Opening Business in Japan: GEOS Guide for Global Expansion

This article is apart of our weekly series associated with the The Global Subsidiary Index. The series is designed to help businesses identify the best countries for establishing a subsidiary based on key operational factors. GEOS provides a data-driven ranking of jurisdictions worldwide, assessing across 40+ criteria to bring you insights into global expansion opportunities.

Each country on the index is scored on an overall score out of 100, with each individual criterion out of 5 or 10. Higher scores indicate a more favorable environment for businesses. By leveraging these insights, companies can make informed decisions on where to establish a legal presence.

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Japan gave us Nintendo, the Toyota Prius, and the Sony Walkman. It’s changed how we play, commute, and listen to music. And the country is still moving forward. If you’re looking for your next destination to start business, Japan is one of the strongest markets to consider.

The economy grew faster than expected in the second quarter of 2025, with exports holding firm despite new U.S. tariffs. GDP rose 1.0% on an annualized basis, making it five straight quarters of growth. That momentum is boosting confidence at home and catching the eye of businesses abroad.

Japan is advanced, stable, and innovation-driven. But setting up there isn’t simple. Strict compliance rules and cultural expectations can slow even the best-prepared teams. In this guide, GEOS walks you through what it takes to expand into Japan and how we make the process faster, and more reliable.

Why Should You Expand to Japan?

Japan is one of Asia’s most advanced and dependable markets. It’s backed by world-class infrastructure and consumers who expect quality at every turn.

The costs and compliance hurdles are real, but the chance to tap into such a high-value economy makes it worth it. For companies targeting growth, choosing to start business, Japan puts you in the heart of a premium consumer market.

Asia’s Most Mature and Innovative Market

Japan is Asia’s most mature and innovative economy. With a GEOS Global Subsidiary Index Score of 54.4, it blends advanced infrastructure with a strong global reputation for innovation. Still, businesses face challenges such as high operating costs, complex compliance, and strict labor rules.

Foreign companies can enter the Japanese market by establishing one of the main types of legal entities available: subsidiaries, branch offices, or representative offices. Each of these legal entities offers different opportunities and considerations for establishing a business presence in Japan.

Economic Strengths

Japan is the world’s fourth-largest economy and home to one of the wealthiest consumer bases globally. Its GDP per capita score of 10/10 shows strong purchasing power and a market ready for premium goods and services. Services dominate today, but manufacturing still drives key sectors like cars, electronics, and steel.

• Private investment is rising, with companies spending heavily on automation and housing construction.
• Consumer spending remains steady, even as households juggle higher costs.

Inflation, which peaked in 2023, is now cooling. That shift is creating healthier conditions for long-term growth.

Economic expansion in Japan is steady but modest. The GDP growth score of 4/5 highlights its ability to maintain consistent, if moderate, performance. Recent contractions were softened by strength in private investment and housing.

If inflation falls closer to the Bank of Japan’s 2% target, real GDP should recover, though long-term growth is likely to remain around 1% a year.

Challenges Ahead

Structural issues weigh heavily on Japan’s outlook. The aging population has pushed the old-age dependency ratio to 70%, shrinking the labor force. Public debt is now about 250% of GDP, the highest among advanced economies.

Japan also relies heavily on imported energy and food, making it vulnerable to external shocks. Meanwhile, competition from South Korea and Taiwan challenges its position in semiconductors.

Political and Trade Climate

Japan’s political environment is one of the most stable in the world. The political risk score of 5/5 reflects low corruption, predictable regulations, and strong property rights. For companies, the main barrier is not politics but paperwork — compliance remains costly and time-consuming.

The Japanese government regularly introduces new policies and regulations to facilitate foreign entrepreneurs and business owners, impacting visa availability, residency, and business registration processes.

Trade remains central. The U.S. and China are top partners. Vehicles, electronics, and machinery dominate exports, while energy drives imports. Protectionist U.S. policies could affect future flows, but Japan’s large domestic market provides balance.

Industry Diversity

Japan’s strength lies in variety. With an industry diversity score of 4/5, it is competitive in manufacturing, robotics, healthcare, and technology. This diversity helps spread risk and gives businesses a wide range of entry points into the market.

For global firms looking to start business, Japan offers opportunities across multiple sectors, from advanced tech to world-class healthcare. Even with slower growth, Japan’s resilience and innovative industries ensure it remains a key global economy.

