Government relaxing foreign business permit requirements

Japan is continuing to create an environment more favorable for foreign entrepreneurs.

One of the challenges hindering the growth of foreign-owned startups is the strict requirements for obtaining a residence permit. The government is planning to allow aspiring foreign entrepreneurs to stay in the country for two years without needing to secure business premises or investment capital. However, many issues still need to be addressed, such as the digitalization of administrative procedures and language barriers.

The increase in foreign entrepreneurs can lead to the introduction of cutting-edge technologies and diverse ideas from abroad. This can also contribute to the growth of new industries and revitalize local areas. Examples from the United States, such as Google and Tesla, show how foreign entrepreneurs have created next-generation industries.

Under the current system, foreigners usually have to meet specific criteria to get a residence permit: 1) secure a business location, and 2) either employ two or more full-time staff or invest more than 5 million yen.

If they could establish a base within university research institutes, it would become easier for foreign students to start businesses while studying.

For startups in their earliest phases, the requirements of raising more than 5 million yen can be challenging due to limited revenue and razor-thin profit margins. A two-year grace period would help these businesses reinvest their funds for growth.

The government is looking to relax these requirements to foster a better entrepreneurial environment. Changes to the Business Management residence permit are expected to be made by the Immigration Services Agency by fiscal 2024.

The National Strategic Special Zones system to support foreign entrepreneurs started in 2015, and as of April 2023, around 380 people have been approved. Most of them are concentrated in Tokyo and Fukuoka, and there's been less success in regional cities. This new plan will take on the pre-existing zone system and expand it so that if a business plan is approved, it will allow for a two-year stay anywhere in Japan.

According to the Immigration Services Agency, as of the end of June 2023, around 35,000 foreigners hold a 'Business Management' permit, almost double compared to 2015. However, the government still views the hurdles for starting a business as being too high.

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