Setting Up in Japan – a Business Diary

Preface

I was originally going to write this as a series of blog posts, but on the advice of my wife, I am going to put it all in the one place.

I was asked to set up a subsidiary office in Japan of my company in June of 2014, with an aim to look after all of Asia/Australia by about 2017. However, with the departure of our COO in early 2015, I was asked to speed up this process and do both at once.

Additionally, our second child, was due in Jan 2015.

I’m writing this for two reasons. Firstly, I thought it would be good for anyone that was thinking about setting up a business and moving to Japan. I’m sure there are parts that will be informative no matter if you are moving to Japan on your own, sponsored by a company, or for investment.

The other reasons is that that I can remember how to do all of this when, inevitably, I am asked to do it again.

Please feel free to write comments on this. It is a work in progress, so I’ll see how I go…

The First Chapter

I will admit that the first move that I made was probably the most beneficial. I had heard about the Japanese External Trade Organisation (JETRO), but wasn’t 100% sure what, if any, support they offered.

The JETRO website, http://www.jetro.go.jp, is full of information on pretty much every topic that you could think of. JETRO is a government-run organisation with the purpose of encouraging trade and investment in Japan.

After reading everything I could from their website, I formulated a business plan for the Board to approve. JETRO made this easy, as it included rough estimates for everything, including rent, lawyers, employment, social insurance… the whole lot. So instead of flying blind into this venture, we had a rough idea of the required investment and the ongoing costs.

Once the plan received board approval, it was time to get in touch with JETRO. The Board approved the plan in about September of 2014.

JETRO run satellite offices in most major cities. However, these offices serve only one purpose – they screen applicants so that the head office doesn’t have to deal with every lunatic that thinks they can start up a company in Japan selling home-brewed manga. If you’re going to one of these screening meetings, make sure that you bring some proof of your existing business (if you’re setting up a subsidiary) or a detailed business plans and proof of investment (if you’re starting a new venture).

The things that they are looking for (as this will make life a lot easier – see below):

  • Proof of a successful business plan (e.g. having a distributor/dealer network in Japan, or at least some form of market research for new ventures)
  • Proof of an initial investment of at least 5,000,000 Yen (This will become even more important when registering the company)

There are other factors that will affect their decision to forward your request for support to their HQ, but these really are the main ones. If you can’t show that you have some kind of plan in mind and the money to back it up, then they may refuse your request.

I went through the screening process in October 2014

JETRO's Invest Japan Business Support Centre. Here you can get a free office for 10 weeks, as well as introductions to many professionals that are able to help you through the maze of bureaucracy...
JETRO’s Invest Japan Business Support Centre. Here you can get a free office for 10 weeks, as well as introductions to many professionals that are able to help you through the maze of bureaucracy…

Get on the Plane

Once approved for JETRO support, I traveled to Japan to meet with them and get introduced to their specialists. Usually it is best to leave a few days for this, as most of the specialists come in on different days. On rare occasions they are able to organise for multiple specialists on the same day, but I wouldn’t bet on it.

The specialists cover the following topics:

  • Company Registration
  • Immigration
  • Corporate Tax/Social Insurance
  • Human Resources

These specialists aren’t directly employed by JETRO, they volunteer their time for this initial advice. However, you can also employ these specialists separately of JETRO as required.

On this trip, I also managed to do a few office viewings. This gave me a feel for the rent and what I could expect for our budget. I also used this chance to check out a few of the areas that we were thinking about living. This gives you a good idea of how longs trains take, how you’ll transfer and the like. At this point, you won’t have a visa, so there is no point in trying to get a mobile phone or bank account. Those things are difficult enough to get even once you have a visa, so don’t waste your time trying.

If you are going to be in-country for a while and you want a pone number, there are a very limited number of very expensive pre-paid or short-contract cards available from the big electronics stores like Yamada Denki or Yodabasi.

If you do get one of these phones, you can carry this number across to a mainstream network (like Docomo or Softbank) later, however there really is little need at this point. Also, the range of phones that are “SIM Free” (meaning unlocked) is really limited.

Company Registration

There are a number of types of company registration in Japan, however there is only one that matters: the Kabushiki-Kaisha (KK). I’ll come back to why in a second.

