Report
What is the Startup Visa in Japan?
Startup Capital Kyoto: Becoming a Global City for Startups (3)

*This article was originally published in Japanese. All information in this article is as of November 12, 2021.

In July 2020, the Cabinet Office selected eight areas including the Tokyo Metropolitan Area, the Keihanshin area, Aichi, Hamamatsu, and Fukuoka to become startup ecosystem cities that rival those around the world. The aim is to have these cities become a mecca for entrepreneurs where startups can be created and can thrive. This initiative seeks not only to have venture capitals invest in startup companies and to create unicorn companies, but also gives detailed goals regarding the further use of the Startup Visa in order to attract foreign entrepreneurs.

What kinds of efforts are being made in Japan with regards to the Startup Visa? In this third series, we will examine the key features and the issues related to the Startup Visa system in Japan.

Japan is following the global trend by implementing the Startup Visa for certain municipalities and foreign students at specified universities within the country. If a foreign national wishes to start a business in Japan, normally, that person would have to acquire a residency status under a Business Manager qualification. *1 However, to get this visa, the applicant would be required to acquire a place of business and make an investment of 5 million yen or more, as well as hire at least two full-time employees. These requirements are considered as obstacles for foreign nationals to start a business immediately. Certain municipalities therefore implemented measures that allow temporary residency status to foreign entrepreneurs so that they would be able to start preparations toward launching their business.

In July 2015, the Cabinet Office started the Program to Promote Startups by Foreign Nationals that selects national strategic special zones where acceptance of diverse foreign nationals who have the potential of becoming startup talents will be increased. This program allows applicants who wish to start a business to enter Japan, if this person is expected to fulfill the requirements for residency status under the Business Manager category within six months, and if the municipality determines, through examination of the business plan and other submitted information, that the applicant has fulfilled certain requirements. As of August 2021, the following ten municipalities have been selected: Tokyo Metropolitan Government, Kanagawa Prefecture, Kyoto Prefecture, Niigata City, Fukuoka City, Kitakyushu City, Sendai City, Aichi Prefecture, Hiroshima Prefecture, and Imabari City.

Detailed procedures are as follows. The applicant should submit the required documents, such as their business plan, to the relevant municipality. If the application is approved by that municipality upon examination, the applicant will be issued with a Certificate of Confirmation of Business Startup Activities. The applicant should submit this certificate to the Immigrations Services Agency for the relevant municipality. A six-month visa will be provided if a residency status for Business Manager is approved. During these six months, the applicant would be required to make preparations for launching their business so that they will be able to renew their visa for the Business Manager category. If the applicant is able to renew their visa for the Business Manager category, they will be able to continue their business activities for a maximum of one year.*2

Furthermore, in December 2018, the Ministry of Economy, Trade and Industry (METI) and the Ministry of Justice (MOJ) also introduced the Projects for Encouraging Foreign Entrepreneurs to Start Business, which gives residency status to foreign nationals so that they can make preparations to start a new business. Foreign entrepreneurs who will be managed or supported by the regional municipalities, based on the Plan for Managing and Supporting Business Startup Activities by Foreign Entrepreneurs approved by the METI Minister, will be able to enter and remain in Japan for a maximum of one year in order to prepare for the launch of their new business. As of August 2021, this program is being implemented in the following 12 municipalities: Fukuoka City, Aichi Prefecture, Gifu Prefecture, Kobe City, Osaka City, Mie Prefecture, Hokkaido Prefecture, Sendai City, Ibaraki Prefecture, Oita Prefecture, Kyoto Prefecture, and Shibuya City.

Detailed procedures are as follows. The applicant should submit the required documents, such as their business plan, to the relevant municipality. If the submission is approved by that municipality upon examination, the applicant will be issued with a Certificate of Confirmation of Business Startup Activities. The applicant should submit this Certificate of Confirmation of Business Startup Activities to the Immigrations Services Agency for the municipality. A six-month visa will be provided if a residency status for Designated Activities is approved. After six months, if the applicant renew the visa under the Designated Activities category, the applicant needs to undergo screening by the municipality again and receive the Certificate of Confirmation of Business Startup Activities, which needs to be submitted to the Immigration Services Agency. After completing preparatory activities for their startup during this one-year period, the applicant will be able to stay a maximum of one year and continue their business if the requirements for the Business Manager visa category are met.

