How to Set Up Business in Japan Initial Cost Estimation

Model Case

Basic Premises of Model Case

  • The model case is based on the most common type of new business operation established by foreign firms entering the Japan market with an initial staff of two: one person from the foreign firm (who typically serves as managing director) and a Japanese national (manager-level person).
  • The company makes use of a temporary office to complete incorporation procedures to set up joint-stock company or branch office, and then moves into a permanent office (rented).
  • The foreign national (managing director) lives in an extended-stay apartment or hotel, then moves to permanent housing in a residential area after completing incorporation procedures.
  • The company engages licensed professionals with publicly administered qualifications for a kind of procedures.
The following is an example case. You start setting up a company with two - person staff a staff of two people: a foreign national who is a managing director and a Japanese who is a manager recruited through a staff agency. After staying at a temporary office for three months,the company relocates to a permanent office in central Tokyo. Approximate floor space of the office is 50 sq.m. After a temporary stay at an extended-stay apartment for three months,the foreign managing director relocates to permanent housing in central Tokyo. Approximate floor space is 60 - 70 sq.m.

Initial Costs in Tokyo

For the establishment of a Japanese corporation or a branch, the costs are generally as follows. See below for details.

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Company establishment and tax notices: About US$5,000~US$50,000(unit: $US; 1 $US=JPY112.21)
Details Subsidiary Company
(Kabushiki Kaisha)
Branch Criteria/Remarks
Costs to register company 2,230 890 Registration and license tax, stamp tax for article of incorporation, obtaining official copy etc.
Paid-in capital 44,560 N/A Although establishment with capital of 1 yen is possible under the Companies Act of Japan, you need to invest 5 million yen or more if you are in receipt of an "Business Manager" visa status.
*The Tokyo Metropolitan Government, Fukuoka City, Niigata City, etc. have started accepting applications for the "Startup Visa Program" (Entrepreneurial Incentives for Foreigners). (For more information, see “How to Set Up Business in Japan: Section 2. Promoting acceptance of foreign entrepreneurs.”)
Name seals for company and personal use 270 Price for standard kit (4 company seals:registered seal, square seal, seal used for bank transactions, a rubber stamp) at major seal chain store in Japan.
Company registration and notifications (through proxy) 2,230 1,780 Includes fees to prepare affidavit(s).
Notification of stock acquisition to the Bank of Japan (through proxy) 270 N/A
Tax and social insurance notices (through proxy) 1,780
Subtotal 51,340 4,720
Obtaining visas: About US$2,000(unit: $US; 1 $US=JPY112.21)
Details Subsidiary Company
(Kabushiki Kaisha)
Branch Criteria/Remarks
Temporary visitor visa (short-term stay visa) 0 Not required for citizens of countries with which Japan has visa exemption agreements; View list of 68 countries (as of July 2017) on Ministry of Foreign Affairs website.External site: a new window will open
Certificate of eligibility through proxy (work or long-term stay visa) 1,780 Commission to professional (proxy) varies depending on type of visa.
Subtotal 1,780
Setting up an office: About US$35,000~US$44,000(unit: $US; 1 $US=JPY112.21)
Details Subsidiary Company
(Kabushiki Kaisha)
Branch Criteria/Remarks
Rent (3 months) for temporary office (includes security deposit) 0~8,910 Assuming use of the temporary office until an official location is found, for a period of up to three months.
Rental fees and required deposits vary among the private companies and public organizations that offer such facilities. JETRO IBSCs provide free temporary office space (for up to 50 business days).
Monthly rent (do not include maintenance fee) 2,540 Based on rates for a 50 sq.m office in one of Tokyo's five major districts (Source: "MIKI OFFICE REPORT 2017 June," Miki Shoji). Security deposit is equivalent to ten months' rent.
Security deposit (approximately 10 months of rent) 25,400
Real estate brokerage fee (equivalent to one month's rent) 2,540
Basic office furnishings (desks, chairs, etc.) 1,160 New items bought at major office equipment stores. (*)
Basic office equipment (computers, printers, phones, etc.) 2,940 New items bought at major electronics retail stores. (*)
Communication costs (basic monthly fee for internet and telephone, internet initial cost) 210 Same provider for fixed telephone, cell phone and Internet service. Subscription fee for fixed telephone is not included.
Fire and accident insurance (one-year policy) 220 Covers costs for damage to building/office equipment due to fire, lighting/flood and theft.
Subtotal 35,010~43,920

(*) Cost-savings is possible through leasing equipment or buying items second hand. Rental serviced offices are generally furnished with desks, chairs and equipment such as telephones.