The other types that you can register as include a Godo-Kaisha (A Limited Liability Company – basically a company that has no possibility of offering shares), a Limited Partnership or a Sales Office.

A Godo-Kaisha is a new format that was invented to allow for LLC/Pty-Ltd style companies to operate in Japan. However, as this is a new format with fewer restrictions, it is still viewed as a bit of an “easy-mode” way of starting a company, and is sometimes considered as a lack of trust in the Japanese market. Unless you have a really solid and established brand, or if you are dealing mostly with newer and more flexible companies (that aren’t hung up on corporate structures) then you should consider a KK.

A Limited Partnership is also viable, but only if you have a Japanese company that is willing to partner with you. The upside is that anyone looking at your company will see the Japanese company backing you and will give you street cred for this, but the down side is that there is no way t to grow the company, and you will always fall under the oversight of the Japanese Partner (who will pretty much win every dispute by default).

A Sales/Branch office is the smallest way of opening operations in Japan, however you can’t trade locally as a branch office. You either need to trade through a distributor network, or at arm’s length (i.e. Cost Plus).

So the KK is the way to go. You get respect from other companies, and it sends a clear message to your market that you are willing to invest in Japan and trade locally.

Once the decisions have been made it is time to start registering the company. JETRO introduced us to a combined company registration/immigration lawyer, so this was the first step for us. Leaving this stage to a lawyer is much easier than trying to get the registration done yourself. You will need a Resident of Japan to be one of your directors to register your company. Our lawyer was willing to sit on the board (for a fee) until my visas and residence were finalised, after which time he would step down. There are also companies that will offer this service for a fee, and you can expect to pay a few thousand dollars for them.

There are a number of questions and documents that you need to provide, but the basics are here:

  • Company Purpose. This will be noted on your certificate of registration as well as forming part of your articles of incorporation. If you are setting up a subsidiary-type company you should simply copy your existing article of incorporation. If you’re a new company then these will probably be along the lines of “Consulting services to Small computing business” or “The manufacture and sale of Widgets to marketing companies”. It helps if you have both your product and the expected markets. You can also have multiple purposes; for example my company has three purposes:
    – To Manufacture optical fibre and communications equipment to broadcasters, theatres and other entertainment markets
    – To Rent optical fibre and communications equipment to broadcasters, theatres and other entertainment markets
    – Any Sales or Marketing activities to support the above purposes
  • Articles of Incorporation. These are usually pretty generic, so it is best to ask your lawyer to tailor the boiler-plate terms for you, and then customise them as required. These articles cover things like the Company Purpose, the issuance of shares and capital, the names of the Directors and the Representative Directors, and similar legal proceedings.
  • Start-up capital. Since 2007 you only need 1 Yen to start a company.
    DO NOT START A COMPANY WITH 1 YEN!!!
    I can’t stress this hard enough. In most countries the articles of incorporation and registration details of a company are not freely available until the company is listed publicly. In Japan, all companies, no matter how small or private, will have their detailed gazetted and freely available.
    Everyone looks at your initial capital – your bank, your landlord, your private landlord, the immigration department, your business partners, your customers, your competitors. If they see 1 Yen, you will have to answer a lot of questions. Unless you know a lot of Japanese and can think on your feet, you will have little to no chance of being able to get an office or a bank account.
    You can deposit your capital with most banks; they will issue a “Capital Holding Certificate” that you can use to prove your investment, which they will then deposit into your corporate bank account (when you get one in about 6 month’s time). Alternatively, your local Japanese director can hold the funds in their private account until a corporate account is opened.
    The suggested amount is 5,000,000 Yen. This is a good amount as it also allows your Company Directors to apply for an “Investor’s Visa” – this is a much easier visa to apply for as it only has two requirements – the initial capital and your name on the company register.
  • Tax Cycle. As with many countries, Japan lets you pick your own reporting period. The common time frames are 1st Jan – 31st Dec or 1st Apr – 31 Mar (as this aligns with the Japanese Government Tax year as well as the usual hiring/school enrollment periods).
  • Registration Certificates. If you are setting up as a subsidiary company, you will need proof of the registration of the head company. If your shares will be held by a private person you will need their ID.
  • Signature and ID checks for Directors. Your directors will all need to provide Signature Samples and have their ID sighted by a public notary in their home company, and the original documents must be submitted to the Legal Affairs Bureau.
  • An Address. You need a fixed address in order to register your company. You can request that JETRO provide you with an address, but you can only really use this for 10 weeks. If you are thinking about this then you should really be in-country and looking at offices from the moment the company is founded. There are some other “rental offices” (like Regus) that can also let you use their address, else you can use a residential address temporarily. Some accountants and lawyers may let you use their legal address, however this is not often the case.

