Invest Asia Group in Japan
Last Update: 13th September 2020
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Hiroshima Castle in Hiroshima, Japan
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As of 2020, Japan is the world’s third largest economy and during modern history, experienced strong economic growth during the 20th century (post World War 2). The economic growth experienced during the 1960s and '70s was primarily based on the expansion from agriculture to manufacturing (automobiles, shipbuilding, steel, electronics & chemicals).
During the 1980s, domestic consumption further propelled the economy away from the export led growth over the previous decades, an emphasis on processing (telecommunications, computers etc.) and into a technology economy. Japan has experienced persistent deflation since the 1990s but has become a successful and rich country that successfully overcame the 'middle income' trap during its economic development.
During the 1980s, domestic consumption further propelled the economy away from the export led growth over the previous decades, an emphasis on processing (telecommunications, computers etc.) and into a technology economy. Japan has experienced persistent deflation since the 1990s but has become a successful and rich country that successfully overcame the 'middle income' trap during its economic development.
Japan: OverviewJapan is an island country located in East Asia consisting of five main islands - Hokkaido, Honshu, Kyushu, Okinawa and Shikoku. With approximately 75% of Japan's terrain being mountainous, Japan is considered one of the most urbanized and densely populated country within the entire world.
With a highly skilled labor force, Japan has one of the lowest tax revenues among developed countries worldwide. Aside from its unique culture, the Japanese work environment also has many different features including the 'lifetime employment' contractual understanding and feature of the 'keiretsu' companies. Depending upon your proposed business type, we recommend a thorough analysis to determine the best location to establish a company within Japan. Moreover, Japan also ranks highly for both competitiveness as well as economic freedom provisions, making Japan an attractive market, depending upon the sector. |
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Japan Prefectures & Regions
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The country of Japan is divided into 47 different prefectures, which form the country's administration and jurisdiction divisions. This current system was first established in 1871 under the Meiji government and within these 47 prefectures, a breakdown is outlined as follows:
These prefectures are also grouped into 8 x different regions:
Within the main prefectures, there are a few major cities that stand out and are popular for international investment, business and living in Japan. |
Shibuya in Tokyo, Japan
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Top Japan Cities
Whilst Japan is considered a relatively small country in terms of geography, it is one of the larger countries in the world in terms of population size. With 13 x cities containing a population of over 1 million people, the top 10 cities (by population) in Japan are as follows:
The main cities of Tokyo, Yokohama, Osaka and Nagoya are known internationally, a large proportion of other mid-sized Japanese cities are less known among international investors. This is despite being a high GDP per capita, developed country offering a variety of options available. |
Pedestrian Crossing in Tokyo, Japan
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Business Operations in Japan
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Where to Establish in Japan?
This depends upon your business type and goals for doing business in Japan. The Top 10 Japanese cities (outlined above by population size) generally offer the best opportunities but with much higher competition, costs are also higher.
Please advise your business type and specific goals for Japan when contacting our team. |
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Operating a business in Japan presents a multitude of different opportunities as well as challenges. Aside from the business risks, understanding and working within a foreign system can present additional challenges to prospective investors.
However, with a relevant strategy, professional advice and local team, these risks can be mitigated. Whilst details are quite complex, we’ve summarized accordingly so readers can gain an understanding of the different options and processes involved in operating a business in Japan. |
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Forming a Company in Japan
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Establishing a company in Japan is a fairly straightforward process but also depends upon your specific business objectives. There are different types of options available for forming a company and operating entity in Japan - namely whether it's a local company or foreign company.
Different Types of Japanese Companies
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Torii Gate in Hakane, Japan
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Company Formation Procedure
The procedures and corresponding steps for company formation in Japan are as follows:
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Aside from the above standard procedures to form a company, there are also additional steps required, depending upon the specific industry and sector.
Invest Asia Group strongly advises investors to engage either an experienced local consulting company or an international law firm to navigate these processes.
Invest Asia Group strongly advises investors to engage either an experienced local consulting company or an international law firm to navigate these processes.