Tax & Regulatory Environment

Japan’s corporate tax rates sit in the middle globally, reflected in a score of 6/10. Domestic firms pay tax on worldwide income, though most qualifying foreign dividends are excluded. Foreign companies are taxed only on income earned in Japan, usually through a permanent establishment. The type of business entity established in Japan determines the applicable tax obligations and compliance requirements.

• Large corporations pay a 23.2% rate, while smaller firms get reduced rates on their first JPY 8 million of income.
• These benefits phase out as income rises, making bigger firms shoulder more.

On top of corporate tax, companies also pay local, enterprise, and inhabitants’ taxes. In Tokyo, this combination pushes the effective rate to between 31% and 35%, depending on company size.

Accounting and Reporting

Accounting must follow Japanese standards, not international ones. That brings the tax and accounting score to 4/10. J-SOX, Japan’s version of Sarbanes-Oxley, enforces strict internal controls and documentation. Failure to comply can lead to fines, lawsuits, and reputational harm.

Reporting adds even more weight. The compliance reporting score of 1/5 reflects the pressure. Companies must file often and in detail at the national and local levels. Even firms with losses may still owe enterprise tax, since obligations can be tied to capital or value-added measures, not just profit.

Licensing and Professional Services

Licensing requirements vary, which explains the 3/5 score. Lawyers must complete Japanese training or register as “Foreign Law Business Attorneys,” and even then their practice is limited to international matters. Accounting is stricter still.

The CPA exam is offered only in Japanese, followed by years of training before full registration. Tax accountants face similar barriers. By contrast, consulting roles in business or HR involve far fewer restrictions.

Beneficial Ownership and Foreign Investment

Japan is generally open to foreign ownership, reflected in a 6/10 score. Some sectors still require special approvals. Since 2022, the Legal Persons List System has tightened oversight. Companies must disclose beneficial owners through registries and notaries, who verify legitimacy and check for risks.

Foreign investors must ensure compliance with all disclosure and registration requirements when establishing a business in Japan. When setting up a subsidiary, official documentation from the parent company is often required to demonstrate its legal authority and ownership structure.

Incorporation & Compliance Essentials

Incorporation in Japan usually takes 2–4 months. The registration process involves several steps, including payment of a registration fee, which varies depending on the company type.

A Kabushiki Kaisha (KK) is a joint stock company, which is a common and trusted business structure in Japan. Notarization of documents slows the process, and post-incorporation tax registrations add more time.

If the business needs licenses, the timeline can stretch to three months. For any company looking to start business, Japan is a place where patience and careful planning really pay off.

Resident Director Requirement

Japan requires local representation. The resident director score of 3/5 shows this clearly. Every company needs at least one local director or legal rep in place. If you’re setting up a branch office, appointing a branch representative is a must. That’s why many foreign firms lean on judicial scriveners or notaries to:

• Act as local representatives
• Manage paperwork
• Guide filings through review

Paperwork and Documentation

The paperwork burden is high. The original paperwork score of 1/5 shows how much notarization and translation are involved. For example:

• KK companies must notarize articles of incorporation
• Revenue stamps and filing fees are required
• All documents must be translated into Japanese

It is essential to gather all the required documents, including the company’s seal certificate and proof of the company’s seal registration completion, to complete the registration process efficiently. Ensuring you have all the documents prepared and properly authorized will help avoid delays.

Registered Address

Every company in Japan needs a physical office address to register. The registered address score of 4/5 shows this step is usually straightforward, but there’s no way around it — a virtual office does not count as a registered address.

An official address is essential for opening bank accounts, signing contracts, and completing filings. The company’s head office address must also be included in the Articles of Incorporation and registration documents.

• Many businesses choose serviced offices. They’re quick to set up, come with built-in infrastructure, and keep costs down.
• Startups and non-residents often like serviced offices because flexible lease terms make scaling or adjusting much easier.
• For a more established presence, long-term office rentals offer stability and a customizable environment, giving your brand a stronger base.

A clear office address is your starting point for doing business in Japan. It also signals commitment, which matters in a relationship-driven market.

In-Person Travel

Some tasks require presence in Japan. The in-person travel score is 3/5 captures this. Incorporation filings, license applications, and banking often need face-to-face action. Seals and handwritten signatures still carry legal weight, even as digital tools expand.

Digitalization and Portals

Japan is moving toward digitalization, but progress is slow. The government portal score is 3/5 reflects this balance. Some steps can be filed online, yet many still require paper documents or notarized originals. Electronic signatures can reduce stamp costs, though not all offices accept them.

Local Expert Insight

Judicial scriveners or notaries are essential. They prepare, translate, and submit incorporation documents. Because everything must be in Japanese, companies often go through several rounds of review before approval.

