Japan is set to relax its residency requirements for foreign individuals embarking on business ventures

30 Oct, 2023

Japan is set to relax its residency requirements for foreign individuals embarking on business ventures

Japan is preparing to implement a significant change in its immigration policies by enabling foreign entrepreneurs to reside in the country for up to two years without the need for a place of business or investment, according to reports by Nikkei. This initiative is aimed at providing foreign entrepreneurs with a smoother pathway to launch their businesses by reducing residency requirements.

The Japanese government's move represents its latest effort to infuse international talent into its economy and stimulate economic growth. Currently, the requirements for obtaining a business management residency in Japan involve having a registered business location and a minimum of two full-time employees or an investment of at least 5 million yen (about $33,000).

For many aspiring startups, this investment requirement can be quite challenging, especially when their businesses are still in their early, non-profitable stages. The proposed two-year grace period aims to provide business owners with the flexibility to concentrate on business growth rather than the financial obligations of residency requirements.

Yuma Saito, the president of Deloitte Tohmatsu Venture Support, believes that Japanese startups can still attract funding despite the relaxation of these requirements, as major Japanese corporations remain interested in investments.

Furthermore, the loosening of location requirements could potentially allow international students to embark on entrepreneurial endeavors while still pursuing their education in Japan.

Compared to Japan, some other Asian countries have adopted more flexible approaches to welcome foreign entrepreneurs. For instance, in South Korea, visa applicants have various options to choose from, such as patent ownership and educational background, rather than meeting all the requirements. Thailand offers a visa option that permits individuals with a personal fund of at least 600,000 baht (around $16,600) to stay for up to two years, with the option to bring their family members along.

The Japanese government is planning to revise the residency rules for foreign business owners as early as the upcoming fiscal year, starting in April. Two existing entrepreneurship promotion programs will be consolidated into one.

One of these programs, initiated in 2015, aims to simplify the process for foreigners to establish businesses in 13 special zones. By April, it had already approved more than 380 participants. However, most of these entrepreneurs have been located in major cities like Tokyo and Fukuoka, leaving smaller cities struggling to attract foreign talent.

While there has been growth in the number of foreign nationals residing in Japan under the business management residency status, with approximately 35,000 individuals as of the end of June (almost double the 2015 figures according to the Immigration Services Agency), the government perceives the entry barriers for foreign entrepreneurs in Japan to remain excessively high.

According to the Organisation for Economic Co-operation and Development, Japan ranks 21st out of 24 countries in terms of attractiveness as a destination for potential startup founders. This ranking is based on factors such as the presence of multinational companies, tax policies, and nationality acquisition options.

Yuki Kojima, the president of Resorz, an organization aiding Japanese companies in expanding overseas, mentioned some of the hurdles faced by foreign entrepreneurs in Japan, including difficulties in opening bank accounts.

Japan's venture sector is considered less mature compared to its European and U.S. counterparts and is in need of additional talent to support its growth. Samuel Davis, CEO of Amplified AI, an American company specializing in artificial intelligence patent search services primarily operating in Japan, highlighted these challenges.

Kempei Monna, who hails from Shanghai, runs Kauche, a Japanese startup specializing in e-commerce application development. Monna highlighted language as a significant obstacle, stating, "The biggest challenge is the language.Without Japanese language proficiency, you'll find it impossible to navigate the incorporation process."