International Investors
Whilst there are certain restrictions, international investors/companies can operate businesses in Japan. Invest Asia Group recommends investors conduct substantial market research for Japan as it's a highly developed, mature economy.
Corporate Taxes & Details
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There are a number of different corporate taxes within Japan and further details are outlined below:
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For further details regarding Corporate Taxes & other details in Japan, please contact us. |
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Tax-Friendly Policies
Yes – a number of tax-friendly investment policies exist to encourage investment within specific sectors and industries. Further details can be provided, depending upon your specific inquiry and business.
Financial Markets in Japan
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Japan's stock markets are highly developed with the Tokyo Stock Exchange consisting of the third largest market value worldwide. In March 2020 there are currently four stock exchanges operating in Japan with Tokyo being by far the largest by market capitalization. These exchanges are as follows:
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Tokyo Stock Exchange (TSE/TYO)
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The Tokyo Stock Exchange is Japan's largest and most famous exchange with a market cap of approximately USD $5.6 trillion (fluctuating depending upon JPY exchange rate). Also known as the Tosho or TSE/TYO, it's located in Tokyo and was first established in 1878 as the Tokyo Kabushiki Torihikijo and thereafter as the Tokyo Stock Exchange in 1949. On 1st January 2013, the Tokyo Stock Exchange & Osaka Securities Exchang merged to form the Japan Exchange Group.
The Nikkei 225 (which is also commonly just called the Nikkei) is a corresponding stock index for the Tokyo Stock Exchange and measures the specific performance of 225 large, publicly listed companies across a diverse range of sectors. In addition, the TOPIX is a capitalization weighted index that tracks all domestic firms listed in the first section of the Tokyo Stock Exchange. |
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Nagoya Stock Exchange
The Nagoya Stock Exchange is a stock exchange (and Japan's second largest exchange) located in Nagoya. It provides an exchange securities market for investors and is under the authorization of the Prime Minister.
Fukuoka Stock Exchange
The Fukuoka Stock Exchange is a stock exchange located in Fukuoka. Operating two equity markets - the Main Board (for existing companies) and Q-Board (for new companies), the Fukuoka Stock Exchange offers a platform for both small and medium enterprises as well as regional companies.
Sapporo Stock Exchange
The Sapporo Stock Exchange is a stock exchange located in Sapporo. Currently (as at December 2017), there are 58 companies listed on the Sapporo Stock Exchange with only 17 exclusively listed on this exchange.
Japan Stock Types
There are different products available across the exchanges in Japan including the various stocks, indexes and others such as the following:
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Other ways to get exposure to Japanese Stocks
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Aside from the aforementioned ways to gain exposure to Japanese companies within Japan, investors also have options to invest in both internationally tracked Index Funds and Japan stocks listing in US markets. There are a number of different Japan related Exchange Traded Funds (ETFs) and some of the larger individual Japanese stocks listing on American stock exchanges include Sony, Hitachi and Mitsubishi, among others.
Most brokers will offer access to Japan exposure ETFs and individual stocks listed on the US bourses. Some of the top Japanese ETFs/index funds available include the following:
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Foreign Exchange
The Japanese Yen (JPY) is the third most traded currency within foreign exchange markets and is considered a 'reserve' currency just to a lesser extent compared to the United States Dollar (USD), Euro (EUR) and Great British Pound (GBP). The Japanese Yen is a 'free-floating' currency and there are no capital controls within Japan.
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Commodities
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Being the world’s third largest economy, Japan's economy features substantial demand for a diverse range of commodities. As one of the world's largest export economies (fourth largest), it exports substantially more than it imports.
The economic growth experienced during the post-war years lead to several decades of strong economic growth in Japan, leading to an infrastructure boom across with high demand for infrastructure related commodities (energy and metals). Nowadays, some of of the top commodities Japan imports annually includes:
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In regards to oil, during 2019 Japan predominantly imported crude petroleum from Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Russia and Oman. OPEC supplier countries still dominate supply of oil to Japan but due to voluntary reductions in supply, Japan has also sourced elsewhere with Russia the largest non-OPEC supplier.