Workforce & Employment Considerations in Japan

Employment law in Japan is moderately complex. It applies to employees, but not to board members or independent contractors. There’s no at-will employment. Terminations must be judged reasonable and acceptable under social standards.

Courts often lean toward employees. That puts the burden of proof squarely on the employer. Even small mistakes in the process can undo a dismissal. Judges expect to see evidence of warnings, retraining, or even attempts at reassignment.

Without proper documentation, cases are tough to defend. Performance reviews, written warnings, and meeting notes matter. Because of this, many disputes end in settlement. For companies planning to start business, Japan requires extra care in HR policies and recordkeeping to avoid costly disputes.

Employers must also notify the Public Employment Security Office when hiring staff to comply with employment regulations.

Hiring Costs and Benefits

Hiring staff in Japan brings added costs. Employers share the bill for health insurance, pensions, and unemployment coverage. In Tokyo, employees pay about 14.655% of wages and bonuses, and employers match the same.

Benefits are generous. Workers receive health coverage, pension contributions, and paid leave. Bonuses are also standard and usually treated like part of base pay.

• Contributions apply to both wages and bonuses.
• Rates change slightly by age and region.
• Employee contributions are tax-deductible.

Working Time and Overtime

Working hours are tightly regulated. Any overtime needs a written “36 agreement.” Premium pay applies to late-night shifts, holiday work, and extra hours. Authorities keep an eye on compliance, so accurate records are essential.

Termination and Disputes

Letting people go isn’t simple. Poor performance rarely qualifies on its own unless you’ve documented support and retraining. Employers are expected to try transfers or other options first. Since courts often side with employees, settlements are common.

• Keep detailed performance records.
• Use step-by-step discipline with clear timelines.
• Show proof that alternatives were considered.

Unions and Labor Relations

Unions are still active in Japan, especially in manufacturing. Most unions are company-based rather than industry-wide. The annual shuntō bargaining round often shapes pay trends across industries. Union membership may be falling, but consultation is still part of workplace culture.

Equal Treatment and Conduct

Japan has strict rules on equal treatment. Discrimination based on gender, nationality, union activity, or family leave is not allowed. Employers also must prevent workplace harassment. Laws now reduce gaps in pay and benefits between permanent and non-regular workers. Training and policy reviews help companies stay compliant.

Pensions and Long-Term Obligations

Japan’s pension system is solid but also demanding. Everyone between 20 and 59 must enroll. In FY2025, the basic National Pension contribution is ¥17,510 a month. Employers have to register staff correctly, manage exemptions, and file everything on time. Decisions to start early or delay payments directly shape long-term payouts.

Practical Setup Notes

Paperwork is still part of doing business. Seals and in-person steps remain common, though digital systems are growing. Many companies bring in a social insurance labor consultant (sharōshi). They handle employee registrations, draft work rules, and keep payroll filings on track.

Business Structures in Japan

When setting up a company in Japan, you’ll need to decide on the right business structure. The main options are stock companies (Kabushiki Kaisha or KK, also known as stock company) and limited liability companies (Godo Gaisha or GK, also known as limited liability company). Subsidiary companies and branch offices are also common for foreign businesses.

• A subsidiary company is a separate legal entity under Japanese law, giving it more independence. Forming a subsidiary company is a common way for foreign businesses to establish a legal presence in Japan.
• A branch office isn’t legally separate but can still handle business activities in Japan.

Japan recognizes several types of business entities, each with its own legal status and compliance requirements.

During registration, companies—including subsidiary companies—must provide documents like Articles of Incorporation, proof of capital deposit, and other required records. The structure you choose impacts liability, compliance, and flexibility. After registration, you’ll also need a registry certificate to open bank accounts and sign contracts.

Talent Availability & Salaries

Japan’s developer pool is smaller than in China or South Korea. Demand for AI, data science, and cybersecurity is rising quickly. Tokyo ranks among the top ten global tech hubs, but competition is fierce. Startups and large firms chase the same talent. The weak yen lowers costs for overseas employers, but it doesn’t solve the scarcity.

• AI and cybersecurity specialists are the hardest to hire.
• Regional cities lag far behind Tokyo in talent depth.

Sales, Marketing, and Finance

Sales, marketing, and finance professionals are available but mainly clustered in Tokyo and Osaka. Outside these hubs, the pool thins fast. Foreign companies often set up headquarters in Tokyo to access more candidates. Even there, bilingual talent with international experience is in short supply and commands high pay.

