward and well-structured. The main steps generally include:

• Preparing the Articles of Incorporation

• Notarizing the Articles of Incorporation (required for a Kabushiki Kaisha or KK)

• Depositing the initial capital

• Registering the company with the Legal Affairs Bureau

• Registering the company seal (if applicable)

• Opening a corporate bank account

• Completing tax, social insurance, and other administrative registrations

Many entrepreneurs choose to handle part of the process themselves. However, engaging a judicial scrivener, administrative scrivener, accountant, or lawyer can save considerable time and help avoid procedural mistakes.

Before incorporation, several important decisions must be made, including the company's business activities, registered address, capital amount, fiscal year-end, shareholders, and directors. Japan no longer requires a Japanese national to serve as a director. However, if all directors reside overseas, additional documentation, notarization, and certification procedures may be required.

Entrepreneurs intending to relocate to Japan and manage their business may need to obtain a Business Manager Visa. Under the revised framework introduced in 2025, immigration authorities generally expect the business to have substantial capital, a dedicated office, a viable business plan, and the capability to operate on a continuous and stable basis. The commonly referenced capital guideline has been increased to 30 million yen (from 5 million yen) in 2026, and additional requirements, such as employing at least one full-time employee, may apply. Since immigration policies are subject to revision and individual circumstances vary, applicants should carefully confirm the latest requirements with the Immigration Services Agency of Japan or qualified legal professionals before making investment decisions.

The company is legally established on the date its registration application is accepted by the Legal Affairs Bureau. Registration is usually completed within one to two weeks. Depending on the type of company, foreign ownership structure, and business activities, additional filings may be required. Businesses operating in regulated sectors such as financial services, medical devices, pharmaceuticals, defense-related products, telecommunications, or cybersecurity may require licenses or approvals from the relevant government authorities before commencing operations.

The entire incorporation process typically takes between one and three months, depending on the complexity of the business and the preparedness of the applicant.

Office Requirements

Choosing the right office is an important consideration when establishing a business in Japan. In Japan, your office address means more than just an address. It forms the primary impression of your credibility and sustainability. Entrepreneurs seeking a Business Manager Visa are generally expected to maintain a dedicated business office that is separate from their residence and suitable for commercial activities. While virtual offices may be sufficient for certain registration purposes, they are often not accepted for visa applications.

Operating a business from home may also be restricted by lease agreements, condominium rules, or local regulations. To reduce initial costs, many startups choose shared offices, serviced offices, or coworking spaces, which provide professional business facilities while offering greater flexibility during the early stages of business development. 

Human Resource Management

As a business grows in Japan, effective human resource management becomes increasingly important. Employers must comply with Japanese labor laws regarding working hours, wages, paid leave, workplace safety, and employee welfare. Employment contracts should clearly define job responsibilities, compensation, working conditions, probation periods, and termination provisions. Since Japanese labor regulations generally provide strong protections for employees, it is advisable to seek professional guidance when drafting contracts and workplace policies.

Companies should also pay close attention to overtime regulations. In most cases, overtime work requires a labor-management agreement and must be compensated according to statutory rates. Employers are further responsible for enrolling eligible employees in social insurance programs, including health insurance, pension insurance, employment insurance, and workers' compensation insurance. These obligations increase labor costs but also contribute to employee stability and retention. Hiring Japanese staff can greatly assist with customer communication, regulatory compliance, and cultural understanding. A well-managed workforce, supported by clear policies and fair treatment, is one of the most important foundations for building a sustainable and reputable business in Japan.

Companies can recruit full-time and part-time employees through various channels. Popular job portals include Indeed Japan, Rikunabi, Mynavi, Townwork, and Baitoru. Local Hello Work offices operated by the government provide free recruitment support and are particularly useful for small businesses. Foreign-owned businesses may also benefit from referrals through community organizations, chambers of commerce, universities, vocational schools, and employee networks. While part-time employees are commonly used in retail, hospitality, and restaurant businesses, key positions should ideally be filled with reliable full-time staff who can contribute to the long-term growth and stability of the company.

Payroll and Accounting

Accurate payroll administration and accounting are essential for maintaining compliance, credibility, and long-term business sustainability. While the fundamental principles are similar to those in other countries, Japan has specific reporting requirements, tax regulations, and documentation standards that are generally conducted in Japanese.

