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How to Set Up Business in Japan Initial Cost Estimation: Model Case

Basic Premises of Model Case [More details]

  • 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 establish a corporation or branch office, and then moves into a permanent office (rented).
  • Japan representative to stay in a monthly-contract apartment during the preparation period, then move to a newly rented residence upon completion of company registration.
  • Applications and notifications completed by professional service providers.
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.

Note: Click on the links to be taken to the pertinent page.

1. Company establishment and tax notices [More details]
Subsidiary company: About US$7,000 , Branch: About US$ 5,000 (unit: $US; 1US$ =JPY111.28)
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.
Name seals for company and personal use 270 270 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 1,780
Subtotal 6,840 4,720
2. Paid-in capital [More details]
Subsidiary company: About US$45,000 , Branch: N/A(unit: $US; 1US$ =JPY111.28)
Details Subsidiary Company
(Kabushiki Kaisha)
Branch Criteria/Remarks
Paid-in capital 44,940 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.”)
Subtotal 44,940 N/A
3. Obtaining visas [More details] : About US$2,000(unit: $US; 1US$ =JPY111.28)
Details Cost for subsidiary company and 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
4. Setting up an office [More details] : About US$30,000~US$40,000(unit: $US; 1US$ =JPY111.28)
Details Cost for subsidiary company and branch Criteria/Remarks
Rent (3 months) for temporary office (includes security deposit) 0~8,990 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 2,090 Based on rates for a 50 sq.m office in one of Tokyo's five major districts (Source: "Office Market Data for small-scale office buildings, June 2018” , Sanko Estate). Security deposit is equivalent to ten months' rent.
Security deposit (approximately 10 months of rent) 20,850
Real estate brokerage fee (equivalent to one month's rent) 2,090
Basic office furnishings (desks, chairs, etc.) 1,260 New items bought at major office equipment stores. (*)
Basic office equipment (computers, printers, phones, etc.) 2,970 New items bought at major electronics retail stores. (*)
Communication costs (basic monthly fee for internet and telephone, internet initial cost) 220 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 29,700~38,690

(*) 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.

5. Hiring local personnel [More details] : About US$30,000(unit: $US; 1US$ =JPY111.28)
Details Cost for subsidiary company and branch Criteria/Remarks
Fee paid to recruiting agency for hiring a manager 31,460 Equivalent to 35% of expected first year salary (JPY 10 million)
Subtotal 31,460
6. Setting up housing (for foreign national) [More details] : About US$20,000(unit: $US; 1US$ =JPY111.28)
Details Cost for subsidiary company and branch Criteria/Remarks
Rent (3 months) for temporary housing (in extended-stay apartment)  5,380 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) 2,830 Based on average rent for 60 to 70 sq.m apartment in Tokyo's Minato ward.
Deposit two month's rent, key money two month's rent. 11,290 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) 2,830
Subtotal 22,330

Initial costs in areas beside Tokyo

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

City Tokyo Sapporo Sendai Yokohama Nagoya Osaka Kobe Hiroshima Fukuoka
Cost US$137,000 US$100,000 US$105,000 US$115,000 US$110,000 US$111,000 US$108,000 US$108,000 US$109,000

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 Beijing

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

Note 1: The district for each major world city is as follows. New Delhi (Connaught Place-CDB), Shanghai (Pudong), 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 (July 2018)
Source: “Global Prime Office Occupancy Cost, July 2018”, CBRE, “Office Market Data, June 2018,” Sanko Estate

(2) Rent for land in industrial parks in Osaka and Nagoya is cheaper than that of Shanghai and Manila

Comparison of rent for land in industrial parks in major world cities and Japan (Average montly cost per square meter)
Unit: USD

Source: Comparative Survey of Investment-Related Costs, JETRO (As of July 2018)

(3) Personnel expenses in Yokohama and Osaka are cheaper than that of San Francisco and Dubai

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

Source: Comparative Survey of Investment-Related Costs, JETRO (As of July 2018)

(4) Housing rent in Tokyo and Nagoya is cheaper than that of Beijing and Seoul

Housing rent comparison for expatriates in world cities
(monthly rent per square meter) (Unit: US$)
Rank City Rent
1 Hong Kong 48.9
2 Beijing 40.2~41.4
3 Singapore 31.6~39.1
4 Yokohama 36.1
5 Osaka 35.6
6 London 35.2
7 Geneva 35
8 Paris 30.8~32.2
9 Seoul 25.7
10 Tokyo 18.1~24.3
11 Shanghai 21.5
12 Nagoya 20.7
13 New delih 10.6

(5) Tokyo and Osaka are out of the top ten in the cost of living ranking covering 133 cities worldwide

The fifteen most expensive cities in the world
(New York=100)
Rank City Index
1 Singapore 116
2 Paris 112
2 Zurich 112
4 Hong Kong 111
5 Oslo 107
6 Geneva 106
6 Seoul 106
7 Copenhagen 105
9 Tel Aviv 103
9 Sydney 102
11 Tokyo 101
11 Osaka 101
13 New York 100
14 Los Angels 99
14 Reykjavík 99

(As of August 2018)