Recruiting Challenges

Hiring is highly competitive. Technical and bilingual professionals are limited. Senior hiring is even more difficult, since many executives remain loyal to big conglomerates. Foreign firms often find it tough to persuade them to switch.

• Bilingual professionals are rare and expensive.
• Executives expect stability and long-term loyalty.
• Younger workers are more mobile but demand faster promotions and better pay.

Salary Pressures

Pay expectations are high, especially in Tokyo. Technical and bilingual roles drive costs up further. Benchmarking is inconsistent since compensation varies widely by sector and city. Bonuses are the norm and treated as part of base pay, so total packages are heavier than they first appear.

Language and Workplace Culture

Japanese dominates in most workplaces. English is widely taught, but fluency remains limited. In a 2019 survey, Japan dropped to 53rd in global English proficiency, placing it in the “low proficiency” band. 

Many employees hesitate to use English for fear of mistakes, which slows adoption. This can frustrate foreign firms that rely on English for daily operations. Still, younger professionals are more confident thanks to education reforms and global exposure.

• Japanese is the default business language.
• English is improving among younger talent, but gaps remain.

Financial & Banking Considerations

Japan has one of the most advanced financial systems in the world. Banking and payment networks are efficient and secure. Tokyo is the main hub, home to the country’s largest institutions. Three major banking groups dominate the market. The system supports both local firms and global investors.

When opening a personal bank account to deposit the initial capital for your business, a capital deposit is required as part of the company registration process. You must provide proof of invested capital to the authorities, typically by submitting documentation that shows the capital deposit has been made.

Sumitomo Mitsui Banking Corporation is a leading bank in Japan, known for its long history, excellent customer service, and English-language support, offering convenient account opening and tailored services for foreign investors and entrepreneurs.

Opening Bank Accounts

Advanced systems don’t mean easy access. Opening a bank account, especially a corporate bank account, takes time. Before registering your company, you may need to open a personal bank account to deposit the initial capital and provide proof of funds during the registration process.

Once your business is registered, opening a corporate bank account requires documents such as the registry certificate, corporate number, and seal certificates. Foreign-owned companies face long reviews and strict checks. Directors usually must appear in person. Banks require extensive paperwork and detailed verification. The process can stretch for weeks with multiple visits.

• KYC checks are extensive.
• Directors must show up in person.
• Foreign ownership adds more review cycles.

For foreign entrepreneurs, Japan Post Bank and Seven Bank are accessible options for opening a bank account in Japan. Japan Post Bank offers convenient services, no withdrawal limits, and international remittance, making it suitable for those seeking postal banking.

Seven Bank is known for its user-friendly online banking, a wide ATM network in 7-Eleven stores, and support for non-Japanese speakers, making it a reliable choice for expatriates and business owners.

Compliance and Expense Management

Compliance in Japan is strict. Every expense must have proper invoices, seals, or electronic stamps. Missing details can make deductions invalid. Expense management becomes an ongoing priority for companies.

• Paper and stamps still carry weight.
• Errors in invoicing can lead to tax rejection.
• Local accountants are often essential.

For firms aiming to start business, Japan makes it clear that strong bookkeeping is a necessity.

KYC and AML Framework

Japan follows global KYC and AML standards but adds its own layers. Banks must confirm identities, verify beneficial owners, and record the purpose of each transaction. Monitoring continues throughout the relationship. High-risk clients face enhanced checks.

• Valid ID and address proof are mandatory.
• Owners with 25% or more control must be identified.
• Transactions are tracked and suspicious activity reported.

All records must be kept for at least seven years. Reports of unusual activity go to Japan’s Financial Intelligence Unit (JAFIC).

Cost of Doing Business

Japan is one of the most expensive markets worldwide. Office space in Tokyo is costly. Payroll contributions add to hiring costs. Compliance demands create extra admin work. Many new entrants underestimate these expenses.

• Operating costs are among the world’s highest.
• Payroll and compliance push costs up further.
• Careful budgeting is essential.

Moving Toward Digital

Japan is modernizing its systems. eKYC tools like facial recognition and MyNumber card scans are becoming common. Video verification is also in use. These steps help speed up onboarding, though paper filings remain widespread. Crypto transactions above ¥100,000 must also meet FATF Travel Rule standards, with full sender and receiver details recorded.

Immigration & Work Permits

Japan’s immigration system is complex and bureaucratic. Employer sponsorship is almost always required, and many visas involve quotas, heavy paperwork, and long processing times.

