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

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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.

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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.
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

Comarison chart of initial start-up costs in Japan’s major business areas (349KB)

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

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

(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

Note: Covering 133 cities worldwide. A cost of living index is calculated from the cost of 160 products and services that are gathered in each city. These include food, clothing, household supplies, utilities, transportation, recreation & entertainment, etc.
Source: Worldwide Cost of Living 2018, The Economist Intelligence Unit

(As of August 2018)