Once all of this information has been compiled you will usually get a copy of your draft articles of incorporation. If you are lucky you’ll also get an English translation, but this is not binding.

If all is okay then this will be submitted to the Bureau of Legal Affairs, and if all goes well you will get your Certificate of Registration in about 3-4 weeks.

We submitted our draft paperwork in Late Jan and the company was registered on the 24th of Feb. You can officially start trading from the day of registration, but in realty it will be a few weeks yet. You need to get the originals of many of your documents, like the Certificate of Registration, your Inkan (Stamp) and Inkan Registration Certificate, and your Articles of Incorporation. Without these it is difficult to open bank accounts, Social Security Accounts and rent property.

2015-03-24 12.54.07-2

Living in Japan

Once you’ve actually registered a company, you can apply for a Visa. Without your Visa and the Foreigner Registration Card (Zairyuu Card) you are really limited in what you can do. It is incredibly difficult to rent an apartment without a Zairyuu card, and it is impossible to get the card without an address. For this reason, you’re usually better off getting a serviced apartment for about 3 months. If you’re planning on working straight away after establishing the company then you’re going to need at least 3 months, if not more, in order to get everything processed.

I have to advise you to get a lawyer to prepare your visa application. It’s their job, and trying to do it yourself will just delay the process.

In general, you will need at least the following to get one of the visa classes:

  • A contract/letter of offer from the company (If you are the Representative Director – Daihyoutorishimariyaku – then you can’t contract to the company, but only have a letter of offer). This should state, at a minimum, your duties in the company and your salary.
  • The company registration documents
  • JPY 5,000,000 in start-up capital if you want to use the “Investor” class licence
  • Passport copies and photos

Depending on the class of visa there may be other things required, but that is best left to your lawyer.

It can take a few months for your application to be processed. Since most countries have 90-day visa free entry in Japan, this at least lets you start to work on finding offices/residences etc.

If your visa is approved you will be issued with a Certificate of Eligibility. This is effectively your Visa, but you need to get to a Japanese consulate or embassy in order to get the actual Visa issued. You can do this in-country, however that takes a few weeks. Doing this outside of Japan takes about 48 hours. Normally, you have to convert the CoE in your home country, however you can ask any other consulate to perform the service if you have a legitimate reason.

In most cases you will only be given a 12 month visa in the first instance, which can then be extended. The visa states “single entry,” however Japan has a “Special Re-entry Permission” which is just a slip of paper that you fill in at the airport on the way out of the country.

Finding a place to live is an expensive exercise, and unless you are going to live in Japan for longer than a year I would recommend staying in a serviced apartment.

To rent a house/apartment, you can expect to be paying about US$1,000 per “room” per month (i.e. a 2 bedroom apartment would be about $2,000). There are cheaper places if you live further out from the city, but the train lines are incredibly packed.

When you do eventually find a place, you can expect the following fees:

  • Security Deposit (Or Key Money) – 1-2 months’ rent – refundable
  • Gift Money – 1-2 months (one guy asked us for 6 months!) – non-refundable
  • Your Agent’s Fees – Usually a month  – non-refundable
  • The Landlord’s Fees – Possibly another month – non-refundable

You may also be asked to provide a guarantor, usually a Japanese Citizen, to cover you should you fail to pay rent. There are companies that provide this service, however they will also charge a yearly fee.

So, as you can see, if you’re going to be staying for less than a year, you’re better off paying the Serviced Apartment for the term. They are happy for you to use their address for your residence card and most other things.

