How is Japan Encouraging Start-Up Development?

Support for Japan start-ups is improving but is there enough momentum and speed?  Once a leader in the world of innovation, Japan has seen a steady decline in economic growth and has been lagging behind in the start-up scene compared to other neighbouring countries like China and Singapore.

Up until recently, setting up or joining a japan start-up was seen as a risk, and a Plan B option if you were unsuccessful in securing a corporate job with giants like Sony or Toyota. These larger companies offered employees stability and wealth while start-ups brought uncertainty and the fear of failure.

However, with the rise of companies such as Airbnb and Uber, and more success stories being reported in the news, start-ups are becoming more attractive options for people, especially amongst the younger generation.

Government Invests in Local Talent

This change in attitude has seen the government boost its efforts to get foreign venture capitalists to invest in Japanese entrepreneurs.

In 2013, the government established Cool Japan Fund, an investment initiative to support local entrepreneurs. The fund provides risk capital to business start-ups across a range of industries.

The aim was to promote Japanese culture and increase the demand for its products and services abroad. Since its inception, it has invested in more than 25 companies, including live music venue developers, Zepp Hall Network Inc. and cafe chain, Green Tea World USA Inc.

In June 2017, Cool Japan Fund teamed up with 500 Startups, a venture capitalist firm from San Francisco which specializes in early-stage investments. The government-backed fund contributed $10 million last year to 500 Startups Japan. This partnership will help new businesses in Japan expand abroad by leveraging the venture firm’s global network in over 50 countries.

Making Japan Attractive to Foreign Business Start-Ups

In an effort to attract foreign start-up interest in Japan, the government introduced a number of incentives to make setting up a business easier for entrepreneurs.

Incentives include:

• Start-up visa
• Financial aid for rent
• Tax reductions
• Advice and support

The start-up visa currently allows foreigners to take up residence in Japan for a period of six months to establish their business in Tokyo and Fukuoka. However, in 2018, plans have been put in place to increase the limit to one year, and to allow start-ups to operate anywhere in the country instead of being restricted to ‘special areas’.

Some businesses could qualify for financial aid for rental properties. The rent subsidy program means entrepreneurs can get half of their personal and office rent covered.

Tax reductions are available for start-ups operating in some specific industries, like Internet of Things (IoT), medicine and advanced IT.

The start-up café was established to help entrepreneurs get their businesses up and running. Here they can discuss their ideas and get advice from experts in English.

These initiatives are certainly steps in the right direction to boost start-up growth in the country. However, it remains to be seen whether the new measures will be enough for Japan to bridge the gap between its Asian competitors. Only time will tell.