Hiring local personnel: About US$30,000(unit: $US; 1 $US=JPY112.21)
Details Subsidiary Company
(Kabushiki Kaisha)
Branch Criteria/Remarks
Fee paid to recruiting agency for hiring a manager 31,190 Equivalent to 35% of expected first year salary (JPY 10 million)
Subtotal 31,190
Setting up housing (for foreign national): About US$20,000(unit: $US; 1 $US=JPY112.21)
Details Subsidiary Company
(Kabushiki Kaisha)
Branch Criteria/Remarks
Rent (3 months) for temporary housing (in extended-stay apartment)  4,040 Assuming residence in temporary housing until a permanent location is found, for a period of up to three months. 20 to 30 sq.m
Monthly rent (includes maintenance fee) 2,420 Based on average rent for 60 to 70 sq.m apartment in Tokyo's Minato district.
Deposit two month's rent, key money two month's rent. 9,680 There has been an increasing trend towards properties that reduce the deposit and key money amounts or do not require them at all. 
Real estate brokerage fee (equivalent to one month's rent) 2,420
Subtotal 18,560

Initial costs in areas beside Tokyo

1. Comparison of initial start-up costs for subsidiary in major business areas

Comparison of initial start-up costs for subsidiary company in major business areas When initial start-up cost for subsidiary company in Tokyo is 100, Nagoya is 82%, Osaka is 82%, Yokohama is 81%, Kobe is 79%, Hiroshima is 79%, Fukuoka is 77%, Sendai is 76%, Sapporo is 74%.

* For more information on the business environments of Japan's regions.
*This model case is meant to be only a "guide". The actual costs of setting up a business in Japan vary from company to company (and depend on current economic and business conditions).

2. Reasonable business costs of Japan compared to major cities of the world

(1) Office rent for major cities in Japan is cheaper than that of Hong Kong and London

Office rent comparison in major world cities and Japan (Average annual cost per square foot)
Unit: US$

Office rent comparison in major world cities and Japan (Average annual cost per 1sqft) Sapporo 57 US dollars, Sendai 61 US dollars, Fukuoka 63 US dollars, Hiroshima 65 US dollars, Yokohama 73 US dollars, Nagoya 74 US dollars, Kobe 74 US dollars, Osaka 75 US dollars, New Delhi 105 US dollars, Shanghai 117 US dollars, Tokyo 127 US dollars, New York 144 US dollars, Beijing 179 US dollars, Hong Kong 264 US dollars

Note 1: The district for each major world city is as follows. New Delhi (Connaught Place-CDB), Shanghai (Pudong), Tokyo (Marunouchi/Otemachi), New York (Midtown Manhattan), London (Wes End), Beijing (CBD), Hong Kong (Central)
Note 2: The cost of cities in Japan besides Tokyo is calculated by JETRO from the average rent of each business district (May 2017)
Source: “Global Prime Office Rents, March 2017”, CBRE, “Office Report, June 2017,” Miki Shoji

(2) Personnel expenses in Yokohama and Osaka are cheaper than that of New York and Singapore

Comparison of manager wages by city in non-manufacturing industries (monthly)
Unit: US$

Comparison of manager's wage by cities in non-manufacturing industry (monthly) New York 15,118 US dollars、San Francisco 14,834 US dollars、Dubai 7,952 US dollars、Sendai 4,862 US dollars、Tokyo 4,660 US dollars、Hiroshima 4,558 US dollars、Singapore 4,347 US dollars、Yokohama 4,332 US dollars、Nagoya 4,255 US dollars、Osaka 4,219 US dollars、Hong Kong 4,001 US dollars、Kobe 3,975 US dollars、Sapporo 3,785 US dollars、Seoul 3,652 US dollars、Fukuoka 3,607 US dollars

Source: Comparative Survey of Investment-Related Costs, JETRO (As of June 28)

(3) Housing rent in Tokyo and Nagoya is cheaper than that of Beijing and Paris

Housing rent comparison for expatriates in world cities
(monthly rent per square meter)(Unit: US$)
Rank City Rent
1 Hong Kong 51.2
2 Geneva 39.5
3 Yokohama 38.9
4 Osaka 31.1~38.8
5 Singapore 32.7~37.1
6 Beijing 35.7
7 London 34.1
8 Paris 25.3~30.5
9 Tokyo 26.0~28.6
10 Seoul 23.0~27.4
11 Nagoya 19.9
12 Shanghai 19.0
13 New Delhi 9.9

(4) Living cost in Tokyo and Osaka is cheaper than that of Hong Kong and Singapore

The ten most expensive cities in the world
(New York=100)
Rank City Index
1 Singapore 120
2 Hong Kong 114
3 Zurich 113
4 Tokyo 110
5 Osaka 109
6 Seoul 108
7 Geneva 107
7 Paris 107
9 New York 100
9 Copenhagen 100

(As of July 2017)

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