Many businesses choose to outsource payroll, bookkeeping, tax filing, and social insurance administration to professional accounting firms or payroll service providers. Depending on the size and complexity of the business, outsourcing costs may range from a few hundred thousand yen per year to significantly higher amounts for larger organizations. Some firms also provide visa-related support services for foreign business owners and employees.

Business owners with sufficient Japanese language ability and accounting knowledge may choose to manage these functions themselves. Accounting software such as Yayoi, freee, and Money Forward are widely used in Japan and can simplify bookkeeping, payroll processing, and tax reporting. While there is a learning curve, managing accounting internally can significantly reduce operating costs for small businesses.

Corporate Taxes and Statutory Obligations

Companies operating in Japan are subject to various national and local taxes. These generally include corporate tax, local inhabitant tax, enterprise tax, and consumption tax, depending on the company's size, profitability, and turnover. Even companies that generate little or no profit may be required to pay certain minimum local taxes and submit annual tax returns.

Employers are responsible for withholding income tax from employee salaries and remitting it to the tax authorities. They must also enroll eligible employees in social insurance programs, including health insurance, pension insurance, employment insurance, and workers' compensation insurance. Japanese authorities have become increasingly strict regarding compliance with payroll, social insurance, and labor regulations.

Businesses engaged in international trade must also consider customs duties, import taxes, transfer pricing regulations, and withholding taxes. Certain payments made from Japan to overseas entities, such as royalties, licensing fees, or specific service fees, may be subject to withholding tax under Japanese law. However, tax treaties between Japan and other countries may reduce or eliminate some of these obligations. Professional tax advice is strongly recommended for businesses involved in cross-border transactions.

Setting up a restaurant in Japan

Opening a restaurant in Japan requires careful planning and a thorough understanding of local business practices. Before investing, spend time observing successful restaurants and studying how they operate. Pay attention to standards of cleanliness, customer service, seating arrangements, menu design, kitchen layout, inventory management, and staff coordination. Visiting well-established restaurants across different price segments can provide valuable insights into customer expectations and operational efficiency.

The restaurant business typically requires significant initial investment. Depending on the location, size, and concept, a small restaurant may require an investment of approximately 8 to 15 million yen or more. Costs can be reduced by purchasing quality second-hand equipment and furniture from reputable suppliers such as Tempos and other restaurant-equipment dealers. Acquiring an existing restaurant business may also be an attractive option, as it can reduce setup time and licensing requirements. However, prospective buyers should conduct thorough due diligence and obtain professional advice before committing to a purchase.

Food safety compliance is a critical requirement in Japan. Every restaurant must appoint a certified food sanitation manager (shokuhin eisei sekininsha), who is required to complete a designated training course. If the number of seats is more than 30, you must appoint an anti-fire manager (bouka sekininsha). Depending on the menu and business model, additional permits or notifications may be required. Restaurants serving alcoholic beverages should also ensure that staff are properly trained in responsible alcohol service and equipment maintenance.

The success of a restaurant depends largely on selecting the right location, understanding the target customer base, and offering a menu that differentiates the business from competitors. Strong branding, an attractive website, multilingual online presence, and active engagement on social media can significantly enhance visibility. Registering the restaurant on popular review and ranking platforms, participating in local community events, and distributing promotional materials within the neighborhood can help build a loyal customer base and generate steady growth.

Exporting food products to Japan

India's food processing industry has witnessed remarkable growth in recent years, and many producers are now exploring Japan as a promising export destination. Japan is one of the world's largest food-importing nations and offers opportunities for suppliers of processed foods, spices, tea, coffee, confectionery, ready-to-eat products, and specialty foods. However, entering the Japanese market requires strict compliance with regulatory and quality standards.

Japan maintains a comprehensive framework governing the importation of food products. The regulations cover every stage of the supply chain, including cultivation or production methods, processing, packaging, storage, transportation, and distribution. Imported food products must comply with Japanese food safety standards, residue limits, and labeling requirements. Packaging is generally required to display essential information in Japanese, including ingredients, allergens, nutritional composition, country of origin, expiration dates, and storage instructions. Since the requirements vary depending on the product category, exporters are advised to consult import specialists, testing laboratories, or Japanese trading partners before shipping their products. Thorough preparation and compliance with Japanese standards can significantly improve the chances of successful market entry.

