Japan’s Bold Startup Gamble: 100 Unicorns in 5 Years

The Japanese government announced its ‘Startup Development Five-year Plan’ in November 2022. Now-former Prime Minister Fumio Kishida presented the Five-Year Startup Plan as part of his grand design for a new form of capitalism in Japan. While Abenomics led to higher stock prices and corporate profits, it did not translate into higher wages. This, coupled with the social and economic turmoil caused by the Corona pandemic created a desire to shift to a new, more sustainable, more inclusive capitalism.

In Japan, in particular, the issues of a rapidly aging population, falling birthrate, increasing social security costs, and the decline of the manufacturing industry has created a stagnation of the Japanese economy.

Startups are expected to be catalysts for major reinvigoration of the economy in response to these challenges; promoting wage increases, double asset income, and heavy investment in science, technology, and innovation.

With this plan the Japanese government has set goals of 10 trillion yen in investment, 100,000 startups, and 100 unicorn companies by FY2027.

Overview of the Five-Year Plan: Three Pillars

The Startup Development Five-year Plan consists of the following three policies, referred to as the "three pillars":

(1) Human resource and network building: Creating human resources and communities that will create startups by promoting entrepreneurship education and expanding the mentoring system.

(2) Enhancement of funding supply and diversification of exit strategies: Increase the amount of funds injected by the sector while diversifying exit strategies to improve the return on funds.

(3) Promote open innovation: Promote collaboration between startups and existing players, such as companies and research institutions, and social implementation of startups' new technologies through changes in taxation measures and the use of an open competition system.

Why do startup need help in Japan?

There has been much debate about why startups and tech entrepreneurship have not increased in Japan compared with other developed nations. Some argue that the lack of successful startups and the absence of role models prevent the development of successors. Others argue that it is a problem of the tax and legal systems. Yet more point out that it is not an environmental issue but a national character issue; in other words, the Japanese mindset towards shame and failure is why startups are not increasing.

There is a general model for life in Japan. Graduate from college, join a large company, and work until retirement. This is the ‘typical’ life established in Japan in the past and the one that most of Japanese society is geared towards. Deviating from this life is associated with a dangerous and unstable image—so while people who go to work for a startup can indeed be considered ambitious and with a challenging spirit like they are overseas, they can also be seen as eccentric gamblers who take too many chances. This is why the Five-Year Plan includes a component of education for young people as one of the three pillars.

Progress at the Turnaround Point; Current Issues

According to government data, as of January 2025 steady progress is being reported in many areas. Finding and fostering young human resources through mentors had a target of 500 mentors per year for FY2027, and as of FY2024 555 mentors have been selected. An "angel taxation system" has also been established to exempt the reinvestment of profits from stock transfers in startups that have just been established. The Japan Innovation Campus was established in Silicon Valley, with 98 companies currently using the campus.

On the other hand, it is unclear whether the achievement of individual KPIs will lead to the plan's overall success. Will developing human resources and establishing hubs really help achieve the ambitious goals of 10 trillion yen in investment, 100,000 startups, and 100 unicorn companies? Various estimates of the scale of investment in Japan have been made, but most believe the current investment amount remains around 1 trillion yen. It will take time to see the results of educating young people and fostering communities. However, achieving the goal will require an exponential increase in investment over the next three years. We will have to keep a close eye on the plan to see if the detailed items outlined in the plan will have an effect.

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