Once you have an address and your visa, you need to get on down to your local City Hall, where you will be ping-ponged between multiple desks in the same room, and eventually someone will give you a Green bit of paper (Juuminhyou –  Certificate of Residence) and then write your address on the back of your residence card. You need to do that within 2 weeks of getting your visa; which is why it is a good idea to come during the visa application waiting period and find a place to live at that time, and then sign the lease once you actually get the visa. Oh, and no-one speaks any English, so either brush up on your Japanese or bring a friend. I went alone (well, I took my 3-year-old – bad move) and I had a headache at the end of the process. I have heard from Japanese people that they have a similar reaction as well.

Congratulations; you now officially “live” in Japan. (For me, this was a good 12 weeks after leaving Australia).

Finding an Office

With the clock ticking at Jetro, it is a good idea to also start the search for an office before you actually get your visa.

In reality, there is only one office in Tokyo. It is a nearly perfect square with blue carpet tiles, power points in the floor and nothing else.

That describes 70% of the offices I inspected in Tokyo. However, there are the occasional ones that are a little nicer.

One thing that was interesting to know is that you can’t erect walls in an office you rent; you can only install temporary dividers. So if you want to have a private meeting or demonstration room, you need to make sure that it is there when you move in.

Just like the apartments, you can expect to be paying a lot of fees for the privilege of renting an office, except that the security deposit is usually 6 months. However, it is relatively easy to get the first month free in order to move in etc.

Once you have signed the lease, you can apply to change the registered address of the company. You’ll need to do this and get updated certificates of registration before you can do anything else, like apply for a bank account, telephone line, internet service etc.

The process of finding an office is generally a long one; after you have found your office you can expect 2-3 inspections and a similar number of meetings with the owner. They will quiz you on everything, like what your company does, your parent company’s performance over the last few years (if you are a subsidiary), what work you expect to be doing in the office and how many people you will employ in the short term.

Oh yeah, and no-one speaks English. It might cost a little more, but you should really consider a bi-lingual estate agent. JETRO has a few of them in their contact list, and they are worth the extra fees.

Getting a Bank Account (Corporate) 

Ok. Now all the easy stuff is over, you need to start putting in some real time and effort. Without a Japanese bank account, you will find it hard to do pretty much anything in Japan. Whilst you can get away with using an overseas account for paying your wage and rents, anything beyond that will need a local account. Plus, paying from an overseas account starts getting expensive when you start building up your office and payroll.

To get an account will take some time and patience. And, if you don’t feel confident in your Japanese, take a translator. It is something that I wished that I did, but foolishly didn’t.

To begin with, I suggest going with one of the “Big Four” banks, being Mitsui-Sumitomo, Mizuho, Mitsubishi UFJ, or the Japan Post Bank.

If you don’t bank with one of these banks your accountants are going to charge you extra, plus you will find that some people will raise an eyebrow trying to work out why you don’t bank with one of the majors.

There are some advantages as well. The big banks let you do pretty much anything from their ATMs, including transferring large amounts (I’ve done a transfer of about US$20,000 without issue). This is immensely useful, as you can forget about getting a credit card for at least six months (more on this later).

To open an account, you’ll need the following:

  • A company Touhon (certifiate of registration) with the current address and all directors listed. If you are going to change directors (e.g. removing your lawyer and instating a local director) then you should wait until you finish this before opening the account. The Touhon needs to have been printed in the last 3 months.
  • Personal details, including birthdays, of all of the listed directors
  • Details of the company and all of the shareholding companies, including their date of founding
  • Proof of identity of the person opening the bank account (which is usually your Zairyuu Card – your foreigner registration card, Passport, and Juuminhyou – address certificate)
  • A business card of the person opening the account
  • Your company Seal
  • Your Company Inkanshoumeisho – Seal Registration Certificate

There is a very good chance that you will need something other than this, but don’t count on them telling you this over the phone or in person.

When you go into the bank, prepare to be rejected. Unless your paperwork is in perfect order, you will be turned away. However, it is usually a 2-hour process before they even let you know this! When I set up our account I had to go back three times; 2 hours each time, before they finally accepted the paperwork. They explain a lot of stuff in this period, and they also make a lot of settings for the account, like how you accept overseas payments, who can make transfers, what kinds of information you need to register new users on the account… all of that.