Foreign nationals and foreign entrepreneurs looking to establish or operate a business in Japan have several visa options. These include the business visa, business manager visa, investor visa, and start up visa.

The business manager visa is specifically designed for business managers and entrepreneurs who wish to manage or start a business in Japan. To obtain an investor visa, applicants must first secure an investor visa certificate of eligibility, which is a crucial step before applying for the actual visa.

Achieving investor status allows for long-term residence and lawful investment activities. After arrival, obtaining a residence card is required to demonstrate legal residence status and to open a bank account.

The government is now reviewing its policies as foreign resident numbers surge. A task force will study the impacts, with possible caps if integration becomes strained.

• Foreign residents make up 2.82% of the population today.
• That share could reach 10.8% by 2070, and growth is accelerating.
• In 2024 alone, the number of foreign residents rose by more than 350,000.

Officials aim to avoid the social division seen in other G7 countries. Reforms under discussion include:

• Electronic travel authorization by 2028.
• Faster asylum screening by 2030.
• Stricter oversight of skilled worker programs.
• Expanded deportation capacity for illegal work.

For businesses, immigration remains a major hurdle. Sponsorship, quotas, and strict compliance slow hiring, while potential caps could add new barriers. Yet Japan’s shrinking workforce means foreign professionals are becoming more important. Companies that plan ahead and budget for compliance will be better positioned to secure talent.

Unique Japan Expansion Insights

In Japan, decisions are made by consensus, not by one person at the top. Negotiations often move slowly but lead to smoother implementation once agreement is reached. Face-to-face meetings remain standard, and patience is expected. Punctuality is critical, and silence in discussions usually signals careful thought rather than resistance.

• Arrive early to show respect.
• Expect greetings and small talk before business begins.
• Consensus building (nemawashi) takes time but ensures buy-in.

Company Seal, Market Access, and Strategic Hubs

Even in a digital age, company seals (hanko) remain central in Japan. They’re required for contracts, filings, and many official transactions. A registered seal (jitsuin), backed by a seal certificate, is legally binding and often needed to open bank accounts or sign agreements. Using the correct company name in full, including legal designations like Kabushiki Gaisha or Godo Kaisha, is essential for compliance.

The notary office plays a role too. It notarizes the Articles of Incorporation, a step required for company formation. After that, filings go to the registry office and the Legal Affairs Bureau, which issue registry certificates and formalize operations.

Before entering the market, companies should do their homework. Market research and a solid business plan covering financials, legal considerations, and growth strategies are key. A representative office can support early activities like marketing or research, but it cannot conduct trade or open bank accounts. For full operations, incorporation is the only path. Trademark registration with the Japan Patent Office adds another layer of protection for new entrants.

Japan’s consumer market is sophisticated. Buyers favor quality and brand trust over low cost, which makes reputation just as valuable as price.

Strategic Hubs Across Japan

Opportunities shift depending on where you land. Each hub brings its own strength to Japan’s economy:

• Tokyo is the financial and tech capital, home to global firms, startups, and venture capital.
• Osaka drives trade, life sciences, and manufacturing.
• Nagoya anchors the automotive industry and advanced manufacturing.
• Fukuoka positions itself as a startup city with a special visa program for entrepreneurs.
• Kobe invests heavily in biotech and medical technology.
• Sapporo promotes AI and digital industries through its startup initiatives.

Together, these hubs show Japan’s economic diversity. Tokyo leads globally, Osaka powers industry, Nagoya drives automotive, and regional cities are leaning on innovation to offset population decline.

How GEOS Simplifies Your Expansion into Japan

Japan is a market where few outsiders do well. Incorporation drags on, paperwork never seems to end, and banking takes multiple in-person visits. GEOS makes it simple.

We handle incorporation, nominee director needs, tax filings, and compliance so you can get set up faster and focus on growth. For companies looking to start business, Japan doesn’t have to feel overwhelming when GEOS is guiding the process.

AI-Powered Expansion Support

Meet Geovanna, your AI-powered assistant. She takes care of filings, payroll compliance, and ongoing entity management. With Geovanna, staying compliant in Japan becomes less of a burden and more of a routine.

Is Japan the Right Fit?

Japan scores 54.4 on the GEOS Global Subsidiary Index. It’s advanced, stable, and highly innovative, but also expensive and strict. The companies that win here know their value and play for the long term. Success means navigating compliance, building trust, and respecting cultural norms.

The Japan External Trade Organization (JETRO) provides valuable information and support for foreign companies considering expansion into Japan.

📩 Make Japan your next success story. Contact GEOS now.

This article does not constitute legal advice.