Japan Welcomes Foreign Investors

With foreign direct investment less than that of Botswana you could be forgiven for thinking that Japan is no Eldorado for foreign investment. However, this has not always been the case.

Since the Perry expedition opened Japan to the outside world, many famous foreign enterprises have made significant investments in the country. These include the likes of Citibank, General Electric and Siemens from the very beginning.

Moreover, many big Japanese companies, including NEC and Toshiba, started their lives as joint ventures with foreign investors. Post WWII, the scene has been dominated by Japanese domestic players and outbound foreign direct investment (FDI) has far outweighed inbound.

However, since the collapse of the bubble economy, the Japanese government has been making strong efforts to welcome foreign investors again.

This may be seen as part of a wider trend to welcome immigration in a bid to counter Japan’s demographic situation (specifically, a declining birthrate), which is commonly reported as in dire straights.

Following a drop after the pre-Lehman crisis peak of 2.2 million, as of the end of 2014, the number of foreigners in Japan had returned to 2.1 million.

To that end, the government made two important updates to business immigration procedures effective March 16, 2015. To wit:

The address of representative director

Prior to  the update one of the criteria to set up a Japanese company was that  at least one of the representative directors had to have an address in Japan. This obviously meant that a non-Japanese resident needed a Japanese or Japanese resident as a partner.

This restriction has now been lifted i.e. all representative directors can be non-Japanese or non-Japanese resident and Japanese partner is now not needed in this regard. Documentation requirements do remain, in particular proving an address.

When you prepare to set up a Japanese company, you are granted 4 months to stay in Japan. What documents are required to be granted a 4 month visa is not disclosed, however, these would typically include a business plan, a draft of the articles of the corporation, planned office location, etc.

This reform by the government is important as prior to it non-residents in Japan wishing to start a business and acquire an investment management visa could only obtain the visa after the establishment of the corporation.

The update also helps to resolve two practical issues around the establishment of an enterprise, which were proving particularly thorny.

Prior to the change you had to have a representative director with an address in Japan. In practice, it has proven hard for many would-be foreign investors to find credible business partners. The new change solves this. All the representative directors can be non-residents in Japan and non-residents in Japan can get the visa even before the establishment of the corporation.

The other issue is that you need a bank account to inject capital and bank accounts in Japan are only available for residents in Japan. Under the amended procedures, if the incorporator of the company has an address in Japan, none of the representative directors need to be resident. Even if nobody has a bank account in Japan prior to incorporating, opening the bank account is still feasible as the visa will allow an address to be registered.

The criteria to start a business through an investment management visa are:

  • Hiring two permanent employees or having ¥5 million as capital (or hiring one permanent employee and ¥2.5 million as capital)
  • Existence of a business location
The simplification of requirements is intended to act as a spur to foreign investment. That said, abundant paperwork is still required.

(This article originally appeared on Japan Today's Tokyo Insight blog on June 10, 2015. (http://insight.japantoday.com/foreign-investment-for-nonresidents-in-japan/)


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