Obstacles that foreign startups and companies run into when starting up in Japan

Many foreign startups and companies are interested in expanding their businesses to Japan.

This is because the Japanese market is considered large and highly attractive.

However, it is also widely recognized that entering the Japanese market can be challenging for foreign companies.

This article is based on research from related articles and interviews with individuals involved in the startup ecosystem.

There are three main reasons why it is difficult for foreign startups to

starting up in Japan

Three main obstacles

1．Differences in culture, especially business customs

2．Language barrier

3.   Complexity of procedures

1．Differences in culture, especially business customs

Japan has its own unique business customs.

There is still a strong top-down approach, especially in large companies.

Japanese companies tend to take a long time to make decisions, which can be perceived as a slow pace of work compared to overseas companies.

On the other hand, this cautious approach allows them to carefully plan their business in advance, reducing the risk of failure.

There are also differences in business etiquette.

Laws may vary as well. For example, in the content industry, broadcasting standards regulations differ by country. As a result, Japanese content (i.e., products) may not be allowed to be broadcast (i.e., sold) overseas.

Having worked in content sales for nine years, I had to be aware of the laws and regulations in each country when selling Japanese content to media platforms worldwide.

What we usually consider “common sense” often turns out not to be so in different countries.

In addition to conducting market research, it is crucial to understand national characteristics and culture, as well as differences in business etiquette.

2．Language barrier

Japan is an island nation with a predominantly single ethnic group.

The necessity of using a language other than Japanese in daily life is low.

It is said that only 7% of Japanese people can speak practical English.

In business, a high level of specialization is required, along with even stronger English communication skills. This means that only a small percentage of people possess English proficiency suitable for business settings.

In the global business environment, communication skills—which include an understanding of different cultures and customs to overcome barriers—are essential.

When setting up an office in Japan, securing human resources with these skills is crucial.

３．Complexity of procedures

Visa procedures, business incorporation, insurance, opening a corporate bank account, tax reporting, office rental procedures, securing housing and office space, and other administrative paperwork required for foreign companies to establish themselves in Japan pose significant hurdles.

While startup support offices in various cities offer assistance, companies often need to contact multiple offices individually, prepare documents on their own, and repeat the process multiple times. As a result, many find themselves unsure of what to ask, who to ask, or what steps to take next.

From a certain point on forward, you might feel you might feel there is no companion to guide you through the entire process, making the journey especially challenging.

Foreign companies facing these obstacles can easily get lost along the way, and even if they successfully establish a business in Japan, some withdraw after just a year or two.

We believe it is crucial for overseas startups to be aware of these challenges before entering the Japanese market and to have a strategy in place to navigate them effectively.

My friend's Case

I actually asked an American friend of mine who incorporated in Japan how his start-up process went.　 (Incorporated in Osaka ｜Content industry｜Bilingual English-Japanese)

Ｑ．What type of visa do you have?

I started with the Culture Visa, then transitioned to the Startup Visa and now I have the Business Manager Visa. My father received the Business Manager in 1991 which bring my whole family to Japan. I think me and father is first in Japan history to do that, lol. So my childhood + adult = 6 visas in Japan.

Ｑ．What were the top 3 difficulties and obstacles you faced during the process of registering your company in Japan?

１．Synchronizing Visa and Company Registration Timelines: 

Managing the visa application process and company registration can be tricky since they occur almost simultaneously, often with overlapping requirements.

２．Office Lease Timing: 

Securing an office lease is required for the visa application, but landlords may hesitate without a completed company registration. Navigating this timing issue can be challenging, making it highly beneficial—if not critical—to be in Japan on a startup visa for smoother coordination of the business manager visa and company registration. The same goes for your personal home rental, just give yourself more time to find the right fit and contact rental agents who cater to overseas students and professionals.

３．Engaging Professionals:

It's wise to work with an administrative scrivener or bilingual local lawyer during the startup visa process and engage a tax lawyer once the business manager visa and corporate bank account are established. These professionals can help clarify the process, which is often not fully detailed or explained ahead of time.

Practicle Advice from my friend

Overall, you learn and adapt as you proceed, encountering unexpected steps and rules along the way. While it may feel overwhelming, allowing yourself sufficient time in Japan makes the process manageable. Regional startup offices are incredibly helpful and continuously improving, as they adapt to the unique needs of each foreign applicant.

The process depends on the city, with some areas offering more English support than others. Overall, I observed that the process sometimes requires entrepreneurs to solve issues independently and we are required to go find answers in-person, or over the phone. There is not an email address to contact for every issue, and what’s available publicly online in English might not be the full situation. However, I view this challenge as a valuable step for new startups, as successfully navigating the visa process builds confidence and readiness for other tasks like opening business accounts or personal memberships in Japan.

Established overseas companies can outsource everything for a fee, whereas young startups must handle more themselves. For those who want full assistance, hiring an administrative scrivener/immigration lawyer and a tax lawyer, costing around $3,000–$4,000 USD, is a great option.

Obtaining a visa and starting a company are among life's most significant and stressful experiences, and doing so in a foreign country adds emotional challenges so just try to trust this process, and be clear and specific about your business when working with all the new city and startup workers you’ll interact with in Japan; from when you first apply for a startup visa all the way until you are living here and setting up everything. I met so many generous and helpful people at every step. Just take it one step at a time and give yourself as much time as you can.

Toward the Growth of Japan's Startup Ecosystem

In attracting foreign start-ups and companies to Japan, it can be said that Japan still has many issues to resolve in terms of its reception system. It is important for Japan to continue to work on these issues so that as many good overseas companies and talented people as possible can do business in Japan.

We, STARTUPPERS, would like to cover on startup support organizations, companies, and people who are working to solve these issues in the startup ecosystem and to introduce and connect them to the rest of the world.

➡ Watch Related video clip Start Your Business in Japan with PRO Tips!

https://youtu.be/VBasMoX9sFs

Article credited to STARTUPPERS