Economic Outlook for Entrepreneurs in Japan

Published on October 30, 2025 and written by Cyril Jarnias

Japan, the world’s third-largest economy, offers fertile ground for visionary entrepreneurs ready to tackle the unique challenges of this sophisticated market. Despite decades of economic stagnation, the Land of the Rising Sun is currently experiencing renewed dynamism, driven by ambitious government reforms and the emergence of innovative sectors. For foreign entrepreneurs, now is the opportune moment to seize the opportunities arising in this rapidly changing archipelago.

An Economic Recovery Giving Wings to Investors

After years of sluggish growth, the Japanese economy is finally showing encouraging signs of recovery. Forecasts for 2025 are optimistic, with expected GDP growth around 1.1% to 1.2%, a pace comparable to that of the eurozone and higher than some European countries like France or Germany.

This economic upturn is driven by several key factors:

• An increase in capital investments
• An improvement in consumer spending
• A rise in wages, unprecedented in 30 years
• A resurgence of confidence among consumers and businesses

The services sector, in particular, is showing robust growth. The services PMI index reached 52.7 in January 2025, its highest level in four months, indicating expanding economic activity. This positive momentum in services offers numerous opportunities for innovative entrepreneurs.

Furthermore, inflation, long the Achilles’ heel of the Japanese economy, is showing encouraging signs. Core inflation reached 3% year-on-year at the end of 2024, a level considered healthy for stimulating consumption and investment without eroding purchasing power.

A Pro-Business Government Opening Doors Wide to Foreign Investors

The Japanese government has made attracting foreign investment a national priority. This political will translates into concrete measures aimed at facilitating the establishment and development of foreign companies on Japanese soil.

Among the flagship initiatives are:

• The “Action Plan for Attracting Foreign Human and Financial Resources,” which aims to double incoming foreign direct investment (FDI) to reach 100 trillion yen (approximately 15% of GDP) by 2030
• Continuous alignment of regulations with international standards to create a legal and regulatory environment favorable to investors
• Strengthened protection of intellectual property rights, a major asset for innovative companies
• Liberalization of foreign exchange operations, facilitating profit transfers and capital repatriation

These efforts are bearing fruit, as evidenced by Japan’s ranking in various international indices. The country ranks 13th out of 133 economies in the 2024 Global Innovation Index and holds 7th place in Kearney’s 2024 Foreign Direct Investment Confidence Index.

However, foreign entrepreneurs should be aware of certain specificities of the Japanese market. Traditional corporate culture can sometimes be resistant to mergers and acquisitions, and corporate governance remains an area under improvement. Additionally, relatively rigid labor legislation can complicate human resource management for foreign investors.

Future-Oriented Sectors Paving the Way for Innovation

Japan, renowned for its technological excellence, offers numerous opportunities in cutting-edge and emerging sectors. Visionary entrepreneurs will find fertile ground to develop innovative solutions in various fields.

Among the most promising sectors are:

• Artificial intelligence and robotics: Japan is at the forefront of these technologies and seeks to apply them in various fields, from industry to services
• Renewable energy: With the goal of carbon neutrality by 2050, the country is heavily investing in green technologies
• Health and biotechnology: The aging population creates growing demand for innovative solutions in these areas
• Semiconductors: Japan seeks to strengthen its position in this strategic industry
• Digital transformation: Japanese companies are undergoing digital transformation, creating opportunities for technology solution providers

Food and agriculture, cosmetics, and aerospace are also sectors where foreign companies can find their place, as the Japanese market is known for its demands regarding quality and innovation.

Furthermore, Japan will host the World Expo from April 13 to October 13, 2025, an event expected to stimulate economic activity and offer numerous opportunities for entrepreneurs in various fields.

Navigating Between Risks and Opportunities: The Entrepreneur’s Challenge in Japan

Although Japan offers a generally favorable business environment, entrepreneurs must be aware of the specific challenges of this unique market.

Among the main risks to consider:

• The language and cultural barrier: Proficiency in Japanese and understanding cultural codes are often essential for success
• Intense competition: The Japanese market is known for its demands and competitiveness
• High costs: Setup and labor expenses can be significant, especially in large cities
• Regulatory complexity: Some sectors are subject to strict regulations that can be difficult for foreigners to navigate

However, these challenges come with unique opportunities. The Japanese market, although mature, remains open to innovation and quality. Japanese consumers are known for their loyalty to brands that earn their trust, offering long-term growth prospects for companies that successfully establish themselves.

Moreover, Japan can serve as a springboard to other Asian markets. As Nicolas Bonnardel, General Manager of the French Chamber of Commerce in Japan, emphasized: “If you succeed in Japan, it opens invaluable doors throughout Asia. Breaking into Japan may not be the easiest, but if you succeed, you gain a label for the entire region. It’s a benchmark market.”

Horizon 2030: A Promising Future for Bold Entrepreneurs

Long-term prospects for the Japanese economy and opportunities for foreign entrepreneurs are generally positive. The Japanese government maintains its course of structural reforms aimed at stimulating growth and innovation.

Several factors should support Japan’s economic development in the coming years:

• Continued reforms to improve productivity, particularly in SMEs
• Increased participation of women in the labor market
• Development of artificial intelligence and robotics to address the aging population
• Continuous investment in infrastructure, including ambitious projects like the North-South high-speed railway line
• Growing openness to foreign investment and talent

Japan also aims to strengthen its position in strategic areas like semiconductors and nuclear energy. These ambitions will create new opportunities for foreign entrepreneurs with expertise in these sectors.

However, Japan’s demographic challenges, with an aging and declining population, will remain a major issue. Entrepreneurs who can propose innovative solutions to address these challenges, whether in healthcare, personal services, or automation, will be particularly well-positioned.