Exporters seeking entry into the Japanese market may consider approaching established importers, trading houses, and distribution companies that specialize in food products. Some of the major trading companies include Mitsubishi Corporation, Mitsui & Co., Itochu Corporation, Marubeni Corporation, and Sumitomo Corporation. Exporters of specialty foods, spices, tea, coffee, and ethnic products may also approach importers and distributors such as Kato Sangyo Co., Ltd., Nippon Access, Kokubu Group, and Mitsubishi Shokuhin. In addition, retailers and supermarket chains such as AEON Co., Ltd., Seiyu, and Life Corporation often source imported products through their procurement networks. Organizations such as the Japan External Trade Organization, Indian trade promotion agencies, and industry exhibitions like FOODEX Japan can help exporters identify suitable partners, understand market requirements, and establish business relationships in Japan. 

The startup ecosystem

Japan has steadily transformed itself into one of Asia’s most attractive destinations for startups and innovation-driven businesses. Recognizing the need to revitalize its economy and address demographic challenges, the Japanese government has launched several initiatives to encourage entrepreneurship, attract foreign founders, and support new ventures. The government’s "Startup Development Five-Year Plan" aims to increase startup investment and create globally competitive companies. Entrepreneurs can benefit from support mechanisms such as startup visas, subsidies, grants, low-interest loans, tax incentives, office space support, and business matching opportunities. Key organizations supporting startups include the Japan External Trade Organization (JETRO), the Japan Finance Corporation, the New Energy and Industrial Technology Development Organization, the Small and Medium Enterprise Agency, the Organization for Small & Medium Enterprises and Regional Innovation, and the Japan Science and Technology Agency. In addition, metropolitan governments such as the Tokyo Metropolitan Government, the Osaka Prefectural Government, and the Fukuoka City Government offer dedicated startup programs, incubation facilities, and financial assistance to domestic and foreign entrepreneurs.

The private sector has also become an important pillar of Japan’s startup ecosystem. Large corporations increasingly collaborate with startups through open innovation programs, venture funds, accelerators, and proof-of-concept initiatives. Prominent startup support organizations include Plug and Play Japan, CIC Tokyo, Samurai Incubate, Mistletoe, Global Brain Corporation, JAFCO Group, Open Network Lab, Beyond Next Ventures, and Shibuya Startup Support. Universities such as the University of Tokyo, Kyoto University, and Tsukuba University also operate incubation and commercialization programs that help researchers convert innovations into businesses. Foreign entrepreneurs are particularly welcomed in sectors such as artificial intelligence, digital transformation, robotics, healthcare, clean energy, semiconductors, education technology, and advanced manufacturing. While Japan's business environment requires patience and long-term relationship building, startups that combine innovation with Japan's strengths in quality, reliability, and trust can find significant opportunities for sustainable growth. 

Challenges of Doing Business in Japan

Japan is one of the world's largest and most stable economies, but it is also one of the most demanding markets for new entrants. Many foreign entrepreneurs underestimate the time, patience, and persistence required to build a successful business in Japan. Unlike some markets where decisions are made quickly, Japanese customers and corporations tend to evaluate suppliers carefully before committing to a business relationship. As a result, the sales cycle is often significantly longer, particularly when dealing with large corporations, government organizations, schools, or established distributors.

The first sale is usually the most difficult. Japanese customers place a high value on trust, reputation, reliability, and long-term commitment. A prospective customer may require multiple meetings, product demonstrations, sample evaluations, references, and internal reviews before placing an order. Once trust is established, however, business relationships often become stable and long-lasting. Entrepreneurs should therefore focus not only on making a sale but also on building credibility and demonstrating their commitment to the Japanese market.

Documentation and quality standards are another major challenge. Japanese clients frequently expect detailed proposals, specifications, manuals, contracts, quotations, quality-control records, and after-sales support documentation. Products and services are often evaluated not only on price but also on consistency, reliability, safety, presentation, and responsiveness. Even minor errors in quality or communication can negatively affect customer confidence.

Success in Japan also requires understanding the Japanese language and nuances, business culture, and communication styles. Direct sales approaches and aggressive negotiations may not always produce the desired results. Sometimes the Japanese customers want you to start with a loss. They are testing your willingness and integrity. Sincerity, humility, punctuality, responsiveness, and attention to detail are highly valued. Business discussions often emphasize consensus-building, mutual benefit, and long-term relationships rather than short-term gains. The ability to communicate and negotiate in Japanese, or to work closely with trusted Japanese partners, can significantly improve the chances of success. Foreign entrepreneurs who combine patience, high-quality standards, cultural sensitivity, and a long-term commitment to the market are more likely to build sustainable and profitable businesses in Japan.

