Incorporating a Company in Japan: The Complete Guide

Published on October 30, 2025 and written by Cyril Jarnias

Japan, the world’s third-largest economy, offers numerous opportunities for foreign entrepreneurs looking to establish a presence in Asia. With its sophisticated market of 126 million consumers and strategic position, the Japanese archipelago is attracting more and more international investors. However, starting a business in Japan requires a solid understanding of local specifics, both legally and culturally. In this article, we guide you step by step through the process of launching your company in the Land of the Rising Sun.

Why Japan is an attractive destination for entrepreneurs

Japan offers numerous advantages for foreign entrepreneurs:

A mature and solvent market: With a GDP per capita of over $40,000, Japan offers high purchasing power and sophisticated demand across many sectors. Japanese consumers are known for their high standards regarding quality and innovation.

A stable and diversified economy: Japan has a robust economy, leading in fields such as electronics, automotive, and robotics. The country invests heavily in R&D and new technologies.

A gateway to Asia: Based in Japan, you benefit from privileged access to growing Asian markets like China and Southeast Asia.

First-class infrastructure: Japan has modern infrastructure (transportation, telecommunications, etc.) that facilitates business development.

A business-friendly environment: The Japanese government has implemented various measures to attract foreign investment, such as simplifying administrative procedures and offering tax incentives.

Main legal structures for starting a business

Several legal forms are available to foreign entrepreneurs looking to establish themselves in Japan:

Kabushiki Kaisha (KK)

This is the equivalent of a corporation. It’s the most common and prestigious form in Japan. Its main characteristics are:

• Minimum capital: 1 yen (since 2006)
• Limited liability for shareholders
• Formal governance structure with a board of directors
• Ability to issue shares

Godo Kaisha (GK)

Equivalent to an LLC, this is a more flexible and less expensive structure to set up:

• No minimum capital required
• Limited liability for members
• More flexible management
• Simplified incorporation procedures

Branch Office

An option for foreign companies wanting a local presence without creating a separate legal entity:

• Extension of the foreign parent company
• No minimum capital
• Taxed as a resident entity

Representative Office

Lightweight structure allowing local presence for non-commercial activities:

• Limited activities (market research, information gathering)
• No legal personality
• No taxation in Japan

Corporate taxation in Japan: what you need to know

The Japanese tax system is known to be complex, but recent reforms have made it more competitive. Here are the main taxes companies are subject to:

Corporate tax: The combined effective rate (national and local) is approximately 29.74% in 2025 for large companies, and can drop to 25.9% for SMEs. This rate has been gradually reduced in recent years to improve Japan’s competitiveness.

Residence tax: It applies at the prefectural and municipal levels, with varying rates depending on the locality.

Consumption tax: Equivalent to VAT, its rate has been 10% since October 2019.

Withholding taxes: They apply particularly to dividends, interest, and royalties paid to non-residents.

Japan has signed tax treaties with many countries to avoid double taxation. Additionally, various tax incentives exist to encourage innovation and foreign investment.

Creating your legal structure in Japan: the step-by-step procedure

Here are the main steps to create your company in Japan:

1. Choose a company name: Check its availability with the Legal Affairs Bureau.

2. Prepare incorporation documents: Articles of incorporation, bank certificate of capital deposit, etc.

3. Register the company: Submit your file to the local Legal Affairs Bureau. Allow about 2 weeks for registration.

4. Obtain a company seal: Essential for official documents in Japan.

5. Register with tax authorities: Within 2 months of incorporation.

6. Register for social security: For Japanese and foreign employees.

7. Obtain specific licenses: Depending on your industry.

It is highly recommended to consult a local expert (lawyer, accountant) to guide you through these steps and avoid mistakes.

Japan vs. offshore jurisdictions: advantages and disadvantages

Compared to classic offshore jurisdictions, Japan has specific strengths and constraints:

• Reputation and credibility of a major economy
• Access to a significant domestic market
• State-of-the-art infrastructure and technology
• Intellectual property protection

• High setup and operating costs
• Administrative complexity and language barrier
• Less favorable taxation than some tax havens

• Singapore: More attractive taxation (17% corporate tax) but smaller market
• Hong Kong: Simpler procedures but political uncertainties
• Cayman Islands: Tax advantages but less prestigious image

Social obligations for employers in Japan

Hiring staff in Japan requires compliance with a strict social framework:

Employment contract: A written contract is mandatory, specifying employment conditions.

Working hours: The legal duration is 40 hours per week, with strict rules on overtime.

Paid leave: Minimum 10 days per year, increasing with seniority.

Social security: The employer must contribute to various schemes (health, pension, unemployment, work accidents).

Dismissal: Procedures are highly regulated and economic layoffs are difficult to implement.

Foreign companies must be particularly vigilant about these aspects to avoid any labor disputes.

Opening a corporate bank account in Japan: how to do it

Opening a bank account is a crucial step for your business in Japan. Here’s the procedure to follow:

1. Choose a bank: Opt for a major Japanese bank (MUFG, Mizuho, SMBC) or an international bank with a local presence.

2. Prepare documents: You’ll need the company’s articles of incorporation, registration certificate, company seal, identification documents of directors, etc.

3. Schedule an appointment: Physical presence of the legal representative is generally required.

4. Bank interview: Be prepared to explain your business and plans in Japan.

5. KYC verification: The bank will conduct thorough Know Your Customer checks.

6. Account activation: Once approved, you’ll receive your credentials and payment methods.

The process can take several weeks, or even months for foreign companies. It’s recommended to start the process as early as possible.

Promising sectors for entrepreneurship in Japan

Japan offers opportunities in many fields, particularly:

Advanced technologies: AI, robotics, IoT, fintech Renewable energy: Japan is heavily investing in energy transition Healthcare and biotechnologies: Growing market with the aging population Tourism: Booming sector, especially with the Tokyo Olympics Senior services: An expanding market with an aging population E-commerce and digital services: Growing adoption of online solutions

Innovative companies capable of adapting to the specificities of the Japanese market have excellent growth prospects.

Recruiting in Japan: keys to building your team

Recruitment in Japan has particularities to consider:

Recruitment cycle: Recruitment of new graduates mainly happens once a year, in April.

Recruitment agencies: Widely used in Japan, they can facilitate your search.

Language skills: Proficiency in Japanese is often essential, even though English is progressing in international companies.

Corporate culture: Japanese employees value stability and loyalty to the company.

Training: Japanese companies invest heavily in employee training.

Compensation: The compensation system often includes significant bi-annual bonuses.

To succeed in your recruitment, it’s essential to understand these specificities and adapt your practices to the local context.

Starting a business in Japan represents an exciting challenge for foreign entrepreneurs. Although procedures may seem complex, the Japanese market offers real opportunities for innovative and well-prepared companies. The key to success lies in a good understanding of local specificities, both legally and culturally.