Who can skip the 5 million JPY boundary and the office requirements?

Photo by Kid Circus on Unsplash

As we all know, acquiring a Business Manager residential status to operate a business in Japan requires to fulfill 5 million JPY capital and a dedicated office space. Who can skip these boundaries and operate a business without fillfilling these criteria?

Short answers :

  • Permanent Residents
  • Special Permanent Residents
  • Long Term Residents
  • Spouse of Japanese Nationals
  • Spouse of Permanent Residents
  • Highly Skilled Professional (HSP)

Japan Finance Corporation (JFC), the biggest public financial institution that offers loan program for founders conducted an extensive research about foreign business managers in Japan last year. The number of serveyee was over 600.

https://www.jfc.go.jp/n/findings/pdf/ronbun2105_03.pdf

On this research paper, the authors insist the necessity of increasing international students, keeping them and creating a comprehensive support system after evaluating policies for bringing foreign entrepreneurs in the US, UK, Germany and South Korea.

Kansai Bureau of Economy, Trade and Industry (近畿経済産業局) distinguishes founders into three categories.

  1. Student turned founders
    Their personnel network, cultural competence and higher Japanese language ability make business expansion easier, but they often have issues with fundraising part.
  2. Spinned-out founders from Japanese companies
    Their characteristics are similar to student turned founders, but they spend more time in Japan to start a business than student turned founders.
  3. Founders landed in Japan to start a business
    They only spend a small amount of time in Japan until they start a business. Their challenges are language barrier, understanding of Japanese culture and norm.

Foreign business owners in Japan

The authors referred and gathered data that TOKYO SHOKO RESEARCH, LTD has been collecting (as of October 2020). Out of 703,277 small and medium sized enterprise (SME) owners, 0.7% (5,232 owners) are originally from abroad.

The number of Business Manage Visa holders as of June 2021 was 26,943.

Owning a business without holding Business Manager Visa status

Aside from Business Manager Visa holders, the following status holders can start a business, incorporate a company and run businesses without sufficing 5 million JPY criteria & dedicated office space.

  • Permanent Residents (793,164)
  • Special Permanent Residents (312,501)
  • Long Term Residents (204,787)
  • Spouse of Japanese Nationals (145,254)
  • Spouse of Permanent Residents (41,517)
  • Highly Skilled Professional (15,891)
    *JFC did not mention about HSP.
p.65 of the report “増加する外国人経営者とその全体像

That said, JFC acknowledges that it is hard to guess how many “foreign business managers” are operating businesses in Japan especially because over 70% of the surveyee answered they already have Permanent Residence status, and the number of Permanent Residents are far bigger than the number of Business Manager visa holders.

p.78 of the report “増加する外国人経営者とその全体像

So where are they?

The first is Tokyo (45.2%), the second is Osaka (9.2%), and the third is Kanagawa (5.7%).

The 4th Chiba (5.0%), the 5th Aichi (3.4%), the 6th Fukuoka (3.1%) and the 7th Hyogo (2.6%).

And where are they originally from?

p.67–68 of the report “増加する外国人経営者とその全体像

The majority (44.7%) is from China. The next is Korea (19.7%), and Asian countries consist of 84.7%.

The other continents:

  • Europe 8.1%
  • North America 3.9%
  • South America 2.6%
  • Oceania 0.8%

As of June 2021, statistically 91.7% (24,708 out of the total 26,943) of Business Manager visa holders staying in Japan was from Asian countries accoding to immigration bureau.

Age of foreign business owners

Average age of “business owners” was 51.2 years old.

p.68 of the report “増加する外国人経営者とその全体像

When did they become “business owners”?

On average they started a business at the age of 38.

p.70 of the report “増加する外国人経営者とその全体像

Academic background of foreign business owners

According to JFC’s research in 2020, 38.6% of foreign business owners has bachelor or associate degree, and 4.5% has master degree.

Japanese language ability of business owners

Over 84.6% of business owners’ language ability is higher than Business Level Japanese.

p.70 of the report “増加する外国人経営者とその全体像

JFC is one of the most friendly financial institutions for foreign business owners since majority of mega-banks only allow Permanent Residents to take out a loan (not business manager visa holders), but still the background of the over 600 surveyee might be fitting to those who are eligible to apply for loan programs (70%+ Permanent Residents). That said, this survey of over 600 business owners may not perfectly reflect the latest trend of founders’ information, especially “startup founders” information given the fact that it’s hard to track how many Permanent Residents are owning companies.

At the same time, the accuracy of ratio might be just as well especially in regard to “Business Manager Visa” holders considering the limited fund raising opportunities for English speaking foreign founders on top of capital and office requirements specified under immigration law.

So our question is,

how many founders are actually holding Business Manager visa to operate businesses, and can Japan revitalize the economy by only supporting startup visa holders?

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