It is also important to recognize that periods of economic uncertainty or national crisis can influence consumer and business behavior. Following the Great East Japan Earthquake of March 2011, some Japanese companies and consumers showed a stronger preference for dealing with familiar domestic suppliers and businesses. This shift posed challenges for certain foreign-owned enterprises, including restaurants and small businesses that relied heavily on local customers. Some establishments experienced a significant decline in sales and, despite having operated successfully for many years, were forced to reduce operations or close. While such situations are not unique to Japan and can occur in many countries during times of crisis, foreign entrepreneurs should be aware of the importance of building strong local relationships, establishing trust within the community, and demonstrating a long-term commitment to the Japanese market.

Closure of a company

1. Closure of a branch office

Branch offices can be closed in two ways: either by registering the closure of a branch office or by registering the resignation of all representatives in Japan. A Japanese branch office’s register will not be closed unless all representatives in Japan resign. This is because it is possible for a business to be continued in Japan if representatives are registered. Conversely, a branch office in Japan is closed when all its representative directors in Japan resign.

The approach commonly adopted in practice is only to register the resignation of all representatives in Japan. Creditors of the branch office must be given no less than one month before the closure to submit objections to the closure of the branch office.

The general flow of events is as follows.

1. Decision on branch office closure and the resignation of all representatives in Japan

2. Call for creditors with objections to the branch office closure, on an individual basis and through a notice in the official gazettes, to submit claims

3. Notification by a tax agent to tax authorities

4. Branch office closure (no sooner than one month after call/notice above)

5. Preparation of an affidavit regarding the closure of the branch office and resignation of all representatives in Japan

6. Attestation of an affidavit by an embassy consul or similar official

7. Application for registration of resignation of all representatives in Japan with the Legal Affairs Bureau

8. Acquisition of a certificate on registered closure information (about two weeks after registration application)

9. Notification of branch office closure to tax authorities, etc.

These procedures for closing a branch office must also be completed when upgrading a branch office to a subsidiary company. Because a branch office cannot be directly reorganized into a joint-stock corporation (Kabushiki-Kaisha (K.K.)) or a limited liability company (Godo-Kaisha (LLC)), the branch office closure procedures and the subsidiary company establishment procedures must be carried out simultaneously. In such instances, however, the branch office's assets may be passed on to the subsidiary through investment in kind.

Once the resignation of all representatives in Japan has been registered, the register is closed without a date being entered for the branch office’s closure. Although it is usually sufficient for the date of closure to be recorded in the affidavit, it is necessary to register both (1) branch office closure (abolishment) and (2) resignation of all representatives in Japan if a date of closure is required in the register. Where the address of a representative in Japan and the branch office fall under the jurisdictions of different regional legal affairs bureaus, it may be necessary that a registration application similar to that for registration of transfer of a business office is made to the bureau with jurisdiction over the representative’s address.

2. Closure of a local entity

The following procedures must be completed when dissolving/liquidating a GK or KK. Creditors of the subsidiary company must be given a period of no less than two months before the liquidation to submit their claims against the subsidiary company. Should the subsidiary company have negative net assets, the corporation cannot independently complete the liquidation procedures below but instead must follow special liquidation procedures under the direction of a court.

The general flow of the procedures is as follows

1. Resolution at the general meeting of shareholders or equivalent on the dissolution of the subsidiary company and the appointment of a liquidator

2. Application to the Legal Affairs Bureau for registration of the dissolution of the subsidiary company and the appointment of a liquidator

3. Notification to tax authorities of the dissolution of the subsidiary company and the appointment of a liquidator

4. Call for creditors with claims against the subsidiary company, on an individual basis and through notices in official gazettes, to submit claims

5. Preparation of a balance sheet and inventory of property at dissolution

6. Approval by a general meeting of shareholders or equivalent of the above balance sheet and inventory of property (notification delivered to members in the case of a limited liability company)

7. Ascertainment and distribution of residual assets

8. Resolution approving conclusion of liquidation at the general meeting of shareholders or equivalent (no sooner than two months after the call and placement of notices in 4 above)

9. Application for registration of the completion of the liquidation of the subsidiary company with the Legal Affairs Bureau

10. Acquisition of a certificate on registered closure information (approx. two weeks after application for registration)

11. Notification of completion of liquidation of the subsidiary company to tax authorities, etc.

References

1. Japan External Trade Organization (JETRO) website

For more blogs by Yogi, please visit <www.yogi3677.org/blogs> 他のブログはこちらをご覧ください。