The Iron Ore commodity market is dominated by predominantly Australia and Brazil exports of this raw material. Japan also imports some smaller amounts of iron ore from Canada. As a world leading manufacturer, automobile exports including car parts and machinery as well as integrated circuits dominate Japan's exports. The top commodities exported from Japan include Gold, Refined Petroleum, Silver, Copper and Steel. Within Japan, the main commodity exchanges are:
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Cryptocurrency in Japan
As at February 2020, cryptocurrency is legal and there are currently 23 different exchanges operating cryptocurrency platforms within the country. Within Japan, cryptocurrency is overseen by the Financial Services Agency (FSA) and Japan is considered to be among one of the developed world's most progressive countries for cryptocurrency.
Under the Payment Services Act, cryptocurrency is recognized as legal property, allowing additional protection. Among the population of 126 million citizens in Japan, there are estimates that approximately 3.5 million citizens use cryptocurrency (which represents less than 3%). |
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[UPDATE: MAY 2020]:
Substantial changes are occurring within the cryptocurrency scene in Japan as new cryptocurrency regulations are approved. Some of these changes include th regulation of cryptocurrency 'custody service providers' as well as cryptocurrency derivatives companies. Japan still has 23 x regulated exchanges and unregulated platforms have changed their service terms impacting Japanese citizens.
Substantial changes are occurring within the cryptocurrency scene in Japan as new cryptocurrency regulations are approved. Some of these changes include th regulation of cryptocurrency 'custody service providers' as well as cryptocurrency derivatives companies. Japan still has 23 x regulated exchanges and unregulated platforms have changed their service terms impacting Japanese citizens.
Property in JapanThe property market in Japan has gone through a number of rises and falls throughout its recent history. However, most importantly, as a foreign investor, you can legally purchase both land & properties within Japan with the same protections as local citizens. Japan is very unique with its property ownership laws among Asian countries.
Due to the Japan's size and stark differences between regions (from beaches in Okinawa to snowy mountains in Sapporo), there are multiple property markets within Japan as a whole. Therefore, the best way to analyse the property market is on a local level as opposed to a country-wide analysis of Japan. |
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International Investors & Japanese Property
Yes and yes! Unlike most peer countries in Asia, Japan allows full ownership of land/property by foreign investors. Invest Asia Group recommends property investment for foreign investors seeking a stable, developed country but as a result of the stagnant economy, likely low yields. As part of a multi jurisdiction approach and for investors seeking other reasons from investing in Japan, a property purchase can offer good returns.
Property Taxes
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The property market in Japan is highly developed and can be transparently understood across cities/regions. With a democratically elected government and highly ranked on the corruption perceptions index, Japan is a stable, liberal economy with rule of law.
When purchasing property in Japan there are a number of fees associated in doing so and based on Japan's specific legal and regulatory requirements. Details are outlined below and relate specifically to Tokyo as an example:
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Best Locations to Purchase Property in Japan
Overall, Tokyo is by far the most popular location in Japan among foreign investors searching for property to purchase. As the capital city of Japan and being a metropolis with a population of 38 million in the Greater Tokyo Area, we predict this trend will continue and have outlined a few popular areas to purchase property within Tokyo.
[UPDATE: MAY 2020]: With the Covid-19 Pandemic, we will update accordingly if foreign investor preferences change from Tokyo to any other locations within Japan. |
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Top 10 Popular Wards in Tokyo Among Foreign Investors (from search traffic)
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Additional Property Information
For investors who live in Japan, when purchasing a property a residence card/passport and an inkan is required. Alternatively, if investors live outside of Japan, an affidavit is required when purchasing a property.
If you need any assistance with property advice or help in Japan, please contact us directly.
If you need any assistance with property advice or help in Japan, please contact us directly.
Venture Capital/Private Equity in Japan
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Venture Capital started to become popular in the late 1980s and become a full phenomenon during the 1990s throughout Japan.
Some of the most successful VC investments/startups in Japanese companies include:
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Profit from the Asian Century with IAG.
eCommerce Property Financial Assets Offshore Consulting