In addition, there are also programs that give benefits to foreign students who are preparing to launch their own business. In March 2020, the Immigration Services Agency established a system that makes it possible for foreign students to change their visa status to a Startup Visa while they are still a student or after graduating, without return to their country to make this change.*3 Moreover, from November 2020, a visa program started being offered to foreign students who belong to universities that are known for their active efforts to accept outstanding foreign students. If such students are conducting startup activities while still being a student at that university, and if such students wish to continue their business activities even after graduating, they will be granted a maximum of two years of residency status under the Designated Activities category if they fulfill certain requirements.*4

A major feature of the Startup Visa in Japan is that the programs are being implemented by authorized municipalities. Certified municipalities have major discretion in implementing these programs, and are providing Startup Visas to companies that operate in business areas that are suited to each region (see “Targeted Businesses for Startup Visas in Each Municipality”). Bringing innovations from outside Japan into industries to which a municipality is focusing on would help create growth in line with the characteristics in the region.*5

Meanwhile, the Startup Visa being offered in Japan have room for improvements, both in its operation and in the system itself, when compared to startup visas being implemented in other countries.

With regards to its operation, there are two issues; one is the development of local area as a startup ecosystem, and the other is the way of disseminating information to overseas. The first issue is, since the Startup Visa is led by government agencies from the perspective of immigration control that they tend to only focus on administrative procedures between the applicant and the local agency. However, this method fails to adequately attract overseas innovations to local areas. By working with local communities, such as private supportive organizations and experienced entrepreneurs, this would create growth not only for the startup company but also for the surroundings, and would ultimately lead to enhancing the entrepreneurship environment of the area.

As for the second issue, since the users of this system are foreign nationals, information needs to be proactively disseminated overseas in foreign languages. Many websites of the municipalities upload information that is literally translated into English from Japanese, which fails to make an adequate appeal of the attractive features of the area. Moreover, there are still not enough information made available in foreign languages regarding the support systems and life-related services provided by the municipalities.

With regards to the system itself, incentives need to be enhanced, and redundancies need to be resolved. Incentives, such as startups founded by multiple persons or allowing the accompaniment of family members, which are approved by many countries, are not taken into consideration by this current system. Thus, in such cases, each person would have to apply for a visa themselves, individually. However, the success ratio increases when startups are launched by more than one person, and it would be better to allow families to accompany the applicant because this would help attract outstanding entrepreneurs who wish to be successful in both their personal life and their business life. Actually, in Kyoto, there is a case where a foreign entrepreneur who had been considering launching a startup reviewed the Startup Visa system being offered at other countries, and ended up opting to launch the business in a different country. Thus, there is room for expanding the benefits offered in order to encourage foreign nationals to launch and create new businesses in Japan.

In terms of redundancies in the system, we must note that the Program to Promote Startups by Foreign Nationals and the Projects for Encouraging Foreign Entrepreneurs to Start Business are extremely similar. The only main differences are in the length of time allowed for preparing the startup and the category for residency status. Despite this, since the two programs are under the jurisdiction of different government offices, the contact person for the Startup Visa at the municipalities in particular faces a significantly increased workload for performing administrative procedures. This also makes it difficult for startup applicant companies to appropriately understand about the system.

*1 For details on work qualifications, refer to JETRO’s “2.4 Types of Working Statuses” in “How to Setup Business in Japan”. * in Japanese only

*2 At Kyoto Prefecture, Fukuoka City, and Sendai City, applicants are allowed to conduct their business activities not only at an individual office space but also at approved co-working spaces. However, this is limited to up to the second visa renewal after acquiring the 6-month Business Manager visa category.

*3 “Guideline for changing the residency status or for renewing the residency period with regards to the Program to Promote Startups by Foreign Nationals in the National Strategic Special Zones ” (129.15KB), Immigration Services Agency.* in Japanese only

*4 “Measures related to entrepreneurial activities by international students who graduated from Japanese universities ”, Ministry of Justice. * in Japanese only

*5 For example, with regards to Fukuoka City’s initiatives, refer to “The World Today: JETRO Global Eye, becoming a city that creates new businesses with the Startup Visa--new business created with foreign entrepreneurs” (October 2020); “Promoting new business by foreign nationals utilizing the national strategic special zone--initiatives by Fukuoka City”, Kenichiro Sato and Izumi Tozaki, Japan Finance Corporation Research Institute Discussion Papers No. 51 (May 2021), p. 81 – 102. * in Japanese only

* The original article in Japanese