Investment in Japan: Is 2022 a Great Time to Invest?

In this guest post, Tyson Batino, host of the Scaling Japan podcast, weighs in on his opinions on investment opportunities in the Japanese market for foreign residents and non-residents of Japan.

2022 and 2023 may result in being the best time to invest in Japan for the next two decades. The exchange rate as of July 2022 is around 133 to 138 Japanese yen to the US dollar — and the lowest since the Asian financial crisis in 1998. In addition to the low exchange rate, many Japanese cities have made major strides in making it easier to start a company. They are even providing tax benefits, loans and subsidies to help foreigners who want to set up a company or branch in their cities. These cities are aggressively looking for new companies, so if you have considered investing or doing business in Japan, now is the time to explore your options.

The Japan Investment Landscape in 2022 and 2023

For most of 2022, the Japanese government has been very strict on the allowance of new foreign entrants. However, as of June 2022, the Japanese government has loosened border restrictions for foreign nationals through their Entrants, Returnees, Follow-up System (ERFS) program. This change has led to an increase in the number of workers, business travelers and new investors and startups entering Japan. It’s likely that this will continue to grow once Japan opens its borders to all tourists, which is expected to happen in late 2022.

Despite the increased amounts of opportunities for business and investments in July 2022, the yen has dropped from a high of 113 to the dollar to 135 to the dollar — a decrease of 17% in value. Due to COVID, many of the businesses that catered to foreign residents and travelers have significantly decreased.

The combination of the devaluing of the yen, a decrease in competition for services, and the increase in business and investment opportunities for foreigners creates a unique timing for outside investors who want to invest in Japan long-term.

Startup Cities in Japan

Starting in December 2015, cities like Fukuoka (roughly 1.5 million population) started offering startup visas to entrepreneurs who wanted to launch their companies in Japan. Since then cities like Kobe, Sapporo, Tokyo, Fukuoka and Aichi prefecture (among many others) have come up with many initiatives to make it easier to get a visa to Japan and start your company.

In recent years, Kobe city and Aichi prefecture have even partnered up with the world-famous startup accelerator and venture capitalist firm 500 global to create an accelerator program for foreign and Japanese entrepreneurs.

What types of support do they actually provide to entrepreneurs?

Fukuoka city offers quite a few financial support like a 500,000 yen subsidy for hiring a person from Fukuoka, a subsidy for covering your rent for a quarter of the year, a reduction in your corporate taxes and even up to a 35,000,000 yen loan at a very low-interest rate of around 1.3%. Starting in late 2022, Sapporo city will start providing a grant of up to 2.5 million yen to startups that meet certain criteria.

Most cities will offer incorporation and banking support and free consultations with labor and visa experts. They will also offer assistance by introducing you to other government agencies, corporations, and partners who can help you jumpstart your business in their city. The cities mentioned here have web pages in English and all have staff that can provide support in English: Kobe, Sapporo, Tokyo, Fukuoka, and Aichi prefecture. 

Most startup centers will also help foreign companies who want to enter the Japanese market and conduct a proof of concept/test launch before diving fully into the Japanese market. They reduce your market entry risk by introducing potential partnerships with local governments and corporations that would normally not give any new entrant the time of day.

The Japanese national government is also offering some big subsidies to financial tech (fintech) companies and even 2 trillion yen to the green innovation fund through NEDO, the New Energy and Industrial Technology Development Organization, which will support for-profit companies that help Japan achieve ambitious 2030 green goals. You can learn about loans, subsidies, and more about government support from this interview with Miho Tanaka, who is currently supporting Sapporo city’s startup initiatives.

Would they support my company?

These cities support entrepreneurs, but depending on your company and service, the range of support differs. Someone wanting to start a restaurant, language school or traditional business may be eligible to get assistance on registering as a company, and a business manager visa (the one where you need around $50,000 US dollars in your business bank account). However, to qualify for the startup visa, subsidies, and partnership support, these cities are looking to support “innovative” and “high technology” services and products.

The people in the startup support departments are really friendly and when in doubt, I would recommend just saying hello and asking them directly to see if you qualify. Additionally, the city would have to approve your business plan before offering you a startup visa and the staff can answer the question if you have a good chance or not to get a startup visa. The length of the initial visa can last up to one year and you can find more information at the Ministry of Economic, Trade and Industry here.

Real Estate Investment in Japan

There are more real estate investment opportunities than meets the eye when it comes to Japan. You can invest in something traditional like a home, apartment building, apartment complex, or office building. You can also purchase abandoned homes for cheap or go upscale with rentals in popular winter destinations like Niseko and summer destinations like Okinawa. However, the current trend in July 2022 is people buying homes and institutional investors buying office property in big cities like Sapporo, a population of nearly 2 million people, because they are betting on the city to boom in the upcoming years. 

A good place to learn about real estate in Japan is through the Japan Real Estate channel on YouTube. The number of subscribers and viewers may seem low, but this channel is a hotbed of accurate, but more importantly, date information on the real estate market in Japan. There are many articles on real estate in Japan, but they cannot compete with the focus on current trends that can be found on this YouTube channel. When looking for a high-scale real estate purchase, just do a simple google search for Niseko and Okinawa properties and you will find an abundance of places that have condominiums, land plots, and houses for sale. For information on cheap abandoned homes and properties, this article is a good introduction but if you are really serious about this you may need a Japanese friend’s help to navigate the abandoned house database websites in Japanese.

Invest in Franchises in Japan

With the rapid increase of tourism in Japan comes an increase in the number of investors. This also led to a spike in investment types and businesses to support investors. One such type is businesses that help foreign investors buy into Japanese franchises: Franchise Japan and Nippon Bridge. These companies help investors not only evaluate franchises in Japan but also provide relocation assistance and visa advice. Their database of franchises is much smaller than the over 1,000 franchises in Japan. However, the people running these businesses know Japan well and can answer many of your questions and avoid surprises.

The benefit of buying a franchise is you have a proven model for the Japanese market that matches Japanese preferences and tests. This is helpful because a common reason many foreign businesses or entrepreneurs fail is that they do not adapt to the local preferences and needs in time. You can get started for around $100,000 in initial capital to start a restaurant, after-school tutoring, or second-hand luxury goods store and up to $500,000 and more for something capital intensive like a gym franchise.

Invest in Your Japanese learning

Real estate investment, franchises, and starting a company in Japan are all risky investments. However, there is one type of investment in Japan that is low-cost and can provide major benefits if you are going long-term on your investment in Japan. That investment is to learn Japanese. 

Learning Japanese can provide you with a huge advantage in successfully doing other types of investments and lower your risk for failure. When doing things in English you are dependent on other people. The amount of people, programs, and customers who can support you is much more limited. Being able to network, interact with Japanese people and staff and get a second opinion from non-English speaking experts in Japan will help lower the risk of your investments. 

The Japanese language is something that will be a bit challenging at first but is an investment that can still continue to grow if the investments are not successful. Coto Academy has excellent teachers and lessons that can take you from beginner to advanced. We also offer programs to improve your business Japanese and understanding of Japanese culture. If you are interested in learning with us, contact us here.

Tyson Batino is the founder of One Coin English, Japan Switch, and Scaling Your Company. He now helps startups and business owners to grow their businesses in Japan. He also hosts the Scaling Japan podcast which focuses on ways businesses can scale their company in Japan through sales, investment, marketing, and more.

Feature image taken from Canva under Free Media License Agreement.