Introduction
With a GDP of $4.2 trillion (IMF, 2024), Japan is the third-largest economy in the world and a top destination for international businesspeople. It is the perfect location for companies wishing to grow in Asia because of its reputation for innovation, sophisticated infrastructure, political stability, and international trade connections.
However, what are the specific reasons for establishing a firm in Japan? Its strategic position, highly qualified workforce, robust customer base, advantageous trade agreements, and innovative atmosphere all contribute to the solution.
Whether you are a startup founder, an investor, or a multinational corporation, Japan offers compelling opportunities for sustainable business growth.
In this article, we’ll break down the key reasons to set up a business in Japan, supported by facts and figures, while also giving you insights on how to get started.
Why set up a business in Japan?
Listed below are various reasons to register a company in Japan:
1. Japan’s Strategic Economic Position
- Japan is located in the heart of East Asia, providing seamless access to markets such as China, South Korea, Taiwan, and Southeast Asia.
- It is a founding member of the World Trade Organization (WTO) and part of major economic pacts like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
- With double taxation treaties with over 80 countries, Japan minimizes tax burdens for international businesses.
- Its ports, airports, and transport networks are among the most advanced globally, making logistics highly efficient.
- This strategic advantage allows entrepreneurs to not only tap into the domestic Japanese market but also use Japan as a gateway to the Asia-Pacific region.
2. Strong Consumer Market
Japan’s domestic market is one of the most lucrative in the world:
- Population: 123 million (2025, World Bank)
- Household Income: Average annual disposable income of over ¥4.5 million ($30,000+)
- Consumer Spending: Over $3.3 trillion annually
Japanese consumers are known for their brand loyalty, high purchasing power, and preference for quality products. This makes Japan an attractive destination for businesses in sectors such as luxury goods, technology, fashion, food & beverages, and healthcare.
3. Skilled and Innovative Workforce
Japan consistently ranks among the most innovative nations in the world:
- Ranked 13th in the Global Innovation Index 2024.
- Home to global tech leaders like Sony, Toyota, Panasonic, and SoftBank.
- Over 50% of young adults hold tertiary education degrees.
The country’s highly skilled workforce is not just technologically advanced but also known for discipline, attention to detail, and long-term loyalty. For entrepreneurs, this means higher productivity and quality standards in operations.
4. Government Incentives and Business-Friendly Policies
The Japanese government actively supports foreign investment:
- Subsidies & Grants: Offered for R&D, green energy, and technology startups.
- Special Economic Zones (SEZs): Provide tax breaks and relaxed regulations.
- Innovation Programs: Startups can benefit from schemes like JETRO (Japan External Trade Organization), which assists foreign companies with incorporation, office space, and business matchmaking.
In fact, in recent years, Japan has relaxed visa and immigration laws to attract entrepreneurs under the Business Manager Visa program, making it easier for foreign directors and investors to relocate and manage their business.
5. Stable Political and Legal Environment
Japan is one of the safest and most stable countries in the world:
- Rule of Law: Strong legal framework that protects intellectual property and investor rights.
- Low Corruption: Ranked 18th globally in the Corruption Perceptions Index (2024).
- Safety: Tokyo consistently ranks among the safest cities globally.
This stability gives entrepreneurs the confidence to invest in long-term projects without fear of political disruptions or legal uncertainties.
6. Innovation & Technology Hub
Japan invests heavily in research and development (R&D), spending nearly 3.2% of GDP annually (OECD data).
- Robotics, AI, fintech, green energy, and biotech are rapidly growing sectors.
- Japan is a global leader in patent applications, accounting for over 16% of global patents.
- The government is investing in Society 5.0, an initiative blending AI, IoT, and big data to create a smart, interconnected economy.
For entrepreneurs in technology, renewable energy, or advanced manufacturing, Japan provides a thriving innovation ecosystem.
7. Attractive Tax Environment
Japan offers a competitive tax structure for entrepreneurs:
- Corporate Income Tax: Standard rate of 23.2%.
- SMEs Benefit: A reduced rate of 15% applies on the first ¥8 million of taxable income.
- Incentives: Tax deductions are available for R&D investments, green energy, and employee training.
Combined with double taxation treaties, this ensures businesses enjoy optimized tax benefits while expanding globally.
8. Infrastructure and Connectivity
Japan is famous for its world-class infrastructure:
- Bullet trains (Shinkansen) connect major cities at speeds of up to 320 km/h.
- Airports: Narita, Haneda, and Kansai are ranked among the top airports in Asia.
- Digital Infrastructure: Over 95% of households have access to high-speed internet, making digital business operations seamless.
Such infrastructure makes it easy for businesses to operate, distribute, and expand efficiently.
9. Japan as a Global Business Gateway
By setting up a company in Japan, entrepreneurs can:
- Access Japan’s $4.2 trillion economy.
- Expand into neighboring Asian economies worth $30 trillion+ combined.
- Build a globally trusted brand by leveraging Japan’s reputation for quality and innovation.
Conclusion
Japan is not just another business destination—it is a strategic, innovative, and stable hub that connects you to global markets. From its advanced infrastructure and highly skilled workforce to its government incentives and consumer power, Japan provides everything entrepreneurs need to grow and scale internationally.
If you’re considering global expansion, setting up your company in Japan could be your best move in 2025.
Speak with experts from OnDemand International to set up your business in Japan and get asssitance with visa support, and compliance.
FAQ’s
The two most common are Kabushiki Kaisha (KK), similar to a corporation, and Godo Kaisha (GK), similar to a limited liability company. Foreign businesses also choose branch offices or representative offices.
While Japan has higher operational costs than some Asian countries, low corporate tax rates, government incentives, and strong ROI from a high-spending consumer market balance the investment.
Technology, automotive, robotics, renewable energy, healthcare, e-commerce, and luxury consumer goods are among the fastest-growing industries in Japan.