Assuming that your paperwork is in order, they will let you know that they will get back to you. This will usually take a fortnight. I’m not entirely sure what they check, but I imagine that they check everything against your gazetted information. I didn’t get any phone calls, but I have heard of people being called to explain various items on their application before the account is finally opened.

If you manage to run the gauntlet of the application process and you are granted the eternal honour of entry to the Japanese banking system, you will be called back to the bank where you will have another hour-long barrage of information before being asked to apply for a cash card. You might be able to walk out of the bank with a Tsuucho – Bank Passbook, but this is really just a way of viewing the transactions. You’ll be asked to make a non-compulsory deposit on the spot, but don’t let them pressure you into this.

You should also ask for a copy of that branch’s SWIFT information. Some of the big branches have their own SWIFT code. Since you are likely banking in somewhere convenient, like Shinjuku Station, it is nearly impossible to search for this information online. Our bank has 4 branches in the vicinity of Shinjuku station, and they all have very similar names and vastly different SWIFT codes.

Personal Bank Account

So, remember all that stuff you have to do for the company bank account? Thankfully, the personal account only requires all of that paperwork, nothing more. However, as a mere individual (and a foreigner), you are likely to get rejected by everyone. Get used to it.

Unless you have a Japanese driving licence and six month’s history in the country, you are not likely to get an account with one of the majors. And then, if you’re on a one-year visa, they might reject you after the 6 months as you haven’t got enough time left on your visa.

The one tip I can give you is to look at a bank like Shinsei Bank. They aren’t as convenient as a major, and they usually have only limited ATM features, but they are more friendly to foreigners. Shinsei actually has good Forex accounts, so if you have payments that you have to make back home then this can be a good option.

 

Credit Cards

It is very difficult to survive in Japan without a credit card. You’ll need to pay all of your bills in cash or by furikomi – Bank Transfer. Since the smaller banks don’t let you do furikomi by ATMs, this means cash, basically.

However, it is also difficult to get a credit card. You can simply forget the idea in the first 6 months. No matter how much cash you have in your account or how many houses you own, Japan doesn’t care until you hit that magical half-year of taxpaying.

Once you do reach six months, don’t get too excited. Our first company credit card was issued with a JPY400,000 limit (about US$4,000), meaning that you basically blow your limit after you buy a single plane ticket back to HQ. The best option is to go with your bank’s card (another reason to use a major bank). Other companies will require more proof of your trading.

Personal cards are worse; you will get rejected until you have 6 months, and even then you’re still likely to get rejected half the time. Our initial credit limit was JPY200,000, and due to the odd way the credit limits work here, that has to last you 2 months…

Rakuten Card is probably the easiest to apply for as a foreigner, however it has the dual disadvantages of a low limit and also a bit of a reputation as a “card for people who can’t get a real card”. If you’re OK with that then it is fine, however you can clearly see the look on people’s face when you pay with it… especially when it get rejected due to the stupidly low limit and inability to pay it back until their set date.

Amex is ok, however they are very much marketed at the high wage earners. If you’re not on a huge package then you should consider it carefully.

Most major department stores also issue cards, however you will need to prove that you can pay your bills in order to build up a credit history with them. You’re better off getting a Rakuten card, using it for a bit to build up a history, and then trying to get a store card.

It’s not uncommon for Japanese people to hold a card from each department store that they use regularly, due to a national obsession with points. However, if you’re only going to be here for a small number of years, these points are only going to save you about a hundred dollars a year (if that) so you’re better off ignoring them and taking up a decent hobby during the time you save trying to track the various points systems.

 

One thing that you will also hear is that stores will always offer you the option of splitting your payments across a number of months, especially with big purchases. This makes it easier to manage the abysmally low limits of the cards – you can balance the payments to match your limit. This often comes at a price though, and this varies depending on the card, store and number of payments. In reality, you’re better off just paying for it in one hit.

Lastly, the credit cards are usually set to “re-zero” themselves each month. The card company will take out the entire balance on the card on the “scheduled day,” and there is little that you can do about it. So the credit cards here aren’t for buying something big and paying it off with some interest; it is more like a charge/debit card with a bit of a time lag… and points.

 

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